Document:

Exhibit 10.4

 

EXECUTION VERSION

 

PLEDGE AND SECURITY AGREEMENT

 

THIS PLEDGE AND SECURITY AGREEMENT (this “Agreement”) is made as of the 5th  day of October, 2012, by and between WALKER & DUNLOP, INC., a Maryland corporation having an address at 7501 Wisconsin Avenue, Suite 1200E, Bethesda, Maryland 20814 (as “Pledgor”) and BANK OF AMERICA, N.A., as Administrative Agent for the benefit of the Lenders (“Administrative Agent”) under the Credit Agreement (as defined herein).

 

WHEREAS, Pledgor is the direct legal and beneficial owner of one hundred percent (100%) of the limited liability company interests in and to (the “Pledged Ownership Interests”), and is the sole manager of, W&D INTERIM LENDER II LLC, a Delaware limited liability company (the “Pledged Entity”);

 

WHEREAS, pursuant to that certain Warehousing Credit and Security Agreement dated of even date herewith (as amended, modified, supplemented, or restated from time to time, the “Credit Agreement”), among the Pledged Entity, Pledgor, the Lenders now or hereafter party to thereto (the “Lenders”), and Administrative Agent, the Pledged Entity and the Pledgor, and as described and contemplated therein and the other Loan Documents (as defined in the Credit Agreement) will incur obligations to Administrative Agent and the Lenders from time to time;

 

WHEREAS, Pledgor is the owner of one hundred percent (100%) of the equity interests in the Pledged Entity and will benefit from the extension of credit to the Pledged Entity under the Credit Agreement; and

 

WHEREAS, Pledgor wishes to grant pledges and security interests in favor of Administrative Agent, for the benefit of the Lenders, as herein provided.

 

NOW, THEREFORE, in consideration of the premises contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

1.                                      Pledge of Collateral.  Pledgor hereby pledges and assigns to Administrative Agent, for the benefit of the Lenders, and grants to Administrative Agent, for the benefit of the Lenders, a security interest in, any and all of Pledgor’s right, title, and interest in and to the following (singly and collectively, the “Collateral”):

 

(a)                                 the Pledged Ownership Interests together with any and all rights to Distributions or other payments from the Pledged Entity arising therefrom or relating thereto, and any and all options, rights, instruments and other property or proceeds from time to time received, receivable or otherwise distributable in respect of, in exchange for, and/or otherwise relating to any or all of the Pledged Ownership Interests, including, without limitation, all general intangibles related thereto as defined or otherwise described in the UCC; and

 

(b)                                 to the extent not covered by subparagraph (a), any and all rights to receive all income, gain, profit, loss or other items allocated, allocable, distributable, or distributed to Pledgor under the Pledged Entity’s Organizational Documents; and

 

(c)                                  to the extent not covered by subparagraphs (a) or (b), any and all of Pledgor’s ownership interest in and to any and all capital accounts of the Pledged Entity; and

 

 

(d)                                 all of Pledgor’s voting, consent, management, management removal and replacement, and approval rights, and/or rights to control or direct the affairs of the Pledged Entity; and

 

(e)                                  any additional membership or other ownership interest in the Pledged Entity or entity which is the successor of the Pledged Entity, or any membership or other ownership interest exchangeable for or convertible into additional membership or other ownership interests in the Pledged Entity, or successor of the Pledged Entity, by purchase or otherwise and the certificates or other instruments representing such additional interests, warrants, rights, instruments, and other property or proceeds from time to time received, receivable, or otherwise distributable or distributed in respect of or in exchange for any or all of such additional membership or other ownership interests, shares, securities, warrants, options, or other rights; and

 

(f)                                   to the extent not covered by clauses (a) through (e) above, all proceeds of any or all of the foregoing.  For purposes of this Agreement, the term “proceeds” includes whatever is receivable or received when Collateral or proceeds are sold, exchanged, collected, or otherwise disposed of, whether such disposition is voluntary or involuntary, and includes, without limitation, proceeds of any indemnity or guaranty payable to Pledgor from time to time with respect to any of the Collateral.

 

2.                                      Certain Definitions.  Capitalized terms used herein (including the Recitals hereto) without definition shall have the respective meanings provided therefor in the Credit Agreement.  Terms (whether or not capitalized) used herein and not defined in the Credit Agreement or otherwise defined herein that are defined in the Uniform Commercial Code as in effect in the Commonwealth of Massachusetts or other applicable jurisdiction (the “UCC”) have such defined meanings herein, unless the context otherwise indicates or requires.  In addition, the following terms used herein shall have the following meanings:

 

(a)                                 “Article 8 Matter” means any action, decision, determination or election by the Pledged Entity or the owner(s) of the Pledged Entity that the Pledged Ownership Interests or other equity interests in the Pledged Entity shall be, or cease to be, a “security” as defined in and governed by Article 8 of the UCC, and all other matters related to any such action, decision, determination or election.

 

(b)                                 “Contractual Obligation” means, as to any Person, any contract, agreement, or undertaking, regardless of how characterized, oral or written, to which such Person is a party, or by which such Person or such Person’s property is bound, or to which such Person or such Person’s property is subject.

 

(c)                                  “Distributions” means the declaration or payment of any distribution of property, including cash, regardless of whether from cash flow, capital transactions, or otherwise, on account of the Pledged Ownership Interests, or any other distribution or payment on or in respect of any membership or other ownership interest or the redemption or repurchase thereof.

 

(d)                                 “Governmental Authority” means any national, state, or local government, any political subdivision thereof, or any other governmental, quasi-governmental, judicial, public, or statutory instrumentality, authority, body, agency, bureau, or entity or any arbitrator with authority to bind a Person at law, and any agency, authority, department, commission, board, bureau or instrumentality of any of them.

 

(e)                                  “Legal Requirements” means all applicable federal, state, county and local laws, by-laws, rules, regulations, codes and ordinances, and the requirements of any Governmental Authority having or claiming jurisdiction with respect thereto, including, but not limited to, all orders and directives of any Governmental Authority having or claiming jurisdiction with respect thereto.

 

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(f)                                   “Lien” means any lien, pledge, encumbrance, security interest, mortgage, restriction, charge or encumbrance of any kind.

 

(g)                                  “Organizational Documents” means for any corporation, partnership, trust, limited liability company, limited liability partnership, unincorporated association, business or other legal entity, the agreements pursuant to which such entity has been established or organized, its affairs are to be governed, and its business is to be conducted, as such documents may be amended from time to time.

 

3.                                      Security for Obligations.  This Agreement secures, and the Collateral is collateral security for, the prompt payment or performance in full when due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise (including, without limitation, the payment of amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. § 362(a)), of the Obligations of the Pledged Entity and Pledgor under the Credit Agreement, the Guaranty and other Loan Documents, of every nature, now or hereafter existing under or arising out of or in connection with the Credit Agreement and the other Loan Documents and all renewals or extensions thereof, whether for principal, interest, fees, expenses, indemnities, or otherwise, whether voluntary or involuntary, direct or indirect, absolute or contingent, liquidated or unliquidated, whether or not jointly owed with others, and whether or not from time to time decreased or extinguished and later increased, created, or incurred, and all or any portion of such obligations or liabilities that are paid, to the extent that all or any part of such payment is avoided or recovered directly or indirectly from Administrative Agent or any Lender as a preference, fraudulent transfer, or otherwise, and all obligations of every nature of Pledgor now or hereafter existing under this Agreement (all such obligations of Pledgor being referred to herein as the “Secured Obligations”).

 

4.                                      Delivery of Collateral; Release of Collateral.

 

(a)                                 Simultaneously with the execution of this Agreement, Pledgor shall deliver to Administrative Agent the original certificate evidencing the Pledged Ownership Interests, which shall be in the form of Exhibit A attached hereto (the “Certificate”), in suitable form for transfer by delivery or, as applicable, accompanied by any necessary endorsement or duly executed instruments of transfer or assignment, in blank, all in form and substance reasonably satisfactory to Administrative Agent.

 

(b)                                 Administrative Agent shall have the right, at any time after the occurrence and during the continuation of an Event of Default, in its discretion and without notice to Pledgor, to transfer to or to register in the name of Administrative Agent or any of its nominees any or all of the Collateral.  In addition, Administrative Agent shall have the right at any time to exchange certificates or instruments representing or evidencing Collateral for certificates or instruments of smaller or larger denominations.

 

(c)                                  Notwithstanding the foregoing, to better assure the perfection of the security interest of Lender in the Pledged Interests, concurrently with the execution and delivery of this Agreement, Pledgor shall send written instructions in the form of Exhibit B hereto to the Pledged Entity, and shall cause the Pledged Entity to, and the Pledged Entity shall, deliver to Administrative Agent the Confirmation Statement and Instruction Agreement in the form of Exhibit C hereto pursuant to which the Pledged Entity will confirm that it has registered the pledge effected by this Agreement on its books and agrees to comply with the instructions of Administrative Agent in respect of the Pledged Interests without further consent of Pledgor or any other Person.  Notwithstanding anything in this paragraph, neither the written instructions provided for on Exhibit B nor the Confirmation Statement and Instruction Agreement provided for on Exhibit C shall be construed as expanding the rights of Administrative Agent to give instructions with respect to the Collateral beyond such rights set forth in this Agreement.

 

5.                                      Representations and Warranties.  Pledgor hereby represents and warrants as follows:

 

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(a)                                 Description of Collateral.  There are no outstanding unfunded capital contributions of Pledgor to be made with respect to the Pledged Entity. The Pledged Ownership Interests constitute all of the issued and outstanding ownership interests of the Pledged Entity owned beneficially or of record by Pledgor.  Pledgor does not hold nor does Pledgor have any right to the issuance of any options or other rights to purchase, and is not party to any other agreement with respect to, and does not hold or have the right to any property that is now or hereafter convertible into, or that requires the issuance or sale of, any membership or other ownership interests of the Pledged Entity.

 

(b)                                 Ownership of Collateral.  (i)  Pledgor is the legal, record and beneficial owner of, and has good and marketable title to, the Collateral free and clear of, and subject to no, pledges, Liens, security interests, charges, options, restrictions or other encumbrances, except the pledge and security interest created by this Agreement; (ii) Pledgor has the legal capacity to execute, deliver and perform Pledgor’s obligations under this Agreement and to pledge and grant a security interest in all of the Collateral of which it is the legal or beneficial owner, pursuant to this Agreement; (iii) except for authorizations and consents which have already been obtained, no authorization, consent of or notice to any party that has not been obtained is required in connection with the execution, delivery, performance, validity or enforcement of this Agreement, including, without limitation, the assignment and transfer by Pledgor of any of the Collateral to Administrative Agent or the subsequent transfer by Administrative Agent pursuant to the terms hereof; and (iv) the giving of notices in the form of Exhibit B and Exhibit C hereto, Administrative Agent’s having possession of the Certificate (together with an endorsement thereof in blank), instruments and cash constituting the Collateral from time to time and the filing of UCC-1 financing statements with the Secretary of State of the State of Delaware results in the perfection of Administrative Agent’s security interest therein.

 

(c)                                  Governmental Authorizations.  No authorization, approval or other action by, and no notice to or filing with, any Governmental Authority is required for either (i) the pledge by Pledgor of the Collateral pursuant to this Agreement and the grant by Pledgor of the security interest granted hereby; (ii) the execution, delivery, or performance of this Agreement by Pledgor; or (iii) the exercise by Administrative Agent of the voting or other rights, or the remedies in respect of the Collateral provided for in this Agreement (except as may be required in connection with a disposition of Collateral by laws affecting the offering and sale of securities generally).

 

(d)                                 Opt-In to Article 8. With respect to the Pledged Ownership Interests, Pledgor represents and warrants that the Pledged Entity has opted into Article 8 of the UCC; provided, however, that the Pledged Ownership Interests shall be deemed “securities” for purposes of UCC compliance only, and Pledgor acknowledges and agrees that the act of opting into Article 8 of the UCC alone does not categorize such interests as “securities” under any federal investment company laws or federal or state securities laws.  None of the Collateral is dealt with or traded on any securities exchanges or in any securities markets.  Pledgor intends that Administrative Agent have “control” of the Pledged Ownership Interests within the meaning of Sections 9-314, 9-106, and 8-106 of the UCC.

 

(e)                                  Creation, Perfection and Priority of Security Interest.  By reason of the acts taken by Pledgor and the Pledged Entity, and the Administrative Agent’s control (within the meaning of Section 9-314, 9-106 and 8-105 of the UCC) of the Pledged Ownership Interests, the Administrative Agent has, for the benefit of the lenders, a first priority, perfected security interest in the Collateral, and no further or additional acts are required to create or perfect Administrative Agent’s security interest in and Lien on the Collateral, and the security interest in and the Lien on the Collateral in favor of Administrative Agent is superior in right and priority to any rights or claims of any other Person.  This Agreement constitutes an authenticated record, and Administrative Agent is authorized at all times to file any and all UCC financing statements and take such other actions determined by Administrative Agent to be necessary or desirable to perfect its security interest in the Collateral.

 

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(f)                                   No Other Financing Statements.  Other than the UCC financing statements filed by Administrative Agent in connection with securing the Collateral, there is no financing statement (or similar statement or registration under the laws of any jurisdiction) now on file or registered in any public office covering any interest of Pledgor or any other Person in the Collateral or intended so to be.

 

(g)                                  Other Information.  All information heretofore, herein or hereafter supplied to Administrative Agent by Pledgor with respect to the Collateral is accurate and complete in all material respects.

 

6.                                      Assurances and Covenants of Pledgor.

 

(a)                                 Transfers and Other Liens.  Pledgor shall not:

 

(i)                                     sell, assign (by operation of law or otherwise), pledge or hypothecate or otherwise dispose of, or grant any option with respect to, any of the Collateral, except to Administrative Agent hereunder; or

 

(ii)                                  create or suffer to exist any Lien upon or with respect to any of the Collateral, except for the Lien created hereunder.

 

(b)                                 Covenants of Pledgor.  Pledgor covenants and agrees that so long as any of the Secured Obligations are outstanding:

 

(i)                                     Pledgor is the holder of the Pledged Ownership Interests and shall not resign or withdraw as a member or manager or vote for, agree or consent to, or permit the admission of any new members to the Pledged Entity.

 

(ii)                                  Pledgor shall not vote for, agree or consent to, or permit the sale, transfer, pledge or encumbrance of the Pledged Ownership Interests.

 

(iii)                               Pledgor shall not vote for, agree or consent to, permit, or take any action in furtherance of the discontinuance of the business or the dissolution or liquidation of the Pledged Entity.

 

(iv)                              Pledgor shall not vote for, agree or consent to, permit, or make any amendments or modifications to the Organizational Documents of the Pledged Entity, except as permitted by the Credit Agreement.

 

(v)                                 Pledgor shall not enter into any agreements which restrict, limit or otherwise impair the transferability of the Pledged Ownership Interests, except the restrictions contained in the Loan Documents.

 

(c)                                  Additional Collateral.  Pledgor shall pledge hereunder, immediately upon Pledgor’s acquisition (directly or indirectly) thereof, any and all additional membership or other ownership interests of the Pledged Entity.

 

(d)                                 Pledge Amendments.  Pledgor shall, upon obtaining any additional membership or other interests required to be pledged hereunder,  promptly (and in any event within five (5) Business Days) deliver to Administrative Agent such documents as Administrative Agent reasonably may require to confirm the pledge hereunder of such additional collateral; provided that the failure of Pledgor to execute any such additional documents with respect to any additional Pledged Ownership Interests

 

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pledged pursuant to this Agreement shall not impair the security interest of Administrative Agent therein or otherwise adversely affect the rights and remedies of Administrative Agent hereunder with respect thereto.

 

(e)                                  Taxes and Assessments.  Pledgor shall pay promptly when due all taxes, assessments, and governmental charges or levies imposed upon, and all claims against, the Collateral, except to the extent the validity thereof is being contested in good faith and by appropriate proceedings and in which reserves or other appropriate provisions have been made or provided therefor; provided that Pledgor shall in any event pay such taxes, assessments, charges, levies, or claims not later than five (5) days prior to the date of any proposed sale under any judgment, writ or warrant of attachment entered or filed against Pledgor or any of the Collateral as a result of the failure to make such payment.

 

(f)                                   Further Assurances.  Pledgor shall from time to time, at the expense of Pledgor, promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or desirable, or that Administrative Agent may reasonably request, in order to give full effect to this Agreement and to perfect and protect any security interest granted or purported to be granted hereby or to enable Administrative Agent to exercise and enforce its rights and remedies hereunder with respect to any Collateral, provided that such further instruments, documents and actions are consistent with this Agreement.

 

(g)                                  Warranty of Title to Collateral.  Pledgor covenants that Pledgor will defend its rights, title and interest in and to the Collateral against the claims and demands of all Persons whomsoever.  Pledgor further covenants that Pledgor will have the title to and right to pledge and grant a security interest in the Collateral hereafter pledged or in which a security interest is granted to Administrative Agent hereunder and will likewise defend its rights therein.

 

(h)                                 Good Standing.  Pledgor will at all times be duly formed and is, and will at all times be, validly existing, in good standing and qualified to do business in each jurisdiction where required. Pledgor will at all times have all requisite power to own its property and conduct its business as now conducted and as presently contemplated.

 

7.                                      Voting Rights, Dividends, Etc.

 

(a)                                 So long as no Event of Default shall have occurred and be continuing:

 

(i)                                     Pledgor shall be entitled to exercise any and all voting, management, and other consensual rights pertaining to the Collateral or any part thereof for any purpose not inconsistent with the terms of this Agreement, the Credit Agreement or any other Loan Document, subject to the provisions of Section 6(b) hereof;

 

(ii)                                  Subject to the terms and conditions of the Credit Agreement, Pledgor shall be entitled to receive and retain, and to utilize free and clear of the Lien of this Agreement, any and all (A) Distributions, and (B) distributions of capital or other property on or in respect of any of the Pledged Ownership Interests pursuant to the recapitalization or reclassification of the capital of the issuer thereof or pursuant to the reorganization thereof, paid in respect of the Collateral; provided, however, that if any such property is distributed in the form of ownership interests in the Pledged Entity, such ownership interests shall be pledged and any certificates evidencing such ownership interests shall be delivered to Administrative Agent as provided for in Section 6(c) (collectively, “Collateral Payments and Distributions”); and

 

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(iii)                               Administrative Agent shall promptly execute and deliver (or cause to be executed, and delivered) to Pledgor all such proxies, dividend payment orders and other instruments as Pledgor may from time to time reasonably request for the purpose of enabling Pledgor to exercise the voting, management, and other consensual rights which it is entitled to exercise pursuant to paragraph (i),  above, and to receive the Collateral Payments and Distributions which Pledgor is authorized to receive and retain pursuant to paragraph (ii) above.

 

(b)                                 Upon the occurrence and during the continuation of an Event of Default, and after notice from Administrative Agent (to the extent notice is required under the Loan Documents):

 

(i)                                     upon written notice from Administrative Agent to Pledgor, all rights of Pledgor to exercise the voting, management, and other consensual rights which it would otherwise be entitled to exercise pursuant to Section 7(a)(i) shall cease, and all such rights shall thereupon become vested in Administrative Agent who shall thereupon have the sole right to exercise such voting, management, and other consensual rights;

 

(ii)                                  all rights of Pledgor to receive the Collateral Payments and Distributions which Pledgor would otherwise be authorized to receive and retain pursuant to Section 7(a)(ii) shall cease, and all such rights shall thereupon become vested in Administrative Agent who shall thereupon have the sole right to receive and hold as Collateral such Collateral Payments and Distributions; and

 

(iii)                               all Collateral Payments and Distributions which are received by Pledgor contrary to the provisions of paragraph (ii) of this Section 7(b) shall be received in trust for the benefit of Administrative Agent, shall be segregated from other funds of Pledgor and shall forthwith be paid over to Administrative Agent as Collateral in the same form as so received (with any necessary endorsements).

 

(c)                                  In order to permit Administrative Agent to exercise the voting, management, and other consensual rights which it may be entitled to exercise pursuant to Section 7(b)(i) and to receive all Collateral Payments and Distributions which it may be entitled to receive under Section 7(b)(ii),  (i) Pledgor shall promptly execute and deliver (or cause to be executed and delivered) to Administrative Agent all such proxies, dividend payment orders and other instruments as Administrative Agent may from time to time reasonably request; and (ii) without limiting the effect of the immediately preceding clause (i),  Pledgor hereby grants to Administrative Agent, in order for Administrative Agent to exercise the rights provided to it under this Section, an irrevocable proxy to vote the Pledged Ownership Interests and to exercise all other rights, powers, privileges and remedies to which a holder of the Pledged Ownership Interests would be entitled (including, without limitation, giving or withholding written consents of members, calling special meetings of members and voting at such meetings), which proxy shall be effective, automatically and without the necessity of any action (including any transfer of any Pledged Ownership Interests on the record books of the issuer thereof), by any other Person (including the issuer of the Pledged Ownership Interests or any officer or agent thereof).

 

(d)                                 Notwithstanding any of the foregoing, Pledgor agrees that this Agreement shall not in any way be deemed to obligate Administrative Agent to assume any of Pledgor’s obligations, duties, expenses or liabilities arising out of this Agreement unless Administrative Agent otherwise expressly agrees to assume any or all of said obligations, duties, expenses or liabilities in writing.

 

8.                                      Administrative Agent Appointed Attorney-in-Fact.  Pledgor hereby irrevocably appoints Administrative Agent as Pledgor’s attorney-in-fact, with full authority in the place and stead of Pledgor and in the name of Pledgor, exercisable after the occurrence and during the continuation of an Event of

 

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Default, from time to time in Administrative Agent’s discretion to take any action and to execute any instrument that Administrative Agent may deem necessary or advisable to accomplish the purposes of this Agreement, including, without limitation, upon and during the continuation of an Event of Default:

 

(a)                                 to ask, demand, collect, sue for, recover, compound, receive, and give acquittance and receipts for moneys due and to become due under or in respect of any of the Collateral;

 

(b)                                 to receive, endorse and collect any instruments made payable to Pledgor representing any dividend or other Distribution in respect of the Collateral or any part thereof and to give full discharge for the same; and

 

(c)                                  to file any claims or take any action or institute any proceedings that Administrative Agent may deem necessary or desirable for the collection of any of the Collateral or otherwise to enforce the rights of Administrative Agent with respect to any of the Collateral.

 

9.                                      Standard of Care.  The powers conferred on Administrative Agent hereunder are solely to protect its interest in the Collateral and shall not impose any duty upon it to exercise any such powers.  Except for the exercise of reasonable care in the custody of any Collateral in its possession and the accounting for moneys actually received by it hereunder, Administrative Agent shall have no duty as to any Collateral, it being understood that Administrative Agent shall have no responsibility for (a) ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relating to any Collateral, whether or not Administrative Agent has or is deemed to have knowledge of such matters; (b) taking any necessary steps (other than steps taken in accordance with the standard of care set forth above to maintain possession of the Collateral) to preserve rights against any parties with respect to any Collateral; (c) taking any necessary steps to collect or realize upon the Secured Obligations or any guaranty therefor, or any part thereof, or any of the Collateral; or (d) initiating any action to protect the Collateral against the possibility of a decline in market value.  In no event shall the standard of care imposed upon Administrative Agent hereunder exceed the minimum applicable standard of care imposed under Section 9-207 of the UCC.

 

10.                               Waiver of Defenses; Secured Obligations Not Affected.  Pledgor hereby waives and agrees not to assert or take advantage of any defense based on: (a) except for a breach of the standard of care set forth in Section 9 hereof, any lack of diligence by Administrative Agent in collection, protection or realization upon any Collateral; (b) the failure to make or give notice of presentment and demand for payment, or failure to make or give protest and notice of dishonor or of default to Pledgor or to any other party with respect to the Secured Obligations; (c) any exculpation of liability of any party contained in the Loan Documents; (d) the failure of Administrative Agent to perfect any security or to extend or renew the perfection of any security; (e) any valuation, stay, moratorium law or other similar law now or hereafter in effect or any right to require the marshalling of assets of Pledgor; (f) any fraudulent, illegal or improper act by the Pledged Entity or Pledgor; and (g) any other legal, equitable, or suretyship defenses whatsoever to which Pledgor might otherwise be entitled, it being the intention that the obligations of Pledgor hereunder shall be absolute, unconditional and irrevocable.

 

11.                               Remedies.

 

(a)                                 If any Event of Default shall have occurred and be continuing, then Administrative Agent may exercise in respect of the Collateral, in addition to all other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party on default under the UCC (whether or not the UCC applies to the affected Collateral), and Administrative Agent may also in its sole discretion, without notice except as specified below, sell the Collateral or any part thereof in one or more parts at public or private sale, at any exchange or broker’s board or at any of

 

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Administrative Agent’s offices or elsewhere, for cash, on credit, or for future delivery, at such time or times and at such price or prices and upon such other terms as would be commercially reasonable given the circumstances thereof, irrespective of the impact of any such sales on the market price of the Collateral.  Administrative Agent may be the purchaser of any or all of the Collateral at any such sale and Administrative Agent shall be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Collateral sold at any such public sale, to use and apply any of the Secured Obligations as a credit on account of the purchase price for any Collateral payable by Administrative Agent at such sale.  Each purchaser at any such sale shall hold the property sold absolutely free from any claim or right on the part of Pledgor, and Pledgor hereby waives all rights of redemption, stay, and/or appraisal which Pledgor now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted.  Pledgor agrees that, to the extent notice of sale shall be required by law, at least ten (10) Business Days’ notice to Pledgor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification.  Administrative Agent shall not be obligated to make any sale of Collateral regardless of notice of sale having been given.  Administrative Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned.  Pledgor hereby waives any claims against Administrative Agent arising by reason of the fact that the price at which any Collateral may have been sold at such a private sale was less than the price which might have been obtained at a public sale, even if Administrative Agent accepts the first offer received and does not offer such Collateral to more than one offeree.

 

(b)                                 Pledgor recognizes that, by reason of certain prohibitions contained in the Securities Act of 1933, as from time to time amended (the “Securities Act”), and applicable state securities laws, Administrative Agent may be compelled, with respect to any sale of all or any part of the Collateral conducted without prior registration or qualification of such Collateral under the Securities Act and/or such state securities laws, to limit purchasers to those who will agree, among other things, to acquire the Collateral for their own account, for investment and not with a view to the distribution or resale thereof.  Pledgor acknowledges that any such private sales may be at prices and on terms less favorable than those obtainable through a public sale without such restrictions (including, without limitation, a public offering made pursuant to a registration statement under the Securities Act) and, notwithstanding such circumstances, Pledgor agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner and that Administrative Agent shall have no obligation to engage in public sales and no obligation to delay the sale of any Collateral for the period of time necessary to permit the issuer thereof to register it for a form of public sale requiring registration under the Securities Act or under applicable state securities laws, even if such issuer would, or should, agree to so register it.

 

(c)                                  If Administrative Agent determines to exercise its right to sell any or all of the Collateral, then, upon Administrative Agent’s written request, the Pledged Entity shall furnish to Administrative Agent such information as Administrative Agent may reasonably request of Pledgor concerning Pledgor and the Collateral granted by Pledgor.

 

12.                               Application of Proceeds.  Except as expressly provided elsewhere in this Agreement, all proceeds received by Administrative Agent in respect of any sale of, collection from, or other realization upon all or any part of the Collateral may, in the discretion of Administrative Agent, be held by Administrative Agent as Collateral for, and/or then, or at any time thereafter, applied in full or in part by Administrative Agent against, the Secured Obligations.  Upon the indefeasible payment in full of all Secured Obligations, any such proceeds remaining shall be paid to or upon the order of Pledgor, or to whosoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct.

 

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13.                               Indemnity and Expenses.

 

(a)                                 Pledgor agrees to indemnify Administrative Agent from and against any and all claims, losses, and liabilities in any way relating to, growing out of, or resulting from this Agreement and the transactions contemplated hereby (including, without limitation, enforcement of this Agreement), except to the extent such claims, losses, or liabilities result from Lender’s gross negligence or willful misconduct, as finally determined by a court of competent jurisdiction.

 

(b)                                 Pledgor shall pay to Administrative Agent upon demand the amount of any and all reasonable costs and expenses, including the reasonable fees and expenses of its counsel and of any experts and agents, that Administrative Agent or Lenders may incur in connection with (i) the sale of, collection from, or other realization upon, any of the Collateral, (ii) the exercise or enforcement of any of the rights of Administrative Agent hereunder, or (iii) the failure by Pledgor to perform or observe any of the provisions hereof.

 

14.                               Continuing Security Interest.  This Agreement shall create a continuing security interest in the Collateral and shall (a) remain in full force and effect until the payment in full of all Secured Obligations and the cancellation or termination of the Credit Agreement, (b) be binding upon Pledgor and Pledgor’s legal representatives, successors and assigns, and (c) inure, together with the rights and remedies of Administrative Agent and the Lenders hereunder, to the benefit of Administrative Agent and the Lenders and their successors, transferees and assigns (to the extent permitted by the Credit Agreement).  Upon the payment in full of all Secured Obligations and the cancellation or termination of the Credit Agreement, the security interest granted hereby shall terminate and all rights to the Collateral shall revert to Pledgor.  Upon any such termination Administrative Agent will, at Pledgor’s expense, execute and deliver to Pledgor such documents as Pledgor shall reasonably request to evidence such termination and Pledgor shall be entitled to the return, upon Pledgor’s request and at Pledgor’s expense, against receipt and without recourse to Administrative Agent or any Lender, of such of the Collateral as shall not have been sold or otherwise applied pursuant to the terms hereof.

 

15.                               Amendments, Etc.  No amendment, modification, termination or waiver of any provision of this Agreement, and no consent to any departure by Pledgor from the terms and conditions hereof, shall in any event be effective as to Pledgor unless the same shall be in writing and signed by Administrative Agent and, in the case of any such amendment or modification, by Pledgor.  Any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given.

 

16.                               Failure or Indulgence Not Waiver; Remedies Cumulative.  No failure or delay on the part of Administrative Agent in the exercise of any power, right or privilege hereunder shall impair such power, right or privilege or be construed to be a waiver of any default or acquiescence therein, nor shall any single or partial exercise of any such power, right, or privilege preclude any other or further exercise thereof or of any other power, right, or privilege.  All rights and remedies existing under this Agreement are cumulative to, and not exclusive of, any rights or remedies otherwise available.

 

17.                               Severability.  In case any provision in or obligation under this Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.

 

18.                               Headings.  Section and subsection headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose or be given any substantive effect.

 

10

 

19.                                 Counterparts.  This Agreement may be executed in one or more counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document.

 

20.                                 Marshalling.  Administrative Agent shall not be required to marshal any present or future security for (including, but not limited to, this Agreement and the Collateral), or other assurances of payment of, the Secured Obligations or any of them, or to resort to such security or other assurances of payment in any particular order.  All of Administrative Agent’s rights hereunder and in respect of such security and other assurances of payment shall be cumulative and in addition to all other rights, however existing or arising.  To the extent lawfully permissible, Pledgor hereby agrees that Pledgor will not invoke any law, doctrine or principle relating to the marshalling of collateral that might cause delay in or impede the enforcement of Administrative Agent’s rights under this Agreement or under any other instrument evidencing any of the Secured Obligations or under which any of the Secured Obligations is outstanding or by which any of the Secured Obligations is secured or payment thereof is otherwise assured, and, to the extent that Pledgor lawfully may, Pledgor hereby irrevocably waives the benefits of all such laws.

 

21.                                 Notices, Etc.  Any notice or other communication in connection with this Agreement shall be in writing, and shall be delivered in accordance with the provisions of the Credit Agreement to the addresses, if any, specified for the intended recipient in the Credit Agreement, and if to Pledgor, addressed to the address set forth in the introductory paragraph of this Agreement.

 

22.                                 Governing Law.  This Agreement shall be governed by, and construed and interpreted in accordance with, the laws of the Commonwealth of Massachusetts, excluding the laws applicable to conflicts or choice of law.  Pledgor hereby agrees that any suit for the enforcement of this Agreement may be brought in the courts of the Commonwealth of Massachusetts or any federal court sitting therein and consents to the nonexclusive jurisdiction of such court and service of process in any such suit being made upon Pledgor by mail at the address set forth in the Credit Agreement.  Pledgor hereby waives any objection that it may now or hereafter have to the venue of any such suit or any such court or that such suit is brought in an inconvenient forum; provided,  however,  that nothing contained in this Agreement will prevent Administrative Agent from bringing any action, enforcing any award or judgment or exercising any rights against Pledgor, against any security or against any property of Pledgor within any other county, state or other foreign or domestic jurisdiction.  Pledgor waives any objection to venue and any objection based on a more convenient forum in any action instituted under this Agreement.

 

23.                                 Irrevocable Proxy. With respect to Article 8 Matters, Pledgor hereby irrevocably grants and appoints Administrative Agent, from the date of this Agreement until the termination of this Agreement in accordance with its terms, as Pledgor’s true and lawful proxy, for and in Pledgor’s name, place and stead to vote the Pledged Ownership Interests in the Pledged Entity by Pledgor, whether directly or indirectly, beneficially or of record, now owned or hereafter acquired, and to exercise Pledgor’s management rights, with respect to Article 8 Matters.  The proxy granted and appointed in this Section 23 shall include the right to sign Pledgor’s name (as a member or manager of the Pledged Entity) to any consent, certificate or other document relating to any Article 8 Matter.  Pledgor hereby represents and warrants that there are no other proxies and powers of attorney with respect to any Article 8 Matter and the Pledged Ownership Interests that Pledgor may have granted or appointed.  Pledgor will not give a subsequent proxy or power of attorney or enter into any other voting agreement with respect to the Pledged Ownership Interests with respect to any Article 8 Matter and any attempt to do so with respect to an Article 8 Matter shall be void and of no effect.  THE PROXIES AND POWERS GRANTED BY PLEDGOR PURSUANT TO THIS AGREEMENT ARE COUPLED WITH AN INTEREST, ARE

 

11

 

GIVEN TO SECURE THE PERFORMANCE OF PLEDGOR’S OBLIGATIONS UNDER THIS AGREEMENT, AND ARE IRREVOCABLE.

 

24.                                 Delay Not a Waiver.  Any waiver, express or implied, of any provision hereunder and any delay or failure by Administrative Agent to enforce any provision hereof, or any other available right or remedy, at law or in equity, shall not preclude the enforcement of any such provision or right or remedy thereafter.

 

25.                                 WAIVER OF TRIAL BY JURY.  EACH PARTY HERETO HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY, INCLUDING ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS OR ACTIONS OF ADMINISTRATIVE AGENT OR ANY LENDER RELATING TO THE ADMINISTRATION OF THE LOANS OR ENFORCEMENT OF THE LOAN DOCUMENTS, AND AGREE THAT NO PARTY WILL SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED.

 

[Signature Pages Follow]

 

12

 

IN WITNESS WHEREOF, intending to be legally bound, Pledgor and Administrative Agent have caused this Agreement to be executed as of the date first above written.

 

	
 
    	
PLEDGOR:
    
	
 
    	
 
    
	
 
    	
WALKER &   DUNLOP, INC., a Maryland corporation
    
	
 
    	
 
    
	
 
    	
By:   
    	
/s/   William M. Walker
    
	
 
    	
 
    	
Name:  William M. Walker
    
	
 
    	
 
    	
Title:    President and Chief Executive Officer
    

 

[Signature page to Pledge and Security Agreement]

 

 

	
 
    	
ADMINISTRATIVE   AGENT:
    
	
 
    	
 
    
	
 
    	
BANK   OF AMERICA, N.A.
    
	
 
    	
 
    
	
 
    	
By:   
    	
/s/   Margaret A. Mulcahy
    
	
 
    	
 
    	
Name:    Margaret A. Mulcahy
    
	
 
    	
 
    	
Title:  Senior Vice President
    

 

[Signature page to Pledge and Security Agreement]

 

 

JOINDER AND CONSENT OF THE PLEDGED ENTITY

 

The undersigned hereby (a) joins in the above Agreement for the sole purpose of consenting to the terms thereof; (b) agrees to cooperate fully and in good faith with Administrative Agent and Pledgor in carrying out this Agreement; (c) waives any transfer or other restrictions, existing pursuant to Contractual Obligations, Organizational Documents, or otherwise (other than under any applicable securities laws), which otherwise might apply to the granting of the pledges and security interests hereunder, or to the exercise by Administrative Agent of the rights and remedies provided in this Agreement or applicable law, at law or in equity, so as to, among other things, permit (x) Pledgor to enter into and perform Pledgor’s obligations under this Agreement, and (y) Administrative Agent’s exercise of Administrative Agent’s rights and remedies hereunder and under applicable law, at law or in equity; (d) represents and warrants that the (i) Pledged Entity has elected to have all of its ownership interests deemed to be “securities” for the purposes of Articles 8 and 9 of the UCC, and such interests are “certificated,” (ii) Administrative Agent is duly noted in the Pledged Entity’s books and records as the sole pledgee of the Collateral, and (iii) Pledged Entity will not recognize any transferee or pledgee of the Collateral other than Administrative Agent or pursuant to the exercise of Administrative Agent’s rights and remedies under this Agreement; and (e) agrees to comply with any “instructions” (as defined in Section 8-102(a)(12) of the UCC) originated by Administrative Agent without further consent of Pledgor, including, without limitation, instructions regarding the transfer, redemption or other disposition of the Collateral or the proceeds thereof, including any Distributions with respect thereto (this clause (e) shall not be construed as expanding the rights of Administrative Agent to give instructions with respect to the Collateral beyond such rights set forth in the above Agreement).

 

IN WITNESS WHEREOF, intending to be legally bound, the undersigned has caused this Agreement to be executed as an instrument under seal of the date first above written.

 

	
 
    	
PLEDGED   ENTITY:
    
	
 
    	
 
    
	
 
    	
W&D INTERIM LENDER II LLC,
    
	
 
    	
a   Delaware limited liability company
    
	
 
    	
 
    
	
 
    	
By:   
    	
WALKER &   DUNLOP, INC., a Maryland corporation, its managing member
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/   William M. Walker
    
	
 
    	
 
    	
Name:  
    	
William   M. Walker
    
	
 
    	
 
    	
Title:  
    	
President   and Chief Executive Officer
    
					

 

[Joinder and Consent to Pledge and Security Agreement]

 

 

EXHIBIT A

 

LIMITED LIABILITY COMPANY INTEREST CERTIFICATE

 

CERTIFICATE FOR

W&D INTERIM LENDER II LLC

 

	
Certificate   Number 
    	
 
    	
 
    	
% outstanding 
    	
 
    
	
 
    	
 
    	
limited liability company
    	
 
    	
 
    
	
interests
    	
 
    	
 
    	
 
    	
 
    

 

W&D INTERIM LENDER II LLC, a Delaware limited liability company (the “Company”), hereby certifies that WALKER & DUNLOP, INC. or, to the fullest extent permitted by applicable law and in all events subject to the Agreement (as defined below), any successors and assigns (the “Holder”) is the registered owner of 100% of the limited liability company interest in the Company (the “Interests”).  THE RIGHTS, POWERS, PREFERENCES, RESTRICTIONS (INCLUDING TRANSFER RESTRICTIONS) AND LIMITATIONS OF THE INTERESTS ARE SET FORTH IN, AND THIS CERTIFICATE AND THE INTERESTS REPRESENTED HEREBY ARE ISSUED AND SHALL IN ALL RESPECTS BE SUBJECT TO THE TERMS AND PROVISIONS OF THE LIMITED LIABILITY COMPANY AGREEMENT OF THE COMPANY, DATED AS OF SEPTEMBER [     ], 2012, AS THE SAME MAY BE AMENDED OR AMENDED AND RESTATED FROM TIME TO TIME (THE “AGREEMENT”).  THE TRANSFER OF THIS CERTIFICATE AND THE INTERESTS REPRESENTED HEREBY IS RESTRICTED AS DESCRIBED IN THE AGREEMENT.  By acceptance of this Certificate, and as a condition to being entitled to any rights and/or benefits with respect to the Interests evidenced hereby, the Holder is deemed to have agreed to comply with and be bound by all of the terms and conditions of the Agreement.  The Company will furnish a copy of the Agreement to the Holder without charge upon written request to the Company at its principal place of business.  The Company maintains books for the purpose or registering the transfer of Interests.  In all events subject to the Agreement, transfer of any or all Interests can be effected only after compliance with all the relevant restrictions in the Agreement and the delivery of an endorsed Certificate to the Company, accompanied by an assignment in the form appearing on the reverse side of this Certificate, duly completed and executed by and on behalf of the transferor in such transfer, and an applicable for transfer in the form appearing on the reverse side of this Certificate, duly completed and executed by and on behalf of the transferee in such transfer.

 

Each limited liability company interest in the Company shall constitute a “security” within the meaning of, and governed by, (i) Article 8 of the Uniform Commercial Code (including Section 8-102(a)(15) thereof) as in effect from time to time in the State of Delaware, and (ii) Article 8 of the Uniform Commercial Code of any other applicable jurisdiction that now or hereafter substantially includes the 1994 revisions to Article 8 thereof as adopted by the American Law Institute and the National Conference of Commissioners on Uniform State Laws and approved by the American Bar Association on February 14, 1995.

 

This Certificate shall be governed by and construed in accordance with the laws of the State of Delaware without regard to principles of conflict of laws.

 

IN WITNESS WHEREOF, the Company has caused this Certificate to be executed by                               its                      as of the date set forth below.

 

Dated:                       , 2012

 

	
 
    	
W&D INTERIM LENDER II LLC,
    
	
 
    	
a   Delaware limited liability company
    
	
 
    	
 
    
	
 
    	
By:   
    	
WALKER &   DUNLOP, INC., a Maryland corporation, its managing member
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
 
    	
 

	
 
    	
 
    	
 
    	
Name:  
    	
 

	
 
    	
 
    	
 
    	
Title:  
    	
 

 

Exhibit A-1

 

REVERSE SIDE OF CERTIFICATE

REPRESENTED INTERESTS OF

W&D INTERIM LENDER II LLC

 

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto                          [print or typewrite the name of the transferee],                          [insert Social Security Number or other taxpayer identification number of transferee], the following specified percentage of Interests:                          [identify percentage of Interests being transferred], and irrevocably constitutes and appoints                          as attorney-in-fact to transfer the same on the books and records of the Company, with full power of substitution in the premises.

 

 

	
Dated:
    	
 
    	
 
    	
Signature:   
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
(Transferor)
    
	
 
    	
Address:   
    	
 
    

 

APPLICATION FOR TRANSFER OF INTERESTS

 

The undersigned applicant (the “Applicant”) hereby (a) applies for a transfer of the percentage of limited liability company interests in the Company described above (the “Transfer”) and applies to be admitted to the Company as a substitute member of the Company in accordance with the Agreement (as defined on the front side hereof), (b) agrees to comply with and be bound by all of the terms and provisions of the Agreement, (c) represents that the Transfer complies with the terms and conditions of the Agreement, (d) represents that the Transfer does not violate any applicable laws and regulations, and (e) agrees to execute and acknowledge such instruments (including, without limitation, a counterpart of the Agreement), in form and substance satisfactory to the Company, as the Company reasonably deems necessary or desirable to effect the Applicant’s admission to the Company as a substitute member of the Company in accordance with the Agreement and to confirm the agreement of the Applicant to be bound by all the terms and provisions of the Agreement with respect to the limited liability company interests in the Company described above.  Initially capitalized terms used herein and not otherwise defined herein are used as defined in the Agreement.

 

Subject to the Agreement, the Delaware Limited Liability Company Act, 6 Del. C. § 18-101 et  seq. (the “Act”), and Article 8 of the Uniform Commercial Code as in effect in the State of Delaware on the date hereof (“Article 8”), the Applicant directs that the foregoing Transfer and the Applicant’s admission to the Company as a substitute member of the Company shall be effective as of                        .

 

	
Name   of Transferee (Print)
    	
 
    
	
 
    	
 
    
	
 
    	
 
    

 

	
Dated:
    	
 
    	
 
    	
Signature:   
    	
 
    
	
 
    	
 
    	
(Transferee)
    
	
 
    	
 
    	
 
    
	
 
    	
Address:   
    	
 
    

 

Subject to the Agreement, the Act and Article 8, the Company has determined (a) that the Transfer described above is permitted by the Agreement, (b) hereby agrees to effect such Transfer and the admission of the Applicant as a substitute member of the Company effective as of the date and time directed above, and (c) agrees to record, as promptly as possible, in the books and records of the Company the admission of the Applicant as a substitute member of the Company.

 

 

	
 
    	
By:
    	
 
    
	
 
    	
Name:  
    	
 
    
	
 
    	
Title:  
    	
 
    

 

Exhibit A-2

 

EXHIBIT B

 

Form of Instruction to Register Pledge

                    , 2012

 

To:                             W&D INTERIM LENDER II LLC

 

In accordance with the requirements of that certain Pledge and Security Agreement, dated as the date hereof (as amended, supplemented or otherwise modified from time to time, the “Pledge Agreement”), between BANK OF AMERICA, N.A., a national banking association, as agent (“Administrative Agent”), and WALKER & DUNLOP, INC., a Maryland corporation (“Pledgor”) (defined terms used herein as therein defined), you are hereby instructed (i) that the limited liability company interests described below are and shall be deemed to be securities under the Uniform Commercial Code and (ii) to register the pledge of the following interests as follows:

 

The 100% limited liability company interest of the undersigned in W&D INTERIM LENDER II LLC, a Delaware limited liability company (collectively, the “Issuer”), including, without limitation, all of the following property now owned or at any time hereafter acquired by Pledgor or in which Pledgor now has or at any time in the future may acquire any right, title or interest:

 

(a)                                 all additional membership or limited liability company interests of, or other equity interests in, the Issuer and options, warrants, and other rights hereafter acquired by Pledgor in respect of such membership or limited liability company interests or other equity interests (whether in connection with any capital increase, recapitalization, reclassification, or reorganization of the Issuer or otherwise) (all such membership or limited liability company interests and other equity interests of Pledgor, and all such options, warrants and other rights being hereinafter collectively referred to as the “Pledged Interests”);

 

(b)                                 all certificates, instruments, or other writings representing or evidencing the Pledged Interests, and all accounts and general intangibles arising out of, or in connection with, the Pledged Interests;

 

(c)                                  any and all moneys or property due and to become due to Pledgor now or in the future in respect of the Pledged Interests, or to which Pledgor may now or in the future be entitled to in its capacity as a member of the Issuer, whether by way of a dividend, distribution, return of capital, or otherwise;

 

(d)                                 all other claims which Pledgor now has or may in the future acquire in its capacity as a member or other equityholder of the Issuer against the Issuer and its property;

 

(e)                                  all rights of Pledgor under the limited liability company agreement of the Issuer (and all other agreements, if any, to which Pledgor is a party from time to time which relate to its ownership of the Pledged Interests), including, without limitation, all voting, consent, and management rights of Pledgor arising thereunder or otherwise in connection with Pledgor’s ownership of the Pledged Interests; and

 

(f)                                   to the extent not otherwise included, all Proceeds of any or all of the foregoing.

 

[Signature Page Follows]

 

Exhibit B-1

 

You are hereby further authorized and instructed to execute and deliver to Administrative Agent a Confirmation Statement and Instruction Agreement, substantially in the form of Exhibit C to the Pledge Agreement and, to the extent provided more fully therein, to comply with the instructions of Administrative Agent in respect of the Collateral without further consent of, or notice to, the undersigned.  Notwithstanding anything in this paragraph, this instruction shall not be construed as expanding the rights of Administrative Agent to give instructions with respect to the Collateral beyond such rights set forth in the Pledge Agreement.

 

	
 
    	
Very   truly yours,
    
	
 
    	
 
    
	
 
    	
ADMINISTRATIVE   AGENT:
    
	
 
    	
 
    
	
 
    	
BANK   OF AMERICA, N.A.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:   
    	
 
    
	
 
    	
 
    	
Name:  
    
	
 
    	
 
    	
Title:  
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
PLEDGOR:
    
	
 
    	
 
    
	
 
    	
WALKER &   DUNLOP, INC., a Maryland corporation
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:  
    
	
 
    	
 
    	
Title:  
    

 

Exhibit B-2

 

EXHIBIT C

 

FORM OF CONFIRMATION STATEMENT AND INSTRUCTION AGREEMENT

 

	
 
    	
                    ,   2012
    

 

To:                             BANK OF AMERICA, N.A.

 

Pursuant to the requirements of that certain Pledge and Security Agreement dated as of the date hereof (as amended, supplemented or otherwise modified from time to time, the “Pledge Agreement’’), between BANK OF AMERICA, N.A., a national banking association (“Administrative Agent”), and WALKER & DUNLOP, INC., a Maryland corporation (“Pledgor”) (defined terms used herein are as therein defined), this Confirmation Statement and Instruction Agreement relates to all of the limited liability company interests held by Pledgor (the “Pledged Interests”), issued by W&D INTERIM LENDER II LLC, a Delaware limited liability company (the “Issuer”).

 

The Pledged Interests (i) are not “investment company securities” (within the meaning of Section 8-103 of the Uniform Commercial Code (the “Code”)) and (ii) are not, and shall not be, dealt in or traded on securities exchanges or in securities markets. The terms of the Pledged Interests provide that they are “securities” (within the meaning of Sections 8-102(a)(15) and 8-103 of the Code).

 

For purposes of perfecting the security interest of Administrative Agent therein, the Issuer agrees as follows:

 

On the date hereof, the registered owner of 100% of the limited liability company interests in W&D INTERIM LENDER II LLC is WALKER & DUNLOP, INC.

 

The registered pledgee of the Pledged Interests is:

 

BANK OF AMERICA, N.A., as agent

 

There are no liens of the Issuer on the Pledged Interests or any adverse claims thereto for which Issuer has a duty under Section 8-403 of the Code. Issuer has by book-entry registered the Pledged Interests in the name of the registered pledgee on or before the date hereof. No other pledge is currently registered on the books and records of Issuer with respect to the Pledged Interests.

 

Until confirmed in writing by Administrative Agent that the Secured Obligations are paid in full (exclusive of provisions which shall survive full payment), Issuer agrees to: (i) comply with the instructions of Administrative Agent, without any further consent from Pledgor or any other Person, in respect of the Collateral; and (ii) disregard any request made by Pledgor or any other person which contravenes the instructions of Administrative Agent with respect to the Collateral.  Notwithstanding anything in this paragraph, this Confirmation Statement and Instruction Agreement shall not be construed as expanding the rights of Administrative Agent to give instructions with respect to the Collateral beyond such rights set forth in the Pledge Agreement.

 

[Signature Pages Follow]

 

Exhibit C-1

 

	
 
    	
Very   truly yours,
    
	
 
    	
 
    
	
 
    	
W&D   INTERIM LENDER II LLC,
    
	
 
    	
a   Delaware limited liability company
    
	
 
    	
 
    
	
 
    	
By:   
    	
WALKER &   DUNLOP, INC., a Maryland corporation, its managing member
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:  
    	
 
    
	
 
    	
 
    	
Title:  
    	
 
    

 

Exhibit C-2

 

ACKNOWLEDGED AND AGREED TO BY:

 

BANK OF AMERICA, N.A., as Administrative Agent

 

	
By:
    	
 
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    

 

 

PLEDGOR:

 

WALKER & DUNLOP, INC., a Maryland corporation

 

	
By:
    	
 
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    

 

Exhibit C-3Exhibit 10.1

 

	
Citibank,   N.A.
   390 Greenwich Street
   New York, New York 10013
    	

    

 

Execution Copy

 

	
Date:
    	
August 11,   2011 (amended and restated as of October 11, 2012)
    
	
 
    	
 
    
	
To:
    	
EP   Investments LLC
    
	
 
    	
Cira Centre
    
	
 
    	
2929 Arch Street, Suite 675
    
	
 
    	
Philadelphia,   PA 19104
    
	
 
    	
Attention:   Gerald F. Stahlecker
    
	
 
    	
Phone:   215-495-1169
    
	
 
    	
Fax: 215-222-4649
    
	
 
    	
Email: jerry.stahlecker@franklinsquare.com
    
	
 
    	
 
    
	
From:
    	
Citibank,   N.A.
    
	
 
    	
388   Greenwich Street
    
	
 
    	
11th   Floor
    
	
 
    	
New   York, New York 10013
    
	
 
    	
Attention:   Director Derivative Operations
    
	
 
    	
Facsimile:   212-615-8594
    
	
 
    	
 
    
	
Transaction Reference Number:  [            ]
    

 

CONFIRMATION

 

Ladies and Gentlemen:

 

The purpose of this letter agreement is to set forth the terms and conditions of the Transactions entered into between Citibank, N.A. (“Citibank”) and EP Investments LLC, a limited liability company formed under the laws of the State of Delaware (“Counterparty”), on the Trade Date specified below (each, a “Transaction” and, collectively, the “Transactions”).  This letter constitutes a “Confirmation” as referred to in the Master Agreement specified below.

 

The definitions and provisions contained in the 2000 ISDA Definitions (the “Definitions”), as published by the International Swaps and Derivatives Association, Inc., are incorporated into this Confirmation.  In the event of any inconsistency between the Definitions and this Confirmation, this Confirmation shall govern.  Capitalized terms used but not defined in this Confirmation have the meanings assigned to them in Annex A.  Capitalized terms used but not defined in this Confirmation or in Annex A have the meanings assigned to them in the Definitions.

 

With effect from the Amendment Effective Date (as defined below), this Confirmation amends and restates the prior Confirmation dated August 11, 2011, amended and restated as of May 11, 2012 (the “Original Confirmation”), relating to the Transactions described herein, which Original Confirmation is hereby superseded and shall be of no further force or effect.

 

1

 

1.                                      AGREEMENT

 

This Confirmation supplements, forms a part of and is subject to, the ISDA 2002 Master Agreement, dated as of August 11, 2011 (as amended, supplemented and otherwise modified and in effect from time to time, the “Master Agreement”), between Citibank and Counterparty.  All provisions contained in the Master Agreement govern this Confirmation except as expressly modified below.

 

2.                                      TERMS OF TRANSACTIONS

 

The terms of the particular Transactions to which this Confirmation relates are as follows:

 

	
General   Terms:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Trade   Date:
    	
 
    	
August 11,   2011
    
	
 
    	
 
    	
 
    
	
Effective   Date:
    	
 
    	
August 11,   2011
    
	
 
    	
 
    	
 
    
	
Amendment   Effective Date:
    	
 
    	
October 11,   2012
    
	
 
    	
 
    	
 
    
	
Scheduled   Termination Date:
    	
 
    	
The   latest date for the final scheduled payment (or, if there is only one   scheduled payment, for the scheduled payment) of principal of any Reference   Obligation at any time included in the Reference Portfolio.
    
	
 
    	
 
    	
 
    
	
Termination   Date:
    	
 
    	
The   final Scheduled Settlement Date (as defined in the Master Agreement) with   respect to all Transactions (other than any Counterparty Third Floating Rate   Payer Payment Date). The obligations of the parties to make payments required   to be made hereunder shall survive the Termination Date.
    
	
 
    	
 
    	
 
    
	
Obligation   Termination Date:
    	
 
    	
(a) In   relation to any Repaid Obligation, the related Repayment Date; and
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
(b) In   relation to any Terminated Obligation, the related Termination Settlement   Date.
    
	
 
    	
 
    	
 
    
	
Reference   Portfolio:
    	
 
    	
As   of any date of determination, all Reference Obligations with respect to all   Transactions outstanding on such date.
    
	
 
    	
 
    	
 
    
	
Reference   Obligation:
    	
 
    	
Each   obligation listed on Annex I from time to time having a Reference Amount   equal to the “Reference Amount” indicated on Annex I for such obligation   (and, in the case of a Committed Obligation, having an Outstanding Principal   Amount equal to the “Outstanding Principal Amount” indicated on Annex I   for such Committed Obligation), in each case, subject to adjustment by the   Calculation Agent 
    

 

2

 

	
 
    	
 
    	
in   accordance with the terms of this Confirmation.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Counterparty   may, by notice to Citibank on any Business Day on or after the Trade Date   (each, an “Obligation   Trade Date”), designate that any obligation (each, a “Reference Obligation”)   shall become the subject of a Transaction hereunder. Any such notice shall   specify the proposed Reference Obligation and the proposed Reference Amount,   Reference Entity, Independent Amount Percentage and Initial Price in   relation to such Transaction. 

 

Notwithstanding   the foregoing, no such designation by Counterparty will be effective unless: 

 

(a)   Citibank consents on or prior to the   Obligation Trade Date to the relevant Reference Obligation becoming the   subject of a Transaction hereunder (having the proposed Reference Amount and   Initial Price in the notice of designation from Counterparty); 

 

(b)     on the Obligation Trade Date the   relevant Reference Obligation satisfies the Obligation Criteria set forth in   Annex II; and 

 

(c)     after giving effect to such Transaction,   on the Obligation Trade Date the Portfolio Notional Amount will not exceed   the Maximum Portfolio Notional Amount. 

 

Without   limiting the generality of the foregoing clause (a), Citibank may withhold   its consent to any such designation based on any legal, accounting, tax or   other similar issues that are adverse to Citibank in any material respect and   that would or could reasonably be expected to arise as a result of the entry   into such Transaction or any purchase by the Citibank Holder of such Reference   Obligation as a hedge for such Transaction. In the event that Citibank   determines not to hold, or cause to be held, all or any portion of any such   Reference Obligation as a hedge for such Transaction on the Obligation   Settlement Date for such Transaction, Citibank shall give prompt notice   thereof to Counterparty. 

 

The   “Obligation Settlement Date” for a   Transaction shall be the date following the Obligation Trade Date for such   Transaction that is customary for settlement of the related Reference   Obligation substantially in accordance with the then-current market practice   in 
    

 

3

 

	
 
    	
 
    	
the   principal market for the related Reference Obligation (as determined by the   Calculation Agent).

 

On   the Obligation Trade Date for a Transaction, the Reference Amount of such   Transaction shall, for all purposes hereof (including the determination of   the “Portfolio Notional Amount”) other than calculating Rate Payments, be   increased by the “Reference Amount” specified in such notice from   Counterparty. On the Obligation Settlement Date for a Transaction, the   Reference Amount of such Transaction shall, solely for the purposes of   calculating Rate Payments, be increased by the “Reference Amount” specified   in such notice from Counterparty. 

 

Once   a Reference Obligation becomes the subject of a Transaction hereunder,   Citibank shall promptly prepare and deliver to Counterparty a revised   Annex I reflecting the Reference Portfolio as of the related Obligation   Trade Date.

 

If   any payment of interest on a Reference Obligation that would otherwise be   made during the period from and including the Obligation Trade Date to but   excluding the Termination Trade Date is not made but is capitalized as   additional principal (without default), then the amount of interest so   capitalized as principal shall become a new Transaction hereunder (a “PIK Transaction”) having the same   terms and conditions as the Transaction relating to the Reference Obligation   in respect of which such interest is capitalized, except that (1) the   Initial Price in relation to such PIK Transaction shall be zero, (2) the   Obligation Trade Date and Obligation Settlement Date for such PIK Transaction   shall be the date on which such interest is capitalized and (3) the   Reference Amount of such PIK Transaction will be the amount of interest so   capitalized as principal. Citibank shall give notice to Counterparty after a   PIK Transaction becomes outstanding as provided above, which notice shall set   forth the information in the foregoing clauses (2) and (3).
    
	
 
    	
 
    	
 
    
	
Reference   Entity:
    	
 
    	
The   borrower of the Reference Obligation identified as such in Annex I   hereto. In addition, “Reference Entity”, unless the context otherwise   requires, shall also refer to any guarantor of or other obligor on the   Reference Obligation.
    
	
 
    	
 
    	
 
    
	
Portfolio   Notional Amount:
    	
 
    	
As   of any date of determination, the sum of the Notional Amounts for all   Reference Obligations as of 
    

 

4

 

	
 
    	
 
    	
such   date.
    
	
 
    	
 
    	
 
    
	
Notional   Amount:
    	
 
    	
(a) In   relation to any Transaction (other than with respect to any Terminated   Obligation or Repaid Obligation), as of any date of determination, the   Reference Amount of the related Reference Obligation as of such date multiplied   by the Initial Price in relation to such Reference Obligation; and

 

(b) In   relation to any Transaction with respect to a Terminated Obligation or Repaid   Obligation, the amount of the reduction in the Reference Amount of the   related Reference Obligation determined, in the case of a Terminated   Obligation, pursuant to Clause 3 or, in the case of a Repaid Obligation,   pursuant to Clause 5, in each case multiplied by the Initial   Price in relation to the related Reference Obligation.
    
	
 
    	
 
    	
 
    
	
Outstanding   Principal Amount:
    	
 
    	
In   relation to any Reference Obligation as of any date of determination, the   outstanding principal amount of such obligation as shown in the then current   Annex I, as increased pursuant to this Clause 2 (or, in the case of   any Committed Obligation, pursuant to any borrowing in respect of such Committed   Obligation after the Obligation Trade Date) and reduced pursuant to   Clauses 3 and 5. Except as otherwise expressly provided below with   respect to Counterparty First Floating Amounts, the principal amount of any   Committed Obligation outstanding on any date shall include the aggregate   stated face amount of all letters of credit, bankers’ acceptances and other   similar instruments issued in respect of such Committed Obligation to the   extent that the holder of such Committed Obligation is obligated to extend   credit in respect of any drawing or other similar payment thereunder.
    
	
 
    	
 
    	
 
    
	
Commitment   Amount:
    	
 
    	
In   relation to any Reference Obligation that is a Committed Obligation (and the   related Transaction) as of any date of determination, the maximum outstanding   principal amount of such Reference Obligation that a registered holder   thereof would on such date be obligated to fund (including all amounts   previously funded and outstanding, whether or not such amounts, if repaid,   may be reborrowed).
    
	
 
    	
 
    	
 
    
	
Notional   Funded Amount:
    	
 
    	
In   relation to any Reference Obligation that is a Committed Obligation (and to   the related Transaction) as of any date of determination, the greater of   (a) zero and (b) the sum of (i) the Outstanding Principal   Amount of such Reference 
    

 

5

 

	
 
    	
 
    	
Obligation   as of the Obligation Trade Date multiplied by the Initial Price in relation   to such Reference Obligation minus (ii) the product of (x) the   excess, if any, of the Commitment Amount of such Reference Obligation as of   the Obligation Trade Date over the Outstanding Principal Amount of such   Reference Obligation as of the Obligation Trade Date multiplied by   (y) 100% minus the Initial Price in relation to such Reference   Obligation plus (iii) any increase in the Outstanding Principal Amount   of such Reference Obligation during the period from but excluding the   Obligation Trade Date to and including such date of determination minus   (iv) any decrease in the Outstanding Principal Amount of such Reference   Obligation during the period from but excluding the Obligation Trade Date to   and including such date of determination. 

 

In   relation to any Reference Obligation that is a Term Obligation (and the   related Transaction) as of any date of determination, the Notional Amount of   such Reference Obligation.
    
	
 
    	
 
    	
 
    
	
Reference   Amount:
    	
 
    	
In   relation to (a) any Term Obligation, the Outstanding Principal Amount   thereof and (b) any Committed Obligation, the Commitment Amount thereof.
    
	
 
    	
 
    	
 
    
	
Maximum   Portfolio Notional Amount:
    	
 
    	
USD200,000,000   or such greater amount as Citibank and Counterparty may agree in writing from   time to time.
    
	
 
    	
 
    	
 
    
	
Business   Day:
    	
 
    	
New   York
    
	
 
    	
 
    	
 
    
	
Business   Day Convention:
    	
 
    	
Following   (which shall apply to any date specified herein for the making of any payment   or determination or the taking of any action which falls on a day that is not   a Business Day). 

 

If   any anniversary date specified herein would fall on a day on which there is   no corresponding day in the relevant calendar month, then such anniversary   date shall be the last day of such calendar month.
    
	
 
    	
 
    	
 
    
	
Monthly   Period:
    	
 
    	
Each   period from but excluding the 25th day of any calendar month to and including   the same day of the immediately succeeding calendar month.
    
	
 
    	
 
    	
 
    
	
Calculation   Agent:
    	
 
    	
Citibank.   Unless otherwise specified, the Calculation Agent shall make all   determinations, calculations and adjustments required pursuant to this   Confirmation in 
    

 

6

 

	
 
    	
 
    	
good   faith and on a commercially reasonable basis.
    
	
 
    	
 
    	
 
    
	
Calculation   Agent City:
    	
 
    	
New   York
    
	
 
    	
 
    	
 
    
	
Independent   Amount Percentage:
    	
 
    	
In   relation to any Reference Obligation (and the related Transaction), the   Independent Amount Percentage specified in Annex I ; provided that, if, on any date of determination, the   number of Reference Obligations of different Reference Entities in the   Reference Portfolio is four or fewer, the Independent Amount Percentage on   such date in relation to each Reference Obligation (and each related   Transaction) will not be less than 35%. For purposes of this definition, a   Reference Entity and its Affiliates shall be deemed to be a single Reference   Entity.
    
	
 
    	
 
    	
 
    
	
Initial   Price:
    	
 
    	
In   relation to any Reference Obligation (and the related Transaction), the   Initial Price specified in Annex I. The Initial Price (a) will be   expressed exclusive of accrued interest, (b) will be expressed as a   percentage of the Reference Amount, (c) will be determined exclusive of   Costs of Assignment that would be incurred by a buyer in connection with any   purchase of the Reference Obligation and exclusive of any Delay Compensation   and (d) will be, as of the related Obligation Trade Date, the “Initial   Price” specified by Counterparty to Citibank in the notice of designation   referred to above and consented to by Citibank.
    
	
 
    	
 
    	
 
    
	
Payments   by Counterparty
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Counterparty   First Floating Amounts:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
First   Floating Amount Payer:
    	
 
    	
Counterparty
    
	
 
    	
 
    	
 
    
	
First   Floating Amount:
    	
 
    	
In   relation to any First Floating Rate Payer Payment Date, the sum, for each   Transaction, of the products of (a) the First Floating Rate Payer   Calculation Amount for such Transaction for the related First Floating Rate   Payer Calculation Period multiplied by (b) the Floating Rate   Option for such Transaction during the related First Floating Rate Payer   Calculation Period plus the Spread multiplied by (c) the   Floating Rate Day Count Fraction; provided   that, for purposes of the foregoing calculation, the percentage specified in   the foregoing clause (b) shall be the Spread (and not the Floating Rate   Option plus the Spread) with respect to any portion of a First 
    

 

7

 

	
 
    	
 
    	
Floating   Rate Payer Calculation Amount constituting the undrawn stated face amount of   all letters of credit, bankers’ acceptances and other similar instruments   issued in respect of a related Committed Obligation.
    
	
 
    	
 
    	
 
    
	
First   Floating Rate Payer
   Calculation Amount:
    	
 
    	
In   relation to any First Floating Rate Payer Calculation Period and any   Transaction, the daily average of the Notional Funded Amount of such   Transaction during such First Floating Rate Payer Calculation Period.
    
	
 
    	
 
    	
 
    
	
First   Floating Rate Payer
   Calculation Period:
    	
 
    	
In   relation to any Transaction, each Monthly Period, except that (a) the   initial First Floating Rate Payer Calculation Period will commence on, and   include, the related Obligation Settlement Date and (b) the final First   Floating Rate Payer Calculation Period will end on, but exclude, the related   Obligation Termination Date.
    
	
 
    	
 
    	
 
    
	
First   Floating Rate
   Payer Payment Date:
    	
 
    	
(a) In   relation to any Transaction (other than with respect to any Terminated   Obligation or Repaid Obligation), the seventh Business Day following the last   day of any Monthly Period, commencing with the first such date after the   Obligation Settlement Date for such Transaction and ending with the last such   date occurring prior to the related Obligation Termination Date; and 

 

(b) In   relation to any Terminated Obligation or Repaid Obligation, the related Total   Return Payment Date.
    
	
 
    	
 
    	
 
    
	
Floating   Rate Option:
    	
 
    	
In   relation to any Transaction, USD-LIBOR-BBA.
    
	
 
    	
 
    	
 
    
	
Designated   Maturity:
    	
 
    	
In   relation to any Transaction, one month.
    
	
 
    	
 
    	
 
    
	
Spread:
    	
 
    	
1.30%.
    
	
 
    	
 
    	
 
    
	
Floating   Rate Day
   Count Fraction:
    	
 
    	
In   relation to any Transaction, Actual/360.
    
	
 
    	
 
    	
 
    
	
Reset   Dates:
    	
 
    	
The   first day of each First Floating Rate Payer Calculation Period.
    
	
 
    	
 
    	
 
    
	
Compounding:
    	
 
    	
Inapplicable
    

 

8

 

	
Counterparty   Second Floating Amounts
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Second   Floating Amount Payer:
    	
 
    	
Counterparty
    
	
 
    	
 
    	
 
    
	
Second   Floating Amount:
    	
 
    	
Each   Expense or Other Payment.
    
	
 
    	
 
    	
 
    
	
Second   Floating Rate
   Payer Payment Dates:
    	
 
    	
In   relation to any Transaction, (a) the seventh Business Day following the   last day of each Monthly Period, beginning with the first such Business Day   after the Obligation Settlement Date for such Transaction, (b) the   related Obligation Termination Date and (c) after the related Obligation   Termination Date, the seventh Business Day after notice of a Second Floating   Amount from Citibank to Counterparty; provided   that, prior to the seventh Business Day after the related Obligation   Termination Date, if Counterparty has received less than seven Business Days’   notice from Citibank that such Second Floating Amount is due and payable,   such Second Floating Rate Payer Payment Date shall be the seventh Business   Day following the last day of the next succeeding Monthly Period The   obligation of Counterparty to pay Second Floating Amounts in respect of any   Transaction shall survive the related Obligation Termination Date.
    
	
 
    	
 
    	
 
    
	
Counterparty   Third Floating Amounts:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Third   Floating Amount Payer:
    	
 
    	
Counterparty
    
	
 
    	
 
    	
 
    
	
Third   Floating Amount:
    	
 
    	
In   relation to any Terminated Obligation or Repaid Obligation, Capital   Depreciation, if any.
    
	
 
    	
 
    	
 
    
	
Third   Floating Rate
   Payer Payment Dates:
    	
 
    	
Each   Total Return Payment Date.
    
	
 
    	
 
    	
 
    
	
Payments   by Citibank:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Citibank   Fixed Amounts:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Fixed   Amount Payer:
    	
 
    	
Citibank
    
	
 
    	
 
    	
 
    
	
Fixed   Amount:
    	
 
    	
In   relation to any Transaction, the Interest and Fee Amount with respect to such   Transaction for the related Fixed Amount Payer Payment Date.
    

 

9

 

	
Fixed   Amount Payer Calculation Periods:
    	
 
    	
In   relation to each Reference Obligation in the Reference Portfolio, each period   from and including any date upon which a payment of interest is made on such   Reference Obligation to but excluding the next such date; provided that (a) the initial Fixed   Amount Payer Calculation Period shall commence on and include the Obligation   Settlement Date for such Reference Obligation and (b) the final Fixed   Amount Payer Calculation Period shall end on, but exclude, the related   Obligation Termination Date.
    
	
 
    	
 
    	
 
    
	
Fixed   Amount Payer Payment Dates:
    	
 
    	
(a) In   relation to any Transaction (other than with respect to any Terminated   Obligation or Repaid Obligation), the seventh Business Day following the last   day of any Monthly Period, commencing with the first such date after the   Obligation Settlement Date for such Transaction and ending with the last such   date occurring prior to the related Obligation Termination Date; and

 

(b) In   relation to any Transaction with respect to any Terminated Obligation or   Repaid Obligation, the related Total Return Payment Date.
    
	
 
    	
 
    	
 
    
	
Citibank   Floating Amounts:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Floating   Amount Payer:
    	
 
    	
Citibank
    
	
 
    	
 
    	
 
    
	
Floating   Amount:
    	
 
    	
In   relation to any Terminated Obligation or Repaid Obligation, Capital   Appreciation, if any.
    
	
 
    	
 
    	
 
    
	
Floating   Rate Payer Payment Dates:
    	
 
    	
Each   Total Return Payment Date.
    

 

3.                                      REFERENCE OBLIGATION REMOVAL; ACCELERATED TERMINATION.

 

Reference Obligation Removal

 

(a)                                 A Transaction may be terminated in whole by either party (or in part by Counterparty) in accordance with this Clause 3 by the giving of notice (an “Accelerated Termination Notice”) to the other party (each such termination, an “Accelerated Termination”).

 

(i)                                    Counterparty shall be entitled to terminate any Transaction or any portion thereof by delivering an Accelerated Termination Notice to Citibank that is given (i) no later than the proposed Termination Trade Date and (ii) no more than 30 days, and no less than seven days, prior to the proposed Termination Settlement Date.  The Accelerated Termination Notice shall specify the

 

10

 

Reference Obligation that is the subject of such Accelerated Termination, the amount of the Terminated Obligation, the proposed Termination Trade Date and the proposed Termination Settlement Date.

 

(ii)                                  Following the occurrence of a Credit Event (as determined by the Calculation Agent) with respect to the related Reference Entity (including any guarantor or other obligor referred to in the definition thereof), Citibank will have the right, but not the obligation, to terminate the related Transaction by delivering an Accelerated Termination Notice to Counterparty no less than 10 days prior to the proposed Termination Trade Date.  The Accelerated Termination Notice shall specify the Reference Obligation that is the subject of such Accelerated Termination, the amount of the Terminated Obligation, the proposed Termination Trade Date and the proposed Termination Settlement Date.

 

Elective Termination by Citibank due to Certain Events

 

(b)                                 If:

 

	
(i)
    	
 
    	
any   Reference Obligation (including any Exchange Consideration) fails to satisfy   the Obligation Criteria at any time,
    
	
 
    	
 
    	
 
    
	
(ii)
    	
 
    	
Counterparty   fails to perform when due any obligation to Transfer Eligible Collateral   under Clause 9(a),
    
	
 
    	
 
    	
 
    
	
(iii)
    	
 
    	
Counterparty   does not, by the deadline specified therefor in the Credit Support Annex,   effect the Transfer to Citibank as Secured Party of Eligible Credit Support   as contemplated by Paragraph 3(a) of the Credit Support Annex,
    
	
 
    	
 
    	
 
    
	
(iv)
    	
 
    	
the   Reference Portfolio consists of Reference Obligations of fewer than three   different Reference Entities (and, for this purpose, a Reference Entity   includes any Affiliate thereof then included in the Reference Portfolio), or
    
	
 
    	
 
    	
 
    
	
(v)
    	
 
    	
the   sum of the Notional Amounts for Reference Obligations of any single Reference   Entity or any of its Affiliates exceeds USD10,000,000,
    

 

then Citibank may notify Counterparty in writing of such event.  In the case of any of the foregoing clauses (i), (iv) or (v), if such event continues for 30 days following the delivery of such notice, then Citibank will have the right but not the obligation to terminate the related Transaction.  In the case of the foregoing clause (ii) or (iii), Citibank will have the immediate right but not the obligation to terminate each Transaction that is the subject of this Confirmation.  Citibank may exercise this termination right with respect to each Terminated Obligation by delivering an Accelerated Termination Notice to Counterparty that is given, as to any Terminated Obligation, (1) on the proposed Termination Trade Date and (2) no less than 10 days prior to the proposed Termination Settlement Date for the related Terminated Obligation.  The Accelerated Termination Notice shall specify each Reference Obligation that is the subject of such Accelerated Termination and, with respect to each such Reference Obligation, the amount of the Terminated Obligation, the proposed Termination Trade Date and the proposed Termination Settlement Date.

 

Citibank Optional Termination Date

 

(c)                                  Citibank will have the right, but not the obligation, to terminate each Transaction that is the subject of this Confirmation, effective on any Business Day occurring on or after May 11, 2013 (the

 

11

 

“Citibank Optional Termination Date”).  Citibank can exercise this termination right by delivering an Accelerated Termination Notice to Counterparty that is given no less than 15 days prior to the first proposed Termination Trade Date specified in the related Accelerated Termination Notice.  The Accelerated Termination Notice shall specify, as to each Reference Obligation, the amount of the Terminated Obligation, the proposed Termination Trade Date and the proposed Termination Settlement Date.  If Citibank does not exercise its right to terminate each Transaction that is the subject of this Confirmation on or before the date occurring 30 days prior to the Citibank Optional Termination Date, then Citibank will have the right, but not the obligation, to propose, by notice to Counterparty, to amend and restate one or more material terms of the Transactions, including, without limitation, the Spread, the Independent Amount Percentage and the application of the Obligation Criteria to the Transactions.  If Citibank provides a notice to Counterparty proposing to amend and restate one or more material terms of the Transactions as provided above and Counterparty does not agree in writing to such amended and restated terms within 10 Business Days after Citibank provides such notice to Counterparty, each Transaction shall terminate, and the Termination Trade Date shall be such tenth Business Day.  In the event of any such termination, Citibank shall deliver an Accelerated Termination Notice to Counterparty, which shall specify, as to each Reference Obligation, the amount of the Terminated Obligation, the proposed Termination Trade Date and the proposed Termination Settlement Date.  Even if a Termination Trade Date has been designated with respect to each Transaction pursuant to this Clause 3(c), such designation will not prevent Citibank or Counterparty from subsequently designating an earlier Termination Trade Date in relation to any Transaction to the extent Citibank or Counterparty, as the case may be, is entitled to designate such earlier Termination Trade Date pursuant to this Confirmation.  Notwithstanding anything in this Confirmation to the contrary, if Citibank elects to exercise its termination right under this Clause 3(c), then each reference to the term “Scheduled Termination Date” in Clauses 4 and 5 and in the definition of “Termination Trade Date” will instead be a reference to the date 30 days after the first proposed Termination Trade Date specified in such notice.

 

Early Termination Date under Master Agreement

 

(d)                                 If there is effectively designated an Early Termination Date under the Master Agreement, then (i) each Transaction will be terminated in its entirety, (ii) notwithstanding any contrary or otherwise inconsistent provision of the Master Agreement, the provisions set forth in Section 6(e) of the Master Agreement shall not apply to any Transaction (except that amounts that become due and payable on or prior to such Early Termination Date with respect to any Transaction as provided in this Confirmation will constitute Unpaid Amounts) and (iii) the Termination Trade Date for each Transaction will be the date specified by the Calculation Agent occurring on or promptly after such Early Termination Date; provided that, if such Early Termination Date is designated by reason of an Event of Default as to which Citibank is the Defaulting Party, Counterparty may specify the Termination Trade Date with respect to any Transaction as to which the Calculation Agent has not specified the Termination Trade Date within 10 days after such Early Termination Date.  The Calculation Agent shall give notice (an “Accelerated Termination Notice”) to each party (such termination, an “Accelerated Termination”) on or prior to such Early Termination Date, which Accelerated Termination Notice shall specify each Reference Obligation that is the subject of such Accelerated Termination and, with respect to each such Reference Obligation, the amount of the Terminated Obligation, the proposed Termination Trade Date and the proposed Termination Settlement Date.  The amount, if any, payable in respect of such Early Termination Date will be determined in accordance with Clause 4(b) of this Confirmation based upon the delivery of such Accelerated Termination Notice.

 

Effect of Termination

 

(e)                                  With respect to any Transaction terminated in whole pursuant to this Clause 3, (i) as of the relevant Termination Trade Date the Reference Amount shall, for all purposes hereof (including the

 

12

 

determination of the “Portfolio Notional Amount”) other than calculating Rate Payments, be reduced to zero (and, in the case of a Committed Obligation, the Outstanding Principal Amount thereof shall be reduced to zero) and (ii) as of the relevant Termination Settlement Date the Reference Amount, for purposes of calculating Rate Payments, shall be reduced to zero (and, in the case of a Committed Obligation, the Outstanding Principal Amount thereof shall be reduced to zero).  With respect to any Transaction terminated in part pursuant to this Clause 3, (i) as of the relevant Termination Trade Date the Reference Amount shall, for all purposes hereof (including the determination of the “Portfolio Notional Amount”) other than calculating Rate Payments, be reduced by the amount of the reduction of the Reference Amount specified in the Accelerated Termination Notice (and, in the case of a Committed Obligation, the Outstanding Principal Amount shall be reduced by an amount equal to the product of the Outstanding Principal Amount in effect immediately prior to such reduction multiplied by the amount of the reduction of the Reference Amount divided by the Reference Amount in effect immediately prior to such reduction) and (ii) as of the relevant Termination Settlement Date the Reference Amount shall, for purposes of calculating Rate Payments, be reduced by the amount of the reduction of the Reference Amount specified in the Accelerated Termination Notice (and, in the case of a Committed Obligation, the Outstanding Principal Amount shall be reduced by an amount equal to the product of the Outstanding Principal Amount in effect immediately prior to such reduction multiplied by the amount of the reduction of the Reference Amount divided by the Reference Amount in effect immediately prior to such reduction).  Following any Termination Trade Date (other than the Termination Trade Date in respect of the Termination Date), Citibank shall promptly prepare and deliver to Counterparty a revised Annex I.

 

4.                                      FINAL PRICE DETERMINATION

 

Following the termination of any Transaction in whole or in part pursuant to Clause 3 or by reason of the occurrence of the Scheduled Termination Date (other than in connection with a Repayment), the Final Price for the relevant Terminated Obligation will be determined in accordance with this Clause 4.

 

Determination by Counterparty

 

(a)                                 In order to determine the Final Price for any Terminated Obligation then held by or on behalf of Citibank as a hedge for the related Transaction if such determination is being made as the result of a termination pursuant to Clause 3(a), Counterparty may arrange for the sale of such Terminated Obligation by giving notice of such sale to Citibank; provided that Counterparty shall have no right to arrange a sale of a Terminated Obligation pursuant to this Clause 4(a) if, as a result of such termination and the termination of all other Transactions as to which the Total Return Payment Date has not yet occurred, (i) the aggregate Value (as defined in the Credit Support Annex) of all Posted Credit Support (as so defined) held by Citibank as Secured Party (as so defined) plus the aggregate of all Citibank Floating Amounts payable in connection with such terminations would be less than (ii) the aggregate of all Counterparty Third Floating Amounts payable in connection with such terminations.  Such notice must be given at least three Business Days prior to the related Termination Settlement Date in the case of any Terminated Obligation and at least 10 days prior to the Scheduled Termination Date if all Transactions are to be terminated in connection with the Scheduled Termination Date.  Any sale (i) must be to an Approved Buyer or another buyer approved in advance by Citibank, such approval not to be unreasonably withheld or delayed, and (ii) must be scheduled to occur no later than the date customary for settlement, substantially in accordance with the then-current market practice in the principal market for such Terminated Obligation (as determined by the Calculation Agent), following the Termination Trade Date and prior to the Scheduled Termination Date if all Transactions are to be terminated in connection with the Scheduled Termination Date.  If Counterparty so arranges any sale, the net cash proceeds received from the sale of any Terminated Obligation, net of the related Costs of Assignment and adjusted by any Delay Compensation as provided in Clause 6(b), shall be the “Final Price” for that Terminated Obligation.

 

13

 

Determination by Calculation Agent

 

(b)                                 If the Final Price for any Terminated Obligation is not determined according to Clause 4(a), the Calculation Agent shall attempt to obtain Firm Bids for such Terminated Obligation with respect to the applicable Termination Trade Date from two or more Dealers.  The Calculation Agent will give Counterparty notice of its intention to obtain Firm Bids pursuant to this Clause 4(b) (such notice to be given telephonically and via electronic mail) not later than two hours prior to the bid submission deadline specified below.  By notice to Citibank not later than the bid submission deadline specified below, Counterparty may, but shall not be obligated to, designate up to three Approved Buyers each of which shall provide a Firm Bid (and the Calculation Agent will seek a Firm Bid from any such designee so designated by Counterparty on a timely basis).  A “Firm Bid” shall be a good and irrevocable bid for value, to purchase all or a portion of the applicable Terminated Obligation, expressed as a percentage of the Reference Amount of such Terminated Obligation and exclusive of accrued interest, for scheduled settlement substantially in accordance with the then-current market practice in the principal market for such Terminated Obligation, as determined by the Calculation Agent, submitted as of 11 a.m. New York time or as soon as practicable thereafter.  If there is more than one Terminated Obligation at any time, then the Calculation Agent shall obtain Firm Bids solely with respect to each separate Terminated Obligation (but not with respect to any group or groups of such Terminated Obligations).  Citibank may, but is not obligated to, sell or cause the sale of any portion of any Terminated Obligation to any Dealer that provides a Firm Bid.

 

If the Calculation Agent is unable to obtain from Dealers at least one Firm Bid or combination of Firm Bids for all of the Reference Amount of any Terminated Obligation with respect to the relevant Termination Trade Date, the Calculation Agent will attempt to obtain a Firm Bid or combination of Firm Bids for all of the Reference Amount of such Terminated Obligation from two or more Dealers until the earlier of (i) the second Business Day (inclusive) following such Termination Trade Date and (ii) the date a Firm Bid or combination of Firm Bids is obtained for all of the Reference Amount of such Terminated Obligation.

 

If the Calculation Agent is able to obtain at least one Firm Bid or combination of Firm Bids for all or any portion of the Reference Amount of any Terminated Obligation, the Final Price for such Terminated Obligation or portion thereof shall be determined by reference to such Firm Bid or Firm Bids pursuant to the last paragraph of this Clause 4(b).  If no Firm Bids are obtained on or before such second Business Day for all or a portion of the applicable Terminated Obligation, the Final Price shall be deemed to be zero with respect to each portion of such Terminated Obligation for which no Firm Bid was obtained.  The Calculation Agent will conduct the bid process in accordance with the procedures set forth in this Clause 4(b) and otherwise in good faith and in a commercially reasonable manner.  Other than in the case of a termination pursuant to Clause 3(b) or 3(d), Citibank and Counterparty will make commercially reasonable efforts to accomplish the assignment to Counterparty (free of payment by Counterparty) of the related Terminated Obligation or portion thereof held by or on behalf of Citibank as a hedge for the related Transaction for which the Final Price is deemed to be zero (including as provided below); provided that Citibank shall not be liable for any losses related to any delay in or failure of such assignment beyond its control.

 

Notwithstanding anything to the contrary herein,

 

(i)                                     the Calculation Agent shall be entitled to disregard any Firm Bid submitted by a Dealer if, in the Calculation Agent’s commercially reasonable judgment, (x) such Dealer is ineligible to accept assignment or transfer of the related Terminated Obligation or portion thereof, as applicable, substantially in accordance with the then-current market practice in the principal market for the Terminated Obligation, as determined by the Calculation Agent, or (y) as a result of the terms of

 

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any agreement or instrument governing the related Terminated Obligation or any order of a court of competent jurisdiction relating to such Terminated Obligation, such Dealer is prohibited or restricted from obtaining any consent required for the assignment or transfer of the related Terminated Obligation or portion thereof, as applicable, to it; and

 

(ii)                                  if the Calculation Agent determines that the highest Firm Bid obtained in connection with any Termination Trade Date is not bona fide as a result of (x) the occurrence of an Event of Default described in Section 5(a)(vii) with respect to the bidder, (y) the inability, failure or refusal of the bidder to settle the purchase of the related Terminated Obligation or portion thereof, as applicable, or otherwise settle transactions in the relevant market or perform its obligations generally or (z) the Calculation Agent not having pre-approved trading lines with the bidder that would permit settlement of the purchase of the related Terminated Obligation or portion thereof, as applicable, that Firm Bid shall be disregarded and the next highest Firm Bid that is not disregarded shall be used to determine the Final Price.

 

If there is no such Firm Bid, then the Calculation Agent shall designate a new Termination Trade Date; provided that the Calculation Agent shall designate a new Termination Trade Date pursuant to this paragraph only once.  If the highest Firm Bid for any portion of the related Terminated Obligation determined in connection with the second Termination Trade Date is disregarded pursuant to this paragraph, the Calculation Agent shall have no obligation to obtain further bids, and the applicable “Final Price” for the portion which was so disregarded shall be deemed to be zero.

 

If Citibank transfers, or causes the transfer of, all or any portion of the Terminated Obligation to the Dealer or Dealers providing the highest Firm Bid or highest combination of Firm Bids for such Terminated Obligation (or portion thereof) or to such other party as provided above, the net cash proceeds received from the sale of such Terminated Obligation or portion thereof (which sale shall be scheduled to settle substantially in accordance with the then-current market practice in the principal market for the related Reference Obligation as determined by the Calculation Agent), net of the related Costs of Assignment and adjusted by any Delay Compensation as provided in Clause 6(b), shall be the “Final Price” for that Terminated Obligation (or the portion thereof that is sold).

 

If Citibank has determined not to hold, or cause to be held, all or any portion of any Terminated Obligation as a hedge for the related Transaction or otherwise determines, in its sole discretion, not to sell or cause the sale of any portion of any Terminated Obligation to a Dealer providing the highest Firm Bid or combination of Firm Bids, the “Final Price” for such Terminated Obligation or portion thereof shall be equal to the highest Firm Bid (or highest combination of Firm Bids) for such Terminated Obligation (or portion thereof) multiplied by the Reference Amount of such Terminated Obligation (or the respective portions of the Reference Amount to which such Firm Bids relate).  The Calculation Agent may perform any of its duties under this Clause 4(b) through any Affiliate designated by it, but no such designation shall relieve the Calculation Agent of its duties under this Clause 4(b).

 

5.                                      REPAYMENT.

 

If all or a portion of the Reference Amount of any Reference Obligation is repaid or otherwise reduced (in the case of a Committed Obligation, only if the Reference Amount thereof is permanently reduced)  (including, without limitation, through any exercise of any right of set-off, reduction, or counterclaim that results in the satisfaction of the obligations of such Reference Entity to pay any principal owing in respect of such Reference Obligation) on or prior to the Scheduled Termination Date (the amount of such repayment or other reduction, a “Repayment”; the portion of the related Reference Obligation so repaid or otherwise reduced, a “Repaid Obligation”; and the date of such Repayment, the “Repayment Date”):

 

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(a)                                 the Total Return Payment Date with respect to the Repaid Obligation will be the seventh Business Day next succeeding the last day of the Monthly Period in which the Repayment Date occurred;

 

(b)                                 as of the related Repayment Date, the Reference Amount of such Reference Obligation shall be decreased by an amount equal to the principal amount of the Repaid Obligation; and

 

(c)                                  the related Final Price in relation to the Repaid Obligation shall be (i) in the case of a Committed Obligation, the portion of the Reference Amount that is permanently reduced (excluding any such reduction below the Outstanding Principal Amount thereof) on such Repayment Date and (ii) in the case of a Term Obligation, the amount of principal and premium in respect of principal paid by such Reference Entity on the Repaid Obligation to holders thereof (or the amount by which the Reference Obligation was otherwise reduced) on such Repayment Date.  Following any Repayment Date, Citibank shall promptly prepare and deliver to Counterparty a revised Annex I showing the revised Reference Amount for the related Reference Obligation.

 

6.                                      ADJUSTMENTS.

 

(a)                                 If any Reference Obligation or portion thereof is irreversibly converted or exchanged into or for any securities, obligations or other assets or property (“Exchange Consideration”), thereafter such Exchange Consideration will constitute such Reference Obligation or portion thereof, and, unless Citibank shall otherwise agree in writing, if such Exchange Consideration fails to satisfy the Obligation Criteria, then Clause 3(b)(i) shall apply.

 

(b)                                 Delay Compensation (as defined below) shall result in an adjustment (i) as contemplated by the definition of “Interest and Fee Amount” in connection with the establishment by the Citibank Holder of a related hedge in respect of a Transaction, if the actual settlement of the purchase of the related hedge occurs after the Obligation Settlement Date and (ii) of a Final Price with respect to a Terminated Obligation in connection with the termination by the Citibank Holder of a related hedge, if the actual settlement of the sale of the related hedge occurs after the Termination Settlement Date.  “Delay Compensation” shall accrue (x) in the case of clause (i) above, from and including the Obligation Settlement Date to but excluding the actual settlement of the purchase effected to establish the related hedge (and, during such period, (A) the Counterparty First Floating Amount shall be calculated by reference to the Spread and not the Floating Rate Option and (B) Interest and Fee Amounts will be determined without regard to payments in respect of the interest rate index, but will be determined inclusive of the applicable spread above such interest rate index, used in the Reference Obligation Credit Agreement to calculate interest payments in respect of the related Reference Obligation and in effect during such period) and (y) in the case of clause (ii) above, from and including the Termination Settlement Date to but excluding the actual settlement of the sale effected to terminate the related hedge (and, during such period, (A) the Counterparty First Floating Amount shall be calculated by reference to the Floating Rate Option and not the Spread and (B) Interest and Fee Amounts shall be reduced by interest accrued during such period in excess of the interest rate index used in the Reference Obligation Credit Agreement to calculate interest payments in respect of the related Reference Obligation and in effect during such period).  In connection with any adjustment by reason of Delay Compensation, (i) any initial Payment Date in this Confirmation determined by reference to the “Obligation Settlement Date” shall be determined as if the Obligation Settlement Date were the actual settlement of the purchase of the related hedge and (ii) any final Payment Date in this Confirmation determined by reference to the “Termination Settlement Date” shall be determined as if the Termination Settlement Date were the actual settlement of the termination of the related hedge.

 

(c)                                  If (i) Citibank elects to establish a hedge as a result of the addition or increase in the Reference Amount of any Reference Obligation that is the subject of a Transaction and (ii) the Citibank Holder is

 

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unable after using commercially reasonable efforts to effect the settlement of such hedge, then, by notice to Counterparty, Citibank may in its sole discretion, specify that such addition or increase in the Reference Amount of such Reference Obligation shall be of no force or effect (retroactive to the Obligation Trade Date or the Obligation Settlement Date, as the case may be).

 

7.                                      REPRESENTATIONS, WARRANTIES AND AGREEMENTS.

 

(a)                                 Each party hereby agrees as follows, so long as either party has or may have any obligation under any Transaction.

 

(i)                                     Non-Reliance.  It is acting for its own account, and it has made its own independent decisions to enter into such Transaction and as to whether such Transaction is appropriate or proper for it based upon its own judgment and upon advice from such advisors as it has deemed necessary.  It is not relying on any communication (written or oral) of the other party as investment advice or as a recommendation to enter into such Transaction; it being understood that information and explanations related to the terms and conditions of such Transaction shall not be considered investment advice or a recommendation to enter into such Transaction.  It has not received from the other party any assurance or guarantee as to the expected results of such Transaction;

 

(ii)                                  Evaluation and Understanding.  It is capable of evaluating and understanding (on its own behalf or through independent professional advice), and understands and accepts, the terms, conditions and risks of such Transaction.  It is also capable of assuming, and assumes, the financial and other risks of such Transaction;

 

(iii)                               Status of Parties.  The other party is not acting as a fiduciary or an advisor for it in respect of such Transaction; and

 

(iv)                              Reliance on its Own Advisors.  Without limiting the generality of the foregoing, in making its decision to enter into, and thereafter to maintain, administer or terminate, such Transaction, it will not rely on any communication from the other party as, and it has not received any representation or other communication from the other party constituting, legal, accounting, business or tax advice, and it will consult its own legal, accounting, business and tax advisors concerning the consequences of such Transaction.

 

(b)                                 Each party acknowledges and agrees that, so long as either party has or may have any obligation under any Transaction:

 

(i)                                     such Transaction does not create any direct or indirect obligation of any Reference Entity or any direct or indirect participation in any Reference Obligation or any other obligation of any Reference Entity;

 

(ii)                                  each party and its Affiliates may deal in any Reference Obligation and may accept deposits from, make loans or otherwise extend credit to, and generally engage in any kind of commercial or investment banking or other business with any Reference Entity, any Affiliate of any Reference Entity, any other person or entity having obligations relating to any Reference Entity and may act with respect to such business in the same manner as if such Transaction did not exist and may originate, purchase, sell, hold or trade, and may exercise consensual or remedial rights in respect of, obligations, securities or other financial instruments of, issued by or linked to any Reference Entity, regardless of whether any such action might have an adverse effect on such Reference Entity, the value of the related Reference Obligation or the position of the other party to such Transaction or otherwise;

 

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(iii)                               except as provided in Clause 7(d)(iii), each party and its Affiliates and the Calculation Agent may, whether by virtue of the types of relationships described herein or otherwise, at the date hereof or at any time hereafter, be in possession of information regarding any Reference Entity or any Affiliate of any Reference Entity that is or may be material in the context of such Transaction and that may or may not be publicly available or known to the other party.  In addition, except as provided in Clause 7(b)(vii), this Confirmation does not create any obligation on the part of such party and its Affiliates to disclose to the other party any such relationship or information (whether or not confidential);

 

(iv)                              neither Citibank nor any of its Affiliates shall be under any obligation to hedge such Transaction or to own or hold any Reference Obligation as a result of such Transaction, and Citibank and its Affiliates may establish, maintain, modify, terminate or re-establish any hedge position or any methodology for hedging at any time without regard to Counterparty.  Counterparty acknowledges and agrees that it is not relying on any representation, warranty or statement by Citibank or any of its Affiliates as to whether, at what times, in what manner or by what method Citibank or any of its Affiliates may engage in any hedging activities;

 

(v)                                 notwithstanding any other provision in this Confirmation or any other document, Citibank and Counterparty (and each employee, representative, or other agent of Citibank or Counterparty) may each disclose to any and all persons, without limitation of any kind, the U.S. tax treatment and U.S. tax structure of the transaction and all materials of any kind (including opinions or other tax analyses) that are provided to them relating to such U.S. tax treatment and U.S. tax structure (as those terms are used in Treasury Regulations under Sections 6011, 6111 and 6112 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”)), other than any information for which nondisclosure is reasonably necessary in order to comply with applicable securities laws.  To the extent not inconsistent with the previous sentence, Citibank and Counterparty will each keep confidential (except as required by law) all information unless the other party has consented in writing to the disclosure of such information;

 

(vi)                              if Citibank chooses to hold a Reference Obligation as a result of any Transaction, Citibank shall hold such Reference Obligation directly or through an Affiliate (the “Citibank Holder”). The Citibank Holder may deal with such Reference Obligation as if the related Transaction did not exist, provided that, so long as the Citibank Holder remains the lender of record with respect to such Reference Obligation, upon any occasion permitting the Citibank Holder to exercise any right in relation to such Reference Obligation to give or withhold consent (an “Election”) to an action proposed to be taken (or to be refrained from being taken), the Citibank Holder shall, insofar as permitted under (x) applicable laws, rules and regulations and (y) each provision of any agreement or instrument evidencing or governing such Reference Obligation (and, in the case of any participation interest, governing such participation interest), give its consent to the action proposed to be taken (or to be refrained from being taken), unless (A) Counterparty, by timely notice to Citibank, requests (a “Counterparty Election Request”) that the Citibank Holder withhold such consent and (B) the Citibank Holder, in its sole discretion, elects to withhold such consent in accordance with the Counterparty Election Request.  Notwithstanding the foregoing: (1) the Citibank Holder shall have no obligation to respond to, or consult with Counterparty in relation to, a Counterparty Election Request (failure to respond to a Counterparty Election Request being deemed a denial); (2) the Citibank Holder shall have no other duties or obligations to Counterparty of any nature with respect to any Election or any Counterparty Election Request; (3) the Citibank Holder shall not be liable to Counterparty or any of its Affiliates for the consequences of any consent given or withheld by the Citibank Holder in connection with such Reference Obligation (whether or not pursuant to a Counterparty Election Request); and (4) if the Citibank Holder elects in its sole discretion to withhold its consent in accordance with a

 

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Counterparty Election Request, the Citibank Holder may subsequently determine to give such consent at any time without notice to Counterparty; and

 

(vii)                           in connection with each Reference Obligation that is held by a Citibank Holder as a result of any Transaction, the Citibank Holder will promptly (and in any event within one Business Day after receipt) deliver or cause to be delivered to Counterparty the following information and documentation, in each case, to the extent actually received by the Citibank Holder from the Reference Entity or its agents under the related Reference Obligation Credit Agreement:  all notices of any borrowings, prepayments and interest rate settings, all amendments, consents, waivers and other modifications (whether final or proposed) in relation to the terms of the Reference Obligation; and all notices given by the Reference Entity to the lenders or their agent or by the lenders or their agent to the Reference Entity in relation to the exercise of remedies.

 

(c)                                  Each of the parties hereby represents that, on each date on which a Transaction is entered into hereunder:

 

(i)                                     it is entering into such Transaction for investment, financial intermediation, hedging or other commercial purposes; and

 

(ii)                                  (x) it is an “eligible contract participant” as defined in Section 1a(18) of the U.S. Commodity Exchange Act, as amended (the “CEA”), (y) the Master Agreement and each Transaction are subject to individual negotiation by each party, and (z) neither the Master Agreement nor any Transaction will be executed or traded on a “trading facility” within the meaning of Section 1a(33) of the CEA.

 

(d)                                 Counterparty hereby represents to Citibank that:

 

(i)                                     its financial condition is such that it has no need for liquidity with respect to its investment in any Transaction and no need to dispose of any portion thereof to satisfy any existing or contemplated undertaking or indebtedness.  Its investments in and liabilities in respect of any Transaction, which it understands is not readily marketable, is not disproportionate to its net worth, and it is able to bear any loss in connection with any Transaction, including the loss of its entire investment in such Transaction;

 

(ii)                                  it understands no obligations of Citibank to it hereunder will be entitled to the benefit of deposit insurance and that such obligations will not be guaranteed by any Affiliate of Citibank or any governmental agency;

 

(iii)                               as of (x) the relevant Obligation Trade Date and (y) any date on which a sale is effected pursuant to Clause 4(a) or on which the Calculation Agent solicits Firm Bids pursuant to Clause 4(b), neither Counterparty nor any of its Affiliates, whether by virtue of the types of relationships described herein or otherwise, is on such date in possession of information regarding any related Reference Entity or any Affiliate of such Reference Entity that is or may be material in the context of such Transaction or the purchase or sale of any related Reference Obligation unless such information either (x) is publicly available or (y) has been made available to each registered owner of such Reference Obligation on a basis that permits such registered owner to disclose such information to any assignee of or participant (whether on a funded or unfunded basis) in, or any prospective assignee of or participant (whether on a funded or unfunded basis) in, any rights or obligations under the related Reference Obligation Credit Agreement;

 

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(iv)                              Counterparty is a wholly owned subsidiary of a United States person, within the meaning of Section 7701(a)(30) of the Code, and has elected to be treated as a disregarded entity for U.S. Federal income tax purposes;

 

(v)                                 it has delivered to Citibank on or prior to the Trade Date (and it will, prior to any expiration of any such form previously so delivered, deliver to Citibank) a United States Internal Revenue Service Form W-9 (or applicable successor form), properly completed and signed (which representation shall also be made for purposes of Section 3(f) of the Master Agreement);

 

(vi)                              it could have received all payments on the Reference Obligation without U.S. Federal or foreign withholding tax if it owned the Reference Obligation (which representation shall also be made for purposes of Section 3(f) of the Master Agreement); and

 

(vii)                           it is not, for U.S. Federal income tax purposes, a tax-exempt organization.

 

(e)                                  Except for disclosure authorized pursuant to Clause 7(b)(v), Counterparty agrees to be bound by the confidentiality provisions of the related Reference Obligation Credit Agreement with respect to all information and documentation in relation to a Reference Entity or a Reference Obligation delivered to Counterparty hereunder. Counterparty acknowledges that such information may include material non-public information concerning the Reference Entity or its securities and agrees to use such information in accordance with applicable law, including Federal and State securities laws.

 

(f)                                   Multiple Transaction Payment Netting under Section 2(c) of the Master Agreement will apply to the Transactions to which this Confirmation relates.

 

(g)                                  Notwithstanding anything in the Master Agreement to the contrary, Citibank will not be required to pay any additional amount under Section 2(d)(i) of the Master Agreement in respect of any deduction or withholding for or on account of any Tax in relation to any payment under any Transaction that is determined by reference to interest or fees payable with respect to any Reference Obligation.  If Citibank is required by any applicable law, as modified by the practice of any relevant governmental revenue authority, to make any deduction or withholding for or on account of any Tax in relation to any payment under any Transaction that is determined by reference to interest or fees payable with respect to any Reference Obligation and Citibank does not so deduct or withhold, then Section 2(d)(ii) of the Master Agreement shall be applicable.

 

8.                                      ADJUSTMENTS RELATING TO CERTAIN UNPAID OR RESCINDED PAYMENTS.

 

(a)                                 If (i) Citibank makes any payment to Counterparty as provided under Clause 2 and the corresponding Interest and Fee Amount is not paid (in whole or in part) when due or (ii) any Interest and Fee Amount in respect of a Reference Obligation is required to be returned (in whole or in part) by a holder of such Reference Obligation (including, without limitation, the Citibank Holder) to the applicable Reference Entity or paid to any other person or entity or is otherwise rescinded pursuant to any bankruptcy or insolvency law or any other applicable law, then Counterparty will pay to Citibank, upon request by Citibank, such amount (or portion thereof) so not paid or so required to be returned, paid or otherwise rescinded.  If such returned, paid or otherwise rescinded amount is subsequently paid, Citibank shall pay such amount (subject to Clause 8(c)) to Counterparty within seven Business Days after the date of such subsequent payment.

 

(b)                                 If, with respect to any Repaid Obligation, the corresponding payment of principal of the Repaid Obligation is required to be returned (in whole or in part) by a holder thereof (including, without limitation, the Citibank Holder) to the applicable Reference Entity or paid to any other person or entity or

 

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is otherwise rescinded pursuant to any bankruptcy or insolvency law or any other applicable law, then (i) the parties hereto shall be restored severally and respectively to their former positions hereunder and thereafter all rights and obligations of the parties hereunder shall continue as though no Repayment had occurred and (ii) without limiting the generality of the foregoing, if either party has made a payment to the other party in respect of Capital Appreciation or Capital Depreciation related to such Repayment as provided under Clause 2, then the party that received the payment in respect of such Capital Appreciation or Capital Depreciation, as applicable, shall repay such amount (subject to Clause 8(c)) to the other party.  If such returned, paid or otherwise rescinded amount is subsequently paid by the related Reference Entity or any such other person or entity, then the relevant party shall pay the amount of such Capital Appreciation or Capital Depreciation, as applicable, within seven Business Days after the date of such subsequent payment.

 

(c)                                  Amounts payable pursuant to this Clause 8 shall be subject to adjustment by the Calculation Agent in good faith and on a commercially reasonable basis, as agreed by Citibank and Counterparty, in order to preserve for the parties the intended economic risks and benefits of the relevant Transaction.

 

(d)                                 The payment obligations of Citibank and Counterparty pursuant to this Clause 8 shall survive the termination of all Transactions.

 

9.                                      CREDIT SUPPORT.

 

Notwithstanding anything in the Credit Support Annex (the “Credit Support Annex”) to the Schedule to the Master Agreement to the contrary, the following collateral terms shall apply to each Transaction to which this Confirmation relates (capitalized terms used in this Clause 9 but not otherwise defined in this Confirmation have the respective meanings given to such terms in the Credit Support Annex):

 

(a)                                  With respect to each Transaction to which this Confirmation relates, a single “Independent Amount” shall be applicable to Counterparty in an amount equal to the Notional Amount with respect to such Transaction (or, in the case of any increase of the Notional Amount under any Transaction, the amount of such increase) multiplied by the Independent Amount Percentage applicable to such Transaction.  Not later than the Effective Date, Counterparty as Pledgor will Transfer to Citibank as Secured Party Eligible Collateral having a Value as of the date of Transfer equal to the aggregate of all Independent Amounts determined pursuant this Clause 9(a).  If the aggregate of all Independent Amounts on any date would increase as a result of an increase in the Portfolio Notional Amount on such date and the aggregate Value of Eligible Collateral Transferred to Citibank pursuant to this Clause 9(a) prior to such date is less than the aggregate of all Independent Amounts as so increased, then Counterparty as Pledgor will Transfer to Citibank as Secured Party Eligible Collateral having a Value as of the date of Transfer equal to the greater of (i) USD250,000 and (ii) the amount of such shortfall.

 

(b)                                 In no event shall Citibank as Secured Party be obligated to Transfer Posted Credit Support in respect of a Return Amount to Counterparty as Pledgor if the Value as of any Valuation Date of all Posted Credit Support held by Citibank as Secured Party would be less than the aggregate of all Independent Amounts determined pursuant to Clause 9(a).

 

(c)                                  Solely for the purpose of determining any Delivery Amount or Return Amount pursuant to the Credit Support Annex, (i) in no event shall Counterparty as a Secured Party have any positive “Exposure” to Citibank with respect to the Transactions (in aggregate) to which this Confirmation relates or (ii) without limiting Clause 3(b), in no event shall Citibank as a Secured Party have any positive “Exposure” to Counterparty with respect to the Transactions (in aggregate) to which this Confirmation relates. For purposes of calculating “Exposure” with respect to any Transaction to

 

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which this Confirmation relates, (i) Citibank shall be the sole Valuation Agent and shall determine any Market Quotation in relation to such Transaction, (ii) such Market Quotation will be determined by the Valuation Agent using its estimate of the amount that would be paid to or by the Secured Party based on the application of Section 6(e)(ii)(1) of the Master Agreement, (iii) such Market Quotation may from time to time be determined by the Valuation Agent in its sole discretion and without notice to Counterparty solely in respect of payments in respect of Capital Appreciation or Capital Depreciation that would have been required in respect of a Transaction after the relevant Early Termination Date (provided that the Valuation Agent will not thereafter be precluded from making such determination with respect to all payments and deliveries that would have been required after the relevant Early Termination Date, regardless of the absence of notice thereof to Counterparty) and (iv) if Counterparty disputes the calculation of Exposure with respect to such Transaction, the Valuation Agent will recalculate Exposure for such Transaction on the basis that the market value of the related Reference Obligation is equal to its Current Price.

 

(d)                                 If Counterparty enters into any Transaction under the Master Agreement other than the Transactions contemplated by this Confirmation (each, a “Separate Transaction”), then the Credit Support Amount with respect to Counterparty as Pledgor shall never be less than the “Credit Support Amount” with respect to Counterparty as Pledgor calculated (i) solely with reference to all Separate Transactions and (ii) without regard to the aggregate of all Independent Amounts applicable to Counterparty as Pledgor under this Confirmation.

 

(e)                                  Each Business Day shall be a Valuation Date.

 

(f)                                    The “Interest Rate” will be (i) the overnight ask rate in effect for such day, as set forth opposite the caption “O/N” under the heading “USD” on Reuters Page LIBOR01 or any successor page thereto on or about 11:00 a.m., New York time, on such day, or (ii) if no successor page is quoted, the rate in effect for such day, as set forth in H.15(519) for that day opposite the caption “Federal Funds (Effective)” and if the rate is not yet published in H.15(519), the rate for such day will be the rate set forth in Composite 3:30 p.m. Quotations for U.S. Government Securities for that day under the caption “Federal Funds/Effective Rate”.  If on any day the appropriate rate for such day is not published in either H.15(519) or Composite 3:30 p.m. Quotations for U.S. Government Securities, the rate for such day will be the arithmetic mean of the rate for the last transaction in overnight U.S. Dollar Federal funds arranged by three leading brokers of U.S. Dollar federal funds transactions in New York City selected by Citibank in good faith prior to 9:00 a.m., New York City time on such day.  “H.15(519)” means the weekly statistical release designated as such, or any successor publication, published by the Board of Governors of the Federal Reserve System.  “Composite 3:30 p.m. Quotations for U.S. Government Securities” means the daily statistical release designated as such, or any successor publication, published by the Federal Reserve Bank of New York, or (iii) if such Federal funds rate is not available, any page agreed by the parties.  Transfers of the Interest Amount will be made in arrears on the seventh Business Day following the last day of each Monthly Period.

 

(g)                                 Any Transfer required to be made pursuant to this Clause 9 shall be a Transfer made under the Credit Support Annex (and not a payment or delivery made under Section 2(a)(i) of the Master Agreement).

 

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10.                               NOTICE AND ACCOUNT DETAILS.

 

	
Notices to Citibank:
    
	
 
    
	
 
    	
Citibank, N.A., New York   Branch
    
	
 
    	
390 Greenwich Street, 4th   Floor
    
	
 
    	
New York, New York 10013
    
	
 
    	
Tel:  (212) 723-6181
    
	
 
    	
Fax: (646) 291-5779
    
	
 
    	
Attn: Mitali Sohoni
    
	
 
    	
 
    
	
 
    	
with a copy to:
    
	
 
    	
 
    
	
 
    	
Office of the General   Counsel
    
	
 
    	
Fixed Income and   Derivatives Sales and Trading
    
	
 
    	
Citibank, N.A., New York   Branch
    
	
 
    	
388 Greenwich Street, 17th   Floor
    
	
 
    	
New York, New York 10013
    
	
 
    	
Tel:  (212) 816-2121
    
	
 
    	
Fax: (646) 862-8431
    
	
 
    	
Attn: Craig Seledee
    
	
 
    	
 
    
	
Notices to Counterparty:
    
	
 
    	
 
    
	
 
    	
As set forth in Part 4 of   the Schedule to the Master Agreement
    
	
 
    	
 
    
	
Payments to Citibank:
    
	
 
    	
 
    
	
 
    	
Citibank, N.A., New York
    
	
 
    	
ABA No.: 021-000-089
    
	
 
    	
Account No.: 00167679
    
	
 
    	
Ref: Financial Futures
    
	
 
    	
 
    
	
Payments to Counterparty:
    
	
 
    
	
 
    	
Any payment to be made to   Counterparty shall be subject to the condition that Citibank shall have   received notice of the account to which such payment is to be made not less   than three Local Business Days prior to the date of such payment.
    

 

11.                               OFFICES.

 

(a)                                  The Office of Citibank for each Transaction:

 

New York, NY

 

23

 

(b)                                 The Office of Counterparty for each Transaction:

 

Philadelphia, PA

 

Please confirm that the foregoing correctly sets forth the terms of our agreement by having a duly authorized officer of Counterparty execute this Confirmation and return the same by facsimile to the attention of the individual at Citibank indicated on the first page hereof.

 

Very truly yours,

 

CITIBANK, N.A.

 

 

	
By:
    	
/s/   David Santos
    	
 
    
	
 
    	
Name:   
    	
David   Santos
    
	
 
    	
Title:
    	
Authorized   Signatory
    
				

 

 

CONFIRMED AND AGREED
 AS OF THE DATE FIRST ABOVE WRITTEN:

 

EP INVESTMENTS LLC

 

 

	
By:
    	
/s/   Gerald F. Stahlecker
    	
 
    
	
 
    	
Name:
    	
Gerald   F. Stahlecker
    
	
 
    	
Title:
    	
Executive   Vice President
    
				

 

24

 

ANNEX A

 

ADDITIONAL DEFINITIONS

 

“Affiliate”, for purposes of this Confirmation only, has the meaning given to such term in Rule 405 under the Securities Act of 1933, as amended.

 

“Approved Buyer” means (a) any entity listed in Annex III hereto (as such Annex may be amended by mutual written consent of the parties hereto from time to time) so long as its long-term unsecured and unsubordinated debt obligations on the “trade date” for the related purchase or submission of a Firm Bid contemplated hereby are rated at least “A2” by Moody’s and at least “A” by S&P and (b) if an entity listed in Annex III hereto is not the principal banking or securities Affiliate within a financial holding company group, the principal banking or securities Affiliate of such listed entity within such financial holding company group so long as such obligations of such Affiliate have the rating indicated in clause (a) above.

 

“Capital Appreciation” and “Capital Depreciation” mean, for any Total Return Payment Date, the amount determined according to the following formula for the applicable Terminated Obligation or Repaid Obligation:

 

Final Price — Applicable Notional Amount

 

where

 

“Final Price” means (a) in the case of any Terminated Obligation, the amount determined pursuant to Clause 4, and (b) in the case of any Repaid Obligation, the amount determined pursuant to Clause 5, and

 

“Applicable Notional Amount” means the Notional Funded Amount (determined immediately prior to the related Repayment Date or Termination Trade Date) for such Terminated Obligation or Repaid Obligation, as applicable.

 

If such amount is positive, such amount is “Capital Appreciation” and if such amount is negative, the absolute value of such amount is “Capital Depreciation”.

 

“Committed Obligation” means (a) any Delayed Drawdown Reference Obligation and (b) any Revolving Reference Obligation.

 

“Costs of Assignment” means, in the case of any Terminated Obligation, the sum of (a) any actual costs of transfer or assignment paid by the seller under the terms of any Terminated Obligation or otherwise actually imposed on the seller by any applicable administrative agent, borrower or obligor incurred in connection with the sale of such Terminated Obligation and (b) any reasonable expenses incurred by the seller in connection with such sale and, if transfers of the Terminated Obligation are subject to the Standard Terms and Conditions for Distressed Trade Confirmations, as published by the LSTA and as in effect on the Obligation Trade Date, reasonable legal costs incurred by the seller in connection with such sale, in each case to the extent not already reflected in the Final Price.

 

“Credit Event” means the occurrence of a Bankruptcy or Failure to Pay.  For purposes of the determination of whether a Credit Event has occurred, the Obligation Category will be Borrowed Money, the Payment Requirement will be USD1,000,000 and no Obligation Characteristics will be specified.  Capitalized terms used in this definition but not defined in this Confirmation shall have the meanings specified in the 2003 ISDA Credit Derivatives Definitions.

 

25

 

“Current Price” means, with respect to any Reference Obligation on any date of determination, the Calculation Agent’s determination of the net cash proceeds that would be received from the sale on such date of determination of such Reference Obligation, net of the related Costs of Assignment.  If Counterparty disputes the Calculation Agent’s determination of the Current Price of any Reference Obligation, then Counterparty may, no later than two hours after Counterparty is given notice of such determination, (a) designate two Dealers of credit standing acceptable to Citibank in the exercise of its reasonable discretion and (b) provide to Citibank within such two-hour period with respect to each such Dealer a Firm Bid with respect to the entire Reference Amount of the Reference Obligation.  The highest of such two Firm Bids will be the Current Price.  The “Current Price” shall be expressed as a percentage of par and will be determined exclusive of accrued interest.

 

“Dealer” means (a) any nationally recognized independent dealer in the related Reference Obligation chosen by the Calculation Agent or its designated Affiliate, (b) any Approved Buyer or other entity designated by the Calculation Agent and having a credit standing acceptable to Citibank and (c) any Approved Buyer designated by Counterparty pursuant to Clause 4(b).

 

“Delayed Drawdown Reference Obligation” means a Reference Obligation that (a) requires the holder thereof to make one or more future advances to the borrower under the instrument or agreement pursuant to which such Reference Obligation was issued or created, (b) specifies a maximum amount that can be borrowed on one or more fixed borrowing dates and (c) does not permit the re-borrowing of any amount previously repaid; provided that, on any date on which all commitments by the holder thereof to make advances to the borrower under such Delayed Drawdown Reference Obligation expire or are terminated or reduced to zero, such Reference Obligation shall cease to be a Delayed Drawdown Reference Obligation.

 

“Expense or Other Payment” means the aggregate amount of any payments (other than extensions of credit) due from the lender(s) in respect of any Reference Obligation, including, without limitation, (a) any expense associated with any amendment, modification or waiver of the provisions of a credit agreement, (b) any reimbursement of any agents under the provisions of a credit agreement, and (c) any indemnity or other similar payment, including amounts owed on or after the related Obligation Termination Date in respect of amounts incurred or any event that occurred before the related Obligation Termination Date.

 

“Interest and Fee Amount” means, for any Citibank Fixed Amount Payer Payment Date and any Transaction, the aggregate amount of interest (including interest breakage costs), fees (including, without limitation, amendment, consent, tender, facility, letter of credit and other similar fees) and other amounts (other than in respect of principal and premium paid in respect of principal) paid with respect to the related Reference Obligation (after deduction of any withholding taxes for which the Reference Entities are not obligated to reimburse holders of the related Reference Obligation, if applicable) during the relevant Citibank Fixed Amount Payer Calculation Period; provided that Interest and Fee Amounts:

 

(a)                                  in the case of “Interest and Accruing Fees” (as defined in the “Standard Terms and Conditions for Par/Near Par Trade Confirmations” or “Standard Terms and Conditions for Distressed Trade Confirmations”, as applicable to the relevant Reference Obligation, most recently published by the LSTA prior to the Trade Date), shall not include any amounts that accrue prior to the Obligation Settlement Date for the related Reference Obligation or that accrue on or after the Obligation Termination Date for the related Reference Obligation or portion thereof,

 

(b)                                 in the case of “Non-Recurring Fees” (as so defined), shall not include any amounts that (i) accrue prior to the Obligation Trade Date for the related Reference Obligation or that accrue on or after the Termination Trade Date for the related Reference Obligation or portion thereof or (ii) to the

 

26

 

extent that such amounts are payable contingent upon whether a consent is given or withheld by the record owner of the related Reference Obligation, accrue with respect to the related Reference Obligation that is not held by or on behalf of Citibank as a hedge for the related Transaction,

 

(c)                                  shall be determined after deducting any Costs of Assignment that would be incurred by a buyer in connection with any purchase of the Reference Obligation as a hedge for such Transaction and, in connection with the establishment by the Citibank Holder of a related hedge in respect of such Transaction, shall be adjusted by any Delay Compensation as provided in Clause 6(b); and

 

(d)                                 in the case of any Transaction as to which the related Reference Obligation is a Committed Obligation, shall include only 75% of fees that are stated to accrue on or in respect of the unfunded portion of any Commitment Amount.

 

“Loan” means any obligation for the payment or repayment of borrowed money that is documented by a term loan agreement, revolving loan agreement or other similar credit agreement.

 

“LSTA” means The Loan Syndications and Trading Association, Inc. and any successor thereto.

 

“Rate Payments” means Counterparty First Floating Amounts and Citibank Fixed Amounts.

 

“Revolving Reference Obligation” means a Reference Obligation that (a) requires the holder thereof to make one or more future advances to the borrower under the instrument or agreement pursuant to which such Reference Obligation was issued or created, (b) specifies a maximum aggregate amount that can be borrowed and (c) permits, during any period on or after the date on which the holder thereof acquires such Reference Obligation, the re-borrowing of any amount previously repaid; provided that, on the date that all commitments by the holder thereof to make advances to the borrower under such Revolving Reference Obligation expire or are terminated or reduced to zero, such Reference Obligation shall cease to be a Revolving Reference Obligation.

 

“Subordinate” means, with respect to an obligation (the “Subordinated Obligation”) and another obligation of the obligor thereon to which such obligation is being compared (the “Senior Obligation”), a contractual, trust or similar arrangement (without regard to the existence of preferred creditors arising by operation of law or to collateral, credit support, lien or other credit enhancement arrangements or provisions regarding the application of proceeds of any of the foregoing) providing that (i) upon the liquidation, dissolution, reorganization or winding up of the obligor, claims of the holders of the Senior Obligation will be satisfied prior to the claims of the holders of the Subordinated Obligation or (ii) the holders of the Subordinated Obligation will not be entitled to receive or retain payments in respect of their claims against the obligor at any time that the obligor is in payment arrears or is otherwise in default under the Senior Obligation.

 

“Term Obligation” means any Reference Obligation that is not a Committed Obligation.

 

“Terminated Obligation” means any Reference Obligation or portion of any Reference Obligation that is terminated pursuant to Clause 3.

 

“Termination Settlement Date” means, for any Terminated Obligation, the date customary for settlement, substantially in accordance with the then-current market practice in the principal market for such Terminated Obligation (as determined by the Calculation Agent), of the sale of such Terminated Obligation with the trade date for such sale occurring on the related Termination Trade Date.

 

27

 

“Termination Trade Date” means, with respect to any Terminated Obligation, the date so designated in the related Accelerated Termination Notice; provided that:

 

(a)                                  except as provided in the following clause (b), if the related Final Price is not determined in accordance with Clause 4(a), the “Termination Trade Date” will be the bid submission deadline for the Firm Bid or combination of Firm Bids for all of the Reference Amount of such Terminated Obligation that are to be the basis for determining the Final Price of such Terminated Obligation as designated by the Calculation Agent in order to cause the related Total Return Payment Date to occur as promptly as practicable (in the discretion of the Calculation Agent) after the date originally designated as the “Termination Trade Date” in the related Accelerated Termination Notice; and

 

(b)                                 in respect of the Scheduled Termination Date, if the related Final Price is not determined in accordance with Clause 4(a), the “Termination Trade Date” will be the date so designated by the Calculation Agent in its discretion, occurring during the 30 calendar days preceding the Scheduled Termination Date (or earlier in the case of any Terminated Obligation determined by the Calculation Agent in its sole discretion to be a distressed loan or other obligation) in a manner reasonably likely to cause the final Total Return Payment Date to occur on the Scheduled Termination Date.

 

The Calculation Agent shall notify the parties of any Termination Trade Date designated by it pursuant to the foregoing proviso.

 

“Total Return Payment Date” means, with respect to any Terminated Obligation or Repaid Obligation, the seventh Business Day next succeeding the last day of the Monthly Period during which the related Obligation Termination Date occurs.

 

28

 

ANNEX I

 

	
Reference
   Obligation
    	
 
    	
Reference
   Entity
    	
 
    	
Reference
   Amount
    	
 
    	
Outstanding
   Principal
   Amount
    	
 
    	
Initial
   Price
   (%)
    	
 
    	
Independent
   Amount
   Percentage
   (%)
    	
 
    	
Obligation
   Trade
   Date
    	
 
    	
Obligation
   Settlement
   Date
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    

 

29

 

ANNEX II

 

OBLIGATION CRITERIA

 

The “Obligation Criteria” are as follows:

 

(i)                                     The obligation is a Loan.

 

(ii)                                  The obligation is denominated in USD.

 

(iii)                               The obligation is secured.

 

(iv)                              The obligation is not Subordinate.

 

(v)                                 The obligation constitutes a legal, valid, binding and enforceable obligation of the applicable Reference Entity, enforceable against such person in accordance with its terms.

 

(vi)                             Except for any Delayed Drawdown Reference Obligation or Revolving Reference Obligation, the obligation does not require any future advances to be made to the related issuer or obligor on or after the relevant Obligation Trade Date.

 

(vii)                           On the relevant Obligation Trade Date for the Transaction relating to the obligation, the obligation is in the form of, and is treated as, indebtedness for U.S. Federal income tax purposes.

 

(viii)                        Transfers thereof on the Obligation Trade Date may be effected pursuant to the Standard Terms and Conditions for Par/Near Par Trade Confirmations and not the Standard Terms and Conditions for Distressed Trade Confirmations, in each case as published by the LSTA and as in effect on the Obligation Trade Date.

 

(ix)                            On the Obligation Trade Date the obligation is part of a fungible class of debt obligations (as to issuance date and all economic terms) of at least USD150,000,000.

 

(x)                                   The obligation has as of the Obligation Trade Date a Moody’s Rating of at least B3 and an S&P Rating of at least B-.

 

(xi)                                The obligation has an Initial Price as of the Obligation Trade Date of at least 80%.

 

(xii)                             Either (x) the obligation is on the Obligation Trade Date the subject of at least two bid quotations from nationally recognized independent dealers in the related obligation as reported on a nationally recognized pricing service or (y) the obligation satisfies each of the following four conditions:  (A) the obligation was originated not more than 30 days prior to the Obligation Trade Date, (B) the obligation is on the Obligation Trade Date the subject of at least one bid quotation from a nationally recognized independent dealer in the related obligation as reported on a nationally recognized pricing service, (C) on the Obligation Trade Date the obligation is part of a fungible class of debt obligations (as to issuance date and all economic terms) of at least USD150,000,000 and (D) the obligation has as of the Obligation Trade Date a Moody’s Rating of at least B2 and an S&P Rating of at least B.

 

30

 

ANNEX III

 

APPROVED BUYERS

 

Bank of America, NA

The Bank of Montreal

The Bank of New York Mellon, N.A.

Barclays Bank plc

BNP Paribas

Calyon

Canadian Imperial Bank of Commerce

Citibank, N.A.

Credit Agricole S.A.

Credit Suisse

Deutsche Bank AG

Dresdner Bank AG

Goldman Sachs & Co.

HSBC Bank

JPMorgan Chase Bank, N.A.

Merrill Lynch, Pierce, Fenner & Smith Incorporated

Morgan Stanley & Co.

Natixis

Northern Trust Company

Royal Bank of Canada

The Royal Bank of Scotland plc

Societe Generale

The Toronto-Dominion Bank

UBS AG

U.S. Bank, National Association

Wachovia Bank National Association

Wells Fargo Bank, National Association

 

31

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