Exhibit 10.1

 

SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT

 

This Second Amendment to Loan and Security Agreement (this “Amendment”), dated
as of March 27, 2019, is entered into by and among GREAT LAKES KCAP FUNDING I,
LLC, f/k/a KCAP Funding I, LLC, a Delaware limited liability company
(“Borrower”), KCAP FINANCIAL, INC., a Delaware corporation (“Servicer”), the
lenders party hereto, and CADENCE BANK, N.A., a national banking association,
successor by merger to State Bank and Trust Company, as agent for the Lenders
(in such capacity, “Agent”).

 

Recitals

 

Borrower, Servicer, Agent and certain lenders party thereto (the “Existing
Lenders”) entered into that certain Loan and Security Agreement dated as of
March 1, 2018, as amended by that certain First Amendment to Loan and Security
Agreement dated as of June 4, 2018 (as the same may be further amended, amended
and restated, supplemented, or otherwise modified from time to time, the “Loan
Agreement”). Capitalized terms used in this Amendment have the meanings given to
them in the Loan Agreement unless otherwise specified.

 

Pursuant to the Loan Agreement, the Existing Lenders have extended a revolving
credit facility to Borrower in an amount not to exceed $50,000,000 (the
“Existing Revolving Facility”).

 

Borrower proposed to the Agent and Existing Lenders that certain amendments be
made to the Loan Agreement to (i) increase the size of Existing Revolving
Facility, (ii) eliminate concentration limits for Single Covenant Loans, (iii)
reduce the Asset Coverage Ratio, (iv) increase the Borrowing Base limit for
Portfolio Investment of the same Portfolio Company, (v) make certain other
revisions to the Loan Agreement as more fully set forth herein and (vi) to
replace Woodforest National Bank (the “Exiting Lender”) as a Lender under the
Loan Agreement (collectively, the “Proposed Amendments”).

 

In connection with the increase in the size of Existing Revolving Facility,
certain new lenders (the “New Lenders”) have agreed to become a Lender under the
Loan Agreement with the aggregate amount of such New Lender’s Revolver
Commitment set forth on Schedule 1 attached hereto.

 

The Agent and Lenders have agreed enter into this Amendment to give effect to
the Proposed Amendments, but only to the extent, and in accordance with the
terms and conditions set forth herein.

 

NOW, THEREFORE, in consideration of the foregoing and of other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Agent, the Existing Lenders, the New Lenders, the Exiting Lender and the
Borrower agree as follows:

 

1.                   New Lenders and Exiting Lender.

 

(a)                Each New Lender, by its signature to this Amendment, agrees
to become a Lender under the Loan Agreement, with a Revolver Commitment in the
amount set forth with respect to such New Lender on Schedule 1 hereto, and to be
bound by all of the terms and conditions applicable to Lenders under the Loan
Agreement and each other Transaction Document.

 

(b)                Each New Lender (i) represents and warrants that (A) it has
full power and authority, and has taken all action necessary, to execute and
deliver this Amendment and to consummate the transactions contemplated hereby
and to become a Lender under the Loan Agreement, (B) it meets all requirements
of an Eligible Assignee under the Loan Agreement, (C) from and after the Second
Amendment Effective Date (as such term is hereinafter defined), it shall be
bound by the provisions of the Loan Agreement and the other Transaction
Documents as a Lender thereunder and shall have the obligations of a Lender
thereunder, (D) it has received a copy of the Loan Agreement, together with
copies of the most recent financial statements delivered pursuant to Section
9.1.3 thereof, and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into this
Amendment and to become a party to the Loan Agreement, and (E) it has,
independently and without reliance upon the Agent or any other Lender, and based
on such documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Amendment and to become a party
to the Loan Agreement; and (ii) agrees that (A) it will, independently and
without reliance on the Agent or any other Lender, and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under the Transaction
Documents, and (B) it will perform in accordance with their terms all of the
obligations which by the terms of the Transaction Documents are required to be
performed by it as a Lender.

 

 

 

 

(c)                 Each of the Agent, each Existing Lender, the Borrower, and
Servicer agrees that, as of the Second Amendment Effective Date, each New Lender
shall (i) be a party to the Loan Agreement with a Revolver Commitment in the
amount set forth with respect to such New Lender on Schedule 1 hereto, (ii) be a
Lender for all purposes of the Loan Agreement and the other Transaction
Documents, and (iii) have the rights and obligations of a Lender under the Loan
Agreement and the other Transaction Documents.

 

(d)                Each of the Agent, Existing Lender, the Exiting Lender, the
Borrower, and Servicer agrees that, as of the Second Amendment Effective Date,
(i) the Revolver Commitment of the Exiting Lender shall be reduced to zero, and
(ii) the Exiting Lender shall cease to be a party to the Loan Agreement and
shall cease to have the rights and obligations of a Lender under the Loan
Agreement and the other Transaction Documents.

 

(e)                The address of each New Lender for purposes of all notices
and other communications is as set forth on the signature page hereto.

 

2.                   Effective Date Reallocation. On the Second Amendment
Effective Date, the Existing Lenders (including, but not limited to, the Exiting
Lender) shall automatically and without further act assign to the Lenders
holding Revolver Commitments immediately after to the Second Amendment Effective
Date (the “Continuing Lenders”), and the Continuing Lenders shall purchase from
the Existing Lenders, at the principal amount thereof, such interests in the
Loans outstanding on the Second Amendment Effective Date as shall be necessary
in order that, after giving effect to all such assignments and purchases, such
Loans are held by the Continuing Lenders ratably in accordance with their
Revolver Commitments as set forth on Schedule 1 attached hereto and incorporated
herein by reference. The requirements under Section 12 of the Loan Agreement and
requirements in respect of minimum borrowing, pro rata borrowing and pro rata
payment requirements contained elsewhere in the Loan Agreement shall not apply
to the transactions effected pursuant to the immediately preceding sentence.

 

3.                   Amendments to Loan Agreement. As of the effective date of
this Amendment, the Loan Agreement is amended as follows:

 

 2 

 

 

(a)                The following terms and their respective definitions set
forth in Section 1.1 of the Loan Agreement are hereby amended in their entirety
and replaced with the following:

 

““AloStar” means Cadence Bank, N.A., a national banking association, successor
by merger to State Bank and Trust Company, and its successors and assigns.

 

“Commitment” means for any Lender, the aggregate amount of such Lender’s
Revolver Commitment. “Commitments” means the aggregate amount of all Revolver
Commitments. The initial aggregate amount of the Commitments shall not exceed
$57,500,000.”

 

“Required Lenders” means Lenders (subject to Section 4.2) having (a) Revolver
Commitments in excess of 50% of the aggregate Revolver Commitments; and (b) if
the Revolver Commitments have terminated, Loans in excess of 50% of all
outstanding Loans; provided, however, that (x) the Commitments and Loans of any
Defaulting Lender shall be excluded from such calculation, (y) at any time that
there are two or more Lenders party to this Agreement, the term “Required
Lenders” must include at least two Lenders (Lenders that are Affiliates or
Approved Funds of each other shall be deemed to be a single Lender for purposes
of this proviso (y)), and (z) at any time there is one Lender only, such Lender
shall constitute the Required Lenders.

 

“Unitranche Loan” means each Bank Loan determined by Borrower in accordance with
the Investment and Valuation Policies to be a “unitranche” loan or otherwise
underwritten as such. A Unitranche Loan can be a First Lien Bank Loan or a Last
Out Loan, depending on the nature of the interest held.”

 

(b)                Section 1.1 of the Loan Agreement is hereby amended to add,
in appropriate alphabetical order, the following defined terms and their
respective definitions to read as follows:

 

“EBITDA” has, for any Portfolio Company, the meaning assigned to such term in
the Underlying Instruments applicable to such Portfolio Company.

 

“Participant Register” is as defined in Section 12.2.”

 

(c)                 Section 1.1. of the Loan Agreement is hereby amended by
deleting the defined term “Notice of Conversion/Continuation” from such Section.

 

(d)                Sections 3.1.2 and 3.1.3 of the Loan Agreement are amended
and restated in their entirety as follows:

 

“3.1.2       Reserved.

 

3.1.3       Types of Loans. Except as otherwise provided in this Agreement,
including, but not limited to, Sections 3.5 or 3.6, all Loans shall be made as
LIBOR Index Revolver Loans.”

 

(e)                Section 4.1.1 of the Loan Agreement is amended and restated
in its entirety as follows:

 

    4.1.1       Notice of Borrowing.

 3 

 

 

 

(a)       Whenever Borrower desires funding of a Borrowing of Revolver Loans,
Borrower shall give Agent a Notice of Borrowing signed by a Senior Officer,
which shall be in such form as may be required by Agent (and which notice may be
given electronically subject to the limitations set forth in Section 13.3.2) and
which shall specify the account of Borrower into which the proceeds of such
Revolver Loans should be disbursed. Such notice must be received by Agent no
later than 11:00 a.m. on the Business Day of the requested funding date. Notices
received after 11:00 a.m. shall be deemed received on the next Business Day.
Each Notice of Borrowing shall be irrevocable and shall specify (A) the amount
of the Borrowing, and (B) the requested funding date (which must be a Business
Day).

 

(b)       Unless payment is otherwise timely made by Borrower, the becoming due
of any Obligations (whether principal, interest, fees or other charges,
including Extraordinary Expenses, Cash Collateral and Secured Bank Product
Obligations) shall be deemed to be a request for Revolver Loans on the due date,
in the amount of such Obligations. The proceeds of such Revolver Loans shall be
disbursed as direct payment of the relevant Obligation. In addition, Agent may,
at its option, charge such Obligations against any operating, investment or
other account of Borrower maintained with Agent or any of its Affiliates.

 

(c)       If Borrower establishes a controlled disbursement account with Agent
or any Affiliate of Agent, then the presentation for payment of any check, ACH
or electronic debit, or other payment item at a time when there are insufficient
funds to cover it shall be deemed to be a request for Revolver Loans on the date
of such presentation, in the amount of such payment item. The proceeds of such
Revolver Loans may be disbursed directly to the controlled disbursement account
or other appropriate account.

 

(f)                  Section 4.1.4 of the Loan Agreement is amended and restated
in its entirety as follows:

 

“4.1.4       Notices. Borrower may request Loans and transfer funds based on
telephonic or e-mailed instructions to Agent (subject to the limitations set
forth in Section 13.3.2). Borrower shall confirm each such request by prompt
delivery to Agent of a Notice of Borrowing, but if it differs materially from
the action taken by Agent or Lenders, the records of Agent and Lenders shall
govern. Neither Agent nor any Lender shall have any liability for any loss
suffered by Borrower as a result of Agent or any Lender acting upon its
understanding of telephonic or e-mailed instructions (subject to the limitations
set forth in Section 13.3.2) from a person believed in good faith by Agent or
any Lender to be a person authorized to give such instructions on Borrower’s
behalf.”

 

(g)                Section 9.1.3 (c) of the Loan Agreement is amended and
restated in its entirety as follows:

 

“(c) as soon as available, and in any event within 45 days after the end of each
Fiscal Quarter (but within 75 days after the last Fiscal Quarter in a Fiscal
Year), unaudited balance sheets as of the end of such Fiscal Quarter and the
related statements of income and cash flow for such quarter and for the portion
of the Fiscal Year then elapsed, on a consolidated basis for Borrower and
Borrower’s Subsidiaries, setting forth in comparative form corresponding figures
for the preceding Fiscal Year and certified by a manager of Borrower as prepared
in accordance with GAAP and fairly presenting the financial position and results
of operations for such quarter and period, subject to normal year-end
adjustments and the absence of footnotes;”

 

 4 

 

 

(h)                Section 9.1.3 (h) of the Loan Agreement is amended and
restated in its entirety as follows:

 

“(h) as soon as available, and in any event within 45 days after the end of each
Fiscal Quarter, (i) a copy of Borrower’s loan data tape in a format reasonably
acceptable to Agent, which shall include but not be limited to the following
information: (A) for each Portfolio Investment, the name and number of the
related Portfolio Company, the collection status, the loan status, an indication
of whether or not such Portfolio Investment is an Eligible Portfolio Investment,
the date of each scheduled payment and the outstanding balance, (B) the
Borrowing Base for each Eligible Portfolio Investment, and such other
information as may be reasonably required for the Backup Servicer to perform its
duties under the Servicing Agreement; and (ii) a credit stats worksheet showing,
for each Portfolio Company, (A) the enterprise valuation, (B) the loan to value
ratio, (C) the first lien net leverage ratio, (D) the total net leverage ratio,
and (E) the dates as of which the values in the foregoing clauses (A), (B), (C)
and (D) are calculated;”

 

(i)                  Section 9.1.10(b) of the Loan Agreement is amended and
restated in its entirety as follows:

 

“(b) the portion of the Borrowing Base comprising of Portfolio Investments of
the same Portfolio Company may not exceed ten percent (10%) of the Commitments;”

 

(j)                  Section 9.1.10(f) of the Loan Agreement is amended and
restated in its entirety as follows:

 

“(f) [reserved];”

 

(k)                Section 9.3.1 of the Loan Agreement is amended and restated
in its entirety as follows:

 

“9.3.1 Asset Coverage Ratio. Borrower shall maintain at all times an Asset
Coverage Ratio of not less than 1.75 to 1.00.”

 

(l)                  Section 12.2.1 of the Loan Agreement is amended and
restated in its entirety as follows:

 

“12.2.1 Permitted Participants; Effect. Any Lender may at any time, without the
consent of, or notice to, the Borrower or the Agent, sell participations to any
Person (other than a natural Person, or a holding company, investment vehicle or
trust for, or owned and operated for the primary benefit of, a natural Person,
or the Borrower or any of the Borrower’s Affiliates or Subsidiaries) (each, a
“Participant”) in all or a portion of such Lender’s rights and/or obligations
under this Agreement (including all or a portion of its Revolver Commitment
and/or the Loans owing to it); provided that (i) such Lender’s obligations under
this Agreement shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations,
and (iii) the Borrower, the Agent and Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender’s rights and
obligations under this Agreement. For the avoidance of doubt, each Lender shall
be responsible for the indemnity under Section VI of Exhibit D with respect to
any payments made by such Lender to its Participant(s). Each Lender shall be
solely responsible for notifying its Participants of any matters under the
Transaction Documents, and Agent and the other Lenders shall not have any
obligation or liability to any such Participant. A Participant that would be a
Foreign Lender if it were a Lender shall not be entitled to the benefits of
Section 5.10 unless Borrower agrees otherwise in writing.

 

 5 

 

 

Any agreement or instrument pursuant to which a Lender sells such a
participation shall provide that such Lender shall retain the sole right to
enforce this Agreement and to approve any amendment, modification or waiver of
any provision of this Agreement; provided that such agreement or instrument may
provide that such Lender will not, without the consent of the Participant, agree
to any amendment, modification or waiver described in Section 13.1.1(b) that
affects such Participant. The Borrower agrees that each Participant shall be
entitled to the benefits of Sections 3.7 and 5.10 (subject to the requirements
and limitations therein, including the requirements under Section 5.11 (it being
understood that the documentation required under Section 5.11 shall be delivered
to the participating Lender)) to the same extent as if it were a Lender and had
acquired its interest by assignment pursuant to Section 12.3; provided that such
Participant (A) agrees to be subject to the provisions of Sections 3.8 as if it
were an assignee under Section 12.3; and (B) shall not be entitled to receive
any greater payment under Sections 3.7 or 5.10, with respect to any
participation, than its participating Lender would have been entitled to
receive, except to the extent such entitlement to receive a greater payment
results from a Change in Law that occurs after the Participant acquired the
applicable participation. Each Lender that sells a participation agrees, at the
Borrower's request and expense, to use reasonable efforts to cooperate with the
Borrower to effectuate the provisions of Section 12.4 with respect to any
Participant. To the extent permitted by law, each Participant also shall be
entitled to the benefits of Section 10.4 as though it were a Lender; provided
that such Participant agrees to be subject to Section V on Exhibit D as though
it were a Lender. Each Lender that sells a participation shall, acting solely
for this purpose as a non-fiduciary agent of the Borrower, maintain a register
on which it enters the name and address of each Participant and the principal
amounts (and stated interest) of each Participant’s interest in the Loans or
other obligations under the Loan Documents (the “Participant Register”);
provided that no Lender shall have any obligation to disclose all or any portion
of the Participant Register (including the identity of any Participant or any
information relating to a Participant's interest in any commitments, loans,
letters of credit or its other obligations under any Loan Document) to any
Person except to the extent that such disclosure is necessary to establish that
such commitment, loan, letter of credit or other obligation is in registered
form under Section 5f.103-1(c) of the United States Treasury Regulations. The
entries in the Participant Register shall be conclusive absent manifest error,
and such Lender shall treat each Person whose name is recorded in the
Participant Register as the owner of such participation for all purposes of this
Agreement notwithstanding any notice to the contrary. For the avoidance of
doubt, the Agent (in its capacity as Agent) shall have no responsibility for
maintaining a Participant Register.”

 

 6 

 

 

(m)              Schedule 1 to the Loan Agreement is amended by deleting it in
its entirety and replacing it with the Schedule 1 attached hereto.

 

(n)                Exhibit E to the Loan Agreement is amended by deleting it in
its entirety and replacing it with the form of Exhibit E attached hereto as
Exhibit A.

 

4.                   Effect of Amendment. Except as set forth expressly herein,
all terms of the Loan Agreement, as amended hereby, and the other Transaction
Documents shall be and remain in full force and effect and shall constitute the
legal, valid, binding and enforceable obligations of the Borrower and the
Servicer to the Lenders and the Agent. The execution, delivery and effectiveness
of this Amendment shall not, except as expressly provided herein, operate as a
waiver of any right, power or remedy of the Agent or the Lenders under the Loan
Agreement, nor constitute a waiver of any provision of the Loan Agreement. This
Amendment shall constitute a Transaction Document for all purposes of the Loan
Agreement.

 

5.                   Conditions Precedent. This Amendment, and the New Lender’s
Revolver Commitment to make Loans under the Loan Agreement, shall become
effective as of such date (such date, the “Second Amendment Effective Date”)
that each of the following conditions are satisfied or specifically waived in
writing by Agent (with the consent of the Lenders):

 

(a)                Agent shall have received counterparts of this Amendment,
duly executed by the Borrower, the Servicer, the Agent, the Existing Lenders and
the New Lenders;

 

(b)                Borrower shall have executed and delivered to each New Lender
requesting a note pursuant to Section 2.1.2 of the Loan Agreement, a promissory
note evidencing Borrower’s obligations in respect of the Revolver Commitments of
such New Lender;

 

(c)                 Agent shall have received certificates, in form and
substance satisfactory to it, from a knowledgeable Senior Officer of Borrower
certifying that, after giving effect to this Amendment and the making of the
initial Loans after the Second Amendment Effective Date, (i) Borrower is
Solvent; (ii) no Default or Event of Default exists; (iii) the representations
and warranties set forth in Section 8 of the Loan Agreement are true and correct
in all material respects on the date hereof (except for representations and
warranties that expressly relate to an earlier date, and that any representation
or warranty which is subject to any materiality qualifier is true and correct in
all respects); and (iv) Borrower has complied with all agreements and conditions
to be satisfied by it under the Transaction Documents;

 

(d)                Agent shall have received a certificate of a duly authorized
officer of Borrower and Servicer, certifying (i) that attached copies of such
Person’s Organic Documents are true and complete, and in full force and effect,
without amendment except as shown, and that such Person is in good standing in
the applicable jurisdictions, with good standing certificates attached; (ii)
that an attached copy of resolutions authorizing execution and delivery of this
Amendment and the other Transaction Documents is true and complete, and that
such resolutions are in full force and effect, were duly adopted, have not been
amended, modified or revoked, and constitute all resolutions adopted with
respect to this credit facility; (iii) to the title, name and signature of each
Person authorized to sign the this Amendment and other Transaction Documents;
and (iv) that attached copies of Borrower’s Material Contracts are true and
complete, and in full force and effect, without amendment except as shown. Agent
may conclusively rely on this certificate until it is otherwise notified by
Borrower or Servicer in writing;

 

 7 

 

 

(e)                Agent shall have received a favorable written opinion of
counsel to Borrower and Servicer in form and substance satisfactory to Agent
covering, among other matters, (i) the enforceability of this Amendment, the
Loan Agreement as amended hereby and the other Transaction Documents, (ii) the
grant and perfection of security interests in the Collateral, and (iii) such
other matters as Agent may require in Agent’s sole discretion, as well as a
reliance letter in favor of the New Lender;

 

(f)                  Agent and each New Lender shall have received, at least one
Business Day prior to the Second Amendment Effective Date, of all documentation
and other information required by regulatory authorities under applicable “know
your customer” and anti-money laundering rules and regulations, including,
without limitation, the PATRIOT Act, in each case to the extent requested by the
Agent or the New Lender in writing at least two Business Days prior to the
Second Amendment Effective Date;

 

(g)                after giving effect to this Amendment, no Default or Event of
Default shall have occurred and be continuing or shall be caused by the
transactions contemplated by this Amendment;

 

(h)                after giving effect to this Amendment, the representations
and warranties of the Borrower and the Servicer set forth in this Amendment and
the other Loan Documents shall be true and correct in all material respects with
the same effect as if then made (except to the extent stated to relate to a
specific earlier date, in which case such representations and warranties shall
be true and correct in all material respects as of such earlier date); and

 

(i)                  the Borrower shall have paid all reasonable and documented
fees and expenses of Agent in connection with the negotiation, preparation,
execution and delivery of this Amendment and the Loan Documents (including,
without limitation, the fees and expenses of counsel to Agent) and all fees
payable under the Fee Letter of even date herewith between Borrower and Agent
and the Fee Letter of even date herewith between Borrower and each New Lender.

 

6.                   Representations and Warranties. The Borrower hereby
represents and warrants to the Agent and Lenders as follows:

 

(a)                The Amendment and the transactions contemplated herein are
within the Borrower’s organizational powers and have been duly authorized by all
necessary organizational actions and, if required, actions by equity holders.
The Amendment has been duly executed and delivered by the Borrower and
constitutes a legal, valid and binding obligation of the Borrower, enforceable
in accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting creditors’ rights generally
and subject to general principles of equity, regardless of whether considered in
a proceeding in equity or at law.

 

(b)                The Amendment (i) does not require any consent or approval
of, registration or filing with, or any other action by, any governmental
authority, except such as have been obtained or made and are in full force and
effect, (b) will not violate any law applicable to the Borrower or any
Subsidiary, (c) will not violate or result in a default under any indenture,
agreement or other instrument binding upon the Borrower or any Subsidiary or the
assets of the Borrower or any Subsidiary, or give rise to a right thereunder to
require any payment to be made by the Borrower or any Subsidiary, and (d) will
not result in the creation or imposition of any Lien on any asset of the
Borrower or any Subsidiary, except Liens created pursuant to the Transaction
Documents.

 

 8 

 

 

(c)                 All of the representations and warranties contained in
Section 8 of the Loan Agreement are correct in all material respects on and as
of the date hereof as though made on and as of such date (except for
representations and warranties that expressly relate to an earlier date, and
that any representation or warranty which is subject to any materiality
qualifier is true and correct in all respects).

 

7.                   Reaffirmation. Servicer, in its capacity as the “Pledgor”
under and as defined in the Pledge Agreement, hereby (a) consents to the
execution and delivery by the Borrower of this Amendment and ratifies and
confirms the terms of the Pledge Agreement with respect to the Obligations now
or hereafter outstanding under the Loan Agreement as amended hereby, (b)
acknowledges and agrees that all obligations of the Borrower owing to the New
Lenders under the Loan Agreement and the other Transaction Documents, as amended
hereby, are included in the "Obligations," as such term is used in the Pledge
Agreement, and are secured by the Pledge Agreement, and (c) acknowledges that,
notwithstanding anything to the contrary contained herein or in any other
document evidencing any indebtedness of the Borrower to the Agent or the Lenders
or any other obligation of the Borrower, or any actions now or hereafter taken
by the Agent or the Lenders with respect to any obligation of the Borrower, the
Pledge Agreement is and shall continue to be in full force and effect in
accordance with its terms.

 

8.                   References. All references in the Loan Agreement to “this
Agreement” shall be deemed to refer to the Loan Agreement as amended hereby; and
any and all references in the Transaction Documents to the Loan Agreement shall
be deemed to refer to the Loan Agreement as amended hereby.

 

9.                   No Waiver. The execution of this Amendment and any
documents related hereto and the acceptance of all other agreements and
instruments related hereto shall not be deemed to be a waiver of any Default or
Event of Default under the Loan Agreement or a waiver of any breach, default or
event of default under any Transaction Document or other document held by
Lenders, whether or not known to Lenders and whether or not existing on the date
of this Amendment.

 

10.               Release. The Borrower and Servicer each hereby absolutely and
unconditionally releases and forever discharges Agent and Lenders, and any and
all participants, parent corporations, subsidiary corporations, affiliated
corporations, insurers, indemnitors, successors and assigns thereof, together
with all of the present and former directors, officers, agents and employees of
any of the foregoing, from any and all claims, demands or causes of action of
any kind, nature or description, whether arising in law or equity or upon
contract or tort or under any state or federal law or otherwise, which the
Borrower or Servicer has had, now has or has made claim to have against any such
person for or by reason of any act, omission, matter, cause or thing whatsoever
arising from the beginning of time to and including the date of this Amendment,
whether such claims, demands and causes of action are matured or unmatured or
known or unknown.

 

11.               Costs and Expenses. The Borrower hereby reaffirms its
agreement under the Loan Agreement to pay or reimburse Agent on demand for all
costs and expenses incurred by Agent in connection with the Transaction
Documents, including without limitation all reasonable fees and disbursements of
legal counsel. Without limiting the generality of the foregoing, the Borrower
specifically agrees to pay all fees and disbursements of counsel to Agent for
the services performed by such counsel in connection with the preparation of
this Amendment and the documents and instruments incidental hereto. Borrower
hereby agrees that Lenders may, at any time or from time to time in its sole
discretion and without further authorization by Borrower, make a loan to
Borrower under the Loan Agreement, or apply the proceeds of any loan, for the
purpose of paying any such fees, disbursements, costs and expenses.

 

 9 

 

 

12.               Counterparts. This Amendment may be executed in counterparts,
each of which shall constitute an original, but all of which when taken together
shall constitute a single contract. Delivery of a signature page of this
Amendment by telecopy or other electronic means (including, but not limited to,
in “tif” or ‘pdf” format) shall be effective as delivery of a manually executed
counterpart of such agreement.

 

13.               Choice of Law and Venue. With limiting the applicability of
any other provisions of the Loan Agreement or any other Transaction Document,
the terms and provisions set forth in Section 13.13 and 13.14 of the Loan
Agreement are expressly incorporated herein by reference.

 

 

 

[Signature Page Follows]

 

 10 

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed and delivered by their respective authorized officers as of the day and
year first above written.

 

ATTEST:   BORROWER:           GREAT LAKES KCAP FUNDING I, LLC       [SEAL]      
  By:       Name: Dan Gilligan     Title: Manager                   ATTEST:  
SERVICER:           KCAP FINANCIAL, INC.       [SEAL]         By:       Name:
Dan Gilligan     Title: Vice President

 

 

 

Signature Page – Second Amendment to Loan and Security Agreement

 

 

  

  AGENT AND LENDERS:       CADENCE BANK N.A., as Agent and a Lender          
By:     Name: Megan Enlow   Title: Director

 

 

 

Signature Page – Second Amendment to Loan and Security Agreement

 

 

  CIBC BANK USA,   as a Lender and as Documentation Agent           By:    
Name:   Title:

 

 

Signature Page – Second Amendment to Loan and Security Agreement

 

 

 

  WOODFOREST NATIONAL BANK,   as Exiting Lender           By:   Name:   Title:

 

Signature Page – Second Amendment to Loan and Security Agreement

 

 

  CONGRESSIONAL BANK, as a New Lender           By:   Name:   Title:      
Address for Notices:   ________________   ________________

 

 

Signature Page – Second Amendment to Loan and Security Agreement

 

 

 

  BANCALLIANCE INC., as a New Lender       By: Alliance Partners, a wholly owned
subsidiary   of Congressional Bank, as its attorney in fact       By:     Name:
  Title:           Address for Notices:   ________________   ________________

 

  

 

Signature Page – Second Amendment to Loan and Security Agreement

 

 

 

  HITACHI CAPITAL AMERICA CORP.,   as a New Lender           By:     Name:  
Title:       Address for Notices:       800 W. University Drive   Rochester,
MI  48307

 

Signature Page – Second Amendment to Loan and Security Agreement

 

 

EXHIBIT A

 

Form of Borrowing Base Certificate

 

1. KCAP Funding I, LLC         Borrowing Base Certificate        Date as of: 
                        Gross Collateral        Market Value Adjustment       
Contributed Assets @ FMV  $0.00                            Less: ineligibles 
        a The Advance Rate applicable to the aggregate Value of all Eligible
Portfolio Investments in their entirety shall be 0% at any time when the
Borrowing Base is composed entirely of Eligible Portfolio Investments issued by
fewer than 8 different issuers;          B The portion of Borrowing Base
comprising of Portfolio Investments of the same Portfolio Company may not exceed
ten percent (10%) of the Commitments;          c Not more than 15% of the
Borrowing Base may consist of Portfolio Investments having a maturity date of
greater than eight (8) years from the origination or closing date of such
Portfolio Investment;          d Eligible Portfolio Investments that are not
Cash, Cash Equivalents, Performing First Lien Bank Loans or Performing Last Out
Loans shall be excluded from the Borrowing Base to the extent such Eligible
Portfolio Investments would exceed, in the aggregate, 35% of the Borrowing
Base;          e Eligible Portfolio Investments that are Revolving Loans and
Delayed Draw Loans shall be excluded from the Borrowing Base to the extent such
Eligible Portfolio Investments would exceed, in the aggregate, 15% of the
Borrowing Base;          f [reserved];          g Eligible Portfolio Investments
that are Covenant Lite Loans (including, but not limited to, Covenant Lite Loans
subject to clause (h) below) shall be excluded from the Borrowing Base to the
extent such Eligible Portfolio Investments would exceed, in the aggregate, 40%
of the Borrowing Base;          h Eligible Portfolio Investments that (i) are
Covenant Lite Loans and (ii) for which the applicable Portfolio Company had
EBITDA of less than $50,000,000 for the 12 month period most recently ended
shall be excluded from the Borrowing Base to the extent such Eligible Portfolio
Investments would exceed, in the aggregate, 10% of the Borrowing Base;         
i Eligible Portfolio Investments that are Unitranche Loans shall be excluded
from the Borrowing Base to the extent such Eligible Portfolio Investments would
exceed, in the aggregate, 15% of the Borrowing Base;          j Eligible
Portfolio Investments which are in the same Industry Classification Group shall
be excluded from the Borrowing Base to the extent such Eligible Portfolio
Investments would exceed, in the aggregate, 25% of the Borrowing Base; and      
   k. Other ineligibles.          Total Ineligibles  $-                 Total
Eligible       $-            Blended Advance Rate                     Borrowing
Base       $-            Loan Roll Forward:                     Beginning Loan
Balance (as of previous Borrowing Base Report)                     Collections
since prior report (input as negative)                     Advances since prior
report                     New Loan Balance       $            Maximum Facility
Amount       $80,000,000.00            Excess Availability       $            As
of the date of this Certificate, no Event of Default exists or has occurred and
is continuing. Borrower acknowledges that the Loans by Lender to Borrower are
based upon Lender's reliance on the information contained herein and all
representations and warranties with respect to US Collateral in the Loan
Agreement are applicable to the US Collateral included in this Certificate. The
reliance by Lender on this Certificate should not be deemed to limit the right
of Lender to establish or revise criteria of eligibility or Availability
Reserves or other Reserves or otherwise limit, impair, or affect in any manner
the rights of Lender under the Loan Agreement. In the event of any conflict
between the determination of Lender of the amount of the Loans to Borrower in
accordance with the terms of the Loan Agreement and the determination by
Borrower of such amounts, the determination of Lender shall govern. All
capitalized terms used in this Certificate shall have the meaning assigned to
them in the Loan Agreement.         

   

 

 

 

SCHEDULE 1

to

Loan and Security Agreement

 

 

COMMITMENTS OF LENDERS

  

 

Lender

 

Revolver Commitment

 

Total Commitments

Cadence Bank, N.A. $20,000,000 $20,000,000 CIBC Bank USA $15,000,000 $15,000,000
Congressional Bank $10,000,000 $10,000,000 BancAlliance Inc. $2,500,000
$2,500,000 Hitachi Capital America Corp. $10,000,000 $10,000,000 TOTAL
$57,500,000 $57,500,000