**Exhibit 10**

 

**EXECUTIONCOPY**

 

 

 

[PublishedCUSIP Number:                            ]

 

 

**CREDIT AGREEMENT**

 

 

Dated as of June 23, 2006

 

among

 

**KKRFINANCIAL CORP.**

 

**KKRTRS HOLDINGS, INC.**

 

as the Borrowers,

 

**BANK OFAMERICA, N.A.,**as Administrative Agent and Swingline Lender

 

and

 

The Other Lenders Party Hereto

 

and

 

**BANC OFAMERICA SECURITIES LLC,**

as

Sole Lead Arranger and SoleBook Manager

 

and

 

**CITIGROUPGLOBAL MARKETS INC.**

and

**JPMORGANCHASE BANK, N.A.,**

as Syndication Agents

 

----

 

**TABLE OF CONTENTS**

 
| **Section**       | ** **                                                   | ** ** | **Page** |
|-------------------|--------------------------------------------------------------|------------|----------|
|              |                                                         |       |     |
| ARTICLE I.   | DEFINITIONS AND ACCOUNTING TERMS                             |       | 1        |
| 1.01              | Defined Terms                                                |       | 1        |
| 1.02              | Other Interpretive Provisions                                |       | 27       |
| 1.03              | Accounting Terms                                             |       | 28       |
| 1.04              | Rounding                                                     |       | 29       |
| 1.05              | Times of Day                                                 |       | 29       |
|              |                                                         |       |     |
| ARTICLE II.  | THE COMMITMENTS AND BORROWINGS                               |       | 29       |
| 2.01              | Revolving Loans                                              |       | 29       |
| 2.02              | Borrowings, Conversions and Continuations of Revolving Loans |       | 29       |
| 2.03              | Swingline Loans                                              |       | 30       |
| 2.04              | Prepayments                                                  |       | 33       |
| 2.05              | Termination or Reduction of Commitments                      |       | 33       |
| 2.06              | Repayment of Loans                                           |       | 34       |
| 2.07              | Interest                                                     |       | 34       |
| 2.08              | Fees                                                         |       | 35       |
| 2.09              | Computation of Interest and Fees                             |       | 35       |
| 2.10              | Evidence of Debt                                             |       | 35       |
| 2.11              | Payments Generally; Administrative Agent’s Clawback     |       | 36       |
| 2.12              | Sharing of Payments by Lenders                               |       | 37       |
| 2.13              | Increase in Commitments                                      |       | 38       |
| 2.14              | Concerning Joint and Several Liability of the Borrowers      |       | 39       |
| 2.15              | Contribution                                                 |       | 41       |
| 2.16              | Collateral Security                                          |       | 42       |
|              |                                                         |       |     |
| ARTICLE III. | TAXES, YIELD PROTECTION AND ILLEGALITY                       |       | 42       |
| 3.01              | Taxes                                                        |       | 42       |
| 3.02              | Illegality                                                   |       | 44       |
| 3.03              | Inability to Determine Rates                                 |       | 44       |
| 3.04              | Increased Costs; Reserves on Fixed Period Eurodollar Loans   |       | 45       |
| 3.05              | Compensation for Losses                                      |       | 46       |
| 3.06              | Mitigation Obligations                                       |       | 46       |
| 3.07              | Survival                                                     |       | 46       |
|              |                                                         |       |     |
| ARTICLE IV.  | CONDITIONS PRECEDENT TO BORROWINGS                           |       | 47       |
| 4.01              | Conditions of Initial Borrowing                              |       | 47       |
| 4.02              | Conditions to all Borrowings                                 |       | 49       |
|              |                                                         |       |     |
| ARTICLE V.   | REPRESENTATIONS AND WARRANTIES                               |       | 50       |
| 5.01              | Existence, Qualification and Power                           |       | 50       |
| 5.02              | Authorization; No Contravention                              |       | 50       |
| 5.03              | Governmental Authorization; Other Consents                   |       | 50       |
| 5.04              | Binding Effect                                               |       | 50       |
| 5.05              | Financial Statements; No Material Adverse Effect             |       | 51       |
| 5.06              | Litigation                                                   |       | 51       |
| 5.07              | No Default                                                   |       | 51       |

 

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| 5.08               | Environmental Compliance                                   |   | 51     |
|--------------------|------------------------------------------------------------|--------|--------|
| 5.09               | Insurance                                                  |   | 51     |
| 5.10               | Taxes                                                      |   | 52     |
| 5.11               | ERISA Compliance                                           |   | 52     |
| 5.12               | Properties                                                 |   | 52     |
| 5.13               | Investment Company Act; Public Utility Holding Company Act |   | 52     |
| 5.14               | Disclosure                                                 |   | 52     |
| 5.15               | Compliance with Laws                                       |   | 53     |
| 5.16               | Taxpayer Identification Number                             |   | 53     |
| 5.17               | Solvency                                                   |   | 53     |
| 5.18               | No Burdensome Restrictions                                 |   | 53     |
| 5.19               | Borrowing Base Report                                      |   | 53     |
|               |                                                       |   |   |
| ARTICLE VI.   | AFFIRMATIVE COVENANTS                                      |   | 53     |
| 6.01               | Financial Statements                                       |   | 53     |
| 6.02               | Certificates; Other Information                            |   | 54     |
| 6.03               | Notices                                                    |   | 56     |
| 6.04               | Payment of Obligations                                     |   | 56     |
| 6.05               | Preservation of Existence, Etc                             |   | 56     |
| 6.06               | Maintenance of Properties                                  |   | 57     |
| 6.07               | Maintenance of Insurance                                   |   | 57     |
| 6.08               | Compliance with Laws                                       |   | 57     |
| 6.09               | Books and Records                                          |   | 57     |
| 6.10               | Inspection Rights                                          |   | 57     |
| 6.11               | Use of Proceeds                                            |   | 57     |
|               |                                                       |   |   |
| ARTICLE VII.  | NEGATIVE COVENANTS                                         |   | 57     |
| 7.01               | Liens                                                      |   | 57     |
| 7.02               | Investments                                                |   | 58     |
| 7.03               | Indebtedness                                               |   | 59     |
| 7.04               | Fundamental Changes                                        |   | 60     |
| 7.05               | Dispositions                                               |   | 60     |
| 7.06               | Restricted Payments                                        |   | 61     |
| 7.07               | Transactions with Affiliates                               |   | 61     |
| 7.08               | Burdensome Agreements                                      |   | 61     |
| 7.09               | Financial Covenants                                        |   | 62     |
| 7.10               | Management Fees; Compensation                              |   | 62     |
| 7.11               | Fiscal Year                                                |   | 62     |
| 7.12               | Margin Regulations; Securities Laws                        |   | 62     |
| 7.13               | Investment Policies                                        |   | 62     |
|               |                                                       |   |   |
| ARTICLE VIII. | EVENTS OF DEFAULT AND REMEDIES                             |   | 63     |
| 8.01               | Events of Default                                          |   | 63     |
| 8.02               | Remedies Upon Event of Default                             |   | 64     |
| 8.03               | Application of Funds                                       |   | 64     |
|               |                                                       |   |   |
| ARTICLE IX.   | ADMINISTRATIVE AGENT                                       |   | 65     |
| 9.01               | Appointment and Authority                                  |   | 65     |
| 9.02               | Rights as a Lender                                         |   | 65     |
| 9.03               | Exculpatory Provisions                                     |   | 66     |
| 9.04               | Reliance by Administrative Agent                           |   | 66     |

 

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| 9.05            | Delegation of Duties                                   |   | 67     |
|-----------------|--------------------------------------------------------|--------|--------|
| 9.06            | Resignation of Administrative Agent                    |   | 67     |
| 9.07            | Non-Reliance on Administrative Agent and Other Lenders |   | 68     |
| 9.08            | No Other Duties, Etc                                   |   | 68     |
| 9.09            | Administrative Agent May File Proofs of Claim     |   | 68     |
| 9.10            | Collateral Matters                                     |   | 68     |
|            |                                                   |   |   |
| ARTICLE X. | MISCELLANEOUS                                          |   | 69     |
| 10.01           | Amendments, Etc                                        |   | 69     |
| 10.02           | Notices; Effectiveness; Electronic Communication       |   | 70     |
| 10.03           | No Waiver; Cumulative Remedies                         |   | 71     |
| 10.04           | Expenses; Indemnity; Damage Waiver                     |   | 72     |
| 10.05           | Payments Set Aside                                     |   | 73     |
| 10.06           | Successors and Assigns                                 |   | 74     |
| 10.07           | Treatment of Certain Information; Confidentiality      |   | 77     |
| 10.08           | Right of Setoff                                        |   | 78     |
| 10.09           | Interest Rate Limitation                               |   | 78     |
| 10.10           | Counterparts; Integration; Effectiveness               |   | 78     |
| 10.11           | Survival of Representations and Warranties             |   | 79     |
| 10.12           | Severability                                           |   | 79     |
| 10.13           | Replacement of Lenders                                 |   | 79     |
| 10.14           | Governing Law; Jurisdiction; Etc.                      |   | 79     |
| 10.15           | No Advisory or Fiduciary Responsibility                |   | 81     |
| 10.16           | USA PATRIOT Act Notice                                 |   | 81     |
| 10.17           | Entire Agreement                                       |   | 81     |
|            |                                                   |   |   |
| SIGNATURES      | S-1                                                    |   |   |

 

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| **SCHEDULES** |                                                               |   |   |
|---------------|--------------------------------------------------------------------|--------|--------|
| ** **    |                                                               |   |   |
| 2.01          | Commitments  and Applicable Percentages                            |   |   |
| 5.06          | Litigation                                                         |   |   |
| 5.09          | Environmental  Matters                                             |   |   |
| 7.01          | Existing  Liens                                                    |   |   |
| 7.03          | Existing  Indebtedness                                             |   |   |
| 7.08          | Burdensome  Agreements                                             |   |   |
| 10.02         | Administrative  Agent’s Office; Certain Addresses for Notices |   |   |
| 10.06         | Processing  and Recordation Fees                                   |   |   |
|          |                                                               |   |   |
| **EXHIBITS**  |                                                               |   |   |
| ** **    |                                                               |   |   |
| A             | Form of  Revolving Loan Notice                                |   |   |
| B             | Form of  Swingline Loan Notice                                |   |   |
| C             | Form of  Promissory Note                                      |   |   |
| D             | Form of  Borrowing Base Report                                |   |   |
| E             | Form of  Compliance Certificate                               |   |   |
| F             | Form of  Assignment and Assumption                            |   |   |
| G             | Opinion  Matters                                                   |   |   |

 

iv

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**CREDIT AGREEMENT**

 

This CREDIT AGREEMENT (“Agreement”) is entered into as of June 23,2006, among KKR FINANCIAL CORP., a Maryland corporation (“KKR Financial”),KKR TRS HOLDINGS, INC., a Delaware corporation (“KKR TRS,” andcollectively with KKR Financial, the “Borrowers” and each, individually,a “Borrower”), each lender from time to time party hereto (collectively,the “Lenders” and individually, a “Lender”), and BANK OF AMERICA,N.A., as Administrative Agent and Swingline Lender.

 

**W I T N E S S E T H:**

 

**WHEREAS**, theBorrowers have requested that the Lenders and the Swingline Lender provide arevolving credit facility, and the Lenders and the Swingline Lender are willingto do so on the terms and conditions set forth herein.

 

**NOW**, **THEREFORE**, in consideration of the premisesand the mutual covenants herein contained, the Borrowers, the Lenders, theAdministrative Agent and the Swingline Lender agree as follows:

 

# **ARTICLE I.DEFINITIONS AND ACCOUNTING TERMS**

#  

## **1.01****                       ****Defined Terms**. As used in this Agreement, thefollowing terms shall have the meanings set forth below:

##  

“Administrative Agent” means Bank of America in its capacity asadministrative agent under any of the Loan Documents, or any successoradministrative agent.

 

“Administrative Agent’s Office” means the Administrative Agent’saddress and, as appropriate, account as set forth on Schedule 10.02,or such other address or account as the Administrative Agent may from time totime notify to the Borrowers and the Lenders.

 

“Administrative Questionnaire” means an AdministrativeQuestionnaire in a form supplied by the Administrative Agent.

 

“Affiliate” means, with respect to any Person, another Personthat directly, or indirectly through one or more intermediaries, Controls or isControlled by or is under common Control with the Person specified.

 

“Agent Parties” has the meaning specified in Section 10.02(c).

 

“Aggregate Borrowing Availability” means, at any time, thelesser of (a) the Aggregate Commitment Amount and (b) an amount equalto the sum of (i) the Tranche A Borrowing Base plus (ii) the TrancheB Borrowing Base, in each case at or as of such time.

 

“Aggregate Commitments” means, collectively, all Commitments ofall Lenders at any time outstanding.

 

“Aggregate Commitment Amount” means the aggregate principalamount of the Aggregate Commitments from time to time. On the Closing Date, theAggregate Commitment Amount equals

 

1

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$375,000,000. The Aggregate Commitment Amountmay be increased to an amount up to $550,000,000 in accordance with Section 2.13.

 

“Agreement” means this Credit Agreement, as amended, restated,extended, supplemented or otherwise modified in writing from time to time.

 

“Allocable Amount” has the meaning specified in Section 2.15.

 

“Applicable Percentage” means with respect to any Lender at anytime, the percentage (carried out to the ninth decimal place) of the AggregateCommitment Amount represented by such Lender’s Commitment at such time. If thecommitment of each Lender to make Loans has been terminated pursuant to Section 8.02or if the Aggregate Commitments have expired, then the Applicable Percentage ofeach Lender shall be determined based on the Applicable Percentage of suchLender most recently in effect, giving effect to any subsequent assignments. Theinitial Applicable Percentage of each Lender is set forth opposite the name ofsuch Lender on Schedule 2.01 or in the Assignment and Assumptionpursuant to which such Lender becomes a party hereto, as applicable.

 

“Applicable Rate” means a per annum rate equal to:

 

### (a)                                  with respect to Tranche A Loans,0.50%;

###  

### (b)                                 with respect to Tranche B Loans,0.75%; and

###  

### (c)                                  with respect to the FacilityFee, 0.15%.

###  

“Applicable Sublimit” means the exclusion from the Tranche BBorrowing Base of an amount (without duplication) attributable to any EligibleSpecified Financial Asset to the extent that the Net Value Amount included inthe Tranche B Borrowing Base would exceed the amount shown in the chart belowfor the applicable Eligible Specified Financial Asset:

 
| **Eligible Specified Financial Asset(*)**                                              | ** ** | **Sublimits** | ** ** |
|-------------------------------------------------------------------------------------------------------|------------|---------------|------------|
| Rule 144A  private placed Debt Securities                                                        |       |          |       |
| a.  NAIC 1 / AAA thru A-                                                                         |       |          |       |
| b.  NAIC 2 / BBB+ thru BBB-                                                                      |       |          |       |
| c.  NAIC 3 / BB+ thru BB                                                                         |       | Unlimited(1)  |       |
| d.  NAIC 4 / BB- thru B-                                                                         |       |          |       |
| e.  NAIC 5 / CCC+ thru CCC-                                                                      |       |          |       |
| Investments  Denominated in Foreign Currency (Euros, Pounds or Yen)                                   |       | $100 million  |       |
| KKR  Financial CLO/CBO/CDO Securitizations(2)                                                         |       |          |       |
| a.  AAA thru A-                                                                                  |       | $200  million |       |
| b.  BBB+ and BBB                                                                                 |       | $100 million  |       |
| Mortgage  backed Debt Securities (“***MBS***”)  Interest Only Strips (“***IO***”) |       |          |       |
| a.  Federal National Mortgage  Association Fannie Mae (***FNMA***”)  IOs                    |       | $50 million   |       |
| b.  Non Agency IOs                                                                               |       |          |       |
| Senior  Unsecured Bank Loans                                                                          |       |          |       |
| a.  CCC+ thru CCC-                                                                               |       | $100 million  |       |

 

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(*)  References to credit ratings are to the DebtRating.

 

(1) Subject to there not being any restrictions on Bank of America’s ability asAdministrative Agent to sell any securities financed in the Senior CreditFacility. A sublimit of 15% of the Aggregate Commitment Amount will apply to144A privately placed debt transactions that are less than $100 million in sizeand in which KKR Financial owns more than 33% of the total issuance.

 

(2)  Amountsattributable to CLO/CBO/CDO Securitizations rated BBB or better shall beexcluded from the Tranche B Borrowing Base to the extent that any such EligibleSpecified Financial Assets have been included in such Borrowing Base for morethan 120 days.

 

2

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“Approved Fund” means any Fund that is administered or managed by(a) a Lender, (b) an Affiliate of a Lender or (c) an entity oran Affiliate of an entity that administers or manages a Lender.

 

“Arranger” means Banc of America Securities LLC, in its capacity as sole lead arranger and solebook manager.

 

“Assignee Group” means two or more Eligible Assignees that areAffiliates of one another or two or more Approved Funds managed by the sameinvestment advisor.

 

“Assignment and Assumption” means an assignment and assumptionentered into by a Lender and an Eligible Assignee with the consent of any partywhose consent is required by Section 10.06(b), and accepted by theAdministrative Agent, in substantially the form of Exhibit F or anyother form approved by the Administrative Agent.

 

“Attributable Indebtedness” means, on any date, (a) inrespect of any capital lease of any Person, the capitalized amount thereof thatwould appear on a balance sheet of such Person prepared as of such date inaccordance with GAAP, and (b) in respect of any Synthetic LeaseObligation, the capitalized amount of the remaining lease payments under therelevant lease that would appear on a balance sheet of such Person prepared asof such date in accordance with GAAP if such lease were accounted for as acapital lease.

 

“Audited Financial Statements” means the audited consolidatedbalance sheet of KKR Financial and its Subsidiaries for the fiscal year ended December 31, 2005, and therelated consolidated statements of income or operations, shareholders’ equityand cash flows for such fiscal year of KKR Financial and its Subsidiaries,including the notes thereto.

 

“Availability Period” means the period from and including theClosing Date to the earliest of (a) the Maturity Date, (b) the dateof termination of the Aggregate Commitments pursuant to Section 2.05,and (c) the date of termination of the commitment of each Lender to makeLoans pursuant to Section 8.02.

 

“Bank” means a financial institution that (i) has, or ispart of a Consolidated Group that has, at least $2.0 billion in capital, andis, or is an affiliate of another entity within such Consolidated Group thatis, regulated by the Office of the Comptroller of the Currency, the FederalReserve or the Office of Thrift Supervision; or (ii) is, or is anaffiliate of another entity within a Consolidated Group that is, a registeredbroker/dealer under the Securities Exchange Act of 1934, and has, or is part ofa Consolidated Group that has, a senior unsecured debt rating of at leastA-/A3; provided*,*that aninstitution that does not meet the criteria of clause (i) or clause (ii) abovemay nonetheless be classified as a “Bank” on the following conditions: (x) theAdministrative Agent, in its sole discretion, exercised in a commerciallyreasonable manner, which discretionary decision shall not be unreasonablywithheld or delayed, shall have expressly agreed to such classification, and(y) the Value of all Eligible Specified Financial Assets that are Bank Loansoriginated by such financial institution does not exceed $50 million (or suchgreater amount as the Administrative Agent, in its sole discretion, exercisedin a commercially reasonable manner, may determine) at any time.

 

“Bank Loan” means either (i) a Delayed Draw Loan or (ii) afully funded term debt obligation (including, without limitation, term loans,debtor-in-possession financings and synthetic letter of credit facilities andother similar loans and investments including interim loans and seniorsubordinated loans), which are generally under a syndicated loan or creditfacility provided or originated by a Bank or for which a Bank has acted asunderwriter or agent.

 

3

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“Bank of America” means Bank of America, N.A. and itssuccessors.

 

“Base Rate” means for any day a fluctuating rate per annum equalto the higher of (a) the Federal Funds Rate plus 1/2 of 1% and (b) therate of interest in effect for such day as publicly announced from time to timeby Bank of America as its “prime rate.” The “prime rate” is a rate set by Bank of America based upon variousfactors including Bank of America’s costs and desired return, general economicconditions and other factors, and is used as a reference point for pricing someloans, which may be priced at, above, or below such announced rate. Any changein such rate announced by Bank of America shall take effect at the opening ofbusiness on the day specified in the public announcement of such change.

 

“Base Rate Loan” means aLoan that bears interest at a per annum rate equal to the Base Rate .

 

“Borrowers” and “Borrower” have the respective meaningspecified in the introductory paragraph hereto.

 

“Borrowing” means (i) Revolving Loans of the same Type andTenor, made, converted or continued on the same date and, in the case of FixedPeriod Eurodollar Loans, as to which a single Interest Period is in effect, or (ii) SwinglineLoans of the same Tenor, as applicable.

 

“Borrowing Base” means the Tranche A Borrowing Base or theTranche B Borrowing Base.

 

“Borrowing Base Report” means a report signed by a ResponsibleOfficer of each of Borrowers, in substantially the form of Exhibit Dhereto, delivered to the Administrative Agent.

 

“Borrower Materials” has the meaning specified in Section 6.02.

 

“Bridge Loan” means debt financing with an originalmaturity of not more than one (1) year with an expected repayment from acapital markets transaction.

 

“Business Day” means any day other than a Saturday, Sunday orother day on which commercial banks are authorized to close under the Laws of,or are in fact closed in, the state where the Administrative Agent’s Office islocated and, if such day relates to any Eurodollar Loan, means any such day onwhich dealings in Dollar deposits are conducted by and between banks in theLondon interbank eurodollar market.

 

“Capital Lease Obligations” of any Person means the obligationsof such Person to pay rent or other amounts under any lease of (or otherarrangement conveying the right to use) real or personal property, or acombination thereof, which obligations are required to be classified and accountedfor as capital leases on a balance sheet of such Person under GAAP, and theamount of such obligations shall be the capitalized amount thereof determinedin accordance with GAAP.

 

“Change in Control” means (a) the acquisition of ownership,directly or indirectly, beneficially or of record, by any Person or group(within the meaning of the Securities Exchange Act of 1934 and the rules ofthe Securities and Exchange Commission thereunder as in effect on the datehereof), of Equity Interests representing more than 50% of the aggregateordinary voting power represented by the issued and outstanding EquityInterests of KKR Financial; (b) occupation of a majority of the seats(other than vacant seats) on the board of directors of KKR Financial by Personswho were neither (i) nominated by the board of directors of KKR Financialnor (ii) appointed by directors so nominated; or (c) the acquisitionof direct or indirect Control of KKR Financial by any Person or group (withinthe meaning of the Securities Exchange Act of 1934 and the rules of theSecurities and Exchange Commission thereunder

 

4

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as in effect on the date hereof). It isunderstood and agreed that KKR Financial LLC does not Control KKR Financialsolely for purposes of this definition.

 

“Change in Law” means the occurrence, after the date of thisAgreement, of any of the following: (a) the adoption or taking effect ofany law, rule, regulation or treaty, (b) any change in any law, rule,regulation or treaty or in the administration, interpretation or applicationthereof by any Governmental Authority or (c) the making or issuance of anyrequest, guideline or directive (whether or not having the force of law) by anyGovernmental Authority.

 

“CLO/CBO/CDO Tranches” means collateralized loan obligation(CLO), collateralized bond obligation (CBO) and collateralized debt obligation(CDO) tranches rated BB+/Bal or lower (including non-rated) on transactionsmanaged by KKR Financial LLC or an Affiliate thereof.

 

“Closing Date” means the first date all the conditions precedentin Section 4.01 are satisfied or waived in accordance with Section 10.01.

 

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

 

“Collateral” means all of the property, rights and interests ofthe Borrowers and their respective Subsidiaries that are or are intended to besubject to the Liens created by the Security Documents.

 

“Collateral Agreement” means the Collateral Agency Agreement ofeven date herewith, among the Borrowers, the Administrative Agent and theCustodian in form and substance reasonably satisfactory to the AdministrativeAgent or such other agreement (the terms of which will be substantiallyconsistent with the existing Collateral Agreement, unless otherwise agreed bythe Borrowers) in replacement thereof as the Administrative Agent may require,with the consent of the Borrowers, which consent shall not be unreasonablywithheld or delayed.

 

“Commitment” means, as to each Lender, its obligation to (a) makeRevolving Loans to the Borrowers pursuant to Section 2.01 and (b) purchaseparticipations in Swingline Loans, in an aggregate principal amount at any onetime outstanding not to exceed the amount set forth opposite such Lender’s nameon Schedule 2.01 or in the Assignment and Assumption pursuant towhich such Lender becomes a party hereto, as applicable, as such amount may beadjusted from time to time in accordance with this Agreement.

 

“Compliance Certificate” means a certificate substantially inthe form of Exhibit E.

 

“Concentration Limit” means (i) the exclusion from theTranche B Borrowing Base of an amount (without duplication) attributable to anysecond lien Bank Loans, Mezzanine Obligations and Bridge Loans considered inthe aggregate (including without limitation any of the same that are alsoDelayed Draw Loans), to the extent that the amount included in such BorrowingBase would exceed 50% of the Aggregate Revolving Commitment Amount, (ii) withrespect to any single Eligible Specified Financial Asset (other thanCLO/CBO/CDO Tranches), the exclusion from the Tranche B Borrowing Base of anamount attributable to such Eligible Specified Financial Asset, to the extentthat (a) the amount included in such Borrowing Base would exceed theapplicable maximum Net Value Amount for each category as specified in the chartbelow and (b) the number of investments in any single Eligible SpecifiedFinancial Asset exceeds the maximum number of investments for each category asspecified in the chart below, (iii) with respect to any Single Obligor ofone or more Eligible Specified Financial Assets (other than CLO/CBO/CDOTranches), the exclusion from the Tranche B Borrowing Base of an amountattributable to such Single Obligor, to the extent that (a) the amountincluded in the Borrowing Base would exceed the applicable maximum Net ValueAmount for each category as specified in the chart below and (b) the

 

5

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number of investments attributable to anySingle Obligor exceeds the maximum number of investments for each category asspecified in the chart below and (iv) with respect to any first lien BankLoans, second lien Bank Loans, Mezzanine Obligations, Bridge Loans and MBS IOs,to the extent there is no Debt Rating (each, an “Unrated Asset”),considered individually, with no Debt Rating, the exclusion from the Tranche BBorrowing Base of an amount attributable to such Eligible Specified FinancialAsset, to the extent that (a) the amount included in such Borrowing Basewould exceed the applicable maximum Net Value Amount for each category asspecified in the chart below and (b) the number of investments in anyunrated Eligible Specified Financial Asset exceeds the maximum number ofinvestments for each category as specified in the chart below and (v) theexclusion from the Tranche B Borrowing Base of an amount attributable toCLO/CBO/CDO Tranches considered in the aggregate, to the extent that the amountincluded in such Borrowing Base would exceed 50% of the Aggregate RevolvingCommitment Amount.

 

**Limits onSingle Obligor / Single Asset / Unrated Asset Investments**

 
| **Category of Investments based on  Net Value Amount ****($Millions)*** | ** ** | **Maximum Number of  Investments Allowed**** | ** ** | **Maximum Net Value Amount per Single  Obligor/Asset ($Millions)** | ** ** |
|------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------|------------|--------------------------------------------------------------------------------------------------|------------|
| > $75 but up to $100                                                                                    |       | 1                                                           |       | 100                                                                                              |       |
| > $50 but up to $75                                                                                     |       | 1                                                           |       | 75                                                                                               |       |
| > $25 but up to $50                                                                                     |       | 3                                                           |       | 50                                                                                               |       |
|                                                                                                       |       | Up to Aggregate Revolving                                   |       |                                                                                             |       |
| < or = $25                                                                                              |       | Commitment Amount                                           |       | N/A                                                                                              |       |

 

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*The Tranche B Borrowing Base shall exclude amounts attributable to (i) anySingle Obligor or single Eligible Specified Financial Asset investments ratedCCC+/Caa1 through CCC-/Caa3 and (ii) any Unrated Asset investments, ineach case, in the top three categories of investments based on Net Value Amountwhich are included in the Tranche B Borrowing Base for more than fifteen (15)consecutive months solely for a thirty (30) day period after such fifteen (15)month period to the extent the Net Value Amount thereof exceeds $25.0 million. Referencesto credit ratings are to the Debt Rating.

 

**If there are no Single Obligor, single Eligible Specified Financial Asset orUnrated Asset investments in any particular category specified in the left handcolumn of the chart (the “Unutilized Category of Investments”), then theTranche B Borrowing Base may include an increased number of Single Obligor,single Eligible Specified Financial Asset or Unrated Asset investments in acategory specifying lower Net Value Amounts so long as the aggregate Net Valueof such investments does not exceed the Maximum Net Value Amount per SingleObligor, single Eligible Specified Financial Asset or Unrated Asset investmentspecified in the right hand column of the chart for such Unutilized Category ofInvestments; provided, however, that the Tranche B Borrowing Baseshall not, at any time, include amounts attributable to more than five (5) SingleObligor, single Eligible Specified Financial Asset or Unrated Asset investmentsthe Net Value Amount of which, individually, exceeds $25.0 million.

 

“Consolidated Group” means the collective group of affiliatedentities that are required, in accordance with GAAP, to issue consolidatedfinancial statements.

 

“Consolidated Net Income” means, for any period, for KKRFinancial and its Subsidiaries on a consolidated basis, the net income of KKRFinancial and its Subsidiaries (excluding extraordinary gains and extraordinarylosses) for that period.

 

“Consolidated Net Worth” means, as of any date of determination,the excess of Consolidated Total Assets over Consolidated Total Liabilities.

 

“Consolidated Tangible Net Worth” means, as of any date ofdetermination, the excess of Consolidated Total Assets over Consolidated TotalLiabilities, and less the sum (without duplication) of the following (in eachcase, to the extent included in the Consolidated Total Assets):

 

### (a)                                  the total book value of allassets of KKR Financial and its Subsidiaries properly classified as intangibleassets under GAAP, including such items as goodwill, the purchase price ofacquired assets

 

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### in excess of the fair market value thereof,trademarks, trade names, service marks, brand names, copyrights, patents andlicenses, and rights with respect to the foregoing; plus

###  

### (b)                                 all amounts representing anywrite-up in the book value of any assets of KKR Financial or its Subsidiariesresulting from a revaluation thereof subsequent to December 31, 2005,excluding adjustments to translate foreign assets and liabilities for changesin foreign exchange rates made in accordance with Financial AccountingStandards Board Statement No. 52.

###  

“Consolidated Total Assets” means, as of any date ofdetermination, the sum of (a) all assets (“consolidatedbalance sheet assets”) of KKR Financial and its Subsidiaries determined ona consolidated basis in accordance with GAAP, plus (b) withoutduplication, all assets leased by KKR Financial or any Subsidiary as lesseeunder any Synthetic Lease to the extent that such assets would have beenconsolidated balance sheet assets had the Synthetic Lease been treated foraccounting purposes as a capital lease, plus (c) withoutduplication, all sold receivables in respect of sales of (i) accounts orgeneral intangibles for money due or to become due, (ii) chattel paper,instruments or documents creating or evidencing a right to payment of money or (iii) otherreceivables (collectively “receivables”), whether pursuant to a purchasefacility or otherwise, other than in connection with the disposition of thebusiness operations of such Persons relating thereto or a disposition ofdefaulted receivables for collection and not as a financing arrangement, andtogether with any obligation of such Persons to pay any discount, interest,fees, indemnities, penalties, recourse, expenses or other amounts in connectiontherewith, to the extent that such receivables would have been consolidatedbalance sheet assets had they not been sold.

 

“Consolidated Total Liabilities” means, as of any date ofdetermination, all liabilities of KKR Financial and its Subsidiaries determinedon a consolidated basis in accordance with GAAP and classified as such on theconsolidated balance sheet of KKR Financial and its Subsidiaries and all otherIndebtedness of KKR Financial and its Subsidiaries, whether or not soclassified; provided, that for purposes of this definition, in the caseof a Trust Preferred Securities Transaction, only the Trust PreferredIndebtedness issued or incurred by KKR Financial in connection therewith,excluding Trust Preferred Indebtedness relating solely to the common equitysecurities of the applicable Trust Preferred Financing Vehicle, shall beincluded in determining the liabilities and other Indebtedness of KKR Financialand its Subsidiaries.

 

“Contractual Obligation” means, as to any Person, any provisionof any security issued by such Person or of any agreement, instrument or otherundertaking to which such Person is a party or by which it or any of itsproperty is bound.

 

“Control” means the possession, directly or indirectly, of thepower to direct or cause the direction of the management or policies of aPerson, whether through the ability to exercise voting power, by contract orotherwise. “Controlling” and “Controlled” have meaningscorrelative thereto.

 

“Custodial Account” means the account established and maintainedpursuant to the Collateral Agreement in which Collateral will be deposited bythe Borrowers and pledged to the Administrative Agent and any demand depositaccount established and maintained in connection therewith.

 

“Custodian” means The Bank of New York or another institutionselected by the Administrative Agent with the consent of the Borrowers, whichconsent shall not be unreasonably withheld or delayed.

 

“Daily Floating Eurodollar Loan” means a Swingline Loan thatbears interest at a per annum rate equal to the Daily Floating Eurodollar Rateplus the Applicable Rate.

 

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“Daily Floating Eurodollar Rate” means, for any day, afluctuating rate per annum equal to the British Bankers Association LIBOR Rate(“BBA LIBOR”), as published by Reuters (or other commercially availablesource providing quotations of BBA LIBOR as designated by the AdministrativeAgent from time to time) at approximately 11:00 a.m. (London time) on suchday (if such day is a Business Day) or the immediately preceding Business Day(if such day is not a Business Day), for U.S. dollar deposits with a termequivalent to one (1) month. If such rate is not available at such timefor any reason, then the “Daily Floating Eurodollar Rate” shall be the rate perannum determined by the Administrative Agent to be the rate at which depositsin U.S. dollars in same day funds in the approximate amount of the DailyFloating Eurodollar Loan being made, continued or converted by Bank of Americaand with a term equivalent to one (1) month would be offered by Bank ofAmerica’s London Branch to major banks in the London interbank eurodollarmarket at their request at approximately 11:00 a.m. (London time) on suchday (if such day is a Business Day) or the immediately preceding Business Day(if such day is not a Business Day).

 

“Debt Rating” means, as of any date, the rating that has beenmost recently assigned (either publicly or privately, and including a “shadow”rating) by S&P, Moody’s or Fitch (or, if no such rating is available withrespect to 144A Debt Securities only, NAIC), as the case may be, for either (i) anyEligible Specified Financial Asset or (ii) if no such rating is availablefrom any such rating agency with respect to senior unsecured Bank Loans only,for a class of non-credit enhanced long-term senior unsecured debt issued bythe applicable obligor of such senior unsecured Bank Loan. For purposes of theforegoing, (a) if only one of S&P, Moody’s or Fitch (or, if no suchrating is available with respect to 144A Debt Securities only, NAIC) shall havein effect a Debt Rating, the Debt Rating for the purposes of this Agreementshall be determined by reference to the available rating, (b) if more thanone Debt Rating shall be in effect, the Debt Rating for the purposes of thisAgreement shall be determined by reference to the lowest rating issued byS&P, Moody’s or Fitch, (c) if any Debt Rating established by S&P,Moody’s or Fitch (or, if no such rating is available with respect to 144A DebtSecurities only, NAIC) shall be changed or if any agency establishes a DebtRating for any Eligible Specified Financial Asset where, previously, there wasno Debt Rating, such new Debt Rating shall be effective, subject to clause (b) above,as of the date on which such change is first announced publicly or privately bythe rating agency making such change or issuing such rating, as applicable, and(d) if S&P, Moody’s or Fitch (or, for 144A Debt Securities, NAIC)shall change the basis on which Debt Ratings are established, each reference tothe Debt Rating assigned by S&P, Moody’s or Fitch (or, for 144A DebtSecurities, NAIC), as the case may be, shall refer to the then equivalentrating by S&P, Moody’s or Fitch (or, for 144A Debt Securities, NAIC), asthe case may be.

 

“Debt Securities” as used in the other definitions containedherein, means securities evidencing debt obligations, including, withoutlimitation, certificates representing an interest in a trust, the principalassets of which consist of debt obligations.

 

“Debtor Relief Laws” means the Bankruptcy Code of the UnitedStates, and all other liquidation, conservatorship, bankruptcy, assignment forthe benefit of creditors, moratorium, rearrangement, receivership, insolvency,reorganization, or similar debtor relief Laws of the United States or otherapplicable jurisdictions from time to time in effect and affecting the rightsof creditors generally.

 

“Default” means any event or condition that constitutes an Eventof Default or that, with the giving of any notice, the passage of time, orboth, would be an Event of Default.

 

“Default Rate” means when used with respect to Obligations, (i) withrespect to Base Rate Loans, an interest rate equal to (A) the Base Rate plus(B) 2% per annum; and (ii) with respect to a Eurodollar Loan, aninterest rate equal to (A) the interest rate (including any ApplicableRate) otherwise applicable to such Eurodollar Loan plus (B) 2% per annum.

 

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“Defaulting Lender” means any Lender that (a) has failed tofund any portion of the Revolving Loans or participations in Swingline Loansrequired to be funded by it hereunder within one Business Day of the daterequired to be funded by it hereunder unless such failure has been cured, (b) hasotherwise failed to pay over to the Administrative Agent or any other Lenderany other amount required to be paid by it hereunder within one Business Day ofthe date when due, unless the subject of a good faith dispute or unless suchfailure has been cured, or (c) has been deemed insolvent or become thesubject of a bankruptcy or insolvency proceeding.

 

“Delayed Draw Loan” means, as of any date, a term loan that hasnot yet been fully funded.

 

“Delayed Draw Reserve” means, as of any date, an amount equal tothe aggregate amount of the respective Unfunded Delayed Draw Amounts for eachDelayed Draw Loan that is a Tranche B Specified Financial Asset as of suchdate.

 

“Disposition” means the sale, transfer, license, lease or otherdisposition (including any sale and leaseback transaction) of any property byany Person, including any sale, assignment, transfer or other disposal, with orwithout recourse, of any notes or accounts receivable or any rights and claimsassociated therewith.

 

“Dollar” and “$” mean lawful money of the United States.

 

“Eligible Assignee” means (a) any Person that meets therequirements to be an assignee under Sections 10.06(b)(iii), 10.06(b)(v) and10.06(b)(vi), (b) a commercial bank organized under the laws of theUnited States, or any State thereof, having total assets in excess of$500,000,000 or any commercial finance or asset based lending affiliate of anysuch commercial bank, (c) a savings and loan association or savings bankorganized under the laws of the United States, or any State thereof, having anet worth of at least $250,000,000 calculated in accordance with GAAP, (d) anyLender (or any Affiliate of any Lender) listed on the signature page ofthis Agreement and (e) other financial institutions with a net worth of atleast $250,000,000.

 

“Eligible Specified Financial Asset” means a Tranche A SpecifiedFinancial Asset or a Tranche B Specified Financial Asset, or a ParticipationInterest therein, of any Borrowers:

 

### (a)                                  in which, to secure theObligations, whether contingent or otherwise, the Administrative Agent has asecurity interest (i) perfected by the Administrative Agent’s possessionor by “control” (as defined in §§ 8-106, 9-104, 9-105 and 9-106 of theUniform Commercial Code of the State of New York) in favor of the AdministrativeAgent (with, if the Administrative Agent so elects and terminates theCollateral Agreement, another Custodian or securities intermediary designatedby the Administrative Agent with the Borrowers’ consent, which consent shallnot be unreasonably withheld or delayed, for the purposes of obtainingcontrol), or, if in the reasonable opinion of the Administrative Agent it isnot possible or practicable to perfect the security interest by theAdministrative Agent’s possession or by “control” in favor of theAdministrative Agent, is otherwise perfected, and perfected in such a way as tobe entitled to first priority, to the reasonable satisfaction of theAdministrative Agent and (ii) is capable of being enforced by theAdministrative Agent without the consent of any third party (other than, in thecase of a Specified Financial Asset that is a loan, the customary requirementof the consent of the administrative agent or, unless the loan is in default,borrower or material obligor of the loan) or resort to judicial process;

###  

### (b)                                 which is not otherwise subjectto any prior security interest, lien or encumbrance other than liens in favorof the Administrative Agent for the benefit of the Lenders;

 

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### (c)                                  which is not in default as ofthe date on which such asset was acquired by the Borrowers;

###  

### (d)                                 which is not subject to anyright of recoupment or set-off;

###  

### (e)                                  in respect of which, unlessunder the “control” of the Administrative Agent acting as a securities intermediary,such Borrower has issued to the applicable issuer or material obligor (or, ifpayments are made through an agent, to the applicable agent) an instructiondirecting all payments of amounts payable to such Borrower in respect of suchSpecified Financial Asset to the Custodial Account or another account approvedby the Administrative Agent;

###  

### (f)                                    the Value of which to beincluded, for purposes of the computation of the applicable Borrowing Base atany time, has been obtained, or, if required to be updated, has been obtainedin response to the update requirement, and to the extent such Value is notbeing disputed by the Administrative Agent;

###  

### (g)                                 for which the depositary bank,issuer or material obligor, as the case may be, excluding any issuer ofsecurities by a special purpose entity in a securitization, is organized andhas its chief executive office in (i) the United States of America, or (ii) ifapproved by the Administrative Agent in its sole discretion, which shall beexercised in a commercially reasonable manner, Belgium, France, Italy,Luxembourg, Netherlands, Germany, Denmark, Ireland, United Kingdom, Austria,Finland, Sweden or Japan;

###  

### (h)                                 which is denominated in U.S.Dollars, Euros, British Pounds or Japanese Yen;

###  

### (i)                                     is not “margin stock” as definedin Regulation U of the Federal Reserve Board;

###  

### (j)                                     in the case of a first or secondlien Bank Loan, a Mezzanine Obligations or a Bridge Loan, that is a term loan,and is either a Delayed Draw Loan or has been fully funded (i.e., is notsubject to an additional lending commitment) and is not in default; and

###  

### (k)                                  in the case of a ParticipationInterest, which the Administrative Agent is reasonably satisfied is a “true”participating interest rather than being a financing and is consistent withmarket norms for agreements between unaffiliated entities dealing at arm’slength.

###  

Notwithstanding the foregoing, the Borrowing Base on any date mayinclude an asset to be purchased by any Borrower with the proceeds of a Loan tobe made on that date so long as (i) the Administrative Agent has beendirected by such Borrower to pay the proceeds of such Loan directly to theseller of the asset (to the extent of the purchase price thereof), (ii) theseller is to deliver the asset to such Borrower before or against payment bysuch Borrower, (iii) the seller has been directed by such Borrower todeliver the asset to the Administrative Agent or its nominee or, if suchdelivery is not possible or practical, in such other manner as is reasonablyacceptable to the Administrative Agent to satisfy the requirements of clauses(a), (b) and (c) of this definition of “Eligible Specified FinancialAsset.”  In such instance, therequirements of clauses (a), (b), (c) and (d) need not be met for theasset to qualify as an Eligible Specified Financial Asset until the expirationof three Business Days following the date of the Borrowing so long as duringthe three Business Day period, the Administrative Agent has a perfectedsecurity interest in the asset, *provided*,*however*, that the Value of theasset does not exceed $25,000,000.

 

“Environmental Laws” means any and all Federal, state, local,and foreign statutes, laws, regulations, ordinances, rules, judgments, orders,decrees, permits, concessions, grants, franchises, licenses, agreements orgovernmental restrictions relating to pollution and the protection of the

 

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environment or the release of any materialsinto the environment, including those related to hazardous substances orwastes, air emissions and discharges to waste or public systems.

 

“Environmental Liability” means any liability, contingent orotherwise (including any liability for damages, costs of environmentalremediation, fines, penalties or indemnities), of KKR Financial or any of theirrespective Subsidiaries directly or indirectly resulting from or based upon (a) violationof any Environmental Law, (b) the generation, use, handling,transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposureto any Hazardous Materials, (d) the release or threatened release of anyHazardous Materials into the environment or (e) any contract, agreement orother consensual arrangement pursuant to which liability is assumed or imposedwith respect to any of the foregoing.

 

“Equity Interests” means, with respect to any Person, all of theshares of capital stock of (or other ownership or profit interests in) suchPerson, all of the warrants, options or other rights for the purchase oracquisition from such Person of shares of capital stock of (or other ownershipor profit interests in) such Person, all of the securities convertible into orexchangeable for shares of capital stock of (or other ownership or profitinterests in) such Person or warrants, rights or options for the purchase oracquisition from such Person of such shares (or such other interests), and allof the other ownership or profit interests in such Person (includingpartnership, member or trust interests therein), whether voting or nonvoting,and whether or not such shares, warrants, options, rights or other interestsare outstanding on any date of determination.

 

“ERISA” means the Employee Retirement Income Security Act of1974.

 

“ERISA Affiliate” means any trade or business (whether or notincorporated) under common control with any Borrower within the meaning of Section 414(b) or(c) of the Code (and Sections 414(m) and (o) of the Code for purposesof provisions relating to Section 412 of the Code).

 

“ERISA Event” means (a) a Reportable Event with respect toa Pension Plan; (b) a withdrawal by any Borrower or any ERISA Affiliatefrom a Pension Plan subject to Section 4063 of ERISA during a plan year inwhich it was a substantial employer (as defined in Section 4001(a)(2) ofERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) ofERISA; (c) a complete or partial withdrawal by a any Borrower or any ERISAAffiliate from a Multiemployer Plan or notification that a Multiemployer Planis in reorganization; (d) the filing of a notice of intent to terminate,the treatment of a Plan amendment as a termination under Section 4041 or4041A of ERISA, or the commencement of proceedings by the PBGC to terminate aPension Plan or Multiemployer Plan; (e) an event or condition which constitutesgrounds under Section 4042 of ERISA for the termination of, or theappointment of a trustee to administer, any Pension Plan or Multiemployer Plan;or (f) the imposition of any liability under Title IV of ERISA, other thanfor PBGC premiums due but not delinquent under Section 4007 of ERISA, uponany Borrower or any ERISA Affiliate.

 

“Eurodollar Loans” means Fixed Period Eurodollar Loans or DailyFloating Eurodollar Loans.

 

“Eurodollar Rate” means the Fixed Period Eurodollar Rate or theDaily Floating Eurodollar Rate.

 

“Event of Default” has the meaning specified in Section 8.01.

 

“Excluded Taxes” means, with respect to the AdministrativeAgent, any Lender or any other recipient of any payment to be made by or onaccount of any obligation of any Borrower hereunder, (a) taxes imposed onor measured by its overall gross or net income (however denominated), andfranchise taxes imposed on it (in lieu of net income taxes), in each case, bythe jurisdiction (or any political subdivision thereof including, withoutlimitation, a state of the United States and any political subdivision

 

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of such state) under the laws of which suchrecipient is organized (or political subdividision thereof) or in which its principaloffice is located or, in the case of any Lender, in which its applicableLending Office is located, (b) any branch profits taxes imposed by theUnited States or any similar tax imposed by any other jurisdiction (orpolitical subdividision thereof) in which any Borrower is located, (c) inthe case of a Foreign Lender (other than an assignee pursuant to a request byany Borrower under Section 10.13), any and all Taxes (includingwithholding tax) that is imposed on amounts payable to such Foreign Lender atthe time such Foreign Lender becomes a party hereto (or designates a newLending Office) or is attributable to such Foreign Lender’s failure orinability (other than as a result of a Change in Law) to comply with Section 3.01(e),except to the extent that such Foreign Lender (or its assignor, if any) wasentitled, at the time of designation of a new Lending Office (or assignment),to receive additional amounts from any Borrower with respect to suchwithholding tax pursuant to Section 3.01(a), and (d) any andall Taxes imposed on it as a result of a trade or business, a permanentestablishment, or a present or former connection between such Lender or theAdministrative Agent (as the case may be) and the jurisdiction of theGovernmental Authority imposing such tax or any taxing authority thereof ortherein (other than any connection resulting from being a Lender hereunder).

 

“Existing Collateral” means the property or assets of either ofthe Borrowers in or on which the administrative agent under the Existing CreditAgreement has liens or security interests.

 

“Existing Credit Agreement” means the Credit Agreement dated asof June 16, 2005 among the Borrowers, the lenders party thereto, J.P.Morgan Chase Bank, N.A., as administrative agent, and Citigroup Global MarketsInc., as syndication Agent, as amended.

 

“Federal Funds Rate” means, for any day, the rate per annumequal to the weighted average (rounded upwards, if necessary, to a wholemultiple of 1/100 of 1%) of the rates on overnight Federal funds transactionswith members of the Federal Reserve System arranged by Federal funds brokers onsuch day, as published by the Federal Reserve Bank of New York on the BusinessDay next succeeding such day; provided that (a) if such day is nota Business Day, the Federal Funds Rate for such day shall be such rate on suchtransactions on the next preceding Business Day as so published on the nextsucceeding Business Day, and (b) if no such rate is so published on suchnext succeeding Business Day, the Federal Funds Rate for such day shall be theaverage rate (rounded upward, if necessary, to a whole multiple of 1/100 of 1%)charged to Bank of America on such day on such transactions as determined bythe Administrative Agent.

 

“Fee Letter” means the letter agreement, dated June [        ],2006, among the Borrowers, the Administrative Agent and the Arranger.

 

“Fee Letter Supplement” means that certain supplement to the FeeLetter entered into on or prior to the Closing Date among the Borrowers, theAdministrative Agent and the Arranger.

 

“Fitch” means Fitch, Inc.

 

“Financing SPE” means any bankruptcy-remote special purposeSubsidiary formed by any Borrower or an Affiliate and which is, or isestablished for the purpose of becoming, an issuer in a Securitization.

 

“Fixed Period Eurodollar Loan” means any Loan that bearsinterest at a per annum rate equal to the Fixed Period Eurodollar Rate plus theApplicable Rate.

 

“Fixed Period Eurodollar Rate” means, for any day, a fixed rateequal to the rate per annum equal to the British Bankers Association LIBOR Rate(“BBA LIBOR”), as published by Reuters (or other

 

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commercially available source providingquotations of BBA LIBOR as designated by the Administrative Agent from time totime) at approximately 11:00 a.m., London time, two Business Days prior tothe commencement of such Interest Period, for U.S. dollar deposits (fordelivery on the first day of such Interest Period) with a term equivalent tosuch Interest Period. If such rate is not available at such time for anyreason, then the “Fixed Period Eurodollar Rate” for such Interest Period shallbe the rate per annum determined by the Administrative Agent to be the rate atwhich deposits in U.S. dollars for delivery on the first day of such InterestPeriod in same day funds in the approximate amount of the Fixed PeriodEurodollar Loan being made, continued or converted by Bank of America and witha term equivalent to such Interest Period would be offered by Bank of America’sLondon Branch to major banks in the London interbank eurodollar market at theirrequest at approximately 11:00 a.m. (London time) two Business Days priorto the commencement of such Interest Period.

 

“Foreign Lender” means any Lender that is organized under the lawsof a jurisdiction other than that in which any Borrower is resident for taxpurposes. For purposes of this definition, the United States, each Statethereof and the District of Columbia shall be deemed to constitute a singlejurisdiction.

 

“FRB” means the Board of Governors of the Federal Reserve Systemof the United States.

 

“Fund” means any Person (other than a natural person) that is(or will be) engaged in making, purchasing, holding or otherwise investing incommercial loans and similar extensions of credit in the ordinary course of itsbusiness.

 

“GAAP” means generally accepted accounting principles in theUnited States set forth in the opinions and pronouncements of the AccountingPrinciples Board and the American Institute of Certified Public Accountants andstatements and pronouncements of the Financial Accounting Standards Board orsuch other principles as may be approved by a significant segment of theaccounting profession in the United States, that are applicable to thecircumstances as of the date of determination, consistently applied.

 

“Governmental Authority” means the government of the UnitedStates or any other nation, or of any political subdivision thereof, whetherstate or local, and any agency, authority, instrumentality, regulatory body,court, central bank or other entity exercising executive, legislative,judicial, taxing, regulatory or administrative powers or functions of orpertaining to government (including any supra-national bodies such as theEuropean Union or the European Central Bank).

 

“Guarantee” means, as to any Person, (a) any obligation,contingent or otherwise, of such Person guaranteeing or having the economiceffect of guaranteeing any Indebtedness or other obligation payable orperformable by another Person (the “primary obligor”) in any manner, whetherdirectly or indirectly, and including any obligation of such Person, direct orindirect, (i) to purchase or pay (or advance or supply funds for thepurchase or payment of) such Indebtedness or other obligation, (ii) topurchase or lease property, securities or services for the purpose of assuringthe obligee in respect of such Indebtedness or other obligation of the paymentor performance of such Indebtedness or other obligation, (iii) to maintainworking capital, equity capital or any other financial statement condition orliquidity or level of income or cash flow of the primary obligor so as toenable the primary obligor to pay such Indebtedness or other obligation, or (iv) enteredinto for the purpose of assuring in any other manner the obligee in respect ofsuch Indebtedness or other obligation of the payment or performance thereof orto protect such obligee against loss in respect thereof (in whole or in part),or (b) any Lien on any assets of such Person securing any Indebtedness orother obligation of any other Person, whether or not such Indebtedness or otherobligation is assumed by such Person (or any right, contingent or otherwise, ofany holder of such Indebtedness to obtain any such Lien); provided thatthe term “Guarantee” shall not include endorsements for collection or depositin the ordinary course of business. The amount of any

 

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Guarantee shall be deemed to be an amountequal to the stated or determinable amount of the related primary obligation,or portion thereof, in respect of which such Guarantee is made or, if notstated or determinable, the maximum reasonably anticipated liability in respectthereof as determined by the guaranteeing Person in good faith. The term “Guarantee”as a verb has a corresponding meaning.

 

“Guarantor Payment” has the meaning specified in Section 2.15.

 

“Hazardous Materials” means all explosive or radioactivesubstances or wastes and all hazardous or toxic substances, wastes or otherpollutants, including petroleum or petroleum distillates, asbestos orasbestos-containing materials, polychlorinated biphenyls, radon gas, infectiousor medical wastes and all other substances or wastes of any nature regulatedpursuant to any Environmental Law.

 

“Indebtedness” means, as to any Person at a particular time,without duplication, all of the following, whether or not included asindebtedness or liabilities in accordance with GAAP:

 

### (a)                                  all obligations of such Personfor borrowed money and all obligations of such Person evidenced by bonds,debentures, notes, loan agreements or other similar instruments;

###  

### (b)                                 all direct or contingentobligations of such Person arising under letters of credit (including standbyand commercial), bankers’ acceptances, bank guaranties, surety bonds andsimilar instruments;

###  

### (c)                                  net obligations of such Personunder any Swap Contract;

###  

### (d)                                 all obligations of such Personto pay the deferred purchase price of property or services (other than tradeaccounts payable in the ordinary course of business and, in each case, not pastdue for more than 60 days after the date on which such trade account payablewas created);

###  

### (e)                                  indebtedness (excluding prepaidinterest thereon) secured by a Lien on property owned or being purchased bysuch Person (including indebtedness arising under conditional sales or othertitle retention agreements), whether or not such indebtedness shall have beenassumed by such Person or is limited in recourse;

###  

### (f)                                    Capital Lease Obligations andSynthetic Lease Obligations;

###  

### (g)                                 all obligations of such Personto purchase, redeem, retire, defease or otherwise make any payment in respectof any Equity Interest in such Person or any other Person, valued, in the caseof a redeemable preferred interest, at the greater of its voluntary orinvoluntary liquidation preference plus accrued and unpaid dividends;and

###  

### (h)                                 all Guarantees of such Person inrespect of any of the foregoing.

###  

For all purposes hereof, the Indebtedness of any Person shall includethe Indebtedness of any partnership or joint venture (other than a jointventure that is itself a corporation or limited liability company) in whichsuch Person is a general partner or a joint venturer to the extent such Personis liable therefor by reason of its status as general partner or jointventurer, unless such Indebtedness is expressly made non-recourse to suchPerson. The amount of any net obligation under any Swap Contract on any dateshall be deemed to be the Swap Termination Value thereof as of such date. Theamount of any Capital Lease Obligation or Synthetic Lease Obligation as of anydate shall be deemed to be the amount of Attributable Indebtedness in respectthereof as of such date.

 

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“Indemnified Taxes” means Taxes other than Excluded Taxes.

 

“Indemnitees” has the meaning specified in Section 10.04(a).

 

“Information” has the meaning specified in Section 10.07.

 

“Interest Payment Date” means, (a) as to any Loan otherthan a Base Rate Loan or a Daily Floating Eurodollar Loan, the last day of eachInterest Period applicable to such Loan and the Maturity Date; provided,however, that if any Interest Period for a Fixed Period Eurodollar Loanexceeds three months, the respective dates that fall every three months afterthe beginning of such Interest Period shall also be Interest Payment Dates; and(b) as to any Base Rate Loan or a Daily Floating Eurodollar Loan(including a Swingline Loan), the last Business Day of each March, June, September and December andthe Maturity Date.

 

“Interest Period” means, as to each Fixed Period EurodollarLoan, the period commencing on the date such Fixed Period Eurodollar Loan isdisbursed or converted to or continued as a Fixed Period Eurodollar Loan andending on the date, one, two, three or six months thereafter, as selected byany Borrower in its Loan Notice; provided that:

 

### (a)                                  any Interest Period that wouldotherwise end on a day that is not a Business Day shall be extended to the nextsucceeding Business Day unless such Business Day falls in another calendarmonth, in which case such Interest Period shall end on the next precedingBusiness Day;

###  

### (b)                                 any Interest Period that beginson the last Business Day of a calendar month (or on a day for which there is nonumerically corresponding day in the calendar month at the end of such InterestPeriod) shall end on the last Business Day of the calendar month at the end ofsuch Interest Period; and

###  

### (c)                                  no Interest Period shall extendbeyond the Maturity Date.

###  

“Investment” means, as to any Person, any direct or indirectacquisition or investment by such Person, whether by means of (a) thepurchase or other acquisition of capital stock or other securities of anotherPerson, (b) a loan, advance or capital contribution to, Guarantee orassumption of debt of, or purchase or other acquisition of any other debt orequity participation or interest in, another Person, including any partnershipor joint venture interest in such other Person and any arrangement pursuant towhich the investor Guarantees Indebtedness of such other Person, or (c) thepurchase or other acquisition (in one transaction or a series of transactions)of assets of another Person that constitute a business unit. For purposes ofcovenant compliance, the amount of any Investment shall be the amount actuallyinvested, without adjustment for subsequent increases or decreases in the valueof such Investment.

 

“IRS” means the United States Internal Revenue Service.

 

“KKR Financial” has the meaning specified in the introductoryparagraph hereto.

 

“KKR TRS” has the meaning specified in the introductoryparagraph hereto.

 

“Laws” means, collectively, all international, foreign, Federal,state and local statutes, treaties, rules, guidelines, regulations, ordinances,codes and administrative or judicial precedents or authorities, including theinterpretation or administration thereof by any Governmental Authority chargedwith the enforcement, interpretation or administration thereof, and allapplicable administrative orders, directed duties, requests, licenses,authorizations and permits of, and agreements with, any Governmental Authority,in each case whether or not having the force of law.

 

15

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“Lender” has the meaning specified in the introductory paragraphhereto and, as the context requires, includes the Swingline Lender.

 

“Lending Office” means, as to any Lender, the office or officesof such Lender described as such in such Lender’s Administrative Questionnaire,or such other office or offices as a Lender may from time to time notify theBorrowers and the Administrative Agent.

 

“Letter of Credit Obligations” means reimbursement obligationsof either of the Borrowers in respect of letters of credit issued for thebenefit of either of the Borrowers or any of their respective Subsidiaries,which reimbursement obligations may be unsecured or may be collateralized bymeans of a deposit of cash with the issuer of any such letter of credit.

 

“Lien” means any mortgage, pledge, hypothecation, assignment,deposit arrangement, encumbrance, lien (statutory or other), charge, orpreference, priority or other security interest or preferential arrangement inthe nature of a security interest of any kind or nature whatsoever (includingany conditional sale or other title retention agreement, any easement, right ofway or other encumbrance on title to real property, and any financing leasehaving substantially the same economic effect as any of the foregoing).

 

“Loan” means any Revolving Loan or Swingline Loan.

 

“Loan Documents” means this Agreement, the Collateral Agreement,the Security Documents, the Fee Letter and each Note, if any, issued hereunder.

 

“Loan Notice” means either a Revolving Loan Notice or aSwingline Loan Notice.

 

“Management Agreement” means that certain Management Agreementdated as of August 12, 2004, between KKR Financial and KKR FinancialAdvisors LLC.

 

“Material Adverse Effect” means a material adverse effect on (a) thebusiness, assets, operations or condition, financial or otherwise, of theBorrowers and their respective Subsidiaries taken as a whole, (b) theability of any Borrower to perform any of its obligations under this Agreementor any other Loan Document or (c) the rights of or benefits available tothe Lenders under this Agreement or any other Loan Document.

 

“Material Indebtedness” means Indebtedness (other than theLoans) of any one or more of each of the Borrowers and their respectiveSubsidiaries in an aggregate principal amount exceeding $25,000,000. For purposesof determining Material Indebtedness, the “principal amount” of the obligationsof any Borrower or any Subsidiary in respect of any Swap Contract or RepurchaseAgreement at any time shall be the maximum aggregate amount (giving effect toany netting agreements) that such Borrower or such Subsidiary would be requiredto pay if such Swap Contract or Repurchase Agreement were terminated at suchtime.

 

“Maturity Date” means the later of the third anniversary of theClosing Date and, if such date is not aBusiness Day, the Maturity Date shall be the next preceding Business Day.

 

“Maximum Rate” has the meaning specified in Section 10.09.

 

“Mezzanine Obligation” means a subordinate Loan or Debt Securitythat is senior to all equity classes. For clarity, Mezzanine Obligations shallnot include any preferred stock or any equity security that is mandatorilyredeemable as defined by GAAP.

 

16

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“Moody’s” means Moody’s Investors Service, Inc. and anysuccessor thereto.

 

“Multiemployer Plan” means any employee benefit plan of the typedescribed in Section 4001(a)(3) of ERISA, to which any Borrower orany ERISA Affiliate makes or is obligated to make contributions, or during thepreceding five plan years, has made or been obligated to make contributions.

 

“Net Value Amount” means, in relation to an Eligible SpecifiedFinancial Asset, the product of the Value of such Eligible Specified FinancialAsset and the relevant Specified Percentage applicable to such EligibleSpecified Financial Asset.

 

“Note” means a promissory note made by any Borrower in favor ofa Lender evidencing Loans made by such Lender, substantially in the form of Exhibit C.

 

“Obligations” means all advances to, and debts, liabilities,obligations, covenants and duties of, any Borrower arising under any LoanDocument or otherwise with respect to any Loan hereunder, whether direct orindirect (including those acquired by assumption), absolute or contingent, dueor to become due, now existing or hereafter arising and including interest andfees that accrue after the commencement by or against any Borrower or anyAffiliate thereof of any proceeding under any Debtor Relief Laws naming suchPerson as the debtor in such proceeding, regardless of whether such interest andfees are allowed claims in such proceeding.

 

“Organization Documents” means, (a) with respect to anycorporation, the certificate or articles of incorporation and the bylaws (orequivalent or comparable constitutive documents with respect to any non-U.S.jurisdiction); (b) with respect to any limited liability company, thecertificate or articles of formation or organization and operating agreement;and (c) with respect to any partnership, joint venture, trust or otherform of business entity, the partnership, joint venture or other applicableagreement of formation or organization and any agreement, instrument, filing ornotice with respect thereto filed in connection with its formation ororganization with the applicable Governmental Authority in the jurisdiction ofits formation or organization and, if applicable, any certificate or articlesof formation or organization of such entity.

 

“Other Taxes” means all present or future stamp or documentarytaxes or any other excise or property taxes, charges or similar levies of theUnited States or any political subdivision thereof (including, withoutlimitation, any state in the United States and any political subdivision of anysuch state) (including interest, fines, penalties and additions to tax) arisingfrom the execution, delivery, performance or enforcement of, or otherwise withrespect to, this Agreement or any other Loan Document.

 

“Outstanding Amount” means with respect to all Loans hereunder,on any date, the aggregate outstanding principal amount thereof after givingeffect to any borrowings and prepayments or repayments of Loans occurring onsuch date.

 

“Participant” has the meaning specified in Section 10.06(d).

 

“Participation Interest” means any participating interest in anycollateralized loan obligation, collateralized bond obligation, collateralizeddebt obligation, first lien Bank Loan, second lien Bank Loan, MezzanineObligation or Bridge Loan where the record holder of such interest is aFinancing SPE or a financial institution which has a Debt Rating equal to A+ byS&P, or its equivalent from another rating agency, or higher.

 

“Patriot Act” has the meaning specified in Section 10.16.

 

17

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“Payoff Documents” has the meaning specified in Section 4.01(a).

 

“PBGC” means the Pension Benefit Guaranty Corporation or anysuccessor entity performing similar functions.

 

“PCAOB” means the Public Company Accounting Oversight Board.

 

“Pension Plan” means any “employee pension benefit plan” (assuch term is defined in Section 3(2) of ERISA), other than aMultiemployer Plan, that is subject to Title IV of ERISA and is sponsored ormaintained by KKR Financial or any ERISA Affiliate or to which KKR Financial orany ERISA Affiliate contributes or has an obligation to contribute, or in thecase of a multiple employer or other plan described in Section 4064(a) ofERISA, has made contributions at any time during the immediately preceding fiveplan years.

 

“Perfection Certificate” has the meaning set forth in theSecurity Agreement.

 

“Permitted Encumbrances” means:

 

### (a)                                  Liens imposed by law for taxesthat are not yet due or are being contested in good faith by the Borrowers or aSubsidiary thereof;

###  

### (b)                                 landlords’, carriers’,warehousemen’s, mechanics’, materialmen’s, repairmen’s and other like Liensimposed by law, arising in the ordinary course of business and securingobligations that are not overdue by more than 30 days or are being contested ingood faith by the Borrowers or a Subsidiary thereof;

###  

### (c)                                  pledges and deposits made in theordinary course of business in compliance with workers’ compensation,unemployment insurance and other social security laws or regulations anddeposits securing liability to insurance carriers in relation to the foregoing;

###  

### (d)                                 deposits to secure theperformance of bids, trade contracts, leases, statutory obligations, surety andappeal bonds, performance bonds and other obligations of a like nature, in eachcase in the ordinary course of business;

###  

### (e)                                  judgment liens in respect ofjudgments that do not constitute an Event of Default; and

###  

### (f)                                    easements, zoning restrictions,rights-of-way and similar encumbrances on real property imposed by law orarising in the ordinary course of business that do not secure any monetaryobligations and do not materially interfere with the ordinary conduct ofbusiness of any Borrower or any Subsidiary;

###  

provided that theterm “Permitted Encumbrances” shall not include any Lien securing Indebtedness.

 

“Permitted Investments” means:

 

### (a)                                  direct obligations of, orobligations the principal of and interest on which are unconditionallyguaranteed by, the United States of America (or by any agency thereof to theextent such obligations are backed by the full faith and credit of the UnitedStates of America), in each case maturing within one year from the date ofacquisition thereof;

 

18

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### (b)                                 investments in commercial papermaturing within 270 days from the date of acquisition thereof and having, atsuch date of acquisition, the highest credit rating obtainable from S&P,Moody’s or Fitch;

###  

### (c)                                  investments in certificates ofdeposit, banker’s acceptances and time deposits maturing within 180 days fromthe date of acquisition thereof issued or guaranteed by or placed with, andmoney market deposit accounts issued or offered by, any domestic office of anycommercial bank organized under the laws of the United States of America or anyState thereof which has a combined capital and surplus and undivided profits ofnot less than $500,000,000;

###  

### (d)                                 fully collateralized RepurchaseAgreements with a term of not more than 30 days for securities described inclause (a) above and entered into with a financial institution satisfyingthe criteria described in clause (c) above; and

###  

### (e)                                  money market funds that (i) complywith the criteria set forth in Securities and Exchange Commission Rule 2a-7under the Investment Company Act of 1940, (ii) have a Debt Rating of AAAby S&P, or its equivalent from another rating agency, and (iii) haveportfolio assets of at least $5,000,000,000.

###  

“Person” means any natural person, corporation, limitedliability company, trust, joint venture, association, company, partnership,Governmental Authority or other entity.

 

“Plan” means any “employee benefit plan” (as such term isdefined in Section 3(3) of ERISA) established by any Borrower or,with respect to any such plan that is subject to Section 412 of the Codeor Title IV of ERISA, any ERISA Affiliate.

 

“Platform” has the meaning specified in Section 6.02.

 

“Post-Closing Condition” has the meaning ascribed to such termin the Fee Letter Supplement.

 

“Public Lender” has the meaning specified in Section 6.02.

 

“Register” has the meaning specified in Section 10.06(c).

 

“Registered Public Accounting Firm” has the meaning specified inthe Securities Laws and shall be independent of the Borrowers as prescribed bythe Securities Laws.

 

“REIT” means a domestic trust or corporation that qualifies as areal estate investment trust under the provisions of Sections 856, et seq., ofthe Code.

 

“Related Borrowing Base Information” means, with respect to any “SpecifiedFinancial Asset” as defined herein, or Participation Interest therein, includedor to be included in the Borrowing Base, (a) the category of the SpecifiedFinancial Asset as referred to in clauses (a) through (k) of thedefinition and, if a Participation Interest is applicable, the participatinginterest, (b) the identification of all primary and secondary materialobligors obligated on the Specified Financial Asset, (c) the CUSIP number,if any, corresponding to such Eligible Specified Financial Asset, (d) theprincipal amount of the loan, debt or other monetary obligation in which anyBorrower has an interest, (e) the scheduled maturity of the loan, debt orother monetary obligation, (f) the type of collateral securing the loan,debt or other monetary obligation and (g) the source of information usedin the determination of the Value.

 

19

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“Related Parties” means, with respect to any Person, such Person’sAffiliates and the partners, directors, officers, employees, agents andadvisors of such Person and of such Person’s Affiliates.

 

“Reportable Event” means any of the events set forth in Section 4043(c) ofERISA, other than events for which the 30 day notice period has been waived.

 

“Repurchase Agreement” means any agreement involving the sale orpurchase of financial or other assets whereby the seller of such assets agreesto repurchase such assets at an agreed upon price and at a stated time.

 

“Request for Borrowing” means (a) with respect to aBorrowing, conversion or continuation of Revolving Loans, a Revolving LoanNotice and (b) with respect to a Swingline Loan, a Swingline Loan Notice.

 

“Required Lenders” means, as of any date of determination, (a) ifthere are three (3) or fewer Lenders on such date, all of the Lenders and (b) ifthere are three or more Lenders on such date, the Lenders having Commitments inthe aggregate representing more than 50% of the Aggregate Commitments at suchtime or, if the commitment of each Lender to make Loans have been terminatedpursuant to Section 8.02, at least two Lenders holding in theaggregate more than 50% of the Total Outstandings (with the aggregate amount ofeach Lender’s risk participation and Swingline Loans being deemed “held” bysuch Lender for purposes of this definition); provided that theCommitment of, and the portion of the Total Outstandings held or deemed heldby, any Defaulting Lender shall be excluded for purposes of making adetermination of Required Lenders.

 

“Responsible Officer” means the chief executive officer,president, chief financial officer, treasurer, assistant treasurer orcontroller of a Borrower and, solely for purposes of notices given pursuant to Article II,any other officer of the applicable Borrower so designated by any of theforegoing officers in a notice to the Administrative Agent. Any documentdelivered hereunder that is signed by a Responsible Officer of a Borrower shallbe conclusively presumed to have been authorized by all necessary corporate,partnership and/or other action on the part of such Borrower and suchResponsible Officer shall be conclusively presumed to have acted on behalf ofsuch Borrower.

 

“Restricted Payment” means any dividend or other distribution(whether in cash, securities or other property) with respect to any capitalstock or other Equity Interest of the Borrowers or any Subsidiary, or anypayment (whether in cash, securities or other property), including any sinkingfund or similar deposit, on account of the purchase, redemption, retirement,acquisition, cancellation or termination of any such capital stock or otherEquity Interest, or on account of any return of capital to the Borrower’sstockholders, partners or members (or the equivalent Person thereof).

 

“Revolving Credit Facility” means the credit facility pursuantto which Revolving Loans are made available to the Borrowers in accordance withthis Agreement.

 

“Revolving Loan” means an extension of credit made by a Lenderto a Borrower pursuant to Section 2.01 of this Agreement as aTranche A Loan or a Tranche B Loan.

 

“Revolving Loan Notice” means a notice of (a) a Borrowingof a Revolving Loan, (b) a conversion of Revolving Loans from one Type toanother, or (c) a continuation of Fixed Period Eurodollar Loans pursuantto Section 2.02(a), which, if in writing, shall be substantially inthe form of Exhibit A.

 

20

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“S&P” means Standard & Poor’s Ratings Services, adivision of The McGraw-Hill Companies, Inc. and any successor thereto.

 

“Sarbanes-Oxley” means the Sarbanes-Oxley Act of 2002.

 

“SEC” means the Securities and Exchange Commission, or anyGovernmental Authority succeeding to any of its principal functions.

 

“Secured Indebtedness” means secured Indebtedness incurred byany Borrower or any Subsidiary in the course of its business as such businessis described in KKR Financial’s Form 10-K filed with the Securities andExchange Commission on March 29, 2006, including any such Indebtednessincurred pursuant to or in connection with any loan warehouse agreement,Repurchase Agreement, Swap Agreement, collateralized bond obligation,collateralized loan obligation, collateralized debt obligation orSecuritization.

 

“Securitization” means the issuance by a bankruptcy-remotespecial purpose entity of evidences of debt obligations or equity interests toholders which are third party institutional investors and which entitle theholders to receive payments that depend primarily on the cash flow of accounts,chattel paper, instruments, investment property or payment intangibles owned bythe special purpose entity.

 

“Security Agreement” means the Security Agreement of even dateherewith, among the Borrowers and the Administrative Agent and in form andsubstance reasonably satisfactory to the Administrative Agent.

 

“Security Documents” means the Security Agreement and all otherinstruments and documents, including without limitation, Uniform CommercialCode financing statements, which (a) are required to be executed,delivered or filed pursuant to the Security Agreement or any other LoanDocument or (b) are necessary for the creation or perfection of any Lienin favor of the Agent for the benefit of the Lenders to secure any of theObligations.

 

“Securities Laws” means the Securities Act of 1933, theSecurities Exchange Act of 1934, Sarbanes-Oxley and the applicable accountingand auditing principles, rules, standards and practices promulgated, approvedor incorporated by the SEC or the PCAOB.

 

“Single Obligor” means, collectively, all obligors that areAffiliates.

 

“Solvent” means, with respect to any Person as of a particulardate, that on such date (a) such Person is able to pay its debts and otherliabilities, contingent obligations and other commitments as they mature in thenormal course of business, (b) such Person does not intend to, and doesnot believe that it will, incur debts or liabilities beyond such Person’sability to pay as such debts and liabilities mature in their ordinary course, (c) suchPerson is not engaged in a business or a transaction, and is not about toengage in a business or a transaction, for which such Person’s assets wouldconstitute unreasonably small capital after giving due consideration to theprevailing practice in the industry in which such Person is engaged or is toengage, (d) the fair value of the assets of such Person is greater thanthe total amount of liabilities, including, without limitation, contingentliabilities, of such Person, and (e) the present fair saleable value ofthe assets of such Person is not less than the amount that will be required topay the probable liability of such Person on its debts as they become absoluteand matured. In computing the amount of contingent liabilities at any time, itis intended that such liabilities will be computed at the amount which, inlight of all the facts and circumstances existing at such time, represents theamount that can reasonably be expected to become an actual or maturedliability.

 

21

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“Special Event” means, in connection with a Trust PreferredFinancing Vehicle, the receipt by the Borrower (or its Subsidiary) of anopinion of counsel that as a result of certain changes in or interpretations ofthe tax law or the Investment Company Act of 1940, as amended (the “InvestmentCompany Act”) or, in each case, regulations thereunder, there is more than aninsubstantial risk that the Trust Preferred Vehicle will be considered an “investmentcompany” under the Investment Company Act or that the Trust Preferred Vehiclewill be subject to United States federal income tax or subject to more than ade minimus amount of other taxes or governmental charges or that interestpayable by the maker of the Trust Preferred Indebtedness will not be eligibleas a tax deduction by such maker.

 

“Specified Financial Asset” means a Tranche A SpecifiedFinancial Asset or a Tranche B Specified Financial Asset.

 

“Specified Percentage” means, in relation to any EligibleSpecified Financial Asset, the percentage set forth in the table below oppositesuch Eligible Specified Financial Asset:

 

**TRANCHEA**

 
| **Eligible Specified Financial  Asset**                                                  | ** ** | **Specified Percentage** | ** ** |
|------------------------------------------------------------------------------------------|------------|--------------------------|------------|
| Cash                                                                                     |       | 100                      | %          |
| Certificates of deposit                                                                  |       | 95                       | %          |
| Commercial paper                                                                         |       | 95                       | %          |
| United States obligations consisting of interest rate strips or zero  coupon obligations |       | 90                       | %          |
| Other United States obligations maturing in 10 or more and up to 30  years               |       | 95                       | %          |
| Other United States obligations maturing in 2 or more but less than  10                  |       | 97                       | %          |
| Other United States obligations maturing in less than 2 years                            |       | 98                       | %          |
| MBS rated AAA and with a weighted average life of less than five  years                  |       | 95                       | %          |
| MBS rated AA to AA+ and with a weighted average life of less than  five years            |       | 90                       | %          |
| MBS rated A to AA-and with a weighted average life of less than five  years              |       | 85                       | %          |

 

**TRANCHEB**

 
| **Eligible Specified Financial  Asset(*)**                                                                                              | ** ** | **Specified Percentage**                                                                                                       | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------------------------------------------------------------------|------------|
| Publicly traded investment grade Debt Securities.                                                                                       |       |                                                                                                                           |       |
| a.  BBB+ or higher                                                                                                                 |       | 90                                                                                                                             | %          |
| b.  BBB thru BBB-                                                                                                                  |       | 80                                                                                                                             | %          |
| Rule 144A private placed Debt Securities                                                                                           |       |                                                                                                                           |       |
| a.  NAIC 1 / AAA thru A-                                                                                                           |       | 85                                                                                                                             | %          |
| b.  NAIC 2 / BBB+ thru BBB-                                                                                                        |       | 80                                                                                                                             | %          |
| c.  NAIC 3 / BB+ thru BB                                                                                                           |       | 75                                                                                                                             | %          |
| d.  NAIC 4 / BB- thru B-                                                                                                           |       | 60                                                                                                                             | %          |
| e.  NAIC 5 / CCC+ thru CCC-                                                                                                        |       | 50                                                                                                                             | %          |
| Other Debt Securities, excluding MBS, rated BB+/Ba1 through BB-/B3                                                                      |       | 75                                                                                                                             | %          |
| Other Debt Securities, excluding MBS, rated B+/B1 through B-/B3                                                                         |       | 60                                                                                                                             | %          |
| Other Debt Securities, excluding MBS, rated CCC+/Caa1 through  CCC-/Caa3                                                                |       | 50                                                                                                                             | %          |
| First lien Bank Loans                                                                                                                   |       | 85                                                                                                                             | %          |
| Second lien Bank Loans                                                                                                                  |       | 70                                                                                                                             | %          |
| Real estate related Mezzanine Obligations                                                                                               |       | 60                                                                                                                             | %          |
| Mezzanine Obligations (other than real estate related Mezzanine  Obligations)                                                           |       | 50                                                                                                                             | %          |
| Bridge Loans                                                                                                                            |       | 50                                                                                                                             | %          |
| MBS rated BBB- to A- and with a weighted average life of less than  five years                                                          |       | 75                                                                                                                             | %          |
| MBS rated BB- to BB+ and with a weighted average life of less than  five years                                                          |       | 50                                                                                                                             | %          |
| CLO/CBO/CDO Tranches rated BB+/Ba1 or lower (including non-rated) on  transactions managed by KKR Financial LLC or an Affiliate thereof |       | 40                                                                                                                             | %          |
| Investments Denominated in Foreign Currency (Euros, Pounds or Yen)                                                                      |       | Mimic rates  on US currency  denominated assets if micro  hedged for FX risk and, if not, an additional decrease of 5%(1) |       |
| KKR Financial CLO/CBO/CDO Securitizations                                                                                               |       |                                                                                                                           |       |
| a.  AAA thru A-                                                                                                                    |       | 90                                                                                                                             | %          |
| b.  BBB+ and BBB                                                                                                                   |       | 80                                                                                                                             | %          |
| MBS IO Strips                                                                                                                           |       |                                                                                                                           |       |
| a.  FNMA IOs                                                                                                                       |       | 50                                                                                                                             | %          |
| b.  Non Agency IOs                                                                                                                 |       | 40                                                                                                                             | %          |

 

22

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| Senior Unsecured Bank Loans |   |   |   |
|-----------------------------|--------|--------|--------|
| a.  BBB- or higher     |   | 80     | %      |
| b.  BB+ thru BB-       |   | 75     | %      |
| c.  B+ thru B-         |   | 70     | %      |
| d.  CCC+ thru CCC-     |   | 50     | %      |

 

----

* References to credit ratings are to theDebt Rating.

(1) Subject to confirmation ofAdministrative Agent’s first lien on foreign exchange hedges.

 

“Subsidiary” of a Person means a corporation, partnership, jointventure, limited liability company or other business entity of which a majorityof the shares of securities or other interests having ordinary voting power forthe election of directors or other governing body (other than securities orinterests having such power only by reason of the happening of a contingency)are at the time beneficially owned, or the management of which is otherwisecontrolled, directly, or indirectly through one or more intermediaries, orboth, by such Person. Unless otherwise specified, all references herein to a “Subsidiary”or to “Subsidiaries” shall refer to a Subsidiary or Subsidiaries of theBorrower.

 

“Swap Contract” means (a) any and all rate swaptransactions, basis swaps, credit derivative transactions, forward ratetransactions, commodity swaps, commodity options, forward commodity contracts,equity or equity index swaps or options, bond or bond price or bond index swapsor options or forward bond or forward bond price or forward bond indextransactions, interest rate options, forward foreign exchange transactions, captransactions, floor transactions, collar transactions, currency swaptransactions, cross-currency rate swap transactions, currency options, spotcontracts, or any other similar transactions or any combination of any of theforegoing (including any options to enter into any of the foregoing), whetheror not any such transaction is governed by or subject to any master agreement,and (b) any and all transactions of any kind, and the relatedconfirmations, which are subject to the terms and conditions of, or governedby, any form of master agreement published by the International Swaps andDerivatives Association, Inc., any International Foreign Exchange MasterAgreement, or any other master agreement (any such master agreement, togetherwith any related schedules, a “Master Agreement”), including any suchobligations or liabilities under any Master Agreement.

 

“Swap Termination Value” means, in respect of any one or moreSwap Contracts, after taking into account the effect of any legally enforceablenetting agreement relating to such Swap Contracts, (a) for any date on orafter the date such Swap Contracts have been closed out and terminationvalue(s) determined in accordance therewith, such termination value(s), and (b) forany date prior to the date referenced in clause (a), the amount(s) determinedas the mark-to-market value(s) for such Swap Contracts, as determined basedupon one or more mid-market or other readily available quotations provided byany recognized dealer in such Swap Contracts (which may include a Lender or anyAffiliate of a Lender).

 

“Swingline Facility” means that portion of the Revolving CreditFacility made available by the Swingline Lender pursuant to Section 2.03.

 

“Swingline Borrowing” means a borrowing of a Swingline Loanpursuant to Section 2.03.

 

“Swingline Lender” means Bank of America in its capacity asprovider of Swingline Loans, or any successor swingline lender hereunder.

 

“Swingline Loan” has the meaning specified in Section 2.03(a).

 

“Swingline Loan Notice” means a notice of a Swingline Borrowingpursuant to Section 2.03(b), which, if in writing, shall besubstantially in the form of Exhibit B.

 

23

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“Swingline Sublimit” means, at any time, an amount equal to thelesser of (a) $50,000,000 and (b) the Aggregate Commitment Amount. TheSwingline Sublimit is part of, and not in addition to, the Aggregate CommitmentAmount.

 

“Syndication Agents” means, collectively, JPMorgan Chase Bank,N.A. and Citigroup Global Markets Inc.

 

“Synthetic Lease” means any lease of goods or other property,whether real or personal, which is treated as an operating lease under GAAP andas a loan or financing for U.S. income tax purposes.

 

“Synthetic Lease Obligation” means the monetary obligation of aPerson under a Synthetic Lease.

 

“Taxes” means all present or future taxes, levies, imposts,duties, deductions, withholdings, assessments, fees or other charges imposed byany Governmental Authority, including any interest, additions to tax orpenalties applicable thereto.

 

“Tenor” means, with respect to any Loan, its characterization asa Tranche A Loan or a Tranche B Loan.

 

“Total Outstandings” means, at any time, the aggregateOutstanding Amount of all Loans under this Agreement or any of the other Loan Documentsas of such time.

 

“Tranche” means either Tranche A or Tranche B.

 

“Tranche A” means that portion of the Revolving Credit Facilitypursuant to which Tranche A Loans are made.

 

“Tranche B” means that portion of the Revolving Credit Facilitypursuant to which Tranche B Loans are made.

 

“Tranche A Availability” means, at any time, the lesser of (a) anamount not less than zero and otherwise equal to (i) the AggregateCommitment Amount minus (ii) Total Outstandings and (b) an amount notless than zero and otherwise equal to (i) the Tranche A Borrowing Baseminus (ii) the Outstanding Amount of Tranche A Loans, in each case as ofsuch time.

 

“Tranche A Borrowing Base” means an amount, as of any date,equal to the sum of each and all Tranche A Specified Financial Asset ValueAmounts as of such date; provided that the Tranche A Borrowing Base onany date may include an asset to be purchased by any Borrower with the proceedsof a Tranche A Loan to be made on that date so long as (i) theAdministrative Agent has been directed by such Borrower to pay the proceeds ofsuch Loan directly to the seller of the asset, (ii) the seller is todeliver the asset to such Borrower before or against payment by such Borrower, (iii) theseller has been directed by such Borrower to deliver the asset to theAdministrative Agent or its nominee or, if the delivery is not possible orpractical, in such other manner as is reasonably acceptable to theAdministrative Agent to satisfy the requirements of clauses (a), (b) and (c) ofthe definition of “Eligible Specified Financial Asset;” and providedfurtherthat the requirements of clauses (a), (b), (c) and (d) of thedefinition of “Eligible Specified Financial Asset” are met for such asset notlater than the expiration of three Business Days following the date of therelated Tranche A Loan.

 

“Tranche A Loans” means any Loan made with reference to TrancheA Availability.

 

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“Tranche A Specified Financial Asset” means any EligibleSpecified Financial Asset described in one of the following categories:

 

### (a)                                  cash on deposit in, orcertificates of deposit maturing in less than 90 days on the date ofacquisition and issued by, a bank with at least $2,000,000,000 in capital andrated A1/P1;

###  

### (b)                                 commercial paper maturing inless than 90 days on the date of acquisition and rated A2/P2 or higher;

###  

### (c)                                  direct obligations of, orobligations the principal and interest on which are unconditionally guaranteedby, the United States of America (or by any agency thereof to the extent backedby the full faith and credit of the United States of America), in each casematuring within 30 years from the date of acquisition thereof; or

###  

### (d)                                 residential or commercialmortgage-backed Debt Securities having a Debt Rating and weighted average lifeindicated in the Tranche A table for Specified Percentages relating tomortgage-backed Debt Securities.

###  

“Tranche A Specified Financial Asset Value Amount” means, foreach Tranche A Specified Financial Asset, as of any date, the product of theValue of such Tranche A Specified Financial Asset as of the most recent datesuch Value is required to be determined pursuant to Section 6.02and the Specified Percentage applicable to such Tranche A Specified FinancialAsset, and subtracting from such product, in each case, any amount secured by aprior Lien.

 

“Tranche B Availability” means, at any time, the lesser of (a) anamount not less than zero and otherwise equal to (i) the AggregateCommitment Amount minus (ii) Total Outstandings and (b) an amount notless than zero and otherwise equal to (i) the Tranche B Borrowing Baseminus (ii) the Outstanding Amount of Tranche B Loans, in each case as ofsuch time.

 

“Tranche B Borrowing Base” means an amount, as of any date,equal to (a) the sum of each and all Tranche B Specified Financial AssetValue Amounts as of such date minus (b) the amount of the DelayedDraw Reserve as of such date; provided that the Tranche B Borrowing Baseon any date may include an asset to be purchased by any Borrower with theproceeds of a Tranche B Loan to be made on that date so long as (i) theAdministrative Agent has been directed by such Borrower to pay the proceeds ofsuch Loan directly to the seller of the asset, (ii) the seller is todeliver the asset to such Borrower before or against payment by such Borrower, (iii) theseller has been directed by such Borrower to deliver the asset to theAdministrative Agent or its nominee or, if the delivery is not possible orpractical, in such other manner as is reasonably acceptable to theAdministrative Agent to satisfy the requirements of clauses (a), (b) and (c) ofthe definition of “Eligible Specified Financial Asset;” and providedfurther,that the requirements of clauses (a), (b), (c) and (d) of thedefinition of “Eligible Specified Financial Asset” are met for the asset notlater than the expiration of three Business Days following the date of therelated Tranche B Loan.

 

“Tranche B Loans” means any Loan made with reference to TrancheB Availability.

 

“Tranche B Specified Financial Asset” means any EligibleSpecified Financial Asset described in one of the following categories:

 

### (a)                                  publicly traded investment gradeDebt Securities rated BBB-/Baa3 or higher;

 

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### (b)                                 Debt Securities placed privatelyunder SEC Rule 144A and rated CCC-/Caa3 or higher or NAIC 5 or higher;

###  

### (c)                                  other Debt Securities(including, in the case of CLO/CBO/CDO Tranches, non-rated securities, whetheror not treated as debt for tax purposes), excluding mortgage-backed securitieshaving the Debt Ratings indicated in the table for Specified Percentages;

###  

### (d)                                 first lien Bank Loans (i.e.,Bank Loans secured by a first priority security interest in and lien onsubstantially all of the material obligors’ assets);

###  

### (e)                                  second lien Bank Loans (i.e.,Bank Loans secured by a second priority security interest in and lien onsubstantially all of the material obligors’ assets);

###  

### (f)                                    Mezzanine Obligations;

###  

### (g)                                 Bridge Loans;

###  

### (h)                                 senior unsecured debt having aDebt Rating indicated in the Tranche B table for Specified Percentages;

###  

### (i)                                     for all Specified FinancialAssets defined in items (a) through (h), (j) and (k) under thisdefinition, investments denominated in U.S. Dollars, Euros, British Pounds orJapanese Yen;

###  

### (j)                                     mortgage-backed debtinterest-only STRIPS; or

###  

### (k)                                  residential or commercialmortgage-backed Debt Securities having a Debt Rating and weighted average lifeindicated in the Tranche B table for Specified Percentages relating tomortgage-backed Debt Securities.

###  

“Tranche B Specified Financial Asset Value Amount” means, foreach Tranche B Specified Financial Asset as of any date, the product of theValue of each such Tranche B Specified Financial Asset as of the most recentdate such Value is required to be determined under Section 6.02 andthe Specified Percentage applicable to such Tranche B Specified FinancialAsset, subject to any Applicable Sublimit and, to the extent applicable, aConcentration Limit.

 

“Trust Preferred Financing Vehicle” has the meaning assigned tosuch term in the definition of Trust Preferred Securities Transaction.

 

“Trust Preferred Securities Transaction” means a transactionpursuant to which (i) a Borrower (or any Subsidiary of a Borrower) issuesunsecured, subordinated, Debt Securities to, or borrows on an unsecured,subordinated basis from, any trust or other entity that, as its primarypurpose, provides financing to a Borrower (or any Subsidiary of a Borrower) (a “TrustPreferred Financing Vehicle”; such indebtedness of a Borrower or any of itsSubsidiaries owing to a Trust Preferred Financing Vehicle, “Trust PreferredIndebtedness”) and (ii) the Trust Preferred Financing Vehicle fundssuch financing of such Borrower (or such Subsidiary of a Borrower) by issuingand selling preferred securities having a mandatory redemption date no earlierthan 30 years and not subject to redemption in less than 5 years from the dateof their issuance (other than at the option of the Borrower or applicableSubsidiary upon the occurrence of a Special Event) (“Trust PreferredSecurities”), which securities may be guaranteed on an unsecured,subordinated basis by such Borrower or such Subsidiary to the extent that thetrustee has failed to make distributions from payments received from suchBorrower or such Subsidiary (each such guaranty, a “Trust Preferred Guaranty”,collectively, “Trust Preferred Guarantees”).

 

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“Type” means, with respect to a Loan, its character as a BaseRate Loan, Daily Floating Eurodollar Loan or a Fixed Period Eurodollar Loan.

 

“Unfunded Delayed Draw Amount” means, as of any date, and forany Delayed Draw Loan that is a Tranche B Specified Financial Asset as of suchdate, an amount equal to the maximum unfunded portion of such Delayed Draw Loanthat could be required to be funded by a Borrower as of or after such date.

 

“Unfunded Pension Liability” means the excess of a Pension Plan’sbenefit liabilities under Section 4001(a)(16) of ERISA, over the currentvalue of that Pension Plan’s assets, determined in accordance with theassumptions used for funding the Pension Plan pursuant to Section 412 ofthe Code for the applicable plan year.

 

“United States” and “U.S.” mean the United States ofAmerica.

 

“Unsecured Indebtedness” means unsecured Indebtedness incurredby any Borrower or any Subsidiary in the course of its business as suchbusiness is described in KKR Financial’s Form 10-K filed with theSecurities and Exchange Commission on March 29, 2006.

 

“Value” means, on any date, in relation to an Eligible SpecifiedFinancial Asset, the fair market value of the Eligible Specified FinancialAsset, determined, where applicable on a settlement basis, in the followingorder of priority:

 

### (a)                                  If the Eligible SpecifiedFinancial Asset is of a type sold on a recognized exchange, the closing priceon the exchange as of such date;

###  

### (b)                                 If the Eligible SpecifiedFinancial Asset is of a type for which sales quotations are provided by IDC,Loan X, Loan Pricing Corporation or any other pricing service approved by theAdministrative Agent, in its sole discretion, which shall be exercised in acommercially reasonable manner, the sales price provided by the pricing serviceas of such date;

###  

### (c)                                  If the Eligible SpecifiedFinancial Asset is of a type for which sales quotations are available from Bankof America, Bear Stearns, Citigroup, Credit Suisse First Boston, Deutsche Bank,Goldman Sachs, JPMorgan, Lehman Brothers, Merrill Lynch, UBS, or any of theirrespective Affiliates or any other dealers approved by the AdministrativeAgent, in its sole discretion, which shall be exercised in a commerciallyreasonable manner, the average of the bid prices as of such date provided by atleast two of such dealers; and

###  

### (d)                                 In all other cases, the Value isthe amount agreed to in writing (as of or for any date(s) set forth therein) bythe Administrative Agent and the Borrowers or, in the absence of agreement, theamount appraised by an unaffiliated and disinterested nationally recognizedthird party appraiser, experienced in valuing financial assets of that type,selected by the Borrowers or the amount determined by the Administrative Agentbased upon its own internal valuation, whichever is lower, in each case as ofsuch date.

###  

## **1.02****                       ****Other Interpretive Provisions**. With reference to thisAgreement and each other Loan Document, unless otherwise specified herein or insuch other Loan Document:

##  

### (a)                                  The definitions of terms hereinshall apply equally to the singular and plural forms of the terms defined. Wheneverthe context may require, any pronoun shall include the corresponding masculine,feminine and neuter forms. The words “include,” “includes” and “including”shall be deemed

 

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### to be followed by the phrase “without limitation.”The word “will” shall be construed to have the same meaning and effectas the word “shall.” Unless the context requires otherwise, (i) anydefinition of or reference to any agreement, instrument or other document(including any Organization Document) shall be construed as referring to suchagreement, instrument or other document as from time to time amended,supplemented or otherwise modified (subject to any restrictions on suchamendments, supplements or modifications set forth herein or in any other LoanDocument), (ii) any reference herein to any Person shall be construed toinclude such Person’s successors and assigns, (iii) the words “herein,”“hereof” and “hereunder,” and words of similar import when usedin any Loan Document, shall be construed to refer to such Loan Document in itsentirety and not to any particular provision thereof, (iv) all referencesin a Loan Document to Articles, Sections, Exhibits and Schedules shall beconstrued to refer to Articles and Sections of, and Exhibits and Schedules to,the Loan Document in which such references appear, (v) any reference toany law shall include all statutory and regulatory provisions consolidating,amending, replacing or interpreting such law and any reference to any law orregulation shall, unless otherwise specified, refer to such law or regulationas amended, modified or supplemented from time to time, and (vi) the words“asset” and “property” shall be construed to have the samemeaning and effect and to refer to any and all tangible and intangible assetsand properties, including cash, securities, accounts and contract rights.

###  

### (b)                                 In the computation of periods oftime from a specified date to a later specified date, the word “from”means “from and including;” the words “to” and “until” eachmean “to but excluding;” and the word “through” means “to andincluding.”

###  

### (c)                                  Section headings herein andin the other Loan Documents are included for convenience of reference only andshall not affect the interpretation of this Agreement or any other LoanDocument.

###  

## **1.03****                       ****Accounting Terms**. (a) Generally. Allaccounting terms not specifically or completely defined herein shall beconstrued in conformity with, and all financial data (including financialratios and other financial calculations) required to be submitted pursuant tothis Agreement shall be prepared in conformity with, GAAP applied on aconsistent basis, as in effect from time to time, applied in a mannerconsistent with that used in preparing the Audited Financial Statements, exceptas otherwise specifically prescribed herein.

##  

### (b)                                 Changes in GAAP. KKR Financial shall provide awritten summary of material changes in GAAP or in the consistent applicationthereof in accordance with Section 6.02(a). If at any time anychange in GAAP would affect the computation of any financial ratio orrequirement set forth in any Loan Document, and either the Borrowers or theRequired Lenders shall so request, the Administrative Agent, the Lenders andthe Borrowers shall negotiate in good faith to amend such ratio or requirementto preserve the original intent thereof in light of such change in GAAP(subject to the approval of the Required Lenders); provided that, untilso amended, (i) such ratio or requirement shall continue to be computed inaccordance with GAAP prior to such change therein and (ii) the Borrowersshall provide to the Administrative Agent and the Lenders financial statementsand other documents required under this Agreement or as reasonably requestedhereunder setting forth a reconciliation between calculations of such ratio orrequirement made before and after giving effect to such change in GAAP.

###  

### (c)                                  Consolidation of VariableInterest Entities.All references herein to consolidated financial statements of KKR Financial andits Subsidiaries or to the determination of any amount for KKR Financial andits Subsidiaries on a consolidated basis or any similar reference shall, ineach case, be deemed to include each variable interest entity that KKRFinancial is required to consolidate pursuant to FASB Interpretation No. 46– Consolidation of Variable Interest Entities: an interpretation of ARB No. 51(January 2003) as if such variable interest entity were a Subsidiary asdefined herein.

 

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## **1.04****                       ****Rounding**. Any financial ratios requiredto be maintained by KKR Financial pursuant to this Agreement shall becalculated by dividing the appropriate component by the other component,carrying the result to one place more than the number of places by which suchratio is expressed herein and rounding the result up or down to the nearestnumber (with a rounding-up if there is no nearest number).

##  

## **1.05****                       ****Times of Day**. Unless otherwise specified,all references herein to times of day shall be references to Easterntime (daylight orstandard, as applicable).

##  

# **ARTICLE II.THE COMMITMENTS AND BORROWINGS**

#  

## **2.01****                       ****Revolving Loans**. Subject to the terms andconditions set forth herein, each Lender severally agrees to make Tranche ALoans and Tranche B Loans to the Borrowers from time to time, on any BusinessDay during the Availability Period, in an aggregate amount not to exceed at anytime outstanding the amount of such Lender’s Commitment; provided that,after giving effect to any Revolving Loan, (i) the Outstanding Amount ofthe Loans in the applicable Tranche does not exceed (A) in the case ofTranche A Loans, Tranche A Availability and (B) in the case of Tranche BLoans, Tranche B Availability, (ii) the Total Outstandings do not exceedthe Aggregate Borrowing Availability, and (iii) the aggregate OutstandingAmount of the Revolving Loans of any Lender, plus such Lender’sApplicable Percentage of the Outstanding Amount of all Swingline Loans do notexceed such Lender’s Commitment. Within the limits of each Lender’s Commitment,and subject to the other terms and conditions hereof, the Borrowers may borrowunder this Section 2.01, prepay under Section 2.04, andreborrow under this Section 2.01. Revolving Loans may be Base RateLoans or Fixed Period Eurodollar Loans, as further provided herein.

##  

## **2.02****                       ****Borrowings, Conversions andContinuations of Revolving Loans**.

##  

### (a)                                  Each Revolving Loan, eachconversion of Revolving Loans from one Type to another, and each continuationof Fixed Period Eurodollar Loans shall be made upon the Borrower’s irrevocablenotice to the Administrative Agent, which may be given by telephone. Each suchnotice must be received by the Administrative Agent not later than 11:00 a.m.(i) three Business Days prior to the requested date of any Borrowing of,conversion to or continuation of Fixed Period Eurodollar Loans or of anyconversion of Fixed Period Eurodollar Loans to Base Rate Loans, and (ii) onthe requested date of any Borrowing of Base Rate Loans. Each telephonic noticeby any Borrower pursuant to this Section 2.02(a) must beconfirmed promptly by delivery to the Administrative Agent of a writtenRevolving Loan Notice, appropriately completed and signed by a ResponsibleOfficer of the Borrower. Each Borrowing of, conversion to or continuation ofFixed Period Eurodollar Loans shall be in a principal amount of $5,000,000 or awhole multiple of $1,000,000 in excess thereof. Except as provided in Section 2.03(c),each Borrowing of or conversion to Base Rate Loans shall be in a principalamount of $500,000 or a whole multiple of $100,000 in excess thereof. EachRevolving Loan Notice (whether telephonic or written) shall specify (i) whethersuch Borrower is requesting a Revolving Loan, a conversion of Revolving Loansfrom one Type to the other, or a continuation of Fixed Period Eurodollar Loans,(ii) the requested date of the Revolving Loan, conversion or continuation,as the case may be (which shall be a Business Day), (iii) the principalamount of Revolving Loans to be borrowed, converted or continued, (iv) theType of Revolving Loans to be borrowed or to which existing Revolving Loans areto be converted, (v) the Tenor of the Revolving Loans to be borrowed and (vi) ifapplicable, the duration of the Interest Period with respect thereto. If theapplicable Borrower fails to specify a Type of Revolving Loan in a RevolvingLoan Notice or if such Borrower fails to give a timely notice requesting aconversion or continuation, then the applicable Revolving Loans shall be madeas, or converted to, Base Rate Loans. Any such automatic conversion to BaseRate Loans shall be effective as of the last day of the Interest

 

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### Period then in effect with respect to theapplicable Fixed Period Eurodollar Loans. If the applicable Borrower requests aRevolving Loan of, conversion to, or continuation of Fixed Period EurodollarLoans in any such Revolving Loan Notice, but fails to specify an InterestPeriod, it will be deemed to have specified an Interest Period of one month.

###  

### (b)                                 Following receipt of a RevolvingLoan Notice, the Administrative Agent shall promptly notify each Lender of theamount of its Applicable Percentage of the applicable Revolving Loans, and ifno timely notice of a conversion or continuation is provided by the Borrower,the Administrative Agent shall promptly notify each Lender of the details ofany automatic conversion to Base Rate Loans described in the precedingsubsection. In the case of a Revolving Loan, each Lender shall make the amountof its Revolving Loan available to the Administrative Agent in immediatelyavailable funds at the Administrative Agent’s Office not later than 1:00 p.m.on the Business Day specified in the applicable Revolving Loan Notice. Uponsatisfaction of the applicable conditions set forth in Section 4.02(and, if such Borrowing is the initial Borrowing, Section 4.01),the Administrative Agent shall make all funds so received available to theBorrowers in like funds as received by the Administrative Agent by wiretransfer of such funds to the account specified by the applicable Borrower.

###  

### (c)                                  Except as otherwise providedherein, a Fixed Period Eurodollar Loan may be continued or converted only onthe last day of an Interest Period for such Loan. During the existence of aDefault, no Loans may be requested as, converted to or continued as FixedPeriod Eurodollar Loans without the consent of the Required Lenders.

###  

### (d)                                 The Administrative Agent shallpromptly notify the Borrowers and the Lenders of the interest rate applicableto any Interest Period for Fixed Period Eurodollar Loans upon determination ofsuch interest rate. At any time that Base Rate Loans are outstanding, theAdministrative Agent shall notify the Borrowers and the Lenders of any changein Bank of America’s prime rate used in determining the Base Rate promptlyfollowing the public announcement of such change.

###  

### (e)                                  After giving effect to allRevolving Loans, all conversions of Revolving Loans from one Type to the other,and all continuations of Revolving Loans as the same Type, there shall not bemore than ten(10) Interest Periods in effect with respect to Revolving Loans.

###  

## **2.03****                       ****Swingline Loans**.

##  

### (a)                                  The Swingline. Subject to the terms andconditions set forth herein, the Swingline Lender agrees, in reliance upon theagreements of the other Lenders set forth in this Section 2.03, tomake Tranche A Loans and Tranche B Loans (each such loan, a “Swingline Loan”)to the Borrowers from time to time on any Business Day during the AvailabilityPeriod in an aggregate amount not to exceed at any time outstanding the amountof the Swingline Sublimit, notwithstanding the fact that such Swingline Loans,when aggregated with the Applicable Percentage of the Outstanding Amount ofRevolving Loans of the Lender acting as Swingline Lender, may exceed the amountof such Lender’s Commitment; provided, however, that after givingeffect to any Swingline Loan, (i) the Outstanding Amount of the Loans inthe applicable Tranche does not exceed (A) in the case of Tranche A Loans,Tranche A Availability and (B) in the case of Tranche B Loans, Tranche BAvailability, (ii) the Total Outstandings do not exceed the AggregateBorrowing Availability, and (iii) the aggregate Outstanding Amount of theRevolving Loans of any Lender, plus such Lender’s Applicable Percentageof the Outstanding Amount of all Swingline Loans shall not exceed such Lender’sCommitment, and provided, further, that the applicable Borrowershall not use the proceeds of any Swingline Loan to refinance any outstandingSwingline Loan. Within the foregoing limits, and subject to the other terms andconditions hereof, the Borrowers may borrow under this Section 2.03,prepay under Section 2.04, and reborrow under this Section 2.03.Each Swingline Loan shall be either a Base Rate Loan or a Daily FloatingEurodollar Loan

 

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### as selected by the applicable Borrower. Immediatelyupon the making of a Swingline Loan, each Lender shall be deemed to, and herebyirrevocably and unconditionally agrees to, purchase from the Swingline Lender arisk participation in such Swingline Loan in an amount equal to the product ofsuch Lender’s Applicable Percentage times the amount of such SwinglineLoan. Notwithstanding the foregoing and subject to subsection (c) below,no Lender hereunder, other than the Swingline Lender, shall be required to makea Daily Floating Eurodollar Loan.

###  

### (b)                                 Borrowing Procedures. Each Swingline Borrowing shallbe made upon the applicable Borrower’s irrevocable notice to the SwinglineLender and the Administrative Agent, which may be given by telephone. Each suchnotice must be received by the Swingline Lender and the Administrative Agentnot later than 3:00 p.m. on the requested borrowing date, and shallspecify (i) the amount to be borrowed, which shall be a minimum of$1,000,000, and (ii) the requested borrowing date, which shall be aBusiness Day. Each such telephonic notice must be confirmed promptly bydelivery to the Swingline Lender and the Administrative Agent of a writtenSwingline Loan Notice, which shall specify (i) the requested date of theSwingline Borrowing, (ii) the principal amount of Swingline Loan, (iii) theTenor of the Swingline Loan to be borrowed and (iv) the duration withrespect thereto. Promptly after receipt by the Swingline Lender of anytelephonic Swingline Loan Notice, the Swingline Lender will confirm with theAdministrative Agent (by telephone or in writing) that the Administrative Agenthas also received such Swingline Loan Notice and, if not, the Swingline Lenderwill notify the Administrative Agent (by telephone or in writing) of thecontents thereof. Unless the Swingline Lender has received notice (by telephoneor in writing) from the Administrative Agent (including at the request of anyLender) prior to 4:00 p.m. on the date of the proposed Swingline Borrowing(A) directing the Swingline Lender not to make such Swingline Loan as aresult of the limitations set forth in the proviso to the first sentence of Section 2.03(a),or (B) that one or more of the applicable conditions specified in Article IVis not then satisfied, then, subject to the terms and conditions hereof, theSwingline Lender will, not later than 4:00 p.m. on the borrowing datespecified in such Swingline Loan Notice, make the amount of its Swingline Loanavailable to the applicable Borrower at its office by wire transfer to theaccount specified by the applicable Borrower.

###  

### (c)                                  Refinancing of Swingline Loans.

###  

#### (i)                                     TheSwingline Lender, at any time in its sole and absolute discretion, may request,on behalf of the Borrowers (which hereby irrevocably authorizes the SwinglineLender to so request on its behalf), that each Lender make a Base Rate Loan orFixed Period Eurodollar Loan, as applicable, in an amount equal to such Lender’sApplicable Percentage of the amount of Swingline Loans then outstanding. Suchrequest shall be made in writing (which written request shall be deemed to be aRevolving Loan Notice for purposes hereof) and in accordance with therequirements of Section 2.02, without regard to the minimum andmultiples specified therein for the principal amount of Base Rate Loans orFixed Period Eurodollar Loans, but subject to the unutilized portion of theAggregate Commitments and the conditions set forth in Section 4.02.The Swingline Lender shall furnish the applicable Borrower with a copy of theapplicable Revolving Loan Notice promptly after delivering such notice to theAdministrative Agent. Each Lender shall make an amount equal to its ApplicablePercentage of the amount specified in such Revolving Loan Notice available tothe Administrative Agent in immediately available funds for the account of theSwingline Lender at the Administrative Agent’s Office not later than 1:00 p.m.on the day specified in such Revolving Loan Notice, whereupon, subject to Section 2.03(c)(ii),each Lender that so makes funds available shall be deemed to have made a BaseRate Loan or Fixed Period Eurodollar Loan, as applicable, to the applicableBorrower in such amount. The Administrative Agent shall remit the funds soreceived to the Swingline Lender.

 

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#### (ii)                                  Iffor any reason any Swingline Loan cannot be refinanced by such a Revolving Loanin accordance with Section 2.03(c)(i), the request for Base RateLoans or Fixed Period Eurodollar Loans, as applicable, submitted by theSwingline Lender as set forth herein shall be deemed to be a request by theSwingline Lender that each of the Lenders fund its risk participation in therelevant Swingline Loan and each Lender’s payment to the Administrative Agentfor the account of the Swingline Lender pursuant to Section 2.03(c)(i) shallbe deemed payment in respect of such participation.

####  

#### (iii)                               Ifany Lender fails to make available to the Administrative Agent for the accountof the Swingline Lender any amount required to be paid by such Lender pursuantto the foregoing provisions of this Section 2.03(c) by thetime specified in Section 2.03(c)(i), the Swingline Lender shall beentitled to recover from such Lender (acting through the Administrative Agent),on demand, such amount with interest thereon for the period from the date suchpayment is required to the date on which such payment is immediately availableto the Swingline Lender at a rate per annum equal to the greater of the FederalFunds Rate and a rate determined by the Swingline Lender in accordance withbanking industry rules on interbank compensation, plus any administrative,processing or similar fees customarily charged by the Swingline Lender inconnection with the foregoing. If such Lender pays such amount (with interestand fees as aforesaid), the amount so paid shall constitute such Lender’sRevolving Loan included in the relevant Borrowing or funded participation inthe relevant Swingline Loan, as the case may be. A certificate of the SwinglineLender submitted to any Lender (through the Administrative Agent) with respectto any amounts owing under this clause (iii) shall be conclusive absentmanifest error.

####  

#### (iv)                              EachLender’s obligation to make Revolving Loans or to purchase and fund riskparticipations in Swingline Loans pursuant to this Section 2.03(c) shallbe absolute and unconditional and shall not be affected by any circumstance,including (A) any setoff, counterclaim, recoupment, defense or other rightwhich such Lender may have against the Swingline Lender, the Borrowers or anyother Person for any reason whatsoever, (B) the occurrence or continuanceof a Default, or (C) any other occurrence, event or condition, whether ornot similar to any of the foregoing; provided, however, that eachLender’s obligation to make Revolving Loans pursuant to this Section 2.03(c) issubject to the conditions set forth in Section 4.02. No suchfunding of risk participations shall relieve or otherwise impair the obligationof the Borrowers to repay Swingline Loans, together with interest as providedherein.

####  

### (d)                                 Repayment of Participations.

###  

#### (i)                                     Atany time after any Lender has purchased and funded a risk participation in aSwingline Loan, if the Swingline Lender receives any payment on account of suchSwingline Loan, the Swingline Lender will distribute to such Lender itsApplicable Percentage thereof in the same funds as those received by theSwingline Lender.

####  

#### (ii)                                  Ifany payment received by the Swingline Lender in respect of principal or intereston any Swingline Loan is required to be returned by the Swingline Lender underany of the circumstances described in Section 10.05 (includingpursuant to any settlement entered into by the Swingline Lender in itsdiscretion), each Lender shall pay to the Swingline Lender its ApplicablePercentage thereof on demand of the Administrative Agent, plus interest thereonfrom the date of such demand to the date such amount is returned, at a rate perannum equal to the Federal Funds Rate. The Administrative Agent will make suchdemand upon the request of the Swingline Lender. The obligations of the Lendersunder this clause shall survive the payment in full of the Obligations and thetermination of this Agreement.

 

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### (e)                                  Interest for Account ofSwingline Lender.The Swingline Lender shall be responsible for invoicing the Borrowers forinterest on the Swingline Loans. Until each Lender funds its Base Rate Loan orFixed Period Eurodollar Loan, as applicable, or risk participation pursuant tothis Section 2.03 to refinance such Lender’s Applicable Percentageof any Swingline Loan, interest in respect of such Applicable Percentage shallbe solely for the account of the Swingline Lender.

###  

## **2.04****                       ****Prepayments.**

##  

### (a)                                  The Borrowers may, upon noticeto the Administrative Agent, at any time or from time to time voluntarilyprepay Revolving Loans in whole or in part without premium or penalty; providedthat (i) such notice must be received by the Administrative Agent notlater than 11:00 a.m. (A) three Business Days prior to any date ofprepayment of Fixed Period Eurodollar Loans and (B) on the date ofprepayment of Base Rate Loans; (ii) any prepayment of Fixed PeriodEurodollar Loans shall be in a principal amount of $5,000,000 or a wholemultiple of $1,000,000 in excess thereof; and (iii) any prepayment of BaseRate Loans shall be in a principal amount of $500,000 or a whole multiple of$100,000 in excess thereof or, in each case, if less, the entire principalamount thereof then outstanding. Each such notice shall specify the date andamount of such prepayment and the Type and Tenor of Revolving Loans to beprepaid and, if Fixed Period Eurodollar Loans are to be prepaid, the InterestPeriod(s) of such Loans. The Administrative Agent will promptly notify eachLender of its receipt of each such notice, and of the amount of such Lender’sApplicable Percentage of such prepayment. If such notice is given by anyBorrower, such Borrower shall make such prepayment and the payment amount specifiedin such notice shall be due and payable on the date specified therein. Anyprepayment of a Fixed Period Eurodollar Loan shall be accompanied by allaccrued interest on the amount prepaid, together with any additional amountsrequired pursuant to Section 3.05. Each such prepayment shall beapplied to the Revolving Loans of the Lenders in accordance with theirrespective Applicable Percentages.

###  

### (b)                                 The Borrowers may, upon noticeto the Swingline Lender (with a copy to the Administrative Agent), at any timeor from time to time, voluntarily prepay Swingline Loans in whole or in partwithout premium or penalty; provided that (i) such notice must bereceived by the Swingline Lender and the Administrative Agent not later than1:00 p.m. on the date of the prepayment, and (ii) any such prepaymentshall be in a minimum principal amount of $1,000,000. Each such notice shallspecify the date and amount of such prepayment. If such notice is given by anyBorrower, such Borrower shall make such prepayment and the payment amountspecified in such notice shall be due and payable on the date specifiedtherein.

###  

### (c)                                  If for any reason, at any time, (i) theTotal Outstandings exceed the Aggregate Borrowing Availability at such time, (ii) theoutstanding Tranche A Loans exceed the Tranche A Borrowing Base, or (iii) theoutstanding Tranche B Loans exceed the Tranche B Borrowing Base, the Borrowersshall immediately prepay Loans in an aggregate amount of such excess, asapplicable.

###  

## **2.05****                       ****Termination or Reduction ofCommitments**. TheBorrowers may, upon notice to the Administrative Agent, terminate theCommitments hereunder, and, from time to time, permanently reduce the AggregateCommitment Amount; provided that (i) any such notice shall bereceived by the Administrative Agent not later than 11:00 a.m. five (5) BusinessDays prior to the date of termination or reduction, (ii) any such partialreduction shall be in an aggregate amount of $5,000,000 or any whole multipleof $1,000,000 in excess thereof, (iii) the Borrowers shall not terminateor reduce the Aggregate Commitments if, after giving effect thereto and to anyconcurrent prepayments hereunder, the Total Outstandings would exceed theAggregate Commitment Amount, (iv) if, after giving effect to any reductionof the Aggregate Commitments, the Swingline Sublimit exceeds the AggregateCommitment Amount, such Sublimit shall be automatically reduced by the amountof such excess and (v) in the case of

 

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## a partial termination or reduction of theCommitments, the Aggregate Commitment Amount shall not be less than $50,000,000.The Administrative Agent will promptly notify the Lenders of any such notice oftermination or reduction of the Aggregate Commitments. Any reduction of the AggregateCommitment Amount shall be applied to the Commitment of each Lender accordingto its Applicable Percentage. All fees accrued until the effective date of anytermination of the Aggregate Commitments shall be paid on the effective date ofsuch termination.

##  

## **2.06****                       ****Repayment of Loans.**

##  

### (a)                                  The Borrowers shall repay to theLenders on the Maturity Date the aggregate principal amount of Revolving Loansoutstanding on such date.

###  

### (b)                                 The Borrowers shall repay eachSwingline Loan on the earliest to occur of (i) the Maturity Date or (ii) thedate requested by the Swingline Lender which shall not be earlier than theBusiness Day in which the Borrowers may request Base Rate Loans pursuant to Section 2.02.

###  

## **2.07****                       ****Interest.**

##  

### (a)                                  Subject to the provisions of subsection (b) below,(i) each Fixed Period Eurodollar Loan shall bear interest on theoutstanding principal amount thereof for each Interest Period at a rate perannum equal to the Fixed Period Eurodollar Rate for such Interest Period plusthe Applicable Rate for the applicable Tranche, (ii) each Base Rate Loanshall bear interest on the outstanding principal amount thereof for eachInterest Period at a rate per annum equal to the Base Rate; and (iii) eachSwingline Loan shall bear interest on the outstanding principal amount thereoffrom the applicable borrowing date to the date of payment thereof at a rate perannum equal to, at the election of the Borrowers, (A) the Base Rate or (B) theDaily Floating Eurodollar Rate plus the Applicable Rate for theapplicable Tranche.

###  

### (b)                                 (i)                                     If any amount of principal ofany Loan is not paid when due (without regard to any applicable grace periods),whether at stated maturity, by acceleration or otherwise, such amount shallthereafter bear interest at a fluctuating interest rate per annum at all timesequal to the Default Rate to the fullest extent permitted by applicable Laws.

###  

#### (ii)                                  Ifany amount (other than principal of any Loan) payable by the Borrowers underany Loan Document is not paid when due (without regard to any applicable graceperiods), whether at stated maturity, by acceleration or otherwise, then uponthe request of the Required Lenders, such amount shall thereafter bear interestat a fluctuating interest rate per annum at all times equal to the Default Rateto the fullest extent permitted by applicable Laws.

####  

#### (iii)                               Upon the request of the Required Lenders,while any Event of Default exists, the Borrowers shall pay interest on theprincipal amount of all outstanding Obligations hereunder at a fluctuatinginterest rate per annum at all times equal to the Default Rate to the fullestextent permitted by applicable Laws.

####  

#### (iv)                              Accruedand unpaid interest on past due amounts (including interest on past dueinterest) shall be due and payable upon demand.

####  

### (c)                                  Interest on each Loan shall bedue and payable in arrears on each Interest Payment Date applicable thereto andat such other times as may be specified herein. Interest hereunder shall be dueand payable in accordance with the terms hereof before and after judgment, andbefore and after the commencement of any proceeding under any Debtor ReliefLaw.

 

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## **2.08****                       ****Fees.**

##  

### (a)                                  Facility Fee. The Borrowers shall pay to theAdministrative Agent for the account of each Lender in accordance with itsApplicable Percentage, a facility fee equal to the Applicable Rate timesthe actual daily Aggregate Commitment Amount (or, if the Aggregate Commitmentshave terminated, on the Outstanding Amount of all Revolving Loans and SwinglineLoans), regardless of usage. The facility fee shall accrue at all times duringthe Availability Period (and thereafter so long as any Revolving Loans orSwingline Loans remain outstanding), including at any time during which one ormore of the conditions in Article IV is not met, and shall be dueand payable quarterly in arrears on the last Business Day of each March, June, September andDecember, commencing with the first such date to occur after the Closing Date,and on the last day of the Availability Period (and, if applicable, thereafteron demand). The facility fee shall be calculated quarterly in arrears, and ifthere is any change in the Applicable Rate during any quarter, the actual dailyamount shall be computed and multiplied by the Applicable Rate separately foreach period during such quarter that such Applicable Rate was in effect.

###  

### (b)                                 Other Fees. (i)  The Borrowers shall pay to theArranger and the Administrative Agent for their own respective accounts fees inthe amounts and at the times specified in the Fee Letter. Such fees shall befully earned when paid and shall not be refundable for any reason whatsoever.

###  

#### (ii)                                  TheBorrowers shall pay to the Lenders such fees as shall have been separatelyagreed upon in writing in the amounts and at the times so specified. Such feesshall be fully earned when paid and shall not be refundable for any reasonwhatsoever.

####  

## **2.09****                       ****Computation of Interest and Fees**. All computations of interestfor Base Rate Loans or Daily Floating Eurodollar Loans shall be made on the basisof a year of 365 or 366 days, as the case may be, and actual days elapsed. Allother computations of fees and interest shall be made on the basis of a 360-dayyear and actual days elapsed (which results in more fees or interest, asapplicable, being paid than if computed on the basis of a 365-day year). Interestshall accrue on each Loan for the day on which the Loan is made, and shall notaccrue on a Loan, or any portion thereof, for the day on which the Loan or suchportion is paid, provided that any Loan that is repaid on the same dayon which it is made shall, subject to Section 2.11(a), bearinterest for one day. Each determination by the Administrative Agent of aninterest rate or fee hereunder shall be conclusive and binding for allpurposes, absent manifest error.

##  

## **2.10****                       ****Evidence of Debt.**

##  

### (a)                                  The Loans made by each Lendershall be evidenced by one or more accounts or records maintained by such Lenderand by the Administrative Agent in the ordinary course of business. Theaccounts or records maintained by the Administrative Agent and each Lendershall be conclusive absent manifest error of the amount of the Loans made bythe Lenders to the Borrowers and the interest and payments thereon. Any failureto so record or any error in doing so shall not, however, limit or otherwiseaffect the obligation of the Borrowers hereunder to pay any amount owing withrespect to the Obligations. In the event of any conflict between the accountsand records maintained by any Lender and the accounts and records of the AdministrativeAgent in respect of such matters, the accounts and records of theAdministrative Agent shall control in the absence of manifest error. Upon therequest of any Lender made through the Administrative Agent, the Borrowersshall execute and deliver to such Lender (through the Administrative Agent) aNote, which shall evidence such Lender’s Loans in addition to such accounts orrecords. Each Lender may attach schedules to its Note and endorse thereon thedate, Type (if applicable), Tenor, amount and maturity of its Loans andpayments with respect thereto.

###  

### (b)                                 In addition to the accounts andrecords referred to in subsection (a), each Lender and the AdministrativeAgent shall maintain in accordance with its usual practice accounts or recordsevidencing

 

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### the purchases and sales by such Lender ofparticipations in Swingline Loans. In the event of any conflict between theaccounts and records maintained by the Administrative Agent and the accountsand records of any Lender in respect of such matters, the accounts and recordsof the Administrative Agent shall control in the absence of manifest error.

###  

## **2.11****                       ****Payments Generally;Administrative Agent’s Clawback.**

##  

### (a)                                  General. All payments to be made by anyBorrower shall be made without condition or deduction for any counterclaim,defense, recoupment or setoff. Except as otherwise expressly provided herein,all payments by any Borrower hereunder shall be made to the AdministrativeAgent, for the account of the respective Lenders to which such payment is owed,at the Administrative Agent’s Office in Dollars and in immediately availablefunds not later than 2:00 p.m. on the date specified herein. TheAdministrative Agent will promptly distribute to each Lender its ApplicablePercentage (or other applicable share as provided herein) of such payment inlike funds as received by wire transfer to such Lender’s Lending Office. Allpayments received by the Administrative Agent after 2:00 p.m. shall bedeemed received on the next succeeding Business Day and any applicable interestor fee shall continue to accrue. If any payment to be made by any Borrowershall come due on a day other than a Business Day, payment shall be made on thenext following Business Day, and such extension of time shall be reflected incomputing interest or fees, as the case may be.

###  

### (b)                                 (i)  Funding by Lenders;Presumption by Administrative Agent. Unless the Administrative Agent shallhave received notice from a Lender prior to the proposed date of any RevolvingLoan of Fixed Period Eurodollar Loans (or, in the case of any Revolving Loan ofBase Rate Loans, prior to 12:00 noon on the date of such Revolving Loan) thatsuch Lender will not make available to the Administrative Agent such Lender’sshare of such Revolving Loan, the Administrative Agent may assume that suchLender has made such share available on such date in accordance with Section 2.02(or, in the case of a Revolving Loan of Base Rate Loans, that such Lender hasmade such share available in accordance with and at the time required by Section 2.02)and may, in reliance upon such assumption, make available to the Borrowers acorresponding amount. In such event, if a Lender has not in fact made its shareof the applicable Revolving Loan available to the Administrative Agent, thenthe applicable Lender and the Borrowers severally agree to pay to theAdministrative Agent forthwith on demand such corresponding amount inimmediately available funds with interest thereon, for each day from and includingthe date such amount is made available to the Borrowers to, but excluding, thedate of payment to the Administrative Agent, at (A) in the case of apayment to be made by such Lender, the greater of the Federal Funds Rate and arate determined by the Administrative Agent in accordance with banking industryrules on interbank compensation, plus any administrative, processing orsimilar fees customarily charged by the Administrative Agent in connection withthe foregoing, and (B) in the case of a payment to be made by theBorrowers, the interest rate applicable to Base Rate Loans. If the Borrowersand such Lender shall pay such interest to the Administrative Agent for thesame or an overlapping period, the Administrative Agent shall promptly remit tothe Borrowers the amount of such interest paid by the Borrowers for such period.If such Lender pays its share of the applicable Revolving Loan to theAdministrative Agent, then the amount so paid shall constitute such Lender’sRevolving Loan included in such Borrowing. Any payment by the Borrowers shallbe without prejudice to any claim the Borrowers may have against a Lender thatshall have failed to make such payment to the Administrative Agent.

###  

#### (ii)                                  Paymentsby Borrowers; Presumptions by Administrative Agent. Unless theAdministrative Agent shall have received notice from the Borrowers prior to thedate on which any payment is due to the Administrative Agent for the account ofthe Lenders hereunder that the Borrowers will not make such payment, the AdministrativeAgent may assume that the Borrowers has made such payment on such date inaccordance herewith and may, in reliance upon such assumption, distribute tothe Lenders, as the case may be, the amount due. In such event, if the

 

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#### Borrowers have not in fact madesuch payment, then each of the Lenders, as the case may be, severally agrees torepay to the Administrative Agent forthwith on demand the amount so distributedto such Lender, in immediately available funds with interest thereon, for eachday from and including the date such amount is distributed to it to butexcluding the date of payment to the Administrative Agent, at the greater ofthe Federal Funds Rate and a rate determined by the Administrative Agent inaccordance with banking industry rules on interbank compensation.

####  

A notice of the Administrative Agent to any Lender or the Borrowerswith respect to any amount owing under this subsection (b) shall beconclusive, absent manifest error.

 

### (c)                                  Failure to Satisfy ConditionsPrecedent. Ifany Lender makes available to the Administrative Agent funds for any Loan to bemade by such Lender as provided in the foregoing provisions of this Article II,and such funds are not made available to the Borrowers by the AdministrativeAgent because the conditions to the applicable Borrowing set forth in Article IVare not satisfied or waived in accordance with the terms hereof, theAdministrative Agent shall return such funds (in like funds as received fromsuch Lender) to such Lender, without interest.

###  

### (d)                                 Obligations of Lenders Several. The obligations of the Lendershereunder to make Revolving Loans, to fund participations in Swingline Loansand to make payments pursuant to Section 10.04(c) are severaland not joint. The failure of any Lender to make any Revolving Loan, to fundany such participation or to make any payment under Section 10.04(c) onany date required hereunder shall not relieve any other Lender of itscorresponding obligation to do so on such date, and no Lender shall beresponsible for the failure of any other Lender to so make its Revolving Loan,to purchase its participation or to make its payment under Section 10.04(c).

###  

### (e)                                  Funding Source. Nothing herein shall be deemedto obligate any Lender to obtain the funds for any Loan in any particular placeor manner or to constitute a representation by any Lender that it has obtainedor will obtain the funds for any Loan in any particular place or manner.

###  

## **2.12****                       ****Sharing of Payments by Lenders**. If any Lender shall, byexercising any right of setoff or counterclaim or otherwise, obtain payment inrespect of any principal of or interest on any of the Revolving Loans made byit, or the participations in Swingline Loans held by it resulting in suchLender’s receiving payment of a proportion of the aggregate amount of suchRevolving Loans or participations and accrued interest thereon greater than itsprorata share thereof as provided herein, then the Lenderreceiving such greater proportion shall (a) notify the AdministrativeAgent of such fact, and (b) purchase (for cash at face value)participations in the Revolving Loans and subparticipations in Swingline Loansof the other Lenders, or make such other adjustments as shall be equitable, sothat the benefit of all such payments shall be shared by the Lenders ratably inaccordance with the aggregate amount of principal of and accrued interest ontheir respective Revolving Loans and other amounts owing them, providedthat:

##  

#### (i)                                     ifany such participations or subparticipations are purchased and all or anyportion of the payment giving rise thereto is recovered, such participations orsubparticipations shall be rescinded and the purchase price restored to theextent of such recovery, without interest; and

####  

#### (ii)                                  theprovisions of this Section shall not be construed to apply to (x) anypayment made by the Borrowers pursuant to and in accordance with the expressterms of this Agreement or (y) any payment obtained by a Lender asconsideration for the assignment of or sale of a participation in any of itsRevolving Loans or subparticipations in Swingline Loans to any

 

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#### assignee or participant, otherthan to the Borrowers or any Subsidiary thereof (as to which the provisions ofthis Section shall apply).

####  

Each Borrower consents to the foregoing and agrees, to the extent itmay effectively do so under applicable law, that any Lender acquiring aparticipation pursuant to the foregoing arrangements may exercise against suchBorrower rights of setoff and counterclaim with respect to such participationas fully as if such Lender were a direct creditor of such Borrower in theamount of such participation.

 

## **2.13****                       ****Increase in Commitments.**

##  

### (a)                                  Request for Increase. Provided there exists noDefault, upon notice to the Administrative Agent (which shall promptly notifythe Lenders), and subject to the prior satisfaction of the Post-ClosingCondition, the Borrowers may from time to time, request an increase in theAggregate Commitment Amount by an amount (for all such requests) not exceeding$175,000,000; provided that (i) any such request for an increaseshall be in a minimum amount of $25,000,000 and integral multiples of$5,000,000 in excess thereof, and (ii) the Borrowers may make a maximum offour (4) such requests in any 12 month period. At the time of sending suchnotice, the Borrowers (in consultation with the Administrative Agent) shallspecify the time period within which each Lender is requested to respond (whichshall in no event be less than ten (10) Business Days from the date ofdelivery of such notice to the Lenders).

###  

### (b)                                 Lender Elections to Increase. Each Lender shall notify theAdministrative Agent within such time period whether or not it agrees toincrease its Commitment and, if so, whether by an amount equal to, greaterthan, or less than its Applicable Percentage of such requested increase. AnyLender not responding within such time period shall be deemed to have declinedto increase its Commitment.

###  

### (c)                                  Notification by AdministrativeAgent; Additional Lenders.The Administrative Agent shall notify the Borrowers and each Lender of theLenders’ responses to each request made hereunder. To achieve the full amountof a requested increase and subject to the approval of the Administrative Agentand the Swingline Lender (which approvals shall not be unreasonably withheld),the Borrowers may also invite additional Eligible Assignees to become Lenderspursuant to a joinder agreement in form and substance satisfactory to the AdministrativeAgent and its counsel.

###  

### (d)                                 Effective Date and Allocations. If the Aggregate Commitmentsare increased in accordance with this Section, the Administrative Agent and theBorrowers shall determine the effective date (the “Increase Effective Date”)and the final allocation of such increase. The Administrative Agent shallpromptly notify the Borrowers and the Lenders of the final allocation of suchincrease and the Increase Effective Date.

###  

### (e)                                  Conditions to Effectiveness ofIncrease. As acondition precedent to such increase, the Borrowers shall deliver to theAdministrative Agent a certificate of each Borrower dated as of the IncreaseEffective Date (in sufficient copies for each Lender) signed by a ResponsibleOfficer of such Borrower (i) certifying and attaching the resolutionsadopted by such Borrower approving or consenting to such increase, and (ii) certifyingthat, before and after giving effect to such increase, (A) therepresentations and warranties contained in Article V and the otherLoan Documents are true and correct on and as of the Increase Effective Date,except to the extent that such representations and warranties specificallyrefer to an earlier date, in which case they are true and correct as of suchearlier date, and except that for purposes of this Section 2.13,the representations and warranties contained in subsections (a) and (b) ofSection 5.05 shall be deemed to refer to the most recent statementsfurnished pursuant to clauses (a) and (b), respectively, of Section 6.01,and (B) no Default exists.

 

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### (f)                                    Loans; Reallocation ofOutstanding Amounts.

###  

#### (i)                                     Exceptas set forth in subsection (ii) of this subsection (f), if anybank, financial institution or other entity becomes a Lender hereunder or anyLender’s Commitment is increased pursuant to this Section, Loans made on orafter the applicable Increase Effective Date shall be made in accordance withthe Applicable Percentages of each Lender in effect on and after such IncreaseEffective Date (except to the extent that any such Loan would result in anyLender making an aggregate principal amount of Loans in excess of itsCommitment, in which case such excess amount will be allocated to and made by,any new Lenders and Lenders with increased Commitments pursuant to subsection (b) above,in each case, in accordance with their Applicable Percentages).

####  

#### (ii)                                  Uponany increase in the Aggregate Commitment Amount pursuant to this Section 2.13that is not pro rata among all Lenders, within 5 Business Days, in the case ofany Base Rate Loans outstanding on the Increase Effective Date, and at the endof the then current Interest Period with respect thereto in the case of anyFixed Period Eurodollar Loans then outstanding, the applicable Borrower shallprepay such Loans in their entirety and, to the extent such Borrower elects todo so and subject to the conditions specified in Article IV, the Borrowershall reborrow such Loans from the Lenders in proportion to their ApplicablePercentages after giving effect to such increase, until such time as alloutstanding Revolving Loans are held by the Lenders in such proportion.

####  

### (g)                                 Conflicting Provisions. This Section shallsupersede any provisions in Section 2.12 or 10.01 to the contrary.

###  

## **2.14****                       ****Concerning Joint and SeveralLiability of the Borrowers.**

##  

### (a)                                  Each of the Borrowers isaccepting joint and several liability hereunder and under the other LoanDocuments in consideration of the financial accommodations to be provided bythe Lenders and the Administrative Agent under this Credit Agreement, for themutual benefit, directly and indirectly, of each of the Borrowers and inconsideration of the undertakings of each other Borrower to accept joint andseveral liability for the Obligations.

###  

### (b)                                 Each of the Borrowers, jointlyand severally, hereby irrevocably and unconditionally accepts, not merely as asurety but also as a co-debtor, joint and several liability with the otherBorrower, with respect to the payment and performance of all of the Obligations(including, without limitation, any Obligations arising under this Section 2.14),it being the intention of the parties hereto that all the Obligations shall bethe joint and several obligations of each of the Borrowers without preferencesor distinction among them.

###  

### (c)                                  If and to the extent that any ofthe Borrowers shall fail to make any payment with respect to any of theObligations as and when due or to perform any of the Obligations in accordancewith the terms thereof; then in each such event the other Borrower will makesuch payment with respect to, or perform, such Obligation.

###  

### (d)                                 The Obligations of each of theBorrowers under the provisions of this Section 2.14 constitute thefull recourse Obligations of each of the Borrowers enforceable against each suchPerson to the full extent of its properties and assets, irrespective of thevalidity, regularity or enforceability of this Credit Agreement or the otherLoan Documents or any other circumstance whatsoever.

 

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### (e)                                  Except as otherwise expresslyprovided herein, each Borrower hereby waives promptness, diligence,presentment, demand, protest, notice of acceptance of its joint and severalliability, notice of any and all advances of the Loans made under this CreditAgreement and any promissory note issued hereunder, notice of occurrence of anyDefault or Event of Default (except to the extent notice is expressly requiredto be given pursuant to the terms of this Credit Agreement or any of the otherLoan Documents), or of any demand for any payment under this Credit Agreement,notice of any action at any time taken or omitted by the Administrative Agentor the Lenders under or in respect of any of the Obligations hereunder, anyrequirement of diligence and, generally, all demands, notices and otherformalities of every kind in connection with this Credit Agreement and theother Loan Documents. Each Borrower hereby waives all defenses which may beavailable by virtue of any valuation, stay, moratorium law or other similar lawnow or hereafter in effect, any right to require the marshaling of assets ofthe Borrowers and any other entity or Person primarily or secondarily liablewith respect to any of the Obligations, and all surety ship defenses generally.Each Borrower hereby assents to, and waives notice of, any extension orpostponement of the time for the payment, or place or manner for payment,compromise, refinancing, consolidation or renewals of any of the Obligationshereunder, the acceptance of any partial payment thereon, any waiver, consentor other action or acquiescence by the Administrative Agent and the Lenders atany time or times in respect of any default by any Borrower in the performanceor satisfaction of any term, covenant, condition or provision of this CreditAgreement and the other Loan Documents, any and all other indulgenceswhatsoever by the Administrative Agent and the Lenders in respect of any of theObligations hereunder, and the taking, addition, substitution or release, inwhole or in part, at any time or times, of any security for any of suchObligations or the addition, substitution or release, in whole or in part, ofany Borrower or any other entity or Person primarily or secondarily liable forany Obligation. Such Borrower further agrees that its Obligations shall not bereleased or discharged, in whole or in part, or otherwise affected by theadequacy of any rights which the Administrative Agent or any Lender may haveagainst any collateral security or other means of obtaining repayment of any ofthe Obligations, the impairment of any collateral security securing theObligations, including, without limitation, the failure to protect or preserveany rights which any Administrative Agent or any Lender may have in suchcollateral security or the substitution, exchange, surrender, release, loss ordestruction of any such collateral security, any other act or omission whichmight in any manner or to any extent vary the risk of such Borrower, orotherwise operate as a release or discharge of such Borrower, all of which maybe done without notice to such Borrower. If for any reason the other Borrowerhas no legal existence or is under no legal obligation to discharge any of theObligations, or if any of the Obligations have become irrecoverable from theother Borrower by reason of such other Borrower’s insolvency, bankruptcy orreorganization or by other operation of law or for any reason, this CreditAgreement and the other Loan Documents to which it is a party shallnevertheless be binding on such Borrower to the same extent as if such Borrowerat all times had been the sole obligor on such Obligations. Without limitingthe generality of the foregoing, each Borrower assents to any other action ordelay in acting or failure to act on the part of the Administrative Agent andthe Lenders, including, without limitation, any failure strictly or diligentlyto assert any right or to pursue any remedy or to comply fully with applicablelaws or regulations thereunder which might, but for the provisions of this Section 2.14,afford grounds for terminating, discharging or relieving such Borrower, inwhole or in part, from any of its obligations under this Section 2.14,it being the intention of each Borrower that, so long as any of the Obligationshereunder remain unsatisfied, the obligations of such Borrower under this Section 2.14shall not be discharged except by performance and then only to the extent ofsuch performance. The Obligations of each Borrower under this Section 2.14shall not be diminished or rendered unenforceable by any winding up,reorganization, arrangement, liquidation, reconstruction or similar proceedingwith respect to any reconstruction or similar proceeding with respect to anyother Borrower, or any of the Lenders. The joint and several liability of theBorrowers hereunder shall continue in full force and effect notwithstanding anyabsorption, merger, amalgamation or any other change whatsoever in the name,ownership, membership, constitution or place of formation of any Borrower or theLenders. Each of the Borrowers acknowledges and confirms that it has itselfestablished its own adequate means of obtaining from the

 

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### other Borrower on a continuing basis allinformation desired by such Borrower concerning the financial condition of theother Borrower and that each such Borrower will look to the other Borrower andnot to the Administrative Agent or any Lender in order for such Borrower tokeep adequately informed of changes in the other Borrower’s respectivefinancial conditions.

###  

### (f)                                    The provisions of this Section 2.14are made for the benefit of the Lenders and the Administrative Agent and theirrespective permitted successors and assigns, and may be enforced by it or themfrom time to time against either or both of the Borrowers as often as occasiontherefor may arise and without requirement on the part of the Lenders, theAdministrative Agent or such successor or assign first to marshal any of its ortheir claims or to exercise any of its or their rights against the otherBorrower or to exhaust any remedies available to it or them against the otherBorrower or to resort to any other source or means of obtaining payment of anyof the Obligations hereunder or to elect any other remedy. The provisions ofthis Section 2.14 shall remain in effect until all of theObligations shall have been paid in full or otherwise fully satisfied. If atany time, any payment, or any part thereof; made in respect of any of theObligations, is rescinded or must otherwise be restored or returned by anyLender or any Administrative Agent upon the insolvency, bankruptcy orreorganization of any of the Borrowers, or otherwise, the provisions of this Section 2.14will forthwith be reinstated in effect, as though such payment had not beenmade.

###  

### (g)                                 Each of the Borrowers herebyagrees that it will not enforce any of its rights of reimbursement,contribution, subrogation or the like against the other Borrower with respectto any liability incurred by it hereunder or under any of the other LoanDocuments, any payments made by it to any of the Lenders or the AdministrativeAgent with respect to any of the Obligations or any collateral securitytherefor until such time as all of the Obligations have been indefeasibly paidin full in cash. Any claim which any Borrower may have against the otherBorrower with respect to any payments to the Lenders or the AdministrativeAgent hereunder or under any other Loan Documents are hereby expressly madesubordinate and junior in right of payment, without limitation as to anyincreases in the Obligations arising hereunder or thereunder, to the priorpayment in full of the Obligations and, in the event of any insolvency,bankruptcy, receivership, liquidation, reorganization or other similarproceeding under the laws of any jurisdiction relating to any Borrower, itsdebts or its assets, whether voluntary or involuntary, all such Obligationsshall be paid in full before any payment or distribution of any character,whether in cash, securities or other property, shall be made to any otherBorrower therefore.

###  

### (h)                                 Each of the Borrowers herebyagrees that the payment of any amounts due with respect to the indebtednessowing by any Borrower to the other Borrower is hereby subordinated to the priorpayment in full in cash of the Obligations. Each Borrower hereby agrees thatafter the occurrence and during the continuance of any Default or Event ofDefault, such Borrower will not demand, sue for or otherwise attempt to collectany indebtedness of the other Borrower owing to such Borrower until theObligations shall have been paid in full in cash. If, notwithstanding theforegoing sentence, such Borrower shall collect, enforce or receive any amountsin respect of such indebtedness, such amounts shall be collected, enforced andreceived by such Borrower as trustee for the Administrative Agent and be paidover to the Administrative Agent for the prorata accounts of theLenders to be applied to repay the Obligations.

###  

## **2.15****                       ****Contribution.**

##  

### (a)                                  To the extent that any Borrowershall make a payment under Section 2.14 of all or any of theObligations (other than Loans made to that Borrower for which it is primarilyliable) (a “Guarantor Payment”) that, taking into account all otherGuarantor Payments then previously or concurrently made by any other Borrower,exceeds the amount that such Borrower would otherwise have paid if eachBorrower had paid the aggregate Obligations satisfied by such Guarantor Paymentin the same portion

 

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### that such Borrower’s “Allocable Amount” (asdefined below) (as determined immediately prior to such Guarantor Payment) boreto the aggregate Allocable Amounts of each of the Borrowers as determinedimmediately prior to the making of such Guarantor Payment, then, followingindefeasible payment in full in cash of the Obligations and termination of theCommitments, such Borrower shall be entitled to receive contribution andindemnification payments from, and be reimbursed by, the other Borrower for thenet amount of such excess, pro rata based upon their respective AllocableAmounts in effect immediately prior to such Guarantor Payment.

###  

### (b)                                 As of any date of determination,the “Allocable Amount” of any Borrower shall be equal to the maximumamount of the claim that could then be recovered from such Borrower under Section 2.15without rendering such claim voidable or avoidable under Section 548 ofChapter 11 of the Bankruptcy Code or under any applicable state UniformFraudulent Transfer Act, Uniform Fraudulent Conveyance Act or similar statuteor common law.

###  

### (c)                                  This Section 2.15 isintended only to define the relative rights of Borrowers and nothing set forthin this Section 2.15 is intended or shall impair the obligations ofthe Borrowers, jointly and severally, to pay any amounts as and when the sameshall become due and payable in accordance with the terms of this CreditAgreement, including Section 2.14. Nothing contained in this Section 2.15shall limit the liability of any Borrower to pay the Loans made directly orindirectly to that Borrower and accrued interest, fees and expenses withrespect thereto for which such Borrower shall be primarily liable.

###  

### (d)                                 The parties hereto acknowledgethat the rights of contribution and indemnification of any Borrower under this Section 2.15shall constitute assets of such Borrower.

###  

### (e)                                  The rights of an indemnifyingBorrower against the other Borrower under this Section shall beexercisable upon the full and indefeasible payment of the Obligations and thetermination of Commitments.

###  

## **2.16****                       ****Collateral Security**. The Obligations shall besecured by a perfected first priority security interest in all of the Borrowers’interest in the Collateral, whether now owned or hereafter acquired, asdescribed in the Security Documents to which any of the Borrowers is a party.

##  

# **ARTICLE III.TAXES, YIELD PROTECTION AND ILLEGALITY**

#  

## **3.01****                       ****Taxes.**

##  

### (a)                                  Payments Free of Taxes. Any and all payments by or onaccount of any obligation of the Borrowers hereunder or under any other LoanDocument shall be made free and clear of and without reduction or withholdingfor any Indemnified Taxes, provided that if the Borrowers shall berequired by applicable law to deduct any Indemnified Taxes from such payments,then (i) the sum payable shall be increased as necessary so that aftermaking all required deductions (including deductions applicable to additionalsums payable under this Section) the Administrative Agent or Lender, as thecase may be, receives an amount equal to the sum it would have received had nosuch deductions been made, (ii) the Borrowers shall make such deductionsor withholdings and (iii) the Borrowers shall timely pay the full amountdeducted to the relevant Governmental Authority in accordance with applicablelaw.

###  

### (b)                                 Payment of Other Taxes by theBorrowers. Withoutlimiting the provisions of subsection (a) above, the Borrowers shalltimely pay any Other Taxes to the relevant Governmental Authority in accordancewith applicable law.

 

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### (c)                                  Indemnification by the Borrowers. The Borrowers shall indemnifythe Administrative Agent and each Lender, within 10 days after written demandtherefor, for the full amount of any Indemnified Taxes or Other Taxes(including Indemnified Taxes or Other Taxes imposed or asserted on orattributable to amounts payable under this Section) paid by the AdministrativeAgent or such, as the case may be, and any penalties, interest and reasonableexpenses arising therefrom or with respect thereto, whether or not suchIndemnified Taxes or Other Taxes were correctly or legally imposed or assertedby the relevant Governmental Authority. A certificate as to the amount of suchpayment or liability delivered to the Borrowers by a Lender (with a copy to theAdministrative Agent), or by the Administrative Agent on its own behalf or onbehalf of a Lender, shall be conclusive absent manifest error.

###  

### (d)                                 Evidence of Payments. As soon as practicable afterany payment of Indemnified Taxes or Other Taxes by the Borrowers to aGovernmental Authority, the Borrowers shall deliver to the Administrative Agentthe original or a certified copy of a receipt issued by such GovernmentalAuthority evidencing such payment, a copy of the return reporting such paymentor other evidence of such payment reasonably satisfactory to the AdministrativeAgent.

###  

### (e)                                  Status of Lenders. Any Foreign Lender that isentitled to an exemption from or reduction of withholding tax under the law ofthe jurisdiction in which any Borrower is resident for tax purposes, or anytreaty to which such jurisdiction is a party, with respect to paymentshereunder or under any other Loan Document shall deliver to the Borrowers (witha copy to the Administrative Agent), at the time or times prescribed by applicablelaw or reasonably requested by the Borrowers or the Administrative Agent, suchproperly completed and executed documentation prescribed by applicable law aswill permit such payments to be made without withholding or at a reduced rateof withholding. In addition, any Lender, if requested by the Borrowers or theAdministrative Agent, shall deliver such other documentation prescribed byapplicable law or reasonably requested by the Borrowers or the AdministrativeAgent as will enable the Borrowers or the Administrative Agent to determinewhether or not such Lender is subject to backup withholding or informationreporting requirements.

###  

Any Foreign Lender shall deliver to the Borrowers and theAdministrative Agent (in such number of copies as shall be requested by therecipient) on or prior to the date on which such Foreign Lender becomes aLender under this Agreement (and from time to time thereafter upon the requestof the Borrowers or the Administrative Agent, but only if such Foreign Lenderis legally entitled to do so), whichever of the following is applicable:

 

#### (i)                                     dulycompleted copies of Internal Revenue Service Form W-8BEN claimingeligibility for benefits of an income tax treaty to which the United States isa party,

####  

#### (ii)                                  dulycompleted copies of Internal Revenue Service Form W-8ECI,

####  

#### (iii)                               inthe case of a Foreign Lender claiming the benefits of the exemption forportfolio interest under section 881(c) of the Code, (x) acertificate to the effect that such Foreign Lender is not (A) a “bank”within the meaning of section 881(c)(3)(A) of the Code, (B) a “10percent shareholder” of any Borrower within the meaning of section 881(c)(3)(B) ofthe Code, or (C) a “controlled foreign corporation” described in section 881(c)(3)(C) ofthe Code and (y) duly completed copies of Internal Revenue Service Form W-8BEN,or

####  

#### (iv)                              anyother form prescribed by applicable law as a basis for claiming exemption fromor a reduction in United States Federal withholding tax duly completed togetherwith such supplementary documentation as may be prescribed by applicable law topermit the Borrowers to determine the withholding or deduction required to bemade.

 

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### (f)                                    Treatment of Certain Refunds. If the Administrative Agent orany Lender determines, in its sole discretion, which shall beexercised in a commercially reasonable manner, that it has received a refund of any Taxes or Other Taxes asto which it has been indemnified by the Borrowers or with respect to which anyBorrower has paid additional amounts pursuant to this Section, it shall pay tosuch Borrower an amount equal to such refund (but only to the extent ofindemnity payments made, or additional amounts paid, by the Borrowers underthis Section with respect to the Taxes or Other Taxes giving rise to suchrefund), net of all out-of-pocket expenses of the Administrative Agent or suchLender, as the case may be, and without interest (other than any interest paidby the relevant Governmental Authority with respect to such refund), providedthat each Borrower, upon the request of the Administrative Agent or suchLender, agrees to repay the amount paid over to such Borrower (plus anypenalties, interest or other charges imposed by the relevant GovernmentalAuthority) to the Administrative Agent or such Lender in the event theAdministrative Agent or such Lender is required to repay such refund to suchGovernmental Authority. This subsection shall not be construed to requirethe Administrative Agent or any Lender to make available its tax returns (orany other information relating to its taxes that it deems confidential) to theBorrowers or any other Person.

###  

## **3.02****                       ****Illegality**. If any Lender determines thatany Law has made it unlawful, or that any Governmental Authority has assertedthat it is unlawful, for any Lender or its applicable Lending Office to make,maintain or fund Fixed Period Eurodollar Loans, or to determine or chargeinterest rates based upon the Fixed Period Eurodollar Rate, or any GovernmentalAuthority has imposed material restrictions on the authority of such Lender topurchase or sell, or to take deposits of, Dollars in the London interbankmarket, then, on notice thereof by such Lender to the Borrowers through theAdministrative Agent, any obligation of such Lender to make or continue FixedPeriod Eurodollar Loans or to convert Base Rate Loans to Fixed PeriodEurodollar Loans shall be suspended until such Lender notifies theAdministrative Agent and the Borrowers that the circumstances giving rise tosuch determination no longer exist. Upon receipt of such notice, the Borrowersshall, upon demand from such Lender (with a copy to the Administrative Agent),prepay or, if applicable, convert all Fixed Period Eurodollar Loans of suchLender to Base Rate Loans, either on the last day of the Interest Periodtherefor, if such Lender may lawfully continue to maintain such Loans to suchday, or immediately, if such Lender may not lawfully continue to maintain suchLoans. Upon any such prepayment or conversion, the Borrowers shall also payaccrued interest on the amount so prepaid or converted.

##  

## **3.03****                       ****Inability to Determine Rates**. If the Administrative Agent orthe Required Lenders determine that for any reason in connection with anyrequest for a Fixed Period Eurodollar Loan or Daily Floating Eurodollar Loan,as applicable, or a conversion to or continuation thereof that (a) Dollardeposits are not being offered to banks in the London interbank eurodollarmarket for the applicable amount and Interest Period of such Fixed PeriodEurodollar Loan or Daily Floating Eurodollar Loan, (b) adequate andreasonable means do not exist for determining the Fixed Period Eurodollar Rateor Daily Floating Eurodollar Loan, as applicable, for any requested InterestPeriod with respect to a proposed Fixed Period Eurodollar Loan or DailyFloating Eurodollar Loan, as applicable, or (c) the Fixed PeriodEurodollar Rate or Daily Floating Eurodollar Loan for any requested InterestPeriod with respect to a proposed Fixed Period Eurodollar Loan or DailyFloating Eurodollar Loan does not adequately and fairly reflect the cost offunding such Loan, the Administrative Agent will promptly so notify theBorrowers and each Lender. Thereafter, the obligation of the Lenders to make ormaintain Fixed Period Eurodollar Loans or Daily Floating Eurodollar Loan shallbe suspended until the Administrative Agent (upon the instruction of theRequired Lenders) revokes such notice. Upon receipt of such notice, theBorrowers may revoke any pending Request for Borrowing of, conversion to orcontinuation of Fixed Period Eurodollar Loans or Daily Floating EurodollarLoan, as applicable, or, failing that, will be deemed to have converted suchrequest into a request for a Base Rate Loan in the amount specified therein.

 

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## **3.04****                       ****Increased Costs; Reserves onFixed Period Eurodollar Loans.**

##  

### (a)                                  Increased Costs Generally. If any Change in Law shall:

###  

#### (i)                                     impose,modify or deem applicable any reserve, special deposit, compulsory loan, insurancecharge or similar requirement against assets of, deposits with or for theaccount of, or credit extended or participated in by, any Lender (except anyreserve requirement reflected contemplated by Section 3.04(e));

####  

#### (ii)                                  imposeon any Lender or the London interbank market any other condition, cost orexpense affecting this Agreement or Fixed Period Eurodollar Loans made by suchLender;

####  

and the result of any of the foregoing shall be to increase the cost tosuch Lender of making or maintaining any Fixed Period Eurodollar Loan (or ofmaintaining its obligation to make any such Loan), or to reduce the amount ofany sum received or receivable by such Lender (whether of principal, interestor any other amount) then, upon request of such Lender, the Borrowers will payto such Lender, as the case may be, such additional amount or amounts as willcompensate such Lender, as the case may be, for such additional costs incurredor reduction suffered.

 

### (b)                                 Capital Requirements. If any Lender determines thatany Change in Law affecting such Lender or any Lending Office of such Lender orsuch Lender’s holding company, if any, regarding capital requirements has orwould have the effect of reducing the rate of return on such Lender’s capitalor on the capital of such Lender’s holding company, if any, as a consequence ofthis Agreement, the Commitments of such Lender or the Loans made by, suchLender, to a level below that which such Lender or such Lender’s holdingcompany could have achieved but for such Change in Law (taking intoconsideration such Lender’s policies and the policies of such Lender’s holdingcompany with respect to capital adequacy), then from time to time the Borrowerswill pay to such Lender, as the case may be, such additional amount or amountsas will compensate such Lender or such Lender’s holding company for any suchreduction suffered.

###  

### (c)                                  Certificates for Reimbursement. A certificate of a Lendersetting forth the amount or amounts necessary to compensate such Lender or itsholding company, as the case may be, as specified in subsection (a) or(b) of this Section and delivered to the Borrowers shall beconclusive absent manifest error. The Borrowers shall pay such Lender, as thecase may be, the amount shown as due on any such certificate within 10 daysafter receipt thereof.

###  

### (d)                                 Delay in Requests. Failure or delay on the partof any Lender to demand compensation pursuant to the foregoing provisions ofthis Section shall not constitute a waiver of such Lender’s right todemand such compensation, provided that the Borrowers shall not berequired to compensate a Lender pursuant to the foregoing provisions of this Section forany increased costs incurred or reductions suffered more than 180 days prior tothe date that such Lender, as the case may be, notifies the Borrowers of theChange in Law giving rise to such increased costs or reductions and of suchLender’s intention to claim compensation therefor (except that, if the Changein Law giving rise to such increased costs or reductions is retroactive, thenthe 180 days period referred to above shall be extended to include the periodof retroactive effect thereof).

###  

### (e)                                  Reserves on Fixed PeriodEurodollar Loans.The Borrowers shall pay to each Lender, as long as such Lender shall berequired to maintain reserves with respect to liabilities or assets consistingof or including Eurocurrency funds or deposits (currently known as “Eurocurrencyliabilities”), additional interest on the unpaid principal amount of each FixedPeriod Eurodollar Loan equal to the actual costs of such reserves allocated tosuch Loan by such Lender (as determined by such Lender in good faith, whichdetermination shall be conclusive), which shall be due and payable on each dateon which interest is payable on such Loan, provided the Borrowers shallhave received at least 10 days’ prior notice (with a

 

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### copy to the Administrative Agent) of suchadditional interest from such Lender. If a Lender fails to give notice 10 daysprior to the relevant Interest Payment Date, such additional interest shall bedue and payable 10 days from receipt of such notice.

###  

## **3.05****                       ****Compensation for Losses**. Upon demand of any Lender(with a copy to the Administrative Agent) from time to time, the Borrowersshall promptly compensate such Lender for and hold such Lender harmless fromany loss, cost or expense incurred by it as a result of:

##  

### (a)                                  any continuation, conversion,payment or prepayment of any Loan other than a Base Rate Loan or a DailyFloating Eurodollar Loan on a day other than the last day of the InterestPeriod for such Loan (whether voluntary, mandatory, automatic, by reason ofacceleration, or otherwise);

###  

### (b)                                 any failure by the Borrowers(for a reason other than the failure of such Lender to make a Loan) to prepay,borrow, continue or convert any Loan other than a Base Rate Loan or a DailyFloating Eurodollar Loan on the date or in the amount notified by theBorrowers; or

###  

### (c)                                  any assignment of a Fixed PeriodEurodollar Loan on a day other than the last day of the Interest Periodtherefor as a result of a request by the Borrowers pursuant to Section 10.13;

###  

including any loss of anticipated profits and any loss or expensearising from the liquidation or reemployment of funds obtained by it tomaintain such Loan or from fees payable to terminate the deposits from whichsuch funds were obtained. The Borrowers shall also pay any customaryadministrative fees charged by such Lender in connection with the foregoing. Notwithstandingthe foregoing, if, during the 120 day period following the Closing Date, theAdministrative Agent incurs any breakage costs on account of the syndication ofthe credit facility established hereunder, the Borrowers shall immediatelyreimburse the Administrative Agent for any such breakage costs.

 

For purposes of calculating amounts payable by the Borrowers to theLenders under this Section 3.05, each Lender shall be deemed tohave funded each Fixed Period Eurodollar Loan made by it at the Fixed PeriodEurodollar Rate used in determining the Fixed Period Eurodollar Rate for suchLoan by a matching deposit or other borrowing in the London interbankeurodollar market for a comparable amount and for a comparable period, whetheror not such Fixed Period Eurodollar Loan was in fact so funded.

 

## **3.06****                       ****Mitigation Obligations**. If any Lender requestscompensation under Section 3.04, or any Borrower is required to payany additional amount to any Lender or any Governmental Authority for theaccount of any Lender pursuant to Section 3.01, or if any Lendergives a notice pursuant to Section 3.02, then such Lender shall usereasonable efforts to designate a different Lending Office for funding orbooking its Loans hereunder or to assign its rights and obligations hereunderto another of its offices, branches or affiliates, if, in the judgment of suchLender, such designation or assignment (i) would eliminate or reduceamounts payable pursuant to Section 3.01 or 3.04, as thecase may be, in the future, or eliminate the need for the notice pursuant to Section 3.02,as applicable, and (ii) in each case, would not subject such Lender to anyunreimbursed cost or expense and would not otherwise be disadvantageous to suchLender. Each Borrower hereby agrees to pay all reasonable costs and expensesincurred by any Lender in connection with any such designation or assignment.

##  

## **3.07****                       ****Survival**. All of the Borrowers’obligations under this Article III shall survive termination of theAggregate Commitments and repayment of all other Obligations hereunder.

 

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# **ARTICLE IV.CONDITIONS PRECEDENT TO BORROWINGS**

#  

## **4.01****                       ****Conditions of Initial Borrowing**. The obligation of each Lenderto make its initial Borrowing hereunder is subject to satisfaction of the followingconditions precedent:

##  

### (a)                                  The Administrative Agent’sreceipt of the following, each of which shall be originals or telecopies(followed promptly by originals) unless otherwise specified, each properlyexecuted by a Responsible Officer of the signing Borrower, each dated theClosing Date (or, in the case of certificates of governmental officials, arecent date before the Closing Date) and each in form and substancesatisfactory to the Administrative Agent and each of the Lenders:

###  

#### (i)                                     executedcounterparts of this Agreement, sufficient in number for distribution to theAdministrative Agent, each Lender and the Borrowers;

####  

#### (ii)                                  executedcounterparts of the Collateral Agreement and Security Agreement, sufficient innumber for distribution to the Administrative Agent and the Custodian;

####  

#### (iii)                               aNote executed by the Borrowers in favor of each Lender requesting a Note;

####  

#### (iv)                              suchcertificates of resolutions or other action, incumbency certificates and/orother certificates of Responsible Officers of each Borrower as the AdministrativeAgent may require evidencing the identity, authority and capacity of eachResponsible Officer thereof authorized to act as a Responsible Officer inconnection with this Agreement and the other Loan Documents to which suchBorrower is a party;

####  

#### (v)                                 suchdocuments and certifications as the Administrative Agent may reasonably requireto evidence that each Borrower is duly organized or formed, and that each ofthe Borrowers is validly existing, in good standing and qualified to engage inbusiness in each jurisdiction where such Borrowers’ ownership, lease oroperation of properties or the conduct of its business requires suchqualification, except to the extent that failure to do so could not reasonablybe expected to have a Material Adverse Effect;

####  

#### (vi)                              afavorable written opinion (addressed to the Administrative Agent and theLenders and dated the Closing Date) of each of (i) the in-house generalcounsel for the Borrowers, substantially in the form of Exhibit G-1hereto (ii) Sidley Austin LLP, counsel for the Borrowers, substantially inthe form of Exhibit G-2 hereto, and (iii) Hunton &Williams LLP, counsel for KKR Financial, substantially in the form of Exhibit G-3hereto, and in each case, covering such other matters relating to theBorrowers, this Agreement, the other Loan Documents or the transactioncontemplated hereby or thereby as the Administrative Agent shall reasonablyrequest. The Borrowers hereby request such counsel to deliver such opinions.;

####  

#### (vii)                           acertificate signed by a Responsible Officer of each Borrower, in a formsatisfactory to the Administrative Agent, either (A) attaching copies ofall consents, licenses and approvals required in connection with the execution,delivery and performance by such Borrower and the validity against such Borrowerof the Loan Documents to which it is a party, and such consents, licenses andapprovals shall be in full force and effect, or (B) stating that no suchconsents, licenses or approvals are so required;

####  

#### (viii)                        acertificate signed by a Responsible Officer of each Borrower, in a formsatisfactory to the Administrative Agent, certifying (A) that theconditions specified in

 

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#### Sections 4.02(a) and4.02(b) have been satisfied and (B) that there has been noevent or circumstance since the date of the Audited Financial Statements thathas had or could be reasonably expected to have, either individually or in theaggregate, a Material Adverse Effect;

####  

#### (ix)                                acertificate signed by a Responsible Officer of each Borrower, in a formsatisfactory to the Administrative Agent, stating that (i) no action,suit, investigation or proceeding is pending or threatened in any court orbefore any arbitrator or governmental instrumentality that purports to affectany Borrower or any Subsidiary thereof or any transaction contemplated by theLoan Documents, if such action, suit, investigation or proceeding could have aMaterial Adverse Effect, (ii) immediately prior to and following thetransactions contemplated herein, each of the Borrowers shall be Solvent, and (iii) immediatelyafter the execution of this Credit Agreement and the other Loan Documents, (A) noDefault or Event of Default exists and (B) all representations andwarranties contained herein and in the other Loan Documents are true andcorrect;

####  

#### (x)                                   aduly completed Compliance Certificate as of the last day of the fiscal quarterof KKR Financial ended on March 31, 2006, signed by a Responsible Officer;

####  

#### (xi)                                evidence,in form and substance reasonably satisfactory to the Administrative Agent, thatthe Security Documents are effective to create in favor of the AdministrativeAgent a legal, valid and enforceable first Lien and security interest in or oneach item of Collateral in existence and owned or controlled by the Borrowersas of the Closing Date, including without limitation, the Existing Collateral.All filings, recordings, deliveries of instruments and other actions necessaryor desirable in the opinion of the Administrative Agent to protect and preservesuch security interests shall have been duly effected;

####  

#### (xii)                             evidencethat the Existing Credit Agreement has been or concurrently with the ClosingDate is being terminated, that all obligations of the Borrowers thereunder havebeen fulfilled or waived in full and all Liens securing obligations under theExisting Credit Agreement have been or concurrently with the Closing Date arebeing released. The Administrative Agent and the administrative agent under theExisting Facility shall have executed and delivered a payoff letter and otherancillary agreements, instruments and other documents in support thereof as maybe mutually acceptable in form and substance to such agents (collectively the “PayoffDocuments”); and such performance under the Payoff Documents as may berequired by the terms thereof to be rendered prior to or on the Closing Dateshall have been tendered by the appropriate party;

####  

#### (xiii)                          acompleted and fully executed Perfection Certificate from the Borrowers and theresults of Uniform Commercial Code searches (and the equivalent thereof in allapplicable foreign jurisdictions) with respect to the Collateral, indicating noLiens other than Liens permitted by Section 7.01(a) andotherwise in form and substance reasonably satisfactory to the Administrative Agent;

####  

#### (xiv)                         satisfactoryfinancial statements of the type described in Section 6.01(a) forthe 2005 fiscal year ended of KKR Financial and financial statements of thetype described in Section 6.01(b) for the fiscal quarter ofKKR Financial ended March 31, 2006;

####  

#### (xv)                            evidence,in form and substance reasonably satisfactory to the Administrative Agent, thatall governmental and third party approvals necessary in connection with thefinancing contemplated by this Agreement and the continuing operations of eachof Borrowers and each of their Subsidiaries shall have been obtained and be infull force and effect;

 

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#### (xvi)                         theAdministrative Agent shall notify the Borrowers and the Lenders of theEffective Date, and such notice shall be conclusive and binding; and

####  

#### (xvii)                      such otherassurances, certificates, documents, consents or opinions as the AdministrativeAgent, the Swingline Lender or the Required Lenders reasonably may require.

####  

### (b)                                 Any fees required to be paid onor before the Closing Date under the Fee Letter or any other Loan Documentshall have been paid, and the Fee Letter Supplement shall have been executedand delivered by all parties thereto.

###  

### (c)                                  Unless waived by theAdministrative Agent, the Borrowers shall have paid all fees, charges anddisbursements of counsel to the Administrative Agent (directly to such counselif requested by the Administrative Agent) to the extent invoiced prior to or onthe Closing Date, plus such additional amounts of such fees, charges anddisbursements as shall constitute its reasonable estimate of such fees, chargesand disbursements incurred or to be incurred by it through the closingproceedings (provided that such estimate shall not thereafter preclude a finalsettling of accounts between the Borrowers and the Administrative Agent).

###  

Without limiting the generality of the provisions of Section 9.04,for purposes of determining compliance with the conditions specified in this Section 4.01,each Lender that has signed this Agreement shall be deemed to have consentedto, approved or accepted or to be satisfied with, each document or other matterrequired thereunder to be consented to or approved by or acceptable orsatisfactory to a Lender unless the Administrative Agent shall have receivednotice from such Lender prior to the proposed Closing Date specifying itsobjection thereto.

 

## **4.02****                       ****Conditions to all Borrowings**. The obligation of each Lenderto honor any Request for Borrowing (other than a Revolving Loan Notice requesting only aconversion of Revolving Loans to the other Type, or a continuation of FixedPeriod Eurodollar Loans) is subject to the following conditions precedent:

##  

### (a)                                  The representations andwarranties of the Borrowers contained in Article V and any other LoanDocument, and which are contained in any document furnished at any time underor in connection herewith or therewith, shall, after taking into account anymateriality or other qualification contained therein, be true and correct onand as of the date of such Borrowing, except to the extent that suchrepresentations and warranties specifically refer to an earlier date, in whichcase they shall be true and correct as of such earlier date, and except thatfor purposes of this Section 4.02, the representations andwarranties contained in subsections (a) and (b) of Section 5.05shall be deemed to refer to the most recent statements furnished pursuant toclauses (a) and (b), respectively, of Section 6.01.

###  

### (b)                                 No Default shall exist, or wouldresult from such proposed Borrowing or from the application of the proceedsthereof.

###  

### (c)                                  The Administrative Agent shallhave received a current Borrowing Base Report dated within three (3) BusinessDays of the drawdown date of such Loan or such more recent Borrowing BaseReport as the Administrative Agent or any Lender shall reasonably request.

###  

### (d)                                 In the event that an asset to bepurchased with the proceeds of a Borrowing made on the date of the Borrowing isto be included in the Borrowing Base as of the date of the Borrowing, theAdministrative Agent shall have received evidence reasonably satisfactory to itthat the conditions referred to in clauses (i), (ii) and (iii) of theproviso to the definitions of Tranche A Borrowing Base or Tranche BorrowingBase, as applicable, have been satisfied.

 

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### (e)                                  The Administrative Agent and, ifapplicable, the Swingline Lender shall have received a Request for Borrowing inaccordance with the requirements hereof.

###  

Each Request for Borrowing (other than a Revolving Loan Noticerequesting only a conversion of Revolving Loans to the other Type or acontinuation of Fixed Period Eurodollar Loans) submitted by the Borrowers shallbe deemed to be a representation and warranty that the conditions specified in Sections 4.02(a) and4.02(b) have been satisfied on and as of the date of the applicableBorrowing.

 

# **ARTICLE V.REPRESENTATIONS AND WARRANTIES**

#  

The Borrowers represents and warrants to the Administrative Agent andthe Lenders that:

 

## **5.01****                       ****Existence, Qualification andPower**. EachBorrower (a) is duly organized or formed, validly existing and, asapplicable, in good standing under the Laws of the jurisdiction of itsincorporation or organization, (b) has all requisite power and authorityand all requisite governmental licenses, authorizations, consents and approvalsto (i) own or lease its assets and carry on its business and (ii) execute,deliver and perform its obligations under the Loan Documents to which it is aparty, and (c) is duly qualified and is licensed and, as applicable, ingood standing under the Laws of each jurisdiction where its ownership, lease oroperation of properties or the conduct of its business requires suchqualification or license; except in each case referred to in clause (b)(i) or(c), to the extent that failure to do so could not reasonably be expected tohave a Material Adverse Effect.

##  

## **5.02****                       ****Authorization; No Contravention**. The execution, delivery andperformance by each Borrower of each Loan Document to which such Person isparty, have been duly authorized by all necessary corporate or otherorganizational action, and do not and will not (a) contravene the terms ofany of such Person’s Organization Documents; (b) conflict with or resultin any breach or contravention of, or require any payment to be made under (i) anyContractual Obligation to which such Person is a party or affecting such Personor the properties of such Person or any of its Subsidiaries or (ii) anyorder, injunction, writ or decree of any Governmental Authority or any arbitralaward to which such Person or its property is subject; (c) violate anyLaw; except, in each case referred to in clause (b) or (c) to theextent such conflict, breach, contravention, payment or violation would notreasonably be expected to have a Material Adverse Effect or (d) result inthe creation or imposition of any Lien on any asset of any of the Borrowers orany of their Subsidiaries other than the Liens created pursuant to the LoanDocuments.

##  

## **5.03****                       ****Governmental Authorization; OtherConsents**. Noapproval, consent, exemption, authorization, or other action by, or notice to,or filing with, any Governmental Authority or any other Person is necessary orrequired in connection with the execution, delivery or performance by, orenforcement against, any Borrower of this Agreement or any other Loan Documentexcept (i) for the filing of UCC financing statements and (ii) suchapprovals, consents, exemptions, authorizations or other actions, notices orfilings as have been obtained or made and are in full force and effect or wherethe failure to obtain or make such approvals, consents, exemptions,authorizations or other actions, notices or filings would not have a MaterialAdverse Effect.

##  

## **5.04****                       ****Binding Effect**. This Agreement has been, andeach other Loan Document, when delivered hereunder, will have been, dulyexecuted and delivered by each Borrower that is a party thereto. This Agreementconstitutes, and each other Loan Document when so delivered will constitute, alegal, valid and binding obligation of such Borrower, enforceable against eachBorrower that is party thereto in accordance with its terms, subject toapplicable bankruptcy, insolvency, reorganization, moratorium or

 

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## other laws affecting creditors’ rightsgenerally and subject to general principles of equity, regardless of whetherconsidered in a proceeding in equity or at law.

##  

## **5.05****                       ****Financial Statements; No MaterialAdverse Effect.**

##  

### (a)                                  The Audited Financial Statements(i) were prepared in accordance with GAAP consistently applied throughoutthe period covered thereby, except as otherwise expressly noted therein; and (ii) fairlypresent the financial condition of KKR Financial and its consolidatedSubsidiaries as of the date thereof and their results of operations for theperiod covered thereby in accordance with GAAP consistently applied throughoutthe period covered thereby, except as otherwise expressly noted therein.

###  

### (b)                                 The unaudited consolidatedbalance sheet of KKR Financial and its consolidated Subsidiaries dated March 31,2006, and the related consolidated statements of income or operations,shareholders’ equity and cash flows for the fiscal quarter ended on that date (i) wereprepared in accordance with GAAP consistently applied throughout the periodcovered thereby, except as otherwise expressly noted therein, and (ii) fairlypresent the financial condition of KKR Financial and its Subsidiaries as of thedate thereof and their results of operations for the period covered thereby,subject, in the case of clauses (i) and (ii), to the absence of footnotesand to normal year-end audit adjustments.

###  

### (c)                                  Since the date of the AuditedFinancial Statements, there has been no event or circumstance, eitherindividually or in the aggregate, that has had or could reasonably be expectedto have a Material Adverse Effect.

###  

## **5.06****                       ****Litigation**. There are no actions, suits,proceedings, formal investigations, claims or disputes pending or, to theknowledge of the Borrowers after due and diligent investigation, threatened orcontemplated, at law, in equity, in arbitration or before any GovernmentalAuthority, by or against any Borrower or any of its Subsidiaries or against anyof their properties or revenues that (a) purport to affect or pertain tothis Agreement or any other Loan Document, or any of the transactionscontemplated hereby, or (b) either individually or in the aggregate, couldreasonably be expected to have a Material Adverse Effect.

##  

## **5.07****                       ****No Default**. Neither any Borrower nor anySubsidiary thereof is in default under or with respect to any ContractualObligation that could, either individually or in the aggregate, reasonably beexpected to have a Material Adverse Effect. No Default has occurred and iscontinuing or would result from the consummation of the transactionscontemplated by this Agreement or any other Loan Document.

##  

## **5.08****                       ****Environmental Compliance**. Except with respect to anymatters that, individually or in the aggregate, could not reasonably beexpected to result in a Material Adverse Effect, none of the Borrowers nor anyof their Subsidiaries (i) has failed to comply with any Environmental Lawor to obtain, maintain or comply with any permit, license or other approvalrequired under any Environmental Law, (ii) has become subject to anyEnvironmental Liability, (iii) has received notice of any claim withrespect to any Environmental Liability or (iv) knows of any basis thatcould reasonably be expected to result in any Environmental Liability.

##  

## **5.09****                       ****Insurance**. The properties of theBorrowers and their Subsidiaries are insured with financially sound andreputable insurance companies not Affiliates of the Borrowers, in such amounts,with such deductibles and covering such risks as are customarily carried bycompanies engaged in similar businesses and owning similar properties inlocalities where the Borrowers or the applicable Subsidiary operates.

 

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## **5.10****                       ****Taxes**. Each Borrower and itsSubsidiaries have filed all Federal, state and other material tax returns andreports required to be filed, and have paid all Federal, state and othermaterial taxes, assessments, fees and other governmental charges levied orimposed upon them or their properties, income or assets otherwise due andpayable, except (i) those which are being contested in good faith byappropriate proceedings diligently conducted and for which adequate reserveshave been provided in accordance with GAAP and (ii) to the extent that thefailure to do so could not reasonably be expected to have a Material AdverseEffect.

##  

## **5.11****                       ****ERISA Compliance.**

##  

### (a)                                  No ERISA Event has occurred oris reasonably expected to occur that, when taken together with all other suchERISA Events for which liability is reasonably expected to occur, couldreasonably be expected to result in a Material Adverse Effect. The presentvalue of all accumulated benefit obligations under each Plan (based on theassumptions used for purposes of Statement of Financial Accounting Standards No. 87)did not, as of the date of the most recent financial statements reflecting suchamounts, exceed by more than $25,000,000 the fair market value of the assets ofsuch Plan, and the present value of all accumulated benefit obligations of allunderfunded Plans (based on the assumptions used for purposes of Statement ofFinancial Accounting Standards No. 87) did not, as of the date of the mostrecent financial statements reflecting such amounts, exceed by more than$25,000,000 the fair market value of the assets of all such underfunded Plans.

###  

## **5.12****                       ****Properties**. (i) Each of the Borrowersand each of their Subsidiaries has good title to, or valid leasehold, easementor other property interests in, all its real and personal property necessary toits business, except for minor defects in title that do not interfere with itsability to conduct its business as currently conducted or to utilize suchproperties for their intended purposes and except where the failure to havesuch title would not have a Material Adverse Effect.

##  

#### (ii)                                  Eachof the Borrowers and each of their Subsidiaries owns, or is licensed to use,all trademarks, tradenames, copyrights, patents and other intellectual propertynecessary to its business, and the use thereof by such Person does not infringeupon the rights of any other Person, except for any such infringements that,individually or in the aggregate, could not reasonably be expected to result ina Material Adverse Effect.

####  

## **5.13****                       ****Investment Company Act; PublicUtility Holding Company Act.**Noneof the Borrower, any Person Controlling the Borrower, or any Subsidiary (i) isa “holding company,” or a “subsidiary company” of a “holding company,” or an “affiliate”of a “holding company” or of a “subsidiary company” of a “holding company,”within the meaning of the Public Utility Holding Company Act of 1935, or (ii) isor is required to be registered as an “investment company” under the InvestmentCompany Act of 1940.

##  

## **5.14****                       ****Disclosure**. The Borrowers have disclosedto the Administrative Agent and the Lenders all agreements, instruments andcorporate or other restrictions to which it or any of its Subsidiaries issubject, and all other matters known to it, that, individually or in theaggregate, could reasonably be expected to result in a Material Adverse Effect.No report, financial statement, certificate or other written informationfurnished by or on behalf of any Borrower to the Administrative Agent or anyLender in connection with the transactions contemplated hereby and thenegotiation of this Agreement or delivered hereunder or under any other LoanDocument (in each case, as modified or supplemented by other information sofurnished) contains any material misstatement of fact or omits to state anymaterial fact necessary to make the statements therein, in the light of thecircumstances under which they were made, not misleading as of the datefurnished; provided that, with respect to projected financialinformation, the

 

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## Borrowers represent only that suchinformation was prepared in good faith based upon assumptions believed to bereasonable at the time.

##  

## **5.15****                       ****Compliance with Laws**. Each Borrower and eachSubsidiary thereof is in compliance in all material respects with therequirements of all Laws and all orders, writs, injunctions and decreesapplicable to it or to its properties, except in such instances in which (a) suchrequirement of Law or order, writ, injunction or decree is being contested ingood faith by appropriate proceedings diligently conducted or (b) thefailure to comply therewith, either individually or in the aggregate, could notreasonably be expected to have a Material Adverse Effect.

##  

## **5.16****                       ****Taxpayer Identification Number**. The Borrowers’ true andcorrect U.S. taxpayer identification numbers are set forth on Schedule 10.02.

##  

## **5.17****                       ****Solvency**. Each of the Borrowers is and,after consummation of the transactions contemplated by the Loan Documents, willbe Solvent.

##  

## **5.18****                       ****No BurdensomeRestrictions**. Noneof the Borrowers is a party to any agreement or instrument or subject to anyother obligation or any charter or corporate restriction or any provision ofany applicable law, rule or regulation which, individually or in theaggregate, would have or would be reasonably expected to have a MaterialAdverse Effect.

##  

## **5.19****                       ****Borrowing BaseReport**. Themost recent Borrowing Base Report delivered by the Borrowers accuratelyreflects the Borrowing Base and the Value of all Eligible Specified FinancialAssets included therein on and as of the date of such Borrowing Base Report(or, in the case of Values, as of the most recent date that such Values arerequired to be determined under Section 6.02) and all RelatedBorrowing Base Information set forth therein and the Value of all EligibleSpecified Financial Assets is true and correct in all material respects on andas of the date of such Borrowing Base Report (or, in the case of Values, as ofthe most recent date that such Values are required to be determined under Section 6.02).

##  

# **ARTICLE VI.AFFIRMATIVE COVENANTS**

#  

So long as any Lender shall have any Commitment hereunder, any Loan orother Obligation hereunder shall remain unpaid or unsatisfied, the Borrowersshall, and shall (except in the case of the covenants set forth in Sections 6.01,6.02, and 6.03) cause each Subsidiary to:

 

## **6.01****                       ****Financial Statements**. Deliver to the AdministrativeAgent and each Lender:

##  

### (a)                                  as soon as available, but in anyevent within 90 days after the end of each fiscal year of KKR Financial, aconsolidated balance sheet of the KKR Financial and its Subsidiaries as at theend of such fiscal year, and the related consolidated statements of income oroperations, shareholders’ equity and cash flows for such fiscal year, settingforth, in each case, in comparative form the figures for the previous fiscalyear, all in reasonable detail and prepared in accordance with GAAP, auditedand accompanied by a report and opinion of Deloitte & Touche LLP oranother Registered Public Accounting Firm of nationally recognized standing,which report and opinion shall be prepared in accordance with generallyaccepted auditing standards and applicable Securities Laws and shall not besubject to any “going concern” or like qualification or exception or anyqualification or exception as to the scope of such audit or with respect to theabsence of any material misstatement; and

 

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### (b)                                 as soon as available, but in anyevent within 45 days after the end of each of the first three fiscal quartersof each fiscal year of KKR Financial, a consolidated balance sheet of KKRFinancial and its Subsidiaries as at the end of such fiscal quarter, and therelated consolidated statements of income or operations, shareholders’ equityand cash flows for such fiscal quarter and for the portion of the KKR Financial’sfiscal year then ended, setting forth in each case in comparative form thefigures for the corresponding fiscal quarter of the previous fiscal year andthe corresponding portion of the previous fiscal year, all in reasonabledetail, certified by the chief executive officer, chief financial officer,treasurer or controller of KKR Financial as fairly presenting the financialcondition, results of operations, shareholders’ equity and cash flows of KKRFinancial and its Subsidiaries in accordance with GAAP, subject only to normalyear-end audit adjustments and the absence of footnotes.

###  

As to any information contained in materials furnished pursuant to Section 6.02(d), the Borrowers shall not beseparately required to furnish such information under clause (a) or (b) above,but the foregoing shall not be in derogation of the obligation of the Borrowersto furnish the information and materials described in clauses (a) and (b) aboveat the times specified therein.

 

## **6.02****                       ****Certificates; Other Information**. Deliver to the AdministrativeAgent and each Lender, in form and detail reasonably satisfactory to theAdministrative Agent:

##  

### (a)                                  concurrently with the deliveryof the financial statements referred to in Section 6.01(a), (i) acertificate of the Registered Public Accounting Firm certifying such financialstatements and stating that in making the examination necessary therefor noknowledge was obtained of any Default or, if any such Default shall exist, stating the natureand status of such event (which certificate may be limited to the extentrequired by accounting rules, guidelines or practices), (ii) setting forthreasonably detailed calculations demonstrating compliance with the financialcovenants contained in Section 7.09 and (iii) stating whetherany change in GAAP or in the application thereof which is material in any respectto KKR Financial’s financial statements has occurred since the date of theAudited Financial Statements and, if any such change has occurred, specifyingthe effect of such change on the financial statements accompanying suchcertificate;

###  

### (b)                                 concurrently with the deliveryof the financial statements referred to in Sections 6.01(a) and6.01(b)**,** aduly completed Compliance Certificate signed by the chief executive officer,chief financial officer, treasurer or controller of the Borrowers;

###  

### (c)                                  promptly after the same areavailable, copies of each annual report, proxy or financial statement or otherreport or communication sent to the stockholders of the KKR Financial, andcopies of all annual, regular, periodic and special reports and registration statementswhich KKR Financial may file or be required to file with the SEC under Section 13or 15(d) of the Securities Exchange Act of 1934, and not otherwiserequired to be delivered to the Administrative Agent pursuant hereto;

###  

### (d)                                 on a weekly basis, an update asto the Value of all publicly quoted Eligible Specified Financial Assetscontained in the Borrowing Base (such update to include any events of which anyof the Borrowers is aware, based upon facts and circumstances known to it, thataffect the Value of any such Eligible Specified Financial Assets in anymaterial respect);

###  

### (e)                                  on a monthly basis or asotherwise approved by the Administrative Agent, an update as to the Value ofall Eligible Specified Financial Assets contained in the Borrowing Base, theValue for which could only be determined based on valuations provided by athird party appraiser reasonably satisfactory to the Administrative Agent (suchupdate to include any events of which any of the Borrowers is aware, based uponfacts and circumstances known to it, that affect the Value of any such EligibleSpecified Financial Assets in any material respect);

 

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### (f)                                    promptly, but, in any event,within five (5) Business Days, upon the Borrowers obtaining knowledge,based upon facts and circumstances known to it, of an event which may result ina material adverse effect on the Value of any Eligible Specified FinancialAsset, an update as to the Value of such Eligible Specified Financial Assets,except with respect to such Eligible Specified Financial Assets requiring anappraisal for the determination of Value which shall be due within thirty (30)days, and a description of the nature of such event and the effect of thematerial adverse effect on the Value of such Eligible Specified FinancialAsset;

###  

### (g)                                 simultaneously with the initialinclusion of any Eligible Specified Financial Asset in the Borrowing Base inconnection with a Loan hereunder, a Borrowing Base Report containing all of theRelated Borrowing Base Information in respect of such Eligible SpecifiedFinancial Asset;

###  

### (h)                                 promptly, and in any eventwithin five (5) Business Days after receipt thereof by KKR Financial orany Subsidiary thereof, copies of each notice or other correspondence receivedfrom the SEC (or comparable agency in any applicable non-U.S. jurisdiction)concerning any investigation or possible investigation or other inquiry by suchagency regarding financial or other operational results of KKR Financial or anySubsidiary thereof; and

###  

### (i)                                     promptly following any requesttherefor, such other information regarding the operations, business affairs andfinancial condition of any of the Borrowers or any of their Subsidiaries, orcompliance with the terms of this Agreement, as the Administrative Agent or anyLender may reasonably request.

###  

Documents required to be delivered pursuant to Section 6.01(a) or6.01(b) or Section 6.02(c) (to the extent any suchdocuments are included in materials otherwise filed with the SEC) may bedelivered electronically and if so delivered, shall be deemed to have beendelivered on the date (i) on which the KKR Financial posts such documents,or provides a link thereto on KKR Financial’s website on the Internet at thewebsite address listed on Schedule 10.02; or (ii) on whichsuch documents are posted on KKR Financial’s behalf on an Internet or intranetwebsite, if any, to which each Lender and the Administrative Agent have access(whether a commercial, third-party website or whether sponsored by the AdministrativeAgent); provided that (i) the Borrowers shall deliver paper copiesof such documents to the Administrative Agent or any Lender that requests theBorrowers to deliver such paper copies until a written request to ceasedelivering paper copies is given by the Administrative Agent or such Lender and(ii) the Borrowers shall notify the Administrative Agent and each Lender(by telecopier or electronic mail) of the posting of any such documents andprovide to the Administrative Agent by electronic mail electronic versions(i.e., soft copies) of such documents. Notwithstanding anything containedherein, in every instance KKR Financial shall be required to provide papercopies of the Compliance Certificates required by Section 6.02(b) tothe Administrative Agent. Except for such Compliance Certificates, theAdministrative Agent shall have no obligation to request the delivery or tomaintain copies of the documents referred to above, and in any event shall haveno responsibility to monitor compliance by the Borrowers with any such requestfor delivery, and each Lender shall be solely responsible for requestingdelivery to it or maintaining its copies of such documents.

 

The Borrowers hereby acknowledge that (a) the Administrative Agentand/or the Arranger will make available to the Lenders materials and/orinformation provided by or on behalf of the Borrowers hereunder (collectively, “BorrowerMaterials”) by posting the Borrower Materials on IntraLinks or anothersimilar electronic system (the “Platform”) and (b) certain of theLenders may be “public-side” Lenders (*i.e.,*Lenders that do not wish to receive material non-public information withrespect to KKR Financial or its securities) (each, a “Public Lender”). Eachof the Borrowers hereby agrees that (w) all Borrower Materials that are to bemade available to Public Lenders shall be clearly and conspicuously marked “PUBLIC”which, at a minimum, shall mean that the word “PUBLIC” shall appear prominently

 

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on the first page thereof; (x) bymarking Borrower Materials “PUBLIC,” the Borrowers shall be deemed to haveauthorized the Administrative Agent, the Arranger and the Lenders to treat suchBorrower Materials as not containing any material non-public information withrespect to the Borrowers or any securities for purposes of United StatesFederal and state securities laws (provided, however, that to theextent such Borrower Materials constitute Information, they shall be treated asset forth in Section 10.07); (y) all Borrower Materials marked “PUBLIC”are permitted to be made available through a portion of the Platform designated“Public Investor;” and (z) the Administrative Agent and the Arranger shall beentitled to treat any Borrower Materials that are not marked “PUBLIC” as beingsuitable only for posting on a portion of the Platform other than that which isdesignated “Public Investor.”

 

## **6.03****                       ****Notices**. Promptly notify theAdministrative Agent and each Lender upon a Responsible Officer of a Borrowerobtaining knowledge thereof:

##  

### (a)                                  of the occurrence of anyDefault;

###  

### (b)                                 of any matter that has resultedor could reasonably be expected to result in a Material Adverse Effect,including (i) breach or non-performance of, or any default under, aContractual Obligation of either of the Borrowers or any Subsidiary; (ii) anydispute, litigation, investigation, proceeding or suspension between either ofthe Borrowers or any Subsidiary and any Governmental Authority; or (iii) thefiling or commencement of, or any material development in, any litigation orproceeding affecting the either of the Borrowers or any Subsidiary, includingpursuant to any applicable Environmental Laws;

###  

### (c)                                  of the occurrence of any ERISAEvent that, alone or together with any other ERISA Events that have occurred,could reasonably be expected to result in liability of the Borrowers and theirSubsidiaries in an aggregate amount exceeding $25,000,000; and

###  

### (d)                                 any other development thatresults in, or could reasonably be expected to result in, a Material AdverseEffect.

###  

Each notice pursuant to this Section 6.03 shall beaccompanied by a statement of a Responsible Officer of the applicable Borrowersetting forth details of the occurrence referred to therein and stating whataction such Borrower has taken and proposes to take with respect thereto. Eachnotice pursuant to Section 6.03(a) shall describe withparticularity any and all provisions of this Agreement and any other LoanDocument that have been breached.

 

## **6.04****                       ****Payment of Obligations**. Pay and discharge itsobligations, including Tax liabilities, that, if not paid, could result in aMaterial Adverse Effect before the same shall become delinquent or in default,except where (a) the validity or amount thereof is being contested in goodfaith by appropriate proceedings, (b) such Borrower or such Subsidiary hasset aside on its books adequate reserves with respect thereto in accordancewith GAAP and (c) the failure to make payment pending such contest couldnot reasonably be expected to result in a Material Adverse Effect.

##  

## **6.05****                       ****Preservation of Existence, Etc.**Preserve, renew and maintain infull force and effect its legal existence and good standing under the Laws ofthe jurisdiction of its organization except in a transaction permitted by Section 7.04or 7.05; and (b) take all reasonable action to maintain all rights,privileges, permits, licenses and franchises necessary in the normal conduct ofits business, except to the extent that failure to do so could not reasonablybe expected to have a Material Adverse Effect. Without limiting the generalityof the foregoing, KKR Financial will do all things necessary to maintain itsstatus as a REIT.

 

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## **6.06****                       ****Maintenance of Properties**. Maintain, preserve and protectall of its material properties and equipment necessary in the operation of itsbusiness in good working order and condition, ordinary wear and tear excepted; and (b) makeall necessary repairs thereto and renewals and replacements thereof exceptwhere the failure to do so could not reasonably be expected to have a MaterialAdverse Effect.

##  

## **6.07****                       ****Maintenance of Insurance**. Maintain with financiallysound and reputable insurance companies, insurance with respect to itsproperties and business against loss or damage of the kinds customarily insuredagainst by Persons engaged in the same or similar business, of such types andin such amounts as are customarily carried under similar circumstances by suchother Persons.

##  

## **6.08****                       ****Compliance with Laws**. Comply in all materialrespects with the requirements of all Laws and all orders, writs, injunctionsand decrees applicable to it or to its business or property, except in suchinstances in which (a) such requirement of Law or order, writ, injunctionor decree is being contested in good faith by appropriate proceedingsdiligently conducted; or (b) the failure to comply therewith could notreasonably be expected to have a Material Adverse Effect.

##  

## **6.09****                       ****Books andRecords**. Maintainproper books of record and account, in conformity with GAAP consistentlyapplied.

##  

## **6.10****                       ****Inspection Rights**. Permit representatives andindependent contractors of the Administrative Agent and each Lender to visitand inspect any of its properties, to examine its corporate, financial andoperating records, and make copies thereof or abstracts therefrom, and todiscuss its affairs, finances and accounts with its directors, officers, andindependent public accountants, all at such reasonable times duringnormal businesshours and as often as may be reasonably desired, upon reasonable advance noticeto the Borrowers (subject to reasonable requirements of confidentiality); provided,however, that when an Event of Default exists the Administrative Agentor any Lender (or any of their respective representatives or independentcontractors) may do any of the foregoing at the expense of the Borrowers at anytime during normal business hours and without advance notice.

##  

## **6.11****                       ****Use of Proceeds**. Use the proceeds of the Loansonly for working capital requirements and other general corporate purposesconsistent with KKR Financial’s Form 10-K filed with the Securities andExchange Commission on March 29, 2006; provided that the Loansshall initially be used to satisfy the Borrowers’ obligations in full under theExisting Credit Agreement. No part of the proceeds of any Loan will be used,whether directly or indirectly, for any purpose that entails a violation of anyof the Regulations of the FRB, including Regulations T, U and X.

##  

# **ARTICLE VII.NEGATIVE COVENANTS**

#  

So long as any Lender shall have any Commitment hereunder, any Loan orother Obligation hereunder shall remain unpaid or unsatisfied, the Borrowersshall not, nor shall it permit any Subsidiary to, directly or indirectly:

 

## **7.01****                       ****Liens**. Create, incur, assume orsuffer to exist any Lien upon any of its property, assets or revenues, whethernow owned or hereafter acquired, other than the following:

##  

### (a)                                  as to Collateral only, Lienspursuant to or as contemplated in any Loan Document and Permitted Encumbrances(only with respect to clauses (a) and (e) of the definition thereof)subordinate to such Liens; and

 

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### (b)                                 as to all other assets andproperties of the Borrowers and their Subsidiaries other than Collateral:

###  

#### (i)                                     PermittedEncumbrances;

####  

#### (ii)                                  Lienspursuant to or as contemplated in any Loan Document;

####  

#### (iii)                               Liensexisting on the date hereof and listed on Schedule 7.01 and anyrenewals or extensions thereof, provided that (i) the property orasset covered thereby is not changed, (ii) the amount secured or benefitedthereby is not increased except as contemplated by Section 7.03(b),(iii) the direct or any contingent obligor with respect thereto is notchanged, and (iv) any renewal or extension of the obligations secured or benefitedthereby is permitted by Section 7.03(b);

####  

#### (iv)                              Lienssecuring Indebtedness permitted under Section 7.03(f); providedthat (i) such Liens do not at any time encumber any property other thanthe property financed by such Indebtedness and (ii) the Indebtednesssecured thereby does not exceed the cost or fair market value, whichever islower, of the property being acquired on the date of acquisition;

####  

#### (v)                                 Lienson cash deposits with issuers of letters of credit in support of Letter ofCredit Obligations permitted under Section 7.03(i);

####  

#### (vi)                              anyLien existing on any property or asset prior to the acquisition thereof by anyof the Borrowers or any Subsidiary or existing on any property or asset of anyPerson that becomes a Subsidiary after the date hereof prior to the time suchPerson becomes a Subsidiary; provided that (i) such Lien is notcreated in contemplation of or in connection with such acquisition or suchPerson becoming a Subsidiary, as the case may be, (ii) such Lien shall notapply to any other property or assets of any of the Borrowers or any Subsidiaryand (iii) such Lien shall secure only those obligations which it secureson the date of such acquisition or the date such Person becomes a Subsidiary,as the case may be; and

####  

#### (vii)                           Lienson any property or asset that secures any Swap Contract (including any totalrate of return Swap Contract) or any other Secured Indebtedness or any relatedobligation incurred in connection with the transactions contemplated thereby.

####  

#### (viii)                        For theavoidance of doubt, except to the extent that the Borrowers grant a Lien to thetrustee of any Trust Preferred Financing Vehicle, the parties agree that therights of such trustee in respect of any Trust Preferred Indebtedness permittedunder this Agreement shall not be deemed a Lien hereunder.

####  

## **7.02****                       ****Investments**. Make any Investments, except:

##  

### (a)                                  Permitted Investments;

###  

### (b)                                 Investments by any Borrower orany Subsidiary existing as of the Closing Date;

###  

### (c)                                  Investments of the Borrowers inany Subsidiary and Investments of any Subsidiary in the either of the Borrowersor in another Subsidiary;

###  

### (d)                                 Guarantees of Letter of CreditObligations permitted by Section 7.03;

 

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### (e)                                  investments in any Financing SPEor Trust Preferred Financing Vehicle, including any Financing SPE or TrustPreferred Financing Vehicle established after the date hereof, for the purposeof facilitating a Securitization or Trust Preferred Securities Transaction; and

###  

### (f)                                    other investments (including totalrate of return Swap Contracts and other Swap Contacts) made by any Borrower orany Subsidiary in the course of such Borrower’s or such Subsidiary’s businessand consistent with KKR Financial’s business as described in its Form 10-Kfiled with the Securities and Exchange Commission on March 29, 2006.

###  

## **7.03****                       ****Indebtedness**. Create, incur, assume orsuffer to exist any Indebtedness, except:

##  

### (a)                                  Indebtedness under the LoanDocuments;

###  

### (b)                                 Indebtedness outstanding on thedate hereof and listed on Schedule **7.03** and any refinancings, refundings, renewals or extensionsthereof; provided that (i) the terms and conditions of suchextensions, renewals or refinancings of such Indebtedness do not, in theAdministrative Agent’s reasonable judgment, materially impair the prospects ofrepayment of the Obligations by the Borrowers or impair any Borrower’screditworthiness and (ii) such extensions, renewals or refinancings ofsuch Indebtedness do not result in an increase in the principal amount of suchIndebtedness so extended, renewed or refinanced or add any Borrower as liablewith respect thereto if such Borrower was not liable with respect to theoriginal Indebtedness;

###  

### (c)                                  Indebtedness of any Borrower toany Subsidiary and of any Subsidiary to any Borrower or any other Subsidiary;

###  

### (d)                                 Guarantees of the Borrowers orany Subsidiary in respect of Indebtedness otherwise permitted hereunder of theBorrowers or any consolidated Subsidiary;

###  

### (e)                                  obligations (contingent orotherwise) of the Borrowers or any Subsidiary existing or arising under anySwap Contract (including any total rate of return Swap Contract);

###  

### (f)                                    Indebtedness owed to (includingobligations in respect of letters of credit for the benefit of) any personproviding workers’ compensation, health, disability or other employee benefitsor property, casualty or liability insurance to any Borrower or any Subsidiary,pursuant to reimbursement or indemnification obligations to such person;

###  

### (g)                                 Indebtedness in respect ofperformance bonds, bid bonds, appeal bonds, surety bonds and completionguarantees and similar obligations, in each case, provided in the course ofordinary business, including those incurred to secure health, safety andenvironmental obligations in the ordinary course of business;

###  

### (h)                                 Unsecured Indebtedness;

###  

### (i)                                     Letter of Credit Obligations, upto a maximum amount outstanding at any time not greater than $10,000,000;

###  

### (j)                                     Indebtedness arising from theoccasional honoring by a bank or other financial institution of a check, draftor similar instrument drawn against insufficient funds in the ordinary courseof business and not from an overdraft credit facility granted by the bank orother financial institution;

###  

### (k)                                  other Secured Indebtedness; and

 

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### (l)                                     Trust Preferred Indebtedness andrelated Trust Preferred Guarantees and Trust Preferred Securities incurred,executed or issued respectively, as part of a Trust Preferred SecuritiesTransaction.

###  

## **7.04****                       ****Fundamental Changes**. Merge, dissolve, liquidate,consolidate with or into another Person, or Dispose of (whether in onetransaction or in a series of transactions) all or substantially all of itsassets (whether now owned or hereafter acquired) to or in favor of any Person,except that, so long as no Default exists or would result therefrom:

##  

### (a)                                  any Subsidiary may merge with (i) aBorrower, provided that such Borrower shall be the continuing orsurviving Person, or (ii) any one or more other Subsidiaries; providedthat any such merger involving a Person that is not a wholly owned Subsidiaryimmediately prior to such merger shall not be permitted unless also permittedby Section 7.02

###  

### (b)                                 any Subsidiary may Dispose ofall or substantially all of its assets (upon voluntary liquidation orotherwise) to a Borrower or to another Subsidiary;

###  

### (c)                                  any Subsidiary may liquidate ordissolve if the Borrower which is the parent of such Subsidiary determines ingood faith that such liquidation or dissolution is in the best interests ofsuch Borrower and is not materially disadvantageous to the Lenders; and

###  

### (d)                                 any Financing SPE may sell,transfer, lease or otherwise dispose of (in one transaction or in a series ofrelated transactions) all or substantially all of its assets in connection witha Securitization, provided that the proceeds of such Securitization inexcess of the amount such Financing SPE is required to pay to any holder of anydebt obligation or equity interests issued by such Financing SPE pursuant tothe terms of such Securitization are paid to a Borrower promptly thereafter.

###  

Notwithstanding the foregoing, none of the Borrowers will, nor willpermit any of its Subsidiaries to, engage to any material extent in anybusiness other than businesses of the type conducted by such Borrower and itsSubsidiaries on the date of execution of this Agreement, businesses reasonablyrelated thereto or that is a reasonable extension, development or expansionthereof. It is understood that a Trust Preferred Securities Transactionconsummated for purposes of financing the type of business of such Borrower orSubsidiary as of the date of execution of this Agreement shall not be deemed toviolate the foregoing restriction.

 

For the avoidance of doubt, the transfer of legal ownership of anyTrust Preferred Indebtedness permitted under this Agreement to a trusteepursuant to a Trust Preferred Securities Transaction shall not be deemed to bea sale, transfer, lease or other disposition of any assets to such trustee.

 

## **7.05****                       ****Dispositions**. Make any Disposition or enterinto any agreement to make any Disposition, except:

##  

### (a)                                  Dispositions of obsolete or wornout property, whether now owned or hereafter acquired, in the ordinary courseof business;

###  

### (b)                                 Dispositions of assets otherthan Collateral in the course of the Borrower’s or any Subsidiary’s businessand consistent with KKR Financial’s business as described in its Form 10-Kfiled with the Securities and Exchange Commission on March 29, 2006;

###  

### (c)                                  Dispositions of equipment orreal property to the extent that (i) such property is exchanged for creditagainst the purchase price of similar replacement property or (ii) theproceeds of such Disposition are reasonably promptly applied to the purchaseprice of such replacement property;

 

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### (d)                                 Dispositions of property by anySubsidiary to a Borrower or to a consolidated Subsidiary;

###  

### (e)                                  Dispositions of Collateral tothe extent permitted by the Security Documents; and

###  

### (f)                                    Dispositions permitted by Section 7.04.

###  

For the avoidance of doubt, the transfer of legal ownership of anyTrust Preferred Indebtedness permitted under this Agreement to a trusteepursuant to a Trust Preferred Securities Transaction shall not be deemed to bea sale, transfer, lease or other disposition of any assets to said trustee.

 

## **7.06****                       ****Restricted Payments**. Declare or make, directly orindirectly, any Restricted Payment, or incur any obligation (contingent orotherwise) to do so, except that:

##  

### (a)                                  so long as (i) no eventconstituting a Default under Sections 8.01(a), 8.01(f) or 8.01(h) orshall have occurred and be continuing, and (ii) no Event of Default shallhave occurred and be continuing, in each case, at the time of or would resulttherefrom, KKR Financial may declare and make Restricted Payments to any Personthat owns an Equity Interest in KKR Financial, ratably according to theirrespective holdings of the type of Equity Interest of the applicable class orseries in respect of which such Restricted Payment is being made;

###  

### (b)                                 each Subsidiary (including,without limitation, KKR TRS) may declare and make Restricted Payments to theBorrowers, and to any other Person that owns an Equity Interest in suchSubsidiary, ratably according to their respective holdings of the type ofEquity Interest of the applicable class or series in respect of which suchRestricted Payment is being made;

###  

### (c)                                  the Borrowers and eachSubsidiary may declare and make dividend payments or other distributionspayable solely in the common stock or other common Equity Interests of suchPerson; and

###  

### (d)                                 any Borrower may make RestrictedPayments pursuant to and in accordance with stock option plans or other benefitplans for management or employees of such Borrower and its Subsidiaries.

###  

## **7.07****                       ****Transactions with Affiliates**. Enter into any transaction ofany kind with any Affiliate of any Borrower except (a) in the ordinarycourse of business at prices and on terms and conditions not less favorable tosuch Borrower or such Subsidiary than could be obtained on an arm’s-lengthbasis from unrelated third parties, (b) transactions between or among anyBorrower and its wholly owned Subsidiaries not involving any other Affiliate, (c) transactionsfor which KKR Financial or such Subsidiary is obligated under the ManagementAgreement and (d) any Restricted Payment permitted by Section 7.06.

##  

## **7.08****                       ****Burdensome Agreements**. Enter into any ContractualObligation (other than this Agreement or any other Loan Document) thatrestricts or imposes any condition upon (i) the ability of any Borrower orany Subsidiary to create, incur or permit to exist any Lien upon any of itsproperty or assets, or (ii) the ability of any Subsidiary to pay dividendsor other distributions with respect to any shares of its capital stock or tomake or repay loans or advances to any Borrower or any other Subsidiary or toGuarantee Indebtedness of any Borrower or any other Subsidiary; providedthat (A) the foregoing shall not apply to restrictions and conditionsimposed by law or by this Agreement or any other Loan Document or upon anyFinancing SPE by any lender thereto or investor therein or upon any TrustPreferred Financing Vehicle in respect of its common securities issued to aBorrower or any Subsidiary of a Borrower, (B) the foregoing shall notapply to restrictions and conditions existing on the date hereof identified on Schedule 7.08(but shall apply to any extension or renewal of, or any amendment ormodification expanding the scope of, any such restriction or condition), (C) theforegoing shall not apply

 

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## to customary restrictions and conditionscontained in agreements relating to the sale of a Subsidiary pending such sale,provided such restrictions and conditions apply only to the Subsidiary that isto be sold and such sale is permitted hereunder, (D) clause (i) ofthe foregoing shall not apply to restrictions or conditions imposed by anyagreement relating to secured Indebtedness permitted by this Agreement if suchrestrictions or conditions apply only to the property or assets securing suchIndebtedness and (E) clause (i) of the foregoing shall not apply tocustomary provisions in leases and other contracts restricting the assignmentthereof.

##  

For the avoidance of doubt, except to the extent that the Borrowersgrant a Lien to the trustee of any Trust Preferred Financing Vehicle, theparties agree that the rights of such trustee in respect of any Trust PreferredIndebtedness permitted under this Agreement shall not be deemed a Lienhereunder.

 

## **7.09****                       ****Financial Covenants.**

##  

### (a)                                  Consolidated Tangible Net Worth. Permit Consolidated TangibleNet Worth, at any time, to be less than the greater of (i) $1,425,000,000or (ii) an amount equal to 85% of KKR Financial’s Consolidated TangibleNet Worth as at March 31, 2006, in either case, plus an amount equal to85% of the net proceeds received from the issuance and sale, after the datehereof, of Equity Interests of KKR Financial or any Subsidiary (other thanissuances to any Borrower or a wholly-owned Subsidiary), including upon anyconversion of Debt Securities of KKR Financial into such Equity Interests.

###  

### (b)                                 Leverage Ratio. Permit the ratio ofConsolidated Total Liabilities to Consolidated Tangible Net Worth, at any time,to exceed the ratio of 12.50 to 1.00.

###  

### (c)                                  Positive Net Income. Permit its Consolidated Net Incometo be less than $1.00 for any fiscal quarter.

###  

## **7.10****                       ****Management Fees; Compensation**. Pay management fees, incentivefees or otherwise increase the compensation payable to KKR Financial AdvisorsLLC pursuant to the Management Agreement, in excess of those fees andcompensation levels in effect as of the Closing Date, without the prior writtenconsent of the Administrative Agent (not to be unreasonably withheld).

##  

## **7.11****                       ****Fiscal Year**. Change its fiscal year foraccounting purposes from a period consisting of the 12-month period ending on December 31of each calendar year.

##  

## **7.12****                       ****Margin Regulations; SecuritiesLaws**. Use allor any portion of the proceeds of any credit extended under this Agreement topurchase or carry Margin Stock.

##  

## **7.13****                       ****Investment Policies.**Materially alter the policiescontained in the amended and restated polices adopted by the board of directorsof KKR Financial Corp. on April 5, 2005 and amended by such directors on February 1,2006 without obtaining the prior written consent of the Administrative Agent,which, shall not be unreasonably withheld or delayed; provided that ifthe Administrative Agent has not responded within 10 Business Days afterwritten request for a consent by the Borrowers, it shall be deemed to haveconsented.

 

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# **ARTICLE VIII.EVENTS OF DEFAULT AND REMEDIES**

#  

## **8.01****                       ****Events of Default**. Any of the following shallconstitute an Event of Default:

##  

### (a)                                  Non-Payment. Any Borrower fails to pay (i) whendue or as required to be paid herein, any amount of principal of any Loan, or (ii) withinthree Business Days after the same becomes due, any interest on any Loan, orany fee due hereunder, or any other amount payable hereunder or under any otherLoan Document; or

###  

### (b)                                 Specific Covenants. Any Borrower fails to performor observe any term, covenant or agreement contained in any of Section 6.03(Notices), 6.05(a) (Preservation of Existence), or 6.11 (Useof Proceeds) or Article VII (Negative Covenants). Any Borrowerfails to perform or observe any covenant contained in Section 6.02(Certificates; Other Information) (other than the proviso in the first sentenceof the penultimate paragraph thereof) and such failure continues for five (5) BusinessDays after notice thereof from the Administrative Agent; or

###  

### (c)                                  Other Defaults. Any Borrower fails to performor observe any other covenant or agreement (not specified in subsection (a) or(b) above) contained in any Loan Document on its part to be performed orobserved and such failure continues for 30 days after notice thereof from theAdministrative Agent to the Borrowers (which notice will be given at therequest of the Required Lenders); or

###  

### (d)                                 Representations and Warranties. Any representation or warrantymade or deemed made by or on behalf of any Borrower in or in connection withthis Agreement or any other Loan Document or any amendment or modificationhereof or thereof or waiver hereunder or thereunder, or in any report,certificate, financial statement or other document furnished pursuant to or inconnection with this Agreement, any other Loan Document or any amendment ormodification hereof or thereof or waiver hereunder or thereunder, shall, aftertaking into account any materiality or other qualification contained therein,prove to have been incorrect when made or deemed made; or

###  

### (e)                                  Cross-Default. Any Borrower (i) fails tomake any payment (whether of principal or interest and regardless of amount) inrespect of any Material Indebtedness, when and as the same shall become due andpayable (with all applicable grace periods having expired), or (ii) anyevent or condition occurs that results in any Material Indebtedness becomingdue prior to its scheduled maturity or that enables or permits (with or withoutthe giving of notice, the lapse of time or both, but after all applicable graceperiods have expired) the holder or holders of any Material Indebtedness or anytrustee or agent on its or their behalf to cause any Material Indebtedness tobecome due, or to require the prepayment, repurchase, redemption or defeasancethereof, prior to its scheduled maturity; provided that this Section 8.01(e)(ii) shallnot apply to secured Indebtedness that becomes due as a result of the voluntarysale or transfer of the property or assets securing such Indebtedness; or

###  

### (f)                                    Insolvency Proceedings, Etc. (i) Any Borrower or anySubsidiary (A) voluntarily commences any proceeding or files any petitionseeking liquidation, reorganization or other relief under any Federal, state orforeign bankruptcy, insolvency, receivership or similar law now or hereafter ineffect, (B) consents to the institution of, or fails to contest in atimely and appropriate manner, any proceeding or petition described in sub-part(ii) of this Section 8.01(f), (C) applies for or consentsto the appointment of a receiver, trustee, custodian, sequestrator, conservatoror similar official for any Borrower or any Subsidiary or for a substantialpart of its assets, (D) files an answer admitting the material allegationsof a petition filed against it in any such proceeding, (E) make a generalassignment for the benefit of creditors or (F) take any action for thepurpose of effecting any of the foregoing, or (ii) an involuntaryproceeding is commenced or an involuntary petition is filed seeking (A) liquidation,

 

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### reorganization or other relief in respect ofany Borrower or any Subsidiary or its debts, or of a substantial part of itsassets, under any Federal, state or foreign bankruptcy, insolvency,receivership or similar law now or hereafter in effect or (B) theappointment of a receiver, trustee, custodian, sequestrator, conservator orsimilar official for any Borrower or any Subsidiary or for a substantial partof its assets, and, in any such case, such proceeding or petition shallcontinue undismissed for 60 days or an order or decree approving or orderingany of the foregoing shall be entered;

###  

### (g)                                 Inability to Pay Debts;Attachment. AnyBorrower or any Subsidiary becomes unable, admits in writing its inability orfails generally to pay its debts as they become due; or

###  

### (h)                                 Judgments. One or more judgments for thepayment of money in an aggregate amount in excess of $25,000,000 is renderedagainst any Borrower, any Subsidiary or any combination thereof and the sameshall remain undischarged for a period of 30 consecutive days during whichexecution shall not be effectively stayed, or any action is legally taken by ajudgment creditor to attach or levy upon any assets of any Borrower or anySubsidiary to enforce any such judgment; or

###  

### (i)                                     ERISA. an ERISA Event occurs that, inthe opinion of the Required Lenders, when taken together with all other ERISAEvents that have occurred, could reasonably be expected to result in a MaterialAdverse Effect; or

###  

### (j)                                     Management. KKR Financial Advisors LLCshall cease to (i) serve as manager and adviser to the Borrowers or (ii) bean Affiliate of Kohlberg Kravis Roberts & Co. L.P.; or

###  

### (k)                                  Change of Control. There occurs any Change ofControl.

###  

## **8.02****                       ****Remedies Upon Event of Default**. If any Event of Default occursand is continuing (other than an event with respect to a Borrower described in Section 8.01(g)),and at any time thereafter during the continuance of such event, theAdministrative Agent may, and at the request of the Required Lenders shall, bynotice to the Borrowers, take either or both of the following actions, at thesame or different times:

##  

### (a)                                  terminate the Commitments, andthereupon the Commitments shall terminate immediately, and;

###  

### (b)                                 declare the Loans thenoutstanding to be due and payable in whole (or in part, in which case anyprincipal not so declared to be due and payable may thereafter be declared tobe due and payable), and thereupon the principal of the Loans so declared to bedue and payable, together with accrued interest thereon and all fees and otherobligations of the Borrowers accrued hereunder, shall become due and payableimmediately, without presentment, demand, protest or other notice of any kind,all of which are hereby waived by each of the Borrowers;

###  

provided, however, that in case of anyevent with respect to a Borrower described in Section 8.01(g), theCommitments shall automatically terminate and the principal of the Loans thenoutstanding, together with accrued interest thereon and all fees and otherObligations, shall automatically become due and payable, without presentment,demand, protest or other notice of any kind, all of which are hereby waived byeach of the Borrowers.

 

## **8.03****                       ****Application of Funds**. In the event that, followingthe occurrence or during the continuance of any Event of Default, theAdministrative Agent or any Lender, as the case may be, receives any monies inconnection the exercise of remedies provided for in Section 8.02(or after the

 

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## Loans have automatically become immediatelydue and payable), such monies shall be distributed for application as follows:

##  

First, to thepayment of, or (as the case may be) the reimbursement of, the AdministrativeAgent for or in respect of all reasonable costs, expenses, disbursements andlosses which shall have been incurred or sustained by the Administrative Agentin connection with the collection of such monies by the Administrative Agent,for the exercise, protection or enforcement by the Administrative Agent of allor any of the rights, remedies, powers and privileges of the AdministrativeAgent under this Agreement or any of the other Loan Documents or in respect ofthe Collateral or in support of any provision of adequate indemnity to theAdministrative Agent against any taxes or liens which by law shall have, or mayhave, priority over the rights of the Administrative Agent to such monies;

 

Second, to all otherObligations in such order or preference as the Required Lenders may determine; provided,however, that (i) distributions shall be made (A) paripassuamong Obligations with respect to any fees payable to the Administrative Agentand all other Obligations and (B) with respect to each type of Obligationowing to the Lenders, such as interest, principal, fees and expenses, among theLenders prorata, and (ii) the Administrative Agent may inits discretion make proper allowance to take into account any Obligations notthen due and payable;

 

Third, upon paymentand satisfaction in full or other provisions for payment in full satisfactoryto the Lenders and the Administrative Agent of all of the Obligations, to thepayment of any obligations required to be paid pursuant to §9-608(a)(1)(C) or9-615(a)(3) of the Uniform Commercial Code of the State of New York;

 

Fourth, the excess,if any, shall be returned to the Borrowers or to such other Persons as areentitled thereto;

 

Notwithstanding the foregoing, any payment of the Obligations hereundershall be apportioned, within each category above, first, to Obligationsin respect of Tranche A Loans and, second, to Obligations in respect ofTranche B Loans.

 

# **ARTICLE IX.ADMINISTRATIVE AGENT**

#  

## **9.01****                       ****Appointment and Authority**. Each of the Lenders herebyirrevocably appoint Bank of America to act on its behalf as the AdministrativeAgent hereunder and under the other Loan Documents and authorizes theAdministrative Agent to take such actions on its behalf and to exercise suchpowers as are delegated to the Administrative Agent by the terms hereof orthereof, together with such actions and powers as are reasonably incidentalthereto. The provisions of this Article are solely for the benefit of theAdministrative Agent. No Lender or Borrower shall have rights as a third partybeneficiary of any of such provisions.

##  

## **9.02****                       ****Rights as a Lender**. The Person serving as theAdministrative Agent hereunder shall have the same rights and powers in itscapacity as a Lender as any other Lender and may exercise the same as though itwere not the Administrative Agent and the term “Lender” or “Lenders” shall,unless otherwise expressly indicated or unless the context otherwise requires,include the Person serving as the Administrative Agent hereunder in itsindividual capacity. Such Person and its Affiliates may accept deposits from,lend money to, act as the financial advisor or in any other advisory capacityfor and generally engage in any kind of business with the Borrowers or anySubsidiary or other Affiliate thereof as if such Person were not the AdministrativeAgent hereunder and without any duty to account therefor to the Lenders.

 

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## **9.03****                       ****Exculpatory Provisions**. The Administrative Agent shallnot have any duties or obligations except those expressly set forth herein andin the other Loan Documents. Without limiting the generality of the foregoing,the Administrative Agent:

##  

### (a)                                  shall not be subject to anyfiduciary or other implied duties, regardless of whether a Default has occurredand is continuing;

###  

### (b)                                 shall not have any duty to takeany discretionary action or exercise any discretionary powers, exceptdiscretionary rights and powers expressly contemplated hereby or by the otherLoan Documents that the Administrative Agent is required to exercise as directedin writing by the Required Lenders (or such other number or percentage of theLenders as shall be expressly provided for herein or in the other LoanDocuments), provided that the Administrative Agent shall not be requiredto take any action that, in its opinion or the opinion of its counsel, mayexpose the Administrative Agent to liability or that is contrary to any LoanDocument or applicable law; and

###  

### (c)                                  shall not, except as expresslyset forth herein and in the other Loan Documents, have any duty to disclose,and shall not be liable for the failure to disclose, any information relatingto any Borrower or any of its Affiliates that is communicated to or obtained bythe Person serving as the Administrative Agent or any of its Affiliates in anycapacity.

###  

The Administrative Agent shall not be liable for any action taken ornot taken by it (i) with the consent or at the request of the RequiredLenders (or such other number or percentage of the Lenders as shall benecessary, or as the Administrative Agent shall believe in good faith shall benecessary, under the circumstances as provided in Sections 10.01and 8.02) or (ii) in the absence of its own gross negligence orwillful misconduct. The Administrative Agent shall be deemed not to haveknowledge of any Default unless and until notice describing such Default isgiven to the Administrative Agent by any Borrower or a Lender.

 

The Administrative Agent shall not be responsible for or have any dutyto ascertain or inquire into (i) any statement, warranty or representationmade in or in connection with this Agreement or any other Loan Document, (ii) thecontents of any certificate, report or other document delivered hereunder orthereunder or in connection herewith or therewith, (iii) the performanceor observance of any of the covenants, agreements or other terms or conditionsset forth herein or therein or the occurrence of any Default, (iv) thevalidity, enforceability, effectiveness or genuineness of this Agreement, anyother Loan Document or any other agreement, instrument or document or (v) thesatisfaction of any condition set forth in Article IV or elsewhereherein, other than to confirm receipt of items expressly required to bedelivered to the Administrative Agent.

 

## **9.04****                       ****Reliance by Administrative Agent.**

##  

### (a)                                  The Administrative Agent shallbe entitled to rely upon, and shall not incur any liability for relying upon,any notice, request, certificate, consent, statement, instrument, document orother writing (including any electronic message, Internet or intranet websiteposting or other distribution) believed by it to be genuine and to have beensigned, sent or otherwise authenticated by the proper Person. TheAdministrative Agent also may rely upon any statement made to it orally or bytelephone and believed by it to have been made by the proper Person, and shallnot incur any liability for relying thereon. In determining compliance with anycondition hereunder to the making of a Loan, that by its terms must befulfilled to the satisfaction of a Lender or the Administrative Agent maypresume that such condition is satisfactory to such Lender unless theAdministrative Agent shall have received notice to the contrary from suchLender prior to the making of such Loan. The Administrative Agent may consult withlegal counsel (who may be counsel for any Borrower), independent accountantsand other experts selected

 

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### by it, and shall not be liable for any actiontaken or not taken by it in accordance with the advice of any such counsel,accountants or experts.

###  

### (b)                                 For purposes of determiningcompliance with the conditions specified in Section 4.01, eachLender that has signed this Credit Agreement shall be deemed to have consentedto, approved or accepted or to be satisfied with, each document or other matterrequired thereunder to be consented to or approved by or acceptable orsatisfactory to a Lender unless the Administrative Agent shall have receivednotice from such Lender prior to the proposed Closing Date specifying itsobjection thereto.

###  

## **9.05****                       ****Delegation of Duties**. The Administrative Agent mayperform any and all of its duties and exercise its rights and powers hereunderor under any other Loan Document by or through any one or more sub-agentsappointed by the Administrative Agent. The Administrative Agent and any suchsub-agent may perform any and all of its duties and exercise its rights andpowers by or through their respective Related Parties. The exculpatoryprovisions of this Article shall apply to any such sub-agent and to theRelated Parties of the Administrative Agent and any such sub-agent, and shallapply to their respective activities in connection with the syndication of thecredit facilities provided for herein as well as activities as AdministrativeAgent.

##  

## **9.06****                       ****Resignation of AdministrativeAgent**. TheAdministrative Agent may at any time give notice of its resignation to theLenders and the Borrowers. Upon receipt of any such notice of resignation, theRequired Lenders shall have the right, in consultation with the Borrowers, toappoint a successor, which shall be a bank with an office in the United States,or an Affiliate of any such bank with an office in the United States. If nosuch successor shall have been so appointed by the Required Lenders and shallhave accepted such appointment within 30 days after the retiringAdministrative Agent gives notice of its resignation, then the retiringAdministrative Agent may on behalf of the Lenders, appoint a successorAdministrative Agent meeting the qualifications set forth above; providedthat if the Administrative Agent shall notify the Borrowers and the Lendersthat no qualifying Person has accepted such appointment, then such resignationshall nonetheless become effective in accordance with such notice and (1) theretiring Administrative Agent shall be discharged from its duties andobligations hereunder and under the other Loan Documents (except that in thecase of any collateral security held by the Administrative Agent on behalf ofthe Lenders under any of the Loan Documents, the retiring Administrative Agentshall continue to hold such collateral security until such time as a successorAdministrative Agent is appointed) and (2) all payments, communicationsand determinations provided to be made by, to or through the AdministrativeAgent shall instead be made by or to each Lender directly, until such time asthe Required Lenders appoint a successor Administrative Agent as provided forabove in this Section. Upon the acceptance of a successor’s appointment asAdministrative Agent hereunder, such successor shall succeed to and becomevested with all of the rights, powers, privileges and duties of the retiring(or retired) Administrative Agent, and the retiring Administrative Agent shallbe discharged from all of its duties and obligations hereunder or under theother Loan Documents (if not already discharged therefrom as provided above inthis Section). The fees payable by the Borrowers to a successor AdministrativeAgent shall be the same as those payable to its predecessor unless otherwiseagreed between the Borrowers and such successor. After the retiringAdministrative Agent’s resignation hereunder and under the other LoanDocuments, the provisions of this Article and Section 10.04shall continue in effect for the benefit of such retiring Administrative Agent,its sub-agents and their respective Related Parties in respect of any actionstaken or omitted to be taken by any of them while the retiring AdministrativeAgent was acting as Administrative Agent.

##  

Any resignation by Bank of America as Administrative Agent pursuant tothis Section shall also constitute its resignation as Swingline Lender. Uponthe acceptance of a successor’s appointment as Administrative Agent hereunder, (a) suchsuccessor shall succeed to and become vested with all of the rights, powers,privileges and duties of the retiring Swingline

 

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Lender and (b) the retiring SwinglineLender shall be discharged from all of their respective duties and obligationshereunder or under the other Loan Documents.

 

## **9.07****                       ****Non-Reliance on AdministrativeAgent and Other Lenders**.Each Lender acknowledges that it has, independently and without reliance uponthe Administrative Agent or any other Lender or any of their Related Partiesand based on such documents and information as it has deemed appropriate, madeits own credit analysis and decision to enter into this Agreement. Each Lenderalso acknowledges that it will, independently and without reliance upon theAdministrative Agent or any other Lender or any of their Related Parties andbased on such documents and information as it shall from time to time deemappropriate, continue to make its own decisions in taking or not taking actionunder or based upon this Agreement, any other Loan Document or any relatedagreement or any document furnished hereunder or thereunder.

##  

## **9.08****                       ****No Other Duties, Etc.**Anything herein to the contrarynotwithstanding, the Syndication Agents and the Arranger listed on the cover page hereofshall not have any powers, duties or responsibilities under this Agreement orany of the other Loan Documents, except in its capacity, as applicable, as theAdministrative Agent or a Lender hereunder.

##  

## **9.09****                       ****Administrative Agent May FileProofs of Claim**.In case of the pendency of any proceeding under any Debtor Relief Law or anyother judicial proceeding relative to any Borrower, the Administrative Agent(irrespective of whether the principal of any Loan shall then be due andpayable as herein expressed or by declaration or otherwise and irrespective ofwhether the Administrative Agent shall have made any demand on the Borrowers)shall be entitled and empowered, by intervention in such proceeding orotherwise

##  

### (a)                                  to file and prove a claim forthe whole amount of the principal and interest owing and unpaid in respect ofthe Loans and all other Obligations that are owing and unpaid and to file suchother documents as may be necessary or advisable in order to have the claims ofthe Lenders and the Administrative Agent (including any claim for thereasonable compensation, expenses, disbursements and advances of the Lendersand the Administrative Agent and their respective agents and counsel and allother amounts due the Lenders and the Administrative Agent under Sections2.08 and 10.05) allowed in such judicial proceeding; and

###  

### (b)                                 to collect and receive anymonies or other property payable or deliverable on any such claims and todistribute the same;

###  

and any custodian, receiver, assignee, trustee, liquidator,sequestrator or other similar official in any such judicial proceeding ishereby authorized by each Lender to make such payments to the AdministrativeAgent and, in the event that the Administrative Agent shall consent to themaking of such payments directly to the Lenders to pay to the AdministrativeAgent any amount due for the reasonable compensation, expenses, disbursementsand advances of the Administrative Agent and its agents and counsel, and anyother amounts due the Administrative Agent under Sections 2.08 and 10.04.

 

Nothing contained herein shall be deemed to authorize theAdministrative Agent to authorize or consent to or accept or adopt on behalf ofany Lender any plan of reorganization, arrangement, adjustment or compositionaffecting the Obligations or the rights of any Lender to authorize theAdministrative Agent to vote in respect of the claim of any Lender in any suchproceeding.

 

## **9.10****                       ****Collateral Matters**. The Lenders irrevocablyauthorize the Administrative Agent, at its option and in its discretion,

 

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### (a)                                  to release any Lien on anyproperty granted to or held by the Administrative Agent under any Loan Document(i) upon termination of the Aggregate Commitments and payment in full ofall Obligations (other than contingent indemnification obligations), (ii) thatis sold or to be sold as part of or in connection with any sale permittedhereunder or under any other Loan Document or where the Borrowers are permittedto obtain such release pursuant to the terms of the Security Documents, or (iii) subjectto Section 10.01, if approved, authorized or ratified in writing bythe Required Lenders;

###  

### (b)                                 to subordinate any Lien on anyproperty granted to or held by the Administrative Agent under any Loan Documentto the holder of any Lien on such property that is permitted by Section 7.01(a);and

###  

Upon request by the Administrative Agent at any time, the RequiredLenders will confirm in writing the Administrative Agent’s authority to releaseor subordinate its interest in particular types or items of property.

 

# **ARTICLE X.MISCELLANEOUS**

#  

## **10.01****                ****Amendments, Etc.**No amendment or waiver of anyprovision of this Agreement or any other Loan Document, and no consent to anydeparture by any Borrower therefrom, shall be effective unless in writingsigned by the Required Lenders and applicable Borrower, as the case may be, andacknowledged by the Administrative Agent, and each such waiver or consent shallbe effective only in the specific instance and for the specific purpose forwhich given; provided, however, that no such amendment, waiver orconsent shall:

##  

### (a)                                  waive any condition set forth inSection 4.01(a) without the written consent of each Lender;

###  

### (b)                                 extend or increase theCommitment of any Lender (or reinstate any Commitment terminated pursuant to Section 8.02)without the written consent of such Lender;

###  

### (c)                                  postpone any date fixed by thisAgreement or any other Loan Document for any payment or mandatory prepayment ofprincipal, interest, fees or other amounts due to the Lenders (or any of them)hereunder or under any other Loan Document without the written consent of eachLender directly affected thereby;

###  

### (d)                                 reduce the principal of, or therate of interest specified herein on, any Loan or (subject to clause (iii) ofthe second proviso to this Section 10.01) any fees or other amountspayable hereunder or under any other Loan Document without the written consentof each Lender directly affected thereby; provided, however, thatonly the consent of the Required Lenders shall be necessary (i) to amendthe definition of “Default Rate” or to waive any obligation of the Borrowers topay interest at the Default Rate or (ii) to amend any financial covenantshereunder (or any defined term used therein);

###  

### (e)                                  change any components of thedefinitions of Eligible Specified Financial Asset, Tranche A SpecifiedFinancial Asset, Tranche B Specified Financial Asset or Specified Percentage,without the written consent of the Required Lenders; provided that (i) theaddition of any new type of Tranche A Specified Financial Asset or Tranche BSpecified Financial Asset and (ii) any increase in any SpecifiedPercentage shall require the written consent of each Lender;

###  

### (f)                                    change Section 2.12or Section 8.03 in a manner that would alter the pro rata sharingof payments required thereby without the written consent of each Lender; or

 

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### (g)                                 change any provision of this Section orthe definition of “Required Lenders” or any other provision hereof specifyingthe number or percentage of Lenders required to amend, waive or otherwisemodify any rights hereunder or make any determination or grant any consenthereunder without the written consent of each Lender;

###  

and, providedfurther, that (i) no amendment, waiveror consent shall, unless in writing and signed by the Swingline Lender inaddition to the Lenders required above, affect the rights or duties of theSwingline Lender under this Agreement; (ii) no amendment, waiver orconsent shall, unless in writing and signed by the Administrative Agent inaddition to the Lenders required above, affect the rights or duties of theAdministrative Agent under this Agreement or any other Loan Document; and (iii) theFee Letter may be amended, or rights or privileges thereunder waived, in awriting executed only by the parties thereto. Notwithstanding anything to thecontrary herein, no Defaulting Lender shall have any right to approve ordisapprove any amendment, waiver or consent hereunder, except that theCommitment of such Lender may not be increased or extended without the consentof such Lender.

 

## **10.02****                ****Notices; Effectiveness;Electronic Communication.**

##  

### (a)                                  Notices Generally. Except in the case of noticesand other communications expressly permitted to be given by telephone (andexcept as provided in subsection (b) below), all notices and othercommunications provided for herein shall be in writing and shall be deliveredby hand or overnight courier service, mailed by certified or registered mail orsent by telecopier as follows, and all notices and other communicationsexpressly permitted hereunder to be given by telephone shall be made to theapplicable telephone number, as follows:

###  

#### (i)                                     ifto the Borrowers, the Administrative Agent or the Swingline Lender, to theaddress, telecopier number, electronic mail address or telephone numberspecified for such Person on Schedule 10.02; and

####  

#### (ii)                                  ifto any other Lender, to the address, telecopier number, electronic mail addressor telephone number specified in its Administrative Questionnaire.

####  

Notices sent by hand or overnight courier service, or mailed bycertified or registered mail, shall be deemed to have been given when received;notices sent by telecopier shall be deemed to have been given when sent (exceptthat, if not given during normal business hours for the recipient, shall bedeemed to have been given at the opening of business on the next business dayfor the recipient). Notices delivered through electronic communications to theextent provided in subsection (b) below, shall be effective asprovided in such subsection (b).

 

### (b)                                 Electronic Communications. Notices and othercommunications to the Lenders may be delivered or furnished by electroniccommunication (including e-mail and Internet or intranet websites) pursuant toprocedures approved by the Administrative Agent, provided that theforegoing shall not apply to notices to any Lender pursuant to Article IIif such Lender, as applicable, has notified the Administrative Agent that it isincapable of receiving notices under such Article by electroniccommunication. The Administrative Agent or any Borrower may, in its discretion,agree to accept notices and other communications to it hereunder by electroniccommunications pursuant to procedures approved by it, provided thatapproval of such procedures may be limited to particular notices orcommunications.

###  

Unless the Administrative Agent otherwise prescribes, (i) noticesand other communications sent to an e-mail address shall be deemed receivedupon the sender’s receipt of an acknowledgement from the intended recipient(such as by the “return receipt requested” function, as available, returne-mail or other written acknowledgement), provided that if such noticeor other communication is not sent during the

 

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normal business hours of the recipient, suchnotice or communication shall be deemed to have been sent at the opening ofbusiness on the next business day for the recipient, and (ii) notices orcommunications posted to an Internet or intranet website shall be deemedreceived upon the deemed receipt by the intended recipient at its e-mailaddress as described in the foregoing clause (i) of notification thatsuch notice or communication is available and identifying the website addresstherefor.

 

### (c)                                  The Platform. THE PLATFORM IS PROVIDED “ASIS” AND “AS AVAILABLE.” THE AGENT PARTIES (AS DEFINED BELOW) DO NOT WARRANT THEACCURACY OR COMPLETENESS OF THE BORROWER MATERIALS OR THE ADEQUACY OF THE PLATFORM,AND EXPRESSLY DISCLAIM LIABILITY FOR ERRORS IN OR OMISSIONS FROM THE BORROWERMATERIALS. NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDINGANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,NON-INFRINGEMENT OF THIRD PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODEDEFECTS, IS MADE BY ANY AGENT PARTY IN CONNECTION WITH THE BORROWER MATERIALSOR THE PLATFORM. In no event shall the Administrative Agent or any of itsRelated Parties (collectively, the “Agent Parties”) have any liabilityto the Borrowers, any Lender or any other Person for losses, claims, damages,liabilities or expenses of any kind (whether in tort, contract or otherwise)arising out of the Borrowers’ or the Administrative Agent’s transmission ofBorrower Materials through the Internet, except to the extent that such losses,claims, damages, liabilities or expenses are determined by a court of competentjurisdiction by a final and nonappealable judgment to have resulted from thegross negligence or willful misconduct of such Agent Party; provided, however,that in no event shall any Agent Party have any liability to the Borrowers, anyLender or any other Person for indirect, special, incidental, consequential orpunitive damages (as opposed to direct or actual damages).

###  

### (d)                                 Change of Address, Etc. Each of the Borrowers, theAdministrative Agent and the Swingline Lender may change its address,telecopier or telephone number for notices and other communications hereunderby notice to the other parties hereto. Each other Lender may change itsaddress, telecopier or telephone number for notices and other communicationshereunder by notice to the Borrowers, the Administrative Agent and theSwingline Lender. In addition, each Lender agrees to notify the AdministrativeAgent from time to time to ensure that the Administrative Agent has on record (i) aneffective address, contact name, telephone number, telecopier number andelectronic mail address to which notices and other communications may be sentand (ii) accurate wire instructions for such Lender.

###  

### (e)                                  Reliance by Administrative Agentand Lenders. TheAdministrative Agent and the Lenders shall be entitled to rely and act upon anynotices (including telephonic Revolving Loan Notices and Swingline LoanNotices) purportedly given by or on behalf of the Borrowers even if (i) suchnotices were not made in a manner specified herein, were incomplete or were notpreceded or followed by any other form of notice specified herein, or (ii) theterms thereof, as understood by the recipient, varied from any confirmationthereof. The Borrowers shall jointly and severally indemnify the AdministrativeAgent, each Lender and the Related Parties of each of them from all losses,costs, expenses and liabilities resulting from the reliance by such Person oneach notice purportedly given by or on behalf of the Borrowers. All telephonicnotices to and other telephonic communications with the Administrative Agentmay be recorded by the Administrative Agent, and each of the parties hereto herebyconsents to such recording.

###  

## **10.03****                ****No Waiver; Cumulative Remedies**. No failure by any Lender orthe Administrative Agent to exercise, and no delay by any such Person inexercising, any right, remedy, power or privilege hereunder shall operate as awaiver thereof; nor shall any single or partial exercise of any right, remedy,power or privilege hereunder preclude any other or further exercise thereof orthe exercise of any other

##  

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## 

##  

## right, remedy, power or privilege. Therights, remedies, powers and privileges herein provided are cumulative and notexclusive of any rights, remedies, powers and privileges provided by law.

##  

## **10.04****                ****Expenses; Indemnity; DamageWaiver.**

##  

### (a)                                  Costs and Expenses. The Borrowers shall pay (i) allreasonable out-of-pocket expenses incurred by the Administrative Agent and itsAffiliates (including the reasonable fees, charges and disbursements of counselfor the Administrative Agent in an aggregate amount not greater than thatspecified in the Commitment Letter, dated June [  ], 2006 amongthe Borrowers, the Administrative Agent and the Arranger), in connection withthe syndication of the credit facilities provided for herein, the preparation,negotiation, execution, delivery and administration of this Agreement and theother Loan Documents or any amendments, modifications or waivers of theprovisions hereof or thereof (whether or not the transactions contemplatedhereby or thereby shall be consummated), and (ii) all out-of-pocket expensesincurred by the Administrative Agent or any Lender (including the fees, chargesand disbursements of any counsel for the Administrative Agent and any Lender),in connection with the enforcement or protection of its rights (A) inconnection with this Agreement and the other Loan Documents, including itsrights under this Section, or (B) in connection with the Loans madehereunder, including all such out-of-pocket expenses incurred during anyworkout, restructuring or negotiations in respect of such Loans.

###  

### (b)                                 Indemnification by the Borrowers. The Borrowers shall indemnifythe Administrative Agent (and any sub-agent thereof), each Lender, and eachRelated Party of any of the foregoing Persons (each such Person being called an“Indemnitee”) against, and hold each Indemnitee harmless from, any andall losses, claims, damages, liabilities and related expenses (including thefees, charges and disbursements of any counsel for any Indemnitee), and shallindemnify and hold harmless each Indemnitee from all fees and time charges anddisbursements for attorneys who may be employees of any Indemnitee, incurred byany Indemnitee or asserted against any Indemnitee by any third party or by anyof the Borrowers arising out of, in connection with, or as a result of (i) theexecution or delivery of this Agreement, any other Loan Document or anyagreement or instrument contemplated hereby or thereby, the performance by theparties hereto of their respective obligations hereunder or thereunder, theconsummation of the transactions contemplated hereby or thereby, or, in thecase of the Administrative Agent (and any sub-agent thereof) and its RelatedParties only, the administration of this Agreement and the other LoanDocuments, (ii) any Loan or the use or proposed use of the proceedstherefrom, (iii) any actual or alleged presence or release of HazardousMaterials on or from any property owned or operated by any of the Borrowers orany of their Subsidiaries, or any Environmental Liability related in any way tosuch Borrower or any such Subsidiaries, or (iv) any actual or prospectiveclaim, litigation, investigation or proceeding relating to any of theforegoing, whether based on contract, tort or any other theory, whether broughtby a third party or by any of the Borrowers, and regardless of whether anyIndemnitee is a party thereto, in all cases, whether or not caused by orarising, in whole or in part, out of the comparative, contributory or solenegligence of the Indemnitee; provided that such indemnity shall not, asto any Indemnitee, be available to the extent that such losses, claims,damages, liabilities or related expenses (x) are determined by a court ofcompetent jurisdiction by final and nonappealable judgment to have resultedfrom the gross negligence or willful misconduct of such Indemnitee or(y) result from a claim brought by any of the Borrowers against anIndemnitee for breach in bad faith of such Indemnitee’s obligations hereunderor under any other Loan Document, if any Borrower has obtained a final andnonappealable judgment in its favor on such claim as determined by a court ofcompetent jurisdiction. Unless an Event of Default shall have occurred and becontinuing, the Borrowers shall be entitled to assume the defense of any actionfor which indemnification is sought hereunder with counsel of its choice at itsexpense (in which case the Borrowers shall not thereafter be responsible forthe fees and expenses of any separate counsel retained by an Indemnitee exceptas set forth below); provided, however, that such counsel shallbe reasonably satisfactory to each such Indemnitee. Notwithstanding theBorrowers’

 

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### election to assume the defense of suchaction, each Indemnitee shall have the right to employ separate counsel and toparticipate in the defense of such action, and the Borrowers shall bear thereasonable fees, costs and expenses of such separate counsel if (i) theuse of counsel chosen by the Borrowers to represent such Indemnitee wouldpresent such counsel with a conflict of interest; (ii) the actual orpotential defendants in, or targets of, any such action include the Borrowersand such Indemnitee and such Indemnitee shall have reasonably concluded thatthere may be legal defenses available to it that are different from oradditional to those available to the Borrowers; (iii) the Borrowers shallnot have employed counsel reasonably satisfactory to such Indemnitee torepresent it within a reasonable time after notice of the institution of suchaction; or (iv) the Borrowers shall authorize such Indemnitee to employseparate counsel at the Borrowers’ expense. The Borrowers will not be liableunder this Agreement for any amount paid by an Indemnitee to settle any claimsor actions if the settlement is entered into without the Borrowers’ consent,which consent may not be unreasonably withheld or delayed.

###  

### (c)                                  Reimbursement by Lenders. To the extent that anyBorrower for any reason fails to indefeasibly pay any amount required under subsection (a) or(b) of this Section to be paid by it to the Administrative Agent (orany sub-agent thereof) or any Related Party of any of the foregoing, eachLender severally agrees to pay to the Administrative Agent (or any suchsub-agent) or such Related Party, as the case may be, such Lender’s ApplicablePercentage (determined as of the time that the applicable unreimbursed expenseor indemnity payment is sought) of such unpaid amount, provided that theunreimbursed expense or indemnified loss, claim, damage, liability or relatedexpense, as the case may be, was incurred by or asserted against theAdministrative Agent (or any such sub-agent) in its capacity as such, oragainst any Related Party of any of the foregoing acting for the AdministrativeAgent (or any such sub-agent) in connection with such capacity. The obligationsof the Lenders under this subsection (c) are subject to theprovisions of Section 2.11(d).

###  

### (d)                                 Waiver of Consequential Damages,Etc. To thefullest extent permitted by applicable law, the Borrowers shall not assert, andhereby waives, any claim against any Indemnitee, on any theory of liability,for special, indirect, consequential or punitive damages (as opposed to director actual damages) arising out of, in connection with, or as a result of, thisAgreement, any other Loan Document or any agreement or instrument contemplatedhereby, the transactions contemplated hereby or thereby, any Loan or the use ofthe proceeds thereof. No Indemnitee referred to in subsection (b) aboveshall be liable for any damages arising from the use by unintended recipientsof any information or other materials distributed to such unintended recipientsby such Indemnitee through telecommunications, electronic or other informationtransmission systems in connection with this Agreement or the other LoanDocuments or the transactions contemplated hereby or thereby other than fordirect or actual damages resulting from the gross negligence or willfulmisconduct of such Indemnitee as determined by a final and nonappealablejudgment of a court of competent jurisdiction.

###  

### (e)                                  Payments. All amounts due under this Section shallbe payable not later than ten (10) Business Days after demand therefor.

###  

### (f)                                    Survival. The agreements in this Section shallsurvive the resignation of the Administrative Agent and the Swingline Lender,the replacement of any Lender, the termination of the Aggregate Commitments andthe repayment, satisfaction or discharge of all the other Obligations.

###  

## **10.05****                ****Payments Set Aside**. To the extent that any paymentby or on behalf of the Borrowers is made to the Administrative Agent or anyLender, or the Administrative Agent or any Lender exercises its right ofsetoff, and such payment or the proceeds of such setoff or any part thereof issubsequently invalidated, declared to be fraudulent or preferential, set asideor required (including pursuant to any settlement entered into by theAdministrative Agent or such Lender in its discretion) to be repaid to atrustee, receiver or any other party, in connection with any proceeding under anyDebtor Relief Law or

 

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## otherwise, then (a) to the extent ofsuch recovery, the obligation or part thereof originally intended to besatisfied shall be revived and continued in full force and effect as if suchpayment had not been made or such setoff had not occurred, and (b) eachLender severally agrees to pay to the Administrative Agent upon demand itsapplicable share (without duplication) of any amount so recovered from orrepaid by the Administrative Agent, plus interest thereon from the date of suchdemand to the date such payment is made at a rate per annum equal to theFederal Funds Rate from time to time in effect. The obligations of the Lendersunder clause (b) of the preceding sentence shall survive the payment infull of the Obligations and the termination of this Agreement.

##  

## **10.06****                ****Successors and Assigns.**

##  

### (a)                                  Successors and Assigns Generally. The provisions of thisAgreement shall be binding upon and inure to the benefit of the parties heretoand their respective successors and assigns permitted hereby, except thatneither of the Borrowers may assign or otherwise transfer any of its rights orobligations hereunder without the prior written consent of the AdministrativeAgent and each Lender and no Lender may assign or otherwise transfer any of itsrights or obligations hereunder except (i) to an assignee in accordancewith the provisions of subsection (b) of this Section, (ii) byway of participation in accordance with the provisions of subsection (d) ofthis Section, or (iii) by way of pledge or assignment of a securityinterest subject to the restrictions of subsection (f) of this Section (andany other attempted assignment or transfer by any party hereto shall be nulland void). Nothing in this Agreement, expressed or implied, shall be construedto confer upon any Person (other than the parties hereto, their respectivesuccessors and assigns permitted hereby, Participants to the extent provided insubsection (d) of this Section and, to the extent expresslycontemplated hereby, the Related Parties of each of the Administrative Agentand the Lenders) any legal or equitable right, remedy or claim under or byreason of this Agreement.

###  

### (b)                                 Assignments by Lenders. Any Lender may at any timeassign to one or more Eligible Assignees all or a portion of its rights andobligations under this Agreement (including all or a portion of its Commitmentand the Loans (including for purposes of this subsection (b),participations in Swingline Loans) at the time owing to it); providedthat any such assignment shall be subject to the following conditions:

###  

#### (i)                                     MinimumAmounts.

####  

##### (A)                              inthe case of an assignment of the entire remaining amount of the assigningLender’s Commitment and the Loans at the time owing to it or in the case of anassignment to a Lender, an Affiliate of a Lender or an Approved Fund, nominimum amount need be assigned; and

#####  

##### (B)                                inany case not described in subsection 10.06(b)(i)(A) of this Section,the aggregate amount of the Commitment (which for this purpose includes Loansoutstanding thereunder) or, if the Commitment is not then in effect, theprincipal outstanding balance of the Loans of the assigning Lender subject toeach such assignment, determined as of the date the Assignment and Assumptionwith respect to such assignment is delivered to the Administrative Agent or, if“Trade Date” is specified in the Assignment and Assumption, as of the TradeDate, shall not be less than $5,000,000****unless each ofthe Administrative Agent and, so long as no Event of Default has occurred andis continuing, each Borrower otherwise consents (each such consent not to beunreasonably withheld or delayed); provided, however, thatconcurrent assignments to members of an Assignee Group and concurrentassignments from members of an Assignee Group to a single

 

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##### assignee (or to an assignee andmembers of its Assignee Group) will be treated as a single assignment forpurposes of determining whether such minimum amount has been met.

#####  

#### (ii)                                  ProportionateAmounts. Each partial assignment shall be made as an assignment of aproportionate part of all the assigning Lender’s rights and obligations underthis Agreement with respect to the Loans or the Commitment assigned, except thatthis clause (ii) shall not apply to the Swingline Lender’s rights andobligations in respect of Swingline Loans;

####  

#### (iii)                               RequiredConsents. No consent shall be required for any assignment except to theextent required by subsection 10.06(b)(i)(B) of this Section and,in addition:

####  

##### (A)                              theconsent of each Borrower (such consent not to be unreasonably withheld ordelayed) shall be required unless (1) an Event of Default has occurred andis continuing at the time of such assignment or (2) such assignment is toa Lender, an Affiliate of a Lender or an Approved Fund;

#####  

##### (B)                                theconsent of the Administrative Agent (such consent not to be unreasonablywithheld or delayed) shall be required if such assignment is to a Person thatis not a Lender, an Affiliate of such Lender or an Approved Fund with respectto such Lender; and

#####  

##### (C)                                theconsent of the Swingline Lender (such consent not to be unreasonably withheldor delayed) shall be required if such assignment is to a Person that is not aLender, an Affiliate of such Lender or an Approved Fund with respect to suchLender.

#####  

#### (iv)                              Assignmentand Assumption. The parties to each assignment shall execute and deliver tothe Administrative Agent an Assignment and Assumption, together with aprocessing and recordation fee in the amount, if any, required as set forth in Schedule 10.06;provided, however, that the Administrative Agent may, in its solediscretion, elect to waive such processing and recordation fee in the case ofany assignment. The assignee, if it is not a Lender, shall deliver to theAdministrative Agent an Administrative Questionnaire.

####  

#### (v)                                 NoAssignment to Borrowers. No such assignment shall be made to the Borrowersor any of the Borrowers’ Affiliates or Subsidiaries.

####  

#### (vi)                              NoAssignment to Natural Persons. No such assignment shall be made to anatural person.

####  

Subject to acceptance and recording thereof by the Administrative Agentpursuant to subsection (c) of this Section, from and after theeffective date specified in each Assignment and Assumption, the assigneethereunder shall be a party to this Agreement and, to the extent of theinterest assigned by such Assignment and Assumption, have the rights andobligations of a Lender under this Agreement, and the assigning Lenderthereunder shall, to the extent of the interest assigned by such Assignment andAssumption, be released from its obligations under this Agreement (and, in thecase of an Assignment and Assumption covering all of the assigning Lender’srights and obligations under this Agreement, such Lender shall cease to be aparty hereto) but shall continue to be entitled to the benefits of Sections 3.01,3.04, 3.05, and 10.04 with respect to facts andcircumstances occurring prior to the effective date of such assignment. Uponrequest, each Borrower (at its expense) shall execute and deliver a Note to theassignee Lender. Any assignment or transfer by a Lender of rights orobligations under this Agreement that does

 

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not comply with this subsection shall betreated for purposes of this Agreement as a sale by such Lender of aparticipation in such rights and obligations in accordance with subsection (d) ofthis Section.

 

### (c)                                  Register. The Administrative Agent,acting solely for this purpose as an agent of the Borrowers, shall maintain atthe Administrative Agent’s Office a copy of each Assignment and Assumptiondelivered to it and a register for the recordation of the names and addressesof the Lenders, and the Commitments of, and principal amounts of the Loans owingto, each Lender pursuant to the terms hereof from time to time (the “Register”).The entries in the Register shall be conclusive, and the Borrowers, theAdministrative Agent and the Lenders may treat each Person whose name isrecorded in the Register pursuant to the terms hereof as a Lender hereunder forall purposes of this Agreement, notwithstanding notice to the contrary and thetransfer of any Loan shall not be recognized except to the extent reflected onthe Register. The Register shall be available for inspection by the Borrowersand any Lender, at any reasonable time and from time to time upon reasonableprior notice. This Section 10.06 is intended to cause the Loans to betreated as being in registered form within the meaning of U.S. Treasury RegulationSection 103-1(c) and will be interpreted in accordance with thatintention.

###  

### (d)                                 Participations. Any Lender may at any time,without the consent of, or notice to, the Borrowers or the AdministrativeAgent, sell participations to any Person (other than a natural person or theBorrowers or any of the Borrowers’ Affiliates or Subsidiaries) (each, a “Participant”)in all or a portion of such Lender’s rights and/or obligations under thisAgreement (including all or a portion of its Commitment and/or the Loans(including such Lender’s participations in Swingline Loans) owing to it); providedthat (i) such Lender’s obligations under this Agreement shall remainunchanged, (ii) such Lender shall remain solely responsible to the otherparties hereto for the performance of such obligations and (iii) theBorrowers, the Administrative Agent and the Lenders shall continue to dealsolely and directly with such Lender in connection with such Lender’s rightsand obligations under this Agreement.

###  

Any agreement or instrument pursuant to which a Lender sells such aparticipation shall provide that such Lender shall retain the sole right toenforce this Agreement and to approve any amendment, modification or waiver ofany provision of this Agreement; provided that such agreement orinstrument may provide that such Lender will not, without the consent of theParticipant, agree to any amendment, waiver or other modification described inthe first proviso to Section 10.01 that affects such Participant. Subjectto subsection (e) of this Section, each Borrower agrees that eachParticipant shall be entitled to the benefits of Sections 3.01, 3.04and 3.05 to the same extent as if it were a Lender and had acquired itsinterest by assignment pursuant to subsection (b) of this Section. Tothe extent permitted by law, each Participant also shall be entitled to thebenefits of Section 10.08**as though itwere a Lender, provided such Participant agrees to be subject to Section 2.12as though it were a Lender.

 

### (e)                                  Limitations upon ParticipantRights. AParticipant shall not be entitled to receive any greater payment under Section 3.01or 3.04**than the applicable Lender would havebeen entitled to receive with respect to the participation sold to suchParticipant, unless the sale of the participation to such Participant is madewith the Borrowers’ prior written consent. A Participant that would be aForeign Lender if it were a Lender shall not be entitled to the benefits of Section 3.01unless the Borrowers are notified of the participation sold to such Participantand such Participant agrees, for the benefit of the Borrowers, to comply with Section 3.01(e) asthough it were a Lender.

###  

### (f)                                    Certain Pledges. Any Lender may at any timepledge or assign a security interest in all or any portion of its rights underthis Agreement (including under its Note, if any) to secure obligations of suchLender, including any pledge or assignment to secure obligations to a FederalReserve Bank; provided that no such pledge or assignment shall releasesuch Lender from any of its obligations hereunder or substitute any suchpledgee or assignee for such Lender as a party hereto.

 

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### (g)           Electronic Execution ofAssignments. Thewords “execution,” “signed,” “signature,” and words of like import in anyAssignment and Assumption shall be deemed to include electronic signatures orthe keeping of records in electronic form, each of which shall be of the samelegal effect, validity or enforceability as a manually executed signature orthe use of a paper-based recordkeeping system, as the case may be, to theextent and as provided for in any applicable law, including the FederalElectronic Signatures in Global and National Commerce Act, the New York StateElectronic Signatures and Records Act, or any other similar state laws based onthe Uniform Electronic Transactions Act.

###  

### (h)           Resignation as Swingline Lenderafter Assignment.Notwithstanding anything to the contrary contained herein, if at any time Bankof America assigns all of its Commitment and Loans pursuant to subsection (b) above,Bank of America may upon 30 days’ notice to the Borrowers, resign asSwingline Lender. In the event of any such resignation as Swingline Lender, the Borrowersshall be entitled to appoint from among the Lenders a successor SwinglineLender hereunder; provided, however, that no failure by theBorrowers to appoint any such successor shall affect the resignation of Bank ofAmerica as Swingline Lender, as the case may be. If Bank of America resigns asSwingline Lender, it shall retain all the rights of the Swingline Lenderprovided for hereunder with respect to Swingline Loans made by it andoutstanding as of the effective date of such resignation, including the rightto require the Lenders to make Base Rate Loans, Daily Floating Eurodollar Loansor fund risk participations in outstanding Swingline Loans. Upon theappointment of a successor Swingline Lender, such successor shall succeed toand become vested with all of the rights, powers, privileges and duties of theretiring Swingline Lender, as the case may be.

###  

## **10.07****     ****Treatment of Certain Information;Confidentiality**.Each of the Administrative Agent and the Lenders agrees to maintain theconfidentiality of the Information (as defined below), except that Informationmay be disclosed (a) to its Affiliates and to its and its Affiliates’respective partners, directors, officers, employees, agents, advisors andrepresentatives, in each case, who have a need to know such Information inconnection with the performance of their respective duties hereunder (it beingunderstood that the Persons to whom such disclosure is made will be informed ofthe confidential nature of such Information and instructed to keep suchInformation confidential), (b) to the extent requested by any regulatoryauthority purporting to have jurisdiction over it (including anyself-regulatory authority, such as the National Association of Insurance Commissioners),(c) to the extent required by applicable laws or regulations or by anysubpoena or similar legal process, (d) to any other party hereto, (e) inconnection with the exercise of any remedies hereunder or under any other LoanDocument or any action or proceeding relating to this Agreement or any otherLoan Document or the enforcement of rights hereunder or thereunder, (f) subjectto an agreement executed and delivered to and for the benefit of the Borrowerscontaining provisions substantially the same as those of this Section, to (i) anyassignee of or Participant in, or any prospective assignee of or Participantin, any of its rights or obligations under this Agreement or (ii) anyactual or prospective counterparty (or its advisors) to any swap or derivativetransaction relating to any Borrower and its obligations, (g) with theconsent of the Borrowers or (h) to the extent such Information (x) becomespublicly available other than as a result of a breach of this Section or(y) becomes available to the Administrative Agent, any Lender or any of theirrespective Affiliates on a nonconfidential basis from a source other than theBorrowers.

##  

For purposes of this Section, “Information” means allinformation received from the Borrowers or any Subsidiary relating to theBorrowers or any Subsidiary (whether before or after the Closing Date) or anyof their respective businesses, other than any such information that isavailable to the Administrative Agent or any Lender on a nonconfidential basisprior to disclosure by the Borrowers or any Subsidiary, provided that,in the case of information received from the Borrowers or any Subsidiary afterthe date hereof, such information either is clearly identified at the time ofdelivery as confidential or is material non-public information. Any Personrequired to maintain the confidentiality of Information as provided in this Section shallbe considered to have complied with its obligation to do so if such Person has

 

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exercised the same degree of care to maintainthe confidentiality of such Information as such Person would accord to its ownconfidential information.

 

Each of the Administrative Agent and the Lenders acknowledges that (a) theInformation may include material non-public information concerning theBorrowers or a Subsidiary, as the case may be, (b) it has developedcompliance procedures regarding the use of material non-public information, (c) itwill handle such material non-public information in accordance with applicableLaw, including Federal and state securities Laws and (d) theconfidentiality provisions contained herein, [in so far as such provisionsrelate to material proprietary Information, shall survive for 12 monthsfollowing the Maturity Date and, in so far as such provisions relate tomaterial non-public information, shall survive indefinitely the Maturity Date].

 

## **10.08****     ****Right of Setoff**. If an Event of Default shallhave occurred and be continuing, each Lender and each of their respective Affiliatesis hereby authorized at any time and from time to time, after providing priorwritten notice to the Administrative Agent, to the fullest extent permitted byapplicable law, to set off and apply any and all deposits (general or special,time or demand, provisional or final, in whatever currency) at any time heldand other obligations (in whatever currency) at any time owing by such Lenderor any such Affiliate to or for the credit or the account of the applicableBorrower against any and all of the obligations of the applicable Borrower nowor hereafter existing under this Agreement or any other Loan Document to suchLender, irrespective of whether or not such Lender shall have made any demandunder this Agreement or any other Loan Document and although such obligationsof such Borrower may be contingent or unmatured or are owed to a branch oroffice of such Lender different from the branch or office holding such depositor obligated on such indebtedness. The rights of each Lender and theirrespective Affiliates under this Section are in addition to other rightsand remedies (including other rights of setoff) that such Lender or theirrespective Affiliates may have. Each Lender agrees to notify the Borrowers andthe Administrative Agent promptly after any such setoff and application, providedthat the failure to give such notice shall not affect the validity of suchsetoff and application.

##  

## **10.09****     ****Interest Rate Limitation**. Notwithstanding anything tothe contrary contained in any Loan Document, the interest paid or agreed to bepaid under the Loan Documents shall not exceed the maximum rate of non-usuriousinterest permitted by applicable Law (the “Maximum Rate”). If theAdministrative Agent or any Lender shall receive interest in an amount thatexceeds the Maximum Rate, the excess interest shall be applied to the principalof the Loans or, if it exceeds such unpaid principal, refunded to the Borrowers.In determining whether the interest contracted for, charged, or received by theAdministrative Agent or a Lender exceeds the Maximum Rate, such Person may, tothe extent permitted by applicable Law, (a) characterize any payment thatis not principal as an expense, fee, or premium rather than interest, (b) excludevoluntary prepayments and the effects thereof, and (c) amortize, prorate,allocate, and spread in equal or unequal parts the total amount of interestthroughout the contemplated term of the Obligations hereunder.

##  

## **10.10****     ****Counterparts; Integration;Effectiveness**. ThisAgreement may be executed in counterparts (and by different parties hereto indifferent counterparts), each of which shall constitute an original, but all ofwhich when taken together shall constitute a single contract. This Agreementand the other Loan Documents constitute the entire contract among the partiesrelating to the subject matter hereof and supersede any and all previousagreements and understandings, oral or written, relating to the subject matterhereof. Except as provided in Section 4.01, this Agreement shallbecome effective when it shall have been executed by the Administrative Agentand when the Administrative Agent shall have received counterparts hereof that,when taken together, bear the signatures of each of the other parties hereto. Deliveryof an executed counterpart of a signature page of this Agreement bytelecopy shall be effective as delivery of a manually executed counterpart ofthis Agreement.

 

78

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## **10.11****     ****Survival of Representations andWarranties**. Allrepresentations and warranties made hereunder and in any other Loan Document orother document delivered pursuant hereto or thereto or in connection herewithor therewith shall survive the execution and delivery hereof and thereof. Suchrepresentations and warranties have been or will be relied upon by theAdministrative Agent and each Lender, regardless of any investigation made bythe Administrative Agent or any Lender or on their behalf and notwithstandingthat the Administrative Agent or any Lender may have had notice or knowledge ofany Default at the time of any Borrowing, and shall continue in full force andeffect as long as any Loan or any other Obligation hereunder shall remainunpaid or unsatisfied.

##  

## **10.12****     ****Severability**. If any provision of thisAgreement or the other Loan Documents is held to be illegal, invalid orunenforceable, (a) the legality, validity and enforceability of theremaining provisions of this Agreement and the other Loan Documents shall notbe affected or impaired thereby and (b) the parties shall endeavor in goodfaith negotiations to replace the illegal, invalid or unenforceable provisionswith valid provisions the economic effect of which comes as close as possibleto that of the illegal, invalid or unenforceable provisions. The invalidity ofa provision in a particular jurisdiction shall not invalidate or renderunenforceable such provision in any other jurisdiction.

##  

## **10.13****     ****Replacement of Lenders**. If any Lender requestscompensation under Section 3.04, or if any Borrower is required topay any additional amount to any Lender or any Governmental Authority for theaccount of any Lender pursuant to Section 3.01, if any Lender givesa notice pursuant to Section 3.02 or if any Lender is a Defaulting Lenderor if any other circumstance exists hereunder that gives any Borrower the rightto replace a Lender as a party hereto, then such Borrower may, at its soleexpense and effort, upon notice to such Lender and the Administrative Agent,require such Lender to assign and delegate, without recourse (in accordancewith and subject to the restrictions contained in, and consents required by, Section 10.06),all of its interests, rights and obligations under this Agreement and therelated Loan Documents to an assignee that shall assume such obligations (whichassignee may be another Lender, if a Lender accepts such assignment), providedthat:

##  

### (a)           such Lender shall have received payment of an amount equalto the outstanding principal of its Loans, accrued interest thereon, accruedfees and all other amounts payable to it hereunder and under the other LoanDocuments (including any amounts under Section 3.05) from theassignee (to the extent of such outstanding principal and accrued interest andfees) or the Borrowers (in the case of all other amounts);

###  

### (b)           in the case of any such assignment resulting from a claimfor compensation under Section 3.04 or payments required to be madepursuant to Section 3.01, such assignment will result in areduction in such compensation or payments thereafter;

###  

### (c)           such assignment does not conflict with applicable Laws; and

###  

### (d)           such assignment is made in accordance with Section 10.06(b)(iii)(B).

###  

### (e)           A Lender shall not be required to make any such assignmentor delegation if, prior thereto, as a result of a waiver by such Lender or otherwise,the circumstances entitling the Borrowers to require such assignment anddelegation cease to apply.

###  

## **10.14****     ****Governing Law; Jurisdiction; Etc.**

##  

### (a)           GOVERNING LAW. THIS AGREEMENT SHALL BEGOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEWYORK, WITHOUT

###  

### 79

### 

###  

### REGARD TO THE CHOICE OF LAW PROVISIONSTHEREOF, OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONSLAW.

###  

### (b)           SUBMISSION TO JURISDICTION. EACH OF THE BORROWERS IRREVOCABLYAND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVEJURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTYAND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK,AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISINGOUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR FORRECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETOIRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCHACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATECOURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERALCOURT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCHACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHERJURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHINGIN THIS AGREEMENT OR IN ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT THEADMINISTRATIVE AGENT, ANY LENDER MAY OTHERWISE HAVE TO BRING ANY ACTION ORPROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST ANYBORROWER OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.

###  

### (c)           WAIVER OF VENUE. EACH OF THE BORROWERSIRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BYAPPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THELAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THISAGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO INPARAGRAPH (B) OF THIS SECTION. EACH OF THE PARTIES HERETO HEREBYIRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THEDEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION ORPROCEEDING IN ANY SUCH COURT.

###  

### (d)           SERVICE OF PROCESS. EACH PARTY HERETO IRREVOCABLYCONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 10.02.NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVEPROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.

###  

### (e)           **Waiver of Jury Trial**. EACH PARTY HERETO HEREBYIRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANYRIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY ORINDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOANDOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ONCONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THATNO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED,EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OFLITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THATIT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENTAND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS ANDCERTIFICATIONS IN THIS SECTION.

 

80

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## **10.15****     ****No Advisory or FiduciaryResponsibility**.In connection with all aspects of each transaction contemplated hereby, each ofthe Borrowers acknowledges and agrees, and acknowledges its Affiliates’understanding, that: (i) the credit facility provided for hereunder andany related arranging or other services in connection therewith (including inconnection with any amendment, waiver or other modification hereof or of anyother Loan Document) are an arm’s-length commercial transaction between theBorrowers and their respective Affiliates, on the one hand, and theAdministrative Agent and the Arranger, on the other hand, and each of theBorrowers is capable of evaluating and understanding and understands andaccepts the terms, risks and conditions of the transactions contemplated herebyand by the other Loan Documents (including any amendment, waiver or othermodification hereof or thereof); (ii) in connection with the processleading to such transaction, the Administrative Agent and the Arranger each isand has been acting solely as a principal and is not the financial advisor,agent or fiduciary, for the Borrowers or any of their respective Affiliates,stockholders, creditors or employees or any other Person; (iii) neitherthe Administrative Agent nor the Arranger has assumed or will assume anadvisory, agency or fiduciary responsibility in favor of the Borrowers withrespect to any of the transactions contemplated hereby or the process leadingthereto, including with respect to any amendment, waiver or other modificationhereof or of any other Loan Document (irrespective of whether theAdministrative Agent or the Arranger has advised or is currently advising theBorrowers or any of their respective Affiliates on other matters) and neitherthe Administrative Agent nor the Arranger has any obligation to the Borrowersor any of their respective Affiliates with respect to the transactionscontemplated hereby except those obligations expressly set forth herein and inthe other Loan Documents; (iv) the Administrative Agent and the Arrangerand their respective Affiliates may be engaged in a broad range of transactionsthat involve interests that differ from those of the Borrowers and theirrespective Affiliates, and neither the Administrative Agent nor the Arrangerhas any obligation to disclose any of such interests by virtue of any advisory,agency or fiduciary relationship; and (v) the Administrative Agent and theArranger have not provided and will not provide any legal, accounting,regulatory or tax advice with respect to any of the transactions contemplatedhereby (including any amendment, waiver or other modification hereof or of anyother Loan Document) and each of the Borrowers has consulted its own legal,accounting, regulatory and tax advisors to the extent it has deemed appropriate.Each of the Borrowers hereby waives and releases, to the fullest extentpermitted by law, any claims that it may have against the Administrative Agentand the Arranger with respect to any breach or alleged breach of agency orfiduciary duty.

##  

## **10.16****     ****USA PATRIOT Act Notice**. Each Lender that is subject tothe Patriot Act (as hereinafter defined) and the Administrative Agent (foritself and not on behalf of any Lender) hereby notifies the Borrowers thatpursuant to the requirements of the USA PATRIOT Act (Title III of Pub. L. 107-56(signed into law October 26, 2001)) (the “Patriot Act”), it isrequired to obtain, verify and record information that identifies theBorrowers, which information includes the name and address of the Borrowers andother information that will allow such Lender or the Administrative Agent, asapplicable, to identify the Borrowers in accordance with the Patriot Act.

##  

## **10.17****     ****Entire Agreement**. This Agreement and the otherLoan Documents represent the final agreement among the parties and may not becontradicted by evidence of prior, contemporaneous, or subsequent oralagreements of the parties. There are no unwritten oral agreements among theparties.

 

81

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*IN WITNESS WHEREOF,*theparties hereto have caused this Agreement to be duly executed as of the datefirst above written.

 
|   | **KKR FINANCIAL  CORP.**,    |
|--------|------------------------------|
|   |                         | ** ** | ** ** |
|   |                         | ** ** | ** ** |
|   | By:                          |   |   |
|   |                         | Name: |   |
|   |                         | Title: |   |
|   |                         |   |   |
|   | **KKR TRS  HOLDINGS, INC.**, |   |
|   | ** **                   |   |
|   | ** **                   |   |
|   | By:                          |   |   |
|   |                         | Name: |   |
|   |                         | Title: |   |

 

S-1

----

 
|   | **BANK OF AMERICA, N.A.,**as |   |
|--------|------------------------------|--------|
|   | Administrative  Agent        |   |
|   |                         |   |
|   |                         |   |
|   | By:                          |   |   |
|   | Name:                        |   |   |
|   | Title:                       |   |   |
|        |                              |        |  |  |  |

 

S-2

----

 
|   | **BANK OF  AMERICA, N.A.,**as a Lender, |   |
|--------|-----------------------------------------|--------|
|   | and  Swingline Lender                   |   |
|   |                                    |   |
|   |                                    |   |
|   | By:                                     |   |   |
|   | Name:                                   |   |   |
|   | Title:                                  |   |   |
|        |                                         |        |  |  |  |

 

S-3

----

 
|   | **CITIGROUP GLOBAL MARKETS INC.**, as  a Syndication Agent |   |
|--------|------------------------------------------------------------|--------|
|   |                                                       |   |
|   |                                                       |   |
|   | By:                                                        |   |   |
|   | Name:                                                      |   |   |
|   | Title:                                                     |   |   |
|        |                                                            |        |  |  |  |

 

S-4

----

 
|   | **CITICORP  NORTH AMERICA, INC.,**as  a |   |
|--------|-----------------------------------------|--------|
|   | Lender                                  |   |
|   |                                    |   |
|   |                                    |   |
|   | By:                                     |   |   |
|   | Name:                                   |   |   |
|   | Title:                                  |   |   |
|        |                                         |        |  |  |  |

 

S-5

----

 
|   | **JPMORGAN CHASE BANK, N.A.,**as a |   |
|--------|------------------------------------|--------|
|   | Syndication  Agent and a Lender    |   |
|   |                               |   |
|   |                               |   |
|   | By:                                |   |   |
|   | Name:                              |   |   |
|   | Title:                             |   |   |
|        |                                    |        |  |  |  |

 

S-6

----

 

***SCHEDULE 2.01***

 

**COMMITMENTSAND APPLICABLE PERCENTAGES**

 
| **Lender**            | ** ** | **Commitment** | ** **                                                                                       | **Applicable  Percentage** | ** **    |
|-----------------------|------------|----------------|--------------------------------------------------------------------------------------------------|----------------------------|---------------|
| Bank of America, N.A. |       |           |                                                                                             |                       |          |
|                  |       |           |                                                                                             |                       |          |
| Total                 |       | $              |                  |                       | 100.000000000 | % |
|                       |            |                |                                                                                                  |                            |               |  |

 

1

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***SCHEDULE 5.06***

 

**LITIGATION**

 

None.

 

1

----

 

***SCHEDULE 5.08***

 

**ENVIRONMENTAL MATTERS**

 

None.

 

1

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***SCHEDULE 7.01***

 

**EXISTING LIENS**

 

1

----

 

***SCHEDULE 7.03***

 

**EXISTING INDEBTEDNESS**

 

1

----

 

***SCHEDULE 7.08***

 

**BURDENSOME AGREEMENTS**

 

1

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***SCHEDULE 10.02***

 

**ADMINISTRATIVE AGENT’S OFFICE;CERTAIN ADDRESSES FOR NOTICES**

 

 

**KKRFINANCIAL CORP.**:

 

555 California Street, 50thFloor

San Francisco, CA 94104

Attention: Treasurer

Telephone:

Telecopier:415-391-3077

ElectronicMail:        @        

Website Address:                www.                                                    

U.S. Taxpayer Identification Number: 20-1426618

 

**KKR TRSHOLDINGS, INC.**

 

555 California Street, 50thFloor

San Francisco, CA 94104

Attention: Treasurer

Telephone:

Telecopier:  415-391-3077

ElectronicMail:           @          

Website Address:  www.                                                    

U.S. Taxpayer Identification Number: 20-1527391

 

**ADMINISTRATIVE AGENT**:

 

*Administrative Agent’s Office*

*(for payments and Requests for Borrowings):*

Bankof America, N.A.

901 Main Street, 14thFloor

Dallas, TX  75202

Attention:  Shelley A. Bloom, Credit Services

Telephone:  214-209-4103

Facsimile:  214-290-9462

Electronic Mail:  shelley.a.bloom@bankofamerica.com

Account No.: 1292000883

Account Name: Corporate Credit Services

Ref: KKR Financial

ABA# 026-009-593

 

*Other Notices as Administrative Agent:*

Bankof America, N.A.

901 Main Street, 66thFloor

Dallas, TX  75202

Attention:  Elizabeth Kurilecz, Senior Vice President

 

1

----

 

Telephone:  214-209-0975

Facsimile:  214-209-0670

Electronic Mail: elizabeth.kurilecz@bankofamerica.com

 

Bankof America, N.A.

901 Main Street, 14thFloor

Dallas, TX  75202

Attention:  Henry Pennell, Vice President

Telephone:  214-209-1226

Facsimile:  214-290-9448

Electronic Mail: henry.pennell@bankofamerica.com

 

**SWINGLINE LENDER**:

Bank of America, N.A.

901 Main Street, 66thFloor

Dallas, TX  75202

Attention:  Elizabeth Kurilecz, Senior Vice President

Telephone:  214-209-0975

Facsimile:  214-209-0670

ElectronicMail:elizabeth.kurilecz@bankofamerica.com

Account No.: 1292000883

Ref: KKR Financial

ABA# 026-009-593

 

2

----

 

***SCHEDULE 10.06***

 

**PROCESSING AND RECORDATION FEES**

 

The Administrative Agent will charge a processing and recordation fee(an “Assignment Fee”) in the amount of $2,500 for each assignment; provided,however, that in the event of two or more concurrent assignments tomembers of the same Assignee Group (which may be effected by a suballocation ofan assigned amount among members of such Assignee Group) or two or moreconcurrent assignments by members of the same Assignee Group to a single EligibleAssignee (or to an Eligible Assignee and members of its Assignee Group), theAssignment Fee will be $2,500 plus the amount set forth below:

 

| **Transaction**                                                                                                                                       | ** ** | **Assignment Fee** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------|------------|
|                                                                                                                                                  |       |                    |       |
| First four concurrent assignments or suballocations to members of an  Assignee Group (or from members of an Assignee Group, as applicable)            |       | -0-                     |       |
|                                                                                                                                                  |       |                    |       |
| Each additional concurrent assignment or suballocations to a member  of such Assignee Group (or from a member of such Assignee Group, as  applicable) |       | $                       | 500        |   |
|                                                                                                                                                       |            |                         |            |  |

 

1

----

 

***EXHIBIT A***

 

**FORM OF REVOLVING LOAN NOTICE**

 

Date:                      ,        

 

To:          Bankof America, N.A., as Administrative Agent

 

Ladies and Gentlemen:

 

Reference is made to that certain Credit Agreement, dated as of [                  ,           ] (asamended, restated, extended, supplemented or otherwise modified in writing fromtime to time, the “Agreement;” the terms defined therein being usedherein as therein defined), among KKR Financial Corp., KKR TRS Holdings, Inc.,the Lenders from time to time party thereto, Bank of America, N.A., asAdministrative Agent and Swingline Lender, and JPMorgan Chase Bank, N.A. andCitigroup Global Markets Inc., as Syndication Agents.

 

The undersigned hereby requests (select one):

 

o  A Borrowing of Revolving Loans               o  A conversion or continuation of Loans

 

o  In or oNot in connection with the purchase of an Eligible Specified Financial Asset.

 

1.             On                                                   (aBusiness Day).

 

2.             In the amount of$                             .

 

3.             Comprised of                                     .

[Type andTenor of Revolving Loan requested]

 

4.             For Fixed PeriodEurodollar Loans:  with an InterestPeriod of         months.

 

5.             [In connection withthe purchase of the following Eligible Specified Financial Asset in the amountindicated:

 

(a)           Obligor:                                                                       .]

 

(b)           CUSIP No. :                                                                        .]

 

(c)           Dollar Amount:                                                                        .]

 

(d)           Other Information:                                                                        .]

 

The Revolving Loan, if any, requested herein complies with the provisosto the first sentence of Section 2.01 of the Agreement.

 
|   |   | **[BORROWER]** |   |
|--------|--------|----------------|--------|
|   |   | ** **     |   |
|   |   | By:            |   |   |
|   |   | Name:          |   |   |
|   |   | Title:         |   |   |
|        |        |                |        |  |  |  |

 

A-1

----

 

***EXHIBIT B***

 

**FORM OF SWINGLINE LOAN NOTICE**

 

Date:                   ,        

 

To:          Bank of America, N.A.,as Swingline LenderBank of America, N.A., as Administrative Agent

 

Ladies and Gentlemen:

 

Reference is made to that certain Credit Agreement, dated as of [                ,         ] (as amended, restated,extended, supplemented or otherwise modified in writing from time to time, the “Agreement;”the terms defined therein being used herein as therein defined), among KKRFinancial Corp., KKR TRS Holdings, Inc., the Lenders from time to timeparty thereto, Bank of America, N.A., as Administrative Agent and SwinglineLender, and JPMorgan Chase Bank, N.A. and Citigroup Global Markets Inc., asSyndication Agents.

 

The undersigned hereby requests a Swingline Loan:

 

o  In or oNot in connection with the purchase of an Eligible Specified Financial Asset.

 

1.             On                                                      (aBusiness Day).

 

2.             In the amount of $                           .

 

3.             Comprised of                                   .

[Type andTenor of Swingline Loan requested]

 

4.             [In connection withthe purchase of the following Eligible Specified Financial Asset in the amountindicated:

 

(a)           Obligor:                                                                            .]

 

(b)           CUSIP No. :                                                                            .]

 

(c)           Dollar Amount:                                                                            .]

 

(d)           Other Information:                                                                            .]

 

The Swingline Borrowing requested herein complies with the requirementsof the provisos to the first sentence of Section 2.03(a) ofthe Agreement.

 
|   |   | **[BORROWER]** |   |
|--------|--------|----------------|--------|
|   |   | ** **     |   |
|   |   | By:            |   |   |
|   |   | Name:          |   |   |
|   |   | Title:         |   |   |
|        |        |                |        |  |  |  |

 

B-1

----

 

***EXHIBIT C***

 

**FORM OF PROMISSORY NOTE**

 

 

 

FOR VALUE RECEIVED, the undersigned (the “Borrower”) herebypromises to pay to                                      or registered assigns (the “Lender”), in accordance with the provisionsof the Agreement (as hereinafter defined), the principal amount of each[Revolving][Swingline] Loan from time to time made by the Lender to theBorrower under that certain Credit Agreement, dated as of [                    ,              ] (as amended, restated, extended,supplemented or otherwise modified in writing from time to time, the “Agreement;”the terms defined therein being used herein as therein defined), among KKRFinancial Corp., KKR TRS Holdings, Inc., the Lenders from time to timeparty thereto, Bank of America, N.A., as Administrative Agent and SwinglineLender, and JPMorgan Chase Bank, N.A. and Citigroup Global Markets Inc., asSyndication Agents.

 

The Borrowers promise to pay interest on the unpaid principal amount ofeach Loan from the date of such Loan until such principal amount is paid infull, at such interest rates and at such times as provided in the Agreement. [ForRevolving Loan Notes: Except as otherwise provided in the Agreement withrespect to Swingline Loans, all payments of principal and interest shall bemade to the Administrative Agent for the account of the Lender in Dollars inimmediately available funds at the Administrative Agent’s Office.]  If any amount is not paid in full when duehereunder, such unpaid amount shall bear interest, to be paid upon demand, fromthe due date thereof until the date of actual payment (and before as well asafter judgment) computed at the per annum rate set forth in the Agreement.

 

This Note is one of the Notes referred to in the Agreement, is entitledto the benefits thereof and may be prepaid in whole or in part subject to theterms and conditions provided therein. Upon the occurrence and continuation ofone or more of the Events of Default specified in the Agreement, all amountsthen remaining unpaid on this Note shall become, or may be declared to be,immediately due and payable all as provided in the Agreement. Loans made by theLender shall be evidenced by one or more loan accounts or records maintained bythe Lender in the ordinary course of business. The Lender may also attachschedules to this Note and endorse thereon the date, amount and maturity of itsLoans and payments with respect thereto.

 

Each Borrower, for itself, its successors and assigns, hereby waivesdiligence, presentment, protest and demand and notice of protest, demand, dishonorand non-payment of this Note.

 

C-1

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THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THELAWS OF THE STATE OF NEW YORK.

 
|   |   | **[BORROWER]** |   |
|--------|--------|----------------|--------|
|   |   | ** **     |   |
|   |   | By:            |   |   |
|   |   | Name:          |   |   |
|   |   | Title:         |   |   |
|        |        |                |        |  |  |  |

 

C-2

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**LOANS AND PAYMENTS WITH RESPECT THERETO**

 

 
| **Date** | ** ** | **Type of  Loan  Made** | ** ** | **Tenor of  Loan  Made** | ** ** | **Amount of  Loan  Made** | ** ** | **End of  Interest  Period** | ** ** | **Amount of  Principal or  Interest  Paid This  Date** | ** ** | **Outstanding  Principal  Balance This  Date** | ** ** | **Notation  Made By** | ** ** |
|----------|------------|------------------------------|------------|-------------------------------|------------|--------------------------------|------------|-----------------------------------|------------|-----------------------------------------------------------------------|------------|-----------------------------------------------------|------------|----------------------------|------------|
|     |       |                         |       |                          |       |                           |       |                              |       |                                                                  |       |                                                |       |                       |       |
|     |       |                         |       |                          |       |                           |       |                              |       |                                                                  |       |                                                |       |                       |       |
|     |       |                         |       |                          |       |                           |       |                              |       |                                                                  |       |                                                |       |                       |       |

 

C-3

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***EXHIBIT D***

 

**FORM OF BORROWING BASE REPORT**

 

Dated as of:                                                   

 

For the period ending:                                    

 

To:                              Bankof America, N.A., as Administrative Agent

 

Ladies and Gentlemen:

 

Reference is made to that certain Credit Agreement, dated as of [                            ,              ](as amended, restated, extended, supplemented or otherwise modified in writingfrom time to time, the “Agreement;” the terms defined therein being usedherein as therein defined), among KKR Financial Corp. (“KKR Financial”), KKRTRS Holdings, Inc. (together with KKR Financial, the “Borrowers” and eachindividually, a “Borrower”), the Lenders from time to time party thereto, Bankof America, N.A., as Administrative Agent and Swingline Lender, and JPMorganChase Bank, N.A. and Citigroup Global Markets Inc., as Syndication Agents.

 

The undersigned,                                                   ,the duly elected and qualified Responsible Officer[(s)] of the Borrowers herebycertifies that (a) the information set forth in this Borrowing Base Reportis true and correct as of the last day of the period specified herein, (b) therepresentations and warranties of each of the Borrowers contained in the CreditAgreement and the other Loan Documents are true and correct in all materialrespects on and as of the date of this Borrowing Base Report except to theextent such representations and warranties relate solely to an earlier date, (c) thisBorrowing Base Report has been prepared in accordance with the applicableprovisions of the Credit Agreement relating to the computation of the BorrowingBase and the various components thereof, and (d) as of the date of thisBorrowing Base Report, there exists no Default or Event of Default.

 
|   | **KKR FINANCIAL CORP.**         |
|--------|---------------------------------|
|   |                            |
|   |                            |
|   | By:                             |   |   |
|   |                            | Name: |
|   |                            | Title: |
|   |                            |
|   |                            |
|   | **KKR TRS HOLDINGS, INC.** |
|   |                            |
|   |                            |
|   | By:                             |   |   |
|   |                            | Name: |
|   |                            | Title: |

 

D-1

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| **Borrowing Base Worksheet** |
|------------------------------|
| **TRANCHE A**                |

 
| **Eligible Specified  Financial Asset***Include within each category below a reasonably detailed description  of each Eligible Specified Financial Asset within such category to be  included in the Borrowing Base. | ** ** | **Value(1)**         | ** ** | **Date Pledged** | ** ** | **Valuation  Source** | ** ** | **Specified  Percentage** | ** ** | **Concentration Limit  (if applicable)(2) or  Applicable  Sublimit(3)** | ** ** | **Total**  | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------|------------|-----------------------|------------|-----------------------|------------|---------------------------|------------|------------------------------------------------------------------------------|------------|------------|------------|
| ** **                                                                                                                                                                                                           | ** ** | **multiplied****by** | ** ** | ** **            | ** ** | ** **            | ** ** | ** **                | ** ** | **equals**                                                                   | ** ** | ** ** | ** ** |
| Cash                                                                                                                                                                                                                 |       |                 |       |                  |       |                  |       | 100                       | %          |                                                                         |       |       |       |
| Certificates  of deposit                                                                                                                                                                                             |       |                 |       |                  |       |                  |       | 95                        | %          |                                                                         |       |       |       |
| Commercial  paper                                                                                                                                                                                                    |       |                 |       |                  |       |                  |       | 95                        | %          |                                                                         |       |       |       |
| United  States obligations consisting of interest rate strips or zero coupon  obligations                                                                                                                            |       |                 |       |                  |       |                  |       | 90                        | %          |                                                                         |       |       |       |
| Other  United States obligations maturing in 10 or more and up to 30 years                                                                                                                                           |       |                 |       |                  |       |                  |       | 95                        | %          |                                                                         |       |       |       |

 

----

(1)           As determined pursuant to thedefinition of Value in the Credit Agreement.

 

(2)           Pursuant to the definition of ConcentrationLimit: (i) the exclusion from the Tranche B Borrowing Base of an amount(without duplication) attributable to any second lien Bank Loans, MezzanineObligations and Bridge Loans considered in the aggregate (including withoutlimitation any of the same that are also Delayed Draw Loans), to the extentthat the amount included in such Borrowing Base would exceed 50% of theAggregate Revolving Commitment Amount, (ii) with respect to any singleEligible Specified Financial Asset (other than CLO/CBO/CDO Tranches), theexclusion from the Tranche B Borrowing Base of an amount attributable to suchEligible Specified Financial Asset, to the extent that (a) the amountincluded in such Borrowing Base would exceed the applicable maximum Net ValueAmount for each category as specified in the chart set forth in the definitionof “Concentration Limit” and (b) the number of investments in any singleEligible Specified Financial Asset exceeds the maximum number of investmentsfor each category as specified in the chart set forth in the definition of “ConcentrationLimit”, (iii) with respect to any Single Obligor of one or more EligibleSpecified Financial Assets (other than CLO/CBO/CDO Tranches), the exclusionfrom the Tranche B Borrowing Base of an amount attributable to such SingleObligor, to the extent that (a) the amount included in the Borrowing Basewould exceed the applicable maximum Net Value Amount for each category asspecified in the chart set forth in the definition of “Concentration Limit” and(b) the number of investments attributable to any Single Obligor exceedsthe maximum number of investments for each category as specified in the chartset forth in the definition of “Concentration Limit” and (iv) with respectto any first lien Bank Loans, second lien Bank Loans, Mezzanine Obligations,Bridge Loans and MBS IOs, to the extent there is no Debt Rating (each, an “UnratedAsset”), considered individually, with no Debt Rating, the exclusion from theTranche B Borrowing Base of an amount attributable to such Eligible SpecifiedFinancial Asset, to the extent that (a) the amount included in suchBorrowing Base would exceed the applicable maximum Net Value Amount for eachcategory as specified in the chart set forth in the definition of “ConcentrationLimit” and (b) the number of investments in any unrated Eligible SpecifiedFinancial Asset exceeds the maximum number of investments for each category asspecified in the chart set forth in the definition of “Concentration Limit” and(v) the exclusion from the Tranche B Borrowing Base of an amountattributable to CLO/CBO/CDO Tranches considered in the aggregate, to the extentthat the amount included in such Borrowing Base would exceed 50% of theAggregate Revolving Commitment Amount.

 

(3)           Pursuant to the definition of ApplicableSublimit, amounts shall be included to the extent that the amount included inthe Tranche B Borrowing Base would exceed the amount/maximum time period shownin the chart for the applicable Eligible Specified Financial Asset.

 

D-2

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| **Eligible Specified  Financial Asset***Include within each category below a reasonably detailed description  of each Eligible Specified Financial Asset within such category to be  included in the Borrowing Base. | ** ** | **Value(1)**         | ** ** | **Date Pledged** | ** ** | **Valuation  Source** | ** ** | **Specified  Percentage** | ** ** | **Concentration Limit  (if applicable)(2) or  Applicable  Sublimit(3)** | ** ** | **Total**  | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------|------------|-----------------------|------------|-----------------------|------------|---------------------------|------------|------------------------------------------------------------------------------|------------|------------|------------|
| ** **                                                                                                                                                                                                           | ** ** | **multiplied****by** | ** ** | ** **            | ** ** | ** **            | ** ** | ** **                | ** ** | **equals**                                                                   | ** ** | ** ** | ** ** |
| Other United States obligations maturing in 2 or more but less than  10 years                                                                                                                                        |       |                 |       |                  |       |                  |       | 97                        | %          |                                                                         |       |       |       |
| Other United States obligations maturing in less than 2 years                                                                                                                                                        |       |                 |       |                  |       |                  |       | 98                        | %          |                                                                         |       |       |       |
| MBS rated AAA and with a weighted average life of less than five  years                                                                                                                                              |       |                 |       |                  |       |                  |       | 95                        | %          |                                                                         |       |       |       |
| MBS rated AA to AA+ and with a weighted average life of less than  five years                                                                                                                                        |       |                 |       |                  |       |                  |       | 90                        | %          |                                                                         |       |       |       |
| MBS rated A to AA- and with a weighted average life of less than five  years                                                                                                                                         |       |                 |       |                  |       |                  |       | 85                        | %          |                                                                         |       |       |       |

 
| **Borrowing Base Worksheet** |
|------------------------------|
| **TRANCHE B**                |

 
| **Eligible Specified  Financial Asset***Include within each category below a reasonably detailed description  of each Eligible Specified Financial Asset within such category to be  included in the Borrowing Base. | ** ** | **Value(1)**         | ** ** | **Date Pledged** | ** ** | **Valuation  Source** | ** ** | **Specified  Percentage** | ** ** | **Concentration Limit  (if applicable)(2) or  Applicable  Sublimit(3)** | ** ** | **Total**  | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------|------------|-----------------------|------------|-----------------------|------------|---------------------------|------------|------------------------------------------------------------------------------|------------|------------|------------|
| ** **                                                                                                                                                                                                           | ** ** | **multiplied****by** | ** ** | ** **            | ** ** | ** **            | ** ** | ** **                | ** ** | **equals**                                                                   | ** ** | ** ** | ** ** |
| Publicly traded investment grade Debt Securities                                                                                                                                                                     |       |                 |       |                  |       |                  |       |                      |       |                                                                         |       |       |       |
| a. BBB+ or higher                                                                                                                                                                                                    |       |                 |       |                  |       |                  |       | 90                        | %          |                                                                         |       |       |       |
| b. BBB thru BBB-                                                                                                                                                                                                     |       |                 |       |                  |       |                  |       | 80                        | %          |                                                                         |       |       |       |
| Rule 144A private placed Debt Securities                                                                                                                                                                        |       |                 |       |                  |       |                  |       |                      |       | Unlimited(4)                                                                 |       |       |       |

 

----

(4)           Subject to no restrictions on Bank ofAmerica’s ability as Administrative Agent to sell any securities financed inthe Senior Credit Facility. A sublimit of 15% of the Aggregate CommitmentAmount will apply to 144A privately placed debt transactions that are less than$100 million in aggregate and in which KKR Financial owns more than 33% of thetotal issuance.

 

D-3

----

 
| **Eligible Specified  Financial Asset***Include within each category below a reasonably detailed description  of each Eligible Specified Financial Asset within such category to be  included in the Borrowing Base. | ** ** | **Value(1)**         |       | **Date Pledged** | ** ** | **Valuation  Source** | ** ** | **Specified  Percentage** | ** ** | **Concentration Limit  (if applicable)(2) or  Applicable  Sublimit(3)** | ** ** | **Total**  | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------|------------|-----------------------|------------|-----------------------|------------|---------------------------|------------|------------------------------------------------------------------------------|------------|------------|------------|
| ** **                                                                                                                                                                                                           | ** ** | **multiplied****by** | ** ** | ** **            | ** ** | ** **            | ** ** | ** **                | ** ** | **equals**                                                                   | ** ** | ** ** | ** ** |
| a. NAIC 1 / AAA thru A-                                                                                                                                                                                              |       |                 |       |                  |       |                  |       | 85                        | %          |                                                                         |       |       |       |
| b. NAIC 2 / BBB+ thru BBB-                                                                                                                                                                                           |       |                 |       |                  |       |                  |       | 80                        | %          |                                                                         |       |       |       |
| c. NAIC 3 / BB+ thru BB                                                                                                                                                                                              |       |                 |       |                  |       |                  |       | 75                        | %          |                                                                         |       |       |       |
| d. NAIC 4 / BB- thru B-                                                                                                                                                                                              |       |                 |       |                  |       |                  |       | 60                        | %          |                                                                         |       |       |       |
| e. NAIC 5 / CCC+ thru CCC-                                                                                                                                                                                           |       |                 |       |                  |       |                  |       | 50                        | %          |                                                                         |       |       |       |
| Other Debt Securities, excluding MBS, rated BB+/Bal through BB-/B3                                                                                                                                                   |       |                 |       |                  |       |                  |       | 75                        | %          |                                                                         |       |       |       |
| Other Debt Securities, excluding MBS, rated B+/B1 through B-/B3                                                                                                                                                      |       |                 |       |                  |       |                  |       | 60                        | %          |                                                                         |       |       |       |
| Other Debt Securities, excluding MBS, rated CCC+/Caal through  CCC-/Caa3                                                                                                                                             |       |                 |       |                  |       |                  |       | 50                        | %          |                                                                         |       |       |       |
| First lien Bank Loans                                                                                                                                                                                                |       |                 |       |                  |       |                  |       | 85                        | %          |                                                                         |       |       |       |
| Second lien Bank Loans                                                                                                                                                                                               |       |                 |       |                  |       |                  |       | 70                        | %          | Amount in  excess of 50% of the Aggregate Commitment Amount                  |       |       |       |
| Real estate related Mezzanine Obligations                                                                                                                                                                            |       |                 |       |                  |       |                  |       | 60                        | %          | Amount in  excess of 50% of the Aggregate Commitment Amount                  |       |       |       |
| Mezzanine Obligations (other than real estate related Mezzanine Obligations)                                                                                                                                         |       |                 |       |                  |       |                  |       | 50                        | %          | Amount in  excess of 50% of the Aggregate Commitment Amount                  |       |       |       |
| Bridge Loans                                                                                                                                                                                                         |       |                 |       |                  |       |                  |       | 50                        | %          | Amount in  excess of 50% of the Aggregate Commitment Amount                  |       |       |       |
| MBS rated BBB- to A- and with a weighted average life of less than  five years                                                                                                                                       |       |                 |       |                  |       |                  |       | 75                        | %          |                                                                         |       |       |       |
| MBS rated BB- to BB+ and with a weighted average life of less than  five years                                                                                                                                       |       |                 |       |                  |       |                  |       | 50                        | %          |                                                                         |       |       |       |

 

D-4

----

 
| **Eligible Specified  Financial Asset***Include within each category below a reasonably detailed description  of each Eligible Specified Financial Asset within such category to be  included in the Borrowing Base. | ** ** | **Value(1)**         | ** ** | **Date Pledged** | ** ** | **Valuation  Source** | ** ** | **Specified  Percentage** | ** ** | **Concentration Limit  (if applicable)(2) or  Applicable  Sublimit(3)** | ** ** | **Total**  | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------|------------|-----------------------|------------|-----------------------|------------|---------------------------|------------|------------------------------------------------------------------------------|------------|------------|------------|
| ** **                                                                                                                                                                                                           | ** ** | **multiplied****by** | ** ** | ** **            | ** ** | ** **            | ** ** | ** **                | ** ** | **equals**                                                                   | ** ** | ** ** | ** ** |
| CLO/CBO/CDO Tranches rated BB+/Ba1 or lower (including non-rated) on  transactions managed by KKR Financial LLC or an Affiliate thereof                                                                              |       |                 |       |                  |       |                  |       | 40                        | %          | Amount in  excess of 50% of the Aggregate Commitment Amount                  |       |       |       |
| Investments Denominated in Foreign Currency (Euros, Pounds or Yen)                                                                                                                                                   |       |                 |       |                  |       |                  |       | Various(5)                |       | Amount in  excess of $100 million                                            |       |       |       |
| KKR Financial CLO/CBO/CDO Securitizations                                                                                                                                                                            |       |                 |       |                  |       |                  |       | ** **                |       | ** **                                                                   |       |       |       |
| a. AAA thru A-                                                                                                                                                                                                       |       |                 |       |                  |       |                  |       | 90                        | %          | $200  million(6)                                                             |       |       |       |
| b. BBB+ and BBB                                                                                                                                                                                                      |       |                 |       |                  |       |                  |       | 80                        | %          | $100  million(6)                                                             |       |       |       |
| MBS IO Strips                                                                                                                                                                                                        |       |                 |       |                  |       |                  |       |                      |       | Amount in  excess of                                                         |       |       |       |
| a. FNMA IOs                                                                                                                                                                                                          |       |                 |       |                  |       |                  |       | 50                        | %          | $50 million                                                                  |       |       |       |
| b. Non-Agency IOs                                                                                                                                                                                                    |       |                 |       |                  |       |                  |       | 40                        | %          | ** **                                                                   |       |       |       |
| Senior Unsecured Bank Loans                                                                                                                                                                                          |       |                 |       |                  |       |                  |       | ** **                |       | ** **                                                                   |       |       |       |
| a. BBB- or higher                                                                                                                                                                                                    |       |                 |       |                  |       |                  |       | 80                        | %          | ** **                                                                   |       |       |       |
| b. BB+ thru BB-                                                                                                                                                                                                      |       |                 |       |                  |       |                  |       | 75                        | %          | ** **                                                                   |       |       |       |
| c. B+ thru B-                                                                                                                                                                                                        |       |                 |       |                  |       |                  |       | 70                        | %          |                                                                         |       |       |       |
| d. CCC+ thru CCC-                                                                                                                                                                                                    |       |                 |       |                  |       |                  |       | 50                        | %          | Amount in  excess of $100 million                                            |       |       |       |
| ** **                                                                                                                                                                                                           |       |                 |       |                  |       |                  |       | ** **                |       | **Subtotal**                                                                 |       |       |       |
| ** **                                                                                                                                                                                                           |       |                 |       |                  |       |                  |       | ** **                |       | **Borrowing Base**=                                                          |       |       |       |

 

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(5)           Specified Percentage should be same as the SpecifiedPercentages applicable to U.S. currency denominated assets if micro hedged forforeign exchange. If not, the Specified Percentage should be decreased by 5%. Subjectto confirmation of obtaining first lien on foreign exchange hedges.

 

(6)           Amounts attributable to CLO/CBO/CDOSecuritizations rated BBB or better shall be excluded from the Tranche BBorrowing Base to the extent that any such Eligible Specified Financial Assetshave been included in such Borrowing Base for more than 120 days.

 

D-5

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* Exclude any Specified Financial Asset, or Participation Interesttherein, of any Borrower to the extent such Specified Financial Asset, orParticipation Interest therein, fails to satisfy each of the following criteriapursuant to the definition of Eligible Specified Financial Asset.

 

(a)                        in which,to secure the Obligations, whether contingent or otherwise, the AdministrativeAgent has a security interest (i) perfected by the Administrative Agent’spossession or by “control” (as defined in §§ 8-106, 9-104, 9-105 and 9-106of the Uniform Commercial Code of the State of New York) in favor of theAdministrative Agent (with, if the Administrative Agent so elects andterminates the Collateral Agreement, another custodian or securitiesintermediary designated by the Administrative Agent with the Borrowers’consent, which consent shall not be unreasonably withheld or delayed, for thepurposes of obtaining control), or, if in the reasonable opinion of theAdministrative Agent it is not possible or practicable to perfect the securityinterest by the Administrative Agent’s possession or by “control” in favor ofthe Administrative Agent, is otherwise perfected, and perfected in such a wayas to be entitled to first priority, to the reasonable satisfaction of theAdministrative Agent and (ii) is capable of being enforced by theAdministrative Agent without the consent of any third party (other than, in thecase of a Specified Asset that is a loan, the customary requirement of theconsent of the administrative agent or, unless the loan is in default, borroweror material obligor of the loan) or resort to judicial process;

 

(b)                       which isnot otherwise subject to any prior security interest, lien or encumbrance otherthan liens in favor of the Administrative Agent for the benefit of the Lenders;

 

(c)                        which isnot in default as of the date on which such asset was acquired by theBorrowers;

 

(d)                       which isnot subject to any right of recoupment or set-off;

 

(e)                        in respectof which, unless under the “control” of the Administrative Agent acting as asecurities intermediary, such Borrower has issued to the applicable issuer ormaterial obligor (or, if payments are made through an agent, to the applicableagent) an instruction directing all payments of amounts payable to suchBorrower in respect of such Specified Financial Asset to the Custodial Accountor another account approved by the Administrative Agent;

 

(f)                          theValue of which to be included, for purposes of the computation of theapplicable Borrowing Base at any time, has been obtained, or, if required to beupdated, has been obtained in response to the update requirement, and to theextent such Value is not being disputed by the Administrative Agent;

 

(g)                       for whichthe depositary bank, issuer or material obligor, as the case may be,excluding any issuer of securities by a special purpose entity in asecuritization, is organized and has its chief executive office in (i) theUnited States of America, or (ii) if approved by the Administrative Agentin its sole discretion, whichshall be exercised in a commercially reasonable manner, Belgium, France,Italy, Luxembourg, Netherlands, Germany, Denmark, Ireland, United Kingdom,Austria, Finland. Sweden or Japan;

 

(h)                       which isdenominated in U.S. Dollars, Euros, British Pounds or Japanese Yen;

 

D-6

----

 

(i)                           is not “marginstock” as defined in Regulation U of the Federal Reserve Board;

 

(j)                           in thecase of a first or second lien Bank Loan, Mezzanine Obligation or Bridge Loan,that is a term loan, and is either a Delayed Draw Loan or has been fully funded(i.e., is not subject to an additional lending commitment) and is not indefault; and

 

(k)                        in thecase of a Participation Interest, which the Administrative Agent is reasonablysatisfied is a “true” participating interest rather than being a financing andis consistent with market norms for agreements between unaffiliated entitiesdealing at arm’s length.

 

Notwithstanding the foregoing, in the case of an asset included in theapplicable Borrowing Base solely pursuant to the proviso of the definition ofeither Tranche A Borrowing Base or Tranche B Borrowing Base contained in theCredit Agreement in connection with a Borrowing the requirements of clauses(a), (b), (c) and (d) need not be met for the asset to qualify as anEligible Specified Financial Asset until the expiration of three Business Daysfollowing the date of the Borrowing so long as during the three Business Dayperiod, the Administrative Agent has a perfected security interest in theasset, *provided*, *however*, that the Value of the asset doesnot exceed $25,000,000.

 

D-7

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ANNEX 1

 

DESCRIPTION OF EACH ELIGIBLESPECIFIED FINANCIAL ASSET

 

[To include all RelatedBorrowing Base Information for each Eligible Specified Financial Asset to beincluded in the Borrowing Base]

 

D-8

----

 

***EXHIBIT E***

 

**FORM OF COMPLIANCE CERTIFICATE**

 

Financial Statement Date:                         ,        

 

To:                              Bankof America, N.A., as Administrative Agent

 

Ladies and Gentlemen:

 

Reference is made to that certain Credit Agreement, dated as of [                      ,          ] (as amended,restated, extended, supplemented or otherwise modified in writing from time totime, the “Agreement;” the terms defined therein being used herein astherein defined), among KKR Financial Corp. (“KKR Financial”), KKR TRS Holdings, Inc.,the Lenders from time to time party thereto, Bank of America, N.A., asAdministrative Agent and Swingline Lender, and JPMorgan Chase Bank, N.A. andCitigroup Global Markets Inc., as Syndication Agents.

 

The undersigned Responsible Officer hereby certifies as of the datehereof that he/she is the                                                     of KKR Financial, and that, as such, he/she is authorized to execute anddeliver this Certificate to the Administrative Agent on the behalf of KKRFinancial, and that:

 

*[Usefollowing paragraph 1 for fiscal **year-end**financial statements]*

 

1.                                       TheBorrowers have made available to the Lenders the year-end audited financialstatements required by Section 6.01(a) of the Agreement forthe fiscal year of KKR Financial ended as of the above date, together with thereport and opinion of an independent certified public accountant required bysuch section.

 

*[Use following paragraph 1 for fiscal **quarter-end** financial statements]*

 

1.                                       TheBorrowers have made available to the Lenders the unaudited financial statementsrequired by Section 6.01(b) of the Agreement for the fiscalquarter of KKR Financial ended as of the above date. Such financial statementsfairly present the financial condition, results of operations and cash flows ofKKR Financial and its Subsidiaries in accordance with GAAP as at such date andfor such period, subject only to normal year-end audit adjustments and theabsence of footnotes.

 

2.                                       Theundersigned has reviewed and is familiar with the terms of the Agreement andhas made, or has caused to be made under his/her supervision, a detailed reviewof the transactions and condition (financial or otherwise) of KKR Financialduring the accounting period covered by the financial statements referred toabove.

 

3.                                       Areview of the activities of KKR Financial during such fiscal period has beenmade under the supervision of the undersigned with a view to determiningwhether during such fiscal period KKR Financial performed and observed all itsObligations under the Loan Documents, and

 

*[select one:]*

 

[to the best knowledge of the undersigned during such fiscal period,KKR Financial performed and observed each covenant and condition of the LoanDocuments applicable to it, and no Default has occurred and is continuing.]

 

E-1

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*—or—*

 

[the following covenants or conditions have not been performed orobserved and the following is a list of each such Default and its nature andstatus:]

 

4.                                       Therepresentations and warranties of KKR Financial contained in Article Vof the Agreement, and any representations and warranties of any Borrower thatare contained in any document furnished at any time under or in connection withthe Loan Documents, are true and correct on and as of the date hereof, exceptto the extent that such representations and warranties specifically refer to anearlier date, in which case they are true and correct as of such earlier date,and except that for purposes of this Compliance Certificate, therepresentations and warranties contained in subsections (a) and (b) ofSection 5.05 of the Agreement shall be deemed to refer to the mostrecent statements furnished pursuant to clauses (a) and (b), respectively,of Section 6.01 of the Agreement, including the statements inconnection with which this Compliance Certificate is delivered.

 

5.                                       Thefinancial covenant analyses and information set forth on Schedules 2 and3 attached hereto are true and accurate on and as of the date of thisCertificate.

 

*IN WITNESS WHEREOF,* the undersigned hasexecuted this Certificate as of                                        ,        .

 
|   | **KKR FINANCIAL CORP.**         |
|--------|---------------------------------|
|   | ** **                      |
|   |                            |
|   | By:                             |   |   |
|   |                            | Name: |   |
|   |                            | Title: |   |
|   |                            |
|   |                            |
|   | **KKR TRS HOLDINGS, INC.** |
|   | ** **                      |
|   |                            |
|   | By:                             |   |   |
|   |                            | Name: |   |
|   |                            | Title: |   |

 

E-2

----

 

For the Quarter/Year ended                                          (“StatementDate”)

 

**SCHEDULE 2**to the Compliance Certificate($ in 000’s)

 
| **I.**     | **Section 7.10(a) – Consolidated  Tangible Net Worth.** | ** **                                                                                                             |
|------------|------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------|
| ** ** | ** **                                                             | ** **                                                                                                             |
| ** ** | A.                                                                     | Actual Consolidated Tangible Net Worth at Statement Date:                                                              |   |
|       |                                                                   |                                                                                                                   |
|       |                                                                   | 1.                                                                                                                     | Consolidated Total Assets: | $ |
|       |                                                                   |                                                                                                                   |   |   |
|       |                                                                   | 2.                                                                                                                     | Intangible Assets: | $ |
|       |                                                                   |                                                                                                                   |   |   |
|       |                                                                   | 3.                                                                                                                     | Consolidated Tangible Net Worth (Line I.A1  less Line I.A.2): | $ |
|       |                                                                   |                                                                                                                   |
|       | B.                                                                     | 85% of  Consolidated Tangible Net Worth as at the fiscal quarter ended March 31,  2006 (no reduction for losses): | $ |
|       |                                                                   |                                                                                                                   |   |
|       | C.                                                                     | 85% of increases in Shareholders’ Equity  after date of Agreement from issuance and sale of Equity Interests:     | $ |
|       |                                                                   |                                                                                                                   |   |
|       | D.                                                                     | Minimum required Consolidated Tangible Net Worth:                                                                      | $ |
|       |                                                                   |                                                                                                                   |   |
|       | E.                                                                     | Excess (deficient) for covenant compliance (Line I.A – I.D):                                                      | $ |
|            |                                                                        |                                                                                                                        |  |  |  |  |

 
| **II.** | **Section 7.10 (b) –  Leverage Ratio.** |                                                 |
|---------|-------------------------------------------------------------|------------------------------------------------------|
|    |                                                        |                                                 |   |
|    | A.                                                          | Consolidated Total Liabilities at Statement  Date:   | $ |
|    |                                                        |                                                 |   |
|    | B.                                                          | Consolidated Tangible Net Worth for Subject  Period: | $ |
|    |                                                        |                                                 |   |
|    | C.                                                          | Consolidated Leverage Ratio:                         | $ |

 
| **III.** | **Section 7.10 (c) – Positive Net  Income:** | **$** |
|----------|-------------------------------------------------------------|-------|

 

E-3

----

 

***EXHIBIT F***

 

**ASSIGNMENT AND ASSUMPTION**

 

This Assignment and Assumption (this “Assignment and Assumption”)is dated as of the Effective Date set forth below and is entered into by andbetween [the][each] Assignor identified in item 1 below ([the][each, an] “Assignor”)and [the][each] Assignee identified in item 2 below ([the][each, an] “Assignee”).[It is understood and agreed that the rights and obligations of [theAssignors][the Assignees] hereunder are several and not joint.]  Capitalized terms used but not defined hereinshall have the meanings given to them in the Credit Agreement identified below(as amended, restated, extended, supplemented or otherwise modified in writingfrom time to time, the “Credit Agreement”), receipt of a copy of whichis hereby acknowledged by the Assignee. The Standard Terms and Conditions setforth in Annex 1 attached hereto are hereby agreed to and incorporated hereinby reference and made a part of this Assignment and Assumption as if setforth herein in full.

 

For an agreed consideration, [the][each] Assignor hereby irrevocablysells and assigns to [the Assignee][the respective Assignees], and [the][each]Assignee hereby irrevocably purchases and assumes from [the Assignor][therespective Assignors], subject to and in accordance with the Standard Terms andConditions and the Credit Agreement, as of the Effective Date inserted by theAdministrative Agent as contemplated below (i) all of [the Assignor’s][therespective Assignors’] rights and obligations in [its capacity as aLender][their respective capacities as Lenders] under the Credit Agreement andany other documents or instruments delivered pursuant thereto to the extentrelated to the amount and percentage interest identified below of all of suchoutstanding rights and obligations of [the Assignor][the respective Assignors]under the respective facilities identified below (including, withoutlimitation, the Swingline Loans included in such facilities) and (ii) tothe extent permitted to be assigned under applicable law, all claims, suits,causes of action and any other right of [the Assignor (in its capacity as aLender)][the respective Assignors (in their respective capacities as Lenders)]against any Person, whether known or unknown, arising under or in connectionwith the Credit Agreement, any other documents or instruments deliveredpursuant thereto or the loan transactions governed thereby or in any way basedon or related to any of the foregoing, including, but not limited to, contractclaims, tort claims, malpractice claims, statutory claims and all other claims atlaw or in equity related to the rights and obligations sold and assignedpursuant to clause (i) above (the rights and obligations sold and assignedby [the][any] Assignor to [the][any] Assignee pursuant to clauses (i) and (ii) abovebeing referred to herein collectively as [the][an] “Assigned Interest”).Each such sale and assignment is without recourse to [the][any] Assignor and,except as expressly provided in this Assignment and Assumption, withoutrepresentation or warranty by [the][any] Assignor.

 

1.                                       Assignor[s]:                             

 

 

2.                                       Assignee[s]:                            

 

 

[for eachAssignee, indicate [Affiliate][Approved Fund] of [*identifyLender*]]

 

3.                                       Borrower(s):                              

 

4.                                       AdministrativeAgent: Bank of America, N.A., as the administrative agent under the CreditAgreement

 

F-1

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5.                                       CreditAgreement:                                               CreditAgreement, dated as of [                      ,          ] (as amended,restated, extended, supplemented or otherwise modified in writing from time totime, the “Credit Agreement;”), among KKR Financial Corp., KKR TRSHoldings, Inc., the Lenders from time to time party thereto, Bank ofAmerica, N.A., as Administrative Agent and Swingline Lender, and JPMorgan ChaseBank, N.A. and Citigroup Global Markets Inc., as Syndication Agents.

 

6.                                       AssignedInterest[s]:

 
| **Assignor[s]** | ** ** | **Assignee[s]** | ** ** | **Facility  Assigned** | ** ** | **Aggregate  Amount of  Commitment/Loans  for all Lenders** | ** ** | **Amount of  Commitment  /Loans  Assigned** | ** ** | **Percentage  Assigned of  Commitment/  Loans** | ** ** | **CUSIP  Number** | ** ** |
|-----------------|------------|-----------------|------------|------------------------|------------|-------------------------------------------------------------|------------|---------------------------------------------|------------|-------------------------------------------------|------------|-------------------|------------|
|            |       |            |       |                   |       | $                                                           |       | $                                           |       |                                            | %          |              |       |
|            |       |            |       |                   |       | $                                                           |       | $                                           |       |                                            | %          |              |       |
|            |       |            |       |                   |       | $                                                           |       | $                                           |       |                                            | %          |              |       |

 

[7.                                   TradeDate:                                  ]

 

Effective Date:                                        ,20     [TO BE INSERTED BY ADMINISTRATIVE AGENT AND WHICHSHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTERTHEREFOR.]

 

The terms set forth in this Assignment and Assumption are hereby agreedto:

 
|                          | ASSIGNOR            |
|-------------------------------|---------------------|
|                          | [NAME OF  ASSIGNOR] |
|                          |                |
|                          | By:                 |   |   |
|                          |                |  Title: |
|                          |                |
|                          | ASSIGNEE            |
|                          | [NAME OF  ASSIGNEE] |
|                          |                |
|                          | By:                 |   |   |
|                          |                |  Title: |
|                          |                |
| [Consented  to and] Accepted: |                |
|                          |                |
| BANK OF  AMERICA, N.A., as    |                |
| Administrative Agent          |                |
|                          |                |
| By:                           |                |   |   |
|                          | Title:              |   |
|                          |                |
| [Consented  to:]              |                |
|                          |                |
| KKR  FINANCIAL CORP,          |                |
| as Borrower                   |                |
|                          |                |
| By:                           |                |   |   |
|                          | Title:              |   |

 

F-2

----

 
| KKR TRS  HOLDINGS, INC., |   |
|-------------------------------|--------|
| as Borrower                   |   |
|                          |   |
| By:                           |   |   |   |
|                          | Title: |   |
|                               |        |  |  |

 

F-3

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***ANNEX 1 TO ASSIGNMENT ANDASSUMPTION***

 

[                                         ]

 

**STANDARD TERMS AND CONDITIONS FORASSIGNMENT AND ASSUMPTION**

 

1.                                                   Representationsand Warranties.

 

1.1.                                          Assignor.[The][Each] Assignor (a) represents and warrants that (i) it is thelegal and beneficial owner of [the][[the relevant] Assigned Interest, (ii) [the][such]Assigned Interest is free and clear of any lien, encumbrance or other adverseclaim and (iii) it has full power and authority, and has taken all actionnecessary, to execute and deliver this Assignment and Assumption and toconsummate the transactions contemplated hereby; and (b) assumes noresponsibility with respect to (i) any statements, warranties orrepresentations made in or in connection with the Credit Agreement or any otherLoan Document, (ii) the execution, legality, validity, enforceability,genuineness, sufficiency or value of the Loan Documents or any collateralthereunder, (iii) the financial condition of KKR Financial, any of itsSubsidiaries or Affiliates or any other Person obligated in respect of any LoanDocument or (iv) the performance or observance by any Borrower, any of itsSubsidiaries or Affiliates or any other Person of any of their respectiveobligations under any Loan Document.

 

1.2.                                          Assignee.[The][Each] Assignee (a) represents and warrants that (i) it has fullpower and authority, and has taken all action necessary, to execute and deliverthis Assignment and Assumption and to consummate the transactions contemplatedhereby and to become a Lender under the Credit Agreement, (ii) it meetsall the requirements to be an assignee under Section 10.06(b)(iii),10.06(b)(v) and 10.06(b)(vi) of the Credit Agreement(subject to such consents, if any, as may be required under Section 10.06(b)(iii) ofthe Credit Agreement), (iii) from and after the Effective Date, it shallbe bound by the provisions of the Credit Agreement as a Lender thereunder and,to the extent of [the][the relevant] Assigned Interest, shall have theobligations of a Lender thereunder, (iv) it is sophisticated with respectto decisions to acquire assets of the type represented by [the][such] AssignedInterest and either it, or the Person exercising discretion in making itsdecision to acquire [the][such] Assigned Interest, is experienced in acquiringassets of such type, (v) it has received a copy of the Credit Agreement,and has received or has been accorded the opportunity to receive copies of themost recent financial statements delivered pursuant to Section thereof, asapplicable, and such other documents and information as it deems appropriate tomake its own credit analysis and decision to enter into this Assignment andAssumption and to purchase [the][such] Assigned Interest, (vi) it has,independently and without reliance upon the Administrative Agent or any otherLender and based on such documents and information as it has deemedappropriate, made its own credit analysis and decision to enter into thisAssignment and Assumption and to purchase [the][such] Assigned Interest, and (vii) ifit is a Foreign Lender, attached hereto is any documentation required to bedelivered by it pursuant to the terms of the Credit Agreement, duly completedand executed by [the][such] Assignee; and (b) agrees that (i) itwill, independently and without reliance upon the Administrative Agent,[the][any] Assignor or any other Lender, and based on such documents andinformation as it shall deem appropriate at the time, continue to make its owncredit decisions in taking or not taking action under the Loan Documents, and (ii) itwill perform in accordance with their terms all of the obligations whichby the terms of the Loan Documents are required to be performed by it as aLender.

 

2.                                                   Payments.From and after the Effective Date, the Administrative Agent shall make allpayments in respect of [the][each] Assigned Interest (including payments ofprincipal, interest, fees and other amounts) to [the][the relevant] Assignorfor amounts which have accrued to but excluding the Effective Date and to[the][the relevant] Assignee for amounts which have accrued from and after theEffective Date.

 

F-4

----

 

3.                                                   GeneralProvisions. This Assignment and Assumption shall be binding upon, and inureto the benefit of, the parties hereto and their respective successors andassigns. This Assignment and Assumption may be executed in any number ofcounterparts, which together shall constitute one instrument. Delivery of anexecuted counterpart of a signature page of this Assignment andAssumption by telecopy shall be effective as delivery of a manually executedcounterpart of this Assignment and Assumption. This Assignment andAssumption shall be governed by, and construed in accordance with, the law ofthe State of                                            [*confirm that choice of law provision parallels theCredit Agreement*].

 

F-5

----

 

***EXHIBIT G-1***

 

KKR FINANCIAL LLC

KKR FINANCIAL CORP.

KKR FINANCIAL ADVISORS LLC

 

                        

GEOFFREY JONES

 

June     ,2006

 

Bank of America, N.A.,

as Administrative Agent

270 Park Avenue, 10th FloorNew York, New York 10017

 

The Lenders

party to the Credit Agreement(as defined below)

 

listed on Schedule      thereto

 

Re:                               KKRFinancial Corp.

 

Ladies and Gentlemen:

 

I am acting General Counsel of KKR Financial Corp., a corporationorganized under the laws of the State of Maryland (“KKR Financial”), andin that capacity I have represented KKR Financial and KKR TRS Holdings, Inc.,a corporation organized under the laws of the State of Delaware (“KKRHoldings” and together with KKR Financial, the “Borrowers”), inconnection with the execution of that certain Credit Agreement among KKRFinancial, KKR Holdings, the lenders party thereto (the “Lenders”), andBank of America, N.A., as administrative agent (the “Administrative Agent”),dated as of June     , 2006 (the “Credit Agreement”),a Fee Letter among the KKR Financial, KKR Holdings, the Administrative Agentand Banc of America Securities LLC, as sole lead arranger, dated as of June     ,2006 (the “Fee Letter”), a Domestic Collateral Account Control Agreementamong KKR Financial, KKR Holdings, the Administrative Agent and The Bank of NewYork dated as of June     , 2006 (the “CollateralAgreement”), and the Security Agreement among KKR Financial, KKR Holdingsand the Administrative Agent for itself and for the Lenders, dated as of June     ,2006 (the “Security Agreement”). The Credit Agreement, the Fee Letter,the Collateral Agreement and the Security Agreement are collectively hereinreferred to as the “Transaction Documents.”  Capitalized terms used but not defined hereinare used as defined in the Transaction Documents.

 

In connection with this opinion, I have examined, among other things,the Transaction Documents, KKR Holdings Certificate of Incorporation, KKRHoldings’ Bylaws, the resolutions of the Board of Directors of KKR Holdings,good standing certificates for KKR Holdings and originals, or copies certifiedor otherwise identified to my satisfaction, of such other records, documents orother instruments as in my judgment are necessary or appropriate to enable meto render the opinions expressed below. As to factual matters, I have reliedupon statements, certificates and other assurances of public officials and ofofficers and other representatives of the Borrowers and the other parties tothe Transaction Documents and upon such other certificates as I have deemedappropriate, which factual matters have not been independently established orverified by me. I have assumed (i) that the representations and warrantiesas to factual matters contained in the Transaction Documents are true andcorrect, (ii) the genuineness of all signatures and the authenticity ofall documents submitted to me as originals, (iii) the

 

----

 

conformity with authentic originals of alldocuments submitted to me as copies and (iv) the legal competency of eachindividual who executed documents or who purported to act in connection withmatters addressed in the opinions expressed below.

 

On the basis of such examination and subject to the assumptions,limitations, qualifications and exceptions set forth herein, I am of theopinion that:

 

1.                                       Eachof the Borrowers is duly qualified to do business and is in good standing ineach jurisdiction in which the character of the business transacted by itrequires such qualification and in which the failure so to qualify would have amaterial adverse effect on the business, properties, assets or condition(financial or other) of each Borrower and its subsidiaries, considered as awhole.

 

2.                                       Noconsent, approval, authorization or order of, or notice to or filing with, anyfederal court or governmental agency or body is required to be obtained by theBorrowers under any federal law or regulation that are generally recognized bya lawyer admitted in Ohio exercising customary professional diligence asapplicable to the Borrowers or to transactions contemplated by the TransactionDocuments, in connection with the execution and delivery by the Borrowers ofthe Transaction Documents and the performance by each of the Borrowers of theirobligations thereunder.

 

3.                                       Theexecution and delivery of the Transaction Documents by the Borrowers and theperformance by each of the Borrowers of their obligations thereunder (a) willnot conflict with, result in a breach of, or constitute a default under theterms of any indenture or other agreement or instrument to which any of theBorrowers is party or bound, (b) will not violate any of the provisions ofthe Certificate of Incorporation or Bylaws of KKR Holdings, (c) will notviolate any judgment, order or decree of any court or other tribunal applicableto the Borrowers, (d) will not violate any law or regulations applicableto the Borrowers, of any federal court, regulatory body, administrative agency,governmental body or arbitrator having jurisdiction over the Borrowers, and (e) willnot result in the creation or imposition of any lien (other than liensevidenced by the Transaction Documents in favor of the Administrative Agent) onany asset of the Borrowers.

 

4.                                       Thereis no pending or, to my actual knowledge, threatened action, suit or proceedingbefore any court or governmental agency, authority or body or any arbitratorinvolving the Borrowers or relating to the transaction contemplated by theTransaction Documents which, in any manner draws into question the validity ofthe Transaction Documents or which if adversely determined, would have amaterial adverse effect on the financial position of the Borrowers.

 

5.                                       KKRHoldings is duly incorporated and validly existing as a corporation in goodstanding under the laws of the State of Delaware.

 

6.                                       KKRHoldings has the corporate power to execute, deliver and perform itsobligations under the Transaction Documents, and it has taken all necessarycorporate action to authorize the execution, delivery and performance of theTransaction Documents.

 

7.                                       TheTransaction Documents have been duly authorized, executed and delivered by KKRHoldings.

 

The opinions expressed above are subject to the following additionalassumptions, qualifications, limitations and exceptions:

 

G-1-2

----

 

A.                                   Forpurposes of the opinion in paragraph 2 hereof, I have assumed that theBorrowers will not in the future take any discretionary action (including adecision not to act) that would cause the performance of any of theirobligations under any Transaction Document to require a consent, approval,authorization or order to be obtained from a federal governmental authority.

 

B.                                     Inote that you are receiving an opinion letter dated the date hereof from Hunton &Williams LLP, special counsel to KKR Financial and have, with your permission,relied on that opinion letter as to certain of such matters with respect to KKRFinancial (in particular the opinions set forth in paragraphs 1, 2 and 3thereof), and have assumed that opinion letter is correct.

 

C.                                     Iam admitted to the bar of the State of Ohio and the foregoing opinions (exceptfor the opinions in paragraphs 1, 5, 6 and 7 and clause (b) of paragraph 3hereof) are limited to matters arising under the federal laws of the UnitedStates of America and the laws of the State of Ohio. I express no opinion as tothe laws, rules or regulations of any other jurisdiction or as to themunicipal laws or the laws, rules or regulations of any local agencies orgovernmental authorities of or within the State of Ohio, or in each case as toany matters arising thereunder or relating thereto, except to the extent thatmy opinion in paragraphs 5, 6 and 7 and clause (b) paragraph 3 hereofrelate to the Delaware General Corporation Law.

 

D.                                    Thisletter is solely for your benefit in connection with the transactions describedin the first paragraph above and may not be quoted or relied upon by, nor may copiesbe delivered to, any other Person (except that this letter may befurnished to actual and potential assignees and participants with theunderstanding that this letter speaks only as of the date hereof), nor may thisletter be filed with any governmental agency (unless required by applicablelaw) or be relied upon by you for any other purpose, without my prior writtenconsent.

 
|   | Very truly  yours,      |
|--------|-------------------------|
|   |                    |
|   |                    |
|   | Geoffrey  Jones         |
|   | Acting  General Counsel |

 

G-1-3

----

 

***EXHIBIT G-2***

 

**OPINION OF COUNSEL TO THE BORROWERS**

 

[SIDLEY AUSTIN LLP LETTERHEAD]

 

June     ,2006

 

Bank of America, N.A.

as Administrative Agent

270 Park Avenue, 10th Floor

New York, New York 10017

 

The Lenders party to the

Credit Agreement (as definedbelow)

 

listed on Schedule      thereto

 

Re:                               KKRFinancial Corp. and KKR TRS Holdings, Inc.

 

Ladies and Gentlemen:

 

We have acted as counsel to KKR Financial Corp., a Maryland Corporationand KKR TRS Holdings, Inc., a Delaware corporation (“KKR TRS” and,together with KKR Financial, the “Borrowers”), in connection with theCredit Agreement of even date herewith (the “Credit Agreement”) amongthe Borrowers, the financial institutions parties thereto as lenders (the “Lenders”)and Bank of America, N.A. as Administrative Agent, and the transactionscontemplated thereby. This opinion letter is furnished to you at the request ofthe Borrowers pursuant to Article IV of the Credit Agreement. Capitalizedterms not otherwise defined herein have the meanings specified in the CreditAgreement. Non-capitalized terms used in, or in connection with, the opinionsgiven in Paragraph 4 hereof are used as defined in the Uniform CommercialCode as enacted in the State of New York (the “New York UCC”), to theextent that they are defined therein.

 

In connection with this opinion letter, we have examined originals, orcopies certified or otherwise identified to our satisfaction, of the following:

 

(i)                                     theCredit Agreement;

 

(ii)                                  theSecurity Agreement of even date herewith among the Borrowers and theAdministrative Agent (the “Security Agreement”)

 

(iii)                               theCollateral Account Control Agreement of even date herewith among the Borrowers,the Administrative Agent and The Bank of New York (the “Collateral Agreement”)

 

(iv)                              theFee Letter, dated June     ,2006, by and among each ofthe Borrowers, the Administrative Agent and Banc of America Securities LLC.;and

 

(v)                                 theUniform Commercial Code financing statement naming KKR TRS as debtor andthe Administrative Agent as secured party (the “Financing Statement”), preparedfor filing

 

----

 

with theoffice of the Secretary of State of the State of Delaware (the “Filing Office”),a copy of which is attached hereto as Exhibit A.

 

The Credit Agreement, the Security Agreement and the CollateralAgreement are sometimes hereinafter referred to collectively as the “LoanDocuments.”  The Loan Documents and theFinancing Statement are hereinafter collectively referred to as the “TransactionDocuments.”  As used herein, “ApplicableLaw” means those laws, rules and regulations that are generally recognizedby a lawyer admitted in New York exercising customary professional diligence asapplicable to the transactions contemplated in the Loan Documents.

 

In rendering the opinions set forth herein, we have also examined andrelied on originals, or copies certified or otherwise identified to oursatisfaction, of such (i) certificates of public officials, (ii) asto matters of fact, certificates and representations of officers and representativesof the Borrowers, and (iii) other documents and records, and we have madesuch inquiries of officers and representatives of the Borrowers, as we havedeemed relevant or necessary as the basis for such opinions. We have reliedupon, and assumed the accuracy of, all such certificates and representations,documents and records and the representations and warranties made by theBorrowers in the Loan Documents, in each case with respect to the factualmatters set forth therein. We have assumed the genuineness of all signatures,the authenticity of all documents submitted to us as originals, the conformityto original documents of all copies submitted to us as certified or photostaticcopies and the legal capacity of all natural persons.

 

In rendering the opinions set forth herein, we have assumed that:

 

(i)                                     allparties to the Loan Documents are duly organized, validly existing, and in goodstanding under the laws of their respective jurisdictions of organization andhave the requisite corporate or banking power (as applicable) to enter intosuch Loan Documents;

 

(ii)                                  theexecution and delivery of the Loan Documents have been duly authorized by allnecessary corporate or banking action (as applicable) and proceedings on the part ofall such parties; the Transaction Documents have been duly executed anddelivered by all such parties; and the respective terms and provisions of eachof the Loan Documents do not, and the execution, delivery and performance ofits obligations thereunder by each of such parties will not, violate thearticles or certificate of incorporation or other charter document or by-lawsof any such party or any law, order or decree of any court, administrativeagency or other governmental authority binding on any such party, or result ina breach of or cause a default under any contract or indenture to which it is aparty or by which it is bound;

 

(iii)                               theLoan Documents constitute the valid and binding obligations of all partiesthereto other than the Borrowers, enforceable against such parties inaccordance with their respective terms

 

(iv)                              forpurposes of the opinion set forth in Paragraph 4, (A) the name and mailingaddress of the Administrative Agent, the mailing address for KICR TRS, and theorganizational identification number of KKR TRS are as set forth on theFinancing Statement and (B) KKR TRS is incorporated solely under the lawsof the State of Delaware; and

 

(v)                                 forpurposes of the opinion set forth in Paragraph 4, the Borrowers have received “value”(within the meaning of Article 9 of the New York UCC or the Delaware UCC,as applicable) in respect of the Obligations under the Credit Agreement.

 

G-2-2

----

 

Based upon the foregoing and subject to the qualifications statedherein, we are of the opinion that, as of the date hereof:

 

1.                                       The execution,delivery and performance by the Borrowers of their obligations under each ofthe Loan Documents, assuming the Borrowers will comply with the provisions ofthe Credit Agreement relating to use of proceeds, will not violate anyApplicable Law of the State of New York or any Applicable Law of the UnitedStates of America applicable to the Borrowers (including Regulations U and X ofthe Federal Reserve Board).

 

2.                                       Each of the LoanDocuments constitutes the valid and binding obligation of the Borrowers,enforceable against the Borrowers in accordance with its respective terms.

 

3.                                       No consent,approval or authorization of, or notification to, or registration, filing ordeclaration with, any federal or New York state governmental authority, courtor other regulatory agency is required under Applicable Law of the State of NewYork or of the United States of America for the valid execution or delivery byeither of the Borrowers of the Transaction Documents or the performance by theBorrowers of their respective obligations thereunder, except any such consent,approval, authorization, registration, filing or declaration which has beenobtained or made and remains in effect and those that may be required underthe Delaware UCC (as defined below) with respect to the filing of the FinancingStatement in the Filing Office.

 

4.                                       The SecurityAgreement is sufficient to create, in favor of the Administrative Agent for thebenefit of the Lenders, a valid security interest in all of the Borrowers’rights in the Collateral, to the extent a security interest may be createdtherein under Article 9 of the New York UCC (the “Applicable UCCCollateral”). Such security interest will attach when the applicable Borroweracquires rights in such Applicable UCC Collateral. The Financing Statement isin proper form for filing with the Filing Office. Upon the filing of theFinancing Statement in the Filing Office, such security interest in theApplicable UCC Collateral that is described in the Financing Statement and inwhich KKR TRS has rights will be perfected to the extent a security interesttherein can be perfected by the filing of a financing statement under Article 9of the Uniform Commercial Code as enacted in the State of Delaware (the “DelawareUCC”).

 

Our opinions above are subject to the following qualifications:

 

(a)                                  Our opinions inParagraph 2 above and our opinion relating to validity and enforceability ofsecurity interests in Paragraph 4 above are subject to limitations imposed byany applicable bankruptcy, insolvency, reorganization, fraudulent conveyance,moratorium and similar laws affecting creditors’ rights generally. Our opinionin Paragraph 2 above is also subject to the effect of general principles ofequity (regardless of whether considered in a proceeding in equity or at law).In addition, a court may refuse to enforce a provision of a Loan Documentif it deems such provision to violate public policy, including any provisionindemnifying a party against liability for its own wrongful or negligent acts.

 

(b)                                 Certain remedialprovisions of the Loan Documents may not be enforceable, but suchunenforceability will not, subject to the other exceptions, qualifications andlimitations set forth herein, render such Loan Documents invalid as a whole orsubstantially interfere with the substantial realization of the principalbenefits or security, or both, which such Loan Documents purport to provide(except for the economic consequences of procedural or other delay).

 

(c)                                  We express no opinionas to the effect of (i) the compliance or noncompliance of theAdministrative Agent or any Lender with any state or federal laws orregulations applicable to

 

G-2-3

----

 

any such party because of such party’s legalor regulatory status or the nature of such party’s business or (ii) thefailure of any such party to be authorized to conduct business in anyjurisdiction.

 

(d)                                 We have assumed thatthe Borrowers have sufficient rights to the Collateral in order for thesecurity interest of the Administrative Agent to attach thereto, and we expressno opinion as to the nature and extent of the Borrowers’ rights in or title toany of the Collateral or any property securing the Collateral.

 

(e)                                  Our opinions inParagraph 4 are limited to Article 9 of the New York UCC and Article 9of the Delaware UCC. Therefore those opinions do not address (i) laws ofjurisdictions other than New York or Delaware or (ii) laws of New York orDelaware except for those described above. We do not express any opinion as totransactions excluded from Article 9 of the New York UCC or Article 9of the Delaware UCC by virtue of Section 9-109 thereof.

 

(f)                                    We express noopinion with respect to the perfection of a security interest in any Collateralof a type described in Section 9-501(a)(1)(A) or (B) of the NewYork UCC or the Delaware UCC or represented by a certificate of title.

 

(g)                                 We express no opinionas to the actions that will be required to be taken periodically under anyapplicable law after the filing of the Financing Statement in the Filing Officein order for the effectiveness of any financing statement, or the validity orperfection of any lien or security interest referred to herein, to bemaintained.

 

(h)                                 We call to yourattention that the security interest created by each Borrower in proceeds ofthe Collateral and the perfection of such security interest is limited to theextent set forth in Section 9-315 of the New York UCC or the Delaware UCC,as applicable.

 

(i)                                     We note that Section 552of Title 11 of the United States Code (the “Bankruptcy Code”) limits the extentto which property acquired by a debtor after commencement of a case under theBankruptcy Code is subject to a security interest arising from a securityagreement entered into by the debtor before such commencement.

 

(j)                                     We call to yourattention that the rights of a Borrower to assign any Collateral consisting ofclaims against any government or governmental agency (including, withoutlimitation, the United States of America or any state thereof or any agency ordepartment thereof or of any state) may be limited by the FederalAssignment of Claims Act or similar state or local statute.

 

(k)                                  We have assumed thatthe Borrowers have satisfied any requirements in the documents and agreementscomprising or governing the Collateral which prohibit or restrict assignment asthey relate to the grant of a security interest therein to the AdministrativeAgent, except to the extent that any such requirement is ineffective under Section 9-406,9-407 or 9-408 of the New York UCC or the Delaware UCC, as applicable.

 

(l)                                     We call to yourattention that any security interests in the Collateral may be subject tothe limitations set forth in Section s 9-404, 9-405 and 9-408 of the NewYork UCC or the Delaware UCC, as applicable; and, in any event, any securityinterests in the assets of either of the Borrowers may be subject to theeconomic effects of valid recoupments, offsets, counterclaims, and similarrights of account debtors, lessees, or other contractual parties, the terms ofleases and other contracts between either of the Borrowers and such lessees orother

 

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parties, and any claims or defenses of suchlessees or other parties against either of the Borrowers arising under orextrinsic to such leases or other contracts.

 

(m)                               We express no opinion asto the priority of any security interest in any Collateral.

 

The foregoing opinions are limited to the Applicable Laws of the Stateof New York and the Applicable Laws of the United States of America, and weexpress no opinion with respect to the laws of any other state or jurisdiction,except that, with respect to the opinions expressed in the second and thirdsentences of Paragraph 4, we also express an opinion as to Article 9of the Delaware UCC. As to our opinions expressed herein with respect to theDelaware UCC, our conclusions are based solely on a review of the Delaware UCCas set forth in the CCH Secured Transactions Guide, as updated through Issue No. 968dated May 16, 2006 (the “Guide”). The lawyers who prepared this opinionare not admitted to practice law in the State of Delaware. With yourconcurrence, we have not consulted with Delaware counsel or conducted anyinvestigation of the laws of the State of Delaware other than Article 9 ofthe Delaware UCC as set forth in the Guide.

 

This opinion letter is furnished by us solely for your benefit inconnection with the transactions contemplated by the Credit Agreement and,without our written approval, it may not be relied upon, quoted from ordelivered to any person (except that this opinion may be furnished toassignees and participants with the understanding that it speaks only as of thedate hereof). The opinions expressed above are based solely on factual mattersin existence as of the date hereof and laws and regulations in effect on thedate hereof, and we assume no obligation to revise or supplement this opinionletter to reflect any matters which may hereafter come to our attention,or should such factual matters change or should such laws or regulations bechanged by legislative or regulatory action, judicial decision or otherwise.

 

Very trulyyours,

 

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***EXHIBIT G-3***

 

**OPINION OF SPECIAL COUNSEL TO KKR FINANCIALCORP.**

 

[HUNTON & WILLIAMS LLPLETTERHEAD]

 

June     ,2006

 

Bank of America, N.A.

as Administrative Agent

270 Park Avenue, 10th Floor

New York, New York 10017

 

The Lenders party to the

Credit Agreement

(as defined below)

listed on Schedule       thereto

 

Re:                               KKRFinancial Corp.

 

Ladies and Gentlemen:

 

We have acted as counsel to KKR Financial Corp., a Maryland corporation(the “Borrower”), in connection with a Credit Agreement among theBorrower, KKR TRS Holdings, Inc. (the “Co-Borrower”), the lendersparty thereto (the “Lenders”), and Bank of America, N.A., as theadministrative agent (the “Administrative Agent”), dated as of June     ,2006 (the “Credit Agreement”), a Fee Letter among the Borrower, the Co-Borrower,the Administrative Agent and Banc of America Securities LLC, as lead arranger,dated as of June 16, 2005 (the “Fee Letter”),a Domestic Collateral Account Control Agreement among the Borrower, theCo-Borrower, the Administrative Agent and The Bank of New York dated as of June     ,2006 (the “Collateral Agreement”), and the Security Agreement among theBorrower, the Co-Borrower and the Administrative Agent for itself and for theLenders, dated as of June     , 2006 (the “SecurityAgreement”). This opinion is provided in accordance with Article IV ofthe Credit Agreement. Capitalized terms used herein that are not otherwisedefined herein shall have the meanings assigned to them in the CreditAgreement.

 

In connection with the opinions set forth herein, we have examined thefollowing documents:

 

(i)                                     the Credit Agreement;

 

(ii)                                  the Fee Letter;

 

(iii)                               the Collateral Agreement;

 

(iv)                              the Security Agreement;

 

(v)                                 a certificate of theSecretary of the Borrower, to which are attached true and correct copies of: (i) thearticles of amendment and restatement of the Borrower as certified by theMaryland State Department of Assessments and Taxation (the “Articles”); (ii) theamended and restated by-laws of the Borrower (the “By-laws”); (iii) resolutionsof the

 

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Borrower with respect to the Agreements (as defined below); (iv) acertificate of good standing with respect to the Borrower issued by theMaryland State Department of Assessments and Taxation; and (v) acertificate of good standing with respect to the Borrower issued by theSecretary of State of the State of California; and

 

(vi)                              an initial financingstatement a copy of which attached hereto as Exhibit A (the “FinancingStatement”), naming the Borrower as debtor and the Administrative Agent assecured party under the Uniform Commercial Code as in effect on the datehereof in the State of Maryland, to be filed in the Maryland State Departmentof Assessments and Taxation (the “Filing Office”).

 

The Credit Agreement, the Fee Letter, the Collateral Agreement and theSecurity Agreement are herein collectively referred to as the “Agreements.”

 

For purposes of the opinions expressed below, we have assumed (i) theauthenticity of all documents submitted to us as originals, (ii) theconformity to the originals of all documents submitted as certified orphotostatic copies, and the authenticity of the originals thereof, (iii) thelegal capacity of natural persons, (iv) the genuineness of signatures notwitnessed by us, and (v) the due authorization, execution and delivery ofall documents by all parties, other than the Borrower, and the validity andbinding effect thereof.

 

As to factual matters, we have relied upon representations included inthe Agreements, upon certificates of the Borrower, and upon certificates ofpublic officials. Whenever the phrase “to our knowledge” or “known to us” isused herein, it refers to the actual knowledge of the attorneys of this firminvolved in the representation of the Borrower in the transaction withoutindependent investigation.

 

We do not purport to express an opinion on the laws of any jurisdictionother than those of the United States of America and the State of New York,except to the extent that our opinions in numbered paragraphs 1, 2, 3, 4(i) and4(iii) relate to the Maryland General Corporation Law and our opinion innumbered paragraph 5 relates to the Maryland UCC (as defined below). Theopinions expressed in numbered paragraph 5 below are limited to Articles 1, 8and 9 of the Uniform Commercial Code (the “UCC”) as in effect on the datehereof in the State of New York (the “New York UCC”) and the State of Maryland(the “Maryland UCC”). With respect to the Maryland UCC, we have relied solelyon the text of such Articles 8 and 9 of the Maryland UCC in the form containedin the LexisTM electronic database on the date hereof and identified therein asthe official text of such law, in the form presented electronically tousers of the LexisTM state statute library, and we have assumed that suchversion is correct and complete. We have further assumed that the courts of theStates of New York and Maryland and the federal courts sitting therein orapplying the laws thereof would give effect to the provisions of the Agreementsthat specify New York law as the governing law thereof.

 

As used herein, “Applicable UCC” means the New York UCC or the MarylandUCC, or more than one of the foregoing, as the context requires, and anyreference herein to a specific section of the UCC refers to that section ofthe New York UCC or the corresponding provision of the Maryland UCC.

 

As used herein, “General Intangibles” has the meaning defined in Section 9-102(a)(42)of the Applicable UCC. In rendering the opinions expressed herein regardingperfection of the security interest in General Intangibles, we note that (i) thesecurity interest relates to, and will therefore be subject to and limited by,the terms of any agreement under which such rights exist and (ii) therealization of the benefits of the security interest may also be limitedby the rights, claims and defenses of any other party to such agreement.

 

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Based upon the foregoing and such other documents and matters as wehave deemed necessary and appropriate to render the opinions set forth below,and subject to the limitations, assumptions, and qualifications noted herein,we are of the opinion that:

 

1.                                       The Borrower is dulyincorporated and validly existing as a corporation in good standing under thelaws of the State of Maryland.

 

2.                                       The Borrower has thecorporate power to execute, deliver and perform its obligations under theAgreements, and the Borrower has taken all necessary corporate action toauthorize the execution, delivery and performance of the Agreements.

 

3.                                       The Agreements have beenduly authorized, executed and delivered by the Borrower.

 

4.                                       The execution and deliveryof, and the performance of the obligations under, the Agreements by theBorrower (i) will not violate the Articles or Bylaws of the Borrower, (ii) willnot conflict with or result in the breach of any court decree or order of anycourt, regulatory body, administrative agency, governmental body or arbitratorbinding on the Borrower known to us, or (iii) will not violate any law orregulation of the State of New York or the State of Maryland that are generallyrecognized by lawyers admitted in New York exercising customary professionaldiligence as being applicable to transactions of the type contemplated by theAgreements.

 

5.                                       The Financing Statement isin proper form for filing in the Filing Office. The filing of theFinancing Statement in the Filing Office will be sufficient to perfect thesecurity interest in the Collateral described in the Security Agreement andincluded on the Financing Statement (the “Applicable UCC Collateral”) to theextent that a security interest therein may be perfected by the filing ofa financing statement under Article 9 of the Maryland UCC (the “ApplicableFiling Collateral”), and the Filing Office is the only office in which a financingstatement must be filed under the Maryland UCC to perfect the security interestin the Applicable Filing Collateral.

 

6.                                       The Borrower is not, andafter giving effect to the execution and delivery of the Agreements, will notbe an “investment company,” as such term is defined in the Investment CompanyAct of 1940, as amended.

 

We express no opinion or advice as to (i) whether a court otherthan a court of the State of New York would give effect to any choice of NewYork law, (ii) any provision requiring a party to submit to thejurisdiction of any court, insofar as such provision relates to the subjectmatter jurisdiction of such court to adjudicate any controversy or purports togrant exclusive jurisdiction to any court, (iii) the subject matterjurisdiction of any court to consider any dispute arising out of theAgreements, (iv) the waiver of any right to assert that an action has beenbrought in an inconvenient forum or any right to have venue laid in the properforum, (v) the enforceability of any waiver of a trial by jury or waiverof objection to venue or claim of an inconvenient forum with respect toproceedings, (vi) the waiver of any right to have service of process madein the manner prescribed by applicable law or to claim immunity from service ofprocess or from any legal proceeding, (vii) the waiver of any right totrial by jury, (viii) the appointment of any Person as attorney in factinsofar as exercise of such power of attorney may be limited by publicpolicy or limitations referred to elsewhere in this opinion, (ix) theenforceability of indemnification or contribution provided for in theAgreements for claims, losses or liabilities in an unreasonable amount or forclaims, losses or liabilities attributable to the indemnified party’s negligence,(x) the ability of any Person to receive the remedies of specific performance,injunctive relief, liquidated damages or any similar remedy in any proceeding,(xi) any right to the appointment of a receiver, (xii) any right to obtain

 

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possession of any property or the exercise ofself-help remedies or other remedies without judicial process, (xiii) anywaiver or limitation concerning mitigation of damages, (xiv) the availabilityof the right of rescission, (xv) the effect of the law of any jurisdiction thatlimits the rate(s) of interest that may be charged or collected, (xvi) theenforceability of any right to receive interest on interest or (xvii) theright, title or interest of any person in, to or under any property, thepriority of any security interest or, except to the extent that we expresslyopine herein, the existence, creation or perfection of any security interest.

 

In addition, we express no opinion or advice as to (i) any rightto liquidated damages, to the extent such liquidated damages constitute apenalty, (ii) any provision purporting to waive or otherwise modifyapplicable law, to the extent that such waiver or other modification is deemedto be contrary to public policy, and (iii) any provision requiring anyperson to agree on any matter after the execution and delivery of the documentin which such provision appears.

 

We also express no opinion or advice with respect to the effect of anylaw pertaining to taxation, pensions or employee benefits, labor andemployment, antitrust, unfair trade practices, banking, securities,environmental liability, land use, public health or safety, racketeering orcriminal or civil forfeiture, or with respect to any ordinance, regulation orother provision of law made by any county, municipality or other localpolitical subdivision or by any agency or instrumentality thereof.

 

We note that the perfection of any security interest that has beenperfected by the filing of the Financing Statement in the Filing Office willexpire upon the earliest to occur of (i) the expiration of four monthsafter the debtor so changes its name that the financing statement becomesseriously misleading under § 9-506 and § 9-507 of the Maryland UCC asto any collateral acquired more than four months after such change, unlesswithin such four month period an amendment which renders the financingstatement not seriously misleading is filed, (ii) the expiration of thefour-month period after a new debtor whose name is seriously misleading under § 9-506and § 9-508 of the Maryland UCC becomes bound under § 9-203(d) ofthe Maryland UCC as to any collateral acquired by the new debtor after theexpiration of the four-month period, unless an initial financing statementproviding the name of the new debtor is filed before the expiration of thefour-month period, or (iii) the expiration of one year after the transferof collateral by the debtor to a person that becomes a debtor and is located inanother jurisdiction within the meaning of § 9-307 of the Maryland UCC,unless the secured party becomes perfected as to the transferred collateralwithin the one-year period under the laws of the location of the transfereedebtor. To the extent that the Maryland law continues to govern the effect ofthe Financing Statement, continuation statements complying with the MarylandUCC must be filed in the Filing Office in order to maintain the effectivenessof the Financing Statement, as provided therein.

 

The opinions set forth in Paragraph 5 above also are subject to thefollowing additional limitations and exclusions:

 

(a)                                  We express no opinion as tothe validity, perfection or enforceability of a security interest arising outof any transaction not subject to Article 9 of the Applicable UCC,including those described in §§ 9-109(c) and (d) of theApplicable UCC.

 

(b)                                 We express no opinion withrespect to any “commercial tort claim,” “letter-of-credit-right,” collateralarising from a “consumer transaction,” a “health-care-insurance-receivable,” an“agricultural lien,” “farm products” or “as-extracted collateral” or any “manufacturedhome collateral” (as those terms are defined in Article 9 of theApplicable UCC), collateral subject to a certificate of title, goods consignedby or to the Seller, documents or goods covered by documents, electronicchattel paper (other than perfection by filing as set forth in Paragraph 5), orstanding timber.

 

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(c)                                  Under §9-315 of theApplicable UCC, the continuation of perfection of a security interest inproceeds is limited to the extent set forth in such section.

 

(d)                                 Under § 9-316 of theApplicable UCC, the continuation of perfection of a security interest followinga change in the jurisdiction, the laws of which govern perfection, the effectof perfection and non-perfection and priority, is limited to the extent setforth in such section.

 

(e)                                  In the case of property thatbecomes Collateral after the date hereof, Section 552 of the FederalBankruptcy Code limits the extent to which property acquired by a debtor afterthe commencement of a case under the Federal Bankruptcy Code may besubject to a security interest arising from a security agreement entered intoby the debtor before the commencement of such a case.

 

(f)                                    The Financing Statementmight become ineffective due to events that cause them to be “seriouslymisleading” under §§ 9-506 through § 9-508 of the Applicable UCC.

 

(g)                                 We note that the Buyer’srights against account debtors will be subject to the terms of the assignedaccount, chattel paper or general intangible, to dealings between such accountdebtor and the Borrower, and to the other limitations provided in §§ 9-403,9-404, 9-405 and 9-406 of the Applicable UCC, and will be subject to defensesas provided in § 9-404 of the Applicable UCC.

 

(h)                                 We express no opinion as towhether provisions in the Security Agreement granting an absolute assignment ofrights or interests will be construed as effecting an absolute assignmentrather than a collateral assignment or security interest.

 

(i)                                     We express no opinion hereinwith respect to (i) the priority of any security interest with respect toany tax or other governmental or other lien, claim or other encumbrance that may bystatute take priority over a previously perfected security interest, or anylien or claim, including a right of set-off, of any trustee, custodian or “securitiesintermediary” or “financial intermediary” as defined in the Applicable UCC, (ii) anysecurity of which there exists a duplicate original, (iii) thecontinuation of perfection of the security interest in any collateral in whicha security interest has been perfected by possession and which is released fromsuch possession for servicing or any other purpose, unless such collateral isreleased for a purpose specified in Section 9-312(f) or (g) ofthe Applicable UCC and returned to such possession within the period specifiedtherein and (iv) the effect of any applicable fraudulent conveyance ortransfer, voidable preference or other similar law affecting the rights ofcreditors or secured parties.

 

(j)                                     We express no opinion hereinwith respect to the priority of any security interest.

 

For the purposes of the opinions set forth above, we also have assumedthat:

 

(a) TheBorrower is a corporation organized solely under the laws of the State ofMaryland, and except for the amendment and restatement of its bylaws effectiveas of April 5, 2005, it has not changed its name, identity, legalstructure or location (as determined pursuant to Section 9-307 of the NewYork UCC), whether by amendment of its articles or by-laws, reorganization orotherwise, within the past four months and is not a “transmitting utility” asdefined in Section 9-102 of the New York UCC;

 

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(b)                                 The requirements forenforceability of security interests under Section 9-203(b)(1) and (2) ofthe New York UCC have been satisfied;

 

(c)                                  The FinancingStatement correctly states (i) an address of the secured party from whichinformation concerning such Financing Statement can be obtained, and (ii) anindication of such debtor’s nature (e.g., individual or organization) and, ifan organization, its state organizational identification number (if any), itstype and jurisdiction of organization, and, if included, its federal employeeidentification number; and

 

(d)                                 The Collateral has notbeen leased to any third party in what would be characterized as a “leaseintended as security” within the meaning of Section 1-201(37) of the NewYork UCC.

 

(e)                                  The SecurityAgreement is sufficient to create in favor of the Administrative Agent a validsecurity interest in the Collateral.

 

The opinions expressed in this letter are solely for the use of theAdministrative Agent and the Lenders in connection with the transactionscontemplated by the Agreements, and may not be relied on by any otherperson, and may not be used for any other purpose (except that this lettermay be furnished to assignees and participants with the understanding thatit speaks only as of the date hereof), without our prior written approval. Theopinions expressed in this letter are limited to the matters set forth in thisletter, and no other, opinions should be inferred beyond the matters expresslystated. This opinion letter speaks as of its date and we do not undertake toadvise you of any changes in the opinions expressed herein from matters thatmight hereafter arise or be brought to our attention.

 

Very trulyyours,

 

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EXHIBIT A

 

UCC FINANCING STATEMENT

 

Appendix VI-1

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