Execution Version 

Exhibit 10.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

COLLATERAL MANAGEMENT AGREEMENT

 

dated as of September 29, 2016

 

by and between

 

GARRISON FUNDING 2016-2 LTD.
as Issuer

 

and

 

GARRISON CAPITAL INC.
as Collateral Manager

 

 

 

 

 

 

 

 

 

 
 

 

TABLE OF CONTENTS

 

  Page Section 1.   Definitions; Rules of Construction. 1 Section 2.   General
Duties and Authority of the Collateral Manager. 4 Section 3.   Purchase and Sale
Transactions; Brokerage. 10 Section 4.   Additional Activities of the Collateral
Manager. 11 Section 5.   Certain Conflicts of Interest. 14 Section 6.   Records;
Confidentiality. 16 Section 7.   Obligations of Collateral Manager. 17 Section
8.   Compensation. 18 Section 9.   Benefit of the Agreement. 20 Section
10.   Limits of Collateral Manager Responsibility. 20 Section 11.   No Joint
Venture. 24 Section 12.   Term; Termination. 24 Section 13.   Assignments. 26
Section 14.   Removal for Cause. 27 Section 15.   Obligations of Resigning or
Removed Collateral Manager. 30 Section 16.   Representations and Warranties. 31
Section 17.   Limited Recourse; No Petition. 35 Section 18.   Notices. 35
Section 19.   Binding Nature of Agreement; Successors and Assigns. 36 Section
20.   Entire Agreement; Amendment. 37 Section 21.   Governing Law. 37 Section
22.   Submission to Jurisdiction. 37 Section 23.   Waiver of Jury Trial. 38
Section 24.   Conflict with the Indenture. 38 Section 25.   Subordination;
Assignment of Agreement. 38 Section 26.   Indulgences Not Waivers. 38 Section
27.   Costs and Expenses. 38 Section 28.   Third Party Beneficiary. 39 Section
29.   Titles Not to Affect Interpretation. 39

 

 

- i -

 

TABLE OF CONTENTS

(continued)

 

  Page Section 30.   Execution in Counterparts. 39 Section 31.   Provisions
Separable. 39 Section 32.   Gender. 40 Section 33.   Communications with Rating
Agencies. 40

 

Schedule I Investment Procedures

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

- ii -

 

 

COLLATERAL MANAGEMENT AGREEMENT

 

This Collateral Management Agreement (as amended, supplemented or otherwise
modified from time to time, this “Agreement”), dated as of September 29, 2016,
is entered into by and between Garrison Funding 2016-2 Ltd., an exempted company
incorporated with limited liability under the laws of the Cayman Islands
(together with successors and assigns permitted hereunder, the “Issuer”), and
Garrison Capital Inc., a Delaware corporation (together with its successors and
permitted assigns, the “Collateral Manager”).

 

WITNESSETH:

 

WHEREAS, the Notes (as defined in the Indenture) will be issued pursuant to an
Indenture dated as of the date hereof (the “Indenture”), among the Issuer,
Garrison Funding 2016-2 LLC, a limited liability company formed under the laws
of the State of Delaware, as co-issuer (the “Co-Issuer”), and Deutsche Bank
Trust Company Americas, as trustee (together with any successor trustee
permitted under the Indenture, the “Trustee”);

 

WHEREAS, the Issuer intends to pledge all Collateral Obligations and the other
Assets, as set forth in the Indenture, to the Trustee as security for the
Secured Parties under the Indenture;

 

WHEREAS, the Issuer desires to appoint Garrison Capital Inc. as the Collateral
Manager to provide the services described herein and Garrison Capital Inc.
desires to accept such appointment;

 

WHEREAS, the Indenture authorizes the Issuer to enter into this Agreement,
pursuant to which the Collateral Manager agrees to perform, on behalf of the
Issuer, certain investment management duties with respect to the acquisition,
administration and disposition of Assets in the manner and on the terms set
forth herein and to perform such additional duties as are consistent with the
terms of this Agreement and the Indenture as the Issuer may from time to time
reasonably request; and

 

WHEREAS, the Collateral Manager has the capacity to provide the services
required hereby and is prepared to perform such services upon the terms and
subject to the conditions set forth herein;

 

NOW, THEREFORE, in consideration of the agreements herein set forth, the parties
hereto agree as follows:

 

Section 1.                Definitions; Rules of Construction.

 

(a)                As used in this Agreement:

 

“Advisers Act” shall mean the Investment Advisers Act of 1940, as amended.

 

 
 

“Agreement” shall have the meaning set forth in the preamble.

 

“Cause” shall have the meaning set forth in Section 14(a).

 

“Client” means, with respect to any specified Person, any Person to whom, or
account for which, the specified Person provides investment management services
or investment advice.

 

“Co-Issuer” shall have the meaning set forth in the recitals hereto.

 

“Collateral Management Fee” shall have the meaning set forth in Section 8(a).

 

“Collateral Manager” shall have the meaning set forth in the preamble.

 

“Collateral Manager Breaches” shall have the meaning set forth in Section 10(a).

 

“Collateral Manager Indemnified Party” shall have the meaning set forth in
Section 10(b).

 

“Collateral Manager Indemnifying Party” shall have the meaning set forth in
Section 10(b).

 

“Collateral Manager Information” shall have the meaning set forth in Section
16(b)(v).

 

“Collateral Manager Notes” shall mean any Notes owned by the Collateral Manager,
an Affiliate thereof, or any account, fund, client or portfolio established and
controlled by the Collateral Manager or an Affiliate thereof or for which the
Collateral Manager or an Affiliate thereof acts as the investment adviser or
with respect to which the Collateral Manager or an Affiliate thereof exercises
discretionary authority.

 

“Cumulative Deferred Collateral Management Fee” shall have the meaning set forth
in Section 8(d).

 

“Cumulative Deferred Senior Collateral Management Fee” shall have the meaning
set forth in Section 8(d).

 

“Cumulative Deferred Subordinated Collateral Management Fee” shall have the
meaning set forth in Section 8(d).

 

“Current Deferred Collateral Management Fee” shall have the meaning set forth in
Section 8(d).

 

“Current Deferred Senior Collateral Management Fee” shall have the meaning set
forth in Section 8(d).

 

“Current Deferred Subordinated Collateral Management Fee” shall have the meaning
set forth in Section 8(d).

 

 2 

 

“Expenses” shall have the meaning set forth in Section 10(b).

 

“Fee Basis Amount” means, for any Payment Date, the sum, without duplication, of
(i) the Daily Average Collateral Obligation Commitment Amount for such Payment
Date, (ii) the daily average balance of the amounts on deposit in all Accounts
(including Eligible Investments therein) representing Principal Proceeds for the
Collection Period related to such Payment Date and (iii) the aggregate amount of
all Principal Financed Accrued Interest.

 

“Final Offering Circular” shall mean the Offering Circular, dated as of
September 26, 2016, with respect to the Secured Notes, as amended or
supplemented.

 

“Force Majeure Event” shall have the meaning set forth in Section 10(j).

 

“Garrison Entities” shall have the meaning set forth in Section 14(a)(iii).

 

“Indemnified Party” shall have the meaning set forth in Section 10(b).

 

“Indemnifying Party” shall have the meaning set forth in Section 10(b).

 

“Indenture” shall have the meaning set forth in the recitals hereto.

 

“Instrument of Acceptance” shall have the meaning set forth in Section 12(c).

 

“Investment Committee” shall have the meaning set forth is Schedule I.

 

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

 

“Investment Procedures” shall have the meaning set forth in Schedule I.

 

“Issuer” shall have the meaning set forth in the preamble.

 

“Issuer Indemnified Party” shall have the meaning set forth in Section 10(b).

 

“Issuer Indemnifying Party” shall have the meaning set forth in Section 10(b).

 

“Losses” shall have the meaning set forth in Section 10(b).

 

“Material Adverse Effect” means, with respect to any event or circumstance, a
material adverse effect on (a) the business, financial condition (other than the
performance of the Assets) or operations of the Issuer, taken as a whole, (b)
the validity or enforceability of the Indenture, this Agreement or the Issuer’s
Organizational Instruments or (c) the existence, perfection, priority or
enforceability of the Trustee’s lien on the Assets.

 

“Organizational Instruments” shall mean the partnership agreement, in the case
of a partnership, or the certificate of formation and limited liability company
agreement (or the comparable documents for the applicable jurisdiction), in the
case of a limited liability company, or the certificate of incorporation and
memorandum and articles of association (or the comparable documents for the
applicable jurisdiction), in the case of a corporation.

 

 3 

 

“Principal Transaction” shall have the meaning set forth in Section 5(a).

 

“Proceedings” shall have the meaning set forth in Section 22.

 

“Related Person” means, with respect to any Person, the direct or indirect
owners of the equity interests therein, directors, officers, members, partners,
employees, managers, agents and professional advisors thereof, including, with
respect to the Collateral Manager, any investment adviser in which the
Collateral Manager or any of its Affiliates has an economic or ownership
interest.

 

“Section 28(e)” shall have the meaning set forth in Section 3(b).

 

“Standard of Care” shall have the meaning set forth in Section 2(b).

 

“Statement of Cause” shall have the meaning set forth in Section 14(a).

 

“Sub-Adviser” shall have the meaning set forth in Section 6.

 

“Sub-Collateral Management Agreement” shall have the meaning set forth in
Section 6.

 

“Termination Notice” shall have the meaning set forth in Section 14(a).

 

“Transaction” shall mean any action taken by the Collateral Manager on behalf of
the Issuer with respect to the Assets, including, without limitation, (i)
selecting the Collateral Obligations and Eligible Investments to be acquired by
the Issuer, (ii) investing and reinvesting the Assets, (iii) amending, waiving
and/or taking any other action commensurate with managing the Assets, (iv)
instructing the Trustee with respect to any acquisition, disposition or tender
of, or Offer with respect to, a Collateral Obligation, Equity Security or
Eligible Investment by the Issuer and (v) any of the services set forth in
Section 2.

 

“Trustee” shall have the meaning set forth in the recitals hereto.

 

(b)       Capitalized terms used but not otherwise defined herein shall have the
respective meanings assigned thereto in the Indenture and the rules of
construction set forth in Section 1.2 of the Indenture are hereby incorporated
by reference herein.

 

Section 2.                General Duties and Authority of the Collateral
Manager.

 

(a)                Subject to Sections 2(b), 2(d), 5 and 10 and to the
applicable provisions of the Indenture, the Collateral Manager agrees, and is
hereby authorized, to provide the following services to the Issuer:

 

 4 

 

(i)                 select the Collateral Obligations and Eligible Investments
to be acquired and select the Collateral Obligations, Equity Securities and
Eligible Investments to be sold or otherwise disposed of by the Issuer;

 

(ii)               invest and reinvest the Assets in accordance with the
Indenture, the Issuer’s Organizational Instruments, investment guidelines and
applicable law;

 

(iii)             instruct the Trustee with respect to any acquisition,
disposition, or tender of, or Offer with respect to, a Collateral Obligation,
Equity Security, Eligible Investment or other assets received in respect thereof
in the open market or otherwise by the Issuer; and

 

(iv)             perform all other tasks and take all other actions that are
specified in the Indenture, the Collateral Administration Agreement or this
Agreement.

 

Notwithstanding anything in this Agreement or the Transaction Documents to the
contrary, in each instance in which notice or any other information must be made
available to S&P for purposes of satisfying the Rating Agency Condition, or as
otherwise required under any Transaction Document, such notice or information
may only be made available by the Collateral Manager, unless otherwise agreed to
in writing by the Collateral Manager.

 

The Collateral Manager shall, and is hereby authorized to, perform its
obligations hereunder and under the Indenture in a manner which is consistent
with the terms hereof and of the Indenture.

 

Notwithstanding anything to the contrary in this Section 2(a), none of the
services performed by the Collateral Manager shall result in or be construed as
resulting in an obligation to perform any of the following: (i) the Collateral
Manager acting repeatedly or continuously as an intermediary in securities for
the Issuer; (ii) the Collateral Manager providing investment banking services to
the Issuer; or (iii) the Collateral Manager having direct contact with, or
actively soliciting or finding outside investors to invest in the Issuer.

 

(b)               The Collateral Manager shall have the power to execute and
deliver all necessary and appropriate documents and instruments on behalf of the
Issuer in connection with performing its obligations set forth herein. Except as
may otherwise be expressly provided in this Agreement or the Indenture, the
Collateral Manager shall in rendering its services as Collateral Manager use a
degree of skill and attention no less than that which (i) would be exercised by
a prudent institutional portfolio manager in connection with the servicing and
administration of similar assets under similar circumstances and (ii) each of
the Collateral Manager and its Affiliates exercises with respect to comparable
assets that it manages for itself and for others having similar investment
objectives and restrictions in accordance with its existing practices and
procedures relating to assets of the nature and character of the Assets, except
as expressly provided otherwise in this Agreement or the Indenture (such
standard of care, the “Standard of Care”); provided that the Collateral Manager
shall not be liable for any loss or damages resulting from its failure to
satisfy the foregoing standard of care except to the extent such failure would
result in liability pursuant to Section 10(a) hereof. Subject to the immediately
preceding sentence, the Collateral Manager shall follow its customary policies,
standards and procedures in performing its duties hereunder.

 

 5 

 

The Collateral Manager agrees to implement the Investment Procedures for the
review and approval process for the establishment of portfolio management
parameters and the acquisition of Assets as described in Schedule I.

 

(c)                Subject to the provisions concerning its general duties and
obligations as set forth in paragraphs (a) and (b) above and the terms of the
Indenture, the Collateral Manager shall provide, and is hereby authorized to
provide, the following services to the Issuer:

 

(i)                 The Collateral Manager shall perform the investment-related
duties and functions (including, without limitation, the furnishing of Issuer
Orders and Authorized Officer’s certificates) as are expressly required
hereunder or under the Indenture with regard to acquisitions, sales or other
dispositions of Collateral Obligations, Equity Securities, Eligible Investments
and other securities and assets permitted to be acquired or sold under, and
subject to, the Indenture (including any proceeds received by way of Offers,
workouts and restructurings on assets owned by the Issuer) and shall comply with
the Eligibility Criteria and other requirements in the Indenture.

 

The Collateral Manager shall have no obligation to perform any other duties
other than as expressly specified herein or in the Indenture or in any other
Transaction Document.

 

The Issuer hereby irrevocably (except as provided below) appoints the Collateral
Manager as its true and lawful agent and attorney-in-fact (with full power of
substitution) in its name, place and stead and at its expense, in connection
with the performance of its duties provided for in this Agreement, in the
Indenture and in any other Transaction Document, including, without limitation,
the following powers: (A) to give or cause to be given any necessary receipts or
acquittance for amounts collected or received in the performance of its
obligations under the Indenture and hereunder, (B) to make or cause to be made
all necessary transfers of the Collateral Obligations, Equity Securities and
Eligible Investments in connection with any acquisition, sale or other
disposition made pursuant hereto and the Indenture, (C) to execute (under hand,
under seal or as a deed) and deliver or cause to be executed and delivered on
behalf of the Issuer all necessary or appropriate bills of sale, assignments,
agreements and other instruments in connection with any such acquisition, sale
or other disposition and (D) to execute (under hand, under seal or as a deed)
and deliver or cause to be executed and delivered on behalf of the Issuer any
consents, votes, proxies, waivers, notices, amendments, modifications,
agreements, instruments, orders or other documents in connection with or
pursuant to this Agreement or the Indenture or any other Transaction Document
and relating to any Collateral Obligation, Equity Security or Eligible
Investment.

 

The Issuer hereby ratifies and confirms all that such attorney-in-fact (or any
substitute) shall lawfully do hereunder and pursuant hereto and authorizes such
attorney-in-fact to exercise full discretion and act for the Issuer in the same
manner and with the same force and effect as the officers of the Issuer might or
could do in respect of the actions taken by such attorney-in-fact (or any
substitute), as well as in respect of all other things the Collateral Manager
deems necessary or incidental to the furtherance or conduct of the Collateral
Manager’s services under this Agreement or under the Indenture or under any
other Transaction Document, subject in each case to the applicable terms of this
Agreement, the Indenture and each other Transaction Document.

 

 6 

 

The Issuer hereby authorizes such attorney-in-fact, in its sole discretion (but
subject to applicable law and the provisions of this Agreement and the
Indenture), to take all actions that it considers reasonably necessary and
appropriate in respect of the Assets, this Agreement and the other Transaction
Documents. Nevertheless, if so requested by the Collateral Manager or by a
purchaser of any Collateral Obligation, Equity Security or Eligible Investment,
the Issuer shall ratify and confirm any such sale or other disposition by
executing and delivering to the Collateral Manager or such purchaser all proper
bills of sale, assignments, releases, powers of attorney, proxies, dividends,
other orders and other instruments as may reasonably be designated in any such
request.

 

Except as otherwise set forth and provided for herein, this grant of power of
attorney is coupled with an interest, and it shall survive and not be affected
by the subsequent winding-up or bankruptcy of the Issuer.

 

Notwithstanding anything herein to the contrary, the appointment herein of the
Collateral Manager as the Issuer’s agent and attorney-in-fact shall
automatically cease and terminate upon the effective date of any termination of
this Agreement, the resignation of the Collateral Manager pursuant to Section 12
or any removal of the Collateral Manager pursuant to Section 14.

 

Each of the Collateral Manager and the Issuer shall take such other actions, and
furnish such certificates, opinions and other documents, as may be reasonably
requested by the other party hereto in order to effectuate the purposes of this
Agreement and to facilitate compliance with applicable laws and regulations and
the terms of this Agreement, the Indenture and each other Transaction Document.

 

(ii)               The Collateral Manager shall negotiate on behalf of the
Issuer with prospective originators, sellers or purchasers of Collateral
Obligations or Eligible Investments as to the terms relating to the acquisition,
sale or other dispositions thereof.

 

(iii)             Subject to any applicable terms of the Collateral
Administration Agreement, the Collateral Manager shall monitor the Assets on
behalf of the Issuer on an ongoing basis and shall provide or cause to be
provided to the Issuer all reports, schedules and other data reasonably
available to the Collateral Manager that the Issuer is required to prepare and
deliver or cause to be prepared and delivered under the Indenture, in such forms
and containing such information required thereby, in reasonably sufficient time
for such required reports, schedules and data to be reviewed and delivered by or
on behalf of the Issuer to the parties entitled thereto under the Indenture.

 

 7 

 

The Collateral Manager shall be entitled to rely upon, and shall not incur any
liability for relying upon, any notice, request, certificate, consent,
statement, instrument, document or other writing reasonably believed by it to be
genuine and to have been signed or sent by a Person that the Collateral Manager
has no reason to believe is not duly authorized. The Collateral Manager also may
rely upon any statement made to it orally or by telephone and made by a Person
the Collateral Manager has no reason to believe is not duly authorized, and
shall not incur any liability for relying thereon. The Collateral Manager is
entitled to rely on any other information furnished to it by third parties that
it reasonably believes in good faith to be genuine.

 

(iv)             The Collateral Manager, on behalf of the Issuer, shall be
responsible for obtaining, to the extent reasonably practicable and to the
extent such information is available to it, any information concerning whether a
Collateral Obligation has become a Defaulted Obligation, a Current Pay
Obligation, a Credit Risk Obligation or a Credit Improved Obligation. In
connection with the acquisition of any Collateral Obligation, the Collateral
Manager shall ensure that the Origination Requirement is satisfied.

 

(v)               The Collateral Manager may, subject to and in accordance with
the Indenture, as agent of the Issuer and on behalf of the Issuer, direct the
Trustee to take, or take on behalf of the Issuer, as applicable, any of the
following actions with respect to a Collateral Obligation, Equity Security or
Eligible Investment (as applicable):

 

(A)             purchase or otherwise acquire such Collateral Obligation, Equity
Security or Eligible Investment;

 

(B)              retain such Collateral Obligation, Equity Security or Eligible
Investment;

 

(C)              sell or otherwise dispose of such Collateral Obligation, Equity
Security or Eligible Investment (including any assets received by way of Offers,
workouts and restructurings on assets owned by the Issuer) in the open market or
otherwise;

 

(D)             if applicable, tender such Collateral Obligation, Equity
Security or Eligible Investment;

 

(E)              if applicable, consent to or refuse to consent to any proposed
amendment, modification, restructuring, exchange, waiver or Offer and give or
refuse to give any notice or direction;

 

(F)               retain or dispose of any securities or other property (if
other than cash) received by the Issuer;

 

(G)             call or waive any default with respect to any Defaulted
Obligation;

 

(H)             vote to accelerate the maturity of any Defaulted Obligation;

 

 8 

 

(I)                participate in a committee or group formed by creditors of an
Obligor or an issuer under a Collateral Obligation, Eligible Investment or
Equity Security;

 

(J)                after or in connection with the payment in full of all
amounts owed under the Secured Notes and the termination without replacement of
the Indenture or in connection with any redemption of the Notes, advise the
Issuer as to when, in the view of the Collateral Manager, it would be in the
best interest of the Issuer to liquidate all or any portion of the Issuer’s
investment portfolio and, if applicable, after discharge of the Indenture,
render such assistance as may be reasonably necessary or reasonably required by
the Issuer in connection with such liquidation or any actions necessary to
effectuate a redemption of the Notes;

 

(K)             advise and assist the Issuer with respect to the valuation of
the Assets, to the extent required or permitted by the Indenture;

 

(L)              provide strategic and financial planning advice (including
advice on utilization of assets) and prepare financial statements and other
similar reports; and

 

(M)            exercise any other rights or remedies with respect to such
Collateral Obligation, Equity Security or Eligible Investment as provided in the
Underlying Instruments of the Obligor or issuer under such Assets or the other
documents governing the terms of such Assets or take any other action consistent
with the terms of this Agreement or of the Indenture which the Collateral
Manager reasonably determines to be in the best interests of the Issuer.

 

(vi)             The Collateral Manager may:

 

(A)             retain accounting, tax, counsel and other professional services
on behalf of the Issuer as may be needed by the Issuer; and

 

(B)              consult on behalf of the Issuer with S&P at such times as may
be reasonably requested thereby and provide S&P with any information reasonably
requested in connection with its monitoring of the acquisition and disposition
of Collateral Obligations and the maintenance of its ratings of the Secured
Notes.

 

(vii)           In connection with the purchase of any Collateral Obligation by
the Issuer, the Collateral Manager shall prepare, on behalf of the Issuer, the
information required to be delivered to the Trustee pursuant to the Indenture.

 

(d)               In performing its duties hereunder and when exercising its
discretion and judgment in connection with any transactions involving the
Assets, the Collateral Manager shall carry out any reasonable written directions
of the Issuer for the purpose of the Issuer’s compliance with its Organizational
Instruments and the Indenture and the other Transaction Documents; provided that
such directions are not inconsistent with any provision of this Agreement or the
Indenture by which the Collateral Manager is bound.

 

 9 

 

(e)                In providing services hereunder, the Collateral Manager may,
without the consent of any party, employ third parties, including, without
limitation, its Affiliates, to render advice (including investment advice), to
provide services to arrange for trade execution and otherwise provide assistance
to the Issuer or the Collateral Manager and to perform any of its duties
hereunder; provided that the Collateral Manager shall not be relieved of any of
its duties hereunder regardless of the performance of any such duties by third
parties, including Affiliates.

 

(f)                The Collateral Manager shall not be bound to comply with any
amendment or supplement to the Indenture until it has received a copy of any
such amendment or supplement from the Issuer or the Trustee and, if such
amendment or supplement, as described in the next sentence, requires the
Collateral Manager’s consent, shall have consented thereto in writing and until
such amendment or supplement is in fact validly executed and enforceable. The
Issuer agrees that it shall not permit to become effective any amendment or
supplement to the Indenture that affects the obligations or rights of the
Collateral Manager in any manner including, without limitation, (i) modifying
the restrictions on the acquisition and disposition of Collateral Obligations or
the definition of “Collateral Obligation,” (ii) expanding or restricting the
Collateral Manager’s discretion or (iii) affecting the amount or priority of any
fees or other amounts payable to the Collateral Manager in any manner unless, in
each case, the Collateral Manager has been given prior written notice of such
amendment or supplement and has consented thereto in writing.

 

Section 3.                Purchase and Sale Transactions; Brokerage.

 

(a)                The Collateral Manager, subject to and in accordance with the
Indenture, hereby agrees that it shall cause any Transaction to be conducted on
terms and conditions negotiated on an arm’s-length basis and in accordance with
applicable law.

 

(b)               The Collateral Manager will seek to obtain the best execution
(but shall have no obligation to obtain the lowest prices available) for all
orders placed with respect to any Transaction, in a manner permitted by law and
in a manner it believes to be in the best interests of the Issuer. Subject to
the preceding sentence, the Collateral Manager may, in the allocation of
business, select brokers and/or dealers with whom to effect trades on behalf of
the Issuer and may open cash trading accounts with such brokers and dealers
(provided that none of the Assets may be credited to, held in or subject to the
lien of the broker or dealer with respect to any such account). In addition,
subject to the first sentence of this paragraph, the Collateral Manager may, in
the allocation of business, take into consideration research and other brokerage
services furnished to the Collateral Manager or its Affiliates by brokers and
dealers which are not Affiliates of the Collateral Manager and furnished, in the
Collateral Manager’s good faith belief, in compliance with Section 28(e) of the
Securities Exchange Act of 1934, as amended (“Section 28(e)”) or, if Section
28(e) is not applicable, in compliance with the provisions set forth therein.
Such services may be used by the Collateral Manager in connection with its other
advisory activities or investment operations. The Collateral Manager may
aggregate sales and purchase orders placed with respect to the Assets with
similar orders being made simultaneously for other Clients of the Collateral
Manager or of Affiliates of the Collateral Manager, if in the Collateral
Manager’s reasonable judgment such aggregation shall result in an overall
economic benefit to the Issuer, taking into consideration the advantageous
selling or purchase price, brokerage commission or other expenses, as well as
the availability of such Assets or opportunity for sale on any other basis. In
accounting for such aggregated order price, commissions and other expenses may
be apportioned on a weighted average basis. When a Transaction occurs as part of
any aggregate sales or purchase orders, the objective of the Collateral Manager
will be to allocate the executions among the Clients in an equitable manner and
in accordance with the internal policies and procedures of the Collateral
Manager (as the same may be amended from time to time) and applicable law.

 

 10 

 

(c)                The Issuer acknowledges and agrees that (i) the determination
by the Collateral Manager of any benefit to the Issuer will be subjective and
will represent the Collateral Manager’s evaluation at the time that the Issuer
will be benefited by relatively better purchase or sales prices, lower brokerage
commissions, lower transaction costs and expenses and beneficial timing of
transactions or any combination of any of these and/or other factors and (ii)
the Collateral Manager shall be fully protected with respect to any such
determination to the extent the Collateral Manager acts in accordance with
Section 2(b). The Issuer acknowledges that, on the Closing Date, the Collateral
Manager will be the Holder of all of the Subordinated Notes (including
Subordinated Notes sufficient to satisfy its obligations as Retention Provider
pursuant to the terms of the Retention Letter), and that at any time the
Collateral Manager, Affiliates thereof or Clients thereof may acquire other
classes of Notes, which may give rise to conflicts of interest between the
Collateral Manager’s duties to the Issuer under this Agreement and its duty to
such other Clients. Any such Holder of Notes may dispose of such Notes at any
time, except that the Collateral Manager shall not transfer its interest in any
of the Subordinated Notes other than, subject to its obligations as Retention
Provider to retain the Retained Amount pursuant to the Retention Letter, to an
Affiliate; provided that the Subordinated Notes may only be transferred if the
Collateral Manager provides an Officer’s certificate or Opinion of Counsel that
the Collateral Manager will be in compliance with the registration requirements
of the Advisers Act after giving effect to such transfer.

 

(d)               Subject to the Collateral Manager’s execution obligations
described herein, including, without limitation, Sections 5(c) and 5(d),
compliance with applicable law and compliance with the applicable provisions of
the Indenture and the terms of the exemptive relief granted to Garrison Capital
Inc. with respect to certain negotiated co-investment transactions, the
Collateral Manager may effect transactions with the Issuer or its Affiliates (i)
on an agency basis or (ii) on a principal basis where the Collateral Manager or
any of its Affiliates sells assets to or purchases assets from the Issuer.

 

Section 4.                Additional Activities of the Collateral Manager.

 

(a)                Nothing herein shall prevent the Collateral Manager or any of
its Affiliates from engaging in other businesses, or from rendering services of
any kind to the Issuer, the Trustee, the Placement Agent, any Holder or their
respective Affiliates or any other Person regardless of whether such business is
in competition with the Issuer or otherwise. Without prejudice to the generality
of the foregoing, partners, members, managers, shareholders, directors,
officers, employees and agents of the Collateral Manager, Affiliates of the
Collateral Manager, and the Collateral Manager may:

 

 11 

 

(i)                 serve as managers or directors (whether supervisory or
managing), officers, employees, partners, agents, nominees or signatories for
the Issuer or any Affiliate thereof, or for any Obligor or issuer in respect of
any of the Collateral Obligations, Equity Securities or Eligible Investments or
any Affiliate thereof, to the extent permitted by their respective
Organizational Instruments and Underlying Instruments, as from time to time
amended, or by any resolutions duly adopted by the Issuer, its Affiliates or any
Obligor or issuer in respect of any of the Collateral Obligations, Eligible
Investments or Equity Securities (or any Affiliate thereof) pursuant to their
respective Organizational Instruments;

 

(ii)               to the extent permitted by applicable law, receive fees for
services of whatever nature rendered to the Obligor or issuer in respect of any
of the Collateral Obligations, Eligible Investments or Equity Securities or any
Affiliate thereof;

 

(iii)             be retained to provide services unrelated to this Agreement to
the Issuer or its Affiliates and be paid therefor, on an arm’s-length basis;

 

(iv)             be a secured or unsecured creditor of, or hold a debt
obligation of or equity interest in, the Issuer or any Affiliate thereof or any
Obligor or issuer of any Collateral Obligation, Eligible Investment or Equity
Security or any Affiliate thereof;

 

(v)               subject to Section 3(b) and Section 5, applicable law and the
applicable provisions of the Indenture sell any Collateral Obligation or
Eligible Investment to, or purchase any Collateral Obligation or Equity Security
from, the Issuer while acting in the capacity of principal or agent;

 

(vi)             underwrite, arrange, structure, originate, syndicate, act as a
distributor of or make a market in any Collateral Obligation, Equity Security or
Eligible Investment;

 

(vii)           serve as a member of any “creditors’ board”, “creditors’
committee” or similar creditor group with respect to any Collateral Obligation,
Defaulted Obligation, Eligible Investment or Equity Security; or

 

(viii)         act as collateral manager, portfolio manager, investment manager
and/or investment adviser or sub-adviser in collateralized bond obligation
vehicles, collateralized loan obligation vehicles and other similar warehousing,
financing or investment vehicles.

 

(b)               The Issuer acknowledges that there are generally no ethical
screens or information barriers among the Collateral Manager and certain of its
Affiliates of the type that many firms implement to separate individuals who
make investment decisions from others who might possess applicable material,
non-public information. The Issuer acknowledges that the Collateral Manager may
be prevented from causing the Issuer to transact in certain assets due, among
other things, to internal restrictions imposed on the Collateral Manager
regarding the possession and use of material and/or non-public information and
certain restrictions of the Investment Company Act regarding co-investments with
Affiliates. The Collateral Manager will not have any liability to the Issuer or
any Holder of any Note for the failure to disclose such information or for
taking, or failing to take, any action based upon such information or
restrictions.

 

 12 

 

(c)                Subject to applicable law, including the Investment Company
Act, the Collateral Manager or any of its Affiliates may acquire or sell assets,
for its own account or for the accounts of its Clients, without either requiring
or precluding the acquisition or sale of such assets for the account of the
Issuer. Such investments may be the same as or different from those made on
behalf of the Issuer. In the event that, in light of market conditions and
investment objectives, the Collateral Manager determines that it would be
advisable to acquire the same Collateral Obligation both for the Issuer and
either the proprietary account of the Collateral Manager or any Affiliate of the
Collateral Manager or another Client of the Collateral Manager, the Collateral
Manager will allocate investment opportunities across such entities for which
such opportunities are appropriate, consistent with (1) its internal conflict of
interest and allocation policies, (2) any applicable requirements of the
Advisers Act and (3) if and to the extent applicable, certain restrictions of
the Investment Company Act regarding co-investments with Affiliates and the
terms of the exemptive relief granted to Garrison Capital Inc. with respect to
certain negotiated co-investment transactions.

 

(d)               The Issuer acknowledges and agrees that the Collateral Manager
and its Affiliates may invest for their own accounts or for the accounts of
others in certain assets that would be appropriate investments for the Issuer.
The Issuer acknowledges that the Collateral Manager and its Affiliates may enter
into, for their own accounts or for the accounts of others, credit default swaps
relating to Obligors and issuers with respect to the Collateral Obligations
included in the Assets.

 

(e)                It is understood that, subject to applicable law, including
the Investment Company Act and the requirements of the Collateral Manager’s
exemptive order regarding certain negotiated co-investment transactions, (i) the
Collateral Manager and any of its Affiliates may engage in any other business
and furnish investment management and advisory services to others, including
Persons which may have investment policies similar to those followed by the
Collateral Manager with respect to the Assets and which may own securities or
obligations of the same class, or which are of the same type, as the Collateral
Obligations or the Eligible Investments or other securities or obligations of
the Obligor or issuer of the Collateral Obligations or the Eligible Investments;
(ii) the Collateral Manager will be free, in its sole discretion, to make
recommendations to others, or effect transactions on behalf of itself or for
others, which may be the same as or different from those effected with respect
to the Assets; and (iii) nothing in the Indenture and this Agreement shall
prevent the Collateral Manager or any of its Affiliates, acting either as
principal or agent on behalf of others, from buying or selling, or from
recommending to or directing any other account to buy or sell, at any time,
securities or obligations of the same kind or class, or securities or
obligations of a different kind or class of the same issuer, as those directed
by the Collateral Manager to be purchased or sold on behalf of the Issuer. It is
understood that, to the extent permitted by applicable law, including the
Investment Company Act and the requirements of the Collateral Manager’s
exemptive order regarding certain negotiated co-investment transactions, the
Collateral Manager, its Affiliates or their respective Related Persons or any
member of their families or a person or entity advised by the Collateral Manager
may have an interest in a particular transaction or in securities or obligations
of the same kind or class, or securities or obligations of a different kind or
class of the same issuer, as those whose purchase or sale the Collateral Manager
may direct hereunder.

 

 13 

 

Section 5.                Certain Conflicts of Interest.

 

(a)                The Issuer understands that the Collateral Manager and its
Affiliates may have economic interests in (including, without limitation,
controlling equity interests or other equity or debt interests), be lenders to,
receive payments from, render services to, engage in transactions with or have
other relationships with Obligors and issuers with respect to the Collateral
Obligations included in the Assets. In particular, subject to applicable law,
the Collateral Manager and its Affiliates may make and/or hold investments in an
Obligor’s or issuer’s obligations or securities that may be pari passu, senior
or junior in ranking to an investment in such Obligor’s or issuer’s obligations
or securities made and/or held by the Issuer, or otherwise have interests
different from or adverse to those of the Issuer. The Issuer agrees that, in the
course of managing the Collateral Obligations held by the Issuer, the Collateral
Manager may consider its relationships with other Clients (including obligors
and issuers) and its Affiliates. The Collateral Manager may decline to make a
particular investment for the Issuer in view of such relationships. In addition,
individuals who are partners, managers, members, shareholders, directors,
officers, employees or agents of the Collateral Manager or of one or more of its
Affiliates may serve on boards of directors of, or otherwise have ongoing
relationships with, such Obligors and issuers. As a result, such individuals may
possess information relating to Obligors and issuers of Collateral Obligations
that is (a) not known to or (b) known but restricted as to its use by the
individuals at the Collateral Manager responsible for monitoring the Collateral
Obligations and performing the other obligations of the Collateral Manager under
this Agreement. Each of such ownership and other relationships may result in
securities laws restrictions on transactions in such securities by the Issuer
and otherwise create conflicts of interest for the Issuer. The Issuer
acknowledges and agrees that, in all such instances, the Collateral Manager and
its Affiliates may in their discretion make investment recommendations and
decisions that may be the same as or different from those made with respect to
the Issuer’s investments and they have no duty, in making or managing such
investments, to act in a way that is favorable to the Issuer.

 

(b)               The Issuer agrees that neither the Collateral Manager nor any
of its Affiliates is under any obligation to offer all investment opportunities
of which they become aware to the Issuer or to account to the Issuer for (or
share with the Issuer or inform the Issuer of) any such transaction or any
benefit received by them from any such transaction. The Issuer understands that
the Collateral Manager and/or its Affiliates may have, for their own accounts or
for the accounts of others, portfolios with substantially the same portfolio
criteria as are applicable to the Issuer. Furthermore, the Collateral Manager
and/or its Affiliates may make an investment on their own behalf or on behalf of
any Client without offering the investment opportunity or making any investment
on behalf of the Issuer and, accordingly, investment opportunities may not be
allocated among all such Clients. The Issuer acknowledges that affirmative
obligations may arise in the future, whereby the Collateral Manager and/or its
Affiliates are obligated to offer certain investments to Clients before or
without the Collateral Manager’s offering those investments to the Issuer. The
Issuer agrees that the Collateral Manager may make investments on behalf of the
Issuer in securities or obligations that it has declined to invest in or enter
into for its own account, the account of any of its Affiliates or the account of
any other Client.

 

 14 

 

(c)                Subject to the provisions of the Indenture, this Agreement
and applicable law, the Collateral Manager is hereby authorized to effect client
cross-transactions in which the Collateral Manager causes a purchase or sale of
a Collateral Obligation or Eligible Investment or a sale of an Equity Security
to be effected between the Issuer and another account advised by the Collateral
Manager or any of its Affiliates. In addition, except as otherwise permitted
pursuant to Section 2, with the prior authorization of the Issuer, which
authorization is hereby given and may be revoked at any time, the Collateral
Manager is authorized to enter into agency cross-transactions in which the
Collateral Manager or any of its Affiliates act as broker for the Issuer and for
the other party to the transaction, to the extent permitted under applicable
law, in which case the Collateral Manager or any such Affiliate will receive
commissions from, and have a potentially conflicting division of loyalties and
responsibilities regarding, both parties to the transaction.

 

(d)               Subject to the Collateral Manager’s execution obligations
described in Sections 3(a), 3(b) and 3(d) and the covenants set forth in this
Section 5, the Collateral Manager is hereby authorized to effect Principal
Transactions where the Issuer may invest in securities of issuers in which the
Collateral Manager and/or its Affiliates have a debt, equity or participation
interest, in each case in accordance with applicable law. A “Principal
Transaction” is a transaction in which the Collateral Manager or any of its
Affiliates sells assets to or purchases assets from the Issuer.

 

(e)                The Issuer acknowledges that the Collateral Manager or its
Affiliates will acquire all of the Subordinated Notes and that the Collateral
Manager, Affiliates thereof or Clients thereof may acquire Secured Notes. In
certain circumstances, the interests of the Issuer and/or the Holders with
respect to matters as to which the Collateral Manager is advising the Issuer may
conflict with the interests of the Collateral Manager, its Affiliates or some of
its other Clients. The Issuer hereby acknowledges that various potential and
actual conflicts of interest do or may exist with respect to the Collateral
Manager as described in this Agreement and in the Final Offering Circular;
provided that nothing in this Section 5 shall be construed as altering the
duties of the Collateral Manager as set forth herein, in the Indenture or under
applicable law.

 

 15 

 

Section 6.                Records; Confidentiality.

 

The Collateral Manager shall maintain or cause to be maintained appropriate
books of account and records relating to its services performed hereunder, and
such books of account and records shall be accessible for inspection by
representatives of the Issuer, the Trustee, the Holders, and the Independent
accountants appointed by the Collateral Manager on behalf of the Issuer pursuant
to Section 10.12 of the Indenture at any time during normal business hours and
upon not less than five Business Days’ prior notice; provided that any books or
records provided or made available to such representatives do not contain
confidential information concerning other Clients of the Collateral Manager or
if so that such information is removed or redacted as appropriate prior to its
release; and provided further that such representatives prior to having access
to such books or records sign any confidentiality agreement reasonably required
by the Collateral Manager concerning information reasonably deemed confidential
by the Collateral Manager.

 

If requested by any of the Holders of the Class A-1 Notes, the Collateral
Manager shall participate in a meeting with the Holders of the Class A-1 Notes
once during each fiscal year of the Collateral Manager, to be held at a location
in New York City and at a time reasonably determined by the Collateral Manager;
provided that such meeting shall be combined with any meeting that is held
pursuant to Section 11(b) of the Sub-Collateral Management Agreement dated
September 29, 2016 between the Collateral Manager and Garrison Capital Advisers
LLC (the “Sub-Collateral Management Agreement”) such that no more than one such
meeting under this Agreement and the Sub-Collateral Management Agreement shall
be held during any fiscal year of the Collateral Manager.

 

If requested by any of the Holders of the Class A-1 Notes, the Collateral
Manager shall (i) make requests of Garrison Capital Advisers LLC, as sub-adviser
under the Sub-Collateral Management Agreement (the “Sub-Adviser”), which the
Collateral Manager is permitted to make pursuant to Section 11 of the
Sub-Collateral Management Agreement and (ii) use commercially reasonable efforts
to cause the Sub-Adviser to comply with its duties and covenants specified in
Section 11 of the Sub-Collateral Management Agreement, in each case, on the
terms (and in accordance with the conditions) specified therein.

 

The Collateral Manager shall keep confidential any and all information obtained
in connection with the services rendered hereunder and shall not disclose any
such information to non-affiliated third parties except (a) with the prior
written consent of the Issuer, (b) such information as S&P shall reasonably
request in connection with its rating of the Secured Notes or in supplying
credit estimates on any Collateral Obligation included in the Assets, (c) in
connection with establishing trading or investment accounts or otherwise in
connection with effecting Transactions on behalf of the Issuer, (d) as required
by (i) applicable law, regulation, court order, or a request by a governmental
regulatory agency with jurisdiction over the Collateral Manager or any of its
Affiliates, (ii) the rules or regulations of any self-regulating organization,
body or official having jurisdiction over the Collateral Manager or any of its
Affiliates or (iii) the Irish Stock Exchange, (e) to its professional advisors
(including, without limitation, legal, tax and accounting advisors), (f) such
information as shall have been publicly disclosed other than in known violation
of this Agreement or the provisions of the Indenture or shall have been obtained
by the Collateral Manager on a non-confidential basis, (g) as expressly
permitted in the Final Offering Circular, in the Indenture or in any other
Transaction Document, (h) such information as is necessary or appropriate to
disclose so that the Collateral Manager may perform its duties hereunder, under
the Indenture or any other Transaction Document or (i) general performance
information which may be used by the Collateral Manager, its Affiliates or their
Related Persons in connection with their marketing activities.

 

 16 

 

For purposes of this Section 6, the Holders, the Trustee, the Calculation Agent
and the Collateral Administrator shall not be considered “non-affiliated third
parties.”

 

Notwithstanding the foregoing, it is agreed that the Collateral Manager (and
with respect to clause (e) of this sentence, each of its respective employees,
representatives or other agents) may disclose (a) that it is serving as
collateral manager of the Issuer, (b) the nature, aggregate principal amount and
overall performance of the Issuer’s assets, (c) the amount of earnings on the
Assets, (d) such other information about the Issuer, the Assets and the Notes as
is customarily disclosed by managers of collateralized loan obligations and (e)
to any and all Persons, without limitation of any kind, the United States
federal income tax treatment and United States federal income tax structure of
the transactions contemplated by the Indenture, this Agreement and the related
documents and all materials of any kind (including opinions and other tax
analyses) that are provided to them relating to such United States federal
income tax treatment and United States income tax structure.

 

Section 7.                Obligations of Collateral Manager.

 

In accordance with the Standard of Care set forth in Section 2(b), the
Collateral Manager shall not intentionally take any action that it knows would
(a) cause the Issuer to elect to be treated as a corporation for U.S. federal
income tax purposes, (b) not be permitted by the Issuer’s Organizational
Instruments, copies of which the Collateral Manager acknowledges the Issuer has
provided to the Collateral Manager, or to the extent consented to by the
Collateral Manager, amendments thereto, (c) violate any law, rule or regulation
of any governmental body or agency having jurisdiction over the Issuer,
including, without limitation, actions which would violate any United States
federal, state or other applicable securities law that is known by the
Collateral Manager to be applicable to the Issuer, and in each case, the
violation of which would have a Material Adverse Effect, (d) require
registration of the Issuer, the Co-Issuer or the pool of Assets as an
“investment company” under Section 8 of the Investment Company Act or (e)
knowingly and willfully adversely affect the interests of the Issuer in the
Assets in any material respect (other than (i) as expressly permitted hereunder
or under the Indenture or (ii) in connection with any action taken in the
ordinary course of business of the Collateral Manager in accordance with its
Standard of Care).

 

If the Collateral Manager is ordered by the Issuer or the requisite Holders to
take any action which would, or could reasonably be expected to, in each case in
its reasonable business judgment, have any such consequences, the Collateral
Manager shall promptly notify the Issuer and the Trustee that such action would,
or could reasonably be expected to, in each case in its reasonable business
judgment, have one or more of the consequences set forth above and shall not
take such action unless the Issuer then requests the Collateral Manager to do so
and both a Majority of the Controlling Class and a Majority of the Subordinated
Notes have consented thereto in writing. Notwithstanding any such request, the
Collateral Manager shall not take such action unless (i) arrangements
satisfactory to it are made to insure or indemnify the Collateral Manager,
Affiliates of the Collateral Manager and shareholders, partners, members,
managers, directors, officers or employees of the Collateral Manager or such
Affiliates from any liability and expense it may incur as a result of such
action and (ii) if the Collateral Manager so requests in respect of a question
of law, the Issuer delivers to the Collateral Manager an opinion of counsel
(from outside counsel reasonably satisfactory to the Collateral Manager) that
the action so requested does not violate any law, rule or regulation of any
governmental body or agency having jurisdiction over the Issuer or over the
Collateral Manager.

 

 17 

 

Neither the Collateral Manager nor its Affiliates, shareholders, partners,
members, managers, directors, officers or employees shall be liable to the
Issuer or any other Person, except as provided in Section 10. Notwithstanding
anything contained in this Agreement to the contrary, any indemnification or
insurance by the Issuer provided for in this Section 7 or Section 10 shall be
payable out of the Assets in accordance with the Priority of Payments, and the
Collateral Manager may take into account such Priority of Payments in
determining whether any proposed indemnity arrangements contemplated by this
Section 7 are satisfactory.

 

Section 8.                Compensation.

 

(a)                As compensation for the performance of its obligations as
Collateral Manager, the Collateral Manager will be entitled to receive a fee on
each Payment Date (in accordance with the Priority of Payments), which will
consist of the Senior Collateral Management Fee and the Subordinated Collateral
Management Fee (collectively, the “Collateral Management Fee”).

 

The Senior Collateral Management Fee (the “Senior Collateral Management Fee”)
will accrue quarterly in arrears on each Payment Date (prorated for the related
Interest Accrual Period), in an amount equal to 0.25%, each per annum
(calculated on the basis of a 360-day year consisting of twelve 30-day months)
of the Fee Basis Amount at the beginning of the Collection Period relating to
such Payment Date; provided that the Senior Collateral Management Fee payable on
any Payment Date shall not include any such fee (or any portion thereof) that
has been waived or deferred by the Collateral Manager hereunder.

 

The Subordinated Collateral Management Fee (the “Subordinated Collateral
Management Fee”) will accrue quarterly in arrears on each Payment Date (prorated
for the related Interest Accrual Period), in an amount equal to 0.35%, each per
annum (calculated on the basis of a 360-day year consisting of twelve 30-day
months) of the Fee Basis Amount at the beginning of the Collection Period
relating to such Payment Date; provided that the Subordinated Collateral
Management Fee payable on any Payment Date shall not include any such fee (or
any portion thereof) that has been waived or deferred by the Collateral Manager
hereunder.

 

 18 

 

(b)               The Collateral Management Fee is payable on each Payment Date
in accordance with the Priority of Payments only to the extent that sufficient
Interest Proceeds or Principal Proceeds are available. To the extent they are
not paid on any Payment Date when due, the Senior Collateral Management Fee and
the Subordinated Collateral Management Fee will be deferred and will be payable
on subsequent Payment Dates on which any funds are available therefor in
accordance with the Priority of Payments, without interest.

 

(c)                The Collateral Manager may, in its sole discretion (but shall
not be obligated to), elect to waive all or any portion of the Collateral
Management Fee payable to the Collateral Manager on any Payment Date. Any such
election shall be made by the Collateral Manager by delivering written notice
thereof to the Trustee no later than the Determination Date immediately prior to
such Payment Date. Any election to waive the Collateral Management Fee may also
take the place of written standing instructions to the Trustee; provided that
such standing instructions may be rescinded by the Collateral Manager at any
time.

 

(d)               In addition, the Collateral Manager may, in its sole
discretion, elect to defer payment of any or all of its Senior Collateral
Management Fee or Subordinated Collateral Management Fee otherwise due and
payable on any Payment Date (respectively, the “Current Deferred Senior
Collateral Management Fee” and the “Current Deferred Subordinated Collateral
Management Fee” and, collectively, the “Current Deferred Collateral Management
Fee”).  Any Current Deferred Collateral Management Fee for such Payment Date
will be distributed as Interest Proceeds or, at the option of the Collateral
Manager, as Principal Proceeds.  After such Payment Date, any Current Deferred
Collateral Management Fee will be added to the cumulative amount of the Senior
Collateral Management Fee or the Subordinated Collateral Management Fee, as
applicable, which the Collateral Manager has elected to defer on prior Payment
Dates and which has not been repaid (respectively, the “Cumulative Deferred
Senior Collateral Management Fee” and the “Cumulative Deferred Subordinated
Collateral Management Fee” and, collectively, the “Cumulative Deferred
Collateral Management Fee”). Any Cumulative Deferred Collateral Management Fee
will be payable, without interest, on any subsequent Payment Date at the
election of the Collateral Manager to the extent funds are available for such
purpose in accordance with the Priority of Payments.  Any election to defer the
Collateral Management Fee may also be made by written standing instructions to
the Trustee; provided that such standing instructions may be rescinded by the
Collateral Manager at any time except during the period between a Determination
Date and Payment Date.

 

(e)                If this Agreement is terminated pursuant to Section 14 hereof
or otherwise or if the Collateral Manager resigns, is removed or assigns this
Agreement in accordance with the terms hereof, the Collateral Management Fee
shall be accrued from the Payment Date occurring on or immediately prior to the
date of such resignation, removal or assignment and shall be due and payable
together with all other amounts owing to such predecessor Collateral Manager
under this Agreement or the Indenture on the first Payment Date following the
date of such resignation, removal or assignment, subject to the Priority of
Payments described in the Indenture.

 

 19 

 

(f)                Except as otherwise set forth herein and in the Indenture,
the Collateral Manager will continue to serve as Collateral Manager under this
Agreement notwithstanding that the Collateral Manager will not have received
amounts due it under this Agreement because sufficient funds were not then
available pursuant to the terms of the Indenture to pay such amounts in
accordance with the Priority of Payments.

 

Section 9.                Benefit of the Agreement.

 

The Collateral Manager shall perform its obligations hereunder in accordance
with the terms of this Agreement and the terms of the Indenture and the other
Transaction Documents applicable to it. The Collateral Manager agrees and
consents to the provisions contained in Article XV of the Indenture. In
addition, the Collateral Manager acknowledges the pledge by the Issuer of this
Agreement under the granting clause of the Indenture.

 

Section 10.            Limits of Collateral Manager Responsibility.

 

(a)                Notwithstanding anything in this Agreement to the contrary,
none of the Collateral Manager, its Affiliates or their respective Related
Persons assumes any responsibility under this Agreement, other than the
Collateral Manager’s assumption of its responsibility to render the services
required to be performed by it hereunder and under the terms of the Indenture
applicable to it in good faith, subject to the Standard of Care described in
Section 2(b). The Collateral Manager shall not be responsible for any action or
inaction of the Issuer, the Trustee or any other Person in following or
declining to follow any advice, recommendation or direction of the Collateral
Manager, including as set forth in Section 7. Notwithstanding anything in this
Agreement to the contrary, the Indemnified Parties (as defined below) shall not
be liable to the Issuer, the Trustee, any Holder, the Placement Agent, any of
their respective Affiliates, or Related Persons or any other Persons for any
act, omission, error of judgment, mistake of law, or for any claim, loss,
liability, damage, judgments, assessments, settlement, cost, or other expense
(including attorneys’ fees and expenses and court costs) arising out of or with
respect to any investment or for any other act or omission in the performance of
the Collateral Manager’s obligations under or in connection with this Agreement
or the terms of any other Transaction Document applicable to the Collateral
Manager, incurred as a result of actions taken or recommended or for any
omissions of the Collateral Manager or any of its Related Persons, or for any
decrease in the value of the Assets, except for liability to which the
Collateral Manager would be subject (i) by reason of acts or omissions
constituting bad faith, willful misconduct or gross negligence in the
performance of its duties hereunder and under the terms of the Indenture or (ii)
caused by (x) an untrue statement of a material fact included in the Collateral
Manager Information or (y) the omission by the Collateral Manager of a material
fact necessary to make the statements in the Collateral Manager Information, in
light of the circumstances in which they were made, not misleading (the
preceding clauses (i) and (ii) collectively referred to for purposes of this
Section 10 as “Collateral Manager Breaches”). Notwithstanding any provision
herein or in the Indenture to the contrary, the Collateral Manager shall not be
liable for any consequential, indirect, punitive, exemplary or treble damages or
lost profits hereunder or under the Indenture regardless of whether such losses
or damages are foreseeable and regardless of the form of action. Nothing
contained herein shall be deemed to waive any liability which cannot be waived
under applicable state or federal law or any rules or regulations adopted
thereunder.

 

 20 

 

(b)               (i) The Issuer shall indemnify and hold harmless (the Issuer
in such case, the “Collateral Manager Indemnifying Party”) the Collateral
Manager, its Affiliates and their respective Related Persons (each, in such
case, an “Issuer Indemnified Party”) from and against any and all losses,
claims, damages, judgments, assessments, costs or other liabilities
(collectively, “Losses”) and will promptly reimburse each Issuer Indemnified
Party for all reasonable fees and expenses incurred by any such Issuer
Indemnified Party with respect thereto (including reasonable fees and expenses
of counsel) (collectively, “Expenses”) arising out of or in connection with the
issuance of the Notes (including, without limitation, any untrue statement of
material fact contained in the Final Offering Circular, or omission or alleged
omission to state therein a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, in each case, other than the Collateral Manager
Information), the transactions contemplated by the Final Offering Circular, the
Indenture or this Agreement and any acts or omissions of any such Issuer
Indemnified Party; provided that such Issuer Indemnified Party shall not be
indemnified for any Losses or Expenses incurred as a result of any act or
omission by such Issuer Indemnified Party that constitutes a Collateral Manager
Breach. Notwithstanding anything contained herein to the contrary, the
obligations of the Issuer under this Section 10 to indemnify any Issuer
Indemnified Party for any Losses or Expenses are non-recourse obligations of the
Issuer payable solely out of the Assets in accordance with the Priority of
Payments set forth in the Indenture.

 

(ii)               The Collateral Manager shall indemnify and hold harmless (the
Collateral Manager in such case, the “Issuer Indemnifying Party” and, together
with the Collateral Manager Indemnifying Party, the “Indemnifying Parties” and
each, an “Indemnifying Party”) the Issuer, its Affiliates and their respective
Related Persons (each, in such case, a “Collateral Manager Indemnified Party”
and, together with the Issuer Indemnified Party, the “Indemnified Parties” and
each, an “Indemnified Party”) from and against any and all Losses and shall
promptly reimburse each such Collateral Manager Indemnified Party for all
reasonable Expenses as such Expenses are incurred in investigating, preparing,
pursuing or defending any actions in respect of or arising out of any Collateral
Manager Breaches; provided that the Collateral Manager shall not be liable for
any consequential, punitive, exemplary or treble damages or lost profits.

 

(c)                An Indemnified Party shall (or, with respect to the Related
Persons of the Collateral Manager or of the Issuer, as applicable, the
Collateral Manager or the Issuer, as applicable, shall cause such Indemnified
Party to) promptly notify the Indemnifying Party if the Indemnified Party
receives a complaint, claim, compulsory process or other notice of any Loss
giving rise to a claim for indemnification under this Section 10, but failure to
so notify the Indemnifying Party or to comply with paragraph (d) below shall not
relieve such Indemnifying Party from its obligations under this Section 10
unless and to the extent that such Indemnifying Party did not otherwise learn of
such action or proceeding and to the extent such failure results in the
forfeiture by the Indemnifying Party of material rights and defenses.

 

 21 

 

(d)               With respect to any claim made or threatened against an
Indemnified Party, or compulsory process or request served upon such Indemnified
Party for which such Indemnified Party is or may be entitled to indemnification
under this Section 10, such Indemnified Party shall (or with respect to the
Related Persons of the Collateral Manager or of the Issuer, as applicable, the
Collateral Manager or the Issuer, as applicable, shall cause such Indemnified
Party to):

 

(i)                 at the Indemnifying Party’s expense, provide the
Indemnifying Party such information and cooperation with respect to such claim
as the Indemnifying Party may reasonably require, including, but not limited to,
making appropriate personnel available to the Indemnifying Party at such
reasonable times as the Indemnifying Party may request;

 

(ii)               at the Indemnifying Party’s expense, cooperate and take all
such steps as the Indemnifying Party may reasonably request to preserve and
protect any defense to such claim;

 

(iii)             in the event suit is brought with respect to such claim, upon
reasonable prior notice, afford to the Indemnifying Party the right, which the
Indemnifying Party may exercise in its sole discretion and at its expense, (A)
to participate in the investigation, defense and settlement of such claim, and,
(B) to the extent that it shall wish, to assume the defense thereof, with
counsel satisfactory to such Indemnified Party (who shall not, except with the
consent of the Indemnified Party, be counsel to the Indemnifying Party), and,
after notice from the Indemnifying Party to such Indemnified Party of its
election so to assume the defense thereof, the Indemnifying Party shall not be
liable to such Indemnified Party under this Section 10 for any legal fees and
expenses of other counsel or any other expenses, in each case subsequently
incurred by such Indemnified Party, in connection with the defense thereof other
than reasonable costs of investigation, except that, if such Indemnified Party
reasonably determines that counsel selected by the Indemnifying Party has a
conflict of interest, such Indemnifying Party shall pay the reasonable fees and
disbursements of one additional counsel selected by the Indemnified Party (in
addition to any local counsel) separate from its own counsel for all Indemnified
Parties in connection with any one action or separate but similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstances; and

 

(iv)             neither incur any material expense to defend against nor make
any admission with respect thereto (other than routine or incontestable
admissions or factual admissions the failure to make which could expose such
Indemnified Party to (A) unindemnified liability or (B) only if the Indemnified
Party is the Collateral Manager or an Affiliate or Related Person of the
Collateral Manager or of an Affiliate thereof, any liability in respect of
which, in the good faith determination of such Indemnified Party, the
Indemnifying Party is unlikely to have sufficient funds available to indemnify
the Indemnified Party in full, taking into account the Priority of Payments),
nor permit a default or consent to the entry of any judgment in respect thereof,
in each case without the prior written consent of the Indemnifying Party;
provided that the Indemnifying Party shall have advised such Indemnified Party
that such Indemnified Party is entitled to be indemnified hereunder with respect
to such claim.

 

 22 

 

(e)                No Indemnified Party shall, without the prior written consent
of the Indemnifying Party, which consent shall not be unreasonably withheld,
settle or compromise any claim giving rise to a claim for indemnity hereunder,
or permit a default or consent to the entry of any judgment in respect thereof.

 

(f)                No Indemnifying Party shall, without the prior written
consent of the Indemnified Party, which consent shall not be unreasonably
withheld, settle or compromise or consent to the entry of any judgment with
respect to any claim giving rise to a claim for indemnity hereunder if such
settlement includes a statement as to or an admission of fault, culpability or a
failure to act by or on behalf of any Indemnified Party.

 

(g)               The compliance of the Collateral Manager’s actions with the
provisions of the Indenture and this Agreement shall be determined on the date
of action only, based upon the prices and characteristics of the Assets on the
date of such action (or on the most recent date practicable, in the case of
Collateral Obligations not purchased or sold on such date); provided that the
provisions of the Indenture and this Agreement shall not be deemed breached as a
result of changes in value, status or any other conditions of an investment
following the date of such action and the Collateral Manager shall not be
responsible under this Agreement for the performance of or any losses on the
Assets acquired in accordance with this Agreement.

 

(h)               The Assets shall be held by the Custodian appointed by the
Issuer pursuant to the Indenture. The Collateral Manager and its Affiliates
shall at no time have custody or physical control of the Assets. The Collateral
Manager shall not be liable for any act or omission of the Custodian, the
Collateral Administrator, the Calculation Agent or the Trustee or any
sub-custodian or other agent appointed by the Calculation Agent or the Issuer.
Any compensation owed to the Collateral Administrator, the Trustee or the
Calculation Agent for their services to the Issuer shall be the obligation of
the Issuer and not the Collateral Manager.

 

(i)                 Notwithstanding anything in this Agreement to the contrary,
the Collateral Manager’s obligations hereunder will be solely the obligations of
the Collateral Manager, and the Issuer will not have any recourse to any Related
Person of the Collateral Manager, with respect to any claims, losses, damages,
liabilities, indemnities or other obligations in connection with any
transactions contemplated hereby.

 

(j)                 The Collateral Manager shall not be responsible for any
liability resulting from any failure by the Collateral Manager to fulfill its
duties under this Agreement if such liability or failure shall be caused by or
directly or indirectly due to a Force Majeure Event, provided that the
Collateral Manager shall use commercially reasonable efforts to minimize the
effect of the same. As used herein, the term “Force Majeure Event” means such an
operation of the forces of nature as reasonable foresight and ability could not
foresee or reasonably provide against including but not limited to, acts of god,
flood, war (whether declared or undeclared), terrorism, fire, strikes or work
stoppages for any reason, embargo, government action, including any laws,
ordinances, regulations or the like which restrict or prohibit the providing of
the services contemplated by this Agreement, inability to obtain material,
equipment, or communications or computer facilities, or the failure of equipment
or interruption of communications or computer facilities, and other causes
beyond a party’s control whether or not of the same class or kind as
specifically named above.

 

 23 

 

(k)               The Collateral Manager shall be entitled to conclusively rely
in good faith, and shall be fully protected in relying, upon any writing,
resolution, notice, consent, certificate, affidavit, letter, cablegram,
telegram, facsimile, email, telex or teletype message, statement (which may be
made orally or by telephone), order or other document or communication
reasonably believed by it to be genuine and correct and to have been signed,
sent or made by a Person that the Collateral Manager has no reason to believe is
not duly authorized and upon the advice and statements of independent
accountants.

 

(l)                 The Collateral Manager may consult with reputable outside
legal counsel as to questions of law pertaining to the performance of its duties
hereunder and the advice or any opinion of such counsel on any such question
shall be full and complete authorization and protection in respect of any action
taken or omitted by it hereunder in good faith and in accordance with the advice
or opinion of such counsel.

 

Section 11.            No Joint Venture.

 

The Issuer and the Collateral Manager are not partners or joint venturers with
each other and nothing herein shall be construed to make them such partners or
joint venturers or impose any liability as such on either of them. The
Collateral Manager shall be deemed, for all purposes herein, an independent
contractor and shall, except as otherwise expressly provided herein or in the
Indenture or authorized by the Issuer from time to time, have no authority to
act for or represent the Issuer in any way or otherwise be deemed an agent of
the Issuer. It is acknowledged that neither the Collateral Manager nor any of
its Affiliates has provided or shall provide any tax, accounting or legal advice
or assistance to the Issuer or any other Person in connection with the
transactions contemplated hereby.

 

Section 12.            Term; Termination.

 

(a)                This Agreement shall commence as of the date first set forth
above and shall continue in force until the first of the following occurs: (i)
the final liquidation of the Assets and the final distribution of the proceeds
of such liquidation to the Noteholders in accordance with the Indenture, (ii)
the payment in full of the Secured Notes, and the satisfaction and discharge of
the Indenture in accordance with its terms or (iii) the early termination of
this Agreement in accordance with Section 12(b), (c), (d), (e) or (f) or Section
14.

 

(b)               Subject only to clause (c) below, the Collateral Manager may
resign, upon 90 days’ prior written notice to the Issuer (or such shorter notice
as is acceptable to the Issuer) and the Trustee (and the Issuer shall direct the
Trustee to distribute a copy of such notice to the Holders within five (5)
Business Days of receipt); provided that the Collateral Manager shall have the
right to resign immediately upon the effectiveness of any material change in
applicable law or regulations which renders the performance by the Collateral
Manager of its duties hereunder or under the Indenture to be a violation of such
law or regulation.

 

 24 

 

(c)                No resignation or removal of the Collateral Manager pursuant
to this Agreement shall be effective until the date as of which a successor
Collateral Manager shall have been appointed and approved and has accepted and
assumed all of the Collateral Manager’s duties and obligations pursuant to this
Agreement in writing (an “Instrument of Acceptance”).

 

(d)               Promptly after notice of any removal under Section 14 or any
resignation of the Collateral Manager that is to take place while any of the
Notes are Outstanding, the Issuer shall transmit or cause the Trustee to
transmit copies of such notice to the Holders and S&P and shall appoint a
successor Collateral Manager in accordance with the procedures set forth in
clause (e) below; provided that (i) such successor Collateral Manager has
demonstrated an ability to professionally and competently perform duties similar
to those imposed upon the Collateral Manager hereunder, (ii) such successor
Collateral Manager is legally qualified and has the capacity to assume all of
the responsibilities, duties and obligations of the Collateral Manager hereunder
and under the applicable terms of the Indenture, (iii) such successor Collateral
Manager has agreed to coordinate with the replaced Collateral Manager regarding
communications with S&P, (iv) such appointment does not cause or result in the
Issuer or the Co-Issuer becoming, or require the pool of Assets to be registered
as, an investment company under the Investment Company Act, (v) the Rating
Agency Condition has been satisfied with respect to such appointment and (vi)
the appointment of which does not subject the Issuer to material adverse tax
consequences.

 

(e)                A Majority of the Subordinated Notes will nominate a
successor Collateral Manager that meets the criteria set forth in clause (d)
above (other than subclause (v) thereof) within 30 days of initial notice of the
resignation or removal of the Collateral Manager and if the Majority of the
Controlling Class consents thereto, such proposed successor will be appointed
the successor Collateral Manager by the Issuer; provided that the Rating Agency
Condition has been satisfied with respect to such appointment. If a Majority of
the Subordinated Notes fails to nominate such a successor within 30 days of
initial notice of the resignation or removal of the Collateral Manager or if a
Majority of the Controlling Class does not consent thereto within ten days of
the date of the notice of such nomination, then a Majority of the Controlling
Class shall, within 60 days of initial notice of the resignation or removal of
the Collateral Manager, nominate a successor Collateral Manager that meets the
criteria set forth in clause (d) above (other than subclause (v) thereof). If a
Majority of the Subordinated Notes consents to such Controlling Class nominee,
such nominee shall be appointed the successor Collateral Manager by the Issuer;
provided that the Rating Agency Condition has been satisfied with respect to
such appointment. If no successor Collateral Manager is appointed within 90 days
with the consent thereto of a Majority of the Controlling Class (if nominated by
a Majority of the Subordinated Notes) or the consent thereto of a Majority of
the Subordinated Notes (if nominated by a Majority of the Controlling Class)
(or, in the event of a change in applicable law or regulation which renders the
performance by the Collateral Manager of its duties under this Agreement or the
Indenture to be a violation of such law or regulation, within 30 days) following
the termination or resignation of the Collateral Manager, any of the Issuer, the
Collateral Manager, a Majority of the Subordinated Notes and the Majority of the
Controlling Class shall have the right to petition a court of competent
jurisdiction to appoint a successor Collateral Manager, in any such case whose
appointment shall become effective after such successor has accepted its
appointment and assumed all of the Collateral Manager’s duties and obligations
pursuant to this Agreement in an Instrument of Acceptance and without the
consent of any Holder.

 

 25 

 

(f)                The successor Collateral Manager shall be entitled to the
Collateral Management Fee set forth in Section 8(a) (and, to the extent such
fees are not payable due to insufficient funds, the Collateral Management Fee
due and owing to such successor Collateral Manager under Section 8(b)) and no
compensation payable to such successor Collateral Manager shall be greater than
as set forth in Section 8 without the prior written consent of 100% of the
Holders of each Class of Notes (voting separately by Class), including
Collateral Manager Notes. Upon the later of the expiration of the applicable
notice periods with respect to termination specified in this Section 12 or in
Section 14 and the acceptance of its appointment hereunder by the successor
Collateral Manager, all authority and power of the Collateral Manager hereunder,
whether with respect to the Assets or otherwise, shall automatically and without
action by any person or entity pass to and be vested in the successor Collateral
Manager. The Issuer, the Trustee and the successor Collateral Manager shall take
such action (or cause the outgoing Collateral Manager to take such action)
consistent with this Agreement and as shall be necessary to effect any such
succession.

 

(g)               If this Agreement is terminated pursuant to this Section 12,
such termination shall be without any further liability or obligation of either
party to the other, except as provided in clause (h) below.

 

(h)               Sections 6, 7 (with respect to any indemnity or insurance
provided thereunder), 8 (with respect to any accrued and unpaid Collateral
Management Fee) 10, 12(g), 15, 17, and 21 through 27 shall survive any
termination of this Agreement pursuant to this Section 12 or Section 14.

 

Section 13.            Assignments.

 

(a)                Except as otherwise provided in this Section 13, the
Collateral Manager may not assign or delegate (except as provided in Section
2(e)) its rights or responsibilities under this Agreement without (i)
satisfaction of the Rating Agency Condition with respect thereto, (ii) providing
30 days’ prior written notice of any proposed assignment or delegation to the
Issuer and the Trustee (who shall promptly forward such notice to the Holders of
the Notes) and (iii) the approval in writing by (A) a Majority of the
Subordinated Notes and (B) for an assignment to any person who is not an
Affiliate of the Collateral Manager, a Majority of the Controlling Class.

 

(b)               The Collateral Manager may without satisfaction of the Rating
Agency Condition and without obtaining the consent of the Holders of the Secured
Notes, (1) assign any of its rights or obligations under this Agreement to an
Affiliate; provided that such Affiliate (i) has demonstrated ability, whether as
an entity or by its principals and employees, to professionally and competently
perform duties similar to those imposed upon the Collateral Manager pursuant to
this Agreement, (ii) has the legal right and capacity to act as Collateral
Manager under this Agreement, (iii) shall not cause the Issuer or the pool of
Assets to become required to register under the provisions of the Investment
Company Act and (iv) immediately after the assignment, employs principal
personnel performing the duties required under this Agreement who are the same
individuals who would have performed such duties had the assignment not occurred
or (2) enter into (or have its parent enter into) any consolidation or
amalgamation with, or merger with or into, or transfer of all or substantially
all of its asset management business to, another entity and, at the time of such
consolidation, merger, amalgamation or transfer the resulting, surviving or
transferee entity assumes all the obligations of the Collateral Manager under
this Agreement generally (whether by operation of law or by contract) and the
other entity has substantially the same investment staff providing investment
management services to the Issuer; provided that the Collateral Manager shall
deliver prior notice to S&P of any assignment, delegation or combination made
pursuant to this sentence. Any assignee under this Agreement shall, before such
assignment becomes effective, execute and deliver to the Issuer and the Trustee
(and the Trustee shall promptly provide a copy thereof to the Holders of the
Notes) a counterpart of this Agreement naming such assignee as Collateral
Manager. Upon the execution and delivery of any such assignment by the assignee,
the Collateral Manager will be released from further obligations pursuant to
this Agreement except with respect to its obligations and agreements arising
under Sections 10, 12(g), 17, 21 through 24, 26 and 27, Section 25 in respect of
its acts or omissions occurring prior to such assignment and except with respect
to its obligations under Section 15 after such assignment. The consent
provisions for the approval of an assignee for the Collateral Manager under this
Section 13(b) shall not apply in the event of the Collateral Manager’s
resignation or removal pursuant to Section 12 or 14, and instead the consent
provisions of Section 12 shall govern.

 

 26 

 

(c)                This Agreement shall not be assigned by the Issuer without
(i) the prior written consent of (1) the Collateral Manager, (2) the Trustee and
(3) a Majority of each Class of Notes (voting separately) and (ii) satisfaction
of the Rating Agency Condition, except in the case of (x) assignment by the
Issuer to an entity which is a successor to the Issuer permitted under the
Indenture, in which case such successor organization shall be bound hereunder
and by the terms of said assignment in the same manner as the Issuer is bound
hereunder or (y) the collateral assignment to the Trustee as contemplated by the
granting clause of the Indenture. The Issuer shall simultaneously assign its
rights, title and interest in (but not its obligations under) this Agreement to
the Trustee pursuant to the Indenture; and the Collateral Manager by its
signature below agrees to, and acknowledges, such assignment. Upon assignment by
the Issuer, the Issuer shall use reasonable efforts to cause such assignee to
execute and deliver to the Collateral Manager such documents as the Collateral
Manager shall consider reasonably necessary to effect fully such assignment.

 

(d)               The Issuer shall provide (or cause the Trustee to provide) S&P
and the Holders with notice of any assignment pursuant to this Section 13.

 

Section 14.            Removal for Cause.

 

(a)                The Collateral Manager may be removed for Cause upon 10
Business Days’ prior written notice by the Issuer or the Trustee (“Termination
Notice”) at the direction of a Majority of the Controlling Class (excluding all
Collateral Manager Notes) (or, if all of the Notes of the Controlling Class are
Collateral Manager Notes, a Majority of the most senior Class of Notes that is
not comprised entirely of Collateral Manager Notes) or a Majority of the
Subordinated Notes (excluding all Collateral Manager Notes). Simultaneous with
its direction to the Issuer to remove the Collateral Manager for Cause, such
Majority of the Controlling Class or of the Subordinated Notes, as applicable,
shall give to the Issuer and the Trustee a written statement setting forth the
reason for such removal (“Statement of Cause”). The Trustee (at the direction of
the Issuer) shall distribute a copy of the Termination Notice and the Statement
of Cause to the Holders within two (2) Business Days of receipt. No such removal
shall be effective (A) until the date as of which a successor Collateral Manager
shall have been appointed in accordance with Sections 12(d) and (e) and
delivered an Instrument of Acceptance to the Issuer and the successor Collateral
Manager has effectively assumed all of the Collateral Manager’s duties and
obligations and (B) unless the Statement of Cause has been delivered to the
Issuer and the Trustee as set forth in this Section 14(a). “Cause” means any of
the following:

 

 27 

 

(i)                 the Collateral Manager shall willfully and intentionally
violate or breach any material provision of this Agreement or the Indenture
applicable to it (not including a willful and intentional breach that results
from a good faith dispute regarding reasonable alternative courses of action or
interpretation of instructions or provisions of the relevant Transaction
Documents);

 

(ii)               (A) the Collateral Manager shall breach in any material
respect any provision of this Agreement or any terms of the Indenture or any
other Transaction Document applicable to it (other than as covered by clause (i)
and it being understood that failure to meet any Concentration Limitation,
Collateral Quality Test or Coverage Test is not a breach for purposes of this
clause (ii)), which breach could reasonably be expected to have a Material
Adverse Effect, and shall not cure such breach (if capable of being cured)
within 30 days after the earlier to occur of an Authorized Officer of the
Collateral Manager receiving notice or having actual knowledge of such breach,
unless, if such breach is remediable, the Collateral Manager has taken action
commencing the cure thereof within such 30 day period that the Collateral
Manager believes in good faith will remedy such breach within 60 days of the
earlier to occur of such Authorized Officer receiving notice or having actual
knowledge thereof; or (B) the failure of any representation, warranty,
certification or statement made or delivered by the Collateral Manager in or
pursuant to this Agreement, the Indenture or any other Transaction Document to
be correct in any material respect when made, which failure could reasonably be
expected to have a Material Adverse Effect, and no correction is made for a
period of 30 days after the Collateral Manager having actual knowledge of, or
its receipt of written notice of such failure;

 

(iii)             the Collateral Manager, Garrison Investment Group LP or
Garrison Capital Advisers LLC (collectively, the “Garrison Entities”) is wound
up or dissolved or there is appointed over it or a substantial part of its
assets a receiver, administrator, administrative receiver, trustee or similar
officer; or any of the Garrison Entities (A) ceases to be able to, or admits in
writing its inability to, pay its debts as they become due and payable, or makes
a general assignment for the benefit of, or enters into any composition or
arrangement with, its creditors generally; (B) applies for or consents (by
admission of material allegations of a petition or otherwise) to the appointment
of a receiver, trustee, assignee, custodian, liquidator or sequestrator (or
other similar official) of any of the Garrison Entities or of any substantial
part of its properties or assets in connection with any winding up, liquidation,
reorganization or other relief under any bankruptcy, insolvency, receivership or
similar law, or authorizes such an application or consent, or proceedings
seeking such appointment are commenced without such authorization, consent or
application against any of the Garrison Entities and continue undismissed for 60
days; (C) authorizes or files a voluntary petition in bankruptcy, or applies for
or consents (by admission of material allegations of a petition or otherwise) to
the application of any bankruptcy, reorganization, arrangement, readjustment of
debt, insolvency, dissolution, or similar law, or authorizes such application or
consent, or proceedings to such end are instituted against any of the Garrison
Entities without such authorization, application or consent and are approved as
properly instituted and remain undismissed for 60 days or result in adjudication
of bankruptcy or insolvency or the issuance of an order for relief; or (D)
permits or suffers all or any substantial part of its properties or assets to be
sequestered or attached by court order and the order (if contested in good
faith) remains undismissed for 60 days;

 

 28 

 

(iv)             the occurrence and continuation of an Event of Default pursuant
to Section 5.1(a) of the Indenture that primarily results from any willful and
material breach by the Collateral Manager of its duties under this Agreement or
under the Indenture which breach or default is not cured within any applicable
cure period;

 

(v)               (A) the occurrence of an act by any of the Garrison Entities
that constitutes fraud or criminal activity in the performance of its
obligations under this Agreement or any advisory agreement, staffing agreement
or similar agreement that is entered into for the benefit of the Collateral
Manager or the Issuer (as determined pursuant to a final adjudication by a court
of competent jurisdiction) or any of the Garrison Entities being indicted or
convicted of a criminal offense materially related to its primary business of
providing asset management services, or (B) any officer of any of the Garrison
Entities primarily responsible for the performance by the Collateral Manager of
its obligations under this Agreement (in the performance of his or her
investment management duties) is indicted or convicted of a criminal offense
materially related to the business of the Collateral Manager providing asset
management services and continues to have responsibility for the performance by
the Collateral Manager under this Agreement for a period of ten days after such
indictment or conviction;

 

(vi)             the Collateral Manager consolidates with or merges into any
other corporation, partnership, trust or other entity if the survivor of such
transaction (A) fails to expressly assume the obligations of the Collateral
Manager under this Agreement and the other Transaction Documents and such
failure is not corrected by the surviving entity within 30 days or (B) the
transaction fails to comply with the provisions of Section 13 and such failure
is not corrected by the surviving entity within 30 days; or

 

(vii)           the inability of the Collateral Manager to perform its duties
hereunder and under the Indenture due to termination of, non-performance under,
or any other reason relating to any advisory agreement, staffing agreement or
other similar agreement that is entered into with any of the Garrison Entities
for the benefit of the Collateral Manager or the Issuer and such inability
continues for more than 30 days.

 

 29 

 

(b)               If any of the events specified in this Section 14 shall occur,
the Collateral Manager shall give written notice thereof within three (3)
Business Days to the Issuer, the Trustee and S&P; provided that if any of the
events specified in Section 14(a)(iii) shall occur, the Collateral Manager shall
give written notice thereof within one (1) Business Day to the Issuer, the
Trustee, and S&P following the Collateral Manager’s becoming aware of the
occurrence of such event. A Majority of the Controlling Class and a Majority of
the Subordinated Notes, voting separately by Class, may waive any event
described in Section 14 (other than any of the events specified in Section
14(a)(iii)) as a basis for termination of this Agreement and removal of the
Collateral Manager under this Section 14.

 

(c)                If the Collateral Manager is removed pursuant to this Section
14, the Issuer shall have, in addition to the rights and remedies set forth in
this Agreement, all of the rights and remedies available with respect thereto at
law or equity.

 

(d)               Notwithstanding any other provision of this Agreement to the
contrary, Collateral Manager Notes shall have no voting rights and shall be
deemed not to be Outstanding with respect to any vote in connection with (i) a
removal of the Collateral Manager for Cause, (ii) a waiver of an event
constituting Cause under this Agreement as a basis for termination of this
Agreement or removal of the Collateral Manager or (iii) the appointment of an
Approved Replacement. The Collateral Manager shall provide notice to the Trustee
and the Issuer of any Collateral Manager Notes so held.

 

Section 15.            Obligations of Resigning or Removed Collateral Manager.

 

(a)                On, or as soon as practicable after, the date any resignation
or removal is effective, the Collateral Manager shall (at the Issuer’s expense):

 

(i)                 deliver to the Issuer or to such other Person as the Issuer
shall instruct all property and documents of the Issuer or otherwise relating to
the Assets then in the custody of the Collateral Manager;

 

(ii)               deliver to the Trustee an accounting with respect to the
books and records delivered to the Trustee or the successor Collateral Manager
appointed pursuant to Section 12; and

 

(iii)             agree to cooperate with all reasonable requests related to any
proceedings, even after its resignation or removal, which arise in connection
with this Agreement or the Indenture, assuming the Collateral Manager has
received an indemnity in form reasonably satisfactory to the Collateral Manager
from an entity reasonably satisfactory to the Collateral Manager, and expense
reimbursement reasonably satisfactory to the Collateral Manager.

 

 30 

 

(b)               Notwithstanding such resignation or removal, the Collateral
Manager shall remain liable for its obligations under Section 10 and its acts or
omissions giving rise thereto and for any expenses, losses, damages,
liabilities, demands, charges and claims of any nature whatsoever (including
reasonable attorneys’ fees) in respect of or arising out of a Collateral Manager
Breach, subject to the limitations of liability set forth in Section 10.

 

Section 16.            Representations and Warranties.

 

(a)                The Issuer hereby represents and warrants to the Collateral
Manager as follows:

 

(i)                 The Issuer has been duly incorporated as an exempted company
with limited liability and is validly existing and in good standing under the
laws of the Cayman Islands, has the full power and authority to own its assets
and the obligations and securities proposed to be owned by it and included in
the Assets and to transact the business in which it is presently engaged and is
duly qualified under the laws of each jurisdiction where its ownership or lease
of property, the conduct of its business or the performance of this Agreement,
the Indenture, the Notes or any other Transaction Document require such
qualification, except for those jurisdictions in which the failure to be so
qualified, authorized or licensed would not have a Material Adverse Effect on
the Issuer.

 

(ii)               The Issuer has full power and authority to execute, deliver
and perform all of its obligations under this Agreement, the Indenture, the
Notes and any other Transaction Document to which it is a party and has taken
all necessary action to authorize this Agreement and the execution and delivery
of this Agreement and the performance of all obligations imposed upon it
hereunder, and, as of the Closing Date, will have taken all necessary action to
authorize the Indenture, the Notes and any other Transaction Document to which
it is a party and the execution, delivery and performance of this Agreement, the
Indenture, the Notes and any other Transaction Document to which it is a party
and the performance of all obligations imposed upon it hereunder or thereunder.
No consent of any other Person including, without limitation, members and
creditors of the Issuer, and no license, permit, approval or authorization of,
exemption by, notice or report to, or registration, filing (other than any
filings pursuant to the UCC required under the Indenture and necessary to
perfect any security interest granted thereunder) or declaration with, any
governmental authority is required by the Issuer in connection with the
execution, delivery, performance, validity or enforceability of this Agreement,
the Indenture, the Notes or any other Transaction Document to which the Issuer
is a party or the obligations imposed upon the Issuer hereunder and thereunder.
This Agreement and all other Transaction Documents to which the Issuer is a
party have been, and each instrument and document to which the Issuer is a party
required hereunder or under the Indenture, the Notes or any other Transaction
Document to which the Issuer is a party will be, executed and delivered by an
Authorized Officer of the Issuer, and this Agreement or any other Transaction
Document to which the Issuer is a party constitute, and each instrument or
document required hereunder to which the Issuer is a party, when executed and
delivered hereunder or thereunder, will constitute, the legally valid and
binding obligation of the Issuer enforceable against the Issuer in accordance
with its terms, subject, as to enforcement, (A) to the effect of bankruptcy,
receivership, insolvency, winding-up or similar laws affecting generally the
enforcement of creditors’ rights as such laws would apply in the event of any
bankruptcy, receivership, insolvency, winding-up or similar event applicable to
the Issuer and (B) to general equitable principles (whether enforceability of
such principles is considered in a proceeding at law or in equity).

 

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(iii)             The execution, delivery and performance of this Agreement, any
other Transaction Document to which the Issuer is a party and the documents and
instruments required hereunder and thereunder will not violate any provision of
any existing law or regulation binding on the Issuer, or any order, judgment,
award or decree of any court, arbitrator or governmental authority binding on
the Issuer, or the Organizational Instruments of, or any securities issued by,
the Issuer or of any mortgage, indenture, lease, contract or other agreement,
instrument or undertaking to which the Issuer is a party or by which the Issuer
or any of its assets may be bound, the violation of which would have a Material
Adverse Effect on the Issuer, and will not result in or require the creation or
imposition of any lien on any of its property, assets or revenues pursuant to
the provisions of any such mortgage, indenture, lease, contract or other
agreement, instrument or undertaking (other than the lien of the Indenture).

 

(iv)             The Issuer is not in violation of its Organizational
Instruments or in breach or violation of or in default under any contract or
agreement to which it is a party or by which it or any of its property may be
bound, or any applicable statute or any rule, regulation or order of any court,
government agency or body having jurisdiction over the Issuer or its properties,
the breach or violation of which or default under which would have a material
adverse effect on the validity or enforceability of this Agreement, the
provisions of the Indenture or any other Transaction Document applicable to the
Issuer, or the performance by the Issuer of its duties hereunder or thereunder.

 

(v)               There is no charge, investigation, action, suit or proceeding
before or by any court pending or, to the best knowledge of the Issuer,
threatened that, if determined adversely to the Issuer, would have a material
adverse effect upon the performance by the Issuer of its duties under, or on the
validity or enforceability of, this Agreement, the Indenture or any other
Transaction Document applicable to the Issuer.

 

(vi)             The Issuer has not engaged in any transaction that would result
in the violation of, or require registration as an “investment company” under,
the Investment Company Act.

 

(vii)           The Issuer agrees for the benefit of the Collateral Manager on
behalf of the Secured Parties to follow the lawful instructions and directions
of the Collateral Manager in connection with the Collateral Manager’s services
hereunder.

 

(viii)         Neither the Issuer nor the pool of Assets is required to register
as an “investment company” under the Investment Company Act.

 

(ix)             The Issuer has taken and will take all reasonable and
practicable steps to ensure that the assets of the Issuer do not and will not at
any time constitute the assets of any plan subject to the fiduciary
responsibility provisions of Title I of ERISA or of any plan subject to Section
4975 of the Code.

 

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(x)               The Issuer has taken and will take all reasonable and
practicable steps to ensure that it does not accept funds, directly or
indirectly, from a Person whose name appears on the List of Specially Designated
Nationals and Blocked Persons maintained by the U.S. Office of Foreign Asset
Control and such other lists of prohibited persons and entities as may be
mandated by applicable law or regulation.

 

(b)               The Collateral Manager hereby represents and warrants to the
Issuer, as of the date hereof, as follows:

 

(i)                 The Collateral Manager is a corporation duly incorporated
and validly existing and in good standing under the laws of the State of
Delaware, has full power and authority to own its assets and to transact the
business in which it is currently engaged, and is duly qualified to do business
and is in good standing under the laws of each jurisdiction where the
performance of this Agreement and any other Transaction Document to which it is
a party would require such qualification, except for those jurisdictions in
which the failure to be so qualified, authorized or licensed would not have a
material adverse effect on the ability of the Collateral Manager to perform its
obligations under this Agreement, the provisions of the Indenture and any other
Transaction Document applicable to the Collateral Manager, or on the validity or
enforceability of this Agreement, the provisions of the Indenture and any other
Transaction Document applicable to the Collateral Manager.

 

(ii)               The Collateral Manager has full power and authority to
execute and deliver this Agreement and any other Transaction Document to which
it is a party and to perform all of its obligations hereunder and under the
provisions of the Indenture and such other Transaction Documents applicable to
the Collateral Manager, and has taken all necessary action to authorize this
Agreement and any other Transaction Document to which it is a party on the terms
and conditions hereof and thereof and the execution and delivery of this
Agreement and any other Transaction Document to which it is a party and the
performance of all obligations required hereunder and thereunder applicable to
the Collateral Manager. No consent of any other Person, including, without
limitation, members and creditors of the Collateral Manager, and no license,
permit, approval or authorization of, exemption by, notice or report to, or
registration, filing or declaration with, any governmental authority is required
by the Collateral Manager in connection with this Agreement or any other
Transaction Document applicable to it or the execution, delivery, performance,
validity or enforceability of this Agreement or any Transaction Document
applicable to it or the obligations imposed on the Collateral Manager hereunder
or under the terms of the Indenture or any other Transaction Document applicable
to the Collateral Manager other than those which have been obtained or made. No
representation is made herein with respect to the requirements of state
securities laws or regulations. This Agreement has been executed and delivered
by an Authorized Officer of the Collateral Manager, and this Agreement and any
other Transaction Document to which it is a party constitute the valid and
legally binding obligations of the Collateral Manager enforceable against the
Collateral Manager in accordance with its terms, subject, as to enforcement, (A)
to the effect of bankruptcy, insolvency, winding-up or similar laws affecting
generally the enforcement of creditors’ rights as such laws would apply in the
event of any bankruptcy, receivership, insolvency, winding-up or similar event
applicable to the Collateral Manager and (B) to general equitable principles
(whether enforceability of such principles is considered in a proceeding at law
or in equity).

 

 33 

 

(iii)             The execution, delivery and performance of this Agreement and
the terms of the Indenture and any other Transaction Document applicable to the
Collateral Manager will not violate any provision of any existing law or
regulation binding on the Collateral Manager (except that no representation is
made herein with respect to the requirements of state securities laws or
regulations), or any order, judgment, award or decree of any court, arbitrator
or governmental authority binding on the Collateral Manager, or the
Organizational Instruments of, or any securities issued by, the Collateral
Manager or of any mortgage, indenture, lease, contract or other agreement,
instrument or undertaking to which the Collateral Manager is a party or by which
the Collateral Manager or any of its assets may be bound, the violation of which
would have a material adverse effect on the business, operations, assets or
financial condition of the Collateral Manager or which would reasonably be
expected to adversely affect in a material manner its ability to perform its
obligations hereunder or under the Indenture or any other Transaction Document
to which it is a party.

 

(iv)             There is no charge, investigation, action, suit or proceeding
before or by any court pending or, to the actual knowledge of the Collateral
Manager, threatened, that, if determined adversely to the Collateral Manager,
would have a material adverse effect upon the performance by the Collateral
Manager of its duties under this Agreement or the provisions of the Indenture
and any other Transaction Document applicable to the Collateral Manager.

 

(v)               Any information contained in the sections entitled “Summary of
Terms—Collateral Manager,” “Risk factors—Relating to Certain Conflicts of
Interest—Relating to the Collateral Manager and its Affiliates” and “The
Collateral Manager” in the Final Offering Circular, as thereafter amended or
supplemented, as of the date of the Final Offering Circular, the Closing Date or
as of the date of any such amendment or supplement, as applicable (provided that
the Collateral Manager has consented to such amendment or supplement)
(collectively, the “Collateral Manager Information”) does not and, as of such
dates, will not contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.

 

(vi)             The Collateral Manager is not required to register as an
investment adviser with the SEC.

 

(vii)           The Origination Requirement is satisfied.

 

(c)                The Collateral Manager makes no representation, express or
implied, with respect to the Issuer or any disclosure with respect to the
Issuer.

 

 34 

 

Section 17.            Limited Recourse; No Petition.

 

The Collateral Manager hereby agrees that it shall not institute against, or
join any other Person in instituting against the Issuer any bankruptcy,
reorganization, arrangement, insolvency, moratorium or liquidation proceedings
or other proceedings under United States federal or state or other bankruptcy or
similar laws until at least one year (or, if longer, the applicable preference
period then in effect) plus one day after payment in full of all Notes issued
under the Indenture; provided that nothing in this Section 17 shall preclude the
Collateral Manager from (A) taking any action prior to the expiration of such
applicable preference period in (x) any case or proceeding voluntarily filed or
commenced by the Issuer or (y) any insolvency proceeding filed or commenced
against the Issuer by any Person other than the Collateral Manager or any
Affiliate or (B) commencing against the Issuer or any properties of the Issuer
any legal action that is not a bankruptcy, reorganization, arrangement,
insolvency, moratorium or liquidation proceeding. The Collateral Manager hereby
acknowledges and agrees that the Issuer’s obligations hereunder will be solely
the corporate obligations of the Issuer, and that the Collateral Manager will
not have any recourse to any of the members, managers, directors, officers,
employees, or Affiliates of the Issuer with respect to any claims, losses,
damages, liabilities, indemnities or other obligations in connection with any
Transactions contemplated hereby. Notwithstanding any other provisions hereof or
of any other Transaction Document, recourse in respect of any obligations of the
Issuer to the Collateral Manager hereunder or thereunder will be limited to the
Assets as applied in accordance with the Priority of Payments pursuant to the
Indenture and, on the exhaustion of the Assets, all claims against the Issuer
arising from this Agreement or any Transaction Document or any Transactions
contemplated hereby or thereby shall be extinguished and shall not revive. This
Section 17 shall survive the termination of this Agreement for any reason
whatsoever.

 

Section 18.            Notices.

 

Unless expressly provided otherwise herein, all notices, requests, demands and
other communications required or permitted under this Agreement shall be in
writing and shall be deemed to have been duly given, made and received when
delivered against receipt or upon actual receipt of registered or certified
mail, postage prepaid, return receipt requested, or, in the case of telecopier
notice, when received in legible form, addressed as set forth below:

 

(a)           If to the Issuer:

 

Garrison Funding 2016-2 Ltd.
c/o MaplesFS Limited

P.O. Box 1093, Boundary Hall

Cricket Square, George Town

Grand Cayman, KY1-1102, Cayman Islands
Telephone No.: (345) 945-7099
Telecopier No.: (345) 945-7100
Attention: The Directors

 

 35 

 

(b)           If to the Collateral Manager:

 

Garrison Capital Inc.
1290 Avenue of the Americas, Suite 914
New York, New York 10104
Telephone No.: (212) 372-9526
Telecopier No.: (212) 372-9525
Attention: Sujit Sahadevan

 

with a copy to:

 

Dechert LLP
100 North Tryon Street
Suite 4000
Charlotte, NC 28202
Telephone No.: (704) 339-3100
Telecopier No.: (704) 339-3101
Attention: John Timperio

 

(c)           If to the Trustee or the Registrar:

 

Deutsche Bank Trust Company Americas
1761 East St. Andrew Place
Santa Ana, CA 92705
Telephone No.: (714) 247-6000
Telecopier No.: (714) 656-2568
Attention: Structured Credit Services – Garrison Funding 2016-2

 

(d)           If to the Holders:

 

At their respective addresses maintained in the Register or otherwise maintained
by the Trustee pursuant to the Indenture.

 

Any party may change the address or telecopy number to which communications or
copies directed to such party are to be sent by giving notice to the other
parties of such change of address or telecopy number in conformity with the
provisions of this Section 18 for the giving of notice.

 

Section 19.            Binding Nature of Agreement; Successors and Assigns.

 

This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns as provided herein.

 

 36 

 

Section 20.            Entire Agreement; Amendment.

 

This Agreement, the Indenture, the Sub-Collateral Management Agreement and the
Collateral Administration Agreement contain the entire agreement and
understanding among the parties hereto with respect to the subject matter
hereof, and supersede all prior and contemporaneous agreements, understandings,
inducements and conditions, express or implied, oral or written, of any nature
whatsoever with respect to the subject matter hereof. The express terms hereof
and thereof control and supersede any course of performance and/or usage of the
trade inconsistent with any of the terms hereof. This Agreement may not be
modified, supplemented or amended other than by an agreement in writing executed
by the parties hereto and (other than in respect of a modification or amendment
of the type that may be made to the Indenture without consent of any Holders of
Secured Notes or Subordinated Notes (it being understood that any proposed
modification or amendment to this Agreement of the type that may be made
pursuant to Section 8.1 of the Indenture shall be subject to the corresponding
notice and Noteholder objection provisions, if any, set forth in Section 8.1 of
the Indenture)), with the written consent of (A) (i) a Majority of each Class of
Notes entitled to vote or (ii) the percentage sufficient to meet the Holder of
Notes requirements for such modification, supplement or amendment if it were
made to the Indenture, whichever is greater (it being understood that any
proposed modification or amendment to this Agreement of the type that may be
made pursuant to Sections 8.1 and 8.2 of the Indenture shall be subject to the
corresponding notice and Noteholder objection provisions, if any, set forth in
Sections 8.1 and 8.2 of the Indenture), and (B) a Majority of the Subordinated
Notes. Any amendment to this Agreement that is not solely to cure an ambiguity
or inconsistency or of a formal, minor or technical nature shall be subject to
the satisfaction of the Rating Agency Condition in respect thereto.

 

Section 21.            Governing Law.

 

THIS AGREEMENT SHALL BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK INCLUDING
NEW YORK GENERAL OBLIGATIONS LAW §§ 5-1401 AND 5-1402 BUT OTHERWISE WITHOUT
REGARD TO THE PRINCIPLES THEREOF GOVERNING CONFLICTS OF LAW.

 

Section 22.            Submission to Jurisdiction.

 

With respect to any suit, action or proceedings relating to this Agreement or
any matter between the parties arising under or in connection with this
Agreement (“Proceedings”), each party irrevocably: (i) submits to the
non-exclusive jurisdiction of the Supreme Court of the State of New York sitting
in the Borough of Manhattan and the United States District Court for the
Southern District of New York, and any appellate court from any thereof; and
(ii) waives any objection which it may have at any time to the laying of venue
of any Proceedings brought in any such court, waives any claim that such
Proceedings have been brought in an inconvenient forum and further waives the
right to object, with respect to such Proceedings, that such court does not have
any jurisdiction over such party. Nothing in this Agreement precludes any of the
parties from bringing Proceedings in any other jurisdiction, nor will the
bringing of Proceedings in any one or more jurisdictions preclude the bringing
of Proceedings in any other jurisdiction.

 

 37 

 

Each of the Collateral Manager and the Issuer irrevocably consents to the
service of any and all process in any action or proceeding by the mailing or
delivery of copies of such process to it at the office to which notices are sent
to it.

 

Section 23.            Waiver of Jury Trial.

 

EACH PARTY TO THIS AGREEMENT HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY RIGHT THAT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
PROCEEDING.

 

Section 24.            Conflict with the Indenture.

 

Except as set forth in Section 2(f), in respect of any conflict between the
terms of this Agreement and the Indenture or actions required under the terms of
the Indenture and the terms of this Agreement, the terms of the Indenture shall
control.

 

Section 25.            Subordination; Assignment of Agreement.

 

The Collateral Manager agrees that the payment of all amounts to which it is
entitled pursuant to this Agreement shall be subordinated to the extent set
forth in, and the Collateral Manager agrees to be bound by the provisions of,
Article XI of the Indenture as if the Collateral Manager were a party to the
Indenture and hereby consents to the assignment of this Agreement as provided in
Article XV of the Indenture.

 

Section 26.            Indulgences Not Waivers.

 

Neither the failure nor any delay on the part of any party hereto to exercise
any right, remedy, power or privilege under this Agreement shall operate as a
waiver thereof, nor shall any single or partial exercise of any right, remedy,
power or privilege preclude any other or further exercise of the same or of any
other right, remedy, power or privilege, nor shall any waiver of any right,
remedy, power or privilege with respect to any occurrence be construed as a
waiver of such right, remedy, power or privilege with respect to any other
occurrence. No waiver shall be effective unless it is in writing and is signed
by the party asserted to have granted such waiver.

 

Section 27.            Costs and Expenses.

 

The costs and expenses (including the fees and disbursements of counsel and
accountants) of the Collateral Manager and of the Issuer incurred in connection
with the negotiation and preparation of and the execution of this Agreement, and
all matters incidental thereto, shall be paid by the Collateral Manager or an
Affiliate thereof. The Issuer will reimburse the Collateral Manager for expenses
including fees and out-of-pocket expenses reasonably incurred by the Collateral
Manager in connection with services provided after the Closing Date under this
Agreement with respect to (a) legal advisers, consultants, rating agencies,
accountants, brokers and other professionals retained by the Issuer or the
Collateral Manager (on behalf of the Issuer), (b) asset pricing and asset rating
services, compliance services and software, and accounting, programming and data
entry services directly related to the management of the Assets, (c) all Taxes,
regulatory and governmental charges (not based on the income of the Collateral
Manager), insurance premiums or expenses (d) any and all costs and expenses
incurred in connection with the acquisition, disposition of investments on
behalf of the Issuer (whether or not actually consummated) and management
thereof, including attorneys’ fees and disbursements, (e) any fees, expenses or
other amounts payable to S&P, (f) any extraordinary costs and expenses incurred
by the Collateral Manager in the performance of its obligations under this
Agreement and the Indenture, (g) any expenses related to compliance with Rule
17g-5 under the Exchange Act and (h) as otherwise agreed upon by the parties.
The Issuer shall be obligated to pay all reasonable costs and disbursements in
connection with the perfection and the maintenance of perfection, as against all
third parties, of the Issuer’s and Trustee’s respective right, title and
interest in and to the Assets (including, without limitation, the security
interests provided for in the Indenture). The fees and expenses payable by the
Issuer to the Collateral Manager in accordance with this Section 27 shall be
paid on any Payment Date as Administrative Expenses in accordance with, and
subject to the limitations contained in, the Priority of Payments and shall be
subject to the availability of funds thereunder.

 

 38 

 

Section 28.            Third Party Beneficiary.

 

The parties hereto agree that the Trustee on behalf of the Secured Parties shall
be a third party beneficiary of this Agreement and shall be entitled to rely
upon and enforce such provisions of this Agreement (other than Section 20) to
the same extent as if each of them were a party hereto. For the avoidance of
doubt, amendments to this Agreement may be entered into without the consent of
the Trustee.

 

Section 29.            Titles Not to Affect Interpretation.

 

The titles of paragraphs and subparagraphs contained in this Agreement are for
convenience only, and they neither form a part of this Agreement nor are they to
be used in the construction or interpretation hereof.

 

Section 30.            Execution in Counterparts.

 

This Agreement may be executed in any number of counterparts by telegraphic or
other written form of communication, each of which shall be deemed to be an
original as against any party whose signature appears thereon, and all of which
shall together constitute one and the same instrument. This Agreement shall
become binding when one or more counterparts hereof, individually or taken
together, shall bear the signatures of all of the parties reflected hereon as
the signatories.

 

Section 31.            Provisions Separable.

 

The provisions of this Agreement are independent of and separable from each
other, and no provision shall be affected or rendered invalid or unenforceable
by virtue of the fact that for any reason any other or others of them may be
invalid or unenforceable in whole or in part.

 

 39 

 

Section 32.            Gender.

 

Words used herein, regardless of the number and gender specifically used, shall
be deemed and construed to include any other number, singular or plural, and any
other gender, masculine, feminine or neuter, as the context requires.

 

Section 33. Communications with Rating Agencies.

 

The Collateral Manager shall, on behalf of the Issuer, take all steps required
for the Issuer to comply with its obligations under the Indenture and under
rating application letters and any related side letters, in each case in respect
of Rule 17g-5 under the Exchange Act.

 

[Remainder of Page Intentionally Left Blank]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 40 

 

 

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

 

  GARRISON FUNDING 2016-2 LTD.,   as Issuer             By /s/ Carrie Bunton    
Name: Carrie Bunton     Title: Director                     GARRISON CAPITAL
INC., as Collateral Manager           By /s/ Michael Butler     Name: Michael
Butler     Title: Secretary  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 41 

 

SCHEDULE I

 

Investment Procedures:

 

For so long as Garrison Capital Inc. is the Collateral Manager, all decisions
regarding the acquisition of Collateral Obligations and the formulation of
portfolio management parameters will require the consent of representatives of
an investment committee (the “Investment Committee”) of Garrison Capital Inc. as
set forth herein. The Investment Committee will be responsible for, inter alia,
(1) formulating portfolio management parameters for the Issuer (including as to
acquisition and disposition of Assets) for purposes of the Indenture and the
other Transaction Documents and (2) credit review of all Collateral Obligations
proposed to be acquired by the Issuer. If the Investment Committee approves the
acquisition of a Collateral Obligation, the Collateral Manager may (but need
not) acquire such Collateral Obligation on behalf of the Issuer at such time as
it deems appropriate. No Collateral Obligation may be acquired or committed to
be acquired by the Issuer (or the Collateral Manager on its behalf) without
approval from the Investment Committee.

 

The Investment Committee shall communicate and meet (including telephonically or
using other electronic means) as needed in connection with reviewing Collateral
Obligations proposed to be acquired by the Issuer. The members of the Investment
Committee taking part in any such communication or meeting will be entitled
under the Collateral Management Agreement to indemnification by the Issuer under
certain circumstances.

 

The Investment Committee need not approve the disposition of any Collateral
Obligation of the Issuer directed by the Collateral Manager in accordance with
the Indenture and the other Transaction Documents or, except as expressly
provided in the second preceding paragraph, the taking of any other action by
the Collateral Manager or the Issuer. The Investment Committee may provide to
the Collateral Manager input on Collateral Obligation dispositions or any other
investment-related issue of the Issuer.

 

 

 

 

 

 

 

 

 

 

Sch. I-1