FS Investment Corporation II - 8-K [fsii_8k-21717.htm]

 

EXHIBIT 10.1

 

FIRST AMENDMENT TO LOAN AND SERVICING AGREEMENT, dated as of February 17, 2017
(this “Amendment”), by and among WISSAHICKON CREEK LLC, as the borrower (the
“Borrower”), WELLS FARGO BANK, NATIONAL ASSOCIATION, as the collateral agent,
account bank and the collateral custodian (the “Collateral Agent”, the “Account
Bank” and the “Collateral Custodian”) and WELLS FARGO BANK, NATIONAL
ASSOCIATION, as the administrative agent and the lender (the “Administrative
Agent” and the “Lender”).

 

WHEREAS, the Borrower, the Administrative Agent, the Lender, each of the conduit
lenders and institutional lenders from time to time party thereto, each of the
lender agents from time to time party thereto, the Collateral Agent, the Account
Bank and the Collateral Custodian are party to the Loan and Servicing Agreement,
dated as of February 19, 2014 (as amended, modified and supplemented from time
to time, the “Loan and Servicing Agreement”). Terms used but not defined herein
have the respective meanings given to such terms in the Loan and Servicing
Agreement.

 

WHEREAS, the parties hereto desire to amend and otherwise modify the Loan and
Servicing Agreement, in accordance with Section 12.01 of the Loan and Servicing
Agreement and subject to the terms and conditions set forth herein.

 

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

 

1.Amendments to Transaction Documents.

 

(a)          Amendments to Loan and Servicing Agreement. As of the date of this
Amendment, the Loan and Servicing Agreement is hereby amended as follows:

 

(i)          to delete the stricken text (indicated textually in the same manner
as the following example: stricken text) and to add the bold and
double-underlined text (indicated textually in the same manner as the following
example: bold and double-underlined text) as set forth on the pages of the Loan
and Servicing Agreement attached as Appendix A hereto.

 

(ii)         to delete the stricken text (indicated textually in the same manner
as the following example: stricken text) and to add the bold and
double-underlined text (indicated textually in the same manner as the following
example: bold and double-underlined text) as set forth on the pages of the
Exhibits and Schedules attached as Appendix B hereto.

 

(b)          Amendments to Transaction Documents. As of the date of this
Amendment, each Transaction Document, to the extent applicable, is amended by
deleting each reference to “Wells Fargo Securities, LLC” and inserting “Wells
Fargo Bank, National Association” in lieu thereof.

 

 

 

 

2.            Representations and Warranties. The Borrower hereby represents and
warrants to the Administrative Agent and the Lender that, as of the date first
written above, (i) no Unmatured Event of Default, Event of Default or Collateral
Manager Event of Default has occurred and is continuing and (ii) the
representations and warranties of the Borrower contained in the Transaction
Documents are true and correct in all material respects on and as of such day
(other than any representation and warranty that is made as of a specific date).

 

3.            Conditions Precedent. This Amendment shall become effective as of
the date first written above upon the satisfaction of the following conditions:

 

(a)           the execution and delivery of this Amendment by each party hereto;

 

(b)           the Administrative Agent’s receipt of a legal opinion of Dechert
LLP, counsel for the Borrower, in form and substance substantially similar to
the legal opinion delivered on the Closing Date and reasonably satisfactory to
the Administrative Agent;

 

(c)           the Administrative Agent’s receipt of a good standing certificate
for the Borrower by the applicable office body of its jurisdiction of
organization and a certified copy of the resolutions of the board of managers or
directors (or similar items) of the Borrower approving this Amendment and the
transactions contemplated hereby, certified by its secretary or assistant
secretary or other authorized officer; and

 

(d)           the Borrower shall have paid to the Administrative Agent, in
immediately available funds for its own account, any fees (including reasonable
and documented fees, disbursements and other charges of counsel to the
Administrative Agent) to be received on the date hereof.

 

4.            Governing Law. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES UNDER THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

 

5.            Ratification. Except as expressly amended hereby, the Loan and
Servicing Agreement is in all respects ratified and confirmed and all the terms,
conditions and provisions thereof shall remain in full force and effect. This
Amendment shall form a part of the Loan and Servicing Agreement for all
purposes.

 

6.            Counterparts. The parties hereto may sign one or more copies of
this Amendment in counterparts, all of which together shall constitute one and
the same agreement. Delivery of an executed signature page of this Amendment by
facsimile or email transmission shall be effective as delivery of a manually
executed counterpart hereof.

 

7.            Headings. The headings of the Articles and Sections in this
Amendment are for convenience of reference only and shall not be deemed to alter
or affect the meaning or interpretation of any provisions hereof.

 

8.            Severability Clause. In case any provision in this Amendment shall
be invalid, illegal or unenforceable, the validity, legality, and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.

 

2 

 

 

9.            FATCA. This Amendment to the Loan and Servicing Agreement will not
result a “material modification” that affects this transaction’s status as a
“grandfathered obligation” (each as defined in FATCA) for FATCA purposes. The
Collateral Agent and Collateral Custodian shall be entitled to rely, and shall
be fully protected in relying upon, the foregoing statement and shall have no
obligation to determine and shall assume that this transaction’s status as a
“grandfathered obligation” under FATCA has not changed, unless and until the
Collateral Agent and Collateral Custodian receives written notice from the
Borrower.

 

[Signature page follows]

 

3 

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed as of the date first written above.

        WISSAHICKON CREEK LLC as the Borrower         By: /s/ Gerald F.
Stahlecker     Name: Gerald F. Stahlecker     Title: Executive Vice President  
      WELLS FARGO BANK, NATIONAL ASSOCIATION, as the Administrative Agent      
  By: /s/ Matt Jensen     Name: Matt Jensen     Title: Director         WELLS
FARGO BANK, NATIONAL ASSOCIATION, as an Institutional Lender         By: /s/
Matt Jensen     Name: Matt Jensen     Title: Director         WELLS FARGO BANK,
NATIONAL ASSOCIATION, as the Collateral Agent, the Account Bank and the
Collateral Custodian         By: /s/ Philip Dean     Name: Philip Dean    
Title: Vice President

 

[Signature Page to First Amendment to LSA]

 

 

 

 

Acknowledged and agreed to by:

      FS INVESTMENT CORPORATION II, as Collateral Manager         By: /s/ Gerald
F. Stahlecker     Name: Gerald F. Stahlecker     Title: Executive Vice President
 

 

[Signature Page to First Amendment to LSA]

 

 

 

 

APPENDIX A

 

Loan and Servicing Agreement Amendments

 

Appendix A

 

 

 

EXECUTION VERSION

Conformed through the First Amendment dated February 17, 2017

 

 

U.S. $250,000,000

 

LOAN AND SERVICING AGREEMENT

 

Dated as of February 19, 2014

 

Among

 

WISSAHICKON CREEK LLC,
as the Borrower

 

WELLS FARGO SECURITIES, LLCBANK, NATIONAL ASSOCIATION,
as the Administrative Agent

 

EACH OF THE CONDUIT LENDERS AND INSTITUTIONAL LENDERS FROM TIME TO TIME PARTY
HERETO,
as the Lenders

 

EACH OF THE LENDER AGENTS FROM TIME TO TIME PARTY HERETO,
as the Lender Agents

 

and

 

WELLS FARGO BANK, NATIONAL ASSOCIATION,
as the Collateral Agent, Account Bank and Collateral Custodian

 

 

 

 

TABLE OF CONTENTS

 

    Page   ARTICLE I.   DEFINITIONS   Section 1.01 Certain Defined Terms 1
Section 1.02 Other Terms 4346 Section 1.03 Computation of Time Periods 4346
Section 1.04 Instruction by Borrower Advisors 4346 Section 1.05 Paydown of
Partially Eligible Loans 4447 Section 1.06 Interpretation 4447   ARTICLE II.  
THE FACILITY       Section 2.01 Variable Funding Note and Advances 4548 Section
2.02 Procedure for Advances 4649 Section 2.03 Yield and Non-Usage Fees 4750
Section 2.04 Remittance Procedures 4750 Section 2.05 Instructions to the
Collateral Agent and the Account Bank 5154 Section 2.06 Borrowing Base
Deficiency Payments 5155 Section 2.07 Discretionary Sales, Substitutions, Lien
Release Dividends, and Purchases and the Required Sale Date 52 56 Section 2.08
Payments and Computations, Etc 5760 Section 2.09 Increased Costs; Capital
Adequacy 5861 Section 2.10 Taxes 5962 Section 2.11 Assignment of Certain
Documents 6165 Section 2.12 Grant of a Security Interest 6265 Section 2.13
Evidence of Debt 6266 Section 2.14 Survival of Representations and Warranties
6366 Section 2.15 Release of Loans 6366 Section 2.16 Treatment of Amounts
Received by the Borrower 6467 Section 2.17 Repayment; Reduction of Commitments
6467 Section 2.18 Collections and Allocations 6568 Section 2.19 Reinvestment of
Principal Collections 6670 Section 2.20 Commitment Increases and Joinder of New
Lenders 6771 Section 2.21 Defaulting Lenders 6871

 

-i-

 

 

      ARTICLE III.   CONDITIONS PRECEDENT   Section 3.01 Conditions Precedent to
Effectiveness 6972 Section 3.02 Conditions Precedent to All Advances 7276
Section 3.03 Advances Do Not Constitute a Waiver 7478   ARTICLE IV.  
REPRESENTATIONS AND WARRANTIES   Section 4.01 Representations and Warranties of
the Borrower 7478 Section 4.02 Representations and Warranties of the Borrower
Relating to the Agreement and the Collateral Portfolio 8286 Section 4.03
Representations and Warranties of the Collateral Agent 8386 Section 4.04
Representations and Warranties of each Lender 8487 Section 4.05 Representations
and Warranties of the Collateral Custodian 8487   ARTICLE V.   GENERAL COVENANTS
  Section 5.01 Affirmative Covenants of the Borrower 8588 Section 5.02 Negative
Covenants of the Borrower 9194 Section 5.03 Affirmative Covenants of the
Collateral Agent 9497 Section 5.04 Negative Covenants of the Collateral Agent
9497 Section 5.05 Affirmative Covenants of the Collateral Custodian 9498 Section
5.06 Negative Covenants of the Collateral Custodian 9598   ARTICLE VI.  
ADMINISTRATION AND SERVICING OF CONTRACTS   Section 6.01 [Reserved] 9598 Section
6.02 Collateral Management Duties 9598 Section 6.03 Authorization of the
Collateral Manager 9599 Section 6.04 Collection of Payments; Accounts 96100
Section 6.05 Management of REO Assets 97101 Section 6.06 [Reserved] 98102
Section 6.07 Reports to the Administrative Agent; Account Statements; Servicing
Information 98102 Section 6.08 Annual Statement as to Compliance 100104 Section
6.09 Annual Independent Public Accountant’s Review of Collateral Management
Reports 101104 Section 6.10 [Reserved] 101105

 

-ii-

 

 

Section 6.11 Collateral Manager Events of Default 101105   ARTICLE VII.   EVENTS
OF DEFAULT   Section 7.01 Events of Default 103107 Section 7.02 Additional
Remedies of the Administrative Agent 107111   ARTICLE VIII.   INDEMNIFICATION  
Section 8.01 Indemnities by the Borrower 109113 Section 8.02 Notices 112116
Section 8.03 Legal Proceedings 112116 Section 8.04 After-Tax Basis 113117  
ARTICLE IX.   THE ADMINISTRATIVE AGENT AND LENDER AGENTS   Section 9.01 The
Administrative Agent 113117 Section 9.02 The Lender Agents 117121 Section 9.03
Non-Receipt of Funds by the Administrative Agent 119123       ARTICLE X.  
COLLATERAL AGENT   Section 10.01 Designation of Collateral Agent 119123 Section
10.02 Duties of Collateral Agent 120123 Section 10.03 Merger or Consolidation
122126 Section 10.04 Collateral Agent Compensation 122126 Section 10.05
Collateral Agent Removal 122126 Section 10.06 Limitation on Liability 123126
Section 10.07 Collateral Agent Resignation 124128       ARTICLE XI.   COLLATERAL
CUSTODIAN   Section 11.01 Designation of Collateral Custodian 124128 Section
11.02 Duties of Collateral Custodian 125129 Section 11.03 Merger or
Consolidation 127131 Section 11.04 Collateral Custodian Compensation 127131

 

-iii-

 

 

Section 11.05 Collateral Custodian Removal 128131 Section 11.06 Limitation on
Liability 128132 Section 11.07 Collateral Custodian Resignation 129133 Section
11.08 Release of Documents 129133 Section 11.09 Return of Required Loan
Documents 130134 Section 11.10 Access to Certain Documentation and Information
Regarding the Collateral Portfolio; Due Diligence on the Borrower Advisors
130134 Section 11.11 Bailment 131135       ARTICLE XII.   MISCELLANEOUS  
Section 12.01 Amendments and Waivers 131135 Section 12.02 Notices, Etc 133136
Section 12.03 No Waiver; Remedies 133137 Section 12.04 Binding Effect;
Assignability; Multiple Lenders 133137 Section 12.05 Term of This Agreement
134138 Section 12.06 GOVERNING LAW; JURY WAIVER 134138 Section 12.07 Costs,
Expenses and Taxes 135138 Section 12.08 No Proceedings 136139 Section 12.09
Recourse Against Certain Parties 136140 Section 12.10 Execution in Counterparts;
Severability; Integration 137141 Section 12.11 Consent to Jurisdiction; Service
of Process 138142 Section 12.12 Characterization of Conveyances Pursuant to the
Purchase and Sale Agreement 138142 Section 12.13 Confidentiality 139143 Section
12.14 Non-Confidentiality of Tax Treatment 141145 Section 12.15 Waiver of Set
Off 141145 Section 12.16 Headings and Exhibits 141145 Section 12.17 Ratable
Payments 141145 Section 12.18 Failure of Borrower or Collateral Manager to
Perform Certain Obligations 142146 Section 12.19 Power of Attorney 142146
Section 12.20 Intent of the Parties 142146 Section 12.21 Limitation on Liability
142146

 

-iv-

 

 

LIST OF SCHEDULES AND EXHIBITS

 

SCHEDULES SCHEDULE I Prior Names, Tradenames, Fictitious Names and “Doing
Business As” Names SCHEDULE II Agreed-Upon Procedures For Independent Public
Accountants SCHEDULE III Moody’s Industry Classification Group List     EXHIBITS
    EXHIBIT A Form of Approval Notice EXHIBIT B Intentionally Omitted EXHIBIT C
Form of Borrowing Base Certificate EXHIBIT D Form of Disbursement Request
EXHIBIT E Form of Joinder Supplement EXHIBIT F Form of Notice of Borrowing
EXHIBIT G Form of Notice of Reduction (Reduction of Advances Outstanding)
EXHIBIT H Form of Notice of Reduction (Reduction of Maximum Facility Amount)
EXHIBIT I Form of Variable Funding Note EXHIBIT J Form of Certificate of Closing
Attorneys EXHIBIT K Form of Collateral Management Report EXHIBIT L Form of
Collateral Manager Certificate (Collateral Management Report) EXHIBIT M Form of
Release of Required Loan Documents EXHIBIT N Form of Transferee Letter EXHIBIT O
Intentionally Omitted EXHIBIT P Form of Officer’s Certificate (Solvency) EXHIBIT
Q Form of Notice and Request for Consent to Lien Release Dividend     ANNEXES  
  ANNEX A Addresses for Notices ANNEX B Commitments

 

-v-

 

 

THIS LOAN AND SERVICING AGREEMENT (as amended, modified, waived, supplemented,
restated or replaced from time to time, this “Agreement”) is made as of February
19, 2014, among:

 

(1)           WISSAHICKON CREEK LLC, a Delaware limited liability company
(together with its successors and assigns in such capacity, the “Borrower”);

 

(2)           EACH OF THE CONDUIT LENDERS FROM TIME TO TIME PARTY HERETO
(together with its respective successors and assigns in such capacity, each a
“Conduit Lender” and collectively, the “Conduit Lenders”);

 

(3)           EACH OF THE INSTITUTIONAL LENDERS FROM TIME TO TIME PARTY HERETO
(together with its respective successors and assigns in such capacity, each an
“Institutional Lender”, collectively, the “Institutional Lenders” and, together
with the Conduit Lenders, the “Lenders”);

 

(4)           EACH OF THE LENDER AGENTS FROM TIME TO TIME PARTY HERETO (together
with its respective successors and assigns in such capacity, each a “Lender
Agent” and collectively, the “Lender Agents”);

 

(5)           WELLS FARGO SECURITIES, LLCBANK, NATIONAL ASSOCIATION, as
Administrative Agent (together with its successors and assigns in such capacity,
the “Administrative Agent”); and

 

(6)           WELLS FARGO BANK, NATIONAL ASSOCIATION, as the Collateral Agent
(together with its successors and assigns in such capacity, the “Collateral
Agent”), the Account Bank (as defined herein) and the Collateral Custodian
(together with its successors and assigns in such capacity, the “Collateral
Custodian”).

 

PRELIMINARY STATEMENT

 

The Lenders have agreed, on the terms and conditions set forth herein, to
provide a secured revolving credit facility which shall provide for Advances
under the Variable Funding Note(s) from time to time in an aggregate principal
amount not to exceed the Borrowing Base. The proceeds of the Advances will be
used to finance the Borrower’s purchase of Eligible Loans either (i) from the
Seller pursuant to the Purchase and Sale Agreement between the Borrower and the
Seller or (ii) that the Borrower funds or acquires from a third party seller as
approved by the Administrative Agent in accordance herewith. Accordingly, the
parties agree as follows:

 

ARTICLE I.

DEFINITIONS

 

Section 1.01        Certain Defined Terms.

 

(a)           Certain capitalized terms used throughout this Agreement are
defined above or in this Section 1.01.

 

 

 

(b)           As used in this Agreement and the exhibits, schedules and annexes
thereto (each of which is hereby incorporated herein and made a part hereof),
the following terms shall have the following meanings (such meanings to be
equally applicable to both the singular and plural forms of the terms defined):

 

“1940 Act” means the Investment Company Act of 1940, as amended, and the rules
and regulations promulgated thereunder.

 

“Account Bank” means Wells Fargo, in its capacity as the “Securities
Intermediary” pursuant to the Securities Account Control Agreement.

 

“Action” has the meaning assigned to that term in Section 8.06.

 

“Additional Amount” has the meaning assigned to that term in Section 2.10(a).

 

“Adjusted Borrowing Value” means for any Eligible Loan on any date of
determination, an amount equal to the Assigned Value of such Eligible Loan at
such time multiplied by the Outstanding Balance of such Loan; provided that the
parties hereby agree that the Adjusted Borrowing Value of any Loan that is no
longer an Eligible Loan shall be zero.

 

“Administrative Agent” means Wells Fargo Securities, LLCBank, National
Association, in its capacity as administrative agent for the Lender Agents,
together with its successors and assigns, including any successor appointed
pursuant to Article IX.

 

“Advance” means each loan advanced by the Lenders to the Borrower on an Advance
Date pursuant to Article II.

 

“Advance Date” means, with respect to any Advance, the date on which such
Advance is made.

 

“Advances Outstanding” means, on any date, the aggregate principal amount of all
Advances outstanding on such date, after giving effect to all repayments of
Advances and the making of new Advances on such date.

 

“Advisory Agreements” means (i) the Collateral Advisor Agreement and (ii) the
Investment Sub-Advisory Agreement between the Collateral Advisor and the
Collateral Sub-Advisor.

 

“Affected Party” has the meaning assigned to that term in Section 2.09(a).

 

“Affiliate” means, when used with respect to a Person, any other Person
controlling, controlled by or under common control with such Person. For the
purposes of this definition, “control” means, when used with respect to any
specified Person, the power to vote 20% or more of the voting securities of such
Person or to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms “controlling” and “controlled” have meanings
correlative to the foregoing; provided, that for purposes of determining whether
any Loan is an Eligible Loan, the term Affiliate shall not include any Affiliate
relationship which may exist solely as a result of direct or indirect ownership
of, or control by, a common Financial Sponsor.

 

-2-

 

 

“Aggregate Unfunded Exposure Amount” means, on any date of determination, the
sum of the Unfunded Exposure Amounts of all Loans owned by the Borrower.

 

“Agented Loan” means any Loan other than a Third Party Agented Loan (i)
originated by the Seller as a part of a syndicated loan transaction that has
been closed (without regard to any contemporaneous or subsequent syndication of
such Loan) prior to the Pledge of such Loan, (ii) with respect to which the
Seller is the administrative agent, and (iii) with respect to which, upon an
assignment of the promissory note under the Purchase and Sale Agreement to the
Borrower, the Borrower, as assignee of the note, will have all of the rights but
none of the obligations of the Seller with respect to such note and the
Underlying Collateral.

 

“Agreement” has the meaning assigned in the preamble hereto.

 

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

 

-3-

 

 

“Applicable Percentage” means, for each Eligible Loan, the corresponding
percentage for the type of Loan (such type to be determined as of the Cut-Off
Date of each Loan and set forth on the Approval Notice pertaining to such Loan)
set forth below:

 

Loan Type

Applicable Percentage

Broadly Syndicated Loan 75.0% Large Middle Market Loan 70.0% Traditional Middle
Market Loan 67.5% Fixed Rate Loan or Senior Secured Bond 50.0% First Lien Last
Out Loan 45.0% Second Lien Loan 25.0% DIP Loan To be agreed by the
Administrative Agent and the Borrower as set forth in the Approval Notice
pertaining to such Loan

 

“Applicable Spread” means, with respect to any Lender and/or Lender Agent, the
“applicable spread” set forth in the applicable Lender Fee Letter.

 

“Approval Notice” means, with respect to any Eligible Loan, the written notice,
in substantially the form attached hereto as Exhibit A, evidencing the approval
by the Administrative Agent, in its sole discretion, of the acquisition of such
Eligible Loan by the Borrower.

 

“Approval Right” has the meaning assigned to that term in Section 3.02(c).

 

“Approved Broker Dealer” means each of ABN Amro, Bank of America Merrill Lynch,
The Bank of New York Company, Inc., Barclays, BNP Paribas SA, Citigroup, Inc.,
Credit Suisse, Deutsche Bank AG, The Goldman Sachs Group, Inc., HSBC, JPMorgan
Chase & Co., Macquarie, Mitsubishi, Morgan Stanley, Royal Bank of Canada, The
Royal Bank of Scotland Group plc, Societe Generale, Suntrust, UBS and Wells
Fargo.

 

“Approved Valuation Firm” means each of Duff & Phelps Corp., FTI Consulting,
Inc., Houlihan Lokey Howard & Zukin, Lincoln International LLC, Valuation
Research Corporation, American Appraisal Associates, Inc., Deloitte LLP, Ernst &
Young, LLP, KPMG, Sterling Valuation Group, and any other nationally recognized
accounting firm or valuation firm as approved by the Administrative Agent in its
sole discretion.

 

“Asset Coverage Ratio” means, with respect to the Collateral Manager, the ratio,
determined on a consolidated basis, without duplication, and in accordance with
GAAP as required by and in accordance with, the 1940 Act as affected by any
orders of the Securities and Exchange Commission issued to the Collateral
Manager, to be determined by the Board of Directors of the Collateral Manager
and reviewed by its auditors, of (a) the fair market value of the total assets
of the Collateral Manager and its Subsidiaries less all liabilities (other than
Indebtedness, including Indebtedness hereunder) of the Collateral Manager and
its Subsidiaries, to (b) the aggregate amount of Indebtedness of the Collateral
Manager and its Subsidiaries; provided, that the calculation of the Asset
Coverage Ratio shall not include Subsidiaries that are not required to be
included in consolidated reports by the 1940 Act (which includes any subsidiary
licensed by the Small Business Administration to operate under the Small
Business Investment Act of 1958).

 

-4-

 

 

“Assigned Value” means, with respect to each Loan, (i) prior to the occurrence
of a Value Adjustment Event with respect to such Loan, the least of (A) the
Purchase Price of such Loan (expressed as a percentage of par), (B) the value of
such Loan (expressed as a percentage of par and exclusive of any
post-acquisition PIK Interest or other accrued and unpaid interest thereon)
determined by the Administrative Agent in its sole discretion on the date such
Loan was acquired by the Borrower (provided that, in no event shall such value
be lower than the price that would be determined pursuant to clause (b)(ii) of
this definition) and (C) the par value of such Loan, and (ii) after the
occurrence of a Value Adjustment Event with respect to such Loan, as determined
below:

 

(a)           If a Value Adjustment Event of the type described in clauses (h)
or (j) of the definition thereof with respect to such Loan occurs, the Assigned
Value of such Loan will be zero.

 

(b)           If a Value Adjustment Event of the type described in clauses (a),
(b), (c), (d), (e), (f), (g) or (i) of the definition thereof with respect to
such Loan occurs:

 

(i)            unless such Loan is a Broadly Syndicated Loan, the Assigned Value
shall be determined by the Administrative Agent in its sole discretion; provided
that solely with respect to the occurrence of a Value Adjustment Event (other
than with respect to a Broadly Syndicated Loan) of the type described in clauses
(b) and (c) of the definition thereof, immediately after giving effect to any
such reevaluation, the Assigned Value shall, to the extent applicable, not be
lower than (1) the original Assigned Value and (2) such value that would result
in the Facility Attachment Ratio for such Loan being equating to the “Minimum
Facility Attachment Ratio” specified therefor in accordance with the grids
below:

 

Large Middle Market Loans, Traditional Middle Market Loans, Fixed Rate Loans

Senior Net Leverage Ratio Minimum Facility Attachment Ratio Less than 4.25x
2.90x Greater than or equal to 4.25 and less than 5.00x 2.80x Greater than or
equal to 5.00 and less than 6.00x 2.70x Greater than or equal to 6.00 and less
than 7.00x 2.60x Greater than or equal to 7.00 and less than 8.00x 2.40x Greater
than or equal to 8.00x 0.00x

 

-5-

 

 

First Lien Last Out Loans

Senior Net Leverage Ratio Minimum Facility Attachment Ratio Less than 5.00x
Facility Attachment Ratio as of the date of acquisition of such Loan Greater
than or equal to 5.00 and less than 6.00x Facility Attachment Ratio as of the
date of acquisition of such Loan less 0.25x Greater than or equal to 6.00 and
less than 7.00x Facility Attachment Ratio as of the date of acquisition of such
Loan less 0.50x Greater than or equal to 7.00x 0.00x

Second Lien Loans

Total Net Leverage Ratio Minimum Facility Attachment Ratio Less than 5.00x
Facility Attachment Ratio as of the date of acquisition of such Loan Greater
than or equal to 5.00 and less than 6.00x Facility Attachment Ratio as of the
date of acquisition of such Loan less 0.25x Greater than or equal to 6.00 and
less than 7.00x Facility Attachment Ratio as of the date of acquisition of such
Loan less 0.50x Greater than or equal to 7.00x 0.00x

Designated Loans

Total Net Leverage Ratio Minimum Facility Attachment Ratio Less than 6.00x
Lesser of (x) the Facility Attachment Ratio as of the date of acquisition of
such Loan and (y) 2.00x Greater than or equal to 6.00x 0.00x

 

(ii)           if such Loan is a Broadly Syndicated Loan, the Assigned Value
shall be the value (expressed as a percentage of par) assigned to such Loan by
LoanX Mark-It Partners, Loan Pricing Corporation or another nationally
recognized pricing service selected by the Borrower (or the Collateral Manager
on its behalf) and approved in writing by the Administrative Agent; provided
that, if the Administrative Agent, in its sole discretion, determines that the
value assigned by the applicable pricing service(s) is not current or accurate
or is not available, the value for such Loan (expressed as a percentage of par)
shall be determined by (A) the average of the bid side prices obtained from
three (3) Approved Broker Dealers or (B) if a value cannot be obtained pursuant
to the means contemplated by clause (A), the lower of the bid side prices
obtained from two (2) Approved Broker Dealers or (C) if a value cannot be
obtained pursuant to the means contemplated by either clause (A) or (B), the bid
side price obtained from one (1) Approved Broker Dealer; provided, further, that
if the Administrative Agent, in its sole discretion, determines that any bid
side price obtained from any applicable Approved Broker Dealer(s) is not current
or accurate or is not available, then such price will not be eligible for
consideration in clauses (A), (B) or (C). If no Assigned Value can be determined
under clauses (A), (B) or (C), then the value for such Loan (expressed as a
percentage of par) shall be determined by the Administrative Agent in its sole
discretion. The Assigned Value of such Loan shall be the value assigned by the
Administrative Agent until the Assigned Value is otherwise determined pursuant
to this clause (ii) (subject to clause (c) below); and

 

-6-

 

 

(iii)          notwithstanding clauses (i) and (ii) above, at all times more
than 12 months after the occurrence of a Value Adjustment Event of the type
described in clauses (d), (e) or (f) of the definition thereof with respect to
such Loan, the Assigned Value of such Loan will be zero.

 

(c)           If the Borrower or the Collateral Manager disagrees with the
Administrative Agent’s determination of the Assigned Value of a Loan, it may (at
the expense of the Borrower) retain any Approved Valuation Firm to value such
Loan and if the value (expressed as a percentage of par) determined by such
Approved Valuation Firm is greater than the Administrative Agent’s determination
of the Assigned Value, such Approved Valuation Firm’s valuation shall become the
Assigned Value of such Loan; provided that (i) such Approved Valuation Firm must
value such Loan within twenty (20) days after the related Approval Notice or the
Borrower’s receipt of the notice pursuant to clause (e) below, as applicable,
and (ii) the Assigned Value of such Loan shall be the value (expressed as a
percentage of par) determined by the Administrative Agent until such Approved
Valuation Firm has determined its value.

 

(dc)          After the initial determination by the Administrative Agent of the
Assigned Value of a Loan pursuant to clause (b), the Administrative Agent may
only decrease the Assigned Value of such Loan upon the occurrence of the
applicable Value Adjustment Event or upon the occurrence of another Value
Adjustment Event.

 

(ed)          The Administrative Agent shall promptly notify the Borrower or the
Collateral Manager of any change effected by the Administrative Agent to the
Assigned Value of any Loan.

 

“Authorized Person” means, with respect to any Person, any other duly authorized
Person by appropriate organizational process (a copy of which has been delivered
to the Administrative Agent) to whom, with respect to a particular matter, such
matter is referred because of such Person’s knowledge of and familiarity with
the particular subject.

 

“Available Collections” means all cash collections and other cash proceeds with
respect to any Loan, including, without limitation, all Principal Collections,
all Interest Collections, all proceeds of any sale or disposition (in part or in
whole) with respect to such Loan, cash proceeds or other funds received by the
Borrower or any Borrower Advisor with respect to any Underlying Collateral
(including from any guarantors), all other amounts on deposit in the Controlled
Accounts from time to time, and all proceeds of Permitted Investments with
respect to the Controlled Accounts.

 

“Bankruptcy Code” means Title 11, United States Code, 11 U.S.C. §§ 101 et seq.,
as amended from time to time.

 

“Bankruptcy Event” means, with respect to a specified Person, (a) the filing of
a decree or order for relief by a court having jurisdiction over such Person or
any substantial part of its property in an involuntary case under any applicable
Bankruptcy Law now or hereafter in effect, or appointing a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official for such Person
or for any substantial part of its property, or ordering the winding-up or
liquidation of such Person’s affairs, and such decree, order or appointment
shall remain unstayed and in effect for a period of sixty (60) consecutive days,
(b) the commencement by such Person of a voluntary case under any applicable
Bankruptcy Law now or hereafter in effect, or the consent by such Person to the
entry of an order for relief in an involuntary case under any such law, (c) the
consent by such Person to the appointment of or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official for
such Person or for any substantial part of its property, or the making by such
Person of any general assignment for the benefit of creditors, or (d) the
failure by such Person generally to pay its debts as such debts become due.

 

-7-

 

 

“Bankruptcy Laws” means the Bankruptcy Code and all other applicable
liquidation, conservatorship, bankruptcy, moratorium, rearrangement,
receivership, insolvency, reorganization, suspension of payments, or similar
debtor relief laws from time to time in effect affecting the rights of creditors
generally.

 

“Bankruptcy Proceeding” means any case, action or proceeding before any court or
other Governmental Authority relating to any Bankruptcy Event.

 

“Base Rate” means, on any date, a fluctuating per annum interest rate equal to
the higher of (a) the Prime Rate or (b) the Federal Funds Rate plus 0.5%;
provided that, notwithstanding the foregoing, on any date LIBOR exceeds the
higher of the rates specified in clauses (a) and (b), the Base Rate shall be
increased by such excess for such date.

 

“Borrower” has the meaning assigned to that term in the preamble hereto.

 

“Borrower Advisors” means, collectively, the Collateral Manager, the Collateral
Advisor and the Collateral Sub-Advisor.

 

“Borrower Parties” means, collectively, the Borrower, the Equityholder, the
Seller and the Borrower Advisors.

 

“Borrowing Base” means, as of any date of determination, an amount equal to the
least of:

 

(a)       (i) the aggregate sum of the products of (A) the Applicable Percentage
for each Eligible Loan as of such date and (B) the Adjusted Borrowing Value of
such Eligible Loan as of such date, plus (ii) the amount on deposit in and the
value of all Permitted Investments credited to the Principal Collection Account
on such date, minus (iii) the Unfunded Exposure Equity Shortfall; or

 

(b)       (i) the aggregate sum of the Adjusted Borrowing Values of all Eligible
Loans as of such date minus (ii) the Minimum Equity Amount, plus (iii) the
amount on deposit in and the value of all Permitted Investments credited to the
Principal Collection Account on such date, minus (iv) the Unfunded Exposure
Equity Shortfall; or

 

(c)       (i) the Maximum Facility Amount, minus (ii) the Unfunded Exposure
Equity Shortfall;

 

-8-

 

 

provided that, for the avoidance of doubt, any Loan which is not an Eligible
Loan shall not be included in any calculation of “Borrowing Base”.

 

“Borrowing Base Certificate” means a certificate setting forth the calculation
of the Borrowing Base as of the applicable date of determination substantially
in the form of Exhibit C hereto, prepared by the Borrower or the Collateral
Manager.

 

“Borrowing Base Deficiency” means, as of any date of determination, the extent
to which the aggregate Advances Outstanding on such date exceeds the Borrowing
Base.

 

“Breakage Fee” means, for Advances which are repaid (in whole or in part) on any
date other than a Payment Date, the breakage costs, if any, related to such
repayment, based upon the assumption that the applicable Lender funded its loan
commitment in the London Interbank Eurodollar market and using any reasonable
attribution or averaging methods which the Lender deems appropriate and
practical, it hereby being understood that the amount of any loss, costs or
expense payable by the Borrower to any Lender as Breakage Fee shall be
determined in the respective Lender Agent’s reasonable discretion and shall be
conclusive absent manifest error.

 

“Broadly Syndicated Loan” means any Loan Asset that (i) is broadly syndicated,
(ii) is not (and cannot by its terms become) subordinate in right of payment to
any obligation of the Obligor in any bankruptcy, reorganization, insolvency,
moratorium or liquidation proceedings, (iii) is secured by a pledge of
collateral, which security interest is validly perfected and first priority
under Applicable Law (subject to Liens described in clause (b) (other than
clause (v) thereof) of the definition of Permitted Liens), (iv) the Borrower or
the Collateral Manager determines in good faith that the value of the collateral
securing such Loan Asset (or the enterprise value of the underlying business) on
or about the time of origination equals or exceeds the outstanding principal
balance of such Loan Asset plus the aggregate outstanding balances of all other
loans of equal or higher seniority secured by the same collateral, (v) has a
Tranche Size of $250,000,000 or greater, (vi) unless such Loan Asset is a DIP
Loan, at the time such Loan Asset is acquired by the Borrower, it is rated by
both S&P and Moody’s (or the Obligor is rated by both S&P and Moody’s) and such
ratings are not lower than “B3” by Moody’s and “B-” by S&P and (vii) has an
Outstanding Balance that, when aggregated with the Outstanding Balances of all
other Broadly Syndicated Loans to such Obligor, is less than (a) for up to ten
(10) Obligors at any one time, $5,000,000 or (b) with respect to any Obligor not
covered by clause (a), $4,000,000. For the avoidance of doubt, if the
Outstanding Balance of a Loan Asset is greater than the applicable threshold in
clause (vii), such Loan Asset is not a Broadly Syndicated Loan.

 

“Business Day” means a day of the year other than (i) Saturday or a Sunday or
(ii) any other day on which commercial banks in New York, New York, Columbia,
Maryland or Charlotte, North Carolina are not open for business; provided, that,
if any determination of a Business Day shall relate to an Advance bearing
interest at LIBOR, the term “Business Day” shall also exclude any day on which
banks are not open for dealings in dollar deposits in the London interbank
market.

 

-9-

 

 

“Capital Lease Obligations” means, with respect to any entity, the obligations
of such entity to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such entity under GAAP,
and the amount of such obligations shall be the capitalized amount thereof
determined in accordance with GAAP.

 

“Cash Interest Expense” means, with respect to any Obligor for any period, the
amount which, in conformity with GAAP, would be set forth opposite the caption
“interest expense” (exclusive of any PIK Interest) or any like caption reflected
on the most recent financial statements delivered by such Obligor to the
Borrower for such period.

 

“Closing Date” means February 19, 2014.

 

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

 

“Collateral Advisor” means FSIC II Advisor, LLC, a Delaware limited liability
company in its capacity as collateral advisor.

 

“Collateral Advisor Agreement” means the Investment Advisory and Administrative
Services Agreement between the Collateral Manager and the Collateral Advisor.

 

“Collateral Agent” has the meaning assigned to that term in the preamble hereto.

 

“Collateral Agent Expenses” means the expenses set forth in the Wells Fargo
Corporate Trust Fee Letter and any other accrued and unpaid reasonable and
documented out-of-pocket expenses (including reasonable and documented
attorneys’ fees, costs and expenses) and indemnity amounts payable by the
Borrower to the Collateral Agent under the Transaction Documents.

 

“Collateral Agent Fees” means the fees set forth in the Wells Fargo Corporate
Trust Fee Letter, as such fee letter may be amended, restated, supplemented
and/or otherwise modified from time to time.

 

“Collateral Agent Termination Notice” has the meaning assigned to that term in
Section 10.05.

 

“Collateral Custodian” means Wells Fargo, not in its individual capacity, but
solely as collateral custodian pursuant to the terms of this Agreement.

 

“Collateral Custodian Expenses” means the expenses set forth in the Wells Fargo
Corporate Trust Fee Letter and any other accrued and unpaid reasonable and
documented out-of-pocket expenses (including reasonable and documented
attorneys’ fees, costs and expenses) and indemnity amounts payable by the
Borrower to the Collateral Custodian under the Transaction Documents.

 

-10-

 

 

“Collateral Custodian Fees” means the fees set forth in the Wells Fargo
Corporate Trust Fee Letter, as such fee letter may be amended, restated,
supplemented and/or otherwise modified from time to time.

 

“Collateral Custodian Termination Notice” has the meaning assigned to that term
in Section 11.05.

 

“Collateral File” means, for each Loan, (a) copies of each of the Required Loan
Documents and (b) any other portion of the Loan File which is not part of the
Required Loan Documents.

 

“Collateral Management Report” has the meaning assigned to that term in Section
6.07(b).

 

“Collateral Manager” means FS Investment Corporation II or any other Person then
authorized, pursuant to the Management Agreement, to service, administer, and
collect on the Loans and exercise rights and remedies in respect of the same.

 

“Collateral Manager Event of Default” has the meaning assigned to that term in
Section 6.11.

 

“Collateral Management Standard” means, with respect to any Loans included in
the Collateral Portfolio, to service and administer such Loans on behalf of the
Secured Parties in accordance with Applicable Law, the terms of this Agreement,
the Underlying Instruments, all customary and usual servicing practices for
loans like the Loans and, to the extent consistent with the foregoing, (i) with
reasonable care, using a degree of skill and diligence not less than that with
which the Borrower or Collateral Manager, as applicable, services and
administers loans for its own account or for the account of its Affiliates
having similar lending objectives and restrictions, and (ii) to the extent not
inconsistent with clause (i), in a manner consistent with the customary
standards, policies and procedures followed by institutional managers of
national standing relating to assets of the nature and character of the
Collateral Portfolio and without regard to any relationship that the Collateral
Manager or any Affiliate thereof may have with any Obligor or any Affiliate of
any Obligor. Solely pursuant to Section 6.11(a), the “Collateral Management
Standard” shall apply to each Borrower Advisor.

 

“Collateral Manager Certificate” has the meaning assigned to that term in
Section 6.07(c).

 

-11-

 

 

“Collateral Portfolio” means all right, title, and interest (whether now owned
or hereafter acquired or arising, and wherever located) of the Borrower in the
property identified below in clauses (a) through (e) and all accounts, cash and
currency, chattel paper, tangible chattel paper, electronic chattel paper,
copyrights, copyright licenses, equipment, fixtures, contract rights, general
intangibles, instruments, certificates of deposit, certificated securities,
uncertificated securities, financial assets, securities entitlements, commercial
tort claims, deposit accounts, inventory, investment property, letter-of-credit
rights, software, supporting obligations, accessions, or other property
consisting of, arising out of, or related to any of the following (in each case
excluding the Retained Interest and the Excluded Amounts):

 

(a)          the Loans, and all monies due or to become due in payment under
such Loans on and after the related Cut-Off Date, including, but not limited to,
all Available Collections;

 

(b)          the Portfolio Assets with respect to the Loans referred to in
clause (a);

 

(c)          the Controlled Accounts and all Permitted Investments purchased
with funds on deposit in the Controlled Accounts;

 

(d)          the Borrower’s equity interests in any Portfolio Subsidiary;

 

(e)          any Loan or other asset received in exchange for an Eligible Loan
in connection with any workout or other restructuring of such asset (it being
understood, for the avoidance of doubt, that such Loan or other asset shall not
be an Eligible Loan unless it meets each of the criteria set forth in such
definition); and

 

(f)          all income and Proceeds of the foregoing.

 

“Collateral Sub-Advisor” means GSO/Blackstone Debt Funds Management LLC, a
Delaware limited liability company, in its capacity as Collateral Sub-Advisor.

 

“Collection Account” means account number 48444900 at the Account Bank in the
name of the Borrower subject to the Lien of the Collateral Agent for the benefit
of the Secured Parties including any sub-account thereof; provided, that the
funds deposited therein (including any interest and earnings thereon) from time
to time shall constitute the property and assets of the Borrower, and the
Borrower shall be solely liable for any Taxes payable with respect to the
Collection Account.

 

“Collection Date” means the date on which the aggregate outstanding principal
amount of the Advances have been repaid in full and all Yield and Fees and all
other Obligations have been paid in full (other than contingent liability
obligations as to which no claim has been made), and the Borrower shall have no
further right to request any additional Advances.

 

“Collection Period” means, (i) as to the initial Payment Date, the period
beginning on the Closing Date and ending on, and including, the Determination
Date immediately preceding such Payment Date and (ii) as to any subsequent
Payment Date, the period beginning on the first day after the most recently
ended Collection Period and ending on, and including, the Determination Date
immediately preceding such Payment Date, or, with respect to the final
Collection Period, the Collection Date.

 

“Commercial Paper Notes” means, any short-term promissory notes of any Conduit
Lender issued by such Conduit Lender in the commercial paper market.

 

“Commitment” means, with respect to each Lender, (i) prior to the end of the
Reinvestment Period, the dollar amount set forth opposite such Lender’s name on
Annex B hereto or the amount set forth as such Lender’s “Commitment” on Schedule
I to the Joinder Supplement relating to such Lender, as applicable (after giving
effect to any decrease pursuant to Section 2.17 or increase pursuant to Section
2.20) and (ii) on or after the Reinvestment Period, such Lender’s Pro Rata Share
of the aggregate Advances Outstanding.

 

-12-

 

 

“Conduit Lender” means each commercial paper conduit as may from time to time
become a Lender hereunder by executing and delivering a Joinder Supplement to
the Administrative Agent and the Borrower as contemplated by Section 2.20.

 

“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.

 

“Controlled Accounts” means the Collection Account, the Interest Collection
Account, the Principal Collection Account and the Unfunded Exposure Account.

 

“Credit Risk Loan” means an Eligible Loan that, in the Borrower or the
Collateral Manager’s reasonable commercial judgment (as certified by the
Borrower or the Collateral Manager to the Administrative Agent and the Lenders),
is declining in value or has a significant risk of declining in credit quality
or price in the near term.

 

“Cure Plan” means a plan submitted by the Borrower to the Administrative Agent
satisfying the requirements of Section 2.06(c).

 

“Cure Plan Sale” means a sale of a Loan pursuant to an approved Cure Plan.

 

“Cut-Off Date” means, with respect to each Loan, the date such Loan is Pledged
hereunder.

 

“Defaulting Lender” means any Lender that has (or, with respect to clause (iv)
of this definition, has a direct or indirect parent company that has) (i) failed
to fund any portion of the Advances on the date required to be funded by it
hereunder, (ii) otherwise failed to pay over to the Administrative Agent or any
other Lender any other amount required to be paid by it hereunder within three
Business Days of the date when due, unless such amount is the subject of a good
faith dispute, (iii) notified the Borrower, the Administrative Agent or any
other Lender in writing that it does not intend to comply with any of its
funding obligations under this Agreement or has made a public statement to the
effect that it does not intend to comply or has failed to comply with its
funding obligations under this Agreement or generally under other agreements in
which it commits or is obligated to extend credit, or (iv) become or is not
Solvent or has become the subject of a Bankruptcy Proceeding, or has had a
receiver, conservator, trustee or custodian appointed for it, or has taken any
action in furtherance of, or indicating its consent to, approval of or
acquiescence in any such proceeding or appointment.

 

“Delayed Draw Loan” means a Loan that requires one or more future advances to be
made by the Borrower and which does not permit the re-borrowing of any amount
previously repaid by the related Obligor; provided that, such Loan shall only be
considered a Delayed Draw Loan for so long as any future funding obligations
remain in effect and any reference to a Delayed Draw Loan shall refer only to
any portion of such Loan which constitutes a future funding obligation.

 

-13-

 

“Designated Loan” means a Loan that the Administrative Agent, in its sole
discretion, has designated as a “Designated Loan” on the related Approval Notice
solely for the purposes of determining the Assigned Value of such Loan in
reference to the “Minimum Facility Attachment Ratio” specified therefor and set
forth in the definition of “Assigned Value”.

 

“Determination Date” means the 4th day of each January, April, July and October.

 

“DIP Loan” means any Loan (i) with respect to which the related Obligor is a
debtor-in-possession as defined under the Bankruptcy Code, (ii) which has the
priority allowed pursuant to Section 364 of the Bankruptcy Code, (iii) the terms
of which have been approved by a court of competent jurisdiction (the
enforceability of which is not subject to any pending contested matter or
proceeding) and (iv) which is not a Fixed Rate Asset, a Senior Secured BondLoan,
a First Lien Last Out Loan or a Second Lien Loan.

 

“Disbursement Request” means a disbursement request from the Borrower to the
Administrative Agent and the Collateral Agent in the form attached hereto as
Exhibit D in connection with a disbursement request from the Principal
Collection Account in accordance with Section 2.19.

 

“Discretionary Sale” has the meaning set forth in Section 2.07(b).

 

“Dollars” means the lawful currency of the United States of America.

 

“EBITDA” means, with respect to any period and any Loan, the meaning of
“EBITDA”, “Adjusted EBITDA” or any comparable definition in the Underlying
Instrument for each such Loan, together with all reasonable add-backs and
exclusions as designated in such Underlying Instrument, and in any case that
“EBITDA”, “Adjusted EBITDA” or such comparable definition is not defined in such
Underlying Instrument, an amount, for the principal obligor on such Loan and any
of its parents or Subsidiaries that are obligated pursuant to the Underlying
Instrument for such Loan (determined on a consolidated basis without duplication
in accordance with GAAP) equal to earnings from continuing operations for such
period plus interest expense, income taxes and unallocated depreciation and
amortization for such period (to the extent deducted in determining earnings
from continuing operations for such period), and any other item the Borrower and
the Administrative Agent mutually deem to be appropriate.

 

“Eligible Assignee” means any commercial bank or insurance company.

 

“Eligible Loan” means each Loan (A) for which the Administrative Agent and/or
the Collateral Agent have received (or, in accordance with the definition of
“Required Loan Documents,” will receive) the related Required Loan Documents;
(B) with respect to which an Approval Notice has been executed by the
Administrative Agent; and (C) that satisfies each of the following eligibility
requirements (unless the Administrative Agent, with the prior consent of the
Required Lenders, agrees to waive any such eligibility requirement with respect
to such Loan):

 

(a)       such Loan is (i) a Broadly Syndicated Loan, a Fixed Rate Loan, a Large
Middle Market Loan, a Traditional Middle Market Loan, a First Lien Last Out
Loan, a

 

 -14-

 

 

Second Lien Loan or a DIP Loan or (ii) prior to the occurrence of the Required
Sale Date, a Senior Secured Bond;

 

(b)       after giving effect to such Loan as an Eligible Loan, as of the
related Cut-Off Date, the aggregate Outstanding Balance of all Eligible Loans
made to the applicable Obligor is not greater than $15,000,000; provided that
the aggregate Outstanding Balance of all Eligible Loans made to up to three (3)
Obligors may be up to $25,000,000 for each such Obligor; provided, further, that
only the portion of the Loans in excess of this threshold will be deemed to have
not satisfied this clause (b);

 

(c)       such Loan is denominated and payable solely in Dollars;

 

(d)       such Loan does not constitute Margin Stock;

 

(e)       unless such Loan is a Delayed Draw Loan, such Loan does not require
the Borrower to make advances in respect of such Loan at any time after the
Borrower’s purchase of such Loan;

 

(f)        the acquisition of such Loan will not cause the Borrower or the
Collateral Portfolio to be required to register as an investment company under
the 1940 Act;

 

(g)       after giving effect to such Loan as an Eligible Loan, the aggregate
Outstanding Balance of all Eligible Loans that are DIP Loans is not more than 5%
of the aggregate Outstanding Balance of all Eligible Loans; provided that, only
the portion of the Loans in excess of such threshold will be deemed to have not
satisfied this clause (g);

 

(h)       the principal Underlying Collateral for such Loan is not real
property;

 

(i)        such Loan, together with the Underlying Instrument related thereto,
is in full force and effect and constitutes the legal, valid and binding
obligation of the related Obligor and each guarantor thereof (if applicable),
enforceable against such Obligor and each such guarantor in accordance with its
terms, subject to customary bankruptcy, insolvency and equity limitations;

 

(j)        such Loan is in the form of and is treated as indebtedness of the
related Obligor for U.S. federal income tax purposes;

 

(k)       as of the related Cut-Off Date, such Loan is not delinquent in payment
of any amount under the related Underlying Instrument or other related
transaction documents;

 

(l)        none of the acquisition, sale, transfer or assignment of such Loan
nor the granting of a security interest hereunder to the Collateral Agent will
(i) violate, conflict with or contravene any Applicable Law or any contractual
or other restriction, limitation or encumbrance binding on the Borrower or (ii)
cause any Lender to fail to comply with any Applicable Law or request or
directive (whether or not having the force of law) from any banking or other
Governmental Authority having jurisdiction over such Lender;

 

 -15-

 

 

(m)      such Loan is eligible under the applicable Underlying Instrument
(giving effect to the provisions of Sections 9-406 and 9-408 of the UCC) to be
sold, transferred or assigned to the Borrower and to have a security interest
therein granted to the Collateral Agent, as agent for the Secured Parties
(subject to the rights of any applicable agents under the terms of the related
Underlying Instrument);

 

(n)       such Loan is not subject to, or the subject of any assertions in
respect of, any litigation, dispute or offset, and contains provisions
substantially to the effect that the Obligor’s and each guarantor’s (if
applicable) payment obligations thereunder are absolute and unconditional
without any right of rescission, setoff, counterclaim or defense for any reason
against the Borrower or any assignee;

 

(o)       immediately after giving effect to its acquisition of such Loan and at
all times it is owned by the Borrower, the Borrower (i) has good and marketable
title to, and is the sole owner of, such Loan, and the Borrower has granted to
the Collateral Agent for the benefit of the Secured Parties a valid and
perfected first priority (subject to Permitted Liens) Lien in the Loan and
related Underlying Instrument and (ii) has not granted a Lien in the Loan or the
related Underlying Instrument to any Person other than to the Collateral Agent
hereunder;

 

(p)       such Loan (or the acquisition thereof) is not subject to and will not
subject any Secured Party or any Affiliate thereof to any Tax, fee or other
governmental charge payable to any Governmental Authority;

 

(q)       the Obligor with respect to such Loan and each guarantor (if
applicable) thereof had full legal capacity to execute and deliver the related
Underlying Instrument;

 

(r)       all material consents, licenses, approvals or authorizations of, or
registrations or declarations with, any Governmental Authority or any other
Person required by the Borrower or under the Related Underlying Instrument under
Applicable Law to be obtained, effected or given in connection with the making,
acquisition, transfer or performance of such Loan have been duly obtained,
effected or given and are in full force and effect;

 

(s)       such Loan requires the related Obligor to pay customary maintenance,
repair, insurance and taxes, together with all other ancillary costs and
expenses, with respect to the Underlying Collateral of such Loan;

 

(t)       such Loan and any Underlying Collateral (i) comply in all respects
with all Applicable Laws and (ii) have not, and will not, be used by the related
Obligor in any manner or for any purpose that would result in any material risk
of liability being imposed upon the Borrower or any Secured Party under any
Applicable Law;

 

(u)       unless otherwise approved by the Administrative Agent in its sole
discretion, such Loan has a term to stated maturity that does not exceed seven
(7) years;

 

(v)       the Underlying Instrument for such Loan does not contain a
confidentiality provision that would prohibit any Secured Party from accessing
all necessary information with regard to such Loan, so long as such Secured
Party has agreed to maintain the confidentiality of such information in
accordance with the provisions of such Underlying Instrument;

 

 -16-

 

 

(w)      after giving effect to such Loan as an Eligible Loan, the aggregate
Outstanding Balance of all Fixed Rate Loans and Senior Secured Bonds is not more
than 10% of the aggregate Outstanding Balance of all Eligible Loans; provided
that, only the portion of the Loans in excess of such threshold will be deemed
to have not satisfied this clause (w);

 

(x)        if such Loan is a Fixed Rate Loan, it is not also a Second Lien Loan;

 

(y)       such Loan, and any payment made with respect to such Loan, is not
currently withholding any tax (or similar governmental charge) unless the
Obligor thereon is making “gross-up” payments that cover the full amount of such
withheld tax (or similar governmental charge) on an after-tax basis;

 

(z)       after giving effect to such Loan as an Eligible Loan, the aggregate
Outstanding Balance of all Eligible Loans that are Second Lien Loans is not more
than 20% of the aggregate Outstanding Balance of all Eligible Loans; provided
that, only the portion of the Loans in excess of such threshold will be deemed
to have not satisfied this clause (z);

 

(aa)     after giving effect to such Loan as an Eligible Loan, the aggregate
Outstanding Balance of all Eligible Loans that are Delayed Draw Loans is not
more than 5% of the aggregate Outstanding Balance of all Eligible Loans;
provided that, only the portion of the Loans in excess of such threshold will be
deemed to have not satisfied this clause (aa);

 

(bb) after giving effect to such Loan as an Eligible Loan, the aggregate
Outstanding Balance of all Eligible Loans that are First Lien Last Out Loans or
Second Lien Loans is not more than 40% of the aggregate Outstanding Balance of
all Eligible Loans; provided that, only the portion of the Loans in excess of
such threshold will be deemed to have not satisfied this clause (bb);

 

(bbcc)         to the actual knowledge of the Borrower, no written or verbal
notice of, or inquiry from any Governmental Authority regarding, any violation,
alleged violation, non-compliance, liability or potential liability regarding
environmental matters or compliance with Environmental Laws with regard to any
of the Underlying Collateral, nor does the Borrower have knowledge or reason to
believe that any such notice will be received or is being threatened, other
than, in each case, as notified to the Administrative Agent in writing on or
prior to the applicable Cut-Off Date or promptly after obtaining actual
knowledge of any such notice or inquiry; provided that, unless otherwise
permitted by the Administrative Agent, from and after the Borrower obtaining
such actual knowledge, the related Loans will no longer be counted as Eligible
Loans for purposes of calculating the Borrowing Base; and

 

(cc)     the Obligor with respect to such Loan is an Eligible Obligor.

 

 -17-

 

 

“Eligible Obligor” means, on any date of determination, any Obligor that:

 

(a)       is a business organization (and not a natural person) duly organized
and validly existing under the laws of its jurisdiction of organization;

 

(b)       is not a Governmental Authority;

 

(c)       is not an Affiliate of the Borrower or any Borrower Advisor;

 

(d)       is organized and incorporated in the United States or any State
thereof or Canada;

 

(e)       as of the related Cut-Off Date, there are no proceedings pending or,
to the best of the Borrower’s or the Equityholder’s knowledge, threatened (i)
asserting that such Obligor is not Solvent or (ii) pursuant to which such
Obligor, any other obligated party or any Governmental Authority has asserted
that such Loan or the related Underlying Instrument is illegal or unenforceable;

 

(f)       as of the related Cut-Off Date, is not the subject of and, to the best
of the Borrower’s or the Equityholder’s knowledge is not threatened with any
proceeding which would result in, a Bankruptcy Event with respect to such
Obligor;

 

(g)       to the actual knowledge of the Borrower, none of such Obligor’s
operations is the subject of a material Federal or state investigation
evaluating whether any remedial action, involving expenditures, is needed to
respond to a release of any Hazardous Materials into the environment, other
than, in each case, as notified to the Administrative Agent in writing on or
prior to the applicable Cut-Off Date or promptly after obtaining actual
knowledge of any such investigation; provided that, unless otherwise permitted
by the Administrative Agent, from and after the Borrower obtaining such actual
knowledge, the related Loans will no longer be counted as Eligible Loans for
purposes of calculating the Borrowing Base; and

 

(h)       to the actual knowledge of the Borrower, such Obligor does not have
any material contingent liability in connection with any release of any
Hazardous Materials into the environment, other than, in each case, as notified
to the Administrative Agent in writing on or prior to the applicable Cut-Off
Date or promptly after obtaining actual knowledge of any such material
contingent liability; provided that, unless otherwise permitted by the
Administrative Agent, from and after the Borrower obtaining such actual
knowledge, the related Loans will no longer be counted as Eligible Loans for
purposes of calculating the Borrowing Base.

 

“Eligible Repurchase Obligations” means repurchase obligations with respect to
any security that is a direct obligation of, or fully guaranteed by, the United
States or any agency or instrumentality thereof the obligations of which are
backed by the full faith and credit of the United States, in either case entered
into with a depository institution or trust company (acting as principal)
described in the definition of Permitted Investments.

 

 -18-

 

 

“Environmental Laws” means any and all foreign, federal, state and local laws,
statutes, ordinances, rules, regulations, permits, licenses, approvals, binding
interpretations and orders of courts or Governmental Authorities, relating to
the protection of human health from exposure to Hazardous Materials or the
environment, including, but not limited to, requirements pertaining to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transportation, handling, reporting, licensing, permitting, investigation or
remediation of Hazardous Materials. Environmental Laws include, without
limitation, the Comprehensive Environmental Response, Compensation, and
Liability Act (42 U.S.C. § 9601 et seq.), the Hazardous Material Transportation
Act (49 U.S.C. § 331 et seq.), the Resource Conservation and Recovery Act (42
U.S.C. § 6901 et seq.), the Federal Water Pollution Control Act (33 U.S.C. §
1251 et seq.), the Clean Air Act (42 U.S.C. § 7401 et seq.), the Toxic
Substances Control Act (15 U.S.C. § 2601 et seq.), the Safe Drinking Water Act
(42 U.S.C. § 300, et seq.), the Environmental Protection Agency’s regulations
relating to underground storage tanks (40 C.F.R. Parts 280 and 281), and the
Occupational Safety and Health Act (29 U.S.C. § 651 et seq.), and the rules and
regulations thereunder, each as amended or supplemented from time to time.

 

“Equityholder” means FS Investment Corporation II, as the owner of 100% of the
membership interests in the Borrower.

 

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

 

“ERISA Affiliate” means (a) any corporation that is a member of the same
controlled group of corporations (within the meaning of Section 414(b) of the
Code) as the Borrower or the Collateral Manager, as applicable, (b) a trade or
business (whether or not incorporated) under common control (within the meaning
of Section 414(c) of the Code) with the Borrower or the Collateral Manager, as
applicable, or (c) a member of the same affiliated service group (within the
meaning of Section 414(m) of the Code) as the Borrower or the Collateral
Manager, as applicable, any corporation described in clause (a) above or any
trade or business described in clause (b) above.

 

“Eurodollar Disruption Event” means occurrence of any of the following: (a) any
Liquidity Bank or any Institutional Lender shall have notified the
Administrative Agent in writing of a determination by such Liquidity Bank or any
of its assignees or participants or such Institutional Lender that it would be
contrary to law or to the directive of any central bank or other Governmental
Authority (whether or not having the force of law) to obtain United States
dollars in the London interbank market to fund any Advance, (b) the
Administrative Agent is unable to determine LIBOR for any reason, (c) any
Liquidity Bank or any Institutional Lender shall have notified the
Administrative Agent in writing of a determination by such Liquidity Bank or any
of its assignees or participants or such Institutional Lender, as applicable,
that the rate at which deposits of United States dollars are being offered to
such Liquidity Bank or any of its assignees or participants or such
Institutional Lender in the London interbank market does not accurately reflect
the cost to such Liquidity Bank, such assignee or such participant or such
Institutional Lender of making, funding or maintaining any Advance or (d) any
Liquidity Bank or any Institutional Lender shall have notified the
Administrative Agent in writing of the inability of such Liquidity Bank or any
of its assignees or participants or such Institutional Lender, as applicable, to
obtain United States dollars in the London interbank market to make, fund or
maintain any Advance.

 

“Event of Default” has the meaning assigned to that term in Section 7.01.

 

 -19-

 

 

“Excepted Persons” has the meaning assigned to that term in Section 12.13(a).

 

“Exchange Act” means the United States Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.

 

“Excluded Amounts” means (a) any amount received in any Controlled Account with
respect to any Loan included as part of the Collateral Portfolio, which amount
is attributable to the payment of any Tax, fee or other charge imposed by any
Governmental Authority on such Loan or on any Underlying Collateral, or (b) any
amount received in any Controlled Account representing (i) any amount
representing a reimbursement of insurance premiums, (ii) any escrows relating to
Taxes, insurance and other amounts in connection with Loans which are held in an
escrow account for the benefit of the Obligor and the secured party pursuant to
escrow arrangements under a Underlying Instrument and (iii) any amount received
in any Controlled Account with respect to any Loan that is sold or transferred
by the Borrower pursuant to Section 2.07, to the extent such amount is
attributable to a time after the effective date of such replacement or sale.

 

“Excluded Taxes” has the meaning assigned to that term in Section 2.10(a).

 

“Facility Attachment Ratio” means, with respect to any Eligible Loan, as of any
date of determination, an amount equal to (a) if such Eligible Loan is a Large
Middle Market Loan, Traditional Middle Market Loan or a Fixed Rate Loan, the
product of (i) the First Out Attachment Ratio, (ii) the Applicable Percentage
and (iii) the Assigned Value, (b) if such Eligible Loan is a First Lien Last Out
Loan, the sum of (i) the First Out Attachment Ratio and (ii) the product of (A)
the Last Out Attachment Ratio less the First Out Attachment Ratio, (B) the
Applicable Percentage and (C) the Assigned Value, (c) if such Eligible Loan is a
Second Lien Loan, the sum of (i) the Senior Net Leverage Ratio and (ii) the
product of (A) the Total Net Leverage Ratio less the Senior Net Leverage Ratio,
(B) the Applicable Percentage and (C) the Assigned Value, and (d) if such
Eligible Loan is a Designated Loan, the product of (i) the Total Net Leverage
Ratio, (ii) the Applicable Percentage and (iii) the Assigned Value.

 

“Facility Maturity Date” means the earliest to occur of (i) the Stated Maturity
Date, (ii) the date of the declaration or automatic occurrence of the Facility
Maturity Date pursuant to Section 7.01 and (iii) the Collection Date.

 

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

 

“Federal Funds Rate” means, for any period, a fluctuating interest rate per
annum equal, for each day during such period, to the weighted average of the
overnight federal funds rates as in Federal Reserve Board Statistical Release
H.15(519) or any successor or substitute publication selected by the
Administrative Agent (or, if such day is not a Business Day, for the next
preceding Business Day), or, if for any reason such rate is not available on any
day, the rate determined, in the sole discretion of the Administrative Agent, to
be the rate at which overnight federal funds are being offered in the national
federal funds market at 9:00 a.m. on such day.

 

 -20-

 

 

“Fees” means the Non-Usage Fee and all other fees payable to each Lender or
Lender Agent pursuant to the terms of any Lender Fee Letter.

 

“Financial Asset” has the meaning specified in Section 8-102(a)(9) of the UCC.

 

“Financial Sponsor” means any Person, including any Subsidiary of such Person,
whose principal business activity is acquiring, holding, and selling investments
(including controlling interests) in otherwise unrelated companies that each are
distinct legal entities with separate management, books and records and bank
accounts, whose operations are not integrated with one another and whose
financial condition and creditworthiness are independent of the other companies
so owned by such Person.

 

“First Amendment Closing Date” means February 17, 2017.

 

“First Lien Last Out Loan” means a Loan that would constitute a Broadly
Syndicated Loan, a Large Middle Market Loan or a Traditional Middle Market Loan,
but that, at any time prior to and/or after an event of default under the
related loan agreement of such Eligible Loan, will be paid after one or more
tranches of first lien loans issued by the same Obligor have been paid in full
in accordance with a specified waterfall or other priority of payments; provided
that the Administrative Agent may, in its sole discretion, designate an Eligible
Loan that would otherwise constitute a First Lien Last Out Loan as a Broadly
Syndicated Loan, a Large Middle Market Loan or a Traditional Middle Market Loan.

 

“First Out Attachment Ratio” means, with respect to any Eligible Loan as of any
date of determination, an amount equal to the Senior Net Leverage Ratio with
respect to all or any portion of such Eligible Loan that constitutes first lien
senior secured Indebtedness that is not (and cannot by its terms become)
subordinate in right of payment to any obligation of the Obligor in any
bankruptcy, reorganization, arrangement, insolvency, moratorium or liquidation
proceedings (excluding any First Lien Last Out Loan or other first lien last out
Indebtedness within the capital structure).

 

“Fitch”: Fitch Ratings, Inc. or any successor thereto.

 

“Fixed Rate Loan” means a Loan Asset that is (i) a fixed rate loan, (ii) is not
(and cannot by its terms become) subordinate in right of payment to any
obligation of the Obligor in any bankruptcy, reorganization, insolvency,
moratorium or liquidation proceedings, (iii) is secured by a pledge of
collateral, which security interest is validly perfected and first priority
under Applicable Law (subject to Liens described in clause (b) (other than
clause (v) thereof) of the definition of Permitted Liens), and (iv) the Borrower
or the Collateral Manager determines in good faith that the value of the
collateral securing the loan (or the enterprise value of the underlying
business) on or about the time of origination equals or exceeds the outstanding
principal balance of the loan plus the aggregate outstanding balances of all
other loans of equal or higher seniority secured by the same collateral.

 

 -21-

 

 

“GAAP” means generally accepted accounting principles as in effect from time to
time in the United States.

 

“Governmental Authority” means, with respect to any Person, any nation or
government, any state or other political subdivision thereof, any central bank
(or similar monetary or regulatory authority) thereof, any body or entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government and any court or arbitrator having
jurisdiction over such Person.

 

“Hazardous Materials” means all hazardous or toxic materials subject to any
Environmental Law, including, without limitation, materials listed in 49 C.F.R.
§ 172.010, materials defined as hazardous pursuant to § 101(14) of the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, flammable, explosive or radioactive materials, hazardous or toxic
wastes or substances, lead-based materials, petroleum or petroleum distillates
or asbestos or material containing asbestos, polychlorinated biphenyls, radon
gas, urea formaldehyde and any such materials classified as being “in
inventory”, “usable work in process” or similar classification that would, if
classified as unusable, be included in the foregoing definition.

 

“Highest Required Investment Category” means (a) with respect to ratings
assigned by Moody’s, “Aa2” or “P-1” for one-month instruments, “Aa2” and “P-1”
for three-month instruments, “Aa2” and “P-1” for six-month instruments and “Aaa”
and “P-1” for instruments with a term in excess of six-months, and (b) with
respect to rating assigned by S&P, “A-1+” for short-term instruments and “AAA”
for long-term instruments, and (c) with respect to rating assigned by Fitch (if
such investment is rated by Fitch), “F-1+” for short-term instruments and “AAA”
for long-term instruments.

 

“Indebtedness” means (i) with respect to any Obligor under any Loan, the meaning
of “Indebtedness” or any comparable definition in the Underlying Instrument for
each such Loan, and in any case that “Indebtedness” or such comparable
definition is not defined in such Underlying Instrument, without duplication,
(a) all obligations of such entity for borrowed money, (b) all obligations of
such entity evidenced by bonds, debentures, notes or similar instruments, (c)
all obligations of such entity under conditional sale or other title retention
agreements relating to property acquired by such entity, (d) all obligations of
such entity in respect of the deferred purchase price of property or services
(excluding current accounts payable and trade payables incurred in the ordinary
course of business), (e) 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 entity, whether or
not the indebtedness secured thereby has been assumed, (f) all guarantees by
such entity of indebtedness of others, (g) all Capital Lease Obligations of such
entity, (h) all obligations, contingent or otherwise, of such entity as an
account party in respect of letters of credit and letters of guaranty and (i)
all obligations, contingent or otherwise, of such entity in respect of bankers’
acceptances; and (ii) for all other purposes, with respect to any Person at any
date, (a) all indebtedness of such Person for borrowed money or for the deferred
purchase price of property or services (other than current liabilities incurred
in the ordinary course of business and payable in accordance with customary
trade practices) or that is evidenced by a note, bond, debenture or similar
instrument or other evidence of indebtedness customary for indebtedness of that
type, (b) all Capital Lease Obligations of such Person, (c) all obligations of
such Person in respect of acceptances issued or created for the account of such
Person, (d) all liabilities secured by any Lien on any property owned by such
Person even though such Person has not assumed or otherwise become liable for
the payment thereof, (e) all indebtedness, obligations or liabilities of that
Person in respect of derivatives (on a net basis, to the extent the same are
reported by such Person on a net basis), and (f) all obligations under direct or
indirect guaranties in respect of obligations (contingent or otherwise) to
purchase or otherwise acquire, or to otherwise assure a creditor against loss in
respect of, indebtedness or obligations of others of the kind referred to in
clauses (a) through (e) of this clause (ii).

 

 -22-

 

 

“Indemnified Amounts” has the meaning assigned to that term in Section 8.01.

 

“Indemnified Party” has the meaning assigned to that term in Section 8.01.

 

“Indemnity Letter” means that certain Indemnity Letter, dated as of the date
hereof, given by the Collateral Advisor to the Administrative Agent, on behalf
of the Secured Parties.

 

“Independent Director” means a natural person who, (A) has not been for the
three-year period prior to his or her appointment as an Independent Director,
and during the continuation of his or her service as Independent Director is
not: (i) an employee, director, stockholder, member, manager, partner or officer
of the Borrower or any of their respective Affiliates (other than his or her
service as an Independent Director of the Borrower or other Affiliates that are
structured to be “bankruptcy remote” and does not hold, either directly or
indirectly, any equity interests in the Borrower or in any direct or indirect
parent or Subsidiary thereof); (ii) a customer, creditor, service provider
(including a provider of professional services) or supplier of the Borrower or
any of their Affiliates (other than his or her service as an Independent
Director of the Borrower or other Affiliates of the Borrower that are structured
to be “bankruptcy remote”); (iii) any member of the immediate family of a person
described in (i) or (ii), or (iv) a Person that controls (whether directly,
indirectly or otherwise) any of (i), (ii) or (iii), (B) has, (i) prior
experience as an Independent Director for a corporation or limited liability
company whose charter documents required the unanimous consent of all
Independent Directors thereof before such corporation or limited liability
company could consent to the institution of bankruptcy or insolvency proceedings
against it or could file a petition seeking relief under any applicable federal
or state law relating to bankruptcy and (ii) at least three years of employment
experience with CT Corporation, Corporation Service Company, National Registered
Agents, Inc., Wilmington Trust Company, Stewart Management Company, Lord
Securities Corporation or, if none of those companies is then providing
professional Independent Directors, another nationally-recognized company
reasonably approved by the Administrative Agent, in each case that is not an
Affiliate of the Borrower and that provides professional Independent Directors
and other corporate services in the ordinary course of its business and (C) is
employed by a nationally recognized company that routinely provides professional
Independent Directors and other corporate services in the ordinary course of its
business. A natural person who otherwise satisfies the foregoing definition and
satisfies subparagraphs (i) and (ii) by reason of being the Independent Director
of a “bankruptcy remote” Affiliate shall be qualified to serve as an Independent
Director of the Borrower, provided that the fees that such individual earns from
serving as an Independent Director of Affiliates of the Borrower in any given
year constitute in the aggregate less than five percent (5%) of such
individual’s annual income for that year.

 

 -23-

 

 

“Indorsement” has the meaning specified in Section 8-102(a)(11) of the UCC, and
“Indorsed” has a corresponding meaning.

 

“Ineligible Portion” has the meaning assigned to that term in Section 1.05.

 

“Initial Advance” means the first Advance made pursuant to Article II.

 

“Initial Notice of Borrowing” means a Notice of Borrowing that (i) specifies a
requested Advance of not less than $1,000,000, (ii) specifies an Advance Date
not more than sixty (60) days after the Closing Date and (iii) is revocable by
the Borrower only if, at any time prior to the specified Advance Date, the
Advances Outstanding exceed $1,000,000.

 

“Institutional Lender” means (i) Wells Fargo and (ii) each financial institution
other than a Conduit Lender which may from time to time become a Lender
hereunder by executing and delivering a Joinder Supplement to the Administrative
Agent and the Borrower as contemplated by Section 2.20.

 

“Instrument” has the meaning specified in Section 9-102(a)(47) of the UCC.

 

“Insurance Policy” means, with respect to any Loan, an insurance policy covering
liability and physical damage to, or loss of, the Underlying Collateral.

 

“Insurance Proceeds” means any amounts received on or with respect to a Loan
under any Insurance Policy or with respect to any condemnation proceeding or
award in lieu of condemnation other than (i) any such amount received which is
required to be used to restore, improve or repair the related property or
required to be paid to the Obligor under the Underlying Instrument or (ii) any
such amount for which the Borrower or the Collateral Manager has consented, in
its reasonable business discretion, to be used to restore, improve or repair the
related property or otherwise to be paid to the Obligor under the Underlying
Instrument.

 

“Interest” means, with respect to any period and any Loan, for the Obligor on
such Loan and any of its parents or Subsidiaries that are obligated under the
Underlying Instrument for such Loan (determined on a consolidated basis without
duplication in accordance with GAAP), the meaning of “Interest” or any
comparable definition in the Underlying Instrument for each such Loan and in any
case that “Interest” or such comparable definition is not defined in such
Underlying Instrument, all interest in respect of Indebtedness (including the
interest component of any payments in respect of Capital Lease Obligations)
accrued or capitalized during such period (whether or not actually paid during
such period).

 

“Interest Collection Account” means account number 48444901 at the Account Bank
in the name of the Borrower subject to the Lien of the Collateral Agent for the
benefit of the Secured Parties including any sub-account thereof; provided, that
the funds deposited therein (including any interest and earnings thereon) from
time to time shall constitute the property and assets of the Borrower, and the
Borrower shall be solely liable for any Taxes payable with respect to the
Interest Collection Account.

 

 -24-

 

 

“Interest Collections” means, (i) with respect to any Loan, all payments and
collections attributable to interest on such Loan, including, without
limitation, all scheduled payments of interest and payments of interest relating
to principal prepayments, all guaranty payments attributable to interest and
proceeds of any liquidations, sales, dispositions or securitizations
attributable to interest on such Loan and (ii) amendment fees, late fees, waiver
fees, prepayment fees or other fees received in respect of Loans.

 

“Interest Coverage Ratio” means, with respect to any Loan for any Relevant Test
Period, either (a) the meaning of “Interest Coverage Ratio” or comparable
definition set forth in the related Underlying Instrument, or (b) in the case of
any Loan with respect to which the related Underlying Instrument does not
include a definition of “Interest Coverage Ratio” or comparable definition, the
ratio of (i) EBITDA to (ii) Cash Interest Expense of such Obligor as of such
Relevant Test Period, as calculated by a Borrower Advisor in good faith.

 

“Joinder Supplement” means an agreement among the Borrower, a Lender, its Lender
Agent and the Administrative Agent in the form of Exhibit E to this Agreement
(appropriately completed) delivered in connection with a Person becoming a
Lender hereunder after the Closing Date.

 

“Large Middle Market Loan” means any Loan Asset that is not a Broadly Syndicated
Loan and (i) is syndicated (but not a “club” syndication as determined by the
Administrative Agent in its sole discretion), (ii) is not (and cannot by its
terms become) subordinate in right of payment to any obligation of the Obligor
in any bankruptcy, reorganization, insolvency, moratorium or liquidation
proceedings, (iii) is secured by a pledge of collateral, which security interest
is validly perfected and first priority under Applicable Law (subject to Liens
described in clause (b) (other than clause (v) thereof) of the definition of
Permitted Liens), (iv) the Borrower or the Collateral Manager determines in good
faith that the value of the collateral securing such Loan Asset (or the
enterprise value of the underlying business) on or about the time of origination
equals or exceeds the outstanding principal balance of such Loan Asset plus the
aggregate outstanding balances of all other loans of equal or higher seniority
secured by the same collateral, (v) has a Tranche Size of at least $200,000,000
and (vi) as of the applicable Cut-Off Date, has an EBITDA for the prior twelve
calendar months of at least $60,000,000 (after giving pro forma effect to any
acquisition in connection therewith).

 

“Last Out Attachment Ratio” means, with respect to any Eligible Loan as of any
date of determination, an amount equal to the Senior Net Leverage Ratio with
respect to all or any portion of such Eligible Loan that constitutes first lien
senior secured Indebtedness that is not (and cannot by its terms become)
subordinate in right of payment to any obligation of the Obligor in any
bankruptcy, reorganization, arrangement, insolvency, moratorium or liquidation
proceedings (including any First Lien Last Out Loan or other first lien last out
Indebtedness within the capital structure).

 

“Lender” means any Institutional Lender or Conduit Lender, and/or any other
Person to whom an Institutional Lender or Conduit Lender assigns any part of its
rights and obligations under this Agreement and the other Transaction Documents
in accordance with the terms of Section 12.04.

 

 -25-

 

 

“Lender Agent” means, with respect to (i) Wells Fargo, Wells Fargo; (ii) each
Conduit Lender which may from time to time become party hereto, the Person
designated as the “Lender Agent” with respect to such Conduit Lender in the
applicable Joinder Supplement and (iii) each Institutional Lender which may from
time to time become a party hereto, each shall be deemed to be its own Lender
Agent, and, in each case, each of their respective successors and assigns (and
each shall be deemed to be its own Lender Agent).

 

“Lender Fee Letter” means each fee letter agreement that shall be entered into
by and among the Borrower, the applicable Lender and the related Lender Agent,
if applicable, in connection with the transactions contemplated by this
Agreement, as amended, modified, waived, supplemented, restated or replaced from
time to time.

 

“LIBOR” means, for any day during the Collection Period, with respect to any
Advance (or portion thereof) the greater of (I) zero and (II) (a) the rate per
annum appearing on Reuters Screen LIBOR01 Page (or any successor or substitute
page) as the London interbank offered rate for deposits in dollars at
approximately 11:00 a.m., London time, for such day, provided, if such day is
not a Business Day, the immediately preceding Business Day, for a three-month
maturity; and (b) if no rate specified in clause (a) of this definition so
appears on Reuters Screen LIBOR01 Page (or any successor or substitute page),
the interest rate per annum at which dollar deposits of $5,000,000 and for a
three-month maturity are offered by the principal London office of Wells Fargo
in immediately available funds in the London interbank market at approximately
11:00 a.m., London time, for such day.

 

“Lien” means any mortgage or deed of trust, pledge, hypothecation, collateral
assignment, deposit arrangement, encumbrance, lien (statutory or other), charge,
claim, preference, priority or other security interest or preferential
arrangement in the nature of a security interest of any kind or nature
whatsoever (including any conditional sale, lease or other title retention
agreement, sale subject to a repurchase obligation, any easement, right of way
or other encumbrance on title to real property, and any financing lease having
substantially the same economic effect as any of the foregoing); provided that,
in no event shall an operating lease in and of itself be deemed to be a Lien.

 

“Lien Release Dividend” has the meaning assigned to that term in Section
2.07(e).

 

“Lien Release Dividend Date” means the date specified by the Borrower, which
date may be any Business Day, provided written notice is given in accordance
with Section 2.07(e).

 

“Liquidity Agreement” means any agreement entered into in connection with this
Agreement pursuant to which a Liquidity Bank agrees to make purchases from or
advances to, or purchase assets from, any Conduit Lender in order to provide
liquidity support for such Conduit Lender’s Advances hereunder.

 

“Liquidity Bank” means the Person or Persons who provide liquidity support to
any Conduit Lender pursuant to a Liquidity Agreement in connection with the
issuance by such Conduit Lender of Commercial Paper Notes.

 

 -26-

 

 

“LLC Agreement” means the Limited Liability Company Agreement of the Borrower,
dated as of the date hereof, as amended, supplemented or otherwise modified from
time to time.

 

“Loan” means (i) a Loan Asset or (ii) prior to the occurrence of the Required
Sale Date, a Senior Secured Bond.

 

“Loan Asset” means the portion of any commercial loan or note (or, if such asset
is a Fixed Rate Loan, either (i) a commercial loan or (ii) prior to the
occurrence of the Required Sale Date, a note or a bond) that the Borrower
Advisors direct the Borrower to fund to or acquire from the Seller or any third
party seller, which loan, or note or bond includes, without limitation, (i) the
Required Loan Documents and Loan File, and (ii) all right, title and interest of
such seller in and to such loan, or note or bond and any Underlying Collateral,
but excluding, in each case, the Retained Interest and Excluded Amounts, and
which loan, or note or bond was acquired from or funded to and owned by the
Borrower on the applicable Cut-Off Date (as set forth on the Loan Tape delivered
on such Cut-Off Date).

 

“Loan Checklist” means an electronic or hard copy, as applicable, of a checklist
delivered by or on behalf of the Borrower to the Collateral Custodian, for each
Loan, of all Required Loan Documents to be included within the respective Loan
File, which shall specify whether such document is an original or a copy and
which shall include the identification number and name of the Obligor with
respect to such Loan.

 

“Loan File” means, with respect to each Loan, a file containing (a) each of the
documents and items as set forth on the Loan Checklist with respect to such Loan
and (b) duly executed originals (to the extent required by the definition of
“Required Loan Documents”) and copies of any other reasonably available Records
relating to such Loans and Portfolio Assets pertaining thereto.

 

“Loan Register” has the meaning assigned to that term in Section 5.01(hh).

 

“Loan Tape” means the loan tape to be delivered in connection with each
Collateral Management Report and on each applicable Cut-Off Date, which tape
shall include (but not be limited to) the aggregate Outstanding Balance of all
Loans and, with respect to each Loan, the following information:

 

(a)       name of the related Obligor;

 

(b)       if such Loan is a Broadly Syndicated Loan, a Large Middle Market Loan,
a Traditional Middle Market Loan or a Senior Secured BondFirst Lien Last Out
Loan, calculation of the Senior Net Leverage Ratio provided in the applicable
Approval Notice (provided that if any other positions in such Loan existed on
the date of such Approval Notice, then the Senior Net Leverage Ratio utilized
for the position with the earliest of such other Cut-Off Dates shall apply) and
for the most recent Relevant Test Period;

 

(c)       calculation of the Interest Coverage Ratio provided in the applicable
Approval Notice (provided that if any other positions in such Loan existed on
the date of such Approval Notice, then the Interest Coverage Ratio utilized for
the position with the earliest of such other Cut-Off Dates shall apply) and for
the most recent Relevant Test Period;

 

 -27-

 

 

(d)       if such Loan is a Second Lien Loan, calculation of the Total Net
Leverage Ratio on the applicable Cut-Off Date (provided that if any other
positions in such Loan existed on the date of such Approval Notice, then the
Total Net Leverage Ratio utilized for the position with the earliest of such
other Cut-Off Dates shall apply) and for the most recent Relevant Test Period;

 

(e)       collection status (number of days past due);

 

(f)        loan status (whether in default, and the number of days such default
is outstanding) or on non-accrual status);

 

(g)       scheduled maturity date;

 

(h)       date and amount of next Scheduled Payment;

 

(i)        loan rate of interest (and reference rate, if applicable);

 

(j)        LIBOR floor (if applicable);

 

(k)       Outstanding Balance;

 

(l)        par amount;

 

(m)      the portion of the Outstanding Balance of such Loan that is in excess
of the threshold set forth in clauses (b), (g) (w), (z) and/or (aa) of the
definition of “Eligible Loan”;

 

(n)       Assigned Value;

 

(o)       Purchase Price;

 

(p)       Moody’s asset and Obligor rating (if available);

 

(q)       S&P asset and Obligor rating (if available);

 

(r)        Loan type (Broadly Syndicated Loan, Fixed Rate Loan, Large Middle
Market Loan, Traditional Middle Market Loan or Second Lien Loan);

 

(s)       whether such Loan is a DIP Loan or a Delayed Draw Loan;

 

(t)        the applicable industry classification set forth on Schedule III;

 

(u)       whether such Loan has been subject to a Value Adjustment Event (and of
what type);

 

(v)       whether such Loan has been subject to any Material Modification;

 

 -28-

 

 

(w)      the applicable Cut-Off Date;

 

(x)       the Adjusted Borrowing Value of such Loan;

 

(y)       the Tranche Size of such Loan;

 

(z)       the EBITDA of such Loan over the twelve-month period for the most
Relevant Test Period;

 

(aa)     the revenue of the related Obligor(s) during the twelve-month period
for the most Relevant Test Period; and

 

(bb)    the Collateral Manager’s risk rating of such Loan, as determined in
accordance with its current internal rating system;

 

(cc)     annual (i) maintenance capital expenditure and (ii) cash taxes, or if
either are unavailable, a good faith approximation by the Collateral Manager;
provided that, for the avoidance of doubt, the amounts in this clause (c) shall
not be subject to the agreed-upon procedures described in Section 6.09.

 

(dd)    aggregate gross debt (and the date as of which such calculation was
made), as calculated and delivered by the related Obligor or, if not calculated
and delivered by such Obligor, as calculated by the Collateral Manager in its
commercially reasonably determination;

 

(ee)     total available Unrestricted Cash for the related Obligor, as
calculated and delivered by the related Obligor or, if not calculated and
delivered by such Obligor, as calculated by the Collateral Manager in its
commercially reasonably determination; and

 

(ff)       the “as of” date, with respect to the financials used for such
Obligor.

 

“Management Agreement” means the Collateral Management Agreement, dated as of
the date hereof, between the Borrower and the Collateral Manager relating to the
management of the Collateral Portfolio of the Borrower, as amended, supplemented
or otherwise modified from time to time.

 

“Margin Stock” means “margin stock” as such term is defined in Regulation T, U
or X of the Federal Reserve Board.

 

“Material Adverse Effect” means, with respect to any event or circumstance, a
material adverse effect on (a) the business, condition (financial or otherwise),
operations, performance or properties of the Seller, any Borrower Advisor or the
Borrower, (b) the validity, enforceability or collectability of this Agreement
or any other Transaction Document or the validity, enforceability or
collectability of the Loans generally or any material portion of the Loans, (c)
the rights and remedies of the Collateral Agent, the Collateral Custodian, the
Account Bank, the Administrative Agent, any Lender, any Lender Agent and the
Secured Parties with respect to matters arising under this Agreement or any
other Transaction Document, (d) the ability of each of the Borrower and
Collateral Manager to perform their respective obligations under the Transaction
Documents, or (e) the status, existence, perfection, priority or enforceability
of the Collateral Agent’s, the Administrative Agent’s or the other Secured
Parties’ lien on the Collateral Portfolio, in each case as determined in the
reasonable discretion of the Required Lenders.

 

 -29-

 

 

“Material Modification” means any amendment or waiver of, or modification or
supplement to, a Underlying Instrument governing a Loan executed or effected on
or after the Cut-Off Date for such Loan which:

 

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

 

(b)       (i) waives one or more interest payments, (ii) permits any interest
due in cash to be deferred or capitalized and added to the principal amount of
such Loan (other than (x) any deferral or capitalization already allowed by the
terms of the Underlying Instrument of any PIK Loan or (y) in addition to
existing cash interest payments), or (iii) reduces the spread or coupon when the
Interest Coverage Ratio for any Relevant Test Period with respect to such Loan
is less than 1.50:1.00 (prior to giving effect to such reduction in the spread
or coupon) (for the avoidance of doubt, automatic changes in grid pricing
existing on the Cut-Off Date do not constitute “Material Modifications” under
this clause (b));

 

(c)       contractually or structurally subordinates such Loan by operation of
(i) any priority of payment provisions, (ii) turnover provisions, (iii) the
transfer of assets in order to limit recourse to the related Obligor (other than
where such transfer is not intended to avoid or limit recourse but is a bona
fide disposition transaction which results in the repayment of indebtedness from
any net proceeds) or (iv) the granting of Liens (other than Permitted Liens) on
any of the Underlying Collateral securing such Loan;

 

(d)       substitutes, alters or releases the Underlying Collateral securing
such Loan and each such substitution, alteration or release, as determined in
the sole discretion of the Administrative Agent, materially and adversely
affects the value of such Loan;

 

(e)       amends, waives, forbears, supplements or otherwise modifies (i) the
meaning of “Senior Net Leverage Ratio”, “Interest Coverage Ratio” or “Total Net
Leverage Ratio” or any respective comparable definitions in the applicable
Underlying Instruments for such Loan or (ii) any term or provision of such
Underlying Instrument referenced in or utilized in the calculation of the
“Senior Net Leverage Ratio”, “Interest Coverage Ratio” or “Total Net Leverage
Ratio” or any respective comparable definitions for such Loan, in either case in
a manner that, in the sole discretion of the Administrative Agent, is materially
adverse to the Secured Parties; or

 

(f)        delays or extends the stated maturity date of such Loan.

 

“Maximum Facility Amount” means the aggregate Commitments as then in effect,
after giving effect to any decrease pursuant to Section 2.17 or increase
pursuant to Section 2.20; provided that at all times after the Reinvestment
Period, the Maximum Facility Amount shall mean the aggregate Advances
Outstanding at such time and the Aggregate Unfunded Exposure Amount at such
time. As of the Closing Date, the Maximum Facility Amount is $250,000,000.

 

 -30-

 

 

“Middle Market Loan” means any Large Middle Market Loan or any Traditional
Middle Market Loan.

 

“Minimum Equity Amount” means the greater of (i) the sum of the Adjusted
Borrowing Value of all Eligible Loans attributable to the three Obligors
collectively comprising the largest aggregate Adjusted Borrowing Value included
in the Borrowing Base and (ii) $50,000,000.

 

“Moody’s” means Moody’s Investors Service, Inc. (or its successors in interest).

 

“Mortgage” means the mortgage, deed of trust or other instrument creating a Lien
on an interest in real property securing a Loan, including the assignment of
leases and rents related thereto.

 

“Multiemployer Plan” means a “multiemployer plan” as defined in Section
4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate contributes or
has any obligation to contribute on behalf of its employees or to which the
Borrower or any ERISA Affiliate has any liability.

 

“Non-Usage Fee” means, with respect to any Lender and/or Lender Agent, the
“non-usage fee” set forth in the applicable Lender Fee Letter.

 

“Noteless Loan” means a Loan with respect to which the Underlying Instruments
(i) do not require the Obligor to execute and deliver a promissory note to
evidence the indebtedness created under such Loan or (ii) require any holder of
the indebtedness created under such Loan to affirmatively request a promissory
note from the related Obligor.

 

“Notice and Request for Consent to Lien Release Dividend” has the meaning
assigned to that term in Section 2.07(e)(i).

 

“Notice of Borrowing” means an irrevocable (other than to the extent set forth
on the Initial Notice of Borrowing) written notice of borrowing from the
Borrower to the Administrative Agent and each Lender Agent in the form attached
hereto as Exhibit F.

 

“Notice of Reduction” means a notice of (a) any reduction of the Advances
Outstanding pursuant to Section 2.17(a), in the form attached hereto as Exhibit
G or (b) any termination of this Agreement or reduction in part of the Maximum
Facility Amount pursuant to Section 2.17(b), in the form attached hereto as
Exhibit H.

 

“Obligations” means all present and future indebtedness and other liabilities
and obligations (howsoever created, arising or evidenced, whether direct or
indirect, absolute or contingent, or due or to become due) of the Borrower to
the Lenders, the Lender Agents, the Administrative Agent, the Account Bank, the
Collateral Agent or the Collateral Custodian arising under this Agreement and/or
any other Transaction Document and shall include, without limitation, all
liability for principal of and interest on the Advances, Breakage Fees,
indemnifications and other amounts due or to become due by the Borrower to the
Lenders, the Lender Agents, the Administrative Agent, the Collateral Agent, the
Collateral Custodian and the Account Bank under this Agreement and/or any other
Transaction Document, any Lender Fee Letter and costs and expenses payable by
the Borrower to the Lenders, the Lender Agents, the Administrative Agent, the
Account Bank, the Collateral Agent or the Collateral Custodian, in each case,
under the Transaction Documents, including attorneys’ fees, costs and expenses,
including without limitation, interest, fees and other obligations that accrue
after the commencement of an insolvency proceeding (in each case whether or not
allowed as a claim in such insolvency proceeding).

 

 -31-

 

 

“Obligor” means, collectively, each Person obligated to make payments under a
Underlying Instrument, including any guarantor thereof.

 

“Officer’s Certificate” means a certificate signed by a director, a manager, the
president, the secretary, an assistant secretary, the chief financial officer,
treasurer, assistant treasurer or any vice president, as an authorized officer,
of any Person.

 

“Opinion of Counsel” means a written opinion of counsel, which opinion and
counsel are acceptable to the Administrative Agent in its sole discretion.

 

“Outstanding Balance” means the principal balance of a Loan, expressed exclusive
of PIK Interest and any other accrued and unpaid interest, and inclusive of any
Unfunded Exposure Amount.

 

“Participant Register” has the meaning assigned to that term in Section 2.13(b).

 

“Payment Date” means the 15th day of each January, April, July and October or,
if such day is not a Business Day, the next succeeding Business Day, commencing
July 2014; provided, that the final Payment Date shall occur on the Collection
Date.

 

“Payment Duties” has the meaning assigned to that term in Section 10.02(b)(ii).

 

“Pension Plan” has the meaning assigned to that term in Section 4.01(x).

 

“Permitted Equityholder Transaction” means, a merger of FS Investment
Corporation II with another business development company sponsored by Franklin
Square Holdings, L.P. or other fundamental change transaction the result of
which effectively combines the ownership and/or assets of FS Investment
Corporation II and a business development company sponsored by Franklin Square
Holdings, L.P., or merges or consolidates their respective collateral advisors
or sub-advisors.

 

 -32-

 

 

“Permitted Investments” means any of:negotiable instruments or securities or
other investments, which may include obligations or securities of issuers for
which the Collateral Agent or an Affiliate of the Collateral Agent provides
services or receives compensation that (i) except in the case of demand or time
deposits and investments in money market funds, are represented by instruments
in bearer or registered form or ownership of which is represented by book
entries by a Clearing Agency or by a Federal Reserve Bank in favor of depository
institutions eligible to have an account with such Federal Reserve Bank who hold
such investments on behalf of their customers and (ii) evidence:

 

(a)       direct obligations of, and obligations fully guaranteed as to full and
timely payment by, the United States (or by any agency thereof to the extent
such obligations are backed by the full faith and credit of the United States);

 

(b)       demand deposits, time deposits, bank deposit products of or
certificates of deposit of depository institutions or trust companies
incorporated under the laws of the United States or any state thereof and
subject to supervision and examination by federal or state banking or depository
institution authorities; provided that at the time of the IssuerBorrower’s
investment or contractual commitment to invest therein, the commercial paper, if
any, and short-term unsecured debt obligations (other than such obligation whose
rating is based on the credit of a Person other than such institution or trust
company) of such depository institution or trust company shall have a credit
rating from Moody’sFitch and S&Peach Rating Agency in the Highest Required
Investment Category granted by Moody’sFitch and S&Psuch Rating Agency;

 

(c)       commercial paper, or other short term obligations, having, at the time
of the issuerBorrower’s investment or contractual commitment to invest therein,
a rating in the Highest Required Investment Category granted by Moody’seach
Rating Agency and S&PFitch;

 

(d)       demand deposits, time deposits or certificates of deposit that are
fully insured by the FDIC and either have a rating on their certificates of
deposit or short-term deposits from Moody’s and S&P of “P-1” and “A-1+”,
respectively, and if rated by Fitch, from Fitch of “F-1+”;

 

(e)      notes that are payable on demand or bankers’ acceptances issued by any
depository institution or trust company referred to in clause (b) above;

 

(f)            investments in taxable money market funds or other regulated
investment companies having, at the time of the IssuerBorrower’s investment or
contractual commitment to invest therein, a rating of the Highest Required
Investment Category from Moody’s or S&P;each Rating Agency and Fitch (if rated
by Fitch); or

 

(gf)      time deposits (having maturities of not more than 90 days) by an
entity the commercial paper of which has, at the time of the IssuerBorrower’s
investment or contractual commitment to invest therein, a rating of the Highest
Required Investment Category granted by Moody’seach Rating Agency and S&PFitch;

 

(h)       Eligible Repurchase Obligations with a rating of the Highest Required
Investment Category from Moody’s and a rating of “A-1” or higher from S&P;

 

(i)       Wells Fargo Advantage Money Market Funds – Government Money Market
Fund;

 

(j)       Wells Fargo Money Market Deposit Account; or

 

 -33-

 

 

(k)       any similar investment approved by the Administrative Agent.

 

Permitted Investments may include, without limitation, those investments issued
by or made with Wells Fargo or for which Wells Fargo or an Affiliate provided
services and receives compensation; provided, that notwithstanding the foregoing
clauses (a) through (k), after the occurrence of the Required Sale Datef),
unless the Borrower has received the written advice of counsel of national
reputation experienced in such matters to the contrary (together with an
Officer’s Certificate of the Borrower to the Administrative Agent and the
Collateral Agent (on which the Administrative Agent and the Collateral Agent may
rely) that the advice specified in this definition has been received by the
Borrower), on and after the date required for conformance with the Volcker Rule
(or such later date as may be determined by the Borrower based upon such
advice), Permitted Investments may only include obligations or securities that
constitute cash equivalents for purposes of the rights and assets in paragraph
(c)(8)(i)(B) of the exclusions from the definition of “covered fund” for
purposes of the Volcker Rule. The Collateral Agent shall have no duty to
determine or oversee compliance with the foregoing.

 

“Permitted Liens” means,

 

(a)       with respect to the interest of the Borrower in the Loans included in
the Collateral, Liens in favor of the Collateral Agent created pursuant to this
Agreement; and

 

(b)       with respect to the interest of the Borrower in the rest of the
Collateral Portfolio (including any Underlying Collateral): (i) materialmen’s,
warehousemen’s, mechanics’ and other Liens arising by operation of law in the
ordinary course of business for sums not due or sums that are being contested in
good faith, (ii) purchase money security interests in certain items of
equipment, (iii) Liens for Taxes if such Taxes shall not at the time be due and
payable or if a Person shall currently be contesting the validity thereof in
good faith by appropriate proceedings and with respect to which reserves in
accordance with GAAP have been provided on the books of such Person, (iv) other
customary Liens permitted with respect thereto, (v) Liens in favor of the
Collateral Agent created pursuant to this Agreement, (vi) with respect to
Agented Loans or Third Party Agented Loans, Liens in favor of the lead agent,
the collateral agent or the paying agent for the benefit of all holders of
Indebtedness of such Obligor and (vii) with respect to any Underlying
Collateral, Liens permitted by the applicable Underlying Instrument.

 

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

 

“PIK Interest” means interest accrued on a Loan that is added to the principal
amount of such Loan instead of being paid as interest as it accrues.

 

“PIK Loan” means a Loan which provides for a portion of the interest that
accrues thereon to be added to the principal amount of such Loan for some period
of the time prior to such Loan requiring the current cash payment of such
previously capitalized interest, which cash payment shall be treated as an
Interest Collection at the time it is received.

 

 -34-

 

 

“Pledge” means the pledge of any Eligible Loan or other Portfolio Asset pursuant
to Article II.

 

“Portfolio Assets” means all Loans owned by the Borrower, together with all
proceeds thereof and other assets or property related thereto, including all
right, title and interest of the Borrower in and to:

 

(a)       any amounts on deposit in any cash reserve, collection, custody or
lockbox accounts securing the Loans;

 

(b)       all rights with respect to the Loans to which the Seller or any third
party seller is entitled as lender under the applicable Underlying Instrument;

 

(c)       the Controlled Accounts, together with all cash and investments in
each of the foregoing other than amounts earned on investments therein;

 

(d)       any Underlying Collateral securing a Loan and all Recoveries related
thereto, all payments paid in respect thereof and all monies due, to become due
and paid in respect thereof accruing after the applicable Cut-Off Date and all
liquidation proceeds;

 

(e)       all Required Loan Documents, the Loan Files related to any Loan, any
Records, and the documents, agreements, and instruments included in the Loan
Files or Records;

 

(f)       all Insurance Policies with respect to any Loan;

 

(g)       all Liens, guaranties, indemnities, warranties, letters of credit,
accounts, bank accounts and property subject thereto from time to time
purporting to secure or support payment of any Loan, together with all UCC
financing statements, mortgages or similar filings signed or authorized by an
Obligor relating thereto;

 

(h)       the Purchase and Sale Agreement (including, without limitation, rights
of recovery of the Borrower against the Seller) and the assignment to the
Collateral Agent, for the benefit of the Secured Parties, of all UCC financing
statements filed by the Borrower against the Seller under or in connection with
the Purchase and Sale Agreement;

 

(i)       the Management Agreement (including, without limitation, any rights of
the Borrower against the Collateral Manager);

 

(j)       all records (including computer records) with respect to the
foregoing; and

 

(k)       all collections, income, payments, proceeds and other benefits of each
of the foregoing.

 

“Portfolio Subsidiary” means any Person (a) in which the Borrower (i) has made
an investment in the ordinary course of business that is accounted for under
GAAP as a portfolio investment of the Borrower, (ii) has received an equity
interest in connection with an REO Asset, (iii) has received an “equity kicker”
in connection with its acquisition of any Loan, (iv) owns an equity interest and
that is created as a “blocker” vehicle to address tax-specific issues or (v) has
acquired an equity interest in connection with a relatively contemporaneous
exchange or conversion of a Loan into equity interests and (b) that meets each
of the requirements set forth in each of Section 5.01(b) and Section 5.02(a).

 

 -35-

 

 

“Prime Rate” means the greater of (x) zero and (y) the rate announced by Wells
Fargo from time to time as its prime rate in the United States, such rate to
change as and when such designated rate changes. The Prime Rate is not intended
to be the lowest rate of interest charged by Wells Fargo or any other specified
financial institution in connection with extensions of credit to debtors.

 

“Principal Collection Account” means account number 48444902 at the Account Bank
in the name of the Borrower subject to the Lien of the Collateral Agent for the
benefit of the Secured Parties including any sub-account thereof; provided, that
the funds deposited therein (including any interest and earnings thereon) from
time to time shall constitute the property and assets of the Borrower, and the
Borrower shall be solely liable for any Taxes payable with respect to the
Principal Collection Account.

 

“Principal Collections” means (i) any amounts deposited by the Borrower in
accordance with Section 2.06(a)(i) or Section 2.07, (ii) with respect to any
Loan, all amounts received which are not Interest Collections, including,
without limitation, all Recoveries, all Insurance Proceeds, all scheduled
payments of principal and principal prepayments and all guaranty payments and
proceeds of any liquidations, sales, dispositions or securitizations, in each
case, attributable to the principal of such Loan, (iii) all earnings on
investments in any Principal Collection Account and (iv) all payments made by
the Collateral Manager to the Borrower pursuant to Section 14 of the Management
Agreement.

 

“Pro Rata Share” means, with respect to each Lender, the percentage obtained by
dividing the Commitment of such Lender (as determined under clause (i) of the
definition of “Commitment”), by the aggregate Commitments of all the Lenders (as
determined under clause (i) of the definition of “Commitment”).

 

“Proceeds” means, with respect to any Collateral Portfolio, all property that is
receivable or received when such Collateral Portfolio is collected, sold,
liquidated, foreclosed, exchanged, or otherwise disposed of, whether such
disposition is voluntary or involuntary, and includes all rights to payment with
respect to any insurance relating to such Collateral Portfolio.

 

“Purchase and Sale Agreement” means that certain purchase and sale agreement,
dated the date of this Agreement, by and between the Seller, as the seller, and
the Borrower, as the purchaser, as such agreement may from time to time be
amended, supplemented or otherwise modified in accordance with the terms
thereof.

 

“Purchase Price” means, with respect to any Loan, an amount (expressed as a
percentage) equal to (i) the aggregate purchase price paid by the Borrower (as
applicable) for such Loan (expressed exclusive of accrued interest and original
issue discount) (or if different principal amounts of such Loan were purchased
at different purchase prices, the weighted average of such purchase prices)
divided by (ii) the principal balance of such Loan outstanding as of the date of
such purchase (expressed exclusive of accrued interest and original issue
discount); provided that any Loan acquired by the Borrower in connection with a
primary syndication of such Loan and with a “Purchase Price” equal to or greater
than 95% (including, for the avoidance of doubt, in excess of 100%) shall be
deemed to have a “Purchase Price” equal to 100%.

 

 -36-

 

 

“Rating Agency”: Each of Moody’s and S&P.

 

“Records” means all documents relating to the Loans, including books, records
and other information executed in connection with the origination or acquisition
of the Collateral Portfolio or maintained with respect to the Collateral
Portfolio and the related Obligors that the Borrower, the Seller or the
Collateral Manager have generated, in which the Borrower or the Seller has
obtained an interest.

 

“Recoveries” means, as of the time any Underlying Collateral with respect to any
Loan is sold, discarded or abandoned (after a determination by the Borrower or
the Collateral Manager that such Underlying Collateral has little or no
remaining value) or otherwise determined to be fully liquidated by the Borrower
or the Collateral Manager, the proceeds from the sale of the Underlying
Collateral, the proceeds of any related Insurance Policy, any distributions from
a Portfolio Subsidiary formed to hold an REO Asset, any other recoveries with
respect to such Loan, as applicable, the Underlying Collateral, and amounts
representing late fees and penalties, net of any amounts received that are
required under such Loan, as applicable, to be refunded to the related Obligor.

 

“Register” has the meaning assigned to that term in Section 2.13(a).

 

“Reinvestment Period” shall mean the date commencing on the Closing Date and
ending on the earliest to occur of (i) February 19, 20172020 and (ii) the
Facility Maturity Date.

 

“Relevant Test Period” means, with respect to any Loan, the relevant test period
for the reporting and calculation of the applicable financial covenants included
in the Underlying Instrument for each such Loan, including financial covenants
comparable to Total Net Leverage Ratio, Senior Net Leverage Ratio or Interest
Coverage Ratio, as applicable, for such Loan in the applicable Underlying
Instrument or, if no such period is provided for therein, for Obligors
delivering monthly financing statements, each period of the last 12 consecutive
reported calendar months, and for Obligors delivering quarterly financing
statements, each period of the last four consecutive reported fiscal quarters of
the principal Obligor on such Loan; provided that with respect to any Loan for
which the relevant test period is not provided for in the Underlying Instrument,
if an Obligor is a newly-formed entity or such Loan has been newly issued or
amended and restated as to which 12 consecutive calendar months have not yet
elapsed, “Relevant Test Period” shall initially include the period from the date
of formation of such Obligor to the end of the twelfth calendar month or fourth
fiscal quarter (as the case may be) from the date of formation, and shall
subsequently include each period of the last 12 consecutive reported calendar
months or four consecutive reported fiscal quarters (as the case may be) of such
Obligor.

 

 -37-

 

 

“REO Asset” means, with respect to any Loan, any Underlying Collateral that has
been foreclosed on or repossessed from the current Obligor by the Borrower, and
is being managed by a Borrower Advisor on behalf of and in the name of any
Portfolio Subsidiary, for the benefit of the Secured Parties and any other
equity holder of such Portfolio Subsidiary.

 

“REO Management Standard” has the meaning assigned to that term in Section
6.05(a).

 

“Reportable Event” has the meaning assigned to that term in Section 4.01(x).

 

“Reporting Date” means the date that is (a) two Business Days before each
Payment Date and (b) the seventh Business Day after each Reporting Determination
Date.

 

“Reporting Determination Date” means the 20th day of each February, March, May,
June, August, September, November and December, or, if such day is not a
Business Day, the next succeeding Business Day.

 

“Required Lenders” means (a) at any time when there are two or fewer Lenders,
each Lender and (b) at all other times, the Lenders representing an aggregate of
more than 50% of the aggregate Commitments of the Lenders then in effect;
provided that with respect to clause (b), at least two Lenders will be required,
one of which is Wells Fargo; provided further that the Commitment held or deemed
held by any Defaulting Lender shall be excluded for purposes of making a
determination of Required Lenders.

 

“Required Loan Documents” means, for each Loan, the following documents or
instruments, all as specified on the related Loan Checklist:

 

(a)       other than in the case of a Noteless Loan, (i) if the Borrower is the
sole lender on such Loan or in the case of any Agented Loan, the original or, if
accompanied by an original “lost note” affidavit and indemnity, a copy of the
executed underlying promissory note, endorsed by the Borrower or the prior
holder of record either in blank or to the Collateral Agent (and evidencing an
unbroken chain of endorsements from each prior holder thereof evidenced in the
chain of endorsements either in blank or to the Collateral Agent) with any
endorsement to the Collateral Agent to be in the following form: “Wells Fargo
Bank, National Association, as Collateral Agent for the Secured Parties” or (ii)
in the case of any Third Party Agented Loan, a copy of the executed underlying
promissory note, endorsed by the Borrower or the prior holder of record either
in blank or to the Collateral Agent (and evidencing an unbroken chain of
endorsements from each prior holder thereof evidenced in the chain of
endorsements either in blank or to the Collateral Agent) with any endorsement to
the Collateral Agent to be in the following form: “Wells Fargo Bank, National
Association, as Collateral Agent for the Secured Parties”;

 

(b)       in the case of any Noteless Loan, (i) an executed copy of each
assignment and assumption agreement, transfer document or instrument specified
in the related Underlying Instrument (or, if no form is specified, the Loan
Syndications and Trading Association form of assignment) relating to such Loan
evidencing the assignment of such Noteless Loan either (1) from the Seller to
the Borrower and from the Borrower either to the Collateral Agent or in blank or
(2) from any prior third party owner thereof directly to the Borrower (at the
direction of a Borrower Advisor) and from the Borrower either to the Collateral
Agent or in blank, and (ii) in the case of an Agented Loan or a Third Party
Agented Loan, a copy of the Loan Register with respect to such Noteless Loan, as
described in Section 5.01(hh);

 

 -38-

 

 

(c)       originals or copies of each of the following, to the extent applicable
to the related Loan: (i) any related loan agreement, credit agreement, note
purchase agreement, security agreement (if separate from any Mortgage) and (ii)
if the Borrower is the sole lender on such Loan or in the case of any Agented
Loan, any sale and servicing agreement, acquisition agreement, subordination
agreement, intercreditor agreement or similar instruments, guarantee, Insurance
Policy or similar material operative document, in each case together with any
amendment or modification thereto; and

 

(d)       if any Loan is secured by a Mortgage, either (x) if the Borrower is
the sole lender on such Loan or in the case of any Agented Loan, (I) the
original executed Mortgage, the original executed assignment of leases and
rents, if any, and the originals of all intervening assignments, if any, of the
Mortgage and assignments of leases and rents with evidence of recording thereon
or (II) copies thereof certified by the public recording offices where such
documents were recorded to be true and complete copies thereof in those
instances where the public recording offices retain the original or where the
original recorded documents are lost, or (y) in the case of any Third Party
Agented Loan, copies thereof certified by the Borrower, by closing counsel or by
a title company or escrow company to be true and complete copies thereof where
the originals have been transmitted for recording; provided that, solely for
purposes of the Review Criteria, the Collateral Custodian shall have no duty to
ascertain whether any certification set forth in this subsection (d)(y) has been
received, other than a certification which has been clearly delineated as being
provided by the Borrower or (z) copies certified by the public recording offices
where such documents were recorded to be true and complete copies thereof in
those instances where the public recording offices retain the original or where
the original recorded documents are lost.

 

“Required Reports” means, collectively, the Collateral Management Report
required pursuant to Section 6.07(b), the Collateral Manager Certificate
required pursuant to Section 6.07(c), the financial statements of the
Equityholder required pursuant to Section 6.07(d), the financial statements and
valuation reports of each Obligor required pursuant to Section 6.07(e), the
annual statements as to compliance required pursuant to Section 6.08, and the
annual independent public accountant’s report required pursuant to Section 6.09.

 

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

 

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

 

 -39-

 

 

“Restricted Junior Payment” means (i) any dividend or other distribution, direct
or indirect, on account of any class of membership interests of the Borrower now
or hereafter outstanding, except a dividend paid solely in interests of that
class of membership interests or in any junior class of membership interests of
the Borrower; (ii) any redemption, retirement, sinking fund or similar payment,
purchase or other acquisition for value, direct or indirect, of any class of
membership interests of the Borrower now or hereafter outstanding, (iii) any
payment made to redeem, purchase, repurchase or retire, or to obtain the
surrender of, any outstanding warrants, options or other rights to acquire
membership interests of the Borrower now or hereafter outstanding, and (iv) any
payment of management fees by the Borrower. For the avoidance of doubt, (x)
payments and reimbursements due to a Borrower Advisor in accordance with this
Agreement or any other Transaction Document do not constitute Restricted Junior
Payments, and (y) distributions by the Borrower to holders of its membership
interests of Loan or of cash or other proceeds relating thereto which have been
substituted or transferred in connection with a Lien Release Dividend by the
Borrower in accordance with this Agreement shall not constitute Restricted
Junior Payments.

 

“Retained Interest” means, with respect to any Loan, (a) all obligations of the
Borrower to make advances thereon after the related Cut-Off Date, (b) all of the
obligations of the Borrower, if any, of or owing to the agent(s) under the
documentation evidencing such Loan and (c) the applicable portion of the
interests, rights and obligations under the documentation evidencing such Loan
that relate to such portion(s) of the indebtedness that is owned by another
lender. Notwithstanding the foregoing, the “Retained Interest” shall exclude the
Unfunded Exposure Amount.

 

“Review Criteria” has the meaning assigned to that term in Section 11.02(b)(i).

 

“S&P” means Standard & Poor’s Ratings Group, a division of The McGraw-Hill
Companies, Inc. (or its successors in interest).

 

“Scheduled Payment” means each scheduled payment of principal and/or interest
required to be made by an Obligor on the related Loan, as adjusted pursuant to
the terms of the related Underlying Instrument.

 

“Second Lien Loan” means any Loan Asset that (i) is secured by a pledge of
collateral (including all of the applicable Obligor’s assets constituting
collateral for such Loan Asset (whether or not there is also a security interest
of a higher or lower priority in additional collateral)) which security interest
is validly perfected and second priority under Applicable Law (subject to Liens
described in clause (b) (other than clause (v) thereof) of the definition of
Permitted Liens), (ii) is pari passu in right of payment with the Indebtedness
of the holders of the first priority security interest (other than with respect
to receipt of the proceeds of liquidated collateral following an event of
default) and (iii) pursuant to an intercreditor agreement between the Borrower
(or the applicable agent) and the holder of such first priority security
interest, the amount of Indebtedness covered by such first priority security
interest is limited in terms of aggregate outstanding amount or percent of
outstanding principal.

 

 -40-

 

 

“Secured Party” means each of the Administrative Agent, each Lender (together
with its successors and assigns), each Lender Agent, each Affected Party, each
Indemnified Party, the Collateral Custodian, the Collateral Agent and the
Account Bank.

 

“Securities Account Control Agreement” means the Securities Account Control
Agreement, dated as of the date hereof, among the Borrower, the Collateral Agent
and Wells Fargo as the Securities Intermediary, as the same may be amended,
modified, waived, supplemented or restated from time to time.

 

“Securities Act” means the U.S. Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.

 

“Seller” means FS Investment Corporation II, in its capacity as the seller under
the Purchase and Sale Agreement, together with its successors and assigns in
such capacity.

 

“Senior Net Leverage Ratio” means, with respect to any Loan for any Relevant
Test Period, the meaning of “Senior Net Leverage Ratio” or any comparable
definition relating to first lien senior secured (or such applicable lien or
applicable level within the capital structure) indebtedness (including, without
limitation, such Loan) in the Underlying Instrument for each such Loan, and in
any case that “Senior Net Leverage Ratio” or such comparable definition is not
defined in such Underlying Instrument, the ratio of (a) first lien senior
secured (or such applicable lien or applicable level within the capital
structure) Indebtedness (including, without limitation, such Loan) of the
applicable Obligor as of the date of determination minus the Unrestricted Cash
of such Obligor as of such date to (b) EBITDA of such Obligor with respect to
the applicable Relevant Test Period, in each case as calculated by the Borrower
or the Collateral Manager in good faith using information from and calculations
consistent with relevant compliance statements and financial reporting packages
provided by the relevant Obligor.

 

“Senior Secured Bond” means any bond that (i) pays a coupon at a fixed rate or
floating rate, (ii) is not (and cannot by its terms become) subordinate in right
of payment to any obligation of the Obligor in any bankruptcy, reorganization,
insolvency, moratorium or liquidation proceedings, (iii) is secured by a pledge
of collateral, which security interest is validly perfected and first priority
under Applicable Law (subject to Liens described in clause (b) (other than
clause (v) thereof) of the definition of Permitted Liens), and (iv) the Borrower
or the Collateral Manager determines in good faith that the value of the
collateral securing such bond (or the enterprise value of the underlying
business) on or about the time of origination equals or exceeds the outstanding
principal balance of such bond plus the aggregate outstanding balances of all
other loans of equal or higher seniority secured by the same collateral.

 

 -41-

 

 

“Solvent” means, as to any Person at any time, having a state of affairs such
that all of the following conditions are met: (a) the fair value of the property
of such Person is greater than the amount of such Person’s liabilities
(including contingent liabilities) as such value is established and liabilities
evaluated for purposes of Section 101(32) of the Bankruptcy Code; (b) the
present fair saleable value of the property of such Person is not less than the
amount that will be required to pay the probable liability of such Person on its
debts and other liabilities as they become absolute and matured; (c) such Person
is able to realize upon its property and pay its debts and other liabilities
(including disputed, contingent and unliquidated liabilities) as they mature in
the normal course of business; (d) such Person does not intend to, and does not
believe that it will, incur debts or liabilities beyond such Person’s ability to
pay as such debts and liabilities mature; and (e) such Person is not engaged in
a business or a transaction, and does not propose to engage in a business or a
transaction, for which such Person’s property assets would constitute
unreasonably small capital.

 

“State” means one of the fifty states of the United States or the District of
Columbia.

 

“Stated Maturity Date” means February 19, 2019.18, 2022.

 

“Subsidiary” means with respect to a person, a corporation, partnership or other
entity of which shares of stock or other ownership interests having ordinary
voting power (other than stock or such other ownership interests having such
power only by reason of the happening of a contingency) to elect a majority of
the board of directors or other managers of such corporation, partnership or
other entity are at the time owned, or the management of which is otherwise
controlled, directly or indirectly through one or more intermediaries, or both,
by such person.

 

“Substitution” has the meaning set forth in Section 2.07(a).

 

“Taxes” means any and all present or future taxes, levies, imposts, deductions,
charges or withholdings, and all liabilities (including penalties, interest and
additions to tax) with respect thereto, whether now or hereafter imposed,
levied, collected, withheld or assessed by any taxation authority or other
Governmental Authority.

 

“Third Party Agented Loan” means any Loan which is agented by a Person other
than the Seller or any of its Affiliates as part of a syndicated loan
transaction.

 

“Total Net Leverage Ratio” means, with respect to any Loan for any Relevant Test
Period, the meaning of “Total Net Leverage Ratio” or any comparable definition
in the Underlying Instrument for each such Loan, and in any case that “Total Net
Leverage Ratio” or such comparable definition is not defined in such Underlying
Instrument, the ratio of (a) Indebtedness minus Unrestricted Cash to (b) EBITDA,
in each case as calculated by the Borrower or the Collateral Manager in good
faith using information from and calculations consistent with relevant
compliance statements and financial reporting packages provided by the relevant
Obligor.

 

 -42-

 

 

“Traditional Middle Market Loan” means any Loan Asset (other than a Broadly
Syndicated Loan or a Large Middle Market Loan) that (i) is not (and cannot by
its terms become) subordinate in right of payment to any obligation of the
Obligor in any bankruptcy, reorganization, insolvency, moratorium or liquidation
proceedings, (ii) is secured by a pledge of collateral, which security interest
is validly perfected and first priority under Applicable Law (subject to Liens
described in clause (b) (other than clause (v) thereof) of the definition of
Permitted Liens), and (iii) a Borrower or the Collateral Manager determines in
good faith that the value of the collateral securing such Loan Asset (or the
enterprise value of the underlying business) on or about the time of origination
equals or exceeds the outstanding principal balance of such Loan Asset plus the
aggregate outstanding balances of all other loans of equal or higher seniority
secured by the same collateral.

 

“Tranche Size” means, with respect to any Loan, the dollar value of the tranche
(including any last-out component but excluding any second lien or unsecured
tranche) of Indebtedness of the applicable Obligor currently held or
contemplated for purchase by the Borrower; provided that any pari passu tranche
of Indebtedness that is broadly syndicated with the same material terms and
issued by the same Obligor pursuant to the same Underlying Instrument may be
included in the calculation of Tranche Size in the sole discretion of the
Administrative Agent.

 

“Transaction Documents” means this Agreement, the Variable Funding Note(s), any
Joinder Supplement, the Advisory Agreements, the Indemnity Letter, the LLC
Agreement, the Management Agreement, the Purchase and Sale Agreement, the
Securities Account Control Agreement, the Wells Fargo Corporate Trust Fee
Letter, each Lender Fee Letter and any additional document the execution of
which is necessary or appropriate to carrying out the terms of the foregoing
documents.

 

“Transferee Letter” has the meaning assigned to that term in Section 12.04(a).

 

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

 

“Underlying Collateral” means, with respect to a Loan, any property or other
assets designated and pledged or mortgaged as collateral to secure repayment of
such Loan, as applicable, including, without limitation, mortgaged property
and/or a pledge of the stock, membership or other ownership interests in the
related Obligor and all proceeds from any sale or other disposition of such
property or other assets.

 

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

 

“Unfunded Exposure Account” means account number 48444903 at the Account Bank in
the name of the Borrower subject to the Lien of the Collateral Agent for the
benefit of the Secured Parties including any sub-account thereof; provided, that
the funds deposited therein (including any interest and earnings thereon) from
time to time shall constitute the property and assets of the Borrower, and the
Borrower shall be solely liable for any Taxes payable with respect to the
Unfunded Exposure Account.

 

 -43-

 

 

“Unfunded Exposure Amount” means, on any date of determination, with respect to
any Loan, the aggregate amount (without duplication) of all (i) unfunded
commitments and (ii) all contingent commitments, in each case required to be
funded pursuant to the terms of the related Underlying Instruments with respect
to such Loan.

 

“Unfunded Exposure Equity Amount” means, on any date of determination, with
respect to any Loan, an amount equal to the result of (a) the Unfunded Exposure
Amount of such Loan minus (b) the product of (i) the Unfunded Exposure Amount of
such Loan, (ii) the Assigned Value of such Loan and (iii) the Applicable
Percentage of such Loan.

 

“Unfunded Exposure Equity Shortfall” means (a) the aggregate Unfunded Exposure
Equity Amount of all Loans minus (b) the amount on deposit in the Unfunded
Exposure Account.

 

“United States” means the United States of America.

 

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

 

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

 

“Unrestricted Cash” means the meaning of “Unrestricted Cash” or any comparable
definition in the Underlying Instrument for each such Loan, and in any case that
“Unrestricted Cash” or such comparable definition is not defined in such
Underlying Instrument, all cash available for use for general corporate purposes
and not held in any reserve account or legally or contractually restricted for
any particular purposes or subject to any lien (other than blanket liens
permitted under or granted in accordance with such Underlying Instrument).

 

“Value Adjustment Event” means, with respect to any Loan, the occurrence of any
one or more of the following events after the related Cut-Off Date:

 

(a)       the Interest Coverage Ratio for any Relevant Test Period of the
related Obligor with respect to such Loan is (A) less than 85% of the Interest
Coverage Ratio with respect to such Loan provided in the applicable Approval
Notice (provided that if any other positions in such Loan existed on its Cut-Off
Date then the Interest Coverage Ratio utilized for the position with the
earliest of such other Cut-Off Dates shall apply) and (B) less than 1.50 to
1.00;

 

(b)       with respect to any Loan other than a Second Lien Loan, the Senior Net
Leverage Ratio for any Relevant Test Period of the related Obligor with respect
to such Loan is (A) more than 0.50x higher than such Senior Net Leverage Ratio
provided in the applicable Approval Notice (provided that if any other positions
in such Loan existed on its Cut-Off Date then the Senior Net Leverage Ratio
utilized for the position with the earliest of such other Cut-Off Dates shall
apply) and (B) greater than 3.50 to 1.00;

 

(c)       with respect to any Second Lien Loan, the Total Net Leverage Ratio for
any Relevant Test Period of the related Obligor with respect to such Loan is
more than 0.50x higher than such Total Net Leverage Ratio provided in the
applicable Approval Notice (provided that if any other positions in such Loan
existed on its Cut-Off Date then the Total Net Leverage Ratio utilized for the
position with the earliest of such other Cut-Off Dates shall apply);

 

 -44-

 

 

(d)       an Obligor payment default under such Loan (after giving effect to any
grace and/or cure period set forth in the Underlying Instrument, but not to
exceed three (3) Business Days);

 

(e)       any Obligor default (other than a payment default) under any Loan for
which the Borrower (or agent or required lenders pursuant to the related
Underlying Instrument, as applicable) has elected to exercise any of its rights
and remedies under the applicable Underlying Instrument in case of such default
thereunder (including, but not limited to, acceleration of the debt);

 

(f)        a Bankruptcy Event with respect to the related Obligor;

 

(g)       the occurrence of a Material Modification (in accordance with clauses
(b)-(f) of the definition thereof) with respect to such Loan;

 

(h)       the occurrence of a Material Modification (in accordance with clause
(a) of the definition thereof) with respect to such Loan;

 

(i)        the failure of the Borrower to deliver any financial reporting
package monthly, quarterly or annually with respect to such Loan pursuant to
Section 6.07(e) no later than 45 days after the end of each month, 60 days after
the end of each quarter and 130 days after the end of each fiscal year,
respectively (or such greater number of days as allowed by the applicable
Underlying Instrument (including any grace periods thereunder), but which shall
in no case exceed 150 days after the end of each fiscal year), unless otherwise
agreed to by the Administrative Agent in its sole discretion; or

 

(j)        the Borrower decides not to defend the right, title and interest of
the Collateral Agent on such Loan because the cost to defend the applicable
claims exceeds the value of such Loan pursuant to Section 5.01(u).

 

“Variable Funding Note” has the meaning assigned to such term in Section
2.01(a).

 

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

 

“Wells Fargo” means Wells Fargo Bank, National Association, a national banking
association, in its individual capacity, and its successors and assigns.

 

“Wells Fargo Corporate Trust Fee Letter” means the Wells Fargo Corporate Trust
Fee Letter, dated as of the date hereof, between the Collateral Agent, the
Collateral Custodian, the Account Bank, the Borrower and the Administrative
Agent, as such letter may be amended, modified, supplemented, restated or
replaced from time to time.

 

 -45-

 

 

“Yield” means with respect to any Collection Period, the sum for each day in
such Collection Period determined in accordance with the following formula:

 

YR x L

D

 

where: YR = the Yield Rate applicable on such day;   L = the Advances
Outstanding on such day; and   D = 360 or, to the extent the Yield Rate is the
Base Rate, 365 or 366 days, as applicable;

 

provided that (i) no provision of this Agreement shall require the payment or
permit the collection of Yield in excess of the maximum permitted by Applicable
Law and (ii) Yield shall not be considered paid by any distribution if at any
time such distribution is later required to be rescinded by any Lender to the
Borrower or any other Person for any reason including, without limitation, such
distribution becoming void or otherwise avoidable under any statutory provision
or common law or equitable action, including, without limitation, any provision
of the Bankruptcy Code.

 

“Yield Rate” means, as of any date of determination, an interest rate per annum
equal to LIBOR for such date plus the Applicable Spread; provided that if a
Lender shall have notified the applicable Lender Agent in writing that a
Eurodollar Disruption Event has occurred, the Yield Rate shall be equal to the
Base Rate plus the Applicable Spread until such Lender Agent shall have notified
the Administrative Agent that such Eurodollar Disruption Event has ceased.

 

Section 1.02     Other Terms.

 

All accounting terms used but not specifically defined herein shall be construed
in accordance with GAAP. All terms used in Article 9 of the UCC in the State of
New York, and used but not specifically defined herein, are used herein as
defined in such Article 9.

 

Section 1.03     Computation of Time Periods.

 

Unless otherwise stated in this Agreement, in the computation of a period of
time from a specified date to a later specified date, the word “from” means
“from and including” and the words “to” and “until” each mean “to but
excluding.”

 

Section 1.04     Instruction by Borrower Advisors.

 

If any Secured Party receives contradictory instructions or direction from the
Borrower or any one or more Borrower Advisors pursuant to the terms of this
Agreement or any other Transaction Document, such Secured Party shall seek
clarification from the Collateral Manager (and shall be entitled to rely on such
instructions or directions in accordance with terms hereof or thereof) and shall
not be liable for any action taken or omitted to be taken in connection with any
such instructions or directions.

 

 -46-

 

 

Section 1.05     Paydown of Partially Eligible Loans.

 

If any portion of a Loan is not an Eligible Loan solely because of the threshold
set forth in clause (b), (g), (w), (z) and/or (aa) of the definition of
“Eligible Loan” (each such portion, an “Ineligible Portion”), each decrease in
the Outstanding Balance of such Loan shall be applied pro rata to both the
Eligible Loan and the Ineligible Portion; provided that if the Borrower is
selling such Loan in accordance with the terms hereof, the decrease in the
Outstanding Balance of such Loan shall be applied first to the Ineligible
Portion and then to the Eligible Loan. If the Outstanding Balance of such
Eligible Loan portion is reduced below the threshold set forth in clause (b),
(g), (w), (z) and/or (aa) of the definition of “Eligible Loan”, the Borrower may
submit the Ineligible Portion of such Loan for approval by the Administrative
Agent in its sole discretion as an Eligible Loan.

 

Section 1.06     Interpretation.

 

In each Transaction Document, unless a contrary intention appears:

 

(a)          the singular number includes the plural number and vice versa;

 

(b)          reference to any Person includes such Person’s successors and
assigns but only if such successors and assigns are not prohibited by the
Transaction Documents;

 

(c)          reference to any gender includes each other gender;

 

(d)          reference to day or days without further qualification means
calendar days;

 

(e)          reference to any time means Charlotte, North Carolina time;

 

(f)           reference to the words “include”, “includes” and “including” shall
be deemed to be followed by the phrase “without limitation”;

 

(g)          reference to any agreement (including any Transaction Document),
document or instrument means such agreement, document or instrument as amended,
modified, waived, supplemented, restated or replaced and in effect from time to
time in accordance with the terms thereof and, if applicable, the terms of the
other Transaction Documents, and reference to any promissory note includes any
promissory note that is an extension or renewal thereof or a substitute or
replacement therefor;

 

(h)          reference to any Applicable Law means such Applicable Law as
amended, modified, codified, replaced or reenacted, in whole or in part, and in
effect from time to time, including rules and regulations promulgated thereunder
and reference to any Section or other provision of any Applicable Law means that
provision of such Applicable Law from time to time in effect and constituting
the substantive amendment, modification, codification, replacement or
reenactment of such Section or other provision;

 

 -47-

 

 

(i)           reference to the “occurrence” of an Event of Default means after
any grace period applicable to such Event of Default and shall not include any
Event of Default that has been waived in accordance with the terms of this
Agreement; and

 

(j)           for purposes of this Agreement, a Collateral Manager Event of
Default or an Event of Default shall be deemed to be continuing unless it is
waived in accordance with Section 12.01.

 

ARTICLE II.

THE FACILITY

 

Section 2.01     Variable Funding Note and Advances.

 

(a)          Variable Funding Note. The Borrower has heretofore delivered or
shall, on the date hereof (and on the terms and subject to the conditions
hereinafter set forth), deliver, to each Lender Agent, at the address set forth
on Annex A to this Agreement, and on the effective date of any Joinder
Supplement, to each additional Lender Agent, at the address set forth in the
applicable Joinder Supplement, a duly executed variable funding note (the
“Variable Funding Note”), in substantially the form of Exhibit I, in an
aggregate face amount equal to the applicable Lender’s Commitment as of the
Closing Date or the effective date of any Joinder Supplement, as applicable, and
otherwise duly completed. Interest shall accrue on the Variable Funding Note,
and the Variable Funding Note shall be payable, as described herein.

 

(b)         Advances. On the terms and conditions hereinafter set forth, from
time to time from the Closing Date until the end of the Reinvestment Period, the
Lenders shall make Advances under the Variable Funding Notes, secured by the
Collateral Portfolio, to the Borrower. Under no circumstances shall any Lender
be required to make any Advance if after giving effect to such Advance and the
addition to the Collateral Portfolio of the Eligible Loans being acquired by the
Borrower using the proceeds of such Advance, (i) an Event of Default or
Collateral Manager Event of Default has occurred and is continuing or would
result therefrom or an Unmatured Event of Default exists or would result
therefrom or (ii) the aggregate Advances Outstanding would exceed the Borrowing
Base. Notwithstanding anything to the contrary herein, no Lender shall be
obligated to provide the Borrower with aggregate funds in connection with an
Advance that would exceed the lesser of (x) such Lender’s unused Commitment then
in effect and (y) the aggregate unused Commitments then in effect.

 

(c)          Notations on Variable Funding Note. Each Lender Agent is hereby
authorized to enter on a schedule attached to the Variable Funding Note with
respect to each Conduit Lender and each Institutional Lender a notation (which
may be computer generated) with respect to each Advance under the Variable
Funding Note made by the applicable Lender of: (i) the date and principal amount
thereof, and (ii) each repayment of principal thereof, and any such recordation
shall, absent manifest error, constitute prima facie evidence of the accuracy of
the information so recorded. The failure of any Lender Agent to make any such
notation on the schedule attached to any Variable Funding Note shall not limit
or otherwise affect the obligation of the Borrower to repay the Advances in
accordance with their respective terms as set forth herein.

 

 -48-

 

 

Section 2.02     Procedure for Advances.

 

(a)          Subject to the limitations set forth in Section 2.01(b), the
Borrower may request an Advance from the Lenders by delivering at the specified
times the information and documents set forth in this Section 2.02.

 

(b)         No later than 2:00 p.m. at least one (1) Business Day and not more
than five (5) Business Days prior to the proposed Advance Date, the Borrower
shall, or shall cause the Collateral Manager to, deliver:

 

(i)           to the Administrative Agent (with a copy to the Collateral Agent
and the Collateral Custodian) written notice of such proposed Advance Date
(including a duly completed Borrowing Base Certificate updated to the date such
Advance is requested and giving pro forma effect to the Advance requested and
the use of the proceeds thereof);

 

(ii)          to the Administrative Agent a wire disbursement and authorization
form, to the extent not previously delivered; and

 

(iii)         to the Administrative Agent (with a copy to the Collateral Agent
and the Collateral Custodian) a duly completed Notice of Borrowing which shall
(A) specify the desired amount of such Advance, which amount must be at least
equal to $500,000 (or, with respect to any Delayed Draw Loan, the amount of the
draw request made by the applicable Obligor), to be allocated to each Lender in
accordance with its Pro Rata Share, (B) specify the proposed Advance Date for
such Advance, (C) specify the Loan(s), if any, to be financed on such Advance
Date (including the appropriate file number, a description of the Obligor,
original loan balance, Outstanding Balance, Assigned Value and Purchase Price
for each Loan and identifying each Loan by type and proposed Applicable
Percentage applicable to each such Loan), (D) with respect to any Delayed Draw
Loan, include the Unfunded Exposure Amount with respect to such Loan and the
draw request made by the applicable Obligor and (E) include a representation
that all conditions precedent for an Advance described in Article III hereof
have been met. Each Notice of Borrowing shall be irrevocable. If any Notice of
Borrowing is received by the Administrative Agent after 2:00 p.m. on the
Business Day prior to the Business Day for which such Advance is requested or on
a day that is not a Business Day, such Notice of Borrowing shall be deemed to be
received by the Administrative Agent at 9:00 a.m. on the next Business Day.

 

(c)          On the proposed Advance Date, subject to the limitations set forth
in Section 2.01(b) and upon satisfaction of the applicable conditions set forth
in Article III, (i) each Lender shall make available to the Administrative Agent
in same day funds, at such bank or other location reasonably designated by the
Administrative Agent from time to time, an amount equal to such Lender’s Pro
Rata Share of the least of (A) the amount requested by the Borrower for such
Advance, (B) the aggregate unused Commitments then in effect and (C) an amount
equal to the amount by which the Borrowing Base exceeds Advances Outstanding on
such Advance Date (after giving effect to the use of such Advance for the
purchase of Eligible Loans) and (ii) the Administrative Agent shall make the
aggregate amount received from the Lenders available to the Borrower at such
bank or other location reasonably designated by Borrower in the Notice of
Borrowing given pursuant to this Section 2.02.

 

 -49-

 

 

(d)          On each Advance Date, the obligation of each Lender to remit its
Pro Rata Share of any such Advance shall be several from that of each other
Lender and the failure of any Conduit Lender or Institutional Lender to so make
such amount available to the Borrower shall not relieve any other Lender of its
obligation hereunder.

 

(e)          Subject to Section 2.04 and the other terms, conditions, provisions
and limitations set forth herein, the Borrower may (i) borrow, repay or prepay
and reborrow Advances without any penalty, fee or premium on and after the
Closing Date and prior to the end of the Reinvestment Period and (ii) repay or
prepay Advances without any penalty, on and after the Closing Date and prior to
the Facility Maturity Date.

 

Section 2.03     Yield and Non-Usage Fees.

 

(a)          The Borrower shall pay Yield to the Administrative Agent in
accordance with Section 2.04 for pro rata distribution to each applicable Lender
(either directly or through the applicable Lender Agent). The Administrative
Agent shall calculate the Yield in accordance with each Lender Fee Letter for
each Lender’s portion of the Advances (including unpaid Yield related thereto,
if any, due and payable on a prior Payment Date) to be paid by the Borrower on
each Payment Date for the related Collection Period and shall advise the
Borrower Advisors and the Collateral Agent thereof on the third Business Day
prior to such Payment Date.

 

(b)          The Borrower shall pay Non-Usage Fee to the Administrative Agent in
accordance with Section 2.04 for pro rata distribution to each applicable Lender
(either directly or through the applicable Lender Agent). The Administrative
Agent shall determine the Non-Usage Fee in accordance with each Lender Fee
Letter accrued with respect to each Lender’s unutilized Commitment to be paid by
the Borrower on each Payment Date for the related Collection Period and shall
advise the Borrower Advisors and the Collateral Agent thereof on the third
Business Day prior to such Payment Date.

 

(c)          Any determination that a Eurodollar Disruption Event has occurred
shall be communicated to the Borrower by written notice from the Administrative
Agent promptly after the Administrative Agent learns of such occurrence.

 

Section 2.04     Remittance Procedures.

 

Subject to its ability to apply collections received to the Unfunded Exposure
Account after the end of the Reinvestment Period as set forth in Section
2.18(a), the Borrower shall cause the Collateral Manager and, if it fails to do
so, the Administrative Agent may, instruct the Collateral Agent, to apply funds
on deposit in the Controlled Accounts as described in this Section 2.04;
provided that, at any time after delivery of Notice of Exclusive Control (as
defined in the Securities Account Control Agreement) during the occurrence and
continuance of an Event of Default, the Administrative Agent shall instruct the
Collateral Agent to apply funds on deposit in the Controlled Accounts as
described in this Section 2.04.

 

 -50-

 

 

 

(a)                Interest Payments Absent an Event of Default. On each Payment
Date prior to the Facility Maturity Date, so long as no Event of Default has
occurred and is continuing, the Collateral Agent shall (as directed pursuant to
the first paragraph of this Section 2.04) transfer Interest Collections held by
the Account Bank in the Interest Collection Account, in accordance with the
Collateral Management Report, to the following Persons in the following amounts,
calculated as of the Determination Date immediately preceding any Payment Date,
and priority:

 

(i)                  pari passu to (a) the Collateral Agent, in payment in full
of all accrued Collateral Agent Fees and Collateral Agent Expenses, (b) the
Collateral Custodian in payment in full of all accrued Collateral Custodian Fees
and Collateral Custodian Expenses and (c) the Account Bank in payment in full of
all accrued fees and expenses due under the Wells Fargo Corporate Trust Fee
Letter; provided that amounts payable with respect to Collateral Agent Expenses,
Collateral Custodian Expenses and the Account Bank pursuant to this clause (i)
(and Section 2.04(b)(i) and (c)(i), if applicable) shall not, collectively,
exceed $100,000 per annum;

 

(ii)                to the Administrative Agent in payment in full of all costs
and expenses (other than as set forth in clause (a)(iii)) incurred in connection
with the exercise of its rights during a Collateral Manager Event of Default;

 

(iii)               to the agents and advisers retained by the Administrative
Agent in payment of fees and expenses incurred in connection with the
Administrative Agent’s exercise of its rights during a Collateral Manager Event
of Default; provided that amounts payable pursuant to this clause (iii) during
any calendar year shall not exceed an amount equal to 0.50% of the average
aggregate Outstanding Balance during such calendar year;

 

(iv)               pro rata, in accordance with the amounts due under this
clause, to each Lender Agent, for the account of the applicable Lender, all
Yield and the Non-Usage Fee that is accrued and unpaid as of the last day of the
related Collection Period;

 

(v)                pro rata, to each Lender Agent (for the account of the
applicable Lender) and the Administrative Agent, all accrued and unpaid fees,
expenses (including attorneys’ fees, costs and expenses) and indemnity amounts
payable by the Borrower to the Administrative Agent, any Lender Agent or any
Lender under the Transaction Documents;

 

(vi)               to the Unfunded Exposure Account in an amount (A) during the
Reinvestment Period, equal to the aggregate Unfunded Exposure Equity Shortfall
and (B) after the end of the Reinvestment Period, necessary to cause the amount
on deposit in the Unfunded Exposure Account to equal the Aggregate Unfunded
Exposure Amount;

 

(vii)              to each Lender Agent for the account of the applicable
Lender, an amount necessary to satisfy any existing Borrowing Base Deficiency,
pro rata in accordance with the amount of Advances Outstanding;

 

 -51-

 

 

(viii)             pari passu to (a) the Collateral Agent, in payment in full of
all accrued Collateral Agent Expenses to the extent not previously paid, (b) the
Collateral Custodian in payment in full of all accrued Collateral Custodian
Expenses to the extent not previously paid, and (c) the Account Bank in payment
in full of all accrued expenses to the extent not previously paid;

 

(ix)                to pay any other amounts due (other than with respect to the
repayment of Advances) under this Agreement and the other Transaction Documents
(including any indemnity amounts due from the Borrower hereunder and
thereunder); and

 

(x)                 to the Borrower, any remaining amounts.

 

(b)               Principal Payments Absent an Event of Default. On each Payment
Date, so long as no Event of Default has occurred and is continuing, and in any
case prior to the Facility Maturity Date, the Collateral Agent shall (as
directed pursuant to the first paragraph of this Section 2.04) transfer
Principal Collections held by the Account Bank in the Principal Collection
Account, in accordance with the Collateral Management Report, to the following
Persons in the following amounts, calculated as of the Determination Date
immediately preceding any Payment Date, and priority:

 

(i)                 to pay amounts due under Section 2.04(a)(i) through (v), to
the extent not paid thereunder;

 

(ii)                (A) during the Reinvestment Period, (x) to the Unfunded
Exposure Account in an amount equal to the aggregate Unfunded Exposure Equity
Shortfall and (y) to each Lender Agent for the account of the applicable Lender,
an amount necessary to satisfy any existing Borrowing Base Deficiency, pro rata
in accordance with the amount of Advances Outstanding and (B) after the end of
the Reinvestment Period, (x) to the Unfunded Exposure Account in an amount
necessary to cause the amount on deposit in the Unfunded Exposure Account to
equal the Aggregate Unfunded Exposure Amount and (y) to each Lender Agent for
the account of the applicable Lender, an amount necessary to pay the Advances
Outstanding pro rata in accordance with each Lender’s Pro Rata Share of the
Advances Outstanding until paid in full;

 

(iii)               prior to the end of the Reinvestment Period and during the
continuance of a Collateral Manager Event of Default, to each Lender Agent for
the account of the applicable Lender, an amount equal to each Lender’s Pro Rata
Share of the Advances Outstanding;

 

(iv)               pari passu to (a) the Collateral Agent, in payment in full of
all accrued Collateral Agent Expenses to the extent not previously paid, (b) the
Collateral Custodian in payment in full of all accrued Collateral Custodian
Expenses to the extent not previously paid, and (c) the Account Bank in payment
in full of all accrued expenses to the extent not previously paid;

 

(v)                to pay any other amounts due under this Agreement and the
other Transaction Documents (including any indemnity amounts due from the
Borrower hereunder and thereunder); and

 

 -52-

 

 

(vi)               to the Borrower, any remaining amounts.

 

(c)                Payment Date Transfers Upon the Occurrence of an Event of
Default. On each Payment Date or as requested by the Administrative Agent on any
Business Day, if an Event of Default has occurred and is continuing, or in any
case after the Facility Maturity Date, the Collateral Agent shall (as directed
pursuant to the first paragraph of this Section 2.04) transfer collected funds
held by the Account Bank in the Interest Collection Account and the Principal
Collection Account, in accordance with the Collateral Management Report, to the
following Persons in the following amounts, calculated as of the Determination
Date immediately preceding any Payment Date, and priority:

 

(i)                  pari passu to (a) the Collateral Agent, in payment in full
of all accrued Collateral Agent Fees and Collateral Agent Expenses, (b) the
Collateral Custodian in payment in full of all accrued Collateral Custodian Fees
and Collateral Custodian Expenses and (c) the Account Bank in payment in full of
all accrued fees and expenses due under the Wells Fargo Corporate Trust Fee
Letter; provided that amounts payable with respect to Collateral Agent Expenses,
Collateral Custodian Expenses and the Account Bank pursuant to this clause (i)
(and Section 2.04(a)(i) and (b)(i), if applicable) shall not, collectively,
exceed $100,000 per annum;

 

(ii)                to the Administrative Agent in payment in full of all costs
and expenses (other than as set forth in clause (c)(iii)) incurred in connection
with the exercise of its rights during a Collateral Manager Event of Default;

 

(iii)               to the agents and advisers retained by the Administrative
Agent in payment of fees and expenses incurred in connection with the
Administrative Agent’s exercise of its rights during a Collateral Manager Event
of Default; provided that amounts payable with respect to this clause (iii)
during any calendar year shall not exceed an amount equal to 0.50% of the
average aggregate Outstanding Balance during such calendar year

 

(iv)               pro rata, in accordance with the amounts due under this
clause, to each Lender Agent, for the account of the applicable Lender, all
Yield and the Non-Usage Fee that is accrued and unpaid as of the last day of the
related Collection Period;

 

(v)                pro rata, to each Lender Agent (for the account of the
applicable Lender) and the Administrative Agent, as applicable, all accrued and
unpaid fees, expenses (including attorneys’ fees, costs and expenses) and
indemnity amounts payable by the Borrower to the Administrative Agent, any
Lender Agent or any Lender under the Transaction Documents;

 

(vi)               to the Unfunded Exposure Account in an amount necessary to
cause the amount on deposit in the Unfunded Exposure Account to equal the
Aggregate Unfunded Exposure Amount;

 

(vii)              to each Lender Agent for the account of the applicable
Lender, an amount equal to each Lender’s Pro Rata Share of the Advances
Outstanding;

 

 -53-

 

 

(viii)             pari passu to (a) the Collateral Agent, in payment in full of
all accrued Collateral Agent Expenses to the extent not previously paid, (b) the
Collateral Custodian in payment in full of all accrued Collateral Custodian
Expenses to the extent not previously paid, and (c) the Account Bank in payment
in full of all accrued expenses to the extent not previously paid;

 

(ix)               to pay any other amounts due under this Agreement and the
other Transaction Documents (including any indemnity amounts due from the
Borrower hereunder and thereunder); and

 

(x)                 to the Borrower, any remaining amounts.

 

(d)                Insufficiency of Funds. For the sake of clarity, the parties
hereby agree that if the funds on deposit in the applicable Controlled Account
are insufficient to pay any amounts due and payable on a Payment Date or
otherwise, the Borrower shall nevertheless remain responsible for, and shall pay
when due, all amounts payable under this Agreement and the other Transaction
Documents in accordance with the terms of this Agreement and the other
Transaction Documents.

 

Section 2.05     Instructions to the Collateral Agent and the Account Bank.

 

All instructions and directions given to the Collateral Agent or the Account
Bank by the Borrower or on behalf of the Borrower by a Borrower Advisor or by
the Administrative Agent pursuant to Section 2.04 shall be in writing (and
instructions and directions transmitted to the Collateral Agent or the Account
Bank by facsimile or e-mail shall constitute “in writing” for this purpose), and
such written instructions and directions shall be delivered with a written
certification that such instructions and directions are in compliance with the
provisions of Section 2.04. The Borrower shall, or shall cause any Borrower
Advisor to, immediately transmit to the Administrative Agent by facsimile or
e-mail a copy of all instructions and directions given to the Collateral Agent
or the Account Bank by or on behalf of the Borrower pursuant to Section 2.04.
The Administrative Agent shall promptly transmit to the Borrower Advisors and
the Borrower by facsimile or e-mail a copy of all instructions and directions
given to the Collateral Agent or the Account Bank by the Administrative Agent,
pursuant to Section 2.04. If either the Administrative Agent or Collateral Agent
disagrees with the computation of any amounts to be paid or deposited by the
Borrower or on behalf of the Borrower, under Section 2.04 or otherwise pursuant
to this Agreement, or upon their respective instructions, it shall so notify the
Borrower, the Borrower Advisors and the Collateral Agent in writing and in
reasonable detail to identify the specific disagreement. If such disagreement
cannot be resolved within two (2) Business Days, the determination of the
Administrative Agent as to such amounts shall be conclusive and binding on the
parties hereto absent manifest error. In the event the Collateral Agent or the
Account Bank receives instructions from any Borrower Advisor or the Borrower
after the occurrence and during the continuation of an Event of Default which
conflict with any instructions received from the Administrative Agent, the
Collateral Agent or the Account Bank, as applicable, shall rely on and follow
the instructions given by the Administrative Agent.

 

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Section 2.06     Borrowing Base Deficiency Payments.

 

(a)                Notwithstanding any other obligation of the Borrower to cure
any Borrowing Base Deficiency pursuant to the terms of this Agreement, if, on
any day prior to the Collection Date, any Borrowing Base Deficiency exists, then
the Borrower shall, within 3 Business Days from the date of the occurrence of
such Borrowing Base Deficiency (or such longer period as provided below in
connection with a Cure Plan), eliminate such Borrowing Base Deficiency in its
entirety by effecting (or, in the case of clause (iv), initiating) one or more
(or any combination thereof) of the following actions in order to eliminate such
Borrowing Base Deficiency as of such date of determination: (i) deposit cash in
Dollars into the Principal Collection Account (including, without limitation,
cash contributed by the Equityholder), (ii) repay Advances (together with any
Breakage Fees, and all accrued and unpaid costs and expenses of the
Administrative Agent, the Lender Agents and the Lenders, in each case in respect
of the amount so prepaid), (iii) subject to the approval of the Administrative
Agent, in its sole discretion, Pledge additional Eligible Loans and/or (iv)
submit a Cure Plan that satisfies the requirements of Section 2.06(c) and is
approved in writing (which approval must be given within 3 Business Days from
the date of the occurrence of such Borrowing Base Deficiency and may be by
electronic communication) by the Administrative Agent in its sole discretion. If
the Borrower initiates a Cure Plan in accordance with clause (iv) above, then
the Borrower must eliminate such Borrowing Base Deficiency in accordance with
such Cure Plan within 10 Business Days from the date of the occurrence of such
Borrowing Base Deficiency.

 

(b)               No later than 2:00 p.m. on the Business Day prior to any
proposed repayment of Advances or Pledge of additional Eligible Loans pursuant
to Section 2.06(a), the Borrower (or the Collateral Manager on its behalf) shall
deliver (i) to the Administrative Agent (with a copy to the Collateral Agent and
the Collateral Custodian), notice of such repayment or Pledge and a duly
completed Borrowing Base Certificate, updated to the date such repayment or
Pledge is being made and giving pro forma effect to such repayment or Pledge,
and (ii) to the Administrative Agent, if applicable, a description of any
Eligible Loan and each Obligor of such Eligible Loan to be Pledged and added to
the updated Loan Tape. Any notice pertaining to any repayment or any Pledge
pursuant to this Section 2.06 shall be irrevocable.

 

(c)                Each Cure Plan submitted pursuant to Section 2.06(a)(iv)
shall include, as applicable, (i) a request for an Approval Notice for each Loan
to be purchased, Pledged or sold pursuant to such Cure Plan, (ii) trade tickets
identifying each Loan to be purchased, Pledged or sold and the related
settlement dates (which settlement dates must be no later than 10 Business Days
after the related Borrowing Base Deficiency occurred), (iii) the amount to be
deposited into the Principal Collection Account, (iv) the amount of Advances to
be repaid and (v) a written certification the Borrower has caused the Collateral
Manager to provide with respect to such Cure Plan that the Collateral Manager
believes that such Cure Plan will produce sufficient proceeds to cure the
related Borrowing Base Deficiency and that such proceeds will be applied within
10 Business Days of the date the related Borrowing Base Deficiency occurred to
cure such Borrowing Base Deficiency.

 

 -55-

 

 

Section 2.07     Discretionary Sales, Substitutions, Lien Release Dividends, and
Purchases and the Required Sale Date.

 

(a)                Substitutions. Subject to Sections 2.07(c) and (d), during
the Reinvestment Period the Borrower may, or to the extent a Substitution is
required under the Purchase and Sale Agreement, shall sell and replace or
exchange any Loan with another Eligible Loan (each such sale and replacement or
exchange, a “Substitution”) so long as (i) immediately after giving effect to
such Substitution, no Event of Default, Unmatured Event of Default or Collateral
Manager Event of Default shall have occurred and be continuing, (ii) each
substitute Loan acquired by the Borrower in connection with a Substitution shall
be an Eligible Loan, (iii) 100% of the proceeds from the sale or exchange of the
Loan(s) to be replaced in connection with such Substitution are either applied
by the Borrower to acquire the substitute Loan(s) or deposited in the Collection
Account, (iv) all conditions precedent set forth in Section 3.02 have been
satisfied with respect to each Loan to be acquired by the Borrower in connection
with such Substitution and (v) immediately after giving effect to such
Substitution, no Borrowing Base Deficiency exists; provided that,
notwithstanding anything to the contrary set forth in Section 3.02, in the event
a Borrowing Base Deficiency shall have existed immediately prior to giving
effect to such Substitution, the Borrower may effect a Substitution so long as,
immediately after giving effect to such Substitution and any other action taken
pursuant to Section 2.06 substantially contemporaneous therewith, such Borrowing
Base Deficiency is reduced or cured.

 

(b)               Discretionary Sales. Upon not less than one (1) Business Day’s
prior written notice to the Administrative Agent, the Borrower shall be
permitted, subject to clauses (c) and (d) below, to sell Loans (each, a
“Discretionary Sale”) so long as (i) immediately after giving effect to such
Discretionary Sale, no Event of Default, Unmatured Event of Default or
Collateral Manager Event of Default shall have occurred and be continuing, (ii)
unless the Administrative Agent shall have provided prior written consent, the
sale price of any such Loan sold pursuant to a Discretionary Sale shall be equal
to or greater than its Adjusted Borrowing Value, (iii) immediately after giving
effect to such Discretionary Sale, no Borrowing Base Deficiency exists and (iv)
100% of the proceeds from the sale of the Loan(s) in connection with such
Discretionary Sale are deposited in the Collection Account; provided that, in
the event a Borrowing Base Deficiency shall have existed immediately prior to
giving effect to such Discretionary Sale, the Borrower may, with the prior
consent of the Administrative Agent in its sole discretion, effect a
Discretionary Sale so long as, immediately after giving effect to such
Discretionary Sale and any other action taken pursuant to Section 2.06
substantially contemporaneous therewith, such Borrowing Base Deficiency is
reduced or cured.

 

(c)                Conditions to Sales and Substitutions. Any Discretionary Sale
or sale pursuant to a Substitution effected pursuant to Sections 2.07 (a) or (b)
shall be subject to the satisfaction of the following conditions:

 

(i)                 the Borrower shall deliver a Borrowing Base Certificate to
the Administrative Agent;

 

(ii)                the Borrower shall deliver a list of all Loans to be sold or
substituted to the Administrative Agent and the Trustee;

 

 -56-

 

 

(iii)               the Borrower shall be deemed to have certified to the
Administrative Agent that no selection procedures adverse to the interests of
the Administrative Agent or the Lenders were utilized by the Borrower in the
selection of the Loans to be sold or substituted;

 

(iv)               the Borrower shall notify the Administrative Agent and the
Account Bank of any amount to be deposited into the Collection Account in
connection with any sale or substitution;

 

(v)               the Borrower shall be deemed to have certified to the
Administrative Agent that the representations and warranties contained in
Section 4.01 and 4.02 hereof shall continue to be correct in all material
respects following any sale or substitution, except to the extent any such
representation or warranty relates to an earlier date;

 

(vi)              any repayment of Advances Outstanding in connection with any
sale or substitution of Loans hereunder shall comply with the requirements set
forth in Section 2.17(b);

 

(vii)              the Administrative Agent shall have provided its prior
written consent to any such sale or substitution to an Affiliate of the Borrower
or any Borrower Advisor;

 

(viii)             the Administrative Agent shall have provided its prior
written consent to any such sale or substitution after the occurrence of an
Unmatured Event of Default, Event of Default or a Collateral Manager Event of
Default;

 

(ix)               the Borrower shall pay an amount equal to all Breakage Fees
and other accrued and unpaid costs and expenses (including, without limitation,
reasonable legal fees) of the Administrative Agent, the Lenders and the
Collateral Custodian in connection with any such sale or substitution
(including, but not limited to, expenses incurred in connection with the release
of the Lien of the Collateral Agent on behalf of the Secured Parties and any
other party having an interest in the Loan in connection with such sale or
substitution).

 

(d)                Limitations on Sales, Substitutions and Lien Release
Dividends.

 

(i)                 The aggregate Outstanding Balance of all Loans subject to a
Value Adjustment Event described in clauses (d), (f) or (h) of the definition
thereof which are included in a Lien Release Dividend or sold by the Borrower to
the Seller in connection with a Substitution or a Discretionary Sale permitted
hereunder on any date of determination shall not exceed 10% of the aggregate
Outstanding Balance of all Loans conveyed by the Seller to the Borrower pursuant
to the Purchase and Sale Agreement through such date (the Outstanding Balance of
each such Loan, for purposes of this Section 2.07(d)(i), being that on the date
of conveyance under the Purchase and Sale Agreement).

 

 -57-

 

 

(ii)                The aggregate Outstanding Balance of all Loans which are
sold by the Borrower in connection with a Substitution or a Discretionary Sale
or included in a Lien Release Dividend shall not exceed (i) during the first 12
months after the Closing Date, 50% of the highest aggregate Outstanding Balance
of the Collateral Portfolio during any month of such 12-month period and (ii)
during any 12 month rolling period thereafter (or such lesser number of months
as shall have elapsed since the one-year anniversary of the Closing Date), 20%
of the highest aggregate Outstanding Balance of the Collateral Portfolio during
any month of such 12 month period (or such lesser period); provided that, the
foregoing limitation set forth in this clause (d) shall not apply with respect
to any Substitution, Discretionary Sale or Lien Release Dividend (A) with the
prior written consent of the Administrative Agent, of a Loan which is reasonably
expected to be refinanced or paid off in full by the applicable Obligor, (B) of
a Credit Risk Loan, (C) of a Loan with an Assigned Value of zero or (D) in
connection with a Cure Plan Sale; and provided, further, that, notwithstanding
the foregoing, the aggregate of the Substitutions, Discretionary Sales and Lien
Release Dividends by the Borrower to the Seller permitted hereunder on any date
of determination shall not exceed 20% of the aggregate Outstanding Balance of
all Loans conveyed by the Seller to the Borrower pursuant to the Purchase and
Sale Agreement through such date (the Outstanding Balance of each such Loan, for
purposes of this proviso, being that on the date of conveyance under the
Purchase and Sale Agreement), exclusive of (i) Loans sold to the Seller or
conveyed pursuant to a Substitution, in each case only if such sale or
conveyance is required under Article VI of the Purchase and Sale Agreement and
(ii) Required Sale Assets sold to the Seller for purposes of compliance with
Section 2.07(g).

 

(e)                Lien Release Dividend. Notwithstanding any provision
contained in this Agreement to the contrary, provided no Event of Default or
Collateral Manager Event of Default has occurred and no Unmatured Event of
Default exists, on a Lien Release Dividend Date, the Borrower may dividend any
Loan, or portions thereof, to the Equityholder (each, a “Lien Release
Dividend”), subject to the restrictions set forth in clauses (d)(i) and (ii)
above and the following terms and conditions, as certified by the Borrower to
the Administrative Agent (with a copy to the Collateral Agent and the Collateral
Custodian):

 

(i)                 The Borrower and the Equityholder shall have given the
Administrative Agent, with a copy to the Collateral Agent and the Collateral
Custodian, at least five (5) Business Days prior written notice requesting that
the Administrative Agent consent to the effectuation of a Lien Release Dividend,
in the form of Exhibit Q hereto (a “Notice and Request for Consent to Lien
Release Dividend”), which consent shall be given in the sole and absolute
discretion of the Administrative Agent;

 

(ii)                On any Lien Release Dividend Date, no more than four Lien
Release Dividends shall have been made during the 12-month period immediately
preceding the proposed Lien Release Dividend Date;

 

(iii)               After giving effect to the Lien Release Dividend on the Lien
Release Dividend Date, (A) no Borrowing Base Deficiency, Event of Default,
Collateral Manager Event of Default or Unmatured Event of Default shall exist,
(B) the representations and warranties contained in Sections 4.01 and 4.02 and
in the Management Agreement shall continue to be correct, except to the extent
relating to an earlier date, (C) the eligibility of any Loan remaining as part
of the Collateral Portfolio after the Lien Release Dividend will be redetermined
as of such date, (D) no claim shall have been asserted or proceeding commenced
challenging the enforceability or validity of any of the Required Loan Documents
and (E) there shall have been no Material Adverse Effect on any Borrower Advisor
or the Borrower;

 

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(iv)               Such Lien Release Dividend must be in compliance with
Applicable Law and may not (A) be made with the intent to hinder, delay or
defraud any creditor of the Borrower or (B) leave the Borrower, immediately
after giving effect to the Lien Release Dividend, not Solvent;

 

(v)               On or prior to the Lien Release Dividend Date, the Borrower
shall have (A) delivered to the Administrative Agent, the Collateral Agent and
the Collateral Custodian, a list specifying all Loans or portions thereof to be
transferred pursuant to such Lien Release Dividend and the Administrative Agent
shall have approved the same in its sole discretion and (B) obtained all
corporate or similar authorizations, consents and approvals required to
effectuate the Lien Release Dividend;

 

(vi)              A portion of a Loan may be transferred pursuant to a Lien
Release Dividend provided that (A) such transfer does not have an adverse effect
on the portion of such Loan remaining as a part of the Collateral Portfolio, any
other aspect of the Collateral Portfolio, the Lenders, the Lender Agents, the
Administrative Agent or any other Secured Party and (B) a new promissory note
(other than with respect to a Noteless Loan) for the portion of the Loan
remaining as a part of the Collateral Portfolio has been executed, and the
original thereof has been endorsed to the Collateral Agent and delivered to the
Collateral Custodian;

 

(vii)              Unless waived by the Administrative Agent in its sole
discretion, each Loan, or portion thereof, as applicable, shall be transferred
at a value equal to the Outstanding Balance thereof, exclusive of any accrued
and unpaid interest or PIK Interest thereon;

 

(viii)             The Borrower shall deliver a Borrowing Base Certificate
(including a calculation of the Borrowing Base after giving effect to such Lien
Release Dividend) to the Administrative Agent;

 

(ix)               The Borrower shall have paid in full an aggregate amount
equal to the sum of all amounts due and owing to the Administrative Agent, the
Lenders, the Lender Agents, the Collateral Agent or the Collateral Custodian, as
applicable, under this Agreement and the other Transaction Documents, to the
extent accrued to such date (including, without limitation, Breakage Fees) with
respect to the Loans to be transferred pursuant to such Lien Release Dividend
and incurred in connection with the transfer of such Loans pursuant to such Lien
Release Dividend; and

 

  (x)              The Borrower hereby agrees to pay the reasonable legal fees
and expenses of the Administrative Agent, the Collateral Agent and the
Collateral Custodian in connection with any Lien Release Dividend (including,
but not limited to, expenses incurred in connection with the release of the Lien
of the Collateral Agent, on behalf of the Secured Parties, and any other party
having an interest in the Loan in connection with such Lien Release Dividend).

 

 -59-

 

 

(f)                Purchases. The Borrower may (i) with the prior written
consent of the Administrative Agent in its sole discretion, purchase Loans other
than Eligible Loans and (ii) purchase Loans that are not Eligible Loans solely
because of the threshold set forth in clause (b), (g), (w), (z) and/or (aa) of
the definition of “Eligible Loan”. For the avoidance of doubt, no such purchases
may be made with amounts on deposit in any Controlled Account or any Advance
proceeds.

 

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

 

Section 2.08     Payments and Computations, Etc.

 

(a)                All amounts to be paid or deposited by the Borrower hereunder
shall be paid or deposited in accordance with the terms hereof no later than
2:00 p.m. on the day when due in lawful money of the United States in
immediately available funds to the Collection Account or such other account as
is designated by the Administrative Agent. The Borrower shall, to the extent
permitted by Applicable Law, pay to the Secured Parties interest on all amounts
not paid or deposited when due (taking into account any grace periods) to any of
the Secured Parties hereunder at 2.0% per annum above the Base Rate (other than
with respect to any Advances Outstanding, which shall accrue at the Yield Rate),
payable on demand, from the date of such nonpayment until such amount is paid in
full (as well after as before judgment); provided, that such interest rate shall
not at any time exceed the maximum rate permitted by Applicable Law. Any
Obligation hereunder shall not be reduced by any distribution of any portion of
Available Collections if at any time such distribution is rescinded or required
to be returned by any Lender to the Borrower or any other Person for any reason.
All computations of interest and all computations of Yield, Non-Usage Fees and
other fees hereunder shall be made on the basis of a year of 360 days for the
actual number of days (including the first but excluding the last day) elapsed,
other than calculations with respect to the Base Rate, which shall be based on a
year consisting of 365 or 366 days, as applicable.

 

(b)               Whenever any payment hereunder shall be stated to be due on a
day other than a Business Day, such payment shall instead be due on the next
succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of Yield or any fee payable hereunder, as
the case may be.

 

(c)                If any Advance requested by the Borrower and approved by the
Lender Agents and the Administrative Agent pursuant to Section 2.02 is not for
any reason whatsoever, except as a result of the gross negligence or willful
misconduct of, or failure to fund such Advance on the part of, the Lenders, the
Administrative Agent or an Affiliate thereof, made or effectuated, as the case
may be, on the date specified therefor, the Borrower shall indemnify such Lender
against any loss, cost or expense incurred by such Lender related thereto (other
than any such loss, cost or expense solely due to the gross negligence or
willful misconduct or failure to fund such Advance on the part of the Lenders,
the Administrative Agent or an Affiliate thereof), including, without
limitation, any loss (including cost of funds and reasonable out-of-pocket
expenses), cost or expense incurred by reason of the liquidation or reemployment
of deposits or other funds acquired by such Lender to fund Advances or maintain
the Advances. Any such Lender shall provide to the Borrower documentation
setting forth the amounts of any loss, cost or expense referred to in the
previous sentence, such documentation to be conclusive absent manifest error.

 

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Section 2.09          Increased Costs; Capital Adequacy.

 

(a)                If, due to either (i) the introduction of or any change
following the date hereof (including, without limitation, any change by way of
imposition or increase of reserve requirements) in or in the interpretation,
administration or application arising following the date hereof of any
Applicable Law (including, without limitation, any law or regulation that
subjects an Affected Party to any Taxes (other than (1) Excluded Taxes and (2)
Taxes imposed on payments under this Agreement) on its loans, loan principal,
letters of credit, commitments, or other obligations, or its deposits, reserves,
other liabilities or capital attributable thereto), in each case whether foreign
or domestic or (ii) the compliance with any guideline or request following the
date hereof from any central bank or other Governmental Authority (whether or
not having the force of law), there shall be any increase in the cost to the
Administrative Agent, any Lender, any Lender Agent, any Liquidity Bank or any
Affiliate, successor or assign thereof (each of which shall be an “Affected
Party”) of agreeing to make or making, funding or maintaining any Advance (or
any reduction of the amount of any payment (whether of principal, interest, fee,
compensation or otherwise) to any Affected Party hereunder), as the case may be,
or there shall be any reduction in the amount of any sum received or receivable
by an Affected Party under this Agreement, under any other Transaction Document
or any Liquidity Agreement, the Borrower shall, from time to time, after written
demand by the Administrative Agent (which demand shall be accompanied by a
statement setting forth in reasonable detail the basis for such demand), on
behalf of such Affected Party, pay to the Administrative Agent, on behalf of
such Affected Party, additional amounts sufficient to compensate such Affected
Party for such increased costs or reduced payments within thirty (30) days after
such demand; provided, that the amounts payable under this Section 2.09 shall be
without duplication of amounts payable under Section 2.10; provided, further,
that an Affected Party claiming additional amounts under this Section 2.09
agrees to use commercially reasonable efforts (consistent with its internal
policy and legal and regulatory restrictions) to designate a different lending
office if the making of such a designation would avoid the need for, or reduce
the amount of, such increased cost that may thereafter accrue and would not, in
the reasonable judgment of such Affected Party, be otherwise disadvantageous to
such Affected Party.

 

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

 

 -61-

 

 

(c)                If as a result of any event or circumstance similar to those
described in clause (a) or (b) of this Section 2.09, any Affected Party is
required to compensate a bank or other financial institution providing liquidity
support, credit enhancement or other similar support to such Affected Party in
connection with this Agreement or the funding or maintenance of Advances
hereunder, then within ten days after demand by such Affected Party, the
Borrower shall pay to such Affected Party such additional amount or amounts as
may be necessary to reimburse such Affected Party for any amounts payable or
paid by it.

 

(d)               In determining any amount provided for in this Section 2.09,
the Affected Party may use any reasonable averaging and attribution methods. The
Administrative Agent, on behalf of any Affected Party making a claim under this
Section 2.09, shall submit to the Borrower a certificate setting forth in
reasonable detail the basis for and the computations of such additional or
increased costs, which certificate shall be conclusive absent manifest error.

 

(e)                Failure or delay on the part of any Affected Party to demand
compensation pursuant to this Section 2.09 shall not constitute a waiver of such
Affected Party’s right to demand or receive such compensation; provided,
however, that the Borrower shall not be responsible for costs under this Section
2.09 arising more than 90 days prior to receipt by the Borrower of the demand
from the Affected Party pursuant to this Section 2.09.

 

Section 2.10     Taxes.

 

(a)                All payments made by or on behalf of the Borrower under this
Agreement and the other Transaction Documents will be made free and clear of and
without deduction or withholding for or on account of any Taxes, except as
required by Applicable Law. If any Taxes are required by Applicable Law to be
withheld from any amounts payable to any Indemnified Party (including, for
purposes of this Section 2.10(a) and Section 2.10(b), any assignee, participant,
or successors), then the amount payable to such Person will be increased (the
amount of such increase, an “Additional Amount”) such that every net payment
received under this Agreement and the other Transaction Documents, after
withholding for or on account of any Taxes (including, without limitation, any
Taxes on such increase) is not less than the amount that would have been
received had no such deduction or withholding been made. The foregoing
obligation to pay Additional Amounts with respect to payments required to be
made under this Agreement will not, however, apply with respect to (i) Taxes
imposed on or measured by net income (however denominated), branch profits
Taxes, or franchise Taxes imposed on the relevant Indemnified Party, in each
case, (x) by a taxing jurisdiction in which any such Person is organized or
conducts business, or (y) as a result of any other present or former connection
between such Indemnified Party and the jurisdiction imposing such Tax (other
than connections arising as a result of such Person having executed, delivered
or performed its obligations or received payments under, or enforced, this
Agreement or any of the other Transaction Documents), (ii) in the case of any
Lender, U.S. federal withholding Taxes imposed on amounts payable to or for the
account of such Lender pursuant to a law in effect on the date on which (x) such
Lender becomes a party hereto or (y) such Lender changes its lending office
(other than pursuant to a request by the Borrower), except, in each case, to the
extent that, pursuant to this Section 2.10, amounts with respect to such Taxes
were payable either to such Lender’s transferor immediately before such Lender
became a party hereto or to such Lender immediately before it changed its
lending office, (iii) Taxes attributable to an Indemnified Party’s failure to
comply with Section 2.10(d), and (iv) any Taxes imposed under FATCA (or any
amended or successor version of FATCA that is substantively comparable and not
materially more onerous to comply with) (“Excluded Taxes”).

 

 -62-

 

 

(b)               The Borrower will indemnify each Indemnified Party and each of
its beneficial owners for the full amount of Taxes that are not Excluded Taxes
and are payable by such Person in respect of payments made under this Agreement
or any other Transaction Documents, and for the full amount of Taxes that are
not Excluded Taxes imposed by any jurisdiction on amounts payable under this
Section 2.10 imposed on or paid by such Person, and for any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto. All
payments in respect of this indemnification shall be made within 10 days from
the date a written invoice therefor is delivered to the Borrower, which invoice
shall be conclusive absent manifest error.

 

(c)                Within 30 days after the date of any payment by or on behalf
of the Borrower of any Taxes, the Borrower will furnish to the applicable
Indemnified Party, and to the Administrative Agent at the applicable address set
forth on this Agreement, evidence reasonably satisfactory to the applicable
Indemnified Party and the Administrative Agent of payment thereof.

 

(d)                (i) If any Lender is not created or organized under the laws
of the United States or a political subdivision thereof, such Lender shall, if
it is legally able to do so, deliver to the Borrower, with a copy to the
Administrative Agent, (x) on or prior to the date on which such Lender becomes a
party to this Agreement, or at other times reasonably requested by the Borrower,
two (or such other number as may from time to time be reasonably requested by
the Borrower) duly completed copies of IRS Form W-8BEN or Form W-8ECI or Form
W-8IMY (together with appropriate attachments) (or any successor forms), as
appropriate, and (y) copies (in such numbers as may from time to time be
reasonably requested by the Borrower) of such additional, amended or successor
forms, certificates or statements as the Borrower requests that may be required
under Applicable Law to permit the Borrower to make payments hereunder for the
account of such Lender without or at a reduced rate of deduction or withholding
of United States federal income or similar Taxes, provided, that such Lender
shall not be required to deliver any form, certificate, or statement pursuant to
clause (y) of this Section 2.10(d)(i) if in such Lender’s reasonable judgment
the completion, execution or delivery of such form, certificate or statement
would subject such Lender to any material unreimbursed cost or expense or would
materially prejudice the legal or commercial position of such Lender.

 

(ii)                If a Lender is a United States Person (as that term is
defined in Section 7701(a)(30) of the Code), such Lender shall deliver to the
Borrower, with a copy to the Administrative Agent, on or prior to the date such
Lender becomes a party to this Agreement, or at other times reasonably requested
by the Borrower, two duly completed copies of IRS Form W-9 certifying that such
Lender is exempt from U.S. Federal backup withholding tax.

 

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

 

(iv)               Each Lender agrees that if any form or certification it
previously delivered pursuant to this Section 2.10(d) expires or becomes
obsolete or inaccurate in any respect, it shall update such form or
certification or promptly notify the Borrower and the Administrative Agent in
writing of its legal inability to do so.

 

(e)                If any party determines, in its sole discretion exercised in
good faith, that it has received a refund of any Taxes as to which it has been
indemnified or paid Additional Amounts pursuant to this Section 2.10, it shall
pay to the indemnifying party an amount equal to such refund (but only to the
extent of indemnity payments made or Additional Amounts paid under this Section
with respect to the Indemnified Taxes giving rise to such refund), net of all
out-of-pocket expenses (including Taxes) of such indemnified party and without
interest (other than any interest paid by the relevant Governmental Authority
with respect to such refund). Such indemnifying party, upon the request of such
indemnified party, shall repay to such indemnified party the amount paid over
pursuant to this paragraph (e) (plus any penalties, interest or other charges
imposed by the relevant Governmental Authority) in the event that such
indemnified party is required to repay such refund to such Governmental
Authority. Notwithstanding anything to the contrary in this paragraph (e), in no
event will the indemnified party be required to pay any amount to any
indemnifying party pursuant to this paragraph (e) the payment of which would
place the indemnified party in a less favorable net after-Tax position than the
indemnified party would have been in if the indemnification payments or
Additional Amounts giving rise to such refund had never been paid. This
paragraph shall not be construed to require any indemnified party to make
available its Tax returns (or any other information relating to its Taxes that
it deems confidential) to the indemnifying party or any other Person.

 

(f)                 Without prejudice to the survival of any other agreement of
the Borrower hereunder, the agreements and obligations of the Borrower (and,
with respect to the obligations to provide refunds of amounts paid under this
Section 2.10 pursuant to subsection (e), the other parties) contained in this
Section 2.10 shall survive the termination of this Agreement.

 

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Section 2.11     Assignment of Certain Documents.

 

The Borrower hereby assigns to the Administrative Agent, for the ratable benefit
of the Secured Parties to secure the Obligations hereunder, all of the
Borrower’s right, title and interest in and to, but none of its obligations
under, the Purchase and Sale Agreement and the Management Agreement and any UCC
financing statements filed thereunder or in connection therewith. In furtherance
and not in limitation of the foregoing, the Borrower hereby assigns collaterally
to the Administrative Agent for the benefit of the Secured Parties to secure the
Obligations its right to indemnification under 9.1 of the Purchase and Sale
Agreement. The Borrower confirms that the Administrative Agent, on behalf of the
Secured Parties, shall have the right to enforce the Borrower’s rights and
remedies under the Purchase and Sale Agreement, the Management Agreement and any
UCC financing statements filed thereunder or in connection therewith for the
benefit of the Secured Parties, upon the occurrence and during the continuation
of an Event of Default. The parties hereto agree that such collateral assignment
to the Collateral Agent, for the benefit of the Secured Parties, shall
automatically terminate upon the Collection Date. Notwithstanding anything to
the contrary herein or in the Management Agreement, the Administrative Agent
agrees that the assignment of the Management Agreement provided for in this
Section 2.11 does not include an assignment of the Borrower’s right to terminate
the Management Agreement or the Collateral Manager’s rights and responsibilities
thereunder.

 

Section 2.12     Grant of a Security Interest.

 

To secure the prompt, complete and indefeasible payment in full when due,
whether by lapse of time, acceleration or otherwise, of the Obligations and the
performance by the Borrower of all of the covenants and obligations to be
performed by it pursuant to this Agreement and each other Transaction Document,
whether now or hereafter existing, due or to become due, direct or indirect, or
absolute or contingent, the Borrower hereby grants a security interest to the
Collateral Agent, on behalf of the Secured Parties, in all of the Borrower’s
right, title and interest in, to and under (but none of the obligations under)
all of the Collateral Portfolio, whether now existing or hereafter arising or
acquired by the Borrower, and wherever the same may be located. For the
avoidance of doubt, the Collateral Portfolio shall not include any Excluded
Amounts, and the Borrower does not hereby assign, pledge or grant a security
interest in any such amounts. Anything herein to the contrary notwithstanding,
(a) the Borrower shall remain liable under the Collateral Portfolio to the
extent set forth therein to perform all of its duties and obligations thereunder
to the same extent as if this Agreement had not been executed, (b) the exercise
by the Collateral Agent, for the benefit of the Secured Parties, of any of its
rights in the Collateral Portfolio shall not release the Borrower from any of
its duties or obligations under the Collateral Portfolio and (c) none of the
Administrative Agent, the Collateral Agent, any Lender (nor its successors and
assigns), any Lender Agent, any Liquidity Bank nor any Secured Party shall have
any obligations or liability under the Collateral Portfolio by reason of this
Agreement, nor shall the Administrative Agent, the Collateral Agent, any Lender
(nor its successors and assigns), any Lender Agent, any Liquidity Bank nor any
Secured Party be obligated to perform any of the obligations or duties of the
Borrower thereunder or to take any action to collect or enforce any claim for
payment assigned hereunder.

 

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Section 2.13     Evidence of Debt.

 

(a)               The Administrative Agent shall maintain, solely for this
purpose as the agent of the Borrower, at its address referred to in Section
12.02, a copy of each assignment and acceptance agreement delivered to and
accepted by it and a register for the recordation of the names and addresses of
the Lenders, and the principal amounts and stated interest owing to each Lender
pursuant to the terms of this Agreement and the other Transaction Documents (the
“Register”). No assignment by a Lender of its rights hereunder or under any
Transaction Document shall be effective unless a corresponding entry is made in
the Register pursuant to this Section 2.13(a). The entries in the Register shall
be conclusive and binding for all purposes, absent manifest error, and the
Borrower, the Administrative Agent, each Lender and each Lender Agent shall
treat each person whose name is recorded in the Register as a Lender under this
Agreement for all purposes of this Agreement. The Register shall be available
for inspection by the Borrower or any Lender Agent at any reasonable time and
from time to time upon reasonable prior notice.

 

(b)              Each Lender that sells a participation of its rights hereunder
shall, acting solely for this purpose as a non-fiduciary agent of the Borrower,
maintain (or cause to be maintained) a register (the “Participant Register”) on
which it will record the name and address of each participant and the principal
amounts and stated interest of each participant’s interest in such rights. 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. No Lender shall have any obligation to disclose all or any portion of
the Participant Register to any Person except to the extent that such disclosure
is necessary to establish that an interest under this Agreement with respect to
which the Lender has sold a participation is maintained “in registered form”
within the meaning of Treasury Regulations Section 5f.103-1(c). The Borrower
agrees that each participant shall be entitled to the benefits of Sections 2.09
and 2.10 (subject to the requirements and limitations therein, including the
requirement to provide certain documentation pursuant to Section 2.10(d) (it
being understood that the documentation required under Section 2.10(d) shall be
delivered to the participating Lender)) to the same extent as if it were a
Lender and had acquired its interest by assignment.

 

Section 2.14     Survival of Representations and Warranties.

 

It is understood and agreed that the representations and warranties set forth in
Sections 4.01, 4.02 and in Section 4 of the Management Agreement are made and
are true and correct on the date of this Agreement and on each Cut-Off Date
unless such representations and warranties are made as of a specific date.

 

Section 2.15     Release of Loans.

 

(a)                The Borrower may obtain the release of (i) any Loan (and the
related Portfolio Assets pertaining thereto) sold or substituted in accordance
with the applicable provisions of Section 2.07 and any Portfolio Assets
pertaining to such Loan and (ii) any part of the Collateral Portfolio that
expires by its terms and all amounts in respect thereof have been paid in full
by the related Obligor and deposited in the Collection Account. The Collateral
Agent, for the benefit of the Secured Parties, shall at the sole expense of the
Borrower and at the direction of the Administrative Agent, execute such
documents and instruments of release as may be prepared by the Borrower (or the
Collateral Manager on its behalf), give notice of such release to the Collateral
Custodian (in the form of Exhibit M) (unless the Collateral Custodian and
Collateral Agent are the same Person) and take other such actions as shall
reasonably be requested by the Borrower to effect such release of the Lien
created pursuant to this Agreement. Upon receiving such notification by the
Collateral Agent as described in the immediately preceding sentence, if
applicable, the Collateral Custodian shall deliver the Required Loan Documents
to the Borrower.

 

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(b)               Upon the occurrence of the Collection Date, the respective
remaining interests in the Portfolio Assets of each Lender, each Lender Agent,
the Collateral Agent and the Administrative Agent, including their security
interest therein, shall be automatically released to the Borrower, for no
consideration but at the sole expense of the Borrower, free and clear of any
Lien resulting solely from an act by any Lender, any Lender Agent, the
Collateral Agent or the Administrative Agent but without any other
representation or warranty, express or implied, by or recourse against any
Lender, any Lender Agent, the Collateral Agent or the Administrative Agent, and
the Collateral Agent or the Administrative Agent shall promptly provide evidence
of any such release as the Borrower may request, at the sole expense of the
Borrower (and the Collateral Agent shall take the actions contemplated by
Section 2.15(a) with respect to such release).

 

Section 2.16     Treatment of Amounts Received by the Borrower.

 

Amounts received by the Borrower pursuant to Section 2.07 on account of Loans
shall be treated as payments of Principal Collections or Interest Collections,
as applicable, on Loans hereunder.

 

Section 2.17     Repayment; Reduction of Commitments.

 

(a)                Except as expressly permitted or required herein, including,
without limitation, any repayment necessary to cure a Borrowing Base Deficiency,
Advances may only be prepaid in whole or in part at the option of the Borrower
at any time by delivering a Notice of Reduction (which notice shall include a
Borrowing Base Certificate) to the Administrative Agent, the Collateral Agent
and the Lender Agents no later than 2:00 p.m. at least one Business Day prior to
such reduction. Upon any prepayment (x) in part, the Borrower shall also pay all
accrued and unpaid costs and expenses of Administrative Agent, Lender Agents and
Lenders related to such prepayment and (y) in whole, the Borrower shall also pay
in full all accrued and unpaid Yield, Breakage Fees (solely to the extent such
prepayment occurs on any day other than a Payment Date) and all accrued and
unpaid costs and expenses of Administrative Agent, Lender Agents and Lenders
related to such prepayment; provided that no reduction in Advances Outstanding
shall be given effect unless sufficient funds have been remitted to pay all such
amounts in full, as determined by the Administrative Agent, in its sole
discretion. The Administrative Agent shall apply amounts received from the
Borrower pursuant to this Section 2.17(a) to the payment of any Breakage Fees
and to the pro rata reduction of the Advances Outstanding. Any notice relating
to any repayment pursuant to this Section 2.17(a) shall be irrevocable.

 

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(b)               The Borrower may, at any time after the one year anniversary
of the Closing Date, upon three (3) Business Days’ prior delivery of a Notice of
Reduction (which notice shall include a Borrowing Base Certificate) to the
Administrative Agent, the Collateral Agent and the Lender Agents, either (i)
cause the Collection Date to occur upon payment in full of all Advances
Outstanding, all accrued and unpaid Yield, any Breakage Fees, all accrued and
unpaid costs and expenses of the Administrative Agent, Lender Agents and Lenders
and all other Obligations (other than unmatured contingent indemnification
obligations) or (ii) reduce in part the portion of the Maximum Facility Amount
that exceeds the sum of all Advances Outstanding, all accrued and unpaid
Non-Usage Fee (pro rata with respect to the portion of the Maximum Facility
Amount so reduced) and all accrued and unpaid costs and expenses of the
Administrative Agent, Lender Agents and Lenders relating to such partial
termination. Any termination of this Agreement shall be subject to Section
12.05.

 

Section 2.18     Collections and Allocations.

 

(a)                Collections. The Borrower shall cause the Collateral Manager
to promptly identify any collections received as being on account of Interest
Collections or Principal Collections and shall transfer, or cause to be
transferred, all such Available Collections received directly by it to the
Collection Account by the close of business not later than one (1) Business Day
after such Collections are received. Upon the transfer of Available Collections
to the Collection Account, the Borrower shall cause the Collateral Manager to
segregate Principal Collections and Interest Collections and transfer the same
to the Principal Collection Account and the Interest Collection Account,
respectively; provided that, any Collections received by the Collateral Manager
after the end of the Reinvestment Period shall be applied first to the Unfunded
Exposure Account in the amount, if any, necessary to make the amount on deposit
in the Unfunded Exposure Account equal to the Aggregate Unfunded Exposure Amount
and second to the appropriate subaccount of the Collection Account as set forth
above. The Borrower shall cause the Collateral Manager to report the amount of
Principal Collections and Interest Collections on deposit in the Principal
Collection Account and the Interest Collection Account, in each case on each
Reporting Date in the Collateral Management Report delivered pursuant to Section
6.07(b).

 

(b)               Initial Deposits. On and after the Cut-Off Date with respect
to any Loan, the Borrower shall cause each Borrower Advisor to deposit into the
Collection Account all Available Collections received in respect of Eligible
Loans being transferred to and included as part of the Collateral Portfolio on
such date.

 

(c)                Excluded Amounts. The Borrower may (or may cause the
Collateral Manager to) withdraw from the applicable Controlled Account any
deposits thereto constituting Excluded Amounts if the Borrower has caused the
Collateral Manager to, prior to such withdrawal, deliver to the Administrative
Agent and the Collateral Agent a report setting forth the calculation of such
Excluded Amounts and the Administrative Agent agrees in writing that the form
and substance of the report is satisfactory to the Administrative Agent in its
sole discretion.

 

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(d)               Investment of Funds. Prior to Notice of Exclusive Control (as
defined in the Securities Account Control Agreement), the Borrower or the
Collateral Manager may, pursuant to written instruction (which may be in the
form of standing instructions), direct the Collateral Agent to invest, or cause
the investment of, funds on deposit in the Controlled Accounts in Permitted
Investments, from the date of this Agreement until the Collection Date. Absent
any such written instruction, such funds shall not be invested. A Permitted
Investment acquired with funds deposited in any Controlled Account shall mature
not later than the Business Day immediately preceding any Payment Date, and
shall not be sold or disposed of prior to its maturity. All such Permitted
Investments shall be registered in the name of the Account Bank or its nominee
and shall be credited to a Controlled Account; provided that compliance shall be
the responsibility of the Borrower and not the Collateral Agent and Account
Bank. All income and gain realized from any such investment, as well as any
interest earned on deposits in any Controlled Account shall be distributed in
accordance with the provisions of Article II hereof. During the occurrence and
continuation of a Borrowing Base Deficiency, the Borrower shall deposit in the
Collection Account (with respect to investments made hereunder of funds held
therein), an amount equal to the amount of any actual loss incurred, in respect
of any such investment, promptly upon realization of such loss. None of the
Account Bank, the Collateral Agent, the Administrative Agent, any Lender Agent
or any Lender shall be liable for the amount of any loss incurred, in respect of
any investment, or lack of investment, of funds held in any Controlled Account,
other than with respect to fraud or their own gross negligence or willful
misconduct. The parties hereto acknowledge that Permitted Investments may
include those investments in which the Collateral Agent or any of its Affiliates
provides services and receives reasonable compensation.

 

(e)                Unfunded Exposure Account.

 

(i)                 If, at the end of the Reinvestment Period, the Aggregate
Unfunded Exposure Amount is greater than $0, the Borrower shall be deemed to
have made a timely request for an Advance pursuant to Section 2.02 in an amount
equal to the Aggregate Unfunded Exposure Amount at the end of the Reinvestment
Period. All of the conditions to funding such Advance (including, without
limitation, the conditions set forth in Sections 2.07(c) and 3.02) shall be
deemed to have been satisfied and, on the last day of the Reinvestment Period,
the Lender shall fund such requested Advance into the Unfunded Exposure Account.

 

(ii)                Amounts on deposit in the Unfunded Exposure Account may be
withdrawn (A) by the Collateral Custodian pursuant to Section 2.18(e)(iii) to
fund any draw requests of the relevant Obligors under any Delayed Draw Loan or
(B) if the amount on deposit in the Unfunded Exposure Account exceeds the
Aggregate Unfunded Exposure Amount, by the Borrower (or the Collateral Manager
on the Borrower’s behalf) to make a deposit into the Principal Collection
Account to the extent of such excess.

 

(iii)               After the end of the Reinvestment Period, any draw request
made by an Obligor under a Delayed Draw Loan, along with wiring instructions for
the applicable Obligor, shall be forwarded by the Collateral Manager (on the
Borrower’s behalf) to the Collateral Custodian (with a copy to the Lender) along
with an instruction to the Collateral Custodian to withdraw the applicable
amount from the Unfunded Exposure Account. Upon receipt of, and in accordance
with, such instruction, the Collateral Custodian shall fund such draw request
directly from the Unfunded Exposure Account.

 

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(f)                Rights of Withdrawal. Until the Collection Date, neither the
Borrower nor any Borrower Advisor shall have any rights of direction or
withdrawal, with respect to amounts held in any Controlled Account, except to
the extent explicitly set forth in Section 2.04 or Section 2.19.

 

Section 2.19     Reinvestment of Principal Collections.

 

On the terms and conditions hereinafter set forth as certified in writing to the
Collateral Agent, the Lender Agents and Administrative Agent, prior to the end
of the Reinvestment Period, the Borrower may (or may cause the Collateral
Manager), to the extent of any Principal Collections on deposit in the Principal
Collection Account:

 

(a)                withdraw such funds for the purpose of reinvesting in
additional Eligible Loans to be Pledged hereunder; provided that the following
conditions are satisfied:

 

(i)                 all conditions precedent set forth in Section 3.02 have been
satisfied;

 

(ii)                (x) no Event of Default, Unmatured Event of Default or
Collateral Manager Event of Default has occurred or exists or would result from
such withdrawal and reinvestment, and (y) no Borrowing Base Deficiency exists or
would result from such withdrawal and reinvestment; provided that if as a result
of such withdrawal and reinvestment any Borrowing Base Deficiency would be
decreased, such withdrawal and reinvestment will be permitted;

 

(iii)               the representations and warranties contained in Sections
4.01, 4.02 and in Section 4 of the Management Agreement shall be correct in all
respects on the date of such withdrawal, except to the extent relating to an
earlier date;

 

(iv)              the Borrower provides or causes the Collateral Manager to
provide, same day written notice to the Administrative Agent and the Collateral
Agent by facsimile or email (to be received no later than 2:00 p.m. on such day)
of the request to withdraw Principal Collections and the amount of such request;

 

(v)                the notice required in clause (iv) above shall be accompanied
by an Approval Notice, a Disbursement Request and a Borrowing Base Certificate,
each executed by the Borrower and an Authorized Person of the Collateral
Manager; and

 

(vi)               the Borrower provides (or causes the Collateral Manager to
provide) to the Administrative Agent by facsimile (to be received no later than
2:00 p.m. on that same day) a statement reflecting the total amount on deposit
as of the opening of business on such day in the Principal Collection Account;
or

 

(b)                withdraw such funds for the purpose of making payments in
respect of the Advances Outstanding at such time in accordance with and subject
to the terms of Section 2.17.

 

Upon the satisfaction of the applicable conditions set forth in this Section
2.19 (as certified by the Borrower to the Collateral Agent and the
Administrative Agent), the Collateral Agent will release funds from the
Principal Collection Account to the Borrower in an amount not to exceed the
lesser of (A) the amount requested and (B) the amount on deposit in the
Principal Collection Account on such day.

 

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Section 2.20     Commitment Increases and Joinder of New Lenders.

 

The Borrower may, with the prior written consent of the Administrative Agent,
(i) add additional Persons as Lenders and/or (ii) increase the Commitment of any
Lender, in each case which shall increase the Maximum Facility Amount by the
amount of the Commitment of each such existing or additional Lender. Each
additional Lender and its applicable Lender Agent shall become a party hereto by
executing and delivering to the Administrative Agent and the Borrower a Joinder
Supplement and a Transferee Letter. Along with its written consent, the
Administrative Agent will deliver to the Borrower an updated Annex B reflecting
the new or increased Commitment of each such existing or additional Lender.

 

Section 2.21     Defaulting Lenders.

 

(a)                Notwithstanding anything to the contrary contained in this
Agreement, if any Lender becomes a Defaulting Lender, then, until such time as
that Lender is no longer a Defaulting Lender, to the extent permitted by
Applicable Law:

 

(i)                 such Defaulting Lender’s right to approve or disapprove any
amendment, waiver or consent with respect to this Agreement shall be restricted
as set forth in Section 12.01;

 

(ii)                any payment of principal, interest, fees or other amounts
received by the Administrative Agent for the account of such Defaulting Lender
(whether voluntary or mandatory, at maturity, or otherwise), shall be applied at
such time or times as may be determined by the Administrative Agent as follows:
first, to the payment of any amounts owing by such Defaulting Lender to the
Administrative Agent hereunder; second, as the Borrower may request (so long as
no Unmatured Event of Default, Collateral Manager Event of Default or Event of
Default exists), to the funding of any Advance in respect of which that
Defaulting Lender has failed to fund its portion thereof as required by this
Agreement, as determined by the Administrative Agent; third, if so determined by
the Administrative Agent and the Borrower, to be held in a non-interest bearing
deposit account and released in order to satisfy obligations of such Defaulting
Lender to fund Advances under this Agreement; fourth, so long as no Unmatured
Event of Default, Collateral Manager Event of Default or Event of Default
exists, to the payment of any amounts owing to the Borrower as a result of any
judgment of a court of competent jurisdiction obtained by such Borrower against
such Defaulting Lender as a result of such Defaulting Lender’s breach of its
obligations under this Agreement; and fifth, to such Defaulting Lender or as
otherwise directed by a court of competent jurisdiction. Any payments,
prepayments or other amounts paid or payable to a Defaulting Lender that are
applied (or held) to pay amounts owed by a Defaulting Lender or to post cash
collateral pursuant to this Section 2.21 shall be deemed paid to and redirected
by that Defaulting Lender, and each Lender irrevocably consents hereto;

 

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(iii)              during any period in which there is a Defaulting Lender, for
purposes of computing the amount of the obligation of each non-Defaulting Lender
to Advances, the Commitment of such Defaulting Lender shall be deemed to be
zero; and

 

(iv)               for any period during which such Lender is a Defaulting
Lender, such Defaulting Lender shall not be entitled to receive any Non-Usage
Fee for any period during which such Lender is a Defaulting Lender (and the
Borrower shall not be required to pay any such fee that otherwise would have
been required to have been paid to such Defaulting Lender).

 

(b)               If the Administrative Agent determines in its sole discretion
that a Defaulting Lender should no longer be deemed to be a Defaulting Lender,
the Administrative Agent will so notify the parties hereto, whereupon as of the
effective date specified in such notice and subject to any conditions set forth
therein (which may include arrangements with respect to any cash collateral),
such Lender will, to the extent applicable, purchase that portion of outstanding
Advances of the other Lenders or take such other actions as the Administrative
Agent may determine to be necessary to cause the Advances to be held on a pro
rata basis by the Lenders in accordance with their respective Commitments
(without giving effect to Section 2.21(a)(iii) above), whereupon such Lender
will cease to be a Defaulting Lender; provided that no adjustments will be made
retroactively with respect to fees accrued or payments made by or on behalf of
the Borrowers while such Lender was a Defaulting Lender; provided, further, that
except to the extent otherwise expressly agreed by the affected parties, no
change hereunder from Defaulting Lender to Lender will constitute a waiver or
release of any claim of any party hereunder arising from that Lender’s having
been a Defaulting Lender.

 

ARTICLE III.

CONDITIONS PRECEDENT

 

Section 3.01     Conditions Precedent to Effectiveness.

 

(a)                This Agreement shall be effective upon satisfaction of the
conditions precedent that:

 

(i)                 each Transaction Document shall have been duly executed by,
and delivered to, the parties thereto, and the Administrative Agent shall have
received copies of the Advisory Agreements and such other documents,
instruments, agreements, certificates and legal opinions as the Administrative
Agent shall reasonably request in connection with the transactions contemplated
by this Agreement, each in form and substance satisfactory to the Administrative
Agent;

 

(ii)               any and all information submitted to each Lender, Lender
Agent and the Administrative Agent by any Borrower Party or any of their
Affiliates is true, accurate, complete in all material respects and not
misleading in any material respect;

 

 -72-

 

 

(iii)               each Borrower Party’s underwriting, servicing, collection,
operating, and reporting procedures and systems are satisfactory to the
Administrative Agent in its sole discretion;

 

(iv)               a satisfactory review by the Administrative Agent of all
organizational documents and material contracts of each Borrower Party
(including, without limitation, the Advisory Agreements);

 

(v)               a satisfactory review by the Administrative Agent of business,
financial, legal, tax and accounting due diligence relating to transactions
contemplated hereby, each Borrower Party and the transactions contemplated
hereunder are satisfactory to the Administrative Agent in its sole discretion;

 

(vi)               in the reasonable judgment of the Administrative Agent and
each Lender Agent, there not having been any change in Applicable Law which
adversely affects any Lender’s or the Administrative Agent’s entering into the
transactions contemplated by the Transaction Documents or material disruption
after December 31, 2013 in the financial, banking or commercial loan or capital
markets generally;

 

(vii)              the Administrative Agent and the Lenders shall have received,
sufficiently in advance of the Closing Date, all documentation and other
information required by bank regulatory authorities under applicable “know your
customer” and anti-money laundering rules and regulations, including the Uniting
and Strengthening America by Providing Appropriate Tools Required to Intercept
and Obstruct Terrorism Act of 2001, Public Law 107-56;

 

(viii)             a satisfactory due diligence review by the Administrative
Agent of each Loan submitted for consideration in the initial Collateral
Portfolio;

 

(ix)                the Administrative Agent and each Institutional Lender shall
have received each required approval (including, without limitation, from its
internal credit committee);

 

(x)                the Administrative Agent and the Lenders shall have received
the fees (including fees, disbursements and other charges of counsel to the
Administrative Agent) to be received on the Closing Date referred to herein or
in any other Transaction Document;

 

(xi)               since December 31, 2013, no material adverse change has
occurred in the financial condition of the Equityholder, the Seller, any
Borrower Advisor or the Borrower or in any material portion of the assets in the
initial Collateral Portfolio;

 

(xii)              the Administrative Agent shall have received satisfactory
evidence that the Seller, the Borrower and the Collateral Manager have obtained
all required consents and approvals of all Persons to the execution, delivery
and performance of this Agreement and the other Transaction Documents to which
it is a party and the consummation of the transactions contemplated hereby or
thereby;

 

 -73-

 

 

(xiii)            the Collateral Manager and the Borrower shall each have
delivered to the Administrative Agent a certificate as to whether such Person is
Solvent in the form of Exhibit P;

 

(xiv)            the Borrower and the Collateral Manager shall have delivered to
the Administrative Agent a certification that no Unmatured Event of Default,
Event of Default or Collateral Manager Event of Default has occurred and is
continuing;

 

(xv)             the Administrative Agent shall have received (i) the customary
executed legal opinion or opinions of Dechert LLP, counsel to the Borrower and
the Collateral Manager, covering enforceability, grant and perfection of the
security interests on the Collateral Portfolio and non-consolidation of the
Borrower and (ii) bring-down legal opinions of Dechert LLP covering the
enforceability of the Advisory Agreements as of the Closing Date, in each case,
in form and substance acceptable to the Administrative Agent in its reasonable
discretion;

 

(xvi)            all corporate and other proceedings, and all documents,
instruments and other legal matters in connection with the transactions
contemplated by this Agreement and the other Transaction Documents shall be
reasonably satisfactory in form and substance to the Administrative Agent;

 

(xvii)           each Lender shall have received a duly executed copy of its
Variable Funding Note, in a principal amount equal to the Commitment of such
Lender;

 

(xviii)          the UCC-1 financing statement is in proper form for filing in
the filing office of the appropriate jurisdiction;

 

(xix)            the Administrative Agent shall have received a secretary’s
certificate of each of the Collateral Manager and the Borrower that includes a
copy of the resolutions (or other authorizing instruments, if applicable), in
form and substance satisfactory to the Administrative Agent, of the Board of
Directors (or similar governing or managing body) of such Person authorizing (i)
the execution, delivery and performance of this Agreement and the other
Transaction Documents to which it is a party, (ii) in the case of the Borrower,
the borrowings contemplated hereunder, and (iii) in the case of the Borrower,
the granting by it of the Liens created pursuant to the Transaction Documents,
certified by the Secretary or an Assistant Secretary (or other authorized
Person) of such Person as of the Closing Date, which certification shall be in
form and substance satisfactory to the Administrative Agent and shall state that
the resolutions, or other authorizing instruments, if applicable, thereby
certified have not been amended, modified, revoked or rescinded;

 

(xx)             the Administrative Agent shall have received a certification of
each of the Collateral Manager and the Borrower, dated the Closing Date, as to
the incumbency and signature of the officers of such Person executing any
Transaction Document, which certification may be included in the certificate
delivered in respect of such Person pursuant to Section 3.01(a)(xix) and
satisfactory in form and substance to the Administrative Agent and shall be
executed by an Authorized Person of such Person;

 

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(xxi)            the Administrative Agent shall have received true and complete
copies of the organizational documents of each of the Collateral Manager and the
Borrower, certified as of the Closing Date as complete and correct copies
thereof by the Secretary or an Assistant Secretary (or other authorized Person)
of such Person, which certification shall be included in the certificate
delivered in respect of such Person pursuant to Section 3.1(a)(xix) and shall be
in form and substance satisfactory to the Administrative Agent;

 

(xxii)           the Administrative Agent shall have received certificates dated
as of a recent date from the Secretary of State or other appropriate authority,
evidencing the good standing of each of the Collateral Manager and the Borrower
(i) in the jurisdiction of its organization and (ii) in each other jurisdiction
where its ownership, lease or operation of property or the conduct of its
business requires it to qualify as a foreign Person except, as to this subclause
(ii), where the failure to so qualify could not reasonably be expected to have a
Material Adverse Effect;

 

(xxiii)          the Administrative Agent shall have received evidence in form
and substance satisfactory to it that all filings, recordings, registrations and
other actions, including, without limitation, the filing of duly executed
financing statements on form UCC-1 necessary or, in the opinion of the
Administrative Agent, desirable to perfect the Liens created, or purported to be
created, by the Transaction Documents shall have been completed;

 

(xxiv)          the Administrative Agent shall have received the results of a
recent search by a Person satisfactory to the Administrative Agent, of the UCC,
judgment and tax lien filings which may have been filed with respect to personal
property of the Borrower, and bankruptcy and pending lawsuits with respect to
the Borrower and the results of such search shall be satisfactory to the
Administrative Agent;

 

(xxv)           the Borrower shall have received the executed legal opinion or
opinions of Locke Lord LLP, counsel to the Collateral Agent, the Collateral
Custodian and the Account Bank, covering enforceability of the Transaction
Documents to which the each such Person is a party; and

 

(xxvi)          the Administrative Agent (with a copy to the Collateral
Custodian and the Collateral Agent) shall have received the Initial Notice of
Borrowing.

 

(b)              By its execution and delivery of this Agreement, the Borrower
hereby certifies that each of the conditions precedent to the effectiveness of
this Agreement set forth in this Section 3.01 have been satisfied.

 

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Section 3.02      Conditions Precedent to All Advances.

 

Each Advance under this Agreement, each Pledge of a Loan hereunder, each
Substitution and each Discretionary Sale (each, a “Transaction”) shall be
subject to the further conditions precedent that:

 

(a)               On the related Advance Date, the following statements shall be
true and correct, and the Borrower by entering into such Transaction shall be
deemed to have certified that:

 

(i)                the Borrower shall have delivered, or shall have caused the
Collateral Manager to deliver, to the Administrative Agent (with a copy to the
Collateral Custodian and the Collateral Agent) no later than 2:00 p.m. on the
Business Day prior to such Transaction: (A) if such Transaction is an Advance, a
Notice of Borrowing, (B) a Borrowing Base Certificate and (C) an updated Loan
Tape;

 

(ii)               if the Advance Date is a Cut-Off Date, the Borrower shall
have delivered to the Collateral Custodian (with a copy to the Administrative
Agent), no later than 2:00 p.m. on the date of such Advance, (A) an Approval
Notice, (B) an executed copy of each assignment and assumption agreement,
transfer document or instrument relating to each Loan to be Pledged evidencing
the assignment of such Loan from any prior third party owner thereof directly to
the Borrower, and (C) a faxed or e-mailed copy of the duly executed original
promissory notes of the Loans to be Pledged (and, in the case of any Noteless
Loan, a fully executed assignment agreement) and if any Loans to be Pledged are
closed in escrow, a certificate (in the form of Exhibit J) from the closing
attorneys of such Loans certifying the possession of the Required Loan
Documents; provided that, notwithstanding the foregoing, the Borrower shall
cause the Loan Checklist and the Required Loan Documents to be in the possession
of the Collateral Custodian within two (2) Business Days of any related Advance
Date as to any Loans;

 

(b)               On and as of the date of such Transaction, after giving effect
to such Transaction the Borrower shall certify as follows:

 

(i)                no Unmatured Event of Default, Collateral Manager Event of
Default, event which, if it continues uncured, will, with notice or lapse of
time, constitute a Collateral Manager Event of Default, Event of Default or
Borrowing Base Deficiency exists or would result from such Transaction (other
than, with respect to any Pledge of an Eligible Loan necessary to cure a
Borrowing Base Deficiency in accordance with Section 2.06, an Unmatured Event of
Default arising solely pursuant to such Borrowing Base Deficiency);

 

(ii)               since the Closing Date, no material adverse change has
occurred in the ability of the Seller, any Borrower Advisor or the Borrower to
perform its obligations under any Transaction Document;

 

(iii)              other than Permitted Liens, no Liens exist in respect of
Taxes which are prior to the lien of the Collateral Agent on the Eligible Loans
to be Pledged on the date of such Transaction; and

 

(iv)              the representations and warranties contained in Sections 4.01,
4.02 and in Section 4 of the Management Agreement are true and correct in all
respects, and there exists no breach of any covenant contained in Sections 5.01,
5.02, or Section 5 of the Management Agreement before and after giving effect to
the Transaction to take place on the date of such Transaction and to the
application of proceeds therefrom, on and as of such day as though made on and
as of such date (other than any representation and warranty that is made as of a
specific date).

 

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(c)              The Administrative Agent shall have approved in its sole and
absolute discretion each of the Eligible Loans identified on an updated Loan
Tape for inclusion in the Collateral Portfolio on the applicable Advance Date
(the “Approval Right”).

 

(d)              No Applicable Law shall prohibit, and no order, judgment or
decree of any federal, state or local court or governmental body, agency or
instrumentality shall prohibit or enjoin, the making of such Advances by any
Lender or the proposed Pledge of Eligible Loans in accordance with the
provisions hereof.

 

(e)               With respect to an Advance, the proposed Advance Date shall be
during the Reinvestment Period.

 

(f)               All terms and conditions of the Purchase and Sale Agreement
required to be satisfied in connection with the assignment of each Eligible Loan
being Pledged hereunder on such Advance Date (and the Portfolio Assets related
thereto), including, without limitation, the perfection of the Borrower’s
interests therein, shall have been satisfied in full, and all filings
(including, without limitation, UCC filings) required to be made by any Person
and all actions required to be taken or performed by any Person in any
jurisdiction to give the Collateral Agent, for the benefit of the Secured
Parties, a first priority perfected security interest (subject only to Permitted
Liens) in such Eligible Loans and the Portfolio Assets related thereto and the
proceeds thereof shall have been made, taken or performed.

 

(g)               The Borrower shall have paid all fees then required to be
paid, including all fees required hereunder and under the applicable Lender Fee
Letters and the Wells Fargo Corporate Trust Fee Letter and shall have reimbursed
the Lenders, the Administrative Agent, each Lender Agent, the Collateral
Custodian, the Account Bank and the Collateral Agent for all fees, reasonable
and documented out-of-pocket costs and expenses of closing the transactions
contemplated hereunder and under the other Transaction Documents, including the
reasonable and documented attorney fees and any other legal and document
preparation costs incurred by the Administrative Agent.

 

(h)              All filings (including, without limitation, UCC filings)
required to be made by any Person and all actions required to be taken or
performed by any Person in any jurisdiction to give the Collateral Agent, for
the benefit of the Secured Parties, a first priority perfected security interest
(subject only to Permitted Liens) in any Eligible Loans to be Pledged in
connection with such Transaction and the Portfolio Assets related thereto and
the proceeds thereof shall have been made, taken or performed.

 

The failure of the Borrower to satisfy any of the foregoing conditions precedent
in respect of any Advance (that has not been waived by the Administrative Agent
in its sole discretion) shall give rise to a right of the Administrative Agent,
at the direction of the Required Lenders, to rescind the related Advance and
direct the Borrower to pay to the Administrative Agent, for the pro rata
accounts of the Lenders, an amount equal to the Advances made during any such
time that any of the foregoing conditions (that were not waived by the
Administrative Agent in its sole discretion) precedent were not satisfied.

 

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Section 3.03      Advances Do Not Constitute a Waiver.

 

No Advance made hereunder shall constitute a waiver of any condition to any
Lender’s obligation to make such an advance unless such waiver is in writing and
executed by such Lender.

 

ARTICLE IV.

REPRESENTATIONS AND WARRANTIES

 

Section 4.01      Representations and Warranties of the Borrower.

 

The Borrower hereby represents and warrants, as of the Closing Date, as of each
applicable Cut-Off Date, as of each applicable Advance Date, as of each
Determination Date and as of each other date provided under this Agreement or
the other Transaction Documents on which such representations and warranties are
required to be (or deemed to be) made (unless a specific date is specified
below):

 

(a)       Organization, Good Standing and Due Qualification. The Borrower is a
limited liability company duly formed, validly existing and in good standing
under the laws of the State of Delaware, has the power and all licenses
necessary to own its assets, to transact the business in which it is engaged and
to enter into and perform its obligations pursuant to this Agreement, and is
duly qualified and in good standing under the laws of each jurisdiction where
the transaction of such business, the ownership of the Loans and the Collateral
Portfolio and the entering into and performance of its obligations pursuant to
this Agreement requires such qualification.

 

(b)       Power and Authority; Due Authorization; Execution and Delivery. The
Borrower has the limited liability company power, authority and legal right to
make, deliver and perform this Agreement and each of the Transaction Documents
to which it is a party and all of the transactions contemplated hereby and
thereby, and has taken all necessary action to authorize the execution, delivery
and performance of this Agreement and each of the Transaction Documents to which
it is a party, and to grant to the Collateral Agent, for the benefit of the
Secured Parties, a first priority perfected security interest in the Collateral
Portfolio on the terms and conditions of this Agreement, subject only to
Permitted Liens.

 

(c)       Binding Obligation. This Agreement and each of the Transaction
Documents to which the Borrower is a party constitutes the legal, valid and
binding obligation of the Borrower, enforceable against it in accordance with
their respective terms, except as the enforceability hereof and thereof may be
limited by Bankruptcy Laws and by general principles of equity (whether such
enforceability is considered in a proceeding in equity or at law).

  

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(d)       All Consents Required. No consent of any other party and no consent,
license, approval or authorization of, or registration or declaration with, any
Governmental Authority, bureau or agency is required in connection with the
execution, delivery or performance by the Borrower of this Agreement or any
Transaction Document to which it is a party or the validity or enforceability of
this Agreement or any such Transaction Document or the Loans or the transfer of
an ownership interest or security interest in such Loans, other than such as
have been met or obtained and are in full force and effect.

 

(e)       No Violation. The execution, delivery and performance of this
Agreement and all other agreements and instruments executed and delivered or to
be executed and delivered pursuant hereto or thereto in connection with the
Pledge of the Collateral Portfolio will not (i) create any Lien on the
Collateral Portfolio other than Permitted Liens or (ii) violate any Applicable
Law or the formation documents of the Borrower or (iii) violate any material
contract or other material agreement to which the Borrower is a party or by
which the Borrower or any property or assets of the Borrower may be bound.

 

(f)        No Proceedings. There is no litigation or administrative proceeding
or investigation pending or, to the actual knowledge of the Borrower, threatened
against the Borrower or any properties of the Borrower, before any Governmental
Authority (i) asserting the invalidity of this Agreement or any other
Transaction Document to which the Borrower is a party, (ii) seeking to prevent
the consummation of any of the transactions contemplated by this Agreement or
any other Transaction Document to which the Borrower is a party or (iii) seeking
any determination or ruling that could reasonably be expected to have a Material
Adverse Effect on the Transaction Documents or the transactions contemplated
hereby or thereby.

 

(g)       Selection Procedures. In selecting the Loans to be Pledged pursuant to
this Agreement, no selection procedures were employed which are intended to be
adverse to the interests of the Lenders.

 

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

 

(i)        Pledge of Collateral Portfolio. Except as otherwise expressly
permitted by the terms of this Agreement, no item of Collateral Portfolio has
been sold, transferred, assigned or pledged by the Borrower to any Person, other
than as contemplated by Article II and the Pledge of such Collateral Portfolio
to the Collateral Agent, for the benefit of the Secured Parties, pursuant to the
terms of this Agreement.

 

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

 

(k)       Sole Purpose. The Borrower has been formed solely for the purpose of
engaging in transactions of the types contemplated by this Agreement, and has
not engaged in any business activity other than the negotiation, execution and
to the extent applicable, performance of this Agreement and the transactions
contemplated by the Transaction Documents.

 

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

 

(m)      Taxes. The Borrower is an entity disregarded from its owner for U.S.
federal income tax purposes. The Borrower has filed or caused to be filed (on a
consolidated basis or otherwise) on a timely basis all tax returns (including,
without limitation, all foreign, federal, state, local and other material tax
returns) required to be filed by it (subject to any extensions to file properly
obtained by the same), is not liable for material Taxes payable by any other
Person and has paid or made adequate provisions for the payment of all material
Taxes, assessments and other governmental charges due and payable from the
Borrower except for those Taxes being contested in good faith by appropriate
proceedings and in respect of which it has established proper reserves on its
books. Other than a Permitted Lien, no Tax lien or similar adverse claim has
been filed, and no claim is being asserted with respect to any such Tax,
assessment or other governmental charge. Any Taxes, fees and other governmental
charges due and payable by the Borrower, as applicable, in connection with the
execution and delivery of this Agreement and the other Transaction Documents and
the transactions contemplated hereby or thereby have been paid or shall have
been paid if and when due.

 

(n)       Location. The Borrower’s jurisdiction of formation (within the meaning
of Article 9 of the UCC) is Delaware. The chief executive office of the Borrower
(and the location of the Borrower’s records regarding the Collateral Portfolio
(other than those delivered to the Collateral Custodian)) is located at the
address set forth on Annex A to this Agreement (or at such other address as
shall be designated by such party in a written notice to the other parties
hereto).

 

(o)       Tradenames. Except as permitted hereunder, the Borrower’s legal name
is as set forth in this Agreement. Except as permitted hereunder, the Borrower
has not changed its name since its formation; does not have tradenames,
fictitious names, assumed names or “doing business as” names other than as
disclosed on Schedule I hereto (as such schedule may be updated from time to by
the Administrative Agent upon receipt of a notice delivered to the
Administrative Agent pursuant to Section 5.02(p)); the Borrower’s only
jurisdiction of formation is Delaware, and, except as permitted hereunder, the
Borrower has not changed its jurisdiction of formation.

 

(p)       Solvency. The Borrower is not the subject of any Bankruptcy Proceeding
or Bankruptcy Event. The Borrower is Solvent, and the transactions under this
Agreement and any other Transaction Document to which the Borrower is a party do
not and will not render the Borrower not Solvent. The Borrower is paying its
debts as they become due (subject to any applicable grace period) and, after
giving effect to the transactions contemplated hereby, will have adequate
capital to conduct its business.

 

(q)       No Subsidiaries. The Borrower has no Subsidiaries, other than any
Portfolio Subsidiaries.

 

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(r)        Value Given. The Borrower has given fair consideration and reasonably
equivalent value to the Seller or the applicable third party seller in exchange
for the purchase of the Loans (or any number of them). No such transfer has been
made for or on account of an antecedent debt and no such transfer is or may be
voidable or subject to avoidance under any section of the Bankruptcy Code.

 

(s)       Information Accurate. All information, financial statements of the
Borrower, documents, books, records or reports furnished by the Borrower to any
Secured Party in connection with this Agreement are true, complete and correct
in all material respects; provided that, solely with respect to written or
electronic information furnished to a Secured Party which was provided from an
Obligor with respect to a Loan, such information need only be accurate, true and
correct to the knowledge of the Borrower.

 

(t)        Exchange Act Compliance; Regulations T, U and X. None of the
transactions contemplated herein or in the other Transaction Documents
(including, without limitation, the use of proceeds from the Pledge of the
Collateral Portfolio) will violate or result in a violation of Section 7 of the
Exchange Act, or any regulations issued pursuant thereto, including, without
limitation, Regulations T, U and X of the Board of Governors of the Federal
Reserve System, 12 C.F.R., Chapter II. The Borrower does not own or intend to
carry or purchase, and no proceeds from the Advances will be used to carry or
purchase, any “margin stock” within the meaning of Regulation U or to extend
“purpose credit” within the meaning of Regulation U.

 

(u)       No Adverse Agreements. There are no agreements in effect adversely
affecting the rights of the Borrower to make, or cause to be made, the grant of
the security interest in the Collateral Portfolio contemplated by Section 2.12.

 

(v)       Event of Default/Unmatured Event of Default. No event has occurred
which constitutes an Unmatured Event of Default or an Event of Default.

 

(w)      Credit and Collection Policy. Each of the Loans was underwritten or
acquired and is being serviced in conformance with the standard underwriting,
credit, collection, operating and reporting procedures and systems of the
Collateral Manager.

 

(x)       ERISA. Except as would not reasonably be expected to constitute a
Material Adverse Effect, (i) the present value of all benefits vested under all
“employee pension benefit plans,” as such term is defined in Section 3 of ERISA
which are subject to Title IV of ERISA and maintained by the Borrower, or in
which employees of the Borrower are entitled to participate, other than a
Multiemployer Plan (the “Pension Plans”), does not exceed the value of the
assets of the Pension Plan allocable to such vested benefits (based on the value
of such assets as of the most recent annual financial statements reflecting such
amounts), (ii) no non-exempt prohibited transaction, within the meaning of
Section 406 of ERISA or Section 4975 of the Code, has occurred with respect to
any Pension Plan, (iii) no application for a waiver of the minimum funding
standard pursuant to Section 412 of the Code has been made with respect to any
Pension Plan, (iv) neither the Borrower nor any ERISA Affiliate has any
withdrawal liability with respect to a Multiemployer Plan, (v) no reportable
events within the meaning of 4043 of ERISA, other than those events as to which
the 30 day notice period referred to in Section 4043(c) of ERISA has been
waived, (each a “Reportable Event”) have occurred with respect to any Pension
Plans that, in the aggregate, could subject the Borrower to any material tax,
penalty or other liability and (vi) no notice of intent to terminate a Pension
Plan has been filed, no Pension Plan been terminated under Section 4041(f) of
ERISA, the Pension Benefit Guaranty Corporation has not instituted proceedings
to terminate, or appoint a trustee to administer a Pension Plan, and no event
has occurred or condition exists that constitutes grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to administer, any
Pension Plan. None of the Collateral Portfolio constitutes “plan assets” within
the meaning of 29 CFR 2510.3-101, as amended by Section 3(42) of ERISA, by
reason of a Pension Plan’s investment in the Borrower or its direct or indirect
parent companies.

 

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(y)       Allocation of Charges. There is not any agreement or understanding
between any Borrower Advisor and the Borrower (other than the Transaction
Documents and other than as expressly set forth herein, as disclosed in writing
to the Administrative Agent prior to the Closing Date, or as consented to by the
Administrative Agent), providing for the allocation or sharing of obligations to
make payments or otherwise in respect of any taxes, fees, assessments or other
governmental charges.

 

(z)       Broker-Dealer. The Borrower is not required to register as a
broker-dealer under the provisions of the Exchange Act.

 

(aa)     Instructions to Obligors. The Collection Account is the only account to
which Obligors have been instructed by the Borrower, or a Borrower Advisor on
the Borrower’s behalf, to send Principal Collections and Interest Collections on
the Collateral Portfolio. The Borrower has not granted any Person other than the
Collateral Agent, on behalf of the Secured Parties, an interest in any
Controlled Account.

 

(bb)    Investment Company Act. The Borrower is not required to register as an
“investment company” under the provisions of the 1940 Act.

 

(cc)     Compliance with Law. The Borrower has complied in all respects with all
Applicable Law to which it may be subject, and no item of the Collateral
Portfolio contravenes any Applicable Law (including, without limitation, all
applicable predatory and abusive lending laws, laws, rules and regulations
related to licensing, truth in lending, fair credit billing, fair credit
reporting equal credit opportunity, fair debt collection practices and privacy).

 

(dd)    Set-Off, etc. No Loan has been compromised, adjusted, extended,
satisfied, subordinated, rescinded, set-off or modified by the Borrower, the
Seller or the Obligor thereof, and no Collateral Portfolio is subject to
compromise, adjustment, extension, satisfaction, subordination, rescission,
set-off, counterclaim, defense, abatement, suspension, deferment, deduction,
reduction, termination or modification, whether arising out of transactions
concerning the Collateral Portfolio or otherwise, by the Borrower, the Seller or
the Obligor with respect thereto, except, in each case, for amendments,
extensions and modifications, if any, to such Collateral Portfolio otherwise
permitted pursuant to the Management Agreement.

 

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(ee)     Full Payment. As of the applicable Cut-Off Date in respect of a Loan,
the Borrower has no knowledge of any fact which should lead it to expect that
such Loan will not be paid in full.

 

(ff)      Environmental. With respect to each item of Underlying Collateral as
of the applicable Cut-Off Date for the Loan related to such Underlying
Collateral, to the actual knowledge of an Authorized Person of the Borrower: (a)
the related Obligor’s operations comply in all respects with all applicable
Environmental Laws; (b) none of the related Obligor’s operations is the subject
of a federal or state investigation evaluating whether any remedial action,
involving expenditures, is needed to respond to a release of any Hazardous
Materials into the environment; and (c) the related Obligor does not have any
material contingent liability in connection with any release of any Hazardous
Materials into the environment. As of the applicable Cut-Off Date for the Loan
related to such Underlying Collateral, none of the Borrower, the Seller nor any
Borrower Advisor has received any written notice of, or written inquiry from any
Governmental Authority regarding, any violation, alleged violation,
non-compliance, liability or potential liability regarding environmental matters
or compliance with Environmental Laws with regard to any of the Underlying
Collateral, nor does any such Person have knowledge or reason to believe that
any such notice will be received or is being threatened.

 

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

 

(hh)     Accuracy of Representations and Warranties. Each representation or
warranty by the Borrower contained herein or in any certificate or other
document furnished by the Borrower pursuant hereto or in connection herewith is
true and correct in all respects.

 

(ii)       Confirmation from Seller. The Borrower has received in writing from
the Seller confirmation that the Seller will not cause the Borrower to file a
voluntary bankruptcy petition under the Bankruptcy Code.

 

(jj)       [Reserved].

 

(kk)     Security Interest.

 

(i)        This Agreement creates a valid and continuing security interest (as
defined in the applicable UCC) in the Collateral Portfolio in favor of the
Collateral Agent, on behalf of the Secured Parties, which security interest is
prior to all other Liens (except for Permitted Liens), and is enforceable as
such against creditors of and purchasers from the Borrower;

 

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(ii)          the Collateral Portfolio may from time to time be comprised of
“instruments”, “security entitlements”, “general intangibles”, “tangible chattel
paper”, “accounts”, “certificated securities”, “uncertificated securities”,
“securities accounts”, “deposit accounts”, “supporting obligations” or
“insurance” (each as defined in the applicable UCC), real property and/or such
other category of collateral under the applicable UCC as to which the Borrower
has complied with its obligations under this Section 4.01(kk);

 

(iii)         with respect to Collateral Portfolio that constitute “security
entitlements”:

 

a.        all of such security entitlements have been credited to one of the
Controlled Accounts and the securities intermediary for each Controlled Account
has agreed to treat all assets credited to such Controlled Account as “financial
assets” within the meaning of the applicable UCC;

 

b.        the Borrower has taken all steps necessary to cause the securities
intermediary to identify in its records the Borrower as the Person having a
security entitlement against the securities intermediary in each of the
Controlled Accounts; and

 

c.        the Controlled Accounts are not in the name of any Person other than
the Borrower, subject to the lien of the Collateral Agent, for the benefit of
the Secured Parties. The securities intermediary of any Controlled Account which
is a “securities account” under the UCC has agreed to comply with the
entitlement orders and instructions of the Borrower, the Collateral Manager and
the Collateral Agent (acting at the direction of the Administrative Agent) in
accordance with the Transaction Documents, including causing cash to be invested
in Permitted Investments; provided that, upon the delivery of a Notice of
Exclusive Control (as defined under the Securities Account Control Agreement) by
the Collateral Agent (acting at the direction of the Administrative Agent)
following the occurrence and during the continuance of an Event of Default, the
securities intermediary has agreed to only follow the entitlement orders and
instructions of the Collateral Agent, on behalf of the Secured Parties,
including with respect to the investment of cash in Permitted Investments.

 

(iv)         all Controlled Accounts constitute “securities accounts” as defined
in the applicable UCC;

 

(v)          the Borrower owns and has good and marketable title to (or with
respect to assets securing any Loans, a valid security interest in) the
Collateral Portfolio free and clear of any Lien (other than Permitted Liens) of
any Person;

 

(vi)         the Borrower has received all consents and approvals required by
the terms of any Loan to the granting of a security interest in the Loans
hereunder to the Collateral Agent, on behalf of the Secured Parties;

 

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(vii)         the Borrower has caused the filing of all appropriate financing
statements in the proper filing office in the appropriate jurisdictions under
Applicable Law in order to perfect the security interest in the Collateral
Portfolio and that portion of the Loans in which a security interest may be
perfected by filing granted to the Collateral Agent, on behalf of the Secured
Parties, under this Agreement; provided that filings in respect of real property
shall not be required;

 

(viii)        other than as expressly permitted by the terms of this Agreement
and the security interest granted to the Collateral Agent, on behalf of the
Secured Parties, pursuant to this Agreement, the Borrower has not pledged,
assigned, sold, granted a security interest in or otherwise conveyed any of the
Collateral Portfolio. The Borrower has not authorized the filing of and is not
aware of any financing statements against the Borrower that include a
description of collateral covering the Collateral Portfolio other than any
financing statement (A) relating to the security interests granted to the
Borrower under the Purchase and Sale Agreement, or (B) that has been terminated
and/or fully and validly assigned to the Collateral Agent on or prior to the
date hereof. The Borrower is not aware of the filing of any judgment or Tax lien
filings against the Borrower;

 

(ix)           all original executed copies of each underlying promissory note
or copies of each Loan Register, as applicable, that constitute or evidence each
Loan has been, or subject to the delivery requirements contained herein, will be
delivered to the Collateral Custodian;

 

(x)           other than in the case of Noteless Loans, the Borrower has
received, or subject to the delivery requirements contained herein will receive,
a written acknowledgment from the Collateral Custodian that the Collateral
Custodian, as the bailee of the Collateral Agent, is holding the underlying
promissory notes that constitute or evidence the Loans solely on behalf of and
for the Collateral Agent, for the benefit of the Secured Parties; provided that
the acknowledgement of the Collateral Custodian set forth in Section 11.11 may
serve as such acknowledgement;

 

(xi)          none of the underlying promissory notes, or Loan Registers, as
applicable, that constitute or evidence the Loans has any marks or notations
indicating that they have been pledged, assigned or otherwise conveyed to any
Person other than the Collateral Agent, on behalf of the Secured Parties;

 

(xii)         with respect to any Collateral Portfolio that constitutes a
“certificated security,” such certificated security has been delivered to the
Collateral Custodian and, if in registered form, has been specially Indorsed to
the Collateral Agent or in blank by an effective Indorsement or has been
registered in the name of the Collateral Agent, upon original issue or
registration of transfer by the Borrower of such certificated security and has
been credited to a Controlled Account; and

 

(xiii)        with respect to any Collateral Portfolio that constitutes an
“uncertificated security”, that the Borrower has caused the issuance of such
uncertificated security to be registered to the Collateral Agent, on behalf of
the Secured Parties, as the registered owner of such uncertificated security.

 

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Section 4.02      Representations and Warranties of the Borrower Relating to the
Agreement and the Collateral Portfolio.

 

The Borrower hereby represents and warrants, as of the Closing Date, as of each
applicable Cut-Off Date, as of each applicable Advance Date, as of each
Determination Date and as of each other date provided under this Agreement or
the other Transaction Documents on which such representations and warranties are
required to be (or deemed to be) made (unless a specific date is specified
below):

 

(a)           Valid Transfer and Security Interest. This Agreement constitutes a
grant of a security interest in all of the Collateral Portfolio to the
Collateral Agent, for the benefit of the Secured Parties, which upon the filing
of the financing statement referred to in Section 3.01, shall be a valid and
first priority perfected security interest in the Loans forming a part of the
Collateral Portfolio and in that portion of the Loans in which a security
interest may be perfected by filing subject only to Permitted Liens. Neither the
Borrower nor any Person claiming through or under the Borrower shall have any
claim to or interest in the Controlled Accounts, except for the interest of the
Borrower in such property as a debtor for purposes of the UCC.

 

(b)           Eligibility of Collateral Portfolio. (i) The Loan Tape and the
information contained in each Notice of Borrowing, is an accurate and complete
listing of all the Loans contained in the Collateral Portfolio as of the related
Cut-Off Date and the information contained therein with respect to the identity
of such item of Collateral Portfolio and the amounts owing thereunder is true
and correct as of the related Cut-Off Date, (ii) each Loan designated on the
related Borrowing Base Certificate as an Eligible Loan and each Loan included as
an Eligible Loan in the related calculation of Borrowing Base or Borrowing Base
Deficiency is an Eligible Loan as of the date of such certificate or calculation
and (iii) with respect to each item of Collateral Portfolio, all consents,
licenses, approvals or authorizations of or registrations or declarations of any
Governmental Authority or any Person required to be obtained, effected or given
by the Borrower in connection with the transfer of a security interest in each
item of Collateral Portfolio to the Collateral Agent, for the benefit of the
Secured Parties, have been duly obtained, effected or given and are in full
force and effect.

 

(c)           No Fraud. Each Loan was originated without any fraud or
misrepresentation by the Seller or, to the best of the Borrower’s and each
Borrower Advisor’s knowledge, on the part of the Obligor.

 

Section 4.03      Representations and Warranties of the Collateral Agent.

 

The Collateral Agent in its individual capacity and as Collateral Agent
represents and warrants as follows:

 

(a)           Organization; Power and Authority. It is a duly organized and
validly existing national banking association in good standing under the laws of
the United States. It has full corporate power, authority and legal right to
execute, deliver and perform its obligations as Collateral Agent under this
Agreement.

 

(b)           Due Authorization. The execution and delivery of this Agreement
and the consummation of the transactions provided for herein have been duly
authorized by all necessary association action on its part, either in its
individual capacity or as Collateral Agent, as the case may be.

 

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(c)           No Conflict. The execution and delivery of this Agreement, the
performance of the transactions contemplated hereby and the fulfillment of the
terms hereof will not conflict with, result in any breach of its articles of
incorporation or bylaws or any of the terms and provisions of, or constitute
(with or without notice or lapse of time or both) a default under any indenture,
contract, agreement, mortgage, deed of trust, or other instrument to which the
Collateral Agent is a party or by which it or any of its property is bound.

 

(d)           No Violation. The execution and delivery of this Agreement, the
performance of the transactions contemplated hereby and the fulfillment of the
terms hereof will not conflict with or violate, in any respect, any Applicable
Law.

 

(e)           All Consents Required. All approvals, authorizations, consents,
orders or other actions of any Person or Governmental Authority applicable to
the Collateral Agent, required in connection with the execution and delivery of
this Agreement, the performance by the Collateral Agent of the transactions
contemplated hereby and the fulfillment by the Collateral Agent of the terms
hereof have been obtained.

 

(f)            Validity, Etc. The Agreement constitutes the legal, valid and
binding obligation of the Collateral Agent, enforceable against the Collateral
Agent in accordance with its terms, except as such enforceability may be limited
by applicable Bankruptcy Laws and general principles of equity (whether
considered in a suit at law or in equity).

 

Section 4.04      Representations and Warranties of each Lender.

 

Each Lender hereby individually represents and warrants, as to itself, that it
is (a) either a Qualified Institutional Buyer under Rule 144A of the Securities
Act or an institutional “Accredited Investor” as defined in Rule
(1)-501(a)(1)-(3) or (7) under the Securities Act and (b) a “qualified
purchaser” under the 1940 Act.

 

Section 4.05      Representations and Warranties of the Collateral Custodian.

 

The Collateral Custodian in its individual capacity and as Collateral Custodian
represents and warrants as follows:

 

(a)           Organization; Power and Authority. It is a duly organized and
validly existing national banking association in good standing under the laws of
the United States. It has full corporate power, authority and legal right to
execute, deliver and perform its obligations as Collateral Custodian under this
Agreement.

 

(b)           Due Authorization. The execution and delivery of this Agreement
and the consummation of the transactions provided for herein have been duly
authorized by all necessary association action on its part, either in its
individual capacity or as Collateral Custodian, as the case may be.

 

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(c)           No Conflict. The execution and delivery of this Agreement, the
performance of the transactions contemplated hereby and the fulfillment of the
terms hereof will not conflict with, result in any breach of its articles of
incorporation or bylaws or any of the terms and provisions of, or constitute
(with or without notice or lapse of time or both) a default under any indenture,
contract, agreement, mortgage, deed of trust, or other instrument to which the
Collateral Custodian is a party or by which it or any of its property is bound.

 

(d)           No Violation. The execution and delivery of this Agreement, the
performance of the transactions contemplated hereby and the fulfillment of the
terms hereof will not conflict with or violate, in any respect, any Applicable
Law.

 

(e)           All Consents Required. All approvals, authorizations, consents,
orders or other actions of any Person or Governmental Authority applicable to
the Collateral Custodian, required in connection with the execution and delivery
of this Agreement, the performance by the Collateral Custodian of the
transactions contemplated hereby and the fulfillment by the Collateral Custodian
of the terms hereof have been obtained.

 

(f)            Validity, Etc. The Agreement constitutes the legal, valid and
binding obligation of the Collateral Custodian, enforceable against the
Collateral Custodian in accordance with its terms, except as such enforceability
may be limited by applicable Bankruptcy Laws and general principles of equity
(whether considered in a suit at law or in equity).

 

ARTICLE V.

GENERAL COVENANTS

 

Section 5.01        Affirmative Covenants of the Borrower.

 

From the Closing Date until the Collection Date:

 

(a)           Organizational Procedures and Scope of Business. The Borrower will
observe all organizational procedures required by its formation documents and
the laws of its jurisdiction of formation. Without limiting the foregoing, the
Borrower will limit the scope of its business to: (i) the acquisition of Loans
and the ownership and management of the Portfolio Assets and the related assets
in the Collateral Portfolio; (ii) the sale, transfer or other disposition of
Loans and any equity issued by or assets of any Portfolio Subsidiary, as and
when permitted under the Transaction Documents; (iii) entering into and
performing under the Transaction Documents; (iv) consenting or withholding
consent as to proposed amendments, waivers and other modifications of the
Underlying Instruments to the extent not in conflict with the terms of this
Agreement or any other Transaction Document; and (v) exercising any rights
(including but not limited to voting rights and rights arising in connection
with a Bankruptcy Event with respect to an Obligor or the consensual or
non-judicial restructuring of the debt or equity of an Obligor) or remedies in
connection with the Loans and participating in the committees (official or
otherwise) or other groups formed by creditors of an Obligor to the extent not
in conflict with the terms of this Agreement or any other Transaction Document;
and (vi) engaging in any activity and to exercise any powers permitted to
limited liability companies under the laws of the State of Delaware that are
incident to the foregoing and necessary, convenient or advisable to accomplish
the foregoing.

 

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

 

(c)           Preservation of Company Existence. The Borrower will maintain its
limited liability company existence in good standing under the laws of its
jurisdiction of formation and will promptly obtain and thereafter maintain
qualifications to do business as a limited liability company in any other
jurisdiction in which it does business and in which it is required to so qualify
under Applicable Law.

 

(d)           Compliance with Legal Opinions. The Borrower shall take all other
actions necessary to maintain the accuracy of the factual assumptions set forth
in the legal opinions of Dechert LLP, as special counsel to the Borrower
relating to the issues of substantive consolidation and true sale of the Loans.

 

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(e)           Deposit of Collections. The Borrower shall promptly (but in no
event later than one Business Day after receipt) deposit or cause to be
deposited into the Collection Account any and all Available Collections received
by the Borrower, any Borrower Advisor or any of their respective Affiliates.

 

(f)            Disclosure of Purchase Price. The Borrower shall disclose to the
Administrative Agent and the Lender Agents the Purchase Price for each Loan
proposed to be transferred to the Borrower.

 

(g)           Obligor Defaults and Bankruptcy Events. The Borrower shall give,
or shall cause the Collateral Manager to give, notice to the Administrative
Agent and the Lender Agents within two (2) Business Days of the Borrower’s, the
Seller’s or any Borrower Advisor’s actual knowledge of the occurrence of any
default by an Obligor under any Loan or any Bankruptcy Event with respect to any
Obligor under any Loan.

 

(h)           Required Loan Documents. The Borrower shall deliver to the
Collateral Custodian a hard copy (or, unless an original signature is required,
electronic copy) of the Required Loan Documents and the Loan Checklist
pertaining to each Loan within two (2) Business Days of the Cut-Off Date
pertaining to such Loan.

 

(i)            Taxes. The Borrower will file or cause to be filed its tax
returns and pay any and all Taxes imposed on it or its property as required by
the Transaction Documents (except as otherwise contemplated in Section 4.01(m)).

 

(j)            Notice of Events of Default and Value Adjustment Events. The
Borrower will provide the Administrative Agent and each Lender Agent (with a
copy to the Collateral Agent) with prompt written notice of the occurrence of
each Value Adjustment Event, Collateral Manager Event of Default, Event of
Default and each Unmatured Event of Default of which the Borrower has knowledge
or has received notice. In addition, no later than two (2) Business Days
following the Borrower’s knowledge or notification of the occurrence of any
Event of Default, Collateral Manager Event of Default or Unmatured Event of
Default, the Borrower will provide to the Administrative Agent and each Lender
Agent a written statement of an Authorized Person of the Borrower setting forth
the details of such event and the action that will be taken with respect
thereto.

 

(k)           Notice of Material Events. The Borrower shall promptly notify the
Administrative Agent and each Lender Agent of any event or other circumstance
that is reasonably likely to have a Material Adverse Effect.

 

(l)            Notice of Income Tax Liability. The Borrower shall furnish to the
Administrative Agent and each Lender Agent telephonic or facsimile notice within
10 Business Days (confirmed in writing within five (5) Business Days thereafter)
of the receipt of revenue agent reports or other written proposals,
determinations or assessments of the Internal Revenue Service or any other
taxing authority which propose, determine or otherwise set forth positive
adjustments (i) to the Tax liability of the Borrower or any “affiliated group”
(within the meaning of Section 1504(a)(l) of the Code) of which the Borrower is
a member in an amount equal to or greater than $1,000,000 in the aggregate, or
(ii) to the Tax liability of the Borrower itself in an amount equal to or
greater than $500,000 in the aggregate. Any such notice shall specify the nature
of the items giving rise to such adjustments and the amounts thereof.

 

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(m)          [Reserved].

 

(n)           Notice of Breaches of Representations and Warranties under this
Agreement. The Borrower shall promptly notify the Administrative Agent and each
Lender if any representation or warranty set forth in Section 4.01 or Section
4.02 was incorrect at the time it was given or deemed to have been given and at
the same time deliver to the Collateral Agent, the Administrative Agent and the
Lender Agents a written notice setting forth in reasonable detail the nature of
such facts and circumstances. In particular, but without limiting the foregoing,
the Borrower shall notify the Administrative Agent and each Lender Agent in the
manner set forth in the preceding sentence before any Cut-Off Date of any facts
or circumstances within the knowledge of the Borrower which would render any of
the said representations and warranties untrue at the date when such
representations and warranties were made or deemed to have been made.

 

(o)           Notice of Breaches of Representations and Warranties under the
Purchase and Sale Agreement. Promptly after receiving knowledge or notice of the
same, the Borrower confirms and agrees that the Borrower will send to the
Administrative Agent, each Lender Agent and the Collateral Agent a notice of (i)
any breach of any representation, warranty, agreement or covenant under the
Purchase and Sale Agreement or (ii) any event or occurrence that, upon notice,
or upon the passage of time or both, would constitute such a breach.

 

(p)           Notice of Proceedings. The Borrower shall notify the
Administrative Agent and each Lender Agent, as soon as possible and in any event
within three (3) Business Days, after the Borrower receives notice or obtains
knowledge thereof, of any settlement of, material judgment (including a material
judgment with respect to the liability phase of a bifurcated trial) in or
commencement of any material labor controversy, material litigation, material
action, material suit or material proceeding before any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, affecting the Collateral Portfolio, the Transaction Documents, the
Collateral Agent’s, for the benefit of the Secured Parties, interest in the
Collateral Portfolio, or the Borrower, the Seller, any Borrower Advisor or any
of their respective Affiliates. For purposes of this Section 5.01(p), (i) any
settlement, judgment, labor controversy, litigation, action, suit or proceeding
affecting the Collateral Portfolio, the Transaction Documents, the Collateral
Agent’s, for the benefit of the Secured Parties, interest in the Collateral
Portfolio, or the Borrower in excess of $500,000 shall be deemed to be material,
(ii) any settlement, judgment, labor controversy, litigation, action, suit or
proceeding affecting any Borrower Party, the Seller or any of their respective
Affiliates (other than the Borrower, the Collateral Sub-Advisor or any
Affiliates of the Collateral Sub-Advisor) in excess of $1,000,000 shall be
deemed to be material and (iii) any settlement, judgment, labor controversy,
litigation, action, suit or proceeding affecting the Collateral Sub-Advisor that
would be reasonably likely to result in a Material Adverse Effect shall be
deemed to be material.

 

(q)           Notice of ERISA Reportable Events. The Borrower shall promptly
notify the Administrative Agent and each Lender Agent after receiving notice of
any Reportable Event, and provide them with a copy of such notice.

 

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(r)            Notice of Accounting Changes. As soon as possible and in any
event within five (5) Business Days after the effective date thereof, the
Borrower will provide to the Administrative Agent and, upon request, each Lender
Agent notice of any change in the accounting policies of the Borrower.

 

(s)           Additional Documents. The Borrower shall provide the
Administrative Agent and each Lender Agent with copies of such documents as the
Administrative Agent or any Lender Agent may reasonably request evidencing the
accuracy of the representations set forth in this Agreement.

 

(t)            Protection of Security Interest. With respect to the Collateral
Portfolio acquired by the Borrower, the Borrower will (i) (at the expense of the
Borrower) take all action necessary to perfect, protect and more fully evidence
the Borrower’s ownership of such Collateral Portfolio free and clear of any Lien
other than the Lien created hereunder and Permitted Liens, including, without
limitation, executing or causing to be executed such other instruments or
notices as may be necessary or appropriate, (ii) (at the expense of the
Borrower) take all action necessary to cause a valid, subsisting and enforceable
first priority perfected security interest, subject only to Permitted Liens, to
exist in favor of the Collateral Agent (for the benefit of the Secured Parties)
in the Borrower’s interests in all of the Collateral Portfolio being Pledged
hereunder including the filing of a UCC financing statement in the applicable
jurisdiction adequately describing the Collateral Portfolio (which may include
an “all asset” filing), and naming the Borrower as debtor and the Collateral
Agent as the secured party, and filing continuation statements, amendments or
assignments with respect thereto in such filing offices, (including any
amendments thereto or assignments thereof), (iii) permit the Administrative
Agent, any Lender or their respective agents or representatives to visit the
offices of the Borrower during normal office hours and upon reasonable advance
notice examine and make copies of all documents, books, records and other
information concerning the Collateral Portfolio and discuss matters related
thereto with any of the officers or employees of the Borrower having knowledge
of such matters (provided that, unless an Event of Default shall be continuing,
the Borrower shall only be liable for the costs and expenses of two such visits
per calendar year), and (iv) take all additional action that the Administrative
Agent, any Lender Agent or the Collateral Agent may reasonably request to
perfect, protect and more fully evidence the respective first priority perfected
security interests of the parties to this Agreement in the Collateral Portfolio,
or to enable the Administrative Agent or the Collateral Agent to exercise or
enforce any of their respective rights hereunder.

 

(u)           Liens. The Borrower will promptly notify the Administrative Agent
and the Lender Agents of the existence of any Lien on the Collateral Portfolio
(other than Permitted Liens) and the Borrower shall defend the right, title and
interest of the Collateral Agent, for the benefit of the Secured Parties, in, to
and under the Collateral Portfolio against all claims of third parties (unless
the reasonably anticipated costs to defend such claims exceeds the value of any
Loan and prior written notice has been provided to the Administrative Agent).

 

(v)           Other Documents. At any time from time to time upon prior written
request of the Administrative Agent or any Lender Agent, at the sole expense of
the Borrower, the Borrower will promptly and duly execute and deliver such
further instruments and documents and take such further actions as the
Administrative Agent or any Lender Agent may reasonably request for the purposes
of obtaining or preserving the full benefits of this Agreement including the
first priority security interest (subject only to Permitted Liens) granted
hereunder and of the rights and powers herein granted (including, among other
things, authorizing the filing of such UCC financing statements as the
Administrative Agent may request).

 

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(w)          Compliance with Law. The Borrower shall at all times comply in all
material respects with all Applicable Law (including, without limitation,
Environmental Laws and all federal securities laws), and the Borrower shall do
or cause to be done all things necessary to preserve and maintain in full force
and effect its legal existence, and all licenses material to its business.

 

(x)           Proper Records. The Borrower shall at all times keep proper books
of records and accounts in which full, true and correct entries shall be made of
its transactions in accordance with GAAP and set aside on its books from its
earning for each fiscal year all such proper reserves in accordance with GAAP.

 

(y)           Satisfaction of Obligations. The Borrower shall pay, discharge or
otherwise satisfy at or before maturity or before they become delinquent, as the
case may be, all its obligations of whatever nature, except where the amount or
validity thereof is currently being contested in good faith by appropriate
proceedings and reserves with respect thereto have been provided on the books of
the Borrower.

 

(z)           Performance of Covenants. The Borrower shall observe, perform and
satisfy all the material terms, provisions, covenants and conditions required to
be observed, performed or satisfied by it, and shall pay when due all costs,
fees and expenses required to be paid by it, under the Transaction Documents.

 

(aa)         Tax Treatment. The Borrower and the Lenders shall (and the Borrower
shall cause the Seller to) treat the Advances advanced hereunder as indebtedness
for U.S. federal income tax purposes and file any and all tax forms in a manner
consistent therewith.

 

(bb)         Maintenance of Records. The Borrower will maintain records with
respect to the Collateral Portfolio and the conduct and operation of its
business and will furnish the Administrative Agent and each Lender Agent, upon
the reasonable request by the Administrative Agent and each Lender Agent,
information with respect to the Collateral Portfolio and the conduct and
operation of its business.

 

(cc)         Obligor Notification Forms. The Borrower shall furnish the
Collateral Agent and the Administrative Agent with an appropriate power of
attorney to send (at the Administrative Agent’s discretion on the Collateral
Agent’s behalf, after the occurrence of an Event of Default) Obligor
notification forms to give notice to the Obligors of the Collateral Agent’s
interest in the Collateral Portfolio and the obligation to make payments as
directed by the Administrative Agent on the Collateral Agent’s behalf.

 

(dd)        Officer’s Certificate. On each anniversary of the date of this
Agreement, the Borrower shall deliver an Officer’s Certificate, in form and
substance reasonably acceptable to the Collateral Agent and the Administrative
Agent, providing (i) a certification, based upon a review and summary of UCC
search results, that there is no other interest in the Collateral Portfolio
perfected by filing of a UCC financing statement other than in favor of the
Collateral Agent and Permitted Liens and (ii) a certification, based upon a
review and summary of tax and judgment lien searches satisfactory to the
Administrative Agent, that there is no other interest in the Collateral
Portfolio based on any tax or judgment lien.

 

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(ee)         Continuation Statements. The Borrower shall, not earlier than six
months and not later than three months prior to the fifth anniversary of the
date of filing each financing statement filed pursuant to this Agreement or in
connection with any Advance hereunder, unless the Collection Date shall have
occurred, authorize and deliver and file or cause to be filed an appropriate
continuation statement with respect to such financing statement.

 

(ff)          Disregarded Entity. The Borrower will be disregarded as an entity
separate from its owner pursuant to Treasury Regulation Section 301.7701-3(b),
and neither the Borrower nor any other Person on its behalf shall make an
election to be treated as other than an entity disregarded from its owner under
Treasury Regulation Section 301.7701-3(c).

 

(gg)         Withholding. If the provisions of Sections 1471 through 1474 of the
Code or any regulations promulgated thereunder become applicable to any payments
to the Borrower made in respect of the Collateral Portfolio, the Borrower shall
exercise its best efforts to avoid the imposition of any withholding tax in
respect of such payments under those provisions.

 

(hh)         Loan Register. In the case of Agented Loans, the Borrower shall
maintain, or cause to be maintained, with respect to each Noteless Loan a
register (which may be in physical or electronic form and readily identifiable
as the loan register) (each, a “Loan Register”) in which it will record, or
cause to be recorded, (v) the amount of such Noteless Loan, (w) the amount of
any principal or interest due and payable or to become due and payable from the
Obligor thereunder, (x) the amount of any sum in respect of such Noteless Loan
received from the Obligor, (y) the date of origination of such Noteless Loan and
(z) the maturity date of such Noteless Loan.

 

Section 5.02      Negative Covenants of the Borrower.

 

From the Closing Date until the Collection Date:

 

(a)           Special Purpose Entity Requirements. The Borrower shall not (i)
guarantee any obligation of any Person, including any Affiliate or become
obligated for the debts of any other Person or hold out its credit as being
available to pay the obligations of any other Person; (ii) engage, directly or
indirectly, in any business, other than the actions required or permitted to be
performed under Section 5.01(a); (iii) incur, create or assume any Indebtedness,
other than Indebtedness incurred under the Transaction Documents; (iv) make or
permit to remain outstanding any loan or advance to, or own or acquire any stock
or securities of, any Person, except that the Borrower may invest in those Loans
and other investments permitted under the Transaction Documents and may make any
advance required or expressly permitted to be made pursuant to any provisions of
the Transaction Documents and permit the same to remain outstanding in
accordance with such provisions; (v) fail to be Solvent; (vi) create, form or
otherwise acquire any Subsidiaries or own any equity interest in any other
entity, other than any Portfolio Subsidiaries, (vii) release, sell, transfer,
convey or assign any Loan unless in accordance with the Transaction Documents,
(viii) except for capital contributions or capital distributions permitted under
the terms and conditions of this Agreement and properly reflected on the books
and records of the Borrower, enter into any transaction with an Affiliate of the
Borrower except on commercially reasonable terms similar to those available to
unaffiliated parties in an arm’s-length transaction; (ix) identify itself as a
department or division of any other Person; or (x) own any asset or property
other than the Loans, the Portfolio Assets, any Portfolio Subsidiaries and the
related assets in the Collateral Portfolio and incidental personal property
necessary for the ownership or operation of these assets.

 

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(b)           Requirements for Material Actions. The Borrower shall not fail to
provide (and at all times the Borrower’s organizational documents shall reflect)
that the unanimous consent of all members (including the consent of the
Independent Director(s)) is required for the Borrower to (i) seek to be
adjudicated bankrupt or insolvent or seek any relief under any law relating to
relief from debts or the protection of debtors, (ii) institute or consent to the
institution of bankruptcy or insolvency proceedings against it, (iii) file a
petition seeking or consent to reorganization or relief under any applicable
federal or state law relating to bankruptcy or insolvency, (iv) seek or consent
to the appointment of a receiver, liquidator, assignee, trustee, sequestrator,
custodian or any similar official for the Borrower or a substantial part of its
property, (v) make any assignment for the benefit of the Borrower’s creditors,
(vi) admit in writing its inability to pay its debts generally as they become
due, or (vii) take any action in furtherance of any of the foregoing.

 

(c)           Protection of Title. The Borrower shall not take any action which
would directly or indirectly impair or adversely affect Borrower’s title to the
Collateral Portfolio.

 

(d)           Transfer Limitations. The Borrower shall not transfer, assign,
convey, grant, bargain, sell, set over, deliver or otherwise dispose of, or
pledge or hypothecate, directly or indirectly, any interest in the Collateral
Portfolio to any person other than the Collateral Agent for the benefit of the
Secured Parties, or engage in financing transactions or similar transactions
with respect to the Collateral Portfolio with any person other than the
Administrative Agent and the Lenders, in each case, except as otherwise
expressly permitted by the terms of this Agreement.

 

(e)           Liens. The Borrower shall not create, incur or permit to exist any
lien, encumbrance or security interest in or on any of the Collateral Portfolio
subject to the security interest granted by the Borrower pursuant to this
Agreement, other than Permitted Liens.

 

(f)            Organizational Documents. The Borrower shall not modify or
terminate any of its organizational or operational documents without the prior
written consent of the Administrative Agent.

 

(g)           Merger, Acquisitions, Sales, etc. The Borrower shall not change
its organizational structure, enter into any transaction of merger or
consolidation or amalgamation, or asset sale (other than pursuant to Section
2.07), or liquidate, wind up or dissolve itself (or suffer any liquidation,
winding up or dissolution) without the prior written consent of the
Administrative Agent.

 

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(h)           Use of Proceeds. The Borrower will use the proceeds of the
Advances only to acquire Eligible Loans, to make distributions to its member in
accordance with the terms hereof or to pay related expenses (including expenses
payable hereunder).

 

(i)            Limited Assets. The Borrower shall not hold or own any assets
that are not part of the Collateral Portfolio (other than Excluded Amounts and
Retained Interests).

 

(j)            Tax Treatment. The Borrower shall not elect to be treated as a
corporation for U.S. federal income tax purposes and shall take all reasonable
steps necessary to avoid being treated as a corporation (or as a publicly traded
partnership, taxable mortgage pool or other entity taxable as a corporation) for
U. S. federal income tax purposes.

 

(k)           Extension or Amendment of Loans. The Borrower will not, unless so
directed by the Collateral Manager in accordance with the Management Agreement,
extend, amend or otherwise modify the terms of any Loan (including the related
Underlying Collateral).

 

(l)            Purchase and Sale Agreement. The Borrower will not amend, modify,
waive or terminate any provision of the Purchase and Sale Agreement without the
prior written consent of the Administrative Agent.

 

(m)          Restricted Junior Payments. The Borrower shall not make any
Restricted Junior Payment unless (i) no Event of Default, Collateral Manager
Event of Default, Unmatured Collateral Manager Event of Default or Unmatured
Event of Default (including, without limitation a Borrowing Base Deficiency) has
occurred or would result therefrom and (ii) such Restricted Junior Payments are
made with either (A) the proceeds of an Advance or (B) funds received by the
Borrower pursuant to Section 2.04(a)(x) or Section 2.04(b)(vi).

 

(n)           ERISA Matters. The Borrower will not (a) engage, and will exercise
its best efforts not to permit any ERISA Affiliate to engage, in any prohibited
transaction with respect to a Pension Plan (within the meaning of ERISA Section
406(a) or (b) or Code Section 4975) for which an exemption is not available or
has not previously been obtained from the United States Department of Labor, (b)
fail to meet the minimum funding standard set forth in Section 302(a) of ERISA
and Section 412(a) of the Code with respect to any Pension Plan other than a
Multiemployer Plan, (c) fail to make any payments to a Multiemployer Plan that
the Borrower or any ERISA Affiliate may be required to make under the agreement
relating to such Multiemployer Plan or any law pertaining thereto, (d) terminate
any Pension Plan so as to result, directly or indirectly in any liability to the
Borrower, or (e) permit to exist any occurrence of any Reportable Event.

 

(o)           Instructions to Obligors. The Borrower will not make any change,
or permit any Borrower Advisor to make any change, in its instructions to
Obligors regarding payments to be made with respect to the Collateral Portfolio
to the Collection Account unless the Administrative Agent has consented to such
change.

 

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(p)           Change of Jurisdiction, Location, Names or Location of Loan Files.
The Borrower shall not change the jurisdiction of its formation, make any change
to its limited liability company name or use any tradenames, fictitious names,
assumed names, “doing business as” names or other names (other than those listed
on Schedule I hereto, as such schedule may be revised from time to time to
reflect name changes and name usage permitted under the terms of this Section
5.02(o) after compliance with all terms and conditions of this Section 5.02(o)
related thereto) unless, prior to the effective date of any such change in the
jurisdiction of its formation, name change or use, the Borrower receives prior
written consent from the Administrative Agent of such change and delivers to the
Administrative Agent such financing statements as the Administrative Agent may
request to reflect such name change or use, together with such Opinions of
Counsel and other documents and instruments as the Administrative Agent may
request in connection therewith. The Borrower will not change the location of
its chief executive office unless prior to the effective date of any such change
of location, the Borrower notifies the Administrative Agent of such change of
location in writing. The Borrower will not move, or consent to the Collateral
Custodian or any Borrower Advisor moving, the Loan Files from the location
thereof on the Closing Date, unless the Administrative Agent shall consent to
such move in writing (such consent not to be unreasonably withheld or delayed)
and the Borrower shall, in advance of such move, provide the Administrative
Agent with such Opinions of Counsel and other documents and instruments as the
Administrative Agent may reasonably request in connection therewith.

 

(q)           Allocation of Charges. The Borrower shall not suffer to exist any
agreement or understanding between any Borrower Advisor and the Borrower (other
than the Transaction Documents, and as expressly set forth herein, as disclosed
to the Administrative Agent in writing prior to the Closing Date, or as
consented to by the Administrative Agent), providing for the allocation or
sharing of obligations to make payments or otherwise in respect of any Taxes,
fees, assessments or other governmental charges.

 

(r)            Taxable Mortgage Pool Matters. The sum of the Outstanding
Balances of all Loans owned by the Borrower that are principally secured by an
interest in real property (within the meaning of Treasury Regulation Section
3.01.7701(i)-1(d)(3)) shall not at any time exceed 35% of the Outstanding
Balance of the Collateral Portfolio.

 

Section 5.03      Affirmative Covenants of the Collateral Agent.

 

From the Closing Date until the Collection Date:

 

(a)           Compliance with Law. The Collateral Agent will comply in all
material respects with all Applicable Law.

 

(b)           Preservation of Existence. The Collateral Agent will preserve and
maintain its existence, rights, franchises and privileges in the jurisdiction of
its formation and qualify and remain qualified in good standing in each
jurisdiction where failure to preserve and maintain such existence, rights,
franchises, privileges and qualification could reasonably be expected to have a
Material Adverse Effect.

 

Section 5.04      Negative Covenants of the Collateral Agent.

 

From the Closing Date until the Collection Date, the Collateral Agent will not
make any changes to the Collateral Agent Fees without the prior written approval
of the Administrative Agent.

 

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Section 5.05      Affirmative Covenants of the Collateral Custodian.

 

From the Closing Date until the Collection Date:

 

(a)           Compliance with Law. The Collateral Custodian will comply in all
material respects with all Applicable Law.

 

(b)           Preservation of Existence. The Collateral Custodian will preserve
and maintain its existence, rights, franchises and privileges in the
jurisdiction of its formation and qualify and remain qualified in good standing
in each jurisdiction where failure to preserve and maintain such existence,
rights, franchises, privileges and qualification could reasonably be expected to
have a Material Adverse Effect.

 

(c)           Location of Required Loan Documents. Subject to Article XI of this
Agreement, the Required Loan Documents shall remain at all times in the
possession of the Collateral Custodian at 1055 10th Avenue SE, Minneapolis, MN
55414 unless notice of a different address is given in accordance with the terms
hereof or unless the Administrative Agent agrees to allow certain Required Loan
Documents to be released to a Borrower Advisor on a temporary basis in
accordance with the terms hereof, except as such Required Loan Documents may be
released pursuant to the terms of this Agreement.

 

Section 5.06      Negative Covenants of the Collateral Custodian.

 

From the Closing Date until the Collection Date:

 

(a)           Required Loan Documents. The Collateral Custodian will not dispose
of any documents constituting the Required Loan Documents in any manner that is
inconsistent with the performance of its obligations as the Collateral Custodian
pursuant to this Agreement and will not dispose of any Collateral Portfolio
except as contemplated by this Agreement.

 

(b)           No Changes in Collateral Custodian Fees. The Collateral Custodian
will not make any changes to the Collateral Custodian Fees without the prior
written approval of the Administrative Agent.

 

ARTICLE VI.

ADMINISTRATION AND SERVICING OF CONTRACTS

 

Section 6.01      [Reserved].

 

Section 6.02      Collateral Management Duties.

 

The Borrower shall cause the Collateral Manager to comply with each of the
Collateral Manager’s duties under the Management Agreement.

 

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Section 6.03      Authorization of the Collateral Manager.

 

(a)           Each of the Borrower, the Administrative Agent, each Lender Agent
and each Lender hereby authorizes the Collateral Manager (including any
successors thereto) to take any and all reasonable steps in its name and on its
behalf necessary or desirable in the determination of the Collateral Manager and
not inconsistent with the sale of the Collateral Portfolio by the Seller to the
Borrower under the Purchase and Sale Agreement and the Pledge of the Collateral
Portfolio by the Borrower to the Collateral Agent on behalf of the Secured
Parties hereunder, to collect all amounts due under any and all Collateral
Portfolio, including, without limitation, endorsing any of their names on checks
and other instruments representing Interest Collections and Principal
Collections, executing and delivering any and all instruments of satisfaction or
cancellation, or of partial or full release or discharge, and all other
comparable instruments, with respect to the Collateral Portfolio and, after the
delinquency of any Collateral Portfolio and to the extent permitted under and in
compliance with Applicable Law, to commence proceedings with respect to
enforcing payment thereof. The Borrower and the Collateral Agent on behalf of
the Secured Parties shall (and the Borrower shall cause the Seller to) furnish
the Collateral Manager (and any successors thereto) with any powers of attorney
and other documents necessary or appropriate to enable the Collateral Manager to
carry out their servicing and administrative duties hereunder, and shall
cooperate with the Collateral Manager to the fullest extent in order to ensure
the collectability of the Collateral Portfolio. In no event shall the Borrower
permit the Collateral Manager to make the Secured Parties, the Administrative
Agent, the Collateral Agent, any Lender or any Lender Agent a party to any
litigation without such party’s express prior written consent, or to make the
Borrower a party to any litigation (other than any routine foreclosure or
collection procedure or other routine enforcement of the obligations of any
Obligor owing to the Borrower) without the Administrative Agent’s and each
Lender Agent’s consent.

 

(b)          After the declaration of the Facility Maturity Date, at the
direction of the Administrative Agent, the Borrower shall cause each Borrower
Advisor to take such action as the Administrative Agent may deem necessary or
advisable to enforce collection of the Collateral Portfolio; provided, that the
Administrative Agent may, at any time that an Event of Default has occurred,
notify any Obligor with respect to any Collateral Portfolio of the assignment of
such Collateral Portfolio to the Collateral Agent on behalf of the Secured
Parties and direct that payments of all amounts due or to become due be made
directly to the Administrative Agent or any servicer, collection agent or
account designated by the Administrative Agent and, upon such notification and
at the expense of the Borrower, the Administrative Agent may enforce collection
of any such Collateral Portfolio, and adjust, settle or compromise the amount or
payment thereof.

 

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Section 6.04      Collection of Payments; Accounts.

 

(a)           Controlled Accounts. Each of the parties hereto hereby agrees that
(i) each Controlled Account is intended to be a “securities account” within the
meaning of the UCC and (ii) except as otherwise expressly provided herein and in
the Securities Account Control Agreement, prior to the delivery of a Notice of
Exclusive Control (as defined in the Securities Account Control Agreement, as
applicable), the Borrower shall be entitled to exercise the rights that comprise
each Financial Asset held in each Controlled Account which is a securities
account; provided that after the delivery of a Notice of Exclusive Control (as
defined in the Securities Account Control Agreement) such rights shall be
exclusively held by the Collateral Agent (acting at the direction of the
Administrative Agent). Each of the parties hereto hereby agrees to cause the
securities intermediary that holds any money or other property for the Borrower
in a Controlled Account that is a securities account to agree with the parties
hereto that (A) the cash and other property (subject to Section 6.04(b) below
with respect to any property other than investment property, as defined in
Section 9-102(a)(49) of the UCC) is to be treated as a Financial Asset under
Article 8 of the UCC and (B) regardless of any provision in any other agreement,
for purposes of the UCC, with respect to the Controlled Accounts, New York shall
be deemed to be the securities intermediary’s jurisdiction (within the meaning
of Section 8-110(e) of the UCC). All securities or other property underlying any
Financial Assets credited to the Controlled Accounts in the form of securities
or instruments shall be registered in the name of the Account Bank or if in the
name of the Borrower or the Collateral Agent, Indorsed to the Account Bank,
Indorsed in blank, or credited to another securities account maintained in the
name of the Account Bank, and in no case will any Financial Asset credited to
the Controlled Accounts be registered in the name of the Borrower, payable to
the order of the Borrower or specially Indorsed to the Borrower, except to the
extent the foregoing have been specially Indorsed to the Account Bank or
Indorsed in blank.

 

(b)           Underlying Instruments. Notwithstanding any term hereof (or any
term of the UCC that might otherwise be construed to be applicable to a
“securities intermediary” as defined in the UCC) to the contrary, none of the
Collateral Agent, the Collateral Custodian nor any securities intermediary shall
be under any duty or obligation in connection with the acquisition by the
Borrower, or the grant by the Borrower to the Collateral Agent, of any Loan in
the nature of a loan to examine or evaluate the sufficiency of the documents or
instruments delivered to it by or on behalf of the Borrower under the related
Underlying Instruments, or otherwise to examine the Underlying Instruments, in
order to determine or compel compliance with any applicable requirements of or
restrictions on transfer (including without limitation any necessary consents).
The Collateral Custodian shall hold any Instrument delivered to it evidencing
any Loan granted to the Collateral Agent hereunder as custodial agent for the
Collateral Agent in accordance with the terms of this Agreement.

 

(c)           Adjustments. If (i) any Borrower Advisor makes a deposit into the
Collection Account in respect of an Interest Collection or Principal Collection
of a Loan and such Interest Collection or Principal Collection was received by
such Borrower Advisor in the form of a check that is not honored for any reason
or (ii) any Borrower Advisor makes a mistake with respect to the amount of any
Interest Collection or Principal Collection and deposits an amount that is less
than or more than the actual amount of such Interest Collection or Principal
Collection, the Borrower shall cause such Borrower Advisor to appropriately
adjust the amount subsequently deposited into the Collection Account to reflect
such dishonored check or mistake. Any Scheduled Payment in respect of which a
dishonored check is received shall be deemed not to have been paid.

 

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Section 6.05      Management of REO Assets.

 

(a)           If, in the reasonable business judgment of the Borrower, it
becomes necessary to convert any Loan into an REO Asset in accordance with the
Management Agreement, the Borrower shall transfer and assign such Loan (or the
portion thereof owned by the Borrower) to a Portfolio Subsidiary using a
contribution agreement reasonably acceptable to the Administrative Agent. Any
equity interests of the Portfolio Subsidiary acquired by the Borrower shall
immediately become a part of the Collateral Portfolio and be subject to the
grant of a security interest under Section 2.12 and, if certificated, shall be
promptly delivered to the Collateral Custodian, each undated and duly Indorsed
in blank. The Portfolio Subsidiary shall be formed and operated pursuant to
organizational documents reasonably acceptable to the Administrative Agent.
After execution thereof, the Borrower shall prevent the Portfolio Subsidiary
from agreeing to any amendment or other modification of the Portfolio Subsidiary
organizational documents without first obtaining the written consent of the
Administrative Agent. The Borrower shall manage each Portfolio Subsidiary (i) in
accordance with Applicable Law, (ii) with reasonable care and diligence, (iii)
in accordance with the applicable Portfolio Subsidiary’s organizational
documents and (iv) with a view toward maximizing Recoveries on the applicable
REO Asset (collectively, the “REO Management Standard”). The Borrower will cause
all “Distributable Cash” (or any comparable definition set forth in the
Portfolio Subsidiary’s organizational documents) to be deposited into the
Collection Account within two (2) Business Days of receipt thereof.

 

(b)           In the event that title to any Underlying Collateral is acquired
on behalf of a Portfolio Subsidiary for the benefit of its equity owners in
foreclosure, by deed in lieu of foreclosure or upon abandonment or reclamation
from bankruptcy, the deed or certificate of sale shall be taken in the name of
such Portfolio Subsidiary. The Borrower shall use commercially reasonable
efforts to cause each REO Asset to be managed, conserved, protected and operated
solely for the purpose of its prompt disposition and sale.

 

(c)           Notwithstanding any provision to the contrary contained in this
Agreement, the Borrower shall not (nor shall permit the Portfolio Subsidiary to)
obtain title to any Underlying Collateral as a result of or in lieu of
foreclosure or otherwise, obtain title to any direct or indirect partnership
interest in any Obligor pledged pursuant to a pledge agreement and thereby be
the beneficial owner of Underlying Collateral, have a receiver of rents
appointed with respect to, and shall not otherwise acquire possession of, or
take any other action with respect to, any Underlying Collateral if, as a result
of any such action, the Portfolio Subsidiary would be considered to hold title
to, to be a “mortgagee-in-possession” of, or to be an “owner” or “operator” of,
such Underlying Collateral within the meaning of the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended from time to time,
or any comparable state or local Environmental Law, unless the Borrower has
previously determined in accordance with the REO Management Standard, based on
an updated Phase I environmental assessment report generally prepared in
accordance with the ASTM Phase I Environmental Site Assessment Standard E
1527-05, as may be amended or, with respect to residential property, a property
inspection and title report, that:

 

(i)            such Underlying Collateral is in compliance in all material
respects with applicable Environmental Laws; and

 

(ii)           there are no circumstances present at such Underlying Collateral
relating to the use, management or disposal of any hazardous materials for which
investigation, testing, monitoring, containment, clean-up or remediation would
reasonably be expected to be required by the owner, occupier or operator of the
Underlying Collateral under applicable federal, state or local law or
regulation.

 

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In the event that the Phase I or other environmental assessment first obtained
by the Borrower with respect to Underlying Collateral indicates that such
Underlying Collateral may not be in compliance with applicable Environmental
Laws or that hazardous materials may be present but does not definitively
establish such fact, the Borrower shall immediately sell or substitute the
related Loan in accordance with Section 2.07.

 

Section 6.06      [Reserved].

 

Section 6.07      Reports to the Administrative Agent; Account Statements;
Servicing Information.

 

(a)           Notice of Borrowing. On each Advance Date, on each reduction of
Advances Outstanding pursuant to Section 2.17(a), on any termination of this
Agreement or reduction in part of the Maximum Facility Amount pursuant to
Section 2.17(b) and on each reinvestment of Principal Collections pursuant to
Section 2.19, the Borrower (or the Collateral Manager on its behalf) will
provide a Notice of Borrowing or a Notice of Reduction, as applicable, and a
Borrowing Base Certificate, each updated to no sooner than the Business Day
preceding such date, to the Administrative Agent (with a copy to the Collateral
Agent).

 

(b)           Collateral Management Report. On each Reporting Date, the Borrower
will cause the Collateral Manager to deliver to each Lender Agent, the
Administrative Agent, the Collateral Agent and any Liquidity Bank, a monthly
statement including (i) a Borrowing Base Certificate calculated as of the
immediately prior Determination Date, (ii) the Loan Tape calculated as of the
immediately prior Determination Date, (iii) in connection with any month in
which a Payment Date occurs, amounts to be remitted pursuant to Section 2.04 to
the applicable parties (which shall include any applicable wiring instructions
of the parties receiving payment), and (iv) any other information the Collateral
Manager may deem relevant with respect to any Loan (such monthly statement, a
“Collateral Management Report”). Each Collateral Management Report shall be
signed by an Authorized Person of the Collateral Manager and the Borrower and
shall be substantially in the form of Exhibit K.

 

(c)           Collateral Manager Certificate. Together with each Collateral
Management Report, the Borrower shall cause the Collateral Manager to submit to
the Administrative Agent, each Lender Agent, the Collateral Agent and any
Liquidity Bank a certificate substantially in the form of Exhibit L (a
“Collateral Manager Certificate”), signed by an Authorized Person of the
Collateral Manager, which shall include a certification by such Authorized
Person that, to the knowledge of each such Authorized Person, no Collateral
Manager Event of Default or Event of Default has occurred (in each case except
as specified therein) and no Unmatured Event of Default exists.

 

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(d)          Financial Statements. The Borrower shall cause the Equityholder to
submit to the Administrative Agent, each Lender Agent, any Liquidity Bank and
the Collateral Agent, (i) within 45 days after the end of each of its first
three fiscal quarters (excluding the fiscal quarter ending on the date specified
in clause (ii)), commencing March 31, 2014, consolidated unaudited financial
statements of the Equityholder for the most recent fiscal quarter, and (ii)
within 120 days after the end of each fiscal year, commencing with the fiscal
year ended December 31, 2014, consolidated audited financial statements of the
Equityholder, audited by a firm of nationally recognized independent public
accountants, as of the end of such fiscal year.

 

(e)           Obligor Financial Statements; Valuation Reports; Other Reports.
The Borrower will (pursuant to Section 6.07(g)) cause the Collateral Manager to
deliver to the Administrative Agent, the Collateral Agent and, upon request, any
Lender Agent, with respect to each Obligor, (i) to the extent received by the
Borrower and/or the Collateral Manager pursuant to the Underlying Instrument,
the complete financial reporting package with respect to such Obligor and with
respect to each Loan for such Obligor (including any financial statements,
management discussion and analysis, executed covenant compliance certificates,
and related covenant calculations with respect to such Obligor and with respect
to each Loan for such Obligor) provided to the Borrower and/or the Collateral
Manager either monthly or quarterly, as the case may be, by such Obligor, which
delivery shall be made within 10 Business Days after the Collateral Manager’s or
the Borrower’s receipt thereof, (ii) the annual budget (along with subsequent
changes thereto) with respect to such Obligor and provided to the Borrower
and/or the Collateral Manager by such Obligor, which delivery shall be made
within 10 Business Days after receipt by the Borrower and/or the Collateral
Manager, (iii) a monthly or quarterly, as the case may be, update to the
portfolio summary prepared by the Collateral Manager with respect to such
Obligor and with respect to each Loan for such Obligor, which delivery shall be
made no later than 45 days after receipt by the Borrower and/or the Collateral
Manager of the information set forth in clause (e)(i) above and (iv) the
portfolio update prepared by the Collateral Manager with respect to each Obligor
on a quarterly basis, which delivery shall be made no later than 90 days after
the end of each calendar quarter and 120 days after the end of each fiscal year.
The Collateral Manager will promptly deliver to the Administrative Agent and any
Lender Agent, upon reasonable request and to the extent received by the Borrower
and/or the Collateral Manager, all other documents and information required to
be delivered by the Obligors to the Borrower with respect to any Loan included
in the Collateral Portfolio.

 

(f)           Amendments to Loans. The Borrower shall cause the Collateral
Manager to deliver to the Administrative Agent, the Collateral Custodian and,
upon request, any Lender Agent, a copy of any material amendment, restatement,
supplement, waiver or other modification to the Underlying Instrument of any
Loan (along with any internal documents prepared by the Collateral Manager and
provided to its investment committee in connection with such amendment,
restatement, supplement, waiver or other modification) within 10 Business Days
of the effectiveness of such amendment, restatement, supplement, waiver or other
modification.

 

(g)          Website Access to Information. Notwithstanding anything to the
contrary contained herein, information required to be delivered or submitted to
any Secured Party pursuant to the Management Agreement and this Article VI shall
be posted on a secured website (including IntraLinks or similar services or the
Collateral Manager’s proprietary restricted-access server) to which the
Administrative Agent and, upon request, any Lender Agent have access or upon
receipt of such information through e-mail or another delivery method acceptable
to the Administrative Agent.

 

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(h)          Additional Information. The Borrower will cause the Collateral
Manager to deliver to the requesting party any financial or other information in
connection with this Agreement, the other Transaction Documents or the
transactions contemplated hereby or thereby reasonably requested by the
Administrative Agent, any Lender Agent or the Collateral Agent.

 

Section 6.08      Annual Statement as to Compliance.

 

The Borrower will cause the Collateral Manager to provide to the Administrative
Agent, each Lender Agent and the Collateral Agent within 90 days following the
end of each fiscal year of the Collateral Manager, commencing with the fiscal
year ending on December 31, 2014, a fiscal report signed by an Authorized Person
of the Collateral Manager certifying that (a) a review of the activities of the
Collateral Manager, and the Collateral Manager’s performance pursuant to this
Agreement, for the fiscal period ending on the last day of such fiscal year has
been made under such Person’s supervision and (b) the Collateral Manager has
performed or has caused to be performed in all material respects all of its
obligations under this Agreement and the other Transaction Documents throughout
such year and, except as set forth in such report, no Collateral Manager Event
of Default has occurred.

 

Section 6.09      Annual Independent Public Accountant’s Review of Collateral
Management Reports

 

The Borrower will cause a firm of nationally recognized independent public
accountants (who may also render other services to the Borrower Advisors and who
may include, without limitation, McGladrey & Pullen, LLP) to furnish to the
Administrative Agent, each Lender Agent and the Collateral Agent within 90 days
following the end of each fiscal year of the Borrower, commencing with the
fiscal year ending on December 31, 2014, a report covering such fiscal year to
the effect that such accountants have applied certain agreed-upon procedures (a
copy of which procedures are attached hereto as Schedule II) to certain
documents and records relating to the Collateral Portfolio under any Transaction
Document, compared the information contained in the Collateral Management
Reports and the Collateral Manager Certificates delivered during the period
covered by such report with such documents and records and that no matters came
to the attention of such accountants that caused them to believe that such
servicing was not conducted in compliance with this Article VI, except for such
exceptions as such accountants shall believe to be immaterial and such other
exceptions as shall be set forth in such statement. In the event such
independent public accountants require the Collateral Custodian or Collateral
Agent to agree to the procedures to be performed by such firm in any of the
reports required to be prepared pursuant to this Section 6.09, the Collateral
Manager shall direct the Collateral Custodian or Collateral Agent in writing to
so agree; it being understood and agreed that the Collateral Custodian or
Collateral Agent shall deliver such letter of agreement in conclusive reliance
upon the direction of the Collateral Manager, and the Collateral Custodian or
Collateral Agent has not made any independent inquiry or investigation as to,
and shall have no obligation or liability in respect of, the sufficiency,
validity or correctness of such procedures. Notwithstanding anything to the
contrary herein, if the Collateral Custodian, Administrative Agent, any Lender
Agent or the Collateral Agent fail within 75 days following the end of each
fiscal year of the Borrower to execute any documentation required by the
independent public accountants selected by the Borrower prior to the delivery of
any report contemplated by this Section 6.09, then the Borrower shall have no
obligation to furnish any report covering such fiscal year pursuant to this
Section 6.09.

 

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Section 6.10      [Reserved]. 

 

Section 6.11      Collateral Manager Events of Default.

 

Notwithstanding anything to the contrary herein, if any of the following events
(each a “Collateral Manager Event of Default”) shall occur and be continuing:

 

(a)          any failure on the part of any Borrower Advisor duly to (i) observe
or perform in any material respect any other covenants or agreements of such
Borrower Advisor set forth in any Transaction Documents to which such Borrower
Advisor is a party (including, without limitation, any delegation of such
Borrower Advisor’s duties that is not expressly permitted by the Transaction
Documents) or (ii) comply in any material respect with the Collateral Management
Standard regarding the servicing of the Collateral Portfolio and in each case
the same continues unremedied for a period of thirty (30) days (if such failure
can be remedied) after the earlier to occur of (x) the date on which written
notice of such failure requiring the same to be remedied shall have been given
to such Borrower Advisor by the Administrative Agent, the Borrower or the
Collateral Agent (at the direction of the Administrative Agent) and (y) the date
on which a Authorized Person of such Borrower Advisor acquires knowledge
thereof;

 

(b)          a Bankruptcy Event occurs with respect to any Borrower Advisor;

 

(c)          (i) other than a Permitted Equityholder Transaction, a change of
control occurs with respect to the Collateral Manager or (ii) as determined in
the sole discretion of the Administrative Agent, a change of control that
materially and adversely affects any Secured Party hereunder occurs with respect
to the Collateral Advisor or the Collateral Sub-Advisor (“control” being defined
for purposes of this definition as the possession, direct or indirect, of the
power to direct or cause the direction of the management, actions and policies
of a person, whether through voting rights, ownership rights, or by contract or
otherwise);

 

(d)          any representation, warranty or certification made by the
Collateral Manager in any Transaction Document or in any certificate delivered
pursuant to any Transaction Document shall prove to have been incorrect when
made, which inaccuracy has a Material Adverse Effect and which continues to be
unremedied for a period of thirty (30) days after the earlier to occur of (i)
the date on which written notice of such incorrectness requiring the same to be
remedied shall have been given to the Collateral Manager by the Administrative
Agent, the Borrower or the Collateral Agent (at the direction of the
Administrative Agent) and (ii) the date on which a Authorized Person of the
Collateral Manager acquires knowledge thereof;

 

(e)          the occurrence of an Event of Default;

 

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(f)           no investment professionals of the Collateral Sub-Advisor who from
time to time manage non-investment grade loans on behalf of other clients of the
Collateral Sub-Advisor are actively involved in advising the Collateral Advisor
on the selection and management of the assets of the Borrower on a basis
consistent with the Collateral Sub-Advisor’s existing practices or failure of
the Collateral Advisor to follow such advice on a basis consistent with the
Collateral Advisor’s existing practices, in each case as determined by the
Administrative Agent in its reasonable discretion;

 

(g)          the rendering against the Collateral Manager or the Collateral
Advisor of one or more final judgments, decrees or orders for the payment of
money individually or in the aggregate (as to each such Person) in excess of the
lesser of (x) 3% of the net asset value of such Person and (y) $2,000,000, and
such Person shall not have discharged or provided for the discharge of any such
judgment, decree or order in accordance with its terms and such judgment, decree
or order continues unsatisfied and in effect for any period of more than sixty
(60) consecutive days without a stay of execution;

 

(h)          the Collateral Manager or the Collateral Advisor defaults in making
any payment required to be made under an agreement for borrowed money (other
than this Agreement) to which it is a party individually or in the aggregate (as
to each such Person) in excess of the lesser of (x) 3% of the net asset value of
such Person and (y) $2,000,000, and such default is not cured within the
applicable cure period, if any, provided for under such agreement;

 

(i)           any failure of the Borrower to cause the Collateral Manager,
Collateral Advisor or Collateral Sub-Advisor to deliver (i) any required
Collateral Management Report on or before the date occurring three Business Days
after the date such report is required to be made or given, as the case may be
or (ii) any other Required Reports hereunder on or before the date occurring
three Business Days after the date such report is required to be made or given,
as the case may be, in each case under the terms of this Agreement;

 

(j)           other than as a result of a Permitted Equityholder Transaction,
the failure of (i) FS Investment Corporation II to be the Collateral Manager
(unless it is replaced by the Collateral Sub-Advisor), (ii) FSIC II Advisor, LLC
to be the Collateral Advisor (unless it is replaced by the Collateral
Sub-Advisor) or (iii) GSO/Blackstone Debt Funds Management LLC to be the
Collateral Sub-Advisor;

 

(k)          the Collateral Sub-Advisor fails to have at least $4,000,000,000 of
total commercial loans under management at fair value as reported by it in its
most recent quarterly financial statement;

 

(l)           any merger or consolidation of the Collateral Manager that does
not comply with the provisions of Section 5(h) of the Management Agreement; or

 

(m)         either (i) the organizational documents of either the Collateral
Manager or the Collateral Advisor fail to be in full force and effect or (ii)
the organizational documents of the Collateral Manager are amended in a manner
adverse to any Secured Party without the prior written consent of the
Administrative Agent;

 

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then (i) the Borrower shall not permit the Collateral Manager to consent to
modifications to Loans or to any acquisition or disposition of Loans hereunder
(each, a “Collateral Portfolio Transaction”) and under each other Transaction
Document, (ii) the Borrower shall cause the Collateral Manager to have the prior
written consent of the Administrative Agent in its sole discretion prior to
directing the Borrower to enter into any Collateral Portfolio Transaction, (iii)
the Borrower shall cause the Collateral Manager to direct the Borrower to
acquire or dispose of any Loan as directed by the Administrative Agent in its
sole discretion and (iv) the Borrower shall cause all amounts which are directed
to be paid to the Collateral Manager pursuant to Section 2.04 to be paid instead
to the Administrative Agent for its own account. Unless explicitly set forth in
any Transaction Document, the Borrower shall not permit the Collateral Manager
to be relieved of any of its rights, duties or obligations under this Agreement
or any other Transaction Document.

 

ARTICLE VII.

EVENTS OF DEFAULT

 

Section 7.01      Events of Default.

 

If any of the following events (each, an “Event of Default”) shall occur:

 

(a)          failure on the part of the Seller or the Borrower to make any
payment required by the terms of any Transaction Document within three (3)
Business Days of the day such payment or deposit is required to be made; or

 

(b)         the Borrower defaults in making any payment required to be made
under one or more agreements (other than this Agreement) to which it is a party
in an aggregate principal amount (individually or in the aggregate) in excess of
$500,000, and such default is not cured within the applicable cure period, if
any, provided for under such agreement; or

 

(c)          the Equityholder defaults in making any payment required to be made
under an agreement for borrowed money (other than this Agreement) to which it is
a party individually or in the aggregate in excess of the lesser of (x) 3% of
the net asset value of the Equityholder and (y) $2,000,000, and such default is
not cured within the applicable cure period, if any, provided for under such
agreement; or

 

(d)         any failure on the part of the Borrower or the Seller duly to
observe or perform in any material respect any other covenants or agreements of
the Borrower or the Seller set forth in this Agreement or the other Transaction
Documents to which the Borrower or the Seller is a party and the same continues
unremedied for a period of 30 days (if such failure can be remedied) after the
earlier to occur of (i) the date on which written notice of such failure
requiring the same to be remedied shall have been given to the Borrower or the
Seller by the Administrative Agent or Collateral Agent and (ii) the date on
which the Borrower or the Seller acquires knowledge thereof; or

 

(e)          the occurrence of a Bankruptcy Event relating to the Borrower or
the Equityholder; or

 

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

 

(g)         any representation, warranty or certification made by the Borrower,
the Seller or the Equityholder in any Transaction Document or in any certificate
delivered pursuant to any Transaction Document shall prove to have been
incorrect when made in any material respect, and continues to be unremedied for
a period of 30 days after the earlier to occur of (i) the date on which written
notice of such incorrectness requiring the same to be remedied shall have been
given to the Borrower, the Seller or the Equityholder by the Administrative
Agent or the Collateral Agent (which shall be given at the direction of the
Administrative Agent) and (ii) the date on which a Authorized Person of the
Borrower, the Seller or the Equityholder acquires knowledge thereof; or

 

(h)         any Borrower Party fails to observe or perform any covenant,
agreement or obligation with respect to the management and distribution of funds
received with respect to the Collateral Portfolio, and such failure is not cured
within three (3) Business Days; or

 

(i)           any security interest securing any obligation under any
Transaction Document shall, in whole or in part, cease to be a first priority
perfected security interest except for Permitted Liens and as otherwise
expressly permitted to be released in accordance with the applicable Transaction
Document; or

 

(j)           (1) the rendering of one or more final judgments, decrees or
orders by a court or arbitrator of competent jurisdiction for the payment of
money in excess individually or in the aggregate of $500,000 against the
Borrower and the Borrower shall not have either (i) discharged or provided for
the discharge of any such judgment, decree or order in accordance with its terms
or (ii) perfected a timely appeal of such judgment, decree or order and caused
the execution of same to be stayed during the pendency of the appeal or (2) the
rendering of one or more final judgments, decrees or orders by a court or
arbitrator of competent jurisdiction for the payment of money in excess
individually or in the aggregate of the lesser of (x) 3% of the net asset value
of the Equityholder and (y) $2,000,000 against the Equityholder and the
Equityholder shall not have either (i) discharged or provided for the discharge
of any such judgment, decree or order in accordance with its terms or (ii)
perfected a timely appeal of such judgment, decree or order and caused the
execution of same to be stayed during the pendency of the appeal; or

  

(k)          the Borrower shall have made payments of amounts in excess of
$500,000 in the settlement of any litigation, claim or dispute (excluding
payments made from insurance proceeds); or

 

(l)            (1) any material provision of any Transaction Document or any
lien or security interest granted hereunder or thereunder, shall (except in
accordance with its terms), in whole or in part, terminate, cease to be
effective or cease to be the legally valid, binding and enforceable obligation
of the Borrower, the Seller or the Collateral Manager or (2) the Borrower or any
other Person shall, directly or indirectly, contest in writing in any manner the
effectiveness, validity, binding nature or enforceability of any Transaction
Document, any material provision thereof or any lien or security interest
thereunder, or

 

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(m)         the Borrower shall become required to register as an “investment
company” within the meaning of the 1940 Act or the arrangements contemplated by
the Transaction Documents shall require registration by the Borrower as an
“investment company” within the meaning of the 1940 Act; or

 

(n)          the occurrence of a Borrowing Base Deficiency that is not cured
pursuant to Section 2.06; or

 

(o)          the failure of the Equityholder to own, directly or through one or
more wholly owned Subsidiaries, 100% of the economic interests of the Borrower;
or

 

(p)         (i) failure of the Borrower to maintain at least one Independent
Director, (ii) the removal of any Independent Director without cause or prior
written notice to the Administrative Agent (in each case (as required by the
organization documents of the Borrower) or (iii) an Independent Director of the
Borrower which is not pre-approved by this Agreement or the Administrative Agent
shall be appointed without the consent of the Administrative Agent; provided
that if the Borrower shall fail to have an Independent Director as a result of
the voluntary resignation or incapacitation of the sole Independent Director,
the Borrower shall have five (5) Business Days to replace such Independent
Director; or

 

(q)          the failure of the Collateral Manager to maintain, at the end of
any fiscal quarter, an Asset Coverage Ratio of greater than or equal to 2:1;

 

(r)           the failure of the Collateral Manager to have a net asset value of
at least $300,000,0001,000,000,000;

 

(s)          the occurrence of any material adverse development with respect to
the Borrower, any Borrower Advisor, or Equityholder that has impaired or is
reasonably expected to impair the Borrower’s ability to perform its obligations
under this Agreement or under any of the other Transaction Documents, in each
case in the good faith commercially reasonable judgment of the Administrative
Agent and which has not been waived pursuant to Section 12.01; or

 

(t)           the removal or resignation of any Borrower Advisor; or

 

(u)          either (i) the organizational documents of the Collateral Manager
or the Collateral Advisor shall fail to be in full force and effect or (ii) the
organizational documents of the Collateral Manager shall have been amended in a
manner adverse to any Secured Party without the prior written consent of the
Administrative Agent; or

 

(v)          any of (i) any organizational documents or other material contracts
to which the Borrower is a party shall fail to be in full force and effect or
shall have been amended without the prior written consent of the Agent, (ii) the
Advisory Agreements shall fail to be in full force and effect or shall have been
amended in any manner adverse to any Secured Party (as determined by the
Administrative Agent in its sole discretion) without the prior written consent
of the Administrative Agent, (iii) any organizational documents or Transaction
Documents to which the Collateral Manager is a party shall fail to be in full
force and effect or shall have been amended without the prior written consent of
the Administrative Agent or (iv) any other contract to which the Collateral
Manager is a party shall be amended without the prior written consent of the
Administrative Agent if the effect of such amendment in the Administrative
Agent’s good faith commercially reasonable judgment is to materially impair the
Collateral Manager’s ability to perform its obligations under the Transaction
Documents or to materially impair any Secured Party’s or the Borrower’s rights
and remedies against the Collateral Manager under the Transaction Documents; or

 

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

 

(x)          the Internal Revenue Service shall file notice of a lien pursuant
to Section 6323 of the Code with regard to any assets of the Borrower and such
lien shall not have been released within ten (10) Business Days, or the Pension
Benefit Guaranty Corporation shall file notice of a lien pursuant to Section
4068 of ERISA with regard to any of the assets of the Borrower and such lien
shall not have been released within ten (10) Business Days; or

 

(y)          failure to pay, on the Facility Maturity Date, all outstanding
Obligations; or

 

(z)          except as otherwise permitted by this Agreement, all or
substantially all of the assets of the Borrower cease to be part of the
Collateral Portfolio; or

 

(aa)        the occurrence of a Collateral Manager Event of Default;

 

then the Administrative Agent or the Required Lenders, may, by notice to the
Borrower (which notice may not, in the case of an Event of Default specified in
Section 7.01(aa), be delivered sooner than the fifth Business Day after the
occurrence of such Event of Default), declare the Facility Maturity Date to have
occurred; provided, that, in the case of any event described in Section 7.01(e)
above, the Facility Maturity Date shall be deemed to have occurred automatically
upon the occurrence of such event. Upon any such declaration or automatic
occurrence, (i) the Borrower shall cease purchasing Loans, (ii) the
Administrative Agent or the Required Lenders may declare the Obligations to be
immediately due and payable in full (without presentment, demand, protest or
notice of any kind all of which are hereby waived by the Borrower), and (iii)
all proceeds and distributions in respect of the Portfolio Assets shall be
distributed by the Collateral Agent (at the direction of the Administrative
Agent) as described in Section 2.04(c) (provided that the Borrower shall in any
event remain liable to pay such Advances and all such amounts and Obligations
immediately in accordance with Section 2.04(e) hereof). In addition, upon any
such declaration or upon any such automatic occurrence, the Collateral Agent, on
behalf of the Secured Parties and at the direction of the Administrative Agent,
shall have, in addition to all other rights and remedies under this Agreement or
otherwise, all other rights and remedies provided under the UCC of the
applicable jurisdiction and other Applicable Law, which rights shall be
cumulative. Without limiting any obligation of the Collateral Manager hereunder,
the Borrower confirms and agrees that the Collateral Agent, on behalf of the
Secured Parties and at the direction of the Administrative Agent, (or any
designee thereof, including, without limitation, the Collateral Manager),
following an Event of Default, shall, at its option, have the sole right to
enforce the Borrower’s rights and remedies under the Management Agreement and
the Purchase and Sale Agreement, but without any obligation on the part of the
Administrative Agent, the Lenders, the Lender Agents or any of their respective
Affiliates to perform any of the obligations of the Borrower under any such
agreement. If any Event of Default shall have occurred, the Yield Rate shall be
increased pursuant to the increase set forth in the definition of “Applicable
Spread”, effective as of the date of the occurrence of such Event of Default,
and shall apply after the occurrence and during the continuance of such Event of
Default.

 

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Section 7.02      Additional Remedies of the Administrative Agent.

 

(a)          If, upon the Administrative Agent’s or the Required Lenders’
declaration that the Obligations are immediately due and payable pursuant to
Section 7.01 upon the occurrence of an Event of Default, then the Collateral
Agent (acting as directed by the Administrative Agent) shall have the right, in
its own name and as agent for the Secured Parties, to immediately sell (at the
Borrower’s expense) in a commercially reasonable manner, in a recognized market
(if one exists) at such price or prices as the Administrative Agent may
reasonably deem satisfactory, any or all of the Collateral Portfolio and apply
the proceeds thereof to the Obligations pursuant to Section 7.02(e).

 

(b)          The parties recognize that it may not be possible to sell all of
the Collateral Portfolio on a particular Business Day, or in a transaction with
the same purchaser, or in the same manner because the market for the assets
constituting the Collateral Portfolio may not be liquid. Accordingly, the
Administrative Agent may elect, in its sole discretion, the time and manner of
liquidating any of the Collateral Portfolio, and nothing contained herein shall
obligate the Administrative Agent or the Collateral Agent (acting as directed by
the Administrative Agent) to liquidate any of the Collateral Portfolio on the
date the Administrative Agent or the Required Lenders declare the Obligations to
be immediately due and payable pursuant to Section 7.01 or to liquidate all of
the Collateral Portfolio in the same manner or on the same Business Day.

 

(c)          If the Collateral Agent (acting as directed by the Administrative
Agent) or the Administrative Agent proposes to sell the Collateral Portfolio or
any part thereof in one or more parcels at a public or private sale, at the
request of the Collateral Agent or the Administrative Agent, as applicable, the
Borrower and the Collateral Manager shall make available to (i) the
Administrative Agent, on a timely basis, all information (including any
information that the Borrower and the Collateral Manager is required by
Applicable Law or contract to be kept confidential) relating to the Collateral
Portfolio subject to sale, including, without limitation, copies of any
disclosure documents, contracts, financial statements of the applicable
Obligors, covenant certificates and any other materials requested by the
Administrative Agent, and (ii) each prospective bidder, on a timely basis, all
reasonable information relating to the Collateral Portfolio subject to sale,
including, without limitation, copies of any disclosure documents, contracts,
financial statements of the applicable Obligors, covenant compliance
certificates and any other materials requested by each such bidder.

 

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(d)         The Borrower agrees (and, to the full extent that it may lawfully so
agree) that neither it nor anyone claiming through or under it will set up,
claim or seek to take advantage of any appraisement, valuation, stay, extension
or redemption law now or hereafter in force in any locality where any Collateral
Portfolio may be situated in order to prevent, hinder or delay the enforcement
or foreclosure of this Agreement, or the absolute sale of any of the Collateral
Portfolio or any part thereof, or the final and absolute putting into possession
thereof, immediately after such sale, of the purchasers thereof, and the
Borrower, for itself and all who may at any time claim through or under it,
hereby waives, to the full extent that it may be lawful so to do, the benefit of
all such laws, and any and all right to have any of the properties or assets
constituting the Collateral Portfolio marshaled upon any such sale, and agrees
that the Collateral Agent, or the Administrative Agent on its behalf, or any
court having jurisdiction to foreclose the security interests granted in this
Agreement may sell the Collateral Portfolio as an entirety or in such parcels as
the Collateral Agent (acting at the direction of the Administrative Agent) or
such court may determine.

 

(e)          Any amounts received from any sale or liquidation of the Collateral
Portfolio pursuant to this Section 7.02 in excess of the Obligations will be
applied by the Collateral Agent (as directed by the Administrative Agent) in
accordance with the provisions of Section 2.04(c), or as a court of competent
jurisdiction may otherwise direct.

 

(f)           The Administrative Agent, the Lender Agents and the Lenders shall
have, in addition to all the rights and remedies provided herein and provided by
applicable federal, state, foreign, and local laws (including, without
limitation, the rights and remedies of a secured party under the UCC of any
applicable state, to the extent that the UCC is applicable, and the right to
offset any mutual debt and claim), all rights and remedies available to the
Lenders at law, in equity or under any other agreement between any Lender and
the Borrower.

 

(g)          Except as otherwise expressly provided in this Agreement, no remedy
provided for by this Agreement shall be exclusive of any other remedy, each and
every remedy shall be cumulative and in addition to any other remedy, and no
delay or omission to exercise any right or remedy shall impair any such right or
remedy or shall be deemed to be a waiver of any Event of Default.

 

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

 

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ARTICLE VIII.

INDEMNIFICATION

 

Section 8.01      Indemnities by the Borrower.

 

(a)          Without limiting any other rights which the Affected Parties, the
Secured Parties, the Administrative Agent, the Lenders, the Lender Agents, the
Collateral Agent, the Account Bank, the Collateral Custodian or any of their
respective Affiliates may have hereunder or under Applicable Law, the Borrower
hereby agrees to indemnify the Affected Parties, the Secured Parties,
Administrative Agent, the Lenders, the Lender Agents, the Collateral Agent, the
Account Bank, the Collateral Custodian and each of their respective Affiliates,
assigns, officers, directors, employees and agents (each, an “Indemnified
Party”) from and against any and all damages, losses, claims, liabilities and
related costs and expenses, including reasonable and documented attorneys’ fees
and disbursements (all of the foregoing being collectively referred to as
“Indemnified Amounts”), awarded against or actually incurred by such Indemnified
Party arising out of or as a result of this Agreement or in respect of any of
the Collateral Portfolio, excluding, however, Indemnified Amounts to the extent
resulting solely from (x) gross negligence, bad faith or willful misconduct on
the part of an Indemnified Party or (y) Loans which are uncollectible due to the
Obligor’s financial inability to pay. Without limiting the foregoing, the
Borrower shall indemnify each Indemnified Party for Indemnified Amounts relating
to or resulting from any of the following (to the extent not resulting from the
conditions set forth in (x) or (y) above):

 

(i)           any Loan treated as or represented by the Borrower to be an
Eligible Loan which is not at the applicable time an Eligible Loan, or the
purchase or origination by any party of any Loan which violates Applicable Law;

 

(ii)          reliance on any representation or warranty made or deemed made by
the Borrower, the Collateral Manager or any of their respective officers under
or in connection with this Agreement or any Transaction Document, which shall
have been false or incorrect in any respect when made or deemed made or
delivered;

 

(iii)         the failure by the Borrower or the Collateral Manager to comply
with any term, provision or covenant contained in this Agreement or any
agreement executed in connection with this Agreement, or with any Applicable Law
with respect to any item of Collateral Portfolio, or the nonconformity of any
item of Collateral Portfolio with any such Applicable Law;

 

(iv)         the failure to vest and maintain vested in the Collateral Agent,
for the benefit of the Secured Parties, a first priority perfected security
interest in the Collateral Portfolio, free and clear of any Lien other than
Permitted Liens, whether existing at the time of the related Advance or at any
time thereafter;

 

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(v)          on each Business Day prior to the Collection Date, the occurrence
of a Borrowing Base Deficiency and the same continues unremedied for ten (10)
Business Days;

 

(vi)         the failure to file, or any delay in filing, financing statements,
continuation statements or other similar instruments or documents under the UCC
of any applicable jurisdiction or other Applicable Law with respect to any Loans
included in the Collateral Portfolio or the other Portfolio Assets related
thereto, whether at the time of any Advance or at any subsequent time;

 

(vii)        any dispute, claim, offset or defense (other than the discharge in
bankruptcy of an Obligor) to the payment of any Loan included in the Collateral
Portfolio (including, without limitation, a defense based on such Loan (or the
Underlying Instrument evidencing such Loan) not being a legal, valid and binding
obligation of such Obligor enforceable against it in accordance with its terms),
or any other claim resulting from the sale of the merchandise or services
related to such Collateral Portfolio or the furnishing or failure to furnish
such merchandise or services;

 

(viii)       any failure of the Borrower or the Collateral Manager to perform
its duties or obligations in accordance with the provisions of the Transaction
Documents to which it is a party or any failure by the Collateral Manager, the
Borrower or any Affiliate thereof to perform its respective duties under any
Collateral Portfolio;

 

(ix)         any inability to obtain any judgment in, or utilize the court or
other adjudication system of, any state in which an Obligor may be located as a
result of the failure of the Borrower or the Seller to qualify to do business or
file any notice or business activity report or any similar report;

 

(x)          any action taken by the Borrower or any Borrower Advisor in the
enforcement or collection of the Collateral Portfolio;

 

(xi)         any products liability claim or personal injury or property damage
suit or other similar or related claim or action of whatever sort arising out of
or in connection with the Underlying Collateral or services that are the subject
of any Collateral Portfolio;

 

(xii)        any claim, suit or action of any kind arising out of or in
connection with Environmental Laws (including, but not limited to, with respect
to any REO Asset) including any vicarious liability;

 

(xiii)       the failure by the Borrower to pay when due any Taxes for which the
Borrower is liable, including, without limitation, sales, excise or personal
property Taxes payable in connection with the Collateral Portfolio;

 

(xiv)       any repayment by the Administrative Agent, the Lender Agents, the
Lenders or a Secured Party of any amount previously distributed in payment of
Advances or payment of Yield or Fees or any other amount due hereunder, which
amount the Administrative Agent, the Lender Agents, the Lenders or a Secured
Party believes in good faith is required to be repaid;

 

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(xv)        the commingling by the Borrower or the Collateral Manager of
payments and collections required to be remitted to the Collection Account with
other funds;

 

(xvi)       any investigation, litigation or proceeding related to this
Agreement (or the Transaction Documents), or the use of proceeds of Advances or
the security interest in the Collateral Portfolio, or the administration of the
Loans by the Borrower or the Collateral Manager;

 

(xvii)      any failure by the Borrower to give reasonably equivalent value to
the Seller or applicable third party seller in consideration for the transfer by
the Seller or such third party seller to the Borrower of any item of Collateral
Portfolio or any attempt by any Person to void or otherwise avoid any such
transfer under any statutory provision or common law or equitable action,
including, without limitation, any provision of the Bankruptcy Code;

 

(xviii)     the use of the proceeds of any Advance in a manner other than as
provided in this Agreement and the Transaction Documents;

 

(xix)       any failure of the Borrower, the Collateral Manager or any of their
respective agents or representatives to remit to the Collection Account within
two (2) Business Days of receipt, payments and collections with respect to the
Collateral Portfolio remitted to the Borrower, the Collateral Manager or any
such agent or representative.

 

(b)         Any amounts subject to the indemnification provisions of this
Section 8.01 shall be paid by the Borrower to the Administrative Agent on behalf
of the applicable Indemnified Party within two (2) Business Days of the
Administrative Agent’s written demand therefor on behalf of the applicable
Indemnified Party (and the Administrative Agent shall pay such amounts to the
applicable Indemnified Party promptly after the receipt by the Administrative
Agent of such amounts). The Administrative Agent, on behalf of any Indemnified
Party making a request for indemnification under this Section 8.01, shall submit
to the Borrower a certificate setting forth in reasonable detail the basis for
and the computations of the Indemnified Amounts with respect to which such
indemnification is requested, which certificate shall be conclusive absent
demonstrable error.

 

(c)          If for any reason the indemnification provided above in this
Section 8.01 is unavailable to the Indemnified Party or is insufficient to hold
an Indemnified Party harmless in respect of any losses, claims, damages or
liabilities, then the Borrower shall contribute to the amount paid or payable by
such Indemnified Party as a result of such losses, claims, damages or
liabilities in such proportion as is appropriate to reflect not only the
relative benefits received by such Indemnified Party on the one hand and the
Borrower on the other hand but also the relative fault of such Indemnified Party
as well as any other relevant equitable considerations.

 

(d)         If the Borrower has made any payments in respect of Indemnified
Amounts to the Administrative Agent on behalf of an Indemnified Party pursuant
to this Section 8.01 and such Indemnified Party thereafter collects any of such
amounts from others, such Indemnified Party will promptly repay such amounts
collected to the Borrower in an amount equal to the amount it has collected from
others in respect of such Indemnified Amounts, without interest.

 

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(e)          The obligations of the Borrower under this Section 8.01 shall
survive the resignation or removal of the Administrative Agent, the Lenders, the
Lender Agents, the Collateral Manager, the Collateral Agent, the Account Bank or
the Collateral Custodian and the termination of this Agreement.

  

Section 8.02      Notices.

 

Each applicable Indemnified Party shall deliver to the Borrower under Section
8.01 within a reasonable time after such Indemnified Party’s receipt thereof,
copies of all notices and documents (including court papers) received by such
Indemnified Party relating to the claim giving rise to the Indemnified Amounts.

 

Section 8.03      Legal Proceedings.

 

In the event an Indemnified Party becomes involved in any action, claim, or
legal, governmental or administrative proceeding (an “Action”) for which it
seeks indemnification hereunder, the Indemnified Party shall promptly notify the
Borrower in writing of the nature and particulars of the Action; provided that
its failure to do so shall not relieve the Borrower of its obligations hereunder
except to the extent such failure has a material adverse effect on the Borrower.
Upon written notice to the Indemnified Party acknowledging in writing that the
indemnification provided hereunder applies to the Indemnified Party in
connection with the Action (subject to the exclusion in the first sentence of
Section 8.01), the Borrower may assume the defense of the Action at its expense
with counsel reasonably acceptable to the Indemnified Party. The Indemnified
Party shall have the right to retain separate counsel in connection with the
Action, and the Borrower shall not be liable for the legal fees and expenses of
the Indemnified Party after the Borrower has done so; provided that if the
Indemnified Party determines in good faith that there may be a conflict between
the positions of the Indemnified Party and the Borrower in connection with the
Action, or that the Borrower is not conducting the defense of the Action in a
manner reasonably protective of the interests of the Indemnified Party, the
legal fees and expenses of the Indemnified Party shall be paid by the Borrower;
provided, further, that the Borrower shall not, in connection with any one
Action or separate but substantially similar or related Actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the fees or expenses of more than one separate firm of attorneys (and
any required local counsel) for such Indemnified Party, which firm (and local
counsel, if any) shall be designated in writing to the Borrower by the
Indemnified Party. If the Borrower elects to assume the defense of the Action,
it shall have full control over the conduct of such defense; provided that the
Borrower and its counsel shall, as reasonably requested by the Indemnified Party
or its counsel, consult with and keep them informed with respect to the conduct
of such defense. The Borrower shall not settle an Action without the prior
written approval of the Indemnified Party unless such settlement provides for
the full and unconditional release of the Indemnified Party from all liability
in connection with the Action. The Indemnified Party shall reasonably cooperate
with the Borrower in connection with the defense of the Action.

 

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Section 8.04      After-Tax Basis.

 

Indemnification under Section 8.01 shall be in an amount necessary to make the
Indemnified Party whole after taking into account any Tax consequences to the
Indemnified Party of the receipt of the indemnity provided hereunder, including
the effect of such Tax or refund on the amount of Tax measured by net income or
profits that is or was payable by the Indemnified Party.

 

ARTICLE IX.

THE ADMINISTRATIVE AGENT AND LENDER AGENTS

 

Section 9.01      The Administrative Agent.

 

(a)          Appointment. Each Lender Agent and each Secured Party hereby
appoints and authorizes the Administrative Agent as its agent hereunder and
hereby further authorizes the Administrative Agent to appoint additional agents
to act on its behalf and for the benefit of each Lender Agent and each Secured
Party. Each Lender Agent and each Secured Party further authorizes the
Administrative Agent to take such action as agent on its behalf and to exercise
such powers under this Agreement and the other Transaction Documents as are
delegated to the Administrative Agent by the terms hereof and thereof, together
with such powers as are reasonably incidental thereto. Notwithstanding any
provision to the contrary contained elsewhere in this Agreement or in any other
Transaction Document, the Administrative Agent shall not have any duties or
responsibilities, except those expressly set forth in this Agreement, nor shall
the Administrative Agent have or be deemed to have any fiduciary relationship
with any Lender or Lender Agent, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Transaction Document or otherwise exist against the
Administrative Agent. Without limiting the generality of the foregoing sentence,
the use of the term “agent” in this Agreement with reference to the
Administrative Agent is not intended to connote any fiduciary or other implied
(or express) obligations arising under agency doctrine of any Applicable Law.
Instead, such term is used merely as a matter of market custom, and is intended
to create or reflect only an administrative relationship between independent
contracting parties.

 

(b)         Delegation of Duties. The Administrative Agent may execute any of
its duties under this Agreement or any other Transaction Document by or through
agents, employees or attorneys-in-fact and shall be entitled to advice of
counsel concerning all matters pertaining to such duties. The Administrative
Agent shall not be responsible for the negligence or misconduct of any agent or
attorney-in-fact that it selects with reasonable care.

 

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(c)          Administrative Agent’s Reliance, Etc. Neither the Administrative
Agent nor any of its directors, officers, agents or employees shall be liable
for any action taken or omitted to be taken by it or them as Administrative
Agent under or in connection with this Agreement or any of the other Transaction
Documents, except for its or their own gross negligence or willful misconduct.
Each Lender, Lender Agent and each Secured Party hereby waives any and all
claims against the Administrative Agent or any of its Affiliates for any action
taken or omitted to be taken by the Administrative Agent or any of its
Affiliates under or in connection with this Agreement or any of the other
Transaction Documents, except for its or their own gross negligence or willful
misconduct. Without limiting the foregoing, the Administrative Agent: (i) may
consult with legal counsel (including counsel for the Borrower and the Seller),
independent public accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants or experts; (ii) makes
no warranty or representation and shall not be responsible for any statements,
warranties or representations made in or in connection with this Agreement;
(iii) shall not have any duty to ascertain or to inquire as to the performance
or observance of any of the terms, covenants or conditions of this Agreement or
any of the other Transaction Documents on the part of any Borrower Party or to
inspect the property (including the books and records) of the Borrower or the
Borrower Advisors; (iv) shall not be responsible for the due execution,
legality, validity, enforceability, genuineness, sufficiency or value of this
Agreement, any of the other Transaction Documents or any other instrument or
document furnished pursuant hereto or thereto; and (v) shall incur no liability
under or in respect of this Agreement or any of the other Transaction Documents
by acting upon any notice (including notice by telephone), consent, certificate
or other instrument or writing (which may be by facsimile) believed by it to be
genuine and signed or sent by the proper party or parties.

 

(d)          Actions by Administrative Agent. The Administrative Agent shall be
fully justified in failing or refusing to take any action under this Agreement
or any other Transaction Document unless it shall first receive such advice or
concurrence of the Lender Agents as it deems appropriate and, if it so requests,
it shall first be indemnified to its satisfaction by the Lenders and Lender
Agents against any and all liability and expense which may be incurred by it by
reason of taking or continuing to take any such action. The Administrative Agent
shall in all cases be fully protected in acting, or in refraining from acting,
under this Agreement or any other Transaction Document in accordance with a
request or consent of the Lender Agents; provided, that, notwithstanding
anything to the contrary herein, the Administrative Agent shall not be required
to take any action hereunder if the taking of such action, in the reasonable
determination of the Administrative Agent, shall be in violation of any
Applicable Law or contrary to any provision of this Agreement or shall expose
the Administrative Agent to liability hereunder or otherwise. In the event the
Administrative Agent requests the consent of a Lender Agent pursuant to the
foregoing provisions and the Administrative Agent does not receive a consent
(either positive or negative) from such Person within ten Business Days of such
Person’s receipt of such request, then such Lender or Lender Agent shall be
deemed to have declined to consent to the relevant action.

 

(e)          Notice of Event of Default, Unmatured Event of Default or
Collateral Manager Event of Default. The Administrative Agent shall not be
deemed to have knowledge or notice of the occurrence of an Event of Default,
Unmatured Event of Default or Collateral Manager Event of Default, unless the
Administrative Agent has received written notice from a Lender, Lender Agent,
the Borrower or any Borrower Advisor referring to this Agreement, describing
such Event of Default, Unmatured Event of Default or Collateral Manager Event of
Default and stating that such notice is a “Notice of Event of Default,” “Notice
of Unmatured Event of Default” or “Notice of Collateral Manager Event of
Default,” as applicable. The Administrative Agent shall (subject to Section
9.01(c)) take such action with respect to such Event of Default, Unmatured Event
of Default or Collateral Manager Event of Default as may be requested by the
Lender Agents acting jointly or as the Administrative Agent shall deem advisable
or in the best interest of the Lender Agents.

 

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(f)           Credit Decision with Respect to the Administrative Agent. Each
Lender Agent and each Secured Party acknowledges that none of the Administrative
Agent or any of its Affiliates has made any representation or warranty to it,
and that no act by the Administrative Agent hereinafter taken, including any
consent to and acceptance of any assignment or review of the affairs of the
Borrower, the Seller, the Borrower Advisors or any of their respective
Affiliates or review or approval of any of the Collateral Portfolio, shall be
deemed to constitute any representation or warranty by any of the Administrative
Agent or its Affiliates to any Lender Agent as to any matter, including whether
the Administrative Agent has disclosed material information in its possession.
Each Lender Agent and each Secured Party acknowledges that it has, independently
and without reliance upon the Administrative Agent, or any of the Administrative
Agent’s Affiliates, and based upon such documents and information as it has
deemed appropriate, made its own evaluation and decision to enter into this
Agreement and the other Transaction Documents to which it is a party. Each
Lender Agent and each Secured Party also acknowledges that it will,
independently and without reliance upon the Administrative Agent, or any of the
Administrative Agent’s Affiliates, and based on such documents and information
as it shall deem appropriate at the time, continue to make its own decisions in
taking or not taking action under this Agreement and the other Transaction
Documents to which it is a party. Each Lender Agent and each Secured Party
hereby agrees that the Administrative Agent shall not have any duty or
responsibility to provide any Lender Agent with any credit or other information
concerning the business, prospects, operations, property, financial and other
condition or creditworthiness of the Borrower, the Seller, the Borrower Advisors
or their respective Affiliates which may come into the possession of the
Administrative Agent or any of its Affiliates.

 

(g)          Indemnification of the Administrative Agent. Each Lender Agent
agrees to indemnify the Administrative Agent (to the extent not reimbursed by
the Borrower or the Borrower Advisors), ratably in accordance with the Pro Rata
Share of its related Lender, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by, or asserted against the Administrative Agent in any way
relating to or arising out of this Agreement or any of the other Transaction
Documents, or any action taken or omitted or decision made by the Administrative
Agent hereunder or thereunder; provided that the Lender Agents shall not be
liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from the Administrative Agent’s gross negligence or willful misconduct;
provided, further, that no action taken in accordance with the directions of the
Lender Agents shall be deemed to constitute gross negligence or willful
misconduct for purposes of this Article IX. Without limitation of the foregoing,
each Lender Agent agrees to reimburse the Administrative Agent, ratably in
accordance with the Pro Rata Share of its related Lender, promptly upon demand
for any out-of-pocket expenses (including counsel fees) incurred by the
Administrative Agent in connection with the administration, modification,
amendment or enforcement (whether through negotiations, legal proceedings or
otherwise) of, or legal advice in respect of rights or responsibilities under,
this Agreement and the other Transaction Documents, to the extent that such
expenses are incurred in the interests of or otherwise in respect of the Lender
Agents or Lenders hereunder and/or thereunder and to the extent that the
Administrative Agent is not reimbursed for such expenses by the Borrower or the
Borrower Advisors.

 

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(h)         Successor Administrative Agent. The Administrative Agent may resign
at any time, effective upon the appointment and acceptance of a successor
Administrative Agent as provided below, by giving at least thirty (30) days’
written notice thereof to each Lender Agent and the Borrower and may be removed
at any time with cause by the Lender Agents acting jointly. Upon any such
resignation or removal, the Lender Agents acting jointly shall appoint a
successor Administrative Agent; provided that, so long as no Unmatured Default,
Event of Default, Unmatured Collateral Manager Event of Default or Collateral
Manager Event of Default has occurred and is continuing, the appointment of a
successor Administrative Agent shall require the consent of the Borrower (such
consent not to be unreasonably withheld or delayed). Each Lender Agent agrees
that it shall not unreasonably withhold or delay its approval of the appointment
of a successor Administrative Agent. If no such successor Administrative Agent
shall have been so appointed, and shall have accepted such appointment, within
30 days after the retiring Administrative Agent’s giving of notice of
resignation or the removal of the retiring Administrative Agent, then the
retiring Administrative Agent may, on behalf of the Secured Parties, appoint a
successor Administrative Agent which successor Administrative Agent shall be
either (i) a commercial bank organized under the laws of the United States or of
any state thereof and have a combined capital and surplus of at least
$50,000,000 or (ii) an Affiliate of such a bank. Upon the acceptance of any
appointment as Administrative Agent hereunder by a successor Administrative
Agent, such successor Administrative Agent shall thereupon 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 under this Agreement. After any retiring
Administrative Agent’s resignation or removal hereunder as Administrative Agent,
the provisions of this Article IX shall continue to inure to its benefit as to
any actions taken or omitted to be taken by it while it was Administrative Agent
under this Agreement.

 

(i)           Payments by the Administrative Agent. Unless specifically
allocated to a specific Lender Agent pursuant to the terms of this Agreement,
all amounts received by the Administrative Agent on behalf of the Lender Agents
shall be paid by the Administrative Agent to the Lender Agents in accordance
with their related Lender’s respective Pro Rata Shares in the applicable
Advances Outstanding, or if there are no Advances Outstanding in accordance with
their related Lender’s most recent Commitments, on the Business Day received by
the Administrative Agent, unless such amounts are received after 12:00 noon on
such Business Day, in which case the Administrative Agent shall use its
reasonable efforts to pay such amounts to each Lender Agent on such Business
Day, but, in any event, shall pay such amounts to such Lender Agent not later
than the following Business Day.

 

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Section 9.02      The Lender Agents.

 

(a)          Authorization and Action. Each Lender, respectively, hereby
designates and appoints its applicable Lender Agent to act as its agent
hereunder and under each other Transaction Document, and authorizes such Lender
Agent to take such actions as agent on its behalf and to exercise such powers as
are delegated to such Lender Agent by the terms of this Agreement and the other
Transaction Documents, together with such powers as are reasonably incidental
thereto. No Lender Agent shall have any duties or responsibilities, except those
expressly set forth herein or in any other Transaction Document, or any
fiduciary relationship with its related Lender, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities on the part of
such Lender Agent shall be read into this Agreement or any other Transaction
Document or otherwise exist for such Lender Agent. In performing its functions
and duties hereunder and under the other Transaction Documents, each Lender
Agent shall act solely as agent for its related Lender and does not assume nor
shall be deemed to have assumed any obligation or relationship of trust or
agency with or for the Borrower or the Borrower Advisors or any of the
Borrower’s or the Borrower Advisor’s successors or assigns. No Lender Agent
shall be required to take any action that exposes such Lender Agent to personal
liability or that is contrary to this Agreement, any other Transaction Document
or Applicable Law. The appointment and authority of each Lender Agent hereunder
shall terminate upon the indefeasible payment in full of all Obligations. Each
Lender Agent hereby authorizes the Administrative Agent to file any UCC
financing statement deemed necessary by the Administrative Agent on behalf of
such Lender Agent (the terms of which shall be binding on such Lender Agent).

 

(b)          Delegation of Duties. Each Lender Agent may execute any of its
duties under this Agreement and each other Transaction Document by or through
agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. No Lender Agent shall be
responsible for the negligence or misconduct of any agents or attorneys-in-fact
selected by it with reasonable care.

 

(c)          Exculpatory Provisions. Neither any Lender Agent nor any of its
directors, officers, agents or employees shall be (i) liable for any action
lawfully taken or omitted to be taken by it or them under or in connection with
this Agreement or any other Transaction Document (except for its, their or such
Person’s own gross negligence or willful misconduct), or (ii) responsible in any
manner to its related Lender for any recitals, statements, representations or
warranties made by the Borrower or the Borrower Advisors contained in Article
IV, any other Transaction Document or any certificate, report, statement or
other document referred to or provided for in, or received under or in
connection with, this Agreement or any other Transaction Document, or for the
value, validity, effectiveness, genuineness, enforceability or sufficiency of
this Agreement, any other Transaction Document or any other document furnished
in connection herewith or therewith, or for any failure of the Borrower or any
Borrower Advisor to perform its obligations hereunder or thereunder, or for the
satisfaction of any condition specified in this Agreement, or for the
perfection, priority, condition, value or sufficiency of any collateral pledged
in connection herewith. No Lender Agent shall be under any obligation to its
related Lender to ascertain or to inquire as to the observance or performance of
any of the agreements or covenants contained in, or conditions of, this
Agreement or any other Transaction Document, or to inspect the properties, books
or records of the Borrower or the Borrower Advisors. No Lender Agent shall be
deemed to have knowledge of any Collateral Manager Event of Default, Event of
Default or Unmatured Event of Default unless such Lender Agent has received
notice from the Borrower or its related Lender.

 

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(d)          Reliance by Lender Agent. Each Lender Agent shall in all cases be
entitled to rely, and shall be fully protected in relying, upon any document or
conversation believed by it to be genuine and correct and to have been signed,
sent or made by the proper Person or Persons and upon advice and statements of
legal counsel (including, without limitation, counsel to the Borrower),
independent accountants and other experts selected by such Lender Agent. Each
Lender Agent shall in all cases be fully justified in failing or refusing to
take any action under this Agreement or any other Transaction Document unless it
shall first receive such advice or concurrence of its related Lender as it deems
appropriate and it shall first be indemnified to its satisfaction by its related
Lender; provided that, unless and until such Lender Agent shall have received
such advice, such Lender Agent may take or refrain from taking any action, as
the Lender Agent shall deem advisable and in the best interests of its related
Lender. Each Lender Agent shall in all cases be fully protected in acting, or in
refraining from acting, in accordance with a request of its related Lender, and
such request and any action taken or failure to act pursuant thereto shall be
binding upon its related Lender.

 

(e)          Non-Reliance on Lender Agent. Each Lender expressly acknowledges
that neither its related Lender Agent, nor any of its officers, directors,
employees, agents, attorneys-in-fact or affiliates has made any representations
or warranties to it and that no act by such Lender Agent hereafter taken,
including, without limitation, any review of the affairs of the Borrower or the
Borrower Advisors, shall be deemed to constitute any representation or warranty
by such Lender Agent. Each Lender represents and warrants to its related Lender
Agent that it has and will, independently and without reliance upon its related
Lender Agent, and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
operations, property, prospects, financial and other conditions and
creditworthiness of the Borrower and made its own decision to enter into this
Agreement, the other Transaction Documents and all other documents related
hereto or thereto.

 

(f)           Lender Agents are in their Respective Individual Capacities. Each
Lender Agent and its Affiliates may make loans to, accept deposits from and
generally engage in any kind of business with the Borrower or any Affiliate of
the Borrower as though such Lender Agent were not a Lender Agent hereunder. With
respect to Advances pursuant to this Agreement, each Lender Agent shall have the
same rights and powers under this Agreement in its individual capacity as any
Lender and may exercise the same as though it were not a Lender Agent, and the
terms “Lender,” and “Lenders,” shall include the Lender Agent in its individual
capacity.

 

(g)         Successor Lender Agent. Each Lender Agent may, upon five days’
notice to the Borrower and its related Lender, and such Lender Agent will, upon
the direction of its related Lender resign as the Lender Agent for such Lender.
If any Lender Agent shall resign, then its related Lender during such five day
period shall appoint a successor agent. If for any reason no successor agent is
appointed by such Lender during such five day period, then effective upon the
termination of such five day period, and the Borrower shall make all payments in
respect of the Obligations due to such Lender directly to such Lender, and for
all purposes shall deal directly with such Lender. After any retiring Lender
Agent’s resignation hereunder as a Lender Agent, the provisions of Articles VIII
and IX shall inure to its benefit with respect to any actions taken or omitted
to be taken by it while it was a Lender Agent under this Agreement.

 

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Section 9.03      Non-Receipt of Funds by the Administrative Agent

 

Unless the Administrative Agent shall have been notified in writing by a Lender
prior to the date an Advance is to be made by such Lender (which notice shall be
effective upon receipt) that such Lender does not intend to make its portion of
such Advance available to the Administrative Agent, the Administrative Agent
shall assume that such Lender has made such proceeds available to the
Administrative Agent on such date, and the Administrative Agent may in reliance
upon such assumption (but shall not be required to) make available to the
Borrower a corresponding amount. If such corresponding amount is not in fact
made available to the Administrative Agent by such Lender, the Administrative
Agent shall be entitled to recover such corresponding amount from such Lender.
If such Lender does not pay such corresponding amount forthwith upon the
Administrative Agent’s demand therefor, the Administrative Agent will promptly
notify the Borrower and the Borrower shall immediately pay such corresponding
amount to the Administrative Agent. The Administrative Agent shall also be
entitled to recover interest on such corresponding amount in respect of each day
from the date such corresponding amount was made available by the Administrative
Agent to the Borrower to the date such corresponding amount is recovered by the
Administrative Agent, without duplication, from either the Borrower or such
Lender at a per annum rate equal to the then-applicable Yield Rate. A
certificate of the Administrative Agent submitted to the Borrower or any Lender
with respect to any amount owing under this Section 9.03 shall be conclusive in
the absence of manifest error.

 

ARTICLE X.

COLLATERAL AGENT

 

Section 10.01    Designation of Collateral Agent.

 

(a)          Initial Collateral Agent. Each of the Borrower, the Lender Agents
and the Administrative Agent hereby designate and appoint the Collateral Agent
to act as its agent for the purposes of perfection of a security interest in the
Collateral Portfolio and hereby authorizes the Collateral Agent to take such
actions on its behalf and on behalf of each of the Secured Parties and to
exercise such powers and perform such duties as are expressly granted to the
Collateral Agent by this Agreement. The Collateral Agent hereby accepts such
agency appointment to act as Collateral Agent pursuant to the terms of this
Agreement, until its resignation or removal as Collateral Agent pursuant to the
terms hereof.

 

(b)          Successor Collateral Agent. Upon the Collateral Agent’s receipt of
a Collateral Agent Termination Notice from the Administrative Agent of the
designation of a successor Collateral Agent pursuant to the provisions of
Section 10.05, the Collateral Agent agrees that it will terminate its activities
as Collateral Agent hereunder.

 

(c)          Secured Party. The Administrative Agent, the Lender Agents and the
Lenders hereby appoint Wells Fargo, in its capacity as Collateral Agent
hereunder, as their agent for the purposes of perfection of a security interest
in the Collateral Portfolio. Wells Fargo, in its capacity as Collateral Agent
hereunder, hereby accepts such appointment and agrees to perform the duties set
forth in Section 10.02(b).

 

Section 10.02    Duties of Collateral Agent.

 

(a)          Appointment. The Borrower, the Lender Agents and the Administrative
Agent each hereby appoints Wells Fargo to act as Collateral Agent, for the
benefit of the Secured Parties. The Collateral Agent hereby accepts such
appointment and agrees to perform the duties and obligations with respect
thereto set forth herein.

 

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(b)         Duties. On or before the initial Advance Date, and until its removal
pursuant to Section 10.05, the Collateral Agent shall perform, on behalf of the
Secured Parties, the following duties and obligations:

 

(i)           the Collateral Agent shall re-calculate (based solely on
information provided to the Collateral Agent by the Collateral Manager) amounts
to be remitted pursuant to Section 2.04 to the applicable parties and notify the
Collateral Manager and the Administrative Agent in the event of any discrepancy
between the Collateral Agent’s calculations and the Collateral Management Report
(such dispute to be resolved in accordance with Section 2.05);

 

(ii)          the Collateral Agent shall make payments pursuant to the terms of
the Collateral Management Report or as otherwise directed in accordance with
Sections 2.04 or 2.05 (the “Payment Duties”);

 

(iii)         the Collateral Agent shall provide to the Borrower and the
Collateral Manager a copy of all written notices and communications identified
as being sent to it in connection with the Loans and the other Collateral
Portfolio held hereunder which it receives from the related Obligor,
participating bank and/or agent bank;

 

(iv)         the Collateral Agent shall assist and reasonably cooperate with the
independent certified public accountants in the preparation of those reports
required under Section 6.09; and

 

(v)          the Collateral Agent shall provide the Borrower and the Collateral
Manager with such other information as may be reasonably requested by the
Borrower or the Collateral Manager.

 

(c)          (i)         The Administrative Agent, each Lender Agent and each
Secured Party further authorizes the Collateral Agent to take such action as
agent on its behalf and to exercise such powers under this Agreement and the
other Transaction Documents as are expressly delegated to the Collateral Agent
by the terms hereof and thereof, together with such powers as are reasonably
incidental thereto. In furtherance, and without limiting the generality of the
foregoing, each Secured Party hereby appoints the Collateral Agent (acting at
the direction of the Administrative Agent) as its agent to execute and deliver
all further instruments and documents, and take all further action that the
Administrative Agent deems or the Required Lenders deem necessary or desirable
in order to perfect, protect or more fully evidence the security interests
granted by the Borrower hereunder, or to enable any of them to exercise or
enforce any of their respective rights hereunder, including, without limitation,
the execution by the Collateral Agent as secured party/assignee of such
financing or continuation statements, or amendments thereto or assignments
thereof, relative to all or any of the Loans now existing or hereafter arising,
and such other instruments or notices, as may be necessary or appropriate for
the purposes stated hereinabove. Nothing in this Section 10.02(c) shall be
deemed to relieve the Borrower or any Borrower Advisor of their respective
obligations to protect the interest of the Collateral Agent (for the benefit of
the Secured Parties) in the Collateral Portfolio, including to file financing
and continuation statements in respect of the Collateral Portfolio in accordance
with Section 5.01(s).

 

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

 

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

 

(d)         If, in performing its duties under this Agreement, the Collateral
Agent is required to decide between alternative courses of action, the
Collateral Agent may request written instructions from the Administrative Agent
as to the course of action desired by it. If the Collateral Agent does not
receive such instructions within two (2) Business Days after it has requested
them, the Collateral Agent may, but shall be under no duty to, take or refrain
from taking any such courses of action. The Collateral Agent shall act in
accordance with instructions received after such two (2) Business Day period
except to the extent it has already, in good faith, taken or committed itself to
take, action inconsistent with such instructions. The Collateral Agent shall be
entitled to rely on the advice of legal counsel and independent accountants in
performing its duties hereunder and shall be deemed to have acted in good faith
if it acts in accordance with such advice.

 

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

 

Section 10.03    Merger or Consolidation.

 

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

 

Section 10.04    Collateral Agent Compensation.

 

As compensation for its Collateral Agent activities hereunder, the Collateral
Agent shall be entitled to the Collateral Agent Fees and Collateral Agent
Expenses from the Borrower as set forth in the Wells Fargo Corporate Trust Fee
Letter, payable to the extent of funds available therefor pursuant to the
provisions of Section 2.04. The Collateral Agent’s entitlement to receive the
Collateral Agent Fees shall cease (excluding any unpaid outstanding amounts as
of that date) on the earliest to occur of: (i) its removal as Collateral Agent
pursuant to Section 10.05, (ii) its resignation as Collateral Agent pursuant to
Section 10.07 or (iii) the termination of this Agreement.

 

Section 10.05    Collateral Agent Removal.

 

The Collateral Agent may be removed, with or without cause, by the
Administrative Agent by notice given in writing to the Collateral Agent (the
“Collateral Agent Termination Notice”); provided, notwithstanding its receipt of
a Collateral Agent Termination Notice, the Collateral Agent shall continue to
act in such capacity until a successor Collateral Agent has been appointed and
has agreed to act as Collateral Agent hereunder; provided that the Collateral
Agent shall continue to receive compensation of its fees and expenses in
accordance with Section 10.04 above while so serving as the Collateral Agent
prior to a successor Collateral Agent being appointed.

 

Section 10.06    Limitation on Liability.

 

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

 

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

 

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

 

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

 

(e)          The Collateral Agent shall have no duties or responsibilities
except such duties and responsibilities as are specifically set forth in this
Agreement and no covenants or obligations shall be implied in this Agreement
against the Collateral Agent.

 

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

 

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

 

(h)          Subject in all cases to the last sentence of Section 2.05, in case
any reasonable question arises as to its duties hereunder, the Collateral Agent
may, prior to the occurrence of an Event of Default or the Facility Maturity
Date, request instructions from the Borrower Advisors and may, after the
occurrence of an Event of Default or the Facility Maturity Date, request
instructions from the Administrative Agent, and shall be entitled at all times
to refrain from taking any action unless it has received instructions from any
Borrower Advisor or the Administrative Agent, as applicable. The Collateral
Agent shall in all events have no liability, risk or cost for any action taken
pursuant to and in compliance with the instruction of the Administrative Agent.
In no event shall the Collateral Agent be liable for special, indirect or
consequential loss or damage of any kind whatsoever (including but not limited
to lost profits), even if the Collateral Agent has been advised of the
likelihood of such loss or damage and regardless of the form of action.

 

(i)           The Collateral Agent shall not be liable for the acts or omissions
of the Collateral Custodian under this Agreement and shall not be required to
monitor the performance of the Collateral Custodian. Notwithstanding anything
herein to the contrary, the Collateral Agent shall have no duty to perform any
of the duties of the Collateral Custodian under this Agreement.

 

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Section 10.07    Collateral Agent Resignation.

 

The Collateral Agent may resign at any time by giving not less than 90 days
written notice thereof to the Administrative Agent and with the consent of the
Administrative Agent, which consent shall not be unreasonably withheld. Upon
receiving such notice of resignation, the Administrative Agent shall promptly
appoint a successor collateral agent or collateral agents (provided that, so
long as no Unmatured Default, Event of Default, Unmatured Collateral Manager
Event of Default or Collateral Manager Event of Default has occurred and is
continuing, the appointment of a successor collateral agent or collateral agents
shall require the consent of the Borrower (such consent not to be unreasonably
withheld or delayed)) by written instrument, in duplicate, executed by the
Administrative Agent, one copy of which shall be delivered to the Collateral
Agent so resigning and one copy to the successor collateral agent or collateral
agents, together with a copy to the Borrower, the Borrower Advisors and
Collateral Custodian. If no successor collateral agent shall have been appointed
and an instrument of acceptance by a successor Collateral Agent shall not have
been delivered to the Collateral Agent within 45 days after the giving of such
notice of resignation, the resigning Collateral Agent may petition any court of
competent jurisdiction for the appointment of a successor Collateral Agent.
Notwithstanding anything herein to the contrary, the Collateral Agent may not
resign prior to a successor Collateral Agent being appointed.

 

ARTICLE XI.

COLLATERAL CUSTODIAN

 

Section 11.01    Designation of Collateral Custodian.

 

(a)          Initial Collateral Custodian. The role of Collateral Custodian with
respect to the Required Loan Documents shall be conducted by the Person
designated as Collateral Custodian hereunder from time to time in accordance
with this Section 11.01. Each of the Borrower, the Lender Agents and the
Administrative Agent hereby designate and appoint the Collateral Custodian to
act as its agent and hereby authorizes the Collateral Custodian to take such
actions on its behalf and to exercise such powers and perform such duties as are
expressly granted to the Collateral Custodian by this Agreement. The Collateral
Custodian hereby accepts such agency appointment to act as Collateral Custodian
pursuant to the terms of this Agreement, until its resignation or removal as
Collateral Custodian pursuant to the terms hereof.

 

(b)         Successor Collateral Custodian. Upon the Collateral Custodian’s
receipt of a Collateral Custodian Termination Notice from the Administrative
Agent of the designation of a successor Collateral Custodian pursuant to the
provisions of Section 11.05, the Collateral Custodian agrees that it will
terminate its activities as Collateral Custodian hereunder.

 

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Section 11.02    Duties of Collateral Custodian.

 

(a)          Appointment. The Borrower, the Lender Agents and the Administrative
Agent each hereby appoints Wells Fargo to act as Collateral Custodian, for the
benefit of the Secured Parties. The Collateral Custodian hereby accepts such
appointment and agrees to perform the duties and obligations with respect
thereto set forth herein.

 

(b)         Duties. From the Closing Date until its removal pursuant to Section
11.05, the Collateral Custodian shall perform, on behalf of the Secured Parties,
the following duties and obligations:

  

(i)           The Collateral Custodian shall take and retain custody of the
Required Loan Documents delivered by the Borrower pursuant to Section 3.02 in
accordance with the terms and conditions of this Agreement, all for the benefit
of the Secured Parties. Within five (5) Business Days of its receipt of any
Required Loan Documents, the related Loan Tape and a hard copy of the Loan
Checklist, the Collateral Custodian shall review the Required Loan Documents to
confirm that (A) such Required Loan Documents have been executed (either an
original or a copy, as indicated on the Loan Checklist) and have no mutilated
pages, (B) filed stamped copies of the UCC and other filings (to the extent
required by the Required Loan Documents) are included, (C) if listed on the Loan
Checklist, a copy of an Insurance Policy with respect to any real or personal
property constituting the Underlying Collateral is included, and (D) the related
original balance (based on a comparison to the note or assignment agreement, as
applicable), Loan number and Obligor name, as applicable, with respect to such
Loan is referenced on the related Loan Tape (such items (A) through (D)
collectively, the “Review Criteria”). Notwithstanding anything herein to the
contrary, the Collateral Custodian’s obligation to review the Required Loan
Documents shall be limited to reviewing such Required Loan Documents based on
the information provided on the Loan Checklist. If, at the conclusion of such
review, the Collateral Custodian shall determine that (i) the original balance
of the Loan with respect to which it has received Required Loan Documents is
less than as set forth on the Loan Tape, the Collateral Custodian shall notify
the Administrative Agent and the Borrower and the Borrower Advisors of such
discrepancy within one Business Day, or (ii) any Review Criteria is not
satisfied, the Collateral Custodian shall within one Business Day notify the
Borrower and the Borrower Advisors of such determination and provide the
Borrower and the Borrower Advisors with a list of the non-complying Loans and
the applicable Review Criteria that they fail to satisfy. The Borrower shall
have five (5) Business Days after notice or knowledge thereof to correct any
non-compliance with any Review Criteria. In addition, if requested in writing
(in the form of Exhibit M) by the Borrower and approved by the Administrative
Agent within 10 Business Days of the Collateral Custodian’s delivery of such
report, the Collateral Custodian shall return any Loan which fails to satisfy a
Review Criteria to the Borrower. Other than the foregoing, the Collateral
Custodian shall not have any responsibility for reviewing any Required Loan
Documents. Notwithstanding anything to the contrary contained herein, the
Collateral Custodian shall have no duty or obligation with respect to any Loan
checklist delivered to it in electronic form.

 

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(ii)          In taking and retaining custody of the Required Loan Documents,
the Collateral Custodian shall be deemed to be acting as the agent of the
Secured Parties; provided that the Collateral Custodian makes no representations
as to the existence, perfection or priority of any Lien on the Required Loan
Documents or the instruments therein; and provided, further, that, the
Collateral Custodian’s duties shall be limited to those expressly contemplated
herein.

 

(iii)         All Required Loan Documents shall be kept in fire resistant
vaults, rooms or cabinets at the locations specified on the address of the
Collateral Custodian set forth on Annex A to this Agreement, or at such other
office as shall be specified to the Administrative Agent and the Borrower by the
Collateral Custodian in a written notice delivered at least 30 days prior to
such change. All Required Loan Documents shall be placed together with an
appropriate identifying label and maintained in such a manner so as to permit
retrieval and access. The Collateral Custodian shall segregate the Required Loan
Documents on its inventory system and will not commingle the physical Required
Loan Documents with any other files of the Collateral Custodian other than
those, if any, relating to the Borrower and its Affiliates and Subsidiaries;
provided, however, the Collateral Custodian shall segregate any commingled files
upon written request of the Administrative Agent and the Borrower.

 

(iv)         On each Reporting Date, the Collateral Custodian shall provide a
written report to the Administrative Agent and the Borrower and the Borrower
Advisors (in a form mutually agreeable to the Administrative Agent and the
Collateral Custodian) identifying each Loan for which it holds Required Loan
Documents and the applicable Review Criteria that any Loan fails to satisfy.

 

(c)          (i)        The Collateral Custodian agrees to cooperate with the
Administrative Agent and the Collateral Agent and deliver any Required Loan
Documents to the Collateral Agent or Administrative Agent (pursuant to a written
request in the form of Exhibit M), as applicable, as requested in order to take
any action that the Administrative Agent deems necessary or desirable in order
to perfect, protect or more fully evidence the security interests granted by the
Borrower hereunder, or to enable any of them to exercise or enforce any of their
respective rights hereunder, including any rights arising with respect to
Article VII. In the event the Collateral Custodian receives instructions from
the Collateral Agent, any Borrower Advisors or the Borrower which conflict with
any instructions received by the Administrative Agent, the Collateral Custodian
shall rely on and follow the instructions given by the Administrative Agent.

 

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

 

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

 

Section 11.03    Merger or Consolidation.

 

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

 

Section 11.04    Collateral Custodian Compensation.

 

As compensation for its Collateral Custodian activities hereunder, the
Collateral Custodian shall be entitled to the Collateral Custodian Fees from the
Borrower as set forth in the Wells Fargo Corporate Trust Fee Letter, payable
pursuant to the extent of funds available therefor pursuant to the provisions of
Section 2.04. The Collateral Custodian’s entitlement to receive the Collateral
Custodian Fees shall cease (excluding any unpaid outstanding amounts as of that
date) on the earlier to occur of: (i) its removal as Collateral Custodian
pursuant to Section 11.05, (ii) its resignation as Collateral Custodian pursuant
to Section 11.07 of this Agreement or (iii) the termination of this Agreement.

 

Section 11.05    Collateral Custodian Removal.

 

The Collateral Custodian may be removed, with or without cause, by the
Administrative Agent by notice given in writing to the Collateral Custodian (the
“Collateral Custodian Termination Notice”); provided, notwithstanding its
receipt of a Collateral Custodian Termination Notice, the Collateral Custodian
shall continue to act in such capacity until a successor Collateral Custodian
acceptable to the Borrower has been appointed, has agreed to act as Collateral
Custodian hereunder, and has received all Required Loan Documents held by the
Collateral Custodian being removed.

 

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Section 11.06    Limitation on Liability.

 

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

 

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

 

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

 

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

 

(e)          The Collateral Custodian shall have no duties or responsibilities
except such duties and responsibilities as are specifically set forth in this
Agreement and no covenants or obligations shall be implied in this Agreement
against the Collateral Custodian.

 

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

 

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

 

(h)          Subject in all cases to the last sentence of Section 11.02(c)(i),
in case any reasonable question arises as to its duties hereunder, the
Collateral Custodian may, prior to the occurrence of an Event of Default or the
Facility Maturity Date, request instructions from the Borrower Advisors and may,
after the occurrence of an Event of Default or the Facility Maturity Date,
request instructions from the Administrative Agent, and shall be entitled at all
times to refrain from taking any action unless it has received instructions from
the Borrower Advisors or the Administrative Agent, as applicable. The Collateral
Custodian shall in all events have no liability, risk or cost for any action
taken pursuant to and in compliance with the instruction of the Administrative
Agent. In no event shall the Collateral Custodian be liable for special,
indirect or consequential loss or damage of any kind whatsoever (including but
not limited to lost profits), even if the Collateral Custodian has been advised
of the likelihood of such loss or damage and regardless of the form of action.

 

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Section 11.07    Collateral Custodian Resignation.

 

Collateral Custodian may resign and be discharged from its duties or obligations
hereunder, not earlier than 90 days after delivery to the Administrative Agent
of written notice of such resignation specifying a date when such resignation
shall take effect. Upon the effective date of such resignation, or if the
Administrative Agent gives Collateral Custodian written notice of an earlier
termination hereof, Collateral Custodian shall (i) be reimbursed for any costs
and expenses Collateral Custodian shall incur in connection with the termination
of its duties under this Agreement and (ii) deliver all of the Required Loan
Documents in the possession of Collateral Custodian to the Administrative Agent
or to such Person as the Administrative Agent may designate to Collateral
Custodian in writing upon the receipt of a request in the form of Exhibit M;
provided that the Borrower shall consent to any successor Collateral Custodian
appointed by the Administrative Agent (such consent not to be unreasonably
withheld). Notwithstanding anything herein to the contrary, the Collateral
Custodian may not resign prior to a successor Collateral Custodian being
appointed.

 

Section 11.08    Release of Documents.

 

(a)          Release for Servicing. From time to time and as appropriate for the
enforcement or servicing of any of the Collateral Portfolio, the Collateral
Custodian is hereby authorized (unless and until such authorization is revoked
by the Administrative Agent), upon written receipt from the Borrower (or the
Collateral Manager on its behalf) of a request for release of documents and
receipt in the form annexed hereto as Exhibit M, to release to the Borrower (or
the Collateral Manager on its behalf) within two (2) Business Days of receipt of
such request, the related Required Loan Documents or the documents set forth in
such request and receipt to such Person. All documents so released shall be held
by the Borrower (or the Collateral Manager on its behalf) in trust for the
benefit of the Collateral Agent, on behalf of the Secured Parties in accordance
with the terms of this Agreement. The Borrower (or the Collateral Manager on its
behalf) shall return to the Collateral Custodian the Required Loan Documents or
other such documents (i) promptly upon the request of the Administrative Agent,
or (ii) when the Borrower’s need therefor in connection with such foreclosure or
servicing no longer exists, unless the Loan shall be liquidated, in which case,
the Borrower (or the Collateral Manager on its behalf) shall deliver an
additional request for release of documents to the Collateral Custodian and
receipt certifying such liquidation from the Borrower (or the Collateral Manager
on its behalf) to the Collateral Custodian, all in the form annexed hereto as
Exhibit M.

 

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(b)         Limitation on Release. The foregoing provision with respect to the
release to the Borrower (or the Collateral Manager on its behalf) of the
Required Loan Documents and documents by the Collateral Custodian upon request
by such Person shall be operative until revoked by the Administrative Agent;
provided, that at no time shall the Required Loan Documents with respect to more
than 10 Loans be on release pursuant to this Section 11.08 without the prior
written consent of the Administrative Agent. The Administrative Agent may revoke
such authority if an Event of Default or a Collateral Manager Event of Default
has occurred. Promptly after delivery to the Collateral Custodian of any request
for release of documents, the Borrower (or the Collateral Manager on its behalf)
shall provide notice of the same to the Administrative Agent. Any additional
Required Loan Documents or documents requested to be released by the Borrower
(or the Collateral Manager on its behalf) may be released only upon written
authorization of the Administrative Agent. The limitations of this paragraph
shall not apply to the release of Required Loan Documents to the Collateral
Manager pursuant to the immediately succeeding subsection.

 

(c)          Release for Payment. Upon receipt by the Collateral Custodian of
the Borrower’s (or the Collateral Manager’s on its behalf) request for release
of documents and receipt in the form annexed hereto as Exhibit M (which
certification shall include a statement to the effect that all amounts received
in connection with such payment or repurchase have been credited to the
Collection Account as provided in this Agreement), the Collateral Custodian
shall promptly release the related Required Loan Documents to such requesting
Person.

 

Section 11.09    Return of Required Loan Documents.

 

The Borrower may, with the prior written consent of the Administrative Agent
(such consent not to be unreasonably withheld), require that the Collateral
Custodian return each Required Loan Document (a) delivered to the Collateral
Custodian in error or (b) released from the Lien of the Collateral Agent
hereunder pursuant to Section 2.15, in each case by submitting to the Collateral
Custodian and the Administrative Agent a written request in the form of Exhibit
M hereto (signed by both the Borrower and the Administrative Agent) specifying
the Required Loan Documents to be so returned and reciting that the conditions
to such release have been met (and specifying the Section or Sections of this
Agreement being relied upon for such release). The Collateral Custodian shall
upon its receipt of each such request for return executed by the Borrower and
the Administrative Agent promptly, but in any event within five (5) Business
Days, return the Required Loan Documents so requested to the Borrower.

 

Section 11.10    Access to Certain Documentation and Information Regarding the
Collateral Portfolio; Due Diligence on the Borrower Advisors.

 

The Collateral Custodian shall provide to the Administrative Agent and each
Lender Agent access to the Required Loan Documents and all other documentation
regarding the Collateral Portfolio including in such cases where the
Administrative Agent and each Lender Agent is required in connection with the
enforcement of the rights or interests of the Secured Parties, or by applicable
statutes or regulations, to review such documentation, such access being
afforded without charge but only (i) upon two (2) Business Days prior written
request, (ii) during normal business hours and (iii) subject to the Borrower
Advisors’ and the Collateral Custodian’s normal security and confidentiality
procedures. Prior to the Closing Date and periodically thereafter at the
discretion of the Administrative Agent and each Lender Agent, the Administrative
Agent and each Lender Agent may review any Borrower Advisor’s collection and
administration of the Collateral Portfolio in order to assess compliance by the
Collateral Manager with the Collateral Management Standard, as well as with this
Agreement and may diligence the Collateral Portfolio, and Required Loan
Documents in conjunction with such a review. Without limiting the foregoing
provisions of this Section 11.10, from time to time on request of the
Administrative Agent, the Collateral Custodian shall permit certified public
accountants or other auditors acceptable to the Administrative Agent to conduct,
at the expense of the Borrower, a review of the Required Loan Documents and all
other documentation regarding the Collateral Portfolio. The Borrower shall cause
each Borrower Advisor to provide access to its records and other documentation
to the Administrative Agent and each Lender Agent as contemplated by this
Section 11.10.

 

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Section 11.11    Bailment.

 

The Collateral Custodian agrees that, with respect to any Required Loan
Documents at any time or times in its possession or held in its name, the
Collateral Custodian shall be the agent and bailee of the Collateral Agent, for
the benefit of the Secured Parties, for purposes of perfecting (to the extent
not otherwise perfected) the Collateral Agent’s security interest in the
Collateral Portfolio and for the purpose of ensuring that such security interest
is entitled to first priority status under the UCC.

 

ARTICLE XII.

MISCELLANEOUS

 

Section 12.01    Amendments and Waivers.

 

Except as provided in this Section 12.01, no amendment, waiver or other
modification of any provision of this Agreement shall be effective without the
written agreement of the Borrower, the Administrative Agent and the Required
Lenders; provided, that no amendment, waiver or consent shall:

 

(a)          increase the Commitment of any Lender or the amount of Advances of
any Lender, in any case, without the written consent of such Lender;

 

(b)         waive, extend or postpone any date fixed by this Agreement or any
other Transaction Document for any payment or mandatory prepayment of principal,
interest, fees or other amounts due to the Lenders (or any of them) or any
scheduled or mandatory reduction of the Commitment hereunder or under any other
Transaction Document without the written consent of each Lender directly and
adversely affected thereby;

 

(c)          reduce the principal of, or the Yield Rate on, any Advance or
Obligation, or any fees or other amounts payable hereunder or under any other
Transaction Document without the written consent of each Lender directly and
adversely affected thereby;

 

(d)         change Section 2.04 or any related definitions or provisions in a
manner that would alter the order of application of proceeds or would alter the
pro rata sharing of payments required thereby, in each case, without the written
consent of each Lender directly and adversely affected thereby;

 

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(e)          change any provision of this Section or reduce the percentages
specified in the definition of “Required Lenders,” or any other provision hereof
specifying the number or percentage of Lenders required to amend, waive or
otherwise modify any rights hereunder or make any determination or grant any
consent hereunder, without the written consent of each Lender directly affected
thereby;

 

(f)           consent to the assignment or transfer by the Borrower or the
Collateral Manager of such Person’s rights and obligations under any Transaction
Document to which it is a party (except as expressly permitted hereunder), in
each case, without the written consent of each Lender;

 

(g)          release all or substantially all of the Collateral or release any
Transaction Document (other than as specifically permitted or contemplated in
this Agreement or the applicable Transaction Document) without the written
consent of each Lender; or

 

(h)          materially adversely affect the rights or obligations of the
Collateral Agent, the Account Bank or the Collateral Custodian without the
written agreement of the Collateral Agent, the Account Bank or the Collateral
Custodian, as applicable;

 

provided further, that (i) any amendment of the Agreement that is solely for the
purpose of adding a Lender may be effected without the written consent of the
Borrower or any Lender, (ii) no amendment, waiver or consent shall, unless in
writing and signed by the Administrative Agent, affect the rights or duties of
the Administrative Agent under this Agreement or any other Transaction Document,
(iii) any amendment of the Agreement that a Lender is advised by its legal or
financial advisors to be necessary or desirable in order to avoid the
consolidation of the Borrower with such Lender for accounting purposes may be
effected without the written consent of the Borrower or any other Lender, (iv)
no amendment, waiver or consent shall, unless in writing and signed by the
Conduit Lender, affect the obligations of the Conduit Lender under this
Agreement or any other Transaction Document and (v) the Administrative Agent and
the Borrower shall be permitted to amend any provision of the Transaction
Documents (and such amendment shall become effective without any further action
or consent of any other party to any Transaction Document) if the Administrative
Agent and the Borrower shall have jointly identified an obvious error or any
error or omission of a technical or immaterial nature in any such provision.
Notwithstanding anything to the contrary herein, no Defaulting Lender shall have
any right to approve or disapprove any amendment, waiver or consent hereunder,
except that the Commitment of such Lender may not be increased or extended
without the consent of such Lender.

 

Section 12.02    Notices, Etc.

 

All notices and other communications hereunder shall, unless otherwise stated
herein, be in writing (which shall include facsimile communication and
communication by e-mail) and faxed, e-mailed or delivered, to each party hereto,
at its address set forth on Annex A to this Agreement or at such other address
as shall be designated by such party in a written notice to the other parties
hereto. All such notices and communications shall be effective upon receipt, or
in the case of (a) notice by mail, five days after being deposited in the United
States mail, first class postage prepaid, (b) notice by e-mail, when verbal or
electronic communication of receipt is obtained, or (c) notice by facsimile
copy, when verbal communication of receipt is obtained.

 

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Section 12.03     No Waiver; Remedies.

 

No failure on the part of the Administrative Agent, the Collateral Agent, any
Lender or any Lender Agent to exercise, and no delay in exercising, any right
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any right hereunder preclude any other or further exercise thereof
or the exercise of any other right. The remedies herein provided are cumulative
and not exclusive of any remedies provided by Applicable Law.

 

Section 12.04     Binding Effect; Assignability; Multiple Lenders.

 

(a)          This Agreement shall be binding upon and inure to the benefit of
the Borrower, the Administrative Agent, each Lender, the Lender Agents, the
Collateral Agent, the Account Bank, the Collateral Custodian and their
respective successors and permitted assigns. With the written consent of the
Administrative Agent (such consent not to be unreasonably withheld), each Lender
and their respective successors and assigns may assign, or grant a security
interest or sell a participation interest in, (i) this Agreement and such
Lender’s rights and obligations hereunder and interest herein in whole or in
part (including by way of the sale of participation interests therein) and/or
(ii) any Advance (or portion thereof) or any Variable Funding Note (or any
portion thereof) to:

 

(i)           prior to the occurrence of an Event of Default:

 

a.          any Eligible Assignee with 90 days (or such shorter period as agreed
to by the Borrower) prior written notice specifying the name of such Eligible
Assignee to the Borrower;

 

b.          any other Person with the prior written consent of the Borrower
(such consent not to be unreasonably withheld);

 

c.          any Affiliate of such Lender with prior written notice to the
Borrower; or

 

d.          any Person, if required by any change in Applicable Law with prior
written notice to the Borrower; and

 

(ii)          after the occurrence of any Event of Default, any Person with
prior written notice to the Borrower;

 

; provided that, (y) any Conduit Lender shall not need prior consent to at any
time assign, or grant a security interest or sell a participation interest in,
any Advance (or portion thereof) to a Liquidity Bank or any commercial paper
conduit sponsored by a Liquidity Bank or an Affiliate of its related Lender
Agent and (z) if any Lender becomes a Defaulting Lender, unless such Lender
shall have been deemed to no longer be a Defaulting Lender pursuant to Section
2.21(b), then the Administrative Agent shall have the right to cause such
Defaulting Lender to assign its entire interest in the Advances and this
Agreement pursuant to this Section 12.04(a) to a transferee selected by the
Administrative Agent. Any such assignee shall execute and deliver to the
Borrower and the Administrative Agent a fully-executed Transferee Letter
substantially in the form of Exhibit N hereto (a “Transferee Letter”) and a
fully-executed Joinder Supplement. The parties to any such assignment, grant or
sale of a participation interest shall execute and deliver to the related Lender
Agent for its acceptance and recording in its books and records, such agreement
or document as may be satisfactory to such parties and the applicable Lender
Agent. The Borrower shall not (nor shall it permit the Seller, the Collateral
Manager or the Equityholder to) assign, or permit any Lien to exist upon, any of
its rights or obligations hereunder or under any Transaction Document or any
interest herein or in any Transaction Document without the prior written consent
of each Lender Agent and the Administrative Agent.

 

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(b)           Notwithstanding any other provision of this Section 12.04, any
Lender may at any time pledge or grant a security interest in all or any portion
of its rights (including, without limitation, rights to payment of principal and
interest) under this Agreement to secure obligations of such Lender to a Federal
Reserve Bank, without notice to or consent of the Borrower or the Administrative
Agent; provided that no such pledge or grant of a security interest shall
release such Lender from any of its obligations hereunder, or substitute any
such pledgee or grantee for such Lender as a party hereto.

 

(c)           Each Affected Party and each Indemnified Party shall be an express
third party beneficiary of this Agreement.

 

Section 12.05      Term of This Agreement.

 

This Agreement, including, without limitation, the Borrower’s representations
and covenants set forth in Articles IV and V shall remain in full force and
effect until the Collection Date; provided that the rights and remedies with
respect to any breach of any representation and warranty made or deemed made by
the Borrower pursuant to Articles III and IV and the indemnification and payment
provisions of Article VIII, IX and Article XII and the provisions of Section
2.09, Section 2.10, Section 12.07, Section 12.08 and Section 12.09 shall be
continuing and shall survive any termination of this Agreement.

 

Section 12.06      GOVERNING LAW; JURY WAIVER.

 

THIS AGREEMENT SHALL, IN ACCORDANCE WITH SECTION 5-1401 OF THE GENERAL
OBLIGATIONS LAW OF THE STATE OF NEW YORK, BE GOVERNED BY THE LAWS OF THE STATE
OF NEW YORK. EACH OF THE PARTIES HERETO WAIVES, TO THE FULLEST EXTENT PERMITTED
BY LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
ARISING DIRECTLY OR INDIRECTLY OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREUNDER.

 

Section 12.07      Costs, Expenses and Taxes.

 

(a)           In addition to the rights of indemnification granted to the
Collateral Agent, the Account Bank, the Administrative Agent, the Lenders, the
Lender Agents, the Collateral Custodian and their respective Affiliates under
Section 2.09, Section 2.10 and Section 8.01 hereof, the Borrower agrees to pay
on demand all reasonable and documented out-of-pocket costs and expenses of the
Administrative Agent, the Lenders, the Lender Agents, the Collateral Agent, the
Account Bank and the Collateral Custodian incurred in connection with the
preparation, execution, delivery, administration (including periodic auditing),
syndication, renewal, amendment or modification of, any waiver or consent issued
in connection with, this Agreement, the Transaction Documents and the other
documents to be delivered hereunder or in connection herewith, including,
without limitation, the reasonable and documented expenses of counsel for the
Administrative Agent, the Lenders, the Lender Agents, the Collateral Agent, the
Account Bank and the Collateral Custodian with respect thereto and with respect
to advising the Administrative Agent, the Lenders, the Lender Agents, the
Collateral Agent, the Account Bank and the Collateral Custodian as to their
respective rights and remedies under this Agreement and the other documents to
be delivered hereunder or in connection herewith, and all reasonable and
documented out-of-pocket costs and expenses, if any (including counsel fees and
expenses), incurred by the Administrative Agent, the Lenders, the Lender Agents,
the Collateral Agent, the Account Bank or the Collateral Custodian in connection
with the enforcement or potential enforcement of this Agreement or any
Transaction Document by such Person and the other documents to be delivered
hereunder or in connection herewith.

 

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(b)            The Borrower shall pay on demand any and all stamp, sales, excise
and other taxes and fees payable or determined to be payable to any Governmental
Authority in connection with the execution, delivery, filing, enforcement or
recording of, or any performance, receipt or perfection of a security interest
under, this Agreement or the other Transaction Documents in connection with this
Agreement or the funding or maintenance of Advances hereunder.

 

(c)            The Borrower shall pay on demand, and indemnify each Indemnified
Person, its assignees and participants, and their respective successors on a net
after-Tax basis for, all other out-of-pocket costs and expenses incurred by the
Administrative Agent, the Lenders, the Lender Agents, the Collateral Agent, the
Collateral Custodian and the Account Bank, including, without limitation, all
costs and expenses incurred by the Administrative Agent, the Lender Agents and
the Lenders in connection with periodic audits of the Borrower’s or the
Collateral Manager’s books and records.

 

(d)           For the avoidance of doubt, the Administrative Agent, the Lenders,
the Lender Agents, the Collateral Agent, the Collateral Custodian and the
Account Bank shall not be permitted to seek indemnification under this Section
12.07 for amounts previously paid pursuant to Section 2.09, 2.10 or 8.01.

 

Section 12.08    No Proceedings.

 

(a)            Each of the parties hereto (other than the Administrative Agent
with the consent of each Lender Agent) agrees that it will not institute
against, or join any other Person in instituting against, the Borrower any
proceedings of the type referred to in the definition of Bankruptcy Event so
long as there shall not have elapsed one year and one day (or such longer
preference period as shall then be in effect) since the Collection Date.

 

(b)           Each of the parties hereto (other than any Conduit Lender) hereby
agrees that it will not institute against, or join any other Person in
instituting against, any Conduit Lender, the Administrative Agent or any
Liquidity Banks any Bankruptcy Proceeding so long as any commercial paper issued
by such Conduit Lender shall be outstanding and there shall not have elapsed one
year and one day (or such longer preference period as shall then be in effect)
since the last day on which any such commercial paper shall have been
outstanding.

 

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(c)          The provisions of this paragraph shall survive the termination of
this Agreement. The provisions of this Section 12.08 are a material inducement
for the Secured Parties to enter into this Agreement and the transactions
contemplated hereby and are an essential term hereof. The parties hereby agree
that monetary damages are not adequate for a breach of the provisions of this
Section 12.08 and the Administrative Agent may seek and obtain specific
performance of such provisions (including injunctive relief), including, without
limitation, in any bankruptcy, reorganization, arrangement, winding up,
insolvency, moratorium, winding up or liquidation proceedings, or other
proceedings under United States federal or state bankruptcy laws, or any similar
laws.

 

Section 12.09      Recourse Against Certain Parties.

 

(a)           No recourse under or with respect to any obligation, covenant or
agreement (including, without limitation, the payment of any fees or any other
obligations) of the Administrative Agent, the Lenders, the Lender Agents or any
other Secured Party as contained in this Agreement or any other agreement,
instrument or document entered into by the Administrative Agent, the Lenders,
the Lender Agents or any Secured Party pursuant hereto or in connection herewith
shall be had against any administrator of the Administrative Agent, the Lenders,
the Lender Agents, any other Secured Party or any incorporator, affiliate,
stockholder, officer, employee or director of the Administrative Agent, the
Lenders, the Lender Agents, any other Secured Party or of any such
administrator, as such, by the enforcement of any assessment or by any legal or
equitable proceeding, by virtue of any statute or otherwise; it being expressly
agreed and understood that the agreements of each party hereto contained in this
Agreement and all of the other agreements, instruments and documents entered
into by the Administrative Agent, the Lenders, the Lender Agents or any other
Secured Party pursuant hereto or in connection herewith are, in each case,
solely the corporate obligations of such party (and nothing in this Section
12.09 shall be construed to diminish in any way such corporate obligations of
such party), and that no personal liability whatsoever shall attach to or be
incurred by any administrator of the Administrative Agent, the Lenders, the
Lender Agents, any other Secured Party, or any incorporator, stockholder,
affiliate, officer, employee or director of the Administrative Agent, the
Lenders, the Lender Agents or any other Secured Party or of any such
administrator, as such, or any of them, under or by reason of any of the
obligations, covenants or agreements of the Administrative Agent, the Lenders,
the Lender Agents or any other Secured Party contained in this Agreement or in
any other such instruments, documents or agreements, or are implied therefrom,
and that any and all personal liability of every such administrator of the
Administrative Agent, the Lenders, the Lender Agents or any other Secured Party
and each incorporator, stockholder, affiliate, officer, employee or director of
the Administrative Agent, the Lenders, the Lender Agents or any other Secured
Party or of any such administrator, or any of them, for breaches by the
Administrative Agent, the Lenders, the Lender Agents or any other Secured Party
of any such obligations, covenants or agreements, which liability may arise
either at common law or in equity, by statute or constitution, or otherwise, is
hereby expressly waived as a condition of and in consideration for the execution
of this Agreement; provided that the foregoing non-recourse provisions shall in
no way affect any rights any Secured Party might have against any incorporator,
affiliate, stockholder, officer, employee or director of the Borrower, any
Borrower Advisor or the Collateral Custodian to the extent of any fraud,
misappropriation, embezzlement or any other financial crime constituting a
felony by such Person.

 

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(b)           Notwithstanding anything in this Agreement to the contrary, no
claim may be made by the Borrower or any other Person affiliated with or related
to the Borrower against the Administrative Agent, the Lenders, the Lender Agents
or any Secured Party or their respective Affiliates, directors, officers,
employees, attorneys or agents for any special, indirect, consequential or
punitive damages in respect to any claim for breach of contract or any other
theory of liability arising out of or related to the transactions contemplated
by this Agreement, or any act, omission or event occurring in connection
therewith; and the Borrower hereby waives, releases, and agrees not to sue upon
any claim for any such damages, whether or not accrued and whether or not known
or suspected.

 

(c)            No obligation or liability to any Obligor under any of the Loans
is intended to be assumed by the Administrative Agent, the Lenders, the Lender
Agents or any Secured Party under or as a result of this Agreement and the
transactions contemplated hereby.

 

(d)           Notwithstanding anything in this Agreement to the contrary, no
Conduit Lender shall have any obligation to pay any amount required to be paid
by it hereunder in excess of any amount available to such Conduit Lender after
paying or making provision for the payment of its Commercial Paper Notes. All
payment obligations of each Conduit Lender hereunder are contingent on the
availability of funds in excess of the amounts necessary to pay its Commercial
Paper Notes; and each of the other parties hereto agrees that it will not have a
claim under Section 101(5) of the Bankruptcy Code if and to the extent that any
such payment obligation owed to it by a Conduit Lender exceeds the amount
available to such Conduit Lender to pay such amount after paying or making
provision for the payment of its Commercial Paper Notes.

 

(e)            The provisions of this Section 12.09 shall survive the
termination of this Agreement.

 

Section 12.10     Execution in Counterparts; Severability; Integration.

 

This Agreement may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when so executed shall be
deemed to be an original and all of which when taken together shall constitute
one and the same agreement. Delivery of an executed counterpart of a signature
page to this Agreement by e-mail in portable document format (.pdf) or facsimile
shall be effective as delivery of a manually executed counterpart of this
Agreement. In the event that any provision in or obligation under this Agreement
shall be invalid, illegal or unenforceable in any jurisdiction, the validity,
legality and enforceability of the remaining provisions or obligations, or of
such provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby. This Agreement and any agreements or letters
(including fee letters) executed in connection herewith contains the final and
complete integration of all prior expressions by the parties hereto with respect
to the subject matter hereof and shall constitute the entire agreement among the
parties hereto with respect to the subject matter hereof, superseding all prior
oral or written understandings other than any fee letter delivered by the
Borrower to the Administrative Agent and the Lender Agents.

 

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Section 12.11      Consent to Jurisdiction; Service of Process.

 

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

 

(b)            The Borrower agrees that service of process may be effected by
mailing a copy thereof by registered or certified mail, postage prepaid, to the
Borrower at its address specified in Annex A or at such other address as the
Administrative Agent shall have been notified in accordance herewith. Nothing in
this Section 12.11 shall affect the right of the Lenders, the Lender Agents or
the Administrative Agent to serve legal process in any other manner permitted by
law.

 

Section 12.12      Characterization of Conveyances Pursuant to the Purchase and
Sale Agreement.

 

(a)            It is the express intent of the parties hereto that the
conveyance of Eligible Loans by the Seller to the Borrower as contemplated by
the Purchase and Sale Agreement be, and be treated for all purposes (other than
accounting purposes and subject to the tax characterization of the Borrower and
the Advances) as, a sale by the Seller of such Eligible Loans. It is, further,
not the intention of the parties that such conveyance be deemed a pledge of the
Eligible Loans by the Seller to the Borrower to secure a debt or other
obligation of the Seller. However, in the event that, notwithstanding the intent
of the parties, the Eligible Loans are held to continue to be property of the
Seller, then the parties hereto agree that: (i) the Purchase and Sale Agreement
shall also be deemed to be a security agreement under Applicable Law; (ii) as
set forth in the Purchase and Sale Agreement, the transfer of the Eligible Loans
provided for in the Purchase and Sale Agreement shall be deemed to be a grant by
the Seller to the Borrower of a first priority security interest (subject only
to Permitted Liens) in all of the Seller’s right, title and interest in and to
the Eligible Loans and all amounts payable to the holders of the Eligible Loans
in accordance with the terms thereof and all proceeds of the conversion,
voluntary or involuntary, of the foregoing into cash, instruments, securities or
other property, including, without limitation, all amounts from time to time
held or invested in the Controlled Accounts, whether in the form of cash,
instruments, securities or other property; (iii) the possession by the Borrower
(or the Collateral Custodian on its behalf) of Loans and such other items of
property as constitute instruments, money, negotiable documents or chattel paper
shall be, subject to clause (iv), for purposes of perfecting the security
interest pursuant to the UCC; and (iv) acknowledgements from Persons holding
such property shall be deemed acknowledgements from custodians, bailees or
agents (as applicable) of the Borrower for the purpose of perfecting such
security interest under Applicable Law. The parties further agree that any
assignment of the interest of the Borrower pursuant to any provision hereof
shall also be deemed to be an assignment of any security interest created
pursuant to the terms of the Purchase and Sale Agreement. The Borrower shall, to
the extent consistent with this Agreement and the other Transaction Documents,
take such actions as may be necessary to ensure that, if the Purchase and Sale
Agreement was deemed to create a security interest in the Eligible Loans, such
security interest would be deemed to be a perfected security interest of first
priority (subject only to Permitted Liens) under Applicable Law and will be
maintained as such throughout the term of this Agreement.

 

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(b)           It is the intention of each of the parties hereto that the
Eligible Loans conveyed by the Seller to the Borrower pursuant to the Purchase
and Sale Agreement shall constitute assets owned by the Borrower and shall not
be part of the Seller’s estate in the event of the filing of a bankruptcy
petition by or against the Seller under any bankruptcy or similar law.

 

(c)            The Borrower agrees to treat, and shall cause the Seller to
treat, for all purposes (other than accounting purposes and subject to the tax
characterization of the Borrower and the Advances), the transactions effected by
the Purchase and Sale Agreement as sales of assets to the Borrower. The Borrower
hereby agrees to cause the Seller to reflect in the Seller’s financial records
and to include a note in the publicly filed annual and quarterly financial
statements of the Equityholder indicating that: (i) assets related to
transactions (including transactions pursuant to the Transaction Documents) that
do not meet SFAS 140 requirements for accounting sale treatment are reflected in
the consolidated balance sheet of the Equityholder, as finance receivables
pledged and non-recourse, secured borrowings (or the applicable financial
statements are otherwise footnoted to explain that such assets are maintained
separately from the assets of the Borrower and that such assets are not
available to pay the debts of the Equityholder) and (ii) those assets are owned
by a special purpose entity that is consolidated in the financial statements of
the Equityholder, and the creditors of that special purpose entity have received
ownership and/or security interests in such assets and such assets are not
intended to be available to the creditors of sellers (or any affiliate of the
sellers) of such assets to that special purpose entity.

 

Section 12.13    Confidentiality.

 

(a)           Each of the Administrative Agent, the Lenders, the Lender Agents,
the Borrower, the Account Bank, the Collateral Agent and the Collateral
Custodian shall maintain and shall cause each of its employees and officers to
maintain the confidentiality of the Agreement and all information with respect
to the other parties, including all information regarding the business of the
Borrower obtained by it or them in connection with the structuring, negotiating
and execution of the transactions contemplated herein, except that each such
party and its officers and employees may (i) disclose such information to its
external accountants, investigators, auditors, attorneys or other agents,
including any Approved Broker Dealer or Approved Valuation Firm, engaged by such
party in connection with any due diligence or comparable activities with respect
to the transactions and Loans contemplated herein and the agents of such Persons
(“Excepted Persons”); provided that each Excepted Person shall, as a condition
to any such disclosure, agree for the benefit of the Administrative Agent, the
Lenders, the Lender Agents, the Borrower, the Account Bank, the Collateral Agent
and the Collateral Custodian that such information shall be kept confidential
and used solely in connection with such Excepted Person’s evaluation of, or
relationship with, the Borrower and its affiliates, (ii) disclose the existence
of the Agreement, but not the financial terms thereof, (iii) disclose such
information as is required by Applicable Law (including, without limitation,
public filings with the Securities and Exchange Commission) and (iv) disclose
the Agreement and such information in any suit, action, proceeding or
investigation (whether in law or in equity or pursuant to arbitration) involving
any of the Transaction Documents for the purpose of defending itself, reducing
its liability, or protecting or exercising any of its claims, rights, remedies,
or interests under or in connection with any of the Transaction Documents.
Notwithstanding the foregoing provisions of this Section 12.13(a), the Borrower
Advisors may, subject to Applicable Law and the terms of any Underlying
Instruments, make available copies of the documents in the Collateral Files and
such other documents it holds in its capacity as a Borrower Advisor pursuant to
the terms of the Transaction Documents, to any of its creditors. It is
understood that the financial terms that may not be disclosed except in
compliance with this Section 12.13(a) include, without limitation, all fees and
other pricing terms, and all Events of Default, Collateral Manager Events of
Default, and priority of payment provisions.

 

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(b)           Anything herein to the contrary notwithstanding, the Borrower
hereby consents to the disclosure of any nonpublic information with respect to
it (i) to the Administrative Agent, the Lenders, the Lender Agents, the Account
Bank, the Collateral Agent or the Collateral Custodian by each other, (ii) by
the Administrative Agent, the Lenders, the Lender Agents, the Account Bank, the
Collateral Agent and the Collateral Custodian to any prospective or actual
assignee or participant of any of them provided such Person agrees to hold such
information confidential, or (iii) by the Administrative Agent, the Lenders, the
Lender Agents, the Account Bank, the Collateral Agent and the Collateral
Custodian to any commercial paper dealer or provider of a surety, guaranty or
credit or liquidity enhancement to any Lender or any Person providing financing
to, or holding equity interests in, any Conduit Lender, as applicable, and to
any officers, directors, employees, outside accountants and attorneys of any of
the foregoing, provided each such Person is informed of the confidential nature
of such information. In addition, the Lenders, the Lender Agents, the
Administrative Agent, the Collateral Agent, the Account Bank and the Collateral
Custodian may disclose any such nonpublic information as required pursuant to
any law, rule, regulation, direction, request or order of any judicial,
administrative or regulatory authority or proceedings (whether or not having the
force or effect of law).

 

(c)           Notwithstanding anything herein to the contrary, the foregoing
shall not be construed to prohibit (i) disclosure of any and all information
that is or becomes publicly known; (ii) disclosure of any and all information
(a) if required to do so by any applicable statute, law, rule or regulation, (b)
to any government agency or regulatory body having or claiming authority to
regulate or oversee any respects of the Lenders’, the Lender Agents’, the
Administrative Agent’s, the Collateral Agent’s, the Account Bank’s or the
Collateral Custodian’s business or that of their affiliates, (c) pursuant to any
subpoena, civil investigative demand or similar demand or request of any court,
regulatory authority, arbitrator or arbitration to which the Administrative
Agent, any Lender, any Lender Agent, the Collateral Agent, the Collateral
Custodian or the Account Bank or an officer, director, employer, shareholder or
affiliate of any of the foregoing is a party, (d) in any preliminary or final
offering circular, registration statement or contract or other document approved
in advance by the Borrower or (e) to any affiliate, independent or internal
auditor, agent, employee or attorney of the Collateral Agent or the Collateral
Custodian having a need to know the same, provided that the disclosing party
advises such recipient of the confidential nature of the information being
disclosed; or (iii) any other disclosure authorized by the Borrower.

 

-144- 

 

 

Section 12.14     Non-Confidentiality of Tax Treatment.

 

All parties hereto agree that each of them and each of their employees,
representatives, and other agents may disclose to any and all Persons, without
limitation of any kind, the tax treatment and tax structure of the transaction
and all materials of any kind (including, without limitation, opinions or other
tax analyses) that are provided to any of them relating to such tax treatment
and tax structure. “Tax treatment” and “tax structure” shall have the same
meaning as such terms have for purposes of Treasury Regulation Section 1.6011-4;
provided that with respect to any document or similar item that in either case
contains information concerning the tax treatment or tax structure of the
transaction as well as other information, the provisions of this Section 12.13
shall only apply to such portions of the document or similar item that relate to
the tax treatment or tax structure of the transactions contemplated hereby.

 

Section 12.15     Waiver of Set Off.

 

Each of the parties hereto hereby waives any right of setoff it may have or to
which it may be entitled under this Agreement from time to time against the
Administrative Agent, the Lenders, the Lender Agents or their respective assets.

 

Section 12.16     Headings and Exhibits.

 

The headings herein are for purposes of references only and shall not otherwise
affect the meaning or interpretation of any provision hereof. The schedules and
exhibits attached hereto and referred to herein shall constitute a part of this
Agreement and are incorporated into this Agreement for all purposes.

 

Section 12.17     Ratable Payments.

 

If any Lender, whether by setoff or otherwise, shall obtain any payment (whether
voluntary, involuntary, through the exercise of any right of setoff, or
otherwise) on account of Advances owing to it (other than pursuant to Breakage
Fees, Section 2.09 or Section 2.10) in excess of its ratable share of payments
on account of the Advances obtained by all the Lenders, such Lender shall
forthwith purchase from the other Lenders such participations in the Advances
owing to them as shall be necessary to cause such purchasing Lender to share the
excess payment ratably with each of them; provided, that, if all or any portion
of such excess payment is thereafter recovered from such purchasing Lender, such
purchase from each Lender shall be rescinded and such Lender shall repay to the
purchasing Lender the purchase price to the extent of such recovery together
with an amount equal to such Lender’s ratable share (according to the proportion
of (i) the amount of such Lender’s required repayment to (ii) the total amount
so recovered from the purchasing Lender) of any interest or other amount paid or
payable by the purchasing Lender in respect of the total amount so recovered.

 

-145- 

 

 

Section 12.18     Failure of Borrower or Collateral Manager to Perform Certain
Obligations.

 

If the Borrower fails, or fails to cause the Collateral Manager, as applicable,
to perform any of its agreements or obligations under Section 5.01(s), Section
5.02(p) or the Management Agreement, the Administrative Agent may (but shall not
be required to) itself perform, or cause performance of, such agreement or
obligation, and the expenses of the Administrative Agent incurred in connection
therewith shall be payable by the Borrower upon the Administrative Agent’s
demand therefor.

 

Section 12.19     Power of Attorney.

 

The Borrower irrevocably authorizes the Administrative Agent and appoints the
Administrative Agent as its attorney-in-fact to act on behalf of the Borrower
(i) to file financing statements necessary or desirable in the Administrative
Agent’s sole discretion to perfect and to maintain the perfection and priority
of the interest of the Secured Parties in the Collateral Portfolio and (ii) to
file a carbon, photographic or other reproduction of this Agreement or any
financing statement with respect to the Collateral Portfolio as a financing
statement in such offices as the Administrative Agent in its sole discretion
deems necessary or desirable to perfect and to maintain the perfection and
priority of the interests of the Secured Parties in the Collateral Portfolio.
This appointment is coupled with an interest and is irrevocable.

 

Section 12.20     Intent of the Parties.

 

It is the intent and understanding of each party hereto that the Advances are
loans from the Lenders to the Borrower and do not constitute a “security” within
the meaning of Section 8-102(15) of the UCC.

 

Section 12.21     Permitted Equityholder Transaction.

 

Notwithstanding anything herein to the contrary, each of the Secured Parties
hereby agrees, acknowledges and consents to any Permitted Equityholder
Transaction and agrees that no Permitted Equityholder Transaction (or any part
thereof) shall directly or indirectly breach any representation or covenant
within, or cause any default under, any provision of this Agreement or any other
Transaction Document. Furthermore, each of the Secured Parties agrees to
cooperate with the Equityholder and the Collateral Manager, as the case may be,
to deliver any amendments, modifications or other agreements to the Transaction
Documents as may be reasonably necessary or requested by the Equityholder or the
Collateral Manager, as the case may be, in order to effectuate such Permitted
Equityholder Transaction.

 

Section 12.22     Section 12.21 Limitation on Liability.

 

Notwithstanding anything herein to the contrary, it is understood and agreed
that no Borrower Advisor assumes any liability or obligation of the Borrower,
including without limitation any of the Obligations.

 

-146- 

 

 

[Signature pages to follow.]

 

-147- 

 

 

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their respective officers thereunto duly authorized, as of the date first above
written.

 

THE BORROWER: WISSAHICKON CREEK LLC as the Borrower         By:       Name:    
Title:

 

[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]

 

 

 

 

THE ADMINISTRATIVE AGENT: WELLS FARGO SECURITIES, LLCBANK, NATIONAL ASSOCIATION,
as the Administrative Agent         By:       Name:     Title:

 

[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]

 

 

 

 

INSTITUTIONAL LENDER: WELLS FARGO BANK, NATIONAL ASSOCIATION, as an
Institutional Lender         By:       Name:     Title:

 

[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]

 

 

 

 

THE COLLATERAL AGENT: WELLS FARGO BANK, NATIONAL ASSOCIATION, as the Collateral
Agent         By:       Name:     Title:

 

[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]

 

 

 

 

THE ACCOUNT BANK: WELLS FARGO BANK, NATIONAL ASSOCIATION, as the Account Bank  
      By:       Name:     Title:

 

[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]

 

 

 

 

THE COLLATERAL CUSTODIAN: WELLS FARGO BANK, NATIONAL ASSOCIATION, as the
Collateral Custodian         By:       Name:     Title:

 

 

 

 

ANNEX A

 

Notices for Addresses

If to the Borrower (or any Borrower Advisor c/o the Borrower):

 

Wissahickon Creek LLC

c/o FS Investment Corporation II

Cira Centre

2929 Arch Street, Suite 675

201 Rouse Boulevard

Philadelphia, PA 1910419112

Attn: Gerald F. Stahlecker, Executive Vice President

Telephone: (215) 495-1169

Fax: (215) 222-4649

Email: jerry.stahlecker@franklinsquarecredit.notices@fsinvestments.com

 

Annex A-1 

 

 

ANNEX A (cont’d)

 

If to the Administrative Agent:

 

Wells Fargo Securities, LLCBank, National Association

Duke Energy Center
550 S. Tryon Street
Charlotte, NC 28202
Attention: Mike RomanzoCorporate Debt Finance
Fax: (704) 715-0067
Confirmation No: (704) 410-23692469

All electronic dissemination of Notices should be sent to
scp.mmloans@wellsfargo.com

 

If to the Institutional Lender:

 

Wells Fargo Bank, National Association

Duke Energy Center
550 S. Tryon Street
Charlotte, NC 28202
Attention: Raj ShahCorporate Debt Finance
Fax: (704) 715-0067
Confirmation No: (704) 374-6230410-2469

All electronic dissemination of Notices should be sent to
scp.mmloans@wellsfargo.com

 

If to the Collateral Agent:

 

Wells Fargo Bank, National Association
9062 Old Annapolis Rd.
Columbia, Maryland 21045
Attn: CDO Trust Services – Wissahickon Creek LLC
Fax: (410) 715-3748
Phone: (410) 884-2000

 

If to the Account Bank:

 

Wells Fargo Bank, National Association
9062 Old Annapolis Rd.
Columbia, Maryland 21045
Attn: CDO Trust Services – Wissahickon Creek LLC
Fax: (410) 715-3748
Phone: (410) 884-2000

 

Annex A-2 

 

 

ANNEX A (cont’d)

 

If to the Collateral Custodian:

 

Wells Fargo Bank, National Association
9062 Old Annapolis Rd.
Columbia, Maryland 21045
Attn: CDO Trust Services - Wissahickon Creek LLC
Fax: (410) 715-3748
Phone: (410) 884-2000

 

Annex A-3 

 

 

ANNEX B

 

Commitments

 

Conduit Lender Commitment N/A N/A Institutional Lender Commitment Wells Fargo
Bank, National Association $250,000,000

 

Annex B-1 

 

  

APPENDIX B

 

Exhibits and Schedules Amendments

 

Appendix B

 

 

Conformed through First Amendment dated February 17, 2017

 

SCHEDULES AND EXHIBITS

 

TO

 

LOAN AND SERVICING AGREEMENT

 

Dated as of February 19, 2014

 

(WISSAHICKON CREEK LLC)

 

SCHEDULES

 

SCHEDULE I Prior Names, Tradenames, Fictitious Names and “Doing Business As”
Names SCHEDULE II Agreed-Upon Procedures For Independent Public Accountants
SCHEDULE III Moody’s Industry Classification Group List

EXHIBITS

 

EXHIBIT A Form of Approval Notice EXHIBIT B Intentionally Omitted EXHIBIT C Form
of Borrowing Base Certificate EXHIBIT D Form of Disbursement Request EXHIBIT E
Form of Joinder Supplement EXHIBIT F Form of Notice of Borrowing EXHIBIT G Form
of Notice of Reduction (Reduction of Advances Outstanding) EXHIBIT H Form of
Notice of Reduction (Reduction of Maximum Facility Amount) EXHIBIT I Form of
Variable Funding Note

EXHIBIT J

EXHIBIT K

Form of Certificate of Closing Attorneys

Form of Collateral Management Report

EXHIBIT K Form of Collateral Management Report EXHIBIT L Form of Collateral
Manager’s Certificate (Collateral Management Report) EXHIBIT M Form of Release
of Required Loan Documents EXHIBIT N Form of Transferee Letter EXHIBIT O
Intentionally Omitted EXHIBIT P Form of Officer’s Certificate (Solvency) EXHIBIT
Q Form of Notice and Request for Consent to Lien Release Dividend

 

 

 

 

SCHEDULE I

 

PRIOR NAMES, TRADENAMES, FICTITIOUS NAMES
AND “DOING BUSINESS AS” NAMES

 

Borrower:None

 

Sch. I-1 

 

 

SCHEDULE II

 

AGREED-UPON PROCEDURES FOR
INDEPENDENT PUBLIC ACCOUNTANTS

 

In accordance with Section 6.09 of the Loan and Servicing Agreement, the
Borrower will cause a firm of nationally recognized independent public
accountants to furnish in accordance with attestation standards established by
the American Institute of Certified Public Accountants a report to the effect
that such accountants have either verified, compared or recalculated each of the
following accounts in the Collateral Management Report to applicable system or
records of the Collateral Manager:

 

●Loan Tape:

○Obligor name

○Outstanding Balance (Loan & Obligor)

○Assigned Value

○Adjusted Borrowing Value

○Cut-Off Date (the date that the Loan is added to the facility)

○Purchase Price

○Fixed/Floating

○Index, spread, PIK

○Loan Maturity Date

○Loan type (BSL, LMML TMML, FRL, SSB, SLL OR DIP)

○Moody’s asset and Obligor ratings (if applicable)

○S&P’s asset and Obligor ratings (if applicable)

○Days Delinquent

○Tranche size

○EBITDA (over the twelve-month period for the most Relevant Test Period)

○Collateral Manager’s risk rating (as determined in accordance with its current
internal rating system)

○     The “as of” date, with respect to the financials used for such Obligor

○     The date of the end of the most recent fiscal year.

●Borrowing Base

●Advances Outstanding

●Aggregate Unfunded Exposure Amount

●Discretionary Sales Calculations, Substitution Calculations, Lien Release
Dividend Calculations

●Senior Net Leverage Ratio (provided in each applicable Approval Notice and for
the most recent Relevant Test Period)

●Interest Coverage Ratio (provided in each applicable Approval Notice and for
the most recent Relevant Test Period)

●Total Net Leverage Ratio (as of the applicable Cut-Off Date and for the most
recent Relevant Test Period)

●Senior Net Leverage Ratio (as of the applicable Cut-Off Date and for the most
recent Relevant Test Period)

●Weighted Average Advance Rate

 

Sch. II-1 

 

 

●Total commercial loans under management of the Collateral Sub-Advisor (as
reported in its most recent quarterly financial statements)

●Applicable Spread (for any applicable Collateral Management Report)

 

Sch. II-2 

 

 

At the discretion of the Administrative Agent and the firm of nationally
recognized independent public accountants providing the report in accordance
with Section 6.09 of the Loan and Servicing Agreement, three (3) random
Collateral Management Reports for each fiscal year (including one that pertains
to a month immediately prior to a Payment Date) will be chosen and reviewed. The
report provided by such firm may be in a format typically utilized for a report
of this nature; provided that (at a minimum) it will (i) contain a list of
deviations from the Collateral Management Report and (ii) discuss with the
Collateral Manager the reason for such deviations, and set forth the findings of
such discussion in such report.

 

Sch. II-3 

 

 

SCHEDULE III

 

MOODY’S INDUSTRY CLASSIFICATION GROUP LIST

 

1Aerospace & Defense

2Automotive

3Banking, Finance, Insurance & Real Estate

4Beverage, Food & Tobacco

5Capital Equipment

6Chemicals, Plastics & Rubber

7Construction & Building

8Consumer goods: Durable

9Consumer goods: Non-durable

10Containers, Packaging & Glass

11Energy: Electricity

12Energy: Oil & Gas

13Environmental Industries

14Forest Products & Paper

15Healthcare & Pharmaceuticals

16High Tech Industries

17Hotel, Gaming & Leisure

18Media: Advertising, Printing & Publishing

19Media: Broadcasting & Subscription

20Media: Diversified & Production

21Metals & Mining

22Retail

23Services: Business

24Services: Consumer

25Sovereign & Public Finance

26Telecommunications

27Transportation: Cargo

28Transportation: Consumer

29Utilities: Electric

30Utilities: Oil & Gas

31Utilities: Water

32Wholesale

 

Sch. III-1 

 

 

 

EXHIBIT A

 

FORM OF APPROVAL NOTICE
LOAN APPROVAL NOTICE

        DATE       ELIGIBLE LOAN INFORMATION       Obligor Name       Tranche
Description       Par Amount of Loan       Purchase Price       Pricing      
Maturity Date       Interest Coverage Ratio       Senior Net Leverage Ratio    
  BORROWING BASE RELATED       Assigned Value       Applicable Percentage      
Loan Type: [BSL][LMML][TMML][FRL]   [SSBFLLO][SLL][DIP]       Designated Loan
[Yes][No]     WELLS FARGO SECURITIES, LLCBANK, NATIONAL ASSOCIATION APPROVAL  
Approval Good Until       Approval Conditioned Upon       SUPPORTING
CALCULATIONS/MISCELLANEOUS NOTES                 Reviewed and Approved by:    
Name:   Telephone No.:

 

Ex. A-1 

 

 

EXHIBIT B

 

INTENTIONALLY OMITTED

 

Ex. B-1 

 

 

EXHIBIT C

 

FORM OF BORROWING BASE CERTIFICATE

 

[_] [_], 20[_]

 

In connection with that certain Loan and Servicing Agreement, dated as of
February 19, 2014 (as amended, modified, waived, supplemented or restated from
time to time, the “Loan and Servicing Agreement”), by and among Wissahickon
Creek LLC, as the borrower (in such capacity, the “Borrower”), Wells Fargo
Securities, LLCBank, National Association, as the administrative agent (in such
capacity, the “Administrative Agent”), each of the Conduit Lenders and
Institutional Lenders from time to time party thereto (the “Lenders”), each of
the Lender Agents from time to time party thereto (the “Lender Agents”) and
Wells Fargo Bank, National Association, as the collateral agent (in such
capacity, the “Collateral Agent”), as the account bank (in such capacity, the
“Account Bank”) and as the collateral custodian (in such capacity, the
“Collateral Custodian”). Capitalized terms used but not defined herein shall
have the meanings provided in the Loan and Servicing Agreement.

 

As of the date hereof, the undersigned certifies that (i) all of the information
set forth in Annex I attached hereto is true, correct and complete, (ii) no
Unmatured Event of Default, Event of Default, Unmatured Collateral Manager Event
of Default or Collateral Manager Event of Default has occurred and is continuing
and (iii) solely with respect to itself, each of the representations and
warranties contained in the Loan and Servicing Agreement is true, correct and
complete in all respects.

 

[Remainder of Page Intentionally Left Blank]

 

Ex. C-1 

 

 

Certified as of the date first written above.

        [WISSAHICKON CREEK LLC,
as the Borrower         By:       Name:     Title:] OR         [FS INVESTMENT
CORPORATION II,
as the Collateral Manager       By:       Name:     Title:]

 

Ex. C-2 

 

 

ANNEX I
To Exhibit C

 

BORROWING BASE REPORT 

 

SEE ATTACHED

 

Ex. C-3 

 

 

EXHIBIT D

 

FORM OF DISBURSEMENT REQUEST

 

(Disbursements from the Principal Collection Account and Reinvestment of
Collections)

 

[Date]

 

(WISSAHICKON CREEK LLC)

 

Wells Fargo Bank, National Association   With a copy to:           as the
Collateral Agent and Account Bank   Wells Fargo Securities, LLCBank, National
Association 9062 Old Annapolis Rd.       as the Administrative Agent Columbia,
Maryland 21045   Duke Energy Center Attention: CDO Trust Services—Wissahickon
Creek LLC   550 S. Tryon Street Facsimile No.: (410) 715-3748   Charlotte, NC
28202 Phone No.: (410) 884-2000   Attention: Mike RomanzoCorporate Debt Finance
    Facsimile No.: (704) 715-0067 [Lender Agent Name and Address]   Confirmation
No.: (704) 410-23692469     E-mail: scp.mmloans@wellsfargo.com    
             cp.conduits@wellsfargo.com

 

Re:          Loan and Servicing Agreement dated as of February 19, 2014

 

Ladies and Gentlemen: 

 

This Disbursement Request is delivered to you pursuant to Section 2.19 of that
certain Loan and Servicing Agreement, dated as of February 19, 2014 (as amended,
modified, waived, supplemented or restated from time to time, the “Loan and
Servicing Agreement”), by and among Wissahickon Creek LLC, as the borrower (in
such capacity, the “Borrower”), Wells Fargo Securities, LLCBank, National
Association, as the administrative agent (in such capacity, the “Administrative
Agent”), each of the Conduit Lenders and Institutional Lenders from time to time
party thereto (the “Lenders”), each of the Lender Agents from time to time party
thereto (the “Lender Agents”) and Wells Fargo Bank, National Association, as the
collateral agent (in such capacity, the “Collateral Agent”), as the account bank
(in such capacity, the “Account Bank”) and as the collateral custodian (in such
capacity, the “Collateral Custodian”). Capitalized terms used but not defined
herein shall have the meanings provided in the Loan and Servicing Agreement.

 

Ex. D-1 

 

 

The undersigned, being an Authorized Person of the [Borrower][Collateral
Manager], and holding the office set forth below such officer’s name, and solely
in his/her capacity as such, hereby certifies as follows:

 

[1.          Pursuant to Section 2.19 (a) of the Loan and Servicing Agreement,
[the Collateral Manager on behalf of] the Borrower hereby requests a
disbursement of Principal Collections from the Principal Collection Account in
the amount of $_____________ (the “Disbursement”) to reinvest in additional
Eligible Loans to be Pledged under the Loan and Servicing Agreement.]

 

[2.          Pursuant to Section 2.19(b) of the Loan and Servicing Agreement,
[the Collateral Manager on behalf of] the Borrower hereby requests a
disbursement of Principal Collections from the Principal Collection Account in
the amount of $_____________ (the “Disbursement”) to make payments in respect of
the Advances Outstanding in accordance with and subject to the terms of Section
2.17 of the Loan and Servicing Agreement.]

 

[3].         The Collateral Manager on behalf of the Borrower hereby requests
that such Disbursement be made on the following date: _____________.

        [4]. Wire Instructions: Bank Name:  

    ABA No.:  

    Account Name:  

    Account No.:  

    Reference:  

  

[5].         In connection with a Disbursement pursuant to Section 2.19 (a) of
the Loan and Servicing Agreement, attached to this Disbursement Request are both
a true, correct and complete (i) calculation of the Borrowing Base and all
components thereof and (ii) list of all Loans which will become part of the
Collateral Portfolio on the date hereof, each Loan reflected thereon being an
Eligible Loan on the date hereof and identified as either a Broadly Syndicated
Loan, Traditional Middle Market Loan, Large Middle Market Loan, Fixed Rate Loan,
Senior Secured BondFirst Lien Last Out Loan, Second Lien Loan or DIP Loan.

 

[6].         All of the conditions applicable to the Disbursement as set forth
in [Section 2.19(a)] [Section 2.19(b)] of the Loan and Servicing Agreement have
been satisfied as of the date hereof and will remain satisfied to the date of
such Disbursement including the following:

 

(i)       The representations and warranties of each of the Collateral Manager
and the Borrower, respectively, set forth in Sections 4.01 and 4.02 of the Loan
and Servicing Agreement and Section 4 of the Management Agreement are true and
correct in all respects on and as of such date, before and after giving effect
to such Disbursement and to the application of the proceeds therefrom, as though
made on and as of such date, except to the extent relating to an earlier date;

 

Ex. D-2 

 

 

(ii)      [No Event of Default or Unmatured Event of Default has occurred and is
continuing or would result from such Disbursement or from the application of the
proceeds therefrom and no Borrowing Base Deficiency exists or would result from
such Disbursement or from the application of the proceeds therefrom; provided
that if as a result of such Disbursement any Borrowing Base Deficiency would be
decreased, such Disbursement will be permitted; and]1

 

(iii)     [No Event of Default has occurred and is continuing or would result
from such Disbursement or from the application of the proceeds therefrom, except
to the extent that the Borrower has requested and the Administrative Agent has
agreed to direct the Collateral Agent to allow the Borrower to withdraw funds
from the Principal Collection Account for the purpose of making such
Disbursement; and]2

 

(iv)     The [Collateral Manager][Borrower] is in compliance with each of its
covenants set forth in the Transaction Documents.

 

[7].         The undersigned certifies that all information contained herein and
in the attached Borrowing Base Certificate, as applicable, is true, correct and
complete as of the date hereof.

 

[ATTACH BORROWING BASE CERTIFICATE AND LOAN SCHEDULE FOR DISBURSEMENTS PURSUANT
TO SECTION 2.19(A)]

 

[Remainder of Page Intentionally Left Blank]

 

 

1Add for disbursements requested pursuant to Section 2.19(a) of the Loan and
Servicing Agreement.

 

2Add for disbursements requested pursuant to Section 2.19(b) of the Loan and
Servicing Agreement.

 

Ex. D-3 

 

 

IN WITNESS WHEREOF, the undersigned have executed this Disbursement Request as
of the date first written above.

        [WISSAHICKON CREEK LLC,
as the Borrower         By:       Name:     Title:]         OR         [FS
INVESTMENT CORPORATION II,
as the Collateral Manager       By:       Name:     Title:]

 

Ex. D-4 

 

 

EXHIBIT E

 

FORM OF
JOINDER SUPPLEMENT

 

JOINDER SUPPLEMENT, dated as of the date set forth in Item 1 of Schedule I
hereto, among the financial institution identified in Item 2 of Schedule I
hereto, Wissahickon Creek LLC, as the borrower (the “Borrower”), the Lender
Agent named in Item 5 of Schedule I hereto (the “Lender Agent”). Wells Fargo
Securities, LLCBank, National Association, as the administrative agent (the
“Administrative Agent”) and Wells Fargo Bank, National Association, as the
collateral agent (the “Collateral Agent”).

 

W I T N E S S E T H:

 

WHEREAS, this Joinder Supplement is being executed and delivered under Sections
2.20 and 12.04 of the Loan and Servicing Agreement, dated as of February 19,
2014 (as amended, modified, waived, supplemented or restated from time to time,
the “Loan and Servicing Agreement”), by and among Wissahickon Creek LLC, as the
borrower (in such capacity, the “Borrower”), Wells Fargo Securities, LLCBank,
National Association, as the administrative agent (in such capacity, the
“Administrative Agent”), each of the Conduit Lenders and Institutional Lenders
from time to time party thereto (the “Lenders”), each of the Lender Agents from
time to time party thereto (the “Lender Agents”) and Wells Fargo Bank, National
Association, as the collateral agent (in such capacity, the “Collateral Agent”),
as the account bank (in such capacity, the “Account Bank”) and as the collateral
custodian (in such capacity, the “Collateral Custodian”). Capitalized terms used
but not defined herein shall have the meanings provided in the Loan and
Servicing Agreement; and

 

WHEREAS, the party set forth in Item 2 of Schedule I hereto (the “Proposed
Lender”) wishes to become a Lender designated as a[n] [Conduit Lender]
[Institutional Lender] party to the Loan and Servicing Agreement;

 

NOW, THEREFORE, the parties hereto hereby agree as follows:

 

(a)          Upon receipt by the Administrative Agent of an executed counterpart
of this Joinder Supplement, to which is attached a fully completed Schedule I
and Schedule II, each of which has been executed by the Proposed Lender, the
Borrower, the Lender Agent, the Administrative Agent and the Collateral Agent,
the Administrative Agent will transmit to the Proposed Lender, the Borrower, the
Collateral Agent and the Lender Agent, a Joinder Effective Notice, substantially
in the form of Schedule III to this Joinder Supplement (a “Joinder Effective
Notice”). Such Joinder Effective Notice shall be executed by the Administrative
Agent and shall set forth, inter alia, the date on which the joinder effected by
this Joinder Supplement shall become effective (the “Joinder Effective Date”).
From and after the Joinder Effective Date, the Proposed Lender shall be a Lender
designated as a[n] [Conduit Lender][Institutional Lender] party to the Loan and
Servicing Agreement for all purposes thereof.

 

(b)          Each of the parties to this Joinder Supplement agrees and
acknowledges that at any time and from time to time upon the written request of
any other party, it will execute and deliver such further documents and do such
further acts and things as such other party may reasonably request in order to
effect the purposes of this Joinder Supplement.

 

Ex. E-1 

 

 

(c)          By executing and delivering this Joinder Supplement, the Proposed
Lender confirms to and agrees with the Administrative Agent, the Collateral
Agent, the Lender Agents and the other Lender(s) as follows: (i) none of the
Administrative Agent, the Collateral Agent, the Lender Agents and the other
Lender(s) makes any representation or warranty or assumes any responsibility
with respect to any statements, warranties or representations made in or in
connection with the Loan and Servicing Agreement or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Loan and
Servicing Agreement or any other instrument or document furnished pursuant
thereto, or with respect to any Variable Funding Notes issued under the Loan and
Servicing Agreement, or the Collateral Portfolio or the financial condition of
the Collateral Manager or the Borrower, or the performance or observance by the
Collateral Manager or the Borrower of any of their respective obligations under
the Loan and Servicing Agreement, any other Transaction Document or any other
instrument or document furnished pursuant thereto; (ii) the Proposed Lender
confirms that it has received a copy of such documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
this Joinder Supplement; (iii) the Proposed Lender will, independently and
without reliance upon the Administrative Agent, the Collateral Agent, the Lender
Agents or any other Lender and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under the Loan and Servicing Agreement; (iv) the
Proposed Lender appoints and authorizes the Lender Agent to take such action as
agent on its behalf and to exercise such powers under the Loan and Servicing
Agreement as are delegated to the Lender Agent by the terms thereof, together
with such powers as are reasonably incidental thereto, all in accordance with
Article IX of the Loan and Servicing Agreement; (v) the Proposed Lender appoints
and authorizes the Administrative Agent, the Collateral Custodian and the
Collateral Agent, as applicable, to take such action as agent on its behalf and
to exercise such powers under the Loan and Servicing Agreement as are delegated
to the Administrative Agent, the Collateral Custodian and Collateral Agent, as
applicable, by the terms thereof, together with such powers as are reasonably
incidental thereto, all in accordance with the Loan and Servicing Agreement; and
(vi) the Proposed Lender agrees (for the benefit of the parties hereto and the
other Lender(s)) that it will perform in accordance with their terms all of the
obligations which by the terms of the Loan and Servicing Agreement are required
to be performed by it as a Lender designated as a[n] [Conduit
Lender][Institutional Lender].

 

(d)          Schedule II hereto sets forth administrative information with
respect to the Proposed Lender.

 

(e)          This Joinder Supplement shall be governed by, and construed in
accordance with, the laws of the State of New York.

 

Ex. E-2 

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Joinder Supplement to be
executed by their respective duly authorized officers on Schedule I hereto as of
the date set forth in Item 1 of Schedule I hereto.

        WISSAHICKON CREEK LLC,
as Borrower         By:       Name:     Title:         WELLS FARGO SECURITIES,
LLCBANK, NATIONAL ASSOCIATION,
as Administrative Agent         By:       Name:     Title:         WELLS FARGO
BANK, NATIONAL ASSOCIATION,
as Collateral Agent         By:       Name:     Title:         [NAME OF LENDER
AGENT][NAME OF INSTITUTIONAL LENDER],
as [Lender Agent][Institutional Lender]         By:       Name:     Title:

 

Ex. E-3 

 

        [NAME OF CONDUIT LENDER],
as [Conduit Lender]         By:       Name:     Title:

 

Ex. E-4 

 

 

SCHEDULE I TO
JOINDER SUPPLEMENT

 

COMPLETION OF INFORMATION AND
SIGNATURES FOR JOINDER SUPPLEMENT

 

Re:     Loan and Servicing Agreement, dated as of February 19, 2014, among
Wissahickon Creek LLC, as Borrower, the other parties thereto and Wells Fargo
Securities, LLCBank, National Association, as Administrative Agent.

 

Item 1: Date of Joinder Supplement: ______________       Item 2: Proposed
Lender: ______________________       Item 3: Type of Lender: __________Conduit
Lender     __________Institutional Lender       Item 4: Commitment:
______________         Commitment Termination Date: ______________

 

Item 5: Name of Lender Agent (if a Conduit Lender): _____________________      
Item 6: Signatures of Parties to Agreement:  

  ___________________________,   as Proposed Lender       By:       Name:    
Title:   ___________________________,   as Proposed Lender Agent       By:      
Name:     Title:

 

Ex. E-5 

 

 

SCHEDULE II TO
JOINDER SUPPLEMENT

  

ADDRESS FOR NOTICES
AND
WIRE INSTRUCTIONS

 

Address for Notices:                      

  Telephone:  

  Facsimile:  

  E-mail:           With a copy to:                  

  Telephone:  

  Facsimile:  

  E-mail:  

 

Wire Instructions: Name of Bank:  

  A/C No.:  

  ABA No.  

  Reference:  

 

 

Ex. E-6 

 

 

SCHEDULE III TO
JOINDER SUPPLEMENT

 

FORM OF
JOINDER EFFECTIVE NOTICE

 

To:         [Name and address of the Borrower, Collateral Agent, Lender Agent
and Proposed Lender]

 

The undersigned, as Administrative Agent under the Loan and Servicing Agreement,
dated as of February 19, 2014 (as amended, modified, waived, supplemented or
restated from time to time, the “Loan and Servicing Agreement”), by and among
Wissahickon Creek LLC, as the borrower (in such capacity, the “Borrower”) Wells
Fargo Securities, LLCBank, National Association, as the administrative agent (in
such capacity, the “Administrative Agent”), each of the Conduit Lenders and
Institutional Lenders from time to time party thereto (the “Lenders”), each of
the Lender Agents from time to time party thereto (the “Lender Agents”) and
Wells Fargo Bank, National Association, as the collateral agent (in such
capacity, the “Collateral Agent”), as the account bank (in such capacity, the
“Account Bank”) and as the collateral custodian (in such capacity, the
“Collateral Custodian”). [Note: attach copies of Schedules I and II from such
Joinder Supplement.] Terms defined in such Joinder Supplement are used herein as
therein defined.

 

Pursuant to such Joinder Supplement, you are advised that the Joinder Effective
Date for [Name of Proposed Lender] will be _____________ and such Proposed
Lender will be a Lender designated as a[n] [Conduit Lender] [Institutional
Lender] with a Commitment of __________.

 

  Very truly yours,       WELLS FARGO SECURITIES, LLCBANK, NATIONAL ASSOCIATION,
as Administrative Agent         By:       Name:
Title:

 

Ex. E-7 

 

 

EXHIBIT F

 

FORM OF NOTICE OF BORROWING

 

NOTICE OF BORROWING

 

[Date]

 

(WISSAHICKON CREEK LLC)

 

To:

Wells Fargo Securities, LLCBank, National Association

as the Administrative Agent

Duke Energy Center

550 S. Tryon Street

Charlotte, North Carolina 28202

Attention: Mike Romanzo Corporate Debt Finance

Facsimile No.: (704) 715-0067

Confirmation No.: (704) 410-23692469

E-mail: scp.mmloans@wellsfargo.com

  cp.conduits@wellsfargo.com

 

[Lender Agent Name and Address]

 

With a copy to:

 

Wells Fargo Bank, National Association

as the Collateral Agent

9062 Old Annapolis Rd.

Columbia, Maryland 21045

Attention: CDO Trust Services—Wissahickon Creek LLC

Facsimile No.: (410) 715-3748

Phone No.: (410) 884-2000 

Wells Fargo Bank, National Association

as the Collateral Custodian

9062 Old Annapolis Rd.

Columbia, Maryland 21045

Attention: CDO Trust Services—Wissahickon Creek LLC

Facsimile No.: (410) 715-3748

Phone No.: (410) 884-2000

 

 

Ex. F-1 

 

 

Re:Loan and Servicing Agreement dated as of February 19, 2014

 

Ladies and Gentlemen:

 

This Notice of Borrowing is delivered to you pursuant to Sections 2.02 and 3.02
of that certain Loan and Servicing Agreement, dated as of February 19, 2014 (as
amended, modified, waived, supplemented or restated from time to time, the “Loan
and Servicing Agreement”), by and among Wissahickon Creek LLC, as the borrower
(in such capacity, the “Borrower”), Wells Fargo Securities, LLCBank, National
Association, as the administrative agent (in such capacity, the “Administrative
Agent”), each of the Conduit Lenders and Institutional Lenders from time to time
party thereto (the “Lenders”), each of the Lender Agents from time to time party
thereto (the “Lender Agents”) and Wells Fargo Bank, National Association, as the
collateral agent (in such capacity, the “Collateral Agent”), as the account bank
(in such capacity, the “Account Bank”) and as the collateral custodian (in such
capacity, the “Collateral Custodian”). Capitalized terms used but not defined
herein shall have the meanings provided in the Loan and Servicing Agreement.

 

The undersigned, being an Authorized Person of the [Borrower][Collateral
Manager], hereby certifies as follows:

 

1.             Pursuant to Sections 2.02 and 3.02 of the Loan and Servicing
Agreement, the Borrower hereby requests an Advance in the principal amount of $
____________.3

 

2.             The Borrower hereby requests that such Advance be made on the
following date: ____________.

              3.             Wire Instructions: Bank Name:       ABA No.:      
  Account Name:       Account No.:         Reference:        

  

4.             Attached to this Notice of Borrowing is a true, correct and
complete calculation of the Borrowing Base and all components thereof.

 

5.             Attached to this Notice of Borrowing is a true, correct and
complete list of any Loans that will become part of the Collateral Portfolio on
the date hereof, each Loan reflected thereon being an Eligible Loan on the date
hereof and identified as either a Broadly Syndicated Loan, Traditional Middle
Market Loan, Large Middle Market Loan, Fixed Rate Loan, Senior Secured BondFirst
Lien Last Out Loan, Second Lien Loan or DIP Loan.

 

 

3Advance amount must be at least $500,000.

  

Ex. F-2 

 

 

6.            With respect to Advances, all of the conditions applicable to the
Advance requested herein as set forth in the Loan and Servicing Agreement have
been satisfied as of the date hereof and will remain satisfied to the date of
such Advance, including those set forth in Section 3.02 of the Loan and
Servicing Agreement, and the following:

 

(i)            No Unmatured Event of Default, Event of Default or Borrowing Base
Deficiency has occurred and is continuing or would result from such Advance;

 

(ii)           No event has occurred and is continuing, or would result from
such Advance, which constitutes an Unmatured Collateral Manager Event of Default
or a Collateral Manager Event of Default;

 

(iii)          Since the Closing Date, no material adverse change has occurred
in the ability of the Collateral Manager or the Borrower to perform its
obligations under any Transaction Document; and

 

(iv)          The representations and warranties of each of the Collateral
Manager and the Borrower, respectively, set forth in Sections 4.01 and 4.02 of
the Loan and Servicing Agreement and Section 4 of the Management Agreement are
true and correct in all respects on and as of such date, before and after giving
effect to such Advance and to the application of the proceeds therefrom, as
though made on and as of such date (other than any representation or warranty
that is made as of a specific date);

 

7.            Each of the undersigned certify that all information contained
herein and in the attached Borrowing Base Certificate, as applicable, is true,
correct and complete as of the date hereof.

 

[ATTACH BORROWING BASE CERTIFICATE AND LOAN SCHEDULE]

 

Ex. F-3 

 

 

IN WITNESS WHEREOF, the undersigned have executed this Notice of Borrowing as of
the date first written above.

      [WISSAHICKON CREEK LLC, as the Borrower         By:       Name:
Title:] OR         [FS INVESTMENT CORPORATION II, the Collateral Manager        
By:       Name:
Title:]

 

Ex. F-4 

 

  

EXHIBIT G

 

FORM OF NOTICE OF REDUCTION

 

(Reduction of Advances Outstanding)

 

[Date]

 

(WISSAHICKON CREEK LLC)

 

Wells Fargo Securities, LLC Bank, National Association
    as the Administrative Agent
Duke Energy Center
550 S. Tryon Street
Charlotte, NC 28202

Attention: Mike Romanzo Corporate Debt Finance

Facsimile No.: (704) 715-0067

Confirmation No.: (704) 410-23692469

E-mail: scp.mmloans@wellsfargo.com

  cp.conduits@wellsfargo.com

 

[Lender Agent Name and Address]

 

Wells Fargo Bank, National Association
    as the Collateral Agent
9062 Old Annapolis Rd. 

Columbia, Maryland 21045

Attention: CDO Trust Services—Wissahickon Creek LLC

Facsimile No.: (410) 715-3748

Phone No.: (410) 884-2000

 

 

Re:Loan and Servicing Agreement dated as of February 19, 2014

 

Ladies and Gentlemen:

 

This Notice of Reduction is delivered to you pursuant to Section 2.17(a) of that
certain Loan and Servicing Agreement, dated as of February 19, 2014 (as amended,
modified, waived, supplemented or restated from time to time, the “Loan and
Servicing Agreement”), by and among Wissahickon Creek LLC, as the borrower (in
such capacity, the “Borrower”), Wells Fargo Securities, LLCBank, National
Association, as the administrative agent (in such capacity, the “Administrative
Agent”), each of the Conduit Lenders and Institutional Lenders from time to time
party thereto (the “Lenders”), each of the Lender Agents from time to time party
thereto (the “Lender Agents”) and Wells Fargo Bank, National Association, as the
collateral agent (in such capacity, the “Collateral Agent”), as the account bank
(in such capacity, the “Account Bank”) and as the collateral custodian (in such
capacity, the “Collateral Custodian”). Capitalized terms used but not defined
herein shall have the meanings provided in the Loan and Servicing Agreement.

 

The undersigned, being an Authorized Person of the Borrower, hereby certifies as
follows:

 

1.             Pursuant to Section 2.17(a) of the Loan and Servicing Agreement,
the Borrower desires to reduce the Advances Outstanding (an “Advance Reduction”)
by the amount of $_____________.

 

2.            The Borrower hereby requests that such Advance Reduction be made
on the following date: _____________.

 

Ex. G-1 

 

 

3.            Attached to this Notice of Reduction is a true, correct and
complete calculation of the Borrowing Base and all components thereof.

 

4.            The Borrower, hereby represents that no event would result from
such Advance Reduction, which constitutes an Unmatured Event of Default, Event
of Default, an Unmatured Collateral Manager Event of Default or a Collateral
Manager Event of Default.

 

5.            The undersigned certifies that all information contained herein
and in the attached Borrowing Base Certificate, as applicable, is true, correct
and complete as of the date hereof.

 

[ATTACH BORROWING BASE CERTIFICATE]

 

[Remainder of Page Intentionally Left Blank]

 

Ex. G-2 

 

 

IN WITNESS WHEREOF, the undersigned have executed this Notice of Reduction as of
the date first written above.

      WISSAHICKON CREEK LLC, as the Borrower         By:       Name:
Title:

 

Ex. G-3 

 

  

EXHIBIT H

 

FORM OF NOTICE OF REDUCTION

 

(Reduction of Maximum Facility Amount)

 

[Date]

 

(WISSAHICKON CREEK LLC)

 

Wells Fargo Securities, LLC Bank, National Association
    as the Administrative Agent
Duke Energy Center
550 S. Tryon Street
Charlotte, NC 28202

Attention: Mike RomanzoCorporate Debt Finance

Facsimile No.: (704) 715-0067

Confirmation No.: (704) 410-23692469

E-mail: scp.mmloans@wellsfargo.com

  cp.conduits@wellsfargo.com 

[Lender Agent Name and Address]

 

Wells Fargo Bank, National Association
    as the Collateral Agent
9062 Old Annapolis Rd.

Columbia, Maryland 21045

Attention: CDO Trust Services—Wissahickon Creek LLC

Facsimile No.: (410) 715-3748

Phone No.: (410) 884-2000

 

 

Re:Loan and Servicing Agreement dated as of February 19, 2014

 

Ladies and Gentlemen:

 

This Notice of Reduction is delivered to you pursuant to Section 2.17(b) of that
certain Loan and Servicing Agreement, dated as of February 19, 2014 (as amended,
modified, waived, supplemented or restated from time to time, the “Loan and
Servicing Agreement”), by and among Wissahickon Creek LLC, as the borrower (in
such capacity, the “Borrower”), Wells Fargo Securities, LLCBank, National
Association, as the administrative agent (in such capacity, the “Administrative
Agent”), each of the Conduit Lenders and Institutional Lenders from time to time
party thereto (the “Lenders”), each of the Lender Agents from time to time party
thereto (the “Lender Agents”) and Wells Fargo Bank, National Association, as the
collateral agent (in such capacity, the “Collateral Agent”), as the account bank
(in such capacity, the “Account Bank”) and as the collateral custodian (in such
capacity, the “Collateral Custodian”). Capitalized terms used but not defined
herein shall have the meanings provided in the Loan and Servicing Agreement.

 

The undersigned, being an Authorized Person of the Borrower hereby certifies as
follows:

 

1.             Pursuant to Section 2.17(b) of the Loan and Servicing Agreement,
the Borrower desires to reduce the Maximum Facility Amount (a “Facility
Reduction”) by the amount of $_____________.

 

Ex. H-1 

 

 

2.            The Borrower hereby requests that such Facility Reduction be made
on the following date: _____________.

 

3.            Attached to this Notice of Reduction is a true, correct and
complete calculation of the Borrowing Base and all components thereof.

 

4.            The undersigned certifies that all information contained herein
and in the attached Borrowing Base Certificate, as applicable, is true, correct
and complete as of the date hereof.

 

[ATTACH BORROWING BASE CERTIFICATE]

 

[Remainder of Page Intentionally Left Blank]

 

Ex. H-2 

 

 

IN WITNESS WHEREOF, the undersigned have executed this Notice of Reduction as of
the date first written above.

      WISSAHICKON CREEK LLC, as the Borrower         By:       Name:
Title:

 

Ex. H-3 

 

  

EXHIBIT I

 

FORM OF VARIABLE FUNDING NOTE

 

$_____________ [●], 20[__]

 

THIS VARIABLE FUNDING NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”). NEITHER THIS VARIABLE FUNDING NOTE NOR
ANY PORTION HEREOF MAY BE OFFERED OR SOLD EXCEPT IN COMPLIANCE WITH THE
REGISTRATION PROVISIONS OF THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM SUCH REGISTRATION PROVISIONS.

 

THIS VARIABLE FUNDING NOTE IS NOT PERMITTED TO BE TRANSFERRED, ASSIGNED,
EXCHANGED OR OTHERWISE PLEDGED OR CONVEYED EXCEPT TO A (A) QUALIFIED
INSTITUTIONAL BUYER UNDER RULE 144A OF THE SECURITIES ACT OR AN INSTITUTIONAL
“ACCREDITED INVESTOR” AS DEFINED IN RULE (1)-501(A)(1)-(3) OR (7) UNDER THE
SECURITIES ACT, IN EACH CASE, WHO IS ALSO A (B) QUALIFIED PURCHASER FOR PURPOSES
OF SECTION 3(c)(7) OF THE 1940 ACT, AND IN COMPLIANCE WITH THE TERMS OF THE LOAN
AND SERVICING AGREEMENT REFERRED TO HEREIN.

 

FOR VALUE RECEIVED, WISSAHICKON CREEK LLC, a Delaware limited liability company
(the “Borrower”), promises to pay to [Name of Lender Agent] (the “Lender
Agent”), or [Name of Lender]’s (“Lender”) assigns, the principal sum of [_]
DOLLARS ($[_]), or, if less, the unpaid principal amount of the aggregate
advances (“Advances”) made by the Lender to the Borrower pursuant to the Loan
and Servicing Agreement (as defined below), as set forth on the attached
Schedule, on the dates specified in the Loan and Servicing Agreement, and to pay
interest on the unpaid principal amount of each Advance on each day that such
unpaid principal amount is outstanding, at the Yield Rate related to such
Advance as provided in the Loan and Servicing Agreement, on each Payment Date
and each other date specified in the Loan and Servicing Agreement.

 

This Variable Funding Note (the “Note”) is issued pursuant to the Loan and
Servicing Agreement, dated as of February 19, 2014 (as amended, modified,
waived, supplemented or restated from time to time, the “Loan and Servicing
Agreement”), by and among Wissahickon Creek LLC, as the borrower (in such
capacity, the “Borrower”), Wells Fargo Securities, LLCBank, National
Association, as the administrative agent (in such capacity, the “Administrative
Agent”), each of the Conduit Lenders and Institutional Lenders from time to time
party thereto (the “Lenders”), each of the Lender Agents from time to time party
thereto (the “Lender Agents”) and Wells Fargo Bank, National Association, as the
collateral agent (in such capacity, the “Collateral Agent”), as the account bank
(in such capacity, the “Account Bank”) and as the collateral custodian (in such
capacity, the “Collateral Custodian”). Capitalized terms used but not defined
herein shall have the meanings provided in the Loan and Servicing Agreement.

 

Ex. I-1 

 

 

Notwithstanding any other provisions contained in this Note, if at any time the
rate of interest payable by the Borrower under this Note, when combined with any
and all other charges provided for in this Note, in the Loan and Servicing
Agreement or in any other document (to the extent such other charges would
constitute interest for the purpose of any applicable law limiting interest that
may be charged on this Note), exceeds the highest rate of interest permissible
under applicable law (the “Maximum Lawful Rate”), then for so long as the
Maximum Lawful Rate would be exceeded, the rate of interest under this Note
shall be equal to the Maximum Lawful Rate. If at any time thereafter the rate of
interest payable under this Note is less than the Maximum Lawful Rate, the
Borrower shall continue to pay interest under this Note at the Maximum Lawful
Rate until such time as the total interest paid by the Borrower is equal to the
total interest that would have been paid had applicable law not limited the
interest rate payable under this Note. In no event shall the total interest
received by the Lender under this Note exceed the amount which the Lender could
lawfully have received had the interest due under this Note been calculated
since the date of this Note at the Maximum Lawful Rate.

 

Payments of the principal of, and interest on, Advances represented by this Note
shall be made by or on behalf of the Borrower to the holder hereof by wire
transfer of immediately available funds in the manner and at the address
specified for such purpose as provided in the Loan and Servicing Agreement, or
in such manner or at such other address as the holder of this Note shall have
specified in writing to the Borrower for such purpose, without the presentation
or surrender of this Note or the making of any notation on this Note.

 

Portions or all of the principal amount of the Note shall become due and payable
at the time or times set forth in the Loan and Servicing Agreement. Any portion
or all of the principal amount of this Note may be prepaid, together with
interest thereon (and, as set forth in the Loan and Servicing Agreement, certain
costs and expenses of the Lender) at the time and in the manner set forth in,
but subject to the provisions of, the Loan and Servicing Agreement.

 

Except as provided in the Loan and Servicing Agreement, the Borrower expressly
waives presentment, demand, diligence, protest and all notices of any kind
whatsoever with respect to this Note.

 

All amounts evidenced by this Note, the Lender’s Advances and all payments and
prepayments of the principal hereof and the respective dates and maturity dates
thereof shall be endorsed by the Lender Agent, on the schedule attached hereto
and made a part hereof or on a continuation thereof, which shall be attached
hereto and made a part hereof; provided, however, that the failure of the Lender
Agent to make such a notation shall not in any way limit or otherwise affect the
obligations of the Borrower under this Note as provided in the Loan and
Servicing Agreement.

 

The holder hereof may sell, assign, transfer, negotiate, grant participations in
or otherwise dispose of all or any portion of any Advances made by the Lender
and represented by this Note and the indebtedness evidenced by this Note,
subject to the applicable provisions of the Loan and Servicing Agreement.

 

Ex. I-2 

 

 

This Note is secured by the security interests granted pursuant to Section 2.12
of the Loan and Servicing Agreement. The holder of this Note is entitled to the
benefits of the Loan and Servicing Agreement and may enforce the agreements of
the Borrower contained in the Loan and Servicing Agreement and exercise the
remedies provided for by, or otherwise available in respect of, the Loan and
Servicing Agreement, all in accordance with, and subject to the restrictions
contained in, the terms of the Loan and Servicing Agreement. If an Event of
Default shall occur, the unpaid balance of the principal of all Advances,
together with accrued interest thereon, may be declared, and may become, due and
payable in the manner and with the effect provided in the Loan and Servicing
Agreement.

 

The obligations of the Borrower under this Note are limited recourse obligations
and the provisions of Sections 12.08(a) and 12.09(a) of the Loan and Servicing
Agreement are each incorporated by reference herein mutatis mutandis.

 

The Borrower, the Lenders, the Administrative Agent, the Lender Agents, the
Collateral Agent, the Account Bank and the Collateral Custodian each intend, for
federal, state and local income and franchise tax purposes only, that this Note
be evidence of indebtedness of the Borrower secured by the Collateral Portfolio
and the Lender, as a[n] [institutional lender] [conduit lender] under the Loan
and Servicing Agreement, by the acceptance hereof, agrees to treat the Note for
federal, state and local income and franchise tax purposes as indebtedness of
the Borrower.

 

This Note is one of the “Variable Funding Notes” referred to in Section 2.01 of
the Loan and Servicing Agreement. This Note shall be construed in accordance
with and governed by the laws of the State of New York.

 

[Remainder of Page Intentionally Left Blank]

 

Ex. I-3 

 

 

IN WITNESS WHEREOF, the undersigned has executed this Note as on the date first
written above.

      WISSAHICKON CREEK LLC         By:       Name:
Title:

 

Ex. I-4 

 

  

Schedule attached to Variable Funding Note dated [●], 20[●] of Wissahickon Creek
LLC payable to the order of [LENDER/LENDER AGENT] Date of
Advance or
Repayment Principal
Amount of
Advance Principal
Amount of
Repayment Outstanding
Principal
Amount                                                                          
                                                                               
                             

 

Ex. I-5 

 

 

 

EXHIBIT J

 

FORM OF CERTIFICATE OF CLOSING ATTORNEYS

 

[_] [_], 20[_]

 

Wells Fargo Bank, National Association
   as the Collateral Custodian
9062 Old Annapolis Rd.

Columbia, Maryland 21045

Attention: CDO Trust Services—Wissahickon Creek LLC

Facsimile No.: (410) 715-3748

Phone No.: (410) 884-2000

 

With a copy to:

 

Wells Fargo Securities, LLCBank, National Association
    as the Administrative Agent
Duke Energy Center
550 S. Tryon Street
Charlotte, NC 28202

Attention: Mike Romanzo Corporate Debt Finance

Facsimile No.: (704) 715-0067

Confirmation No.: (704) 410-23692169

E-mail: scp.mmloans@wellsfargo.com

      cp.conduits@wellsfargo.com

 

Re:Loans in the aggregate principal amount of $_________ (collectively, the
“Loans”) made to [Name of Obligor] (the “Obligor”)

 

To Whom It May Concern:

 

In connection with the Loans, the undersigned (i) acknowledges that Wissahickon
Creek LLC has granted a security interest to Wells Fargo Bank, National
Association (the “Collateral Agent”), for the benefit of the Secured Parties, in
each of the items indicated on the closing checklist attached hereto (the
“Checklist”), and (ii) certifies to you as of the day of funding the Loans as to
the matters set forth below. Terms used but not defined herein shall have the
meanings given to such terms in the Loan and Servicing Agreement, dated as of
February 19, 2014 (as amended, modified, waived, supplemented or restated from
time to time, the “Loan and Servicing Agreement”), by and among Wissahickon
Creek LLC, as the borrower (in such capacity, the “Borrower”), Wells Fargo
Securities, LLCBank, National Association, as the administrative agent (in such
capacity, the “Administrative Agent”), each of the Conduit Lenders and
Institutional Lenders from time to time party thereto (the “Lenders”), each of
the Lender Agents from time to time party thereto (the “Lender Agents”) and
Wells Fargo Bank, National Association, as the collateral agent (in such
capacity, the “Collateral Agent”), as the account bank (in such capacity, the
“Account Bank”) and as the collateral custodian (in such capacity, the
“Collateral Custodian”).

 

Ex.: J-1

 

 

A.          It has received and reviewed the Checklist items, in the form and
subject to those exceptions or matters indicated on the Checklist in connection
with acting as closing counsel for the Loans;

 

B.          If a promissory note was executed in connection with the Loan, a
copy of the executed promissory note has been faxed to the Collateral Custodian.
The original promissory note(s) is/are in our possession and will be forwarded
to the Collateral Custodian or as otherwise directed in writing to ____________
(hereinafter referred to as “Outside Counsel”) by the Collateral Custodian or
the Administrative Agent on its behalf, for receipt within two (2) Business Days
after the funding date of the transaction;

 

C.          Within two (2) Business Days after the closing, all remaining
Required Loan Documents (under and as defined in the Loan and Servicing
Agreement) which are in our possession and are indicated on Schedule 1 attached
hereto, will be forwarded to the Collateral Custodian; and

 

D.          Notwithstanding any contrary instruction from the Borrower, in the
event the Loan is funded, it will follow the written direction of the Collateral
Custodian or the Administrative Agent on its behalf, with regard to the original
promissory note(s) in its possession, provided that in the event it reasonably
believes that a dispute exists as to custody of any Required Loan Documents, it
may deposit them with a court of competent jurisdiction and be relieved of its
obligations hereunder with respect to any and all documents so deposited.

 

The Collateral Custodian, the Collateral Agent, the Administrative Agent, and
the Borrower acknowledge and agree that:

 

1.The security interest and rights in the Required Loan Documents of the
Borrower have been assigned to the Collateral Agent, for the benefit of the
Secured Parties (pursuant to the Loan and Servicing Agreement).

 

2.Outside Counsel shall not be required to perform any duties other than the
duties expressly set forth in this letter. No implied obligations or duties
shall be inferred by any other agreement, written or verbal, or any
representation made by any party.

 

3.Outside Counsel is authorized to comply with and obey laws, orders, judgments,
decrees and regulations of any governmental authority, court, tribunal or
arbitrator. If Outside Counsel complies with any such law, order, judgment,
decree or regulation, Outside Counsel shall not be liable to the Collateral
Custodian, the Collateral Agent, the Administrative Agent, the Borrower or to
any other person even if such law, order, judgment, decree or regulation is
subsequently reversed, modified, annulled, set aside, vacated, found to have
been entered without jurisdiction, or found to be in violation or beyond the
scope of the law.

 

Ex.: J-2

 

 

4.Outside Counsel shall be responsible hereunder solely to hold the original
promissory note(s) for the account of the Collateral Agent, on behalf of the
Secured Parties and to deliver the original promissory note(s) and the other
relevant documents to the Collateral Custodian in accordance with the terms of
this letter.

 

5.Outside Counsel may act relative hereto upon the advice of counsel in
reference to any matter in connection herewith and shall not be liable for any
mistakes of fact or errors of judgment, or for any acts or omissions of any kind
unless caused by its own willful misconduct or gross negligence.

 

6.Outside Counsel shall be entitled to rely or act upon any notice, direction,
instrument or document believed by Outside Counsel to be genuine and to be
executed and delivered by the proper person and shall have no obligation to
verify any statements contained in any notice, instrument or document or the
accuracy or due authorization of the execution of any notice, instrument or
document.

 

7.Outside Counsel shall not be responsible or liable in any manner whatsoever
for (a) the sufficiency, correctness, genuineness or validity of any document,
agreement or instrument delivered to it, (b) the form of execution of any such
document, agreement or instrument, (c) the identity, authority or rights of any
person executing or delivering any such document, agreement or instrument, or
(d) the terms and conditions of any instrument pursuant to which the parties may
act.

 

8.Outside Counsel shall be deemed to have satisfied any delivery requirement set
forth herein if it shall have deposited the relevant documents for uninsured
overnight delivery (properly addressed) with FedEx, UPS or other overnight
courier of national standing.

 

  Very truly yours,         By:       Name:     Title:

 

Ex.: J-3

 

        ACCEPTED AND AGREED:         FS INVESTMENT CORPORATION II, as the
Collateral Manager         By:       Name:     Title:         WELLS FARGO BANK,
NATIONAL ASSOCIATION, as the Collateral Agent, the Account Bank and the
Collateral Custodian         By:       Name:     Title:        

WELLS FARGO SECURITIES, LLCBANK, NATIONAL ASSOCIATION, as the Administrative
Agent

        By:       Name:     Title:         WISSAHICKON CREEK LLC, as the
Borrower         By:       Name:     Title:

 

Ex.: J-4

 

 

EXHIBIT K

 

FORM OF COLLATERAL MANAGEMENT REPORT

 

(See attached)

 

Ex.: K-1

 

 

EXHIBIT L

 

FORM OF COLLATERAL MANAGER’S CERTIFICATE
(COLLATERAL MANAGEMENT REPORT)

 

COLLATERAL MANAGER’S CERTIFICATE

(COLLATERAL MANAGEMENT REPORT)

 

[_] [_], 20[_]

 

This Collateral Manager’s Certificate is delivered pursuant to the provisions of
Section 6.07(c) of the Loan and Servicing Agreement, dated as of February 19,
2014 (as amended, modified, waived, supplemented or restated from time to time,
the “Loan and Servicing Agreement”), by and among Wissahickon Creek LLC, as the
borrower (in such capacity, the “Borrower”), Wells Fargo Securities, LLCBank,
National Association, as the administrative agent (in such capacity, the
“Administrative Agent”), each of the Conduit Lenders and Institutional Lenders
from time to time party thereto (the “Lenders”), each of the Lender Agents from
time to time party thereto (the “Lender Agents”) and Wells Fargo Bank, National
Association, as the collateral agent (in such capacity, the “Collateral Agent”),
as the account bank (in such capacity, the “Account Bank”) and as the collateral
custodian (in such capacity, the “Collateral Custodian”). Capitalized terms used
and not otherwise defined herein shall have the meanings provided in the Loan
and Servicing Agreement. This Collateral Manager’s Certificate relates to the
Collateral Management Report set forth on the attached Schedule A.

 

A.FS Investment Corporation II is the Collateral Manager under the Management
Agreement.

 

B.The undersigned hereby certifies to the Administrative Agent, the Collateral
Agent, the Lenders, the Lender Agents and the other Secured Parties that, as of
the date hereof, and to the actual knowledge of the undersigned, no Event of
Default has occurred [(except as set forth herein)], no Unmatured Event of
Default exists [(except as set forth herein)], no Unmatured Collateral Manager
Event of Default exists [(except as set forth herein)], and no Collateral
Manager Event of Default has occurred [(except as set forth herein)].

 

C.The undersigned hereby certifies to the Administrative Agent, the Collateral
Agent, the Lenders, the Lender Agents and the other Secured Parties that, as of
the date hereof, as to itself, each of the representations and warranties
contained in the Management Agreement is true, correct and complete in all
respects (other than any representation or warranty that is made as of a
specific date).

 

D.The undersigned hereby certifies to the Administrative Agent, the Collateral
Agent, the Lenders, the Lender Agents and the other Secured Parties that all of
the foregoing information and all of the information set forth on the attached
Schedule A is true, complete and accurate in all respects as of the date hereof.

 

[Remainder of Page Left Intentionally Blank]

 

Ex. L-1

 

 

IN WITNESS WHEREOF, the undersigned has caused this Collateral Manager’s
Certificate to be duly executed as of the date first written above.

        FS INVESTMENT CORPORATION II, as the Collateral Manager         By:    
  Name:     Title:

 

Ex. L-2

 

 

SCHEDULE A
to Exhibit L

 

COLLATERAL MANAGEMENT REPORT

 

(See attached)

 

Ex. L-3 

 

 

EXHIBIT M

 

FORM OF RELEASE OF REQUIRED LOAN DOCUMENTS

 

[Delivery Date]

 

Wells Fargo Bank, National Association
    as the Collateral Custodian
9062 Old Annapolis Rd. 

Columbia, Maryland 21045 

Attention: CDO Trust Services—Wissahickon Creek LLC 

Facsimile No.: (410) 715-3748 

Phone No.: (410) 884-2000

 

With a copy to:

 

Wells Fargo Bank, National Association
    as Collateral Agent
9062 Old Annapolis Rd. 

Columbia, Maryland 21045 

Attention: CDO Trust Services—Wissahickon Creek LLC 

Facsimile No.: (410) 715-3748 

Phone No.: (410) 884-2000 

 

 

 

 

 

 

 

Re:Loan and Servicing Agreement, dated as of February 19, 2014 (as amended,
modified, waived, supplemented or restated from time to time, the “Loan and
Servicing Agreement”), by and among Wissahickon Creek LLC, as the borrower (in
such capacity, the “Borrower”), Wells Fargo Securities, LLCBank, National
Association, as the administrative agent (in such capacity, the “Administrative
Agent”), each of the Conduit Lenders and Institutional Lenders from time to time
party thereto (the “Lenders”), each of the Lender Agents from time to time party
thereto (the “Lender Agents”) and Wells Fargo Bank, National Association, as the
collateral agent (in such capacity, the “Collateral Agent”), as the account bank
(in such capacity, the “Account Bank”) and as the collateral custodian (in such
capacity, the “Collateral Custodian”).

 

Ladies and Gentlemen:

 

In connection with the administration of the Required Loan Documents held by
Wells Fargo Bank, National Association as the Collateral Custodian, for the
benefit of the Secured Parties, under the Loan and Servicing Agreement, we
request the release of the Required Loan Documents (or such documents as
specified below) for the Loans described below, for the reason indicated. All
capitalized terms used but not defined herein shall have the meaning provided in
the Loan and Servicing Agreement.

 

Ex. M-1 

 

 

Obligor’s Name, Address & Zip Code:

 

Loan Number:

 

Loan File:

 

Reason for Requesting Documents (check one)

 

____ 1.Loan paid in full. (The Borrower hereby certifies that all amounts
received in connection with such Loan have been credited to the Collection
Account.)

 

____ 2.Loan liquidated by ____________________________. (The Borrower hereby
certifies that all proceeds of foreclosure, insurance, condemnation or other
liquidation have been finally received and credited to the Collection Account.)

 

____ 3.Loan in foreclosure.

 

____ 4.Loan released pursuant to a Lien Release Dividend or sold or substituted
in accordance with the applicable provisions of Section 2.07.

 

____ 5.Loan returned due to a failure to satisfy the Review Criteria pursuant to
Section 11.02(b)(i).

 

____ 6.Other (explain).

  

If box 1, 2, 4 or 5 above is checked, and if all or part of the Required Loan
Documents were previously released to us, please release to us any remaining
Required Loan Documents in your possession relating to the specified Loan.

 

If box 3 or 6 above is checked, we will return of all of the above Required Loan
Documents to you as the Collateral Custodian (i) promptly upon the request of
the Administrative Agent or (ii) when our need therefore no longer exists.

 

[Remainder of Page Left Intentionally Blank]

 

Ex. M-2 

 

  

  WISSAHICKON CREEK LLC, as the Borrower       By:       Name:     Title:    
Date:

[Signatures Continue]

 

Ex. M-3 

 

 

Consent of Administrative Agent:

 

  WELLS FARGO SECURITIES, LLC, BANK, NATIONAL ASSOCIATION, as the Administrative
Agent       By:       Name:     Title:     Date:

  

Ex. M-4 

 

 

EXHIBIT N

 

FORM OF TRANSFEREE LETTER

 

_________ __, 20___

 

Wissahickon Creek LLC,
    as the Borrower
c/o FS Investment Corporation II 

Cira Centre 

2929 Arch Street, Suite 675 

Philadelphia, PA 19104 

Attn: Bill Goebel, Chief Financial Officer and Ken Miller, Vice President 

Telephone: (215) 495-1169 

Fax: (215) 222-4649 

Email: bill.goebel@franklinsquare.com 

 

Wells Fargo Securities, LLCBank, National Association
     as the Administrative Agent
Duke Energy Center
550 S. Tryon Street
Charlotte, NC 28202 

Attention: Mike RomanzoCorporate Debt Finance 

Facsimile No.: (704) 715-0067 

Confirmation No.: (704) 410-23692469  

  

Email: scp.mmlloans@wellsfargo.com

  

Ex. N-1 

 

 

Re:         Wissahickon Creek LLC Variable Funding Notes

 

Ladies and Gentlemen:

 

In connection with our acquisition of the above-captioned Variable Funding Notes
(the “Notes”), we certify that (a) we understand that the Notes are not
registered under the Securities Act of 1933, as amended (the “Securities Act”),
or any state securities laws and are being transferred to us in a transaction
that is exempt from the registration requirements of the Securities Act and any
such laws, (b) we are (i) either a Qualified Institutional Buyer under Rule 144A
of the Securities Act or an institutional “Accredited Investor” as defined in
Rule (1)-501(a)(1)-(3) or (7) under the Securities Act and (ii) a “qualified
purchaser” for purposes of Section 3(c)(7) of the 1940 Act, and have such
knowledge and experience in financial and business matters that we are capable
of evaluating the merits and risks of investments in the Notes, (c) we have had
the opportunity to ask questions of and receive answers from the Collateral
Manager concerning the purchase of the Notes and all matters relating thereto or
any additional information deemed necessary to our decision to purchase the
Notes, (d) we are acquiring the Notes for investment for our own account and not
with a view to any distribution of such Notes (but without prejudice to our
right at all times to sell or otherwise dispose of the Notes in accordance with
clause (f) below), (e) we have not offered or sold any Notes to, or solicited
offers to buy any Notes from, any person, or otherwise approached or negotiated
with any person with respect thereto, or taken any other action which would
result in a violation of Section 5 of the Securities Act, (f) we will not sell,
transfer or otherwise dispose of any Notes unless (1) such sale, transfer or
other disposition is made pursuant to an effective registration statement under
the Securities Act or is exempt from such registration requirements, and if
requested, we will at our expense provide an opinion of counsel satisfactory to
the addressees of this certificate that such sale, transfer or other disposition
may be made pursuant to an exemption from the Securities Act, (2) the purchaser
or transferee of such Notes has executed and delivered to you a certificate to
substantially the same effect as this certificate, and (3) the purchaser or
transferee has otherwise complied with any conditions for transfer set forth in
the Loan and Servicing Agreement, dated as of February 19, 2014, by and among
Wissahickon Creek LLC, as the Borrower, Wells Fargo Securities, LLCBank,
National Association, as the Administrative Agent, each of the Conduit Lenders
and the Institutional Lenders from time to time party thereto, each of the
Lender Agents from time to time party thereto and Wells Fargo Bank, National
Association, as the Collateral Agent, as the Account Bank and as the Collateral
Custodian, and (g) the purchaser is not acquiring a Note, directly or
indirectly, for or on behalf of an employee benefit plan or other retirement
arrangement subject to the Employee Retirement Income Security Act of 1974, as
amended, and/or Section 4975 of the Internal Revenue Code of 1986, as amended,
or any entity, the assets of which would be deemed plan assets under Section
3(42) of ERISA and the Department of Labor regulations set forth at 29 C.F.R.
§2510.3–101; unless Prohibited Transaction Class Exemption (“PTCE”) 84–14, PTCE
90–1, PTCE 91–38, PTCE 95–60 or PTCE 92–23 or some other applicable prohibited
transaction exemption is applicable such that the acquisition and holdings of
such Notes will not constitute or result in a non-exempt prohibited transaction
under Title I of ERISA or Section 4975 of the Code and (i) the purchaser is a
U.S. Person, as such term is defined in Section 7701(a)(30) of the Internal
Revenue Code of 1986, as amended.

 

Ex. N-2 

 

 

  Very truly yours,       Print Name of Transferee       By:       Responsible
Officer

 

Ex. N-3 

 

 

 

EXHIBIT O

 

INTENTIONALLY OMITTED

 

Ex. O-1 

 

 

EXHIBIT P

 

FORM OF OFFICER’S CERTIFICATE

(SOLVENCY)

 

[FS Investment Corporation II]

 

[Wissahickon Creek LLC] 

 

This Officer’s Certificate as to solvency is delivered pursuant to Section
3.01(a) of the Loan and Servicing Agreement, dated as of February 19, 2014 (as
amended, modified, waived, supplemented or restated from time to time, the “Loan
and Servicing Agreement”), by and among Wissahickon Creek LLC, as the borrower
(in such capacity, the “Borrower”), Wells Fargo Securities, LLCBank, National
Association, as the administrative agent (in such capacity, the “Administrative
Agent”), each of the Conduit Lenders and Institutional Lenders from time to time
party thereto (the “Lenders”), each of the Lender Agents from time to time party
thereto (the “Lender Agents”) and Wells Fargo Bank, National Association, as the
collateral agent (in such capacity, the “Collateral Agent”), as the account bank
(in such capacity, the “Account Bank”) and as the collateral custodian (in such
capacity, the “Collateral Custodian”). Capitalized terms used and not otherwise
defined herein shall have the meanings provided in the Loan and Servicing
Agreement.

 

The undersigned, through its Authorized Person, hereby certifies as of the
______ day of ___________, _____ (the “Certification Date”) to the
Administrative Agent, the Lenders, the other Secured Parties, and their
respective successors and assigns, as follows:

 

Both before and after giving effect to (a) the transactions contemplated by the
Loan and Security Agreement and the other Transaction Documents and (b) the
payment and accrual of all transaction costs in connection with the foregoing,
the undersigned is and will be Solvent.

 

[Remainder of Page Intentionally Left Blank]

 

Ex. P-1 

 

 

IN WITNESS WHEREOF, the undersigned have executed this Officer’s Certificate as
of the Certification Date.

 

  [WISSAHICKON CREEK LLC,     as the Borrower       By:       Name:     Title:
       ]         [FS INVESTMENT CORPORATION II,     as the Collateral Manager  
      By:       Name:     Title:        ]

 

Ex. P-2 

 

 

EXHIBIT Q

 

FORM OF NOTICE AND REQUEST FOR CONSENT 

TO LIEN RELEASE DIVIDEND

 

[_] [_], 20[_]

 

WISSAHICKON CREEK LLC

 

To: Administrative Agent, with a copy to the Collateral Agent and the Collateral
Custodian

 

Re:          Loan and Servicing Agreement dated as of February 19, 2014

 

Ladies and Gentlemen:

 

This Notice and Request for Consent to Lien Release Dividend (this “Notice”) is
delivered to you under Section 2.07(e) of that certain Loan and Servicing
Agreement, dated as of February 19, 2014 (as amended, modified, waived,
supplemented or restated from time to time, the “Loan and Servicing Agreement”),
by and among Wissahickon Creek LLC, as the borrower (in such capacity, the
“Borrower”), Wells Fargo Securities, LLCBank, National Association, as the
administrative agent (in such capacity, the “Administrative Agent”), each of the
Conduit Lenders and Institutional Lenders from time to time party thereto (the
“Lenders”), each of the Lender Agents from time to time party thereto (the
“Lender Agents”) and Wells Fargo Bank, National Association, as the collateral
agent (in such capacity, the “Collateral Agent”), as the account bank (in such
capacity, the “Account Bank”) and as the collateral custodian (in such capacity,
the “Collateral Custodian”). Capitalized terms used but not defined herein shall
have the meanings provided in the Loan and Servicing Agreement.

 

Each of the undersigned, each being an Authorized Person of the Borrower and the
Equityholder, respectively hereby certifies as follows:

 

1.             Pursuant to Section 2.07(e) of the Loan and Servicing Agreement,
the Borrower and the Equityholder request that the (i) Administrative Agent
consent to a release of the Collateral Agent’s, on behalf of the Secured
Parties, lien on the Loans or portions thereof set forth on Annex 1 (together
with, in the case of a transfer of the Loans but not portions thereof, any
related Portfolio Assets) and to the distribution of such Loans and portions
thereof as a dividend from the Borrower to the Equityholder and (ii) Collateral
Custodian releases the Required Loan Documents related thereto.

 

2.             The Borrower and the Equityholder hereby request that such Lien
Release Dividend be made on the following date: ___________ (the “Lien Release
Dividend Date”), which date is at least five (5) Business Days after this Notice
is received by the Administrative Agent, the Collateral Agent and the Collateral
Custodian.

 

Ex. Q-1 

 

 

3.           The Borrower and the Equityholder represent and warrant, as of the
date hereof and as of the requested Lien Release Dividend Date, as follows:

 

a)          No Event of Default has occurred and no Unmatured Event of Default
exists.

 

b)          On any Lien Release Dividend Date, no more than four Lien Release
Dividends shall have been made within the 12-month period immediately preceding
the proposed Lien Release Dividend Date.

 

c)          After giving effect to the Lien Release Dividend on the Lien Release
Dividend Date, (1) no Borrowing Base Deficiency, Event of Default or Unmatured
Event of Default shall exist, (2) the representations and warranties contained
in Sections 4.01 and 4.02 of the Loan and Servicing Agreement and the Management
Agreement shall continue to be correct, except to the extent relating to an
earlier date, (3) the eligibility of any Loan remaining as part of the
Collateral Portfolio after the Lien Release Dividend will be redetermined as of
such date, (4) no claim shall have been asserted or proceeding commenced
challenging the enforceability or validity of any of the Required Loan
Documents, and (5) there shall have been no Material Adverse Effect on the
Collateral Manager or the Borrower.

 

4.           Attached to this Notice is a Borrowing Base Certificate, including
a calculation of the Borrowing Base after giving effect to such Lien Release
Dividend.

 

This Notice shall not be effective unless all of the conditions applicable to
the Lien Release Dividend requested herein and set forth in the Loan and
Servicing Agreement have been satisfied within the timeframes set forth in
Section 2.07(e) of the Loan and Servicing Agreement.

 

[ATTACH BORROWING BASE CERTIFICATE] 

 

[The Remainder Of This Page Is Intentionally Left Blank]

 

Ex. Q-2 

 

 

IN WITNESS WHEREOF, the undersigned has executed the Notice and Request for
Consent to Lien Release Dividend as of the date first written above.

 

  WISSAHICKON CREEK LLC,     as the Borrower       By:       Name:     Title:  
      FS INVESTMENT CORPORATION II,     as the Equityholder         By:      
Name:     Title:

 

Ex. Q-3 

 

 

Please indicate your consent by signing and returning this signature page to the
Notice and Request for Consent to Lien Release Dividend for receipt no later
than the day which is one Business Day prior to the requested Lien Release
Dividend Date. 

 

THE UNDERSIGNED ADMINISTRATIVE AGENT CONSENTS 

TO THE LIEN RELEASE DIVIDEND 

TO BE MADE ON [________] [____], 20[___]

 

WELLS FARGO SECURITIES, LLCBANK, NATIONAL ASSOCIATION,
as the Administrative Agent

 

By:       Name:     Title:  

 

Dated:    

 

Ex. Q-4 

 

 

ANNEX 1

To Notice and

Request for Consent

  

Loan Assets to be Released by Collateral Agent (at the direction of the
Administrative Agent) and Transferred by Borrower to Equityholder

 

Ex. Q-5