Exhibit 10.30

 

AMENDMENT NO. 5, CONSENT AND WAIVER
TO
CREDIT AGREEMENT

 

THIS AMENDMENT NO. 5, CONSENT AND WAIVER TO CREDIT AGREEMENT (this “Amendment”)
dated as of May 27, 2005, is entered into among GLADSTONE BUSINESS LOAN, LLC, as
the Borrower, TAHOE FUNDING CORP., LLC and PUBLIC SQUARE FUNDING LLC, as CP
Lenders (collectively, the “CP Lenders”), DEUTSCHE BANK AG, NEW YORK BRANCH
(“Deutsche Bank”) and KEYBANK, NATIONAL ASSOCIATION (“KeyBank”), as Committed
Lenders (collectively, the “Committed Lenders”), Deutsche Bank and KeyBank as
Managing Agents (in such capacity, collectively the “Managing Agents”) and
Deutsche Bank as Administrative Agent (in such capacity, the “Administrative
Agent”).  Capitalized terms used herein without definition shall have the
meanings ascribed thereto in the “Credit Agreement” referred to below.

 

PRELIMINARY STATEMENTS

 

A.            Reference is made to that certain Credit Agreement dated as of May
19, 2003 among the Borrower, Gladstone Advisers, Inc., as Servicer, the CP
Lenders, the Committed Lenders, the Managing Agents and the Administrative Agent
(as amended, modified or supplemented from time to time, including, without
limitation, by that certain Resignation, Appointment and Consent dated as of
September 28, 2004, and as further amended, restated, supplemented or modified
from time to time, the “Credit Agreement”).

 

B.            The parties hereto have agreed to (i) amend certain provisions of
the Credit Agreement upon the terms and conditions set forth herein and (ii)
consent to the modification by the Borrower and the Servicer of the Credit and
Collection Policy.

 

SECTION 1.  Amendment.  Subject to the satisfaction of the conditions precedent
set forth in Section 4 hereof, the parties hereto hereby agree:

 

(I)            TO AMEND SECTION 1.1 BY ADDING THE FOLLOWING NEW DEFINITIONS IN
ALPHABETICAL ORDER, AS FOLLOWS:

 

Post-Termination Revolver Loan Fundings: means an advance by the Committed
Lenders, made on or following the Revolver Loan Funding Date, which may be used
for the sole purpose of funding advances requested by Obligors under the
Revolver Loans.

 

Revolver Loan:  means each Loan with respect to which the Borrower has a
revolving credit commitment to advance amounts to the applicable Obligor during
a specified term.

 

Revolver Loan Funding:  has the meaning given to such term in Section 2.14.

 

--------------------------------------------------------------------------------

 

Revolver Loan Funding Account: has the meaning given to such term in Section
2.14.

 

Revolver Loan Funding Account Shortfall: means, on any date, the amount, if any,
by which the Revolver Loan Funding Amount at such time exceeds the aggregate
amount on deposit in the Revolver Loan Funding Accounts.

 

Revolver Loan Funding Account Surplus:  means, on any date, the amount, if any,
by which the amount on deposit in the Revolver Loan Funding Accounts exceeds the
Revolver Loan Funding Amount at such time.

 

Revolver Loan Funding Amount: has the meaning given to such term in Section
2.14.

 

Revolver Loan Funding Date:  means the Termination Date, if Revolver Loans are
outstanding on such date.

 

Servicing Fee Limit Amount:  means, for each Payment Date, an amount equal to
50% of the Servicing Fee for the related Settlement Period.

 

(II)           TO DELETE THE DEFINITION OF “COMMITMENT TERMINATION DATE” IN ITS
ENTIRETY, AND SUBSTITUTE THE FOLLOWING THEREFOR:

 

Commitment Termination Date: means May 26, 2006, or such later date to which the
Commitment Termination Date may be extended (if extended) in the sole discretion
of the Lenders in accordance with the terms of Section 2.1(b).

 

(III)          TO AMEND THE DEFINITION OF “CREDIT AND COLLECTION POLICY” TO
DELETE THE REFERENCE TO “SECTION 7.8(G)” SET FORTH THEREIN AND SUBSTITUTE A
REFERENCE TO “SECTION 7.9(G)” THEREFOR.

 

(IV)          TO DELETE CLAUSE (VIII) OF THE DEFINITION OF “ELIGIBLE LOAN” AND
SUBSTITUTE THE FOLLOWING THEREFOR:

 

(viii)        the Loan bears interest, which is due and payable no less
frequently than quarterly, except for (i) Loans which bear interest which is due
and payable no less frequently than semi-annually, provided that the aggregate
Outstanding Loan Balances of such Loans do not exceed 10% of the Aggregate
Outstanding Loan Balance and (ii) PIK Loans,

 

(V)           TO ADD THE FOLLOWING CLAUSES (XXII) AND (XXIII) TO THE DEFINITION
OF “ELIGIBLE LOAN” IN APPROPRIATE NUMERIC ORDER THEREIN:

 

2

--------------------------------------------------------------------------------

 

(xxii)        if such Loan is a Revolver Loan, it shall be secured by a first
priority, perfected security interest on certain assets of the Obligor which
shall include, without limitation, accounts receivable and inventory; and

 

(xxiii)       if such Loan is a Revolver Loan, the revolving credit commitment
of the Borrower to the applicable Obligor thereunder (A) is between $500,000 and
$5,000,000, (B) shall have a term to maturity of one year or less and (C) shall
permit borrowings thereunder not more frequently than once per week.

 

(VI)          TO DELETE THE DEFINITION OF “EXCESS CONCENTRATION AMOUNT” AND
SUBSTITUTE THE FOLLOWING THEREFOR:

 

Excess Concentration Amount:  On any date of determination, the sum of, without
duplication, (a) the aggregate amount by which the Outstanding Loan Balances of
Eligible Loans included as part of the Collateral, the Obligors of which are
residents of any one state, exceeds 40% of the Aggregate Outstanding Loan
Balance, (b) the aggregate amount by which the Outstanding Loan Balances of
Eligible Loans included as part of the Collateral, the Obligors of which are in
the same Industry, exceeds 25% of the Aggregate Outstanding Loan Balance, (c)
the aggregate amount by which the Outstanding Loan Balance of each Eligible Loan
included as part of the Collateral exceeds the Large Loan Limit applicable to
such Eligible Loan, (d) the aggregate amount by which the Outstanding Loan
Balances of all Eligible Loans included as part of the Collateral whose interest
payments are due and payable less frequently than monthly exceeds 66 2/3% of the
Aggregate Outstanding Loan Balance, (e) the aggregate amount by which the
Outstanding Loan Balances of all Eligible Loans included as part of the
Collateral which are PIK Loans exceeds 40% of the Aggregate Outstanding Loan
Balance, (f) the aggregate amount by which the Outstanding Loan Balances of all
Eligible Loans included as part of the Collateral which are PIK Loans having a
PIK accrual component greater than 3.0% exceeds 25% of the Aggregate Outstanding
Loan Balance, (g) the aggregate amount by which the Outstanding Loan Balances of
all Eligible Loans that have original terms to maturity greater than 84 months
exceeds 10% of the Aggregate Outstanding Loan Balance, (h) the aggregate amount
by which the Outstanding Loan Balances of Qualifying Syndicated Loans included
as part of the Collateral, for which no Subsequent Delivery Trust Receipt

 

3

--------------------------------------------------------------------------------

 

(as defined in the Custody Agreement) has been received exceeds $30,000,000, (i)
the aggregate Outstanding Loan Balances of all Loans which (A) do not have a
long-term credit rating from either S&P or Moody’s and (B) are not priced by
Standard & Poor’s Securities Evaluations, Inc. on a quarterly basis and have not
been so priced by Standard & Poor’s Securities Evaluations, Inc. for a period in
excess of (x) with respect to the Loans described in Annex III to that certain
Amendment No. 4 hereto dated as of September 28, 2004, 45 days from September
28, 2004 or (y) otherwise, 135 days from the date such Loan becomes a
Transferred Loan, provided, however, that the requirements of this clause (i)
shall not apply to the Marcal RE Loan, (j) the aggregate amount by which the
Outstanding Loan Balances of all Eligible Loans included as part of the
Collateral which are Revolver Loans exceeds $20,000,000 and (k) the aggregate
amount by which the Outstanding Loan Balances of all Eligible Loans that are
unsecured exceeds 10% of the Aggregate Outstanding Loan Balance.

 

(VII)         TO DELETE THE DEFINITION OF “PAYMENT DATE” IN ITS ENTIRETY, AND
SUBSTITUTE THE FOLLOWING THEREFOR:

 

Payment Date: means the seventh (7th) day of each calendar month or, if such day
is not a Business Day, the next succeeding Business Day; provided that for
purposes of distributions required pursuant to Section 2.8(a)(vii) only,
“Payment Date” shall mean any Business Day.

 

(VIII)        TO AMEND SECTION 2.1(A) TO DELETE THE SENTENCES “SUCH FUNDING
REQUEST SHALL BE DELIVERED NOT LATER THAN 5:00 P.M. (NEW YORK CITY TIME) ON THE
DATE WHICH IS FOUR (4) BUSINESS DAYS PRIOR TO THE REQUESTED FUNDING DATE. 
FOLLOWING RECEIPT BY THE ADMINISTRATIVE AGENT OF A FUNDING REQUEST, THE
ADMINISTRATIVE AGENT SHALL FORWARD SUCH FUNDING REQUEST TO EACH MANAGING AGENT
NOT LATER THAN 12:00 P.M. (NEW YORK CITY TIME) ON THE DATE WHICH IS THREE (3)
BUSINESS DAYS PRIOR TO THE REQUESTED FUNDING DATE.” AND SUBSTITUTE THE FOLLOWING
THEREFOR:

 

Such Funding Request shall be delivered not later than 10:00 a.m. (New York City
time) on the date which is one (1) Business Day prior to the requested Funding
Date.  Following receipt by the Administrative Agent of a Funding Request, the
Administrative Agent shall forward such Funding Request to each Managing Agent
not later than 11:00 a.m. (New York City time) that day.

 

4

--------------------------------------------------------------------------------

 

(IX)           TO AMEND SECTION 2.2(C) TO INSERT THE PHRASE, “PROVIDED THAT THE
REQUIREMENTS OF THIS SECTION 2.2(C) SHALL APPLY ONLY WITH RESPECT TO THE FIRST
ADVANCE TO BE MADE WITH RESPECT TO A REVOLVER LOAN” AT THE END OF THE FIRST
SENTENCE THEREOF;

 

(X)            TO AMEND SECTION 2.2(E) TO DELETE THE PHRASE “AT LEAST
$3,000,000” AND SUBSTITUTE THE PHRASE “AT LEAST $3,000,000, OR, IF SUCH ADVANCE
IS TO BE MADE WITH RESPECT TO A REVOLVER LOAN, AT LEAST $100,000” THEREFOR;

 

(XI)           TO AMEND SECTION 2.3(B) TO DELETE THE PHRASE “AT LEAST THREE (3)
BUSINESS DAYS PRIOR TO THE PROPOSED FUNDING DATE (OR SUCH SHORTER PERIOD OF TIME
OR LATER DATE AS MAY BE AGREED TO BY THE REQUIRED COMMITTED LENDERS)” AND
SUBSTITUTE THE PHRASE “AT LEAST ONE (1) BUSINESS DAY PRIOR TO THE DATE OF SUCH
REPAYMENT” THEREFOR

 

(XII)          TO FURTHER AMEND SECTION 2.3(B) TO DELETE THE PHRASE “$1,000,000
WITH INTEGRAL MULTIPLES OF $100,000 ABOVE SUCH AMOUNT” AND SUBSTITUTE THE PHRASE
“$1,000,000 WITH INTEGRAL MULTIPLES OF $100,000 ABOVE SUCH AMOUNT, OR, WITH
RESPECT TO ANY PARTIAL PREPAYMENT MADE IN CONNECTION WITH PAYMENTS RECEIVED IN
RESPECT OF A REVOLVER LOAN, $100,000 WITH INTEGRAL MULTIPLES OF $100,000 ABOVE
SUCH AMOUNT” THEREFOR;

 

(XIII)         TO DELETE “SECTION 2.8   SETTLEMENT PROCEDURES” IN ITS ENTIRETY
AND SUBSTITUTE THE SECTION SET FORTH IN ANNEX I THEREFOR;

 

(XIV)        TO AMEND ARTICLE II TO ADD THE FOLLOWING SECTION 2.14 IN NUMERIC
ORDER THEREIN:

 

Section 2.14         Revolver Loan Funding.  (a)  Upon the occurrence of a
Revolver Loan Funding Date (i) each CP Lender shall make an assignment to its
related Committed Lenders of its Advances Outstanding in respect of Revolver
Loans at such time and (ii) each Committed Lender shall make an advance (each, a
“Revolver Loan Funding”) in an amount equal to such Committed Lender’s ratable
share of the aggregate outstanding unfunded commitments under the Revolver Loans
(collectively, the “Revolver Loan Funding Amount”).  Upon receipt of the
proceeds of such Revolver Loan Funding, the Administrative Agent shall deposit
such funds into segregated accounts (each, a “Revolver Loan Funding Account”),
in its name, referencing the name of such Committed Lender, and maintained at a
Qualified Institution.  Each Committed Lender hereby grants to the
Administrative Agent full power and authority, on its behalf, to withdraw funds
from the applicable Revolver Loan Funding Account at the time of, and in
connection with, the funding of any Post-Termination Revolver Loan Fundings to

 

5

--------------------------------------------------------------------------------

 

be made by the Borrower, and to deposit to the related Revolver Loan Funding
Account any funds received in respect of each relevant Committed Lender’s
ratable share of principal payments under Section 2.8 hereof, all in accordance
with the terms of and for the purposes set forth in this Agreement.  The deposit
of monies in such Revolver Loan Funding Account by any Committed Lender shall
not constitute an Advance (and such Committed Lender shall not be entitled to
interest on such monies except as provided in clause (d) below) unless and until
(and then only to the extent that) such monies are used to make Post-Termination
Revolver Loan Fundings pursuant to the first sentence of clause (b) below).  On
each Payment Date, the Borrower shall pay the Administrative Agent, for the
benefit of the Committed Lenders, a fee (the “Revolver Loan Funding Fee”) equal
to 0.30%, multiplied by the weighted average amount on deposit in the Revolver
Loan Funding Accounts during the applicable Settlement Period, calculated on the
basis of a year of 360 days for the actual number of days elapsed.

 

(b)           From and after the establishment of a Revolver Loan Funding
Account with respect to any Committed Lender, and until the earlier of (i) the
reduction to zero of all outstanding commitments in respect of Revolver Loans
and (ii) one year following the Revolver Loan Funding Date, all Post-Termination
Revolver Loan Fundings to be made by such Committed Lender hereunder shall be
made by withdrawing funds from the applicable Revolver Loan Funding Account.  On
each Business Day during such time, the Administrative Agent shall, (i) if a
Revolver Loan Funding Account Shortfall exists, deposit the lesser of (A) the
amount allocable to the repayment of principal to the Committed Lenders and (B)
the Revolver Loan Funding Account Shortfall and (ii) if a Revolver Loan Funding
Account Surplus exists, pay to the applicable Managing Agent, on behalf of each
Committed Lender, such Committed Lender’s ratable share of the Revolver Loan
Funding Account Surplus.  Until the earlier of (i) the reduction to zero of all
outstanding commitments in respect of Revolver Loans and (ii) one year following
the Revolver Loan Funding Date, all remaining funds then held in such Revolver
Loan Funding Account (after giving effect to any Post-Termination Revolver Loan
Fundings to be made on such date) shall be paid by the Administrative Agent to
the applicable Managing Agent, on behalf of such Committed Lender, and
thereafter all payments made in respect of the

 

6

--------------------------------------------------------------------------------

 

Loans (whether or not originally funded from such Committed Lender’s Revolver
Loan Funding Account) shall be paid directly to the applicable Managing Agent,
on behalf of such Committed Lender, in accordance with the terms of Section 2.8.

 

(c)           The Program Agent may, its sole discretion, advance funds
withdrawn from the Revolver Loan Funding Accounts to (i) the Borrower or (ii)
the applicable Obligor directly, on behalf of the Borrower, and in either case,
such funds shall be used solely for the purpose of funding advances requested by
an Obligor under a Revolver Loan.

 

(d)           Proceeds in a Revolver Loan Funding Account shall be invested, at
the written direction of the applicable Committed Lender (or the applicable
Managing Agent on its behalf) to the applicable Revolver Loan Funding Account
bank, only in investments which constitute Permitted Investments.  The
investment earnings with respect to a Revolver Loan Funding Account shall accrue
as the Committed Lender and Revolver Loan Funding Account bank shall agree.  The
Administrative Agent shall direct the Revolver Loan Funding Account bank to pay
all such investment earnings from the relevant account directly to the
applicable Managing Agent, for the account of the applicable Committed Lender.

 

(e)           Notwithstanding anything herein to the contrary, none of the
Administrative Agent, the other Managing Agents, the other Purchasers nor the
Revolver Loan Funding Account bank shall have any liability for any loss arising
from any investment or reinvestment made by it with respect to a Revolver Loan
Funding Account in accordance with, and pursuant to, the provisions hereof.

 

(XV)         TO DELETE “SECTION 5.2   HEDGING AGREEMENT” IN ITS ENTIRETY AND
SUBSTITUTE THE SECTION SET FORTH IN ANNEX II THEREFOR;

 

(XVI)        TO AMEND “SECTION 12.1 AMENDMENTS AND WAIVERS” TO DELETE THE
FOLLOWING LANGUAGE IN ITS ENTIRETY:

 

(x)  written notice to Concord delivered two (2) Business Days prior to
effectiveness, which notice requirement may be waived in Concord’s sole
discretion and (y)

 

7

--------------------------------------------------------------------------------

 

(XVII)       TO DELETE THE FORM OF MONTHLY REPORT SET FORTH ON EXHIBIT E TO THE
CREDIT AGREEMENT IN ITS ENTIRETY, AND SUBSTITUTE THE FORM OF MONTHLY REPORT SET
FORTH ON EXHIBIT A HERETO THEREFOR.

 

SECTION 2.  Waiver.  Each of the Managing Agents and the Administrative Agent
hereby agrees to waive any Early Termination Event arising solely as a result of
the Borrower’s failure to comply with the requirements under Section 5.2 of the
Credit Agreement prior to its amendment hereunder.

 

SECTION 3.  Consent.  Each of the Managing Agents and the Administrative Agent
hereby waives the notice and timing requirements set forth in Sections 5.1(r)
and 7.9(g) of the Credit Agreement and consents to the amendment to the Credit
and Collection Policy, as set forth on Exhibit B hereto.

 

SECTION 4.  Representations and Warranties.  The Borrower hereby represents and
warrants to each of the other parties hereto, that:

 

(A)           THIS AMENDMENT CONSTITUTES ITS LEGAL, VALID AND BINDING
OBLIGATION, ENFORCEABLE AGAINST IT IN ACCORDANCE WITH ITS TERMS; AND

 

(B)           ON THE DATE HEREOF, BEFORE AND AFTER GIVING EFFECT TO THIS
AMENDMENT, OTHER THAN AS AMENDED OR WAIVED PURSUANT TO THIS AMENDMENT, NO EARLY
TERMINATION EVENT OR UNMATURED TERMINATION EVENT HAS OCCURRED AND IS CONTINUING.

 

SECTION 5.  Conditions Precedent.  This Amendment shall become effective on the
first Business Day (the “Effective Date”) on which the Administrative Agent or
its counsel has received counterpart signature pages of this Amendment, executed
by each of the parties hereto.

 

SECTION 6.  Reference to and Effect on the Transaction Documents.

 

(A)           UPON THE EFFECTIVENESS OF THIS AMENDMENT, (I) EACH REFERENCE IN
THE CREDIT AGREEMENT TO “THIS CREDIT AGREEMENT”, “THIS AGREEMENT”, “HEREUNDER”,
“HEREOF”, “HEREIN” OR WORDS OF LIKE IMPORT SHALL MEAN AND BE A REFERENCE TO THE
CREDIT AGREEMENT AS AMENDED OR OTHERWISE MODIFIED HEREBY, AND (II) EACH
REFERENCE TO THE CREDIT AGREEMENT IN ANY OTHER TRANSACTION DOCUMENT OR ANY OTHER
DOCUMENT, INSTRUMENT OR AGREEMENT EXECUTED AND/OR DELIVERED IN CONNECTION
THEREWITH, SHALL MEAN AND BE A REFERENCE TO THE CREDIT AGREEMENT AS AMENDED OR
OTHERWISE MODIFIED HEREBY.

 

(B)           EXCEPT AS SPECIFICALLY AMENDED, TERMINATED OR OTHERWISE MODIFIED
ABOVE, THE TERMS AND CONDITIONS OF THE CREDIT AGREEMENT, OF ALL OTHER
TRANSACTION DOCUMENTS AND ANY OTHER DOCUMENTS, INSTRUMENTS AND AGREEMENTS
EXECUTED AND/OR DELIVERED IN CONNECTION THEREWITH, SHALL REMAIN IN FULL FORCE
AND EFFECT AND ARE HEREBY RATIFIED AND CONFIRMED.

 

(C)           THE EXECUTION, DELIVERY AND EFFECTIVENESS OF THIS AMENDMENT SHALL
NOT OPERATE AS A WAIVER OF ANY RIGHT, POWER OR REMEDY OF THE ADMINISTRATIVE
AGENT, ANY MANAGING AGENT OR ANY LENDER UNDER THE CREDIT AGREEMENT OR ANY OTHER
TRANSACTION DOCUMENT OR ANY OTHER DOCUMENT, INSTRUMENT OR AGREEMENT EXECUTED IN
CONNECTION

 

8

--------------------------------------------------------------------------------

 

THEREWITH, NOR CONSTITUTE A WAIVER OF ANY PROVISION CONTAINED THEREIN, IN EACH
CASE EXCEPT AS SPECIFICALLY SET FORTH HEREIN.

 

SECTION 7.  Execution in Counterparts.  This Amendment may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed to be an original
and all of which taken together shall constitute but one and the same
instrument.  Delivery of an executed counterpart of a signature page to this
Amendment by telecopier shall be effective as delivery of a manually executed
counterpart of this Amendment.

 

SECTION 8.  Governing Law.  This Amendment shall be governed by and construed in
accordance with the laws of the State of New York.

 

SECTION 9.  Headings.  Section headings in this Amendment are included herein
for convenience of reference only and shall not constitute a part of this
Amendment for any other purpose.

 

SECTION 10.  Fees and Expenses.   Seller hereby confirms its agreement to pay on
demand all reasonable costs and expenses of the Administrative Agent, Managing
Agents or Lenders in connection with the preparation, execution and delivery of
this Amendment and any of the other instruments, documents and agreements to be
executed and/or delivered in connection herewith, including, without limitation,
the reasonable fees and out-of-pocket expenses of counsel to the Administrative
Agent, Managing Agents or Lenders with respect thereto.

 

[Remainder of Page Deliberately Left Blank]

 

9

--------------------------------------------------------------------------------

 

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

 

 

GLADSTONE BUSINESS LOAN, LLC

 

 

 

 

 

By:

/s/ George Stelljes, III

 

 

 

Name: George Stelljes, III

 

 

Title: President and Chief Investment
Officer

 

 

Signature Page to Amendment No.5

 

--------------------------------------------------------------------------------

 

 

TAHOE FUNDING CORP., LLC

 

 

 

 

 

By:

/s/ Andrew L. Stidd

 

 

 

Name: Andrew L. Stidd

 

 

Title: President

 

 

 

 

 

DEUTSCHE BANK AG, NEW YORK BRANCH, as a
Committed Lender, Managing Agent and Administrative
Agent

 

 

 

 

 

By:

/s/ Mark D. O’Keefe

 

 

 

Name: Mark D. O’Keefe

 

 

Title: Director

 

 

 

 

 

By:

/s/ Tina Gu

 

 

 

Name: Tina Gu

 

 

Title: Vice President

 

 

Signature Page to Amendment No.5

 

--------------------------------------------------------------------------------

 

 

PUBLIC SQUARE FUNDING LLC

 

 

 

 

 

 

 

By:

/s/ Evelyn Echevarria

 

 

 

Name: Evelyn Echevarria

 

 

Title: Vice President

 

 

 

 

 

 

 

KEYBANK, NATIONAL ASSOCIATION, as a
Committed Lender and Managing Agent

 

 

 

 

 

 

 

By:

/s/ Paul E. Henson

 

 

 

Name: Paul E. Henson

 

 

Title: Executive Vice President

 

 

Signature Page to Amendment No.5

 

--------------------------------------------------------------------------------

 

Annex I

 

Section 2.8      Settlement Procedures.

 

On each Payment Date, the Servicer on behalf of the Borrower shall pay for
receipt by the applicable Lender no later than 11:00 a.m. (New York City time)
to the following Persons, from (i) the Collection Account, to the extent of
available funds, (ii) Servicer Advances, and (iii) amounts received in respect
of any Hedge Agreement during such Settlement Period (the sum of such amounts
described in clauses (i), (ii) and (iii), minus any amounts required to be
deposited to the Revolver Loan Funding Accounts in accordance with Section 2.14
below being the “Available Collections”) the following amounts in the following
order of priority

 

(I)            FIRST, TO EACH HEDGE COUNTERPARTY, ANY AMOUNTS OWING THAT HEDGE
COUNTERPARTY UNDER ITS RESPECTIVE HEDGING AGREEMENT IN RESPECT OF ANY HEDGE
TRANSACTION(S), FOR THE PAYMENT THEREOF, BUT EXCLUDING, TO THE EXTENT THE HEDGE
COUNTERPARTY IS NOT THE SAME PERSON AS THE ADMINISTRATIVE AGENT, ANY SWAP
BREAKAGE AND INDEMNITY AMOUNTS;

 

(II)           SECOND, TO THE SERVICER, IN AN AMOUNT EQUAL TO ANY UNREIMBURSED
SERVICER ADVANCES, FOR THE PAYMENT THEREOF;

 

(III)          THIRD, TO THE EXTENT NOT PAID BY THE SERVICER, TO THE BACKUP
SERVICER AND ANY SUCCESSOR SERVICER, AS APPLICABLE, IN AMOUNT EQUAL TO ANY
ACCRUED AND UNPAID BACKUP SERVICING FEE AND, IF ANY, ACCRUED AND UNPAID
TRANSITION COSTS, BACKUP SERVICER EXPENSES AND MARKET SERVICING FEE
DIFFERENTIAL, EACH FOR THE PAYMENT THEREOF;

 

(IV)          FOURTH, TO THE EXTENT NOT PAID BY THE SERVICER, TO THE COLLATERAL
CUSTODIAN IN AN AMOUNT EQUAL TO ANY ACCRUED AND UNPAID COLLATERAL CUSTODIAN FEE
AND COLLATERAL CUSTODIAN EXPENSES, IF ANY, FOR THE PAYMENT THEREOF;

 

(V)           FIFTH, TO THE SERVICER, IN AN AMOUNT EQUAL TO (A) IF THE SERVICER
IS GLADSTONE ADVISERS, INC. OR ANY OF ITS AFFILIATES, ITS ACCRUED AND UNPAID
SERVICING FEES TO THE END OF THE PRECEDING SETTLEMENT PERIOD, UP TO THE
SERVICING FEE LIMIT AMOUNT FOR SUCH SETTLEMENT PERIOD, FOR THE PAYMENT THEREOF
AND (B) OTHERWISE, ITS ACCRUED AND UNPAID SERVICING FEES TO THE END OF THE
PRECEDING SETTLEMENT PERIOD FOR THE PAYMENT THEREOF;

 

(VI)          SIXTH, TO THE ADMINISTRATIVE AGENT FOR PAYMENT TO EACH MANAGING
AGENT, ON BEHALF OF THE RELATED LENDERS, IN AN AMOUNT EQUAL TO ANY ACCRUED AND
UNPAID INTEREST, PROGRAM FEE AND LIQUIDITY COMMITMENT FEE FOR SUCH PAYMENT DATE;

 

(VII)         SEVENTH, TO THE ADMINISTRATIVE AGENT FOR PAYMENT TO EACH MANAGING
AGENT, ON BEHALF OF THE RELATED LENDERS, AN AMOUNT EQUAL TO THE EXCESS, IF ANY,
OF ADVANCES OUTSTANDING OVER THE LESSER OF (I) THE BORROWING BASE OR (II) THE
FACILITY AMOUNT, TOGETHER WITH THE AMOUNT OF BREAKAGE COSTS INCURRED BY THE

 

--------------------------------------------------------------------------------

 

APPLICABLE LENDERS IN CONNECTION WITH ANY SUCH PAYMENT (AS SUCH BREAKAGE COSTS
ARE NOTIFIED TO THE BORROWER BY THE APPLICABLE LENDER(S));

 

(VIII)        EIGHTH, FOLLOWING THE OCCURRENCE OF THE TERMINATION DATE RESULTING
FROM AN EARLY TERMINATION EVENT, TO THE ADMINISTRATIVE AGENT FOR RATABLE PAYMENT
TO EACH MANAGING AGENT, ON BEHALF OF THE RELATED LENDERS, IN AN AMOUNT TO REDUCE
ADVANCES OUTSTANDING TO ZERO AND TO PAY ANY OTHER OBLIGATIONS IN FULL;

 

(IX)           NINTH, TO EACH HEDGE COUNTERPARTY, ANY SWAP BREAKAGE AND
INDEMNITY AMOUNTS OWING THAT HEDGE COUNTERPARTY.

 

(X)            TENTH, TO THE ADMINISTRATIVE AGENT FOR PAYMENT TO EACH MANAGING
AGENT, ON BEHALF OF THE RELATED LENDERS, IN THE AMOUNT OF UNPAID BREAKAGE COSTS
(OTHER THAN BREAKAGE COSTS COVERED IN CLAUSE (VII) ABOVE) WITH RESPECT TO ANY
PREPAYMENTS MADE ON SUCH PAYMENT DATE, INCREASED COSTS AND/OR TAXES (IF ANY);

 

(XI)           ELEVENTH, TO THE ADMINISTRATIVE AGENT, ALL OTHER AMOUNTS THEN DUE
UNDER THIS AGREEMENT TO THE ADMINISTRATIVE AGENT, THE LENDERS, THE AFFECTED
PARTIES OR INDEMNIFIED PARTIES, EACH FOR THE PAYMENT THEREOF;

 

(xii)          TWELFTH, to the Servicer, in an amount equal to (A) if the
Servicer is Gladstone Advisers, Inc. or any of its Affiliates, its accrued and
unpaid Servicing Fees to the end of the preceding Settlement Period not
otherwise paid pursuant to priority FIFTH above; and

 

(XIII)         THIRTEENTH, ALL REMAINING AMOUNTS TO THE BORROWER.

 

--------------------------------------------------------------------------------

 

Annex II

 

Section 5.2                                      Hedging Agreement.

 

 

(A)           THE BORROWER SHALL, ON OR BEFORE THE INITIAL ADVANCE HEREUNDER,
ENTER INTO A HEDGE TRANSACTION WITH A HEDGE COUNTERPARTY, WHICH SHALL: (I) BE IN
THE FORM OF INTEREST RATE CAPS OR SWAPS HAVING A NOTIONAL AMOUNT EQUAL TO (A) ON
THE CLOSING DATE, THE REQUIRED NOTIONAL AMOUNT AND (B) THEREAFTER, AN AMOUNT
REFLECTING AMORTIZATION AT A RATE TO BE DETERMINED BY THE MANAGING AGENTS UPON
CONSULTATION WITH THE BORROWER AND (II) SHALL PROVIDE FOR PAYMENTS TO THE
BORROWER TO THE EXTENT THAT THE LIBO RATE SHALL EXCEED A RATE AGREED UPON
BETWEEN THE MANAGING AGENTS AND THE BORROWER.  FROM AND AFTER MAY 27, 2005,
PRIOR TO ACQUIRING A FIXED-RATE LOAN, THE BORROWER WILL CONSULT WITH THE
MANAGING AGENTS TO DETERMINE WHETHER AN ADDITIONAL CAP OR SWAP WILL BE REQUIRED
IN RESPECT OF SUCH LOAN TO MAINTAIN COMPLIANCE WITH THE REQUIREMENTS SET FORTH
IN THE PRECEDING SENTENCE.

 

(B)           AS ADDITIONAL SECURITY HEREUNDER, THE BORROWER HEREBY ASSIGNS TO
THE ADMINISTRATIVE AGENT, AS AGENT FOR THE SECURED PARTIES, ALL RIGHT, TITLE AND
INTEREST OF THE BORROWER IN EACH HEDGING AGREEMENT, EACH HEDGE TRANSACTION, AND
ALL PRESENT AND FUTURE AMOUNTS PAYABLE BY A HEDGE COUNTERPARTY TO THE BORROWER
UNDER OR IN CONNECTION WITH THE RESPECTIVE HEDGING AGREEMENT AND HEDGE
TRANSACTION(S) WITH THAT HEDGE COUNTERPARTY (“HEDGE COLLATERAL”), AND GRANTS A
SECURITY INTEREST TO THE ADMINISTRATIVE AGENT, AS AGENT FOR THE SECURED PARTIES,
IN THE HEDGE COLLATERAL.  THE BORROWER ACKNOWLEDGES THAT, AS A RESULT OF THAT
ASSIGNMENT, THE BORROWER MAY NOT, WITHOUT THE PRIOR WRITTEN CONSENT OF THE
ADMINISTRATIVE AGENT, EXERCISE ANY RIGHTS UNDER ANY HEDGING AGREEMENT OR HEDGE
TRANSACTION, EXCEPT FOR THE BORROWER’S RIGHT UNDER ANY HEDGING AGREEMENT TO
ENTER INTO HEDGE TRANSACTIONS IN ORDER TO MEET THE BORROWER’S OBLIGATIONS UNDER
SECTION 5.2(A) HEREOF.  NOTHING HEREIN SHALL HAVE THE EFFECT OF RELEASING THE
BORROWER FROM ANY OF ITS OBLIGATIONS UNDER ANY HEDGING AGREEMENT OR ANY HEDGE
TRANSACTION, NOR BE CONSTRUED AS REQUIRING THE CONSENT OF THE ADMINISTRATIVE
AGENT OR ANY SECURED PARTY FOR THE PERFORMANCE BY THE BORROWER OF ANY SUCH
OBLIGATIONS.

 

--------------------------------------------------------------------------------

 

Exhibit A

 

Form of Monthly Report

 

Please see attached.

 

--------------------------------------------------------------------------------

 

Exhibit B

 

Credit and Collection Policy

 

On file with Agent.

 

--------------------------------------------------------------------------------