FS Investment Corporation III 8-K





EXHIBIT 10.5


EXECUTION COPY





REVOLVING CREDIT AGREEMENT


 


THIS REVOLVING CREDIT AGREEMENT,
(this “Agreement”) is made as of June 18, 2015, between FS Investment Corporation III, a Maryland corporation
(together with its successors and permitted assigns, the “Lender”), and Society Hill Funding LLC, a Delaware
limited liability company (the “Borrower”).


 


PRELIMINARY STATEMENTS


 


WHEREAS, from time to time,
the Borrower will sell certain securities (the “Notes”) to Goldman Sachs Bank USA (the “Purchaser”)
pursuant to the September 1996 Version Master Repurchase Agreement, the Annex thereto and the Master Confirmation exchanged thereunder,
each dated as of June 18, 2015, and each between the Borrower and the Purchaser (as each may be amended, restated, supplemented
or otherwise modified, collectively, the “Repurchase Agreement”);


 


WHEREAS, from time to time,
the Borrower will be required to deliver cash collateral to the Purchaser to satisfy certain margining requirements in accordance
with the terms of and under the Repurchase Agreement and the Borrower desires to borrow from the Lender the amount, if any, necessary
from time to time to satisfy the Borrower’s obligation to deliver such collateral; and


 


WHEREAS, the Lender may
be willing to make subordinated loans to the Borrower to fund such amounts on the terms and conditions set forth herein.


 


NOW, THEREFORE, in consideration
of the premises and the mutual covenants and agreements herein contained, the parties hereto agree as follows:


 


ARTICLE I.


 


Section 1.1. Defined
Terms. Except as otherwise specified herein or as the context may otherwise require, capitalized terms used but not otherwise
defined herein are defined in the Repurchase Agreement. In addition, the following terms have the following meanings:


 


“Event of Default”
means any event of default specified in Section 5.1.


 


“LIBOR Rate”
means, the rate per annum determined as of the first Business Day of each calendar month equal to the rate determined by the Lender
to be the offered rate that appears on the page of the Reuters Screen that displays an average ICE Benchmark Administration Limited
(or any other Person that takes over the administration of such rate) (such page currently being LIBOR01) for deposits in
United States dollars with a one-month period. The LIBOR Rate applicable to Loans hereunder will change monthly on the first Business
Day of each calendar month.


 






    	 



    	 



    




 


“Loan”
means each loan of funds or each advance made to the Borrower by the Lender pursuant to Section 2.1.


 


“Maturity Date”
means the earlier to occur of (i) the date designated as such in writing by the Borrower and the Lender from time to time and (ii)
the date this Agreement is terminated by the Lender pursuant to Section 5.2; provided, that in no event shall the Maturity
Date occur prior to the date that is 90 days after the Final Repurchase Date under the Repurchase Agreement.


 


“Scheduled Expiration
Date” means the date that is 364 days after the date hereof, which shall be automatically renewed for one or more additional,
successive terms of 364 days each unless either the Borrower or the Lender sends written notice to the other party not less than
30 days prior to the next applicable Scheduled Expiration Date of such party’s desire not to extend the Scheduled Expiration
Date for an additional term.


 


“Spread”
means 0.75%.


 


ARTICLE II.


 


Section 2.1. Loans to
Borrower. Subject to the terms and conditions of this Agreement and in reliance on the representations and warranties set forth
herein, the Lender, in its sole discretion, may make Loans to the Borrower, from time to time from the date of this Agreement to
but excluding the Scheduled Expiration Date, in an aggregate principal amount outstanding at any one time not to exceed THREE HUNDRED
MILLION DOLLARS ($300,000,000), as reduced from time to time as the Maximum Aggregate Facility Size is reduced in accordance with
the Repurchase Agreement. The determination of the Lender to make a Loan will also be subject to the conditions that (and the Borrower
shall not request a Loan unless) (i) no event has occurred and is continuing, or would occur by the borrowing of the Loan, which
constitutes an Event of Default or which, upon the giving of notice, the lapse of time, or both, would constitute an Event of Default
and (ii) the representations and warranties contained in Section 3.1 are true and correct in all material respects on and
as of the date of each such Loan and will continue to be true and correct in all material respects after such Loan is made.


 


Section 2.2. Borrower’s
Obligations. The Borrower hereby promises to pay in full the unpaid principal amount of the Loans on the Maturity Date and
any and all accrued and unpaid interest on the Loans as more fully set forth in Section 2.4 below. The obligation of the
Borrower to pay the principal of and interest on the Loans shall be absolute and unconditional, shall be binding and, to the fullest
extent permitted by law, enforceable in all circumstances whatsoever and shall not be subject to setoff, recoupment or counterclaim;
provided, however, that the Borrower shall only be obligated to pay principal of and interest on the Loans from distributions of
available funds (if any) after satisfaction of the Borrower’s payment and margin maintenance obligations under the Repurchase
Agreement and, after termination of the Repurchase Agreement, from funds of the Borrower. The Lender shall maintain on its books
and records a register on which it will record each Loan made and each repayment of any Loan and interest thereon. Any such recordation
by the Lender shall be presumptively correct, absent manifest error. Failure to make any such recordation, or any error in such
recordation, shall not affect the Borrower’s obligations hereunder. The register shall be available for inspection by the
Borrower at any reasonable time and from time to time upon reasonable prior notice.


 






    	 



    	 



    




 


Section 2.3. Requests
for Loans. Unless otherwise agreed to by the Lender, the Borrower will give the Lender notice of a request for a Loan at least
one Business Day prior to the day on which the Borrower wishes to receive the Loan. Subject to the terms and conditions of this
Agreement, if agreed to by the Lender, the Lender will make the requested Loan on the Business Day specified in the notice in immediately
available funds in accordance with the Borrower’s payment instructions.


 


Section 2.4. Interest.
(a) Interest will accrue on the average daily balance of the unpaid principal amount of the Loans, for each day from the date such
Loans are made until they become due or are paid in full, at a rate per annum equal to the sum of the LIBOR Rate then in effect
plus the Spread. Should any principal of, or accrued interest on, a Loan not be paid when due, such amount will bear interest from
its due date until paid in full, at a rate per annum equal to the sum of (i) the LIBOR Rate plus the Spread, then in effect, plus
(ii) 200 basis points (2.00%). In no event will the rate of interest hereunder exceed the maximum rate allowed by law. A certificate
of the Lender as to determination of the LIBOR Rate, the Spread, the calculation of the interest rate therefrom and the calculation
of any interest due and payable will be, absent manifest error, conclusive and binding on the Borrower.


 


(b)    Interest shall be
payable on each Repurchase Date during the term of this Agreement and on the Maturity Date; provided, that if such day is not a
Business Day the payment date for such period shall be the Business Day immediately following such day (but in each case only to
the extent the Borrower has funds in accordance with Section 2.2 hereof). Interest will be computed on the basis of a year of 360
days and paid for the actual number of days elapsed including the first day but excluding the last day.


 


Section 2.5. Repayment
and Prepayment of the Loans. The outstanding principal amount of all Loans and all accrued and unpaid interest thereon will
be due and payable in full on the Maturity Date. The Borrower may prepay any outstanding Loan, in whole or in part, at any time
without penalty. Any amounts prepaid may be reborrowed. All payments of principal of and interest on the Loans will be made in
lawful money of the United States, in immediately available funds, to the Lender. If any such payment falls due on a day which
is not a Business Day, such payment will be due on the next following Business Day. Payments received by the Lender will be applied:
first, to accrued and unpaid interest on the Loans, and second, to the principal of the Loans.


 


Section 2.6. Transfer
Restrictions. The Lender may not transfer any interest in the Loans to persons other than affiliates of the Lender that are
U.S. Persons for U.S. federal income tax purposes. For this purpose, a “non-U.S. person” is a person other than “U.S.
person” as defined in Section 7701(a)(30) of the Internal Revenue Code of 1986, as amended.


 






    	 



    	 



    

 


ARTICLE III.


 


Section 3.1. Representations
and Warranties. To induce the Lender to enter into this Agreement and to make Loans in its sole discretion hereunder, the Borrower
represents and warrants as follows:


 


(a)     It is a limited
liability company duly organized, validly existing and in good standing solely under the laws of the State of Delaware and is duly
qualified to do business, and is in good standing, in every jurisdiction in which the nature of its business requires it to be
so qualified;


 


(b)    It has full power
and authority to enter into the transactions provided for in this Agreement and has been duly authorized to do so by all necessary
and appropriate action and when executed and delivered by it, this Agreement will constitute the legal, valid and binding obligation
of the Borrower enforceable in accordance with its terms, subject, as to enforcement, to (i) the effect of bankruptcy, insolvency
or similar laws affecting generally the enforcement of creditors’ rights, as such laws would apply in the event of any bankruptcy,
receivership, insolvency or similar event applicable to the Borrower and (ii) general equitable principles (whether enforceability
of such principles is considered in a proceeding at law or in equity);


 


(c)    There does not exist
any default or violation by it of or under any of the terms, conditions or obligations of: (i) its organizational documents; (ii)
any material agreement or other instrument to which it is a party or by which it is bound (other than defaults under the Repurchase
Agreement that the Loan is intended to cure, resolve or alleviate); or (iii) in any material respect, any law, regulation, ruling,
order, injunction, decree, condition or other requirement applicable to or imposed upon it by any law or by any governmental authority,
court or agency; and


 


(d)    At the time of (and
immediately after) each Loan is made hereunder, (i) the Borrower is solvent, (ii) the Borrower’s cash on hand is sufficient
to satisfy all of its current obligations (other than its obligations under this Agreement and the Repurchase Agreement), (iii)
its capitalization, including its equity, is commercially reasonable and adequate to conduct its business as presently contemplated
and (iv) the financial capacity of the Borrower to meet its financial commitments under this Agreement is adequate.


 


ARTICLE IV.


 


Section 4.1. Compliance
with Laws. The Borrower shall comply with all applicable laws, rules and regulations in all material respects.


 


Section 4.2. Keeping
of Records and Books of Accounts. The Borrower shall maintain and keep proper books and records and accounts which enable the
Borrower to prepare and issue financial statements in accordance with generally accepted accounting principles and as otherwise
may be required by any applicable law, rule or regulation and in which full, true and correct entries shall be made of all of its
dealings and business and financial affairs. The Borrower shall permit the Lender to examine and make excerpts from such books
and records at such times and as often as the Lender may reasonably request. The Borrower shall permit, upon the request of the
Lender, an audit to be conducted of the Borrower’s financial statements and books and records. Any such audit shall be at
the Borrower’s expense and shall be conducted by independent accountants selected by the Lender.


 






    	 



    	 



    




 


Section 4.3. No Distributions.
The Borrower will not make any cash or in-kind distributions to its equity holders unless both before and after each such distribution
the representations and warranties contained in Section 3.1 above would be true and correct.


 


ARTICLE V.


 


Section 5.1. Events
of Default. Each of the following shall constitute an Event of Default:


 


(a)    the Borrower fails
to pay, within five Business Days after it is due and payable, any principal of or interest on any of the Loans; provided, that
for purposes of this Section 5.1(a) only, no principal or interest shall be considered due and payable on a date that is
prior to the Maturity Date; or


 


(b)    the Borrower fails
to perform or observe any other term or condition of any of this Agreement applicable to it and such event or circumstance, if
capable of being cured, is not cured within 30 days after written notice thereof is given by the Lender to the Borrower; or


 


(c)    an Event of Bankruptcy
occurs with respect to the Borrower.


 


Section 5.2. Remedies.
Upon the occurrence of an Event of Default, the Lender may do any one or more of the following (without presentment, protest or
notice of protest, all of which are expressly waived by the Borrower): (i) terminate this Agreement and declare the principal of
and interest on the Loans and all other sums owing by the Borrower to the Lender under this Agreement forthwith due and payable,
whereupon this Agreement will terminate and the principal of, and interest on, the Loans and all such other sums will become forthwith
due and payable; and (ii) subject to Section 5.3, exercise all rights granted pursuant to this Agreement, in such order and in
such manner as the Lender may, in its sole and exclusive judgment, determine.


 


Section 5.3. Subordination.
Notwithstanding anything contained in this Agreement to the contrary, to the extent that the Lender is deemed to have any interest
in any assets of the Borrower, the Lender agrees that all amounts outstanding hereunder and its interest in those assets are subordinate
in all respects to claims or rights of the Purchaser pursuant to the Repurchase Agreement; provided, that notwithstanding any rights
or remedies available to the Lender under this Agreement, applicable law or otherwise, prior to the time that all secured indebtedness
or other secured obligations owned by the Borrower, including the obligations of the Borrower under the Repurchase Agreement, shall
have been repaid in full, the Lender shall not, directly or indirectly, seek to accelerate or enforce (judicially or non-judicially)
its rights hereunder or assert any claims or interests therein (including, without limitation, by setoff or notification of account
debtors). The Lender agrees that this Agreement constitutes a subordination agreement for purposes of Section 510(a) of the United
States Bankruptcy Code, as amended from time to time (11 U.S.C. §§ 101 et seq.).


 






    	 



    	 



    




 


ARTICLE VI.


 


Section 6.1. Amendments
and Waivers. Any provision of this Agreement may be amended or waived if, but only if, such amendment or waiver is in writing
and, in the case of an amendment, is signed by all the parties hereto and, in the case of a waiver, is signed by the party granting
the waiver and then such waiver shall be effective only in the specific instance and for the specific purpose for which given,
in each case with the prior written consent of the Purchaser. To the extent the consent of the Lender is required under this Agreement,
the determination as to whether to grant or withhold such consent shall be made by the Lender in its sole discretion without any
implied duty toward any other Person, except as otherwise expressly provided herein or therein.


 


Section 6.2. Notices.
All notices and other communications provided for hereunder shall, unless otherwise stated herein, be in writing (including communication
by facsimile copy or other electronic means) and mailed, delivered by nationally recognized overnight courier service, transmitted
or delivered by hand, as to each party hereto, at its address set forth on the signature pages hereto or at such other address
as shall be designated by such party in a written notice to the other parties hereto. Each such notice, request or other communication
shall be effective (i) if given by facsimile, when such facsimile is transmitted to the specified facsimile number and an appropriate
confirmation is received, (ii) if given by mail, five days after being deposited in the United States mails, first class postage
prepaid, (iii) if given by recognized courier guaranteeing overnight delivery, the Business Day following such day after such communication
is delivered to such courier or (iv) if given by any other means, when delivered at the address specified in this Section 6.2.


 


Section 6.3. No Waivers;
Remedies. No failure or delay by any party hereto in exercising, any right hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any
other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law.


 


Section 6.4. Successors
and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, except that no party may assign or otherwise transfer any of its rights or obligations
under this Agreement without the prior written consent of each other party, except as otherwise permitted by this Agreement, and
any such purported assignment without such consent shall be void. Notwithstanding the foregoing, after the date hereof, Lender
may merge with another business development company sponsored by Franklin Square Holdings, L.P. or may be subject to other fundamental
change transactions the result of which effectively combines the ownership and/or assets of FS Investment Corporation III and any
business development company sponsored by Franklin Square Holdings, L.P., or merges or consolidates their respective collateral
advisors or sub-advisors. Notwithstanding anything to the contrary in this agreement, the parties hereto agree that such merger
or fundamental change is permitted hereunder without the consent of the other party.


 






    	 



    	 



    




 


Section 6.5. Governing
Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED
BY THE LAWS OF THE STATE OF NEW YORK.


 


Section 6.6. Severability.
Whenever possible, each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable
law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective
only to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions
of this Agreement.


 


Section 6.7. Submission
to Jurisdiction. EACH OF THE PARTIES HERETO HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN THE CITY OF NEW YORK FOR PURPOSES OF ALL LEGAL
PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING
OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING IN THIS SECTION SHALL AFFECT THE RIGHT OF ANY PARTY HERETO TO BRING ANY ACTION OR
PROCEEDING AGAINST ANY OTHER PARTY HERETQ OR ANY OF THEIR PROPERTY IN THE COURTS OF OTHER JURISDICTIONS.


 


Section 6.8. Waiver
of Jury Trial. EACH OF THE PARTIES HERETO HEREBY WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER
SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG ANY OF THEM ARISING OUT OF, CONNECTED WITH, RELATING TO OR INCIDENTAL TO THE RELATIONSHIP
BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT.


 


Section 6.9. Bankruptcy
Non-Petition and Limited Recourse. Notwithstanding any other provision of this Agreement, the Lender covenants and agrees that
it shall not, prior to the date which is one year and one day (or, if longer, any applicable preference period plus one day) after
the Final Repurchase Date, institute against, or join any other Person in instituting against, the Borrower, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceeding, or any similar proceeding under any federal or state bankruptcy or similar law;
provided that nothing in this provision shall preclude or be deemed to stop any other party hereto from taking any action prior
to the expiration of the aforementioned one year and one day period in (i) any case or proceeding voluntarily filed or commenced
by the Borrower or (ii) any involuntary insolvency proceeding filed or commenced against the Borrower by a Person other than any
other party hereto. The obligations of the Borrower under this Agreement are unsecured obligations. The Lender acknowledges that
the Borrower has no assets other than the Notes (subject to the Borrower’s rights and obligations under the Repurchase Agreement)
and all amounts owed hereunder are limited recourse obligations payable solely from available funds generated by the Notes (subject
to the Borrower’s rights and obligations under the Repurchase Agreement). In addition, no recourse shall be had for any amounts
payable or any other obligations arising under this Agreement against any officer, member, director, employee, partner or security
holder of the Borrower or any of its successors or assigns. The provisions of this Section shall survive the termination of this
Agreement.


 






    	 



    	 



    




 


Section 6.10. Execution
in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and
the same agreement. Delivery by facsimile or electronic mail of an executed signature page of this Agreement shall be effective
as delivery of an executed counterpart hereof.


 


Section 6.11. Integration.
This Agreement, including all exhibits, schedules and appendices and other documents attached hereto or incorporated by reference
herein, constitutes the entire agreement of the parties with respect to the subject matter hereof and supersedes all other negotiations,
understandings and representations, oral or written, with respect to the subject matter hereof


 


Section 6.12. Section
Titles. The section titles contained in this Agreement shall be without substantive meaning or content of any kind whatsoever
and are not a part of the agreement between the parties.


 


Section 6.13. Survival.
The provisions of this Article VI shall be continuing and shall survive termination of this Agreement.


 






    	 



    	 



    




 








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


 


	 	SOCIETY HILL FUNDING LLC, as Borrower
	 	 	 
	 	By:	/s/ Gerald F. Stahlecker
	 	 	Gerald F. Stahlecker
	 	 	Executive Vice President






 


	 	Address for Notices:
	 	 
	 	Society Hill Funding LLC
	 	201 Rouse Boulevard
	 	Philadelphia, Pennsylvania 19112
	 	Telephone: (215) 495-1169
	 	Telecopy: (215) 222-4649
	 	Attention: Gerald F. Stahlecker






  


[Signatures
continue on next page.]


 





[Society Hill Funding Revolving Credit Agreement]



    	 



    	 



    

 


[Signatures continued from previous page.]


 





	 	FS INVESTMENT CORPORATION III,
as Lender
	 	 	 
	 	By:	/s/ Gerald F. Stahlecker
	 	 	Gerald F. Stahlecker
	 	 	Executive Vice President






 


	 	Address for Notices:
	 	 
	 	FS Investment Corporation III
	 	201 Rouse Boulevard
	 	Philadelphia,
Pennsylvania 19112
	 	Telephone:
(215) 495-1169
	 	Telecopy:
(215) 222-4649
	 	Attention:
Gerald F. Stahlecker








 


[Society Hill Funding Revolving Credit Agreement]