FS Investment Corporation II 8-K


EXHIBIT 10.1


THIRD AMENDMENT TO CREDIT AGREEMENT


THIS THIRD AMENDMENT
TO CREDIT AGREEMENT, dated as of May 13, 2016 (together with all exhibits and schedules hereto, this “Third Amendment”),
is entered into by and between DUNNING CREEK LLC, a Delaware limited liability company (the “Borrower”), and
DEUTSCHE BANK AG, NEW YORK BRANCH (“DBNY”) as Administrative Agent (in such capacity, the “Administrative
Agent”) and as a lender (DBNY and each other Lender party to the Credit Agreement from time to time, the “Lenders”
and each a “Lender”). Capitalized terms used herein and not otherwise defined herein have the meanings assigned
to such terms in the Credit Agreement described below.


RECITALS:


A.


The Borrower and
DBNY are parties to a Credit Agreement dated as of May 14, 2014 by and among the Borrower and DBNY, as Administrative Agent and
as a Lender, as amended pursuant to that (i) First Amendment to Credit Agreement dated as of June 4, 2014 and (ii) Second Amendment
to Credit Agreement dated as of May 14, 2015 (the credit agreement, as amended and amended and restated prior to the date hereof,
the “Credit Agreement” and, the Credit Agreement, as amended by this Third Amendment, the “Amended
Credit Agreement”).


B.


The parties hereto
desire, among other things, to (i) modify certain terms upon which the Lenders can terminate their Commitment prior to the Scheduled
Commitment Termination Date, (ii) extend the Scheduled Commitment Termination Date, (iii) provide for a commitment fee with respect
to unused Commitments, (iv) include certain terms with respect to a minimum utilization of the Commitments, and (v) amend certain
of the definitions in the Credit Agreement.


NOW, THEREFORE, for
good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:


Section 1.


Amendment of Credit
Agreement. Effective as of the Third Amendment Closing Date (as defined below), the Credit Agreement is hereby amended as follows:


(a)


Section
2.02 of the
Credit Agreement
is hereby
deleted and
replaced in
its entirety
with the following:


 




    	  



    	 



    

 


“(a)


Each Lender’s
commitment to make Loans hereunder shall automatically terminate, and the Maximum Commitment shall be reduced to zero, upon the
Commitment Termination Date. Subject to the terms and conditions set forth in Section 2.02(b) below, the Borrower may voluntarily,
from time to time, permanently reduce the amount of the Maximum Commitment upon at least ten (10) days’ prior written notice
to the Administrative Agent specifying the amount of such reduction (the “Commitment Reduction Amount”), which
notice shall be irrevocable once given and state the effective date for such reduction (the “Reduction Effective Date”);
provided that (i) no reduction may reduce the Maximum Commitment below $25,000,000 unless the Maximum Commitment is reduced to
zero; (ii) any partial reduction of the Maximum Commitment shall be in a minimum amount of $10,000,000 and in an integral multiple
of $1,000,000 for amounts in excess thereof; and (iii) no such reduction shall reduce the Maximum Commitment to an amount less
than the sum of the then aggregate outstanding Loans. The Administrative Agent shall promptly notify each Lender of the receipt
of any such notice and the pro rata reduction of such Lender’s Commitment.


(b)


Borrower may
reduce the Maximum Commitment in accordance with Section 2.02(a) in all respects on at least ten (10) days’ prior written
notice to the Administrative Agent if Borrower, concurrently with or prior to the effectiveness of any such reduction in the Maximum
Commitment, pays to the Administrative Agent, for the account of the Lenders, a fee equal to (x) to the extent the Maximum Commitment
is reduced to an amount not less than $75,000,000, the Commitment Fee that would have accrued on such portion of the Commitment
Reduction Amount from the proposed Reduction Effective Date through the Scheduled Commitment Termination Date (assuming no additional
borrowings hereunder with respect to the amount of such reduction following the proposed Reduction Effective Date) and (y)
to the extent the Maximum Commitment is reduced below $75,000,000, the Applicable Margin that would have accrued on such portion
of the Commitment Reduction Amount from the proposed Reduction Effective Date through the Scheduled Commitment Termination Date.”


(b)


Section
2.03(a) of the
Credit Agreement
is hereby
deleted and
replaced in
its entirety
with the following:


“(a)
Setup Fee.
The Borrower
shall pay
to DBNY
a Setup Fee
in an
amount and
at the time as
set forth in
the fee letter between
DBNY and the Borrower dated
as of May
13, 2016 (the
“May 2016 Fee
Letter”).
The Borrower agrees
that, once paid,
the fees
or any
part thereof payable
hereunder are irrevocable and non-refundable
under any circumstances. The May
2016 Fee Letter supersedes
all prior fee
letters, which remain valid
and enforceable until the
execution of the May 2016 Fee
Letter.”


(a)


Section 2.03 of the
Credit Agreement is hereby amended by adding the following Section 2.03(d) immediately following Section 2.03(c) thereof:


“(d)


Aggregate
Excess Unused Fee. The Borrower shall pay any applicable Aggregate Excess Unused Fee to the Administrative Agent, for account
of the Lenders, on each Payment Date and on the Commitment Termination Date.”


(c)


Section 2.04
of the Credit Agreement is hereby replaced in its entirety with the following:


 




    	2 



    	 



    

 


“Section
2.04. [Reserved].


(d)


Article 2 of
the Credit Agreement is hereby amended by adding the following new Section 2.05 thereto immediately following Section 2.04 thereof:


“Section
2.05 Illegality of Lending. If at any time during the term of this Agreement a Lender (the “Affected Lender”)
(a) receives a final, nonappealable order of an applicable court, tribunal or other administrative body of competent jurisdiction
or (b) an applicable Governmental Authority or otherwise determines pursuant to any applicable law or regulation or interpretative
guidance thereof that it is unlawful for the Affected Lender to perform its obligations as contemplated by this Agreement (a “Lending
Prohibition”): then (x) the Affected Lender shall promptly notify the Administrative Agent upon becoming aware of that
event (which notice shall include a reference to such Lending Prohibition and specify the applicable restrictions contained therein);
(y) to the extent required pursuant to the Lending Prohibition, upon Administrative Agent notifying the Borrower (which notice
shall include a reference to such Lending Prohibition and specify the applicable restrictions contained therein), the Commitment
of the Affected Lender will be immediately cancelled; and (z) to the extent that the Affected Lender’s interest, rights and
obligations under the credit facilities provided for herein have not been assigned and assumed by another Lender and solely to
the extent that the Obligations owed to such Affected Lender hereunder have been deemed prohibited, the Borrower shall repay such
Obligations deemed prohibited that are owing to the Affected Lender (notwithstanding anything to the contrary contained herein,
without any prepayment penalty, premium, breakage cost or other cost owed hereunder) solely to the extent required pursuant to
the Lending Prohibition within thirty (30) calendar days after the date of the Borrower’s receipt of such notice from Administrative
Agent or, if earlier, the date specified by the Affected Lender in the notice delivered to Administrative Agent and by the Administrative
Agent to the Borrower (being no earlier than the last day on which such payment may be made pursuant to the Lending Prohibition
after giving effect to any applicable grace period permitted thereunder). Notwithstanding anything to the contrary contained in
this Agreement (including, without limitation, any pro rata payment provision), any required prepayment pursuant to this Section
2.05 will solely be on account of the outstanding Obligations owed to the Affected Lender and no payment or prepayment shall be
required to be made to any other Lender, and the Commitments of the Lenders other than the Affected Lender shall be reallocated
in a manner acceptable to the Administrative Agent so that, after giving effect thereto, the Loans are held ratably by such Lenders
in accordance with the respective Commitments of such Lenders (after giving effect to such prepayment). For the avoidance of doubt
(but subject to the other terms and conditions contained herein), the Borrower may borrow additional Loans from the other Lenders
hereunder to make such prepayment.”


(e)


Section 9.03(a)
of the Credit Agreement is hereby deleted and replaced in its entirety with the following:


 




    	3 



    	 



    

 


“(a) Except
as otherwise expressly provided herein, all notices and other communications provided for hereunder shall be in writing (including
email or telecopier communication) and e-mailed, mailed, telecopied or delivered, if to the Borrower, the Administrative Agent
or any Lender, at its address specified on Schedule 1 or, at such other address as shall be designated by any party in a written
notice to the other parties hereto; provided however that the Administrative Agent or any Lender may request a hard copy of any
e-mailed notice or other communication to be sent to it at any specified address. Any notice or communication provided for hereunder
shall be deemed to have been given or made (i) as of the date so delivered, if delivered personally or by overnight courier; (ii)
on the date a transmission report confirming transmission is generated by the sender’s telecopy machine, if telecopied; (iii)
on the date sent, if e-mailed, so long as the sender does not receive a bounce-back message within a reasonable time after delivery;
and (iv) five (5) calendar days after mailing if sent by registered or certified mail (except that a notice of change of address
shall not be deemed to have been given until actually received by the addressee).”


(f)


The definitions
of “Applicable Margin,” “Commitment Fee,” “Maximum Commitment,” and “Scheduled Commitment
Termination Date” in Annex I to the Credit Agreement are hereby replaced in their entirety with the following:


““Applicable
Margin” means 1.70% per annum.”


““Commitment
Fee” means, for each day following the Third Amendment Closing Date, the Unused Amount as of such day multiplied by a
fraction, the numerator of which is, from and after the Third Amendment Closing Date, 0.75% and the denominator of which is 360.”


““Maximum
Commitment” means, (a) at any date of determination prior to the Commitment Termination Date, the lesser of (x) $150,000,000
or (y) such lesser amount remaining following any reduction of the Maximum Commitment in accordance with Section 2.02 (Voluntary
Reductions or Termination of the Maximum Commitment) or Section 2.05 (Illegality of Lending) and (b) on and after the
Commitment Termination Date, zero.”


““Scheduled
Commitment Termination Date” means May 14, 2017.”


(g)


The
 following  definitions 
are  hereby  added 
to  Annex
 I  to
 the  Credit
Agreement in the applicable alphabetical location:


““Aggregate
Excess Unused Fee” means, for any Interest Period, the sum of the Excess Unused Fee (if any) for each day during such
Interest Period.”


““Excess
Unused Amount” means, for any date of determination, an amount equal to the excess, if any, of (x) $75,000,000 less
(y) the aggregate principal amount of Loans outstanding on such date (including Loans made on such date and Loans to be made
pursuant to a Borrowing Request submitted by the Borrower or the Manager on or prior to such date).”


 




    	4 



    	 



    

 


““Excess
Unused Fee” means, for any day on which an Excess Unused Amount exists, 0.95% of the Excess Unused Amount for
such day multiplied by a fraction the numerator of which is 1 and the denominator of which is 360.”


““May
2016 Fee Letter” has the meaning set forth in Section 2.03(a).”


““Third
Amendment Closing Date” means May 13, 2016.”


(h)


The Commitment
of Deutsche Bank AG, New York Branch, as Lender, shall, from and after the Third Amendment Effective Date, be replaced with the
Commitment of DBNY set forth on its signature page hereto.


(i)


Schedule 1 of
the Credit Agreement is hereby replaced with Schedule 1 hereto.


Section 2.


Conditions Precedent.
It shall be a condition precedent to the effectiveness of Section 1 of this Third Amendment that each of the following conditions
is satisfied (the date on which such effectiveness occurs, the “Third Amendment Closing Date”):


(a)


Agreements.
The Administrative Agent shall have received executed counterparts of this Third Amendment and the May 2016 Fee Letter duly executed
and delivered by an Authorized Representative of the Borrower.


(b)


Evidence of Authority.
The Administrative Agent shall have received:


(1)


a certificate of an
Authorized Representative of the Borrower and a Responsible Officer (which could be the same person as the Authorized Representative),
dated the Third Amendment Closing Date, as to:


(i)


the authority of
the Borrower to execute and deliver this Third Amendment and to perform its obligations under the Amended Credit Agreement, the
Notes, and each other Credit Document executed by it, in each case as amended by this Third Amendment and each other instrument,
agreement or other document to be executed in connection with the transactions contemplated in connection herewith and therewith;


(ii)


the absence of any
changes in the Organic Documents of the Borrower since the copies delivered in connection with the closing of the Credit Agreement;
and


(2)


such other instruments,
agreements or other documents (certified if requested) as the Administrative Agent may reasonably request.


 




    	5 



    	 



    

 


(c)


Officer’s
Certificate. The Administrative Agent shall have received a certificate (which may be the same certificate as reference in
Section 2(b)(i) above) of an Authorized Representative of the Borrower and a Responsible Officer (which could be the same
person as the Authorized Representative), in each case on behalf of the Borrower dated as of the Third Amendment Closing Date,
in form and substance reasonably satisfactory to the Administrative Agent (which shall be deemed to have been given under the Credit
Agreement), to the effect that, as of such date:


(1)


all conditions set
forth in this Section 2 (CONDITIONS PRECEDENT) have been fulfilled;


(2)


all representations
and warranties of the Borrower set forth in Article 5 of the Credit Agreement (REPRESENTATIONS AND WARRANTIES) are true and
correct in all material respects as if made on the Third Amendment Closing Date (unless expressly made as of a certain date, in
which case it shall be true and correct in all material respects as of such date);


(3)


all representations
and warranties set forth in each of the Collateral Documents are true and correct in all material respects as if made on the Third
Amendment Closing Date (unless expressly made as of a certain date, in which case it shall be true and correct in all material
respects as of such date); and


(4)


no Default or Event
of Default shall be continuing.


(d)


Opinion of Counsel.
The Administrative Agent shall have received a legal opinion from Dechert LLP, counsel to the Borrower, the Manager and FSIC II
Advisor, in form and substance reasonably satisfactory to the Administrative Agent covering such matters as the Administrative
Agent may reasonably request.


(e)


Manager Letter.
The Administrative Agent shall have received from the Manager a letter in the form of Exhibit A hereto addressed to
the Administrative Agent reaffirming all of its obligations under the Manager Letter entered into in connection with the Credit
Agreement.


(f)


Equity Owner Letter.
The Administrative Agent shall have received from the Equity Owner a letter in the form of Exhibit B hereto addressed
to the Administrative Agent reaffirming all of its obligations under the Equity Owner Letter entered into in connection with the
Credit Agreement.


(g)


FSIC II Advisor
Letter. The Administrative Agent shall have received from FSIC II Advisor a letter in the form of Exhibit C hereto
addressed to the Administrative Agent reaffirming all of its obligations under the FSIC II Advisor Letter entered into in connection
with the Credit Agreement.


(h)


Closing Fees,
Expenses, etc. The Administrative Agent shall have received for its own account, or for the account of the Lenders, as the
case may be, all fees, costs and expenses (x) then due and payable to it under the Credit Agreement and the May 2016 Fee Letter
and (y) incurred in connection with negotiating and documenting this Third Amendment; it being understood that payment of fees
under the 2016 Fee Letter shall not count toward utilization of the limit set forth in clause (x) of the definition of “Administrative
Expenses” or toward utilization of any other limit, cap or basket set forth in any Credit Document.


 




    	6 



    	 



    

 


(i)


After giving effect
to Section 1 of this Third Amendment and any requested Borrowing on the Third Amendment Closing Date, (1) the aggregate
principal amount of all Loans outstanding will not exceed the Maximum Commitment and (2) the Overcollateralization Test is
satisfied.


(j)


Satisfactory Legal
Form. All limited liability company and other actions or proceedings taken or required to be taken in connection with the transactions
contemplated hereby and all agreements, instruments, documents and opinions of counsel executed, submitted, or delivered pursuant
to or in connection with this Third Amendment by or on behalf of the Borrower shall be reasonably satisfactory in form and substance
to the Administrative Agent and its counsel; all certificates and opinions delivered pursuant to this Third Amendment shall be
addressed to the Administrative Agent and the Lenders, or the Administrative Agent and the Lenders shall be expressly entitled
to rely thereon; the Administrative Agent and its counsel shall have received all information, and such number of counterpart originals
or such certified or other copies of such information, as the Administrative Agent or its counsel may reasonably request; and all
legal matters incident to the transactions contemplated by this Third Amendment shall be reasonably satisfactory to counsel to
the Administrative Agent.


Section 3.


Miscellaneous.


(a)


GOVERNING LAW.
THIS THIRD AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK INCLUDING SECTIONS 5-1401
AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES.


(b)


Amendments, Etc.
None of the terms of this Third Amendment may be changed, waived, discharged or terminated unless such change, waiver, discharge
or termination is in writing signed by the Borrower and the Administrative Agent (or other applicable party thereto as the case
may be), and each such waiver or consent shall be effective only in the specific instance and for the specific purpose for which
given.


(c)


Severability.
If any one or more of the covenants, agreements, provisions or terms of this Third Amendment shall be for any reason whatsoever
held invalid, then such covenants, agreements, provisions or terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Third Amendment and shall in no way affect the validity or enforceability of the other provisions of
this Third Amendment.


(d)


Counterparts.
This Third Amendment may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute one and the same instrument.


 




    	7 



    	 



    

 


(e)


Successors and
Assigns. All covenants and agreements contained herein shall be binding upon, and inure to the benefit of the parties hereto
and their respective successors and permitted assigns.


(f)


Captions.
The captions and section headings appearing herein are included solely for convenience of reference and are not intended to affect
the interpretation of any provision of this Third Amendment.


(g)


Entire Agreement.
This Third Amendment constitutes a final and complete integration of all prior expressions by the parties hereto with respect to
the subject matter hereof and shall (together with the Amended Credit Agreement and the other Credit Documents) constitute the
entire agreement among the parties hereto with respect to the subject matter hereof, superseding all previous oral statements and
other writings with respect thereto.


[Signature pages follow]


 




    	8 



    	 



    

 


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


	 	BORROWER
	 	 
	 	DUNNING CREEK LLC,
	 	as Borrower
	 	 	 
	 	 	 
	 	By:	/s/ Gerald F. Stahlecker
	 	 	Name: Gerald F. Stahlecker
	 	 	Title: Executive Vice President


 


 




    	[Signature Page to Third Amendment]



    	 



    

 


	 	ADMINISTRATIVE AGENT:
	 	 
	 	DEUTSCHE BANK AG, NEW YORK

BRANCH as Administrative Agent
	 	 
	 	 
	 	By:	/s/ Ian R. Jackson
	 	 	Name: Ian R. Jackson
	 	 	Title: Director
	 	 	 
	 	 	 
	 	By:	/s/ Miller Brownstein
	 	 	Name: Miller Brownstein
	 	 	Title: Director


 




    	[Signature Page to Third Amendment]



    	 



    

 


	 	DEUTSCHE BANK AG, NEW YORK

BRANCH, as Lender
	 	 
	 	 
	 	By:	/s/ Ian R. Jackson
	 	 	Name: Ian R. Jackson
	 	 	Title: Director
	 	 	 
	 	 	 
	 	By:	/s/ Miller Brownstein
	 	 	Name: Miller Brownstein
	 	 	Title: Director 


 


 


The Commitment of Deutsche Bank AG, New York Branch, as Lender
is as follows:


	Amount of Commitment	Percentage
	$150,000,000	100%