As filed with the Securities and Exchange Commission on April 19, 2023

File No. 000-56505

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

 

 

Amendment No. 1 to

Form 10

 

 

 

GENERAL FORM FOR REGISTRATION OF SECURITIES PURSUANT TO SECTION 12(b) OR 12(g)
OF THE SECURITIES EXCHANGE ACT OF 1934

 

StepStone Private Credit Fund LLC
(Exact name of registrant as specified in its charter)

 

 

 

Delaware   92-0758580
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer
Identification No.)
     
450 Lexington Avenue, 31st Floor New York, New York   10017
(Address of principal executive offices)   (Zip Code)

 

Registrant’s telephone number, including area code: (212) 351-6100

 

with copies to:

 

Darren Friedman

StepStone Private Credit Fund LLC

450 Lexington Avenue, 31st Floor

New York, NY 10017

 

COPIES TO:

Richard Horowitz, Esq.

Clay Douglas, Esq.

Dechert LLP

1095 Avenue of the Americas

New York, NY 10036

(212) 698-3500

 

Securities to be registered pursuant to Section 12(b) of the Act:
None

 

Securities to be registered pursuant to Section 12(g) of the Act:
Limited Liability Company Interests

 

 

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐  Accelerated filer ☐ 
Non-accelerated filer ☒  Smaller reporting company ☐ 
    Emerging growth company ☒ 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

 

 

 

 

TABLE OF CONTENTS 

 

    Page
     
Explanatory Note   1
     
Forward-Looking Statements   2
     
Item 1. Business   3
     
Item 1A. Risk Factors   40
     
Item 2. Financial Information   75
     
Item 3. Properties   81
     
Item 4. Security Ownership of Certain Beneficial Owners and Management   81
     
Item 5. Directors and Executive Officers   82
     
Item 6. Executive Compensation   88
     
Item 7. Certain Relationships and Related Transactions, and Director Independence   89
     
Item 8. Legal Proceedings   92
     
Item 9. Market Price of and Dividends on the Registrant’s Common Equity and Related Shareholder Matters   92
     
Item 10. Recent Sales of Unregistered Securities   94
     
Item 11. Description of Registrant’s Securities to be Registered   94
     
Item 12. Indemnification of Directors and Officers   98
     
Item 13. Financial Statements and Supplementary Data   98
     
Item 14. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure   98
     
Item 15. Financial Statements and Exhibits   99

 

i

 

 

Explanatory Note

 

StepStone Private Credit Fund LLC is filing this Amendment No. 1 to its Registration Statement on Form 10 (the “Registration Statement”) with the Securities and Exchange Commission (the “SEC”) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), on a voluntary basis in connection with its election to be regulated as a business development company (a “BDC”), under the Investment Company Act of 1940, as amended (the “1940 Act”), to provide current public information to the investment community.

 

Unless indicated otherwise in this Registration Statement or the context requires otherwise, the terms:

 

the terms, “we,” “us,” “our” and the “Company” refer to StepStone Private Credit Fund LLC;

 

the terms “Advisor” and our “Investment Advisor” refer to StepStone Group Private Debt LLC, our investment adviser;

 

the terms “SGEAIL” and “Sub-Advisor” refer to StepStone Group Europe Alternative Investments Limited, our investment sub-adviser; and

 

the term “Advisors” refers collectively to the Advisor and the Sub-Advisor.

 

The Company is an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As a result, the Company is eligible to take advantage of certain reduced disclosure and other requirements that are otherwise applicable to public companies including, but not limited to, not being subject to the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”). See “Item 1. Business – Emerging Growth Company.

 

Upon the effective date of this Registration Statement, we will be subject to the requirements of Section 13(a) of the Exchange Act, including the rules and regulations promulgated under the Exchange Act, which will require us to file annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K. We will also be required to comply with all other obligations of the Exchange Act applicable to issuers filing registration statements pursuant to Section 12(g) of the Exchange Act. Upon the effective date of this Registration Statement, we will also be subject to the proxy rules in Section 14 of the Exchange Act, and we and our Directors, officers and principal shareholders will be subject to the reporting requirements of Sections 13 and 16 of the Exchange Act. The SEC maintains a website (http://www.sec.gov) that contains the reports mentioned in this section.

 

Investing in our limited liability company interests (the “Shares”) may be considered speculative and involves a high degree of risk. See “Risk Factors” beginning on page 40 of this Registration Statement. Also consider the following:

 

An investment in our Shares is not suitable for you if you might need access to the money you invest in the foreseeable future.

 

You should not expect to be able to sell your Shares regardless of how we perform. If you are unable to sell your Shares, you will be unable to reduce your exposure on any market downturn.

 

Our Shares are not currently listed on an exchange and given that we have no current intention of pursuing any such listing, it is unlikely that a secondary trading market will develop for our Shares. The purchase of our Shares is intended to be a long-term investment. We do not intend to complete a liquidity event within any specific time period, if at all. We do not intend to list our Shares on a national securities exchange.

 

 

The Company has borrowed, and intends to borrow, money, which increases its investment risk. If the Company is unable to service its borrowings, it may risk the loss of its assets pledged as collateral.

 

  We cannot guarantee that we will make distributions, and if we do, we may fund such distributions from sources other than cash flow from operations, including, without limitation, the sale of assets, offering proceeds or borrowings, which may constitute a return of capital and reduce the amount of capital available to us for investment. We have no limits on the amounts we may pay from such sources, and such sources, such as borrowings, may not be available to us in the future. Any capital returned to you through distributions will be distributed after payment of fees and expenses. A return of capital (1) is a return of the original amount invested, (2) does not constitute earnings or profits and (3) will have the effect of reducing a shareholder’s tax basis such that when a shareholder sells its Shares the sale may be subject to taxes even if the Shares are sold for less than the original purchase price or result in reducing the potential taxable losses.

 

  We intend to invest primarily in private credit investments and debt securities that are rated below investment grade by rating agencies or that would be rated below investment grade if they were rated. Below investment grade securities, which are often referred to as “junk” have predominantly speculative characteristics with respect to the issuer’s capacity to pay interest and repay principal. The private credit investments, debt securities and below-investment grade securities in which the Company intends to invest will be difficult to value and are illiquid.

 

Investment in the Company is suitable only for sophisticated investors and requires the financial ability and willingness to accept the high risks and lack of liquidity inherent in an investment in the Company.

 

We intend to invest primarily in privately held companies for which very little public information exists. Such companies also could be more vulnerable to economic downturns and could experience substantial variations in operating results.

 

We have elected to be regulated as a BDC under the 1940 Act, which imposes numerous restrictions on our activities, including restrictions on leverage and on the nature of our investments.

 

Repurchases of the Shares by the Company, if any, are expected to be limited and to be no more than 5% of outstanding Shares as of the end of any given quarter.

 

1

 

 

Forward-Looking Statements

 

This Registration Statement contains forward-looking statements that involve substantial risks and uncertainties. Such statements involve known and unknown risks, uncertainties and other factors and you should not place undue reliance on such statements. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about us, our current and prospective portfolio investments, our industry, our beliefs and opinions and our assumptions. We are externally managed the Advisor, a registered investment adviser under the Investment Advisers Act of 1940, as amended (the “Advisers Act”), which is affiliated with StepStone Group LP (“StepStone Group”). For the avoidance of doubt, we are not a subsidiary of or consolidated with StepStone Group. Furthermore, StepStone Group does not have any obligation, contractual or otherwise, to financially support us. Words such as “anticipates,” “expects,” “intends,” “plans,” “will,” “may,” “continue,” “believes,” “seeks,” “estimates,” “would,” “could,” “should,” “targets,” “projects,” “potential,” “predicts,” and variations of these words and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements, including:

 

our future operating results;

 

our business prospects and the prospects of our portfolio companies;

 

risk associated with possible disruptions in our operations or the economy generally, including disruptions from the impact of a global pandemic, such as the current COVID-19 or Coronavirus pandemic;

 

changes in the general interest rate environment;

 

general economic, political and industry trends and other external factors, including uncertainty surrounding the financial and political stability of the United States and other countries;

 

our contractual arrangements and relationships with third parties;

 

actual and potential conflicts of interest with our Advisor and its affiliates;

 

the dependence of our future success on the general economy and its effect on the industries in which we invest;

 

the ability of our portfolio companies to achieve their objectives, including as a result of the Coronavirus pandemic;

 

the use of borrowed money to finance a portion of our investments;

 

the adequacy of our financing sources and working capital;

 

the timing and amount of cash flows, if any, from the operations of our portfolio companies;

 

the ability of our Advisors to locate suitable investments for us and to monitor and administer our investments;

 

the ability of our Advisors and their affiliates to attract and retain highly talented professionals;

 

our ability to qualify and maintain our qualification as a regulated investment company (“RIC”) under the Internal Revenue Code of 1986, as amended (the “Code”);

 

the impact on our business of U.S. and international financial reform legislation, rules and regulations;

 

the effect of changes in tax laws and regulations and interpretations thereof; and

 

the risks, uncertainties and other factors we identify under “Item 1A. Risk Factors” and elsewhere in this Registration Statement.

 

Although we believe that the assumptions on which these forward-looking statements are based are reasonable, any of the assumptions could prove to be inaccurate, and as a result, the forward-looking statements based on those assumptions also could be inaccurate. In light of these and other uncertainties, the inclusion of a projection or forward-looking statements in this Registration Statement should not be regarded as a representation by us that our plans and objectives will be achieved. This Registration Statement contains forward-looking statements, which may relate to future events or our future performance or financial condition and involves numerous risks and uncertainties, including, but not limited to, those described or identified in the section entitled “Item 1A. Risk Factors” and elsewhere in this Registration Statement. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this Registration Statement. Moreover, we assume no duty and do not undertake to update the forward-looking statements. You are advised to consult any additional disclosures that we make directly to you or through reports that we may file with the SEC in the future, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.

 

The Company is not able to rely on the safe harbor for forward-looking statements provided in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Exchange Act.

 

2

 

 

Item 1. Business.

 

The Company

 

We were formed on September 26, 2022, as a Delaware limited liability company. We were organized to achieve attractive risk-adjusted returns mainly by investing in various credit-related strategies.

 

We filed an election to be regulated as a BDC under the 1940 Act on April 3, 2023 (the “BDC Election Date”) and operate as an externally managed, non-diversified closed-end management investment company. In addition, we expect to elect to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”), and expect to maintain our qualification as a RIC annually thereafter. As a BDC and a RIC, we must comply with certain regulatory requirements. See “Item 1. Business – Regulation as a Business Development Company” and “Item 1. Business – Certain U.S. Federal Income Tax Considerations.

 

We are a non-exchange traded, perpetual-life BDC, which is a BDC whose shares are not listed for trading on a stock exchange or other securities market. We use the term “perpetual-life BDC” to describe an investment vehicle of indefinite duration, whose shares are intended to be sold by the BDC monthly on a continuous basis at a price generally equal to the BDC’s monthly net asset value (“NAV”) per share. In our perpetual-life structure, we may offer investors an opportunity to repurchase their shares on a quarterly basis at NAV, but we are not obligated to offer to repurchase any Shares in any particular quarter. We believe that our perpetual nature enables us to execute a patient and opportunistic strategy and be able to invest across different market environments. This may reduce the risk of the Company being a forced seller of assets in market downturns compared to non-perpetual funds. While we may consider a liquidity event at any time in the future, we currently do not intend to undertake a liquidity event, and we are not obligated by our Limited Liability Company Agreement (as amended, restated, and otherwise modified from time to time, the “Limited Liability Company Agreement”) or otherwise to effect a liquidity event at any time.

  

Our Board of Directors (the “Board” or the “Board of Directors”) may, in its sole discretion, determine to cause the Company to conduct a “Liquidity Event,” which is defined as including (1) an initial public offering (“IPO”) or other listing of the Shares on a national securities exchange (an “Exchange Listing”), or (2) a Sale Transaction. A “Sale Transaction” means (a) the sale of all or substantially all of the Company’s assets to, or other liquidity event with, another entity or (b) a transaction or series of transactions, including by way of merger, consolidation, recapitalization, reorganization, or sale of stock in each case for consideration of either cash and/or publicly listed securities of the acquirer. A Sale Transaction also may include a sale, merger or other transaction with one or more affiliated investment companies managed by the Advisor or an affiliate thereof. The decision to cause the Company to conduct a Liquidity Event will take into consideration factors such as prevailing market conditions at the time and the Company’s portfolio composition. The ability of the Company to commence and consummate a Liquidity Event is not assured, and will depend on a variety of factors, including the size and composition of the Company’s portfolio and prevailing market conditions at the time.

 

Until such time as the Board determines to cause the Company to conduct a Liquidity Event, the Company will remain a privately offered BDC and, in its commercially reasonable judgment, will conduct quarterly repurchases of its Shares. See “Item 1. Business – Share Repurchase Program.

 

The Company’s investment objectives are to generate current income and, to a lesser extent, long-term capital appreciation, mainly by investing in various credit-related strategies. The Company intends to primarily use a “multi-lender” approach to achieve its investment objectives, whereby the Advisor utilizes a variety of non-bank or corporate lenders (“Lending Sources”) to source investment opportunities for the Company.

 

Under normal circumstances, we will invest or commit at least 80% of our total assets (net assets plus borrowings for investment purposes) in private credit investments (“Private Credit”). We define Private Credit to consist primarily of the following:

 

(1) direct Loans to U.S. private middle-market companies that are privately originated and negotiated directly by a non-bank lender (for example, traditional direct lenders include asset management firms (on behalf of their investors), insurance companies, BDCs and specialty finance companies) primarily including (a) first lien senior secured and unitranche loans, (b) second lien, unsecured, subordinated or mezzanine loans and structured credit, as well as broadly syndicated loans, club deals (generally investments made by a small group of investment firms), and (c) other Loans,

 

(2)

investments in bank Loans to private middle-market companies, including securities representing ownership or participation in a pool of such Loans,

 

(3) notes or other pass-through obligations representing the right to receive the principal and interest payments on a direct Loan (or fractional portions thereof) (the investments described in clauses (1), (2) and (3) collectively referred to as the “Lending Strategy”), and

 

(4)

investments in companies and/or private investment funds (private funds that are excluded from the definition of “investment company” pursuant to Sections 3(c)(1) or 3(c)(7) of the 1940 Act) that primarily hold direct Loans to private middle market companies and other specialty finance debt (the investments described in clause (4) collectively referred to as “Underlying Funds”). Our investments in private investment funds and investment vehicles that are excluded from the definition of “investment company” pursuant to Sections 3(c)(1) or 3(c)(7) of the 1940 Act will be limited to no more than 15% of our net assets.

 

If we change our 80% test, we will provide shareholders with at least 60 days’ advance notice of such change. Loans,” as used in this Registration Statement, refers to loans of any type including, but not limited to, loan promissory notes, secured or unsecured loans, debtor-in-possession loans, priority or lien loans, assignments, participations or sub-interests in loans, syndicated loans, term loans, revolving loans, delayed draw loans or synthetic interests in loans. In connection with a direct Loan, the Company may receive non-cash income features, including payment-in-kind (“PIK”) interest and original issue discount (“OID”) and, to a lesser extent, the Company may invest in warrants or other equity securities of borrowers. The Company may make investments at different levels of a borrower’s capital structure or otherwise in different classes of a borrower’s securities, to the extent permitted by law.

 

3

 

 

The Company’s investments in Underlying Funds will primarily be made on a fund-of-funds basis in private investment funds and investment vehicles that are excluded from the definition of “investment company” pursuant to Sections 3(c)(1) or 3(c)(7) of the 1940 Act, which are managed by non-affiliated third-party managers that operate various Private Credit-related strategies (collectively, the “Underlying Funds Strategy”). Some of these Underlying Funds may from time to time sell seasoned Loans to the Company or other third parties. While the Company’s investments in Underlying Funds will generally focus on such private funds, the Company may invest in the equity or debt of both traded and non-traded registered closed-end funds and BDCs that primarily originate and manage private middle market and specialty finance debt, subject to compliance with the 1940 Act limitations on such investments.

 

In assessing Underlying Funds, the Advisors will assess the Underlying Funds’ strategies with a view to whether such strategies offer attractive risk-adjusted returns, diversified exposures, capital deployment management, market capacity and experienced investment managers.

 

The managers or general partners of the Underlying Funds may impose management fees or performance-based fees, a proportionate share of which will be borne by the Company and, indirectly, its shareholders. With respect to investments approved by the Advisor that are sourced by Lending Sources or through Underlying Funds, the Company may be required to pay an origination or similar fee in connection with making such investment, which fees will be indirectly borne by the Company’s shareholders and are in addition to the fees charged to the Underlying Funds by their managers or general partners.

 

To a lesser extent, we may make Private Credit and/or opportunistic investments in asset-backed securities representing ownership or participation in a pool of direct Loans; equity of U.S. private middle-market companies; high yield securities, including securities representing ownership or participation in a pool of such securities; special purpose vehicles (“SPVs”) and/or joint ventures that primarily hold loans or credit-like securities; CLO-related strategies (including equity, warehousing and mezzanine); convertible debt; non-corporate lending (including, for example and without limitation, core and transitionary real estate, structured products and infrastructure-related debt); other lending (including, for example, trade and supply chain finance, equipment leasing, marketplace lending (consumers, lending to lenders, etc.), insurance-linked strategies and instruments, royalties, aviation financing, shipping, residential whole loan real estate, life settlements, litigation financing, regulatory capital financing and net asset value lending); non-performing Loans (including, for example, U.S. residential mortgage loans and non-U.S. business loans). The Company may also opportunistically invest, on a limited basis, in publicly traded securities of large corporate issuers and liquid credit (including, for example, long/short credit (including public securities) and non-control distressed strategies).

 

To a lesser extent, the Company expects to implement its Lending Strategy and Underlying Funds Strategy via secondary market transactions (“Secondary Investments” or “secondaries”) where all or a substantial portion of the capital has already been invested and expects to allocate a smaller share of the Company’s available capital to Underlying Funds on a primary basis where the capital is largely deployed at the time of commitment (“Primary Fund Investments”). See “Item 1. Business – Investment Objectives and Strategy.

 

As a BDC, at least 70% of our assets must be the type of “qualifying” assets listed in Section 55(a) of the 1940 Act, as described herein, which are generally privately-offered securities issued by U.S. private or thinly-traded companies. We may also invest up to 30% of our portfolio opportunistically in “non-qualifying” portfolio investments, such as investments in non-U.S. companies. Most of our investments will be in private U.S. companies, but (subject to compliance with BDCs’ requirement to invest at least 70% of its assets in private U.S. companies) we also expect to invest to some extent in European and other non-U.S. companies. We do not expect to invest in emerging markets. We generally expect that our investments in Underlying Funds will not be considered “qualifying” assets under Section 55(a) of the 1940 Act.

 

There can be no assurance that the Company will achieve its investment objectives.

 

The Company has two wholly owned subsidiaries—SPV Facility I LLC (“SPV Facility I”) and StepStone Great Lakes SPV Facility II LLC (“SPV Facility II”)—both of which are bankruptcy remote SPVs organized as Delaware limited liability companies. SPV Facility I and SPV Facility II were established to be utilized in connection with secured revolving credit facilities or other secured financing arrangements whereby creditors have a claim on the relevant SPV’s assets prior to those assets becoming available to the relevant SPV’s equity holder.

 

Initial Portfolio

 

On April 3, 2023, shortly prior to our election to be regulated as a BDC, and in order to avoid the blind pool-aspects typically associated with the launch of a new fund, we, through our wholly-owned subsidiary, SPV Facility I, acquired from an affiliated fund managed by SGEAIL (the “Seller”), a select portfolio of first lien, senior secured Private Credit investments in, and funding obligations to, well-established middle-market businesses that operate across a wide range of industries (the “Initial Portfolio”). See “Item 1A. Risk Factors– Risks and Potential Conflicts of Interest Related to the Initial Portfolio Transaction”. We used the proceeds from the initial closing (the “Initial Closing”) of the Private Offering (as defined below), in connection with which we received approximately $18.5 million of gross proceeds, along with borrowings under the MassMutual SPV I Facility (as defined below), to purchase the Initial Portfolio. SPV Facility I purchased the Initial Portfolio pursuant to the terms of a Participation and Assignment Agreement by and between SPV Facility I and the Seller (the “Initial Portfolio Transfer Agreement”).

 

The Initial Portfolio is comprised of U.S. dollar-denominated investments that we believe reflect attractive spreads and fundamentals as compared to the broader direct lending market and provide us with a sound foundation for the start of our business. The investments and unfunded obligations in the Initial Portfolio are consistent with our investment objectives and the investment requirements set forth under the 1940 Act.

 

The aggregate purchase price (the “Purchase Price”) for the Initial Portfolio was $37.4 million, which is equal to the sum of the fair values of each asset and unfunded commitment in the Initial Portfolio as of the time immediately prior to closing under the Initial Portfolio Transfer Agreement. For purposes of determining the Purchase Price, the assets and unfunded commitments in the Initial Portfolio were valued as of February 28, 2023 by an independent third-party valuation firm. In connection with the closing under the Initial Portfolio Transfer Agreement and the acquisition of the Initial Portfolio, the Advisor conducted certain valuation procedures to confirm whether there had been any material changes to the fair value of the investments and obligations in the Initial Portfolio since February 28, 2023 and adjusted the Purchase Price in accordance with the terms of the Initial Portfolio Transfer Agreement to reflect the fair value of the investments and obligations in the Initial Portfolio as of the time immediately prior to closing under the Initial Portfolio Transfer Agreement. 

4

 

 

MassMutual SPV I Facility

 

On April 3, 2023, in connection with the acquisition of the Initial Portfolio, we, through SPV Facility I as borrower, entered into a Loan and Security Agreement (the “MassMutual SPV I Facility”) with Massachusetts Mutual Life Insurance Company (“MassMutual”), as the administrative agent and facility servicer, and the lenders party thereto from time to time. Under the MassMutual SPV I Facility, the lenders have made commitments of $200.0 million. The MassMutual SPV I Facility is secured by all of the assets of SPV Facility I and a pledge over 100% of the equity interest we hold in SPV Facility I. See “Item 2. Financial Information – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Recent Developments” for more information. 

 

The Advisor

 

The Company is externally managed by the Advisor, StepStone Group Private Debt LLC, a Delaware limited liability company registered with the SEC as an investment adviser under the Advisers Act, pursuant to an Investment Advisory Agreement (the “Advisory Agreement”). Pursuant to the Advisory Agreement, the Advisor is responsible for the overall management of the Company’s activities. The Advisor also serves as the Company’s administrator pursuant to an administration agreement (the “Administration Agreement”) and performs certain administrative, accounting and other services for the Company. The Advisor manages the Company’s day-to-day operations, subject to the supervision of the Board, a majority of the members of which are not “interested persons” as defined in Section 2(a)(19) of the 1940 Act. The Advisor is a wholly-owned subsidiary of Swiss Capital Alternative Investments AG (“SCAI”), which is a member of the StepStone group of companies, as discussed below.

 

The Advisor has entered into a resource sharing agreement (“Resource Sharing Agreement”) with an affiliate, StepStone Group LP (“StepStone Group”), a Delaware limited partnership, under which certain designated employees of StepStone Group will provide services, including investment advisory, portfolio management and other services, to the Advisor.

 

In consideration of certain administrative, accounting and other services that the Advisor performs for the Company, or oversees the performance of, under the Administration Agreement, the Company pays the Advisor an administration fee (the “Administration Fee”) in an amount up to 0.30% on an annualized basis of the Company’s net assets. From the proceeds of the Administration Fee, the Advisor pays SEI Investments Global Funds Services (the “Sub-Administrator”) a sub-administration fee (the “Sub-Administration Fee”) to provide certain outsourced administration and outsourced accounting services for the Company.

 

SCAI is an international alternative asset manager that, together with its subsidiaries, has more than $26.0 billion of assets under management as of September 30, 2022 and provides investment management services to institutional and private clients and collective investment schemes. SCAI is a limited liability company incorporated in 1998 and has its offices at Klausstrasse 4, 8008 Zurich, Switzerland. SCAI is regulated as a Manager of Collective Assets by the Swiss Financial Market Supervisory Authority FINMA (former Swiss Federal Banking Commission). SCAI’s principal business is investment management of which a core aspect is the management of collective investment schemes such as the Company. In addition, SCAI provides investment management services to institutional and private clients. It is also involved in corporate finance and in designing and offering structured investment products to clients.

 

SCAI is a subsidiary of StepStone Group Inc. (“SSG”), which is the sole managing member of StepStone Group Holdings LLC, which in turn is the general partner of StepStone Group (collectively, with SSG and their consolidated subsidiaries, “StepStone”). StepStone is a global private markets investment firm focused on providing customized investment solutions and advisory, data and administrative services to its clients. StepStone’s clients include some of the world’s largest public and private defined benefit and defined contribution pension funds, sovereign wealth funds and insurance companies, as well as prominent endowments, foundations, family offices and private wealth clients, including high-net-worth and mass affluent individuals. StepStone partners with its clients to develop and build private markets portfolios designed to meet their specific objectives across the private equity, infrastructure, private debt and real estate asset classes. These portfolios utilize several types of synergistic investment strategies with third-party fund managers, including commitments to funds, acquiring stakes in existing funds on the secondary market and investing directly into companies.

 

The Advisor was formed on September 21, 2022 and is located at 450 Lexington Avenue, 31st Floor, New York, New York 10017.

 

The Sub-Advisor

 

The Advisor has engaged SGEAIL to act as our sub-advisor pursuant to a sub-advisory agreement by and among the Advisor, SGEAIL, and the Company (the “Sub-Advisory Agreement”), to provide certain ongoing, non-discretionary investment advice and services to the Advisor in regard to the Advisor’s management of the Company. Under the Sub-Advisory Agreement, SGEAIL will be responsible for providing ongoing investment advice and services to the Advisor in respect of the Company’s investments, including, but not limited to:

 

providing investment recommendations in respect of the Underlying Funds Strategy;

 

providing allocation recommendations and deploying commitment and over-commitment models and strategies in respect of the Lending Strategy;

 

identifying and managing portfolio risk through tracking commitments, capital calls, distribution variations, and valuations, among other factors;

 

identifying investment opportunities resulting from fundamental financial analysis and initial due diligence performed on investments (actual or contemplated); and

 

tracking and monitoring the continuing operations, management, financial condition and other pertinent details and information and conducting ongoing due diligence as to Company allocations of assets in respect of the Underlying Funds Strategy.

 

5

 

 

SGEAIL is an alternative assets investment manager based in Dublin, Ireland and is a wholly-owned subsidiary of SCAI. SGEAIL was organized as an Irish private limited company and has been providing investment advisory services since 2005. SGEAIL provides investment management and supervisory services to institutional investors worldwide, primarily with respect to private markets. SGEAIL also sponsors and advises private markets funds with a variety of investment strategies. SGEAIL’s full range of private markets services also includes private markets monitoring and reporting services.

 

SGEAIL focuses on investments in private debt, offering tailored multi-manager mandates to clients, as well as in hedge funds through its fund of hedge funds. SGEAIL acts as a discretionary or nondiscretionary investment manager to institutional entities, pooled investment vehicles and individual portfolio investments. SGEAIL also provides non-discretionary private markets monitoring and reporting services, to institutional clients. As of September 30, 2022, SGEAIL had approximately $26.0 billion in regulatory assets under management.

 

Private Offering of Shares

 

We are conducting a continuous private offering (the “Private Offering”) of our Shares in reliance on exemptions from the registration requirements of the Securities Act, including the exemption provided by Section 4(a)(2) of the Securities Act and Regulation D promulgated thereunder, and Regulation S under the Securities Act. In connection with the Private Offering, we have entered into, and expect to continue to enter into, subscription agreements with investors (each, a “Subscription Agreement”). Investors whose subscriptions for Shares are accepted by the Company will be admitted as members of the Company (“shareholders”) following payment of their capital contribution to the Company, pursuant to the terms of the Limited Liability Company Agreement. The Initial Closing of the Private Offering occurred on April 3, 2023, in connection with which we sold 741,800 Shares in exchange for gross proceeds of $18.5 million. 

 

In connection with the Private Offering, we intend to hold monthly closings in connection with which we will issue Shares to investors for immediate cash investment; provided that we retain the right, if determined by us in our sole discretion, to accept subscriptions and issue Shares, in amounts to be determined by us, more or less frequently to one or more investors for regulatory, tax or other reasons as we may determine to be appropriate. We reserve the right to conduct additional offerings of securities in the future in addition to this Private Offering.

 

We are initially offering to sell one class of Shares and may offer additional classes of Shares in the future. We and our investment adviser may apply for exemptive relief from the SEC that, if granted, will permit us to issue multiple classes of shares of Shares with varying sales loads, contingent deferred sales charges, and/or asset-based service and/or distribution fees, the details for which will be finalized at a later date in our discretion (the “Multi-Class Exemptive Relief”). The SEC has not yet granted the Multi-Class Exemptive Relief, and there is no assurance that the relief will be granted.

 

The minimum initial investment in Shares is $25,000, after which additional investments must be in increments of $500. The minimum subsequent investment amount does not apply to purchases made under any distribution reinvestment plan. In addition, we, or any placement agent engaged by us or on our behalf, may elect to accept smaller investments in our or its discretion.

 

Each prospective investor in the Private Offering will be required to represent that it (i) is an “accredited investor” as defined in Rule 501(a) of Regulation D (an “accredited investor”) under the Securities Act or, in the case of offers and sales outside of the United States to a prospective investor that is not an accredited investor, is not a “U.S. person” in accordance with Regulation S under the Securities Act, and (ii) is acquiring the Common Shares purchased by it for investment and not with a view to resale or distribution.

 

We will endeavor to take all reasonable actions to avoid interruptions in the continuous Private Offering. Although the Shares in the Private Offering are being sold under the exemption provided by Section 4(a)(2) of the Securities Act, Regulation D promulgated thereunder, and Regulation S under the Securities Act, there can be no assurance that we will not need to suspend our Private Offering for various reasons, including but not limited to regulatory review from the SEC and various state regulators, to the extent applicable.

 

Prior to an IPO or Exchange Listing, investors may sell, offer for sale, agree to sell, exchange, transfer, assign, pledge, hypothecate, grant any option to purchase or otherwise dispose of or agree to dispose of, in any case whether directly or indirectly (collectively, “Transfer”) their Shares, including a Transfer of solely an economic interest, in whole or in part, provided, that (i) any purported transferee satisfies applicable eligibility and/or suitability requirements as set forth in the Subscription Agreement, and (ii) any such Transfer is made in connection with transactions exempt from, or not subject to, the registration requirements of the Securities Act and otherwise in compliance with applicable securities laws, the Limited Liability Company Agreement, and the Subscription Agreement. No Transfer will be effectuated except by registration of the Transfer on the Company’s books. Each transferee must agree to be bound by these restrictions and all other obligations as an investor in the Company.

 

Following an IPO or Exchange Listing, investors may be restricted from selling or transferring their Shares for a certain period of time by applicable securities laws or contractually by a lock-up agreement with the underwriters of the IPO or otherwise.

 

Purchase Price

 

We intend to sell our Shares at an offering price that we believe reflects our then-calculated NAV per Share as determined in accordance with the Advisor’s valuation policy. The Board has approved the Advisor’s valuation policy, is responsible for overseeing its application and has designated the Advisor as the Company’s valuation designee under Rule 2a-5 under the 1940 Act. In connection with the monthly closings, we expect that the Board will delegate to the Advisor the authority to conduct such closings. There is no guarantee that this NAV will be equal to the offering price of our Shares at any closing.

 

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Each issuance of Shares will be subject to the limitations of Section 23(b) under the 1940 Act, which generally prohibits the Company from issuing Shares at a price below the then-current NAV of the Shares as determined within 48 hours, excluding Sundays and holidays, of such issuance (taking into account any investment valuation adjustments from the latest quarterly valuation date in accordance with the Advisor’s valuation policy), subject to certain exceptions. We reserve the right, in our sole discretion and at any time, to sell Shares to investors subscribing after the initial closing date of the Private Offering at a price set above the NAV per share based on a variety of factors in order to fairly allocate initial offering, organizational and other expenses to such investors.

 

The Private Offering will be made on a best-efforts basis, whereby any broker-dealers participating in the offering are only required to use their best efforts to sell our Shares and will have no firm commitment or obligation to purchase any of our Shares.

 

If the Multi-Class Exemptive Relief is granted to the Company, the Company would be permitted to issue multiple classes of Shares with varying sales loads, contingent deferred sales charges, and/or asset-based service and/or distribution fees, the details for which will be finalized at a later date in the Company’s discretion. Sales loads and other fees imposed on certain classes of Shares, if any, may be less than the sales load and other fees for other classes of Shares, which may cause returns between classes to differ from one another. The SEC has not yet granted the Multi-Class Exemptive Relief, and there is no assurance that the relief will be granted.

 

The Advisor may pay additional compensation, out of its own funds and not as an additional charge to the Company or investors, to selected brokers, dealers or other financial intermediaries, including affiliated broker dealers, for the purpose of introducing a selling agent to the Company and/or promoting the recommendation of an investment in the Shares. Such payments made by the Advisor may be based on the aggregate purchase price of investors in the Company as determined by the Advisor. The amount of these payments is determined from time to time by the Advisor and may be substantial.

 

The purchase of the Shares is intended to be a long-term investment. We do not intend to list the Shares on a national securities exchange. Until such time as the Board determines to cause the Company to conduct a Liquidity Event, the Company will remain a privately offered BDC and, in its commercially reasonable judgment, will conduct quarterly repurchases of its Shares. See “Item 1. Business – Share Repurchase Program.

 

Share Repurchase Program

 

We do not intend to list our Shares on a securities exchange and we do not expect there to be a public market for our shares. As a result, if you purchase our Shares, your ability to sell your shares will be limited.

 

Beginning no later than the second full calendar quarter following the BDC Election Date, and subject to market conditions and the discretion of the Board, we intend to commence a share repurchase program in which we intend to offer to repurchase, in each quarter, up to 5% of our Shares outstanding (either by number of shares or aggregate NAV) as of the close of the previous calendar quarter. Our Board may amend or suspend the share repurchase program at any time if in its reasonable judgment it deems such action to be in our best interest and the best interest of our shareholders. As a result, share repurchases may not be available each quarter, such as when a repurchase offer would place an undue burden on our liquidity, adversely affect our operations or risk having an adverse impact on the Company that would outweigh the benefit of the repurchase offer. We intend to conduct such repurchase offers in accordance with the requirements of Rule 13e-4 promulgated under the Exchange Act and the 1940 Act. All Shares purchased by us pursuant to the terms of each tender offer will be retired and thereafter will be authorized and unissued Shares.

 

Under the share repurchase program, to the extent we offer to repurchase Shares in any particular quarter, we expect to repurchase Shares using a purchase price equal to the NAV per share as of the last calendar day of the applicable quarter (the “Valuation Date”). Shareholders should keep in mind that if they tender Shares in a tender offer with a Valuation Date that is within the 12-month period following the initial issue date of their tendered Shares, the Company may repurchase such Shares subject to an “early repurchase deduction” of 2% of the aggregate NAV of the Shares repurchased (an “Early Repurchase Deduction”). The Early Repurchase Deduction will be retained by the Company for the benefit of remaining shareholders. This Early Repurchase Deduction will also generally apply to minimum account repurchases, discussed below.

 

We may, from time to time, waive the Early Repurchase Deduction in the following circumstances (subject to the conditions described below):

 

repurchases resulting from death, qualifying disability or divorce;

 

in the event that a shareholder’s shares are repurchased because the shareholder has failed to maintain the $500 minimum account balance; or

 

due to trade or operational error.

 

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As set forth above, we may waive the Early Repurchase Deduction in respect of repurchase of Shares resulting from the death, qualifying disability (as such term is defined in Section 72(m)(7) of the Code) or divorce of a shareholder who is a natural person, including Shares held by such shareholder through a trust or an IRA or other retirement or profit-sharing plan, after (i) in the case of death, receiving written notice from the estate of the shareholder, the recipient of the Shares through bequest or inheritance, or, in the case of a trust, the trustee of such trust, who shall have the sole ability to request repurchase on behalf of the trust, (ii) in the case of qualified disability, receiving written notice from such shareholder, provided that the condition causing the qualifying disability was not pre-existing on the date that the shareholder became a shareholder of the Company or (iii) in the case of divorce, receiving written notice from the shareholder of the divorce and the shareholder’s instructions to effect a transfer of the Shares (through the repurchase of the Shares by us and the subsequent purchase by the shareholder) to a different account held by the shareholder (including trust or an individual retirement account or other retirement or profit-sharing plan). We must receive the written repurchase request within 12 months after the death of the shareholder, the initial determination of the shareholder’s disability or divorce in order for the requesting party to rely on any of the special treatment described above that may be afforded in the event of the death, disability or divorce of a shareholder. In the case of death, such a written request must be accompanied by a certified copy of the official death certificate of the shareholder. If spouses are joint registered holders of Shares, the request to have the Shares repurchased may be made if either of the registered holders dies or acquires a qualified disability. If the shareholder is not a natural person, such as certain trusts or a partnership, corporation or other similar entity, the right to waiver of the Early Repurchase Deduction upon death, disability or divorce does not apply.

 

You may tender all of the Shares that you own. In the event the amount of Shares tendered exceeds the repurchase offer amount, Shares will be repurchased on a pro rata basis. All unsatisfied repurchase requests must be resubmitted in the next quarterly tender offer, or upon the recommencement of the share repurchase program, as applicable. We will have no obligation to repurchase Shares, including if the repurchase would violate the restrictions on distributions under federal law or Delaware law. The limitations and restrictions described above may prevent us from accommodating all repurchase requests made in any quarter. Our share repurchase program has many limitations, including the limitations described above, and should not in any way be viewed as the equivalent of a secondary market.

 

We will offer to repurchase Shares on such terms as may be determined by our Board in its complete and absolute discretion unless, in the judgment of the Board, such repurchases would not be in the best interests of our shareholders or would violate applicable law. There is no assurance that the Board will exercise its discretion to offer to repurchase Shares or that there will be sufficient funds available to accommodate all of our shareholders’ requests for repurchase. As a result, we may repurchase less than the full amount of Shares that you request to have repurchased. If we do not repurchase the full amount of your Shares that you have requested to be repurchased, or we determine not to make repurchases of our Shares, you will likely not be able to dispose of your Shares, even if we under-perform. Any periodic repurchase offers will be subject in part to our available cash and compliance with the RIC qualification and diversification rules and the 1940 Act.

 

The Company will repurchase Shares from shareholders pursuant to written tenders on terms and conditions that the Board determines to be fair to the Company and to all shareholders. When the Board determines that the Company will repurchase Shares, notice will be provided to shareholders describing the terms of the offer, containing information shareholders should consider in deciding whether to participate in the repurchase opportunity and containing information on how to participate. Our repurchase offers will generally use the NAV on or around the last day of a calendar quarter, which will not be available until after the expiration of the applicable tender offer, so you will not know the exact price of Shares in the tender offer when you make your decision whether to tender your Shares.

 

Repurchases of Shares from shareholders by the Company will be paid in cash within 65 days of the expiration of the applicable tender offer, after the determination of the relevant NAV per share is finalized. Repurchases will be effective after receipt and acceptance by the Company of eligible written tenders of Shares from shareholders by the applicable repurchase offer deadline. The Company does not intend to impose any charges in connection with repurchases of Shares other than as stated above.

 

The majority of our assets will consist of instruments that cannot generally be readily liquidated without impacting our ability to realize full value upon their disposition. Therefore, we may not always have sufficient liquid resources to make repurchase offers. We may fund repurchase requests from sources other than cash flow from operations, including the sale of assets, borrowings, return of capital or offering proceeds, and although we generally expect to fund distributions from cash flow from operations we have not established any limits on the amounts we may pay from such sources. Should making repurchase offers, in our judgment, place an undue burden on our liquidity, adversely affect our operations or risk having an adverse impact on the company as a whole, or should we otherwise determine that investing our liquid assets in originated loans or other illiquid investments rather than repurchasing our Shares is in the best interests of the Company as a whole, then we may choose to offer to repurchase fewer shares than described above, or none at all.

 

In the event that any shareholder fails to maintain a minimum balance of $500 of our Shares, we may repurchase all of the Shares held by that shareholder at the repurchase price in effect on the date we determine that the shareholder has failed to meet the minimum balance, less any Early Repurchase Deduction. Minimum account repurchases will apply even in the event that the failure to meet the minimum balance is caused solely by a decline in our NAV. Minimum account repurchases are subject to an Early Repurchase Deduction.

 

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Payment for repurchased Shares may require us to liquidate portfolio holdings earlier than our Advisor would otherwise have caused these holdings to be liquidated, potentially resulting in losses, and may increase our investment-related expenses as a result of higher portfolio turnover rates. Our Advisor intends to take measures, subject to policies as may be established by our Board, to attempt to avoid or minimize potential losses and expenses resulting from the repurchase of Shares.

 

Investment Objectives and Strategy

 

Overview

 

The Company’s investment objectives are to generate current income and, to a lesser extent, long-term capital appreciation, mainly by investing in various credit-related strategies. The Company intends to primarily use a “multi-lender” approach to achieve its investment objectives, whereby the Advisor utilizes a variety of Lending Sources to source investment opportunities for the Company. There can be no assurance that the Company will achieve its investment objectives.

 

Under normal circumstances, we will invest or commit at least 80% of our total assets (net assets plus borrowings for investment purposes) in Private Credit, primarily through its Lending Strategy and Underlying Funds Strategy, each as discussed below. Except as otherwise disclosed in this Registration Statement, we may modify or waive our investment objectives and any of our investment policies, restrictions, strategies, and techniques without prior notice and without shareholder approval. However, absent requisite shareholder approval under the 1940 Act, we may not change the nature of our business so as to cease to be, or withdraw our election as, a BDC. If we change our 80% Private Credit test, we will provide shareholders with at least 60 days’ advance notice of such change.

 

The Advisor expects that the direct Loans to which we will have exposure will generally be made to middle-market companies, which we define as companies with an annual EBITDA of approximately $10 million to $100 million. The Loans in which we expect to invest will generally pay floating interest rates based on a variable base rate. The secured debt (including first lien senior secured, unitranche and second lien debt) in which we will invest generally have stated terms of five to eight years, and the mezzanine, unsecured or subordinated debt investments that we may make will generally have stated terms of up to ten years, but the expected average life of such securities is generally between three and five years. However, there is no limit on the maturity or duration of any security we may hold in our portfolio. Loans and securities purchased in the secondary market will generally have shorter remaining terms to maturity than newly issued investments. We expect most of our debt investments will be unrated. Our debt investments may also be rated by a nationally recognized statistical rating organization, and, in such case, generally will carry a rating below investment grade (rated lower than “Baa3” by Moody’s Investors Service, Inc. or lower than “BBB-” by Standard & Poor’s Ratings Services). We expect that our unrated debt investments will generally have credit quality consistent with below investment grade securities.

 

The Loans to which we will have exposure will also generally have the following characteristics:

 

have a loan-to-value of less than 70%;

 

have obligors with leverage of less than 7.0 times EBITDA; and

 

have obligors sponsored by a private equity investment manager.

 

In connection with a direct Loan, the Company may receive non-cash income features, including PIK interest and OID and, to a lesser extent, the Company may invest in warrants or other equity securities of borrowers. The Company may make investments at different levels of a borrower’s capital structure or otherwise in different classes of a borrower’s securities, to the extent permitted by law.

 

The Advisor will allocate the Company’s assets in such proportions as the Advisor deems appropriate from time to time, in accordance with the Advisor’s allocation policy, and provided that such investments are made in accordance with the requirements under the 1940 Act. As a BDC, at least 70% of our assets must be the type of “qualifying” assets listed in Section 55(a) of the 1940 Act, as described herein, which are generally privately-offered securities issued by U.S. private or thinly-traded companies. We may also invest up to 30% of our portfolio opportunistically in “non-qualifying” portfolio investments, such as investments in non-U.S. companies. Most of our investments will be in private U.S. companies, but (subject to compliance with BDCs’ requirement to invest at least 70% of its assets in private U.S. companies) we also expect to invest to some extent in European and other non-U.S. companies. We do not expect to invest in emerging markets. We generally expect that our investments in Underlying Funds will not be considered “qualifying” assets under Section 55(a) of the 1940 Act. See “Item 1. Business – Regulation as a Business Development Company” for more information.

 

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We are classified as a non-diversified investment company within the meaning of the 1940 Act, which means that we are not limited by the 1940 Act with respect to the proportion of our assets that we may invest in securities of a single issuer. Under the 1940 Act, a “diversified” investment company is required to invest at least 75% of the value of its total assets in cash and cash items, government securities, securities of other investment companies and other securities limited in respect of any one issuer to an amount not greater than 5% of the value of the total assets of such company and no more than 10% of the outstanding voting securities of such issuer. As a non-diversified investment company, we are not subject to this requirement. To the extent that we assume large positions in the securities of a small number of issuers or within a particular industry, our NAV may fluctuate to a greater extent than that of a more diversified investment company as a result of changes in the financial condition or the market’s assessment of the issuer. We may also be more susceptible to any single economic or regulatory occurrence than a diversified investment company or to a general downturn in the economy. However, we will be subject to the diversification requirements applicable to RICs under Subchapter M of the Code.

 

Notwithstanding the above, the Advisor does not follow a rigid investment policy with respect to the Company’s investment portfolio that would restrict it from participating in any market, strategy or investment, and the Company’s investment portfolio may be concentrated in one or more investment strategies from time to time. The Company’s assets may be deployed in whatever investment strategies are deemed appropriate under prevailing economic and market conditions to seek to achieve the Company’s investment objectives.

 

Lending Strategy

 

To effectuate the Company’s Lending Strategy, the Advisor intends to primarily utilize a variety of Lending Sources to source Private Credit investments primarily consisting of the following:

 

(1) direct Loans to U.S. private middle-market companies that are privately originated and negotiated directly by a non-bank lender (for example, traditional direct lenders include asset management firms (on behalf of their investors), insurance companies, BDCs and specialty finance companies) primarily including (a) first lien senior secured and unitranche loans, (b) second lien, unsecured, subordinated or mezzanine loans and structured credit, as well as broadly syndicated loans, club deals (generally investments made by a small group of investment firms), and (c) other Loans,

 

(2)

investments in bank Loans to private middle-market companies, including securities representing ownership or participation in a pool of such Loans, and

 

(3) notes or other pass-through obligations representing the right to receive the principal and interest payments on a direct Loan (or fractional portions thereof).

 

In addition to utilizing Lending Sources to source investments for its Lending Strategy, the Company may originate loans and debt instruments, and may also have the ability to acquire investments through secondary transactions, including through loan portfolios, receivables, contractual obligations to purchase subsequently originated loans and other debt instruments. As discussed below, the Advisors may also invest the Company’s assets in Loans acquired from Underlying Funds managed by non-affiliated third-party managers in which the Company is not invested. With respect to investments approved by the Advisor that are sourced by Lending Sources or through Underlying Funds, the Company may be required to pay an origination or similar fee in connection with making such investment, which fees will be indirectly borne by the Company’s shareholders and are in addition to the fees charged to the Underlying Funds by their managers or general partners.

 

Underlying Funds Strategy

 

The Company may invest up to 15% of its total assets (net assets plus borrowings for investment purposes) in Underlying Funds. The Company’s investments in Underlying Funds will primarily be made on a fund-of-funds basis in private investment funds and investment vehicles that are excluded from the definition of “investment company” pursuant to Sections 3(c)(1) or 3(c)(7) of the 1940 Act, which are managed by non-affiliated third-party managers that operate various Private Credit-related strategies. Some of these Underlying Funds may from time to time sell seasoned Loans to the Company or other third parties. While the Company’s investments in Underlying Funds will generally focus on such private funds, the Company may invest in the equity or debt of both traded and non-traded registered closed-end funds and BDCs that primarily originate and manage private middle market and specialty finance debt, subject to compliance with the 1940 Act limitations on such investments.

 

Underlying Funds themselves may originate loans and debt instruments, and may also have the ability to acquire investments through secondary transactions, including through loan portfolios, receivables, contractual obligations to purchase subsequently originated loans and other debt instruments. Certain Underlying Funds may invest in co-investments or secondary loan transactions in the above instruments. In addition to making Private Credit investments consistent with the Company’s Lending Strategy, Underlying Funds may invest in opportunistic investments with a view to enhance returns, asset-backed securities, convertible debt, loan participations, bridge loans, structured products such as CLOs, debtor-in-possession financings, lending to lenders and equity in loan portfolios or portfolios of receivables. In addition, Underlying Funds may also invest in equities, including warrants and equity related to relevant debt investments.

 

In assessing Underlying Funds, the Advisors will assess the Underlying Funds’ strategies with a view to whether such strategies offer attractive risk-adjusted returns, diversified exposures, capital deployment management, market capacity and experienced investment managers. The managers or general partners of the Underlying Funds may impose management fees or performance-based fees, a proportionate share of which will be borne by the Company and, indirectly, its shareholders.

 

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Primary Investment Types

 

The Company’s portfolio, either directly via its Lending Strategy or indirectly via its Underlying Funds Strategy, will primarily consist of the following investment types:

 

Direct Loans

 

The Company’s portfolio will have exposure to direct Loans to private middle-market companies by purchasing or investing in Loans or other investments from/with non-bank lenders (for example, traditional direct lenders include asset management firms (on behalf of their investors), insurance companies, BDCs and specialty finance companies) that specialize in direct Loan originations. The Company will utilize a variety of Lending Sources to source direct Loans. The Company’s direct Loans will primarily include secured debt (including first lien senior secured, unitranche and second lien debt) and mezzanine loans, but may also include unsecured debt (including senior unsecured and subordinated debt) or structured credit, as well as broadly syndicated loans and club deals (generally investments made by a small group of investment firms). First lien senior secured debt has first claim to any underlying collateral of a loan, second lien debt is secured but subordinated in payment and/or lower in lien priority to first lien holders, and unitranche loans are secured loans that combine both senior and subordinated debt into one tranche of debt, generally in a first lien position. In connection with a direct Loan, the Fund may invest in warrants or other equity securities of borrowers and may receive non-cash income features, including PIK interest and OID. The Fund may make investments at different levels of a borrower’s capital structure or otherwise in different classes of a borrower’s securities, to the extent permitted by law. 

 

A portion of the Company’s debt portfolio investment exposure will be made in certain high-yield securities known as mezzanine investments, which are subordinated debt securities that may be issued together with an equity security (e.g., with attached warrants). Those mezzanine investments may be issued with or without registration rights. Mezzanine investments can be unsecured and generally subordinate to other obligations of the issuer. The expected average life of the Company’s mezzanine investments may be significantly shorter than the maturity of these investments due to prepayment rights. 

 

Bank Loans

 

The Company’s portfolio will have exposure to Loans originated by banks and other financial institutions, which will primarily consist of Loans to private middle-market companies. These loans may include term loans and revolving loans, may pay interest at a fixed or floating rate and may be senior or subordinated.

 

Loan Participations and Assignments

 

 The Company may acquire interests in Loans either directly (by way of sale or assignment) or indirectly (by way of participation). The purchaser of an assignment typically succeeds to all the rights and obligations of the assigning institution and becomes a lender under the credit agreement with respect to the debt obligation; however, its rights can be more restricted than those of the assigning institution. Participation interests in a portion of a debt obligation typically result in a contractual relationship only with the institution participating out the interest, not with the borrower. In purchasing participations, the Company generally will have no right to enforce compliance by the borrower with the terms of the loan agreement, nor any rights of set-off against the borrower, and the Company may not directly benefit from the collateral supporting the debt obligation in which it has purchased the participation. As a result, the Company will assume the credit risk of both the borrower and the institution selling the participation. 

 

Secondary Investments and Primary Fund Investments

 

The Company also expects to invest in operating companies and Underlying Funds via secondary market transactions, through the acquisition of an existing interest in an operating company or an Underlying Fund from another investor in a negotiated transaction, and expects to allocate a smaller share of the Company’s available capital to Primary Fund Investments, which are investments made in Underlying Funds on a primary basis where the capital is largely deployed at the time of commitment. Initially, the Company will emphasize investments in seasoned Underlying Funds via secondary transactions: partnerships that have already begun investing and which are typically at a later stage in their lifecycle. Such investments allow for more advanced due diligence and can help reduce blind pool risk by providing better visibility into the early make-up of the Underlying Fund’s portfolio. Further, by primarily focusing on seasoned Underlying Funds, the Advisors believe that the effects of the “J-Curve” typically exhibited by Primary Fund Investments (the tendency for a fund’s NAV to decline moderately during the early years of the fund’s life as investment-related fees and expenses are incurred before investment gains have been realized) can be mitigated.

 

With respect to individual companies, the Advisors believe that the increased time to liquidity of many private middle market companies can provide a significant source of investment opportunities. As a result, company management teams, in some cases, pursue secondary offerings to expedite liquidity. The Advisors believe StepStone Group’s and the Advisors’ networks and value-added approach will provide a strong pipeline of opportunities, and their versatile financing approach gives the team the flexibility to source high quality opportunities.

 

The market for purchasing Underlying Funds on the secondary market may be very limited and competitive, and the strategies and Underlying Funds to which the Company wishes to allocate capital may not be available for secondary investment at any given time. However, the Advisors expect to have ample opportunities for sourcing secondary investments in Underlying Funds. In the Advisors’ and StepStone Group’s experience, seller motivations are myriad, and such motivations continue to increase in immediacy particularly due to enhanced time to liquidity among private middle-market companies. Further, the Advisors and StepStone Group also believe that larger secondary firms continue to exhibit general indifference to many middle-market-focused Underlying Fund secondary transactions as they are often sub-scale for the larger firms and are difficult to evaluate due to a minimal level of provided or obtainable information. Additionally, investment managers of the funds in these types of transactions typically seek to avoid adding new investor relationships, posing a challenge to potential secondary buyers who are not existing investors in the funds. The Advisors believe their value-added approach will allow the Company to garner access and more effectively transact on these opportunities. Finally, the sponsors of middle-market-focused funds are becoming increasingly proactive about offering secondary liquidity options to existing investors as their funds approach the end of their respective terms with substantial remaining unrealized value. Examples of such liquidity options include tender offers or investment manager-led restructurings. StepStone Group believes that its position as a meaningful primary fund investor in many middle-market-focused funds globally and its deep relationships with a large number of investment managers position StepStone Group and its affiliates as a preferred partner to lead these transactions, further enhancing possible deal flow.

 

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The Advisors expect to allocate a smaller share of the Company’s available capital to Underlying Funds on a primary basis, leveraging StepStone Group’s longstanding relationship with historically top-performing fund managers across stage, sectors and geographies. Primary Fund Investments, or “primaries,” refer to investments in newly established private funds which have not yet begun operation. Primary Fund Investments are made during an initial fundraising period in the form of capital commitments, which are then called down by the applicable fund and utilized to finance its investments in portfolio companies during a predefined period. A Private Fund Investment’s NAV will typically exhibit a “J-Curve,” undergoing a decline in the early portion of the fund’s lifecycle as investment-related expenses and fees accrue prior to the realization of investment gains from portfolio investments, with the trend typically reversing in the later portion of the fund’s lifecycle as portfolio investments are sold and gains from investments are realized and distributed. There can be no assurance that any or all Primary Fund Investments made by the Company will exhibit this pattern of investment returns and realization of later gains is dependent upon the performance and disposition of each Primary Fund Investment’s underlying portfolio investments.

 

Co-Investment

 

As stated above, the Advisor intends utilize a variety of Lending Sources to source Loans. The Company may also co-invest in Loans and Underlying Funds alongside one or more other investment funds or investment vehicles managed, sponsored or advised by the Advisors or their affiliates. As a BDC regulated under the 1940 Act, the Company is subject to certain limitations relating to co-investments and joint transactions with affiliates, which, in certain circumstances, likely may limit the Company’s ability to make investments or enter into other transactions alongside other clients. The Advisor intends to apply for an exemptive order from the SEC that will permit the Company, among other things, to co-invest with certain other persons, including certain affiliates of the Advisor and certain funds managed and controlled by the Advisor and its affiliates, subject to certain terms and conditions. There is no assurance that the co-investment exemptive order will be granted by the SEC.

 

Ancillary Investments

 

To a lesser extent, we may make Private Credit and/or opportunistic investments in asset-backed securities representing ownership or participation in a pool of direct Loans; equity of U.S. private middle-market companies; high yield securities, including securities representing ownership or participation in a pool of such securities; SPVs and/or joint ventures that primarily hold loans or credit-like securities; CLO-related strategies (including equity, warehousing and mezzanine); convertible debt; non-corporate lending (including, for example and without limitation, core and transitionary real estate, structured products and infrastructure-related debt); other lending (including, for example, trade and supply chain finance, equipment leasing, marketplace lending (consumers, lending to lenders, etc.), insurance-linked strategies and instruments, royalties, aviation financing, shipping, residential whole loan real estate, life settlements, litigation financing, regulatory capital financing and net asset value lending); non-performing Loans (including, for example, U.S. residential mortgage loans and non-U.S. business loans). The Company may also opportunistically invest, on a limited basis, in publicly traded securities of large corporate issuers and liquid credit (including, for example, long/short credit (including public securities) and non-control distressed strategies).

 

The Company may also invest in ancillary liquid assets, being investments primarily in cash or equivalent instruments, including money market funds and other investment grade liquid financial instruments issued by governments or by corporate issuers such as commercial paper, fixed and/or floating rate bonds, notes, bills, deposits and certificates of deposit, to make follow-on investments, if necessary, in existing portfolio companies, for the purposes of maintaining liquidity for the Company’s share repurchase program or to take advantage of new opportunities.

 

The Company may employ, utilize, acquire or dispose of derivative instruments and techniques of all kinds for investment or for the efficient management of the Company’s assets to hedge against currency, interest rate and market risks as may be permitted by applicable law and regulation and, without prejudice to the generality of the foregoing, to enter into (whether by way of ISDA master agreement, ancillary documentation or any other form of agreement or contract), accept, issue, write and otherwise deal with long and short sales of securities, futures contracts of any type, options, forwards, warrants, securities lending agreements, when issued, delayed delivery and forward commitment agreements, foreign currency spot and forward rate exchange contracts, forward rate agreements, synthetic agreements for foreign exchange, range forward contracts, break forward contracts, participating forward contracts, currency, interest rate or asset swaps, swaptions, collars, floors and caps, contracts for differences, convertible bonds and any foreign exchange or interest rate hedging and investment arrangements and such other instruments, whether exchanged traded or “over-the-counter” as are similar to or derived from any of the foregoing whether for the purpose of making a profit or avoiding a loss or managing a currency or interest rate exposure or any other exposure or for any other purpose. The use of such instruments will expose the Company to counterparty and derivative risks.

 

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For the purpose of providing margin or collateral in respect of transactions in techniques and instruments, the Company may transfer, mortgage, charge or encumber any assets or cash.

 

Our investments are subject to a number of risks. See “Item 1A. Risk Factors”.

 

Investment Process

 

The Advisor, with the support of StepStone Group under the Resource Sharing Agreement, and the Sub-Advisor intend to adhere to a disciplined, focused investment screening and selection process with an emphasis on fundamental analysis and due diligence in connection with investing the Company’s assets. The Advisors will also retain, in certain situations, external consultants, advisors and accountants to augment due diligence. The Advisors’ approach of working closely with lenders and issuers on transactions is expected to allow for a thorough due diligence process as well as providing the Advisors with the requisite time to complete each step in its screening, due diligence and monitoring process for the Company, which will typically include the below steps in connection with the Company’s Lending Strategy.

 

The Advisor’s Investment Committee

 

The Advisor carries out portfolio management through its Investment Committee (the “Investment Committee”). The Investment Committee comprises senior personnel of the StepStone Group. The committee functions include the consideration, and if appropriate, approval of proposed investments based on investment memorandum prepared by the investment teams within the Advisors, decisions on allocations to eligible funds, ongoing monitoring of the investments and incidents, among other things.

 

The Investment Committee review process is multi-step and iterative and occurs in parallel with the diligence of investments. Once the diligence process has begun, the investment team presents updates at twice-weekly Investment Committee meetings. The Investment Committee reviews all activity from the prior week, with a focus on detailed updates of ongoing situations and in-depth review of all new investment opportunities.

 

The ultimate results and findings of the investment analysis are compiled into an investment memorandum that is used as the basis to support the investment thesis and utilized by the Investment Committee for final investment review and approval.

 

In decision-making, the Investment Committee utilizes a consensus-driven approach.

 

See Item 5. Directors and Executive Officers.for more details regarding the Investment Committee.

 

The Investment Process Steps

 

The Advisor’s investment process for an investment opportunity spans one to two months, from the initial screen through final approval and funding. The process begins with the work of the investment team. The investment team are investment professionals in StepStone Group to whom the Advisor has access by virtue of the Resource Sharing Agreement.

 

 

 

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Sourcing and Initial Review

 

In order to source transactions, the Advisor primarily utilizes its significant access to transaction flow through more than 90 different co-investment relationships with Lending Sources. With respect to StepStone’s origination channels, the global presence of StepStone generates access to a substantial amount of opportunities with attractive investment characteristics. The broad network of Lending Sources includes private credit asset managers, origination platforms, private equity asset managers, financial intermediaries, and other parties.

 

The investment team examines information furnished by the Lending Source and, as applicable, the target company and external sources. The investment team determines whether the investment meets the Company’s basic investment criteria and offers an acceptable probability of attractive risk adjusted returns.

 

Only the most attractive opportunities are pursued further, meaning that many opportunities are declined by the investment team at this stage with respective communication to the Lending Source. For opportunities that make it into the next stage, a list of initial due diligence questions and a request for additional diligence materials are prepared.

 

Evaluation and Further Review

 

The investment team reviews additional diligence materials to answer initial due diligence questions identified in the Initial Review.

 

Due Diligence

 

Once the diligence process has begun, the investment team presents updates at twice-weekly Investment Committee meetings. The Investment Committee conducts a thorough and rigorous review of the opportunity with the investment team to ensure the potential investment fits the Company’s investment strategy. The investment team may examine some or all of the following deal attributes, along with other factors:

 

transaction dynamics such as deal rationale, use of proceeds, co-investment rationale;

 

borrower credit profile including credit metrics, size of the borrower, resiliency of business model, market position, industry fundamentals, and relative value assessment;

 

historical financial performance; including asset valuation, financial analysis, scenario analysis, future projections, growth assumptions, free cash flow generation, de-leveraging profile, key financial credit metrics, and comparable credit and equity analyses;

 

legal considerations including the strength of the credit structure and related documentation;

 

performance track record of the Lending Source who sourced the opportunity;

 

performance track record and experience of the private equity sponsor;

 

analysis of the structure and leverage of the transaction; and

 

analysis on how the particular investment fits into the overall investment strategy of the Company.

 

To enhance the analysis of potential investments, the investment team may review additional materials including but not limited to consulting and accounting reports, legal documents and other relevant portfolio company information. The investment team may also conduct reference calls with other general partners and industry participants. In addition, the Advisor may schedule meetings and/or calls with the private equity sponsor.

 

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Final Approval

 

Once all investment team questions are answered appropriately, the investment team seeks final Investment Committee approval. A majority approval of the Investment Committee is required to approve any initial or follow-on investment or disposition for the Company.

 

Monitoring

 

The Advisors will receive financial reports typically detailing operating performance, sales volumes, margins, cash flows, financial position and other key operating metrics on a quarterly basis from portfolio companies. The Advisors will use this data to conduct an ongoing assessment of the investment’s operating performance and prospects.

 

The Board has designated the Advisor as the Company’s valuation designee under Rule 2a-5 under the 1940 Act. Each quarter, the Advisor’s Valuation Committee will value investments of the Company, and such values will be disclosed each quarter in reports filed with the SEC. With respect to investments for which market quotations are not readily available, the Advisor’s Valuation Committee will determine the fair value of such investments in good faith, based on procedures adopted by and subject to the supervision of the Board.

 

We expect that the Advisor will determine the NAV of the Company for each class of Shares on a monthly basis as of the last day of each calendar month. When the Advisor determines the NAV as of the last day of a month that is not also the last day of a calendar quarter, the Advisor intends to update the value of securities with reliable market quotations to the most recent market quotation. With respect to investments for which market quotations are not readily available, the Advisor’s Valuation Committee will determine the fair value of such investments in good faith, based on the Advisor’s valuation policy and subject to the supervision of the Board. If the Advisor determines that a significant observable change with respect to one or more investments has occurred since the most recent quarter-end, the Advisor will determine whether to update the value for each relevant investment using a range of values from an independent valuation firm, where applicable, in accordance with the Advisor’s valuation policy, pursuant to authority designated by the Board. Additionally, the Advisor may otherwise determine to update the most recent quarter-end valuation of an investment without reliable market quotations that the Advisor considers to be material to the Company using a range of values from an independent valuation firm. 

 

The Advisors will regularly monitor the Company’s investments, including Underlying Funds, with regard to their adherence to investment strategy and style, their performance and their exposure to adverse market developments.

 

With respect to investments in Underlying Funds, the Advisors evaluate potential third-party investment managers, primary and secondary private funds, private and public BDCs or investment vehicles in the context of a third-party investment manager’s capabilities, and its opinion of the current and forward-looking market opportunity. The acquisition price is also considered in connection with secondaries. Screening criteria typically includes, but is not limited to, the capabilities and experience of an investment manager’s broader platform, investment team depth and perceived quality, proposed investment strategy, risk management approach, sourcing capabilities, historical track record, investment terms, market references, among other factors. The Advisors’ due diligence process also typically encompasses loan level quantitative analyses using its proprietary database to compare advisors and assess differences across various metrics (e.g., underlying loan performance, attribution, risk, etc.). The Advisors may also review a range of underlying transactions (case studies) to evaluate a Lending Source’s credit underwriting, deal flow quality, risk tolerance and restructuring capabilities among other factors. The Advisors may also review the operational aspects of potential investments including but not limited to financial sustainability, corporate governance, processes and documentation.

 

Allocation of Investment Opportunities

 

The Advisor, the Sub-Advisor and their respective affiliates will simultaneously provide investment advisory services to the Company and to other affiliated entities. Allocation decisions may arise when there is more demand from the Company and other StepStone clients for a particular investment opportunity than supply. The Advisor employs an allocation policy designed to ensure that all of its clients will be treated fairly and equitably over time. The Advisor’s Investment Committee has discretion to decrease or increase the allocation as appropriate for portfolio construction purposes.

 

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To mitigate these conflicts, the Advisor will seek to execute such transactions on a fair and equitable basis and in accordance with its allocation policies, taking into account various factors, which may include, without limitation: differences with respect to investment objectives and strategies; differences with respect to capital available for investment overall and specifically with respect to a specific investment strategy, geography, or other sub-sector; differences with respect to portfolio plans, including annual deployment plans; differences in the risk profile of the opportunity at the time it is available and evaluated; whether an affiliate has an existing investment in, or relationship to, the relevant investment (or the sponsor of such investment); minimum and maximum investment amounts; the source of the opportunity; tax, legal or regulatory considerations; warehousing arrangements; current and anticipated market conditions; and/or such other factors as may be relevant to a particular transaction.

 

As a BDC regulated under the 1940 Act, the Company is subject to certain limitations relating to co-investments and joint transactions with affiliates, which, in certain circumstances, likely may limit the Company’s ability to make investments or enter into other transactions alongside other clients. The Advisor intends to apply for an exemptive order from the SEC that will permit the Company, among other things, to co-invest with certain other persons, including certain affiliates of the Advisor and certain funds managed and controlled by the Advisor and its affiliates, subject to certain terms and conditions. There is no assurance that the co-investment exemptive order will be granted by the SEC. Pursuant to such order, the Board may establish objective criteria (“Board Criteria”) clearly defining co-investment opportunities in which the Company will have the opportunity to participate with other public or private StepStone funds that target similar assets. If an investment falls within the Board Criteria, the Advisor must offer an opportunity for the Company to participate. The Company may determine to participate or not to participate in a co-investment opportunity, depending on whether the Advisor determines that the investment is appropriate for the Company (e.g., based on investment strategy). The Advisor will allocate the co-investment in such proportions as the Advisor deems appropriate from time to time in accordance with its allocation policy under the 1940 Act. If the Advisor determines that such investment is not appropriate for the Company, the investment will not be allocated to us, but the Advisor will be required to report such investment and the rationale for its determination for us to not participate in the investment to the Board at the next quarterly board meeting.

 

Competition

 

Our primary competitors for investments include other BDCs and investment funds (including private equity funds, mezzanine funds and CLO funds). In addition, alternative investment vehicles, such as hedge funds, have begun to invest in areas in which they have not traditionally invested, including making investments in middle market private U.S. companies. We also compete with traditional financial services companies such as commercial banks. We believe we will be able to compete with these entities for financing opportunities on the basis of, among other things, the experience of the Advisor, the Sub-Advisor and their affiliates.

 

Many of our competitors are substantially larger and have considerably greater financial, technical and marketing resources than we do. For example, some competitors may have a lower cost of capital and access to funding sources that are not available to us. In addition, some of our competitors may have higher risk tolerances or different risk assessments than we have and may not be subject to the regulatory restrictions that the 1940 Act imposes on us as a BDC or the restrictions that the Code imposes on us as a RIC. These characteristics could allow our competitors to consider a wider variety of investments, establish more relationships and offer better pricing and more flexible structuring than us.

 

Management Agreements

 

Investment Advisory Agreement

 

The Advisor will provide management services to the Company pursuant to the Advisory Agreement. Under the terms of the Advisory Agreement, the Advisor is responsible, subject to the supervision of the Board and in accordance with the Company’s investment objectives, policies and restrictions, for managing the investment and reinvestment of the Company’s assets, continuously reviewing, supervising and administering the investment program of the Company, and determining in its discretion the securities to be purchased or sold and the portion of the Company’s assets to be held uninvested.

 

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Without limiting the generality of the foregoing, the Advisor is authorized, in its sole discretion, to:

 

perform due diligence on prospective portfolio companies and obtain and evaluate pertinent economic, financial, and other information affecting the economy generally and certain investment assets as such information relates to securities, loans or other financial instruments that are purchased for or considered for purchase by the Company;

 

make investment decisions for the Company (including the exercise or disposition of rights accompanying portfolio securities, loans or other financial instruments (such as tender offers, exchanges, amendments, consents, waivers or forbearances) and other attendant rights thereto);

 

determine the composition and allocation of the Company’s investment portfolio, the nature and timing of any changes therein and the manner of implementing such changes;

 

place purchase and sale orders for portfolio transactions on behalf of the Company;

 

manage otherwise uninvested cash assets of the Company;

 

manage the liquidity requirements of the Company;

 

identify, evaluate and negotiate the structure of the investments made by the Company;

 

arrange for the pricing of Company securities, loans or other financial instruments;

 

execute account documentation, agreements, contracts and other documents as may be requested by brokers, dealers, assignors, assignees, participants, counterparties and other persons in connection with the Advisor’s management of the assets of the Company (in such respect, the Advisor will act as the Company’s agent and attorney-in-fact);

 

employ professional portfolio managers and securities analysts who provide research services to the Company;

 

engage certain third-party professionals, consultants, experts or specialists in connection with the Advisor’s management of the assets of the Company (in such respect, the Advisor will act as the Company’s agent and attorney-in-fact);

 

arrange financings and borrowing facilities for the Company and make decisions with respect to the use by the Company of borrowing for leverage or other investment purposes (in such respect, the Advisor will act as the Company’s agent and attorney-in-fact);

 

provide the Company with such other investment advisory, research and related services as the Company may, from time to time, reasonably require for the investment of its funds; and

 

to the extent permitted under the 1940 Act and the Advisers Act, on the Company’s behalf, and in coordination with any sub-adviser and any administrator, provide significant managerial assistance to those portfolio companies to which the Company is required to provide such assistance under the 1940 Act, including utilizing appropriate personnel of the Advisor to, among other things, monitor the operations of the Company’s portfolio companies, participate in board and management meetings of portfolio companies, consult with and advise officers of portfolio companies and provide other organizational and financial consultation.

 

The Advisor has also entered into the Resource Sharing Agreement with StepStone Group, under which certain designated employees of StepStone Group will provide services, including investment advisory, portfolio management and other services, to the Advisor. The Resource Sharing Agreement (i) provides the Company with access to deal flow generated by StepStone Group in the ordinary course of its business; and (ii) provides the Advisor with access to StepStone Group’s investment professionals and non-investment employees. The Advisor is responsible for determining if the Company will participate in deal flow generated by StepStone Group. StepStone Group will also make available its premises, facilities and systems to the Advisor in order for the Advisor to conduct its daily operations. In return for personnel provided and services rendered under the Resource Sharing Agreement, the Advisor will pay StepStone Group on a cost-plus basis.

 

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Compensation of Advisor under the Advisory Agreement

 

Under the Advisory Agreement, the Company will pay the Advisor fees for investment management services consisting of a base management fee (the “Base Management Fee”) and an incentive fee (the “Incentive Fee”).

 

Any of the fees payable to the Advisor under the Advisory Agreement for any partial month or calendar quarter will be appropriately prorated. The Advisor may agree to temporarily or permanently waive, in whole or in part, the Base Management Fee and/or the Incentive Fee. Prior to the payment of any fee to the Advisor, the Company will obtain written instructions from the Advisor with respect to any waiver or deferral of any portion of such fees. Any portion of a deferred fee payable to the Advisor and not paid over to the Advisor with respect to any month, calendar quarter or year shall be deferred without interest and may be paid over in any such other month prior to the termination of Advisory Agreement, as the Advisor may determine upon written notice to the Company.

 

Base Management Fee

 

The Base Management Fee will be payable monthly in arrears at an annual rate of 1.00% of the value of Company’s net assets as of the beginning of the first calendar day of the applicable month, commencing with the first calendar day of the first full calendar month following the date of the Company’s election to be treated as a BDC under the 1940 Act. For purposes of the Advisory Agreement, “net assets” means the Company’s total assets less liabilities determined on a consolidated basis in accordance with accounting principles generally accepted in the United States (“GAAP”). All or any part of the Base Management Fee not taken as to any month will be deferred without interest and may be taken in such other month as the Advisor determines.

 

Incentive Fee

 

The Incentive Fee will consist of two components, an income-based incentive fee and a capital gains-based incentive fee, that are independent of each other, with the result that one component may be payable even if the other is not.

 

(1)Income-Based Incentive Fee. The first part of the Incentive Fee, referred to as the “Income Incentive Fee,” will be calculated and payable quarterly in arrears based on the Company’s “Pre-Incentive Fee Net Investment Income” for the immediately preceding quarter. The payment of the Income Incentive Fee will be subject to a quarterly hurdle rate, expressed as a rate of return on the value of the Company’s net assets at the end of the most recently completed calendar quarter, of 1.25% (5.0% annualized) (the “Hurdle Rate”), subject to a “catch up” feature (as described below).

 

For this purpose, “Pre-Incentive Fee Net Investment Income” means interest income, dividend income and any other income (including any other fees (other than fees for providing managerial assistance) such as commitment, origination, structuring, diligence and consulting fees or other fees that the Company (or its wholly-owned subsidiaries) receives from portfolio companies) accrued during the calendar quarter, minus the Company’s and its subsidiaries’ operating expenses for the quarter (including the Base Management Fee, expenses and fees paid to the Advisor under the Administration Agreement and any interest expense and dividends paid on any issued and outstanding preferred stock, but excluding the Incentive Fee and any shareholder servicing and/or distribution fees). Pre-Incentive Fee Net Investment Income includes, in the case of investments with a deferred interest feature (such as OID debt instruments with PIK interest and zero-coupon securities), accrued income that the Company has not yet received in cash. Pre-Incentive Fee Net Investment Income does not include any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation.

 

The calculation of the Income Incentive Fee for each quarter is as follows:

 

No Income Incentive Fee will be payable to the Advisor in any calendar quarter in which the Company’s Pre-Incentive Fee Net Investment Income does not exceed the Hurdle Rate;

 

100% of the dollar amount of the Company’s Pre-Incentive Fee Net Investment Income, if any, that exceeds the Hurdle Rate but is less than or equal to 1.3514% in any calendar quarter (5.4056% annualized) will be payable to the Advisor. This portion of the Company’s Income Incentive Fee that exceeds the Hurdle Rate but is less than or equal to 1.3514% is referred to as the “catch up” and is intended to provide the Advisor with an incentive fee of 7.5% on all of the Company’s Pre-Incentive Fee Net Investment Income when the Company’s Pre-Incentive Fee Net Investment Income reaches 1.3514% (5.4056% annualized) on net assets in any calendar quarter; and

 

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7.5% of the dollar amount of the Company’s Pre-Incentive Fee Net Investment Income, if any, that exceeds 1.3514% (5.4056% annualized) on net assets in any calendar quarter will be payable to the Advisor once the Hurdle Rate and catch-up have been achieved (7.5% of the Company’s Pre-Incentive Fee Net Investment Income thereafter will be allocated to the Advisor).

 

(2)Capital Gains-Based Incentive Fee. The second part of the Incentive Fee, referred to as the “Capital Gains-Based Incentive Fee,” will be an incentive fee on capital gains and will be determined and payable in arrears as of the end of each calendar year (or upon termination of the Advisory Agreement). This fee will equal 7.5% of the Company’s incentive fee capital gains, which will equal the Company’s realized capital gains on a cumulative basis from the effective date of the Advisory Agreement, calculated as of the end of the applicable period, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis from effective date of the Advisory Agreement, less the aggregate amount of any previously paid Capital Gains-Based Incentive Fee.

 

Each year, the fee paid for the Capital Gains-Based Incentive Fee is net of the aggregate amount of any previously paid Capital Gains-Based Incentive Fee for all prior periods. The Company will accrue, but will not pay, a Capital Gains-Based Incentive Fee with respect to unrealized appreciation because a Capital Gains-Based Incentive Fee would be owed to the Advisor if the Company were to sell the relevant investment and realize a capital gain.

 

The Board will monitor the mix and performance of the Company’s investments over time and seek to satisfy itself that the Advisor and the Sub-Advisor are acting in the Company’s interests and that the Company’s fee structure appropriately incentivizes the Advisor and Sub-Advisor to do so.

 

Payment of Expenses under the Advisory Agreement

 

Except as otherwise provided in the Advisory Agreement, the Administration Agreement or by law, or as otherwise agreed to in writing by the Advisor, the Advisor shall not be responsible for the Company’s expenses, and the Company assumes and shall pay or cause to be paid all of its expenses, including without limitation, all Company expenses set forth in this Registration Statement. To the extent the Advisor incurs any costs or performs any services which are an obligation of the Company, the Company shall promptly reimburse the Advisor for such costs and expenses unless otherwise agreed to by the Advisor. To the extent the services for which the Company is obligated to pay are performed by the Advisor, the Advisor shall be entitled to recover from the Company only to the extent of its costs for such services, as reasonably determined.

 

Certain Terms of the Advisory Agreement

 

The Advisory Agreement will remain in effect for an initial term of two years. Thereafter, the Advisory Agreement will continue automatically for successive one-year periods; provided that such continuance is specifically approved at least annually by: (i) the vote of the Board, or by the vote of a majority of the Company’s outstanding voting securities, as defined in the 1940 Act, and (ii) the vote of a majority of the Board members who are not “interested persons,” as defined in Section 2(a)(19) of the 1940 Act, of the Company (“Independent Directors”), in accordance with the requirements of the 1940 Act, or as otherwise permitted under Section 15 of the 1940 Act.

  

The Advisory Agreement may be terminated at any time, without the payment of any penalty, (i) by the Company upon 60 days’ prior written notice to the Advisor: (A) upon the vote of a majority of the outstanding voting securities (as defined in the 1940 Act) of the Company or (B) upon the vote of a majority of the Board; or (ii) by the Advisor upon not less than 120 days’ prior written notice to the Company. The Advisory Agreement will automatically terminate in the event of its “assignment” (as such term is defined for purposes of construing Section 15(a)(4) of the 1940 Act).

 

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The Advisory Agreement provides that, in the absence of (a) willful misfeasance, bad faith or gross negligence on the part of the Advisor in performance of its obligations and duties thereunder, (b) reckless disregard by the Advisor of its obligations and duties thereunder, or (c) a loss resulting from a breach of fiduciary duty with respect to the receipt of compensation for services (in which case any award of damages will be limited to the period and the amount set forth in Section 36(b)(3) of the 1940 Act, the Advisor will not be subject to any liability whatsoever to the Company, or to any shareholder of the Company for any error of judgment, mistake of law or any other act or omission in the course of, or connected with, rendering services under the Advisory Agreement including, without limitation, for any losses that may be sustained in connection with the purchase, holding, redemption or sale of any security on behalf of the Company. The Advisory Agreement also includes indemnification provisions in favor of the Advisor and its officers, directors, shareholders, partners, owners, members, managers, principals, employees and agents, or any person who controls, is controlled by or is under common control with, the Advisor, against all losses, claims, damages, liabilities, costs and expenses arising from any act or omission by reason of being or having been investment adviser to the Company, or in connection with the Company’s business, affairs or assets, or the past or present performance of services to the Company in accordance with the Advisory Agreement by the relevant indemnitee, except to the extent that the loss, claim, damage, liability, cost or expense has been finally determined to have been incurred or suffered by the indemnitee by reason of willful misfeasance, bad faith, gross negligence, or reckless disregard of the Advisor’s duties or obligations under the Advisory Agreement or otherwise as investment adviser to the Company.

 

Sub-Advisory Agreement

 

The Advisor has engaged SGEAIL to act as the Company’s Sub-Advisor to provide certain ongoing, non-discretionary investment advice and services to the Advisor in regard to the Advisor’s management of the Company, subject to the broad supervision of the Advisor and the Board. Under the Sub-Advisory Agreement, the Sub-Advisor is responsible for providing ongoing investment advice and services to the Advisor in respect of the Company’s investments, including, but not limited to:

 

providing investment recommendations in respect of the Company’s Underlying Funds Strategy;

 

providing allocation recommendations and deploying commitment and over-commitment models and strategies in respect of the Company’s Lending Strategy;

 

identifying and managing portfolio risk through tracking commitments, capital calls, distribution variations, and valuations, among other factors;

 

identifying investment opportunities resulting from fundamental financial analysis and initial due diligence performed on investments (actual or contemplated); and

 

tracking and monitoring the continuing operations, management, financial condition and other pertinent details and information and conducting ongoing due diligence as to Company allocations of assets in respect of the Company’s Underlying Funds Strategy.

 

The Sub-Advisory Agreement provides that the Sub-Advisor will receive a fee, payable by the Advisor, equal to (a) 20% of the Base Management Fee received by the Advisor each month pursuant to the Advisory Agreement, (b) 20% of the Income Incentive Fee received by the Advisor pursuant to the Advisory Agreement each quarter, and (c) 20% of the Capital-Gains Based Incentive Fee received by the Advisor pursuant to the Advisory Agreement each year, in each case, net of any waiver by the Advisor of any portion of the Base Management Fee, Income Incentive Fee or Capital Gains-Based Incentive Fee. The Sub-Advisor may agree to temporarily or permanently waive, in whole or in part, the fees due to it from the Advisor under the Sub-Advisory Agreement.

 

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Board Approval of the Advisory Agreement and Sub-Advisory Agreement

 

The Board, including a majority of our Directors who are not parties to the Advisory Agreement or Sub-Advisory Agreement or “interested persons” (as defined in the 1940 Act) of any such party, approved the Advisory Agreement and the Sub-Advisory Agreement on January 11, 2023 at an in-person meeting to be called for that purpose. In preparing for approval of the Advisory Agreement and the Sub-Advisory Agreement, the Board reviewed a significant amount of information and considered, among other things:

 

the nature, quality and extent of the advisory and other services to be provided to the Company by the Advisors;

 

the proposed investment advisory fee rates to be paid by the Company to the Advisor;

 

the fee structures of comparable externally managed BDCs that engage in similar investing activities;

 

our projected operating expenses and expense ratio compared to BDCs with similar investment objectives;

 

information about the services to be performed and the personnel who would be performing such services under the Advisory Agreement and under the Sub-Advisory Agreement; and

 

the organizational capability and financial condition of the Advisors and their affiliates.

 

Based on the information reviewed and considered, the Board concluded that the investment advisory fee rates are reasonable in relation to the services to be provided and approved the Advisory Agreement and the Sub-Advisory Agreement as being in the best interests of our shareholders.

 

Administration Agreement and Sub-Administration Agreement

 

The Advisor also serves as the Company’s administrator pursuant to the Administration Agreement and performs certain administrative, accounting and other services for the Company. In consideration of these administrative services, the Company pays the Advisor the Administration Fee in an amount up to 0.30% on an annualized basis of the Company’s net assets. The Administration Fee is calculated based on the Company’s month-end net asset value (as of the close of business on the last calendar day of the applicable month) and payable monthly in arrears. The Administration Fee is an expense paid out of the Company’s net assets.  The Advisor may delegate or sub-contract certain of its services under the Administration Agreement to other entities, including a sub-administrator, and has done so as described below.

 

SEI Investments Global Funds Services serves as the Company’s Sub-Administrator to provide certain outsourced administration and outsourced accounting services for the Company. In consideration of the outsourced administrative services and outsourced accounting services provided by the Sub-Administrator to the Company, the Advisor pays the Sub-Administration Fee to the Sub-Administrator from the proceeds of the Administration Fee. The Sub-Administration Fee is calculated based on the Company’s month-end net asset value and payable monthly in arrears.

 

Certain Terms of the Administration Agreement

 

The Administration Agreement will remain in effect for an initial two-year term and will continue from year to year thereafter so long as such continuation is approved at least annually by the vote of the Board. The Administration Agreement may be terminated by the Company at any time, without the payment of any penalty, by the Board on 90 days’ written notice to the Advisory, or by the Advisor at any time, without the payment of any penalty, on 90 days’ written notice to the Company.

 

The Administration Agreement provides that, in the absence of willful misfeasance, bad faith, gross negligence, or reckless disregard of the responsibilities, obligations or duties thereunder, neither the Advisor nor its shareholders, officers, directors, employees, agents or control persons shall be liable for any act or omission in connection with or arising out of any services rendered under the Administration Agreement.

 

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Payment of Expenses

 

The Advisor bears all of its own costs incurred in providing investment advisory services to the Company. As described below, however, the Company bears all other expenses related to its investment program. The Advisor provides or arranges for certain administrative services to be provided to the Company. Among those services are: providing office space, adequate personnel, and communications and other facilities necessary for administration of the Company, performing certain administrative functions to support the Company and its service providers, supporting the Board and providing it with information, providing accounting and legal services in support of the Company, compliance testing services (not including any compliance services performed by an outsourced CCO) analyzing the value of the Company’s assets, and reviewing and arranging for payment of the Company’s expenses and other support services. Such administrative services are included in the Administration Fee. In addition to the services above, the Advisor is responsible for overseeing the Sub-Administrator.

 

Expenses borne by the Company (and thus indirectly by shareholders) include:

 

  all expenses related to its investment program, including, but not limited to, expenses borne indirectly through the Company’s investments in the underlying assets, including any fees and expenses charged by the investment managers or general partners of the Underlying Funds (including management fees, performance or incentive fees and redemption or withdrawal fees, however titled or structured), all costs and expenses directly related to due diligence of portfolio transactions for the Company such as direct and indirect expenses associated with the Company’s investments (whether or not consummated), and enforcing the Company’s rights in respect of such investments, transfer taxes and premiums, taxes withheld on non-U.S. dividends, fees for data and software providers, research expenses, professional fees (including, without limitation, the fees and expenses of consultants, attorneys and experts) and, if applicable, brokerage commissions, origination or similar fees on investments sourced through Lending Sources or Underlying Funds, interest and commitment fees on loans and debit balances, borrowing charges on securities sold short, dividends on securities sold but not yet purchased and margin fees;

 

attorneys’ fees and disbursements associated with preparing and updating the Company’s registration statement on Form 10 and other regulatory filings, and with reviewing potential investments to be made and executing the Company’s investments;

 

attorneys’ fees and disbursements associated with preparing and filing exemptive applications with the SEC in respect of certain co-investment transactions and the ability of offer multiple classes of shares;

 

fees and disbursements of all accountants or auditors engaged by the Company, expenses related to the annual audit of the Company, expenses related to the unaudited financial statements of the Company and expenses related to the preparation, review, approval and filing of the Company’s tax information;

 

recordkeeping, custody and transfer agency fees and expenses;

 

the costs of errors and omissions/directors’ and officers’ liability insurance and a fidelity bond;

 

the Base Management Fee and the Administration Fee;

 

the Incentive Fee;

 

fees paid to third-party consultants or service providers relating to the Company’s establishment or operations and fees paid to third-party providers for due diligence and valuation services;

 

the costs of preparing and mailing reports and other communications, including proxy, tender offer correspondence, annual reports or similar materials, to shareholders;

 

fees of directors who are not “interested persons” and travel and administrative expenses of directors who are not “interested persons” relating to meetings of the Board and committees thereof;

 

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costs and charges related to electronic platforms through which investors may access, complete and submit subscription and other fund documents or otherwise facilitate activity with respect to their investment in the Company;

 

all costs and charges for equipment or services used in communicating information regarding the Company’s transactions among the Advisor and any custodian or other agent engaged by the Company;

 

any extraordinary expenses (as defined below), including indemnification expenses as provided for in the Company’s organizational documents;

 

the allocable portion of cost, including the rent and overhead, of our Chief Compliance Officer and their administrative support staff, including the costs of any outsourced third-party Chief Compliance Officer; and

 

other expenses not explicitly borne by the Advisor associated with the investment operations of the Company and its subsidiaries; and all reasonable costs and expenses incurred in connection with the formation and organization of, and offering and sale of Shares in, the Company, as determined by the Advisor, including all out-of-pocket legal, accounting, registration and filing fees and expenses will be borne by the Company. The Company will also bear certain administrative costs.

 

The Advisor will be reimbursed by the Company for any of the above expenses that it pays on behalf of the Company, except as otherwise provided above.

 

The Company’s investments in Underlying Funds bear various expenses in connection with their operations similar to those incurred by the Company. Investment managers of the Underlying Funds generally assess asset-based fees to, and receive incentive-based fees from, the Underlying Funds (or their investors), which effectively will reduce the investment returns of the Company’s investments. These expenses and fees will be in addition to those incurred by the Company itself. As an investor in the private assets, the Company will bear its proportionate share of their expenses and fees and will also be subject to incentive fees to the non-affiliated investment managers of the Underlying Funds.

 

The initial operating expenses for the Company, as a new fund, including start-up costs, which may be significant, may be higher than the expenses of an established fund. The Company is expected to incur O&O expenses (as defined below) of approximately $1.3 million in connection with the initial offering of Shares.

 

O&O Expenses” include all of the fees, costs, charges, expenses, liabilities and obligations incurred in relation to or in connection with the establishment of the Company, the marketing and offering of the Shares (including, among other things, legal, accounting, subscription processing and filing fees and expenses and other expenses pertaining to this offering), and the establishment, organization and creation of the operational structure of the Company and its special purpose vehicle subsidiaries, including travel, lodging, meals, entertainment, legal, accounting, regulatory compliance, fees of professional advisors, printing, postage, regulatory and tax filing fees, and other costs of establishment.

 

Expense Limitation and Reimbursement Agreement

 

The Company has entered into an Expense Limitation and Reimbursement Agreement (the “Expense Limitation Agreement”) with the Advisor for a one-year term beginning on the initial closing date for subscriptions for Shares and ending on the one-year anniversary thereof (the “Limitation Period”). The Advisor and the Company may extend the Limitation Period for a period of one year on an annual basis. Pursuant to the Expense Limitation Agreement, the Advisor has agreed that it will pay, absorb or reimburse the Company’s aggregate monthly Other Operating Expenses (as defined below) on the Company’s behalf (which, for the avoidance of doubt, may include any Other Operating Expenses incurred prior to the effective date of the Advisory Agreement) (each such payment, absorption or reimbursement, a “Required Expense Payment”), to ensure that the Company’s aggregate monthly Other Operating Expenses during the Limitation Period do not exceed 1.00%, on an annualized basis, of its month-end net assets (the “Expense Cap”). For any month in which the Company’s aggregate monthly Other Operating Expenses exceed the Expense Cap, the Advisor will make a Required Expense Payment to the extent necessary to eliminate such excess. The Advisor may also directly pay expenses on behalf of the Company and waive reimbursement under the Expense Limitation Agreement. For purposes of the Expense Limitation Agreement, “Other Operating Expenses” includes all of the Company’s operating expenses, including O&O Expenses, but excludes the “Specified Expenses” detailed below.

 

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Under the Expense Limitation Agreement, the Advisor may also elect to pay or reimburse certain additional fees and expenses of the Company on the Company’s behalf, including all or any portion of a Specified Expense (each such payment or reimbursement, a “Voluntary Expense Payment” and, together with a Required Expense Payment, the “Expense Payments”). However, no portion of a Voluntary Expense Payment will be used to pay any interest expense or shareholder servicing and/or distribution fees of the Company. When making a Voluntary Expense Payment, the Advisor will designate, as it deems necessary or advisable, what type of expense it is paying.

 

The Company has no obligation to reimburse or pay the Advisor for any Expense Payment unless the Company has received at least $100 million in gross proceeds from the sale of Shares (the “Offering Proceeds Threshold”), following which time, any Expense Payments will be subject to recoupment by the Advisor to the extent that such recoupment would not cause the Company to exceed the Expense Cap. Calculation of the Offering Proceeds Threshold excludes gross proceeds from Shares purchased by the Advisor and by the Company’s directors and officers.

 

The Expense Cap on Other Operating Expenses under the Expense Limitation Agreement excludes the following “Specified Expenses”: (i) the Base Management Fee; (ii) all fees and expenses charged by the non-affiliated investment managers of the Underlying Funds and other investments in which the Company invests (including management fees, performance or incentive fees and redemption or withdrawal fees, however titled or structured) (the “Acquired Fund Fees and Expenses”); (iii) the Incentive Fee; (iv) transactional costs, including legal costs and brokerage commissions, associated with the acquisition and disposition of the Company’s investments; (v) interest payments incurred on borrowings by the Company or its subsidiaries; (vi) fees and expenses incurred in connection with any credit facility obtained by the Company or any of its subsidiaries, including any expenses for acquiring ratings related to the credit facilities; (vii) distribution and shareholder servicing fees, as applicable; (viii) taxes; and (ix) extraordinary expenses resulting from events and transactions that are distinguished by their unusual nature and by the infrequency of their occurrence, including, without limitation, costs incurred in connection with any claim, litigation, arbitration, mediation, government investigation or similar proceeding, indemnification expenses, and expenses in connection with holding and/or soliciting proxies for all annual and other meetings of shareholders.

 

If the Company’s Other Operating Expenses for any month exceed the Expense Cap, the Advisor will waive its Base Management Fee, Incentive Fee and/or reimburse the Company for expenses to the extent necessary to eliminate such excess. To the extent that the Advisor makes an Expense Payment, it is permitted to recoup from the Company any such amounts for a period not to exceed three years from the month in which such fees and expenses were waived, reimbursed, or paid, even if such recoupment occurs after the termination of the Limitation Period. However, the Advisor may only recoup the waived fees, reimbursed expenses or directly paid expenses if (i) the waived fees, reimbursed expenses or directly paid expenses have fallen to a level below the Expense Cap and (ii) the reimbursement amount does not raise the level of waived fees, reimbursed expenses or directly paid expenses in the month the reimbursement is being made to a level that exceeds the Expense Cap applicable at that time.

 

Determination of Net Asset Value

 

We expect to determine our NAV for each class of Shares on a monthly basis as of the last day of each calendar month. The NAV per share for each class of Shares is determined by dividing the value of total assets attributable to the class minus liabilities attributable to the class by the total number of outstanding Shares in such class at the date as of which the determination is made.

 

The Advisor oversees the valuation of the Company’s investments on behalf of the Company. The Board has approved valuation procedures for the Company (the “Valuation Procedures”) and has designated the Advisor as the valuation designee pursuant to Rule 2a-5(b) under the 1940 Act. The Board has ultimate oversight responsibility for pricing the securities held in the Company’s portfolio. Pursuant to the Valuation Procedures, the Advisor’s Valuation Committee will value the Company’s investments at fair value unless market quotations are “readily available” as defined in the 1940 Act.

 

As a general matter, to value the Company’s investments, the Advisor will use current market values when readily available, and otherwise value the Company’s investments with fair value methodologies set forth in the Valuation Procedures.

 

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These fair value calculations will involve significant professional judgment by the Advisor in the application of both observable and unobservable attributes, and it is possible that the fair value determined for a security may differ materially from the value that could be realized upon the sale of the security. There is no single standard for determining fair value of an investment. Likewise, there can be no assurance that the Company will be able to purchase or sell an investment at the fair value price used to calculate the Company’s NAV. Rather, in determining the fair value of an investment for which there are no readily available market quotations, the Advisor may consider several factors, including the below depending on the type of security:

 

Publicly Traded Securities

 

For securities or investments that are quoted, traded or exchanged in an accessible, active market, the Advisor will value the asset by multiplying the number of securities held by the quoted market price as of the measurement (or reporting) date. The Advisor does not apply any liquidity or restriction discount regardless of ownership structure or the ability to control the sale of the asset.

 

Private Credit/Debt/Debt-Like Securities

 

In determining the estimated fair value of private credit/debt or debt-like securities for which there is no actively traded market, the Advisor’s estimate of fair value will consider such factors as the current market environment relative to that of the investment held, the tenor of maturity date of the investment, the operating performance of the issuer, the concern for maintaining any covenant levels embedded in the instrument, the ability of the issuer to call the security (and the associated redemption price) and the general overall credit quality of the security over the life of the investment.

 

The Advisor’s Valuation Committee will assign an internal credit rating on all private debt/credit and debt-like positions. The ratings are based on fundamental information available at the time of the Valuation Committee meeting and are used in conjunction with market inputs to create an estimate of fair value. Certain assets are considered for additional or alternative procedures for obtaining a fair value, which will include but are not limited to a review of market inputs and performance and other relevant information on comparable assets.

 

Defaulted private debt/credit positions are valued using a number of methods including the following: discounting the expected cash flows of the investment; valuing the net assets of the company; reviewing comparable precedent transactions involving similar companies; and using a performance multiple or market-based approach.

 

Private Fund or Limited Partnership (“LP”) Investments

 

For investments in private funds (each, a “Fund”) or Limited Partnerships (each, an “LP”), the Advisor will generally use the capital account value provided by the Fund/LP’s General Partner (“GP”) as the fair value estimate reported in the financial statements. The Advisor believes that the most logical starting point for the fair value of a Company investment is the GP reported value because the GP has access to full information on the underlying portfolio asset’s past performance and expectations of the future, ongoing access and interaction with the portfolio asset management, and the GP often has the ability to influence activities of the asset and the ultimate outcome for the investment.

 

If the Advisor does not receive sufficient or appropriate detail to determine fair value, the fair value will be estimated using available information, including (such as contributions and distributions) from the Fund, and also applying judgment based on how the market values similar companies.

 

Private Equity Investments

 

In the estimation of fair value for a private equity investments, including warrants, the Advisor will often mirror the valuation of the lead or managing sponsor of the private company investment. Similar to the rationale discussed above under “Private Fund or Limited Partnership (“LP”) Investments”, the lead sponsor managing the investment will typically have significantly more information about the financial performance of the company and can usually be influential in the company’s direction and the ultimate outcome of the investment performance. The Advisor will review the assumptions and judgments made by the lead sponsor in estimating fair value and make any adjustments deemed necessary to appropriately reflect fair value in the financial statements. If there is no sponsor involved in the security then the Advisor will complete its own estimation of fair value.

 

If there is no value provided by the lead sponsor or the Advisor believes there may be an adjustment necessary, the estimation of value for a private company can be derived using a number of methods including the following: discounting the expected cash flows of the investment; valuing the net assets of the company; reviewing comparable precedent transactions involving similar companies; and using a performance multiple or market-based approach.

 

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For securities of all investment types, if purchased less than 90 days before a valuation date, the Valuation Committee considers the purchase price, or cost, as an important indicator of fair value and may use that as the valuation of the investment.

 

The Advisor intends to engage third party valuation firms to provide an independent valuation range for a portion of the portfolio each quarter or as necessary. Where appropriate, the Advisor may use a price within the independent valuation range as the fair value for an investment.

 

As outlined below, the NAV calculation is available generally after the end of the applicable month. Changes in our monthly NAV will reflect factors including, but not limited to, accruals for net portfolio income, interest expense and unrealized/realized gains (losses) on assets, any applicable organization and offering costs and any expense reimbursements. When the Advisor determines NAV as of the last day of a month that is not also the last day of a calendar quarter, the Advisor intends to update the value of securities with reliable market quotations to the most recent market quotation. For securities without reliable market quotations, the Advisor will generally value such assets at the most recent quarterly valuation unless the Advisor determines that a significant observable change has occurred since the most recent quarter-end with respect to the investment (which determination may be as a result of a material event at a portfolio company, material change in market spreads, secondary market transaction in the securities of an investment or otherwise). If the Advisor determines such a change has occurred with respect to one or more investments, the Advisor will determine whether to update the value for each relevant investment, in accordance with the Valuation Procedures, pursuant to authority designated by the Board. Additionally, the Advisor may otherwise determine to update the most recent quarter-end valuation of an investment without reliable market quotations that the Advisor considers to be material to the Company using a range of values from an independent valuation firm.

 

We will report our NAV per share for each class of shares as of the last day of each month under cover of a Current Report on Form 8-K filed with the SEC in connection with this private offering, generally within 20 business days of the last day of each month. The most recently determined NAV per share for each class of shares will also be available via our password-protected investor relations website, once available.

 

Relationship between NAV and Our Transaction Price

 

Although the transaction price in the monthly closings for our Private Offering will generally be based on the NAV per Share as of the last calendar day of the applicable month, such NAV may be significantly different from the current NAV per Share as of the date on which your investment decision is made (or repurchase occurs).

 

In addition, we may offer Shares at a price that we believe reflects the NAV per share more appropriately than the prior month’s NAV per share (including by updating a previously disclosed offering price) or suspend our offering in exceptional cases where we believe there has been a material change (positive or negative) to our NAV per share since the end of the prior month due to the aggregate impact of factors such as general significant market events or disruptions or force majeure events. In cases where our transaction price is not based on the prior month’s NAV per share, the offering price will not equal our NAV per share as of any time.

 

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Limits on the Calculation of Our Per Share NAV

 

Although our primary goal in establishing our valuation guidelines is to produce a valuation that represents a reasonable estimate of the market value of our investments, or the price that would be received upon the sale of our investments in market transactions, the methodologies used will be based on judgments, assumptions and opinions about future events that may or may not prove to be correct, and if different judgments, assumptions or opinions were used, a different estimate would likely result. Furthermore, our published per share NAV may not fully reflect certain extraordinary events because we may not be able to immediately quantify the financial impact of such events on our portfolio. The Advisor will monitor our portfolio between valuations to determine whether there have been any extraordinary events that may have materially changed the estimated market value of the portfolio, such as significant market events or disruptions or force majeure events. If required by applicable securities law, we will promptly disclose the occurrence of such event under cover of a Current Report on Form 8-K or other public disclosure, and the Advisor will analyze the impact of such extraordinary event on our portfolio and determine the appropriate adjustment to be made to our NAV. We will not, however, retroactively adjust NAV. To the extent that the extraordinary events may result in a material change in value of a specific investment, the Advisor will order a new valuation of the investment. It is not known whether any resulting disparity will benefit shareholders whose shares are or are not being repurchased or purchasers of the Shares.

 

We include no discounts to our NAV for the illiquid nature of the Shares, including the limitations on your ability to sell Shares under our discretionary share repurchase program and our ability to suspend the share repurchase program at any time.

 

Our NAV generally does not consider exit costs that would likely be incurred if our assets and liabilities were liquidated or sold. While we may use market pricing concepts to value individual components of our NAV, our per share NAV is not derived from the market pricing information of BDCs or other closed-end investment companies on stock exchanges.

 

We do not represent, warrant or guarantee that:

 

a shareholder would be able to realize the NAV per share for the class of shares a shareholder owns if the shareholder attempts to sell its shares;

 

a shareholder would ultimately realize distributions per share equal to per share NAV upon a liquidation of our assets and settlement of our liabilities or upon any other liquidity event;

 

our Shares would trade at per share NAV on a national securities exchange;

 

a third party in an arm’s-length transaction would offer to purchase all or substantially all of our Shares at NAV; and

 

NAV would equate to a market price for a publicly traded BDC.

 

Non-Exchange Traded, Perpetual-Life BDC

 

We are a non-exchange traded, perpetual-life BDC, which is a BDC whose shares are not listed for trading on a stock exchange or other securities market. We use the term “perpetual-life BDC” to describe an investment vehicle of indefinite duration, whose shares are intended to be sold by the BDC monthly on a continuous basis at a price generally equal to the BDC’s monthly NAV per share. In our perpetual-life structure, we may offer investors an opportunity to repurchase their shares on a quarterly basis at NAV, but we are not obligated to offer to repurchase any Shares in any particular quarter. We believe that our perpetual nature enables us to execute a patient and opportunistic strategy and be able to invest across different market environments. This may reduce the risk of the Company being a forced seller of assets in market downturns compared to non-perpetual funds. While we may consider a Liquidity Event at any time in the future, we do not currently intend to undertake a Liquidity Event and will not be obligated by the Limited Liability Company Agreement or otherwise to effect a Liquidity Event at any time.

 

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Emerging Growth Company

 

We are an “emerging growth company,” as defined by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As an emerging growth company, we are eligible to take advantage of certain exemptions from various reporting and disclosure requirements that are applicable to public companies that are not emerging growth companies. For so long as we remain an emerging growth company, we will not be required to, among other things, have an auditor attestation report on our internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002, as amended (the “Sarbanes-Oxley Act”).

 

In addition, the JOBS Act provides that an emerging growth company may take advantage of an extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies. This means that an emerging growth company can delay adopting certain accounting standards until such standards are otherwise applicable to private companies.

 

We will remain an emerging growth company until the earliest of:

 

the last day of our fiscal year in which the fifth anniversary of the date of the first sale of our common equity securities pursuant to an effective registration statement occurs;

 

the end of the fiscal year in which our total annual gross revenues first equal or exceed $1.235 billion;

 

the date on which we have, during the prior three-year period, issued more than $1.0 billion in non-convertible debt; and

 

December 31 of the fiscal year in which we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act.

 

We do not believe that being an emerging growth company will have a significant impact on our business or the Private Offering. As stated above, we have elected to opt-in to the extended transition period for complying with new or revised accounting standards available to emerging growth companies. Also, because we are not a large accelerated filer or an accelerated filer under Section 12b-2 of the Exchange Act, and will not be for so long as the Shares are not traded on a securities exchange, we will not be subject to auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act even once we are no longer an emerging growth company. In addition, so long as we are externally managed by the Advisor and we do not directly compensate our executive officers, or reimburse the Advisor or its affiliates for the salaries, bonuses, benefits and severance payments for persons who also serve as one of our executive officers or as an executive officer of the Advisor, we do not expect to include disclosures relating to executive compensation in our periodic reports or proxy statements and, as a result, do not expect to be required to seek shareholder approval of executive compensation and golden parachute compensation arrangements pursuant to Section 14A(a) and (b) of the Exchange Act.

 

Employees

 

We do not currently have any employees and do not expect to have any employees. Each of our executive officers described under “Item 5. Directors and Executive Officersis a principal, officer or employee of the Advisor or its affiliates, which manages and oversees our investment operations. In the future, the Advisor may directly retain personnel based upon its needs.

 

Regulation as a BDC

 

We have elected to be regulated as a BDC under the 1940 Act and as a RIC under the Code. The 1940 Act contains prohibitions and restrictions relating to transactions between BDCs and their affiliates, principal underwriters and affiliates of those affiliates or underwriters, as described below. A BDC must be organized in the United States for the purpose of investing in or lending to primarily private companies and making significant managerial assistance available to them.

 

The 1940 Act also requires that a majority of our Board consist of persons other than “interested persons,” as that term is defined in the 1940 Act. In addition, the 1940 Act provides that we may not change the nature of our business so as to cease to be, or to withdraw our election as, a BDC unless approved by a majority of our outstanding voting securities. The 1940 Act defines “a majority of the outstanding voting securities” as the lesser of (i) 67% or more of the voting securities present at a meeting if the holders of more than 50% of our outstanding voting securities are present or represented by proxy or (ii) 50% of our outstanding voting securities.

 

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We will also generally not be able to issue and sell Shares at a price per share, after deducting underwriting commissions and discounts, that is below our NAV per share. We may, however, sell the Shares, or warrants, options or rights to acquire the Shares, at a price below the then-current NAV of the Shares if the Board determines that such sale is in our best interests and the best interests of our shareholders, and our shareholders approve such sale. In addition, we may generally issue new Shares at a price below NAV per share in rights offerings to existing shareholders, in payment of dividends and in certain other limited circumstances.

 

The following discussion is a general summary of the material prohibitions and descriptions governing BDCs generally. It does not purport to be a complete description of all of the laws and regulations affecting BDCs.

 

Qualifying Assets

 

Under the 1940 Act, a BDC may not acquire any asset other than assets of the type listed in Section 55(a) of the 1940 Act, which are referred to as “Qualifying Assets,” unless, at the time the acquisition is made, Qualifying Assets represent at least 70% of the company’s total assets. The principal categories of Qualifying Assets relevant to our business are any of the following:

 

(1)Securities purchased in transactions not involving any public offering from the issuer of such securities, which issuer (subject to certain limited exceptions) is an Eligible Portfolio Company (as defined below), or from any person who is, or has been during the preceding 13 months, an affiliated person of an Eligible Portfolio Company, or from any other person, subject to such rules as may be prescribed by the SEC. An “Eligible Portfolio Company” is defined in the 1940 Act as any issuer which:

 

(a)is organized under the laws of, and has its principal place of business in, the United States;

 

(b)is not an investment company (other than a small business investment company wholly owned by the BDC) or a company that would be an investment company but for certain exclusions under the 1940 Act; and

 

(c)satisfies any of the following:

 

(i)does not have any class of securities that is traded on a national securities exchange;

 

(ii)has a class of securities listed on a national securities exchange, but has an aggregate market value of outstanding voting and non-voting common equity of less than $250 million;

 

(iii)is controlled by a BDC or a group of companies including a BDC and the BDC has an affiliated person who is a director of the Eligible Portfolio Company; or

 

(iv)is a small and solvent company having total assets of not more than $4 million and capital and surplus of not less than $2 million.

 

(2)Securities of any Eligible Portfolio Company controlled by the Company.

 

(3)Securities purchased in a private transaction from a U.S. issuer that is not an investment company or from an affiliated person of the issuer, or in transactions incident thereto, if the issuer is in bankruptcy and subject to reorganization or if the issuer, immediately prior to the purchase of its securities was unable to meet its obligations as they came due without material assistance other than conventional lending or financing arrangements.

 

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(4)Securities of an Eligible Portfolio Company purchased from any person in a private transaction if there is no ready market for such securities and the Company already owns 60% of the outstanding equity of the Eligible Portfolio Company.

 

(5)Securities received in exchange for or distributed on or with respect to securities described in (1) through (4) above, or pursuant to the exercise of warrants or rights relating to such securities.

 

(6)Cash, cash equivalents, U.S. government securities or high-quality debt securities maturing in one year or less from the time of investment.

 

In addition, a BDC must be operated for the purpose of making investments in the types of securities described in (1), (2) or (3) above.

 

Significant Managerial Assistance

 

A BDC must have been organized and have its principal place of business in the United States and must be operated for the purpose of making investments in the types of securities described above. However, in order to count portfolio securities as Qualifying Assets for the purpose of the 70% test, the BDC must either control the issuer of the securities or must offer to make available to the issuer of the securities (other than small and solvent companies described above) significant managerial assistance; except that, where the BDC purchases such securities in conjunction with one or more other persons acting together, one of the other persons in the group may make available such managerial assistance. Making available significant managerial assistance means, among other things, any arrangement whereby the BDC, through its trustees, officers or employees, offers to provide and, if accepted, does so provide, significant guidance and counsel concerning the management, operations or business objectives and policies of a portfolio company through monitoring of portfolio company operations, selective participation in board and management meetings, consulting with and advising a portfolio company’s officers or other organizational or financial guidance.

 

Temporary Investments

 

Pending investment in other types of Qualifying Assets, as described above, our investments can consist of cash, cash equivalents, U.S. government securities or high-quality debt securities maturing in one year or less from the time of investment, which are referred to herein, collectively, as temporary investments, so that 70% of our assets would be Qualifying Assets.

 

Warrants

 

Under the 1940 Act, a BDC is subject to restrictions on the issuance, terms and amount of warrants, options or rights to purchase shares that it may have outstanding at any time. In particular, the amount of shares that would result from the conversion or exercise of all outstanding warrants, options or rights to purchase shares cannot exceed 25% of the BDC’s total outstanding shares.

 

Leverage and Senior Securities; Coverage Ratio

 

We are permitted, under specified conditions, to issue multiple classes of indebtedness and one class of shares senior to the Shares if our asset coverage, as defined in the 1940 Act, would at least equal 150% immediately after each such issuance. Our initial shareholder has approved the adoption of this 150% threshold pursuant to Section 61(a)(2) of the 1940 Act, and such election became effective on the first day immediately after the date of such approval. In addition, while any senior securities remain outstanding, we will be required to make provisions to prohibit any dividend distribution to our shareholders or the repurchase of such securities or shares unless we meet the applicable asset coverage ratios at the time of the dividend distribution or repurchase. We will also be permitted to borrow amounts up to 5% of the value of our total assets for temporary or emergency purposes, which borrowings would not be considered senior securities.

 

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We have entered into the MassMutual SPV I Facility and intend to establish one or more additional credit facilities and enter into other financing arrangements to facilitate investments and the timely payment of our expenses. Any such credit facilities will generally bear interest at floating rates at to be determined spreads over a specific reference rate. We cannot assure shareholders that we will be able to enter into a credit facility or otherwise obtain financing on favorable terms or at all. Shareholders will indirectly bear the costs associated with any borrowings under a credit facility or otherwise. In connection with a credit facility or other borrowings, lenders may require us to pledge assets and may ask to comply with positive or negative covenants that could have an effect on our operations. In addition, from time to time, our losses on leveraged investments may result in the liquidation of other investments held by us and may result in additional drawdowns to repay such amounts.

 

Under Rule 18f-4 under the 1940 Act, related to the use of derivatives, short sales, reverse repurchase agreements and certain other transactions by registered investment companies, we are permitted to enter into derivatives and other transactions that create future payment or delivery obligations, including short sales, notwithstanding the senior security provisions of the 1940 Act if we comply with certain value-at-risk leverage limits and derivatives risk management program and board oversight and reporting requirements or comply with a “limited derivatives users” exception. We expect to be a “limited derivatives user” under Rule 18f-4. To the extent we elect to qualify as a “limited derivatives user,” we are required to adopt and implement written policies and procedures reasonably designed to manage our derivatives risk and limit our derivatives exposure such that it does not exceed 10% of our net assets (with certain exclusions). Rule 18f-4 also permits us to enter into reverse repurchase agreements or similar financing transactions notwithstanding the senior security provisions of the 1940 Act if we aggregate the amount of indebtedness associated with our reverse repurchase agreements or similar financing transactions with the aggregate amount of any other senior securities representing indebtedness when calculating our asset coverage ratios as discussed above. In addition, we are permitted to invest in a security on a when-issued or forward-settling basis, or with a non-standard settlement cycle, and the transaction will be deemed not to involve a senior security under the 1940 Act, provided that (i) we intend to physically settle the transaction and (ii) the transaction will settle within 35 days of its trade date (the “Delayed-Settlement Securities Provision”). We may otherwise engage in such transactions that do not meet the conditions of the Delayed-Settlement Securities Provision so long as we treat any such transaction as a “derivatives transaction” for purposes of compliance with the rule. Furthermore, we are permitted to enter into an unfunded commitment agreement, and such unfunded commitment agreement will not be subject to the asset coverage requirements under the 1940 Act, if we reasonably believe, at the time we enter into such agreement, that we will have sufficient cash and cash equivalents to meet our obligations with respect to all such agreements as they come due. We cannot predict the effects of these requirements. The Advisor intends to monitor developments and seek to manage our assets in a manner consistent with achieving our investment objectives, but there can be no assurance that it will be successful in doing so.

 

We may enter into a total return swap agreement. A total return swap is a contract in which one party agrees to make periodic payments to another party based on the change in the market value of the assets underlying the total return swap, which may include a specified security, basket of securities or securities indices during a specified period, in return for periodic payments based on a fixed or variable interest rate. A total return swap effectively adds leverage to a portfolio by providing investment exposure to a security or market without owning or taking physical custody of such security or investing directly in such market. Because of the unique structure of a total return swap, it often offers lower financing costs than are offered through more traditional borrowing arrangements. The Company would typically have to post collateral to cover this potential obligation.

 

We may also create leverage by securitizing our assets (including in CLOs) and retaining the equity portion of the securitized vehicle. We may also from time to time make secured loans of our marginable securities to brokers, dealers and other financial institutions.

 

Code of Ethics

 

We and the Advisor have adopted a code of ethics pursuant to Rule 17j-1 under the 1940 Act and Rule 204A-1 under the Advisers Act, respectively, that establishes procedures for personal investments and restricts certain personal securities transactions. Personnel subject to the code are permitted to invest in securities for their personal investment accounts, including securities that may be purchased or held by us, so long as such investments are made in accordance with the code’s requirements.

 

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Affiliated Transactions

 

As a BDC, the Company may also be prohibited under the 1940 Act from knowingly participating in certain transactions with its affiliates, including the Company’s officers, directors, investment adviser, investment sub-adviser, principal underwriters and certain of their affiliates, without the prior approval of the members of board of directors who are not interested persons and, in some cases, prior approval by the SEC through an exemptive order (other than pursuant to current regulatory guidance). The Advisor intends to apply for an exemptive order from the SEC that will permit the Company, among other things, to co-invest with certain other persons, including certain affiliates of the Advisor and certain funds managed and controlled by the Advisor and its affiliates, subject to certain terms and conditions. There is no assurance that the co-investment exemptive order will be granted by the SEC. Pursuant to such order, the Board may establish Board Criteria clearly defining co-investment opportunities in which the Company will have the opportunity to participate with other public or private StepStone funds that target similar assets. If an investment falls within the Board Criteria, StepStone must offer an opportunity for the Company to participate. The Company may determine to participate or not to participate in a co-investment opportunity, depending on whether the Advisor determines that the investment is appropriate for the Company (e.g., based on investment strategy). The Advisor will allocate the co-investment in such proportions as the Advisor deems appropriate from time to time in accordance with its allocation policy under the 1940 Act. If the Advisor determines that such investment is not appropriate for the Company, the investment will not be allocated to us, but the Advisor will be required to report such investment and the rationale for its determination for us to not participate in the investment to the Board at the next quarterly board meeting.

 

Proxy Voting Policies and Procedures

 

We have delegated our proxy voting responsibility to the Advisor. The proxy voting policies and procedures of the Advisor are set forth below. The guidelines are reviewed periodically by the Advisor and our Independent Directors, and, accordingly, are subject to change.

 

As an investment adviser registered under the Advisers Act, the Advisor has a fiduciary duty to act solely in the best interests of its clients. As part of this duty, it recognizes that it must vote client securities in a timely manner free of conflicts of interest and in the best interests of its clients. These policies and procedures for voting proxies for the investment advisory clients of the Advisor are intended to comply with Section 206 of, and Rule 206(4)-6 promulgated under, the Advisers Act.

 

The Advisor will vote proxies relating to our securities in the best interest of its clients’ shareholders. It will review on a case-by-case basis each proposal submitted for a shareholder vote to determine its impact on the portfolio securities held by its clients. Although the Advisor will generally vote against proposals that may have a negative impact on its clients’ portfolio securities, it may vote for such a proposal if there exists compelling long-term reasons to do so.

 

The proxy voting decisions of the Advisor are made by the senior officers who are responsible for monitoring each of its clients’ investments. To ensure that its vote is not the product of a conflict of interest, it will require that: (a) anyone involved in the decision-making process disclose to its chief compliance officer any potential conflict that he or she is aware of and any contact that he or she has had with any interested party regarding a proxy vote; and (b) employees involved in the decision making process or vote administration are prohibited from revealing how the Advisor intends to vote on a proposal in order to reduce any attempted influence from interested parties.

 

You may obtain information, without charge, regarding how the Advisor voted proxies with respect to our portfolio securities by making a written request for proxy voting information to: Chief Compliance Officer, StepStone Private Credit Fund LLC, 450 Lexington Avenue, 31st Floor, New York, NY 10017 or by calling us collect at +1 (713) 515-4692.

 

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Sarbanes-Oxley Act of 2002

 

The Sarbanes-Oxley Act imposes a wide variety of regulatory requirements on publicly held companies and their insiders. Many of these requirements affect us. For example:

 

pursuant to Rule 13a-14 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer will be required to certify the accuracy of the financial statements contained in our periodic reports;

 

pursuant to Item 307 of Regulation S-K, our periodic reports will be required to disclose our conclusions about the effectiveness of our disclosure controls and procedures;

 

pursuant to Rule 13a-15 under the Exchange Act, our management will be required to prepare an annual report regarding its assessment of our internal control over financial reporting after we have been subject to the reporting requirements of the Exchange Act for a specified period of time and, starting from the date on which we cease to be an emerging growth company under the JOBS Act, must obtain an audit of the effectiveness of internal control over financial reporting performed by our independent registered public accounting firm should we become an accelerated filer; and

 

pursuant to Item 308 of Regulation S-K and Rule 13a-15 under the Exchange Act, our periodic reports must disclose whether there were significant changes in our internal control over financial reporting or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

 

The Sarbanes-Oxley Act requires us to review our then-current policies and procedures to determine whether we comply with the Sarbanes-Oxley Act and the regulations promulgated under such act. We continue to monitor our compliance with all regulations that are adopted under the Sarbanes-Oxley Act and will take actions necessary to ensure that we comply with that act.

 

Other

 

We will be periodically examined by the SEC for compliance with the 1940 Act and be subject to the periodic reporting and related requirements of the 1934 Act.

 

We are also required to provide and maintain a bond issued by a reputable fidelity insurance company to protect against larceny and embezzlement. Furthermore, as a BDC, we are prohibited from protecting any director or officer against any liability to our shareholders arising from willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such person’s office.

 

We are also required to designate a chief compliance officer and to adopt and implement written policies and procedures reasonably designed to prevent violation of the federal securities laws and to review these policies and procedures annually for their adequacy and the effectiveness of their implementation.

 

Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statement and amendments to those reports will be available to the public, free of charge, on the SEC’s public EDGAR website shortly after we file any such document electronically with, or furnish it to, the SEC.

 

Exclusion from Commodity Pool Operator Registration for the Advisor

 

Because the Company may utilize both over-the-counter and exchange traded instruments (including derivative instruments such as swaps, futures, options and forward agreements) some of which are classified as commodity interests, the Company would be considered a commodity pool under Commodity Futures Trading Commission (“CFTC”) regulations. The Advisor will file a notice to claim the exclusion from the definition of commodity pool operator available under CFTC Rule 4.5 with regard to the operation of the Company. The Advisor, therefore, will not be subject to registration and regulation as a commodity pool operator. CFTC Rule 4.5 imposes limits on using these derivatives other than for certain hedging purposes, whereby the use of derivatives not used solely for those hedging purposes is generally limited to situations where (i) the aggregate initial margin and premiums required to establish such positions does not exceed five percent of the liquidation value of the Company, after taking into account unrealized profits and unrealized losses on any such contracts it has entered into; or (ii) the aggregate net notional value of such derivatives does not exceed 100% of the liquidation value of the Company.

 

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Certain U.S. Federal Income Tax Considerations

 

The following discussion is a summary of some of the U.S. federal income tax considerations relevant to an investment in the Company as a shareholder, including U.S. federal income tax considerations relevant to a BDC. This summary does not purport to be a complete description of the income tax considerations applicable to such an investment. For example, we have not described certain considerations that may be relevant to certain types of holders subject to special treatment under U.S. federal income tax laws, including shareholders subject to the alternative minimum tax, tax-exempt organizations, insurance companies, dealers in securities, traders in securities that elect to mark-to-market their securities holdings, pension plans and trusts, persons that have a functional currency (as defined in Section 985 of the Code) other than the U.S. dollar and financial institutions. This summary assumes that investors hold Shares as capital assets (within the meaning of Section 1221 of the Code). It is based upon the Code, the regulations promulgated thereunder, published rulings of the IRS and court decisions, all as in effect on the date of this Registration Statement. All of the above authorities are subject to change (possibly retroactively) by legislative or administrative action, which could affect the continuing validity of this discussion. We have not sought and will not seek any ruling from the IRS regarding any offering of our securities. This summary does not discuss any aspects of U.S. estate or gift tax or foreign, state or local tax. It does not discuss the special treatment under U.S. federal income tax laws that could result if we invested in tax-exempt securities or certain other investment assets.

 

For purposes of this discussion, a “U.S. Holder” is a shareholder, in each case, that is, for U.S. federal income tax purposes: (a) an individual who is a citizen or resident of the United States; (b) a corporation created or organized in or under the laws of the United States, any state thereof or the District of Columbia; (c) an estate, the income of which is subject to U.S. federal income taxation regardless of its source or (d) a trust if a court within the United States can exercise primary supervision over its administration and certain other conditions are met. A “Non-U.S. Holder” is a shareholder who is not a U.S. Holder.

 

If a partnership (including an entity treated as a partnership for U.S. federal income tax purposes) holds shares in the Company, the tax treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership. A prospective investor that is a partner in a partnership that will hold shares in the Company should consult its tax advisors with respect to the purchase, ownership and disposition of an investment in the Company.

 

THIS SUMMARY DOES NOT DISCUSS ALL OF THE FEDERAL INCOME TAX CONSIDERATIONS THAT MAY BE RELEVANT TO A PARTICULAR INVESTOR OR TO INVESTORS SUBJECT TO SPECIAL TREATMENT AND DOES NOT CONSTITUTE LEGAL OR TAX ADVICE. ACCORDINGLY, PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISORS REGARDING THE SPECIFIC FEDERAL, STATE, LOCAL, ESTATE AND FOREIGN TAX CONSEQUENCES OF INVESTING IN THE COMPANY.

 

Taxation of RIC Operations Generally. The Company intends to qualify as a RIC for U.S. federal income tax purposes. As a RIC, the Company will generally be able to deduct qualifying distributions to its shareholders, so that it is subject to U.S. federal income taxation only in respect of earnings that it retains and does not distribute. In addition, certain distributions made to the Company’s shareholders may be eligible for look-through tax treatment determined by reference to the earnings from which the distribution is made.

 

In order to qualify as a RIC, the Company must, among other things,

 

(a)at all times during each taxable year maintain its election under the 1940 Act to be treated as a BDC;

 

(b)derive in each taxable year at least 90% of its gross income from dividends, interest, gains from the sale or other disposition of stock or securities and other specified categories of investment income; and

 

(c)diversify its holdings so that, subject to certain exceptions and cure periods, at the end of each quarter of its taxable year

 

(i)at least 50% of the value of its total assets is represented by cash and cash items, U.S. government securities, the securities of other RICs and “other securities,” provided that such “other securities” shall not include any amount of any one issuer, if its holdings of such issuer are greater in value than 5% of its total assets or greater than 10% of the outstanding voting securities of such issuer, and

 

(ii)no more than 25% of the value of its assets may be invested in securities of any one issuer, the securities of any two or more issuers that are controlled by the Company and are engaged in the same or similar or related trades or business (excluding U.S. government securities and securities of other RICs), or the securities of one or more “qualified publicly traded partnerships.”

 

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As a RIC, in any taxable year with respect to which the Company distributes (or is treated as distributing) at least 90% of its investment company taxable income (which includes, among other items, dividends, interest and the excess of any net short-term capital gains over net long-term capital losses and other taxable income other than any net capital gain reduced by deductible expenses), the Company generally will not be subject to U.S. federal income tax on its investment company taxable income and net capital gains that are distributed to shareholders. The Company will be subject to U.S. federal income tax at regular corporate rates on any net income or net capital gain not distributed (or deemed distributed) to it shareholders.

 

The Company will be subject to a nondeductible 4% excise tax unless it distributes in a timely manner during each calendar year an amount equal to the sum of:

 

(1)at least 98% of its ordinary income (not taking into account any capital gains or losses) for the calendar year;

 

(2)at least 98.2% of its capital gains in excess of its capital losses (adjusted for certain ordinary losses) for a one-year period generally ending on October 31 of the calendar year; and

 

(3)any undistributed amounts from previous years on which the Company paid no U.S. federal income tax.

 

The Company is generally expected to distribute substantially all of its earnings on a quarterly basis, though one or more of the considerations described below could result in the deferral of dividend distributions until the end of the fiscal year:

 

  (1) The Company may make investments that are subject to tax rules that require it to include amounts in income before cash corresponding to that income is received, or that defer or limit the Company’s ability to claim the benefit of deductions or losses. For example, if the Company holds securities issued with OID, such discount will be included in income in the taxable year of accrual and before any corresponding cash payments are received.

 

(2)In cases where the Company’s taxable income exceeds its available cash flow, the Company will need to fund distributions with the proceeds of sale of securities or with borrowed money, and will raise funds for this purpose opportunistically over the course of the year.

 

In certain circumstances (e.g., where the Company is required to recognize income before or without receiving cash representing such income), the Company may have difficulty making distributions in the amounts necessary to satisfy the requirements for maintaining RIC status and for avoiding income and excise taxes. Accordingly, the Company may have to sell investments at times it would not otherwise consider advantageous, raise additional debt or equity capital or reduce new investment originations to meet these distribution requirements. If the Company is not able to obtain cash from other sources, it may fail to qualify as a RIC and thereby be subject to corporate-level income tax.

 

Although the Company does not presently expect to do so, it will be authorized to borrow funds and to sell assets in order to satisfy distribution requirements. However, under the 1940 Act, it will not be permitted to make distributions to its shareholders while its debt obligations and other senior securities are outstanding unless certain “asset coverage” tests are met.

 

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Moreover, the Company’s ability to dispose of assets to meet distribution requirements may be limited by (1) the illiquid nature of its portfolio and/or (2) other requirements relating to its qualification as a RIC, including the diversification tests. If the Company disposes of assets in order to meet the annual distribution requirement or to avoid the excise tax, it may make such dispositions at times that, from an investment standpoint, are not advantageous.

 

Certain of the Company’s investment practices may be subject to special and complex U.S. federal income tax provisions that may, among other things: (i) disallow, suspend or otherwise limit the allowance of certain losses or deductions; (ii) convert lower taxed long- term capital gain into higher taxed short-term capital gain or ordinary income; (iii) convert an ordinary loss or a deduction into a capital loss (the deductibility of which is more limited); (iv) cause the Company to recognize income or gain without a corresponding receipt of cash; (v) adversely affect the time as to when a purchase or sale of securities is deemed to occur; (vi) adversely alter the characterization of certain complex financial transactions; and (vii) produce income that will not be qualifying income for purposes of the 90% gross income test described above.

 

Certain distributions reported by the Company as Section 163(j) interest dividends may be treated as interest income by shareholders for purposes of the tax rules applicable to interest expense limitations under Section 163(j) of the Code. Such treatment by the shareholder is generally subject to holding period requirements and other potential limitations, although the holding period requirements are generally not applicable to dividends declared by money market funds and certain other funds that declare dividends daily and pay such dividends on a monthly or more frequent basis. The amount that the Company is eligible to report as a Section 163(j) dividend for a tax year is generally limited to the excess of the Company’s business interest income over the sum of the Company’s (i) business interest expense and (ii) other deductions properly allocable to the Company’s business interest income.

 

A RIC is limited in its ability to deduct expenses in excess of its investment company taxable income. If our deductible expenses in a given taxable year exceed our investment company taxable income, we could incur a net operating loss for that taxable year. However, a RIC is not permitted to carry forward net operating losses to subsequent taxable years and such net operating losses do not pass through to its shareholders. In addition, deductible expenses can be used only to offset investment company taxable income, not net capital gain. A RIC cannot use any net capital losses (that is, the excess of realized capital losses over realized capital gains) to offset its investment company taxable income, but could carry forward such net capital losses, and use them to offset future capital gains, indefinitely. Due to these limits on deductibility of expenses and net capital losses, the Company could for tax purposes have aggregate taxable income for several taxable years that the Company is required to distribute and that is taxable to the shareholders even if such taxable income is greater than the net income the Company actually earns during those taxable years.

 

While the Company is expected to distribute any income and capital gains in the manner necessary to minimize imposition of the 4% excise tax, it may not be able to distribute amounts sufficient to avoid the imposition of the tax entirely. In that event, the Company will be liable for the tax only on the amount by which it does not meet the foregoing distribution requirement. Under certain circumstances, the Advisor may, in its sole discretion, determine that it is in the interests of the Company to retain rather than distribute some amount of income and capital gains, and accordingly cause the Company to bear the excise tax burden associated therewith.

 

If in any particular taxable year, the Company does not qualify as a RIC, all of the Company’s taxable income (including net capital gains) will be subject to tax at regular corporate rates without any deduction for distributions to shareholders, and distributions will be taxable to shareholders as ordinary dividends to the extent of the Company’s current and accumulated earnings and profits.

 

In the event the Company invests in foreign securities, it may be subject to withholding and other foreign taxes with respect to those securities. The Company is not expected to satisfy the requirement to pass through to shareholders their share of the foreign taxes paid by the Company.

 

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Taxation of U.S. Holders

 

Distributions from the Company’s investment company taxable income (consisting generally of net investment income, net short-term capital gain, and net gains from certain foreign currency transactions) generally will be taxable to U.S. Holders as ordinary income to the extent made out of the Company’s current or accumulated earnings and profits. Distributions generally will not be eligible for the dividends received deduction allowed to corporate shareholders. Distributions that the Company report as net capital gain distributions will be taxable to U.S. Holders as long-term capital gain regardless of how long such U.S. Holders have held their Shares. Distributions in excess of the Company’s current and accumulated earnings and profits first will reduce a U.S. Holder’s adjusted tax basis in such U.S. Holder’s Shares and, after the adjusted tax basis is reduced to zero, will constitute capital gains to such U.S. Holder.

 

Distributions declared by the Company in October, November, or December of any year and payable to shareholders of record on a specified date in such a month will be deemed to have been paid by the Company on December 31st of the previous calendar year if the distributions are paid during the following January. Accordingly, distributions received in January may be subject to taxation in the preceding year.

 

Although the Company intends to distribute any net long-term capital gains at least annually, it may in the future decide to retain some or all of its net long-term capital gains but designate the retained amount as a “deemed distribution.” In that case, among other consequences, the Company will pay corporate-level federal income tax on the retained amount, each U.S. Holder will be required to include its share of the deemed distribution in income as if it had been distributed to the U.S. Holder, and the U.S. Holder will be entitled to claim a credit equal to its allocable share of the tax paid on the deemed distribution by the Company. The amount of the deemed distribution net of such tax will be added to the U.S. Holder’s tax basis for their Shares or preferred stock. Since the Company expects to pay tax on any retained capital gains at its regular corporate capital gain tax rate, and since that rate is in excess of the maximum rate currently payable by non-corporate U.S. Holders on long-term capital gains, the amount of tax that non-corporate U.S. Holders will be treated as having paid and for which they will receive a credit will exceed the tax they owe on the retained net capital gains. Such excess generally may be claimed as a credit against the U.S. Holder’s other federal income tax obligations or may be refunded to the extent it exceeds a shareholder’s liability for federal income tax. A shareholder that is not subject to federal income tax or otherwise required to file a federal income tax return would be required to file a federal income tax return on the appropriate form to claim a refund for the taxes paid by the Company. To utilize the deemed distribution approach, the Company must provide written notice to its shareholders. The Company cannot treat any of its investment company taxable income as a “deemed distribution.”

 

If a U.S. Holder sells or exchanges its Shares, the holder will recognize gain or loss equal to the difference between its adjusted basis in the Shares sold and the amount received. Any such gain or loss will be treated as a capital gain or loss and will be long-term capital gain or loss if the Shares have been held for more than one year. Any loss recognized on a sale or exchange of Shares that were held for six months or less will be treated as long-term, rather than short-term, capital loss to the extent of any capital gain distributions previously received (or deemed to be received) thereon.

 

U.S. Holders who tender pursuant to the share repurchase program, all Shares held, or considered to be held, by them will be treated as having sold such Shares and generally will realize a capital gain or loss. If a U.S. Holder tenders fewer than all of its Shares or fewer than all Shares tendered are repurchased, such U.S. Holder may be treated as having received a taxable dividend upon the tender of such Shares. In such a case, there is a risk that non-tendering shareholders, and shareholders who tender some but not all of their Shares or fewer than all of whose Shares are repurchased, in each case whose percentage interests in us increase as a result of such tender, will be treated as having received a taxable distribution from the Company. The extent of such risk will vary depending upon the particular circumstances of the share repurchase program, and in particular whether such program is a single and isolated event or is part of a plan for periodically redeeming Shares.

 

The Company or the applicable withholding agent will be required to withhold U.S. federal income tax (“backup withholding”) currently at a rate of 24% from all taxable distributions to any non-corporate U.S. Holder (1) who fails to furnish the Company with a correct taxpayer identification number or a certificate that such shareholder is exempt from backup withholding or (2) with respect to whom the IRS notifies the Company that such shareholder has failed to properly report certain interest and dividend income to the IRS and to respond to notices to that effect. An individual’s taxpayer identification number is his or her social security number. Any amount withheld under backup withholding is allowed as a credit against the U.S. Holder’s U.S. federal income tax liability and may entitle such shareholder to a refund, provided that proper information is timely provided to the IRS.

 

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An additional 3.8% Medicare tax is imposed on certain net investment income (including ordinary dividends and capital gain distributions received from us and net gains from redemptions or other taxable dispositions of our Shares) of U.S. individuals, estates and trusts to the extent that such person’s “modified adjusted gross income” (in the case of an individual) or “adjusted gross income” (in the case of an estate or trust) exceed certain threshold amounts.

 

Limitations on Deductibility of Certain Losses and Expenses

 

If the Company is not treated as a “publicly offered regulated investment company” (within the meaning of Section 67 of the Code) for any calendar year, then a U.S. Holder that is an individual, estate or trust may be subject to limitations on miscellaneous itemized deductions in respect of its share of expenses that the Company incurs, to the extent that the expenses would have been subject to limitations if the holder had incurred them directly. For taxable years beginning before 2026, miscellaneous itemized deductions generally are not deductible by a U.S. Holder that is an individual, trust or estate. For taxable years beginning in 2026 or later, miscellaneous itemized deductions are deductible only to the extent that the aggregate of such U.S. Holder’s miscellaneous itemized deductions exceeds 2% of such U.S. Holder’s adjusted gross income for U.S. federal income tax purposes, are not deductible for purposes of determining a U.S. Holder’s liability for the U.S. federal alternative minimum tax and are subject to the overall limitation on itemized deductions under Section 68 of the Code. In this case, the Company would be required to report the relevant income and expenses, including the fees paid to the Advisor, on Form 1099-DIV, and affected holders will be required to take into account their allocable share of such income and expenses. There is no assurance that the Company will be treated as a “publicly offered regulated investment company” at any time or all times.

 

Tax-Exempt Investors

 

The direct conduct by a tax-exempt U.S. Holder of the activities that the Company is expected to conduct could give rise to UBTI. However, a BDC is a corporation for U.S. federal income tax purposes and its business activities generally will not be attributed to its shareholders for purposes of determining treatment under current law. Therefore, a tax-exempt U.S. Holder should not be subject to U.S. federal income taxation solely as a result of the holder’s ownership of the Shares and receipt of dividends that it pays. Moreover, under current law, if the Company incurs indebtedness, such indebtedness will not be attributed to its shareholders. Therefore, a tax-exempt U.S. Holder should not be treated as earning income from “debt-financed property” and dividends paid by the Company should not be treated as “unrelated debt-financed income” solely as a result of indebtedness that the Company incurs. Proposals periodically are made to change the treatment of “blocker” investment vehicles interposed between tax-exempt investors and non-qualifying investments. In the event that any such proposals were to be adopted and applied to BDCs, the treatment of dividends payable to tax-exempt investors could be adversely affected.

 

Non-U.S. Holders

 

Distributions of our “investment company taxable income” to Non-U.S. Holders (including interest income, net short-term capital gain or non-U.S.-source dividend and interest income, which generally would be free of withholding if paid to Non-U.S. Holders directly) generally will be subject to withholding of U.S. federal tax at a 30% rate (or lower rate provided by an applicable treaty) to the extent of our current and accumulated earnings and profits unless the distributions are effectively connected with a U.S. trade or business of the Non-U.S. shareholder, in which case the distributions will generally be subject to U.S. federal income tax at the rates applicable to U.S. persons. For a corporate Non-U.S. shareholder, distributions (both actual and deemed), and gains realized upon the sale of our Shares that are effectively connected with a U.S. trade or business could, under certain circumstances, be subject to an additional “branch profits tax” at a 30% rate (or at a lower rate if provided for by an applicable treaty). In each such case, we will not be required to withhold U.S. federal tax if the Non-U.S. Holder complies with applicable certification and disclosure requirements. Special certification requirements apply to a Non-U.S. Holder that is a foreign partnership or a foreign trust, and such entities are urged to consult their own tax advisors.

 

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Certain properly reported dividends are generally exempt from withholding of U.S. federal income tax where paid in respect of a RIC’s (i) “qualified net interest income” (generally, its U.S.-source interest income, other than certain contingent interest and interest from obligations of a corporation or partnership in which the RIC or the non-U.S. shareholder are at least a 10% shareholder, reduced by expenses that are allocable to such income) or (ii) “qualified short-term capital gains” (generally, the excess of the RIC’s net short-term capital gain, other than short-term capital gains recognized on the disposition of U.S. real property interests, over the RIC’s long-term capital loss), as well as if certain other requirements are satisfied. Nevertheless, no assurance can be given as to whether any of the Company’s distributions will be eligible for this exemption from withholding of U.S. federal income tax or, if eligible, will be reported as such by the Company. Furthermore, in the case of Shares held through an intermediary, the intermediary may have withheld U.S. federal income tax even if the Company reported the payment as an interest-related dividend or short-term capital gain dividend. Since the Shares are subject to significant transfer restrictions, and an investment in the Shares will generally be illiquid, non-U.S. shareholders whose distributions on the Shares are subject to withholding of U.S. federal income tax may not be able to transfer their Shares easily or quickly or at all.

 

A BDC is a corporation for U.S. federal income tax purposes. Under current law, a non-U.S. Holder will not be considered to be engaged in the conduct of a business in the United States solely by reason of its ownership in a BDC. Proposals periodically are made to change the treatment of “blocker” investment vehicles interposed between foreign investors and investments that would otherwise result in such investors being considered to be engaged in the conduct of a business in the United States. In the event that any such proposals were to be adopted and applied to BDCs, the treatment of dividends payable to foreign investors could be adversely affected.

 

Non-U.S. Holders generally are not subject to U.S. tax on capital gains realized on the sale of the Shares or on actual or deemed distributions of the Company’s net capital gains unless such gains are effectively connected with the conduct of a U.S. trade or business by the holder and, if an income tax treaty applies, are attributable to a permanent establishment in the United States, or the holder is present in the United States for 183 or more days during the taxable year; and the holder is a former citizen or resident of the United States.

 

Generally, gain realized by a Non-U.S. Holder with respect to a tender of its Shares will not be subject to U.S. federal income tax or to any U.S. tax withholding, provided that such gain is not effectively connected with a trade or business carried on in the United States by the Non-U.S. Holder. If a Non-U.S. Holder tenders fewer than all of its Shares or fewer than all Shares tendered are repurchased, such Non-U.S. Holder may be treated as having received a taxable dividend upon the tender of such Shares. Absent a statutory exemption (as discussed above), such dividend received by the Non-U.S. Holder will be subject to a U.S. withholding tax of 30% (or a lower rate provided by an applicable treaty).

 

FATCA Compliance

 

Pursuant to the Foreign Account Tax Compliance Act (“FATCA”), additional requirements will apply to Non-U.S. Holders that are considered for U.S. federal income tax purposes to be a foreign financial institution or non-financial foreign entity, as well as to Non-U.S. Holders that hold their Shares through such an institution or entity. In general, an exemption from U.S. withholding tax will be available only if the foreign financial institution has entered into an agreement with the U.S. government, or under certain intergovernmental agreements collects and provides to the U.S. tax authorities information about its accountholders (including certain investors in such institution) and if the non-financial foreign entity has provided the withholding agent with a certification identifying certain of its direct and indirect U.S. owners. Any U.S. taxes withheld pursuant to the aforementioned requirements from distributions paid to affected Non-U.S. Holders who are otherwise eligible for an exemption from, or reduction of, U.S. federal withholding taxes on such distributions may only be reclaimed by such Non-U.S. Holders by timely filing a U.S. tax return with the IRS to claim the benefit of such exemption or reduction.

 

An investment in Shares by a non-U.S. person could also be subject to U.S. federal estate tax. Non-U.S. Holders should consult their own tax advisors with respect to the U.S. federal income tax, U.S. federal estate tax, withholding tax and state, local and foreign tax consequences of acquiring, owning or disposing of the Shares.

 

Developments in the tax laws of the United States or other jurisdictions could have a material effect on the tax consequences to shareholder, to the Company, and/or the Company’s direct and indirect subsidiaries, and shareholders may be required to provide certain additional information to the Company (which may be provided to the IRS or other taxing authorities) and may be subject to other adverse consequences as a result of such change in tax laws. In the event of any such change in tax law, each shareholder is urged to consult its own advisors.

 

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Item 1A. Risk Factors.

 

Investing in the Shares involves a number of significant risks. The following information is a discussion of the material risk factors associated with an investment in the Shares specifically, as well as those factors generally associated with an investment in a company with investment objectives, investment policies, capital structure or markets similar to ours. In addition to the other information contained in this Registration Statement, you should consider carefully the following information before making an investment in the Shares. The risks below are not the only risks we face. Additional risks and uncertainties not presently known to us or not presently deemed material by us may also impair our operations and performance. If any of the following events occur our business, financial condition and results of operations could be materially and adversely affected. In such cases, the NAV of the Shares could decline, and you may lose all or part of your investment.

 

Risks Relating to the Company’s Business and Structure

 

The Company is a new company and has no operating history.

 

The Company will commence operations upon the first closing date of the Private Offering to third-party or non-affiliated investors and has no prior operating history. As a result, the Company has limited financial information on which you can evaluate an investment in the Company or the Company’s prior performance. The Company is subject to all of the business risks and uncertainties associated with any new business, including the risk that the Company will not achieve its investment objectives and that the value of your investment could decline substantially or your investment could become worthless.

 

The Company is dependent upon key personnel of the Advisor, the Sub-Advisor and StepStone Group for the Company’s future success. If the Advisor, the Sub-Advisor or StepStone Group were to lose any of its key personnel, the Company’s ability to achieve its investment objectives could be significantly harmed.

 

The Company depends on the diligence, skill and network of business contacts of the senior investment professionals of the Advisor, the Sub-Advisor and StepStone Group to achieve its investment objectives. The Advisor’s, the Sub-Advisor’s and StepStone Group’s team of investment professionals evaluates, negotiates, structures, closes and monitors the Company’s investments in accordance with the terms of the Advisory Agreement and the Sub-Advisory Agreement. The Company can offer no assurance, however, that the Advisor’s, the Sub-Advisor’s or StepStone Group’s investment professionals will continue to provide investment advice to the Company.

 

The Advisor (with the support of StepStone Group) and the Sub-Advisor (subject to the Advisor’s supervision under the Sub-Advisory Agreement) have primary responsibility for ongoing research, recommendations, and portfolio management regarding the Company’s investment portfolio. The loss of any of the individuals comprising the Investment Committee or other senior investment professionals of the Advisor or any other senior investment professionals of the Sub-Advisor may limit the Company’s ability to achieve its investment objectives and operate its business. This could have a material adverse effect on its financial condition, results of operations and cash flows.

 

The Company’s business model depends to a significant extent upon strong referral relationships. Any inability of the Advisor’s Investment Committee or other investment professionals at StepStone Group or the Sub-Advisor to maintain or develop these relationships, or the failure of these relationships to generate investment opportunities, could adversely affect the Company’s business.

 

The Company depends upon the Advisor’s Investment Committee and other investment professionals at StepStone Group, as well as upon the senior investment professionals at the Sub-Advisor, to maintain their relationships with Lending Sources, private equity sponsors, placement agents, investment banks, management groups and other financial institutions, and the Company will rely to a significant extent upon these relationships to provide it with potential investment opportunities. If the Advisor’s Investment Committee or such senior investment professionals fail to maintain such relationships, or to develop new relationships with other sources of investment opportunities, the Company will not be able to grow its investment portfolio. In addition, individuals with whom the Advisor’s Investment Committee such other senior investment professionals at the Advisor, Sub-Advisor and/or StepStone Group have relationships are not obligated to provide them with investment opportunities, and the Company can offer no assurance that these relationships will generate investment opportunities for the Company in the future.

 

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The Company’s financial condition, results of operations and cash flows will depend on its ability to manage its business effectively.

 

The Company’s ability to achieve its investment objectives will depend on its ability to manage its business and to grow its investments and earnings. This will depend, in turn, on the Advisor’s Investment Committee’s and the Sub-Advisor’s ability to identify, invest in and monitor portfolio companies that meet the Company’s investment criteria. The achievement of the Company’s investment objectives on a cost-effective basis will depend upon the Advisor’s and the Sub-Advisor’s execution of their investment process, their ability to provide competent, attentive and efficient services to the Company and the Company’s access to financing on acceptable terms. The Advisor, the Advisor’s Investment Committee, and the Sub-Advisor will have substantial responsibilities in connection with the management of other investment funds, accounts and investment vehicles. The Advisor may be called upon to provide managerial assistance to the Company’s portfolio companies. These activities may distract senior investment professionals from sourcing new investment opportunities for the Company or slow the Company’s rate of investment. Any failure to manage the Company’s business and its future growth effectively could have a material adverse effect on its business, financial condition, results of operations and cash flows.

 

There are significant potential conflicts of interest that could negatively affect the Company’s investment returns.

 

Personnel of the Advisor, the Sub-Advisor and StepStone Group, including members of the Advisor’s Investment Committee, serve, or may serve, as officers, directors, members, or principals of entities that operate in the same or a related line of business as the Company, or of investment funds, accounts, or investment vehicles managed by the Advisor or the Sub-Advisor. Similarly, the Advisor, the Sub-Advisor and their respective affiliates may have other clients with similar, different or competing investment objectives. In serving in these multiple capacities, they may have obligations to other clients or investors in those entities, the fulfillment of which may not be in the best interests of the Company or its shareholders.

 

In addition, there may be times when the Advisor, the Sub-Advisor, StepStone Group or their respective investment professionals, including the Advisor’s Investment Committee, have interests that differ from those of the Company’s shareholders, giving rise to a conflict of interest. Although the Advisor and the Sub-Advisor will endeavor to handle these investment and other decisions in a fair and equitable manner, the Company and its shareholders could be adversely affected by these decisions. Moreover, given the subjective nature of the investment and other decisions made by the Advisor on the Company’s behalf, the Company is unable to monitor these potential conflicts of interest between the Company and the Advisor and/or the Sub-Advisor; however, the Board, including its independent members, will review conflicts of interest in connection with its review of the performance of the Advisor and the Sub-Advisor. As a BDC, the Company may also be prohibited under the 1940 Act from knowingly participating in certain transactions with its affiliates, including the Company’s officers, directors, investment adviser and sub-adviser, principal underwriters and certain of their affiliates, without the prior approval of the members of board of directors who are not interested persons and, in some cases, prior approval by the SEC through an exemptive order (other than pursuant to current regulatory guidance).

 

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The Advisor’s Investment Committee, the Sub-Advisor and StepStone Group may, from time to time, possess material non-public information, limiting the Company’s investment discretion.

 

The Advisor’s Investment Committee and senior investment professionals at the Sub-Advisor and StepStone Group may serve as directors of, or in a similar capacity with, portfolio companies in which the Company invests, the securities of which are purchased or sold on the Company’s behalf. In the event that material nonpublic information is obtained with respect to such companies, or the Company become subject to trading restrictions under the internal trading policies of those companies or as a result of applicable law or regulations, the Company could be prohibited for a period of time from purchasing or selling the securities of such companies, and this prohibition may have an adverse effect on the Company.

 

The Company’s incentive fees may induce the Advisor to incur additional leverage.

 

Generally, the incentive fee payable by the Company to the Advisor may create an incentive for the Advisor to use the additional available leverage. For example, because the incentive fee on net investment income is calculated as a percentage of the Company’s net assets subject to a hurdle, having additional leverage available may encourage the Advisor to use leverage to increase the leveraged return on the Company’s investment portfolio. To the extent additional leverage is available at favorable rates, the Advisor could use leverage to increase the size of the Company’s investment portfolio to generate additional income, which may make it easier to meet the incentive fee hurdle.  In addition, an increase in interest rates would make it easier to meet or exceed the incentive fee hurdle rate and may result in a substantial increase of the amount of incentive fees payable to the Advisor with respect to Pre-Incentive Fee Net Investment Income. Because of the structure of the Incentive Fee, it is possible that the Company may pay an Incentive Fee in a calendar quarter in which it incurs an overall loss taking into account capital account losses. For example, if the Company receives Pre-Incentive Fee Net Investment Income in excess of the quarterly hurdle rate, the Company will pay the applicable incentive fee even if the Company has incurred a loss in that calendar quarter due to realized and unrealized capital losses.

 

The Board is charged with protecting the Company’s interests by monitoring how the Advisor addresses these and other conflicts of interests associated with its management services and compensation. While the Board is not expected to review or approve each investment decision, borrowing or incurrence of leverage, the Board’s independent members will periodically review the Advisor’s services and fees as well as its Investment Committee decisions and portfolio performance. In connection with these reviews, the Board’s independent members will consider whether the Company’s fees and expenses (including those related to leverage) remain appropriate.

 

The Company’s incentive fee may induce the Advisor to make speculative investments.

 

The Company pays the Advisor an incentive fee based, in part, upon net capital gains realized on the Company’s investments. Unlike that portion of the incentive fee based on income, there is no hurdle rate applicable to the portion of the incentive fee based on net capital gains. Additionally, under the incentive fee structure, the Advisor may benefit when capital gains are recognized and, because the Advisor will determine when to sell a holding, the Advisor will control the timing of the recognition of such capital gains. As a result, the Advisor may have a tendency to invest more capital in investments that are likely to result in capital gains as compared to income producing securities. Such a practice could result in the Company investing in more speculative securities than would otherwise be the case, which could result in higher investment losses, particularly during economic downturns.

 

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The Company operates in a highly competitive market for investment opportunities, which could reduce returns and result in losses.

 

A number of entities compete with the Company to make the types of investments that the Company makes. The Company competes with public and private funds, commercial and investment banks, commercial financing companies and, to the extent they provide an alternative form of financing, private equity and hedge funds. Many of the Company’s competitors are substantially larger and have considerably greater financial, technical and marketing resources than the Company. For example, the Company believes some of its competitors may have access to funding sources that are not available to it. In addition, some of its competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of investments and establish more relationships than the Company. Furthermore, many of the Company’s competitors are not subject to the regulatory restrictions that the 1940 Act imposes on it as a BDC or the source-of-income, asset diversification and distribution requirements it must satisfy to qualify and maintain its qualification as a RIC. The competitive pressures the Company faces may have a material adverse effect on its business, financial condition, results of operations and cash flows. As a result of this competition, the Company may not be able to take advantage of attractive investment opportunities from time to time, and the Company may not be able to identify and make investments that are consistent with its investment objectives.

 

With respect to the investments the Company makes, the Company does not seek to compete based primarily on the interest rates it offers, and the Company believes that some of its competitors may make loans with interest rates that are lower than the rates it offers. With respect to all investments, the Company may lose some investment opportunities if it does not match its competitors’ pricing, terms and structure. However, if the Company matches its competitors’ pricing, terms and structure, it may experience decreased net interest income, lower yields and increased risk of credit loss. The Company may also compete for investment opportunities with investment funds, accounts and investment vehicles managed by the Advisor, the Sub-Advisor or their respective affiliates. Although the Advisor will allocate opportunities in accordance with its policies and procedures, allocations to such investment funds, accounts and investment vehicles will reduce the amount and frequency of opportunities available to the Company and may not be in the best interests of the Company and its shareholders.

 

The Company will be subject to corporate-level income tax if it is unable to qualify and thereafter maintain its tax treatment as a RIC under Subchapter M of the Code.

 

To qualify and thereafter maintain its tax treatment as a RIC under Subchapter M of the Code, the Company must meet certain source-of-income, asset diversification and distribution requirements. The distribution requirement for a RIC is satisfied if the Company distributes at least 90% of its net ordinary income and net short-term capital gains in excess of net long-term capital losses, if any, to its shareholders on an annual basis. Because the Company has incurred debt, and expects to continue to incur debt, it will be subject to certain asset coverage ratio requirements under the 1940 Act and financial covenants under loan and credit agreements that could, under certain circumstances, restrict it from making distributions necessary to maintain its tax treatment as a RIC. If the Company is unable to obtain cash from other sources, it may fail to maintain its tax treatment as a RIC and, thus, may be subject to corporate-level income tax. To maintain its tax treatment as a RIC, the Company must also meet certain asset diversification requirements at the end of each calendar quarter. Failure to meet these tests may result in the Company having to dispose of certain investments quickly in order to prevent the loss of its tax treatment as a RIC. Because most of the Company’s investments will be in private or thinly-traded public companies, any such dispositions may be made at disadvantageous prices and may result in substantial losses. No certainty can be provided that the Company will satisfy the asset diversification requirements or the other requirements necessary to maintain its tax treatment as a RIC. If it fails to maintain its tax treatment as a RIC for any reason and become subject to corporate income tax, the resulting corporate income taxes could substantially reduce its net assets, the amount of income available for distributions to its shareholders and the amount of funds available for new investments.

 

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There may be potential adverse tax consequences for non-U.S. shareholders with respect to an investment in the Company in his, her or its jurisdiction of tax residence.

 

Depending on (1) the laws of such non-U.S. shareholder’s jurisdiction of tax residence, (2) how the Company is treated in such jurisdiction, and (3) the Company’s activities, an investment in the Company could result in such non-U.S. shareholder recognizing adverse tax consequences in its jurisdiction of tax residence, including with respect to any generally required or additional tax filings and/or additional disclosure required in such filings in relation to the treatment for tax purposes in the relevant jurisdiction of an interest in the Company and/or of distributions from the Company and any uncertainties arising in that respect (the Company not being established under the laws of the relevant jurisdiction), the possibility of taxable income significantly in excess of cash distributed to a non-U.S. shareholder, and possibly in excess of the Company’s actual economic income, the possibilities of losing deductions or the ability to utilize tax basis and of sums invested being returned in the form of taxable income or gains, and the possibility of being subject to tax at unfavorable tax rates. A non-U.S. shareholder could also be subject to restrictions on the use of its share of the Company’s deductions and losses in its jurisdiction of tax residence. Each prospective investor is urged to consult its own tax advisers with respect to the tax and tax filing consequences, if any, in its jurisdiction of tax residence of an investment in the Company, as well as any other jurisdiction in which such prospective investor is subject to taxation.

 

Legislative or regulatory tax changes could have any adverse impact on the Company and its shareholders.

 

At any time, the federal income tax laws governing RICs or the administrative interpretations of those laws or regulations may be amended. Any new laws, regulations or interpretations may take effect retroactively and could adversely affect the taxation of the Company or its shareholders. Therefore, changes in tax laws, regulations or administrative interpretations or any amendments thereto could diminish the value of an investment in the Shares or the value or the resale potential of the Company’s investments.

 

The Company may have difficulty paying its required distributions if it recognizes income before, or without, receiving cash representing such income.

 

For U.S. federal income tax purposes, the Company will include in income certain amounts that it has not yet received in cash, such as the accrual of OID. This may arise if the Company receives warrants in connection with the making of a loan and in other circumstances, or through contracted PIK interest, which represents contractual interest added to the loan balance and due at the end of the loan term. Such OID, which could be significant relative to its overall investment activities and increases in loan balances as a result of contracted PIK arrangements are included in income before it receives any corresponding cash payments. The Company also may be required to include in income certain other amounts that it will not receive in cash.

 

Since in certain cases the Company may recognize income before or without receiving cash representing such income, the Company may have difficulty meeting the requirement to distribute at least 90% of its net ordinary income and net short-term capital gains in excess of net long-term capital losses, if any, to qualify and thereafter maintain its tax treatment as a RIC. In such a case, the Company may have to sell some of its investments at times it would not consider advantageous or raise additional debt or equity capital or reduce new investment originations to meet these distribution requirements. If the Company is not able to obtain such cash from other sources, it may fail to qualify and thereafter maintain its tax treatment as a RIC and thus be subject to corporate-level income tax.

 

Investments with certain deferred interest features will increase the amount of base management fees and incentive fees payable by the Company to the Advisor.

 

Certain of the Company’s debt investments will contain provisions providing for a PIK interest payment and/or OID. Because PIK interest results in an increase in the size of the loan balance of the underlying loan, the receipt by the Company of PIK interest will have the effect of increasing its assets under management. As a result, because the base management fee that the Company will pay to the Advisor is based on the value of the Company’s net assets, the receipt by the Company of PIK interest will result in an increase in the amount of the base management fee payable by the Company. In addition, any such increase in a loan balance due to the receipt of PIK interest will cause such loan to accrue interest on the higher loan balance, which will result in an increase in the Company’s pre-incentive fee net investment income and, as a result, an increase in incentive fees that are payable by the Company to the Advisor.

 

In addition, under these types of investments, we accrue interest during the life of the loan on the PIK interest payment and/or OID but do not receive the cash income from the investment until the end of the term. However, our pre-incentive fee net investment income, which is used to calculate the income portion of our incentive fee, includes accrued interest. Thus, a portion of this incentive fee is based on income that we have not yet received in cash, such as a PIK interest payment and/or OID, which creates the risk of non-refundable cash payments to the Advisor based on noncash accruals that may never be realized.

 

There are certain risks associated with the inclusion of non-cash income in taxable and accounting income prior to receipt of cash.

 

To the extent we make investments that produce income that is not matched by a corresponding cash receipt by us, such as OID instruments, which may arise, for example, if we receive warrants in connection with the making of a loan, or PIK interest representing contractual interest added to the loan principal balance and due at the end of the loan term, investors will be exposed to the risks associated with the inclusion of such non-cash income in taxable and accounting income prior to receipt of cash, including the following:

 

The interest payments deferred on a PIK loan are subject to the risk that the borrower may default when the deferred payments are due in cash at the maturity of the loan;

 

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The interest rates on PIK loans are higher to reflect the time-value of money on deferred interest payments and the higher credit risk of borrowers who may need to defer interest payments;

 

PIK instruments may have unreliable valuations because the accruals require judgments about ultimate collectability of the deferred payments and the value of the associated collateral;

 

Market prices of OID instruments are more volatile because they are affected to a greater extent by interest rate changes than instruments that pay interest periodically in cash;

 

The deferral of interest on a PIK loan increases its loan-to-value ratio, which is a measure of the riskiness of a loan;

 

We will be required under the tax laws to make distributions of OID income to shareholders without receiving any cash. Such required cash distributions may have to be paid from offering proceeds or the sale of assets without investors being given any notice of this fact; and

 

The required recognition of OID, including PIK, interest for U.S. federal income tax purposes may have a negative impact on our available cash, because it represents a non-cash component of the Company’s taxable income that must, nevertheless, be distributed in cash to investors to avoid it being subject to corporate level taxation.

 

Regulations governing the Company’s operation as a BDC will affect its ability to, and the way in which it, raises additional capital. As a BDC, the necessity of raising additional capital may expose the Company to risks, including the typical risks associated with leverage.

 

The Company may issue debt securities or preferred stock and/or borrow money from banks or other financial institutions, which the Company refers to collectively as “senior securities,” up to the maximum amount permitted by the 1940 Act. Under the provisions of the 1940 Act, the Company is permitted as a BDC that has satisfied certain requirements to issue senior securities in amounts such that its asset coverage ratio, as defined in the 1940 Act, equals at least 150% of its gross assets less all liabilities and indebtedness not represented by senior securities, after each issuance of senior securities. If the value of the Company’s assets declines, it may be unable to satisfy this test. If that happens, the Company would not be able to borrow additional funds until it was able to comply with the 150% asset coverage ratio applicable to it under the 1940 Act. Also, any amounts that the Company uses to service its indebtedness would not be available for distributions to its shareholders. If the Company issues senior securities, it will be exposed to typical risks associated with leverage, including an increased risk of loss.

 

Because the Company has financed, and expects to continue to finance, its investments with borrowed money, the potential for gain or loss on amounts invested in the Company is magnified and may increase the risk of investing in the Company.

 

The use of leverage magnifies the potential for gain or loss on amounts invested. The use of leverage is generally considered a speculative investment technique and increases the risks associated with investing in the Shares. To the extent that the Company or its subsidiaries use leverage to partially finance investments through banks, insurance companies and other lenders, investors will experience increased risks of investing in the Shares. Lenders of these funds will have a fixed dollar claims on the Company’s assets that would be superior to the claims of the Company’s shareholders, and the Company would expect such lenders to seek recovery against its assets in the event of a default.

 

In addition, under the terms of the MassMutual SPV I Facility and any other borrowing facility or other debt instrument that the Company may enter into, the Company will be required to use the net proceeds of any investments that it sells to repay a portion of the amount borrowed under such facility or instrument before applying such net proceeds to any other uses. If the value of the Company’s assets decreases, leveraging would cause net asset value to decline more sharply than it otherwise would have had the Company not leveraged, thereby magnifying losses or eliminating its stake in a leveraged investment. Similarly, any decrease in the Company’s revenue or income will cause its net income to decline more sharply than it would have had it not borrowed. Such a decline would also negatively affect its ability to make distributions with respect to the Shares. The Company’s ability to service any debt depends largely on its financial performance and is subject to prevailing economic conditions and competitive pressures. In addition, the Company’s shareholders will bear the burden of any increase in its expenses as a result of its use of leverage, including interest expenses.

 

The Company is generally required to meet a coverage ratio of total assets to total borrowings and other senior securities, which include all of its borrowings and any preferred stock that it may issue in the future, of at least 150%. If this ratio declines below 150%, the Company will not be able to incur additional debt until it is able to comply with the 150% asset coverage ratio applicable to it under the 1940 Act. This could have a material adverse effect on its operations, and the Company may not be able to make distributions. The amount of leverage that the Company employs will depend on the Advisor’s and the Board’s assessment of market and other factors at the time of any proposed borrowing. The Company cannot assure investors that it will be able to obtain credit at all or on terms acceptable to it.

 

In addition, the Company’s current and future debt facilities impose or will likely impose financial and operating covenants that restrict its business activities, including limitations that hinder its ability to finance additional loans and investments or to make the distributions required to qualify and maintain its qualification as a RIC under the Code.

 

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Substantially all of the Company’s assets may be required to be subject to security interests under debt financing arrangements and, if the Company defaults on its obligations thereunder, the Company may suffer adverse consequences, including foreclosure on its assets.

 

Substantially all of the Company’s assets, including assets held by any of its SPV subsidiaries, may be required to be pledged as collateral under the Company’s financing arrangements. If the Company defaults on its obligations under such financing arrangements, the lenders may have the right to foreclose upon and sell, or otherwise transfer, the collateral subject to their security interests. In such event, the Company may be forced to sell its investments to raise funds to repay its outstanding borrowings to avoid foreclosure and these forced sales may be at times and at prices the Company would not consider advantageous. Moreover, such deleveraging of the Company could significantly impair its ability to effectively operate its business as previously planned. As a result, the Company could be forced to curtail or cease new investment activities and lower or eliminate the dividends paid to its shareholders.

 

Because the Company uses debt to finance its investments and may in the future incur additional borrowings or issue additional senior securities, including preferred stock and debt securities, if market interest rates increase, its cost of capital could increase, which could reduce its net investment income.

 

Because the Company borrows money to make investments and may in the future incur additional borrowings or issue additional senior securities including preferred stock and debt securities, its net investment income will depend, in part, upon the difference between the rate at which it borrows funds and the rate at which it invests those funds. As a result, the Company can offer no assurance that a significant change in market interest rates would not have a material adverse effect on its net investment income. In periods of rising interest rates, the Company’s cost of funds would increase, which could reduce its net investment income. The Company may use interest rate risk management techniques in an effort to limit its exposure to interest rate fluctuations. The Company may utilize instruments such as forward contracts, currency options and interest rate swaps, caps, collars and floors to seek to hedge against fluctuations in the relative values of its portfolio positions from changes in currency exchange rates and market interest rates to the extent permitted by the 1940 Act.

 

Provisions of the Company’s borrowing facilities may limit the Company’s discretion in operating its business.

 

The Company’s secured borrowing facilities are and will be backed by all or a portion of the Company’s or its respective SPV subsidiaries’ loans and securities on which the lenders have a security interest. The Company or its SPV subsidiaries may pledge up to 100% of their respective assets and may grant a security interest in all of such assets under the terms of any debt instrument entered into with lenders. Any such security interests will be set forth in a guarantee and security agreement or similar agreement and evidenced by the filing of financing statements by the agent for the lenders. In addition, the custodian for its securities serving as collateral for such loans will generally include in its electronic systems notices indicating the existence of such security interests and, following notice of occurrence of an event of default, if any, and during its continuance, will only accept transfer instructions with respect to any such securities from the lender or its designee. If the Company or its SPV subsidiaries were to default under the terms of any debt instrument, the agent for the applicable lenders would generally be able to assume control of the timing of disposition of any or all of the assets securing such debt, which would have a material adverse effect on its business, financial condition, results of operations and cash flows.

 

In addition, any security interests as well as negative covenants under any borrowing facility may limit the Company’s ability to incur additional liens or debt and may make it difficult for it to restructure or refinance indebtedness at or prior to maturity or obtain additional debt or equity financing.

 

In addition, under any borrowing facility, the Company or its SPV subsidiaries will be subject to limitations as to how borrowed funds may be used, which may include restrictions on geographic and industry concentrations, loan size, payment frequency and status, average life, collateral interests and investment ratings, as well as regulatory restrictions on leverage which may affect the amount of funding that may be obtained. There may also be certain requirements relating to portfolio performance, including required minimum portfolio yield and limitations on delinquencies and charge-offs, a violation of which could limit further advances and, in some cases, result in an event of default. Furthermore, the Company expects that the terms of its financing arrangements may contain a covenant requiring it to qualify and thereafter maintain compliance with RIC provisions at all times, subject to certain remedial provisions. Thus, a failure to maintain compliance with RIC provisions could result in an event of default under the financing arrangement. An event of default under any borrowing facility could result in an accelerated maturity date for all amounts outstanding thereunder and result in a cross-default under the Company’s other financing arrangements, any of which could have a material adverse effect on the Company’s business and financial condition. This could reduce the Company’s revenues and, by delaying any cash payment allowed to it under any borrowing facility until the lenders have been paid in full, reduce the Company’s liquidity and cash flow and impair its ability to grow its business and maintain its qualification as a RIC.

 

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The Company may in the future determine to fund a portion of its investments with preferred stock, which would magnify the potential for gain or loss and the risks of investing in the Company in the same way as borrowings.

 

Preferred stock, which is another form of leverage, has the same risks to the Company’s shareholders as borrowings because the dividends on any preferred stock the Company issues issue must be cumulative. Payment of such dividends and repayment of the liquidation preference of such preferred stock must take preference over any dividends or other payments to our common shareholders, and preferred shareholders are not subject to any of the Company’s expenses or losses and are not entitled to participate in any income or appreciation in excess of their stated preference.

 

Adverse developments in the credit markets may impair the Company’s ability to enter into any other future borrowing facility or to restructure or refinance indebtedness at or prior to maturity or obtain additional debt financing.

 

In past economic downturns, such as the financial crisis in the United States that began in mid-2007 and during other times of extreme market volatility, many commercial banks and other financial institutions stopped lending or significantly curtailed their lending activity. In addition, in an effort to stem losses and reduce their exposure to segments of the economy deemed to be high risk, some financial institutions limited routine refinancing and loan modification transactions and even reviewed the terms of existing facilities to identify bases for accelerating the maturity of existing lending facilities. If these conditions recur, for example as a result of the COVID-19 pandemic, it may be difficult for the Company to obtain desired financing to finance the growth of its investments on acceptable economic terms, or at all.

 

If the Company is unable to consummate credit facilities on commercially reasonable terms or to restructure or refinance indebtedness at or prior to maturity, its liquidity may be reduced significantly. If the Company is unable to repay amounts outstanding under any facility it may enter into and is declared in default or is unable to renew or refinance any such facility, it would limit the Company’s ability to initiate significant originations, make investments or to otherwise operate its business in the normal course. These situations may arise due to circumstances that the Company may be unable to control, such as inaccessibility of the credit markets, a severe decline in the value of the U.S. dollar, a further economic downturn or an operational problem that affects third parties or the Company and could materially damage its business. Moreover, the Company is unable to predict when economic and market conditions may become more favorable. Even if such conditions improve broadly and significantly over the long term, adverse conditions in particular sectors of the financial markets could adversely impact the Company’s business.

 

As required by the 1940 Act, a significant portion of our investment portfolio is and will be recorded at fair value as determined in good faith and, as a result, there is and will be uncertainty as to the value of our portfolio investments.

 

Under the 1940 Act, we are required to carry our portfolio investments at market value or, if there is no readily available market value, at fair value as determined pursuant to policies adopted by, and subject to the oversight of, our Board. There is not a public market for the securities of the privately held companies in which we invest. Most of our investments will not be publicly traded or actively traded on a secondary market. As a result, the Advisor values these securities at least quarterly at fair value as determined in good faith as required by the 1940 Act. In connection with striking a NAV as of the last day of a month that is not also the last day of a calendar quarter, the Advisor will consider whether there has been a material change to such investments as to affect their fair value, but such analysis will be more limited than the quarter-end process. See “Item 1. Business – Determination of Net Asset Value”.

 

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Certain factors that may be considered in determining the fair value of our investments include dealer quotes for securities traded on the secondary market for institutional investors, the nature and realizable value of any collateral, the portfolio company’s earnings and its ability to make payments on its indebtedness, the markets in which the portfolio company does business, comparison to comparable publicly traded companies, discounted cash flows and other relevant factors. Because such valuations, and particularly valuations of private securities and private companies, are inherently uncertain, may fluctuate over short periods of time and may be based on estimates, our determinations of fair value may differ materially from the values that would have been used if a ready market for these non-traded securities existed. Due to this uncertainty, the Advisor’s fair value determinations may cause our NAV on a given date to materially understate or overstate the value that we may ultimately realize upon the sale of one or more of our investments. As a result, investors purchasing our securities based on an overstated NAV would pay a higher price than the value of our investments might warrant. Conversely, investors selling Shares during a period in which the net asset value understates the value of our investments will receive a lower price for their Shares than the value of our investments might warrant.

 

In addition, investors will not know the then-current NAV applicable on the effective date of the share purchase and investors will not know the exact price of Shares in any quarterly tender offer conducted by the Company until after the expiration of the applicable tender offer, which may result in an investor receiving Shares based on an NAV less than, or tendering Shares based on an NAV greater than, the NAV per share available publicly at the time the relevant investor submitted their purchase order or tendered their Shares, as applicable.

 

The Company may expose itself to risks if it engages in hedging transactions.

 

The Company may utilize instruments such as forward contracts, currency options and interest rate swaps, caps, collars and floors to seek to hedge against fluctuations in the relative values of its portfolio positions from changes in currency exchange rates and market interest rates. Use of these hedging instruments may expose us to counter-party credit risk. Hedging against a decline in the values of its portfolio positions does not eliminate the possibility of fluctuations in the values of such positions or prevent losses if the values of such positions decline. However, such hedging can establish other positions designed to gain from those same developments, thereby offsetting the decline in the value of such portfolio positions. Such hedging transactions may also limit the opportunity for gain if the values of the portfolio positions should increase. Moreover, it may not be possible to hedge against an exchange rate or interest rate fluctuation that is generally anticipated at an acceptable price. Engaging in hedging transactions may reduce cash available to pay distributions to our shareholders.

 

The Company anticipates holding assets denominated in currencies other than US Dollars and intends, but is not required to, enter into foreign exchange transactions selectively with the aim of enhancing or maintaining the value of the Company’s investment in absolute terms. If this currency exposure is unhedged, the value of the Company’s investment will fluctuate with exchange rates as well as with price changes of the Company’s investments in the relevant markets and currencies.

 

Regulations limit our investment discretion to invest in derivatives transactions.

 

Rule 18f-4 of the 1940 Act limits a fund’s derivatives exposure through a value-at-risk test and requires the adoption and implementation of a derivatives risk management program for certain derivatives users. The Company expects to be a “limited derivatives user” under Rule 18f-4. Subject to certain conditions, limited derivatives users are not subject to the full requirements of Rule 18f-4.

 

The Company and its portfolio companies may be subjected to potential adverse effects of new or modified laws or regulations.

 

The Company and its portfolio companies are subject to regulation at the local, state, federal and, in some cases, foreign levels. These laws and regulations, as well as their interpretation, are likely to change from time to time, and new laws and regulations may be enacted. Accordingly, any change in these laws or regulations, changes in their interpretation, or newly enacted laws or regulations, or any failure by the Company or its portfolio companies to comply with these laws or regulations, could require changes to certain of the Company’s or its portfolio companies’ business practices, negatively impact the Company’s or its portfolio companies’ operations, cash flows or financial condition, impose additional costs on the Company or its portfolio companies or otherwise adversely affect the Company’s business or the business of its portfolio companies. In addition to the legal, tax and regulatory changes that are expected to occur, there may be unanticipated changes. The legal, tax and regulatory environment for BDCs, investment advisers and the instruments that they utilize (including derivative instruments) is continuously evolving.

 

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Over the last several years, there also has been an increase in regulatory attention to the extension of credit outside of the traditional banking sector, raising the possibility that some portion of the non-bank financial sector will be subject to new regulation. While it cannot be known at this time whether any regulation will be implemented or what form it will take, increased regulation of non-bank credit extension could negatively impact the Company’s operations, cash flows or financial condition, impose additional costs on the Company, intensify the regulatory supervision of the Company or otherwise adversely affect the Company’s business.

 

Because the Company intends to distribute substantially all of its income to its shareholders to obtain and maintain our status as a RIC, it will continue to need additional capital to finance its growth. If additional funds are unavailable or not available on favorable terms, its ability to grow may be impaired.

 

The Company will need additional capital to fund new investments and grow its portfolio of investments. In addition to the Private Offering, the Company intends to access the capital markets periodically to issue debt or equity securities or borrow from financial institutions in order to obtain such additional capital. Unfavorable economic conditions could increase its funding costs, limit its access to the capital markets or result in a decision by lenders not to extend credit to the Company. A reduction in the availability of new capital could limit the Company’s ability to grow. In addition, the Company is required to distribute at least 90% of its net ordinary income and net short-term capital gains in excess of net long-term capital losses, if any, to its shareholders to qualify and thereafter maintain its qualification as a RIC. As a result, these earnings will not be available to fund new investments. An inability on the Company’s part to access the capital markets successfully could limit its ability to grow its business and execute its business strategy fully and could decrease its earnings, if any.

 

The Company is required to meet a coverage ratio of total assets, less liabilities and indebtedness not represented by senior securities to total senior securities, which includes all of the Company’s borrowings, of at least 150%. This requirement limits the amount that the Company may borrow. Since the Company continues to need capital to grow its investment portfolio, these limitations may prevent it from incurring debt and require it to raise additional equity at a time when it may be disadvantageous to do so. While the Company expects that it will be able to borrow additional funds and to issue additional debt securities and expects that it will be able to issue additional equity securities, which would in turn increase the equity capital available to the Company, it cannot assure investors that debt and equity financing will be available to it on favorable terms, or at all. If additional funds are not available the Company, it may be forced to curtail or cease new investment activities, and its net asset value could decline.

 

The Company’s ability to enter into certain transactions with its affiliates is restricted, which may limit the scope of investments available to the Company.

 

The Company is prohibited under the 1940 Act from participating in certain transactions with its affiliates without the prior approval of the Board members who are Independent Directors and, in some cases, the SEC. Any person that owns, directly or indirectly, 5% or more of its outstanding voting securities will be its affiliate for purposes of the 1940 Act, and the Company is generally prohibited from buying or selling any security from or to such affiliate without the prior approval of the Independent Directors. The 1940 Act also prohibits certain “joint” transactions with certain of its affiliates, which could include concurrent investments in the same portfolio company, without prior approval of the Independent Directors and, in some cases, of the SEC. The Company is prohibited from buying or selling any security from or to any person that controls its or who owns more than 25% of its voting securities or certain of that person’s affiliates, or entering into prohibited joint transactions with such persons, absent the prior approval of the SEC.

 

The Advisor intends to apply for an exemptive order from the SEC that will permit the Company, among other things, to co-invest with certain other persons, including certain affiliates of the Advisor and certain funds managed and controlled by the Advisor and its affiliates, subject to certain terms and conditions. There is no assurance that the co-investment exemptive order will be granted by the SEC. Pursuant to such order, the Board may establish Board Criteria clearly defining co-investment opportunities in which the Company will have the opportunity to participate with other public or private StepStone funds that target similar assets. If an investment falls within the Board Criteria, the Advisor must offer an opportunity for the Company to participate. The Company may determine to participate or not to participate in a co-investment opportunity, depending on whether the Advisor determines that the investment is appropriate for the Company (e.g., based on investment strategy). The Advisor will allocate the co-investment in such proportions as the Advisor deems appropriate from time to time in accordance with its allocation policy under the 1940 Act. If the Advisor determines that such investment is not appropriate for the Company, the investment will not be allocated to us, but the Advisor will be required to report such investment and the rationale for its determination for us to not participate in the investment to the Board at the next quarterly board meeting.

 

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The time and resources that the Advisor’s Investment Committee devotes to the Company may be diverted, and the Company may face additional competition due to the fact that such persons are not prohibited from raising money for, or managing, another entity that makes the same types of investments that the Company targets.

 

StepStone is not prohibited from raising money for, or managing, another investment entity that makes the same types of investments as those the Company targets. As a result, the time and resources the Advisor’s Investment Committee could devote to the Company may be diverted. In addition, the Company may compete with any such investment entity for the same investors and investment opportunities.

 

The Company’s incentive fee arrangements with the Advisor may vary from those of other investment funds, account or investment vehicles managed by the Advisor, which may create an incentive for the Advisor’s Investment Committee to devote time and resources to a higher fee-paying fund.

 

If the Advisor is paid a higher performance-based fee from any of its other funds, it may have an incentive to devote more research and development or other activities, and/or recommend the allocation of investment opportunities, to such higher fee-paying fund. For example, to the extent the Advisor’s incentive compensation is not subject to a hurdle or an income incentive fee cap with respect to another fund, it may have an incentive to devote time and resources to such other fund.

 

The Advisor can resign as our investment adviser or administrator upon 120 days’ notice or 90 days’ notice, respectively, and the Sub-Advisor can terminate the Sub-Advisory Agreement on 120 days’ notice. The Company may not be able to find a suitable replacement within that time, or at all, resulting in a disruption in its operations that could adversely affect its financial condition, business and results of operations.

 

The Advisor has the right under the Advisory Agreement to resign as the Company’s investment adviser at any time upon 120 days’ written notice, whether the Company has found a replacement or not. Similarly, the Advisor has the right under the Administration Agreement to resign at any time upon 90 days’ written notice, whether the Company has found a replacement or not. In addition, the Sub-Advisor has the right to terminate the Sub-Advisory Agreement at any time on 120 day’s written notice. If the Advisor were to resign as the Company’s investment adviser or administrator, or the Sub-Advisor terminates the Sub-Advisory Agreement, the Company may not be able to find a new investment adviser or administrator, or investment sub-adviser, or hire internal management with similar expertise and ability to provide the same or equivalent services on acceptable terms within the applicable prior-notice period, or at all. If the Company is unable to do so quickly, its operations are likely to experience a disruption, its financial condition, business and results of operations as well as its ability to pay distributions to its shareholders are likely to be adversely affected. Even if the Company is able to retain comparable management, whether internal or external, the integration of such management and their lack of familiarity with the Company’s investment objectives may result in additional costs and time delays that may adversely affect its business, financial condition, results of operations and cash flows.

 

The Company may experience fluctuations in its annual and quarterly operating results.

 

The Company could experience fluctuations in its annual and quarterly operating results due to a number of factors, including the interest rate payable on the loans and debt securities it acquires, the default rate on such loans and securities, the level of its expenses, variations in and the timing of the recognition of realized and unrealized gains or losses, the degree to which the Company encounters competition in its markets and general economic conditions. In light of these factors, results for any period should not be relied upon as being indicative of performance in future periods.

 

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The Company may change its investment objectives, policies and strategies without shareholder approval.

 

Except as otherwise disclosed in this Registration Statement, we may modify or waive our investment objectives and any of our investment policies, restrictions, strategies, and techniques without prior notice and without shareholder approval. However, absent requisite shareholder approval under the 1940 Act, we may not change the nature of our business so as to cease to be, or withdraw our election as, a BDC. If we change our 80% Private Credit test, we will provide shareholders with at least 60 days’ advance notice of such change.

 

The Company cannot predict the effect any changes to its current investment objectives, operating policies and investment strategies would have on its business or operating results. Nevertheless, any such changes could adversely affect its business and impair its ability to make distributions to its shareholders.

 

We are dependent on information systems and systems failures could significantly disrupt our business, which may, in turn, negatively affect our liquidity, financial condition or results of operations.

 

Our business is dependent on our and third parties’ communications and information systems. Further, in the ordinary course of our business we or our investment adviser may engage certain third-party service providers to provide us with services necessary for our business. Any failure or interruption of those systems or services, including as a result of the termination or suspension of an agreement with any third-party service providers, could cause delays or other problems in our business activities. Our financial, accounting, data processing, backup or other operating systems and facilities may fail to operate properly or become disabled or damaged as a result of a number of factors including events that are wholly or partially beyond our control and adversely affect our business. There could be:

 

sudden electrical or telecommunications outages;
   
natural disasters such as earthquakes, tornadoes and hurricanes;
   
disease pandemics;
   
events arising from local or larger scale political or social matters, including terrorist acts; and
   
cyber-attacks.

 

These events, in turn, could have a material adverse effect on our business, financial condition and operating results and negatively affect the market price of our common stock and our ability to pay dividends to our shareholders.

 

The failure in cyber security systems, as well as the occurrence of events unanticipated in the Company’s or the Advisor’s or its affiliates’ disaster recovery systems and management continuity planning could impair its ability to conduct business effectively.

 

The occurrence of a disaster, such as a cyber-attack against the Company, the Advisor or its affiliates or against a third-party that has access to the Company’s data or networks, a natural catastrophe, an industrial accident, failure of our disaster recovery systems, or consequential employee error, could have an adverse effect on its ability to communicate or conduct business, negatively impacting its operations and financial condition. This adverse effect can become particularly acute if those events affect the Company’s, the Advisor’s or its affiliates’ electronic data processing, transmission, storage, and retrieval systems, or impact the availability, integrity, or confidentiality of its data.

 

The Company, the Advisor and its affiliates depend heavily upon computer systems to perform necessary business functions. Despite its implementation of a variety of security measures, the Company’s, the Advisor’s and its affiliates’ computer systems, networks, and data, like those of other companies, could be subject to cyber-attacks and unauthorized access, use, alteration, or destruction, such as from physical and electronic break-ins or unauthorized tampering, malware and computer virus attacks, or system failures and disruptions. If one or more of these events occurs, it could potentially jeopardize the confidential, proprietary, and other information processed, stored in, and transmitted through our computer systems and networks. Such an attack could cause interruptions or malfunctions in the Company’s, the Advisor’s or its affiliates’ operations, which could result in financial losses, litigation, regulatory penalties, client dissatisfaction or loss, reputational damage, and increased costs associated with mitigation of damages and remediation.

 

Third parties with which the Company or the Advisor or its affiliates do business may also be sources of cybersecurity or other technological risks. The Company and its affiliates outsources certain functions, and these relationships allow for the storage and processing of its information, as well as customer, counterparty, employee and borrower information. Cybersecurity failures or breaches by the Advisor and other service providers (including, but not limited to, accountants, custodians, transfer agents and administrators), and the issuers of securities in which the Company invests, also have the ability to cause disruptions and impact business operations, potentially resulting in financial losses, interference with the Company’s ability to calculate its net asset value, impediments to trading, the inability of its shareholders to transact business, violations of applicable privacy and other laws, regulatory fines, penalties, reputation damages, reimbursement of other compensation costs, or additional compliance costs. While the Company, the Advisor and StepStone Group engage in actions to reduce exposure resulting from outsourcing, ongoing threats may result in unauthorized access, loss, exposure or destruction of data, or other cybersecurity incidents, with increased costs and other consequences, including those described above. In addition, substantial costs may be incurred in order to prevent any cyber incidents in the future.

 

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Privacy and information security laws and regulation changes, and compliance with those changes, may result in cost increases due to system changes and the development of new administrative processes. In addition, the Company may be required to expend significant additional resources to modify its protective measures and to investigate and remediate vulnerabilities or other exposures arising from operational and security risks. The Company currently does not maintain insurance coverage relating to cybersecurity risks, and it may be required to expend significant additional resources to modify its protective measures or to investigate and remediate vulnerabilities or other exposures, and the Company may be subject to litigation and financial losses that are not fully insured.

 

The Company, the Advisor and the Company’s portfolio companies are subject to risks associated with “phishing” and other cyber-attacks.

 

The Company’s business and the business of its portfolio companies relies upon secure information technology systems for data processing, storage and reporting. Despite careful security and controls design, implementation and updating, the Company’s and its portfolio companies’ information technology systems could become subject to cyber-attacks. Cyber-attacks include, but are not limited to, gaining unauthorized access to digital systems (e.g., through “hacking”, malicious software coding, social engineering or “phishing” attempts) for purposes of misappropriating assets or sensitive information, corrupting data, or causing operational disruption. Cyber-attacks may also be carried out in a manner that does not require gaining unauthorized access, such as causing denial-of service attacks on websites (i.e., efforts to make network services unavailable to intended users). The Advisor’s and StepStone Group’s employees have been and expect to continue to be the target of fraudulent calls, emails and other forms of activities. The result of these incidents may include disrupted operations, misstated or unreliable financial data, liability for stolen information, misappropriation of assets, increased cybersecurity protection and insurance costs, litigation and damage to our business relationships, regulatory fines or penalties, or other adverse effects on the Company’s business, financial condition or results of operations. In addition, the Company, the Advisor or StepStone Group may be required to expend significant additional resources to modify its protective measures and to investigate and remediate vulnerabilities or other exposures arising from operational and security risks related to cyber-attacks.

 

The Advisors’ and other service providers’ increased use of mobile and cloud technologies could heighten the risk of a cyber-attack as well as other operational risks, as certain aspects of the security of such technologies may be complex, unpredictable or beyond their control. These service providers’ reliance on mobile or cloud technology or any failure by mobile technology and cloud service providers to adequately safeguard their systems and prevent cyber-attacks could disrupt their operations and result in misappropriation, corruption or loss of personal, confidential or proprietary information. In addition, there is a risk that encryption and other protective measures against cyber-attacks may be circumvented, particularly to the extent that new computing technologies increase the speed and computing power available.

 

Additionally, remote working environments may be less secure and more susceptible to cyber-attacks, including phishing and social engineering attempts. Accordingly, the risks associated with cyber-attacks are heightened under current conditions.

 

General Risks and Risks Related to Economic Conditions

 

Global economic, political and market conditions, including uncertainty about the financial stability of the United States, could have a significant adverse effect on our business, financial condition and results of operations. 

 

Downgrades by rating agencies to the U.S. government’s credit rating or concerns about its credit and deficit levels in general could cause interest rates and borrowing costs to rise, which may negatively impact both the perception of credit risk associated with our debt portfolio and our ability to access the debt markets on favorable terms. In addition, a decreased U.S. government credit rating could create broader financial turmoil and uncertainty, which may weigh heavily on our financial performance and the value of our common stock. U.S. debt ceiling and budget deficit concerns have increased the possibility of additional credit-rating downgrades and economic slowdowns or a recession in the United States.

 

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Deterioration in the economic conditions in the Eurozone and other regions or countries globally and the resulting instability in global financial markets may pose a risk to our business. Financial markets have been affected at times by a number of global macroeconomic events, including the following: large sovereign debts and fiscal deficits of several countries in Europe and in emerging markets jurisdictions, levels of non-performing loans on the balance sheets of European banks, the effect of the United Kingdom (the “U.K.”) leaving the European Union (the “EU”), instability in the Chinese capital markets and the COVID-19 pandemic. Global market and economic disruptions have affected, and may in the future affect, the U.S. capital markets, which could adversely affect our business, financial condition or results of operations. We cannot assure you that market disruptions in Europe and other regions or countries, including the increased cost of funding for certain governments and financial institutions, will not impact the global economy, and we cannot assure you that assistance packages will be available, or if available, be sufficient to stabilize countries and markets in Europe or elsewhere affected by a financial crisis. To the extent uncertainty regarding any economic recovery in Europe or elsewhere negatively impacts consumer confidence and consumer credit factors, our business, financial condition and results of operations could be significantly and adversely affected. Moreover, there is a risk of both sector-specific and broad-based corrections and/or downturns in the equity and credit markets. Any of the foregoing could have a significant impact on the markets in which we operate and could have a material adverse impact on our business prospects and financial condition.

 

Various social and political circumstances in the U.S. and around the world (including wars and other forms of conflict, terrorist acts, security operations and catastrophic events such as fires, floods, earthquakes, tornadoes, hurricanes and global health epidemics or outbreaks of infectious diseases), may also contribute to increased market volatility and economic uncertainties or deterioration in the U.S. and worldwide. Such events, including rising trade tensions between the United States and China, other uncertainties regarding actual and potential shifts in U.S. and foreign, trade, economic and other policies with other countries, the war in Ukraine and Russia, and health epidemics and pandemics, could adversely affect our business, financial condition or results of operations. These market and economic disruptions could negatively impact the operating results of our portfolio companies.

  

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Certain of our portfolio companies’ businesses could be adversely affected by the effects of health pandemics or epidemics, including the ongoing COVID-19 pandemic, which may have a negative impact on our and our portfolio companies’ businesses and operations.

 

Certain of our portfolio companies’ businesses could be adversely affected by the effects of health pandemics or epidemics, including the ongoing COVID-19 global pandemic, the evolution of which continues to be uncertain. Recurring COVID-19 outbreaks around the world have heightened concerns relating to new and potentially more dangerous virus variants, which, if transmitted around the globe could lead to the re-introduction of restrictions that were in place in 2020, 2021, and to a lesser extent in 2022, or even the adoption of other, stricter measures to combat outbreaks. Another severe outbreak of COVID-19 or another pandemic can disrupt our and our portfolio companies’ businesses and materially and adversely impact our and/or their financial results.

 

The COVID-19 pandemic contributed to certain conditions associated with the current macroeconomic environment and caused significant disruptions and instabilities in the global and U.S. financial markets or deteriorations in credit and financing conditions. A resurgence of COVID-19 or another pandemic with effects similar to those of COVID-19 may adversely affect our and our portfolio companies’ liquidity positions.

 

The extent of the impact of any public health emergency, including a pandemic, on the Company’s and its portfolio companies’ operational and financial performance will depend on many factors, including the duration and scope of such public health emergency, the actions taken by governmental authorities to contain the financial and economic impact of the public health emergency, the extent of any related travel advisories and restrictions implemented, the impact of such public health emergency on overall supply and demand, goods and services, investor liquidity, consumer confidence and levels of economic activity, and the extent of the public health emergency’s disruption to important global, regional and local supply chains and economic markets, all of which are highly uncertain and cannot be predicted. In addition, the Company and its portfolio companies’ operations may be significantly impacted, or even temporarily or permanently halted, as a result of government quarantine measures, voluntary and precautionary restrictions on travel or meetings and other factors related to a public health emergency, including the potential adverse impact of the public health emergency on the health of any of its or its portfolio companies’ personnel. This could create widespread business continuity issues for the Company and its portfolio companies.

 

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Risks Related to the Company’s Investments

 

The below risks related to the Company’s investments are generally applicable directly to the Company by virtue of its direct investments, as well as indirectly to the Company through its exposure to the investments made by the Underlying Funds.

 

Economic recessions or downturns could impair the Company’s portfolio companies, which would harm the Company’s operating results.

 

The current macroeconomic environment is characterized by record-high inflation, supply chain challenges, labor shortages, high interest rates, foreign currency exchange volatility, volatility in global capital markets and growing recession risk. The risks associated with our and our portfolio companies’ businesses are more severe during periods of economic slowdown or recession.

 

Many of the portfolio companies in which the Company invests are likely to be susceptible to economic slowdowns or recessions and may be unable to repay the Company’s loans during such periods. Therefore, the number of the Company’s non-performing assets is likely to increase, and the value of its portfolio is likely to decrease during such periods. Adverse economic conditions may decrease the value of collateral securing some of its loans and debt securities and the value of its equity investments. Economic slowdowns or recessions could lead to financial losses in its portfolio and a decrease in revenues, net income and assets. Unfavorable economic conditions also could increase the Company’s funding costs, limit its access to the capital markets or result in a decision by lenders not to extend credit to the Company. These events could prevent the Company from increasing its investments and harm its operating results.

 

A portfolio company’s failure to satisfy financial or operating covenants imposed by the Company or other lenders could lead to defaults and, potentially, termination of its loans and foreclosure on its assets, which could trigger cross-defaults under other agreements and jeopardize its portfolio company’s ability to meet its obligations under the loans and debt securities that the Company holds. The Company may incur expenses to the extent necessary to seek recovery upon default or to negotiate new terms with a defaulting portfolio company. In addition, lenders in certain cases can be subject to lender liability claims for actions taken by them when they become too involved in the borrower’s business or exercise control over a borrower. It is possible that the Company could become subject to a lender’s liability claim, including as a result of actions taken if the Company renders significant managerial assistance to the borrower. Furthermore, if one of the Company’s portfolio companies were to file for bankruptcy protection, a bankruptcy court might re-characterize the Company’s debt holding and subordinate all or a portion of its claim to claims of other creditors, even though the Company may have structured its investment as senior secured debt. The likelihood of such a re-characterization would depend on the facts and circumstances, including the extent to which the Company provided managerial assistance to that portfolio company.

 

Portfolio Companies May be Highly Leveraged

 

Portfolio companies in which the Company or Underlying Funds may invest may be highly leveraged, and there is no restriction on the amount of debt any such portfolio company can incur. Substantial indebtedness may add additional risk with respect to a portfolio company, and could (i) limit its ability to borrow money for its working capital, capital expenditures, debt service requirements, strategic initiatives or other purposes; (ii) require it to dedicate a substantial portion of its cash flow from operations to the repayment of its indebtedness, thereby reducing funds available to it for other purposes; (iii) make it more highly leveraged than some of its competitors, which may place it at a competitive disadvantage; and/or (iv) subject it to restrictive financial and operating covenants, which may preclude it from favorable business activities or the financing of future operations or other capital needs. In some cases, proceeds of debt incurred by a portfolio company could be paid as a dividend to shareholders rather than retained by the portfolio company for its working capital. Leveraged companies are often more sensitive to declines in revenues, increases in expenses, and adverse business, political, or financial developments or economic factors such as a significant rise in interest rates, a severe downturn in the economy or deterioration in the condition of such companies or their industries. A leveraged portfolio company’s income and net assets will tend to increase or decrease at a greater rate than if borrowed money were not used.

 

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If a portfolio company is unable to generate sufficient cash flow to meet principal and interest payments on its indebtedness, it may be forced to take other actions to satisfy its obligations under its indebtedness. These alternative measures may include reducing or delaying capital expenditures, selling assets, seeking additional capital, or restructuring or refinancing indebtedness. Any of these actions could significantly reduce the value of an Underlying Fund’s investments in such portfolio company. If such strategies are not successful and do not permit the portfolio company to meet its scheduled debt service obligations, the portfolio companies may also be forced into liquidation, dissolution or insolvency, and the value of an investment in such portfolio company could be significantly reduced or even eliminated and accordingly the Company is directly or indirectly exposed to such risks.

 

The Company may hold the loans and debt securities of leveraged companies that may, due to the significant operating volatility typical of such companies, enter into bankruptcy proceedings.

 

Leveraged companies may experience bankruptcy or similar financial distress. The bankruptcy process has a number of significant inherent risks. Many events in a bankruptcy proceeding are the product of contested matters and adversary proceedings and are beyond the control of the creditors. A bankruptcy filing by a portfolio company may adversely and permanently affect that company. If the proceeding is converted to a liquidation, the value of the portfolio company may not equal the liquidation value that was believed to exist at the time of the investment. The duration of a bankruptcy proceeding is also difficult to predict, and a creditor’s return on investment can be adversely affected by delays until the plan of reorganization or liquidation ultimately becomes effective. The administrative costs in connection with a bankruptcy proceeding are frequently high and would be paid out of the debtor’s estate prior to any return to creditors. Because the standards for classification of claims under bankruptcy law are vague, the Company’s influence with respect to the class of securities or other obligations it owns may be lost by increases in the number and amount of claims in the same class or by different classification and treatment. In the early stages of the bankruptcy process, it is often difficult to estimate the extent of, or even to identify, any contingent claims that might be made. In addition, certain claims that have priority by law (for example, claims for taxes) may be substantial.

 

Investments in private and middle market portfolio companies are risky, and it could lose all or part of its investment.

 

Our Private Credit investments will primarily consist of Loans to U.S. private middle-market companies. Investment in private and middle-market companies involves a number of significant risks. Generally, little public information exists about these companies, and the Company relies on the ability of the Advisors’ investment professionals to obtain adequate information to evaluate the potential returns from investing in these companies. If the Company is unable to uncover all material information about these companies, it may not make a fully informed investment decision, and it may lose money on its investments. Middle-market companies may have limited financial resources, have difficulty accessing the capital markets to meet future capital needs, and may be unable to meet their obligations under their loans and debt securities that the Company holds, which may be accompanied by a deterioration in the value of any collateral and a reduction in the likelihood of the Company realizing any guarantees it may have obtained in connection with its investment. In addition, such companies typically have shorter operating histories, narrower product lines and smaller market shares than larger businesses, which tend to render them more vulnerable to competitors’ actions and market conditions, as well as general economic downturns. Additionally, middle-market companies are more likely to depend on the management talents and efforts of a small group of persons. Therefore, the death, disability, resignation or termination of one or more of these persons could have a material adverse impact on one or more of the Company’s portfolio companies and, in turn, on the Company. Middle-market companies also may be parties to litigation and may be engaged in rapidly changing businesses with products subject to a substantial risk of obsolescence. In addition, the Company’s executive officers, trustees and investment adviser may, in the ordinary course of business, be named as defendants in litigation arising from its investments in portfolio companies.

 

Senior secured loans

 

Senior loans hold the most senior position in the capital structure of a business entity and are typically, but not necessarily, secured with specific collateral that is senior to that held by unsecured creditors, subordinated debt holders and shareholders of the borrower. The senior loans in which the Company will invest are likely to be collateralized and may be rated below investment grade or may also be unrated. As a result, the risks associated with senior loans may be similar to the risks of below investment grade instruments, although senior loans are typically senior and secured in contrast to other below investment grade instruments, which may be subordinated and/or unsecured. Nevertheless, if a borrower under a senior loan defaults, becomes insolvent or goes into bankruptcy, the Company may recover only a fraction of what is owed on the senior loan or nothing at all. Senior loans are subject to a number of risks described elsewhere in this Registration Statement, including credit risk and liquidity risk.

 

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Although the senior loans in which the Company will invest may be secured by collateral, there can be no assurance that such collateral could be readily liquidated or that the liquidation of such collateral would satisfy the borrower’s obligation in the event of non-payment of scheduled interest or principal. In the event of the bankruptcy or insolvency of a borrower, the Company could experience delays or limitations with respect to its ability to realize the benefits of the collateral securing a senior loan. Such collateral may be subject to complex, competing legal claims and any applicable legal or regulatory requirements which may restrict the giving of collateral or security by a borrower under a loan, such as, for example, thin capitalization, over-indebtedness, financial assistance and corporate benefit requirements. In addition, security interests may be unperfected for a variety of reasons, including the failure to make required filings by lenders, and the Company may not have priority over other creditors. In the event of a decline in the value of the already pledged collateral, if the terms of a senior loan do not require the borrower to pledge additional collateral, the Company will be exposed to the risk that the value of the collateral will not at all times equal or exceed the amount of the borrower’s obligations under the senior loans. Even if such loans do require the borrower to pledge additional collateral, there is no warranty the borrower will be able to pledge collateral of sufficient value or at all. To the extent that a senior loan is collateralized by stock in the borrower or its subsidiaries, such stock may lose some or all of its value in the event of the bankruptcy or insolvency of the borrower. Those senior loans that are under-collateralized involve a greater risk of loss. In the context of cross-border lending it is possible that the rights actually enjoyed by lenders will be adversely affected by the interplay of the rules of the various applicable legal systems.

 

The lack of liquidity in the Company’s investments may adversely affect its business.

 

Most of the Company’s assets will be invested in illiquid loans and securities, and a substantial portion of its investments in leveraged companies will be subject to legal and other restrictions on resale or otherwise be less liquid than more broadly traded public securities. The illiquidity of these investments may make it difficult for the Company to sell such investments if the need arises. In addition, if the Company is required to liquidate all or a portion of its portfolio quickly, the Company may realize significantly less than the value at which it has previously recorded the investments.

 

The Company will be subject to credit, liquidity and interest rate risks.

 

The Company will invest in notes, bonds or other fixed-income securities, which may include, without limitation, notes, bonds and debentures issued by corporations, government issued or guaranteed debt securities, commercial paper and “higher-yielding” (including non-investment grade) and, therefore, higher risk debt securities. The Company will therefore be subject to credit, liquidity and interest rate risks.

 

Generally, the value of fixed income securities will change inversely with changes in interest rates. As interest rates rise, the market value of fixed income securities tends to decrease. Conversely, as interest rates fall, the market value of fixed income securities tends to increase. This risk will be greater for long-term securities than for short-term securities. The Company may attempt to minimize the exposure of the portfolios to interest rate changes through the use of interest rate swaps, interest rate futures and/or interest rate options. However, there can be no guarantee that the Company will be successful in fully mitigating the impact of interest rate changes.

 

A reduction in the interest rates on new investments relative to interest rates on current investments could also have an adverse impact on the Company’s net interest income. An increase in interest rates could decrease the value of any investments the Company holds which earn fixed interest rates, including subordinated loans, senior and junior secured and unsecured debt securities and loans and high yield bonds, and also could increase the Company’s interest expense, thereby decreasing its net income. Also, an increase in interest rates available to investors could make investment in the Company less attractive if the Company is not able to increase its dividend or distribution rate, which could reduce the value of an investment in the Company.

 

Investors should also be aware that a change in the general level of interest rates can be expected to lead to a change in the interest rate the Company may receive on many of its debt investments. Accordingly, a change in the interest rate could make it easier for the Company to meet or exceed the performance threshold and may result in a substantial increase in the amount of incentive fees payable to the Advisor with respect to the portion of the incentive fee based on income.

 

Higher-yielding debt securities are generally unsecured and may be subordinated to certain other outstanding securities and obligations of the issuer, which may be secured on substantially all of the issuer’s assets. The lower rating of debt obligations in the higher-yielding sector reflects a greater probability that adverse changes in the financial condition of the issuer or in general economic conditions or both may impair the ability of the issuer to make payments of principal and interest. Non-investment grade debt securities may not be protected by financial covenants or limitations on additional indebtedness. In addition, evaluating credit risk for debt securities involves uncertainty because credit rating agencies throughout the world have different standards, making comparison across countries difficult. Also, the market for credit spreads is often inefficient and illiquid, making it difficult to accurately calculate discounting spreads for valuing financial instruments. It is likely that a major economic recession could disrupt severely the market for such securities and may have an adverse impact on the value of such securities. In addition, it is likely that any such economic downturn could adversely affect the ability of the issuers of such securities to repay principal and pay interest thereon and increase the incidence of default for such securities.

 

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The Company will be subject to risks associated with bank Loans.

 

The Company may invest in Loans originated by banks and other financial institutions. Such loans are typically private corporate loans that are negotiated by one or more commercial banks or financial institutions and syndicated among a group of commercial banks and financial institutions. The bank Loans invested in by the Company may include term loans and revolving loans, may pay interest at a fixed or floating rate and may be senior or subordinated. Special risks associated with investments in bank Loans and participations include (i) the possible invalidation of an investment transaction as a fraudulent conveyance under relevant creditors’ rights laws, (ii) so-called lender-liability claims by the issuer of the obligations, (iii) environmental liabilities that may arise with respect to collateral securing the obligations, (iv) the risk that bank loans may not be securities and therefore may not have the protections afforded by the federal securities laws, and (v) limitations on the ability of the Company to directly enforce its rights with respect to participations. Successful claims in respect of such matters may reduce the cash flow and/or market value of the investment. In addition, the bank loan market may face illiquidity and volatility. There can be no assurance that future levels of supply and demand in bank loan trading will provide an adequate degree of liquidity or the market will not experience periods of significant illiquidity in the future.

 

In addition to the special risks generally associated with investments in bank Loans described above, the Company’s investments in second-lien and unsecured bank Loans will entail additional risks, including (i) the subordination of the Company’s claims to a senior lien in terms of the coverage and recovery from the collateral and (ii) with respect to second-lien debt investments, the prohibition of or limitation on the right to foreclose on a second-lien or exercise other rights as a second-lien holder, and with respect to unsecured debt, the absence of any collateral on which the Company may foreclose to satisfy its claim in whole or in part. In certain cases, therefore, no recovery may be available from a defaulted second-lien or unsecured loan. The Company’s investments in bank Loans of below-investment grade companies also entail specific risks associated with investments in non-investment grade securities.

 

Investments in loan interests may be difficult to value, have extended settlement periods and expose the Company to the risk of delayed receipt of principal and interest payments.

 

Loan interests generally are subject to restrictions on transfer, and the Company may be unable to sell loan interests at a time when it may otherwise be desirable to do so or may be able to sell them only at prices that are less than what the Advisor regards as their fair market value. Accordingly, loan interests may at times be illiquid. Loan interests may be difficult to value and may have extended settlement periods, which expose the Company to the risk that the receipt of principal and interest payments may be delayed until the loan interest settles.

 

Interests in secured loans have the benefit of collateral and, typically, of restrictive covenants limiting the ability of the borrower to further encumber its assets. There is a risk that the value of any collateral securing a loan in which the Company has an interest may decline and that the collateral may not be sufficient to cover the amount owed on the loan. In most loan agreements there is no formal requirement to pledge additional collateral. In the event the borrower defaults, the Company’s access to the collateral may be limited or delayed by bankruptcy or other insolvency laws. Further, in the event of a default, second lien secured loans will generally be paid only if the value of the collateral exceeds the amount of the borrower’s obligations to the first lien secured lenders, and the remaining collateral may not be sufficient to cover the full amount owed on the loan in which the Company has an interest. In addition, if a secured loan is foreclosed, the Company would likely bear the costs and liabilities associated with owning and disposing of the collateral. The collateral may be difficult to sell and the Company would bear the risk that the collateral may decline in value while the Company is holding it.

 

Loan interests may not be considered “securities,” and purchasers, such as the Company, therefore may not be entitled to rely on the anti-fraud protections of U.S. federal securities laws.

 

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The Company will be subject to risks associated with Loan participations and assignments.

 

The Company may acquire interests in Loans either directly (by way of sale or assignment) or indirectly (by way of participation). The purchaser of an assignment typically succeeds to all the rights and obligations of the assigning institution and becomes a lender under the credit agreement with respect to the debt obligation; however, its rights can be more restricted than those of the assigning institution. Participation interests in a portion of a debt obligation typically result in a contractual relationship only with the institution participating out the interest, not with the borrower.

 

In purchasing participations, the Company generally will have no right to enforce compliance by the borrower with the terms of the loan agreement, nor any rights of set-off against the borrower, and the Company may not directly benefit from the collateral supporting the debt obligation in which it has purchased the participation. As a result, the Company will assume the credit risk of both the borrower and the institution selling the participation. As a participant, the Company also would be subject to the risk that the party selling the participation interest would not remit the Company’s pro rata share of loan payments to the Company. A selling institution voting in connection with a potential waiver of a default by a borrower may have interests different from those of the Company, and the selling institution might not consider the interests of the Company in connection with its vote. Notwithstanding the foregoing, many participation agreements with respect to Loans provide that the selling institution may not vote in favor of any amendment, modification or waiver that forgives principal, interest or fees, reduces principal, interest or fees that are payable, postpones any payment of principal (whether a scheduled payment or a mandatory prepayment), interest or fees or releases any material guarantee or collateral without the consent of the participant (at least to the extent the participant would be affected by any such amendment, modification or waiver). In addition, many participation agreements with respect to Loans that provide voting rights to the participant further provide that if the participant does not vote in favor of amendments, modifications or waivers, the selling institution may repurchase such participation at par.

 

The Company may invest in structured products.

 

The Company may invest in securities backed by, or representing interests in, certain underlying instruments or assets (“structured products”). The cash flow on the underlying instruments or assets may be apportioned among the structured products to create securities with different investment characteristics such as varying maturities, payment priorities and interest rate provisions, and the extent of the payments made with respect to the structured products is dependent on the extent of the cash flow on the underlying instruments. The performance of structured products will be affected by a variety of factors, including the availability of any credit enhancement, the level and timing of payments and recoveries on and the characteristics of the underlying receivables, loans or other assets that are being securitized, remoteness of those assets from the originator or transferor, the adequacy of and ability to realize upon any related collateral and the capability of the servicer of the securitized assets. Structured products are typically sold in private placement transactions, and investments in structured products may therefore be illiquid in nature, with no readily available secondary market. Because certain structured products of the type in which the Company may invest may involve no credit enhancement, the credit risk of those structured products generally would be equivalent to that of the underlying instruments. The Company may invest in a class of structured products that is either subordinated or unsubordinated to the right of payment of another class. Subordinated structured products typically have higher yields and present greater risks than unsubordinated structured products.

 

Additionally, the yield to maturity of a tranche may be extremely sensitive to the rate of defaults in the underlying reference portfolio. A rapid change in the rate of defaults may have a material adverse effect on the yield to maturity. It is therefore possible that the Company may incur losses on its investments in structured products regardless of their original credit profile. Finally, the securities in which the Company is authorized to invest include securities that are subject to legal or contractual restrictions on their resale or for which there is a relatively inactive trading market. Securities subject to resale restrictions may sell at a price lower than similar securities that are not subject to such restrictions.

 

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The Company may invest in structured finance securities, which entails various risks, including credit risks, liquidity risks, interest rate risks, market risks, operations risks, structural risks, geographical concentration risks, basis risks and legal risks.

 

The Company’s portfolio may include investments in structured finance securities. Structured finance securities are generally debt securities that entitle the holders thereof to receive payments of interest and principal that depend primarily on the cash flow from or sale proceeds of a specified pool of assets, either fixed or revolving, that by their terms convert into cash within a finite time period, together with rights or other assets designed to assure the servicing or timely distribution of proceeds to holders of such securities.

 

Investing in structured finance securities entails various risks, including credit risks, liquidity risks, interest rate risks, market risks, operations risks, structural risks, geographical concentration risks, basis risks and legal risks.

 

Structured finance securities are subject to the significant credit risks inherent in the underlying collateral and to the risk that the servicer fails to perform. Such securities may include credit enhancements designed to raise the overall credit quality of the security above that of the underlying collateral, but insurance providers and other sources of credit enhancement may fail to perform their obligations.

 

The Company expects that some structured finance securities it may hold will be subordinate in right of payment and rank junior to other securities that are secured by or represent an ownership interest in the same pool of assets. In addition, many of the related transactions have structural features that divert payments of interest and/or principal to more senior classes when the delinquency or loss experience of the pool exceeds certain levels. Consequently, such securities have a higher risk of loss as a result of delinquencies or losses on the underlying assets. In certain circumstances, payments of interest may be reduced or eliminated for one or more payment dates. Additionally, as a result of cash flow being diverted to payments of principal of more senior classes, the average life of such securities may lengthen.

 

Structured finance securities are also subject to the risks of the assets securitized. In particular, they are subject to risks related to the quality of the control systems and procedures used by the parties originating and servicing the securitized assets. Deficiencies in these systems may negatively affect the value of the securities, including by resulting in higher-than-expected borrower delinquencies or the inability to effectively pursue remedies against borrowers due to defective documentation.

 

Price declines and illiquidity in the corporate debt markets may adversely affect the fair value of the Company’s portfolio investments, reducing its net asset value through increased net unrealized depreciation.

 

As a BDC, the Company is required to carry its investments at market value or, if no market value is ascertainable, at fair value. As part of the valuation process, the Advisor may take into account the following types of factors, if relevant, in determining the fair value of its investments:

 

available current market data, including relevant and applicable market trading and transaction comparables;

 

applicable market yields and multiples;

 

security covenants;

 

call protection provisions;

 

information rights;

 

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the nature and realizable value of any collateral;

 

the portfolio company’s ability to make payments, its earnings and discounted cash flows and the markets in which it does business;

 

comparisons of financial ratios of peer companies that are public;

 

comparable merger and acquisition transactions; and

 

the principal market and enterprise values.

 

When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, the Company uses the pricing indicated by the external event to corroborate its valuation. The Company records decreases in the market values or fair values of its investments as unrealized depreciation. Declines in prices and liquidity in the corporate debt markets may result in significant net unrealized depreciation in the Company’s portfolio. The effect of all of these factors on its portfolio may reduce the Company’s net asset value by increasing net unrealized depreciation in its portfolio. Depending on market conditions, the Company could incur substantial realized losses and may suffer additional unrealized losses in future periods, which could have a material adverse effect on its business, financial condition, results of operations and cash flows.

 

The Company is a non-diversified investment company within the meaning of the 1940 Act, and therefore it is not limited with respect to the proportion of its assets that may be invested in securities of a single issuer.

 

The Company is classified as a non-diversified investment company within the meaning of the 1940 Act, which means that it is not limited by the 1940 Act with respect to the proportion of its assets that it may invest in securities of a single issuer. Beyond the asset diversification requirements associated with its qualification as a RIC under the Code, the Company does not have fixed guidelines for diversification. To the extent that the Company assumes large positions in the securities of a small number of issuers or its investments are concentrated in relatively few industries, its NAV may fluctuate to a greater extent than that of a diversified investment company as a result of changes in the financial condition or the market’s assessment of the issuer. The Company may also be more susceptible to any single economic or regulatory occurrence than a diversified investment company.

 

The Company’s failure to make follow-on investments in its portfolio companies could impair the value of its portfolio.

 

Following an initial investment in a portfolio company, the Company may make additional investments in that portfolio company as “follow-on” investments, in seeking to:

 

increase or maintain in whole or in part our position as a creditor or equity ownership percentage in a portfolio company;

 

exercise warrants, options or convertible securities that were acquired in the original or subsequent financing; or

 

preserve or enhance the value of our investment.

 

The Company has discretion to make follow-on investments, subject to the availability of capital resources. Failure on its part to make follow-on investments may, in some circumstances, jeopardize the continued viability of a portfolio company and its initial investment, or may result in a missed opportunity for it to increase its participation in a successful operation. Even if it has sufficient capital to make a desired follow-on investment, the Company may elect not to make a follow-on investment because it may not want to increase its level of risk, because it prefers other opportunities or because it is inhibited by compliance with the requirements of the 1940 Act or the desire to qualify or maintain its qualification as a RIC.

 

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Reliance on portfolio company management

 

The Advisors and investment managers or general partners of Underlying Funds generally will seek to monitor the performance of investments in portfolio companies either through interaction with the board of directors of the applicable portfolio company and/or by maintaining an on-going dialogue with the portfolio company’s management team. However, the Company and the Underlying Funds will generally not be in a position to control any borrower by investing in its debt securities and a portfolio company’s management will be primarily responsible for the operations of the portfolio company on a day-to-day basis. Although the Company and Underlying Funds may invest in portfolio companies with strong management teams, there can be no assurance that the existing management team, or any new one, will be able to operate the portfolio company successfully. In addition, the Company and Underlying Funds are subject to the risk that a borrower in which it invests may make business decisions with which the relevant lender disagrees and the management of such borrower, as representatives of the common equity holders, may take risks or otherwise act in ways that do not serve the interests of the debt investors, including the Company or the Underlying Fund.

 

Defaults by the Company’s portfolio companies will harm its operating results.

 

A portfolio company’s failure to satisfy financial or operating covenants imposed by the Company or other lenders could lead to defaults and, potentially, termination of its loans and foreclosure on its assets. This could trigger cross-defaults under other agreements and jeopardize such portfolio company’s ability to meet its obligations to the Company under the loans or debt or equity securities held by it. The Company may incur expenses to the extent necessary to seek recovery upon default or to negotiate new terms, which may include the waiver of certain financial covenants, with a defaulting portfolio company.

 

Prepayments of the Company’s debt investments by its portfolio companies could adversely impact its results of operations and ability to make shareholder distributions.

 

The Company is subject to the risk that the debt investments it makes in portfolio companies may be repaid prior to maturity. The Company expects that its investments will generally allow for repayment at any time subject to certain penalties. When this occurs, the Company intends to generally reinvest these proceeds in temporary investments, pending their future investment in accordance with its investment strategy. These temporary investments will typically have substantially lower yields than the debt being prepaid, and the Company could experience significant delays in reinvesting these amounts. Any future investment may also be at lower yields than the debt that was repaid. As a result, the Company’s results of operations could be materially adversely affected if one or more of the Company’s portfolio companies elects to prepay amounts owed to it. Additionally, prepayments could negatively impact the Company’s ability to make, or the amount of, shareholder distributions with respect to the holders of Shares.

 

The effect of global climate change may impact the operations of the Company’s portfolio companies.

 

Climate change creates physical and financial risk and some of the Company’s portfolio companies may be adversely affected by climate change. For example, the needs of customers of energy companies vary with weather conditions, primarily temperature and humidity. To the extent weather conditions are affected by climate change, energy use could increase or decrease depending on the duration and magnitude of any changes. Increases in the cost of energy could adversely affect the cost of operations of the Company’s portfolio companies if the use of energy products or services is material to their business. A decrease in energy use due to weather changes may affect some of the Company’s portfolio companies’ financial condition, through decreased revenues. Extreme weather conditions in general require more system backup, adding to costs, and can contribute to increased system stresses, including service interruptions.

 

The Company’s portfolio companies may incur debt that ranks equally with, or senior to, its investments in such companies and if there is a default, we may experience a loss on our investment.

 

The Company may invest a portion of its capital in second lien, mezzanine and subordinated loans issued by its portfolio companies. The portfolio companies usually have, or may be permitted to incur, other debt that ranks equally with, or senior to, the loans in which the Company invests. By their terms, such debt instruments may provide that the holders are entitled to receive payment of interest or principal on or before the dates on which the Company is entitled to receive payments in respect of the loans in which it invests. Also, in the event of insolvency, liquidation, dissolution, reorganization or bankruptcy of a portfolio company, holders of debt instruments ranking senior to the Company’s investment in that portfolio company would typically be entitled to receive payment in full before the Company receives any distribution in respect of the Company’s investment. After repaying senior creditors, a portfolio company may not have any remaining assets to use for repaying its obligation to the Company. In the case of debt ranking equally with loans in which the Company invest, the Company would have to share any distributions on an equal and ratable basis with other creditors holding such debt in the event of an insolvency, liquidation, dissolution, reorganization or bankruptcy of the relevant portfolio company.

 

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Additionally, certain loans that the Company makes to portfolio companies may be secured on a second priority basis by the same collateral securing senior secured debt of such companies. The first priority liens on the collateral will secure the portfolio company’s obligations under any outstanding senior debt and may secure certain other future debt that may be permitted to be incurred by the portfolio company under the agreements governing the loans. The holders of obligations secured by first priority liens on the collateral will generally control the liquidation of, and be entitled to receive proceeds from, any realization of the collateral to repay their obligations in full before the Company. In addition, the value of the collateral in the event of liquidation will depend on market and economic conditions, the availability of buyers and other factors. There can be no assurance that the proceeds, if any, from sales of all of the collateral would be sufficient to satisfy the loan obligations secured by the second priority liens after payment in full of all obligations secured by the first priority liens on the collateral. If such proceeds were not sufficient to repay amounts outstanding under the loan obligations secured by the second priority liens, then the Company, to the extent not repaid from the proceeds of the sale of the collateral, will only have an unsecured claim against the portfolio company’s remaining assets, if any.

 

The Company may also make unsecured loans to portfolio companies, meaning that such loans will not benefit from any interest in collateral of such companies. Liens on such portfolio companies’ collateral, if any, will secure the portfolio company’s obligations under its outstanding secured debt and may secure certain future debt that is permitted to be incurred by the portfolio company under its secured loan agreements. The holders of obligations secured by such liens will generally control the liquidation of, and be entitled to receive proceeds from, any realization of such collateral to repay their obligations in full before us. In addition, the value of such collateral in the event of liquidation will depend on market and economic conditions, the availability of buyers and other factors. There can be no assurance that the proceeds, if any, from sales of such collateral would be sufficient to satisfy our unsecured loan obligations after payment in full of all secured loan obligations. If such proceeds were not sufficient to repay the outstanding secured loan obligations, then the Company’s unsecured claims would rank equally with the unpaid portion of such secured creditors’ claims against the portfolio company’s remaining assets, if any.

 

The rights the Company may have with respect to the collateral securing the loans the Company makes to portfolio companies with senior debt outstanding may also be limited pursuant to the terms of one or more intercreditor agreements that the Company enter into with the holders of such senior debt. Under a typical intercreditor agreement, at any time that obligations that have the benefit of the first priority liens are outstanding, any of the following actions that may be taken in respect of the collateral will be at the direction of the holders of the obligations secured by the first priority liens:

 

the ability to cause the commencement of enforcement proceedings against the collateral;

 

the ability to control the conduct of such proceedings;

 

the approval of amendments to collateral documents;

 

releases of liens on the collateral; and

 

waivers of past defaults under collateral documents.

 

The Company may not have the ability to control or direct such actions, even if the Company’s rights are adversely affected.

 

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The Company’s portfolio will include exposure to mezzanine investments, which share all of the risks of other high-yield securities and are subject to greater risk of loss of principal and interest than higher-rated securities.

 

A portion of the Company’s debt investments may be made in certain high yield securities known as mezzanine investments, which are subordinated debt securities that may be issued together with an equity security (e.g., with attached warrants). Those mezzanine investments may be issued with or without registration rights. Mezzanine investments can be unsecured and generally subordinate to other obligations of the issuer. The expected average life of the Company’s mezzanine investments may be significantly shorter than the maturity of these investments due to prepayment rights. Mezzanine investments share all of the risks of other high yield securities and are subject to greater risk of loss of principal and interest than higher-rated securities. They are also generally considered to be subject to greater risk than securities with higher ratings in the case of deterioration of general economic conditions. Because investors generally perceive that there are greater risks associated with the lower-rated securities, the yields and prices of those securities may tend to fluctuate more than those for higher-rated securities. The Company does not anticipate a market for its mezzanine investments, which can adversely affect the prices at which these securities can be sold. In addition, adverse publicity and investor perceptions about lower-rated securities, whether or not based on fundamental analysis, may be a contributing factor in a decrease in the value and liquidity of those lower-rated securities. Mezzanine securities are often even more subordinated than other high yield debt, as they often represent the most junior debt security in an issuer’s capital structure.

 

The Company may be exposed to special risks associated with bankruptcy cases.

 

One or more of the Company’s portfolio companies may be involved in bankruptcy or other reorganization or liquidation proceedings. Many of the events within a bankruptcy case are adversarial and often beyond the control of the creditors. While creditors generally are afforded an opportunity to object to significant actions, the Company cannot assure investors that a bankruptcy court would not approve actions that may be contrary to the Company’s interests. There also are instances where creditors can lose their ranking and priority if they are considered to have taken over management of a borrower.

 

To the extent that portfolio companies in which the Company has invested through a unitranche facility are involved in bankruptcy proceedings, the outcome of such proceedings may be uncertain. For example, it is unclear whether a bankruptcy court would enforce an agreement among lenders which sets the priority of payments among unitranche lenders. In such a case, the “first out” lenders in the unitranche facility may not receive the same degree of protection as they would if the agreement among lenders was enforced.

 

The reorganization of a company can involve substantial legal, professional and administrative costs to a lender and the borrower. It is subject to unpredictable and lengthy delays and during the process a company’s competitive position may erode, key management may depart and a company may not be able to invest adequately. In some cases, the debtor company may not be able to reorganize and may be required to liquidate assets. The debt of companies in financial reorganization will, in most cases, not pay current interest, may not accrue interest during reorganization and may be adversely affected by an erosion of the issuer’s fundamental value.

 

In addition, lenders can be subject to lender liability claims for actions taken by them where they become too involved in the borrower’s business or exercise control over the borrower. For example, the Company could become subject to a lender liability claim (alleging that the Company misused its influence on the borrower for the benefit of its lenders), if, among other things, the borrower requests significant managerial assistance from the Company and it provides that assistance. To the extent the Company and an affiliate both hold investments in the same portfolio company that are of a different character, the Company may also face restrictions on its ability to become actively involved in the event that portfolio company becomes distressed as a result of the restrictions imposed on transactions involving affiliates under the 1940 Act. In such cases, the Company may be unable to exercise rights the Company may otherwise have to protect its interests as security holders in such portfolio company.

 

If the Company makes subordinated investments, the obligors or the portfolio companies may not generate sufficient cash flow to service their debt obligations to us.

 

The Company may make subordinated investments that rank below other obligations of the obligor in right of payment. Subordinated investments are subject to greater risk of default than senior obligations as a result of adverse changes in the financial condition of the obligor or economic conditions in general. If the Company makes a subordinated investment in a portfolio company, the portfolio company may be highly leveraged, and its relatively high debt-to-equity ratio may create increased risks that its operations might not generate sufficient cash flow to service all of its debt obligations.

 

The disposition of the Company’s investments may result in contingent liabilities.

 

Substantially all of the Company’s investments involve loans and private securities. In connection with the disposition of an investment in loans and private securities, the Company may be required to make representations about the business and financial affairs of the portfolio company typical of those made in connection with the sale of a business. The Company may also be required to indemnify the purchasers of such investment to the extent that any such representations turn out to be inaccurate or with respect to potential liabilities.

 

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Risks relating to equities/fixed income instrument incidental to loans.

 

From time to time, the Company may also hold common stock, other equity securities or warrants, including equity securities or warrants related to the purchase or ownership of a loan or fixed-income instrument or in connection with a reorganization or restructuring of a borrower or issuer. Investments in equity securities incidental or related to investments in such loans or fixed-income instruments entail certain risks in addition to those associated with investments in loans or fixed-income instruments. Because equity is merely the residual value of an issuer after all claims and other interests, it is inherently more risky than the bonds or loans of the same borrower or issuer. The value of the equity securities may be affected more rapidly, and to a greater extent, by company-specific developments and general market conditions. These risks may increase fluctuations in the Company’s NAV.

 

The Company may not realize gains from its equity investments.

 

When the Company invests in loans and debt securities, it may acquire warrants or other equity securities of portfolio companies as well. The Company may also invest in equity securities directly. To the extent it holds equity investments, the Company will attempt to dispose of them and realize gains upon its disposition of them. However, the equity interests the Company receives may not appreciate in value and may decline in value. As a result, the Company may not be able to realize gains from its equity interests, and any gains that it does realize on the disposition of any equity interests may not be sufficient to offset any other losses it experiences.

 

Risks arising from purchases of secondary debt

 

The Company may invest in secondary loans and secondary debt securities (including loan portfolios). The Company is unlikely to be able to negotiate the terms of secondary loans as part of its acquisition of the debt and, as a result, these investments may not include some of the covenants and protections generally sought when a fund originates loans. For example, indebtedness offered in the debt markets in recent years (so-called “covenant lite” deals) often imposed less stringent covenants on the issuers of such indebtedness than the covenants included in the terms of debt offered in previous periods. Many “covenant lite” loans issued during that time period may not obligate portfolio companies to observe and maintain financial maintenance covenants, such as covenants requiring issuers to comply with a maximum leverage ratio, a minimum interest or fixed charge coverage ratio or maximum capital expenditures. Even if such covenants are included in the loans held by the Company, the terms of the loans may provide portfolio companies substantial flexibility in determining compliance with such covenants.

 

Risks associated with acquisitions of portfolios of loans

 

The Company may invest in portfolios of loans. The Company is unlikely to be able to evaluate the credit or other risks associated with each of the underlying borrowers or negotiate the terms of underlying loans as part of their acquisition but instead must evaluate and negotiate with respect to the entire portfolio of loans or, in the case where the Company invests in contractual obligations to purchase portfolios of loans subsequently originated by a third party, with respect to the origination and credit selection processes of such third party rather than based on characteristics of a static portfolio of loans. As a result, one or more of the underlying loans in a portfolio may not include some of the characteristics, covenants and/or protections generally sought when the Company acquires or originates individual loans. Furthermore, while some amount of defaults may be expected to occur in portfolios, defaults in or declines in the value of investments in excess of these expected amounts may have a negative impact on the value of the portfolio, and may reduce the return that the Company receives in certain circumstances.

 

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Non-performing loans

 

It is possible that certain of the Loans purchased by the Company may be non-performing which may involve workout negotiations, restructuring and the possibility of foreclosure. These processes can be lengthy and expensive. Many of the non-performing loans (“NPLs”) will have been underwritten to “subprime,” “Alternative A-Paper” or “expanded” underwriting guidelines. These underwriting guidelines are different from and, in certain respects, less stringent than the other general underwriting standards employed by originators. For example, these loans may have been originated to borrowers that have poor credit or that provide limited or no documentation in connection with the underwriting of the mortgage loan. Such loans present increased risk standards of delinquency, foreclosure, bankruptcy and loss than prime mortgage loans. An originator generally originates mortgage loans in accordance with underwriting guidelines it has established and, in certain cases, based on exceptions to those guidelines. These guidelines may not identify or appropriately assess the risk that the interest and principal payments due on a mortgage loan will be repaid when due, or at all, or whether the value of the mortgaged property will be sufficient to otherwise provide for recovery of such amounts. To the extent exceptions were made to an originator’s underwriting guidelines in originating an NPL, those exceptions may increase the risk that principal and interest amounts may not be received or recovered and compensating factors, if any, which may have been the premise for making an exception to the underwriting guidelines may not in fact compensate for any additional risk.

 

Additionally, investing in distressed assets such as NPLs can be a contentious and adversarial process. It is by no means unusual for participants to use the threat of, as well as actual, litigation as a negotiating technique. The expense of defending against such claims and paying settlements or judgments will be borne by the Company and this would reduce our net assets.

 

Ratings and/or credit estimates are not a guarantee of quality

 

Credit ratings and/or credit estimates of assets represent the rating agencies’ opinions regarding their credit quality and are not a guarantee of quality or performance. A credit rating or a credit estimate is not a recommendation to buy, sell or hold assets and may be subject to revision or withdrawal at any time by the assigning rating agency. If a credit rating or credit estimate assigned to any Loan is lowered for any reason, no party is obligated to provide any additional support or credit enhancement with respect to such Loan. Rating agencies attempt to evaluate the relative future creditworthiness of an obligation and do not address other risks, including but not limited to, the likelihood of principal prepayments (both voluntary and involuntary), liquidity risk, market value or price volatility; therefore, credit ratings or credit estimates do not fully reflect the true risks of an investment in the related asset. Also, rating agencies may fail to make timely changes in credit ratings in response to subsequent events, so that an obligor’s current financial condition may be better or worse than a rating indicates. Further, rating agencies may change credit rating or credit estimate methodologies. Consequently, credit ratings or credit estimates of any Loan should be used only as a preliminary indicator of perceived investment quality and should not be considered a reliable indicator of actual investment quality. Credit ratings or credit estimates of Loans included in our portfolio or of other loans similar to the Loans may be subject to significant or severe adjustments downward. Credit rating or credit estimate reductions or withdrawals may occur for any number of reasons and may affect numerous assets at a single time or within a short period of time, which may have material adverse effects upon the Company’s investments in Loans.

 

Loans to middle market companies generally will not have a public rating, although some loans may have private ratings and/or credit estimates assigned by, or obtained pursuant to the methodology of, a nationally recognized statistical rating agency. A credit estimate is not identical to a credit rating, and may be assigned using a more limited analysis, based on public information or information supplied by the party requesting the credit estimate. Disclosure of private ratings and/or credit estimates, if any are available, is restricted and any such ratings or estimates are not expected to be disclosed to the Company.

 

The Company will be subject to risks associated with unitranche loans.

 

A unitranche loan blends each tranche of a debt financing into a single tranche combining senior and subordinated loan debt. A unitranche loan in the Company’s investment portfolio will therefore be subject to the same risk factors as senior and subordinated loans set out elsewhere in this Registration Statement. A unitranche loan may, in some cases, have a longer maturity than a senior secured loan and, because it combines senior and subordinated debt, it may be provided in a larger size, often by one or two counterparts as opposed to a club or syndicate. Its broader risk parameters and larger size often lead to more bespoke features, and in some cases the lender taking an observer seat on the borrower’s board.

 

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Risks associated with investing in convertible securities

 

Outside of its primary investment strategy, the Company may acquire convertible securities in connection with a debt investment. Convertible securities are securities that may be converted either at a stated price or at a stated rate within a specified period of time into a specified number of shares of common stock. The value of a convertible security is a function of its investment value and its conversion value. The investment value of a convertible security may be influenced negatively by changes in interest rates, by the credit standing of the issuer and other factors. If the conversion value is low relative to the investment value, the price of the convertible security is governed principally by its investment value. To the extent the market price of the underlying instrument approaches or exceeds the conversion price, the price of the convertible security will be increasingly influenced by its conversion value. A convertible security may be subject to redemption at the option of the issuer at a price established in the convertible security’s governing instrument. If a convertible security held by the Company is called for redemption, the Company will be required to permit the issuer to redeem the security, convert it into the underlying common stock or sell it to a third party, which may adversely affect the Company. The debt characteristic of convertible securities also exposes the Company to changes in interest rates and credit spreads. The value of the convertible securities may fall when interest rates rise or credit spreads widen. The Company’s exposure to these risks may be unhedged or only partially hedged.

 

Investments in seasoned loans

 

The Company intends to purchase Loans originated by Lending Sources or another collective investment scheme or managed account, including Underlying Funds. The Company will generally not participate in any gains (or losses) made by the selling collective investment scheme or managed account in originating and holding the Loan prior to sale. By not exposing such transactions to market forces, the Company may not receive the best price otherwise possible. There can be no assurance that the returns made by the Company and the selling collective investment scheme or managed account will be the same. The returns due to the Company may be diminished by the up-front fees paid to the originating investment scheme or managed account.

 

We may invest in foreign companies or investments denominated in foreign currencies, which may involve significant risks in addition to the risks inherent in U.S. denominated investments.

 

 Our investment strategy contemplates potential investments in foreign companies. Investing in foreign companies may expose us to additional risks not typically associated with investing in U.S. companies. These risks include changes in exchange control regulations, political and social instability, expropriation, imposition of foreign taxes (potentially at confiscatory levels), less liquid markets, less available information than is generally the case in the U.S., higher transaction costs, less government supervision of exchanges, brokers and issuers, less developed bankruptcy laws, difficulty in enforcing contractual obligations, lack of uniform accounting and auditing standards and greater price volatility.

 

Although we expect most of our investments will be U.S. dollar denominated, our investments that are denominated in a foreign currency will be subject to the risk that the value of a particular currency will change in relation to one or more other currencies. Among the factors that may affect currency values are trade balances, the level of short-term interest rates, differences in relative values of similar assets in different currencies, long-term opportunities for investment and capital appreciation and political developments. We may employ hedging techniques to minimize these risks, but we cannot assure you that such strategies will be effective or without risk to us.

 

Risks Relating to Underlying Funds

 

The Company will be subject to risks associated with investments in Underlying Funds.

 

Some of the Underlying Funds may be affected by a number of factors including declines in the value of underlying investments, increasing use of suspensions, defaults, redemption gates, reduction in counterparty availability, prime brokerage default, insolvency and restructurings. The risks associated with investing in such Underlying Funds will closely relate to the risks associated with the investments held by the Underlying Funds. The ability of the Company to achieve its investment objectives will depend upon the ability of the Underlying Funds to achieve their respective investment objectives. There can be no assurance that the investment objectives of any of the Underlying Funds will be achieved. The Company’s NAV will fluctuate in response to changes in the net asset values of the Underlying Funds in which the Company invests. The extent to which the investment performance and risks associated with the Company correlates to those of each of the Underlying Funds will depend upon the extent to which the Company’s assets are allocated from time to time for investment in the Underlying Funds, which may vary.

 

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The Company will also incur higher and duplicative expenses, including advisory fees, when it invests in shares or interests of private and/or registered funds and investment vehicles, including private funds and investment vehicles that are excluded from the definition of “investment company” pursuant to Sections 3(c)(1) or 3(c)(7) of the 1940 Act, non-traded registered closed-end funds and BDCs, and mutual funds and ETFs. There is also the risk that the Company may suffer losses due to the investment practices of the Underlying Funds (such as the use of derivatives). The Underlying Funds may be subject to compensation arrangements based on the performance of such Underlying Fund, which may create an incentive to make investments that are riskier or more speculative than would be the case if such arrangements were not in effect. The shares of listed closed-end funds may also frequently trade at a discount to their NAV. There can be no assurance that the market discount on shares of any closed-end fund purchased by the Company will ever decrease, and it is possible that the discount may increase.

 

The SEC adopted revisions to the rules permitting funds to invest in other investment companies to streamline and enhance the regulatory framework applicable to fund of funds arrangements. While new Rule 12d1-4 permits more types of fund-of-fund arrangements without reliance on an exemptive order or no-action letters, it imposes new conditions, including limits on control and voting of acquired funds’ shares, evaluations and findings by investment advisers, fund investment agreements, and limits on most three-tier fund structures.

 

Over-commitment risk

 

The Company may invest in Underlying Funds which may operate on the basis of commitments and drawdowns from their investors and accordingly commitments to Underlying Funds may not be immediately invested. Therefore, the Company may commit to invest in Underlying Funds in an aggregate amount that exceeds the Company’s NAV plus any undrawn commitments (i.e. to “over-commit”). While the Advisors will make all reasonable efforts to ensure the Company has sufficient liquidity to be able to satisfy capital calls from Underlying Funds, a failure of the Company to meet such a capital call could result in the Company being treated as an investor in default in relation to an Underlying Fund and this could have significant adverse consequences on the value of the Company’s holding in that Underlying Fund.

 

Clawback by Underlying Funds

 

Certain Underlying Funds in which the Company may invest may operate claw-back arrangements whereby the Company may be required to return distributions made to it by such Underlying Funds. Accordingly, the Company’s shareholders should note and accept that the Company, unless prohibited by applicable law, may be required to return distributions or repayments made to it to the relevant Underlying Fund giving rise to such clawback. The Advisors will not be liable for any such clawback imposed upon the Company by Underlying Funds.

 

Regulation of Underlying Funds

 

The Company’s investments in Underlying Funds will primarily be made on a fund-of-funds basis in private investment funds and investment vehicles that are excluded from the definition of “investment company” pursuant to Sections 3(c)(1) or 3(c)(7) of the 1940 Act, managed by non-affiliated third-party managers, but the Company may also invest in the equity or debt of both traded and non-traded registered closed-end funds and BDCs that primarily originate and manage private middle market and specialty finance debt. As such, Underlying Funds may or may not be subject to regulation. The Underlying Funds may be established in regulated and/or unregulated jurisdictions. In certain cases, the jurisdictions in which Underlying Funds are organized will not provide a level of investor protection equivalent to the Company.

 

Litigation and dispute risks

 

An Underlying Fund’s investment activities could subject it to becoming involved in litigation or other disputes with third parties. The expense of prosecuting or defending any such disputes or paying any amounts pursuant to settlements or judgments may be borne by the Underlying Fund and will reduce amounts available for distribution to the Company.

 

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Adverse effect of economic conditions on the Underlying Funds and the portfolio companies

 

The Underlying Fund and the portfolio companies in which they invest may be adversely affected by deteriorations in the financial markets and economic conditions throughout the world, some of which may magnify the risks described in this Registration Statement and have other adverse effects. Deteriorating market conditions could result in increasing volatility and illiquidity in the global credit, debt and equity markets generally. The duration and ultimate effect of adverse market conditions cannot be forecast, nor is it known whether or the degree to which such conditions may remain stable or worsen. Deteriorating market conditions and uncertainty regarding economic markets generally could result in declines in the market values of potential investments or declines in the market values of investments after they are acquired by an Underlying Fund. Such declines could lead to weakened investment opportunities for Underlying Funds, could prevent the Underlying Funds from successfully meeting their respective investment objectives or could require Underlying Funds to dispose of investments at a loss while such unfavorable market conditions prevail.

 

Portfolio valuation of Underlying Funds

 

Certain Underlying Funds may have a limited ability to obtain accurate market quotations for purposes of valuing most of its investments, which may require the relevant investment manager to estimate, in accordance with its established valuation policies, the value of an Underlying Fund’s investments on a valuation date. The investment manager of the relevant Underlying Fund may decide not to obtain an independent appraisal of such investments. Further, because of the overall size and concentrations in particular markets, the maturities of positions that may be held by the relevant Underlying Fund from time to time and other factors, the liquidation values of the relevant Underlying Fund’s investments may differ significantly from the interim valuations of these Underlying Funds derived from the valuation methods described in the relevant offering memorandum. If the relevant investment manager’s valuation should prove to be incorrect, the stated value of the relevant Underlying Fund’s investments could be adversely affected which will subsequently impact the net asset value of such relevant Underlying Fund. The relevant investment manager may delegate its valuation responsibilities to any other person.

 

Underlying Fund investment and trading risks in general

 

All investments made by an Underlying Fund risk the loss of capital. A fundamental risk associated with the Company’s investment strategy is that any portfolio company in whose debt the Underlying Funds invest will be unable to make principal and interest payments when due, or at all to the Underlying Funds. Portfolio companies could deteriorate as a result of, among other factors, an adverse development in their business, a change in the competitive environment, an economic downturn or legal, tax or regulatory changes. Portfolio companies that Underlying Funds expect to remain stable may in fact operate at a loss or have significant variations in operating results, may require substantial additional capital to support their operations or to maintain their competitive position, or may otherwise have a weak financial condition or be experiencing financial distress. Any deterioration in the performance of a portfolio company may result in a consequent negative impact on an Underlying Fund which has invested in it and accordingly the Company is indirectly exposed to the performance of portfolio companies.

 

The characteristics of the Loans held by an Underlying Fund will change as a result of the purchases and sales of Loans. The characteristics of the Loans held by an Underlying Fund will also change over time as a result of scheduled amortization, prepayments, the amount of draws, repayment and termination of revolving Loans, extensions, waivers, modifications, restructuring, work-outs, delinquencies and defaults on Loans. There can be no assurance that the portfolio of Loans owned by an Underlying Fund will have any particular characteristics at any time and the decision to buy Loans or to sell Loans will have a significant impact on those characteristics.

 

The Underlying Funds may also utilize such investment techniques as margin transactions, short sales, option transactions and forward and futures contracts, which practices can, in certain circumstances, maximize the adverse impact to which the Company may be subject. No guarantee or representation is made that an Underlying Fund’s investment program will be successful, and investment results may vary substantially over time. Past results of the Underlying Funds are not necessarily indicative of future performance. No assurance can be made that profits will be achieved or that substantial losses will not be incurred.

 

Trading in securities and other investments that may be illiquid

 

The Underlying Funds intend to primarily invest in private illiquid debt, which is typically subject to significant restrictions on transfer and is difficult to sell in a secondary market. In some cases, an Underlying Fund may be prohibited from selling such investments for a period of time or otherwise be restricted from disposing of such investments. Additionally, not all securities or instruments (if any) invested in by an Underlying Fund will be listed or rated, and may require a substantial length of time to liquidate due to lack of an established market for such investments or other factors. This could prevent an Underlying Fund from liquidating unfavorable positions promptly. Moreover, the accumulation and disposal of holdings in some investments may be time consuming and may need to be conducted at unfavorable prices. An Underlying Fund may also encounter difficulties in disposing of assets at their fair price due to adverse market conditions leading to limited liquidity. Accordingly, an Underlying Fund’s ability to respond to market movements may be impaired, and it may experience adverse price movements upon liquidation of its investments. As a result, there is a significant risk that an Underlying Fund may be unable to realize its investment objectives by sale or other disposition at attractive prices or will otherwise be unable to complete any exit strategy. Even if investments are successful, they are unlikely to produce a realized return to investors for a period of years. Furthermore, a portion of interest on investments may be paid in kind rather than in cash to the Underlying Fund and, in certain circumstances, the Underlying Fund may exit investments through distribution in kind to investors, after which the investor will bear the risk of holding the investment and must make their own disposition decisions. Returns to investors will consequently be uncertain and unpredictable.

 

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Short sales

 

A short sale involves the sale of a security that an Underlying Fund does not own in expectation of purchasing the same security (or a security exchangeable therefore) at a later date at a lower price. In order to deliver to the buyer, an Underlying Fund must borrow the security and later repurchase the security to return it to the lender. Short selling allows the investor to profit from a decline in market price to the extent such decline exceeds the transaction costs and the costs of borrowing the securities. The extent to which an Underlying Fund engages in short sales will depend upon the investment strategy and the opportunities available. A short sale creates the risk of theoretically unlimited loss, in that the price of the underlying security could theoretically increase without limit, thus increasing the cost to an Underlying Fund of buying those securities to cover the short position. There can be no assurance that an Underlying Fund will be able to maintain the ability to repurchase securities in the open market to return to the lender. There also can be no assurance that the securities necessary to cover a short position will be available for purchase at or near prices quoted in the market. Purchasing securities to close out a short position can itself cause the price of the securities to rise further, thereby exacerbating the loss.

 

Risks and Potential Conflicts of Interest Related to the Initial Portfolio Transaction

 

We may pursue less vigorous enforcement of the terms of the Initial Portfolio Transfer Agreement regarding the Initial Portfolio transaction because of our dependence on the Advisor and its affiliates.

 

Under the Initial Portfolio Transfer Agreement pursuant to which we intend to consummate the acquisition of our Initial Portfolio, we have limited recourse against the Seller in the event of breaches of representations or warranties made by the Seller. We may choose not to enforce, or to enforce less vigorously, our rights under the agreement because of our desire to maintain our ongoing relations with, and our reliance on, the Advisor and its affiliates, and this could have an adverse effect on our business.

 

Risks Relating to an Investment in the Shares

 

Our Shares are not listed, and we do not intend to list our Shares, on an exchange, nor are our Shares quoted through a quotation system. Therefore, our shareholders will have limited liquidity and may not receive a full return of invested capital upon selling their Shares or upon liquidation of the Company.

 

Our Shares are illiquid investments for which there is not a secondary market nor is it expected that any such secondary market will develop in the future. We do not intend to list our Shares on a national securities exchange. Liquidity for an investor’s Shares will be limited to participation in our share repurchase program, which may not be for a sufficient number of Shares to meet such investor’s request and which we have no obligation to maintain. In addition, in any repurchase offer, if the amount requested to be repurchased in any repurchase offer exceeds the repurchase offer amount, repurchases of Shares would generally be made on a pro rata basis (based on the number of Shares put to us for repurchases), not on a first-come, first-served basis. In addition, any Shares repurchased pursuant to our share repurchase program may be purchased at a price which may reflect a discount from the purchase price shareholders paid for the Shares being repurchased. See “Item 1. Business – Share Repurchase Program” for a detailed description of the share repurchase program.

 

There is a risk that you may not receive distributions or that our distributions may not grow over time and a portion of our distributions may be a return of capital.

 

We intend to make periodic distributions to our shareholders out of assets legally available for distribution. We may fund our cash distributions to shareholders from any sources of funds available to us, including offering proceeds, borrowings, net investment income from operations, capital gains proceeds from the sale of assets, non-capital gains proceeds from the sale of assets, dividends or other distributions paid to us on account of preferred and common equity investments in portfolio companies and fee and expense reimbursement waivers from the Advisor, if any. We cannot assure you that we will achieve investment results that will allow us to make a specified level of cash distributions or year-to-year increases in cash distributions. Our ability to pay distributions might be adversely affected by the impact of one or more of the risk factors described in this Registration Statement. For example, if the temporary closure of many corporate offices, retail stores, and manufacturing facilities and factories in the jurisdictions, including the United States, affected by the COVID-19 pandemic were to be reinstated and continue for an extended period of time it could result in reduced cash flows to us from our portfolio companies, which could reduce cash available for distribution to our shareholders.

 

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Due to the asset coverage test applicable to us under the 1940 Act as a BDC, we may be limited in our ability to make distributions. To the extent we make distributions to shareholders that include a return of capital, such portion of the distribution essentially constitutes a return of the common shareholder’s original investment in the Company and does not represent income or capital gains. Although such return of capital may not be taxable, such distributions would reduce a shareholder’s adjusted tax basis in its Shares and correspondingly increase such shareholder’s potential tax liability for capital gains, or reduce such shareholder’s loss, on disposition of such Shares. Distributions in excess of a shareholder’s adjusted tax basis in its Shares will constitute capital gains to such shareholder.

 

We have not established any limit on the amount of funds we may use from available sources, such as borrowings, if any, or proceeds from any offering of securities, to fund distributions (which may reduce the amount of capital we ultimately invest in assets).

 

Shareholders should understand that any distributions made from sources other than cash flow from operations or relying on fee or expense reimbursement waivers, if any, from the Advisor are not based on our investment performance and can only be sustained if we achieve positive investment performance in future periods and/or the Advisor continues to make such expense reimbursements, if any. The extent to which we pay distributions from sources other than cash flow from operations will depend on various factors, including the level of participation in our distribution reinvestment plan, how quickly we invest the proceeds from any securities offerings and the performance of our investments. Shareholders should also understand that our future repayments to the Advisor will reduce the distributions that they would otherwise receive. There can be no assurance that we will achieve such performance in order to sustain these distributions or be able to pay distributions at all. The Advisor has no obligation to waive fees or receipt of expense reimbursements, if any.

 

Investors will not know the purchase price per Share at the time they submit their subscription agreements and could receive fewer Shares than anticipated as a result of the 1940 Act requirement that we avoid selling Shares at a net offering price below the net asset value per Share.

 

We intend to sell our Shares at an offering price that we believe reflects the then-calculated NAV per Share as determined in accordance with the Advisor’s valuation policy, but there is no guarantee that this NAV will be equal to the offering price of our Shares at any closing. See “Item 1. Business – Determination of Net Asset Value”. We will modify the offering price of such Shares to the extent necessary to comply with the requirements of the 1940 Act, including the requirement that we not sell our Shares at a net offering price below our NAV per Share unless we obtain the requisite approval from our shareholders.

 

Although the price investors in the Private Offering pay for Shares will generally be based on the NAV per share as of the last calendar day of the applicable month, the most recent NAV per share of such Shares for the month in which an investor makes its investment decision may be significantly different. In addition, investors will not know the exact price of shares in any quarterly tender offer conducted by the Company until after the expiration of the applicable tender offer. In light of the foregoing, an investor may receive shares based on an NAV different than, or tender shares based on an NAV greater than, the NAV per share available publicly at the time the relevant investor submitted their purchase order or tendered their shares, as applicable.

 

If we are unable to raise substantial funds in our ongoing, continuous “best efforts” offering, we may be limited in the number and type of investments we may make, and the value of your investment in us may be reduced in the event our assets under-perform.

 

Our continuous Private Offering will be made on a best-efforts basis, whereby broker-dealers participating in the offering are only required to use their best efforts to sell our Shares and have no firm commitment or obligation to purchase any of our Shares. To the extent that less than the maximum number of Shares is subscribed for, the opportunity for diversification of our investments may be decreased and the returns achieved on those investments may be reduced as a result of allocating all of our expenses among a smaller capital base.

 

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We intend, but are not required, to offer to repurchase your Shares on a quarterly basis. As a result, you will have limited opportunities to sell your Shares.

 

Beginning no later than the second full calendar quarter following our election to be treated as a BDC, and subject to market conditions and the discretion of the Board, we intend to commence a share repurchase program pursuant to which we intend to conduct quarterly repurchase offers. In any such repurchase program, only a limited number of Shares will be eligible for repurchase. In addition, any such repurchases will be at a price equal to the NAV per share as of the last calendar day of the applicable quarter, except that Shares that have not been outstanding for at least one year may be repurchased at 98% of such NAV, in the Company’s discretion. As a result, the price at which we repurchase Shares may be at a discount to the price at which you purchased Shares in the Private Offering. The share repurchase program, if implemented, will include numerous restrictions that limit your ability to sell your Shares, and share repurchases may not be available each quarter. For example, to the extent we choose to repurchase Shares in any particular quarter, we intend to limit the number of Shares to be repurchased in each quarter to no more than 5% of our outstanding Shares (either by number of shares or aggregate NAV) as of the close of the previous calendar quarter. To the extent that the number of Shares put to us for repurchase exceeds the number of Shares that we are able to purchase, we will repurchase Share on a pro rata basis, not on a first-come, first-serve basis. Further, we will have no obligation to repurchase Shares if the repurchase would violate the restrictions on distributions under federal law or Delaware law. These limits may prevent us from accommodating all repurchase requests made in any quarter.

 

We will notify our shareholders of such developments: (i) in our quarterly reports or (ii) by means of a separate notice to you, accompanied by disclosure in a current or periodic report under the Exchange Act. In addition, under the quarterly share repurchase program, if implemented, we will have discretion to not repurchase Shares, to suspend the program, and to cease repurchases. Further, the program may have many limitations and should not be relied upon as a method to sell Shares promptly and at a desired price.

 

The timing of our repurchase offers pursuant to our share repurchase program may be at a time that is disadvantageous to our shareholders, and, to the extent you are able to sell your Shares under the program, you may not be able to recover the amount of your investment in our Shares.

 

In the event a shareholder chooses to participate in our share repurchase program, the shareholder will be required to provide us with notice of intent to participate prior to knowing what the NAV per share of the class of shares being repurchased will be on the repurchase date. Although a shareholder will have the ability to withdraw a repurchase request prior to the repurchase date, to the extent a shareholder seeks to sell shares to us as part of our periodic share repurchase program, the shareholder will be required to do so without knowledge of what the repurchase price of our shares will be on the repurchase date.

 

When we make repurchase offers pursuant to the share repurchase program, we may offer to repurchase Shares at a price that is lower than the price that you paid for our Shares. As a result, to the extent you have the ability to sell your Shares pursuant to our share repurchase program, the price at which you may sell Shares, which will be at a price equal to the NAV per share as of the last calendar day of the applicable quarter (subject to the Early Repurchase Deduction), may be lower than the amount you paid in connection with the purchase of Shares in the Private Offering.

 

The price at which we may repurchase Shares pursuant to our share repurchase program will be determined in accordance with the Advisor’s valuation policy and, as a result, there may be uncertainty as to the value of our Shares.

 

Since our Shares are not publicly traded, and we do not intend to list our Shares on a national securities exchange, the fair value of our Shares may not be readily determinable. Any repurchase of Shares pursuant to our share repurchase program will be at a price equal to the NAV per share as of the last calendar day of the applicable quarter, except that Shares that have not been outstanding for at least one year may be repurchased at 98% of such NAV, in the Company’s discretion. Inputs into the determination of fair value of our Shares require significant management judgment or estimation.

 

In connection with the determination of the fair value of our Shares, investment professionals from the Advisor may use valuations based upon our most recent financial statements and projected financial results. The participation of the Advisor’s investment professionals in our valuation process could result in a conflict of interest as the Advisor’s base management fee is based, in part, on our net assets and our incentive fees will be based, in part, on unrealized losses.

 

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We may be unable to invest a significant portion of the net proceeds of the Private Offering on acceptable terms in an acceptable timeframe.

 

Delays in investing the net proceeds of the Private Offering may impair our performance. We cannot assure you that we will be able to continue to identify investments that meet our investment objectives or that any investment that we make will produce a positive return. We may be unable to invest the net proceeds of our offering on acceptable terms within the time period that we anticipate or at all, which could harm our financial condition and operating results.

 

Before making investments, we may invest the net proceeds of the Private Offering primarily in cash, cash-equivalents, U.S. government securities, repurchase agreements, and/or other high-quality debt instruments maturing in one year or less from the time of investment. This will produce returns that are significantly lower than the returns which we expect to achieve when our portfolio is fully invested in securities and loans meeting our investment objectives. As a result, any distributions that we pay while our portfolio is not fully invested may be lower than the distributions that we may be able to pay when our portfolio is fully invested in securities meeting our investment objectives.

 

Our distributions to shareholders may be funded from expense reimbursements or waivers of investment advisory fees.

 

Substantial portions of our distributions may be funded through the reimbursement of certain expenses by our Advisor and its affiliates, including through the waiver of certain investment advisory fees by our Advisor. Any such distributions funded through expense reimbursements or waivers of advisory fees will not be based on our investment performance and can only be sustained if we achieve positive investment performance in future periods and/or our Advisor and its affiliates continue to make such reimbursements or waivers of such fees. Our future repayments of amounts reimbursed or waived by our Advisor or its affiliates will reduce the distributions that shareholders would otherwise receive in the future. There can be no assurance that we will achieve the performance necessary to be able to pay distributions at a specific rate or at all. Our Advisor and its affiliates have no obligation to waive advisory fees or otherwise reimburse expenses in future periods.

 

Investing in our Shares may involve an above average degree of risk.

 

The investments we make in accordance with our investment objectives may result in a higher amount of risk than alternative investment options and a higher risk of volatility or loss of principal. Our investments in portfolio companies involve higher levels of risk, and therefore, an investment in our Shares may not be suitable for someone with lower risk tolerance. In addition, our Shares are intended for long-term investors who can accept the risks of investing primarily in illiquid loans and other debt or debt-like instruments and should not be treated as a trading vehicle.

 

The net asset value of our Shares may fluctuate significantly.

 

The net asset value and liquidity, if any, of the market for our Shares may be significantly affected by numerous factors, some of which are beyond our control and may not be directly related to our operating performance. These factors include:

 

changes in the value of our portfolio of investments and derivative instruments as a result of changes in market factors, such as interest rate shifts, and also portfolio specific performance, such as portfolio company defaults, among other reasons;

 

changes in regulatory policies or tax guidelines, particularly with respect to RICs or BDCs;

 

loss of RIC tax treatment or BDC status;

 

distributions that exceed our net investment income and net income as reported according to U.S. GAAP;

 

changes in earnings or variations in operating results;

 

changes in accounting guidelines governing valuation of our investments;

 

any shortfall in revenue or net income or any increase in losses from levels expected by investors;

 

departure of our Advisor or certain of its or StepStone Group’s key personnel;

 

general economic trends and other external factors;

 

loss of a major funding source; and

 

the length and duration of the COVID-19 pandemic in the United States as well as worldwide and the magnitude of the resulting economic impact.

 

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Our shareholders may experience dilution in their ownership percentage.

 

Our shareholders do not have preemptive rights to any Shares we issue in the future. To the extent that we issue additional equity interests to new shareholders, holders of our Shares may have their ownership in us diluted and may also experience dilution in the book value and fair value of their Shares.

 

Under the 1940 Act, we generally are prohibited from issuing or selling our Shares at a price below NAV per Share, which may be a disadvantage as compared with certain public companies. We may, however, sell our Shares, or warrants, options, or rights to acquire our Shares, at a price below the current NAV of our Shares if our Board determines that such sale is in our best interests and the best interests of our shareholders, and our shareholders, including a majority of those shareholders that are not affiliated with us, approve such sale. In any such case, the price at which our securities are to be issued and sold may not be less than a price that, in the determination of our Board, closely approximates the fair value of such securities (less any distributing commission or discount). If we raise additional funds by issuing our Shares or senior securities convertible into, or exchangeable for, our Shares, then the percentage ownership of our shareholders at that time will decrease and you will experience dilution.

 

Our shareholders will experience dilution in their ownership percentage if they opt out of our distribution reinvestment plan.

 

We have an “opt out” distribution reinvestment plan pursuant to which shareholders will have their cash distributions automatically reinvested in additional Shares unless they elect to receive their distributions in cash. As a result, our shareholders that “opt out” of our distribution reinvestment plan will experience dilution in their ownership percentage of our Shares over time.

 

Any preferred shares we may issue in the future could adversely affect the value of our Shares.

 

Any preferred shares we may determine to issue in the future may have dividend or conversion rights, liquidation preferences or other economic terms favorable to the holders of such series of preferred shares that could make an investment in our other shares less attractive. In addition, the distributions on any preferred shares we issue must be cumulative. Payment of distributions and repayment of the liquidation preference of preferred shares must take preference over any distributions or other payments to our common shareholders, and preferred shareholders would not be subject to any of our expenses or losses and are not entitled to participate in any income or appreciation in excess of their stated preference (other than any convertible preferred shares that converts into common shares). In addition, under the 1940 Act, any such preferred shares would constitute a “senior security” for purposes of the 150% asset coverage test.

 

Holders of any preferred shares that we may issue will have the right to elect certain members of our Board of Directors and have class voting rights on certain matters.

 

The 1940 Act requires that holders of any preferred shares that we may issue must be entitled as a class to elect two directors at all times. In addition, in accordance with the 1940 Act and the terms of any preferred shares we may issue in the future, if distributions paid upon our preferred shares are unpaid in an amount equal to at least two years of distributions, the holders of our preferred shares will be entitled to elect a majority of our Board of Directors. Holders of our preferred shares may have the right to vote, including in the election of directors, in ways that may benefit their interests but not the interests of holders of our Shares.

 

Our shareholders may be subject to filing requirements under the Exchange Act as a result of an investment in us.

 

Because our Shares are registered under the Exchange Act, ownership information for any person who beneficially owns 5% or more of our Shares must be disclosed in a Schedule 13G or other filings with the SEC. Beneficial ownership for these purposes is determined in accordance with the rules of the SEC, and includes having voting or investment power over the securities. Although we will provide in our quarterly financial statements the amount of outstanding securities and the amount of our investors’ Shares, the responsibility for determining the filing obligation and preparing the filing remains with our investors. In addition, owners of 10% or more of our Shares are subject to reporting obligations under Section 16(a) of the Exchange Act.

 

Our shareholders may be subject to the short-swing profits rules under the Exchange Act as a result of an investment in us.

 

Persons with the right to appoint a director or who hold 10% or more of a class of our Shares may be subject to Section 16(b) of the Exchange Act, which recaptures for the benefit of the issuer profits from the purchase and sale of registered securities within a six-month period.

 

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Item 2. Financial Information.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

The information in this section contains forward-looking statements that involve risks and uncertainties. See “Item 1A. Risk Factors” and “Forward-Looking Statements” for a discussion of the uncertainties, risks and assumptions associated with these statements. You should read the following discussion in conjunction with the financial statements and related notes and other financial information appearing elsewhere in this Registration Statement.

 

Overview

 

We are a newly organized, externally managed, non-diversified closed-end management investment company that has elected to be regulated as a BDC under the 1940 Act. Formed as a Delaware limited liability company on September 26, 2022, we are externally managed by the Advisor, which manages our day-to-day operations and provides us with investment advisory and administrative services pursuant to the terms of the Advisory Agreement and the Administration Agreement. The Advisor is registered as investment adviser with the SEC. We intend to elect to be treated for U.S. federal income tax purposes, and intend to qualify annually thereafter, as a RIC under Subchapter M of the Code, commencing with our taxable year ending on December 31, 2023.

 

The Advisor oversees (subject to the oversight of the Board) the management of our operations and is responsible for making investment decisions with respect to our portfolio pursuant to the terms of the Advisory Agreement. Under the Advisory Agreement, we have agreed to pay the Advisor an annual management fee as well as an incentive fee based on our investment performance.

 

The Advisor has also entered into the Resource Sharing Agreement with StepStone Group, under which certain designated employees of StepStone Group will provide services, including investment advisory, portfolio management and other services, to the Advisor. The Resource Sharing Agreement (i) provides the Company with access to deal flow generated by StepStone Group in the ordinary course of its business; and (ii) provides the Advisor with access to StepStone Group’s investment professionals and non-investment employees. The Advisor is responsible for determining if the Company will participate in deal flow generated by StepStone Group. StepStone Group will also make available its premises, facilities and systems to the Advisor in order for the Advisor to conduct its daily operations. In return for personnel provided and services rendered under the Resource Sharing Agreement, the Advisor will pay StepStone Group on a cost-plus basis.

 

By virtue of the Resource Sharing Agreement, our Advisor is served by experienced investment professionals within StepStone Group, including the members of the Investment Committee, which has primary responsibility for portfolio management regarding the Company’s investment portfolio.

 

The Advisor also serves as the Company’s administrator pursuant to the Administration Agreement and performs certain administrative, accounting and other services for the Company. In consideration of these administrative services, the Company pays the Advisor the Administration Fee in an amount up to 0.30% on an annualized basis of the Company’s net assets. The Administration Fee is calculated based on the Company’s month-end net asset value (as of the close of business on the last calendar day of the applicable month) and payable monthly in arrears. The Administration Fee is an expense paid out of the Company’s net assets.  The Advisor may delegate or sub-contract certain of its services under the Administration Agreement to other entities, including a sub-administrator, and has done so as described below.

 

We are conducting the continuous Private Offering of Shares in reliance on exemptions from the registration requirements of the Securities Act, including the exemption provided by Section 4(a)(2) of the Securities Act and Regulation D promulgated thereunder, and Regulation S under the Securities Act. We are initially offering to sell one class of Shares and may offer additional classes of our Shares in the future. The Company and the Advisor may apply for Multi-Class Exemptive Relief from the SEC that, if granted, will permit the Company to issue multiple classes of Shares with varying sales loads, contingent deferred sales charges, and/or asset-based service and/or distribution fees, the details for which will be finalized at a later date in the Company’s discretion. Sales loads and other fees imposed on certain classes of Shares, if any, may be less than the sales load and other fees for other classes of Shares, which may cause returns between classes to differ from one another. The SEC has not yet granted the Multi-Class Exemptive Relief, and there is no assurance that the relief will be granted.

 

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The Initial Closing of the Private Offering occurred on April 3, 2023, in connection with which we sold 741,800 Shares in exchange for gross proceeds of $18.5 million. We used the proceeds from the Initial Closing, along with borrowings under the MassMutual SPV I Facility, to purchase the Initial Portfolio on April 3, 2023, shortly prior to our election to be regulated as a BDC. See – Recent Developments” below for more information.

 

Investments

 

Our level of investment activity can and is expected to vary substantially from period to period depending on many factors, including the amount of debt available to middle-market companies, the general economic environment and the competitive environment for the type of investments we make.

 

Revenues

 

We plan to principally generate revenues in the form of interest income and, to a lesser extent, capital appreciation on our portfolio investments, including the Loans and Underlying Funds we hold, as well as dividends and other distributions on the equity or other securities we hold. In addition, we plan to generate revenues in the form of non-recurring commitment, closing, origination, prepayment fees, structuring or diligence fees, monitoring fees, fees for providing managerial assistance, consulting fees and performance-based fees.

 

Expenses

 

Our primary operating expenses will include the payment of management and incentive fees and other expenses under the Advisory Agreement and the Administration Agreement, including the Administration Fee, interest expense from financing arrangements and other indebtedness, and other expenses necessary for our operations. The management and incentive fees compensate the Advisor for its work in identifying, evaluating, negotiating, executing, monitoring and servicing our investments.

 

The Advisor oversees our day-to-day operations, including the provision of general ledger accounting, fund accounting, legal services, investor relations, certain government and regulatory affairs activities, and other administrative services, whether provided by the Advisor or by the Sub-Administrator. The Advisor also performs, or oversees the performance by the Sub-Administrator of, our corporate operations and required administrative services, which includes being responsible for the financial records that we are required to maintain and preparing reports for our shareholders and reports filed with the SEC. In addition, the Sub-Administrator assists us in calculating our NAV, overseeing the preparation and filing of tax returns and the printing and dissemination of reports to our shareholders, and the Advisor generally oversees the payment of our expenses and the performance of administrative and professional services rendered to us by others.

 

The Advisor bears all of its own costs incurred in providing investment advisory services to the Company. However, as described in Item 1. Business – Management Agreements,” the Company bears all other expenses related to its investment program. The Advisor provides or arranges for certain administrative services to be provided to the Company. Among those services are: providing office space, adequate personnel, and communications and other facilities necessary for administration of the Company, performing certain administrative functions to support the Company and its service providers, supporting the Board and providing it with information, providing accounting and legal services in support of the Company, compliance testing services (not including any compliance services performed by an outsourced CCO) analyzing the value of the Company’s assets, and reviewing and arranging for payment of the Company’s expenses and other support services. Such administrative services are included in the Administration Fee. See “Item 1. Business – Management Agreements” for more information regarding the expenses borne by us and, thus, our shareholders.

 

SEI Investments Global Funds Services serves as the Company’s Sub-Administrator to provide certain outsourced administration and outsourced accounting services for the Company. In consideration of the outsourced administrative services and outsourced accounting services provided by the Sub-Administrator to the Company, the Advisor pays the Sub-Administration Fee to the Sub-Administrator from the proceeds of the Administration Fee. The Sub-Administration Fee is calculated based on the Company’s month-end net asset value and payable monthly in arrears.

 

The initial operating expenses for the Company, as a new fund, including start-up costs, which may be significant, may be higher than the expenses of an established fund. The Company is expected to incur O&O expenses of approximately $1.3 million in connection with the initial offering of Shares.

 

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O&O Expenses” include all of the fees, costs, charges, expenses, liabilities and obligations incurred in relation to or in connection with the establishment of the Company, the marketing and offering of the Shares (including, among other things, legal, accounting, subscription processing and filing fees and expenses and other expenses pertaining to this offering), and the establishment, organization and creation of the operational structure of the Company and its special purpose vehicle subsidiaries, including travel, lodging, meals, entertainment, legal, accounting, regulatory compliance, fees of professional advisors, printing, postage, regulatory and tax filing fees, and other costs of establishment.

 

Expense Limitation and Reimbursement Agreement

 

The Company has entered into the Expense Limitation Agreement with the Advisor for a one-year term, the Limitation Period. The Advisor and the Company may extend the Limitation Period for a period of one year on an annual basis. Pursuant to the Expense Limitation Agreement, the Advisor has agreed that it will make Required Expense Payments to pay, absorb or reimburse the Company’s aggregate monthly Other Operating Expenses on the Company’s behalf (which, for the avoidance of doubt, may include any Other Operating Expenses incurred prior to the effective date of the Advisory Agreement), to ensure that the Company’s aggregate monthly Other Operating Expenses during the Limitation Period do not exceed the 1.00% Expense Cap (on an annualized basis). For any month in which the Company’s aggregate monthly Other Operating Expenses exceed the Expense Cap, the Advisor will make a Required Expense Payment to the extent necessary to eliminate such excess. The Advisor may also directly pay expenses on behalf of the Company and waive reimbursement under the Expense Limitation Agreement.

 

Under the Expense Limitation Agreement, the Advisor may also elect to make Voluntary Expense Payments to pay or reimburse certain additional fees and expenses of the Company on the Company’s behalf, including all or any portion of a Specified Expense. However, no portion of a Voluntary Expense Payment will be used to pay any interest expense or shareholder servicing and/or distribution fees of the Company. When making a Voluntary Expense Payment, the Advisor will designate, as it deems necessary or advisable, what type of expense it is paying.

 

The Company has no obligation to reimburse or pay the Advisor for any Expense Payment unless the Company has reached the $100 million Offering Proceeds Threshold, following which time, any Expense Payments will be subject to recoupment by the Advisor to the extent that such recoupment would not cause the Company to exceed the Expense Cap. Calculation of the Offering Proceeds Threshold excludes gross proceeds from Shares purchased by the Advisor and by the Company’s directors and officers.

 

See “Item 1. Business – Management Agreements – Expense Limitation and Reimbursement Agreement” for more information.

 

Critical Accounting Estimates

 

Our financial statements are prepared in conformity with GAAP, which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Management will utilize available information, which includes our history, industry standards and the current economic environment, among other factors, in forming the estimates and judgments, giving due consideration to materiality. Actual results may differ from these estimates. In addition, other companies may utilize different estimates, which may impact the comparability of our results of operations to those of companies in similar businesses. Understanding our accounting policies and the extent to which we use management judgment and estimates in applying these policies is integral to understanding our financial statements. We describe our most significant accounting policies in the notes to our financial statements.

 

Critical accounting estimates are those that require the application of management’s most difficult, subjective or complex judgments, often because of the need to make estimates about the effect of matters that are inherently uncertain and that may change in subsequent periods. We will evaluate our critical accounting estimates and judgments required by our policies on an ongoing basis and update them as necessary based on changing conditions. We expect to identify one of our accounting policies, valuation of portfolio investments, specifically the valuation of Level 3 investments, as critical because it involves significant judgments and assumptions about highly complex and inherently uncertain matters, and the use of reasonably different estimates and assumptions could have a material impact on our reported results of operations or financial condition. We also expect that revenue recognition will be identified as a critical accounting estimate. We will describe additional significant accounting policies in the notes to our future financial statements, in addition to those discussed below.

 

Fair Value Measurements

 

The Company is required to report its investments for which current market values are not readily available at fair value. The Company will value its investments in accordance with ASC 820, which defines fair value as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the applicable measurement date. ASC 820 prioritizes the use of observable market prices derived from such prices over entity-specific inputs. Due to the inherent uncertainties of valuation, certain estimated fair values may differ significantly from the values that would have been realized had a ready market for these investments existed, and these differences could be material. See “Item 1. Business – Determination of Net Asset Value” for more information on how we will value our investments.

 

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Revenue Recognition

 

We generate revenues in the form of interest income on debt investments and, to a lesser extent, capital gains and distributions, if any, on equity securities that we may acquire in portfolio companies. Some of our investments may provide for deferred interest payments or PIK interest income. The principal amount of the debt investments and any accrued but unpaid interest generally becomes due at the maturity date.

 

Interest Income

 

Interest income, adjusted for accretion of OID, is recorded on an accrual basis to the extent that such amounts are expected to be collected. We stop accruing interest on investments when it is determined that the collection of future interest payments is no longer probable. Investments that are expected to pay regularly scheduled interest in cash are generally placed on non-accrual status when it is no longer probable that interest cash payments will be collected. Cash interest payments received on investments may be recognized as income or a return of capital depending upon management’s judgment. A non-accrual investment is restored to accrual status if past due principal and interest are paid in cash, and the portfolio company, in management’s judgment, is likely to continue timely payment of its remaining obligations. In connection with our investment in a portfolio company, we will sometimes receive nominal cost equity that is valued as part of the negotiation process with the portfolio company. When we receive nominal cost equity, we will allocate our cost basis in the investment between debt securities and the nominal cost equity at the time of origination. Any resulting discount from recording the loan, or otherwise purchasing a security at a discount, is accreted into interest income over the life of the loan. For our secured borrowings, the interest earned on the entire loan balance will be recorded within interest income and the interest earned by the counterparty will be recorded within interest expense in our Consolidated Statement of Operations.

 

PIK Interest Income

 

Our investments in debt securities may contain PIK interest provisions. PIK interest, which generally represents contractually deferred interest added to the loan balance that is generally due at the end of the loan term, is generally recorded on the accrual basis to the extent such amounts are expected to be collected. We will generally cease accruing PIK interest if there is insufficient value to support the accrual or if we do not expect the portfolio company to be able to pay all principal and interest due. Our decision to cease accruing PIK interest on a loan or debt security involves subjective judgments and determinations based on available information about a particular portfolio company, including whether the portfolio company is current with respect to its payment of principal and interest on its loans and debt securities; financial statements and financial projections for the portfolio company; our assessment of the portfolio company’s business development success; information obtained by us in connection with periodic formal update interviews with the portfolio company’s management and, if appropriate, the private equity sponsor; and information about the general economic and market conditions in which the portfolio company operates. Our determination to cease accruing PIK interest will generally be made well before our full write-down of a loan or debt security. In addition, if it is subsequently determined that we will not be able to collect any previously accrued PIK interest, the fair value of the loans or debt securities would be reduced by the amount of such previously accrued, but uncollectible, PIK interest. The accrual of PIK interest on our debt investments increases the recorded cost bases of these investments in our consolidated financial statements including for purposes of computing the capital gains incentive fee payable by us to the Advisor. To maintain our status as a RIC, certain income from PIK interest may be required to be distributed to our shareholders even though we have not yet collected the cash and may never do so.

 

Distributions

 

To the extent that the Company has taxable income available, the Company expects to pay regular quarterly distributions commencing with the second full calendar quarter after the BDC Election Date. Distributions will be made to shareholders at such times and in such amounts as determined by the Board in its sole discretion, considering factors such as the Company’s earnings, cash flow, capital needs and general financial condition and the requirements of Delaware law. As a result, the Company’s distribution rates and payment frequency may vary from time to time.

 

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Income Taxes

 

The Company has elected to be treated as a BDC under the 1940 Act and intends to elect to be treated as a RIC under the Code. So long as the Company maintains its status as a RIC, it generally will not pay corporate-level U.S. federal income taxes on any ordinary income or capital gains that it distributes at least annually to its shareholders as dividends. Rather, any tax liability related to income earned and distributed by the Company would represent obligations of the Company’s investors and would not be reflected in the financial statements of the Company.

 

The Company will evaluate tax positions taken or expected to be taken in the course of preparing its financial statements to determine whether the tax positions are “more-likely-than-not” to be sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than-not” threshold are reserved and recorded as a tax benefit or expense in the current year. All penalties and interest associated with income taxes are included in income tax expense. Conclusions regarding tax positions are subject to review and may be adjusted at a later date based on factors including, but not limited to, on-going analyses of tax laws, regulations and interpretations thereof.

 

To qualify for and maintain qualification as a RIC, the Company must, among other things, meet certain source-of-income and asset diversification requirements. In addition, to qualify for RIC tax treatment, the Company must distribute to its shareholders, for each taxable year, at least 90% of the sum of (i) its investment company taxable income for that year (without regard to the deduction for dividends paid), which is generally its ordinary income plus the excess, if any, of its realized net short-term capital gains over its realized net long-term capital losses and (ii) its net tax-exempt income.

 

In addition, based on the excise tax distribution requirements, the Company is subject to a 4% nondeductible federal excise tax on undistributed income unless the Company distributes in a timely manner in each taxable year an amount at least equal to the sum of (1) 98% of its ordinary income for the calendar year, (2) 98.2% of capital gain net income (both long-term and short-term) for the one-year period ending October 31 in that calendar year and (3) any income realized, but not distributed, in prior years. For this purpose, however, any ordinary income or capital gain net income retained by the Company that is subject to corporate income tax is considered to have been distributed.

 

Financial Condition, Liquidity and Capital Resources

 

We intend to generate cash primarily from the net proceeds from the Private Offering and from cash flows from interest and fees earned from our investments and principal repayments and proceeds from sales of our investments. We also intend to fund a portion of our investments through borrowings from banks and issuances of senior securities, including before we have fully invested the proceeds of the Private Offering. Our primary use of cash will be to make investments in our portfolio companies, payments of our expenses, payment of cash distributions to our shareholders and repurchases of Shares under our share repurchase program.

 

Credit Facilities

 

We intend to utilize leverage (including through the establishment of wholly-owned financing subsidiaries), to finance our investments and operations. The amount of leverage that we employ will be subject to the restrictions of the 1940 Act and the supervision of the Board. At the time of any proposed borrowing, the amount of leverage we employ will also depend on our Advisor’s assessment of market and other factors.

 

The Company is subject to limitations on leverage applicable to BDCs under the 1940 Act. As a BDC, with certain limited exceptions, the Company is only permitted to borrow amounts such that the Company’s asset coverage ratio, as defined in the 1940 Act, equals at least 150% after such borrowing.

 

We intend to use leverage in the form of borrowings, including loans from certain financial institutions and the issuance of debt, and may form one or more wholly-owned financing subsidiaries in the future in connection therewith. We may also use leverage in the form of the issuance of preferred shares, but do not currently intend to do so, or by using reverse repurchase agreements or similar transactions and derivatives. We may use leverage for investments, working capital, expenses and general corporate purposes (including to pay dividends or distributions).

 

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In determining whether to borrow money or issue debt, we will analyze, as applicable, the maturity, covenant package and rate structure of the proposed borrowings as well as the risks of such borrowings compared to our investment outlook. Any such leverage, if incurred, would be expected to increase the total capital available for investment by the Company.

 

On April 3, 2023, in connection with the acquisition of the Initial Portfolio, we, through SPV Facility I as borrower, entered into the MassMutual SPV I Facility with MassMutual, as the administrative agent and facility servicer, and the lenders party thereto from time to time. Under the MassMutual SPV I Facility, the lenders have made commitments of $200.0 million. The MassMutual SPV I Facility is secured by all of the assets of SPV Facility I and a pledge over 100% of the equity interest we hold in SPV Facility I. See – Recent Developments” below for more information.

 

Contractual Obligations, Off-Balance Sheet Arrangements and Other Liquidity Considerations

 

We have entered into certain contracts under which we may have material future commitments. We have entered into each of the Advisory Agreement and the Administration Agreement with the Advisor to provide us with investment advisory services and administrative services. Payments for investment advisory services under the Advisory Agreement and payment of the Administration Fee under the Administration Agreement are described in “Item 1. Business – Management Agreements.”

 

We are also party to the Sub-Advisory Agreement, under which the Advisor has engaged SGEAIL to provide certain ongoing, non-discretionary investment advice and services to the Advisor in regard to the Advisor’s management of the Company, in exchange for which the Sub-Advisor will receive from the Advisor 20% of the Base Management Fee and Incentive Fee payable to the Advisor by the Company.

 

If any of our contractual obligations are terminated, our costs may increase under any new agreements that we enter into as replacements. We would also likely incur expenses in locating alternative parties to provide the services we receive under the Advisory Agreement, the Sub-Advisory Agreement and the Administration Agreement.

 

We may become a party to financial instruments with off-balance sheet risk in the normal course of our business to meet the financial needs of our portfolio companies. These instruments may include commitments to extend credit and involve, to varying degrees, elements of liquidity and credit risk in excess of the amount recognized in our balance sheet. As of the date of our accompanying unaudited financial statement as of March 31, 2023, we were not party to any off-balance sheet arrangements. As of April 3, 2023, in connection with our acquisition of the Initial Portfolio, we assumed obligations to fund certain delayed draw credit agreements in an aggregate amount equal to $2.3 million, which require us to make future advances during a defined commitment period.

 

Recent Developments

 

Initial Closing/Initial Portfolio Acquisition

 

The Initial Closing of the Private Offering occurred on April 3, 2023, in connection with which we sold 741,800 Shares in exchange for gross proceeds of $18.5 million. We used the proceeds from the Initial Closing, along with borrowings under the MassMutual SPV I Facility, to purchase the Initial Portfolio on April 3, 2023, shortly prior to our election to be regulated as a BDC. See “Item 1. Business – Initial Portfolio” for more information. As of April 3, 2023, we had 742,200 Shares outstanding.

 

As of April 3, 2023, the Initial Portfolio, which comprised all of our investments, had an aggregate amortized cost of $37.4 and an aggregate fair value of $37.4 million. As of April 3, 2023, 100% of the Initial Portfolio comprised of first lien senior secured term loans (including unfunded commitments to fund delayed draw loans) to U.S. private middle-market companies.

 

MassMutual SPV I Facility

 

On April 3, 2023, in connection with the acquisition of the Initial Portfolio, we, through SPV Facility I as borrower, entered into the MassMutual SPV I Facility with MassMutual, as the administrative agent and facility servicer, and the lenders party thereto from time to time.

 

Under the MassMutual SPV I Facility, the lenders have made commitments of $200.0 million. Borrowings under the MassMutual SPV I Facility will generally bear interest at a rate per annum equal to Term SOFR plus a margin of 3.25%, with a 1.0% floor on Term SOFR, and the MassMutual SPV I Facility will have an advance rate of 58% against eligible portfolio assets. The MassMutual SPV I Facility is secured by all of the assets of SPV Facility I and a pledge over 100% of the equity interest we hold in SPV Facility I. The MassMutual SPV I Facility requires payment of (a) a non-use fee during the 18-month availability period of 0.40% on the difference between the average daily outstanding balance under the facility relative to the maximum amount of commitments at such time, and (b) after the 18-month availability period until the stated maturity date, a utilization fee equal to the positive difference, if any, in respect of any period between (i) the amount of interest that would have accrued under the MassMutual SPV I Facility if the principal outstanding thereunder were equal to 75% of the maximum commitment amount in that period, and (ii) the amount of interest that actually accrued under the MassMutual SPV I Facility for such period on the loans advanced thereunder. The Advisor paid, on our behalf, a customary upfront 1.25% commitment fee in connection with the MassMutual SPV I Facility, which amount is subject to reimbursement by us under the Expense Limitation Agreement. The MassMutual SPV I Facility matures on March 31, 2033, unless sooner terminated in accordance with its terms.

 

The MassMutual SPV I Facility also includes various covenants applicable to the Company, in addition to those applicable to SPV Facility I, including covenants relating to certain changes of control of the Company and SPV Facility I. The MassMutual SPV I Facility provides for events of default customary for a facility of its type, including with respect to payment defaults, breach of representations and covenants, cross default provisions, lien and judgment limitations, and bankruptcy.

 

The foregoing description of the MassMutual SPV I Facility does not purport to be complete and is qualified in its entirety by reference to the full text of the agreement, which is attached as an exhibit to this Registration Statement.

 

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Quantitative and Qualitative Disclosures About Market Risk

 

We are subject to financial market risks, including changes in interest rates. A rise in the general level of interest rates can be expected to lead to higher interest rates applicable to the variable rate investments we may hold and to declines in the value of any fixed rate investments we may hold. A rise in interest rates would also be expected to lead to higher cost on our floating rate borrowings, including under the MassMutual SPV I Facility.

 

We expect that our long-term investments will be financed primarily with equity and debt. If deemed prudent, we may use interest rate risk management techniques in an effort to minimize our exposure to interest rate fluctuations. These techniques may include various interest rate hedging activities to the extent permitted by the 1940 Act. Adverse developments resulting from changes in interest rates or hedging transactions could have a material adverse effect on our business, financial condition and results of operations.

 

We plan to invest primarily in illiquid debt securities of private middle-market companies. Most of our investments will not have a readily available market price, and we will value these investments at fair value as determined in good faith pursuant to procedures adopted by the Advisor and overseen by the Board in accordance with the Advisor’s valuation policy. There is no single standard for determining fair value in good faith. As a result, determining fair value requires that judgment be applied to the specific facts and circumstances of each portfolio investment while employing a consistently applied valuation process for the types of investments we make. See “Item 1. Business – Determination of Net Asset Value.

 

From time to time, we may make investments that are denominated in a foreign currency that are subject to the effects of exchange rate movements between the foreign currency of each such investment and the U.S. dollar, which may affect future fair values and cash flows, as well as amounts translated into U.S. dollars for inclusion in our consolidated financial statements. We may use derivative instruments from time to time, including foreign currency forward contracts and cross currency swaps, to manage the impact of fluctuations in foreign currency exchange rates. In addition, we may have the ability to borrow in foreign currencies under any credit facilities or enter into other financing arrangements, which provides a natural hedge with regard to changes in exchange rates between the foreign currencies and U.S. dollar and reduces our exposure to foreign exchange rate differences. We expect to typically be a net receiver of these foreign currencies as related for our international investment positions, and, as a result, our investments denominated in foreign currencies, to the extent not hedged, are expected to benefit from a weaker U.S. dollar and are adversely affected by a stronger U.S. dollar. See “Item 1. Business – Determination of Net Asset Value.

 

Item 3. Properties.

 

We do not own any real estate or other physical properties materially important to our operation or any of our subsidiaries. Our headquarters are currently located at 450 Lexington Avenue, 31st Floor, New York, NY 10017, where we occupy office space provided by the Advisor and StepStone Group. We believe that our office facilities are suitable and adequate for our business as it is contemplated to be conducted.

 

Item 4. Security Ownership of Certain Beneficial Owners and Management.

 

The following table sets forth, as of March 31, 2023, certain ownership information with respect to the Shares for those persons who directly or indirectly own, control or hold with the power to vote 5.0% or more of our outstanding Shares and all of our officers and Directors, individually and as a group. The address for each Director and officer listed below is c/o StepStone Private Credit Fund LLC, 450 Lexington Avenue, 31st Floor, New York, NY 10017.

 

      Percentage of Shares outstanding 
Name  Type of ownership  Shares
owned
  Percentage 
StepStone Group Private Debt LLC (1)   Direct   400   100%
Darren Friedman   N/A       
Ariel Goldblatt   N/A       
Edward U. Gilpin   N/A       
Julie Persily   N/A       
Michael J. Zupon   N/A       
Joseph Cambareri   N/A       
Chris Park   N/A       
Vikas Sharma   N/A       
All Directors and officers as a group (8 persons)          %

 

 

*Represents less than 1.0%.

 

(1) On January 4, 2023, the Advisor, StepStone Group Private Debt LLC, invested $10,000 in Shares as a seed investment in the Company.

 

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Item 5. Directors and Executive Officers.

 

Board of Directors and Executive Officers

 

Our Board of Directors monitors and performs an oversight role with respect to our business and affairs, including oversight over the Advisor’s and Sub-Advisor’s investment practices and performance with respect to the Company, oversight of our financing arrangements, oversight of the valuation of our assets, oversight of compliance with regulatory requirements and oversight of the services, expenses and performance of our service providers. Among other things, our Board of Directors approves the appointment of our Advisor, Sub-Advisor and officers, reviews and monitors the services and activities performed by our Advisor, Sub-Advisor and executive officers, and approves the engagement and reviews the performance of our independent public accounting firm.

 

The Board is composed of five directors, three of whom are not “interested persons,” as defined in Section 2(a)(19) of the 1940 Act, of the Company and are “independent,” as to be determined by the Board. We refer to these individuals as our Independent Directors. Our Board elects our officers, who serve at the discretion of our Board.

 

Directors

 

Information regarding the Board of Directors is as follows:

 

Name   Birth
Year
  Position   Length of
Time
Served
  Other Public Directorships Held by
Director During the Past Five Years
Independent Directors                
Edward U. Gilpin   1961   Director   Since 2023   None.
                 
Julie Persily   1965   Director   Since 2023   Runway Growth Finance Corp. (NASDAQ: RWAY), a BDC; Investcorp Credit Management BDC, Inc. (NASDAQ: ICMB), a BDC; SEACOR Marine Holdings Inc. (NYSE: SMHI), a global marine and support transportation services company
                 
Michael J. Zupon   1960   Director   Since 2023   None.
                 
Interested Directors                
Darren Friedman   1968   Chairperson and Chief Executive Officer   Since 2022  

Agiliti, Inc. (NYSE: AGTI), a service provider to the U.S. healthcare industry

                 
Ariel Goldblatt   1982   Director   Since 2022   None.

 

The address for each director is c/o StepStone Private Credit Fund LLC, 450 Lexington Avenue, 31st Floor, New York, NY 10017.

 

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Biographical Information

 

The Board has determined that each of the above-listed Directors is qualified to serve as our Directors, based on a review of the experience, qualifications, attributes and skills of each Director, including those described below. Each above-named Director has significant experience in the investment or financial services industries and has held management, board or oversight positions in other companies and organizations. Each of the above-named Directors demonstrates high character and integrity and has expertise and diversity of experience to be able to offer advice and guidance to our management.

 

The following is information concerning the business experience of our Board of Directors. Our Directors have been divided into two groups—interested Directors and Independent Directors. Interested Directors are “interested persons” as defined in the 1940 Act.

 

Interested Directors

 

Darren Friedman is a Partner at StepStone, working across the private equity and private debt businesses.  Mr. Friedman co-Chairs the firm’s Private Equity Investment Committee and is a member of several Private Debt Investment Committees. He also co-leads the firm’s private equity co-investment practice and is a member of the private equity executive committee. Prior to joining StepStone in 2010, Mr. Friedman was a Managing Partner at Citi Private Equity, a US$10+ billion private equity and mezzanine asset management business. Before that he worked in the investment banking division at Salomon Smith Barney, where he managed the firm’s relationships with private equity funds and their portfolio companies, completing numerous capital market and M&A transactions. Mr. Friedman received his BS from the University of Illinois and MBA from the Wharton School of the University of Pennsylvania.

 

Ariel Goldblatt is a partner and member of the private debt team at StepStone Group. Prior to joining StepStone Group in April 2019, Ms. Goldblatt was a director of business development at CNBC, Inc., where she led business development and M&A activity. Prior to that, Ms. Goldblatt was a senior analyst at Eachwin Capital, L.P. an institutionally oriented investment management firm, from February 2013 to February 2017. Before that she worked in private equity, private credit and investment banking at Apax Partners LLP, Crescent Capital Group L.P. and Merrill Lynch & Co. Ms. Goldblatt received her MBA from The Wharton School, University of Pennsylvania and her BS in finance from the Schreyer Honors College, Pennsylvania State University.

 

Independent Directors

 

Edward U. Gilpin has served as the Managing Director, Finance of Onex Falcon Investment Advisors, LLC (“Onex Falcon”) and Chief Financial Officer and Treasurer of Onex Falcon Direct Lending BDC Fund since April of 2022. Mr. Gilpin has more than 30 years of experience in financial services. Prior to joining Onex Falcon full time, Mr. Gilpin was a financial consultant at Onex Falcon from June of 2021 to April of 2022. Mr. Gilpin was also a financial consultant at Advantage Capital Holdings, Inc. from January 2021 to May 2022, and was at BC Partners from April 2019 until March 2021, where he was the Chief Financial Officer of Portman Ridge Finance Corp. a public BDC, of BCPL a non-traded BDC, and of Mount Logan Capital a Canadian Public Company. Prior to joining BC Partners, Mr. Gilpin served as the Executive Vice President and Chief Financial Officer of KCAP Financial Inc. (NASDAQ: KCAP), an internally managed, publicly traded BDC from June 2012 to April 2019. Prior to KCAP, he served as Executive Vice President and Chief Financial Officer of Ram Holdings, Ltd. (NASDAQ: RAMR), a provider of financial guaranty reinsurance, and prior to that he was the Executive Vice President, Chief Financial Officer and Director of ACA Capital Holdings, Inc. (NYSE: ACA), a holding company that provided asset management services and credit protection products. Mr. Gilpin has also served as: Vice President in the Financial Institutions Group at Prudential Securities, Inc.’s investment banking division; CFO of WCA, an affiliate of ACA Capital, Director; Chief of Staff for MBIA Insurance Company; and Vice President in the Mutual Funds Department of BHC Securities, Inc. Mr. Gilpin holds an M.B.A. from Columbia University and a B.S. from St. Lawrence University.

 

Julie Persily has served since 2017 as a member of the board of directors of Runway Growth Finance Corp. (NASDAQ: RWAY), a BDC, has served since 2013 as a member of the board of directors of Investcorp Credit Management BDC, Inc. (NASDAQ: ICMB), a BDC, and has served since 2018 on the board of directors of SEACOR Marine Holdings Inc. (NYSE: SMHI), a global marine and support transportation services company. Ms. Persily served as the Co-Head of Leveraged Finance and Capital Markets of Nomura Securities North America, a unit of Nomura Holdings Inc. (NYSE: NMR), a securities and investment banking company, from July 2010 until her retirement in 2011. Ms. Persily previously served in various capacities at Citigroup Inc. (NYSE: C), a financial services company, including as the Co-Head of Leveraged Finance Group from December 2006 to November 2008, the Head of Acquisition Finance Group from December 2001 to November 2006 and as Managing Director from July 1999 to November 2001. From 1990 to 1999, Ms. Persily served in various capacities including as a Managing Director, Leveraged Finance at BT Securities Corp., a financial services company and a subsidiary of Bankers Trust Corp., which was acquired by Deutsche Bank in April 1999. From 1987 to 1989, Ms. Persily served as an analyst at Drexel Burnham Lambert, a securities and investment banking company. Ms. Persily received a B.A. in psychology and economics from Columbia College and a M.B.A. in financing and accounting from Columbia Business School.

 

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Michael J. Zupon is a Senior Advisor to DigitalBridge Credit (“DigitalBridge”), a private credit platform focused on funding global opportunities in digital infrastructure. Mr. Zupon has over 30 years of investment experience managing leveraged loan, high yield bond, distressed debt, mezzanine debt and private equity investments.

 

Prior to joining DigitalBridge in 2020, Mr. Zupon was a managing director and the Chief Investment Officer of the Allianz Global Investors’ (“AllianzGI”) US Private Credit Solutions team. Mr. Zupon joined AllianzGI in January 2017 following the acquisition by AllianzGI of Sound Harbor Partners’ investment funds. Mr. Zupon founded Sounded Harbor Partners’ in 2009 to provide private credit to US companies.

 

Prior to founding Sound Harbor in 2009, Mr. Zupon was a managing director at The Carlyle Group from 1999-2009 and was a partner and member of its management committee. Mr. Zupon founded Carlyle’s Leveraged Finance business and led its growth to over $13 billion of assets under management. As head of U.S. Leveraged Finance, Mr. Zupon served as Chief Investment Officer, loan portfolio manager and special situations portfolio manager. Mr. Zupon developed and led Carlyle’s global expansion in credit and entry into secured loans, mezzanine debt and distressed investing. Mr. Zupon was a member of the Investment Committees to Carlyle Strategic Partners, a distressed fund and Carlyle Mezzanine Partners and served on the board of Carlyle Europe Leveraged Finance.

 

Prior to Carlyle, Mr. Zupon was a Managing Director at Merrill Lynch and Banc of America Securities (f.k.a. NationsBanc Markets, Inc.), where he managed a department responsible for its leveraged loan underwriting business. Earlier, Mr. Zupon worked at Canadian Imperial Bank of Commerce’s Acquisition Finance Group (CIBC). Mr. Zupon earned a B.S. in Business from Miami University of Ohio.

 

Officers Who are Not Directors

 

Information regarding our executive officers who are not Directors, as well as our Chief Compliance Officer, who is not an executive officer of the Company, is as follows:

 

Name  Birth Year  Position
Joseph Cambareri  1978  Chief Financial Officer and Corporate Secretary
Chris Park  1979  Treasurer
Vikas Sharma  1979  Chief Compliance Officer

 

The address for each executive officer is c/o StepStone Private Credit Fund LLC, 450 Lexington Avenue, 31st Floor, New York, NY 10017.

 

Joseph Cambareri is the Company’s Chief Financial Officer and Corporate Secretary and a Managing Director and member of the private debt team at StepStone Group.  Prior to joining StepStone Group in November 2022, Mr. Cambareri was the Chief Financial Officer of Credit Value Partners, a registered investment adviser focusing on high-yielding, stressed and distressed corporate debt investments, from November 2010 to September 2019 and March 2021 to November 2022.  Prior to that, Mr. Cambareri was a Controller at Solar Capital Ltd., a publicly listed middle-market BDC, from May 2008 to October 2010. Before joining Solar Capital, Mr. Cambareri was a manager at Morgan Stanley in Loan Operations and Accounting. From September 2019 to March 2021, Mr. Cambareri was also the Chief Accounting Officer at Churchill Asset Management, a large private credit manager. Mr. Cambareri is a Certified Public Accountant and has a B.S. in Accounting and Finance and an MBA from New York University Stern School of Business.

 

Chris Park is the Company’s Treasurer and a vice president and member of the finance and accounting team at StepStone Group. Prior to joining StepStone Group in October 2022, Mr. Park was a consultant at DigitalBridge, a digital infrastructure firm, from June 2021 to September 2022. Prior to that, Mr. Park was vice president at Allianz Global Investors as a member of the US private credit solutions team from January 2017 to May 2020. Before that, Mr. Park worked in investment operations at Sound Harbor Partners from January 2013 to December 2016 and at Aladdin Capital Management from May 2006 to December 2012. Mr. Park received his B.A. in economics from the University of Southern California.

 

Vikas Sharma is the Company’s Chief Compliance Officer and a Director at ACA Group. Prior to joining ACA Group in November 2022, Mr. Sharma was Deputy Chief Compliance Officer at Nephila Capital Ltd., a registered investment adviser focused on insurance-linked securities and climate risk, from March 2021 to October 2022. Prior to that, Mr. Sharma was Senior Compliance Officer at CORE CCO, which is a Compliance Consulting Firm, from June 2020 to February 2021. Prior to that, Mr. Sharma was a Senior Vice President of Compliance at Hudson Advisors, which is a large private equity fund focused on distressed opportunities and real estate, from 2016 to 2020. Prior to that, Mr. Sharma was a Manager of Compliance at Stellus Capital, a publicly listed middle-market BDC, from 2012 to 2016. Prior to that, Mr. Sharma was an Associate at D.E. Shaw in middle market loan division. Mr. Sharma has a B.Com in Accounting and Finance and an MBA from Symbiosis International University in India.

 

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Communications with Directors

 

Shareholders and other interested parties may contact any member (or all members) of the Board of Directors by mail. To communicate with the Board, any individual Directors or any group or committee of Directors, correspondence should be addressed to the Board of Directors or any such individual Directors or group or committee of Directors by either name or title. All such correspondence should be sent c/o StepStone Private Credit Fund LLC, 450 Lexington Avenue, 31st Floor, New York, NY 10017, Attention: Chief Compliance Officer.

 

Committees of the Board of Directors

 

Our Board of Directors has established an audit committee (the “Audit Committee”), and a nominating and corporate governance committee (the “Nominating and Corporate Governance Committee”) and may establish additional committees in the future. We do not plan to have a compensation committee because our executive officers do not receive any direct compensation from us.

 

All Directors are expected to attend at least 75% of the aggregate number of meetings of our Board of Directors and of the respective committees on which they serve. We require each director to make a diligent effort to attend all Board of Directors and committee meetings as well as any annual meeting of our unitholders.

 

Audit Committee

 

The members of the Audit Committee are Edward U. Gilpin, Julie Persily and Michael J. Zupon, each of whom is financially literate, is not considered an “interested person” of the Company, as that term is defined in Section 2(a)(19) of the 1940 Act, and meets the independence requirements of Rule 10A(m)(3) of the Exchange Act. Mr. Gilpin serves as Chair of the Audit Committee. Our Board of Directors has determined Mr. Gilpin is an “audit committee financial expert” as that term is defined under Item 407 of Regulation S-K of the Exchange Act. The Audit Committee operates pursuant to a charter approved by our Board of Directors, which sets forth the responsibilities of the Audit Committee. The Audit Committee charter will be available on our website at https://stepstonegroup.sharesecurely.com/login.

 

The Audit Committee’s responsibilities include establishing guidelines and overseeing the valuation process for certain of our loans and investments, selecting our independent registered public accounting firm, reviewing with such independent registered public accounting firm the planning, scope and results of their audit of our financial statements, pre-approving the fees for services performed, reviewing with the independent registered public accounting firm the adequacy of internal control systems, reviewing our annual financial statements and periodic filings and receiving our audit reports and financial statements.

 

Nominating and Corporate Governance Committee

 

The members of the Nominating and Corporate Governance Committee are Edward U. Gilpin, Julie Persily and Michael J. Zupon, each of whom is not considered an “interested person” of the Company, as that term is defined in Section 2(a)(19) of the 1940 Act. Mr. Zupon serves as Chair of the Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee operates pursuant to a charter approved by our Board of Directors. The Nominating and Corporate Governance Committee charter will be available on our website at https://stepstonegroup.sharesecurely.com/login. The Nominating and Corporate Governance Committee is responsible for selecting, researching and nominating qualified nominees to be elected to the Board of Directors, selecting qualified nominees to fill any vacancies on our Board of Directors or a committee of the Board of Directors (consistent with criteria approved by our Board of Directors) and overseeing the Company’s corporate governance generally, as well as the evaluation of our Board of Directors and our management.

 

The Nominating and Corporate Governance Committee has not adopted a formal policy with regard to the consideration of diversity in identifying director nominees. In determining whether to recommend a director nominee, the Nominating and Corporate Governance Committee considers and discusses director diversity, among other factors, with a view toward the needs of our Board of Directors as a whole. The Nominating and Corporate Governance Committee generally conceptualizes diversity expansively, including concepts such as race, gender, national origin, differences of viewpoint, professional experience, education, skill and other qualities that contribute to our Board of Directors, when identifying and recommending director nominees. The Nominating and Corporate Governance Committee believes that the inclusion of diversity as one of many factors considered in selecting director nominees is consistent with the Nominating and Corporate Governance Committee’s goal of creating a Board of Directors that best serves our needs and the interests of our unitholders.

 

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Board Leadership Structure

 

Our Board of Directors monitors and performs an oversight role with respect to our business and affairs, including oversight over the Advisor’s and Sub-Advisor’s investment practices and performance with respect to the Company, oversight of our financing arrangements, oversight of the valuation of our assets, oversight of compliance with regulatory requirements and oversight of the services, expenses and performance of our service providers. Among other things, our Board of Directors approves the appointment of our Advisor, Sub-Advisor and officers, reviews and monitors the services and activities performed by our Advisor, Sub-Advisor and executive officers, and approves the engagement and reviews the performance of our independent public accounting firm.

 

Under our Limited Liability Company Agreement, our Board of Directors may designate a Chair to preside over the meetings of our Board of Directors and meetings of the shareholders and to perform such other duties as may be assigned to him or her by the Board of Directors. We do not have a fixed policy as to whether the Chair of the Board of Directors should be an independent director and believe that we should maintain the flexibility to select the Chair and reorganize the leadership structure, from time to time, based on criteria that are in our best interests and the best interests of our shareholders at such times.

 

Presently, Darren Friedman serves as the Chair of our Board of Directors. Mr. Friedman is an “interested person” as defined in Section 2(a)(19) of the 1940 Act of the Company, and therefore, is an interested director. We believe that Mr. Friedman’s extensive knowledge of the financial services industry and capital markets in particular qualify him to serve as the Chair of our Board of Directors. We believe that we are best served through this existing leadership structure, as Mr. Friedman’s relationship with the Advisor and StepStone provides an effective bridge and encourages an open dialogue between management and our Board of Directors, ensuring that both groups act with a common purpose.

 

Our Board of Directors does not currently have a designated lead independent director. The Board believes that its leadership structure is appropriate in light of the characteristics and circumstances of the Company because the structure allocates areas of responsibility among the individual directors and the committees in a manner that enhances effective oversight. The Board also believes that its relatively small size creates a highly efficient governance structure that provides ample opportunity for direct communication and interaction between our Advisor and the Board.

 

We are aware of the potential conflicts that may arise when a non-independent director is Chair of the Board of Directors. We believe these potential conflicts are offset by our strong corporate governance, which includes regular meetings of the Independent Directors in executive session without the presence of interested directors and management, the establishment of the Audit Committee and the Nominating and Corporate Governance Committee, each of which is comprised solely of Independent Directors, and the appointment of a Chief Compliance Officer, with whom the Independent Directors meet regularly without the presence of interested directors and other members of management, for administering our compliance policies and procedures.

 

We recognize that different board of directors’ leadership structures are appropriate for companies in different situations. We intend to re-examine our corporate governance policies on an ongoing basis to ensure that they continue to meet our needs.

 

Board of Directors’ Role in Risk Oversight

 

Our Board of Directors performs its risk oversight function primarily through (a) its standing Audit Committee, which reports to the entire Board of Directors and is comprised solely of Independent Directors, and (b) active monitoring by our Chief Compliance Officer and of our compliance policies and procedures.

 

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As described below in more detail under “Committees of the Board of Directors,” the Audit Committee assists our Board of Directors in fulfilling its risk oversight responsibilities. The Audit Committee’s risk oversight responsibilities include overseeing the accounting and financial reporting processes, our valuation process, our systems of internal controls regarding finance and accounting and audits of our financial statements.

 

Our Board of Directors also performs its risk oversight responsibilities with the assistance of the Chief Compliance Officer. Our Board of Directors will annually review a written report from the Chief Compliance Officer discussing the adequacy and effectiveness of our compliance policies and procedures and our service providers. The Chief Compliance Officer’s annual report will address, at a minimum, (a) the operation of our compliance policies and procedures and our service providers since the last report; (b) any material changes to such policies and procedures since the last report; (c) any recommendations for material changes to such policies and procedures as a result of the Chief Compliance Officer’s annual review; and (d) any compliance matter that has occurred since the date of the last report about which our Board of Directors would reasonably need to know to oversee our compliance activities and risks. In addition, the Chief Compliance Officer will meet separately in executive session with the Independent Directors at least once each year.

 

We believe that our Board of Directors’ role in risk oversight is effective and appropriate given the extensive regulation to which we are subject as a BDC. As a BDC, we are required to comply with certain regulatory requirements that control the levels of risk in our business and operations. For example, our ability to incur indebtedness is limited such that our asset coverage, as defined in the 1940 Act, must equal at least 150% immediately after each time we incur indebtedness, and we generally have to invest at least 70% of our total assets in “qualifying assets.” In addition, we are not generally permitted to invest in any portfolio company in which one of our affiliates currently has an investment.

 

We recognize that different board roles in risk oversight are appropriate for companies in different situations. We intend to re-examine the manners in which our Board of Directors administers its oversight function on an ongoing basis to ensure that they continue to meet our needs.

 

Portfolio Management

 

Investment Committee

 

The Advisor carries out portfolio management through its Investment Committee, which is currently comprised of Ariel Goldblatt (Chair), Darren Friedman, Urs von Büren, Geoffrey Dolan and John Bohill. As the Advisor’s Investment Committee, these individuals have primary responsibility for ongoing research, recommendations, and portfolio management regarding the Company’s investment portfolio. For biographical information of Ms. Goldblatt and Mr. Friedman see “— Biographical Information — Interested Directors” above.

 

Urs Von Büren is a member of the StepStone Group private debt team. He is also involved in various advisory and portfolio management activities. Prior to StepStone, Mr. von Büren held various roles in private credit with UBS in Zurich and London. Mr. von Büren holds a diploma as a banking specialist.

 

Geoffrey Dolan is a member of the StepStone Group private equity team, focusing on co-investments and global buyout managers. Prior to joining StepStone in 2011, Mr. Dolan was an associate at KarpReilly, a private equity firm focused on the consumer industry. Before that he was an analyst in Bear Stearns’ investment banking group, where he worked on a variety of M&A, equity and debt transactions, mainly in the real estate, gaming and lodging sectors. Mr. Dolan graduated with honors with a BS from Rutgers University.

 

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John Bohill is a member of the StepStone Group private debt team. He is also involved in StepStone’s responsible investing initiative. Since Mr. Bohill joined StepStone in 2013, he has also been a director at Kish Capital, a distressed debt, real estate opportunities, and non-performing loan investor based in Dublin and Lisbon. Before joining Kish he acquired and operated several businesses on his own behalf, and was co-head of European technology and communications at BancBoston Capital, a principal private equity investor. Mr. Bohill graduated with first-class honors with a BBS in finance from Trinity College, Dublin.

 

The individuals that comprise the Investment Committee are subject to change, at any time, at the discretion of the Advisor and StepStone Group, and no assurance can be given that such personnel will remain in their current positions or retain their current functions with regard to the Advisor. Also, the Advisor may change the scope of the function of the Investment Committee or the investment teams’ responsibilities from time to time, or may conduct periodic portfolio reviews through other internal management committees within guidelines and constraints approved by the Advisor.

 

The Advisor undertakes no obligation to update the foregoing description relating to the management team and the Investment Committee of the Advisor in the event of a change in personnel or in the scope of responsibilities.

 

Investment Committee Compensation Structure

 

StepStone’s philosophy on compensation is to provide senior investment professionals’ incentives that are tied to both short-term and long-term performance of StepStone. All investment professionals are salaried. Further, all investment professionals are eligible for a short-term incentive bonus each year that is discretionary and based upon the investment professional’s performance, as well as the performance of the business.

 

For their service as Investment Committee members of the Advisor, each member receives a salary, a discretionary bonus, and certain retirement benefits from StepStone.

 

Additionally, each has equity interests in StepStone and may indirectly benefit from the success of the Company based on their ownership interest.

 

Item 6. Executive Compensation.

 

Compensation of Executive Officers

 

The Company’s executive officers, who are each paid employees of StepStone Group, do not receive any direct compensation from the Company. The Company does not currently have any employees and does not expect to have any employees. As an externally managed BDC, services necessary for the Company’s business will be provided by individuals who are employees of the Advisor or its affiliates, including StepStone Group, or by individuals who are contracted by the Advisor, the Company or their respective affiliates to work on behalf of the Company, pursuant to the terms of the Advisory Agreement, the Sub-Advisory Agreement and the Administration Agreement.

 

Compensation of Directors

 

The Company will not pay compensation to its Directors who also serve in an executive officer capacity for the Company or the Advisor. The independent directors will receive an annual fee of $50,000 (prorated for any partial year) for their service on the Board (including service on any committees). The Company is also authorized to pay the reasonable out-of-pocket expenses for each Independent Director incurred in connection with fulfillment of his or her duties as Independent Directors.

 

We have obtained directors’ and officers’ liability insurance on behalf of our directors and officers. We do not have a profit-sharing or retirement plan, and directors do not receive any pension or retirement benefits. No compensation is paid to directors who are “interested persons.” The Board of Directors reviews and determines the compensation of Independent Directors.

 

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Item 7. Certain Relationships and Related Transactions, and Director Independence.

 

Director Independence

 

While we are not listed on any public securities exchange, we intend to comply with listing standards of the New York Stock Exchange (“NYSE”) requiring listed companies to have a board of directors with at least a majority of independent directors. The NYSE listing standards provide that a director of a BDC will be considered to be independent if he or she is not an “interested person” of the Company, as defined in Section 2(a)(19) of the 1940 Act.

 

Based on these standards, the Board has determined that Edward U. Gilpin, Julie Persily and Michael J. Zupon are independent (or not “interested persons” of the Company). Based upon information requested from each such Director concerning his or her background, employment and affiliations, the Board has affirmatively determined that none of the Independent Directors has a material business or professional relationship with the Company, other than in his or her capacity as a member of the Board or any committee thereof. All of the members of the Audit Committee and Nominating and Corporate Governance Committee are not “interested persons” as defined in Section 2(a)(19) of the 1940 Act.

 

Certain Relationships and Related Transactions

 

The Company will be subject to certain conflicts of interest with respect to the services the Advisor, the Sub-Advisor and their respective affiliates provide to us. You should be aware that individual conflicts will not necessarily be resolved in favor of your interest. The ensuing list of conflicts does not purport to be a complete enumeration or explanation of the actual and potential conflicts involved in an investment in the Company.

 

The members of the senior management and investment teams of the Advisor, the Sub-Advisor and their respective affiliates serve or may serve as officers, directors or principals of entities that operate in the same or a related line of business as the Company does, or of investment vehicles managed by the same personnel. For example, the officers, managers and other personnel of the Advisor, the Sub-Advisor and their respective affiliates may serve in management roles or similar capacities for the investment advisers to future investment vehicles affiliated with StepStone. In the future, these persons and other affiliates of StepStone may organize other debt-related programs and acquire for their own account debt-related investments that may be suitable for us.

 

In serving in these multiple and other capacities, they may have obligations to other clients or investors in those entities, the fulfillment of which may not be in the Company’s best interests or in the best interest of our shareholders. The Company’s investment objectives may overlap with the investment objectives of such investment funds, accounts or other investment vehicles.

 

Investment Advisory Agreement, Sub-Advisory Agreement and Administration Agreement

 

Pursuant to the Advisory Agreement, the Advisor provides us with investment advisory services for which we will pay the Advisor a Base Management Fee, monthly in arrears at an annual rate of 1.00% of the value of Company’s net assets as of the beginning of the first calendar day of the applicable month, as well as an Incentive Fee based on performance. The Advisor has engaged SGEAIL to act as the Company’s Sub-Advisor to provide certain ongoing, non-discretionary investment advice and services to the Advisor in regard to the Advisor’s management of the Company, in exchange for which the Sub-Advisor will receive from the Advisor 20% of the Base Management Fee and Incentive Fee payable to the Advisor by the Company. See “Item 1. Business – Management Agreements” for a description of how the fees payable to the Advisor and Sub-Advisor are determined.

 

The Incentive Fee will be computed and paid on income that we may not have yet received in cash. This fee structure may create an incentive for our Advisors to invest in certain types of securities that may have a high degree of risk. We rely on input from investment professionals from our Advisor to value our portfolio investments.

 

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Our Advisor’s Base Management Fee and Incentive Fee will be based on the value of our investments, and there may be a conflict of interest when personnel of our Advisor assist in determining periodic fair values for our portfolio investments.

 

The Advisor also serves as the Company’s administrator pursuant to the Administration Agreement and performs certain administrative, accounting and other services for the Company. In consideration of these administrative services, the Company pays the Advisor the Administration Fee in an amount up to 0.30% on an annualized basis of the Company’s net assets. The Administration Fee is calculated based on the Company’s month-end net asset value (as of the close of business on the last calendar day of the applicable month) and payable monthly in arrears. The Administration Fee is an expense paid out of and based on the Company’s net assets, and there may be a conflict of interest when personnel of our Advisor assist in determining periodic fair values for our portfolio investments

 

Expense Limitation Agreement

 

The Company has entered into the Expense Limitation Agreement with the Advisor for a one-year term, the Limitation Period. The Advisor and the Company may extend the Limitation Period for a period of one year on an annual basis. Pursuant to the Expense Limitation Agreement, the Advisor has agreed that it will make Required Expense Payments to pay, absorb or reimburse the Company’s aggregate monthly Other Operating Expenses on the Company’s behalf (which, for the avoidance of doubt, may include any Other Operating Expenses incurred prior to the effective date of the Advisory Agreement), to ensure that the Company’s aggregate monthly Other Operating Expenses during the Limitation Period do not exceed the 1.00% Expense Cap (on an annualized basis). For any month in which the Company’s aggregate monthly Other Operating Expenses exceed the Expense Cap, the Advisor will make a Required Expense Payment to the extent necessary to eliminate such excess. The Advisor may also directly pay expenses on behalf of the Company and waive reimbursement under the Expense Limitation Agreement.

 

Under the Expense Limitation Agreement, the Advisor may also elect to make Voluntary Expense Payments to pay or reimburse certain additional fees and expenses of the Company on the Company’s behalf, including all or any portion of a Specified Expense. However, no portion of a Voluntary Expense Payment will be used to pay any interest expense or shareholder servicing and/or distribution fees of the Company. When making a Voluntary Expense Payment, the Advisor will designate, as it deems necessary or advisable, what type of expense it is paying.

 

The Company has no obligation to reimburse or pay the Advisor for any Expense Payment unless the Company has reached the $100 million Offering Proceeds Threshold, following which time, any Expense Payments will be subject to recoupment by the Advisor to the extent that such recoupment would not cause the Company to exceed the Expense Cap. Calculation of the Offering Proceeds Threshold excludes gross proceeds from Shares purchased by the Advisor and by the Company’s directors and officers.

 

See “Item 1. Business – Management Agreements – Expense Limitation and Reimbursement Agreement” for more information.

 

The Advisor and the Sub-Advisor

 

The Advisor, the Advisor’s Investment Committee, the Sub-Advisor and its senior investment professionals and their respective affiliates provide or may provide investment advisory and other services to various entities. The Advisor, the Sub-Advisor and certain of their and StepStone Group’s investment professionals and other principals, including the Advisor’s Investment Committee, may also carry on substantial investment activities for their own accounts, for the accounts of family members and for other investment companies, pooled investment vehicles, and/or other accounts (including institutional clients, pension plans and certain high net worth individuals) (collectively, with the other accounts advised by the Advisor, the Sub-Advisor and their respective affiliates, “Other Accounts”). The Company has no interest in these activities. The Advisor, the Advisor’s Investment Committee, the Sub-Advisor and their respective affiliates may receive payments from investment managers of Underlying Funds in connection with such activities. As a result of the foregoing, the Advisor and the Sub-Advisor, and the investment professionals who, on behalf of the Advisor and/or Sub-Advisor, will manage the Company’s investment portfolio will be engaged in substantial activities other than on behalf of the Company, may have differing economic interests in respect of such activities, and may have conflicts of interest in allocating their time and activity between the Company and Other Accounts. Such persons will devote only so much of their time as in their judgment is necessary and appropriate.

 

Because the Advisor, the Sub-Advisor and their respective affiliates may manage assets for Other Accounts, there may be an incentive to favor one client over another resulting in conflicts of interest. For instance, the Advisor, the Sub-Advisor or their respective affiliates may receive fees from certain accounts that are higher than the fee the Advisor receives from the Company or the fee that the Sub-Advisor receives from the Advisor, or they may receive a performance-based fee on certain accounts. In those instances, the Advisor, the Sub-Advisor or their affiliate may have an incentive to favor the higher and/or performance-based fee accounts over the Company. In addition, a conflict of interest could exist to the extent the Advisor or the Sub-Advisor has proprietary investments in certain accounts, where members of the Advisor’s Investment Committee or other senior investment professionals have personal investments in certain accounts or when certain accounts are investment options in the Advisor’s, the Sub-Advisor’s or StepStone Group’s employee benefits and/or deferred compensation plans. The portfolio managers may have an incentive to favor these accounts over others. If the Advisor, the Sub-Advisor or StepStone Group manage accounts that engage in short sales of securities of the type in which the Company invests, the Advisor, the Sub-Advisor or StepStone Group could be seen as harming the performance of the Company for the benefit of the accounts engaging in short sales if the short sales cause the market value of the securities to fall.

 

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There also may be circumstances under which the Advisor, the Sub-Advisor or their respective affiliates will cause one or more Other Accounts to commit a larger percentage of its assets to an investment opportunity than to which the Advisor will commit the Company’s assets. There also may be circumstances under which the Advisor, the Sub-Advisor or their respective affiliates will make investments for Other Accounts in which the Advisor does not invest on behalf of the Company, or vice versa.

 

Investment opportunities are made available to the Company and other StepStone clients where the investment is within the parameters of the applicable strategy. Further, investment opportunities may arise where there is more demand from the Company and other StepStone clients for a particular investment opportunity than supply. The Advisor has adopted allocation and other policies and procedures that it believes are reasonably designed to address these and other conflicts of interest. See “Item 1. Business – Investment Process – Allocation of Investment Opportunities.”

 

The 1940 Act imposes significant limits on co-investments with affiliates of the Company. The Advisor intends to apply for an exemptive order from the SEC that will permit the Company, among other things, to co-invest with certain other persons, including certain affiliates of the Advisor and certain funds managed and controlled by the Advisor and its affiliates, subject to certain terms and conditions. There is no assurance that the co-investment exemptive order will be granted by the SEC. Pursuant to such order, the Board may establish Board Criteria clearly defining co-investment opportunities in which the Company will have the opportunity to participate with other public or private StepStone funds that target similar assets. If an investment falls within the Board Criteria, the Advisor must offer an opportunity for the Company to participate. The Company may determine to participate or not to participate in a co-investment opportunity, depending on whether the Advisor determines that the investment is appropriate for the Company (e.g., based on investment strategy). The Advisor will allocate the co-investment in such proportions as the Advisor deems appropriate from time to time in accordance with its allocation policy under the 1940 Act. If the Advisor determines that such investment is not appropriate for the Company, the investment will not be allocated to us, but the Advisor will be required to report such investment and the rationale for its determination for us to not participate in the investment to the Board at the next quarterly board meeting.

 

The Advisor may compensate, from its own resources, third-party securities dealers, other industry professionals and any affiliates thereof (“financial intermediaries”) in connection with the distribution of Shares or for their ongoing servicing of Shares acquired by their clients. Such compensation may take various forms, including a fixed fee, a fee determined by a formula that takes into account the amount of client assets invested in the Company, the timing of investment or the overall NAV of the Company, or a fee determined in some other method by negotiation between the Advisor and such financial intermediaries. Financial intermediaries may also charge investors, at the financial intermediaries’ discretion, a placement fee based on the purchase price of Shares purchased by the investor. As a result of the various payments that financial intermediaries may receive from investors and the Advisor, the amount of compensation that a financial intermediary may receive in connection with the sale of Shares may be greater than the compensation it may receive for the distribution of other investment products. This difference in compensation may create an incentive for a financial intermediary to recommend the Company over another investment product.

 

Set out below are practices that the Advisor may follow. Although the Advisor anticipates that the investment managers of Underlying Funds will follow practices similar to those described below, no guarantee or assurances can be made that similar practices will be followed or that any such investment manager will abide by, and comply with, its stated practices. An investment manager of an Underlying Fund may provide investment advisory and other services, directly or through affiliates, to various entities and accounts other than the private assets in which the Company typically invests.

 

Participation in Investment Activities

 

Directors, principals, officers, employees and affiliates of the Advisor and its affiliates may buy and sell securities or other investments for their own accounts and may have actual or potential conflicts of interest with respect to investments made on behalf of the Company or its underlying investments. As a result of differing trading and investment strategies or constraints, positions may be taken by directors, principals, officers, employees and affiliates of the Advisor, or by the Advisor for the Other Accounts, or any of their respective affiliates on behalf of their own other accounts (“Investment Manager Accounts”) that are the same as, different from or made at a different time than, positions taken for the Company.

 

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Other Matters

 

An investment manager of an Underlying Fund may, from time to time, cause an Underlying Fund to effect certain principal transactions in securities with one or more Investment Manager Accounts, subject to certain conditions. Future investment activities of investment managers of Underlying Funds, or their affiliates, and the principals, partners, directors, officers or employees of the foregoing, may give rise to additional conflicts of interest.

Future investment activities of the Advisor and its affiliates and their respective principals, partners, members, directors, officers or employees may give rise to conflicts of interest other than those described above.

 

The foregoing list of conflicts does not purport to be a complete enumeration or explanation of the actual and potential conflicts involved in an investment in the Company. In addition, as the Company’s investment program develops and changes over time, an investment in the Company may be subject to additional and different actual and potential conflicts. Although the various conflicts discussed herein are generally described separately, prospective investors should consider the potential effects of the interplay of multiple conflicts.

 

Item 8. Legal Proceedings.

 

Neither we nor the Advisor is currently subject to any material pending legal proceedings, other than ordinary routine litigation incidental to our businesses. We, the Advisor, and our subsidiaries may from time to time, however, be involved in litigation arising out of our operations in the normal course of business or otherwise. Furthermore, third parties may seek to impose liability on us in connection with the activities of our portfolio companies. The outcome of any legal proceedings cannot be predicted with certainty, and there can be no assurance whether any legal proceedings will have a material adverse effect on our financial condition or results of operations in any future reporting period.

 

Item 9. Market Price of and Dividends on the Registrant’s Common Equity and Related Shareholder Matters.

 

Market Information

 

The Shares are being offered and sold in private offerings exempt from registration under the Securities Act under Section 4(a)(2), Regulation D promulgated thereunder, or Regulation S under the Securities Act. See “Item 10. Recent Sales of Unregistered Securities” for more information. There is no public market for the Shares currently, nor can we give any assurance that one will develop.

 

Because Shares are being acquired by investors in one or more transactions “not involving a public offering,” they are “restricted securities” and may be required to be held indefinitely. Our Shares may not be Transferred, whether directly or indirectly, unless the shares are registered under applicable securities laws or specifically exempted from registration (in which case the holders may, at our option, be required to provide us with a legal opinion, in form and substance satisfactory to us, that registration is not required), the transferee meets certain applicable eligibility and/or suitability requirements and the Transfer is otherwise made in accordance with the terms of the Subscription Agreement. Accordingly, investors must be willing to bear the economic risk of investment in the Shares until we are liquidated. No Transfer of Shares may be made except by registration of the transfer on our books. Each transferee will be required to execute a Subscription Agreement pursuant to which they will agree to be bound by these restrictions and the other restrictions imposed on the Shares and to execute such other instruments or certifications as are reasonably required by us.

 

Holders

 

Please see “Item 4. Security Ownership of Certain Beneficial Owners and Management” for disclosure regarding the holders of our Shares.

 

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Distributions

 

We expect to pay regular quarterly distributions commencing with the second full calendar quarter after the BDC Election Date. Any distributions we make will be at the discretion of our Board, considering factors such as our earnings, cash flow, capital needs and general financial condition and the requirements of Delaware law. As a result, our distribution rates and payment frequency may vary from time to time.

 

Our Board’s discretion as to the payment of distributions will be directed, in substantial part, by its determination to cause us to comply with the RIC requirements. To maintain our treatment as a RIC, we generally are required to make aggregate annual distributions to our shareholders of at least 90% of our investment company taxable income. See “Item 11. Description of Registrant’s Securities to be Registered” and “Item 1. Business – Certain U.S. Federal Income Tax Considerations.

 

There is no assurance we will pay distributions in any particular amount, if at all. We may fund any distributions from sources other than cash flow from operations, including the sale of assets, borrowings, return of capital or offering proceeds, and although we generally expect to fund distributions from cash flow from operations, we have not established limits on the amounts we may pay from such sources. The extent to which we pay distributions from sources other than cash flow from operations will depend on various factors, including the level of participation in our distribution reinvestment plan, how quickly we invest the proceeds from this and any future offering and the performance of our investments. Funding distributions from the sales of assets, borrowings, return of capital or proceeds of the Private Offering will result in us having less funds available to acquire investments. As a result, the return investors realize on their investment may be reduced. Doing so may also negatively impact our ability to generate cash flows. Likewise, funding distributions from the sale of additional securities will dilute investors’ interest in us on a percentage basis and may impact the value of their investment especially if we sell these securities at prices less than the price an investor paid for their Shares. We believe the likelihood that we pay distributions from sources other than cash flow from operations will be higher in the early stages of the offering.

 

From time to time, we may also pay special interim distributions in the form of cash or Shares at the discretion of our Board.

 

We have not established limits on the amount of funds we may use from any available sources to make distributions. There can be no assurance that we will achieve the performance necessary to sustain our distributions or that we will be able to pay distributions at a specific rate or at all. The Advisor and its affiliates have no obligation to waive advisory fees or otherwise reimburse expenses in future periods. See “Item 1. Business – Management Agreements – Investment Advisory Agreement.

 

Consistent with the Code, shareholders will be notified of the source of our distributions. Our distributions may exceed our earnings and profits, especially during the period before we have substantially invested the proceeds from the Private Offering. As a result, a portion of the distributions we make may represent a return of capital for tax purposes. The tax basis of Shares must be reduced by the amount of any return of capital distributions, which will result in an increase in the amount of any taxable gain (or a reduction in any deductible loss) on the sale of Shares.

 

For a period of time following commencement of the Private Offering, which time period may be significant, we expect substantial portions of our distributions may be funded indirectly through the reimbursement of certain expenses by the Advisor and its affiliates, including through the waiver of certain investment advisory fees by the Advisor, that are subject to conditional reimbursement by us within three years. Any such distributions funded through expense reimbursements or waivers of advisory fees are not based on our investment performance, and can only be sustained if we achieve positive investment performance in future periods and/or the Advisor or its affiliates continues to advance such expenses or waive such fees. Our future reimbursement of amounts advanced or waived by the Advisor and its affiliates will reduce the distributions that you would otherwise receive in the future. Other than as set forth in this Registration Statement, the Advisor and its affiliates have no obligation to advance expenses or waive advisory fees.

 

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Distribution Reinvestment Plan

 

We have adopted a distribution reinvestment plan, pursuant to which we will reinvest all cash dividends declared by the Board on behalf of our shareholders who do not elect to receive their dividends in cash as provided below. As a result, if the Board authorizes, and we declare, a cash dividend or other distribution, then our shareholders who have not opted out of our distribution reinvestment plan will have their cash distributions automatically reinvested in additional Shares as described below, rather than receiving the cash dividend or other distribution.

 

Pursuant to the distribution reinvestment plan established by the Company, each shareholder whose Shares are registered in its own name will automatically be a participant under the distribution reinvestment plan and have all income dividends and/or capital gains distributions automatically reinvested in additional Shares unless such shareholder specifically elects to receive all income, dividends and/or capital gain distributions in cash. A shareholder is free to terminate participation in the distribution reinvestment plan at any time by submitting written instructions to be received by the plan administrator no less than three calendar days prior to the record date for the next distribution, which record date will be disclosed to shareholders by the Company under cover of a Current Report on Form 8-K or other Exchange Act report filed with the SEC; otherwise, such termination will be effective only for subsequent distributions. A shareholder whose Shares are registered in the name of a nominee must contact the nominee regarding its status under the distribution reinvestment plan, including whether such nominee will participate on such shareholder’s behalf.

 

Generally, for U.S. federal income tax purposes, shareholders receiving Shares under the distribution reinvestment plan will be treated as having received a distribution equal to the amount payable to them in cash as a distribution had the shareholder not participated in the distribution reinvestment plan.

 

Shares will be issued pursuant to the distribution reinvestment plan at their NAV per Share for such Shares at the time the distribution is payable. There is no sales load or other charge for reinvestment, but shareholder servicing fees and distribution fees will be charged where applicable. The Company may terminate the distribution reinvestment plan at any time upon 30 days’ notice to shareholders. Any expenses of the distribution reinvestment plan will be borne by the Company. The reinvestment of dividends and distributions pursuant to the distribution reinvestment plan will increase the Company’s assets on which the Base Management Fee is payable to the Advisor.

 

Item 10. Recent Sales of Unregistered Securities.

 

On January 4, 2023, the Advisor, StepStone Group Private Debt LLC, invested $10,000 in Shares as a seed investment in the Company. In addition, the Initial Closing of the Private Offering occurred on April 3, 2023, in connection with which the Company issued and sold 741,800 Shares in exchange for gross proceeds of $18.5 million. All Shares have been issued and sold in reliance on exemptions from the registration requirements of the Securities Act, including the exemption provided by Section 4(a)(2) of the Securities Act and Regulation D promulgated thereunder, or pursuant to Regulation S under the Securities Act.

 

We expect to enter into additional Subscription Agreements with a number of investors in connection with the Private Offering, pursuant to which we expect to issue and sell Shares in reliance on exemptions from the registration requirements of the Securities Act, including the exemption provided by Section 4(a)(2) of the Securities Act and Regulation D promulgated thereunder, and Regulation S under the Securities Act.

 

Item 11. Description of Registrant’s Securities to be Registered.

 

The following description is based on relevant portions of Delaware law and on the Limited Liability Company Agreement. This summary is not necessarily complete, and the Company refers investors to Delaware law, the Limited Liability Company Agreement and the relevant Subscription Agreement for a more detailed description of the provisions summarized below.

 

General

 

Under the terms of our Limited Liability Company Agreement, we are authorized to issue an unlimited number of Shares and multiple classes of Shares. There is currently no market for our Shares, and we can offer no assurances that a market for our Shares will develop in the future. We do not intend for the Shares offered pursuant to the Private Offering to be listed on any national securities exchange. There are no outstanding options or warrants to purchase our Shares. No Shares have been authorized for issuance under any equity compensation plans. None of our shares are subject to further calls or to assessments, sinking fund provisions, obligations of the Company or potential liabilities associated with ownership of the security (not including investment risks).

 

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Outstanding Securities

 

Title of Class   Amount
Authorized
  Amount
Held by
Fund
for its
Account
    Amount
Outstanding as of
March 31, 2023
 
Limited Liability Company Interests   Unlimited           400

 

Shares

 

Under the terms of the Limited Liability Company Agreement, we retain the right to accept subscriptions for our Shares. In addition, holders of Shares are entitled to one vote for each Share held on all matters submitted to a vote of shareholders and do not have cumulative voting rights. Shareholders are entitled to receive proportionately any distributions declared by the Board of Directors, subject to any preferential dividend rights of outstanding preferred shares (if any). Upon our liquidation, dissolution or winding up, the shareholders will be entitled to receive ratably our net assets available after the payment of (or establishment of reserves for) all debts and other liabilities and will be subject to the prior rights of any outstanding preferred shares (if any). Shareholders have no redemption or preemptive rights. The rights, preferences and privileges of shareholders are subject to the rights of the holders of any preferred shares that we may designate and issue in the future.

 

Under the Limited Liability Company Agreement, the Board of Directors may authorize additional classes of Shares. Each class of Shares shall represent an investment in the same pool of assets and shall have the same preferences, conversion and other rights, voting powers, restrictions, limitations as to distributions, qualifications and terms and conditions of redemption as each other class of Shares except for such differences as will be clearly and expressly set forth in our Certificate of Formation or Limited Liability Company Agreement.

 

Following receipt of any Multi-Class Exemptive Relief, if applied for and granted, each class of Shares will represent an investment in the same pool of assets and shall have the same preferences, conversion and other rights, voting powers, privileges, restrictions, limitations as to dividends, qualifications and terms and conditions of redemption as each other class of Shares except for such differences may be clearly and expressly set forth by the Board in setting the terms of such class of Shares. Dividends and distributions may be paid upon shares of different classes of Shares (which shall be done pro rata among the shareholders of shares of a specific class) at the same time and in different per share amounts on such class of Shares, if, as and when authorized by the Board and declared by us out of funds legally available therefore. As a result of such differences in dividend amounts, as well as potential differences in various fees and charges imposed on the different classes of our Shares, shares of different classes of our Shares may experience different returns.

 

Because of the different distribution fees, shareholder services fees and any other class expenses that may be attributable to the different classes of our Shares, following receipt of the Multi-Class Exemptive Relief, if any, the net income attributable to, and any distributions payable on, each class of shares may differ from each other from time to time. As a result, the NAV per share of the classes may differ over time. The Company’s expenses, respectively allocated to a particular class of shares, will be borne on a pro rata basis by each outstanding share of that class.

 

Transfer and Resale Restrictions

 

Prior to an IPO or Exchange Listing, investors may Transfer their Shares, including a Transfer of solely an economic interest, in whole or in part, provided, that (i) any purported transferee satisfies applicable eligibility and/or suitability requirements as set forth in the Subscription Agreement, and (ii) any such Transfer is made in connection with transactions exempt from, or not subject to, the registration requirements of the Securities Act and otherwise in compliance with applicable securities laws, the Limited Liability Company Agreement, and the Subscription Agreement. No Transfer will be effectuated except by registration of the Transfer on the Company’s books. Each transferee must agree to be bound by these restrictions and all other obligations as an investor in the Company.

 

95

 

 

We intend to sell our Shares in private offerings under the exemption provided by Section 4(a)(2) of the Securities Act and Regulation D promulgated thereunder, and Regulation S under the Securities Act. Investors who acquire our Shares in such private offerings are required to complete, execute and deliver a Subscription Agreement (execution of which will be deemed to be a counterpart signature to the Limited Liability Company Agreement) and related documentation, which includes customary representations and warranties, certain covenants and restrictions and indemnification provisions. Additionally, such investors may be required to provide due diligence information to us for compliance with certain legal requirements. We may, from time to time, engage offering or distribution agents and incur offering or distribution fees or sales commissions in connection with the private offering of our Shares in certain jurisdictions outside the United States. The cost of any such offering or distribution fees may be borne by an affiliate of the Advisor. We will not incur any such fees or commissions if our net proceeds received upon a sale of our Shares after such costs would be less than the net asset value per share.

 

Limited Liability of Our Shareholders

 

No shareholder or former shareholder, in its capacity as such, will be liable for any of our debts, liabilities or obligations except as provided hereunder and to the extent otherwise required by law. Each shareholder will be required to pay to us any unpaid balance of any payments that he, she or it is expressly required to make to us pursuant to the Limited Liability Company Agreement or pursuant to such shareholder’s Subscription Agreement, as the case may be.

 

Delaware Law and Certain Limited Liability Company Agreement Provisions

 

Organization and Duration

 

We were formed as a Delaware limited liability company on September 26, 2022 with the name “StepStone Private Credit Fund LLC”. We will remain in existence until dissolved in accordance with the Limited Liability Company Agreement or pursuant to Delaware law.

 

Purpose

 

Under the Limited Liability Company Agreement, we are permitted to engage in any business activity that lawfully may be conducted by a limited liability company organized under Delaware law and, in connection therewith, to exercise all of the rights and powers conferred upon it pursuant to the agreements relating to such business activity.

 

Agreement to be Bound by the Limited Liability Company Agreement; Power of Attorney

 

By executing the Subscription Agreement (which signature page constitutes a counterpart signature page to the Limited Liability Company Agreement), each investor accepted by the Company is agreeing to be admitted as a member of the Company and bound by the terms of the Limited Liability Company Agreement. Pursuant to the Limited Liability Company Agreement, each shareholder and each person who acquires Shares from a shareholder grants to certain of our officers (and, if appointed, a liquidator) a power of attorney to, among other things, execute and file documents required for our qualification, continuance or dissolution. The power of attorney also grants the Board of Directors the authority to make certain amendments to, and to make consents and waivers under and in accordance with, the Limited Liability Company Agreement.

 

Resignation and Removal of Directors; Procedures for Vacancies

 

The number of directors on the Board may be increased or decreased from time to time only by the affirmative vote of a majority of the directors then in office, but shall never be less than one (1), except for a period of up to sixty (60) days after the death, removal or resignation of a director pending the election of such director’s successor, nor more than fifteen (15). No reduction in the number of directors shall have the effect of removing any director from office prior to the expiration of his or her term (if any). Directors need not be shareholders.

 

Any director may resign at any time by submitting his or her written resignation to the Board of Directors or secretary of the Company. Such resignation will take effect at the time of its receipt by the Company unless another time be fixed in the resignation, in which case it will become effective at the time so fixed. The acceptance of a resignation shall not be required to make it effective. Any or all of the directors may be removed (with or without cause) only by the affirmative vote of at least 66-2/3% of the full Board.

 

96

 

 

Except as otherwise provided by applicable law, including the 1940 Act, any newly created directorship on the Board that results from an increase in the number of directors, and any vacancy occurring in the Board that results from the death, resignation, retirement, disqualification or removal of a director or other cause, will be filled exclusively by the appointment and affirmative vote of a majority of the remaining directors in office, although less than a quorum, or by a sole remaining director. Any director elected to fill a vacancy or newly created directorship will hold office for the remainder of the full term of the directorship in which the vacancy occurred and until a successor is duly elected and qualified, or until his or her death, resignation, retirement, disqualification or removal.

 

Action by Shareholders

 

Under the Limited Liability Company Agreement, shareholder action can be taken only at a meeting of shareholders or by written consent in lieu of a meeting by shareholders representing at least the number of shares required to approve the matter in question.

 

Only our Board of Directors, the Chair of the Board of Directors or our Chief Executive Officer may call a meeting of shareholders. Only business specified in our notice of meeting (or supplement thereto) may be conducted at a meeting of shareholders.

 

Unless otherwise required by law, shareholders holding a majority of the Shares entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum for the transaction of business at all meetings.

 

Amendment of the Limited Liability Company Agreement; No Approval by Shareholders

 

Except as otherwise provided in the Limited Liability Company Agreement, the terms and provisions of the Limited Liability Company Agreement may be amended with the consent of the Board of Directors (which term includes any waiver, modification, or deletion of the Limited Liability Company Agreement) during or after the term of the Company, together with the prior written consent of shareholders representing a majority-in-interest of the Shares,

 

Notwithstanding the above, certain limited amendments, as set forth in the Limited Liability Company Agreement, may be made with the consent of the Board of Directors and without the need to seek the consent of any shareholder.

 

Merger, Sale or Other Disposition of Assets

 

Subject to any restrictions of the 1940 Act and applicable law, the Board shall be entitled, without the approval of any shareholders, to cause the Company to, among other things, sell, exchange or otherwise dispose of all or substantially all of the Company’s assets, merge, convert, consolidate, or conduct a share exchange of the Company or any series or class of Shares with or into any other person or company (including, without limitation, a partnership, corporation, joint venture, statutory or business trust, common law trust or any other business organization), in each case in a single transaction or series of transactions, or approve on behalf of the Company, any of the foregoing transactions. The Board may also cause the sale of all or substantially all of the Company’s assets under foreclosure or other realization without the consent of any shareholders.

 

Shareholders are not entitled to dissenters’ rights of appraisal under the Limited Liability Company Agreement or applicable Delaware law in the event of a merger or consolidation, a sale of all or substantially all of our assets or any other similar transaction or event.

 

Submission to Jurisdiction; Venue; Waiver of Jury Trial

 

Pursuant to Section 13.6(e) of the Limited Liability Company Agreement, shareholders irrevocably accept the non-exclusive jurisdiction of the specified federal and state courts in New York and waive the right to a jury trial for any claim or cause of action directly or indirectly based upon or arising out of the Limited Liability Company Agreement. In submitting to the jurisdiction of the courts of New York, shareholders may have to bring suit in an inconvenient and less favorable forum.

 

Books and Reports

 

We are required to keep appropriate books of our business at our principal offices. The books will be maintained for both tax and financial reporting purposes on an accrual basis in accordance with U.S. GAAP. For financial reporting purposes, our fiscal year is a calendar year ending December 31.

 

97

 

 

Item 12. Indemnification of Directors and Officers.

 

The Limited Liability Company Agreement provides that the Company will indemnify any person who was or is a party, or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Company) by reason of the fact that he or she is or was a Director, officer, employee or agent of the Company, or is or was serving at the request of the Company as a director, officer, employee or agent of another company, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with such action, suit or proceeding if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful.

 

In addition, the Company will indemnify any person who was or is a party, or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Company to procure a judgment in its favor by reason of the fact that he or she is or was a Director, officer, employee or agent of the Company or is or was serving at the request of the Company as a director, officer, employee or agent of another company, partnership, joint venture, trust or other enterprise against expenses (including attorneys’ fees) actually and reasonably incurred by him or her in connection with the defense or settlement of such action or suit if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Company and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Company unless and only to the extent that the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which such court shall deem proper.

 

The Company may pay expenses (including attorneys’ fees) incurred by an officer or Director in defending any civil, criminal, administrative or investigative action, suit or proceeding may be paid by the Company in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such Director or officer to repay such amount if it is ultimately determined that he or she is not entitled to be indemnified by the Company as authorized in the Limited Liability Company Agreement. Such expenses (including attorneys’ fees) incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the Board of Directors deems appropriate.

 

So long as we are regulated under the 1940 Act, the above indemnification and limitation of liability is limited by the 1940 Act or by any valid rule, regulation or order of the SEC thereunder. The 1940 Act provides, among other things, that a company may not indemnify any director or officer against liability to it or its security holders to which he or she might otherwise be subject by reason of his or her willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office unless a determination is made by final decision of a court, by vote of a majority of a quorum of directors who are disinterested, non-party directors or by independent legal counsel that the liability for which indemnification is sought did not arise out of the foregoing conduct. In addition, we have obtained liability insurance for our officers and Directors.

 

Item 13. Financial Statements and Supplementary Data.

 

Set forth below is an index to our financial statements attached to this Registration Statement.

 

    Page
     
Index to Audited Financial Statements   F-1
     
Report of Independent Registered Public Accounting Firm   F-2
     
Statement of Assets and Liabilities as of January 31, 2023   F-3
     
Notes to Audited Financial Statement   F-4
     
Report of the Independent Registered Public Accounting Firm on the Audited Special Purpose Schedule of Investments as of January 31, 2023   F-9
     
Audited Special Purpose Schedule of Investments as of January 31, 2023   F-10
     
Notes to Audited Special Purpose Schedule of Investments   F-11

 

Index to Unaudited Financial Statement   F-15
     
Statement of Assets and Liabilities as of March 31, 2023   F-16
     
Notes to Unaudited Financial Statement   F-17

 

Item 14. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

 

There are not and have not been any disagreements between the Company and its accountant on any matter of accounting principles, practices, or financial statement disclosure.

 

98

 

 

Item 15. Financial Statements and Exhibits.

 

(a)List separately all financial statements filed

 

The financial statements included in this Registration Statement are listed “Item 13. Financial Statements and Supplementary Data.”

 

(b)Exhibits

 

Number   Exhibit
2.1   Participation and Assignment Agreement, dated as of April 3, 2023, between SC Co-Investments Private Debt Fund L.P. and SPV Facility I LLC^
     
3.1   Certificate of Formation of the Company*
     
3.2   Limited Liability Company Agreement of the Company*
     
10.1   Form of Subscription Agreement
     
10.2   Investment Advisory Agreement, dated as of April 3, 2023
     
10.3   Sub-Advisory Agreement, dated as of April 3, 2023
     
10.4   Administration Agreement, dated as of April 3, 2023
     
10.5   Expense Limitation and Reimbursement Agreement, dated as of April 3, 2023
     
10.6   Custody Agreement, dated as of March 29, 2023, by and between the Company and UMB Bank, N.A.
     
10.7   Dividend Reinvestment Plan
     
10.8   Loan and Servicing Agreement, among the Company, SPV Facility I LLC, as the borrower, the lenders from time to time party thereto, and Massachusetts Mutual Life Insurance Company as the administrative agent and the facility servicer, dated as of April 3, 2023^
     
21.1  

List of Subsidiaries:

             SPV Facility I LLC (Delaware)
    ●         StepStone Great Lakes SPV Facility II LLC (Delaware)

 

 

  * Previously filed as part of the Registrant’s Registration Statement on Form 10 (File No. 000-56505) filed on December 30, 2022 and incorporated herein by reference.
^ Schedules to this Exhibit have been omitted in accordance with Item 601 of Regulation S-K. The registrant agrees to furnish supplementally a copy of all omitted schedules to the SEC upon its request.

 

99

 

 

STEPSTONE PRIVATE CREDIT FUND LLC

 

Index to Audited Financial Statements

 

    Page
     
Index to Audited Financial Statements   F-1
     
Report of Independent Registered Public Accounting Firm   F-2
     
Statement of Assets and Liabilities as of January 31, 2023   F-3
     
Notes to Audited Financial Statement   F-4
     
Report of the Independent Registered Public Accounting Firm on the Audited Special Purpose Schedule of Investments as of January 31, 2023   F-9
     
Audited Special Purpose Schedule of Investments as of January 31, 2023   F-10
     
Notes to Audited Special Purpose Schedule of Investments   F-11

 

F-1

 

 

Report of Independent Registered Public Accounting Firm

 

To the Shareholder and the Board of Directors of StepStone Private Credit Fund LLC

 

Opinion on the Financial Statement

 

We have audited the accompanying statement of assets and liabilities of StepStone Private Credit Fund LLC (the “Company”) as of January 31, 2023, and the related notes (collectively referred to as the “financial statement”). In our opinion, the financial statement presents fairly, in all material respects, the financial position of the Company on January 31, 2023, in conformity with U.S. generally accepted accounting principles.

 

Basis for Opinion

 

The financial statement is the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statement based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audit in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audit included performing procedures to assess the risks of material misstatement of the financial statement, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statement. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statement. We believe that our audit provides a reasonable basis for our opinion.

 

/s/ Ernst & Young LLP

 

We have served as the Company’s auditor since 2023.

 

Los Angeles, CA

April 19, 2023

 

F-2

 

 

Statement of Assets and Liabilities

Expressed in US Dollars

 

    As of
January 31,
2023
 
Assets      
Cash   $ 10,000  
Total assets   $ 10,000  
Commitments and contingencies (Note 5)        
Shareholder’s equity        
Common shares, no par value, unlimited shares authorized, 400 shares issued and outstanding     10,000  
Total shareholder’s equity     10,000  
         
Total shareholder’s equity   $ 10,000  
         
Net asset value per share   $ 25.00  

 

F-3

 

 

Notes to Financial Statement

January 31, 2023

Expressed in US Dollars

 

1. Description and Organization

 

StepStone Private Credit Fund LLC (the “Company”) is a Delaware limited liability company which was formed on September 26, 2022. The Company intends to elect to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). The Company seeks to achieve attractive risk-adjusted returns mainly by investing in various credit-related strategies, including investments through underlying funds. The Company is externally managed by StepStone Group Private Debt LLC (the “Advisor”), an investment adviser registered with the U.S. Securities and Exchange Commission (the “SEC”) under the Investment Advisers Act of 1940, as amended (the “Advisers Act”).

 

The Advisor also serves as the Company’s administrator pursuant to an administration agreement (the “Administration Agreement”). SEI Investments Global Funds Services (the “Sub-Administrator”) provides certain outsourced administration and outsourced accounting services for the Company.

 

There were no operations prior to January 31, 2023. As of January 31, 2023, the Advisor contributed $10,000 of capital to the Company in exchange for 400 shares of the Company’s limited liability company interests (the “Shares”). The initial meeting of the Board of Directors of the Company was held on January 11, 2023.

 

2. Significant Accounting Policies

 

The following is a summary of significant accounting policies consistently followed by the Company in the preparation of its statement of assets and liabilities and the related notes (collectively referred to as the “financial statement”) in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). The Company is an investment company following the accounting and reporting guidance in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 946, “Financial Services – Investment Companies”, and therefore the Company reports investments at fair value. Separate statements of income, changes in equity, and cash flows have not been presented in the financial statement because principal operations have not commenced.

 

Use of Estimates

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statement and accompanying notes. Actual results could differ materially from those estimates.

 

Organizational and Offering Costs

 

Organization and offering costs will only be borne by the Company if the Company receives $100.0 million in gross proceeds from the sale of shares, excluding shares purchased by the Advisor and by the Company’s directors and officers. Following such time, costs associated with the organization of the Company will be expensed as incurred. Costs associated with the offering of its shares are capitalized as deferred offering costs and amortized over a 12 month period from the date of the associated offering. See Note 5. Commitments and Contingencies for details of the Company’s Expense Limitation Agreement.

 

Cash

 

Cash is comprised of cash at the custodian bank and is subject to credit risk to the extent those balances exceed applicable Federal Deposit Insurance Corporation limitations.

 

3. Income Taxes

 

The Company intends to elect to be regulated as a BDC under the 1940 Act. The Company also intends to elect to be treated as a regulated investment company (“RIC”) for U.S. federal income tax purposes under Subchapter M of the Internal Revenue Code of 1986, as amended. So long as the Company maintains its status as a RIC, it generally will not have to pay corporate-level U.S. federal income taxes on any ordinary income or capital gains that it distributes at least annually to shareholders. Rather, any tax liability related to income earned and distributed by the Company represents obligations of the Company’s investors and will not be reflected in the financial statement of the Company.

 

To qualify and be subject to tax as a RIC for U.S. federal income tax purposes, the Company will need to ensure that (among other things) it satisfies certain sources of income and asset diversification requirements and distributes to its shareholders, for each taxable year, an amount equal to at least 90% of the sum of (i) its investment company taxable income for that year (without regard to the deduction for dividends paid), which is generally its ordinary income plus the excess, if any, of its realized net short-term capital gains over its realized net long-term capital losses and (ii) its net tax-exempt income. In addition, based on the excise tax distribution requirements, the Company is subject to a 4% nondeductible federal excise tax on undistributed income unless the Company distributes in a timely manner in each taxable year an amount at least equal to the sum of (1) 98% of its ordinary income for the calendar year, (2) 98.2% of capital gain net income (both long-term and short-term) for the one-year period ending October 31 in that calendar year and (3) any income realized, but not distributed, in prior years. For this purpose, however, any ordinary income or capital gain net income retained by the Company that is subject to corporate income tax is considered to have been distributed.

 

F-4

 

 

Notes to Financial Statement (continued)

January 31, 2023

Expressed in US Dollars

 

The Company evaluates tax positions taken or expected to be taken in the course of preparing its financial statement to determine whether the tax positions are “more-likely-than-not” to be sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than-not” threshold are reserved and recorded as a tax benefit or expense in the current year. All penalties and interest associated with income taxes are included in income tax expense. Conclusions regarding tax positions are subject to review and may be adjusted at a later date based on factors including, but not limited to, ongoing analyses of tax laws, regulations and interpretations thereof. As of January 31, 2023, no tax expenses and no interest and penalties were incurred.

 

4. Shareholder’s Equity

 

The Company is authorized to issue an unlimited number of shares. As of January 31, 2023, the Company had issued 400 shares and all are outstanding.

 

5. Commitments and Contingencies

 

The Advisor has agreed to pay all of the Company’s organizational and offering expenses. These expenses consist primarily of legal fees and other costs of organizing the Company and issuing shares. The Company has no obligation to reimburse the Advisor for such advanced expenses until the time at which the Company receives $100.0 million in gross proceeds from the sale of shares, excluding shares purchased by the Advisor and by the Company’s directors and officers. Following such time, all organizational and offering costs of the Company paid by the Advisor will be subject to recoupment by the Advisor to the extent that such recoupment is probable. The recoupment is limited to the amount of the Expense Cap under the Expense Limitation Agreement (each as defined in Note 6). Under the Expense Limitation Agreement, the Advisor is permitted to recoup from the Company any such amounts for a period not to exceed three years from the month in which such fees and expenses were paid. As the Company has not yet received $100.0 million in gross proceeds from the sale of shares, excluding shares purchased by the Advisor and the Company’s directors and officers as of the date of this financial statement, no such costs have been recorded. The total organization and offering costs incurred through January 31, 2023 were $673,518.

 

6. Agreements and Related Party Transactions

 

Advisory Agreement

 

Pursuant to the terms of the Investment Advisory Agreement (the “Advisory Agreement”), the Advisor manages the Company’s day-to-day operations and provides the Company with investment advisory and management services. The Advisor is a wholly-owned subsidiary of Swiss Capital Alternative Investments AG (“SCAI”), which is an affiliate of StepStone Group LP (“StepStone Group”). StepStone Group makes certain personnel and resources available to the Advisor pursuant to the terms of a resource sharing agreement.

 

Under the Advisory Agreement, the Company will pay the Advisor fees for investment management services consisting of a base management fee (the “Base Management Fee”) and an incentive fee (the “Incentive Fee”).

 

Any of the fees payable to the Advisor under the Advisory Agreement for any partial month or calendar quarter will be appropriately prorated. The Advisor may agree to temporarily defer or permanently waive, in whole or in part, the Base Management Fee and/or the Incentive Fee. Prior to the payment of any fee to the Advisor, the Company will obtain written instructions from the Advisor with respect to any waiver or deferral of any portion of such fees. Any portion of a deferred fee payable to the Advisor and not paid over to the Advisor with respect to any month, calendar quarter or year shall be deferred without interest and may be paid over in any such other month prior to the termination of Advisory Agreement, as the Advisor may determine upon written notice to the Company.

 

The Base Management Fee will be payable monthly in arrears at an annual rate of 1.00% of the value of Company’s net assets as of the beginning of the first calendar day of the applicable month, commencing with the first calendar day of the first full calendar month following the date of the Company’s election to be treated as a BDC under the 1940 Act. For purposes of the Advisory Agreement, the value of the Company’s “net assets” means the Company’s total assets less liabilities determined on a consolidated basis in accordance with U.S. GAAP. All or any part of the Base Management Fee not taken as to any month will be deferred without interest and may be taken in such other month as the Advisor determines.

 

The Incentive Fee will consist of two components: an income-based incentive fee and a capital gains-based incentive fee, that are independent of each other, with the result that one component may be payable even if the other is not.

 

The first part of the Incentive Fee, referred to as the “Income Incentive Fee,” will be calculated and payable quarterly in arrears based on the Company’s “Pre-Incentive Fee Net Investment Income” for the immediately preceding quarter. The payment of the Income Incentive Fee will be subject to a quarterly hurdle rate, expressed as a rate of return on the value of the Company’s net assets at the end of the most recently completed calendar quarter, of 1.25% (5.0% annualized) (the “Hurdle Rate”), subject to a “catch up” feature (as described below).

 

F-5

 

 

Notes to Financial Statement (continued)

January 31, 2023

Expressed in US Dollars

 

For this purpose, “Pre-Incentive Fee Net Investment Income” means interest income, dividend income and any other income (including any other fees (other than fees for providing managerial assistance) such as commitment, origination, structuring, diligence and consulting fees or other fees that the Company (or its wholly-owned subsidiaries) receives from portfolio companies) accrued during the calendar quarter, minus the Company’s and its subsidiaries’ operating expenses for the quarter (including the Base Management Fee, expenses and fees paid to the Advisor under the Administration Agreement and any interest expense and dividends paid on any issued and outstanding preferred stock, but excluding the Incentive Fee and any shareholder servicing and/or distribution fees). Pre-Incentive Fee Net Investment Income includes, in the case of investments with a deferred interest feature (such as original issue discount debt instruments with payment-in-kind interest and zero-coupon securities), accrued income that the Company has not yet received in cash. Pre-Incentive Fee Net Investment Income does not include any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation.

 

The calculation of the Income Incentive Fee for each quarter is as follows:

 

No Income Incentive Fee will be payable to the Advisor in any calendar quarter in which the Company’s Pre-Incentive Fee Net Investment Income does not exceed the Hurdle Rate;

 

100% of the dollar amount of the Company’s Pre-Incentive Fee Net Investment Income, if any, that exceeds the Hurdle Rate but is less than or equal to 1.3514% in any calendar quarter (5.4056% annualized) will be payable to the Advisor. This portion of the Company’s Income Incentive Fee that exceeds the Hurdle Rate but is less than or equal to 1.3514% is referred to as the “catch up” and is intended to provide the Advisor with an Incentive Fee of 7.5% on all of the Company’s Pre-Incentive Fee Net Investment Income when the Company’s Pre-Incentive Fee Net Investment Income reaches 1.3514% (5.4056% annualized) on net assets in any calendar quarter; and

 

7.5% of the dollar amount of the Company’s Pre-Incentive Fee Net Investment Income, if any, that exceeds 1.3514% (5.4056% annualized) on net assets in any calendar quarter will be payable to the Advisor once the Hurdle Rate and catch-up have been achieved (7.5% of the Company’s Pre-Incentive Fee Net Investment Income thereafter will be allocated to the Advisor).

 

The second part of the Incentive Fee, referred to as the “Capital Gains-Based Incentive Fee,” will be an incentive fee on capital gains and will be determined and payable in arrears as of the end of each calendar year (or upon termination of the Advisory Agreement). This fee will equal 7.5% of the Company’s incentive fee capital gains, which will equal the Company’s realized capital gains on a cumulative basis from the effective date of the Advisory Agreement, calculated as of the end of the applicable period, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis from effective date of the Advisory Agreement, less the aggregate amount of any previously paid Capital Gains-Based Incentive Fee.

 

Each year, the fee paid for the Capital Gains-Based Incentive Fee is net of the aggregate amount of any previously paid Capital Gains-Based Incentive Fee for all prior periods. The Company will accrue, but will not pay, a Capital Gains-Based Incentive Fee with respect to unrealized appreciation because a Capital Gains-Based Incentive Fee would be owed to the Advisor if the Company were to sell the relevant investment and realize a capital gain.

 

Administration Agreement

 

The Advisor also serves as the Company’s administrator pursuant to the Administration Agreement and performs certain administrative, accounting and other services for the Company. In consideration of these administrative services, the Company pays the Advisor the administration fee (the “Administration Fee”) in an amount up to 0.30% on an annualized basis of the Company’s net assets. The Administration Fee is calculated based on the Company’s month-end net asset value (as of the close of business on the last calendar day of the applicable month) and payable monthly in arrears. The Administration Fee is an expense paid out of the Company’s net assets.

 

F-6

 

 

Notes to Financial Statement (continued)

January 31, 2023

Expressed in US Dollars

 

Expense Limitation and Reimbursement Agreement

 

The Company entered into an Expense Limitation and Reimbursement Agreement (the “Expense Limitation Agreement”) with the Advisor for a one-year term beginning on the initial closing date for subscriptions for shares and ending on the one-year anniversary thereof (the “Limitation Period”). The Advisor may extend the Limitation Period for a period of one year on an annual basis. The Expense Limitation Agreement limits the amount of the Company’s aggregate monthly Other Operating Expenses (as defined below). The Advisor has agreed that it will pay, absorb or reimburse the Company’s aggregate monthly Other Operating Expenses (as defined below) on the Company’s behalf (which, for the avoidance of doubt, may include any Other Operating Expenses incurred prior to the effective date of the Advisory Agreement) (each such payment, absorption or reimbursement, a “Required Expense Payment”), such that the aggregate monthly Other Operating Expenses borne by the Company during the Limitation Period shall not exceed 1.00%, on an annualized basis, of the Company’s month-end net assets (the “Expense Cap”). For any month in which the Company’s aggregate monthly Other Operating Expenses exceed the Expense Cap, the Advisor shall make a Required Expense Payment to the extent necessary to eliminate such excess. The Advisor may also directly pay expenses on behalf of the Company and waive reimbursement under the Expense Limitation Agreement. “Other Operating Expenses” shall include all of the Company’s operating expenses, including O&O Expenses, but shall exclude Specified Expenses (as defined below). “O&O Expenses” shall include all of the fees, costs, charges, expenses, liabilities and obligations incurred in relation to or in connection with the establishment of the Company, the marketing and offering of the Shares (including, among other things, legal, accounting, subscription processing and filing fees and expenses and other expenses pertaining to this offering), and the establishment, organization and creation of the operational structure of the Company and its special purpose vehicle subsidiaries, including travel, lodging, meals, entertainment, legal, accounting, regulatory compliance, fees of professional advisors, printing, postage, regulatory and tax filing fees, and other costs of establishment.

 

Voluntary Expense Support. At such times as the Advisor determines, the Advisor may elect to pay or reimburse certain additional fees and expenses of the Company on the Company’s behalf, including all or any portion of a Specified Expense (each such payment or reimbursement, a “Voluntary Expense Payment” and, together with a Required Expense Payment, the “Expense Payments”); provided that no portion of a Voluntary Expense Payment will be used to pay any interest expense or shareholder servicing and/or distribution fees of the Company. In making a Voluntary Expense Payment, the Advisor will designate, as it deems necessary or advisable, what type of expense it is paying.

 

Company Obligation. The Company shall have no obligation to reimburse or pay the Advisor for any Expense Payment unless the Company has received at least $100.0 million in gross proceeds from the sale of Shares (the “Offering Proceeds Threshold”), following which time, such Expense Payments shall be subject to recoupment by the Advisor to the extent that such recoupment would not cause the Company to exceed the Expense Cap. Calculation of the Offering Proceeds Threshold shall exclude gross proceeds from Shares purchased by the Advisor and by the Company’s directors and officers.

 

Specified Expenses. The Expense Cap applies only to the Company’s aggregate monthly Other Operating Expenses, which excludes Specified Expenses. “Specified Expenses” include: (i) the base management fee under the Advisory Agreement; (ii) all fees and expenses charged by the non-affiliated investment managers of the underlying funds and other investments in which the Company invests (including management fees, performance or incentive fees and redemption or withdrawal fees, however titled or structured) (the “Acquired Fund Fees and Expenses”); (iii) the incentive fee under the Advisory Agreement; (iv) transactional costs, including legal costs and brokerage commissions, associated with the acquisition and disposition of the Company’s investments; (v) interest payments incurred on borrowings by the Company or its subsidiaries; (vi) fees and expenses incurred in connection with any credit facility obtained by the Company or any of its subsidiaries, including any expenses for acquiring ratings related to the credit facilities; (vii) distribution and shareholder servicing fees, as applicable; (viii) taxes; and (ix) extraordinary expenses resulting from events and transactions that are distinguished by their unusual nature and by the infrequency of their occurrence, including, without limitation, costs incurred in connection with any claim, litigation, arbitration, mediation, government investigation or similar proceeding, indemnification expenses and expenses in connection with holding and/or soliciting proxies for all annual and other meetings of the Company’s shareholders.

 

Excess Expenses. In consideration of the Advisor’s agreement, the Company agrees to carry forward the amount of any Expense Payment (“Excess Expenses”) for a period not to exceed three years from the end of the month in which such fees and expenses were waived, reimbursed or paid by the Advisor, and to reimburse the Advisor in the amount of such Excess Expenses as promptly as possible, on a monthly basis, even if such reimbursement occurs after the termination of the Limitation Period, provided that the waived fees, reimbursed expenses or directly paid expenses have fallen to a level below the Expense Cap and the reimbursement amount does not raise the level of waived fees, reimbursed expenses or directly paid expenses in the month the reimbursement is being made to a level that exceeds the Expense Cap applicable at that time. For the avoidance of doubt, if at the end of any fiscal year in which the Company has reimbursed the Advisor for any Excess Expenses, the Company’s waived fees, reimbursed expenses or directly paid expenses for such fiscal year exceed the Expense Cap applicable at that time, the Advisor shall promptly pay the Company an amount equal to the lesser of: (i) the amount by which the Company’s waived fees, reimbursed expenses or directly paid expenses for such fiscal year exceed the Expense Cap; and (ii) the amount of reimbursements for Excess Expenses paid by the Company to the Advisor in such fiscal year.

 

F-7

 

 

Notes to Financial Statement (continued)

January 31, 2023

Expressed in US Dollars

 

7. Subsequent Events

 

The Company has evaluated subsequent events through April 19, 2023, the date the financial statement was available for issuance.

 

On February 23, 2023, the Company formed a wholly owned subsidiary, SPV Facility I LLC (“SPV Facility I”) to be used in obtaining a revolving credit facility, as described below.

 

On April 3, 2023, the Company executed the agreements described herein including the Advisory Agreement, the Administration Agreement, and the Expense Limitation Agreement.

 

On April 3, 2023, the Company sold 741,800 Shares at a price of $25.00 per share for an aggregate of $18.5 million in the initial closing of its private offering of Shares (the “Initial Closing”).

 

On April 3, 2023, in connection with the acquisition of the Initial Portfolio, the Company, through SPV Facility I as borrower, entered into a Loan and Security Agreement (the “MassMutual SPV I Facility”) with Massachusetts Mutual Life Insurance Company (“MassMutual”), as the administrative agent and facility servicer, and the lenders party thereto from time to time.

 

Under the MassMutual SPV I Facility, the lenders have made commitments of $200.0 million. Borrowings under the MassMutual SPV I Facility will generally bear interest at a rate per annum equal to Term SOFR plus a margin of 3.25%, with a 1.0% floor on Term SOFR, and the MassMutual SPV I Facility will have an advance rate of 58% against eligible portfolio assets. The MassMutual SPV I Facility is secured by all of the assets of SPV Facility I and a pledge over 100% of the equity interest in SPV Facility I held by the Company. The MassMutual SPV I Facility requires payment of (a) a non-use fee during the 18-month availability period of 0.40% on the difference between the average daily outstanding balance under the facility relative to the maximum amount of commitments at such time, and (b) after the 18-month availability period until the stated maturity date, a utilization fee equal to the positive difference, if any, in respect of any period between (i) the amount of interest that would have accrued under the MassMutual SPV I Facility if the principal outstanding thereunder were equal to 75% of the maximum commitment amount in that period, and (ii) the amount of interest that actually accrued under the MassMutual SPV I Facility for such period on the loans advanced thereunder. The Advisor paid, on the Company’s behalf, a customary upfront 1.25% commitment fee in connection with the MassMutual SPV I Facility, which amount is subject to reimbursement by the Company under an Expense Limitation Agreement. The MassMutual SPV I Facility matures on March 31, 2033, unless sooner terminated in accordance with its terms.

 

The MassMutual SPV I Facility also includes various covenants applicable to the Company, in addition to those applicable to SPV Facility I, including covenants relating to certain changes of control of the Company and SPV Facility I. The MassMutual SPV I Facility provides for events of default customary for a facility of its type, including with respect to payment defaults, breach of representations and covenants, cross default provisions, lien and judgment limitations, and bankruptcy.

 

On April 3, 2023, SPV Facility I drew $19.5 million from the MassMutual SPV I Facility.

 

On April 3, 2023, shortly prior to the Company’s election to be regulated as a BDC, the Company, through SPV Facility I, acquired from SC Co-Investments Private Debt Fund L.P. (the “Seller”) a select portfolio of first lien, senior secured private credit investments in, and funding obligations to, well-established middle-market businesses that operate across a wide range of industries (the “Initial Portfolio”). The Company used the proceeds from the Initial Closing along with borrowings under the MassMutual SPV I Facility, to purchase the Initial Portfolio. SPV Facility I purchased the Initial Portfolio pursuant to the terms of a Participation and Assignment Agreement (the “Initial Portfolio Transfer Agreement”).

 

The aggregate purchase price (the “Purchase Price”) for the Initial Portfolio was $37.4 million, which is equal to the sum of the fair values of each asset and unfunded commitment in the Initial Portfolio as of the time immediately prior to closing under the Initial Portfolio Transfer Agreement. For purposes of determining the Purchase Price, the assets and unfunded commitments in the Initial Portfolio were valued as of February 28, 2023 by an independent third-party valuation firm. In connection with the closing under the Initial Portfolio Transfer Agreement and the acquisition of the Initial Portfolio, the Advisor conducted certain valuation procedures to confirm whether there had been any material changes to the fair value of the investments and obligations in the Initial Portfolio since February 28, 2023 and adjusted the Purchase Price in accordance with the terms of the Initial Portfolio Transfer Agreement to reflect the fair value of the investments and obligations in the Initial Portfolio as of the time immediately prior to closing under the Initial Portfolio Transfer Agreement.

 

On April 3, 2023, following the closing under the Initial Portfolio Transfer Agreement, the Company filed an election to be treated as a BDC under the 1940 Act.

 

F-8

 

 

Report of Independent Auditors

 

To the Shareholder and the Board of Directors of StepStone Private Credit Fund LLC

 

Opinion

 

We have audited the special purpose schedule of investments of SC Co-Investments Private Debt Fund L.P. (the “Seller”) as of January 31, 2023 to be acquired by StepStone Private Credit Fund LLC (the “Company”) and the related notes (collectively referred to as the “financial statement”).

 

In our opinion, the accompanying financial statement presents fairly, in all material respects, the investments to be acquired by the Company at January 31, 2023, pursuant to the Participation and Assignment Agreement described in Note 1, in accordance with accounting principles generally accepted in the United States of America.

 

Basis for Opinion

 

We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statement section of our report. We are required to be independent of the Company, and to meet our other ethical responsibilities in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

 

Basis of Accounting

 

We draw attention to Note 2 to the financial statement, which describes that the accompanying financial statement has been prepared in accordance with accounting principles generally accepted in the United States of America based on the selected investments identified in the Participation and Assignment Agreement described in Note 1. The financial statement is not intended to be a complete presentation of the Seller’s financial statements. Our opinion is not modified with respect to this matter.

 

Responsibilities of Management for the Financial Statement

 

Management is responsible for the preparation and fair presentation of the financial statement in accordance with accounting principles generally accepted in the United States of America based on the selected investments identified in the Participation and Assignment Agreement described in Note 1. Management is also responsible for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the financial statement is free of material misstatement, whether due to fraud or error.

 

Auditor’s Responsibilities for the Audit of the Financial Statement

 

Our objectives are to obtain reasonable assurance about whether the financial statement as a whole is free of material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statement.

 

In performing an audit in accordance with GAAS, we:

 

Exercise professional judgment and maintain professional skepticism throughout the audit.
Identify and assess the risks of material misstatement of the financial statement, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statement.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, no such opinion is expressed.
Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statement.

 

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.

 

/s/ Ernst & Young LLP

 

Los Angeles, CA

April 19, 2023

 

F-9

 

 

SC CO-INVESTMENTS PRIVATE DEBT FUND L.P.

Special Purpose Schedule of Investments

As of January 31, 2023, to be acquired by StepStone Private Credit Fund LLC

 

Investments   Footnotes   Industry   Reference Rate
Spread
  Interest
Rate
    Maturity
Date
    Outstanding
Principal
     Amortized Cost     Fair Value   Percentage of
Fair Value
 
Debt Investments                                              
First Lien Senior Secured                                              
AIDC IntermediateCo. 2, LLC Initial Term Loan   (1)(2)(3)(4)(5)(7)   Industrials   SOFR + 6.25%     11.06 %     07/22/2027     $ 6,296,934     $ 6,222,817     $ 6,296,934     19 %
BBG, Inc. Initial Term Loan   (1)(2)(3)(4)(5)(7)   Real Estate   SOFR + 6%     10.94 %     01/08/2026       5,992,416       5,926,542       5,703,228     17 %
BCI Burke Holding Corp. Closing Date Term Loan   (1)(2)(3)(4)(5)(7)   Consumer Discretionary   LIBOR + 5.5%     10.23 %     12/14/2027       1,599,559       1,579,780       1,572,240     5 %
By Light Professional IT Services LLC Fifth Additional Term Loan   (1)(2)(3)(4)(5)(7)   Information Technology   LIBOR + 6.875%     11.45 %     05/16/2024       2,052,370       2,041,422       2,042,547     6 %
Community Care Partners, LLC Closing Date Term Loan   (1)(2)(3)(4)(5)(7)   Health Care   SOFR + 5.75%     10.68 %     06/10/2026       2,012,893       1,996,824       2,004,591     6 %
Community Care Partners, LLC Delayed Draw Term B Loan   (1)(2)(3)(4)(5)(6)(7)(8)   Health Care   SOFR + 5.75%     1.00 %     06/10/2026       -       (2,203 )     (1,229 )   0 %
Integrity Marketing Acquisition, LLC Amendment No. 9 Delayed Draw Term Loan   (1)(2)(3)(4)(5)(6)(7)   Financials   SOFR + 6.3%     10.91 %     08/27/2025       2,373,737       2,326,018       2,373,737     7 %
PVI Holdings, Inc. Term Loan   (1)(2)(3)(4)(5)(7)   Industrials   SOFR + 6.48%     9.44 %     07/18/2027       7,000,000       6,936,125       7,000,000     21 %
SageSure Holdings, LLC Closing Date Term Loan   (1)(2)(3)(4)(5)(7)   Financials   LIBOR + 5.75%     10.32 %     01/28/2028       4,495,927       4,407,406       4,471,384     13 %
SageSure Holdings, LLC Delayed Draw Term Loan   (1)(2)(3)(4)(5)(6)(7)   Financials   LIBOR + 5.75%     10.32 %     01/28/2028       194,893       171,258       188,146     1 %
Superjet Buyer, LLC Initial Term Loan   (1)(2)(3)(4)(5)(7)   Information Technology   LIBOR + 5.75%     10.48 %     12/30/2027       1,537,890       1,524,406       1,517,535     5 %
Total First Lien Senior Secured                                 33,556,618       33,130,394       33,169,112     100.00 %
                                                           
Total Investments                               $ 33,556,618     $ 33,130,394     $ 33,169,112     100.00 %

 

(1) Investment is non-controlled/non-affiliated investments as defined by the Investment Company Act of 1940, as amended (the “1940 Act”). The 1940 Act classifies investments based on the level of control that the Company maintains in a particular portfolio company. As defined in the 1940 Act, a company is generally presumed to be “non-controlled” when the Company owns 25% or less of the portfolio company’s voting securities and “controlled” when the Company owns more than 25% of the portfolio company’s voting securities. The 1940 Act also classifies investments further based on the level of ownership that the Company maintains in a particular portfolio company. As defined in the 1940 Act, a company is generally deemed as “non-affiliated” when the Company owns less than 5% of a portfolio company’s voting securities and “affiliated” when the Company owns 5% or more of a portfolio company’s voting securities. The Company generally acquires its investments in private transactions exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”). These investments are generally subject to certain limitations on resale, and may be deemed to be “restricted securities” under the Securities Act. All investments are Level 3 unless otherwise indicated.
   
(2) Investment is U.S. domiciled and no investment represents a 5% or more interest in any outstanding class of voting security of the portfolio company
   
(3) Income-producing debt investment and pays all cash.
   
(4) Investment is treated as a qualifying asset under Section 55(a) of the 1940 Act.
   
(5) The fair value of the investments were valued using significant unobservable inputs.   
   
(6) Investment has undrawn commitments. Unamortized fees are classified as unearned income which reduces cost basis, which may result in a negative cost basis. A negative fair value may result from the unfunded commitment being valued below par. No interest is being earned. The investment may be subject to an unused/letter of credit facility fee.  
   
(7) The majority of the investments bear interest at rates that may be determined by reference to London Interbank Offered Rate (“LIBOR” or “L”), as well as Secured Overnight Financing Rate (“SOFR” or “S”), which reset monthly or quarterly. For each such investment, the Company has provided the spread over LIBOR and SOFR and the current contractual interest rate in effect at January 31, 2023. The interest rate disclosed is based on the reference rate as of the last reset date which may differ from the reference rate as of 1/31/2023. As of January 31, 2023, effective rates for 1 Month (“M”) L, 3M L, 6M L and 12M L are 4.58%, 4.80%, 5.09% and 5.32% respectively. As of January 31, 2023, effective rates for 1M S, 3M S and 6M S, are 4.31%, 4.07% and 3.36, respectively. For portfolio companies with multiple interest rate contracts, the interest rate shown is a weighted average current interest rate in effect as of January 31, 2023. Certain investments are subject to a LIBOR or SOFR floor.   
   
(8) Position is an unfunded delayed draw term loan with no rate setting  

 

F-10

 

 

SC CO-INVESTMENTS PRIVATE DEBT FUND L.P.

Notes to the Special Purpose Schedule of Investments

As of January 31, 2023, to be acquired by StepStone Private Credit Fund LLC

 

1. Description and Organization

 

SC Co-Investments Private Debt Fund L.P. (the “Seller”) is a Cayman Island exempted limited liability partnership registered on July 25, 2017. The Seller is registered with the Cayman Islands Monetary Authority with a registration number of 1720364.

 

StepStone Private Credit Fund LLC (the “Company”) is a Delaware limited liability company which was formed on September 26, 2022. The Company intends to elect to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). The Company seeks to achieve attractive risk-adjusted returns mainly by investing in various credit-related strategies, including investments through underlying funds. The Company is externally managed by StepStone Group Private Debt LLC (the “Advisor”), an investment adviser registered with the U.S. Securities and Exchange Commission (the “SEC”) under the Investment Advisers Act of 1940, as amended (the “Advisers Act”). StepStone Group Europe Alternative Investments Limited (“SGEAIL”) serves as the Seller’s investment manager and as the Company’s sub-advisor.

 

The Seller and the Company intend to enter into a Participation and Assignment Agreement (the “Initial Portfolio Transfer Agreement”). Pursuant to the Initial Portfolio Transfer Agreement, and prior to the Company’s election to be regulated as a BDC under the 1940 Act, the Seller will sell to the Company’s wholly-owned subsidiary certain investments and unfunded lending obligations identified on the accompanying special purpose schedule of investments for an aggregate purchase price equal to the sum of the fair values of each such asset as of the time immediately prior to closing under the Initial Portfolio Transfer Agreement.

 

The accompanying special purpose schedule of investments reflects the principal balances and fair values of the investments expected to be sold by the Seller to the Company as of January 31, 2023. The principal balances and fair values of the investments and unfunded lending obligations expected to be acquired by the Company will be determined on the transaction date and will differ from the principal balances and fair values reported in the accompanying special purpose schedule of investments. The investments ultimately acquired by the Company may differ from the investments identified on the accompanying special purpose schedule of investments.

 

2. Significant Accounting Policies

 

The following is a summary of significant accounting policies consistently followed by the Company in the preparation of the special purpose schedule of investments and the related notes (collectively referred to as the “financial statement”) in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). The Company is an investment company following the accounting and reporting guidance in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 946, “Financial Services – Investment Companies”, and therefore the Company reports investments at fair value.

 

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statement and accompanying notes. Actual results could differ materially from those estimates.

 

Security Transactions

 

Security transactions are recorded on a trade-date basis. The amortized cost of investments represents the original cost adjusted for the accretion/amortization of discounts and premiums on such investments.

 

3. Investment Valuations and Fair Value Measurements

 

As of January 31, 2023, 100% of investments at fair value, or $33.2 million, was invested in senior secured first lien loans and related unfunded commitments across 9 portfolio companies. Investments are valued in accordance with the fair value principles established by FASB ASC Topic 820, Fair Value Measurement (“ASC Topic 820”) and in accordance with the 1940 Act. ASC Topic 820’s definition of fair value focuses on the amount that would be received to sell the asset or paid to transfer the liability in the principal or most advantageous market, and prioritizes the use of market-based inputs (observable) over entity-specific inputs (unobservable) within a measurement of fair value.

 

ASC 820 establishes a “fair value hierarchy” to prioritize the assumptions or inputs market participants use in arriving at the fair value estimate and to enhance the consistency and comparability of the related disclosure. In determining a fair value estimate, market participants are to use the highest level of inputs available as defined by the hierarchy below.

 

Level 1: Quoted prices in active markets for identical assets or liabilities

 

Level 1 is the highest level of input where the fair value is calculated using a market price times the quantity held

 

Level 2: Observable prices in active markets for similar assets or liabilities

 

Assumptions are made in arriving at the fair value estimate based on market data obtained from independent sources

 

F-11

 

 

SC CO-INVESTMENTS PRIVATE DEBT FUND L.P.

Notes to the Special Purpose Schedule of Investments

As of January 31, 2023, to be acquired by StepStone Private Credit Fund LLC

 

Level 3: Unobservable inputs

 

Assumptions are made in arriving at the fair value estimate based on the best information available

 

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of observable input that is significant to the fair value measurement. The assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the investment.

 

For securities or investments that are quoted, traded or exchanged in an accessible, active market, the value of the asset is determined by multiplying the number of securities held by the quoted market price as of the measurement (or reporting) date. There is no liquidity or restriction discount regardless of ownership structure or the ability to control the sale of the asset.

 

In determining the estimated fair value of performing private credit/debt or debt like securities for which there is no actively traded market, the estimate of fair value will consider such factors as the current market environment relative to that of the investment held, the tenor of maturity date of the investment, the operating performance of the issuer, the concern for maintaining any covenant levels embedded in the instrument, the ability of the issuer to call the security (and the associated redemption price), market interest rate spreads, and the general overall credit quality of the security over the life of the investment.

 

Each private credit investment was assigned an internal credit rating. The ratings are based on available fundamental information and used in conjunction with market inputs to create an estimate of fair value. Assets with lower internal credit ratings are considered for additional or alternative procedures for obtaining a fair value, which will include, but are not limited to, a review of market inputs and performance and other relevant information on comparable assets.

 

Defaulted private debt/credit positions are valued using several methods including the following: discounting the expected cash flows of the investment; valuing the net assets of the company; reviewing comparable precedent transactions involving similar companies; and using a performance multiple or market-based approach. None of the assets in the financial statement have defaulted or are on non-accrual.

 

The following table shows information about Level 3 investments by investment type measured at fair value as of January 31, 2023:

  

As of January 31, 2023   Level 1   Level 2   Level 3   Total  
Assets:                  
First Lien Senior Secured Term Loans   $   $   $ 33,169,112   $ 33,169,112  
Total             33,169,112     33,169,112  

  

Significant Unobservable Inputs

 

ASC Topic 820 requires disclosure of quantitative information about the significant unobservable inputs used in the valuation of assets and liabilities classified as Level 3 within the fair value hierarchy. The valuation techniques and significant unobservable inputs used in Level 3 fair value measurements of assets as of January 31, 2023 were as follows:

 

Investment Type   Fair Value at
January 31,
2023
    Valuation
Techniques
  Unobservable
Inputs
  Ranges     Average  
First Lien Senior Secured Term Loans   $ 33,169,112     Yield Method   Market Yield Discount Rates     9.91%-13.53%     11.01 %

 

F-12

 

 

SC CO-INVESTMENTS PRIVATE DEBT FUND L.P.

Notes to the Special Purpose Schedule of Investments

As of January 31, 2023, to be acquired by StepStone Private Credit Fund LLC

 

4. Concentration of Credit Risks

 

The first lien senior secured term loan investments identified in the financial statement may be affected by business, financial market or legal uncertainties. Prices of investments may be volatile, and a variety of factors that are inherently difficult to predict, such as domestic economic and political developments, may significantly affect the value of these investments. In addition, the value of these investments may fluctuate as the general level of interest rates fluctuate. The value of these investments may be detrimentally affected to the extent an issuer defaults on its obligations, there is insufficient collateral and/or there are extensive legal and other costs incurred in collecting on a defaulted loan.

 

5. Commitments and Contingencies

 

In the ordinary course of its business, the Company enters into contracts or agreements that contain indemnifications or warranties. Future events could occur that might lead to the enforcement of these provisions against the Company. The Company believes that the likelihood of such an event is remote; however, the maximum potential exposure is unknown. No accrual has been made in the consolidated financial statements as of January 31, 2023 for any such exposure.

 

The Seller is party to certain delay draw credit agreements with its portfolio companies, which require the Seller to make future advances at the issuers’ discretion during a defined commitment period. For certain unfunded delay draw credit agreements, the Seller will transfer the obligation to fund the delay draw to the Company pursuant to the terms of the Initial Portfolio Transfer Agreement.

 

As of January 31, 2023 the Seller had the following unfunded commitments to fund delayed draw loans:

 

Portfolio Company   January 31,
2023
 
Community Care Partners, LLC Delayed Draw Term B Loan   $ 297,901  
Integrity Marketing Acquisition, LLC Amendment No. 9 Delayed Draw Term Loan     530,667  
SageSure Holdings, LLC Delayed Draw Term Loan     1,041,211  
Total unfunded commitments   $ 1,869,779  

 

6. Subsequent Events

 

The Company evaluated subsequent events through April 19, 2023, the date the financial statement was available for issuance.

 

On February 23, 2023, the Company formed a wholly owned subsidiary, SPV Facility I LLC (“SPV Facility I”) to be used in obtaining a revolving credit facility, as described below.

 

On April 3, 2023, the Company sold 741,800 shares of its limited liability company interests (the “Shares”) at a price of $25.00 per share for an aggregate of $18,545,000 in the initial closing of its private offering of Shares (the “Initial Closing”).

 

F-13

 

 

SC CO-INVESTMENTS PRIVATE DEBT FUND L.P.

Notes to the Special Purpose Schedule of Investments

As of January 31, 2023, to be acquired by StepStone Private Credit Fund LLC

 

On April 3, 2023, in connection with the acquisition of the Initial Portfolio, the Company, through SPV Facility I as borrower, entered into a Loan and Security Agreement (the “MassMutual SPV I Facility”) with Massachusetts Mutual Life Insurance Company (“MassMutual”), as the administrative agent and facility servicer, and the lenders party thereto from time to time.

 

Under the MassMutual SPV I Facility, the lenders have made commitments of $200.0 million. Borrowings under the MassMutual SPV I Facility will generally bear interest at a rate per annum equal to Term SOFR plus a margin of 3.25%, with a 1.0% floor on Term SOFR, and the MassMutual SPV I Facility will have an advance rate of 58% against eligible portfolio assets. The MassMutual SPV I Facility is secured by all of the assets of SPV Facility I and a pledge over 100% of the equity interest in SPV Facility I held by the Company. The MassMutual SPV I Facility requires payment of (a) a non-use fee during the 18-month availability period of 0.40% on the difference between the average daily outstanding balance under the facility relative to the maximum amount of commitments at such time, and (b) after the 18-month availability period until the stated maturity date, a utilization fee equal to the positive difference, if any, in respect of any period between (i) the amount of interest that would have accrued under the MassMutual SPV I Facility if the principal outstanding thereunder were equal to 75% of the maximum commitment amount in that period, and (ii) the amount of interest that actually accrued under the MassMutual SPV I Facility for such period on the loans advanced thereunder. The Advisor paid, on the Company’s behalf, a customary upfront 1.25% commitment fee in connection with the MassMutual SPV I Facility, which amount is subject to reimbursement by the Company under an Expense Limitation and Reimbursement Agreement between the Company and the Advisor. The MassMutual SPV I Facility matures on March 31, 2033, unless sooner terminated in accordance with its terms.

 

The MassMutual SPV I Facility also includes various covenants applicable to the Company, in addition to those applicable to SPV Facility I, including covenants relating to certain changes of control of the Company and SPV Facility I. The MassMutual SPV I Facility provides for events of default customary for a facility of its type, including with respect to payment defaults, breach of representations and covenants, cross default provisions, lien and judgment limitations, and bankruptcy.

 

On April 3, 2023, SPV Facility I drew $19.5 million from the MassMutual SPV I Facility.

 

On April 3, 2023, shortly prior to the Company’s election to be regulated as a BDC, the Company, through SPV Facility I, acquired from the Seller a select portfolio of first lien, senior secured private credit investments in, and funding obligations to, well-established middle-market businesses that operate across a wide range of industries (the “Initial Portfolio”). The Company used the proceeds from the Initial Closing along with borrowings under the MassMutual SPV I Facility, to purchase the Initial Portfolio. SPV Facility I purchased the Initial Portfolio pursuant to the terms of the Initial Portfolio Transfer Agreement. The Initial Portfolio includes two first lien, senior secured private credit investments that were added to the list of transferred assets subsequent to the date of this financial statement.

 

The aggregate purchase price (the “Purchase Price”) for the Initial Portfolio was $37.4 million, which is equal to the sum of the fair values of each asset and unfunded commitment in the Initial Portfolio as of the time immediately prior to closing under the Initial Portfolio Transfer Agreement. For purposes of determining the Purchase Price, the assets and unfunded commitments in the Initial Portfolio were valued as of February 28, 2023 by an independent third-party valuation firm. In connection with the closing under the Initial Portfolio Transfer Agreement and the acquisition of the Initial Portfolio, the Advisor conducted certain valuation procedures to confirm whether there had been any material changes to the fair value of the investments and obligations in the Initial Portfolio since February 28, 2023 and adjusted the Purchase Price in accordance with the terms of the Initial Portfolio Transfer Agreement to reflect the fair value of the investments and obligations in the Initial Portfolio as of the time immediately prior to closing under the Initial Portfolio Transfer Agreement.

 

On April 3, 2023, following the closing under the Initial Portfolio Transfer Agreement, the Company filed an election to be treated as a BDC under the 1940 Act.

 

F-14

 

 

STEPSTONE PRIVATE CREDIT FUND LLC

 

Index to Unaudited Financial Statement

 

Index to Unaudited Financial Statement   F-15
     
Statement of Assets and Liabilities as of March 31, 2023   F-16
     
Notes to Unaudited Financial Statement   F-17

 

F-15

 

 

Statement of Assets and Liabilities

(Unaudited)

Expressed in US Dollars

 

    As of
March 31,
2023
 
Assets      
Cash   $ 10,000  
Total assets   $ 10,000  
         
Commitments and contingencies (Note 5)        
         
Shareholder’s equity        
Common shares, no par value, unlimited shares authorized, 400 shares        
issued and outstanding     10,000  
Total shareholder’s equity     10,000  
         
Total shareholder’s equity   $ 10,000  
         
Net asset value per share   $ 25.00  

 

F-16

 

 

Notes to Unaudited Financial Statement

March 31, 2023

Expressed in US Dollars

 

1. Description and Organization

 

StepStone Private Credit Fund LLC (the “Company”) is a Delaware limited liability company which was formed on September 26, 2022. The Company intends to elect to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). The Company seeks to achieve attractive risk-adjusted returns mainly by investing in various credit-related strategies, including investments through underlying funds. The Company is externally managed by StepStone Group Private Debt LLC (the “Advisor”), an investment adviser registered with the U.S. Securities and Exchange Commission (the “SEC”) under the Investment Advisers Act of 1940, as amended (the “Advisers Act”).

 

The Advisor also serves as the Company’s administrator pursuant to an administration agreement (the “Administration Agreement”). SEI Investments Global Funds Services (the “Sub-Administrator”) provides certain outsourced administration and outsourced accounting services for the Company.

 

There were no operations prior to March 31, 2023. As of March 31, 2023, the Advisor contributed $10,000 of capital to the Company in exchange for 400 shares of the Company’s limited liability company interests (the “Shares”). The initial meeting of the Board of Directors of the Company was held on January 11, 2023.

 

On February 23, 2023, the Company formed a wholly owned subsidiary, SPV Facility I LLC to be used in obtaining a revolving credit facility, as described in Note 7.

 

2. Significant Accounting Policies

 

The following is a summary of significant accounting policies consistently followed by the Company in the preparation of its statement of assets and liabilities and the related notes (collectively referred to as the “financial statement”) in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). The Company is an investment company following the accounting and reporting guidance in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 946, “Financial Services – Investment Companies”, and therefore the Company reports investments at fair value. Separate statements of income, changes in equity, and cash flows have not been presented in the financial statement because principal operations have not commenced.

 

Use of Estimates

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statement and accompanying notes. Actual results could differ materially from those estimates.

 

Organizational and Offering Costs

 

Organization and offering costs will only be borne by the Company if the Company receives $100.0 million in gross proceeds from the sale of shares, excluding shares purchased by the Advisor and by the Company’s directors and officers. Following such time, costs associated with the organization of the Company will be expensed as incurred. Costs associated with the offering of its shares are capitalized as deferred offering costs and amortized over a 12 month period from the date of the associated offering. See Note 5. Commitments and Contingencies for details of the Company’s Expense Limitation Agreement.

 

F-17

 

 

Notes to Unaudited Financial Statement (continued)

March 31, 2023

Expressed in US Dollars

 

Cash

 

Cash is comprised of cash at the custodian bank and is subject to credit risk to the extent those balances exceed applicable Federal Deposit Insurance Corporation limitations.

 

3. Income Taxes

 

The Company intends to elect to be regulated as a BDC under the 1940 Act. The Company also intends to elect to be treated as a regulated investment company (“RIC”) for U.S. federal income tax purposes under Subchapter M of the Internal Revenue Code of 1986, as amended. So long as the Company maintains its status as a RIC, it generally will not have to pay corporate-level U.S. federal income taxes on any ordinary income or capital gains that it distributes at least annually to shareholders. Rather, any tax liability related to income earned and distributed by the Company represents obligations of the Company’s investors and will not be reflected in the financial statement of the Company.

 

To qualify and be subject to tax as a RIC for U.S. federal income tax purposes, the Company will need to ensure that (among other things) it satisfies certain sources of income and asset diversification requirements and distributes to its shareholders, for each taxable year, an amount equal to at least 90% of the sum of (i) its investment company taxable income for that year (without regard to the deduction for dividends paid), which is generally its ordinary income plus the excess, if any, of its realized net short-term capital gains over its realized net long-term capital losses and (ii) its net tax-exempt income. In addition, based on the excise tax distribution requirements, the Company is subject to a 4% nondeductible federal excise tax on undistributed income unless the Company distributes in a timely manner in each taxable year an amount at least equal to the sum of (1) 98% of its ordinary income for the calendar year, (2) 98.2% of capital gain net income (both long-term and short-term) for the one-year period ending October 31 in that calendar year and (3) any income realized, but not distributed, in prior years. For this purpose, however, any ordinary income or capital gain net income retained by the Company that is subject to corporate income tax is considered to have been distributed.

 

The Company evaluates tax positions taken or expected to be taken in the course of preparing its financial statement to determine whether the tax positions are “more-likely-than-not” to be sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than-not” threshold are reserved and recorded as a tax benefit or expense in the current year. All penalties and interest associated with income taxes are included in income tax expense. Conclusions regarding tax positions are subject to review and may be adjusted at a later date based on factors including, but not limited to, ongoing analyses of tax laws, regulations and interpretations thereof. As of March 31, 2023, no tax expenses and no interest and penalties were incurred.

 

F-18

 

 

Notes to Unaudited Financial Statement (continued)

March 31, 2023

Expressed in US Dollars

 

4. Shareholder’s Equity

 

The Company is authorized to issue an unlimited number of shares. As of March 31, 2023, the Company had issued 400 shares and all are outstanding.

 

5. Commitments and Contingencies

 

The Advisor has agreed to pay all of the Company’s organizational and offering expenses. These expenses consist primarily of legal fees and other costs of organizing the Company and issuing shares. The Company has no obligation to reimburse the Advisor for such advanced expenses until the time at which the Company receives $100.0 million in gross proceeds from the sale of shares, excluding shares purchased by the Advisor and by the Company’s directors and officers. Following such time, all organizational and offering costs of the Company paid by the Advisor will be subject to recoupment by the Advisor to the extent that such recoupment is probable. The recoupment is limited to the amount of the Expense Cap under the Expense Limitation Agreement (each as defined in Note 6). Under the Expense Limitation Agreement, the Advisor is permitted to recoup from the Company any such amounts for a period not to exceed three years from the month in which such fees and expenses were paid. As the Company has not yet received $100.0 million in gross proceeds from the sale of shares, excluding shares purchased by the Advisor and the Company’s directors and officers as of the date of this financial statement, no such costs have been recorded. The total organization and offering costs incurred through March 31, 2023 were $1,327,622.

 

6. Agreements and Related Party Transactions

 

Advisory Agreement

 

Pursuant to the terms of the Investment Advisory Agreement (the “Advisory Agreement”), the Advisor manages the Company’s day-to-day operations and provides the Company with investment advisory and management services. The Advisor is a wholly-owned subsidiary of Swiss Capital Alternative Investments AG (“SCAI”), which is an affiliate of StepStone Group LP (“StepStone Group”). StepStone Group makes certain personnel and resources available to the Advisor pursuant to the terms of a resource sharing agreement.

 

Under the Advisory Agreement, the Company will pay the Advisor fees for investment management services consisting of a base management fee (the “Base Management Fee”) and an incentive fee (the “Incentive Fee”).

 

Any of the fees payable to the Advisor under the Advisory Agreement for any partial month or calendar quarter will be appropriately prorated. The Advisor may agree to temporarily defer or permanently waive, in whole or in part, the Base Management Fee and/or the Incentive Fee. Prior to the payment of any fee to the Advisor, the Company will obtain written instructions from the Advisor with respect to any waiver or deferral of any portion of such fees. Any portion of a deferred fee payable to the Advisor and not paid over to the Advisor with respect to any month, calendar quarter or year shall be deferred without interest and may be paid over in any such other month prior to the termination of Advisory Agreement, as the Advisor may determine upon written notice to the Company.

 

F-19

 

 

Notes to Unaudited Financial Statement (continued)

March 31, 2023

Expressed in US Dollars

 

The Base Management Fee will be payable monthly in arrears at an annual rate of 1.00% of the value of Company’s net assets as of the beginning of the first calendar day of the applicable month, commencing with the first calendar day of the first full calendar month following the date of the Company’s election to be treated as a BDC under the 1940 Act. For purposes of the Advisory Agreement, the value of the Company’s “net assets” means the Company’s total assets less liabilities determined on a consolidated basis in accordance with U.S. GAAP. All or any part of the Base Management Fee not taken as to any month will be deferred without interest and may be taken in such other month as the Advisor determines.

 

The Incentive Fee will consist of two components: an income-based incentive fee and a capital gains-based incentive fee, that are independent of each other, with the result that one component may be payable even if the other is not.

 

The first part of the Incentive Fee, referred to as the “Income Incentive Fee,” will be calculated and payable quarterly in arrears based on the Company’s “Pre-Incentive Fee Net Investment Income” for the immediately preceding quarter. The payment of the Income Incentive Fee will be subject to a quarterly hurdle rate, expressed as a rate of return on the value of the Company’s net assets at the end of the most recently completed calendar quarter, of 1.25% (5.0% annualized) (the “Hurdle Rate”), subject to a “catch up” feature (as described below).

 

For this purpose, “Pre-Incentive Fee Net Investment Income” means interest income, dividend income and any other income (including any other fees (other than fees for providing managerial assistance) such as commitment, origination, structuring, diligence and consulting fees or other fees that the Company (or its wholly-owned subsidiaries) receives from portfolio companies) accrued during the calendar quarter, minus the Company’s and its subsidiaries’ operating expenses for the quarter (including the Base Management Fee, expenses and fees paid to the Advisor under the Administration Agreement and any interest expense and dividends paid on any issued and outstanding preferred stock, but excluding the Incentive Fee and any shareholder servicing and/or distribution fees). Pre-Incentive Fee Net Investment Income includes, in the case of investments with a deferred interest feature (such as original issue discount debt instruments with payment-in-kind interest and zero-coupon securities), accrued income that the Company has not yet received in cash. Pre-Incentive Fee Net Investment Income does not include any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation.

 

The calculation of the Income Incentive Fee for each quarter is as follows:

 

No Income Incentive Fee will be payable to the Advisor in any calendar quarter in which the Company’s Pre-Incentive Fee Net Investment Income does not exceed the Hurdle Rate;

 

100% of the dollar amount of the Company’s Pre-Incentive Fee Net Investment Income, if any, that exceeds the Hurdle Rate but is less than or equal to 1.3514% in any calendar quarter (5.4056% annualized) will be payable to the Advisor. This portion of the Company’s Income Incentive Fee that exceeds the Hurdle Rate but is less than or equal to 1.3514% is referred to as the “catch up” and is intended to provide the Advisor with an Incentive Fee of 7.5% on all of the Company’s Pre-Incentive Fee Net Investment Income when the Company’s Pre-Incentive Fee Net Investment Income reaches 1.3514% (5.4056% annualized) on net assets in any calendar quarter; and

 

F-20

 

 

Notes to Unaudited Financial Statement (continued)

March 31, 2023

Expressed in US Dollars

 

7.5% of the dollar amount of the Company’s Pre-Incentive Fee Net Investment Income, if any, that exceeds 1.3514% (5.4056% annualized) on net assets in any calendar quarter will be payable to the Advisor once the Hurdle Rate and catch-up have been achieved (7.5% of the Company’s Pre-Incentive Fee Net Investment Income thereafter will be allocated to the Advisor).

 

The second part of the Incentive Fee, referred to as the “Capital Gains-Based Incentive Fee,” will be an incentive fee on capital gains and will be determined and payable in arrears as of the end of each calendar year (or upon termination of the Advisory Agreement). This fee will equal 7.5% of the Company’s incentive fee capital gains, which will equal the Company’s realized capital gains on a cumulative basis from the effective date of the Advisory Agreement, calculated as of the end of the applicable period, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis from effective date of the Advisory Agreement, less the aggregate amount of any previously paid Capital Gains-Based Incentive Fee.

 

Each year, the fee paid for the Capital Gains-Based Incentive Fee is net of the aggregate amount of any previously paid Capital Gains-Based Incentive Fee for all prior periods. The Company will accrue, but will not pay, a Capital Gains-Based Incentive Fee with respect to unrealized appreciation because a Capital Gains-Based Incentive Fee would be owed to the Advisor if the Company were to sell the relevant investment and realize a capital gain.

 

Administration Agreement

 

The Advisor also serves as the Company’s administrator pursuant to the Administration Agreement and performs certain administrative, accounting and other services for the Company. In consideration of these administrative services, the Company pays the Advisor the administration fee (the “Administration Fee”) in an amount up to 0.30% on an annualized basis of the Company’s net assets. The Administration Fee is calculated based on the Company’s month-end net asset value (as of the close of business on the last calendar day of the applicable month) and payable monthly in arrears. The Administration Fee is an expense paid out of the Company’s net assets.

 

F-21

 

 

Notes to Unaudited Financial Statement (continued)

March 31, 2023

Expressed in US Dollars

 

Expense Limitation and Reimbursement Agreement

 

The Company entered into an Expense Limitation and Reimbursement Agreement (the “Expense Limitation Agreement”) with the Advisor for a one-year term beginning on the initial closing date for subscriptions for shares and ending on the one-year anniversary thereof (the “Limitation Period”). The Advisor may extend the Limitation Period for a period of one year on an annual basis. The Expense Limitation Agreement limits the amount of the Company’s aggregate monthly Other Operating Expenses (as defined below). The Advisor has agreed that it will pay, absorb or reimburse the Company’s aggregate monthly Other Operating Expenses (as defined below) on the Company’s behalf (which, for the avoidance of doubt, may include any Other Operating Expenses incurred prior to the effective date of the Advisory Agreement) (each such payment, absorption or reimbursement, a “Required Expense Payment”), such that the aggregate monthly Other Operating Expenses borne by the Company during the Limitation Period shall not exceed 1.00%, on an annualized basis, of the Company’s month-end net assets (the “Expense Cap”). For any month in which the Company’s aggregate monthly Other Operating Expenses exceed the Expense Cap, the Advisor shall make a Required Expense Payment to the extent necessary to eliminate such excess. The Advisor may also directly pay expenses on behalf of the Company and waive reimbursement under the Expense Limitation Agreement. “Other Operating Expenses” shall include all of the Company’s operating expenses, including O&O Expenses, but shall exclude Specified Expenses (as defined below). “O&O Expenses” shall include all of the fees, costs, charges, expenses, liabilities and obligations incurred in relation to or in connection with the establishment of the Company, the marketing and offering of the Shares (including, among other things, legal, accounting, subscription processing and filing fees and expenses and other expenses pertaining to this offering), and the establishment, organization and creation of the operational structure of the Company and its special purpose vehicle subsidiaries, including travel, lodging, meals, entertainment, legal, accounting, regulatory compliance, fees of professional advisors, printing, postage, regulatory and tax filing fees, and other costs of establishment.

 

Voluntary Expense Support. At such times as the Advisor determines, the Advisor may elect to pay or reimburse certain additional fees and expenses of the Company on the Company’s behalf, including all or any portion of a Specified Expense (each such payment or reimbursement, a “Voluntary Expense Payment” and, together with a Required Expense Payment, the “Expense Payments”); provided that no portion of a Voluntary Expense Payment will be used to pay any interest expense or shareholder servicing and/or distribution fees of the Company. In making a Voluntary Expense Payment, the Advisor will designate, as it deems necessary or advisable, what type of expense it is paying.

 

Company Obligation. The Company shall have no obligation to reimburse or pay the Advisor for any Expense Payment unless the Company has received at least $100.0 million in gross proceeds from the sale of Shares (the “Offering Proceeds Threshold”), following which time, such Expense Payments shall be subject to recoupment by the Advisor to the extent that such recoupment would not cause the Company to exceed the Expense Cap. Calculation of the Offering Proceeds Threshold shall exclude gross proceeds from Shares purchased by the Advisor and by the Company’s directors and officers.

 

F-22

 

 

Notes to Unaudited Financial Statement (continued)

March 31, 2023

Expressed in US Dollars

 

Specified Expenses. The Expense Cap applies only to the Company’s aggregate monthly Other Operating Expenses, which excludes Specified Expenses. “Specified Expenses” include: (i) the base management fee under the Advisory Agreement; (ii) all fees and expenses charged by the non-affiliated investment managers of the Underlying Funds and other investments in which the Company invests (including management fees, performance or incentive fees and redemption or withdrawal fees, however titled or structured) (the “Acquired Fund Fees and Expenses”); (iii) the incentive fee under the Advisory Agreement; (iv) transactional costs, including legal costs and brokerage commissions, associated with the acquisition and disposition of the Company’s investments; (v) interest payments incurred on borrowings by the Company or its subsidiaries; (vi) fees and expenses incurred in connection with any credit facility obtained by the Company or any of its subsidiaries, including any expenses for acquiring ratings related to the credit facilities; (vii) distribution and shareholder servicing fees, as applicable; (viii) taxes; and (ix) extraordinary expenses resulting from events and transactions that are distinguished by their unusual nature and by the infrequency of their occurrence, including, without limitation, costs incurred in connection with any claim, litigation, arbitration, mediation, government investigation or similar proceeding, indemnification expenses and expenses in connection with holding and/or soliciting proxies for all annual and other meetings of the Company’s shareholders.

 

Excess Expenses. In consideration of the Advisor’s agreement, the Company agrees to carry forward the amount of any Expense Payment (“Excess Expenses”) for a period not to exceed three years from the end of the month in which such fees and expenses were waived, reimbursed or paid by the Advisor, and to reimburse the Advisor in the amount of such Excess Expenses as promptly as possible, on a monthly basis, even if such reimbursement occurs after the termination of the Limitation Period, provided that the waived fees, reimbursed expenses or directly paid expenses have fallen to a level below the Expense Cap and the reimbursement amount does not raise the level of waived fees, reimbursed expenses or directly paid expenses in the month the reimbursement is being made to a level that exceeds the Expense Cap applicable at that time. For the avoidance of doubt, if at the end of any fiscal year in which the Company has reimbursed the Advisor for any Excess Expenses, the Company’s waived fees, reimbursed expenses or directly paid expenses for such fiscal year exceed the Expense Cap applicable at that time, the Advisor shall promptly pay the Company an amount equal to the lesser of: (i) the amount by which the Company’s waived fees, reimbursed expenses or directly paid expenses for such fiscal year exceed the Expense Cap; and (ii) the amount of reimbursements for Excess Expenses paid by the Company to the Advisor in such fiscal year.

 

7. Subsequent Events

 

The Company has evaluated subsequent events through April 19, 2023, the date the financial statement was available for issuance.

 

On April 3, 2023, the Company executed the agreements described herein including the Advisory Agreement, the Administration Agreement, and the Expense Limitation Agreement.

 

On April 3, 2023, the Company sold 741,800 Shares at a price of $25.00 per share for an aggregate of $18.5 million in the initial closing of its private offering of Shares (the “Initial Closing”).

 

F-23

 

 

Notes to Unaudited Financial Statement (continued)

March 31, 2023

Expressed in US Dollars

 

On April 3, 2023, in connection with the acquisition of the Initial Portfolio, the Company, through its wholly-owned subsidiary, SPV Facility I LLC (“SPV Facility I”), as borrower, entered into a Loan and Security Agreement (the “MassMutual SPV I Facility”) with Massachusetts Mutual Life Insurance Company (“MassMutual”), as the administrative agent and facility servicer, and the lenders party thereto from time to time.

 

Under the MassMutual SPV I Facility, the lenders have made commitments of $200.0 million. Borrowings under the MassMutual SPV I Facility will generally bear interest at a rate per annum equal to Term SOFR plus a margin of 3.25%, with a 1.0% floor on Term SOFR, and the MassMutual SPV I Facility will have an advance rate of 58% against eligible portfolio assets. The MassMutual SPV I Facility is secured by all of the assets of SPV Facility I and a pledge over 100% of the equity interest in SPV Facility I held by the Company. The MassMutual SPV I Facility requires payment of (a) a non-use fee during the 18-month availability period of 0.40% on the difference between the average daily outstanding balance under the facility relative to the maximum amount of commitments at such time, and (b) after the 18-month availability period until the stated maturity date, a utilization fee equal to the positive difference, if any, in respect of any period between (i) the amount of interest that would have accrued under the MassMutual SPV I Facility if the principal outstanding thereunder were equal to 75% of the maximum commitment amount in that period, and (ii) the amount of interest that actually accrued under the MassMutual SPV I Facility for such period on the loans advanced thereunder. The Advisor paid, on the Company’s behalf, a customary upfront 1.25% commitment fee in connection with the MassMutual SPV I Facility, which amount is subject to reimbursement by the Company under an Expense Limitation Agreement. The MassMutual SPV I Facility matures on March 31, 2033, unless sooner terminated in accordance with its terms.

 

The MassMutual SPV I Facility also includes various covenants applicable to the Company, in addition to those applicable to SPV Facility I, including covenants relating to certain changes of control of the Company and SPV Facility I. The MassMutual SPV I Facility provides for events of default customary for a facility of its type, including with respect to payment defaults, breach of representations and covenants, cross default provisions, lien and judgment limitations, and bankruptcy.

 

On April 3, 2023, SPV Facility I drew $19.5 million from the MassMutual SPV I Facility.

 

On April 3, 2023, shortly prior to the Company’s election to be regulated as a BDC, the Company, through SPV Facility I, acquired from SC Co-Investments Private Debt Fund L.P. (the “Seller”) a select portfolio of first lien, senior secured private credit investments in, and funding obligations to, well-established middle-market businesses that operate across a wide range of industries (the “Initial Portfolio”). The Company used the proceeds from the Initial Closing along with borrowings under the MassMutual SPV I Facility, to purchase the Initial Portfolio. SPV Facility I purchased the Initial Portfolio pursuant to the terms of a Participation and Assignment Agreement (the “Initial Portfolio Transfer Agreement”).

 

The aggregate purchase price (the “Purchase Price”) for the Initial Portfolio was $37.4 million, which is equal to the sum of the fair values of each asset and unfunded commitment in the Initial Portfolio as of the time immediately prior to closing under the Initial Portfolio Transfer Agreement. For purposes of determining the Purchase Price, the assets and unfunded commitments in the Initial Portfolio were valued as of February 28, 2023 by an independent third-party valuation firm. In connection with the closing under the Initial Portfolio Transfer Agreement and the acquisition of the Initial Portfolio, the Advisor conducted certain valuation procedures to confirm whether there had been any material changes to the fair value of the investments and obligations in the Initial Portfolio since February 28, 2023 and adjusted the Purchase Price in accordance with the terms of the Initial Portfolio Transfer Agreement to reflect the fair value of the investments and obligations in the Initial Portfolio as of the time immediately prior to closing under the Initial Portfolio Transfer Agreement.

 

On April 3, 2023, following the closing under the Initial Portfolio Transfer Agreement, the Company filed an election to be treated as a BDC under the 1940 Act.

 

F-24

 

 

SIGNATURES

 

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned thereunto duly authorized.

 

  STEPSTONE PRIVATE CREDIT FUND LLC
     

Date: April 19, 2023

By: /s/ Joseph Cambareri
  Name:  Joseph Cambareri
  Title: Chief Financial Officer and Corporate Secretary

 

 

100

 

 

Exhibit 2.1

 

Execution Version

 

PARTICIPATION and assignment AGREEMENT

 

Participation and Assignment Agreement (this “Agreement”), dated as of April 3, 2023, between SC Co-Investments Private Debt Fund L.P., a Cayman Islands exempted limited liability partnership (“Seller”), and SPV Facility I LLC, a Delaware limited liability company (“Buyer”).

 

RECITALS

 

Reference is hereby made to that certain Loan and Servicing Agreement, dated as of April 3, 2023 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Loan Agreement”), by and among Buyer, as borrower, StepStone Private Credit Fund LLC, as holdings, the lenders from time to time party thereto and Massachusetts Mutual Life Insurance Company, as administrative agent (in such capacity, the “Administrative Agent”) and facility servicer.

 

Seller owns certain loans and obligations described on Annex A hereto and the related Transferred Rights (collectively, the “Transferred Assets”).

 

Seller has agreed to (i) transfer each Transferred Asset by initially granting an undivided 100% participation interest therein to Buyer pursuant to Section 2.01 and (ii) thereafter cause an assignment of such Transferred Asset to be delivered to Buyer so that Buyer becomes the owner of and lender of record in respect of such Transferred Asset pursuant to Section 2.06. Such transfer by Seller and the receipt by Buyer of such participation interest in each Transferred Asset is referred to herein as the “Transfer” of such Transferred Asset.

 

The parties hereto wish to provide for various matters in connection with the foregoing.

 

AGREEMENT

 

Accordingly, in consideration of the mutual agreements set forth herein and other valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows.

 

ARTICLE I
Definitions

 

SECTION 1.01 Certain Definitions; Interpretation.

 

(a) As used herein, the following terms have the meanings provided below.

 

Adjustments”: The meaning given to such term in Section 2.02(a).

 

Agreement”: The meaning given to such term in the preamble to this Agreement.

 

Assumed Obligations”: The meaning given to such term in Section 2.01(b).

 

Borrower”: Collectively, each Person specified as such on Annex A hereto and such other borrower(s) as may be identified in the applicable Credit Agreement.

 

Business Day”: any day other than a Saturday, Sunday or any other day on which commercial banks located in Dublin, Ireland and New York, New York are authorized or required by law to be closed for business.

 

 

 

 

Buyer”: The meaning given to such term in the preamble to this Agreement.

 

Closing Consideration”: The meaning given to such term in Section 2.02(a).

 

Credit Agreement”: Collectively, each credit agreement related to the applicable “Investment” specified on Annex A hereto (including all intercreditor agreements, subordination agreements, waivers and amendments entered into from time to time pursuant thereto or in connection therewith), in each case, as amended, restated, supplemented or otherwise modified from time to time.

 

Elevation”: The meaning given to such term in Section 2.06(a).

 

Excluded Liabilities”: The meaning given to such term in Section 2.01(b).

 

Final Mark”: The meaning given to such term in Section 2.02(a).

 

Income Collections”: The meaning given to such term in the definition of “Transferred Rights”.

 

Participation Interest(s)”: The meaning given to such term in Section 2.01(a).

 

Person”: An individual or a corporation (including a business trust), partnership, exempted limited partnership, exempted company, trust, incorporated or unincorporated association, joint stock company, limited liability company, government (or an agency or political subdivision thereof) or other entity of any kind.

 

Proceeding”: Any suit in equity, action at law or other judicial or administrative proceeding.

 

Representing Party”: The meaning given to such term in Section 3.01.

 

Seller”: The meaning given to such term in the preamble to this Agreement.

 

Settlement Date”: April 3, 2023.

 

Signature Law”: The meaning given to such term in Section 4.07.

 

Transaction Documents”: With respect to each Transferred Asset, the relevant credit documentation or other agreement or documents pursuant to which such Transferred Asset has been issued or created and each other agreement or document that governs the terms of or secures the obligations represented by such Transferred Asset or of which the holders of such Transferred Asset are the beneficiaries, including each Credit Agreement and all guarantees of any of Borrower’s obligations under each Credit Agreement, including Borrower’s obligations in connection with the applicable Transferred Assets, security agreements, mortgages, deeds of trust, letters of credit, reimbursement agreements, waivers, amendments, modifications, supplements, forbearances, intercreditor agreements, subordination agreements and all other agreements, documents or instruments executed and delivered from time to time in connection therewith.

 

Transfer”: The meaning given to such term in the recitals to this Agreement.

 

Transferred Assets”: The meaning given to such term in the recitals to this Agreement.

 

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Transferred Rights”: All of Seller’s rights in its capacity as a lender under the applicable Transaction Documents, all of Seller’s right, title, benefit and interest in and to any fees and interest accruing from and after one day after the Settlement Date, any payments (including principal), proceeds or other distributions (including cash, notes, securities or other property, whether received by setoff or otherwise) to the extent provided in Section 2.03 (“Income Collections”) and, to the extent permitted to be transferred under applicable law and under the applicable Transaction Documents executed and delivered in connection with a Transferred Asset, all claims, causes of action and any other right of Seller (in its capacity as a lender under such Transaction Documents), whether known or unknown, against any obligor or any of its affiliates, agents, representatives, contractors, advisors or other Persons arising under or in connection with such documentation or that is in any way based on or related to any of the foregoing or the loan transactions governed thereby, including contract claims, tort claims, malpractice claims, statutory claims and all other claims at law or in equity related to the rights and obligations sold and purchased pursuant to this Agreement.

 

(b) Except as otherwise specified herein or as the context may otherwise require:

 

(i) the definitions of terms herein are equally applicable both to the singular and plural forms of such terms and to the masculine, feminine and neuter genders of such terms;

 

(ii) the terms “payment” and “distribution” are synonymous;

 

(iii) the words “herein”, “hereof” and “hereunder” and other words of similar import refer to this Agreement as a whole (including any attachments hereto) and not to any particular Article, Section or other subdivision;

 

(iv)   the word “including” and correlative words shall be deemed to be followed by the phrase “without limitation” unless actually followed by such phrase or a phrase of like import;

 

(v) the word “or” is always used inclusively herein (for example, the phrase “A or B” means “A or B or both”, not “either A or B but not both”) when not used in an “either/or” construction;

 

(vi) references to a Person include references to such Person’s successors and assigns (but this clause (vi) shall not permit any assignment of any right hereunder or any delegation of any obligation hereunder that is prohibited or limited hereby);

 

(vii) references to an agreement or other document are to it as amended, supplemented, restated and otherwise modified from time to time and to any successor document;

 

(viii) references to a statute, regulation or other government rule are to it as amended from time to time and, as applicable, are to corresponding provisions of successor governmental rules; and

 

(ix)   references to an “Article”, a “Section” or a “Annex” are to an article hereof, a section hereof or an annex hereto.

 

(c) The titles of Articles and Sections hereof are for convenience only, and they neither form a part of this Agreement nor are to be used in the construction or interpretation hereof.

 

3

 

 

ARTICLE II
Transfer

 

SECTION 2.01 Transfer. Upon the terms and subject to the conditions hereof on the Settlement Date, upon receipt by Seller or its designee of the Closing Consideration (as defined below):

 

(a) Seller hereby irrevocably sells, grants and conveys to Buyer, and Buyer hereby accepts, receives and acquires from Seller, a 100% undivided direct participating beneficial ownership interest in each Transferred Asset (each, a “Participation Interest” and, collectively, the “Participation Interests”); and

 

(b) Buyer hereby agrees to and does assume the direct obligations and liabilities (whether known or unknown, whether asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, and whether due or to become due) of Seller with respect to the Transferred Rights to the extent, and only to the extent, that such obligations arise out of or relate to facts, events or circumstances arising or occurring on or after the Settlement Date (such obligations and liabilities, other than the Excluded Liabilities (as defined below), collectively, the “Assumed Obligations”) (but excluding such obligations and liabilities of Seller relating to the Transferred Assets (i) that result from Seller’s breach of its representations, warranties, covenants, or agreements under any Transaction Document, (ii) that result from Seller’s bad faith, gross negligence, or willful misconduct, (iii) that are attributable to Seller’s actions or obligations in any capacity other than as a Lender (under and as defined in the relevant credit documentation, or (iv) arising or occurring prior to the Settlement Date (such obligations and liabilities of Seller, collectively, the “Excluded Liabilities”))).

 

SECTION 2.02 Purchase Price.

 

(a) With respect to each Transferred Asset, the consideration for the Participation Interest in such Transferred Asset shall be the assumption of the applicable Assumed Obligations and an amount of cash equal to the arm’s length purchase price that corresponds to the “Fair Value” set forth on Annex A (such purchase price with respect to each Transferred Asset, the “Final Mark,” and the aggregate of all Final Marks for all of the Transferred Assets, the “Closing Consideration”); provided, that the Final Marks and the Closing Consideration shall be adjusted once by the parties hereto no later than seven (7) Business Days following the Settlement Date to reflect and reconcile any changes in the principal balances of the Transferred Assets shown on Annex A as of the time immediately prior to the Transfer on the Settlement Date (the “Adjustments”), which adjustments shall be based on relevant information with respect thereto maintained and provided by third-party service providers. The parties hereto shall make such payments to each other as necessary to provide for the Adjustments. Each of the parties hereto acknowledges and agrees that the Final Mark of each Transferred Asset set forth on Annex A, as may be adjusted pursuant to the Adjustments, is equal to the estimated fair market value of such Transferred Asset.

 

(b) On the Settlement Date, Buyer will pay (or cause to be paid) to Seller the Closing Consideration of USD $36,762,933 by wire transfer of immediately available funds to the bank account of Seller.

 

SECTION 2.03 Income Collections; Payments of Income Collections and Other Payments Received After the Settlement Date.

 

(a) With respect to each Transferred Asset, Buyer shall acquire all rights to Income Collections that, as of the Settlement Date, are accrued but unpaid with respect to the period from and after one day after the Settlement Date (inclusive).

 

(b) If at any time after the Settlement Date Seller receives any Income Collections, Seller shall accept and hold such Income Collections for the account and sole benefit of Buyer and deliver such Income Collections promptly (and in any case no later than two (2) Business Days after receipt) to Buyer (free of any withholding, setoff, recoupment, or deduction of any kind except as required by law). If, at any time after the Settlement Date, Seller receives any other payment (including principal, interest (to the extent relating to the period from and after the Settlement Date) or any other amount) with respect to a Transferred Asset, Seller shall accept and hold such payment for the account and sole benefit of Buyer and deliver such payment promptly (and in any case no later than two (2) Business Days after receipt) to Buyer (free of any withholding, setoff, recoupment, or deduction of any kind except as required by law).

 

4

 

 

(c) Without limiting the foregoing, with respect to each payment received in connection with each Transferred Asset to which Buyer is entitled in accordance with Section 2.01 and this Section 2.03, Seller agrees to accept and hold such payment for the account and sole benefit of Buyer and remit to Buyer promptly (and in any case no later than two (2) Business Days) after receipt of such payment and identification thereof. Seller acknowledges that, from and after the Settlement Date (inclusive), it shall have no equitable, beneficial or other interest in any payment received by it with respect to any Transferred Asset (other than any accrued and unpaid interest with respect to the period of time prior to and including the Settlement Date).

 

(d) If Income Collections include securities or other non-cash instruments, Seller shall, to the extent permitted by law, endorse (without recourse, representation or warranty) or use commercially reasonable efforts (at Buyer’s sole expense) to assist Buyer to cause to be registered in Buyer’s name, or such name as Buyer may direct, and deliver such securities or non-cash instruments to Buyer or to such Person as Buyer may direct as soon as practicable. Pending such transfer, Seller shall (from and after one day after the Settlement Date (inclusive)) hold the same on behalf and for the sole benefit of Buyer, and Seller shall have no equitable or beneficial interest in any such Income Collections, and such Income Collections shall for all purposes constitute property of Buyer.

 

(e) Subject to applicable law, Buyer is entitled to receive any Income Collections to be remitted by Seller under this Agreement without the withholding of any tax. If Seller receives any Income Collections that it is required to remit to Buyer, Buyer shall furnish to Seller an IRS Form W-9 and such other forms, certifications, statements and other documents as Seller may reasonably request to evidence Buyer’s exemption from the withholding of any tax imposed by the United States of America or any other jurisdiction, whether domestic or foreign, or to enable Seller to comply with any applicable laws or regulations relating thereto.

 

SECTION 2.04 Treatment of Transfer; Backup Grant of Security Interest.

 

(a) Each party hereto intends, and has as its business objective, that each Transfer be an absolute transfer and not be a transfer as security for a loan. Except as set forth in this Agreement, neither party is a trustee or agent for the other party, nor does either party have any fiduciary obligations to the other party. This Agreement shall not be construed to create a partnership or joint venture between the parties hereto. If, notwithstanding such intention, any Transfer is characterized by a court of competent jurisdiction as a transfer as security for a loan rather than a sale, then Seller shall be deemed to have granted to Buyer, and Seller hereby grants to Buyer, a security interest in and lien on all of Seller’s right, title and interest in and to such Transferred Asset (including the Income Collections thereon), whether now existing or hereafter acquired, in order to secure such loan and all other obligations of Seller hereunder.

 

(b) After the Settlement Date, Seller shall record in Seller’s books and records the fact that Seller is no longer the beneficial owner of such Transferred Asset and, after the relevant Elevation Date (as defined below) with respect to any Transferred Asset, Seller shall record in Seller’s books and records the fact that Seller is no longer the record owner or beneficial owner of such Transferred Asset. After the Settlement Date, Buyer shall record in Buyer’s books and records the fact that Buyer is the beneficial owner of such Transferred Asset and, after the relevant Elevation Date with respect to any Transferred Asset, Buyer shall record in Buyer’s books and records the fact that Buyer is the record owner and beneficial owner of such Transferred Asset.

 

5

 

 

(c) Each party hereto intends that the Transfer of each Participation Interest shall be treated as a true sale as of the Settlement Date from Seller to Buyer, including for U.S. federal income tax purposes except upon a contrary final determination by an applicable taxing authority. Each party shall cause its books and records and tax reporting to reflect, and the books and records of each party shall reflect, the transfer and sale of the Participation Interests.

 

SECTION 2.05 Documents; Exercise of Rights and Remedies; Servicing and Administration.

 

(a) Prior to Elevation, to the extent not already in Buyer’s possession and to the extent required under the Loan Agreement with respect to the Transferred Assets, Seller shall furnish within five (5) Business Days to Buyer and the Administrative Agent copies of any Transaction Document in its possession in respect of such Transferred Asset and, as and when available to Seller in its capacity as lender under the relevant Transaction Document, a copy of each amendment, consent or waiver in connection with any such Transaction Document.

 

(b) From and after the Settlement Date, to the extent not already in Buyer’s possession and to the extent required under the Loan Agreement with respect to the Transferred Assets, subject to applicable law and regulation and the Transaction Documents, Seller shall use commercially reasonable efforts to promptly (and in any case within five (5) Business Days) forward to Buyer (or the Administrative Agent) all material written notices, requests, reports and communications of any nature received by Seller from any Person with respect to each Transferred Asset that are received by Seller in its capacity as a Lender (under and as defined in the Credit Agreement), provided that Seller shall have no liability to Buyer regarding the validity or content of the information and documents furnished pursuant to this Section 2.5(b). On and after the Settlement Date, Buyer shall assume Seller’s executory obligations under the Transferred Assets and Assumed Obligations and assume the ability and right to grant and exercise (or refrain from making, granting and exercising) all votes, whether pursuant to amendments, consents or waivers, and otherwise to exercise (or refrain from exercising) all other rights and remedies with respect to the Transferred Assets and the Assumed Obligations against any other party.

 

(c) Prior to Elevation (as defined below), Seller shall act as servicer, agent and trustee for Buyer in holding, administering and servicing the Participation Interest for Buyer, and Seller shall hold title to the Transferred Assets in trust for the benefit of Buyer and shall act at the direction of Buyer.

 

SECTION 2.06 Elevation.

 

(a) Subject to the terms and provisions of the Transaction Documents and any applicable law or regulation, with respect to each Participation Interest, Seller agrees to use commercially reasonable efforts and to take such actions as are necessary (including obtaining all Elevation Required Consents (if any) as soon as reasonably practicable) to cause, as soon as practicable, Buyer to become a Lender (under and as defined in the relevant Credit Agreement) with respect to all or any part of the Transferred Rights (an “Elevation”) no later than 150 days following the Settlement Date (the “Elevation Date”) or as soon as reasonably practicable thereafter, provided that, if an Elevation would contravene any law, rule, order or regulation applicable to either party hereto, the other party may not request an Elevation.

 

(b) Seller shall pay all transfer fees and other expenses payable in connection with an Elevation. Buyer will make best efforts to cooperate with Seller in connection therewith.

 

6

 

 

(c) Subject to the terms and provisions of the Transaction Documents and any applicable law or regulation, if:

 

(i)   Seller is dissolved notwithstanding the foregoing;

 

(ii)   Seller or a direct or indirect parent company of Seller has become the subject of a proceeding under any debtor relief law or has had appointed for it a received, custodian, conservator, trustee, administrator, assignee for the benefit of creditors or similar Person charged with reorganization of liquidation of its business or assets, including any governmental authority acting in such a capacity; or

 

(iii)   an Event of Default (as defined in the Loan Agreement) has occurred and is continuing under the Loan Agreement,

 

Seller agrees to use commercially reasonable efforts to cause an Elevation, provided that, if an Elevation would contravene any law, rule, order or regulation applicable to either party hereto, the other party may not request an Elevation and Buyer shall not be required to cause an Elevation.

 

(d) Upon the date of Elevation and to the extent of such Elevation, (i) Buyer shall assume all of the Assumed Obligations, (ii) Seller shall have no further responsibility in respect of such Assumed Obligations and (iii) this Agreement shall terminate.

 

(e) Elevation Required Consents” means the consent(s), acknowledgement(s) and/or notice(s) (if any) required by the Transaction Documents to assign the Transferred Rights in connection with an Elevation.

 

SECTION 2.07 Further Assurances. Each party agrees to execute and deliver all such further documents as may be reasonably requested by the other party in order to effect each Transfer and each Elevation as contemplated hereby.

 

ARTICLE III
Representations and Warranties

 

SECTION 3.01  Representations and Warranties of Each Party. Each party hereto (each, the “Representing Party”) represents and warrants to the other party as follows:

 

(i) the Representing Party is duly incorporated or formed, as applicable, and validly existing as an entity and is in good standing under the laws of its jurisdiction of incorporation or formation, as applicable;

 

(ii) the Representing Party has the requisite power and authority to enter into and perform this Agreement; and

 

(iii) this Agreement has been duly authorized by all necessary action on the part of the Representing Party, has been duly executed by the Representing Party and is the valid and binding agreement of the Representing Party enforceable against such party in accordance with its terms, except that such enforceability against the Representing Party may be limited by bankruptcy, insolvency, or other similar laws of general applicability affecting the enforcement of creditors’ rights generally and by a court’s discretion in relation to equitable remedies.

 

(iv)   [reserved]

 

7

 

 

(v) No Transfer will be a transfer of property in connection with any pre- existing indebtedness owed by Seller to Buyer.

 

(vi)   There are no agreements or understandings between the Representing Parties (other than this Agreement, the Loan Agreement and the Transaction Documents (under and as defined in the Loan Agreement)) relating to or affecting the Transferred Assets and the proceeds thereof.

 

(vii) [reserved]

 

(viii) The Representing Party provides for the payment of its expenses and liabilities hereunder from its own funds.

 

(ix)   The Representing Party has not guaranteed and is not otherwise contractually liable for the payment of any liability of Buyer (with respect to Seller as Representing Party) or Seller (with respect to Buyer as Representing Party), in each case, which has the effect of a recourse provision against Seller with respect to the Transferred Rights. Neither the assets nor the creditworthiness of the Representing Party is generally held out as being available for the payment of any liability of Buyer (with respect to Seller as Representing Party) or Seller (with respect to Buyer as Representing Party), in each case, which has the effect of a recourse provision against Seller with respect to the Transferred Rights.

 

(x) The Representing Party maintains (or in the case of Buyer, will maintain from the Settlement Date) separate financial records that enable its assets to be readily ascertained as separate and apart from those of the other party.

 

(xi)   Seller shall not, and shall not cause any of its Affiliates to, deposit or permit the deposit of any funds that do not constitute Income Collections or other proceeds of any Transferred Rights into Buyer’s Collection Account (as defined in the Loan Agreement).

 

(xii) None of the execution, delivery and performance of this Agreement by the Representing Party will:

 

(A)conflict with any term or provision of the organizational documents of the Representing Party, which conflict would materially and adversely affect the Representing Party’s ability to perform its obligations hereunder; or

 

(B)result in any breach of or constitute a default (or an event which, with the giving of notice or passage of time, or both, would constitute a default) under any indenture, agreement, order, decree or other instrument to which the Representing Party is a party or by which the Representing Party is bound, which breach or default would materially and adversely affect the Representing Party’s ability to perform its obligations hereunder; or

 

(C)violate any provision of any law, rule or regulation applicable to the Representing Party of any regulatory body, administrative agency or other governmental instrumentality having jurisdiction over the Representing Party or its properties.

 

8

 

 

SECTION 3.02 Representations and Warranties of Seller. Seller represents and warrants to Buyer that:

 

(i)   on the Settlement Date with respect to each Transferred Asset, Seller owns such Transferred Asset, has good and marketable title thereto, free and clear of any pledge, lien, security interest, charge, claim, equity or encumbrance of any kind (other than any security interest therein which will be released contemporaneously with the Transfer of such Transferred Asset hereunder), and upon the Elevation on the relevant Elevation Date with respect to any Transferred Asset, Buyer will receive good and marketable title to such Transferred Asset, free and clear of any pledge, lien, investment interest, charge, claim, equity or encumbrance of any kind created by Seller or any Person claiming through Seller;

 

(ii) the participation in each Transferred Asset will be granted by Seller to Buyer free and clear of any encumbrance, equity, participation interest, lien, pledge, charge, claim or security interest (other than any security interest therein which will be released contemporaneously with the Transfer of such Transferred Asset hereunder and Seller’s record ownership of the related Transferred Asset which, from and after the Settlement Date to and including the Elevation Date with respect thereto will be and remain free and clear of any encumbrance, equity, participation interest, lien, pledge, charge, claim or security interest); and

 

(iii) the Transaction Documents to which Seller is, and was on the date hereof, a party (i) have been duly and validly authorized, executed and delivered by Seller and (ii) are the legal, valid and binding obligations of Seller, enforceable against Seller in accordance with their respective terms, except that such enforceability against Seller may be limited by bankruptcy, insolvency, or other similar laws of general applicability affecting the enforcement of creditors’ rights generally and by a court’s discretion in relation to equitable remedies.

 

(iv)   [reserved]

 

(v) Other than in connection with an Elevation, the Elevation Required Consents, no consent, license, approval or authorization from, or registration or qualification with, any governmental body, agency or authority, nor any consent, approval, waiver or notification of any other Person is required in connection with the execution, delivery and performance by Seller of this Agreement (including under the Transaction Documents), except such as have been obtained and are in full force and effect or will be obtained prior to the Settlement Date.

 

(vi)   Seller has valid business reasons for transferring the Transferred Assets to Buyer. Seller is not effecting any Transfer in contemplation of Seller’s insolvency or with any actual intent to hinder, delay or defraud any of its creditors.

 

(vii) [reserved]

 

(viii) Seller is solvent before each Transfer of a Transferred Asset and will not be rendered insolvent by any such Transfer.

 

9

 

 

SECTION 3.03 No Liability.

 

(a) Except as otherwise expressly provided herein, Seller makes no representation or warranty, express or implied, and assumes no responsibility, with respect to the genuineness, authorization, execution, delivery, validity, legality, value, sufficiency, perfection, priority, enforceability or collectability of any credit documentation executed and delivered in connection with a Transferred Asset. Seller assumes no responsibility for (except as otherwise expressly provided herein) (a) any representation or warranty made by, or the accuracy, completeness, correctness or sufficiency of any information (or the validity, completeness or adequate disclosure of assumptions underlying any estimates, forecasts or projections contained in such information) provided directly or indirectly by, any obligor in respect of a Transferred Asset or any credit documentation thereof or by any other Person, (b) the performance or observance by any obligor of any of the provisions of any credit documentation in respect of a Transferred Asset (whether on, before or after the Settlement Date), (c) the filing, recording, or taking of any action with respect to any credit documentation in respect of a Transferred Asset by any other Person, (d) the financial condition of any obligor in respect of a Transferred Asset or of any other Person or (e) (except as expressly provided herein) any other matter whatsoever relating to any obligor in respect of a Transferred Asset, any other Person or the Transferred Assets.

 

(b) In making, managing, handling and transferring the Transferred Assets, Seller shall exercise the same care as it normally exercises with respect to loans held for its own account, but Seller shall have no further responsibility to Buyer except as expressly provided herein.

 

(c) Buyer acknowledges that (i) Seller’s sale of the Participation Interests to Buyer and Buyer’s agreement to reimburse Seller in respect of the Assumed Obligations are irrevocable and (ii) Buyer shall have no recourse to Seller, except for Seller’s breaches of its representations, warranties, covenants or other agreements as expressly stated in and subject to this Agreement.

 

(d) Seller represents, warrants and agrees that, from and after the date hereof, it shall not sell, assign or transfer, or grant a security interest in or lien on or otherwise pledge, mortgage, hypothecate or encumber (or permit such to occur or suffer such to exist other than pursuant to this Agreement), any part of the Transferred Assets that are subject to this Agreement.

 

ARTICLE IV
Miscellaneous

 

SECTION 4.01 Amendments. This Agreement may not be amended, altered, supplemented or otherwise modified, except, for so long as the Loan Agreement has not terminated or the Obligations of the Borrower (each such term under and defined under the Loan Agreement) have not been discharged, with the written consent of the Administrative Agent (such consent not to be unreasonably withheld, conditioned or delayed), by the execution and delivery of a written agreement by each of the parties hereto.

 

SECTION 4.02 Communications. Except as may be otherwise agreed between the parties, all communications hereunder shall be made in writing to the relevant party by personal delivery or by courier or first-class mail by facsimile or email transmission to the address, facsimile number or email address as either party may notify to the other party in accordance with the terms hereof from time to time. Any communications hereunder shall be effective upon receipt.

 

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SECTION 4.03 Governing Law; Waiver of Trial by Jury; Jurisdiction.

 

(a) This Agreement shall be construed in accordance with the law of the State of New York, and this Agreement, and all matters arising out of or relating in any way whatsoever to this Agreement (whether in contract, tort or otherwise), shall be governed by such law without reference to its conflicts of laws provisions (other than Section 5-1401 of the New York General Obligations Law).

 

(b) EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT. Each party hereto (i) certifies that no representative, agent or attorney of any other party has represented, expressly or otherwise, that such other party would not, in the event of litigation, seek to enforce the foregoing waiver and (ii) acknowledges that it and the other parties hereto have been induced to enter into this Agreement by, among other things, the mutual waivers and certifications in this Section 4.03(b).

 

(c) Each party hereto hereby irrevocably submits to the non-exclusive general jurisdiction of the courts of the State of New York sitting in New York City, the courts of the United States for the Southern District of New York, and appellate courts from any thereof, in any action or proceeding arising out of or relating this Agreement, and hereby irrevocably agrees that all claims in respect of such action or proceeding may be heard and determined in such New York State or Federal court. Each party hereto hereby irrevocably waives, to the fullest extent that it may legally do so, the defense of an inconvenient forum to the maintenance of such action or proceeding. Each party hereto irrevocably consents to the service of any and all process in any action or proceeding by the mailing or delivery of copies of such process in accordance with Section 4.02. Each party hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.

 

SECTION 4.04 Non-Petition; Limited Recourse.

 

(a) Notwithstanding any other provision of this Agreement, each party agrees that it may not institute against, or join any other Person in instituting against, the other party any bankruptcy, reorganization, arrangement, insolvency, winding-up, moratorium or liquidation Proceedings, or other Proceedings under U.S. federal or state bankruptcy or similar laws.

 

(b) Notwithstanding any other provision of this Agreement:

 

(i)   The obligations of the parties under this Agreement are at all times limited recourse obligations of such party payable solely from such party’s assets available at such time, and, following realization of such assets and application of the proceeds thereof, all obligations of and any claims against such party hereunder or in connection herewith after such realization shall be extinguished and shall not thereafter revive.

 

(ii) No recourse shall be had against any officer, director, employee, shareholder, member, manager, beneficial owner, trustee, authorized person or incorporator of either party or its manager or their respective affiliates, successors or assigns for any amounts payable under this Agreement.

 

(c) This Section 4.04 shall survive the termination of this Agreement.

 

SECTION 4.05 Parties Benefited. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. Neither this Agreement nor any right or obligation in or under this Agreement may be transferred (whether by way of security or otherwise) or delegated by either party without the prior written consent of the other party, except that (i) a party may make a transfer of all (but not less than all) of its rights and obligations under this Agreement pursuant to a consolidation or amalgamation with, or merger with or into, or transfer of all or substantially all its assets to, another entity, (ii) Buyer may grant a lien on its rights hereunder under the Loan Agreement and the other Transaction Documents (under and as defined in the Loan Agreement) and (iii) Buyer may assign and transfer its rights hereunder to the Administrative Agent. Any purported transfer that is not in compliance with this provision will be void.

 

11

 

 

SECTION 4.06 Severability. If any term, provision, covenant or condition of this Agreement, or the application thereof to Seller or Buyer or any circumstance, is held to be unenforceable, invalid or illegal (in whole or in part) for any reason (in any relevant jurisdiction), the remaining terms, provisions, covenants and conditions of this Agreement, modified by the deletion of the unenforceable, invalid or illegal portion (in any relevant jurisdiction), will continue in full force and effect, and such unenforceability, invalidity, or illegality will not otherwise affect the enforceability, validity or legality of the remaining terms, provisions, covenants and conditions of this Agreement so long as this Agreement as so modified continues to express, without material change, the original intentions of Seller and Buyer as to the subject matter hereof and the deletion of such portion of this Agreement will not substantially impair the respective expectations of Seller and Buyer or the practical realization of the benefits hereof that would otherwise be conferred upon Seller and Buyer. Seller and Buyer will endeavor in good faith to replace the prohibited or unenforceable provision with a valid provision, the economic effect of which comes as close as possible to that of the prohibited or unenforceable provision.

 

SECTION 4.07 Counterparts. This Agreement may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. This Agreement shall be valid, binding and enforceable against a party (and any respective successors and permitted assigns thereof) when executed and delivered by an authorized individual on behalf of such party by means of (i) an original manual signature, (ii) a faxed, scanned or photocopied manual signature or (iii) any other electronic signature permitted by the U.S. Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act or any other state enactments of the Uniform Electronic Transactions Act, and/or any other relevant electronic signature law, including, without limitation, any relevant provisions of the UCC (collectively, “Signature Law”), in each case, to the extent applicable; provided that original manual signatures shall be used for execution or indorsement of writings when required under the UCC or other Signature Law due to the character or intended character of the writings. Each faxed, scanned or photocopied manual signature, or other electronic signature, shall for all purposes have the same validity and legal effect as an original manual signature, and shall be equally admissible for evidentiary purposes. Each party hereto shall be entitled to conclusively rely upon, and shall have no liability with respect to, any faxed, scanned or photocopied manual signature, or other electronic signature, of any other party and shall have no duty to investigate, confirm or otherwise verify the validity or authenticity thereof. Delivery of an executed counterpart of a signature page of this Agreement in Portable Document Format (PDF) or by electronic transmission shall be as effective as delivery of a manually executed original counterpart of this Agreement.

 

[Signature page follows.]

 

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

 

 

  SPV Facility I LLC, as Buyer
   
  By: /s/ Joseph Cambareri
  Name: Joseph Cambareri
  Title: Chief Financial Officer
     
  SC CO-INVESTMENTS PRIVATE DEBT FUND L.P., as Seller
   
  By: /s/ Szymon Badura
  Name: Szymon Badura
  Title: Authorized Signatory
   
  By: /s/ Jason Brown
  Name: Jason Brown
  Title: Authorized Signatory

 

[Signature Page to Participation and Assignment Agreement]

 

 

 

 

ANNEX A

 

SCHEDULE OF TRANSFERRED ASSETS

 

[Intentionally Omitted]

 

 

 

 

Exhibit 10.1

 

 

 

 

STEPSTONE PRIVATE CREDIT FUND LLC

 

 

 

SUBSCRIPTION AGREEMENT

 

 

 

CONFIDENTIAL

 

 

 

 

 

 

 

 

THE LIMITED LIABILITY COMPANY INTERESTS (THE “SHARES”) OF StepStone Private Credit Fund LLC HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY U.S. STATES OR OTHER JURISDICTIONS, AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND THE REGISTRATION AND QUALIFICATION REQUIREMENTS OF SUCH LAWS. THE SHARES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT AND SUCH LAWS PURSUANT TO REGISTRATION, QUALIFICATION OR EXEMPTION THEREFROM. IN ADDITION, THE SHARES ARE SUBJECT TO THE CONTRACTUAL RESTRICTIONS ON RESALES DESCRIBED IN THIS SUBSCRIPTION AGREEMENT. THE SHARES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE U.S. SECURITIES AND EXCHANGE COMMISSION OR BY ANY U.S. STATE OR OTHER SECURITIES COMMISSION OR OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THE OFFERING MATERIALS, AND ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.

 

SUBSCRIPTION AGREEMENT

 

StepStone Private Credit Fund LLC

450 Lexington Avenue, 31st Floor

New York, NY 10017

 

Ladies and Gentlemen:

 

This Subscription Agreement (this “Subscription Agreement”) is being executed and delivered in connection with the subscription by the undersigned to purchase the dollar amount of limited liability company interests (the “Shares”) of StepStone Private Credit Fund LLC, a Delaware limited liability company (the “Fund”), set forth on the signature page below. Capitalized terms used herein shall have the same meanings herein as defined in the Fund’s Confidential Private Placement Memorandum (as amended, restated and/or supplemented or otherwise modified from time to time, the “Memorandum”), unless otherwise defined herein.

 

Instructions:

 

In addition to completing and signing the signature page to this Subscription Agreement, each Subscriber must complete and execute, as applicable, any necessary attachments contained in this package (such attachments, together with this Subscription Agreement, the “Subscription Documents”) in the manner described below. For purposes of these Subscription Documents, the “Subscriber” is the person or entity for whose account the Shares will be purchased and that can satisfy the representations and warranties set forth in the Subscription Documents. Another person or entity with investment authority may complete and execute the Subscription Documents on behalf of the Subscriber, but should indicate the capacity in which it is doing so and the name of the Subscriber. All appendices to this Subscription Agreement are incorporated by reference herein.

 

(a) Signature Page(s). Complete and execute the signature page to this Subscription Agreement. If the Subscriber is an individual retirement account (an “IRA”) and the custodian or trustee of the IRA is executing the signature page, then complete and execute the additional signature pages that immediately follow the Fund’s signature page to this Subscription Agreement.

 

 

 

 

(b) Investor Questionnaire. Complete Appendix A (Investor Questionnaire) attached to this Subscription Agreement.

 

(c) Certification of Beneficial Owner(s). If the Subscriber is an entity, complete and execute Appendix B (Certification of Beneficial Owner(s)).

 

(d) Tax Forms.

 

(i) U.S. Subscribers. Complete, sign and date a Form W-9 (available at https://www.irs.gov/pub/irs-pdf/fw9.pdf) in accordance with the instructions to such Form.

 

(ii) Non-U.S. Subscribers. Complete, sign and date the relevant Form(s) W-8, as applicable, in accordance with the instructions to such Form(s):

 

Form W-8BEN (available at https://www.irs.gov/pub/irs-pdf/fw8ben.pdf)

 

Form W-8BEN-E (available at https://www.irs.gov/pub/irs-pdf/fw8bene.pdf)

 

Form W-8IMY (available at https://www.irs.gov/pub/irs-pdf/fw8imy.pdf)

 

Form W-8ECI (available at https://www.irs.gov/pub/irs-pdf/fw8eci.pdf)

 

Form W-8EXP (available at https://www.irs.gov/pub/irs-pdf/fw8exp.pdf)

 

(iii) All Subscribers. In the event that any applicable reduction or exemption from U.S. federal withholding tax is claimed, each Subscriber is required to provide all applicable attachments or addendums as required to claim such exemption or reduction.

 

(e) Evidence of Authorization. Each Subscriber must provide satisfactory evidence of authorization and may be required to submit further information for “know your customer” and anti-money laundering purposes.

 

(i) For Corporations: Certified documentation evidencing the corporation’s existence and certified corporate resolutions authorizing the subscription and identifying the corporate officer empowered to sign the Subscription Documents.

 

(ii) For Partnerships: Certified documentation evidencing the partnership’s existence, and a certified copy of the partnership agreement (which, in the case of a limited partnership, identifies the general partner(s)).

 

(iii) For Limited Liability Companies: Certified documentation evidencing the limited liability company’s existence, and a certified copy of the limited liability operating agreement identifying the manager or managing member, as applicable, empowered to sign the Subscription Documents.

 

(iv) For Trusts: A copy of the trust agreement.

 

(v) For Employee Benefit Plans: A certificate of an appropriate officer certifying that the subscription has been authorized and identifying the individual empowered to sign the Subscription Documents.

 

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(vi) For Individuals: A current copy of a government issued photo identification. Please note that the Fund is required by law to obtain, verify and record certain personal information from you or persons on your behalf in connection with a subscription for Shares. Required information includes name, date of birth, permanent residential address and Social Security/taxpayer identification number. If a Subscriber who is a natural person submits a current government issued photo identification that does not include the Subscriber’s permanent address, then the Subscriber will be required to provide proof of address by another means acceptable to the Fund.

 

(f) Delivery of Subscription Documents. Subscriber shall execute and complete one (1) original copy of the Subscription Agreement and all of the documents referred to in clauses (a) through (e) above. If Subscriber is investing through or introduced to the Fund through a registered investment adviser or custodian, please deliver such documents electronically to the Fund’s [transfer agent], [ ], via [ ] and direct any questions regarding the Subscription Agreement to [    ] toll free at [insert phone number] between [8:00] a.m. and [5:00] p.m. [Eastern Standard Time].  If Subscriber is not investing through or introduced to the Fund via a registered investment adviser or custodian, please deliver such documents, and direct any questions, to the Fund at scred@stepstonegroup.com. Please be sure to also retain a copy for your records.

 

(g) Acceptance by the Fund. If the Fund accepts the Subscriber’s subscription (in whole or in part), a fully executed set of the Subscription Documents will be returned to the Subscriber. The Fund may accept and countersign this Subscription Agreement (in whole or in part) at any time.

 

1. Subscription.

 

(a) The Subscriber acknowledges and agrees that this and any other subscription (i) is conditioned upon acceptance by the Fund, at which time it becomes irrevocable, unconditional and binding on the part of the Subscriber and (ii) may be accepted or rejected in whole or in part by the Fund in its sole discretion (for any reason or for no reason) in any order and at any time prior to the Closing (as defined below). The Subscriber has received and reviewed, and agrees to be bound by, all the terms and provisions of this Subscription Agreement, the Memorandum, the Fund’s Certificate of Formation (as amended and/or restated from time to time, the “Certificate of Formation”), the Fund’s limited liability company agreement (as amended and/or restated or otherwise supplemented from time to time, the “LLC Agreement”), the Investment Advisory Agreement by and between StepStone Group Private Debt LLC (the “Adviser”) and the Fund (as amended and/or restated from time to time, the “Advisory Agreement”) and the Administration Agreement by and between the Adviser and the Fund (as amended and/or restated from time to time, the “Administration Agreement” and, together with the Memorandum, the Certificate of Formation, the LLC Agreement, and the Advisory Agreement the “Operative Documents”), each in the form made available to the Subscriber.

 

(b) The Subscriber agrees to purchase Shares for the aggregate purchase price set forth on the signature page below, payable under the terms and subject to the conditions set forth herein. The minimum initial investment amount for Shares is $25,000, after which additional investments must be in increments of $500, each subject to the discretion of the Fund or the Fund’s distributors (including, but not limited to, the discretion to accept a lower amount).

 

(c) The Fund has filed or will file a registration statement on Form 10 (the “Registration Statement”) for the registration of its common stock with the U.S. Securities and Exchange Commission (the “SEC”) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Registration Statement is not the offering document pursuant to which the Fund is conducting this offering of securities. Accordingly, the Subscriber should rely exclusively on information contained in the Operative Documents, together with reports and other documents the Fund may file under the Exchange Act from time to time, in making its investment decisions. The Fund has entered and expects to enter into separate Subscription Agreements (the “Other Subscription Agreements” and, together with this Subscription Agreement, the “Subscription Agreements”) with other investors (the “Other Investors,” and together with the Subscriber, the “Investors”), providing for the sale of Shares to the Other Investors. This Subscription Agreement and the Other Subscription Agreements are separate agreements, and the sales of Shares to the undersigned and the Other Investors are to be separate sales.

 

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2. Acceptance of Subscription; Closings.

 

This Subscription Agreement is made subject to the following terms and conditions:

 

(a) The Fund shall have the right, in its sole discretion, to accept or reject the Subscriber’s subscription, in whole or in part, for any reason, including, without limitation, (i) the inability of the Subscriber to meet the standards imposed by Regulation D and/or Regulation S promulgated by the SEC under the U.S. Securities Act of 1933, as amended (the “Securities Act”), (ii) the ineligibility of the Subscriber under applicable state or foreign securities laws or (iii) for any other reason. Notwithstanding anything to the contrary contained herein, the Subscriber may elect to void this Subscription Agreement by providing written notice to the board of directors of the Fund (the “Board”) no later than the date that is two business days prior to the Closing (as defined below). The Subscriber hereby acknowledges that failure to notify the Board of its election to void this Subscription Agreement in writing by the date that is two business days prior to the Closing, to the fullest extent permitted by law, will result in the Subscriber being deemed to have waived such rights.

 

(b) If the Subscriber’s subscription is accepted in part and rejected in part, the Subscriber will be so notified and the Subscriber agrees to deliver promptly upon the Fund’s request a new signature page to this Subscription Agreement with respect to such lesser dollar amount of Shares to be purchased as may be determined by the Fund.

 

(c) If the Subscriber’s subscription is wholly rejected, the executed copies of this Subscription Agreement will be returned to the Subscriber. In the event of any whole or partial rejection, the Fund will return to the Subscriber the applicable amount of submitted funds, without interest or deduction.

 

(d) The closing of the subscription for and commitment to purchase the Shares by the Subscriber (the “Closing”) shall take place on the date that this Subscription Agreement (having been executed and fully completed by the Subscriber) has been accepted by the Fund and the Subscriber’s capital contribution has been made (the date of such acceptance, which shall be indicated on the Fund’s acceptance provided to the Subscriber, being hereinafter referred to as the “Closing Date”). On the Closing Date, the Subscriber shall be admitted as a member of the Fund (a “Shareholder”) pursuant to Section 2.1(b) of the LLC Agreement. The Fund intends to conduct closings for Shares on a monthly basis; provided however, that the Fund, in its sole discretion, may conduct closings more or less frequently to one or more investors for regulatory, tax or other reasons as may be determined to be appropriate by the Fund.

 

(e) The Subscriber agrees to provide any information reasonably requested by the Fund to verify the accuracy of the representations contained herein, including the Investor Questionnaire attached hereto as Appendix A (the “Investor Questionnaire”) and the Certification of Beneficial Owner(s) attached hereto as Appendix B.

 

(f) If the individual subscribing for Shares is investing assets on behalf of an individual retirement account (an “IRA”), the individual who established the IRA has signed the signature page of this Subscription Agreement and confirms that such individual (i) has directed the custodian or trustee of the IRA to execute the acknowledgement on the signature page, which has been so executed, and (ii) has reviewed and hereby expressly certifies to the accuracy of the representations and warranties made herein with respect to the IRA and the individual Subscriber.

 

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(g) In the event that the Subscriber is permitted by the Fund to make an additional purchase of Shares on a date after its initial subscription has been accepted, the Subscriber shall be required to enter into an addendum to this Subscription Agreement or a new subscription agreement, at the Fund’s discretion, covering such additional purchase.

 

3. Purchase of Shares.

 

(a) The aggregate purchase price for the Shares shall be payable, in U.S. dollars and in immediately available funds per the wire transfer instructions set forth on the Fund’s signature page below. Please refer to the Memorandum for more information. The Subscriber represents that subscription funds will be wired to the Fund from the account listed in the remitting wiring bank section of the Investor Questionnaire.

 

(b) Following a Closing, and after the Subscriber’s payment of the aggregate purchase price for the Shares in accordance with Section 3(a), the Fund shall issue to the Subscriber a number of Shares equal to the amount of the aggregate purchase price for the Shares paid by the Subscriber divided by the then-current transaction price per Share, which will generally be the net asset value (“NAV”) per Share as of the last calendar day of the month as determined in accordance with the Adviser’s valuation policy and will be communicated to the Subscriber by or on behalf of the Fund following the determination of such NAV. The Fund reserves the right, in its sole discretion and at any time, to sell Shares at a price set above the NAV per share based on a variety of factors, including, without limitation, to account for a Subscriber’s allocable portion of the Fund’s initial offering, organizational and other expenses. Upon a Closing, a Subscriber will not know the NAV per Share applicable on the effective date of the purchase. The NAV per Share applicable to a purchase of Shares at a given effective date will be available generally within 20 business days after the effective date of the Share purchase; at that time, the number of Shares based on that NAV and the Subscriber’s purchase will be determined and Shares shall be credited to the Subscriber’s account as of the effective date of the share purchase. Please refer to the Memorandum for more information.

 

4. Dividends; Distribution Reinvestment Plan. As described more fully in the Memorandum, the Fund generally expects to distribute on a regular quarterly basis, out of assets legally available for distribution, substantially all of its available earnings in such amount so the Fund will not have to pay corporate-level income tax, commencing with the second full calendar quarter after the Fund elects to be regulated as a business development company (“BDC”) under the U.S. Investment Company Act of 1940, as amended (the “1940 Act”), subject to the discretion of the Board. The Fund will adopt a distribution reinvestment plan, as may be amended (the “Distribution Reinvestment Plan”), which shall provide that all cash distributions declared by the Board on behalf of any Shareholder, other than any Shareholder that has affirmatively elected to opt out of the Distribution Reinvestment Plan, shall be reinvested in exchange for such Shareholder receiving a number of newly issued Shares equal to the quotient determined by dividing the total dollar amount of the distribution payable to such Shareholder by the most recent available NAV per Share for such Shares at the time the distribution is payable. The Subscriber may prospectively opt out of the Distribution Reinvestment Plan in the Investor Questionnaire. An election to opt-out or to opt-in to the Distribution Reinvestment Plan may be altered in accordance with the Fund’s Distribution Reinvestment Plan.

 

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5. Representations and Warranties of the Subscriber.

 

The Subscriber represents and warrants as follows, as of the Closing Date and on the subsequent dates specified below:

 

(a) Private Placement.

 

(i) The Subscriber understands that the offering and sale of the Shares are intended to be exempt from registration under the Securities Act, applicable U.S. state securities laws and the laws of any non-U.S. jurisdictions by virtue of the private placement exemption from registration provided in Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D and Regulation S promulgated thereunder, exemptions under applicable U.S. state securities laws and exemptions under the laws of any non-U.S. jurisdictions, and the Subscriber agrees that any Shares acquired by the Subscriber may not be Transferred (as defined below) in any manner that would require the Fund to register the Shares under the Securities Act, under any U.S. state securities laws or under the laws of any non-U.S. jurisdictions. The Subscriber was offered the Shares through private negotiations, not through any general solicitation or general advertising.

 

(ii) The Subscriber understands that the Fund requires each investor in the Fund to be either (A) an “accredited investor” as defined in Rule 501(a) of Regulation D of the Securities Act (“Accredited Investor”), or (B) not “U.S. persons” as within the meaning of Regulation S under the Securities Act, and the Subscriber represents and warrants that it is either (A) an Accredited Investor, as indicated in the Investor Questionnaire, or (B) not a “U.S. person” in accordance with Regulation S, as indicated in the Investor Questionnaire, and is not investing for the direct or indirect benefit of a U.S. Person as within the meaning of Regulation S under the Securities Act.

 

(iii) If the Subscriber is not an Accredited Investor, then Subscriber further represents and warrants that: (a) no offers to sell or to purchase the Shares were made to the Subscriber or by the Subscriber while the Subscriber was in the United States; (b) the Subscriber was not in the United States at the time the offer was accepted; and (c) at the time the Subscriber’s subscription for Shares was originated, the Subscriber was outside the United States, except for offers and sales to discretionary or similar accounts  (other than an estate or trust) held for the benefit or account of a non-U.S. Person (as within the meaning of Regulation S under the Securities Act) by a dealer or other professional fiduciary organized, incorporated or resident in the United States.

 

(iv) The Subscriber understands that the offering and sale of the Shares in non-U.S. jurisdictions may be subject to additional restrictions and limitations and represents and warrants that it is acquiring its Shares in compliance with all applicable laws, rules, regulations and other legal requirements applicable to the Subscriber, including the legal requirements of jurisdictions in which the Subscriber is resident and in which such acquisition is being consummated. In furtherance, and not in limitation, of the foregoing, if the Subscriber is a resident of any of the jurisdictions set forth in the Memorandum, the Subscriber represents, warrants and covenants as specified in the Memorandum hereto for such jurisdiction.

 

(v) The Shares to be acquired hereunder are being acquired by the Subscriber for the Subscriber’s own account for investment purposes only and not with a view to resale or distribution. The Subscriber shall not, directly or indirectly, Transfer all or any portion of such Shares (or solicit any offers to buy, purchase or otherwise acquire or take a pledge or charge of all or any part of such Shares) except in accordance with (i) the registration provisions of the Securities Act or an exemption from such registration provisions, (ii) any applicable U.S. federal or state or non-U.S. securities laws and (iii) the terms of this Subscription Agreement and the LLC Agreement. The Subscriber understands that it may be required to bear the economic risk of its investment in the Shares for a substantial period of time because, among other reasons, the offering and sale of the Shares have not been registered under the Securities Act and, therefore, the Shares cannot be sold other than through a privately negotiated transaction unless they are subsequently registered under the Securities Act or an exemption from such registration is available. “Transfer” (or any derivative thereof) shall mean to sell, offer for sale, agree to sell, exchange, transfer, assign, pledge, hypothecate, grant any option to purchase or otherwise dispose of or agree to dispose of, in any case whether directly or indirectly.

 

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(b) The Subscriber is not subject to and is not aware of any facts that would cause such Subscriber to be subject to any of the “Bad Actor” disqualifications as described in Rule 506(d)(1)(i) to (viii) under the Securities Act.

 

(c) The Subscriber has received, read carefully in its entirety, and understands the Memorandum and the other Operative Documents. The Subscriber has consulted with its own attorney, accountant, investment adviser or other adviser with respect to the investment(s) contemplated hereby and its suitability for the Subscriber, and the Subscriber understands and consents to the fees, risks and other considerations relating to the purchase of the Shares and an investment in the Fund, including but not limited to the fees and expenses outlined in the sections titled “Management Agreements” in the Memorandum and the risks and other considerations set forth in the sections titled “Certain Risk Factors” and “Certain Relationships and Related Party Transactions” in the Memorandum. The Subscriber has had the opportunity to ask questions of and receive answers from representatives of the Fund, all such questions have been answered to the Subscriber’s full satisfaction, and the Subscriber has obtained any additional information concerning the Fund sought by the Subscriber. The Subscriber acknowledges that no representations have been made to the Subscriber in connection with its investment in the Fund, other than this Subscription Agreement and the Memorandum.

 

(d) The Subscriber has substantial knowledge and experience in business and financial matters and is capable of evaluating the merits and risks of a purchase of the Shares. The Subscriber understands that there can be no assurance that the Fund will meet its investment objective or otherwise be able to successfully carry out its investment program.

 

(e) The Subscriber has the financial ability to bear the economic risk of its investment in the Fund (including the possible loss of its entire investment), has adequate means for providing for its current needs and has no current need for liquidity in connection with its purchase of the Shares.

 

(f) The purchase of the Shares by the Subscriber is consistent with the general investment objectives of the Subscriber.

 

(g) If the Subscriber is a natural person, the Subscriber’s domicile and principal residence are at the address shown on the signature page below. If the Subscriber is not a natural person, the Subscriber has its domicile, principal place of business, or principal office at the address shown on the signature page below.

 

(h) The Subscriber is not an entity (including a qualified retirement plan) in which a holder of an interest in the Subscriber may decide whether or how much to invest through the Subscriber in various investment vehicles, including the Fund, unless the Subscriber has so notified the Fund in writing.

 

(i) If the Subscriber is not a natural person, then, unless the Subscriber has notified the Fund in writing that the Subscriber was formed for the specific purpose of acquiring Shares and all of the equity holders of the Subscriber are Accredited Investors, the Subscriber’s aggregate investment in Shares does not exceed 40% of the Subscriber’s assets. If at any time the Subscriber holds Shares, the Subscriber shall no longer be in compliance with the provisions of this Section 5(i), it shall promptly notify the Fund.

 

(j) If the Subscriber is not a citizen of the United States, or a resident of or entity created under the laws of any state of the United States (any such citizen, resident or entity being hereinafter called a “Domestic Person”), the Subscriber is not purchasing the Shares on behalf of any Domestic Person, and the Subscriber has no present intention of becoming a Domestic Person.

 

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(k) If the Subscriber is a natural person, the Subscriber is of legal age in its country or state of residence and has legal capacity to execute, deliver and perform its obligations under this Subscription Agreement and the LLC Agreement and to subscribe for and purchase the Shares hereunder. If the Subscriber is not a natural person, the Subscriber is an entity of the kind set forth under the applicable item of the Investor Questionnaire and has been duly organized, formed or incorporated, as the case may be, and is validly existing and in good standing under the laws of its jurisdiction of organization, formation or incorporation, and the Subscriber has all requisite power and authority to execute, deliver and perform its obligations under this Subscription Agreement and to subscribe for and purchase the Shares hereunder. This Subscription Agreement has been duly executed and delivered by the Subscriber, and the Subscriber’s purchase of the Shares and its execution, delivery and performance of this Subscription Agreement (i) constitutes the legal, valid and binding obligation of the Subscriber (except (A) as limited by any applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting the rights and remedies of creditors generally, as from time to time in effect, (B) as limited by general principles of equity, and (C) as the enforcement of remedies rests in the discretion of any court) and (ii) does not result in the violation of, constitute a default under, or conflict with, any mortgage, indenture, contract, agreement, instrument, judgment, decree, order, statute, rule or regulation applicable to the Subscriber.

 

(l) The execution and delivery of this Subscription Agreement, the consummation of the transactions contemplated hereby and under the LLC Agreement and the performance of the Subscriber’s obligations hereunder and under the LLC Agreement do not and will not conflict with, or result in any violation of or default under, (i) if the Subscriber is not a natural person, any provision of any certificate of formation, certificate of incorporation, charter, by-laws, memorandum and articles of association, trust agreement, partnership agreement, limited liability company agreement or other organizational or governing instrument applicable to the Subscriber, (ii) any agreement or other instrument to which the Subscriber is a party or by which the Subscriber or any of its properties are bound, or (iii) any permit, franchise, judgment, decree, statute, writ, injunction, order, law, rule or regulation applicable to the Subscriber or to its business or properties. In addition, the Subscriber represents that its power of attorney contained in this Subscription Agreement and to be exercised in connection with the LLC Agreement has been granted by the Subscriber, including as to the manner of any execution by the Subscriber, in compliance with all laws applicable to the Subscriber, including the laws of the state or jurisdiction in which the Subscriber executed this Subscription Agreement. The Subscriber has obtained all authorizations, consents, approvals and clearances of all courts, governmental agencies and authorities and such other persons, if any, required to permit the Subscriber to enter into this Subscription Agreement and to consummate the transactions contemplated hereby and thereby.

 

(m) The Subscriber understands that the Fund has filed or intends to file an election to be treated as a BDC under the 1940 Act and intends to elect or has elected to be treated as a “regulated investment company” within the meaning of Section 851 of the Code for U.S. federal income tax purposes. Pursuant to these elections, the Subscriber shall be required to furnish certain information to the Fund as required under U.S. Treasury Regulation §1.852-6(a) and other regulations. If the Subscriber is unable or refuses to provide such information directly to the Fund, the Subscriber understands that it shall be required to include additional information on its income tax return as provided in U.S. Treasury Regulation § 1.852-7.

 

(n) The Subscriber: (i)(A) is not registered or required to be registered as an “investment company” under the 1940 Act; (B) has not elected to be regulated as a BDC under the 1940 Act; and (C) is not relying on the exception from the definition of “investment company” under the 1940 Act set forth in Section 3(c)(1) or 3(c)(7) thereunder or (ii) is otherwise currently permitted to acquire and hold more than 3% of the outstanding voting securities of a BDC, including pursuant to Rule 12d1-4 under the 1940 Act.

 

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(o) ERISA Matters. If the Subscriber is, or is acting on behalf of, a person or entity that is or will be (w) an “employee benefit plan” (as defined in Section 3(3) of ERISA) that is subject to ERISA, (x) a “plan” described in Section 4975(e)(1) of the Code, that is subject to Section 4975 of the Code, (y) an entity whose underlying assets include “plan assets” of any employee benefit plan or other plan described in clause (w) or (x) by reason of such plan’s investment in the entity or otherwise, or (z) an employee benefit plan subject to federal, state or local law similar to Section 406 of ERISA or Section 4975 of the Code (each of the foregoing, a “Plan”), the Subscriber has completed each applicable question in the Investor Questionnaire, and the Subscriber represents, warrants and agrees that:

 

(i) the decision to acquire Shares was made by a “fiduciary” of the Plan, within the meaning of Section 3(21) of ERISA or Section 4975(e)(3) of the Code (the “Plan Fiduciary”), that (A) is independent of the Fund, the Adviser and their respective employees, representatives and affiliates, (B) is qualified to make investment decisions on behalf of the Plan and (C) has authorized the Subscriber’s investment in the Fund;

 

(ii) the Subscriber’s investment in Shares conforms in all respects to the documents governing the Plan and complies with all applicable requirements of ERISA and Section 4975 of the Code;

 

(iii) none of the Adviser or any of its affiliates or any of their respective officers, employees, agents, or representatives have any discretion, or are otherwise acting in a fiduciary capacity with respect to the Plan’s investment in the Fund, whether pursuant to the provisions of ERISA, Section 4975 of the Code or otherwise, and, without limiting the generality of the foregoing, the Plan Fiduciary has not relied on, and is not relying on, any investment advice or recommendation of any such person with respect to the Plan’s investment in the Fund;

 

(iv) the acquisition and the subsequent holding of Shares do not and will not constitute or otherwise result in a non-exempt “prohibited transaction” within the meaning of Section 406 of ERISA or Section 4975 of the Code;

 

(v) the Subscriber acknowledges and agrees that the Fund has the authority to require the transfer, redemption, withdrawal or other cancellation of any Shares if it is determined, in the sole discretion of the Company, that the continued holding of such Shares could result in the Fund or the Adviser being subject to the provisions of Title I of ERISA or Section 4975 of the Code; and

 

(vi) without limiting the remedies in the event of a breach, the Subscriber agrees promptly to provide to the Fund such information as the Fund may from time to time reasonably request for purposes of determining whether the assets of the Fund are “plan assets” within the meaning of ERISA or Section 4975 of the Code and any other matters relating to ERISA or the Fund’s compliance with ERISA.

 

The representations and warranties set forth in this Section 5(o) shall be deemed repeated and reaffirmed on each day the Subscriber holds Shares. Without limiting the remedies available in the event of a breach, if at any time the representations and warranties set forth in this Section 5(o) shall cease to be true, including because there is a change in the Subscriber’s Plan status or the percentage of assets that constitute “plan assets” subject to the provisions of Title I of ERISA or Section 4975 of the Code, the Subscriber shall promptly notify the Fund in writing.

 

(p) The Subscriber has notified, or shall promptly notify, the Fund if the Subscriber is or becomes a person that may be disqualified from participating in the Fund’s acquisition of securities sold in a public offering under Rules 5130 and 5131 of the Financial Industry Regulatory Authority, as in effect from time to time.

 

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(q) If the Subscriber is a partnership or any other entity that is treated as a partnership for U.S. income tax purposes, a grantor trust within the meaning of Sections 671-679 of the Code, or a S corporation within the meaning of Section 1361 of the Code, the Subscriber represents that at no time during the term of the Fund will 65% or more of the value of any beneficial owner’s direct or indirect interest in the Subscriber be attributable to the Subscriber’s interest in the Fund. Except as otherwise disclosed to the Fund in writing, the Subscriber is not disregarded as an entity separate from its owner within the meaning of Treasury Regulation Section 301.7701-3.

 

(r) None of the information concerning the Subscriber nor any statement, certification, representation or warranty made by the Subscriber in this Subscription Agreement or in any document required to be provided under this Subscription Agreement (including the Investor Questionnaire and any Form W-9 or the relevant Forms W-8 (W-8BEN, W-8BEN-E, W-8IMY, W-8ECI or W-8EXP), as applicable, contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained therein or herein not misleading.

 

(s) The Subscriber agrees to provide such information and execute and deliver such documents as the Fund may reasonably request to verify the accuracy of the Subscriber’s representations and warranties herein or to comply with any law or regulation to which the Fund, the Adviser or a portfolio company of the Fund may be subject.

 

(t) The Subscriber, if an individual, has read carefully in its entirety, and understands and agrees with, the StepStone Group Private Debt LLC Privacy Policy attached hereto as Appendix C.

 

(u) The Subscriber acknowledges, agrees and confirms that the Subscriber (i) has received a copy of the LLC Agreement and has reviewed the same and understands its contents; and (ii) agrees to become a party to, to be bound by, and to comply with the terms, conditions and provisions of the LLC Agreement in the same manner as if Subscriber were an original signatory and named as a Member (as defined in the LLC Agreement) thereunder. The execution of this Subscription Agreement shall be deemed to be a counterpart signature to the LLC Agreement pursuant to Section 2.1(b) of the LLC Agreement.

 

(v) The Subscriber agrees that the foregoing certifications, representations, warranties, covenants and agreements shall survive the acceptance of this Subscription Agreement, the issuance of Shares to the Subscriber, and the dissolution of the Fund, without limitation as to time. Without limiting the foregoing, the Subscriber agrees to give the Fund prompt written notice in the event that any statement, certification, representation or warranty of the Subscriber contained in this Section 5 or any information provided by the Subscriber herein or in any document required to be provided under this Subscription Agreement (including the Investor Questionnaire and any Form W-9 or Forms W-8 (W-8BEN, W-8BEN-E, W-8IMY, W-8ECI or W-8EXP), as applicable, ceases to be true at any time following the date hereof.

 

6. Representations and Warranties of the Fund.

 

The Fund represents and warrants as follows (in reliance, where applicable, on the representations and warranties of the Subscriber contained in this Subscription Agreement and the representations and warranties of the Other Investors):

 

(a) The Fund is duly organized and validly existing as a limited liability company the laws of the State of Delaware and has all requisite corporate power to conduct the business in which it proposes to engage as described in the Memorandum.

 

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(b) No consent, approval or authorization of, or filing or registration with, any governmental authority on the part of the Fund is required for the execution and delivery of this Subscription Agreement by it, or the issuance of Shares as contemplated thereby, except for any consents, approvals, authorizations or filings which are required under any applicable securities laws (federal, state or foreign) and which have been made or obtained prior to the Closing or are made or obtained hereafter within the time prescribed by law. All action required to be taken by the Fund as a condition to the issuance and sale of the Shares will have been taken at or before the Closing. The execution and delivery of this Subscription Agreement by the Fund will not result in the violation of, constitute a default under, or conflict with, any mortgage, indenture, contract, agreement, instrument, judgment, decree, order, statute, rule or regulation applicable to the Fund. Upon execution and delivery by the Fund, this Subscription Agreement (i) will have been duly executed and delivered by the Fund, and (ii) will constitute the legal, valid and binding obligation of the Fund, except (A) as limited by any applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting the rights and remedies of creditors generally, as from time to time in effect, (B) as limited by general principles of equity and (C) as the enforcement of remedies rests in the discretion of any court.

 

7. Additional Limitations on Transfer of Shares.

 

(a) General Restrictions on Transfer.

 

(i) Prior to any IPO or Exchange Listing (as such terms are defined in the Memorandum), the Subscriber may not Transfer any of its Shares unless the Transfer is made in accordance with applicable securities laws and is otherwise in compliance with the transfer restrictions set forth in Appendix D. Each transferee must agree to be bound by these restrictions and all other obligations as an investor in the Fund.

 

(ii) The Subscriber acknowledges that the Subscriber is aware and understands that there are other substantial restrictions on the transferability of its Shares under this Subscription Agreement, the LLC Agreement and applicable law, including the fact that (A) there is no established market for the Shares and the Fund expects that no public market for the Shares will develop; (B) the Shares are not currently, and Shareholders have no rights to require that the Shares be, registered under the Securities Act or the securities laws of the various states or any non-U.S. jurisdiction and therefore cannot be Transferred unless subsequently registered or unless an exemption from such registration is available; and (C) the Subscriber may have to hold the Shares herein subscribed for and bear the economic risk of this investment indefinitely, and it may not be possible for the Subscriber to liquidate its investment in the Fund.

 

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8. Compliance with Specific Laws.

 

(a) Anti-Money Laundering.

 

(i) Neither the Subscriber, nor any of its affiliates or beneficial owners nor any person for whom the Subscriber is acting as agent or nominee, (A) appears on the list of Specially Designated Nationals and Blocked Persons maintained by the Office of Foreign Assets Control of the U.S. Department of the Treasury (“OFAC”), the list of Foreign Sanctions Evaders maintained by OFAC, the UK Sanctions List maintained by the UK HM Treasury, the European Union Consolidated Sanctions List, or any other lists of restricted parties maintained by the U.S. Government, UK Government, or European Union, nor are they otherwise a party with which any entity is prohibited to deal under the laws of the United States, United Kingdom, or European Union (“Sanctioned Person”), (B) is a senior foreign political figure or any immediate family member or close associate of a senior foreign political figure or (C) is identified as a terrorist organization on any other relevant lists maintained by governmental authorities. The Subscriber further represents and warrants that the monies used to fund the investment in the Shares are not derived from, invested for the benefit of, or related in any way to, and that no monies or dividends received as a result of the investment in the Shares will be provided to or for the benefit of any Sanctioned Person or the governments of, or persons within, any country (1) under a U.S. embargo enforced by OFAC, (2) that has been designated as a “high-risk jurisdictions subject to a call for action” or “jurisdiction with strategic deficiencies” by the Financial Action Task Force or (3) that has been designated by the U.S. Secretary of the Treasury as a “primary money laundering concern.” The Subscriber further represents and warrants that the Subscriber: (x) has conducted thorough due diligence with respect to all of its beneficial owners, (y) has established the identities of all beneficial owners and the source of each of the beneficial owner’s funds and (z) will retain evidence of any such identities, any such source of funds and any such due diligence. The Subscriber further represents and warrants that the Subscriber does not know or have any reason to suspect that (I) the monies used to fund the Subscriber’s investment in the Shares have been or will be derived from or related to any illegal activities, including money laundering activities, and will not be, directly or indirectly derived from activities that may contravene federal, state or international laws and regulations, including anti-money laundering laws and regulations, and (II) the proceeds from the Subscriber’s investment in the Shares will be used to finance any illegal activities. Subscriber represents that all evidence of identity provided is genuine.

 

(ii) The Subscriber shall provide to the Fund at any time such information as the Fund determines to be necessary or appropriate (A) to comply with the anti-money laundering laws, rules and regulations of any applicable jurisdiction and (B) to respond to requests for information concerning the identity of such Subscriber from any governmental authority, self-regulatory organization or financial institution in connection with its anti-money laundering compliance procedures (which, notwithstanding anything in the Fund’s privacy policies and/or Section 15 of this Subscription Agreement to the contrary, may then be disclosed to such persons), or to update such information. Such information may include, with respect to any Subscriber that is a natural person, the Subscriber’s full legal name, date of birth, residential street address and identification number. The Subscriber hereby represents that the Subscriber is in compliance with all such laws. Failure to provide such information upon request may result in the compulsory redemption or transfer of the Subscriber’s Shares. Subscriber represents that all evidence of identity provided is genuine.

 

(iii) To comply with applicable U.S. anti-money laundering laws and regulations, all payments and contributions by the Subscriber to the Fund, and all payments and distributions to the Subscriber, shall only be made in the Subscriber’s name and to and from a bank account of a bank based or incorporated in or formed under the laws of the United States or that is regulated in and either based or incorporated in or formed under the laws of the United States and that is not a “foreign shell bank” within the meaning of the U.S. Bank Secrecy Act (31 U.S.C. § 5311 et seq.), as amended, and the regulations promulgated thereunder by the U.S. Department of the Treasury, as such regulations may be amended.

 

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(b) Affirmation. The representations and warranties set forth in this Section 8 shall be deemed repeated and reaffirmed by the Subscriber to the Fund as of each date that the Subscriber receives dividends or other distributions from (even if such distribution is reinvested pursuant to the Distribution Reinvestment Plan), the Fund. If at any time during the term of the Fund, the representations and warranties set forth in this Section 8 cease to be true, the Subscriber shall promptly so notify the Fund in writing.

 

(c) Remedies for Failure to Comply with Section 8. The Subscriber understands and agrees that the Fund may not accept any amounts from the Subscriber if the Subscriber cannot make the representations set forth in this Section 8, and may require the compulsory Transfer of the Subscriber’s Shares. In addition, the Subscriber understands and agrees that, in addition to the foregoing remedial measures in order to comply with governmental regulations or if the Fund determines in its sole discretion that such action is in the best interests of the Fund, the Fund may “freeze the account” of the Subscriber, either by prohibiting additional investments in the Fund by the Subscriber, refusing to process a distribution to the Subscriber or suspending other rights the Subscriber may have against the Fund under this Subscription Agreement or under the LLC Agreement. The Fund or the Adviser may be required to report such action or confidential information relating to the Subscriber (including disclosing the Subscriber’s identity) to regulatory authorities.

 

9. FATCA Compliance. The Subscriber acknowledges and agrees that, in order to comply with the provisions of the U.S. Foreign Account Tax Compliance Act (“FATCA”) and avoid the imposition of U.S. federal withholding tax, the Fund and the Adviser may from time to time require further information or documentation from the Subscriber and, if and to the extent required under FATCA, the Subscriber’s direct and indirect beneficial owners (if any), relating to or establishing such person’s identity, residence (or jurisdiction of formation) and income tax status, and may provide or disclose such information and documentation to the U.S. Internal Revenue Service.  The Subscriber agrees that it shall provide such information and documentation concerning itself and its beneficial owners (if any), as and when requested by the Fund or the Adviser sufficient for the Fund, as applicable, to comply with its obligations under FATCA. The Subscriber acknowledges that, if the Subscriber does not provide the information and documentation requested by the Fund, the Fund may, at its sole option and in addition to all other remedies available at law or in equity, immediately redeem or require compulsory Transfer of the Subscriber’s Shares, prohibit the Subscriber from purchasing additional Shares or participating in additional investments in the Fund. The Subscriber hereby agrees to indemnify and hold harmless the Fund from any and all withholding taxes, interest, penalties and other losses or liabilities suffered by the Fund on account of the Subscriber not providing all requested information and documentation in a timely manner. The Subscriber shall have no claim against the Fund, the Adviser or any of their respective affiliates for any form of damages or liability as a result of any of the aforementioned actions.

 

10. Subscriber Information.

 

The Fund reserves the right to request such information as is necessary to verify the identity of the Subscriber or as may reasonably be requested by the Fund in connection with its operations. The Subscriber shall promptly on demand provide such information and execute and deliver such documents as the Fund may request to verify the accuracy of the Subscriber’s representations and warranties or as required for the Fund’s operations. In the event of delay or failure by the Subscriber to produce any information required for verification purposes, or if otherwise required by law or regulation, the Fund may refuse to accept the Subscription or may refuse to process a distribution until proper information has been provided.

 

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The Subscriber agrees further that the Fund shall be held harmless and indemnified against any loss, claim, cost, damage or expense arising as a result of a failure to process any subscription or distribution if such information as has been required by the Fund has not been provided by the Subscriber or which the Fund may suffer as a result of any violations of law committed by the Subscriber.

 

11. Applicable Law; Venue; Waiver of Jury Trial.

 

THIS SUBSCRIPTION AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE INTERPRETED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF DELAWARE. To the fullest extent permitted by applicable law, and unless otherwise agreed by the Fund in writing, the Subscriber hereby irrevocably and unconditionally (i) consents to and accepts for itself and in respect of its property, generally, the exclusive jurisdiction of the courts of the State of New York located in New York County or the U.S. District Court for the Southern District of New York located in New York County for the resolution of all matters arising out of or related to this Subscription Agreement and agrees that any legal action or proceeding arising out of or related to this Subscription Agreement seeking any relief whatsoever shall be brought in the foregoing courts and not in any other court in any other jurisdiction, (ii) waives any claim that such courts lack personal jurisdiction over it, and agrees not to plead or claim, in any legal action or proceeding arising out of or related to this Subscription Agreement, that such courts lack personal jurisdiction over it, (iii) waives any objection that it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or related to this Subscription Agreement brought in the aforesaid courts and hereby further irrevocably waives, to the fullest extent permitted by applicable law, and agrees not to plead or claim in any such court the claim that any such action or proceeding has been brought in an inconvenient forum and (iv) WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT THAT THE SUBSCRIBER MAY HAVE TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION DIRECTLY OR INDIRECTLY BASED UPON OR ARISING OUT OF OR DIRECTLY OR INDIRECTLY RELATED TO THIS SUBSCRIPTION AGREEMENT.

 

12. Notices.

 

All notices and other communications hereunder shall be in writing and shall be sufficiently given if personally delivered or sent by registered or certified mail, return receipt requested, hand delivery, overnight courier, facsimile transmission with transmission confirmed, or electronic mail addressed as follows: (i) if intended for the Fund, to the Fund’s principal office (if notice is hand delivered or sent by registered or certified mail or by overnight courier) or to the email address set forth below in this Section 12; and (ii) if intended for any Subscriber, to the address of such Subscriber (if notice is hand delivered or sent by registered or certified mail or by overnight courier) or the email address set forth on the signature page hereto, or to such other address as the Fund or such Subscriber, as applicable, may designate by written notice. Notices shall be deemed to have been given (i) on the date of service when personally delivered (ii), if mailed or sent by overnight courier, on the date on which received, (iii) on the date of service or transmission if sent by facsimile transmission or electronic mail (provided, that if such service or transmission is not on a business day or is after normal business hours, then such notice shall be deemed given on the next business day); provided, that notices of a change of address shall not be deemed given until the actual receipt thereof. The provisions of this Section 12 shall not prohibit the giving of written notice in any other manner; any such written notice shall be deemed given only when actually received.

 

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If to the Fund, to:

 

StepStone Private Credit Fund LLC

450 Lexington Avenue, 31st Floor

New York, NY 10017

Attn: Joseph Cambareri

E-mail: scred@stepstonegroup.com

 

13. Power of Attorney.

 

By executing this Subscription Agreement, the Subscriber hereby makes, constitutes and appoints the Fund with full power of substitution, its true and lawful attorney-in-fact, in its name, place and stead for its use and benefit, to approve, execute, acknowledge, swear to, file and record:

 

(a) any and all filings required to be made by the Subscriber under the Exchange Act with respect to any of the Fund’s securities that may be deemed to be beneficially owned by the Subscriber under the Exchange Act;

 

(b) all certificates and other instruments deemed advisable by the Fund in order for the Fund to enter into any borrowing or other financing arrangement;

 

(c) all certificates and other instruments deemed advisable by the Fund to comply with the provisions of this Subscription Agreement and applicable law or regulation to permit the Fund to become or to continue as a BDC;

 

(d) all conveyances and other instruments necessary or appropriate to effect the dissolution and liquidation of the Fund;

 

(e) all other instruments or papers not inconsistent with the terms of this Subscription Agreement that may be required by law to be filed on behalf of the Fund; and

 

(f) any amendment or modification to any of the foregoing and all other certificates, instruments and documents which said attorney-in-fact determines in its sole discretion are necessary or desirable to effectuate the provisions of this Subscription Agreement or any Other Subscription Agreements and the purposes of the Fund.

 

It is expressly acknowledged by the Subscriber that the foregoing power of attorney is coupled with an interest and shall survive death or legal incapacity of the Subscriber, and is irrevocable. Such power of attorney may be exercised by said attorney-in-fact either by signing separately as attorney-in-fact for each of the Investors or by listing all the Investors with a single signature as attorney-in-fact for all of them. Such power of attorney shall survive the termination or dissolution of the Subscriber or the assignment of its interest in the Fund; provided, however, that such power of attorney will so survive only to the extent necessary to enable said attorney-in-fact to effect substitution (if approved by the Fund) of the Subscriber’s successor-in-interest. Subscriber hereby waives any and all defenses which may be available to contest, negate or disaffirm the actions of said attorney-in-fact taken in good faith under such power of attorney. Notwithstanding anything to the contrary herein, Subscriber acknowledges that neither the Fund nor its affiliates, by virtue of the foregoing power of attorney, are assuming any of the Subscriber’s responsibilities to make filings under the Exchange Act or otherwise with respect to any of the Fund’s securities that may be deemed to be beneficially owned by the Subscriber.

 

This power of attorney does not supersede the terms of this Subscription Agreement or any written agreement between the Fund and the Subscriber nor is it to be used to deprive the Subscriber of its rights as a Shareholder, and is intended only to provide a simplified system for execution of documents. The Subscriber shall execute and deliver to the Fund, within five days after the receipt of a request therefor, such confirmatory powers of attorney as the Fund may request.

 

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14. Effect of Representations; Survival; Indemnity

 

The Subscriber understands that the offer and sale of the Shares is being made in reliance on specific exemptions from requirements of federal and state securities laws and that the Fund, and the controlling persons thereof, will rely on the representations, warranties, agreements, acknowledgements and understandings of the Subscriber set forth herein in determining the applicability of such exemptions. The Subscriber hereby confirms that all such representations and warranties will remain true and complete on the date of acceptance by the Fund of the Subscriber’s subscription hereunder.

 

This Subscription Agreement, including all representations and warranties of the Subscriber contained herein, shall survive the sale of the Shares to the Subscriber.

 

To the fullest extent permitted under applicable law, the Subscriber agrees to indemnify and hold harmless the Fund, the Adviser and their respective affiliates, and each partner, member, shareholder, officer, director, trustee, employee and agent thereof (the “Indemnified Parties”), from and against any loss, damage or liability due to or arising out of a breach of any representation, warranty or agreement of the Subscriber contained in this Subscription Agreement (including the Investor Questionnaire) or in any other document provided by the Subscriber to the Fund or in any agreement executed by the Subscriber in connection with the Subscriber’s investment in Shares.

 

15. Confidentiality. The Subscriber acknowledges that this Subscription Agreement, the Memorandum, the other Operative Documents and other information relating to the Fund (the “Confidential Information”) have been and will be submitted to the Subscriber on a confidential basis for use solely in connection with the Subscriber’s consideration of the purchase of Shares. In addition, Confidential Information includes non-public information regarding the Adviser, the Fund, their respective affiliates and any other investment vehicles whose investment adviser is the Adviser or an affiliate of the Adviser, as well as information regarding the investment portfolios or proposed investments of such entities, in each case that is provided to the Subscriber in connection with its investment in the Fund. Subscriber agrees to comply with all laws, including securities laws, concerning Confidential Information, and Subscriber agrees that it shall not trade in the securities of any issuer about which Subscriber receives material non-public information under this Subscription Agreement or in its capacity as a holder of Shares and shall refrain from such trading until any material non-public information no longer constitutes material non-public information. The Subscriber agrees that, without the prior written consent of the Fund (which consent may be withheld at the discretion of the Fund), the Subscriber shall not (a) reproduce the Memorandum, the other Operative Documents or any other Confidential Information, in whole or in part, or (b) disclose the Memorandum, the other Operative Documents or any other Confidential Information to any person who is not an officer or employee of the Subscriber who is involved in its investments, or partner (general or limited) or affiliate of the Subscriber (it being understood and agreed that if the Subscriber is a pooled investment fund, it shall only be permitted to disclose the Memorandum, the other Operative Documents or other Confidential Information if the Subscriber has required its investors to enter into confidentiality undertakings no less onerous than the provisions of this Section 15 and the Subscriber remains liable for any breach of this Section 15 by its investors), except to the extent (i) such information is in the public domain (other than as a result of any action or omission of the Subscriber or any person to whom the Subscriber has disclosed such information) or (ii) such information is required by applicable law or regulation to be disclosed, in which case the Subscriber shall first notify the Fund of such requirement (unless such notification is prohibited by law) so that the Fund may pursue a protective order or other appropriate remedy or waive compliance with the terms of this Section 15, and if a protective order or other appropriate remedy is not obtained, or if the Fund waives compliance with the terms of this Section 15, then the Subscriber shall disclose only that portion of Confidential Information that the Subscriber is advised by counsel is legally required to be disclosed and shall use its commercially reasonable efforts to protect the confidentiality of such information disclosed, including by requesting that confidential treatment be accorded such information. The Subscriber further agrees to return the Memorandum, the other Operative Documents and other Confidential Information upon the Fund’s request therefor. The Subscriber acknowledges and agrees that monetary damages would not be sufficient remedy for any breach of this Section 15 by the Subscriber and that, in addition to any other remedies available to the Fund in respect of any such breach, the Fund shall be entitled to specific performance and injunctive or other equitable relief as a remedy for any such breach.

 

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16. Independent Nature of Subscribers’ Obligations and Rights.

 

The obligations of the Subscriber hereunder are several and not joint with the obligations of any Other Investor. Nothing contained herein or in any other agreement or document delivered at any closing, and no action taken by the Subscriber pursuant hereto or thereto, shall be deemed to constitute the Shareholders as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Shareholders are in any way acting in concert with respect to such obligations or the transactions contemplated by this Subscription Agreement.

 

17. Construction.

 

The captions used herein are intended for convenience of reference only, and shall not modify or affect in any manner the meaning or interpretation of any of the provisions of this Subscription Agreement.

 

As used herein, the singular shall include the plural, the masculine gender shall include the feminine and neuter, and the neuter gender shall include the masculine and feminine, unless the context otherwise requires.

 

The words “hereof,” “herein,” and “hereunder,” and words of similar import, when used in this Subscription Agreement shall refer to this Subscription Agreement as a whole and not to any particular provision of this Subscription Agreement.

 

All references herein to Sections shall be deemed to refer to Sections of this Subscription Agreement, unless specified to the contrary.

 

Whenever the words “include”, “includes” or “including” are used in this Subscription Agreement, they shall be deemed to be followed by the words “without limitation”, whether or not they are in fact followed by those words or words of like import.

 

Nothing in this Subscription Agreement shall be deemed to create any right in or benefit for any individual or entity other than the Fund and the Subscriber and this Subscription Agreement shall not be construed in any respect to be for the benefit of, and no provision of this Subscription Agreement may be enforced by, any such person, except any Indemnified Party may enforce its rights under Section 14 hereof.

 

18. Severability

 

If any one or more of the provisions contained in this Subscription Agreement, or any application thereof, shall be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and all other applications thereof shall not in any way be affected or impaired thereby.

 

- 17 -

 

 

19. Consent to Electronic Delivery.

 

The Subscriber acknowledges that it has received this Subscription Agreement electronically as a pdf document and that it has read Section V of Appendix A of the Investor Questionnaire attached hereto relating to consents to electronic delivery of Fund reporting (including Fund statements, commentary, and shareholder letters and notices) and/or tax information in respect of the Shares.

 

20. Entire Agreement.

 

This Subscription Agreement, together with any other document that may be delivered in connection herewith and signed by both parties hereto, sets forth the entire understanding among the parties relating to the subject matter hereof, any and all prior correspondence, conversations, and memoranda or other writings being merged herein and replaced and being without effect hereon. No promises, covenants or representations of any character or nature other than those expressly stated herein or in any such other document have been made to induce any party to enter into this Subscription Agreement.

 

*            *          *

 

The undersigned Subscriber understands that the representations and warranties in the Subscription Agreement and the information in the attached Investor Questionnaire and other appendices hereto will be relied upon by the Fund and the Adviser for the purpose of determining the eligibility of the Subscriber to purchase and own Shares. In the event that the undersigned Subscriber is acting as nominee or custodian for another person or entity (or persons or entities) for whose account(s) the Shares are being purchased and held, the undersigned acknowledges, agrees, represents and warrants that all representations, warranties and covenants given in the Subscription Agreement and in the attached Investor Questionnaire and other appendices are also given as to the underlying person or entity (or persons or entities) for whose account(s) the Shares are being purchased and held. The undersigned Subscriber agrees to notify the Fund immediately if any representation or warranty contained in the Subscription Agreement or any of the information in the Investor Questionnaire or other appendices becomes untrue at any time (including, where the undersigned Subscriber is a nominee or other custodian, with respect to the other person or entity (or persons or entities) for whose account(s) the Shares are being purchased and held). The undersigned Subscriber agrees to provide, if requested by the Fund, any additional information that may reasonably be required to substantiate the status of the undersigned Subscriber (or, where the undersigned Subscriber is a nominee or other custodian, of the other person or entity (or persons or entities) for whose account(s) the Shares are being purchased and held) as an accredited investor or to otherwise determine the eligibility of the undersigned Subscriber (or, where the undersigned Subscriber is a nominee or other custodian, of the other person or entity (or persons or entities) for whose account(s) the Shares are being purchased and held) to purchase Shares in the Fund. To the fullest extent permitted by law, the undersigned Subscriber agrees to indemnify and hold harmless the Fund, the Adviser, and each trustee/director, officer, affiliate, partner or member thereof, from and against any loss, damage or liability due to or arising out of a breach of any representation, warranty or agreement of the undersigned Subscriber (or, where the undersigned Subscriber is a nominee or other custodian, of the other person or entity (or persons or entities) for whose account(s) the Shares are being purchased and held) contained herein.

 

[Signature Pages Follow]

 

- 18 -

 

 

StepStone Private Credit Fund LLC

 

Subscription Agreement Signature Page

 

IN WITNESS WHEREOF, the Subscriber has executed this Subscription Agreement as of ____________________, 20__, for $_________________________________ of Shares.

 

Subscribers who are Individuals Subscribers other than Individuals
   

 

Name of the Subscriber   Name of the Subscriber (exactly as it appears in the Subscriber’s organizational documents)
     
     
Signature of Subscriber   Signature of Authorized Signatory
     
     
Print Name   Print Name of Authorized Signatory
     
     
Social Security Number of Subscriber   Title of Authorized Signatory
     
     
Date of Birth of Subscriber  

Federal Tax Identification Number

(if applicable) 

     
     
Email Address of Subscriber   Email Address of Subscriber
     
     

Record Address of the Subscriber

(P.O. Boxes cannot be accepted)* *

 

Record Address of the Subscriber

(P.O. Boxes cannot be accepted)* *:

     
     
   
     
Signature (joint owner, if applicable)    
     
     
Print Name (joint owner, if applicable)    
     
     
Social Security Number (joint owner, if applicable)    
     
     
Date of Birth (joint owner, if applicable)    

 

 

 

 

Name of Trustees or Fiduciaries exercising investment discretion with respect to the Subscriber:

 

Signature   Printed Name   Title   Physical Street
Address
  Federal Tax
Identification
Number
  Date of Birth
         
           
           

 

If applicable, the custodian of the Subscriber, including a custodian for an IRA, should complete and sign the bottom line of this signature page

 

Signature   Printed Name   Title   Physical Street
Address
  Federal Tax
Identification
Number
  Date of Birth
         

 

**The record address should be the legal residence address where the Subscriber files tax returns.

 

 

 

 

The foregoing Subscription Agreement is accepted and agreed by the Fund, for $_________________________________ of Shares, as of __________________, 20___.

 

 

  StepStone Private Credit Fund LLC
     
  By:              
  Name:  
  Title:

 

 

WIRE TRANSFER INSTRUCTIONS:

 

Bank: [●]

SWIFT: [●]

ABA: [●]

Account #: [●]

Account Name: [●]

For the benefit of: StepStone Private Credit Fund LLC

Payment Details: Include Subscriber Name, Routing or SWIFT number of Subscriber’s Bank, and Subscriber’s Bank Account Number

 

 

 

 

 

ADDITIONAL REPRESENTATION WITH RESPECT TO INVESTMENT FOR AN IRA

 

 

If the Subscriber is an individual retirement account (an “IRA”) and the custodian or trustee of the IRA has executed this Subscription Agreement on the signature page, then the individual who established the IRA: (i) has directed the custodian or trustee of the Subscriber to execute this Subscription Agreement on the signature page; and (ii) has signed below to indicate that he or she has reviewed, directed and certifies to the accuracy of the representation and warranties made by the Subscriber herein.

 

 

Print Name  

 

 

Signature  

 

Name and Address of Custodian and Contact Individual:

 

 
  
  
  
  

 

Account or other Reference Number:

 

 

 

Trustee/Custodian’s Tax I.D. Number:

 

 

 

**** IRA custodian or trustee in every case must sign acknowledgment on next page****

 

 

 

 

ira Custodian/trustee ACKNOWLEDGEMENT:

 

The undersigned, being the custodian or trustee of the above-named individual retirement account, hereby accepts and agrees to this subscription.

 

 

Name of Custodian or Trustee  
     
By:    
  Signature of Authorized Signatory  
     
     
  Name of Authorized Signatory  

 

 

 

 

APPENDIX A

 

StepStone Private Credit Fund LLC

INVESTOR QUESTIONNAIRE

 

Please complete each Section of this Investor Questionnaire.

 

I. General Information.

 

1. If Subscriber is not holding for the Subscriber’s own account, provide the name, and residential street address for whom the interest is being held:

 

 

 

2. Investor category of Subscriber (check all that apply)

 

_____ Individual U.S. person1 (including your trust) _____ Banking or thrift institution
_____ Individual Non-U.S. person (including trust) _____ State or municipal government entity (excluding pension plans)
_____ Broker-dealer _____ SEC-regulated BDC
_____ Insurance company _____ State or municipal pension plan
_____ Investment company registered with SEC _____ Sovereign wealth fund and
_____ Private fund   foreign official institutions
_____ Non-profit _____ Other Non-U.S. person
_____ Pension plan (excluding government plans) _____ Other (describe):

 

3. Form of Subscriber (check all that are applicable):

 

_____ Individual _____ Grantor trust
_____ Joint tenants _____ Other trust
_____ Tenants in common _____ IRA/Keough Plan/SEP
_____ Limited partnership _____ Other Employee benefit plan
_____ General partnership _____ Non-profit, endowment or foundation
_____ Limited liability company _____ Other exempt organization
_____ C corporation _____ Nominee
_____ S corporation _____ Fiduciary
_____ Estate _____ Disregarded entity
    _____ Other (describe):_____________________

 

4. Tax year end (month and day): _____________________

 

5. Is the Subscriber a non-U.S. corporation, company, fund, trust or person?

 

☐ Yes. If selected, the Subscriber represents that (a) it is not a “U.S. person” in accordance with Regulation S and is not investing for the direct or indirect benefit of a U.S. Person as within the meaning of Regulation S under the Securities Act; (b) no offers to sell or to purchase the Shares were made to the Subscriber or by the Subscriber while the Subscriber was in the United States; (c) the Subscriber was not in the United States at the time the offer was accepted; and (d) at the time the Subscriber’s subscription for Shares was originated, the Subscriber was outside the United States, except for offers and sales to discretionary or similar accounts (other than an estate or trust) held for the benefit or account of a non-U.S. Person (as within the meaning of Regulation S under the Securities Act) by a dealer or other professional fiduciary organized, incorporated or resident in the United States.

 

☐ No

 

Is the Subscriber a “fund of funds”? ☐  Yes       ☐ No 

 

6. If the Subscriber is an individual, or if the Subscriber is an entity in which an individual holds, directly or indirectly, more than five percent of the ownership or beneficial interests, please identify (i) all such individuals, and (ii) all entities for which such individuals serve as employee, officer or director.

 

 

 

 

 

 

 

1“U.S. person” has the meaning set forth in Regulation S promulgated under the Securities Act.

 

 

A-1

 

 

STEPSTONE PRIVATE CREDIT Fund LLC

INVESTOR QUESTIONNAIRE

 

II. Accredited Investor Status

 

The Subscriber represents and warrants that it is an “accredited investor” within the meaning of Regulation D under the U.S. Securities Act of 1933, as amended (the “Securities Act”), and has indicated below each category under which the Subscriber qualifies as an accredited investor. Check all applicable categories.

 

The Subscriber is:

 

____ (i)A bank, as defined in Section 3(a)(2) of the Securities Act, whether acting in regard to this offering in its individual or a fiduciary capacity.

 

____ (ii)A savings and loan association or other institution, as defined in Section 3(a)(5)(A) of the Securities Act, whether acting in regard to this offering in its individual or a fiduciary capacity.

 

____ (iii)A broker or dealer registered pursuant to Section 15 of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”).

 

____ (iv)An insurance company, as defined in Section 2(a)(13) of the Securities Act.

 

____ (v)An investment company registered under the U.S. Investment Company Act of 1940, as amended (the “Investment Company Act”).

 

____ (vi)A business development company, as defined in Section 2(a)(48) of the Investment Company Act.

 

____ (vii)A private business development company, as defined in Section 202(a)(22) of the U.S. Investment Advisers Act of 1940, as amended (the “Investment Advisers Act”).

 

____ (viii)An investment adviser registered pursuant to Section 203 of the Investment Advisers Act or registered pursuant to the laws of a state or relying on the exemption from registering with the Securities and Exchange Commission under section 203(l) or (m) of the Investment Advisers Act.

 

____ (ix)A Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958, as amended.

 

____ (x)A Rural Business Investment Company as defined in Section 384A of the Consolidated Farm and Rural Development Act.

 

____ (xi)An employee benefit plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions for the benefit of its employees, if such plan has total assets in excess of $5,000,000.

 

A-2

 

 

STEPSTONE PRIVATE CREDIT Fund LLC

INVESTOR QUESTIONNAIRE

 

____ (xii)An employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), if the investment decision regarding this offering was made by a plan fiduciary (as such term is defined in Section 3(21) of ERISA) which is either a bank, savings and loan association, insurance company or investment adviser duly registered under the Investment Advisers Act.

 

____ (xiii)An employee benefit plan within the meaning of ERISA with total assets in excess of $5,000,000, whether or not the investment decision regarding this offering was made by a bank, insurance company or registered investment adviser.

 

____ (xiv)An employee benefit plan within the meaning of ERISA which is a self-directed plan with investment decisions made solely by persons described in one or more of the categories in this Section II.

 

If the Subscriber checked this statement, or the Subscriber is otherwise a participant directed plan, please provide a list of all decision-makers and a completed Investor Questionnaire from each decision-maker.

 

____ (xv)Either (A) a corporation, (B) a Massachusetts or similar business trust, (C) a partnership, (D) a limited liability company, or (E) an organization described in Section 501(c)(3) of the Internal Revenue Code, in any case not formed for the specific purpose of acquiring the Shares and having total assets in excess of $5,000,000.

 

____ (xvi)A natural person whose individual net worth, or joint net worth with his or her spouse or spousal equivalent (defined as “a cohabitant occupying a relationship generally equivalent to that of a spouse”), excluding the value of his or her primary residence, exceeds $1,000,0002.

 

____ (xvii)A natural person who had individual income in excess of $200,000 in each of the two most recent years or joint income with that person’s spouse or spousal equivalent (defined as “a cohabitant occupying a relationship generally equivalent to that of a spouse”) in excess of $300,000 in each of those years and who reasonably expects income in excess of such amounts in the current year.

 

____ (xviii)A trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring Shares whose purchase is directed by a person who has, alone or together with his or her purchaser representative (as defined in the aforementioned Regulation D), such knowledge and experience in financial and business matters that he or she is capable of evaluating the merits and risks of this investment.

 

 

2For purposes of this net worth calculation, you may exclude the amount of indebtedness secured by the Subscriber’s primary residence up to the amount of the estimated fair market value of such residence. However, if the amount of the indebtedness secured by the Subscriber’s primary residence exceeds the value of such residence, the amount of that excess debt should be treated as a liability and deducted from Subscriber’s net worth. In addition, indebtedness secured by the Subscriber’s primary residence that is incurred within sixty (60) days of the date of subscription must be included as a liability unless such indebtedness is incurred in connection with the acquisition of the Subscriber’s primary residence.

 

A-3

 

 

STEPSTONE PRIVATE CREDIT Fund LLC

INVESTOR QUESTIONNAIRE 

 

____ (xix)A trust pursuant to which the grantor(s) of the trust may revoke the trust at any time and regain title to the trust assets and has (have) retained sole or shared investment control over the assets of the trust, and the (each) grantor is described by one or more of the categories set forth in this Section II in which case the Subscriber has so notified the Fund in writing that it is relying on this clause (xix), and agrees to provide the Fund with information requested by it respecting each grantor of the trust.

 

____ (xx)A partnership, corporation or other entity (other than a trust) in which all of the equity holders are persons or entities described by one or more of the categories set forth in this Section II, in which case the Subscriber has so notified the Fund in writing that it is relying on this clause (xx), and agrees to provide the Fund with information requested by it respecting the Subscriber’s equity holders.)3

 

____ (xxi)A “family office,” as defined in Rule 202(a)(11)(G)-1 under the Investment Advisers Act with assets under management in excess of $5,000,000, that is not formed for the specific purpose of acquiring the Shares, and whose prospective investment is directed by a person who has such knowledge and experience in financial and business matters that such family office is capable of evaluating the merits and risks of the prospective investment.

 

____ (xxii)A “family client,” as defined in Rule 202(a)(11)(G)-1 under the Investment Advisers Act, of a family office defined in clause (xxi) above (and whose prospective investment in the Shares is directed by such family office).

 

____ (xxiii)A natural person who holds at least one of the following licenses in good standing: a Series 7, Series 65 or Series 82 license.

 

____ (xxiv)An entity, not formed for the specific purpose of acquiring the securities offered, which owns in excess of $5 million in “investments” (as defined in Rule 2a51-1(b) under the Investment Company Act).

 

____ (xxv)Not a person or entity described by one or more of the categories set forth in this Section II.

 

 

3In reviewing equity ownership, it is permissible to look through various forms of equity ownership to natural persons.

 

A-4

 

 

STEPSTONE PRIVATE CREDIT Fund LLC

INVESTOR QUESTIONNAIRE

 

III. Supplemental Information

 

1.Is the Subscriber, or will the Subscriber be, an individual retirement account or other Benefit Plan Investor (as defined below) or is it or will it use the assets of an entity or other Person that is or will in the future be a Benefit Plan Investor to invest in the Fund?

 

☐ yes ☐ no

 

A “Benefit Plan Investor” is as defined in 29 C.F.R. § 2510.3-101, as modified by Section 3(42) of ERISA, and includes:

 

Any “employee benefit plan” as defined in Section 3(3) of ERISA that is subject to ERISA.

 

Any “plan” described in Section 4975(e)(1) of the Code that is subject to Section 4975 of the Code.  Such a plan includes, without limitation, an “individual retirement account” described in Section 408 or 408A of the Code, a Keogh plan, an Archer MSA described in Section 220(d) of the Code, a Coverdell education savings account described in Section 530 of the Code and a health saving account described in Section 223(d) of the Code.

 

Any entity that is or would be deemed to be using “plan assets” (within the meaning of Section 3(42) of ERISA) to purchase or hold its investments.

 

A Benefit Plan Investor can also be an insurance-company general account, the assets of which are considered for purposes of ERISA or Section 4975 of the Code to be assets of a Benefit Plan Investor.

 

a. Is the Subscriber, or will the Subscriber be an “employee benefit plan” as defined in Section 3(3) of ERISA that is subject to Title I of ERISA?

 

☐ yes        ☐ no

 

b. Is the Subscriber, or will the Subscriber be, any “plan” described in Section 4975(e)(1) of the Code that is subject to Section 4975 of the Code?

 

☐ yes        ☐ no

 

2.

Is the Subscriber, or will the Subscriber be, an entity (other than an insurance company general account) whose underlying assets are deemed to constitute “plan assets” subject to ERISA or Section 4975 of the Code by reason of investment in such entity by other Benefit Plan Investors?

 

☐ yes             ☐ no

 

3.

Answer this Question 3 only if the answer to Question (2) above is “yes”: What is the maximum percentage of the Subscriber’s assets that constitutes or may in the future constitute “plan assets” subject to ERISA or Section 4975 of the Code?

 

  _____________%

 

A-5

 

 

STEPSTONE PRIVATE CREDIT Fund LLC

INVESTOR QUESTIONNAIRE

 

4.

If the Subscriber is or will be an insurance company using assets of its general account (directly or indirectly), does or will any portion of the underlying assets in its general account constitute “plan assets” subject to ERISA or Section 4975 of the Code?

 

☐ yes             ☐ no

 

5.

Answer this Question 5 only if the answer to Question (4) above is “yes”: What is the maximum percentage of the assets in the Subscriber’s general account as a whole that constitutes or may in the future constitute “plan assets” subject to ERISA or Section 4975 of the Code?

 

  _____%

 

Without limiting the remedies available in the event of a breach, the Subscriber agrees promptly to notify the Fund and the Adviser in writing if there is a change in the percentage as set forth in Question (3) or Question (5) above and at such other time or times as the Fund or the Adviser may request.

 

6.

(a) Is the Subscriber a private investment company which is not registered under the 1940 Act in reliance on:

 

Section 3(c)(1) thereof? ☐ yes ☐ no

 

Section 3(c)(7) thereof? ☐ yes      ☐ no  

 

(b) Does the amount of the Subscriber’s subscription for Shares exceed 40% of the total assets (on a consolidated basis with its subsidiaries) of the Subscriber?    

 

☐ yes             ☐ no

 

7.

Is the Subscriber an “investment company” registered or required to be registered under the 1940 Act or a “business development company,” as defined in Section 202(a)(22) of the Investment Advisers Act of 1940, as amended?

 

☐ yes             ☐ no

 

8.This question is for Non-U.S. Persons only (including Subscribers acting for beneficial owners that are Non-U.S. Persons). If the Subscriber is a U.S. Person, please skip this question 8.

 

8a.

Does the Subscriber qualify as an integral part or a controlled entity of a foreign government for purposes of Section 892 of the Code (for example, certain sovereign wealth funds)?

 

☐ yes             ☐ no

 

If“yes,” please furnish an executed copy of form W-8EXP.

 

8b.

Does the Subscriber qualify as a pension fund entitled to an exemption from withholding tax on dividends under an applicable tax treaty?

 

☐ yes             ☐ no

 

If “yes,” please indicate the relevant treaty below and on an executed copy of form W 8BEN E. Applicable Treaty: _______________________________________________

 

8c.

Does the Subscriber qualify for a reduced rate of withholding tax on dividends under any applicable tax treaty?

 

☐ yes             ☐ no

 

If “yes,” please indicate the relevant treaty below and on an executed copy of form W 8BEN E. Applicable Treaty: _______________________________________________

 

A-6

 

 

STEPSTONE PRIVATE CREDIT Fund LLC

INVESTOR QUESTIONNAIRE

  

Related Parties/Other Beneficial Parties

 

9.Is the Subscriber or will the Subscriber be a person (including an entity) that has discretionary authority or control with respect to the assets of the Fund or a person who provides investment advice with respect to the assets of the Fund or an “affiliate” of such a person (a “Controlling Person”)? For purposes of this representation, an “affiliate” is any person controlling, controlled by or under common control with any such person, including by reason of having the power to exercise a controlling influence over the management or policies of such person.

 

☐ yes ☐ no

 

10.To the best of the Subscriber’s knowledge, does the Subscriber control, or is the Subscriber controlled by or under common control with, any other investor in the Fund?

 

☐ yes ☐ no

 

If the question above was answered “Yes,” please indicated the name of such other investor in the space below:

 

_________________________________________________

 

11.Will any other person or persons have a beneficial interest in the Shares to be acquired hereunder (other than as a shareholder, partner, policy owner or other beneficial owner of equity interests in the Subscriber)? (By way of example, and not limitation, a “nominee” Subscriber or a Subscriber who has entered into swap or other synthetic or derivative instruments or arrangements with regard to the Shares to be acquired herein would check “Yes.”)

 

☐ yes ☐ no

 

If either question above was answered “Yes,” please contact the Fund for additional information that will be

required.

 

BHC Investor Status

 

12.Is the Subscriber a “BHC Investor”?*

 

☐ yes ☐ no

 

*A “BHC Investor” is defined as a Subscriber that is a bank holding company, as defined in Section 2(a) of the Bank Holding Company Act of 1956, as amended (the “BHC Act”), a non-bank subsidiary (for purposes of the BHC Act) of a bank holding company, a foreign banking organization, as defined in Regulation K of the Board of Governors of the Federal Reserve System (12 C.F.R. § 211.23) or any successor regulation, or a non-bank subsidiary (for purposes of the BHC Act) of a foreign banking organization which subsidiary is engaged, directly or indirectly in business in the United States and which in any case holds Shares for its own account.

 

New York State Tax Domicile

 

13.Is the Subscriber’s tax domicile the State of New York?

 

☐ yes ☐ no

 

A-7

 

 

STEPSTONE PRIVATE CREDIT Fund LLC

INVESTOR QUESTIONNAIRE

 

IV. Distribution Reinvestment Plan.

 

The Fund will adopt a distribution reinvestment plan under which cash distributions to Shareholders will be automatically reinvested for additional Shares. Subscribers may opt out of the plan by checking the box below. Elections may be altered in accordance with the terms of such distribution reinvestment plan:

 

☐ Opt-out of Distribution Reinvestment Plan

 

V. Consent to Electronic Delivery of Fund Reports/Notices and/or Tax Information

 

Instructions: Please check the box below or otherwise deliver a signed consent to the Fund along with your subscription documents to confirm that (a) the Subscriber consents to electronic receipt of Fund reporting (including Fund statements, commentary, and shareholder letters and notices) and/or tax information in respect of its Shares and (b) the Subscriber is able to open pdf documents and other electronic files, in each case as made available on the Fund’s investor portal or sent to the Subscriber’s email address on the signature page hereto or to such other email address the Subscriber may designate by written notice to the Fund.

 

Yes. I consent to electronic delivery of Fund reports/notices and/or tax information as set forth above.

 

If you choose not to consent to electronic delivery of Fund reporting (including Fund statements, commentary, and shareholder letters and notices) and/or tax information as set forth above or if you subsequently withdraw your consent to such electronic delivery, paper copies of such documents or tax information will be furnished to you via U.S. mail or UPS / FedEx.

 

Such consent applies to all Fund reporting, statements, commentary, and shareholder letters and notices) and/or tax information, as applicable, required to be furnished to you by the Fund after this consent is given and until the Fund receives a withdrawal of such consent.

 

Notwithstanding your consent, you are entitled to receive paper copies of such documents and tax information upon request. The Fund will NOT treat your request for paper copies as a withdrawal of your consent. If you wish to withdraw consent, you understand that you must do so affirmatively.

 

You may withdraw consent by contacting StepStone Private Credit Fund LLC, 450 Lexington Avenue, 31st Floor, New York, NY 10017, Attn: Corporate Secretary (or at such updated address as the Fund may communicate to the Subscribers from time to time). The withdrawal of consent will be effective within 60 calendar days of receipt by the Fund and will be confirmed in writing by the Fund (including the date on which the withdrawal will take effect). A withdrawal of consent does not apply to any documents or tax information furnished electronically before the withdrawal takes effect.

 

If the Subscriber has received the Subscription Agreement (including this Investor Questionnaire) as a pdf file via the Fund’s investor portal, in an email attachment or in any other electronic format, the receipt thereof reasonably demonstrates that the Subscriber can access any Fund documents or tax information in the electronic format in which it will be furnished to the Subscriber.

 

A-8

 

 

STEPSTONE PRIVATE CREDIT Fund LLC

INVESTOR QUESTIONNAIRE

 

VI. Background Documentation

 

A.Payment Information

 

(i)Name of the bank from which the Subscriber’s investment in the Fund will be wired (the “Wiring Bank”):

 

_________________________________________________

 

(ii)Is the Wiring Bank located in the United States or another FATF Country?*

 

Yes    ____     No ____

 

If “No,” please contact the Fund for more information.

 

(iii)Is the Subscriber a customer of the Wiring Bank?

 

Yes    ____     No ____

 

If “No,” please contact the Fund for more information.

 

VII. For distributions of cash, please wire funds to the following bank account:

 

Bank Name:  
Bank Location:  
Account Number:  
Account Name:  
Bank’s Routing No.:  

 

 

 

*An FATF Country is a country that is a member of the Financial Action Task Force. The list of FATF Countries may be found at: http://www.fatf-gafi.org/countries/#FATF.

 

A-9

 

 

APPENDIX B

 

StepStone Private Credit Fund LLC

CERTIFICATION OF BENEFICIAL OWNER(S)

 

This form requires you to provide the name, address, date of birth and Social Security number (or passport number or other similar information, in the case of Non-U.S. Persons) for the following individuals (i.e., the beneficial owners):

 

(i)Each individual, if any, who owns, directly or indirectly, 25% or more of the equity interests of the Subscriber (e.g., each natural person that owns 25% or more of the shares of a corporation); and

 

(ii)An individual with significant responsibility for managing the Subscriber (e.g., a Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, Managing Member, General Partner, President, Vice President, or Treasurer).

 

The number of individuals that satisfy this definition of “beneficial owner” may vary. Under section (i), depending on the factual circumstances, up to four individuals (but as few as zero) may need to be identified. Regardless of the number of individuals identified under section (i), you must provide the identifying information of one individual under section (ii). It is possible that in some circumstances the same individual might be identified under both sections (e.g., the President of Acme, Inc. who also holds a 30% equity interest). Thus, a completed form will contain the identifying information of at least one individual (under section (ii)), and up to five individuals (i.e., one individual under section (ii) and four 25% equity holders under section (i)).

 

Persons subscribing on behalf of a legal entity must provide the following information:

 

a.Name and Title of Natural Person:

 

________________________________________________________________________

 

b.Name, Type, and Address of Legal Entity:

 

________________________________________________________________________

 

________________________________________________________________________

 

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c.The following information for each individual, if any, who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, owns 25% or more of the equity interests of the legal entity listed above:

 

(If no individual meets this definition, please write “Not Applicable.”)

 

Name Date of Birth Address
(Residential or
Business Street Address)
For U.S. Persons: Social Security Number For Non-U.S. Persons: Social Security Number, Passport Number and Country of Issuance, or other similar identification number4
         
         
         
         

 

d.The following information for one individual with significant responsibility for managing the legal entity listed above, such as:

 

An executive officer or senior manager (e.g., Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, Managing Member, General Partner, President, Vice President, Treasurer); or

 

Any other individual who regularly performs similar functions.

 

(If appropriate, an individual listed under section (c) above may also be listed in this section (d)).

 

Name/Title Date of Birth Address
(Residential or
Business Street Address)
For U.S. Persons: Social Security Number For Non-U.S. Persons: Social Security Number, Passport Number and Country of Issuance, or other similar identification number1
         

 

I, ________________ (name of natural person), hereby certify, to the best of my knowledge, that the information provided above is complete and correct.

 

Signature: ______________________________________ Date: ___________________

 

Legal Entity Identifier __________________ (Optional)

 

 

4In lieu of a passport number, Non-U.S. Persons may also provide a Social Security Number, an alien identification card number, or number and country of issuance of any other government-issued document evidencing nationality or residence and bearing a photograph or similar safeguard.

 

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APPENDIX C

 

STEPSTONE GROUP LP

StepStone Group Private Debt LLC

StepStone Group Europe Alternative Investments Limited

 

Privacy Policy

 

Data privacy is a primary concern for each of StepStone Group LP (“SSG”), StepStone Group Private Debt LLC (the “Advisor”) and StepStone Group Europe Alternative Investments Limited (the “Sub-Advisor”) (the Advisor together with the Sub-Advisor and SSG, collectively, “StepStone”). This data privacy notice (the “Notice”) details StepStone’s practices for collecting and disclosing the personal information of clients and others, to both affiliates of SSG and the Advisor, and, as applicable, nonaffiliated third parties. Recipients of this Notice include, among others, current clients and investors, prospective clients, former clients, employees of managers with whom StepStone has conducted business, and employees of StepStone or any of StepStone’s affiliates (each a “Notice Recipient”). For purposes of this Notice, an affiliate is an entity that (i) controls SSG or the Advisor, (ii) is controlled by SSG or the Advisor, or (iii) is under common control with SSG or the Advisor. Nonaffiliated third parties are parties who are not affiliates of either SSG or the Advisor.

 

Confidentiality of Personal Information

 

StepStone maintains the confidentiality of nonpublic personal information that a Notice Recipient provides to it. StepStone maintains physical, electronic and procedural safeguards to guard a Notice Recipient’s nonpublic personal information. All third parties that handle information must agree to follow the standards for confidentiality that StepStone has established. In addition, all people who work for StepStone are trained to handle a Notice Recipient’s information properly in order to maintain its security, and only employees who need to know personal information about a Notice Recipient to provide services to such Notice Recipient have access to such information.

 

Categories of Personal Information that StepStone Collects

 

StepStone collects personal information about Notice Recipients from the following sources: (i) information it receives from Notice Recipients on applications or other forms; and (ii) information about Notice Recipients’ transactions with StepStone, its affiliates, or others.

 

StepStone is a data controller within the meaning of data protection legislation in force in the European Economic Area (“EEA”) and undertakes to hold any personal information processed within scope of the EEA data protection legislation in accordance with such legislation.

 

Personal information will be used by StepStone for the following purposes:

 

to manage and administer holdings in StepStone managed or advised funds, separately managed accounts, advisory engagements and any related business relationships (and, in each case, the investments made pursuant thereto) on an ongoing basis in accordance with the terms agreed between a Notice Recipient and SSG, the Advisor or Sub-Advisor, as applicable;

 

to carry out statistical analysis and market research; and

 

to comply with legal and regulatory obligations applicable to the Notice Recipient, StepStone or its managed or advised funds, separately managed accounts, advisory engagements or any related business relationship with the Notice Recipient from time to time, including applicable anti-money laundering and counter terrorist financing legislation, investor qualification legislation and tax legislation.

 

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The personal information will only be used in connection with StepStone’s legitimate business interests and accordingly Notice Recipients’ specific consent is not required.

 

Disclosure of Personal Information to Affiliates

 

StepStone generally may share all of a Notice Recipient’s personal information with StepStone’s affiliates; provided that such affiliates will be obligated to keep such personal information confidential to the same extent as StepStone. StepStone shares information with its affiliates in order to serve its Notice Recipients better. If a Notice Recipient prefers that StepStone not disclose nonpublic personal information about such Notice Recipient to its affiliates, such Notice Recipient may opt out of those general disclosures; that is, such Notice Recipient may direct StepStone not to make such disclosures (other than disclosures permitted or required by applicable law or otherwise permitted by StepStone’s privacy policy). However, notwithstanding any such opt-out, StepStone will be permitted to disclose personal information to its affiliates to the extent necessary or appropriate for such affiliates to perform services for the benefit of the Notice Recipient.

 

Disclosure of Personal Information to Non-Affiliates

 

StepStone does not sell or market a Notice Recipient’s personal information to nonaffiliated third parties. StepStone’s intent is to respect the Notice Recipients’ expectations that their personal information will be kept confidential. However, in order to serve the Notice Recipients better, StepStone will disclose personal information to nonaffiliated third parties (including service providers to StepStone), but only to the extent necessary or appropriate for such third parties to perform services for the benefit of the Notice Recipient and only if StepStone believes that such personal information will be kept confidential by such third parties after such disclosure.

 

Additional Information About Categories of Personal Information that StepStone Discloses

 

Except as required by applicable law and described in this privacy notice, StepStone will not share any other personal information about a Notice Recipient with its affiliates or nonaffiliated third parties.

 

Personal Information of Former Investors and Prospective Clients

 

This Notice and StepStone’s policy regarding treatment of personal information of Notice Recipients also apply to former clients, business prospects, potential clients and current and former employees.

 

Disclosure of Personal Information outside the EEA

 

Personal information may be transferred to countries which may not have the same or equivalent data protection laws as that required under EEA data protection legislation. Any such transfer will be made in compliance with applicable data protection legislation, and appropriate measures are in place to ensure this, such as entering into Standard Contractual Clauses (as published by the European Commission). For more information on the means of transfer of data or a copy of the relevant safeguards, please contact us at privacy@stepstoneglobal.com.

 

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To the extent personal information is processed within scope of EEA data protection legislation, data subjects have the right to object to processing of personal information and a number of other rights which may be exercised in certain circumstances, i.e.:

 

the right of access to personal information held;

 

the right to amend and rectify any inaccuracies in personal information held;

 

the right to erase personal information held;

 

the right to data portability of personal information held; and

 

the right to request restriction of the processing of personal information.

 

These rights will be exercisable, subject to limitations as provided for in EEA data protection legislation. Any Notice Recipient may make a request to StepStone to exercise these rights by contacting us at privacy@stepstoneglobal.com.

 

Please note that personal information may be retained by StepStone for the duration of a Notice Recipient’s investment or engagement with StepStone, and afterwards in accordance with StepStone’s legal and regulatory obligations, including but not limited to StepStone’s record retention policy.

 

For queries, requests or comments in respect of this Notice, or the way in which StepStone uses nonpublic personal information, please contact us at privacy@stepstoneglobal.com. Note that Notice Recipients have the right to lodge a complaint with the appropriate regulator.

 

Changes to Privacy Policy

 

StepStone may modify its privacy policy at any time.

 

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APPENDIX D

 

TRANSFER RESTRICTIONS

 

This Appendix D is attached to and made a part of this Subscription Agreement with the Subscriber. Capitalized terms not defined herein shall have the meanings assigned to them in this Subscription Agreement.

 

Prior to an IPO or Exchange Listing (as each is defined in the Memorandum), no Subscriber may Transfer its Shares, or any portion thereof, (a) without registration of the Transfer on the Fund’s books, and (b) unless the transferee satisfies applicable eligibility and/or suitability requirements set forth in the Subscription Agreement and the Transfer is otherwise made in accordance with applicable securities, tax, anti-money laundering and other applicable laws and compliance with the terms of the LLC Agreement. Registration of any Transfer on the Fund’s books may be withheld unless, in the opinion of counsel (who may be counsel for the Fund) satisfactory in form and substance to the Fund, such Transfer would not violate the Securities Act, any state (or other jurisdiction) securities or “blue sky” laws applicable to the Fund or the Shares to be Transferred, or any other laws.

 

The Subscriber agrees that it will pay all reasonable expenses, including attorneys’ fees, incurred by the Fund in connection with any Transfer of all or any fraction of its Shares, prior to the consummation of such Transfer.

 

In addition, the Fund will use commercially reasonable efforts to prevent its assets from being deemed to constitute “plan assets” for purposes of ERISA or Section 4975 of the Code. The Fund may reject any Transfer of Shares if such Transfer could (1) result in the Fund’s assets being considered to be “plan assets” for purposes of ERISA or Section 4975 of the Code or (2) constitute or result in a non-exempt prohibited transaction under ERISA or Section 4975 of the Code or a non-exempt violation of any laws similar to ERISA or Section 4975 of the Code.

 

The Fund shall not recognize for any purpose any purported Transfer of all or any portion of the Shares and shall be entitled to treat the transferor of Shares as the absolute owner thereof in all respects, and shall incur no liability for distributions or dividends made in good faith to it, unless there shall have been filed with the Fund a dated notice of such Transfer, in form satisfactory to the Fund, executed and acknowledged by both the seller, assignor or transferor and the purchaser, assignee or transferee, and such notice (a) contains the acceptance by the purchaser, assignee or transferee of all of the terms and provisions of this Subscription Agreement and its agreement to be bound thereby, and (b) represents that such Transfer was made in accordance with this Subscription Agreement, the provisions of the Memorandum or other Operative Documents, as applicable, and all applicable laws and regulations applicable to the transferee and the transferor.

 

 

D-1

 

 

Exhibit 10.2

 

INVESTMENT ADVISORY AGREEMENT

 

AGREEMENT made and effective as of this 3rd day of April, 2023 (the “Effective Date”) by and between StepStone Private Credit Fund LLC, a Delaware limited liability company (the “Fund”), and StepStone Group Private Debt LLC, a Delaware limited liability company (the “Adviser”).

 

WHEREAS, the Fund is a newly organized non-diversified, closed-end management investment company that has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (together with the rules promulgated thereunder, the “1940 Act”);

 

WHEREAS, the Adviser is registered as an investment adviser under the Investment Advisers Act of 1940, as amended (together with the rules promulgated thereunder, the “Advisers Act”);

 

WHEREAS, the Fund desires to retain the Adviser to provide investment advisory services to the Fund in the manner and on the terms and conditions hereinafter set forth; and

 

WHEREAS, the Adviser is willing to provide investment advisory services to the Fund in the manner and on the terms and conditions hereinafter set forth.

 

NOW, THEREFORE, in consideration of the premises and the covenants hereinafter contained and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Fund and the Adviser hereby agree as follows:

 

1.Duties of Adviser.

 

(a) The Fund hereby appoints the Adviser to act as the investment adviser to the Fund and to manage the investment and reinvestment of the assets of the Fund, to continuously review, supervise and administer the investment program of the Fund, to determine in its discretion the securities to be purchased or sold and the portion of the Fund’s assets to be held uninvested, to provide the Fund with records concerning the Adviser’s activities which the Fund is required to maintain and to render regular reports to the board of directors of the Fund (the “Board”) and the Fund’s officers concerning the Adviser’s discharge of the foregoing responsibilities, in each case subject to the supervision of the Board, for the period and upon the terms herein set forth in accordance with:

 

(i)the investment objective, policies and restrictions that are set forth in the Fund’s Registration Statement on Form 10 filed with the Securities and Exchange Commission (the “SEC”), or other registration statements the Fund may file with the SEC, as applicable, in each case as supplemented, amended or superseded from time to time, and in the Fund’s confidential private placement memorandum, as amended or otherwise modified from time to time, or as may otherwise be set forth in the Fund’s reports filed in compliance with the Securities Exchange Act of 1934, as amended (together with the rules promulgated thereunder, the “Exchange Act”), as applicable;

 

(ii)during the term of this Agreement, all other applicable federal and state laws, rules and regulations, and the Fund’s certificate of formation and limited liability company agreement, as they may be amended from time to time;

 

 

 

 

(iii)such investment policies and directives as the Fund may from time to time establish or issue and communicate to the Adviser in writing;

 

(iv)such regulatory restrictions as the Fund may from time to time communicate to the Adviser in writing; and

 

(v)the Fund’s compliance policies and procedures as applicable to the Adviser and as administered by the Fund’s chief compliance officer.

 

(b) Without limiting the generality of the foregoing, the Adviser is authorized, in its sole discretion, to:

 

(i)perform due diligence on prospective portfolio companies and obtain and evaluate pertinent economic, financial, and other information affecting the economy generally and certain investment assets as such information relates to securities, loans or other financial instruments that are purchased for or considered for purchase by the Fund;

 

(ii)make investment decisions for the Fund (including the exercise or disposition of rights accompanying portfolio securities, loans or other financial instruments (such as tender offers, exchanges, amendments, consents, waivers or forbearances) and other attendant rights thereto);

 

(iii)determine the composition and allocation of the Fund’s investment portfolio, the nature and timing of any changes therein and the manner of implementing such changes;

 

(iv)place purchase and sale orders for portfolio transactions on behalf of the Fund;

 

(v)manage otherwise uninvested cash assets of the Fund;

 

(vi)manage the liquidity requirements of the Fund;

 

(vii)identify, evaluate and negotiate the structure of the investments made by the Fund;

 

(viii)arrange for the pricing of Fund securities, loans or other financial instruments;

 

(ix)execute account documentation, agreements, contracts and other documents as may be requested by brokers, dealers, assignors, assignees, participants, counterparties and other persons in connection with the Adviser’s management of the assets of the Fund (in such respect, the Adviser will act as the Fund’s agent and attorney-in-fact);

 

(x)employ professional portfolio managers and securities analysts who provide research services to the Fund;

 

(xi)engage certain third-party professionals, consultants, experts or specialists in connection with the Adviser’s management of the assets of the Fund (in such respect, the Adviser will act as the Fund’s agent and attorney-in-fact);

 

(xii)arrange financings and borrowing facilities for the Fund and make decisions with respect to the use by the Fund of borrowing for leverage or other investment purposes (in such respect, the Adviser will act as the Fund’s agent and attorney-in-fact);

 

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(xiii)provide the Fund with such other investment advisory, research and related services as the Fund may, from time to time, reasonably require for the investment of its funds; and

 

(xiv)to the extent permitted under the 1940 Act and the Advisers Act, on the Fund’s behalf, and in coordination with any Sub-Adviser (as defined below) and any administrator, provide significant managerial assistance to those portfolio companies to which the Fund is required to provide such assistance under the 1940 Act, including utilizing appropriate personnel of the Adviser to, among other things, monitor the operations of the Fund’s portfolio companies, participate in board and management meetings of portfolio companies, consult with and advise officers of portfolio companies and provide other organizational and financial consultation.

 

(c) To facilitate the Adviser’s performance of these undertakings, but subject to the restrictions contained herein, the Fund hereby delegates to the Adviser (which power and authority may be delegated by the Adviser to one or more Sub-Advisers), and the Adviser hereby accepts, the power and authority to act on behalf of and in the name of the Fund to effectuate investment decisions for the Fund, including the negotiation, execution and delivery of all documents relating to the acquisition and disposition of the Fund’s investments, the placing of orders for other purchase or sale transactions on behalf of the Fund or any entity in which the Fund has a direct or indirect ownership interest, including any interest rate, currency or other derivative instruments, and the engagement of any services providers deemed necessary or appropriate by the Adviser to the exercise of such power and authority.

 

(d) In the event that the Fund determines to acquire debt or other financing (or to refinance existing debt or other financing), the Adviser shall use commercially reasonable efforts to arrange for such financing on the Fund’s behalf, subject to the oversight and approval of the Board. If it is necessary for the Adviser to make investments or obtain financing on behalf of the Fund through a special purpose vehicle, the Adviser shall have authority to create, or arrange for the creation of, such special purpose vehicle and to make investments or obtain financing through such special purpose vehicle in accordance with applicable law.

 

(e) The Fund also grants to the Adviser power and authority to engage in all activities and transactions (and anything incidental thereto) that the Adviser deems, in its sole discretion, appropriate, necessary or advisable to carry out its duties pursuant to this Agreement, including the authority to open accounts and deposit, maintain and withdraw funds of the Fund or any of its subsidiaries in any bank, savings and loan association, brokerage firm or other financial institution.

 

(f) The Adviser hereby accepts such appointment and agrees during the term hereof to render the services and to provide, at its own expense, the office space, furnishings and equipment and the personnel required by it to perform the services described in this Section 1 on the terms and for the compensation provided herein, subject to the terms of the administration agreement, by and between the Fund and the Adviser, dated as of April 3, 2023 (as amended from time to time, the “Administration Agreement”). Unless and until it resigns or is removed as investment adviser to the Fund in accordance with this Agreement, the Adviser, to the extent of its powers as set forth in this Agreement, shall be an agent of the Fund for the purpose of the Fund’s business, and action taken by the Adviser in accordance with such powers shall bind the Fund.

 

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(g) The Adviser is hereby authorized to enter into one or more sub-advisory agreements (each a “Sub-Advisory Agreement”) with other investment advisers (each a “Sub-Adviser”) pursuant to which the Adviser may obtain the services of the Sub-Adviser(s) to assist the Adviser in fulfilling its responsibilities hereunder, subject to the oversight of the Adviser and/or the Fund, with the scope of such services and oversight to be set forth in each Sub-Advisory Agreement and subject to the below.

 

(i)The Adviser and not the Fund shall be responsible for any compensation payable to any Sub-Adviser; provided, however, that the Adviser shall have the right to direct the Fund to pay directly any Sub-Adviser the amounts due and payable to such Sub-Adviser from the fees and expenses otherwise payable to the Adviser under this Agreement.

 

(ii)Any Sub-Advisory Agreement entered into by the Adviser shall be in accordance with the requirements of the 1940 Act and the Advisers Act, including without limitation, the requirements of the 1940 Act relating to Board and Fund unitholder approval thereunder, and other applicable federal and state law.

 

(iii)Any Sub-Adviser shall be subject to the same fiduciary duties as are imposed on the Adviser pursuant to this Agreement, the 1940 Act and the Advisers Act, as well as other applicable federal and state law.

 

(h) The Adviser shall, for all purposes herein provided, be deemed to be an independent contractor and, except as expressly provided or authorized herein, shall have no authority to act for or represent the Fund in any way or otherwise be deemed an agent of the Fund.

 

(i)  Subject to review by and the overall control of the Board, the Adviser shall maintain and keep all books, accounts and other records of the Adviser that relate to activities performed by the Adviser hereunder as required under the 1940 Act and the Advisers Act. The Adviser agrees that all records that it maintains and keeps for the Fund shall at all times remain the property of the Fund, shall be readily accessible during normal business hours, and shall be promptly surrendered to the Fund upon the termination of this Agreement or otherwise on written request by the Fund. The Adviser further agrees that the records that it maintains and keeps for the Fund shall be preserved in the manner and for the periods prescribed by the 1940 Act, unless any such records are earlier surrendered as provided above. The Adviser shall have the right to retain copies, or originals where required by Rule 204-2 promulgated under the Advisers Act, of such records to the extent required by applicable law. The Adviser shall maintain records of the locations where books, accounts and records are maintained among the persons and entities providing services directly or indirectly to the Adviser or the Fund.

 

2.Expenses Payable by the Fund 

 

(a) Fund’s Expenses. Except as otherwise provided in this Agreement, the Administration Agreement or by law, or as otherwise agreed to in writing by the Adviser, the Adviser shall not be responsible for the Fund’s expenses, and the Fund assumes and shall pay or cause to be paid all of its expenses, including without limitation, all Fund expenses set forth in the Fund’s confidential private placement memorandum (as may be amended or otherwise modified from time to time). To the extent the Adviser incurs any costs or performs any services which are an obligation of the Fund, the Fund shall promptly reimburse the Adviser for such costs and expenses unless otherwise agreed to by the Adviser. To the extent the services for which the Fund is obligated to pay are performed by the Adviser, the Adviser shall be entitled to recover from the Fund only to the extent of its costs for such services, as reasonably determined.

 

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(b) Portfolio Company’s Compensation. In certain circumstances the Adviser, any Sub-Adviser, or any of their respective Affiliates (as defined below), may receive compensation from a portfolio company, in connection with the Fund’s investment in such portfolio company. Any compensation received by the Adviser, Sub-Adviser, or any of their respective Affiliates, attributable to the Fund’s investment in any portfolio company, in excess of any of the limitations in or exemptions granted from the 1940 Act, any interpretation thereof by the staff of the SEC, or the conditions set forth in any exemptive relief granted to the Adviser, any Sub-Adviser or the Fund by the SEC, shall be delivered promptly to the Fund and the Fund will retain such excess compensation for the benefit of its unitholders.

 

3.  Compensation of the Adviser.

 

The Fund agrees to pay, and the Adviser agrees to accept, as compensation for the services provided by the Adviser herein, a base management fee (the “Base Management Fee”) and an incentive fee (the “Incentive Fee”) as hereinafter set forth. Any of the fees payable to the Adviser under this Agreement for any partial month or calendar quarter shall be appropriately prorated. The Adviser may agree to temporarily or permanently waive, in whole or in part, the Base Management Fee and/or the Incentive Fee. Prior to the payment of any fee to the Adviser, the Fund shall obtain written instructions from the Adviser with respect to any waiver or deferral of any portion of such fees. Any portion of a deferred fee payable to the Adviser and not paid over to the Adviser with respect to any month, calendar quarter or year shall be deferred without interest and may be paid over in any such other month prior to the termination of this Agreement, as the Adviser may determine upon written notice to the Fund.

 

(a) Base Management Fee. The Base Management Fee is payable monthly in arrears at an annual rate of 1.00% of the Fund’s net assets as of the beginning of the first calendar day of the applicable month, commencing with the first calendar day of the first full calendar month following the date of the Fund’s election to be treated as a BDC under the 1940 Act. For purposes of this Agreement, “net assets” means the Fund’s total assets less liabilities determined on a consolidated basis in accordance with accounting principles generally accepted in the United States. All or any part of the Base Management Fee not taken as to any month will be deferred without interest and may be taken in such other month as the Adviser shall determine.

 

(b) Incentive Fee. The Incentive Fee shall consist of two parts, as follows:

 

(i)The first part of the Incentive Fee, referred to as the “Income Incentive Fee,” shall be calculated and payable quarterly in arrears based on the Fund’s “Pre-Incentive Fee Net Investment Income” for the immediately preceding quarter. The payment of the Income Incentive Fee shall be subject to a quarterly hurdle rate, expressed as a rate of return on the value of the Fund’s net assets at the end of the most recently completed calendar quarter, of 1.25% (5.0% annualized) (the “Hurdle Rate”), subject to a “catch up” feature (as described below).
   
  

For this purpose, “Pre-Incentive Fee Net Investment Income” means interest income, dividend income and any other income (including any other fees (other than fees for providing managerial assistance) such as commitment, origination, structuring, diligence and consulting fees or other fees that the Fund receives from portfolio companies) accrued during the calendar quarter, minus the Fund’s and its subsidiaries’ operating expenses for the quarter (including the Base Management Fee, expenses and fees paid to the Adviser under the Administration Agreement and any interest expense and dividends paid on any issued and outstanding preferred stock, but excluding the Incentive Fee and any shareholder servicing and/or distribution fees). Pre-Incentive Fee Net Investment Income includes, in the case of investments with a deferred interest feature (such as original issue discount debt instruments with payment-in-kind interest and zero-coupon securities), accrued income that the Fund has not yet received in cash. Pre-Incentive Fee Net Investment Income does not include any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation.

 

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  The calculation of the Income Incentive Fee for each quarter is as follows:

 

No Income Incentive Fee shall be payable to the Adviser in any calendar quarter in which the Fund’s Pre-Incentive Fee Net Investment Income does not exceed the Hurdle Rate;

 

100% of dollar amount of the Fund’s Pre-Incentive Fee Net Investment Income, if any, that exceeds the Hurdle Rate but is less than or equal to 1.3514% in any calendar quarter (5.4056% annualized) shall be payable to the Adviser. This portion of the Fund’s Income Incentive Fee that exceeds the Hurdle Rate but is less than or equal to 1.3514% is referred to as the “catch up” and is intended to provide the Adviser with an incentive fee of 7.5% on all of the Fund’s Pre-Incentive Fee Net Investment Income when the Fund’s Pre-Incentive Fee Net Investment Income reaches 1.3514% (5.4056% annualized) on net assets in any calendar quarter; and

 

7.5% of the dollar amount of the Fund’s Pre-Incentive Fee Net Investment Income, if any, that exceeds 1.3514% (5.4056% annualized) on net assets in any calendar quarter shall be payable to the Adviser once the Hurdle Rate and catch-up have been achieved (7.5% of the Fund’s Pre-Incentive Fee Net Investment Income thereafter shall be allocated to the Adviser).

 

(ii)The second part of the Incentive Fee, referred to as the “Capital Gains-Based Incentive Fee,” shall be an incentive fee on capital gains and shall be determined and payable in arrears as of the end of each calendar year (or upon termination of this Agreement). This fee shall equal 7.5% of the Fund’s incentive fee capital gains, which shall equal the Fund’s realized capital gains on a cumulative basis from the Effective Date, calculated as of the end of the applicable period, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis from the Effective Date, less the aggregate amount of any previously paid Capital Gains-Based Incentive Fee. Each year, the fee paid for the Capital Gains-Based Incentive Fee is net of the aggregate amount of any previously paid Capital Gains-Based Incentive Fee for all prior periods. The Fund will accrue, but will not pay, a Capital Gains-Based Incentive Fee with respect to unrealized appreciation because a Capital Gains-Based Incentive Fee would be owed to the Adviser if the Fund were to sell the relevant investment and realize a capital gain. 

 

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4. Covenant of the Adviser.

 

The Adviser covenants that it is registered as an investment adviser under the Advisers Act on the Effective Date, and shall maintain such registration until the expiration or termination of this Agreement. The Adviser agrees that its activities shall at all times comply in all material respects with all applicable federal and state laws governing its operations and investments, except to the extent that any such noncompliance would not reasonably be expected to have a material adverse effect on the ability of the Adviser to fulfill its obligations under this Agreement. The Adviser agrees to observe and comply with applicable provisions of the code of ethics adopted by the Fund pursuant to Rule 17j-1 under the 1940 Act, as such code of ethics may be amended from time to time.

 

5. Brokerage Commissions.

 

The Adviser is hereby authorized, to the fullest extent now or hereafter permitted by law, to cause the Fund to pay a member of a national securities exchange, broker or dealer an amount of commission for effecting a securities transaction in excess of the amount of commission another member of such exchange, broker or dealer would have charged for effecting that transaction, if the Adviser determines in good faith, taking into account factors, including without limitation, price (including the applicable brokerage commission or dealer spread), size of order, difficulty of execution, and operational facilities of the firm and the firm’s risk and skill in positioning blocks of securities, that such amount of commission is reasonable in relation to the value of the brokerage and/or research services provided by such member, broker or dealer, viewed in terms of either that particular transaction or its overall responsibilities with respect to the Fund’s portfolio, and is consistent with the Adviser’s duty to seek the best execution on behalf of the Fund. Notwithstanding the foregoing, with regard to transactions with or for the benefit of the Fund, the Adviser may not pay any commission or receive any rebates or give-ups, nor participate in any business arrangements which would circumvent this restriction.

 

6.Other Activities of the Adviser.

 

The services of the Adviser to the Fund are not exclusive, and the Adviser may engage in any other business or render similar or different services to others including, without limitation, the direct or indirect sponsorship or management of other investment-based accounts or commingled pools of capital, however structured, having investment objectives similar to or different from those of the Fund, and nothing in this Agreement shall limit or restrict the right of any officer, director, equityholder (and their equityholders or members, including the owners of their equityholders or members), or employee of the Adviser to engage in any other business or to devote his or her time and attention in part to any other business, whether of a similar or dissimilar nature, or to receive any fees or compensation in connection therewith (including fees for serving as a director of, or providing consulting services to, one or more of the Fund’s portfolio companies, subject to applicable law). The Adviser assumes no responsibility under this Agreement other than to render the services set forth herein.

 

For purposes of this Agreement, “Affiliate” or “Affiliated” or any derivation thereof means with respect to any individual, corporation, partnership, trust, joint venture, limited liability company or other entity or association (“Person”): (a) any Person directly or indirectly owning, controlling, or holding, with the power to vote, 10% or more of the outstanding voting securities of such other Person; (b) any Person 10% or more of whose outstanding voting securities are directly or indirectly owned, controlled or held, with the power to vote, by such other Person; (c) any Person directly or indirectly controlling, controlled by or under common control with such other Person; (d) any executive officer, director, trustee or general partner of such other Person; or (e) any legal entity for which such Person acts as an executive officer, director, trustee or general partner.

 

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7.Responsibility of Dual Directors, Officers and/or Employees.

 

If any person who is a director, officer, equityholder or employee of the Adviser is or becomes a director, officer, member/unitholder and/or employee of the Fund and acts as such in any business of the Fund, then such director, officer, equityholder and/or employee of the Adviser shall be deemed to be acting in such capacity solely for the Fund, and not as a director, officer, equityholder or employee of the Adviser or under the control or direction of the Adviser, even if paid by the Adviser.

 

8.Information and Reports

 

The Adviser will keep the Fund informed of developments relating to its duties as investment adviser of which the Adviser has, or should have, knowledge that would materially affect the Fund. In this regard, the Adviser will provide the Fund and its officers with such periodic reports concerning the obligations the Adviser has assumed under this Agreement as the Fund may from time-to-time reasonably request.

 

9.Liability of Adviser

 

In the absence of (a) willful misfeasance, bad faith or gross negligence on the part of the Adviser in performance of its obligations and duties hereunder, (b) reckless disregard by the Adviser of its obligations and duties hereunder, or (c) a loss resulting from a breach of fiduciary duty with respect to the receipt of compensation for services (in which case any award of damages shall be limited to the period and the amount set forth in Section 36(b)(3) of the 1940 Act, the Adviser shall not be subject to any liability whatsoever to the Fund, or to any member/unitholder of the Fund for any error of judgment, mistake of law or any other act or omission in the course of, or connected with, rendering services hereunder including, without limitation, for any losses that may be sustained in connection with the purchase, holding, redemption or sale of any security on behalf of the Fund.

 

10.Indemnification

 

(a) To the fullest extent permitted by law, the Fund shall, subject to Section 10(c) of this Agreement, indemnify the Adviser (including for this purpose each officer, director, shareholder, partner, owner, member, manager, principal, employee or agent of, or any person who controls, is controlled by or is under common control with, the Adviser, and their respective executors, heirs, assigns, successors or other legal representatives (each such person, including the Adviser, being referred to as an “indemnitee”)) against all losses, claims, damages, liabilities, costs and expenses arising from any act or omission by reason of being or having been Adviser to the Fund, or in connection with the Fund’s business, affairs or assets, or the past or present performance of services to the Fund in accordance with this Agreement by the indemnitee, except to the extent that the loss, claim, damage, liability, cost or expense has been finally determined in a judicial decision on the merits from which no further appeal may be taken in any action, suit, investigation or other proceeding to have been incurred or suffered by the indemnitee by reason of willful misfeasance, bad faith, gross negligence, or reckless disregard of the Adviser’s duties or obligations under this Agreement or otherwise as Adviser of the Fund. These losses, claims, damages, liabilities, costs and expenses include, but are not limited to, amounts paid in satisfaction of judgments, in compromise, or as fines or penalties, and counsel fees and expenses, incurred in connection with the defense or disposition of any action, suit, investigation or other proceeding, whether civil or criminal, before any judicial, arbitral, administrative or legislative body, in which the indemnitee may be or may have been involved as a party or otherwise, or with which such indemnitee may be or may have been threatened, during the duration of this Agreement or thereafter. The rights of indemnification provided under this Section 10 are not to be construed so as to provide for indemnification of an indemnitee for any liability (including liability under U.S. federal securities laws which, under certain circumstances, impose liability even on persons that act in good faith) to the extent (but only to the extent) that indemnification would be in violation of applicable law, but shall be construed so as to effectuate the applicable provisions of this Section 10.

 

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(b) Expenses, including counsel fees and expenses, incurred by any indemnitee (but excluding amounts paid in satisfaction of judgments, in compromise, or as fines or penalties) may be paid from time to time by the Fund in advance of the final disposition of any action, suit, investigation or other proceeding upon receipt of an undertaking by or on behalf of the indemnitee to repay to the Fund amounts paid if a determination is made that indemnification of the expenses is not authorized under Section 10(a) of this Agreement, so long as (i) the indemnitee provides security for the undertaking, (ii) the Fund is insured by or on behalf of the indemnitee against losses arising by reason of the indemnitee’s failure to fulfill his, her or its undertaking, or (iii) a majority of the directors (each, a “Director,” and collectively, the “Directors”) of the Fund who are not “interested persons” (as that term is defined in the 1940 Act) of the Fund (“Independent Directors”) (excluding any Director who is or has been a party to any other action, suit, investigation or other proceeding involving claims similar to those involved in the action, suit, investigation or proceeding giving rise to a claim for advancement of expenses under this Agreement) or independent legal counsel in a written opinion determines based on a review of readily available facts (as opposed to a full trial-type inquiry) that reason exists to believe that the indemnitee ultimately shall be entitled to indemnification.

 

(c) As to the disposition of any action, suit, investigation or other proceeding (whether by a compromise payment, pursuant to a consent decree or otherwise) without an adjudication or a decision on the merits by a court, or by any other body before which the proceeding has been brought, that an indemnitee is liable to the Fund or its members/unitholders by reason of willful misfeasance, bad faith, gross negligence, or reckless disregard of the Adviser’s duties or obligations under this Agreement or otherwise as the Adviser of the Fund, indemnification shall be provided in accordance with Section 10(a) of this Agreement if (i) approved as in the best interests of the Fund by a majority of the Independent Directors (excluding any Director who is or has been a party to any other action, suit, investigation or other proceeding involving claims similar to those involved in the action, suit, investigation or proceeding giving rise to a claim for indemnification under this Agreement) upon a determination based upon a review of readily available facts (as opposed to a full trial-type inquiry) that the indemnitee acted in good faith and in the reasonable belief that the actions were in the best interests of the Fund and that the indemnitee is not liable to the Fund or its members/unitholders by reason of willful misfeasance, bad faith, gross negligence, or reckless disregard of the Adviser’s duties or obligations under this Agreement or otherwise as the Adviser of the Fund or (ii) the Directors secure a written opinion of independent legal counsel based upon a review of readily available facts (as opposed to a full trial-type inquiry) to the effect that indemnification would not protect the indemnitee against any liability to the Fund or its members/unitholders to which the indemnitee would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence, or reckless disregard of the Adviser’s duties or obligations under this Agreement or otherwise as the Adviser of the Fund.

 

(d) Any indemnification or advancement of expenses made in accordance with this Section 10 shall not prevent the recovery from any indemnitee of any amount if the indemnitee subsequently is determined in a final judicial decision on the merits in any action, suit, investigation or proceeding involving the liability or expense that gave rise to the indemnification or advancement of expenses to be liable to the Fund or its members/unitholders by reason of willful misfeasance, bad faith, gross negligence, or reckless disregard of the Adviser’s duties or obligations under this Agreement or otherwise as Adviser of the Fund. In any suit brought by an indemnitee to enforce a right to indemnification under this Section 10 it shall be a defense that, and in any suit in the name of the Fund to recover any indemnification or advancement of expenses made in accordance with this Section 10 the Fund shall be entitled to recover the expenses upon a final adjudication from which no further right of appeal may be taken that, the indemnitee has not met the applicable standard of conduct described in this Section 10. In any suit brought to enforce a right to indemnification or to recover any indemnification or advancement of expenses made in accordance with this Section 10, the burden of proving that the indemnitee is not entitled to be indemnified, or to any indemnification or advancement of expenses, under this Section 10 shall be on the Fund (or on any member/unitholder of the Fund acting derivatively or otherwise on behalf of the Fund or its members/unitholders).

 

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(e) An indemnitee may not satisfy any right of indemnification or advancement of expenses granted in this Section 10 or to which he, she or it may otherwise be entitled except out of the assets of the Fund, and no member/unitholder of the Fund shall be personally liable with respect to any such claim for indemnification or advancement of expenses.

 

(f) The rights of indemnification provided in this Section 10 shall not be exclusive of or affect any other rights to which any person may be entitled by contract or otherwise under law. Nothing contained in this Section 10 shall affect the power of the Fund to purchase and maintain liability insurance on behalf of the Adviser or any indemnitee.

 

11.Effectiveness, Duration and Termination of Agreement.

 

(a) Term and Effectiveness. This Agreement shall become effective as of the Effective Date. Once effective, this Agreement shall remain in effect for two years, and thereafter shall continue automatically for successive one-year periods; provided that such continuance is specifically approved at least annually by: (i) the vote of the Board, or by the vote of a majority of the outstanding voting securities of the Fund, and (ii) the vote of a majority of the Independent Directors, in accordance with the requirements of the 1940 Act, or as otherwise permitted under Section 15 of the 1940 Act.

 

(b) Termination. This Agreement may be terminated at any time, without the payment of any penalty, (i) by the Fund upon 60 days’ prior written notice to the Adviser: (A) upon the vote of a majority of the outstanding voting securities of the Fund or (B) upon the vote of a majority of the Board; or (ii) by the Adviser upon not less than 120 days’ prior written notice to the Fund. This Agreement shall automatically terminate in the event of its “assignment” (as such term is defined for purposes of construing Section 15(a)(4) of the 1940 Act). The provisions of Sections 9 and 10 shall remain in full force and effect, and the Adviser shall remain entitled to the benefits thereof, notwithstanding any termination of this Agreement. Further, notwithstanding the termination or expiration of this Agreement as aforesaid, the Adviser shall be entitled to any amounts owed to it under Section 3 through the date of termination or expiration and Sections 9 and 10 shall continue in force and effect and apply to the Adviser and its representatives as and to the extent applicable.

 

(c) Duties of Adviser Upon Termination. The Adviser shall promptly upon termination:

 

(i)deliver to the Board a full accounting, including a statement showing all payments collected by it and a statement of all money held by it, covering the period following the date of the last accounting furnished to the Board;

 

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(ii)deliver to the Board all assets, if any, and documents of the Fund then in custody of the Adviser; and

 

(iii)cooperate with the Fund to provide an orderly transition of services.

 

12.Definitions

 

As used in this Agreement, the terms “interested person,” and a “vote of a majority of the outstanding voting securities” shall have the respective meanings set forth in Section 2(a)(19) and Section 2(a)(42) of the 1940 Act.

 

13.Amendment of Agreement

 

This Agreement may be amended by mutual written consent of the parties; provided that the consent of the Fund is required to be obtained in conformity with the requirements of the 1940 Act.

 

14.Severability

 

If any provision of this Agreement shall be declared illegal, invalid, or unenforceable in any jurisdiction, then such provision shall be deemed to be severable from this Agreement (to the extent permitted by law) and in any event such illegality, invalidity or unenforceability shall not affect the remainder hereof.

 

15.Applicable Law

 

Notwithstanding the place where this Agreement may be executed by any of the parties hereto and the provisions of Sections 9 and 10, this Agreement shall be construed in accordance with the laws of the State of New York. For so long as the Fund is regulated as a BDC under the 1940 Act, this Agreement shall also be construed in accordance with the applicable provisions of the 1940 Act and the Advisers Act. In such case, to the extent the applicable laws of the State of New York or any of the provisions herein conflict with the provisions of the 1940 Act or the Advisers Act, the 1940 Act and the Advisers Act shall control.

 

16.Third-Party Beneficiaries

 

Except for any Sub-Adviser and any indemnitee, such Sub-Adviser and the indemnitees each being an intended beneficiary of this Agreement, this Agreement is for the sole benefit of the parties hereto and their permitted assigns and nothing herein express or implied shall give or be construed to give to any person, other than the parties hereto and such assigns, any legal or equitable rights hereunder.

 

17.Entire Agreement.

 

This Agreement contains the entire agreement of the parties and supersedes all prior agreements, understandings and arrangements with respect to the subject matter hereof.

 

18.Notices

 

Any notice under this Agreement shall be given in writing, addressed and delivered, emailed or mailed, postage prepaid, to the other party at the address listed below or at such other address for a party as shall be specified in a notice given in accordance with this Section.

 

19.Counterparts

 

This Agreement may be executed in counterparts, each of which shall be deemed to be an original copy and all of which together shall constitute one and the same instrument binding on all parties hereto, notwithstanding that all parties shall not have signed the same counterpart.

 

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20.Form ADV

 

The Fund acknowledges receiving Part II of the Adviser’s Form ADV.

 

21.Insurance

 

The Fund shall acquire and maintain a directors and officers liability insurance policy or similar insurance policy, which may name the Adviser and any Sub-Adviser each as an additional insured party (each an “Additional Insured Party” and collectively the “Additional Insured Parties”). Such insurance policy shall include reasonable coverage from a reputable insurer. The Fund shall make all premium payments required to maintain such policy in full force and effect; provided, however, each Additional Insured Party, if any, shall pay to the Fund, in advance of the due date of such premium, its allocated share of the premium. Irrespective of whether the Adviser and any Sub-Adviser is a named Additional Insured Party on such policy, the Fund shall provide the Adviser and any Sub-Adviser with written notice upon receipt of any notice of: (a) any default under such policy; (b) any pending or threatened termination, cancellation or non-renewal of such policy or (c) any coverage limitation or reduction with respect to such policy. The foregoing provisions of this Section 21 notwithstanding, the Fund shall not be required to acquire or maintain any insurance policy to the extent that the same is not available upon commercially reasonable pricing terms or at all, as determined in good faith by the required majority (as defined in Section 57(o) of the 1940 Act) of the Board.

 

22.Fund Obligations.

 

The parties to this Agreement agree that the obligations of the Fund under this Agreement shall not be binding upon any of the Directors, members/unitholders of the Fund, officers, employees or agents, whether past, present or future, of the Fund, individually, but are binding only upon the assets and property of the Fund.

 

[Signature Page Follows]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers as of the Effective Date.

 

STEPSTONE PRIVATE CREDIT FUND LLC:   StepStone Group Private Debt LLC:
     
c/o StepStone Group Private Debt LLC   450 Lexington Avenue
450 Lexington Avenue   31st Floor
31st Floor   New York, NY 10017
New York, NY 10017   E-mail: Ariel.Goldblatt@stepstonegroup.com
E-mail: Joseph.Cambareri@stepstonegroup.com    
     
By: /s/ Joseph Cambareri                                       By: /s/ Ariel Goldblatt                                 
Name: Joseph Cambareri   Name: Ariel Goldblatt
Title: Chief Financial Officer   Title:

Partner

       
      By: /s/ Joseph Cambareri
      Name: Joseph Cambareri
      Title: COO

 

 

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Exhibit 10.3

 

SUB-ADVISORY AGREEMENT

 

AGREEMENT made as of the 3rd day of April, 2023 (the “Effective Date”), by and among StepStone Group Private Debt LLC, a Delaware limited liability company (the “Adviser”), StepStone Group Europe Alternative Investments Limited, an Irish private limited company (the “Sub-Adviser”), and StepStone Private Credit Fund LLC, a Delaware limited liability company (the “Fund”).

 

1.Duties of the Sub-Adviser.

 

(a) The Adviser hereby appoints the Sub-Adviser to act as a non-discretionary investment sub-adviser by providing investment advice and services, as described below, to the Adviser in regard to the Adviser’s management of the Fund, subject to the broad supervision of the Adviser and the Fund, for the period and on the terms and conditions set forth in this Agreement. The Sub-Adviser hereby accepts such employment and agrees during such period, at its own expense, to render, or arrange for the rendering of, such services and to assume the obligations herein set forth for the compensation provided for herein. The Sub-Adviser and its affiliates shall for all purposes herein each be deemed to be an independent contractor and shall, unless otherwise expressly provided or authorized, have no authority to act for or represent the Fund in any way or otherwise be deemed an agent of the Fund. The Sub-Adviser shall be responsible for providing ongoing investment advice and services to the Adviser in respect of the Fund’s investments, including, but not limited to:

 

(i)providing investment recommendations in respect of the Fund’s Underlying Funds Strategy (as defined in the Fund’s confidential private placement memorandum (as may be amended or otherwise modified from time to time, the “Memorandum”));

 

(ii)providing allocation recommendations and deploying commitment and over-commitment models and strategies in respect of the Fund’s Lending Strategy (as defined in the Memorandum);

 

(iii)identifying and managing portfolio risk through tracking commitments, capital calls, distribution variations, and valuations, among other factors;

 

(iv)identifying investment opportunities resulting from fundamental financial analysis and initial due diligence performed on investments (actual or contemplated); and

 

(v)tracking and monitoring the continuing operations, management, financial condition and other pertinent details and information and conducting ongoing due diligence as to Fund allocations of assets in respect of the Fund’s Underlying Funds Strategy.

 

All of the foregoing is subject always to the restrictions of the Fund’s Limited Liability Company Agreement, as it may be amended and/or restated from time to time and as provided to the Sub-Adviser by the Adviser, the provisions of the Investment Company Act of 1940, as amended (the “1940 Act”), and the statements relating to the Fund’s investment objective(s), investment policies and investment restrictions as the same are set forth in the Memorandum, as well as to the supervision of the Adviser and the Board of Directors of the Fund (the “Board”).

 

(b) The Sub-Adviser will not hold money on behalf of the Adviser or the Fund, nor will the Sub-Adviser be the registered holder of the registered investments of the Adviser or the Fund or be the custodian of documents or other evidence of title.

 

(c) Unless otherwise instructed by the Adviser or the Board, the Sub-Adviser shall not have the power, discretion or responsibility to execute subscriptions or other documentation effecting investments for the Fund, or to place orders for other securities transactions on behalf of the Fund. Instead, the Adviser will exercise such discretion as to subscriptions, investments and other trading activity necessary to implement the Fund’s investment program strategy. The Sub-Adviser will use its best efforts to cooperate with the Adviser in support of efforts to implement the Fund’s investment program.

 

(d) The Sub-Adviser may, where reasonable, employ agents (including affiliates) to perform any administrative, dealing or ancillary services required to enable the Sub-Adviser to perform its services under this Agreement.

 

 

 

 

2. Authorization and Client Categorization

 

(a) The Sub-Adviser is authorized and regulated by the Central Bank of Ireland of New Wapping Street, North Wall Quay, Dublin 1, D01 F7X3, Ireland as an alternative investment fund manager pursuant to Part 2 of the AIFM Regulations and it is further authorized to provide the services contemplated hereby.

 

(b) The Fund and the Adviser agree that the Sub-Adviser will treat them as a Professional Client within the meaning of Directive 2014/65/EU on markets in financial instruments (“MiFID II” and together with the European Union (Markets in Financial Instruments) Regulations 2017 and Regulation 2017/565/EU, “MiFID”).

 

(c) As a Professional Client, the Sub-Adviser shall not be required to provide reporting in respect of the Fund as described under Article 50 of Regulation 2017/565/EU.

 

3. Allocation of Charges and Expenses. Subject to the terms of the administration agreement between the Fund and the Adviser, as applicable, the Sub-Adviser assumes and shall pay for maintaining the staff and personnel necessary to perform its obligations under this Agreement and shall at its own expense provide the office space, furnishings, equipment and personnel required by it to perform the services described under Section 1 hereof. To the extent the Sub-Adviser pays any fees or incurs any out-of-pocket expenses which are an obligation of the Fund, the Sub-Adviser shall be reimbursed by the Adviser. The Adviser will recoup, from the assets of the Fund, all such fees and out-of-pocket expenses incurred by the Sub-Adviser on behalf of the Fund.

 

4. Compensation of the Sub-Adviser. For the services rendered, the facilities furnished and expenses assumed by the Sub-Adviser, the Adviser will pay the Sub-Adviser (a) 20% of the Base Management Fee (as defined in the Advisory Agreement (defined below)) received by the Adviser each month pursuant to the investment advisory agreement by and between the Adviser and the Fund (as may be amended or otherwise modified from time to time, the “Advisory Agreement”), (b) 20% of the Income Incentive Fee (as defined in the Advisory Agreement) received by the Adviser pursuant to the Advisory Agreement each quarter, and (c) 20% of the Capital-Gains Based Incentive Fee (as defined in the Advisory Agreement) received by the Adviser pursuant to the Advisory Agreement each year, in each case, net of any waiver by the Adviser of any portion of the Base Management Fee, Income Incentive Fee or Capital Gains-Based Incentive Fee. Each fee shall be payable by the Adviser to the Sub-Adviser within three business days of the date that the Adviser receives its Base Management Fee, Income Incentive Fee or Capital Gains-Based Incentive Fee, as applicable, from the Fund. The Sub-Adviser may agree to temporarily or permanently waive, in whole or in part, the fees due to it from the Adviser under this Section 4.

 

5. Commissions and Third-Party Research

 

(a) In the course of providing services in respect of the Fund, the Sub-Adviser may pay a fee or commission or a non-monetary benefit to any other person, where the payment or benefit is designed to enhance the quality of the relevant service to the Fund and does not impair compliance with the Sub-Adviser’s duty to act honestly, fairly and professionally in accordance with the best interests of the Fund. The Sub-Adviser may also receive minor non-monetary benefits from another person, which may include information or materials relating to a financial instrument or investment service, participation in conferences and training events relating to the benefits and features of a specific financial instrument, hospitality of a de minimis amount and such other non-monetary benefits as are permissible under MiFID.

 

(b) If the Sub-Adviser has, or enters into, any such arrangements it will provide information to the Adviser and the Fund on those arrangements as required by MiFID, which shall include the amount of the payment or benefit, calculated using such method as the Sub-Adviser considers appropriate from time to time.

 

(c) the Sub-Adviser may receive research from brokers or a third-party research provider (“Third Party Research”). The Sub-Adviser currently intends to pay for the costs of Third Party Research, out of its own resources. In the event that the Sub-Adviser seeks to attribute the costs of research to the Fund, it shall agree a research budget with the Fund in advance and the Sub-Adviser shall comply with its obligations in respect of such matters in accordance with relevant requirements of MiFID and other applicable law.

 

(d) Unless so specified in this Agreement, the Sub-Adviser shall not be liable to account to the Fund or the Adviser for any profit, commission or remuneration made or received (whether from any client or otherwise) by the Sub-Adviser by reason of any transaction undertaken with the Fund; provided that the Sub-Adviser shall only receive such profits, commissions or remunerations or engage in such transactions to the extent permitted under the 1940 Act and shall disclose the existence of such to the Fund.

 

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6. Liability of Sub-Adviser. In the absence of (a) willful misfeasance, bad faith or gross negligence on the part of the Sub-Adviser in performance of its obligations and duties hereunder, (b) reckless disregard by the Sub-Adviser of its obligations and duties hereunder, or (c) a loss resulting from a breach of fiduciary duty with respect to the receipt of compensation for services (in which case any award of damages shall be limited to the period and the amount set forth in Section 36(b)(3) of the 1940 Act), the Sub-Adviser shall not be subject to any liability whatsoever to the Fund, or to any member/unitholder of the Fund for any error of judgment, mistake of law or any other act or omission in the course of, or connected with, rendering services hereunder including, without limitation, for any losses that may be sustained in connection with the purchase, holding, redemption or sale of any security on behalf of the Fund.

 

7. Indemnification.

 

(a) To the fullest extent permitted by law, the Fund shall, subject to this Section 7, indemnify the Sub-Adviser (including for this purpose each officer, director, shareholder, partner, owner, member, manager, principal, employee or agent of or any person who controls, is controlled by or is under common control with, the Sub-Adviser, and their respective executors, heirs, assigns, successors or other legal representatives (each such person, including the Sub-Adviser, being referred to as a “Sub-Adviser indemnitee”)) against all losses, claims, damages, liabilities, costs and expenses arising from any act or omission by reason of being or having been Sub-Adviser to the Fund, or in connection with the Fund’s business, affairs or assets, or the past or present performance of services to the Fund in accordance with this Agreement by the Sub-Adviser indemnitee, except to the extent that the loss, claim, damage, liability, cost or expense has been finally determined in a judicial decision on the merits from which no further appeal may be taken in any action, suit, investigation or other proceeding to have been incurred or suffered by the Sub-Adviser indemnitee by reason of willful misfeasance, bad faith, gross negligence, or reckless disregard of the Sub-Adviser’s duties or obligations under this Agreement or otherwise as Sub-Adviser of the Fund. These losses, claims, damages, liabilities, costs and expenses include, but are not limited to, amounts paid in satisfaction of judgments, in compromise, or as fines or penalties, and counsel fees and expenses, incurred in connection with the defense or disposition of any action, suit, investigation or other proceeding, whether civil or criminal, before any judicial, arbitral, administrative or legislative body, in which the Sub-Adviser indemnitee may be or may have been involved as a party or otherwise, or with which such Sub-Adviser indemnitee may be or may have been threatened, during the duration of this Agreement or thereafter. The rights of indemnification provided under this Section 7 are not to be construed so as to provide for indemnification of a Sub-Adviser indemnitee for any liability (including liability under U.S. federal securities laws which, under certain circumstances, impose liability even on persons that act in good faith) to the extent (but only to the extent) that indemnification would be in violation of applicable law, but shall be construed so as to effectuate the applicable provisions of this Section 7.

 

(b) Expenses, including counsel fees and expenses, incurred by any Sub-Adviser indemnitee (but excluding amounts paid in satisfaction of judgments, in compromise, or as fines or penalties) may be paid from time to time by the Fund in advance of the final disposition of any action, suit, investigation or other proceeding upon receipt of an undertaking by or on behalf of the Sub-Adviser indemnitee to repay to the Fund amounts paid if a determination is made that indemnification of the expenses is not authorized under this Section 7, so long as: (i) the Sub-Adviser indemnitee provides security for the undertaking; (ii) the Fund is insured by or on behalf of the Sub-Adviser indemnitee against losses arising by reason of the Sub-Adviser indemnitee’s failure to fulfill his, her or its undertaking; or (iii) a majority of the directors of the Board (each, a “Director,” and collectively, the “Directors”) who are not interested persons of the Fund (“Independent Directors”) (excluding any Director who is or has been a party to any other action, suit, investigation or other proceeding involving claims similar to those involved in the action, suit, investigation or proceeding giving rise to a claim for advancement of expenses under this Agreement) or independent legal counsel in a written opinion determines based on a review of readily available facts (as opposed to a full trial-type inquiry) that reason exists to believe that the Sub-Adviser indemnitee ultimately shall be entitled to indemnification.

 

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(c) As to the disposition of any action, suit, investigation or other proceeding (whether by a compromise payment, pursuant to a consent decree or otherwise) without an adjudication or a decision on the merits by a court, or by any other body before which the proceeding has been brought, that a Sub-Adviser indemnitee is liable to the Fund or its members/unitholders by reason of willful misfeasance, bad faith, gross negligence, reckless disregard of the Sub-Adviser’s duties or obligations under this Agreement or otherwise as Sub-Adviser of the Fund, indemnification shall be provided in accordance with this Section 7 if (i) approved as in the best interests of the Fund by a majority of the Independent Directors (excluding any Director who is or has been a party to any other action, suit, investigation or other proceeding involving claims similar to those involved in the action, suit, investigation or proceeding giving rise to a claim for indemnification under this Agreement) upon a determination based upon a review of readily available facts (as opposed to a full trial-type inquiry) that the Sub-Adviser indemnitee acted in good faith and in the reasonable belief that the actions were in the best interests of the Fund and that the Sub-Adviser indemnitee is not liable to the Fund or its members/unitholders by reason of willful misfeasance, bad faith, gross negligence, or reckless disregard of the duties or obligations under this Agreement or otherwise as Sub-Adviser of the Fund or as a result of the Sub-Adviser’s breach of this Agreement, or (ii) the Directors secure a written opinion of independent legal counsel based upon a review of readily available facts (as opposed to a full trial-type inquiry) to the effect that indemnification would not protect the Sub-Adviser indemnitee against any liability to the Fund or its members/unitholders to which the Sub-Adviser indemnitee would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence, or reckless disregard of the Sub-Adviser’s duties or obligations under this Agreement or otherwise as Sub-Adviser of the Fund.

 

(d) Any indemnification or advancement of expenses made in accordance with this Section 7 shall not prevent the recovery from any Sub-Adviser indemnitee of any amount if the Sub-Adviser indemnitee subsequently is determined in a final judicial decision on the merits in any action, suit, investigation or proceeding involving the liability or expense that gave rise to the indemnification or advancement of expenses to be liable to the Fund or its members/unitholders by reason of willful misfeasance, bad faith, gross negligence, or reckless disregard of the Sub-Adviser’s duties or obligations under this Agreement or otherwise as Sub-Adviser of the Fund. In any suit brought by a Sub-Adviser indemnitee to enforce a right to indemnification under this Section 7 it shall be a defense that, and in any suit in the name of the Fund to recover any indemnification or advancement of expenses made in accordance with this Section 7 the Fund shall be entitled to recover the expenses upon a final adjudication from which no further right of appeal may be taken that, the Sub-Adviser indemnitee has not met the applicable standard of conduct described in this Section 7. In any suit brought to enforce a right to indemnification or to recover any indemnification or advancement of expenses made in accordance with this Section 7, the burden of proving that the Sub-Adviser indemnitee is not entitled to be indemnified, or to any indemnification or advancement of expenses, under this Section 7 shall be on the Fund (or on any member/unitholder of the Fund acting derivatively or otherwise on behalf of the Fund or its members/unitholders).

 

(e) A Sub-Adviser indemnitee may not satisfy any right of indemnification or advancement of expenses granted in this Section 7 or to which he, she or it may otherwise be entitled except out of the assets of the Fund, and no member/unitholder of the Fund shall be personally liable with respect to any such claim for indemnification or advancement of expenses.

 

(f) The rights of indemnification provided in this Section 7 shall not be exclusive of or affect any other rights to which any person may be entitled by contract or otherwise under law. Nothing contained in this Section 7 shall affect the power of the Fund to purchase and maintain liability insurance on behalf of the Sub-Adviser or any indemnitee.

 

8. Status of the Sub-Adviser. The Sub-Adviser shall, for all purposes herein, be deemed to be an independent contractor. The services of the Sub-Adviser to the Fund are not to be deemed exclusive, and the Sub-Adviser shall be free to render similar services to others. Nothing in this Agreement shall limit or restrict the right of any director, officer, owner, member, manager, partner or employee of the Sub-Adviser or its affiliates, who also may be a director, officer or employee of the Fund, to engage in any other business or to devote his or her time and attention in part to the management or other aspects of any other business, whether of a similar or dissimilar nature.

 

9. Advice and Suitability.

 

(a) Any investment advice provided by the Sub-Adviser to the Adviser in respect of the Fund will be restricted advice and not provided on an independent basis. The Sub-Adviser may provide advice on a range of financial instruments, having regard to the Fund’s investment objectives. Such financial instruments may include, but will not be limited to, products issued or sponsored by the Sub-Adviser, an associate or another client of the Sub-Adviser or another entity with which the Sub-Adviser has close links or a legal or economic relationship. Any advice given to the Adviser in respect of the Fund may be given in such a manner as the Sub-Adviser deems appropriate or as may be agreed in writing with the Adviser pursuant to this Agreement. The Sub-Adviser will not provide a periodic assessment of the suitability of any financial instruments recommended for the Fund.

 

(b) The Fund and the Adviser agrees to provide the Sub-Adviser with such information as the Sub-Adviser may from time-to-time request in order to enable the Sub-Adviser to undertake an assessment of the suitability of services and instruments for the Fund. The Fund and the Adviser acknowledge that this suitability assessment is undertaken by the Sub-Adviser in order to enable the Sub-Adviser to act in the Fund’s best interests. The Fund and the Adviser acknowledge that if either provides insufficient information regarding its knowledge and experience the Sub-Adviser will not be in a position to determine whether a service or instrument is appropriate for the Fund. As the Adviser is categorised as a professional client it is considered that the Adviser has the experience, knowledge and expertise to make the investment decisions and properly assess the risks that is incurred in respect of the Fund.

 

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10. Risks Associated with Investment Advice. All forms of investment which may be recommended by the Sub-Adviser involve risk. The value of investments and the income derived from them can fall as well as rise and is not guaranteed. The Sub-Adviser makes no representation or warranty as to the performance of the Fund or that the investments recommended for the Fund will be profitable. The Fund, the Adviser and its professional tax advisers remain responsible for the decisions to acquire any investments and for the management of its affairs for tax purposes. The attention of the Fund is drawn to the risk factors set out in Memorandum.

 

11. Potential Conflicts of Interest and Disclosure.

 

(a) It is understood by the Fund that the Sub-Adviser and its officers and affiliates may serve as non-discretionary and discretionary investment managers for other clients, and nothing in this Agreement shall in any way be deemed to restrict the right of the Sub-Adviser and its officers and affiliates to perform such investment management or investment advisory or other services for any other person or entity, and the performance of such services for others shall not be deemed to violate or give rise to any duty or obligation to the Fund or the Adviser.

 

(b) The Sub-Adviser has a conflicts-of-interests policy (the “Conflicts Policy”) in place pursuant to which it will take all appropriate steps to identify and to prevent or manage conflicts of interest during the course of providing investment advisory or ancillary services in respect of the Fund in accordance with the requirements of MiFID. A copy of the Conflicts Policy has been provided to the Adviser. Unless otherwise required under the 1940 Act or the U.S. Investment Advisers Act of 1940, as amended (the “Advisers Act”), the Sub-Adviser is under no obligation to disclose that it or any of its personnel or other connected persons have a material interest in a particular transaction with or for the Fund or that in a particular circumstance a conflict of interest or duty may exist, where the Sub-Adviser has managed such conflicts to ensure, with reasonable confidence, that risks of damage to the Fund’s interests will be prevented. For the avoidance of doubt and in accordance with the Sub-Adviser’s Conflicts Policy, where the Sub-Adviser determines that its organizational or administrative arrangements to prevent conflicts of interest from adversely affecting the interest of the Fund are not sufficient to ensure, with reasonable confidence, that risks of damage to the Fund’s interests will be prevented, the Sub-Adviser will clearly disclose to the Adviser the general nature and/or sources of conflicts of interest and the steps taken to mitigate those risks. The Sub-Adviser shall provide details of any material amendments to the Conflicts Policy as soon as practicable following such change.

 

(c) Subject to the requirements of and limitations under the 1940 Act and the U.S. Investment Advisers Act of 1940, as amended (the “Advisers Act”), the Sub-Adviser may recommend transactions in which, or provide services in circumstances where, the Sub-Adviser has, directly or indirectly, a material interest or a relationship of any description with another party and which may involve a potential conflict with the Sub-Adviser’s duties to the Adviser in respect of the Fund. Subject to the requirements of and limitations under the 1940 Act and Advisers Act, the Sub-Adviser shall not be liable to account to the Fund or the Adviser for any profit, commission or any connected transactions and the Sub-Adviser’s fees shall not, unless otherwise provided, be abated thereby.

 

(d) In addition to the circumstances listed above, potential conflicting interests or duties may arise because, for example:

 

(i)the Sub-Adviser undertakes investment business for other clients;

 

(ii)any of the Sub-Adviser’s directors, members or employees is a director of, holds or deals in securities of, provides services to, or is otherwise interested in, any company whose securities are held or dealt in on behalf of the Fund;

 

(iii)a transaction is in securities issued by a client;

 

(iv)the Sub-Adviser may recommend transactions to the Adviser for the Fund which it has also recommended to other clients. In addition, the Sub-Adviser may make recommendations to the Adviser that it has not made to other clients; or

 

(v)The Sub-Adviser may have regard, in providing investment advice, to the relative performance of other clients in respect of which it provides advisory services.

 

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12. Duration and Termination of this Agreement. This Agreement will become effective as of the Effective Date and will continue for an initial two-year term and will continue thereafter so long as such continuance is specifically approved at least annually by (a) the vote of the Board, or by the vote of a majority of the outstanding voting securities of the Fund, and (ii) the vote of a majority of the Independent Directors, in accordance with the requirements of the 1940 Act, or as otherwise permitted under Section 15 of the 1940 Act; provided, however, that if the members/unitholders of the Fund fail to approve the Agreement as provided herein, the Sub-Adviser may continue to serve in such capacity in the manner and to the extent permitted by the 1940 Act and the rules thereunder. This Agreement may be terminated by the Fund at any time, without the payment of any penalty, by vote of a majority of the entire Board or by vote of a majority of the outstanding voting securities of the Fund on 60 days’ written notice to the Sub-Adviser. This Agreement may be terminated by the Sub-Adviser at any time, without the payment of any penalty, upon 120 days’ written notice to the Fund. This Agreement will automatically and immediately terminate in the event of its assignment.

 

13. Confidentiality. Any information or recommendations supplied by either the Adviser or the Sub-Adviser, that are not otherwise in the public domain or previously known to the other party in connection with the performance of its obligations and duties hereunder, including portfolio holdings of the Fund, financial information or other information relating to a party to this Agreement, are to be regarded as confidential (“Confidential Information”) and held in the strictest confidence. Except as may be required by applicable law or rule or as requested by regulatory authorities having jurisdiction over a party to this Agreement, Confidential Information may be used only by the party to which said information has been communicated and such other persons as that party believes are necessary to carry out the purposes of this Agreement, the custodian, the administrator, and such persons as the Adviser may designate in connection with the Fund.

 

14. Communication and Documentation.

 

(a) The Adviser and the Fund each acknowledges that the Sub-Adviser may make reports and other communications available in electronic form, such as email, or by posting on a secure web site (with notification of the posting by email). The Fund and the Adviser each hereby consents to receive deliveries of reports and other communications from the Sub-Adviser (including annual and other updates of Sub-Adviser’s policies and procedures) exclusively in electronic form (without separate mailing of paper copies), except to the extent the Fund and/or the Adviser notifies the Sub-Adviser in writing that it does not consent.

 

(b) The Sub-Adviser shall provide the Adviser with such reports at such frequency as the Adviser and the Sub-Adviser may reasonably agree from time to time.

 

(c) The Sub-Adviser will report to the Adviser periodically, and in any event no less than annually, regarding the fees and costs arising to the Adviser and/or the Fund under this Agreement.

 

(d) The Adviser acknowledges and agrees that the reporting of costs and charges as required under Article 50 of Regulation 2017/565/EU will be satisfied by the disclosures included in Sections 3 to 6 regarding the services provided, and (ii) the Memorandum in respect of any relevant financial instruments.

 

(e) Instructions from the Adviser shall be acknowledged by the Sub-Adviser acting upon them unless the Adviser is advised that Sub-Adviser believes such compliance is in breach of this Agreement, may not be practicable or may cause a party to be in contravention of any law, rule or regulation.

 

(f) Each of the Adviser and the Fund agrees that communications with the Sub-Adviser, and documents and other information sent to the Adviser and/or the Fund, will be in English, or such other language as may be agreed between the parties from time to time.

 

(g) Communication to the Sub-Adviser may be made in writing to the attention of David Allen at: StepStone Group Europe Alternative Investments Limited, Newmount House, 22-24 Lower Mount Street, Dublin 2, Ireland or david.allen@stepstonegroup.com.

 

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15.Data Protection.

 

(a) In the course of providing the services under this Agreement, the Sub-Adviser may process personal data (as defined under the General Data Protection Regulation (the “GDPR”) (Regulation (EU) 2016/679)) (“Personal Data”). Each party shall at all times conduct their duties hereunder in compliance with the GDPR and other applicable legislation relating to data protection and privacy including (a) national laws implementing the Directive on Privacy and Electronic Communications (2002/58/EC), and (b) any other similar national privacy law, (together with the GDPR, the “Data Protection Legislation”).

 

(b) The parties hereto acknowledge that each of them is a separate and independent data controller. Personal Data obtained in respect of providing the services under this Agreement may be processed by the Sub-Adviser and its service providers and its or their agents and any of their respective related, associated or affiliated companies:

 

(i)for the purpose of, or in connection with the provision of the services under this Agreement;

 

(ii)to carry out statistical analysis and market research;

 

(iii)to comply with legal and regulatory requirements applicable to the Sub-Adviser or any service providers to the Sub-Adviser;

 

(iv)for customer relationship management;

 

(v)for legitimate business interests of the Sub-Adviser; and

 

(vi)for any other specific purpose that the Sub-Adviser may notify to the Adviser or the Fund from time to time.

 

(c) The Sub-Adviser shall retain Personal Data for so long as the Sub-Adviser provides the services under this Agreement and for such longer period as may be required in order to comply with any applicable laws or regulations or any order or direction of a court, arbitrator or tribunal of competent jurisdiction applicable to the Sub-Adviser or any of its service providers.

 

(d) Each of the Fund and the Adviser will make commercially reasonable efforts to ensure that any Personal Data provided to the Sub-Adviser by, or on behalf of, the Fund or the Adviser (as applicable) has been collected lawfully, fairly and in a transparent manner so as to enable such Personal Data to be lawfully processed by the Sub-Adviser for the purposes outlined in Section 15(b). Upon request of the Sub-Adviser, the Fund and/or the Adviser (as applicable) shall provide reasonable assistance to the Sub-Adviser in providing a copy of the Sub-Adviser’s privacy notice (as may be provided to the Fund and/or the Adviser from time to time) to the relevant data subjects.

 

(e) Save where transferring Personal Data to the Fund and/or the Adviser or to the party from which it was originally received, the Sub-Adviser shall not transfer Personal Data to countries outside the European Economic Area (“EEA”) unless there is a lawful basis for such transfer and provided that:

 

(i)the transfer is made on the basis of an adequacy decision of the European Commission with respect to the protection of Personal Data; or

 

(ii)the transfer is made on the basis of appropriate safeguards or derogations listed by and subject to the provisions of Data Protection Legislation.

 

(f) The parties hereto agree to provide reasonable assistance as is necessary to each other:

 

(i)to enable them to comply with any data subjects’ rights requests under Articles 15 to 21 of the GDPR (or equivalent rights under other Data Protection Legislation) and to respond to any other queries or complaints from data subjects relating to this Agreement; and

 

(ii)in respect of any personal data breach (as defined in the Data Protection Legislation) relating to this Agreement including informing the others of any personal data breach in relation to Personal Data as soon as reasonably practicable upon becoming aware of such a breach.

 

16. Complaints. All formal complaints should in the first instance be made in writing to the Sub-Adviser at Newmount House, 22-24 Lower Mount Street, Dublin 2, Ireland for the attention of Fergal Rafter. The Sub-Adviser has in operation a written complaints policy and procedure for the effective consideration and prompt and proper handling of complaints received from clients. Information about the complaints management policy and contact details of the complaints management function shall be provided by the Sub-Adviser to the Adviser and/or the Fund on request.

 

17. Amendments to this Agreement. This Agreement may be amended by mutual consent, but the consent of the Fund must be approved (a) by vote of a majority of the Independent Directors who are not parties to this Agreement or interested persons of any such party, in accordance with the requirements of the 1940 Act, or as otherwise permitted under Section 15 of the 1940 Act, and (b) by vote of a majority of the outstanding voting securities of the Fund.

 

18. Definitions of Certain Terms. The terms “vote of a majority of the outstanding voting securities,” “assignment,” “affiliated” or “affiliated person” and “interested person” used in this Agreement, shall have the respective meanings specified in the 1940 Act and the rules and regulations thereunder, subject, however, to such exemptions as may be granted by the Securities and Exchange Commission under said Act.

 

19. Governing Law. This Agreement shall be construed in accordance with the laws of the State of New York; provided, however, that nothing herein shall be construed in a manner inconsistent with the 1940 Act.

 

[Signature Page Follows]

 

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IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the date first above written.

 

  StepStone Group Private Debt LLC
     
  By: /s/ Ariel Goldblatt 
  Name:  Ariel Goldblatt
  Title: Partner
     
  By: /s/ Joseph Cambareri
  Name: Joseph Cambareri
  Title: COO    
     
  StepStone Group Europe Alternative Investments Limited
     
  By: /s/ David Allen 
  Name: David Allen
  Title: Chief Executive Officer, Authorized Signatory
     
  StepStone Private Credit Fund LLC
     
  By: /s/ Joseph Cambareri 
  Name: Joseph Cambareri
  Title: Chief Financial Officer

 

 

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Exhibit 10.4

 

ADMINISTRATION AGREEMENT

 

THIS AGREEMENT (the “Agreement”) is made as of this 3rd day of April, 2023 (the “Effective Date”), between StepStone Private Credit Fund LLC, a Delaware limited liability company (the “Fund”), and StepStone Group Private Debt LLC , a Delaware limited liability company (the “Administrator”).

 

WHEREAS, the Fund is a newly organized non-diversified, closed-end management investment company that has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (together with the rules promulgated thereunder, the “1940 Act”); and

 

WHEREAS, the Fund desires to retain the Administrator to furnish certain administrative services to the Fund, and the Administrator is willing to furnish such services, on the terms and conditions set forth in this Agreement; and

 

NOW, THEREFORE, in consideration of the premises, the promises and mutual covenants herein contained, it is agreed between the parties as follows:

 

1. Appointment. The Fund hereby appoints the Administrator, subject to the direction of the Fund’s Board of Directors (the “Board”), for the period and on the terms set forth in this Agreement, to furnish or arrange for others to furnish the administrative services, resources described herein, with respect to the Fund. The Administrator hereby accepts such retention and agrees during such period to render, or arrange for the rendering of, such services and to assume the obligations herein set forth subject to terms of this Agreement. The Administrator, and any others with whom the Administrator subcontracts to provide the services set forth herein, shall for all purposes herein be deemed to be independent contractors of the Fund and shall, unless otherwise expressly provided or authorized herein or in another contract with the Fund, have no authority to act for or represent the Fund in any way or otherwise be deemed agents of the Fund.

 

2. Services of the Administrator. Subject to the general supervision of the Board, the Administrator shall furnish (or oversee, or arrange for others to furnish) the administrative services and resources necessary for the operation of the Fund. Without limiting the generality of the foregoing, the Administrator shall:

 

(a) provide the administrative services necessary for the furtherance of the ordinary operation of the Fund including, but not limited to, those set forth in Annex A of this Agreement;

 

(b) render to the Board such periodic and special reports as the Board may reasonably request;

 

(c) make available to the Fund, promptly upon request, any of the Fund’s books and records under supervision of the Administrator under this Agreement, and will furnish to regulatory authorities having the requisite authority any such books and records and any information or reports in connection with the Administrator’s services under this Agreement that may be requested in order to ascertain whether the operations of the Fund are being conducted in a manner consistent with applicable laws and regulations;

 

(d) make its officers and employees available to the Board and officers of the Fund for consultation and discussions regarding the administration of the Fund and the services provided to the Fund under this Agreement;

 

 

 

 

(e) develop and implement, if appropriate, management and shareholder services designed to enhance the value or convenience of the Fund as an investment vehicle, which include receiving and responding to inquiries and instructions from shareholders or their representatives or intermediaries relating to the Fund, concerning, among other things, share transactions or account information, or referring any such inquiries to the Fund’s officers or appropriate agents;

 

(f) supervise the Fund’s accountant in determining, consistent with the Fund’s valuation procedures and the policies and procedures stated in the Fund’s confidential private placement memorandum (as may be amended or otherwise modified from time to time), the net asset value per share for the Fund and calculate for recommendation to or ratification by the Board, or parties to whom the Board have so delegated, the value of any of the Fund’s portfolio securities and other assets for which readily available market quotations are not available; and

 

(g) supervise any sub-administrator of the Fund in its performance of certain sub-administration and sub-accounting services for the Fund.

 

The Administrator shall also provide services in connection with such other administrative services, whether similar to or different from those described in subparagraphs (a)-(g) of this Section 2, as the parties may from time to time agree in writing.

 

In the event that the Administrator provides any services to the Fund, or pays or assumes a Fund expense, which the Administrator is not obligated to provide, pay or assume under this Agreement, the Administrator shall not be obligated hereby to provide the same or any similar service to the Fund or to pay or assume the same or any similar Fund expense in the future; provided, that nothing herein contained shall be deemed to relieve the Administrator of any obligation to the Fund under any separate agreement or arrangement between the parties, including the investment advisory agreement, dated April 3, 2023, between the Fund and the investment adviser to the Fund (the “Adviser”) (as amended from time to time, the “Investment Advisory Agreement”).

 

In addition, the Administrator shall assist the Fund in generally overseeing the payment of the Fund’s expenses and the performance of administrative and professional services rendered to the Fund by others.

 

For the avoidance of any doubt, the parties agree that the Administrator is authorized without the consent of any other person, to enter into such sub-administration agreements as the Administrator may determine to be necessary or desirable in order to carry out the services set forth in Section 2 of this Agreement.

 

Nothing in this Agreement shall be deemed to inhibit the Fund or its officers from engaging, at the expense of the Fund, other persons to assist in providing administrative services to the Fund including, but not limited to, accounting agents, recordkeeping agents, proxy solicitation agents, attorneys, accountants, consultants, sub-administrator and others.

 

3. Conformity with Applicable Law and Industry Standard. The Administrator, in the performance of its duties and obligations under this Agreement, shall act in conformity with private placement memorandum of the Fund (as may be amended or otherwise modified from time to time), and with the instructions, procedures and directions of the Board and will conform to, and comply with, the requirements of the 1940 Act and all other applicable federal and state laws and regulations. In addition, the Administrator shall seek to maintain a standard of service that is consistent with those prevailing in the fund industry for comparable funds.

 

4. Exclusivity. The services of the Administrator to the Fund under this Agreement are not to be deemed exclusive, and the Administrator, or any affiliate thereof, shall be free to render similar services to other investment companies and other clients (whether or not their investment objectives and policies are similar to those of the Fund) and to engage in other activities. It is understood that directors, officers, employees and members/unitholders of the Fund are or may become interested in the Administrator and its affiliates, as directors, officers, members, managers, employees, partners, equityholders or otherwise, and that the Administrator and directors, officers, members, managers, employees, partners and equityholders of the Administrator and its affiliates are or may become similarly interested in the Fund as equityholders or otherwise.

 

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5. Expenses. During the term of this Agreement, the Administrator will pay all expenses incurred by it in connection with its activities under this Agreement, except such expenses as are assumed by the Fund, including without limitation, all Fund expenses set forth in the Fund’s confidential private placement memorandum (as may be amended or otherwise modified from time to time), and such expenses as are assumed by the Adviser pursuant to the Investment Advisory Agreement or by the Fund’s sub-adviser, if any, pursuant to a sub-advisory agreement. To the extent the Administrator incurs any costs or performs any services which are an obligation of the Fund, the Fund shall promptly reimburse the Administrator for such costs and expenses. To the extent the services for which the Fund is obligated to pay are performed by the Administrator, the Administrator shall be entitled to recover from the Fund only to the extent of its costs for such services, as reasonably determined. The Administrator shall have the right to elect to waive all or a portion of the reimbursement of such costs and expenses as Administrator is entitled to be paid by the Fund under this Agreement.

 

6. Compensation. (a) For the services provided by the Administrator to the Fund pursuant to this Agreement, the Fund shall pay to the Administrator at the end of each month (starting with the month investment operations commence) a fee (the “Administration Fee”) in an amount equal to 1/12th of 0.30% of the Fund’s net assets. The Administration Fee will be computed based on the value of the net assets of the Fund as of the close of business on the last calendar day of each month (including any assets in respect of shares that will be repurchased by the Fund as of the end of the month). The Administration Fee is due and payable in arrears within three business days of the determination of the Fund’s net assets but no later than 25 business days after the end of the month. The Administrator will pay all fees of any sub-administrator in connection with its duties in respect of the Fund. The Administrator may agree to temporarily or permanently waive, in whole or in part, the fees due to it from the Fund under this Section 6.

 

(b) In the event of termination of this Agreement, the Administration Fee provided in this Section 6 shall be computed on the basis of the period ending on the last calendar day on which this Agreement is in effect subject to a pro rata adjustment based on the number of days elapsed in the current month as a percentage of the total number of days in such month.

 

7. Liability; Indemnification.

 

(a) The Administrator shall give the Fund the benefit of the Administrator’s reasonable best efforts and diligence in rendering services under this Agreement. The parties acknowledge the importance of the Administrator freely exercising its reasonable judgment in the performance of its responsibilities, obligations and duties hereunder, and thus the Administrator may rely on information reasonably believed by it to be accurate and reliable. Accordingly, in the absence of willful misfeasance, bad faith, gross negligence, or reckless disregard of the responsibilities, obligations or duties hereunder, neither the Administrator nor its shareholders, officers, directors, employees, agents or control persons (collectively, the “Covered Persons”) shall be subject to any liability for any act or omission in connection with or arising out of any services rendered under this Agreement or otherwise related to this Agreement, or for any Losses (as defined below) that may be sustained in the purchase, holding or sale of any security or other asset by the Fund. The Administrator shall be responsible as provided herein for the performance of only such duties as are set forth in this Agreement and shall have no responsibility for the actions or activities of any other party, including other agents of or service providers to the Fund. The Administrator shall not be liable for any special, indirect, incidental, punitive or consequential damages, including lost profits, of any kind whatsoever (including, without limitation, attorneys’ fees) under any provision of this Agreement or for any such damages arising out of any act or failure to act hereunder.

 

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(b) The Administrator is authorized and instructed to rely upon the information it receives from the Fund, members of the Board or any third-party agent (including, without limitation, the Fund’s custodian(s), sub-adviser(s), and pricing services or sources) authorized by the Fund to provide such information to the Administrator. The Fund and any third-party agents from which the Administrator shall receive or obtain certain records, reports and other data used or relied upon by the Administrator in rendering the services provided hereunder are solely responsible for the contents of such information, including, without limitation, the accuracy thereof. The Administrator has no responsibility to review, confirm or otherwise assume any duty with respect to the accuracy or completeness of any such information and shall be without liability for any loss or damage suffered by the Fund as a result of the Administrator’s reliance on and utilization of such information. The Administrator shall have no responsibility and shall be without liability for any loss or damage caused by the failure of the Fund or any third-party agent to provide it with the information required.

 

(c) The Fund shall indemnify and save harmless the Covered Persons and their executors, heirs, assigns, successors or other legal representatives (“Indemnitees”), to the fullest extent permitted by law, from and against any and all claims, liabilities, damages, losses, costs, charges, fees, penalties and other expenses (including reasonable attorney’s fees and disbursements) of every nature and character (“Losses”), which may be asserted against or incurred by any Indemnitee or for which any Indemnitee may be held liable (a “Claim”) and that in any way arise out of or in connection with, or in any way relate to, the performance or non-performance of or by the Indemnitee of any of the Administrator’s duties, responsibilities, or services hereunder, whether express or implied hereunder; provided, however, that no Indemnitee shall be indemnified against any liability by reason of willful misfeasance, bad faith, gross negligence, or reckless disregard of the Indemnitee’s duties under this Agreement (“disabling conduct”).

 

(d) Expenses, including reasonable counsel fees incurred by the Indemnitee (but excluding amounts paid in satisfaction of judgments, in compromise, or as fines or penalties), shall be paid from time to time by the Fund in advance of the final disposition of a proceeding upon receipt by the Fund of an undertaking by or on behalf of the Indemnitee to repay amounts so paid to the Fund if it is ultimately determined that indemnification of such expenses is not indemnifiable under this Agreement; provided, however, that expenses shall not be advanced by the Fund unless (i) the Indemnitee has provided security considered in the reasonable discretion of the Board to be appropriate for such undertaking; or (ii) the Fund shall be insured against losses arising from any such advance payments; or (iii) a reasonable belief is formed that the Indemnitee ultimately will be found entitled to indemnification, as determined by either (x) a majority of the Board members who are not interested persons (as such term is defined in the 1940 Act) of the Fund who are not parties to the proceeding, acting on the matter, or (y) independent legal counsel, in a written opinion that includes a discussion of pertinent facts and legal analysis, based upon a review of readily available facts (as opposed to a full trial-type inquiry).

 

(e) Promptly after receipt of notice of the commencement of an investigation, action, claim or proceeding, an Indemnitee shall notify the Fund in writing of the commencement thereof, although the failure to do so shall not prevent recovery under this paragraph. The Fund shall be entitled to participate at its own expense in the defense or, if it so elects, to assume the defense of any suit brought to enforce any such Loss or Claim, but if the Fund elects to assume the defense, such defense shall be conducted by counsel chosen by the Fund and approved by the Indemnitee, which approval shall not be unreasonably withheld. In the event the Fund elects to assume the defense of any such suit and retain such counsel and notifies the Indemnitee of such election, the Indemnitee in such suit shall bear the fees and expenses of any additional counsel retained by it subsequent to the receipt of the Fund’s election. If the Fund does not elect to assume the defense of any such suit, or in case the Indemnitee does not, in the exercise of reasonable judgment, approve of counsel chosen by the Fund, or in case there is a conflict of interest between the parties or a party and any Indemnitee, the Fund will reimburse the Indemnitee in such suit for the reasonable fees and expenses of any counsel retained by the Indemnitee.

 

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(f) In the event the Fund elects to assume its own defense in any such suit, the Fund agrees that it shall not enter into any settlement agreement or similar agreement with other parties in such suit unless the Administrator and all of the other Indemnitees named as defendants are unconditionally released in such agreement or arrangement, or unless the Administrator provides its consent to such settlement or similar arrangement in writing.

 

(g) The Administrator shall look solely to Fund property for satisfaction of claims of any nature against the Fund or a member of the Board, officer or agent of the Fund arising in connection with the affairs of the Fund.

 

(h) The indemnification agreement and all obligations of the parties contained in this Section 7 shall remain operative and in full force and effect regardless of any investigation made by or on behalf of any party seeking indemnification and shall survive the delivery of any shares of the Fund and the termination of this Agreement. This agreement of indemnity will inure exclusively to the benefit of parties indemnified hereunder and their estates and successors.

 

8. Continuation and Termination. This Agreement will become effective as of Effective Date and will continue for an initial two-year term. Thereafter, if not terminated, this Agreement shall continue from year to year thereafter so long as such continuation is approved at least annually by the vote of the Board.

 

This Agreement may be terminated by the Fund at any time, without the payment of any penalty, by the Board on ninety (90) days’ written notice to the Administrator, or by the Administrator at any time, without the payment of any penalty, on ninety (90) days’ written notice to the Fund.

 

9. Amendment. This Agreement may not be amended or modified in any manner except by a written agreement executed by both parties. This Agreement shall extend to and shall be binding upon the parties thereto, and their respective successors and assigns. This Agreement may not be assigned by a party without the consent of the other party; providedhowever, that (i) the rights and obligations of the Fund under this Agreement shall not be deemed to be assigned to a newly formed entity in the event of the merger of the Fund into, or conveyance of all of the assets of the Fund to, such newly formed entity; provided furtherhowever, that the sole purpose of that merger or conveyance is to effect a mere change in the Fund’s legal form into another limited liability entity and (ii) the Administrator may, without the consent of any other party, assign the rights and obligations of the Administrator under this Agreement to an affiliate of the Administrator.

 

10. Limitation of Liability of Directors. Notice is hereby given that this Agreement is executed by an officer of the Fund on behalf of the Board, as directors of the Fund and not individually, and that the obligations of this Agreement with respect to the Fund shall be binding upon the assets and the properties of the Fund only and shall not be binding upon the assets or properties of the members of the Board, officers, agents or shareholders of the Fund individually.

 

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11. Records. In compliance with the requirements of Rule 31a-3 under the 1940 Act, the Administrator agrees that all records which it maintains for the Fund shall at all times remain the property of the Fund, shall be readily accessible during normal business hours, and shall be promptly surrendered to the Fund upon the termination of this Agreement or otherwise on written request by the Fund. The Administrator further agrees that all records which it maintains for the Fund pursuant to Rule 31a-1 under the 1940 Act shall be preserved for the periods prescribed by Rule 31a-2 under the 1940 Act unless any such records are earlier surrendered as provided above. Records shall be surrendered in usable machine-readable form. The Administrator shall have the right to retain copies of such records subject to observance of its confidentiality obligations under this Agreement.

 

12. Notices. Any notice under this Agreement shall be given in writing, addressed and delivered, emailed or mailed, postage prepaid, to the other party at the address listed below or at such other address for a party as shall be specified in a notice given in accordance with this Section.

 

13. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original.

 

14. Confidentiality. The parties hereto agree that each shall treat confidentially all information provided by each party to the other regarding its business and operations. All confidential information provided by a party hereto, including nonpublic personal information (regulated pursuant to Regulation S-P), shall be used by any other party hereto solely for the purpose of rendering services pursuant to this Agreement and, except as may be required in carrying out this Agreement, shall not be disclosed to any third party, without the prior consent of such providing party. The foregoing shall not be applicable to any information that is publicly available when provided or thereafter becomes publicly available other than through a breach of this Agreement, or that is required to be disclosed by any regulatory authority, any authority or legal counsel of the parties hereto, by judicial or administrative process, or otherwise by applicable law or regulation.

 

15. Entire Agreement. This Agreement contains the entire agreement of the parties and supersedes all prior agreements, understandings and arrangements with respect to the subject matter hereof.

 

16. Applicable Law.

 

(a) This Agreement shall be governed by the laws of the State of New York, provided that nothing herein shall be construed in a manner inconsistent with the 1940 Act, the Investment Advisers Act of 1940, as amended, or any rules or order of the U.S. Securities and Exchange Commission (the “SEC”) thereunder, and without regard for the conflicts of laws principle thereof.

 

(b) If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby and, to this extent, the provisions of this Agreement shall be deemed to be severable.

 

(c) The captions of this Agreement are included for convenience only and in no way define or limit any of the provisions hereof or otherwise affect their construction or effect.

 

[Signature Page Follows.]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and attested by their duly authorized officers, on the day and year first above written.

 

STEPSTONE PRIVATE CREDIT FUND LLC

 

c/o StepStone Group Private Debt LLC

450 Lexington Avenue

31st Floor

New York, NY 10017

E-mail: Joseph.Cambareri@stepstonegroup.com

 

By: /s/ Joseph Cambareri  
Name:  Joseph Cambareri  
Title: Chief Financial Officer  

 

StepStone Group Private Debt LLC

 

450 Lexington Avenue

31st Floor

New York, NY 10017

E-mail: Ariel.Goldblatt@stepstonegroup.com

 

By: /s/ Ariel Goldblatt  
Name:  Ariel Goldblatt  
Title: Partner  
     
By: /s/ Joseph Cambareri  
Name: Joseph Cambareri  
Title: COO  

 

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Annex A

 

Non-Exhaustive List of Administrative Services

 

1.coordinating all matters relating to the ordinary operation of the Fund, including any necessary coordination among the Adviser, custodian, depository, transfer agent or distribution disbursing agent, sub-administrator and any portfolio accounting agent (including pricing and valuation of the Fund’s portfolio), other pricing services, accountants, attorneys, underwriters, brokers, dealers, corporate fiduciaries, insurers, banks and other parties performing services or operational functions for the Fund;

 

2.maintaining, or supervising the maintenance by third parties selected by the Fund of, such books and records of the Fund as may be required by applicable federal or state law;

 

3.supervising the preparation by third parties selected by the Fund of all federal, state, and local tax returns and reports relating to the Fund required by applicable law;

 

4.supervising general portfolio compliance monitoring with respect to applicable federal, state or foreign law or regulation;

 

5.supervising the preparation and the filing, with the assistance of counsel, and arranging for the distribution of proxy materials and periodic reports to shareholders of the Fund as required by applicable law;

 

6.supervising the preparation and the filing, with the assistance of counsel, of registration statements and other documents with the SEC and other federal and state regulatory authorities as may be required by applicable law;

 

7.taking such other action with respect to the Fund as may be required by applicable law, including without limitation the rules and regulations of the SEC and other regulatory agencies;

 

8.providing the Fund, with the assistance of counsel, legal support for the purchase, sale, holding, monitoring, disposing or sustenance of portfolio securities and other assets for the Fund;

 

9.providing the Fund with adequate personnel, office space, communications facilities, and other facilities necessary for operation of the Fund as contemplated in this Agreement;

 

10.arranging for meetings of the Board and, in connection therewith, providing the Board with necessary or appropriate information for its meetings;

 

11.supervising the maintenance of the Fund’s existence and maintaining the registration and qualification of the Fund’s shares under federal and state law, including preparing or overseeing the preparation of any required notice or other filings; and

 

12.supervising the maintenance of the Fund’s governance documents.

 

Reference in this Annex A to “laws” will include any applicable regulations.

 

 

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Exhibit 10.5

 

StepStone Group Private Debt LLC
450 Lexington Avenue, 31st Floor
New York, NY 10017

 

As of April 3, 2023

 

StepStone Private Credit Fund LLC
450 Lexington Avenue, 31st Floor
New York, NY 10017

 

Re:Expense Limitation and Reimbursement Agreement

 

Ladies and Gentlemen:

 

StepStone Group Private Debt LLC (the “Advisor”) hereby confirms its agreement as follows in respect of StepStone Private Credit Fund LLC (the “Company”):

 

1. Expense Limitation. For the period from the effective date of that certain Investment Advisory Agreement (the “Advisory Agreement”), between the Company and the Advisor, for a one-year term beginning with the Company’s initial closing date for subscriptions for the Company’s limited liability company interests (the “Shares”) in its continuous private offering of Shares (the “Initial Closing Date”) and ending on the one year anniversary thereof (the “Limitation Period”), subject to the terms hereof, the Advisor agrees that it will pay, absorb or reimburse the Company’s aggregate monthly Other Operating Expenses (as defined below) on the Company’s behalf (which, for the avoidance of doubt, may include any Other Operating Expenses incurred prior to the effective date of the Advisory Agreement) (each such payment, absorption or reimbursement, a “Required Expense Payment”), such that the aggregate monthly Other Operating Expenses borne by the Company during the Limitation Period shall not exceed 1.00%, on an annualized basis, of the Company’s month-end net assets (the “Expense Cap”). For any month in which the Company’s aggregate monthly Other Operating Expenses exceed the Expense Cap, the Advisor shall make a Required Expense Payment to the extent necessary to eliminate such excess. The Advisor may also directly pay expenses on behalf of the Company and waive reimbursement under this letter agreement. “Other Operating Expenses” shall include all of the Company’s operating expenses, including O&O Expenses, but shall exclude Specified Expenses (as defined below). “O&O Expenses” shall include all of the fees, costs, charges, expenses, liabilities and obligations incurred in relation to or in connection with the establishment of the Company, the marketing and offering of the Shares (including, among other things, legal, accounting, subscription processing and filing fees and expenses and other expenses pertaining to this offering), and the establishment, organization and creation of the operational structure of the Company and its special purpose vehicle subsidiaries, including travel, lodging, meals, entertainment, legal, accounting, regulatory compliance, fees of professional advisors, printing, postage, regulatory and tax filing fees, and other costs of establishment.

 

2. Voluntary Expense Support. At such times as the Advisor determines, the Advisor may elect to pay or reimburse certain additional fees and expenses of the Company on the Company’s behalf, including all or any portion of a Specified Expense (each such payment or reimbursement, a “Voluntary Expense Payment” and, together with a Required Expense Payment, the “Expense Payments”); provided that no portion of a Voluntary Expense Payment will be used to pay any interest expense or shareholder servicing and/or distribution fees of the Company. In making a Voluntary Expense Payment, the Advisor will designate, as it deems necessary or advisable, what type of expense it is paying.

 

 

 

 

3. Company Obligation. The Company shall have no obligation to reimburse or pay the Advisor for any Expense Payment unless the Company has received at least $100 million in gross proceeds from the sale of Shares (the “Offering Proceeds Threshold”), following which time, such Expense Payments shall be subject to recoupment by the Advisor to the extent that such recoupment would not cause the Company to exceed the Expense Cap. Calculation of the Offering Proceeds Threshold shall exclude gross proceeds from Shares purchased by the Advisor and by the Company’s directors and officers.

 

4. Specified Expenses. The Expense Cap applies only to the Company’s aggregate monthly Other Operating Expenses, which excludes Specified Expenses. “Specified Expenses” include: (i) the base management fee under the Advisory Agreement; (ii) all fees and expenses charged by the non-affiliated investment managers of the Underlying Funds and other investments in which the Company invests (including management fees, performance or incentive fees and redemption or withdrawal fees, however titled or structured) (the “Acquired Fund Fees and Expenses”); (iii) the incentive fee under the Advisory Agreement; (iv) transactional costs, including legal costs and brokerage commissions, associated with the acquisition and disposition of the Company’s investments; (v) interest payments incurred on borrowings by the Company or its subsidiaries; (vi) fees and expenses incurred in connection with any credit facility obtained by the Company or any of its subsidiaries, including any expenses for acquiring ratings related to the credit facilities; (vii) distribution and shareholder servicing fees, as applicable; (viii) taxes; and (ix) extraordinary expenses resulting from events and transactions that are distinguished by their unusual nature and by the infrequency of their occurrence, including, without limitation, costs incurred in connection with any claim, litigation, arbitration, mediation, government investigation or similar proceeding, indemnification expenses, and expenses in connection with holding and/or soliciting proxies for all annual and other meetings of Members.

 

5. Term. This letter agreement will remain in effect throughout the Limitation Period (including any extensions thereof), unless terminated by the Company’s Board of Directors upon thirty (30) days written notice to the Advisor.

 

This letter agreement may be renewed by the mutual agreement of the Advisor and the Company for successive terms of one year. Unless so renewed, this letter agreement will terminate automatically at the end of the Limitation Period. This letter agreement will also terminate automatically upon the termination of the Advisory Agreement, unless a new investment advisory agreement with the Advisor (or with an affiliate under common control with the Advisor) becomes effective upon such termination.

 

6. Excess Expenses. In consideration of the Advisor’s agreement as provided herein, the Company agrees to carry forward the amount of any Expense Payment (“Excess Expenses”) for a period not to exceed three years from the end of the month in which such fees and expenses were waived, reimbursed or paid by the Advisor, and to reimburse the Advisor in the amount of such Excess Expenses as promptly as possible, on a monthly basis, even if such reimbursement occurs after the termination of the Limitation Period, provided that the waived fees, reimbursed expenses or directly paid expenses have fallen to a level below the Expense Cap and the reimbursement amount does not raise the level of waived fees, reimbursed expenses or directly paid expenses in the month the reimbursement is being made to a level that exceeds the Expense Cap applicable at that time. For the avoidance of doubt, if at the end of any fiscal year in which the Company has reimbursed the Advisor for any Excess Expenses, the Company’s waived fees, reimbursed expenses or directly paid expenses for such fiscal year exceed the Expense Cap applicable at that time, the Advisor shall promptly pay the Company an amount equal to the lesser of: (i) the amount by which the Company’s waived fees, reimbursed expenses or directly paid expenses for such fiscal year exceed the Expense Cap; and (ii) the amount of reimbursements for Excess Expenses paid by the Company to the Advisor in such fiscal year. Any payment by the Advisor to the Company pursuant to the foregoing sentence shall be subject to later reimbursement by the Company in accordance with this Section 6. The Advisor’s obligations under this Section 6 shall survive termination of this letter agreement.

 

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7. Entire Agreement; Amendment. This letter agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof, and supersedes all prior agreements between the parties hereto relating to the matters contained herein and may not be modified, waived or terminated orally and may only be amended by an agreement in writing signed by the parties hereto.

 

8. Construction and Forum. This letter agreement shall be governed by the laws of the State of New York, without regard to its conflicts of law principles. Each of the parties hereto irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of any New York State court or Federal court of the United States of America sitting in New York, in any action or proceeding arising out of or relating to this letter agreement or the transactions contemplated hereby, and each of the parties hereto irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State court or, to the extent permitted by law, in such Federal court. Capitalized terms used, but not defined, herein shall have the meanings provided to such terms in the Company’s confidential private placement memorandum relating to its continuous private offering of Shares, as may be amended and restated from time to time.

 

9. Counterparts. This letter agreement may be executed in any number of separate counterparts, each of which shall be deemed an original, but the several counterparts shall together constitute but one and the same agreement of the parties hereto.

 

10. Severability. If any one or more of the covenants, agreements, provisions or texts of this letter agreement shall be held invalid, then such covenants, agreements, provisions or terms shall be deemed severable from the remaining covenants, agreements, provisions or terms of this letter agreement and shall in no way affect the validity or enforceability of the other provisions of this letter agreement.

 

[Signature Page Follows]

 

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  STEPSTONE GROUP PRIVATE DEBT LLC
     
  By: /s/ Ariel Goldblatt
    Name:  Ariel Goldblatt
    Title: Partner
     
  By: /s/ Joseph Cambareri
    Name: Joseph Cambareri
    Title: COO

 

Accepted and Agreed:  
   
STEPSTONE PRIVATE CREDIT FUND LLC  
     
By: /s/ Joseph Cambareri  
  Name:  Joseph Cambareri  
  Title: Chief Financial Officer  

 

[Signature Page to Expense Limitation and Reimbursement Agreement]

 

 

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Exhibit 10.6

 

CUSTODY AGREEMENT

 

Dated March 29, 2023

 

Between

 

UMB BANK, N.A.

 

and

 

STEPSTONE PRIVATE CREDIT FUND LLC

 

 

 

 

CUSTODY AGREEMENT

 

This agreement made as of the date first set forth above (the “Agreement”) between UMB Bank, n.a., a national banking association with its principal place of business located in Kansas City, Missouri (hereinafter “Custodian”) and StepStone Private Credit Fund LLC, a Delaware limited liability company, together with such additional Funds which shall be made parties to this Agreement by the execution of Appendix B hereto (individually, a “Fund” and collectively, the “Funds”).

 

WITNESSETH:

 

WHEREAS, the Fund is a closed-end management investment company that intends to elect to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”);

 

WHEREAS, the Fund desires to appoint Custodian as its custodian for the custody of Assets (as hereinafter defined) owned by the Fund, which Assets are to be held in such accounts as the Fund may establish from time to time; and

 

WHEREAS, Custodian is willing to accept such appointment on the terms and conditions hereof.

 

NOW, THEREFORE, in consideration of the mutual promises contained herein, the parties hereto, intending to be legally bound, mutually covenant and agree as follows:

 

1. APPOINTMENT OF CUSTODIAN.

 

The Fund hereby constitutes and appoints the Custodian as custodian of Assets belonging to the Fund which have been or may be from time to time delivered to and accepted by the Custodian. Custodian accepts such appointment as a custodian and agrees to perform the duties and responsibilities of Custodian as set forth herein on the conditions set forth herein. For purposes of this Agreement, the term “Assets” shall include Securities, monies, and other property held by the Custodian for the benefit of the Fund. “Security” or “Securities” shall mean stocks, bonds, rights, warrants, certificates, instruments, loan agreements, obligations, other evidence of indebtedness, and all other negotiable or non-negotiable paper commonly known as Securities which have been or may from time to time be delivered to and accepted by the Custodian. For the avoidance of doubt, “Securities” shall also mean, for purposes of the Fund’s investments in underlying investment companies, the completed subscription agreements (or any document, however titled, containing factual information regarding the Fund and Fund representations and warranties necessary to make the investment, which shall be defined herein as a “Subscription Agreement”), pertaining to such underlying investment company. Custodian shall have no obligation to treat a Subscription Agreement as a Security until the Fund delivers such completed Subscription Agreement to the Custodian. “Securities” need not be certificated and may consist of contractual rights in respect of Securities (e.g., participation agreements) (“Uncertificated Securities and Contract Rights”).

 

2. INSTRUCTIONS.

 

(a) An “Instruction,” as used herein, shall mean a request, direction, instruction or certification initiated by the Fund and conforming to the terms of this paragraph. An Instruction may be transmitted to the Custodian by any of the following means:

 

(i) a writing manually signed on behalf of the Fund by an Authorized Person (as hereinafter defined);

 

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(ii) a telephonic or other oral communication from a person the Custodian reasonably believes to be an Authorized Person;

 

(iii) a facsimile transmission that the Custodian reasonably believes has been signed or otherwise originated by an Authorized Person;

 

(iv) a communication effected through the internet or web-based functionality (including without limitation, emails, data files and other communications) on behalf of the Fund (“Electronic Communication”); or

 

(v) other means reasonably acceptable to both parties.

 

Instructions in the form of oral communications shall be confirmed by the Fund by either a writing (as set forth in (i) above), a facsimile (as set forth in (iii) above), or an Electronic Communication (as set forth in (iv) above), but the lack of such confirmation shall in no way affect any action taken by the Custodian in reliance upon such oral Instructions prior to the Custodian’s receipt of such confirmation. The Fund authorizes the Custodian to record any and all telephonic or other oral Instructions communicated to the Custodian. The parties acknowledge and agree that, with respect to Instructions transmitted by facsimile, the Custodian cannot verify that the signature of an Authorized Person has been properly affixed and, with respect to Instructions transmitted by an Electronic Communication, the Custodian cannot verify that the Electronic Communication has been initiated by an Authorized Person; accordingly, the Custodian shall have no liability as a result of actions taken in reliance on unauthorized facsimile or Electronic Communication Instructions. The Custodian recommends that any Instructions transmitted by the Fund via email be done so through a secure system or process.

 

(b) “Special Instructions,” as used herein, shall mean Instructions countersigned or confirmed in writing by the Treasurer or any other officer of the Fund, which countersignature or confirmation shall be on the same instrument containing the Instructions or on a separate instrument relating thereto.

 

(c) Instructions and Special Instructions shall be delivered to the Custodian at the address and/or telephone number, facsimile transmission number or email address agreed upon from time to time by the Custodian and the Fund.

 

(d) Where appropriate and specifically stated, Instructions and Special Instructions shall be continuing Instructions.

 

(e) An Authorized Person shall be responsible for assuring the accuracy and completeness of Instructions. If the Custodian reasonably determines that an Instruction is unclear or incomplete, the Custodian may notify the Fund of such determination, in which case the Fund shall be responsible for delivering to the Custodian an amended Instruction. The Custodian shall have no obligation to take any action until the Fund re-delivers to the Custodian an Instruction that is clear and complete.

 

(f) The Fund shall be responsible for delivering to the Custodian Instructions or Special Instructions in a timely manner, after considering such factors as the involvement of subcustodians, brokers or agents in a transaction, time zone differences, reasonable industry standards, etc. The Custodian shall have no liability if the Fund delivers Instructions or Special Instructions to the Custodian after any deadline established and reasonably communicated by the Custodian.

 

(g) By providing Instructions to acquire or hold Foreign Assets (as defined in Rule 17f-5(a)(2) under the 1940 Act), the Fund shall be deemed to have confirmed to the Custodian that the Fund has (i) considered and accepted responsibility for all Sovereign Risks and Country Risks (as hereinafter defined) associated with investing in a particular country or jurisdiction, and (ii) made all determinations and provided to shareholders and other investors all disclosures required of BDCs by the 1940 Act.

 

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3. DELIVERY OF CORPORATE AND OTHER DOCUMENTS.

 

Each of the parties to this Agreement represents that its execution does not violate any of the provisions of its respective charter, articles of incorporation, partnership agreement, declaration of trust, articles of association or bylaws, that all required corporate or organizational action to authorize the execution and delivery of this Agreement has been taken, and that the person signing this Agreement is authorized to bind such party.

 

The Fund agrees to provide the Custodian, upon request, documentation regarding the Fund, including, by way of example: declaration of trust, by-laws, resolutions, registration statements, W-9s and other tax-related documentation, compliance policies and procedures and other compliance documents, etc.

 

In addition, the Fund has delivered or will promptly deliver to the Custodian, copies of the resolution(s) of its Board of Trustees and all amendments or supplements thereto, properly certified or authenticated, designating certain officers or employees of the Fund who will have continuing authority to certify to the Custodian: (a) the names, titles, signatures and scope of authority of all persons authorized to give Instructions or any other notice, request, direction, instruction, certificate or instrument on behalf of the Fund, and (b) the names, titles and signatures of those persons authorized to countersign or confirm Special Instructions on behalf of the Fund (in both cases collectively, the “Authorized Persons” and individually, an “Authorized Person”). Such resolutions and certificates may be accepted and relied upon by the Custodian as conclusive evidence of the facts set forth therein and shall be considered to be in full force and effect until delivery to the Custodian of a similar resolution or certificate to the contrary; provided, however, that the Custodian may rely upon any written designation furnished by the Treasurer or other officer of the Fund designating persons authorized to countersign or confirm Special Instructions (as provided in Section 2(b)). Upon delivery of a certificate which deletes or does not include the name(s) of a person previously authorized to give Instructions or to countersign or confirm Special Instructions, such person shall no longer be considered an Authorized Person authorized to give Instructions or to countersign or confirm Special Instructions. Unless the certificate specifically requires that the approval of anyone else will first have been obtained, the Custodian will be under no obligation to inquire into the right of the person giving such Instructions or Special Instructions to do so. Notwithstanding any of the foregoing, no Instructions or Special Instructions received by the Custodian from the Fund will be deemed to authorize or permit any director, trustee, officer, employee, or agent of the Fund to withdraw any of the Assets of the Fund upon the mere receipt of such authorization, Special Instructions or Instructions from such director, trustee, officer, employee or agent.

 

The Fund further agrees to promptly provide the Custodian completed Subscription Agreements and any other applicable documentation for the Fund’s investment in any underlying investment companies. Such investments will only be Securities, and therefore Assets of the Fund, upon receipt by the Custodian of completed Subscription Agreements for the Fund. The Fund undertakes to work with Custodian to ensure that quarterly confirmations, and any documentation representing changes to the Fund’s holding in such investment (such as related to an “add-on” purchase), are provided to Custodian as soon as practicably possible.

 

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4. POWERS AND DUTIES OF CUSTODIAN AND DOMESTIC SUBCUSTODIAN.

 

Except for Assets held by any Foreign Subcustodian, Special Subcustodian or Eligible Securities Depository appointed pursuant to Sections 5(b), (c), or (f) of this Agreement, the Custodian shall have and perform the powers and duties hereinafter set forth in this Section 4. For purposes of this Section 4 all references to powers and duties of the “Custodian” shall also refer to any Domestic Subcustodian appointed pursuant to Section 5(a).

 

(a) Safekeeping.

 

The Custodian will keep safely the Assets of the Fund which are delivered to and accepted by it from time to time. The Custodian shall notify the Fund if it is unwilling or unable to accept custody of any asset of the Fund. The Custodian shall not be responsible for any property of the Fund held by the Fund and not delivered to the Custodian or for any pre-existing faults or defects in Assets that are delivered to the Custodian.

 

(b) Manner of Holding Securities.

 

(1) The Custodian shall at all times hold Securities of the Fund either: (i) by physical possession of the share certificates, completed Subscription Agreements, or other instruments representing such Securities, in registered or bearer form; in the vault of the Custodian, Domestic Subcustodian, a Special Custodian, depository or agent of the Custodian; or in an account maintained by the Custodian or agent at a Securities System (as hereinafter defined); or (ii) in book-entry form by a Securities System in accordance with the provisions of sub-paragraph (3) below.

 

(2) The Custodian may hold registrable portfolio Securities which have been delivered to it in physical form, by registering the same in the name of the Fund or its nominee, or in the name of the Custodian or its nominee, for whose actions the Fund and Custodian, respectively, shall be fully responsible. Upon the receipt of Instructions, the Custodian shall hold such Securities in street certificate form, so called, with or without any indication of representative capacity. However, unless it receives Instructions to the contrary, the Custodian will register all such portfolio Securities in the name of the Custodian’s authorized nominee. All such Securities shall be held in an account of the Custodian containing only assets of the Fund or only assets held by the Custodian for the benefit of customers, provided that the records of the Custodian shall indicate at all times the Fund or other customer for which such Securities are held in such accounts and the respective interests therein.

 

(3) The Custodian may deposit and/or maintain domestic Securities owned by the Fund in, and the Fund hereby approves use of: (a) The Depository Trust & Clearing Corporation; (b) any other clearing agency registered with the Securities and Exchange Commission (“SEC”) under section 17A of the Securities Exchange Act of 1934, which acts as a securities depository; and (c) a Federal Reserve Bank or other entity authorized to operate the federal book-entry system described in the regulations of the Department of the Treasury or book-entry systems operated pursuant to comparable regulations of other federal agencies. Upon the receipt of Special Instructions, the Custodian may deposit and/or maintain domestic Securities owned by the Fund in any other domestic clearing agency that may otherwise be authorized by the SEC to serve in the capacity of depository or clearing agent for the Securities or other assets of investment companies and that acts as a Securities depository. Each of the foregoing shall be referred to in this Agreement as a “Securities System”, and all such Securities Systems shall be listed on the attached Appendix A. Use of a Securities System shall be in accordance with applicable Federal Reserve Board and SEC rules and regulations, if any, and subject to the following provisions:

 

(i) The Custodian may deposit the Securities directly or through one or more agents or Subcustodians which are also qualified to act as custodians for investment companies.

 

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(ii) Securities held in a Securities System shall be subject to any agreements or rules effective between the Securities System and the Custodian or a Subcustodian, as the case may be.

 

(iii) Any Securities deposited or maintained in a Securities System shall be held in an account (“Account”) of the Custodian or a Subcustodian in the Securities System that includes only assets held by the Custodian or a Subcustodian as a custodian or otherwise for customers.

 

(iv) The books and records of the Custodian shall at all times identify those Securities belonging to the Fund which are maintained in a Securities System.

 

(v) The Custodian shall pay for Securities purchased for the account of the Fund only upon (a) receipt of advice from the Securities System that such Securities have been transferred to the Account of the Custodian in accordance with the rules of the Securities System, and (b) the making of an entry on the records of the Custodian to reflect such payment and transfer for the account of the Fund. The Custodian shall transfer Securities sold for the account of the Fund only upon (a) receipt of advice from the Securities System that payment for such Securities has been transferred to the Account of the Custodian in accordance with the rules of the Securities System, and (b) the making of an entry on the records of the Custodian to reflect such transfer and payment for the account of the Fund. Copies of all advices from the Securities System relating to transfers of Securities for the account of the Fund shall be maintained for the Fund by the Custodian. Such copies may be maintained by the Custodian in electronic form. The Custodian shall make available to the Fund or its agent on the next business day, by Electronic Communication, facsimile, or other means reasonably acceptable to both parties, daily transaction activity that shall include each day’s transactions for the account of the Fund.

 

(vi) The Custodian shall, if requested by the Fund pursuant to Instructions, provide the Fund with reports obtained by the Custodian or any Subcustodian with respect to a Securities System’s accounting system, internal accounting control and procedures for safeguarding Securities deposited in the Securities System.

 

(vii) Upon receipt of Special Instructions to do so, the Custodian shall terminate the use of any Securities System on behalf of the Fund as promptly as practicable and shall take all actions reasonably practicable to safeguard the Securities of the Fund maintained with such Securities System.

 

(viii) The Custodian otherwise complies with the requirements of Rule 17f-4 under the 1940 Act.

 

(4) The Custodian shall maintain a record (in book-entry form or in such other form as it shall deem necessary or desirable) of the Uncertificated Securities and Contract Rights owned by the Fund containing such information as the Fund and the Custodian may reasonably agree, provided that the Fund shall have furnished to the Custodian such documents evidencing the Fund’s investment in each such Uncertificated Security or rights under each such Contract Right, together with a description of the material terms of any such Uncertificated Security or Contract Right as requested by the Custodian (collectively, such documents and information are referred to herein as the “Investment Documents”). The Custodian’s sole duties as it relates to such Uncertificated Securities and Contract Rights of the Fund shall be to (i) maintain a record of such Uncertificated Securities and Contract Rights (based on the information provided to the Custodian pursuant to the preceding sentence) and (ii) to retain and hold the Investment Documents in respect of each Uncertificated Security and Contract Right held by the Fund as a document custodian and in a manner consistent with the manner in which the Custodian holds all other Assets of the Fund.

 

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(c) Free Delivery of Assets.

 

Notwithstanding any other provision of this Agreement and except as provided in Section 3 hereof, the Custodian, upon receipt of Special Instructions, will undertake to make free delivery of Assets, provided such Assets are on hand and available, in connection with the Fund’s transactions and to transfer such Assets to such broker, dealer, Subcustodian, bank, agent, Securities System or otherwise as specified in such Special Instructions.

 

(d) Exchange of Securities.

 

Upon receipt of Instructions, the Custodian will exchange Securities held by it for the Fund for other Securities or cash paid in connection with any reorganization, recapitalization, merger, consolidation, conversion, or similar event, and will deposit any such Securities in accordance with the terms of any reorganization or protective plan.

 

Unless otherwise directed by Instructions, the Custodian is authorized to exchange Securities held by it in temporary form for Securities in definitive form, to surrender Securities for transfer into a name or nominee name as permitted in Section 4(b)(2), to effect an exchange of shares in a stock split or when the par value of the stock is changed, to sell any fractional shares, and, upon receiving payment therefor, to surrender bonds or other Securities held by it at maturity or call.

 

(e) Purchases of Assets.

 

(1) Securities Purchases. In accordance with Instructions, the Custodian shall, with respect to a purchase of Securities, pay for such Securities out of monies held for the Fund’s account for which the purchase was made, but only insofar as monies are available therein for such purpose, and receive the Securities so purchased. Unless the Custodian has received Special Instructions to the contrary, such payment will be made only upon delivery of such Securities to the Custodian, a clearing corporation of a national securities exchange of which the Custodian is a member, or a Securities System in accordance with the provisions of Section 4(b)(3) hereof. Notwithstanding the foregoing, upon receipt of Instructions to do so, (i) in connection with a repurchase agreement, the Custodian may release funds to a Securities System prior to the receipt of advice from the Securities System that the Securities underlying such repurchase agreement have been transferred by book-entry into the Account maintained with such Securities System by the Custodian, provided that the Custodian’s instructions to the Securities System require that the Securities System may make payment of such funds to the other party to the repurchase agreement only upon transfer by book-entry of the Securities underlying the repurchase agreement into such Account; (ii) in the case of options, Interest Bearing Deposits (as hereinafter defined), currency deposits and other deposits, and foreign exchange transactions, pursuant to Sections 4(g), 4(k), and 4(l) hereof, the Custodian may make payment therefor before receipt of an advice of transaction; and (iii) the Custodian may make payment for Securities or other Assets prior to delivery thereof in accordance with Instructions, applicable laws, generally accepted trade practices, or the terms of the instrument representing such Security or other Asset, including, but not limited to, Securities and other Assets as to which payment for the Security and receipt of the instrument evidencing the Security are under generally accepted trade practices or the terms of the instrument representing the Security expected to take place in different locations or through separate parties.

 

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(2) Other Assets Purchased. Upon receipt of Instructions and except as otherwise provided herein, the Custodian shall pay for and receive other Assets for the account of the Fund as provided in Instructions.

 

(f) Sales of Assets.

 

(1) Securities Sold. In accordance with Instructions, the Custodian shall, with respect to a sale, deliver or cause to be delivered the Securities thus designated as sold to the broker or other person specified in the Instructions relating to such sale. Unless the Custodian has received Special Instructions to the contrary, such delivery shall be made only upon receipt of payment therefor in the form of: (a) cash, certified check, bank cashier’s check, bank credit, or bank wire transfer; (b) credit to the account of the Custodian with a clearing corporation of a national securities exchange of which the Custodian is a member; or (c) credit to the Account of the Custodian with a Securities System, in accordance with the provisions of Section 4(b)(3) hereof. Notwithstanding the foregoing, the Custodian may deliver Securities and other Assets prior to receipt of payment for such Securities in accordance with Instructions, applicable laws, generally accepted trade practices, or the terms of the instrument representing such Security or other Asset. For example, Securities held in physical form may be delivered and paid for in accordance with “street delivery custom” to a broker or its clearing agent, against delivery to the Custodian of a receipt for such Securities, provided that the Custodian shall have taken reasonable steps to ensure prompt collection of the payment for, or return of, such Securities by the broker or its clearing agent, and provided further that the Custodian shall not be responsible for the selection of or the failure or inability to perform of such broker or its clearing agent or for any related loss arising from delivery or custody of such Securities prior to receiving payment therefor.

 

(2) Other Assets Sold. Upon receipt of Instructions and except as otherwise provided herein, the Custodian shall receive payment for and deliver other Assets for the account of the Fund as provided in Instructions.

 

(g) Options.

 

(1) Upon receipt of Instructions relating to the purchase of an option or sale of a covered call option, the Custodian shall: (a) receive and retain Instructions or other documents, to the extent they are provided to the Custodian, evidencing the purchase or writing of the option by the Fund; (b) if the transaction involves the sale of a covered call option, deposit and maintain in a segregated account the Securities (either physically or by book-entry in a Securities System) subject to the covered call option written on behalf of the Fund; and (c) pay, release and/or transfer such Securities, cash or other Assets in accordance with any notices or other communications evidencing the expiration, termination or exercise of such options which are furnished to the Custodian by the Options Clearing Corporation (the “OCC”), the securities or options exchanges on which such options were traded, or such other organization as may be responsible for handling such option transactions.

 

(2) Upon receipt of Instructions relating to the sale of a naked option (including stock index and commodity options), the Custodian, the Fund and the broker-dealer shall enter into an agreement to comply with the rules of the OCC or of any registered national securities exchange or similar organizations(s). Pursuant to that agreement and the Fund’s Instructions, the Custodian shall: (a) receive and retain Instructions or other documents, if any, evidencing the writing of the option; (b) deposit and maintain in a segregated account, Securities (either physically or by book-entry in a Securities System), cash and/or other Assets; and (c) pay, release and/or transfer such Securities, cash or other Assets in accordance with any such agreement and with any notices or other communications evidencing the expiration, termination or exercise of such option which are furnished to the Custodian by the OCC, the securities or options exchanges on which such options were traded, or such other organization as may be responsible for handling such option transactions. The Fund and the broker-dealer shall be responsible for determining the quality and quantity of assets held in any segregated account established in compliance with applicable margin maintenance requirements and the performance of other terms of any option contract.

 

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(h) Segregated Accounts.

 

Upon receipt of Instructions, the Custodian shall establish and maintain on its books a segregated account or accounts for and on behalf of the Fund, into which account or accounts may be transferred Assets of the Fund, including Securities maintained by the Custodian in a Securities System pursuant to Paragraph (b)(3) of this Section 4, said account or accounts to be maintained (i) for the purposes set forth in Sections 4(g) and 4(m) and (ii) for the purpose of compliance by the Fund with the procedures required by applicable SEC interpretations relating to the maintenance of segregated accounts by BDCs, or (iii) for such other purposes as may be set forth, from time to time, in Special Instructions. The Custodian shall not be responsible for the determination of the type or amount of Assets to be held in any segregated account referred to in this paragraph, or for compliance by the Fund with required procedures noted in (ii) above.

 

(i) Depositary Receipts.

 

Upon receipt of Instructions, the Custodian shall surrender or cause to be surrendered Securities to the depository used for such Securities by an issuer of American Depositary Receipts or International Depositary Receipts (hereinafter referred to, collectively, as “ADRs”), against a written receipt therefor adequately describing such Securities and written evidence satisfactory to the organization surrendering the same that the depository has acknowledged receipt of instructions to issue ADRs with respect to such Securities in the name of the Custodian or a nominee of the Custodian, for delivery in accordance with such instructions.

 

Upon receipt of Instructions, the Custodian shall surrender or cause to be surrendered ADRs to the issuer thereof, against a written receipt therefor adequately describing the ADRs surrendered and written evidence satisfactory to the organization surrendering the same that the issuer of the ADRs has acknowledged receipt of instructions to cause its depository to deliver the Securities underlying such ADRs in accordance with such instructions.

 

(j) Corporate Actions, Put Bonds, Called Bonds, Etc.

 

Upon receipt of Instructions, the Custodian shall: (a) deliver warrants, puts, calls, rights or similar Securities to the issuer or trustee thereof (or to the agent of such issuer or trustee) for the purpose of exercise or sale, provided that the new Securities, cash or other Assets, if any, acquired as a result of such actions are to be delivered to the Custodian; and (b) deposit Securities upon invitations for tenders thereof, provided that the consideration for such Securities is to be paid or delivered to the Custodian, or the tendered Securities are to be returned to the Custodian.

 

Unless otherwise directed to the contrary in Instructions, the Custodian shall comply with the terms of all mandatory or compulsory exchanges, calls, tenders, redemptions, or similar rights of security ownership of which the Custodian receives notice through data services or publications to which it normally subscribes, and shall promptly notify the Fund of such action in writing or in such other manner as the Fund and Custodian may agree in writing.

 

The Fund agrees that if it gives an Instruction for the performance of an action after the last permissible date of a period established by the Custodian or any optional offer or on the last permissible date for the performance of such act, the Fund shall hold the Custodian harmless from any adverse consequences in connection with acting upon or failing to act upon such Instructions.

 

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If the Fund wishes to receive periodic corporate action notices of exchanges, calls, tenders, redemptions and other similar notices pertaining to Securities and to provide Instructions with respect to such Securities via the internet, the Custodian and the Fund may enter into a Supplement to this Agreement whereby the Fund will be able to participate in the Custodian’s Electronic Corporate Action Notification Service.

 

(k) Interest Bearing Deposits.

 

Upon receipt of Instructions directing the Custodian to purchase interest bearing fixed-term certificates of deposit or call deposits (hereinafter referred to, collectively, as “Interest Bearing Deposits”) for the account of the Fund, the Custodian shall purchase such Interest Bearing Deposits with such banks or trust companies, including the Custodian, any Subcustodian or any subsidiary or affiliate of the Custodian (hereinafter referred to as “Banking Institutions”), and in such amounts as the Fund may direct pursuant to Instructions. Such Interest Bearing Deposits shall be denominated in U.S. dollars. Interest Bearing Deposits issued by the Custodian shall be in the name of the Fund. Interest Bearing Deposits issued by another Banking Institution may be in the name of the Fund or the Custodian or in the name of the Custodian for its customers generally. The responsibilities of the Custodian to the Fund for Interest Bearing Deposits issued by the Custodian shall be that of a U.S. bank for a similar deposit. With respect to Interest Bearing Deposits issued by any other Banking Institution, (a) the Custodian shall be responsible for the collection of income and the transmission of cash to and from such accounts; and (b) the Custodian shall have no duty with respect to the selection of the Banking Institution or for the failure of such Banking Institution to pay upon demand.

 

(l) Foreign Exchange Transactions.

 

(l) The Fund may appoint the Custodian as its agent in the execution of all currency exchange transactions. If requested, the Custodian agrees to provide exchange rate and U.S. Dollar information, in writing, or by other means agreeable to both parties, to the Fund.

 

(2) Upon receipt of Instructions, the Custodian shall settle foreign exchange contracts or options to purchase and sell foreign currencies for spot and future delivery on behalf of and for the account of the Fund with such currency brokers or Banking Institutions as the Fund may determine and direct pursuant to Instructions. If, in its Instructions, the Fund does not direct the Custodian to utilize a particular currency broker or Banking Institution, the Custodian is authorized to select such currency broker or Banking Institution as it deems appropriate to execute the Fund’s foreign currency transaction. It is understood that all such transactions shall be undertaken by the Custodian as agent for the Fund.

 

(3) The Fund accepts full responsibility for its use of third party foreign exchange brokers and for execution of said foreign exchange contracts and understands that the Fund shall be responsible for any and all costs and interest charges which may be incurred as a result of the failure or delay of its third party broker to deliver foreign exchange. The Custodian shall have no responsibility or liability with respect to the selection of the currency brokers or Banking Institutions selected by the Fund or the performance or non-performance of such brokers or Banking Institutions.

 

(4) Notwithstanding anything to the contrary contained herein, upon receipt of Instructions the Custodian may, in connection with a foreign exchange contract, make free outgoing payments of cash in the form of U.S. Dollars or foreign currency prior to receipt of confirmation of such foreign exchange contract or confirmation that the countervalue currency completing such contract has been delivered or received.

 

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(m) Pledges or Loans of Securities.

 

(1) Upon receipt of Instructions from the Fund, the Custodian will release or cause to be released Securities held in custody to the pledgees designated in such Instructions by way of pledge or hypothecation to secure loans incurred by the Fund with various lenders including but not limited to UMB Bank, n.a.; provided, however, that the Securities shall be released only upon payment to the Custodian of the monies borrowed, except that in cases where additional collateral is required to secure existing borrowings, further Securities may be released or delivered, or caused to be released or delivered for that purpose upon receipt of Instructions. Upon receipt of Instructions, the Custodian will pay, but only from funds available for such purpose, any such loan upon re-delivery to it of the Securities pledged or hypothecated therefor and upon surrender of the note or notes evidencing such loan. In lieu of delivering collateral to a pledgee, the Custodian, on the receipt of Instructions, shall transfer the pledged Securities to a segregated account for the benefit of the pledgee.

 

(2) Upon receipt of Instructions, the Custodian will release securities to a securities lending agent appointed by the Fund and designated in such Instructions. The Custodian shall act upon Instructions from the Fund and/or such agent in order to effect securities lending transactions on behalf of the Fund. For its services in facilitating the Fund’s securities lending activities through such agent, the Custodian may receive from the agent a portion of the agent’s securities lending revenue or a fee directly from the Fund. The Custodian shall have no responsibility or liability for any losses arising in connection with the agent’s actions or omissions, including but not limited to the delivery of Securities prior to the receipt of collateral, in the absence of negligence or willful misconduct on the part of the Custodian.

 

(n) Stock Dividends, Rights, Etc.

 

The Custodian shall receive and collect all stock dividends, rights, and other items of like nature and, upon receipt of Instructions, take action with respect to the same as directed in such Instructions.

 

(o) Routine Dealings.

 

The Custodian will, in general, attend to all routine and operational matters in accordance with industry standards in connection with the sale, exchange, substitution, purchase, transfer, or other dealings with Securities or other property of the Fund, except as may be otherwise provided in this Agreement or directed from time to time by Instructions from the Fund. The Custodian may also make payments to itself or others from the Assets for disbursements and out-of-pocket expenses incidental to handling Securities or other similar items relating to its duties under this Agreement, provided that all such payments shall be accounted for to the Fund.

 

(p) Collections.

 

The Custodian shall (a) collect amounts due and payable to the Fund with respect to Securities and other Assets; (b) promptly credit to the account of the Fund all income and other payments relating to Securities and other Assets held by the Custodian hereunder upon Custodian’s receipt of such income or payments or as otherwise agreed in writing by the Custodian and the Fund; (c) promptly endorse and deliver any instruments required to effect such collection; and (d) promptly execute ownership and other certificates, affidavits and other documents for all federal, state, local and foreign tax purposes in connection with receipt of income or other payments with respect to Securities and other Assets, or in connection with the transfer of such Securities or other Assets; provided, however, that with respect to Securities registered in so-called street name, or physical Securities with variable interest rates, the Custodian shall use its best efforts to collect amounts due and payable to the Fund. The Custodian shall notify the Fund in writing by facsimile transmission or in such other manner as the Fund and Custodian may agree in writing if any amount payable with respect to Securities or other Assets is not received by the Custodian when due. The Custodian shall not be responsible for the collection of amounts due and payable with respect to Securities or other Assets that are in default.

 

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Any advance credit of cash or Securities expected to be received shall be subject to actual collection and may, when the Custodian determines collection unlikely, be reversed by the Custodian.

 

(q) Dividends, Distributions and Redemptions.

 

To enable the Fund to pay dividends or other distributions to shareholders of the Fund and to make payment to shareholders who have requested repurchase or redemption of their shares of the Fund (collectively, the “Shares”), the Custodian shall release cash or Securities insofar as available. In the case of cash, the Custodian shall, upon the receipt of Instructions, transfer such funds by check or wire transfer to any account at any bank or trust company designated by the Fund in such Instructions. In the case of Securities, the Custodian shall, upon the receipt of Special Instructions, make such transfer to any entity or account designated by the Fund in such Special Instructions.

 

(r) Proceeds from Shares Sold.

 

The Custodian shall receive funds representing cash payments received for shares issued or sold from time to time by the Fund, and shall credit such funds to the account of the Fund. The Custodian shall notify the Fund of Custodian’s receipt of cash in payment for shares issued by the Fund by facsimile transmission or in such other manner as the Fund and the Custodian shall agree. Upon receipt of Instructions, the Custodian shall: (a) deliver all federal funds received by the Custodian in payment for shares as may be set forth in such Instructions and at a time agreed upon between the Custodian and the Fund; and (b) make federal funds available to the Fund as of specified times agreed upon from time to time by the Fund and the Custodian, in the amount of checks received in payment for shares which are deposited to the accounts of the Fund.

 

(s) Proxies and Notices; Compliance with the Shareholders Communication Act of 1985.

 

The Custodian shall deliver or cause to be delivered to the Fund, or its designated agent or proxy service provider, all forms of proxies, all notices of meetings, and any other notices or announcements affecting or relating to Securities owned by the Fund that are received by the Custodian and, upon receipt of Instructions, the Custodian shall execute and deliver, or cause a Subcustodian or nominee to execute and deliver such proxies or other authorizations as may be required. Except as directed pursuant to Instructions, neither the Custodian nor any Subcustodian shall vote upon any such Securities, or execute any proxy to vote thereon, or give any consent or take any other action with respect thereto.

 

The Custodian will not release the identity of the Fund to an issuer which requests such information pursuant to the Shareholder Communications Act of 1985 for the specific purpose of direct communications between such issuer and the Fund unless the Fund directs the Custodian otherwise pursuant to Instructions.

 

(t) Books and Records.

 

The Custodian shall maintain such records relating to its activities under this Agreement as are required to be maintained by Rule 31a-1 under the 1940 Act and to preserve them for the periods prescribed in Rule 31a-2 under the 1940 Act. These records shall be open for inspection by duly authorized officers, employees or agents (including independent public accountants) of the Fund during normal business hours of the Custodian.

 

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The Custodian shall provide accountings relating to its activities under this Agreement as shall be agreed upon by the Fund and the Custodian.

 

(u) Opinion of Fund’s Independent Certified Public Accountants.

 

The Custodian shall take all reasonable action as the Fund may request to obtain from year to year favorable opinions from the Fund’s independent certified public accountants with respect to the Custodian’s activities hereunder and in connection with the preparation of the Fund’s periodic reports to the SEC and with respect to any other requirements of the SEC.

 

(v) Reports by Independent Certified Public Accountants.

 

At the request of the Fund, the Custodian shall deliver to the Fund a written report, which may be in electronic form, prepared by the Custodian’s independent certified public accountants with respect to the services provided by the Custodian under this Agreement, including, without limitation, the Custodian’s accounting system, internal accounting control, financial strength and procedures for safeguarding cash, Securities and other Assets, including cash, Securities and other Assets deposited and/or maintained in a Securities System or with a Subcustodian. Such report shall be of sufficient scope and in sufficient detail as may reasonably be required by the Fund and as may reasonably be obtained by the Custodian.

 

(w) Bills and Other Disbursements.

 

Upon receipt of Instructions, the Custodian shall pay, or cause to be paid, all bills, statements, or other obligations of the Fund.

 

(x) Sweep or Automated Cash Management.

 

Upon receipt of Instructions, the Custodian shall invest any otherwise uninvested cash of the Fund held by the Custodian in a money market mutual fund, a cash deposit product, or other cash investment vehicle made available by the Custodian from time to time, in accordance with the directions contained in such Instructions. A fee may be charged or a spread may be received by the Custodian for investing the Fund’s otherwise uninvested cash in the available cash investment vehicles or products.

 

The Custodian shall have no responsibility to determine whether any purchases of money market mutual fund shares or any other cash investment vehicle or cash deposit product by or on behalf of the Fund under the terms of this section will cause the Fund to exceed the limitations contained in the 1940 Act on ownership of shares of another registered investment company or any other asset or portfolio restrictions or limitations contained in applicable laws or regulations or the Fund’s prospectus. The Fund agrees to indemnify and hold harmless the Custodian from all losses, damages and expenses (including attorney’s fees) suffered or incurred by the Custodian as a result of a violation by the Fund of the limitations on ownership of shares of another registered investment company or any other cash investment vehicle or cash deposit product.

 

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5. SUBCUSTODIANS.

 

From time to time, in accordance with the relevant provisions of this Agreement and subject to the prior written consent of the Fund, which consent shall not be unreasonably withheld, (i) the Custodian may appoint one or more Domestic Subcustodians, Foreign Subcustodians, Special Subcustodians or Interim Subcustodians (each as hereinafter defined) to act on behalf of the Fund; and (ii) the Custodian may be directed, pursuant to an agreement between the Fund and the Custodian (“Delegation Agreement”), to appoint a Domestic Subcustodian to perform the duties of the Foreign Custody Manager (as such term is defined in Rule 17f-5 under the 1940 Act) (“Approved Foreign Custody Manager”) for the Fund so long as such Domestic Subcustodian is so eligible under the 1940 Act. Such Delegation Agreement shall provide that the appointment of any Domestic Subcustodian as the Approved Foreign Custody Manager must be governed by a written agreement between the Custodian and the Domestic Subcustodian, which provides for compliance with Rule 17f-5. The Approved Foreign Custody Manager may then appoint a Foreign Subcustodian or Interim Subcustodian in accordance with this Section 5. For purposes of this Agreement, all Domestic Subcustodians, Special Subcustodians, Foreign Subcustodians and Interim Subcustodians shall be referred to collectively as “Subcustodians.”

 

(a) Domestic Subcustodians.

 

The Custodian may, at any time and from time to time, appoint any bank as defined in Section 2(a)(5) of the 1940 Act or any trust company or other entity, any of which meets the requirements of a custodian under Section 17(f) of the 1940 Act and the rules and regulations thereunder, to act for the Custodian on behalf of the Fund as a subcustodian for purposes of holding Assets of the Fund and performing other functions of the Custodian within the United States (a “Domestic Subcustodian”). The Fund shall approve in writing the appointment of the proposed Domestic Subcustodian; and the Custodian’s appointment of any such Domestic Subcustodian shall not be effective without such prior written approval of the Fund. Each such duly approved Domestic Subcustodian shall be reflected on Appendix A hereto, as it may be amended from time-to-time.

 

(b) Foreign Subcustodians.

 

(1) The Approved Foreign Custody Manager may appoint any entity meeting the requirements of an Eligible Foreign Custodian, as such term is defined in Rule 17f-5(a)(1) under the 1940 Act, and which term shall also include a bank that qualifies to serve as a custodian of assets of investment companies under Section 17(f) of the 1940 Act or by SEC order is exempt therefrom (each a “Foreign Subcustodian” in the context of either a subcustodian or a sub-subcustodian), provided that the Approved Foreign Custody Manager’s appointments of such Foreign Subcustodians shall at all times be governed by an agreement that complies with Rule 17f-5.

 

(2) Notwithstanding the foregoing, in the event that the Approved Foreign Custody Manager determines that it will not provide delegation services (i) in a country in which the Fund has directed that the Fund invest in a security or other Asset or (ii) with respect to a specific Foreign Subcustodian which the Fund has directed be used, the Custodian shall, or shall cause the Approved Foreign Custody Manager to, promptly notify the Fund in writing by facsimile transmission, Electronic Communication, or otherwise of the unavailability of the Approved Foreign Custody Manager’s delegation services in such country. The Custodian and the Approved Foreign Custody Manager (or Domestic Subcustodian) as applicable, shall be entitled to rely on and shall have no liability or responsibility for following such direction from the Fund as a Special Instruction and shall have no duties or liabilities under this Agreement save those that it may undertake specifically in writing with respect to each particular instance. Upon the receipt of such Special Instructions, the Custodian may, in its absolute discretion, designate, or cause the Approved Foreign Custody Manager to designate, an entity (defined herein as “Interim Subcustodian”) designated by the Fund in such Special Instructions, to hold such security or other Asset. In such event, the Fund represents and warrants that it has made a determination that the arrangement with such Interim Subcustodian satisfies the requirements of the 1940 Act and the rules and regulations thereunder (including Rule 17f-5, if applicable). It is further understood that where the Approved Foreign Custody Manager and the Custodian do not agree to provide fully to the Fund the services under this Agreement and the Delegation Agreement with respect to a particular country or specific Foreign Subcustodian, the Fund may delegate such services to another delegate pursuant to Rule 17f-5.

 

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(c) Special Subcustodians.

 

Upon receipt of Special Instructions, the Custodian shall, on behalf of the Fund, appoint one or more banks, trust companies or other entities designated in such Special Instructions to act for the Custodian on behalf of the Fund as a subcustodian for purposes of: (i) effecting third-party repurchase transactions with banks, brokers, dealers or other entities through the use of a common custodian or subcustodian; (ii) providing depository and clearing agency services with respect to certain variable rate demand note Securities, (iii) providing depository and clearing agency services with respect to dollar denominated Securities; and (iv) effecting any other transactions designated by the Fund in such Special Instructions. Each such designated subcustodian (hereinafter referred to as a “Special Subcustodian”) shall be listed on Appendix A attached hereto, as it may be amended from time to time. In connection with the appointment of any Special Subcustodian, the Custodian may enter into a subcustodian agreement with the Special Subcustodian.

 

(d) Termination of a Subcustodian.

 

The Custodian may, at any time in its discretion upon notification to the Fund, terminate any Subcustodian of the Fund in accordance with the termination provisions under the applicable subcustodian agreement, and upon the receipt of Special Instructions, the Custodian shall terminate any Subcustodian in accordance with the termination provisions under the applicable subcustodian agreement.

 

(e) Information Regarding Foreign Subcustodians.

 

Upon request of the Fund, the Custodian shall deliver, or cause any Approved Foreign Custody Manager to deliver, to the Fund a letter or list stating: (i) the identity of each Foreign Subcustodian then acting on behalf of the Custodian; (ii) the Eligible Securities Depositories (as defined in Section 5(f)) in each foreign market through which each Foreign Subcustodian is then holding cash, securities and other Assets of the Fund; and (iii) such other information as may be requested by the Fund to ensure compliance with rules and regulations under the 1940 Act.

 

(f) Eligible Securities Depositories.

 

(1) The Custodian or the Domestic Subcustodian may place and maintain the Fund’s Foreign Assets with an Eligible Securities Depository (as defined in Rule 17f-7, which term shall include any other securities depository for which the SEC by exemptive order has permitted registered investment companies or BDCs to maintain their assets).

 

(2) Upon the request of the Fund, the Custodian shall direct the Domestic Subcustodian to provide to the Fund (including the Fund’s Board of Trustees) and/or the Fund’s adviser or other agent an analysis of the custody risks associated with maintaining the Fund’s Foreign Assets with such Eligible Securities Depository utilized directly or indirectly by the Custodian or the Domestic Subcustodian as of the date hereof (or, in the case of an Eligible Securities Depository not so utilized as of the date hereof, prior to the placement of the Fund’s Foreign Assets at such depository) and at which any Foreign Assets of the Fund are held or are expected to be held. The Custodian shall direct the Domestic Subcustodian to monitor the custody risks associated with maintaining the Fund’s Foreign Assets at each such Eligible Securities Depository on a continuing basis and shall promptly notify the Fund or its adviser of any material changes in such risks through the Approved Foreign Custody Manager’s letter, market alerts or other periodic correspondence.

 

(3) The Custodian shall direct the Domestic Subcustodian to determine the eligibility under Rule 17f-7 of each foreign securities depository before maintaining the Fund’s Foreign Assets therewith and shall promptly advise the Fund if any Eligible Securities Depository ceases to be so eligible. Notwithstanding Subsection 17(c) hereof, Eligible Securities Depositories may, subject to Rule 17f-7, be added to or deleted from such list from time to time.

 

(4) Withdrawal of Assets. If an arrangement with an Eligible Securities Depository no longer meets the requirements of Rule 17f-7, the Custodian shall direct the Domestic Subcustodian to withdraw the Fund’s Foreign Assets from such depository as soon as reasonably practicable.

 

(5) Standard of Care. In fulfilling its responsibilities under this Section 5(f), the Custodian will exercise reasonable care, prudence and diligence.

 

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6. STANDARD OF CARE.

 

(a) General Standard of Care.

 

The Custodian shall exercise due care in accordance with reasonable commercial standards in discharging its duties hereunder. The Custodian shall be liable to the Fund for all losses, damages and reasonable costs and expenses suffered or incurred by the Fund resulting from the negligence, bad faith or willful misconduct of the Custodian or the Custodian’s reckless disregard of its duties under this Agreement; provided, however, in no event shall the Custodian or the Fund be liable for attorneys’ fees or for special, indirect, consequential or punitive damages arising under or in connection with this Agreement.

 

(b) Actions Prohibited by Applicable Law, Etc.

 

In no event shall the Custodian incur liability hereunder if the Custodian or any Subcustodian or Securities System, or any Subcustodian, Eligible Securities Depository utilized by any such Subcustodian, or any nominee of the Custodian or any Subcustodian (individually, a “Person”) is prevented, forbidden or delayed from performing, or omits to perform, any act or thing which this Agreement provides shall be performed or omitted to be performed, by reason of: (i) any provision of any present or future law or regulation or order of the United States of America, or any state thereof, or of any foreign country, or political subdivision thereof or of any court of competent jurisdiction (and neither the Custodian nor any other Person shall be obligated to take any action contrary thereto); or (ii) any “Force Majeure,” which for purposes of this Agreement, shall mean any circumstance or event which is beyond the reasonable control of the Custodian, a Subcustodian or any agent of the Custodian or a Subcustodian and which adversely affects the performance by the Custodian of its obligations hereunder, by the Subcustodian of its obligations under its subcustodian agreement or by any other agent of the Custodian or the Subcustodian, unless in each case, such delay or nonperformance is caused by the negligence, bad faith or willful misconduct of the Custodian or the Custodian’s reckless disregard of its duties under this Agreement. Such Force Majeure events may include any event caused by, arising out of or involving (a) an act of God, (b) accident, fire, water damage or explosion, (c) any computer, system outage or downtime or other equipment failure or malfunction caused by any computer virus or any other reason or the malfunction or failure of any communications medium (provided that the Custodian has adopted commercially reasonable cybersecurity systems, policies and procedures), (d) any interruption of the power supply or other utility service, (e) any strike or other work stoppage, whether partial or total, (f) any delay or disruption resulting from or reflecting the occurrence of any Sovereign Risk (as defined below), (g) any disruption of, or suspension of trading in, the securities, commodities or foreign exchange markets, whether or not resulting from or reflecting the occurrence of any Sovereign Risk, (h) any encumbrance on the transferability of cash, currency or a currency position on the actual settlement date of a foreign exchange transaction, whether or not resulting from or reflecting the occurrence of any Sovereign Risk, or (i) any other cause similarly beyond the reasonable control of the Custodian.

 

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Subject to the Custodian’s general standard of care set forth in Subsection 6(a) hereof and the requirements of Section 17(f) of the 1940 Act and Rules 17f-5 and 17f-7 thereunder, the Custodian shall not incur liability hereunder if any Person is prevented, forbidden or delayed from performing, or omits to perform, any act or thing which this Agreement provides shall be performed or omitted to be performed by reason of any (i) “Sovereign Risk,” which for the purpose of this Agreement shall mean, in respect of any jurisdiction, including but not limited to the United States of America, where investments are acquired or held under this Agreement, (a) any act of war, terrorism, riot, insurrection or civil commotion, (b) the imposition of any investment, repatriation or exchange control restrictions by any governmental authority, (c) the confiscation, expropriation or nationalization of any investments by any governmental authority, whether de facto or de jure, (d) any devaluation or revaluation of the currency, (e) the imposition of taxes, levies or other charges affecting investments, (f) any change in the applicable law, or (g) any other economic, systemic or political risk incurred or experienced that is not directly related to the economic or financial conditions of the Eligible Foreign Custodian, except as otherwise provided in this Agreement or the Delegation Agreement, or (ii) “Country Risk,” which for the purpose of this Agreement shall mean, with respect to the acquisition, ownership, settlement or custody of investments in a jurisdiction, all risks relating to, or arising in consequence of, systemic and market factors affecting the acquisition, payment for or ownership of investments, including (a) the prevalence of crime and corruption in such jurisdiction, (b) the inaccuracy or unreliability of business and financial information (unrelated to the Approved Foreign Custody Manager’s duties imposed by Rule 17f-5(c) under the 1940 Act or to the duties imposed on the Custodian by Rule 17f-7 under the 1940 Act), (c) the instability or volatility of banking and financial systems, or the absence or inadequacy of an infrastructure to support such systems, (d) custody and settlement infrastructure of the market in which such investments are transacted and held, (e) the acts, omissions and operation of any Eligible Securities Depository, it being understood that this provision shall not excuse the Custodian’s performance under the express terms of this Agreement, (f) the risk of the bankruptcy or insolvency of banking agents, counterparties to cash and securities transactions, registrars or transfer agents, (g) the existence of market conditions which prevent the orderly execution or settlement of transactions or which affect the value of assets, and (h) the laws relating to the safekeeping and recovery of the Fund’s Foreign Assets held in custody pursuant to the terms of this Agreement; provided, however, that, in compliance with Rule 17f-5, neither Sovereign Risk nor Country Risk shall include the custody risk of a particular Eligible Foreign Custodian of the Fund’s Foreign Assets.

 

(c) Liability for Past Records.

 

Neither the Custodian nor any Domestic Subcustodian shall have any liability in respect of any loss, damage or expense suffered by the Fund, insofar as such loss, damage or expense arises from the performance of the Custodian or any Domestic Subcustodian in reliance upon records that were maintained for the Fund by entities other than the Custodian or any Domestic Subcustodian prior to the Custodian’s employment hereunder.

 

(d) Advice of Counsel.

 

The Custodian and all Domestic Subcustodians shall be entitled to receive and act upon advice of counsel of its own choosing on all matters. The Custodian and all Domestic Subcustodians shall be without liability for any actions taken or omitted in good faith pursuant to, and in accordance with, the advice of counsel.

 

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(e) Advice of the Fund and Others.

 

The Custodian and any Domestic Subcustodian may rely upon the advice of the Fund and upon statements of the Fund’s accountants and other persons believed by it in good faith to be expert in matters upon which they are consulted, and neither the Custodian nor any Domestic Subcustodian shall be liable for any actions taken or omitted, in good faith, pursuant to such advice or statements.

 

(f) Information Services.

 

The Custodian may rely upon information received from issuers of Securities or agents of such issuers, information received from Subcustodians or depositories, information from data reporting services that provide detail on corporate actions and other securities information, and other commercially reasonable industry sources; and, provided the Custodian has acted in accordance with the standard of care set forth in Section 6 (a), the Custodian shall have no liability as a result of relying upon such information sources, including but not limited to errors in any such information.

 

(g) Instructions Appearing to be Genuine.

 

The Custodian and all Domestic Subcustodians shall be fully protected and indemnified in acting as a custodian hereunder upon any resolutions of the Board of Trustees, Instructions, Special Instructions, advice, notice, request, consent, certificate, instrument or paper appearing to it to be genuine and to have been properly executed and shall, unless otherwise specifically provided herein, be entitled to receive as conclusive proof of any fact or matter required to be ascertained from the Fund hereunder a certificate signed by any officer of the Fund authorized to countersign or confirm Special Instructions. The Custodian shall have no liability for any losses, damages or expenses incurred by the Fund arising from the use of a non-secure form of email or other non-secure electronic system or process.

 

(h) No Investment Advice.

 

The Custodian shall have no duty to assess the risks inherent in Securities or other Assets or to provide investment advice, accounting or other valuation services regarding any such Securities or other Assets.

 

(i) Exceptions from Liability.

 

Without limiting the generality of any other provisions hereof, neither the Custodian nor any Domestic Subcustodian shall be under any duty or obligation to inquire into, nor be liable for:

 

(i) the validity of the issue of any Securities purchased by or for the Fund, the legality of the purchase thereof or evidence of ownership required to be received by the Fund, or the propriety of the decision to purchase or amount paid therefor;

 

(ii) the legality of the sale, transfer or movement of any Securities by or for the Fund, or the propriety of the amount for which the same were sold; or

 

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(iii) any other expenditures, encumbrances of Securities, borrowings or similar actions with respect to the Fund’s Assets;

 

and may, until notified to the contrary, presume that all Instructions or Special Instructions received by it are not in conflict with or in any way contrary to any provisions of the Fund’s Declaration of Trust, Partnership Agreement, Articles of Incorporation or By-Laws or votes or proceedings of the shareholders, trustees, partners or directors of the Fund, or the Fund’s currently effective Registration Statement on file with the SEC.

 

7. LIABILITY OF THE CUSTODIAN FOR ACTIONS OF OTHERS.

 

(a) Domestic Subcustodians

 

Except as provided in Section 7(d), the Custodian shall be liable for the acts or omissions of any Domestic Subcustodian to the same extent as if such actions or omissions were performed by the Custodian itself.

 

(b) Liability for Acts and Omissions of Foreign Subcustodians.

 

The Custodian shall be liable to the Fund for any loss or damage to the Fund caused by or resulting from the acts or omissions of any Foreign Subcustodian to the extent that, under the terms set forth in the subcustodian agreement between the Custodian or a Domestic Subcustodian and such Foreign Subcustodian, the Foreign Subcustodian has failed to perform in accordance with the standard of conduct imposed under such subcustodian agreement and the Custodian or Domestic Subcustodian recovers from the Foreign Subcustodian under the applicable subcustodian agreement.

 

(c) Securities Systems, Interim Subcustodians, Special Subcustodians, Eligible Securities Depositories.

 

The Custodian shall not be liable to the Fund for any loss, damage or expense suffered or incurred by the Fund resulting from or occasioned by the actions or omissions of a Securities System, Interim Subcustodian, Special Subcustodian, or Eligible Securities Depository unless such loss, damage or expense is caused by, or results from, the negligence, bad faith or willful misconduct of the Custodian or the Custodian’s reckless disregard of its duties under this Agreement.

 

(d) Failure of Third Parties.

 

The Custodian shall not be liable for any loss, damage or expense suffered or incurred by the Fund resulting from or occasioned by the actions, omissions, neglects, defaults, insolvency or other failure of any (i) issuer of any Securities or of any agent of such issuer; (ii) any counterparty with respect to any Security or other Asset, including any issuer of any option, futures, derivatives or commodities contract; (iii) investment adviser or other agent of the Fund; or (iv) any broker, bank, trust company or any other person with whom the Custodian may deal (other than any of such entities acting as a Subcustodian, Securities System or Eligible Securities Depository, for whose actions the liability of the Custodian is set out elsewhere in this Agreement); or (v) any agent or depository (including but not limited to a securities lending agent) with whom the Custodian may deal at the direction of, and behalf of, the Fund; unless such loss, damage or expense is caused by, or results from, the negligence, bad faith or willful misconduct of the Custodian or the Custodian’s reckless disregard of its duties under this Agreement or the Custodian’s breach of the terms of any contract between the Fund and the Custodian.

 

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8. INDEMNIFICATION.

 

(a) Indemnification by Fund.

 

Subject to the limitations set forth in this Agreement, the Fund agrees to indemnify and hold harmless the Custodian and its nominees from all losses, damages and expenses (including attorneys’ fees) suffered or incurred by the Custodian or its nominee caused by or arising from actions taken by the Custodian, its employees or agents in the performance of its duties and obligations under this Agreement, including, but not limited to, any indemnification obligations undertaken by the Custodian under any relevant subcustodian agreement; provided, however, that such indemnity shall not apply to the extent (i) the Custodian is liable under Sections 6 or 7 hereof; or (ii) such losses, damages and expenses (including attorneys’ fees) were caused by the negligence or willful misconduct of the Custodian.

 

If the Fund requires the Custodian to take any action with respect to Securities, which action involves the payment of money or which may, in the opinion of the Custodian, result in the Custodian or its nominee assigned to the Fund being liable for the payment of money or incurring liability of some other form, the Fund, as a prerequisite to requiring the Custodian to take such action, shall provide indemnity to the Custodian in an amount and form satisfactory to it.

 

(b) Indemnification by Custodian.

 

Subject to the limitations set forth in this Agreement, the Custodian agrees to indemnify and hold harmless the Fund from all losses, damages and expenses (with the exception of those damages and expenses referenced in Section 6(a)) suffered or incurred by the Fund caused by the negligence, bad faith or willful misconduct of the Custodian or the Custodian’s reckless disregard of its duties under this Agreement.

 

9. ADVANCES.

 

In the event that the Custodian or any Subcustodian, Securities System, or Eligible Securities Depository acting either directly or indirectly under agreement with the Custodian (each of which for purposes of this Section 9 shall be referred to as “Custodian”), makes any payment or transfer of funds on behalf of the Fund as to which there would be, at the close of business on the date of such payment or transfer, insufficient funds held by the Custodian on behalf of the Fund, the Custodian may, in its discretion without further Instructions, provide an advance (“Advance”) to the Fund in an amount sufficient to allow the completion of the transaction by reason of which such payment or transfer of funds is to be made. In addition, in the event the Custodian is directed by Instructions to make any payment or transfer of funds on behalf of the Fund as to which it is subsequently determined that the Fund has overdrawn its cash account with the Custodian as of the close of business on the date of such payment or transfer, said overdraft shall constitute an Advance. Any Advance shall be payable by the Fund on behalf of which the Advance was made on demand by Custodian, unless otherwise agreed by the Fund and the Custodian, and shall accrue interest from the date of the Advance to the date of payment by the Fund to the Custodian at a rate determined from time to time by the Custodian and communicated to the Fund. It is understood that any transaction in respect of which the Custodian shall have made an Advance, including but not limited to a foreign exchange contract or transaction in respect of which the Custodian is not acting as a principal, is for the account of and at the risk of the Fund on behalf of which the Advance was made, and not, by reason of such Advance, deemed to be a transaction undertaken by the Custodian for its own account and risk. The Custodian and the Fund which are parties to this Agreement acknowledge that the purpose of Advances is to finance temporarily the purchase or sale of Securities for prompt delivery in accordance with the settlement terms of such transactions or to meet emergency expenses not reasonably foreseeable by the Fund. The Custodian shall promptly notify the Fund of any Advance. Such notification may be communicated by telephone, Electronic Communication or facsimile transmission or in such other manner as the Custodian may choose. Nothing herein shall be deemed to create an obligation on the part of the Custodian to advance monies to the Fund.

 

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10. SECURITY INTEREST.

 

To secure the due and prompt payment of all Advances, together with any taxes, charges, fees, expenses, assessments, obligations, claims or liabilities incurred by the Custodian in connection with its or their performance of any duties under this Agreement (collectively, “Liabilities”), except for any Liabilities arising from or the Custodian’s negligence, bad faith or willful misconduct or the Custodian’s reckless disregard of its duties under this Agreement, the Fund grants to the Custodian a security interest in all of the Fund’s Securities and other Assets now or hereafter in the possession of the Custodian and all proceeds thereof (collectively, the “Collateral”). The Fund shall promptly reimburse the Custodian for any and all such Liabilities. In the event that the Fund fails to satisfy any of the Liabilities as and when due and payable, the Custodian shall have in respect of the Collateral, in addition to all other rights and remedies arising hereunder or under local law, the rights and remedies of a secured party under the Uniform Commercial Code. Without prejudice to the Custodian’s rights under applicable law, the Custodian shall be entitled, without notice to the Fund, to withhold delivery of any Collateral, sell, set-off, or otherwise realize upon or dispose of any such Collateral and to apply the money or other proceeds and any other monies credited to the Fund in satisfaction of the Liabilities. This includes, but is not limited to, any interest on any such unpaid Liability as the Custodian deems reasonable, and all costs and expenses (including reasonable attorney’s fees) incurred by the Custodian in connection with the sale, set-off or other disposition of such Collateral.

 

11. COMPENSATION.

 

The Fund will pay to the Custodian such compensation as is set forth on Schedule A hereto, or as otherwise agreed to in writing by the Custodian and the Fund from time to time. In addition, the Fund shall reimburse the Custodian for all reasonable out-of-pocket expenses incurred by the Custodian in connection with this Agreement, but excluding salaries and usual overhead expenses. Such compensation, and expenses shall be billed to the Fund and paid in cash to the Custodian.

 

12. POWERS OF ATTORNEY.

 

Upon request, the Fund shall deliver to the Custodian such proxies, powers of attorney or other instruments as may be reasonable and necessary or desirable in connection with the performance by the Custodian or any Subcustodian of their respective obligations under this Agreement or any applicable subcustodian agreement.

 

13. TAX LAWS.

 

The Custodian shall have no responsibility or liability for any obligations now or hereafter imposed on the Fund or on the Custodian as custodian for the Fund by the tax law of any country or of any state or political subdivision thereof. The Fund agrees to indemnify the Custodian for and against any such obligations including taxes, tax reclaims, withholding and reporting requirements, claims for exemption or refund, additions for late payment, interest, penalties and other expenses (including legal expenses) that may be assessed against the Fund or the Custodian as custodian of the Fund.

 

14. TERM AND ASSIGNMENT.

 

Unless sooner terminated as provided herein, this Agreement shall continue in effect with respect to each Fund for a two-year period beginning on the date of this Agreement (the “Initial Term”). Thereafter, if not terminated as provided herein, the Agreement shall continue automatically in effect as to each Fund for successive one-year periods (each a “Renewal Term”).

 

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In the event this Agreement is terminated by the Fund prior to the end of the Initial Term or any subsequent Renewal Term, the Fund shall be obligated to pay the Custodian the remaining balance of the fees payable to the Custodian under this Agreement through the end of the Initial Term or Renewal Term, as applicable. Notwithstanding the foregoing, either party may terminate this Agreement, and pay fees through the date of termination: (i) at the end of the Initial Term or at the end of any successive Renewal Term by giving the other party a written notice not less than ninety (90) days’ prior to the end of the respective term; (ii) upon the material breach of the other party of any term of this Agreement if such breach is not cured within 15 business days of notice of such breach to the breaching party; and (iii) in the event of the appointment of a conservator or receiver for the Custodian by regulatory authorities or upon the happening of a like event at the direction of an appropriate regulatory agency or court of competent jurisdiction. Upon termination of this Agreement, the Fund shall pay to the Custodian such fees as may be due the Custodian hereunder as well as its reimbursable disbursements, costs and expenses paid or incurred. Upon termination of this Agreement, the Custodian shall deliver, at the terminating party’s expense, all Assets held by it hereunder to a successor custodian designated by the Fund or, if a successor custodian is not designated, then to the Fund or as otherwise designated by the Fund by Special Instructions. Upon such delivery, the Custodian shall have no further obligations or liabilities under this Agreement except as to the final resolution of matters relating to activity occurring prior to the effective date of termination. In the event that for any reason Securities or other Assets remain in the possession of the Custodian after the date such termination shall take effect, the Custodian shall be entitled to compensation at the same rates as agreed to by the Custodian and the Fund during the term of this Agreement as set forth in Section 11.

 

This Agreement may not be assigned by the Custodian or the Fund without the respective consent of the other.

 

15. ADDITIONAL FUNDS.

 

An additional Fund or Funds may become a party to this Agreement after the date hereof by an instrument in writing to such effect signed by such Fund or Funds and the Custodian. If this Agreement is terminated as to one or more of the Funds (but less than all of the Funds) or if an additional Fund or Funds shall become a party to this Agreement, there shall be delivered to each party an Appendix B or an amended Appendix B, signed by each of the additional Funds (if any) and each of the remaining Funds as well as the Custodian, deleting or adding such Fund or Funds, as the case may be. The termination of this Agreement as to less than all of the Funds shall not affect the obligations of the Custodian and the remaining Funds hereunder as set forth on the signature page hereto and in Appendix B as revised from time to time.

 

16. NOTICES.

 

As to the Fund, notices, requests, instructions and other writings delivered to StepStone Private Credit Fund, LLC, 450 Lexington Avenue, 31st Floor, New York, NY 10017 postage prepaid, or to such other address as the Fund may have designated to the Custodian in writing, shall be deemed to have been properly delivered or given to the Fund.

 

Notices, requests, instructions and other writings delivered to the Custodian at its office at 928 Grand Blvd., 10th Floor, Attn: Amy Small, Kansas City, Missouri 64106, postage prepaid, or to such other addresses as the Custodian may have designated to the Fund in writing, shall be deemed to have been properly delivered or given to the Custodian hereunder; provided, however, that procedures for the delivery of Instructions and Special Instructions shall be governed by Section 2(c) hereof.

 

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17. CONFIDENTIALITY.

 

The parties agree that all Information, books and records provided by the Custodian or the Fund to each other in connection with this Agreement, and all information provided by either party pertaining to its business or operations, is “Confidential Information.” All Confidential Information shall be used by the party receiving such information only for the purpose of providing or obtaining services under this Agreement and, except as may be required to carry out the terms of this Agreement, shall not be disclosed to any other party without the express consent of the party providing such Confidential Information. The foregoing limitations shall not apply to any information that is available to the general public other than as a result of a breach of this Agreement, or that is required to be disclosed by or to any entity having regulatory authority over a party hereto or any auditor of a party hereto or that is required to be disclosed as a result of a subpoena or other judicial process, or otherwise by applicable laws.

 

18. ANTI-MONEY LAUNDERING COMPLIANCE.

 

Although the Fund is not subject to detailed anti-money laundering program obligations under the USA PATRIOT Act, the Fund represents and warrants that it will establish and maintain policies and procedures designed to meet the requirements imposed by the USA PATRIOT Act, including policies and procedures designed to detect and prevent money laundering, including those required by the USA PATRIOT Act. The Fund agrees to use commercially reasonable efforts to provide to the Custodian, from time to time upon the request of the Custodian, certifications regarding its compliance with the USA PATRIOT Act and other anti-money laundering laws with respect to the Fund. The Fund acknowledges that, because the Custodian will not have information regarding the shareholders of the Fund, the Custodian shall not assume responsibility for customer identification and verification and other CIP requirements in regard to such shareholders.

 

19. MISCELLANEOUS.

 

(a) This Agreement is executed and delivered in the State of Delaware and shall be governed by the laws of such state.

 

(b) All of the terms and provisions of this Agreement shall be binding upon, and inure to the benefit of, and be enforceable by the respective successors and assigns of the parties hereto.

 

(c) No provisions of this Agreement may be amended, modified or waived in any manner except in writing, properly executed by both parties hereto; provided, however, Appendix A may be amended from time to time as Domestic Subcustodians, Securities Systems, and Special Subcustodians are approved or terminated according to the terms of this Agreement.

 

(d) The captions in this Agreement are included for convenience of reference only, and in no way define or delimit any of the provisions hereof or otherwise affect their construction or effect.

 

(e) This Agreement shall be effective as of the date of execution hereof.

 

(f) This Agreement may be executed simultaneously in two or more counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.

 

(g) If any part, term or provision of this Agreement is held to be illegal, in conflict with any law or otherwise invalid by any court of competent jurisdiction, the remaining portion or portions shall be considered severable and shall not be affected, and the rights and obligations of the parties shall be construed and enforced as if this Agreement did not contain the particular part, term or provision held to be illegal or invalid.

 

(h) Entire Agreement. This Agreement and the Delegation Agreement (if applicable), as amended from time to time, constitute the entire understanding and agreement of the parties thereto with respect to the subject matter therein and accordingly, supersedes as of the effective date of this Agreement any custodian agreement heretofore in effect between the Fund and the Custodian.

 

(i) The rights and obligations contained in Sections 6, 7, 8, 9, 10, 11 and 17 of this Agreement shall continue, notwithstanding the termination of this Agreement, in order to fulfill the intention of the parties as described in such Sections.

 

[Signature page to follow.]

 

23

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Custody Agreement to be executed by their respective duly authorized officers.

 

  STEPSTONE PRIVATE CREDIT FUND LLC
   
 

By:

/s/ Joseph Cambareri

 

Name: 

Joseph Cambareri

 

Title:

Chief Financial Officer

 

Date:

March 21, 2023

   
 

UMB BANK, N.A.

   
 

By:

/s/ David Paldino

 

Name:

David Paldino

 

Title:

Senior Vice President

 

Date:

March 29, 2023

 

24

 

 

Schedule A

to the

Custody Agreement

by and between

StepStone Private Credit Fund LLC

and

UMB Bank, N.A.

 

Fees

 

[Intentionally Omitted]

 

 

 

 

 

 

 

25

 

 

APPENDIX A

 

CUSTODY AGREEMENT

 

The following Subcustodians and Securities Systems are approved for use in connection with the Custody Agreement dated March 29, 2023.

 

SECURITIES SYSTEMS:

 

Depository Trust Company

Federal Book Entry

 

SPECIAL SUBCUSTODIANS:

 

DOMESTIC SUBCUSTODIANS:

 

Brown Brothers Harriman & Co. (Foreign Securities Only)

 

STEPSTONE PRIVATE CREDIT FUND LLC   UMB BANK, N.A.
     

By:

/s/ Joseph Cambareri

 

By:

/s/ David Paldino

Name: 

Joseph Cambareri

 

Name: 

David Paldino

Title:

Chief Financial Officer

 

Title:

Senior Vice President

Date: March 21, 2023   Date: March 29, 2023

 

26

 

 

APPENDIX B

 

CUSTODY AGREEMENT

 

The following investment funds (“Funds”) are hereby made parties to the Custody Agreement dated March 29, 2023, with UMB Bank, n.a. (“Custodian”) and StepStone Private Credit Fund LLC, and agree to be bound by all the terms and conditions contained in said Agreement:

 

SPV Facility I LLC

StepStone Great Lakes SPV Facility II LLC

 

 

SPV FACILITY I LLC

 

By: StepStone Private Credit Fund LLC, its sole member

   

 

By:

/s/ Joseph Cambareri

 

Name: 

Joseph Cambareri

 

Title:

Chief Financial Officer

 

Date:

March 21, 2023

   
 

STEPSTONE GREAT LAKES SPV FACILITY II LLC

 

By: StepStone Private Credit Fund LLC, its sole member

   

 

By:

/s/ Joseph Cambareri

 

Name:

Joseph Cambareri

 

Title:

Chief Financial Officer

 

Date:

March 21, 2023

     
 

UMB BANK, N.A.

   

By:

/s/ David Paldino

 

Name:

David Paldino

 

Title:

Senior Vice President

 

Date:

March 29, 2023

 

 

 

27

 

 

Exhibit 10.7

 

STEPSTONE PRIVATE CREDIT FUND LLC

 

DIVIDEND REINVESTMENT PLAN

 

StepStone Private Credit Fund LLC, a Delaware limited liability company (the “Fund”), hereby adopts the following Dividend Reinvestment Plan (the “Plan”) with respect to distributions declared by its board of directors (the “Board”) on its limited liability company interests (the “Shares”):

 

1. Participation. The Fund’s Plan is available to shareholders of record of the Shares. UMB Fund Services, Inc. (the “Plan Administrator”) acting as agent for each participant in the Plan, will apply income dividends or capital gains or other distributions (each, a “Distribution” and collectively, “Distributions”), net of any applicable U.S. withholding tax, that become payable to such participant on Shares (including shares held in the participant’s name and shares accumulated under the Plan), to the purchase of additional whole and fractional Shares for such participant.

 

2. Eligibility and Election to Participate. Participation in the Plan is limited to registered owners of Shares. The Board reserves the right to amend or terminate the Plan. Shareholders automatically participate in the Plan, unless and until an election is made to withdraw from the Plan on behalf of such participating shareholder. If participating in the Plan, a shareholder is required to include all of the Shares owned by such shareholder in the Plan.

 

3. Share Purchases. When the Fund declares a Distribution, the Plan Administrator, on the shareholder’s behalf, will receive additional authorized shares from the Fund either newly issued or repurchased from shareholders by the Fund and held as treasury stock. The number of shares to be received when Distributions are reinvested will be determined by dividing the amount of the Distribution by the Fund’s most recent net asset value per Share for such Shares at the time the Distribution is payable. There will be no sales load charged on Shares issued to a shareholder under the Plan, but shareholder servicing fees and placement agent fees will be charged where applicable. In making purchases for the accounts of participants, the Plan Administrator may commingle the funds of one participant with those of other participants in the Plan. All shares purchased under the Plan will be held in the name of each participant. In the case of shareholders, such as banks, brokers or nominees, that hold shares for others who are beneficial owners participating under the Plan, the Plan Administrator will administer the Plan on the basis of the number of shares certified from time to time by the record shareholder as representing the total amount of shares registered in the shareholder’s name and held for the account of beneficial owners participating under the Plan.

 

4. Timing of Purchases. The Fund expects to issue Shares pursuant to the Plan, immediately following each Distribution payment date and the Plan Administrator will make every reasonable effort to reinvest all Distributions on the day the Distribution is paid (except where necessary to comply with applicable securities laws) by the Fund. If, for any reason beyond the control of the Plan Administrator, reinvestment of the Distributions cannot be completed within 30 days after the applicable Distribution payment date, funds held by the Plan Administrator on behalf of a participant will be distributed to that participant.

 

5. Account Statements. The Plan Administrator will maintain all shareholder accounts and furnish or cause to be furnished written confirmations of all transactions in the accounts, including information needed by shareholders for personal and tax records. The Plan Administrator will hold shares in the account of the shareholders in non-certificated form in the name of the participant, and each shareholder’s proxy, if any, will include those shares purchased pursuant to the Plan. The Plan Administrator will confirm to each participant each acquisition made pursuant to the Plan as soon as practicable after calculating the net asset value of the Shares. No less frequently than quarterly, the Plan Administrator will provide to each participant an account statement showing the Distribution, the number of shares purchased with the Distribution, and the year-to-date and cumulative Distributions paid. The Plan Administrator will distribute or cause to be distributed all proxy solicitation materials, if any, to participating shareholders.

 

6. Expenses. There will be no direct expenses to participants for the administration of the Plan. There is no direct service charge to participants with regard to purchases under the Plan; however, the Fund reserves the right to amend the Plan to include a service charge payable by the participants. Administrative fees associated with the Plan will be paid by the Fund.

 

 

 

 

7. Taxation of Distributions. The reinvestment of Distributions does not relieve the participant of any taxes which may be payable on such Distributions.

 

8. Share Certificates. The Plan Administrator will hold shares in the account of the shareholders in non-certificated form in the name of the participant.

 

9. Voting of Shares. Shares issued pursuant to the Plan will have the same voting rights as all other Shares issued pursuant to the Fund’s continuous private offering of Shares.

 

10. Absence of Liability. Neither the Fund nor the Plan Administrator shall have any responsibility or liability beyond the exercise of ordinary care for any action taken or omitted pursuant to the Plan, nor shall they have any duties, responsibilities or liabilities except such as expressly set forth herein. Neither the Fund nor the Plan Administrator shall be liable for any act done in good faith or for any good faith omission to act, including, without limitation, any claims of liability: (a) arising out of the failure to terminate a participant’s account prior to receipt of written notice of such participant’s death, or (b) with respect to prices at which shares are purchased or sold for the participant’s account and the terms on which such purchases and sales are made. NOTWITHSTANDING THE FOREGOING, LIABILITY UNDER THE U.S. FEDERAL SECURITIES LAWS CANNOT BE WAIVED.

 

11. Termination of Participation. Each shareholder who does not wish to have Distributions automatically reinvested may terminate participation in the Plan and may terminate his, her or its account under the Plan by so notifying the Plan Administrator by submitting a letter of instruction to that effect. Such termination shall be effective immediately if the proper notice is received by the Plan Administrator no less than three calendar days prior to the record date for the Fund’s next Distribution; otherwise, such termination shall be effective only with respect to any subsequent Distributions.

 

12. Amendment, Supplement, Termination, and Suspension of Plan. This Plan may be amended, supplemented, or terminated by the Fund at any time upon 30 days’ notice to shareholders. The amendment or supplement shall be filed with the Securities and Exchange Commission as an exhibit to a subsequent appropriate filing made by the Fund and shall be deemed to be accepted by each participant unless, prior to its effective date thereof, the Plan Administrator receives written notice of termination of the participant’s account. Amendment may include an appointment by the Fund or the Plan Administrator with the approval of the Fund of a successor agent, in which event such successor shall have all of the rights and obligations of the Plan Administrator under this Plan. The Fund may suspend the Plan at any time without notice to the participants.

 

13. Governing Law. This Plan and the authorization form signed by the participant (which is deemed a part of this Plan) and the participant’s account shall be governed by and construed in accordance with the laws of the State of New York.

 

 

 

Exhibit 10.8

 

Execution Version

 

 

LOAN AND SERVICING AGREEMENT

 

among

 

STEPSTONE PRIVATE CREDIT FUND LLC,

as Holdings,

 

SPV FACILITY I LLC,

as the Borrower,

 

MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY

 

and

 

MASSMUTUAL ASCEND LIFE INSURANCE COMPANY,

each as an Initial Lender

 

the other Lenders from time to time party hereto,

 

MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY,

as the Administrative Agent,

 

and

 

MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY,

as the Facility Servicer

 

Dated as of April 3, 2023

 

 

 

 

TABLE OF CONTENTS

 

  Page
     
ARTICLE I INTERPRETATION 2
     
Section 1.01 Certain Defined Terms 2
Section 1.02 Other Terms 44
Section 1.03 Computation of Time Periods 44
Section 1.04 Interpretation 44
Section 1.05 Advances to Constitute Loans 45
Section 1.06 Rates 45
     
ARTICLE II THE FACILITY 46
     
Section 2.01 Advances 46
Section 2.02 Procedure for Advances 47
Section 2.03 Evidence of Debt 48
Section 2.04 Repayment; Termination of Commitments; Extension of Stated Maturity Date 49
Section 2.05 Interest and Fees 50
Section 2.06 Payments and Computations, Etc. 52
Section 2.07 Collections and Allocations 53
Section 2.08 Remittance Procedures 55
Section 2.09 Grant of a Security Interest 58
Section 2.10 Sale and Substitution 59
Section 2.11 Release of Portfolio Assets 61
Section 2.12 Increased Costs 61
Section 2.13 Taxes 62
Section 2.14 Market Trigger Event Cure 66
Section 2.15 Mitigation Obligations; Replacement of Lenders 66
Section 2.16 Defaulting Lenders 67
Section 2.17 Benchmark Provisions 68
     
ARTICLE III CONDITIONS PRECEDENT 71
     
Section 3.01 Conditions Precedent to Effectiveness 71
Section 3.02 Conditions Precedent to Advances 72
Section 3.03 Advances Do Not Constitute a Waiver 74
Section 3.04 Conditions to Transfers of Portfolio Assets 74
     
ARTICLE IV REPRESENTATIONS 75
     
Section 4.01 Representations of the Borrower 75

 

-i-

 

 

Section 4.02 Representations of the Borrower Relating to the Agreement and the Collateral 81
Section 4.03 Representations of the Facility Servicer 82
Section 4.04 Representations of each Lender 84
Section 4.05 Representations of Holdings 84
     
ARTICLE V GENERAL COVENANTS 88
     
Section 5.01 Affirmative Covenants of the Borrower 88
Section 5.02 Negative Covenants of the Borrower 98
Section 5.03 Affirmative Covenants of the Facility Servicer 100
Section 5.04 Negative Covenants of the Facility Servicer 100
Section 5.05 Affirmative Covenants of Holdings 100
Section 5.06 Negative Covenants of Holdings 101
     
ARTICLE VI EVENTS OF DEFAULT 102
     
Section 6.01 Events of Default 102
Section 6.02 Pledged Equity 104
Section 6.03 Additional Remedies 105
     
ARTICLE VII THE ADMINISTRATIVE AGENT 106
     
Section 7.01 Appointment and Authority 106
Section 7.02 Rights as a Lender 107
Section 7.03 Exculpatory Provisions 107
Section 7.04 Reliance by Administrative Agent 109
Section 7.05 Delegation of Duties 109
Section 7.06 Resignation of Administrative Agent 109
Section 7.07 Non-Reliance on Agents and Other Lenders 110
Section 7.08 Reimbursement by Lenders 111
Section 7.09 Administrative Agent May File Proofs of Claim 111
Section 7.10 Collateral Matters 112
Section 7.11 Erroneous Payments 112
     
ARTICLE VIII ADMINISTRATION AND SERVICING OF COLLATERAL 114
     
Section 8.01 Appointment and Designation of the Facility Servicer 114
Section 8.02 Duties of the Facility Servicer 116
Section 8.03 Authorization of the Facility Servicer 117
Section 8.04 Collection of Payments; Accounts 117
Section 8.05 Realization Upon Portfolio Assets 118
Section 8.06 Facility Servicer Compensation 118
Section 8.07 Payment of Certain Expenses by Facility Servicer 118
Section 8.08 Reports to the Administrative Agent Account Statements; Servicing Information 119

 

-ii-

 

 

Section 8.09 The Facility Servicer Not to Resign 120
Section 8.10 Indemnification of the Facility Servicer 120
Section 8.11 Rights as a Lender 121
     
ARTICLE IX [Reserved] 121
     
ARTICLE X INDEMNIFICATION 121
     
Section 10.01 Indemnities by the Borrower 121
Section 10.02 Legal Proceedings 122
     
ARTICLE XI MISCELLANEOUS 123
     
Section 11.01 Amendments and Waivers 123
Section 11.02 Notices, Etc. 124
Section 11.03 No Waiver Remedies 124
Section 11.04 Binding Effect; Assignability; Multiple Lenders 124
Section 11.05 Term of This Agreement 125
Section 11.06 GOVERNING LAW; JURY WAIVER 126
Section 11.07 Costs, Expenses and Taxes 126
Section 11.08 Recourse Against Certain Parties; Non-Petition 127
Section 11.09 Execution in Counterparts; Severability; Integration 128
Section 11.10 Consent to Jurisdiction; Service of Process 129
Section 11.11 Confidentiality 129
Section 11.12 Non-Confidentiality of Tax Treatment 131
Section 11.13 Waiver of Set Off 131
Section 11.14 Headings, Schedules and Exhibits 131
Section 11.15 Ratable Payments 132
Section 11.16 Failure of Borrower to Perform Certain Obligations 132
Section 11.17 Power of Attorney 132
Section 11.18 Delivery of Termination Statements, Releases, etc. 134
Section 11.19 Performance Conditions; Resignation of the Facility Servicer 134
Section 11.20 Post-Closing Performance Conditions 135
Section 11.21 Judgment Currency 135
Section 11.22 USA PATRIOT Act 135

 

-iii-

 

 

LIST OF SCHEDULES AND EXHIBITS

 

ANNEXES

 

ANNEX I Initial Lenders and Commitments
   
SCHEDULES  
   
SCHEDULE I Portfolio Asset Schedule
SCHEDULE II Conditions Precedent Documents
SCHEDULE III Notice Information
SCHEDULE IV Form of Fund Report
SCHEDULE V Borrower Accounts
   
EXHIBITS  
   
EXHIBIT A-1 Form of Borrowing Base Certificate
EXHIBIT A-2 Form of LTV Certificate
EXHIBIT B Form of Notice of Borrowing
EXHIBIT C Form of Portfolio Asset Checklist
EXHIBIT D Form of Revolving Loan Note
EXHIBIT E Form of U.S. Tax Compliance Certificate
EXHIBIT F Form of Servicing Report
EXHIBIT G Form of Payment Date Report
EXHIBIT H Form of Assignment and Assumption Agreement
EXHIBIT I Form of Consent Agreement

 

-iv-

 

 

LOAN AND SERVICING AGREEMENT, dated as of April 3, 2023, by and among:

 

(1) StepStone Private Credit Fund LLC (“Holdings”);

 

(2) SPV FACILITY I LLC (the “Borrower”);

 

(3) MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY, MASSMUTUAL ASCEND LIFE INSURANCE COMPANY and each of the other lenders from time to time party hereto, as Lenders (as defined herein);

 

(4) MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY, as the Administrative Agent (as defined herein) and

 

(5) MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY, as the Facility Servicer (as defined herein).

 

The Lenders have agreed, on the terms and conditions set forth herein, to provide a senior secured revolving loan facility that provides for Advances during the Commitment Period in the amounts and in accordance with the terms set forth herein.

 

The proceeds of the Advances, including to the extent applicable, the Initial Advance, will be used to (i) finance the Borrower’s origination and/or purchase of Eligible Portfolio Assets, (ii) fund Delayed Draws, (iii) pay fees and expenses of the Borrower (other than interest payments due hereunder), (iv) make Restricted Junior Payments subject to the terms of this Agreement, and (v) to make payments into the Unfunded Exposure Account, in each case, in accordance with the terms hereof.

 

 

 

 

 

Accordingly, the parties agree as follows:

 

ARTICLE I

INTERPRETATION

 

Section 1.01 Certain Defined Terms. As used in this Agreement and the exhibits, schedules and other attachments hereto (each of which is hereby incorporated herein and made a part hereof), the following terms have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined):

 

1940 Act” means the Investment Company Act of 1940, as amended, modified, and supplemented from time to time, and the rules and regulations promulgated thereunder.

 

Acceptable Rating Agency” means (a) (i) Moody’s, (ii) Standard & Poor’s, (iii) Fitch, (iv) DBRS Morningstar, and (v) Kroll Bond Rating Agency, LLC (“KBRA”), or (b) any other credit rating agency that is recognized as a nationally recognized statistical rating organization by the SEC and approved by the Majority Lenders, so long as, in each case, any such credit rating agency described in clause (a) or (b) above continues to be a nationally recognized statistical rating organization recognized by the SEC and is approved as a “Credit Rating Provider” (or other similar designation) by the NAIC.

 

Account Bank” means UMB Bank N.A., in its capacity as the “Bank” or “Securities Intermediary” pursuant to an Account Control Agreement, and each other Person acting in the capacity as the “Bank” or “Securities Intermediary” or such other similar term or capacity pursuant to any agreement replacing or substituting any such Account Control Agreement.

 

Account Control Agreement” means (a) for each Account that is a deposit account, a deposit account control agreement or similar agreement in form reasonably acceptable to the Administrative Agent and (b) for each Account that is a securities account, a securities account control agreement in a form reasonably satisfactory to the Administrative Agent, including without limitation, (i) a blocked securities account control agreement in respect of each Collection Account, one of which dated as of the Closing Date with respect the Collection Account open as of such date, (ii) a blocked securities account control agreement in respect of the Unfunded Exposure Account and (iii) a springing securities account control agreement, dated as of the Closing Date in respect of the Operating Account, in each case of clause (a) and (b) above, executed by the Borrower, the Administrative Agent and the applicable Account Bank, as each such agreement may be amended, restated, modified, replaced or otherwise supplemented from time to time.

 

Accounts” means all accounts, whether deposit accounts, securities accounts or otherwise, maintained by, or for the benefit of, the Borrower from time to time.

 

Action” has the meaning assigned to that term in Section 10.02.

 

Additional Amount” has the meaning assigned to that term in Section 2.13(a).

 

Administrative Agent” means Massachusetts Mutual Life Insurance Company, in its capacity as administrative agent for the Lenders, together with its successors and permitted assigns, including any successor appointed pursuant to Article VII.

 

-2-

 

 

Advance” means, the loans made by the Lenders to the Borrower pursuant to Article II.

 

Advance Date” means, with respect to any Advance, the day on which such Advance is made.

 

Advance Rate” means 58%.

 

Advances Outstanding” means, at any time, the aggregate outstanding principal amount of all Advances at such time.

 

Affected Financial Institution” means (a) any EEA Financial Institution or (b) any UK Financial Institution.

 

Affected Portfolio Asset” means with respect to any Partnership Default Trigger Event constituting a Bankruptcy Event with respect to an Equity Investment, such Equity Investment.

 

Affiliate” when used with respect to a Person, means, any other Person Controlling, Controlled by or under common Control with such Person.

 

Aggregate Total Portfolio Value” means, as of any date of determination:

 

(a) the Total Portfolio Value, plus

 

(b) the aggregate available cash balance standing to the credit of the Collection Accounts which are subject to an Account Control Agreement, as of such date, other than Excluded Amounts and any amounts that have been, or are planned to be, distributed to the Borrower on any Payment Date.

 

Agreement” means this Loan and Servicing Agreement.

 

Alternate Base Rate” means, for any day, a rate per annum equal to the higher of (a) the Prime Rate in effect on such day and (b) the Federal Funds Rate in effect on such day plus 0.50% per annum. Any change in the Alternate Base Rate due to a change in the Prime Rate or the Federal Funds Rate shall be effective from and including the effective date of such change in the Prime Rate or the Federal Funds Rate, respectively. The Alternate Base Rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer of the Administrative Agent or any Lender.

 

Anti-Corruption Laws” means, any and all Applicable Laws relating to anti-corruption and anti-bribery, including, but not limited to, the Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations thereunder and any regulation, order, or directive promulgated, issued, or enforced pursuant to such Applicable Laws.

 

Anti-Money Laundering Laws” means, any and all applicable anti-money laundering, financial recordkeeping and reporting requirements of Applicable Law, including those of the Bank Secrecy Act (as amended by Title III of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “USA PATRIOT Act”)), the U.S. Department of State, Executive Order 13224 issued on September 24, 2001 and any applicable anti-money laundering statutes of other jurisdictions, as well as the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any governmental agency.

 

-3-

 

 

Anti-Terrorism Laws and Sanctions” means any and all Applicable Laws relating to terrorism and economic or financial sanctions or trade embargoes administered or enforced by the U.S. Government including the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”), the United Nations Security Council or any other relevant Governmental Authority and any regulation, order or directive promulgated, issued or enforced pursuant to such Applicable Laws.

 

Applicable Law” means for any Person all existing and future laws, rules, regulations (including temporary and final income tax regulations), statutes, treaties, codes, ordinances, orders, licenses of and interpretations by any Governmental Authority applicable to such Person and applicable judgments, decrees, injunctions, writs, awards or orders of any court, arbitrator or other administrative, judicial, or quasi-judicial tribunal or agency of competent jurisdiction.

 

Applicable Spread” means 3.25%.

 

Approved Firm” means Lincoln International LLC, Valuation Research Corporation, Deloitte, Alvarez & Marsal, Citrin Cooperman Advisors LLC or any additional entity designated from time to time by the Initial Lender (i) that is an independent appraisal firm recognized as being experienced in conducting valuations of loans of the type constituting Eligible Portfolio Assets, and (ii) that the Initial Lender, acting reasonably, determines is qualified with respect to each Eligible Portfolio Asset. Notwithstanding the foregoing, at no time may the Borrower, Holdings or any Affiliate of either be an Approved Firm.

 

Approved Firm Valuation” means, with respect to any Portfolio Asset, a valuation or appraisal conducted by an Approved Firm, at the Borrower’s cost and expense, on the basis of the fair market value of such Portfolio Asset (that is, the price that would be paid by a willing buyer to a willing seller of such Portfolio Asset in a commercially reasonable sale on an arm’s-length basis) determined in U.S. Dollars. Any Approved Firm Valuation required to be delivered hereunder may be in the form of an update or reaffirmation by an Approved Firm of an Approved Firm Valuation previously performed by an Approved Firm. If an Approved Firm Valuation indicates a valuation with respect to a Portfolio Asset within a given range, the mid-point of that valuation shall be used for the purposes of this Agreement.

 

Assignment and Assumption Agreement” means an agreement among the Borrower (if required under Section 11.04), a Lender, the Administrative Agent and, unless executed in connection with an assignment under Section 11.04, the Majority Lenders in a form of Exhibit H (or other form approved by the Administrative Agent) and delivered to the Administrative Agent, the Facility Servicer and the Borrower in connection with a Person becoming a Lender hereunder after the Closing Date.

 

-4-

 

 

Attorney” has the meaning assigned to that term in Section 11.17.

 

Available Collections” means all cash Collections and other cash proceeds with respect to any Portfolio Asset deposited, as applicable, in a Collection Account and all other amounts on deposit in a Collection Account from time to time, but excluding the Excluded Amounts.

 

Available Tenor” means, as of any date of determination and with respect to the then-current Benchmark, as applicable, if such Benchmark is a term rate, any tenor for such Benchmark (or component thereof) that is or may be used for determining the length of an interest period pursuant to this Agreement as of such date and not including, for the avoidance of doubt, any tenor for such Benchmark that is then-removed from the definition of “Interest Period” pursuant to Section 2.17.

 

Bail-In Action” means the exercise of any Write-Down and Conversion Powers by the applicable Resolution Authority in respect of any liability of an Affected Financial Institution.

 

Bail-In Legislation” means (a) with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law for such EEA Member Country from time to time that is described in the EU Bail-In Legislation Schedule and (b) with respect to the United Kingdom, Part I of the United Kingdom Banking Act 2009 (as amended from time to time) and any other law, regulation or rule applicable in the United Kingdom relating to the resolution of unsound or failing banks, investment firms or other financial institutions or their affiliates (other than through liquidation, administration or other insolvency proceedings).

 

Bankruptcy Code” means Title 11, United States Code, 11 U.S.C. §§ 101 et seq., as amended from time to time.

 

Bankruptcy Event” is deemed to have occurred with respect to a Person if either:

 

(a) a case or other proceeding shall be commenced, without the application or consent of such Person, in any court, seeking the liquidation, administration, reorganization, debt arrangement, dissolution, winding up, or composition or readjustment of debts of such Person, the appointment of a trustee, receiver, custodian, liquidator, administrator, assignee, sequestrator or the like for such Person or all or substantially all of its assets, or any similar action with respect to such Person under the Bankruptcy Laws, and such case or proceeding shall continue undismissed, or unstayed and in effect, for a period of 60 consecutive days; or an order for relief in respect of such Person shall be entered in an involuntary case under the federal Bankruptcy Laws or other similar laws now or hereafter in effect; or

 

(b) such Person shall commence a voluntary case or other proceeding under any Bankruptcy Laws now or hereafter in effect, or shall consent to the appointment of or taking possession by a receiver, liquidator, administrator, assignee, trustee, custodian, sequestrator (or other similar official) for such Person or all or substantially all of its assets under the Bankruptcy Laws, or shall make any general assignment for the benefit of creditors, or shall fail to, or admit in writing its inability to, pay its debts generally as they become due, or, if a corporation or similar entity, its board of directors or members shall vote to implement any of the foregoing.

 

-5-

 

 

Bankruptcy Laws” means, the Bankruptcy Code and all other applicable liquidation, conservatorship, bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization, suspension of payments, or similar debtor relief laws from time to time in effect affecting the rights of creditors generally.

 

Benchmark” means, initially, the Term SOFR Reference Rate; provided that if a Benchmark Transition Event has occurred with respect to the Term SOFR Reference Rate or the then-current Benchmark, then “Benchmark” means the applicable Benchmark Replacement to the extent that such Benchmark Replacement has replaced such prior benchmark rate pursuant to Section 2.17.

 

Benchmark Replacement” means, with respect to any Benchmark Transition Event, the sum of: (a) the alternate benchmark rate that has been selected by the Administrative Agent (at the direction of the Majority Lenders), the Initial Lender and the Borrower giving due consideration to (i) any selection or recommendation of a replacement benchmark rate or the mechanism for determining such a rate by the Relevant Governmental Body or (ii) any evolving or then-prevailing market convention for determining a benchmark rate as a replacement to the then-current Benchmark for Dollar-denominated syndicated credit facilities at such time and (b) the related Benchmark Replacement Adjustment; provided that, if such Benchmark Replacement as so determined would be less than the Floor, such Benchmark Replacement will be deemed to be the Floor for the purposes of this Agreement and the other Transaction Documents.

 

Benchmark Replacement Adjustment” means, with respect to any replacement of the then-current Benchmark with an Unadjusted Benchmark Replacement, the spread adjustment, or method for calculating or determining such spread adjustment, (which may be a positive or negative value or zero) that has been selected by the Initial Lender, the Administrative Agent (at the direction of the Majority Lenders) and the Borrower giving due consideration to (a) any selection or recommendation of a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of such Benchmark with the applicable Unadjusted Benchmark Replacement by the Relevant Governmental Body or (b) any evolving or then-prevailing market convention for determining a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of such Benchmark with the applicable Unadjusted Benchmark Replacement for U.S. dollar-denominated syndicated credit facilities at such time.

 

Benchmark Replacement Date” means the earliest to occur of the following events with respect to the then-current Benchmark:

 

(a) in the case of clause (a) or (b) of the definition of “Benchmark Transition Event,” the later of (i) the date of the public statement or publication of information referenced therein and (ii) the date on which the administrator of such Benchmark (or the published component used in the calculation thereof) permanently or indefinitely ceases to provide such Benchmark (or such component thereof) or, if such Benchmark is a term rate, all Available Tenors of such Benchmark (or such component thereof); or

 

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(b) in the case of clause (c) of the definition of “Benchmark Transition Event,” the first date on which such Benchmark (or the published component used in the calculation thereof) has been, or, if such Benchmark is a term rate, all Available Tenors of such Benchmark (or such component thereof) have been determined and announced by the regulatory supervisor for the administrator of such Benchmark (or such component thereof) to be non-representative; provided that such non-representativeness will be determined by reference to the most recent statement or publication referenced in such clause (c) and even if such Benchmark (or such component thereof) or, if such Benchmark is a term rate, any Available Tenor of such Benchmark (or such component thereof) continues to be provided on such date.

 

For the avoidance of doubt, if such Benchmark is a term rate, the “Benchmark Replacement Date” will be deemed to have occurred in the case of clause (a) or (b) with respect to any Benchmark upon the occurrence of the applicable event or events set forth therein with respect to all then-current Available Tenors of such Benchmark (or the published component used in the calculation thereof).

 

Benchmark Transition Event” means the occurrence of one or more of the following events with respect to the then-current Benchmark:

 

(a) a public statement or publication of information by or on behalf of the administrator of such Benchmark (or the published component used in the calculation thereof) announcing that such administrator has ceased or will cease to provide such Benchmark (or such component thereof) or, if such Benchmark is a term rate, all Available Tenors of such Benchmark (or such component thereof), permanently or indefinitely; provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide such Benchmark (or such component thereof) or, if such Benchmark is a term rate, any Available Tenor of such Benchmark (or such component thereof);

 

(b) a public statement or publication of information by the regulatory supervisor for the administrator of such Benchmark (or the published component used in the calculation thereof), the Federal Reserve Board, the Federal Reserve Bank of New York, an insolvency official with jurisdiction over the administrator for such Benchmark (or such component), a resolution authority with jurisdiction over the administrator for such Benchmark (or such component) or a court or an entity with similar insolvency or resolution authority over the administrator for such Benchmark (or such component), which states that the administrator of such Benchmark (or such component) has ceased or will cease to provide such Benchmark (or such component) or, if such Benchmark is a term rate, all Available Tenors of such Benchmark (or such component) permanently or indefinitely; provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide such Benchmark (or such component thereof) or, if such Benchmark is a term rate, any Available Tenor of such Benchmark (or such component); or

 

(c) a public statement or publication of information by the regulatory supervisor for the administrator of such Benchmark (or the published component used in the calculation thereof) announcing that such Benchmark (or such component thereof) or, if such Benchmark is a term rate, all Available Tenors of such Benchmark (or such component thereof) are not, or as of a specified future date will not be, representative.

 

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For the avoidance of doubt, if such Benchmark is a term rate, a “Benchmark Transition Event” will be deemed to have occurred with respect to any Benchmark if a public statement or publication of information set forth above has occurred with respect to each then-current Available Tenor of such Benchmark (or the published component used in the calculation thereof).

 

Benchmark Transition Start Date” means, in the case of a Benchmark Transition Event, the earlier of (a) the applicable Benchmark Replacement Date and (b) if such Benchmark Transition Event is a public statement or publication of information of a prospective event, the 90th day prior to the expected date of such event as of such public statement of publication of information (or, if the expected date of such prospective event is fewer than 90 days after such statement or publication, the date of such statement or publication).

 

Benchmark Unavailability Period” means the period (if any) (a) beginning at the time that a Benchmark Replacement Date has occurred if, at such time, no Benchmark Replacement has replaced the then-current Benchmark for all purposes hereunder and under any Transaction Document in accordance with Section 2.17(c) and (b) ending at the time that a Benchmark Replacement has replaced the then-current Benchmark for all purposes hereunder and under any Transaction Document in accordance with Section 2.17(c).

 

Borrowed Money Indebtedness” means Indebtedness of the kind described in clause (a) of the definition of “Indebtedness”.

 

Borrower” has the meaning assigned to that term in the preamble hereto.

 

Borrower Accounts” means all Collection Accounts, the Operating Account and the Unfunded Exposure Account as set forth on Schedule V on the Closing Date, and as updated from time to time as provided herein.

 

Borrower AML and International Trade Default” means, with respect to the Borrower, any one of the following events: (a) any representation contained in Section 4.01(bb) is or becomes false at any time; or (b) the Borrower fails to comply with the covenant contained in Section 11.19(d)(ii) at any time.

 

Borrower Covered Entity” means each of:

 

(a) the Borrower and its subsidiaries, any guarantors or pledgors of collateral under this Agreement or any transaction document relating to the Portfolio Assets, and

 

(b) each Person that, directly or indirectly, is in control of a Person described in clause (a) above.

 

For purposes of this definition, control of a Person shall mean the general partner and the direct or indirect (i) ownership of, or power to vote, 10% or more of the issued and outstanding Equity Interests having ordinary voting power for the election of directors or managers, as applicable, of such Person or other Persons performing similar functions for such Person or (ii) power to direct or cause the direction of the management and policies of such Person whether by ownership of Equity Interests, contract or otherwise.

 

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Borrower Taxes” means any Taxes imposed on the Borrower with respect to its operations but does not include any “imputed underpayment” assessed under Section 6225 of the Code or any similar provision of state, local, or foreign law, or any penalties or interest assessed in connection with any such amount.

 

Borrowing Base” means, as of any date of determination, the aggregate amount for all Eligible Portfolio Assets as of such date, equal to:

 

(i) the Advance Rate multiplied by,

 

(ii) the sum, for each Eligible Portfolio Asset, of the least of:

 

(x) the par value of such Eligible Portfolio Asset,

 

(y) the most recent Approved Firm Valuation of such Eligible Portfolio Asset, conducted pursuant to Section 5.01(e), and

 

(z) such Eligible Portfolio Asset’s Portfolio Asset Value as reported in the NAV Reporting Package most recently delivered prior to such date pursuant to Section 5.01(x)(iii).

 

Borrowing Base Certificate” means a certificate setting forth the calculation of the Borrowing Base as of the applicable date of determination, substantially in the form of Exhibit A-1, prepared by the Borrower.

 

Breakage Fees” means (a) for Advances bearing interest at Term SOFR which are repaid (in whole or in part) or converted into Advances bearing interest at the Alternate Base Rate plus the Applicable Spread on any date other than a Payment Date pursuant to clause (b) of the definition thereof or (b) for the rescission by the Borrower of any request for a proposed Advance bearing interest at Term SOFR, the actual loss, cost and expense incurred by Lender as a result of such repayment or rescission. A certificate submitted pursuant to Section 2.05(k) to the Borrower as to any Breakage Fees payable to any Lender (with a copy to the Administrative Agent) shall be prima facie evidence of the amount of such Breakage Fees.

 

British Pounds” means, and the convention “£” signifies, the lawful money of the United Kingdom.

 

Business Day” means a day of the year other than (a) Saturday or a Sunday or (b) any other day on which commercial banks and/or insurance companies in New York, New York, Boston, Massachusetts and Dublin, Ireland or the offices of the Account Bank or Administrative Agent are authorized or required by Applicable Law, regulation or executive order to close.

 

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Canadian Dollars” means, and the convention “CAD” signifies, the lawful money of Canada.

 

Change in Law” means the occurrence, after the Closing Date, of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty; (b) any change in any law, rule, regulation or treaty or in the administration, interpretation, implementation or application thereof by any Governmental Authority; or (c) the making or issuance of any request, rule, guideline or directive (whether or not having the force of law) by any Governmental Authority; provided that notwithstanding anything herein to the contrary, (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (ii) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “Change in Law”, regardless of the date enacted, adopted or issued.

 

Change of Control” is deemed to have occurred if:

 

(a) Holdings fails to own 100% of the Equity Interests of the Borrower, or

 

(b) the RIA or an affiliate thereof fails or otherwise ceases to serve as the investment advisor of Holdings.

 

Closing Date” means the date of this Agreement.

 

Closing Date Participation” means each Initial Portfolio Asset that consists of a loan participation interest, but only until such Initial Portfolio Asset is elevated by assignment.

 

Code” means the Internal Revenue Code of 1986, as amended.

 

Collateral” has the meaning assigned to that term in Section 2.09(a).

 

Collateral Custodian” means UMB Bank, N.A. .

 

Collateral Custodian Tri-Party Agreement” means that certain Tri Party Agreement by and among the Borrower, the Collateral Custodian and the Administrative Agent in form and substance satisfactory to the Administrative Agent, pursuant to which the Collateral Custodian shall agree, following an Event of Default, to deliver to the Administrative Agent all Collateral and Loan Asset Files in its possession at such time.

 

Collection Account” means each Collection Account established with the Account Bank in the name of the Borrower (i) into which all Collections relating to Portfolio Assets shall be deposited in accordance with the terms of this Agreement and subject to the Account Control Agreement and (ii) under the “control” (within the meaning of Section 9-104 or 9-106 of the UCC, as applicable) of the Administrative Agent for the benefit of the Secured Parties.

 

Collections” means, with respect to the Borrower, all cash collections, cash Distributions and other proceeds with respect to any Portfolio Asset held by it (including payments on account of interest, Scheduled Payments of principal, principal prepayments or repayments (including at maturity or upon acceleration), fees, guaranty payments, payments on account of dividends and distributions, redemption proceeds, forfeiture proceeds, distributions, fees, royalties, management contracts, management fees and all other amounts received in respect of such Portfolio Asset), all Recoveries, all Insurance Proceeds and proceeds of any liquidations or Sales, in each case, attributable to any Portfolio Asset held by it, as applicable, and all other proceeds or other funds of any kind or nature paid to or received by the Borrower or the Account Bank.

 

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Commitment” means, with respect to any Lender:

 

(a) during the Commitment Period:

 

(i) with respect to each Lender which is a Lender as at the Closing Date, the Maximum Facility Amount as such amount may be reduced pursuant to Section 2.04 or by reason of any assignment by such Lender, and

 

(ii) with respect to any other Lender, the amount set forth as such Lender’s “Commitment” on the Assignment and Assumption Agreement relating to such Lender, as such amount may be reduced pursuant to Section 2.04 or by reason of any assignment by such Lender, and

 

(b) after the end of the Commitment Period, such Lender’s Pro Rata Share of the aggregate Advances Outstanding on the last day of the Commitment Period. The Commitment of each Lender on the Closing Date is set forth opposite the name of such Lender on Annex I.

 

Commitment Period” means the period commencing on the Closing Date and ending on the earlier of:

 

(a) April 3, 2026, and

 

(b) the date the Commitments are terminated in accordance with this Agreement, whether as a result of the occurrence and continuance of an Event of Default or otherwise.

 

Conforming Changes” means, with respect to either the use or administration of Term SOFR or the use, administration, adoption or implementation of any Benchmark Replacement, any technical, administrative or operational changes (including changes to the definition of “Alternate Base Rate,” the definition of “Business Day,” the definition of “U.S. Government Securities Business Day,” the definition of “Interest Period,” or any similar or analogous definition (or the addition of a concept of “interest period”), timing and frequency of determining rates and making payments of interest, timing of borrowing requests or prepayment, conversion or continuation notices, the applicability and length of lookback periods, the applicability of Section 2.05(k) and other technical, administrative or operational matters) that the Administrative Agent decides may be appropriate to reflect the adoption and implementation of any such rate or to permit the use and administration thereof by the Administrative Agent in a manner substantially consistent with market practice (or, if the Administrative Agent (at the direction of the Majority Lenders) decides that adoption of any portion of such market practice is not administratively feasible or if the Administrative Agent (at the direction of the Majority Lenders) determines that no market practice for the administration of any such rate exists, in such other manner of administration as the Administrative Agent (at the direction of the Majority Lenders) decides is reasonably necessary in connection with the administration of this Agreement and the other Transaction Documents).

 

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Consent Agreement” means an agreement among the funds listed on the signature pages thereto (the “Portfolio Funds”), the Portfolio Fund’s general partner or investment manager listed on the signature pages thereto (the “Portfolio Sponsors”) and the Borrower in the form of Exhibit I (or other form approved by the Administrative Agent and the Initial Lender) and delivered in connection with Section 5.1(cc) of this Agreement.

 

Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise, and “Controlled” and “Controlling” shall be construed accordingly.

 

Counterparty Lender” means, with respect to any Loan Asset that is a loan participation interest, the lender party to the related Loan Agreement and the related Participation Agreement.

 

Cure Contributions” has the meaning assigned to that term in Section 2.14.

 

Cut-Off Date” means the date (which may be the Closing Date) a Portfolio Asset is Transferred to the Borrower.

 

Debt Rating” means the debt rating of the Advances as determined from time to time by an Acceptable Rating Agency.

 

Default Rate” means, as of any date of determination, a rate per annum equal to the interest rate that is or would be applicable to the Advances at such time plus 2.0%.

 

Defaulting Lender” means, subject to Section 2.16(b), any Lender that:

 

(a) has failed to:

 

(i) fund all or any portion of its Advances within two (2) Business Days of the date such Advances were required to be funded hereunder unless such Lender notifies the Administrative Agent and Borrower in writing that such failure is the result of such Lender’s determination that one or more conditions precedent to funding (each of which conditions precedent, together with any applicable default, shall be specifically identified in such writing) has not been satisfied, or

 

(ii) pay to the Administrative Agent or any Lender any other amount required to be paid by it hereunder within two (2) Business Days of the date when due,

 

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(b) has notified Borrower or the Administrative Agent in writing that it does not intend to comply with its funding obligations hereunder, or has made a public statement to that effect (unless such writing or public statement relates to such Lender’s obligation to fund an Advance hereunder and states that such position is based on such Lender’s determination that a condition precedent to funding (which condition precedent, together with any applicable default, shall be specifically identified in such writing or public statement) cannot be satisfied),

 

(c) has failed, within three (3) Business Days after written request by the Administrative Agent or Borrower, to confirm in writing to the Administrative Agent and Borrower that it will comply with its prospective funding obligations hereunder (provided that such Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon receipt of such written confirmation by the Administrative Agent and Borrower), or

 

(d) has, or has a direct or indirect parent company that has:

 

(i) become the subject of a proceeding under any Bankruptcy Law, or

 

(ii) had appointed for it a receiver, custodian, conservator, trustee, administrator, assignee for the benefit of creditors or similar Person charged with reorganization or liquidation of its business or assets, including the Federal Deposit Insurance Corporation or any other state or federal regulatory authority acting in such a capacity; or

 

(iii) has become subject to Bail-In Action, provided that a Lender shall not be a Defaulting Lender solely by virtue of the ownership or acquisition of any equity interest in that Lender or any direct or indirect parent company thereof by a Governmental Authority so long as such ownership interest does not result in or provide such Lender with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Lender (or such Governmental Authority) to reject, repudiate, disavow or disaffirm any contracts or agreements made with such Lender. Any determination by the Borrower or the Majority Lenders that a Lender is a Defaulting Lender under any one or more of clauses (a) through (d) above shall be conclusive and binding absent manifest error, and such Lender shall be deemed to be a Defaulting Lender (subject to Section 2.16(b)) upon delivery of written notice of such determination to the Administrative Agent and each Lender.

 

Delayed Capital Call” means an Equity Investment Capital Call, the proceeds of which are to be applied, directly or indirectly, by any Person in which the Borrower has an Equity Interest, in funding an obligation which such Person (or any Person in which such Person has an Equity Interest) has to advance funds under any loan agreement.

 

Delayed Draw” means a Loan Asset Delayed Draw and/or a Delayed Capital Call, as applicable.

 

Delayed Draw Funding Amount” has the meaning assigned to that term in Section 2.07(e).

 

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Delayed Draw Funding Notice” has the meaning assigned to that term in Section 2.07(e).

 

DIP Facility” means any Portfolio Asset or Underlying Loan Obligation for a Portfolio Asset:

 

(a) with respect to which the related Obligor is a debtor in possession as defined under the Bankruptcy Code, and

 

(b) which has the priority allowed pursuant to Section 364 of the Bankruptcy Code, and

 

(c) the terms of which have been approved by a court of competent jurisdiction.

 

Distinct Obligor” means, as of any date of determination, each Obligor (treating all Obligors that are Affiliates of one another as a single Obligor); provided that an Obligor will not be considered an Affiliate of any other Obligor (a) solely due to the fact that each such Obligor is under the control of the same financial sponsor or (b) if they have distinct corporate family ratings and/or distinct issuer credit ratings.

 

Distribution” means any (a) dividend, distribution, redemption, proceeds, return of capital or payment, direct or indirect, to or for the benefit of any holder of any Equity Interests of a Person now or hereafter outstanding, and (b) any Distributions in Kind.

 

Distribution in Kind” means any non-cash dividend or distribution, direct or indirect, to or for the benefit of a holder of Equity Interests.

 

EBITDA” means, with respect to any period and for any Loan Asset, the meaning of “EBITDA”, “Adjusted EBITDA” or any comparable definition in the Loan Agreement for such Loan Asset (together with all reasonable add-backs and exclusions as designated in such Loan Agreement), and in any case that “EBITDA”, “Adjusted EBITDA” or such comparable definition is not defined in such Loan Agreement, an amount, for the principal Obligor on such Loan Asset and any of its parents or Subsidiaries that are obligated pursuant to the Loan Agreement for such Loan Asset (determined on a consolidated basis without duplication in accordance with GAAP) equal to (a) consolidated net income for such period plus, (b) to the extent deducted in calculating consolidated net income, the sum of (i) interest expense (ii) income taxes, (iii) depreciation and amortization for such period (to the extent deducted in determining earnings from continuing operations for such period), and (iv) amortization of intangibles (including, but not limited to, goodwill, financing fees and other capitalized costs), other non-cash charges and organization costs, “run-rate” adjustments, extraordinary losses in accordance with GAAP, one-time, and non-recurring non-cash charges consistent with the compliance statements and financial reporting packages provided by the Obligors; provided, however, that amounts added back to EBITDA pursuant to clause (iv) or any similar provisions in the definition of “EBITDA”, “Adjusted EBITDA” or such comparable definition defined in any applicable Loan Agreement shall not exceed 75% of EBITDA calculated prior to giving effect to such addbacks, and minus, (c) to the extent included in calculating net income and without duplication, (i) interest income to the extent received in cash during such period, and (ii) gains realized in connection with the sale or disposition of assets other than in the ordinary course of business.

 

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EBITDA Excluded Loan Assets” has the meaning assigned to that term in the definition of “Eligible Portfolio Asset”.

 

EEA Financial Institution” means:

 

(a) any credit institution or investment firm established in any EEA Member Country that is subject to the supervision of an EEA Resolution Authority,

 

(b) any entity established in an EEA Member Country that is a parent of an institution described in clause (a) of this definition, or

 

(c) any financial institution established in an EEA Member Country that is a subsidiary of an institution described in clauses (a) or (b) of this definition and is subject to consolidated supervision with its parent.

 

EEA Member Country” means any of the member states of the European Union, Iceland, Liechtenstein, and Norway.

 

EEA Resolution Authority” means any public administrative authority or any person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution.

 

Eligible Assignee” means:

 

(a) a Lender or any of its Affiliates,

 

(b) any Person managed by a Lender or any of its Affiliates, or

 

(c) any financial or other institution reasonably acceptable to the Administrative Agent acting at the direction of the Majority Lenders that at the time it becomes a Lender is a Qualified Purchaser, in each case, other than the Borrower or an Affiliate thereof.

 

Eligible Currency” means British Pounds, Canadian Dollars, Euros and U.S. Dollars.

 

Eligible Portfolio Asset” means (1) each Initial Portfolio Asset, and (2) each other Loan Asset or Equity Investment, which at the time of Transfer to the Borrower is approved by the Initial Lender in its sole discretion or satisfies the following criteria:

 

(a) if such Portfolio Asset is a Loan Asset, such Loan Asset is a Senior Loan or Second Lien Loan; provided that (i) any interest due and with respect thereto is payable at least partly in cash, and not fully in kind, and (ii) the Portfolio Asset Value of Eligible Portfolio Assets constituting Second Lien Loans may not exceed 5% of the Total Portfolio Value;

 

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(b) if such Portfolio Asset is a Loan Asset, all Obligors of such Loan Asset are domiciled in the United States; provided that the par value of Loan Assets with Obligors that are Non-U.S. Domiciled Persons may not exceed 7.5% of the Total Portfolio Value;

 

(c) if such Portfolio Asset is a Loan Asset, such Loan Asset, if constituting a Second Lien Loan, the Obligors in respect of such Loan Asset have aggregate EBITDA for the last twelve month period then ended for which financial statements have been delivered (or are required to have been delivered) under the related Loan Agreement (“LTM EBITDA”) of no less than $50,000,000;

 

(d) if such Portfolio Asset is a Loan Asset, the Obligors in respect of such Loan Asset have an aggregate net debt (being total prior ranking debt plus total pari passu debt less total cash) / LTM EBITDA ratio of less than or equal to 6.50 to 1.00, other than Loan Assets (“Leverage Excluded Loan Assets”) having in the aggregate for all such excluded Loan Assets a Portfolio Asset Value not exceeding 10% of the Total Portfolio Value;

 

(e) if such Portfolio Asset is a Loan Asset, after giving effect to the inclusion of such Loan Asset, the Portfolio Leverage Ratio shall be equal to or less than 5.25 to 1.00;

 

(f) if such Portfolio Asset is a Loan Asset, the Obligors in respect of such Loan Asset, other than EBITDA Excluded Loan Assets, have an LTM EBITDA of at least $7,500,000; provided that the par value of Loan Assets with Obligors that have an LTM EBITDA of less than $7,500,000 may not exceed 10% of the Total Portfolio Value;

 

(g) if such Portfolio Asset is a Loan Asset, after giving effect to the inclusion of such Loan Asset, the Portfolio Average LTM EBITDA shall be not less than $25,000,000, other than with respect to Loan Assets (“EBITDA Excluded Loan Assets”) having in the aggregate for all such excluded Loan Assets a Portfolio Asset Value not exceeding 10% of the Total Portfolio Value;

 

(h) if such Portfolio Asset is a Loan Asset, after giving effect to the inclusion of such Loan Asset, no more than 2.25% of the Total Portfolio Value, shall be attributable to any Distinct Obligor;

 

(i) if such Portfolio Asset is a Loan Asset, after giving effect to the inclusion of such Loan Asset, the aggregate par value of Eligible Portfolio Assets with Obligors in any single Industry Sector does not exceed 15% the Total Portfolio Value; provided that no more than two Loan Assets may be with Obligors in the two largest single Industry Sectors, with the value of such Loan Assets not to exceed 17.5% the Total Portfolio Value;

 

(j) if such Portfolio Asset is a Loan Asset, after giving effect to the inclusion of such Loan Asset, the aggregate par value of Eligible Portfolio Assets with Obligors owned by the same general partner or sponsor does not exceed 15% of the Total Portfolio Value;

 

(k) if such Portfolio Asset is a Loan Asset, such Loan Asset is denominated and payable only in an Eligible Currency, and the par value of Loan Assets denominated in currencies other than U.S. Dollars shall not exceed 7.5% of the Total Portfolio Value, as determined by the Borrower on the basis of the foreign currency dollar spot rate as quoted by Bloomberg on www.bloomberg.com/markets/currencies/fxc .html for the applicable Eligible Currency;

 

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(l) if such Portfolio Asset is an Equity Investment, after giving effect to the inclusion of such Equity Investment, the aggregate Portfolio Asset Value of Eligible Portfolio Assets which are Equity Investments shall not exceed 10% of the Total Portfolio Value;

 

(m) if such Portfolio Asset is a Loan Asset, the Loan Agreement (and, if applicable, the Participation Agreement) relating to such Loan Asset is governed by the laws of a State;

 

(n) no Underlying Obligor Default has occurred and is continuing thereunder;

 

(o) there are no proceedings pending or, to the Borrower’s knowledge, threatened (i) with respect to a Bankruptcy Event with respect to any applicable Obligor or (ii) wherein any applicable Obligor, any other party or any governmental entity has alleged that such Portfolio Asset or its related Loan Agreement or any of its Required Portfolio Asset Documents is illegal or unenforceable;

 

(p) if such Portfolio Asset is a Loan Asset, such Loan Asset is a loan participation, the aggregate outstanding principal amount of all Loan Assets that are loan participations shall not exceed 10% of the Total Portfolio Value; provided that, solely as this provision applies to a Loan Asset that is both a loan participation, and an Initial Portfolio Asset, there shall be no limit on the aggregate principal amount of all such Loan Assets that are loan participations from the Closing Date, through to and including 90 days thereafter;

 

(q) if such Loan Asset is a Loan Asset, such Loan Asset is assignable (or the Participation Agreement with respect thereto, if any, is assignable) to the Administrative Agent, for the benefit of the Secured Parties, and saleable as Collateral as provided hereunder;

 

(r) such Portfolio Asset is not subject to any Liens other than Permitted Liens;

 

(s) where such Loan Asset is an Equity Investment, no Partnership Default Trigger Event has occurred and is continuing with respect to the Borrower;

 

(t) the Transfer of such Portfolio Asset to the Borrower is consistent with the investment strategy, and the applicable guidelines and limits of the Borrower (as managed by the RIA), with respect to each Portfolio Asset;

 

(u) no such Portfolio Asset shall be subject to any withholding tax at any time through its maturity unless the applicable Obligor is required to make gross up payments to cover the full amount of the withholding taxes;

 

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(v) if such Portfolio Asset is an Equity Investment, the Administrative Agent shall have received a duly executed Consent Agreement in connection therewith;

 

(w) if such Portfolio Asset is a Loan Asset, where such Loan Asset comprises a debt participation in the debt obligations of any applicable Obligor, the Participation Agreement relating to such debt participation contains customary provisions requiring elevation upon the occurrence of an Event of Default, or is otherwise in a form reasonably agreed to by the Borrower and the Administrative Agent;

 

(x) if such Portfolio Asset is an Equity Investment held by the Custodian, the Borrower has delivered to the Administrative Agent the Collateral Custodian Tri-Party Agreement, provided, that, with respect to each percentage limitation set forth in each applicable clause of the definition of “Eligible Portfolio Assets”, only the portion of the value of each applicable Loan Asset that (together with other such Loan Assets, if applicable) exceeds such percentage limitation shall not constitute an Eligible Portfolio Asset. If the portion of the value of any Loan Asset that is limited by more than one such percentage limitation, the portion of the value of such Loan Asset that constitutes an Eligible Portfolio Asset shall be determined by reference to the percentage limitation that results in the lowest portion of the value of such Loan Asset constituting an Eligible Portfolio Asset.

 

Notwithstanding anything to the contrary herein or in any other Transaction Document, any Loan Asset (including any Initial Portfolio Asset) that following the Cut-Off Date (i) ceases to satisfy clauses (n) (with respect to prong (c) of the definition of “Underlying Obligor Default”), (o)(ii) (with respect to such subclause (ii), as determined in a final, non-appealable judgment determined by a court of competent jurisdiction) (r), (s), (u) or (v) shall, in each case, cease to be an Eligible Portfolio Asset until each such clause is satisfied, unless otherwise agreed to in writing by the Majority Lenders.

 

Eligible Portfolio Asset Obligor” means an Obligor with respect to an Eligible Portfolio Asset.

 

Employee Plan” means an employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV or Section 302 of ERISA, or Section 412 of the Code, and in respect of which a fund party or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an employer as defined in Section 3(5) of ERISA.

 

Environmental Laws” means any and all foreign, federal, State and local laws, statutes, ordinances, rules, regulations, permits, licenses, approvals, interpretations and orders of courts or Governmental Authorities, relating to the protection of human health or the environment, including, but not limited to, requirements pertaining to the manufacture, processing, distribution, use, treatment, storage, disposal, transportation, handling, reporting, licensing, permitting, investigation or remediation of Hazardous Materials.

 

Equity Interest” means (a) all shares of capital stock (whether denominated as common stock or preferred stock), equity interests, beneficial interests, partnership interests, shares, membership interests, joint venture interests, participations or other ownership or profit interests in or equivalents (regardless of how designated) of or in a Person, other than an individual, whether voting or non-voting and (b) all securities convertible into or exchangeable for any other Equity Interest and any warrants, options or other rights to purchase, subscribe for or otherwise acquire any other Equity Interest, whether or not presently convertible, exchangeable or exercisable.

 

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Equity Investment” means, any Equity Interests directly held or maintained by the Borrower (including any such investment received as Distributions in Kind), including, pursuant to which the Borrower: (a) has been admitted as a general partner, limited partner, managing member, non-managing member or shareholder of any Person, (b) is a guarantor of, or is otherwise liable (contingently or otherwise) for obligations to such Person described in clause (a) above, or (c) has made an investment in a portfolio company of a Person in conjunction with an investment therein by such Person.

 

Equity Investment Agreement” means, the investment agreement, co-investment agreement, partnership agreement, limited liability company agreement, shareholder agreement, subscription agreement, or other similar document governing and evidencing an Equity Investment, including any side letters relating thereto to which the Borrower is a party or which is otherwise binding on the Borrower.

 

Equity Investment Capital Call” means with respect to an Equity Investment, a call for payment of all or any portion of an Equity Investment Capital Commitment.

 

Equity Investment Capital Commitment” means, with respect to any Equity Investment, the commitment, if any, of the Borrower to make Equity Investment Capital Contributions or otherwise provide funding to any Obligor in response to an Equity Investment Capital Call pursuant to the applicable Equity Investment Agreement and any related subscription agreement or other offering materials governing such Equity Investment from time to time.

 

Equity Investment Capital Contribution” means, with respect to any Equity Investment of the Borrower, any capital contribution or other funding made by the Borrower in response to an Equity Investment Capital Call.

 

Equityholder” means Holdings in its capacity as the beneficial and legal owner of 100% Equity Interest in the Borrower.

 

ERISA” means the United States Employee Retirement Income Security Act of 1974, as amended from time to time.

 

ERISA Affiliate” means (a) any corporation that is a member of the same controlled group of corporations (within the meaning of Section 414(b) of the Code) as a specified Person, (b) a trade or business (whether or not incorporated) under common control (within the meaning of Section 414(c) of the Code) with such Person, (c) a member of the same affiliated service group (within the meaning of Section 414(m) of the Code) as such Person, any corporation described in clause (a) above or any trade or business described in clause (b) above or (d) a member of the same group of related business entities under Section 414(o) of the Code as such Person, any corporation described in clause (a) above, any trade or business described in clause (b) above or any member of any affiliated service group described in clause (c) above.

 

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Erroneous Payment” has the meaning assigned to that term in Section 7.11(a).

 

Escrow Payment” means, any amount received by the Borrower for the account of an Obligor for application toward the payment of Taxes, insurance premiums, assessments, ground rents, deferred maintenance, environmental remediation, rehabilitation costs, capital expenditures and similar items in respect of an applicable Portfolio Asset.

 

EU Bail-In Legislation Schedule” means the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor Person), as in effect from time to time.

 

Euro” means, and the convention “EUR” signifies, the single currency of the Participating Member States.

 

Event of Default” has the meaning assigned to that term in Section 6.01.

 

Excepted Persons” has the meaning assigned to that term in Section 11.11(a).

 

Exchange Act” means the United States Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

Excluded Amounts” means, without duplication, (a) any amount received in the Collection Account with respect to any Portfolio Asset included as part of the Collateral, which amount is attributable to the payment of any Tax, fee or other charge imposed by any Governmental Authority on such Portfolio Asset or on any Underlying Collateral and (b) any amount received in the Collection Account representing (i) any Escrow Payments, (ii) any amounts received on or with respect to a Portfolio Asset that is not a loan participation interest under any Insurance Policy that is required to be used to restore, improve or repair the related real estate or other assets of such Portfolio Asset or required to be paid to any Obligor under the Loan Agreement for such Portfolio Asset, and (iii) any amount received in the Collection Account with respect to any Portfolio Asset that is otherwise replaced by a Substitute Asset, or that is otherwise Sold by the Borrower pursuant to Section 2.10, to the extent such amount is attributable to a time after the effective date of such Sale or Substitution.

 

Excluded Taxes” means any of the following Taxes imposed on or with respect to a Recipient or required to be withheld or deducted from a payment to a Recipient under any Transaction Document: (a) any income or franchise Taxes imposed on (or measured by) net income (however denominated) and any branch profits Taxes, in each case imposed by (i) the jurisdiction (or any political subdivision thereof) under the laws of which such Recipient is organized or in which such Recipient’s principal office is located or in which such Recipient’s applicable lending office is located or (ii) a jurisdiction (or any political subdivision thereof) as the result of any other present or former connection between such Recipient and the jurisdiction imposing such Tax (other than connections arising from such Recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Transaction Document, or sold or assigned an interest in any loan or Commitment made pursuant to this Agreement); (b) in the case of a Lender, U.S. federal withholding Taxes imposed on amounts payable to or for the account of such Lender with respect to an applicable interest in a loan or Commitment made pursuant to this Agreement pursuant to a law in effect on the date on which (i) such Lender acquires such interest in the loan or Commitment (other than pursuant to an assignment request by the Borrower under Section 2.15(b)) or (ii) such Lender changes its lending office, except in each case to the extent that, pursuant to Section 2.13, amounts with respect to such Taxes were payable either to such Lender’s assignor immediately before such Lender became a party hereto or to such Lender immediately before it changed its lending office; (c) Taxes attributable to such Recipient’s failure to comply with Section 2.13(e), (f) or (g); and (d) any U.S. federal withholding Taxes imposed under FATCA.

 

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Facility Servicer” means Massachusetts Mutual Life Insurance Company, not in its individual capacity, in its capacity as servicer of the Advances, the other Obligations, this Agreement and the other Transaction Documents, together with its successors and permitted assigns, including any successor appointed pursuant to Article VIII.

 

Facility Termination Date” means the date on which the aggregate outstanding principal amount of the Advances have been repaid in full and all accrued and unpaid interest thereon, all Fees and all other Obligations (other than contingent indemnification obligations and other obligations that survive the termination of this Agreement, in each case, not then due and owing) have been paid in full, the Commitments of the Lenders hereunder have been terminated and the Borrower has no further right to request any additional Advances.

 

FATCA” means Sections 1471 through 1474 of the Code as in effect on the date hereof (or any amended or successor version that is substantively comparable and not materially more onerous to comply with) and any current or future regulations promulgated thereunder or official interpretations thereof, any agreements entered into pursuant to Section 1471(b)(1) of the Code as of the date hereof (or any amended or successor version described above) and any intergovernmental agreements, treaty or convention among Governmental Authorities (or related rules, legislation or official administrative guidance) implementing such provisions of the Code or any non-U.S. laws implementing the foregoing.

 

Federal Funds Rate” means, for any day, the rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided, (i) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (ii) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate charged to the Facility Servicer, on such day on such transactions as reasonably determined by the Administrative Agent in good faith, subject to the consent of the Borrower. Notwithstanding the foregoing or any other provision of this Agreement, the rate determined pursuant to this definition shall not be less than the Floor.

 

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Fee Letters” means the MassMutual Fee Letter and each fee letter agreement entered into by and among the Borrower and any of the Administrative Agent, the Facility Servicer, and any Lender in connection with the transactions contemplated by this Agreement.

 

Fees” means the fees payable to the Administrative Agent, the Facility Servicer, any Lender or any other applicable agent or party pursuant to the terms of the Fee Letters or the other Transaction Documents.

 

Floor” means 1.0%.

 

Fund Report” means, each monthly report prepared by the RIA in the form of Schedule IV, which report shall include (a) the Portfolio Asset Value with respect to each Portfolio Asset and the Total Portfolio Value, in each case, as determined by the RIA as of the fiscal month then ended, and (b) a description of each “Key Covenant”.

 

GAAP” means generally accepted accounting principles in the United States, as in effect from time to time, set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants, in the statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions and comparable stature and authority within the accounting profession) that are applicable to the circumstances as of the date of determination. Subject to Section 1.07, all references to “GAAP” shall be to GAAP applied consistently with the principles used in the preparation of the financial statements described in Section 4.03(g).

 

Governmental Authority” means, with respect to any Person, any nation or government, any state or other political subdivision thereof or any entity, authority, agency, division or department exercising the executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to a government and any court or arbitrator having jurisdiction over such Person (including any supra-national bodies such as the European Union or the European Central Bank) and any group or body charged with setting financial accounting or regulatory capital rules or standards (including the Financial Accounting Standards Board, the Bank for International Settlements or the Basel Committee on Banking Supervision or any successor or similar authority to any of the foregoing).

 

Hazardous Materials” means all materials subject to any Environmental Law, including materials listed in 49 C.F.R. § 172.010, materials defined as hazardous pursuant to § 101(14) of the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, flammable, explosive or radioactive materials, hazardous or toxic wastes or substances, lead-based materials, petroleum or petroleum distillates or asbestos or material containing asbestos, polychlorinated biphenyls, radon gas, urea formaldehyde and any substances classified as being “in inventory”, “usable work in process” or similar classification that would, if classified as unusable, be included in the foregoing definition.

 

Holding Company Loan” means any loan (or participation thereof) that is an obligation only of one or more holding companies not owning material operating assets, the source of funds for the repayment of which is anticipated to be dividends from operating Subsidiaries of the Obligor thereunder, and that is not guaranteed by such operating Subsidiaries.

 

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Holdings” has the meaning assigned to that term in the preamble hereto.

 

Holdings AML and International Trade Default” means any one of the following events: (a) any representation contained in Section 4.05(m) is or becomes false at any time; or (b) in the case of the Borrower, it fails to comply with the covenant contained in Section 11.19(d)(ii) in any material respect at any time.

 

Holdings Covered Entity” means each of (a) Holdings and its subsidiaries, any guarantors or pledgors of collateral under this Agreement or any Transaction Document relating to the Portfolio Assets, and (b) each Person that, directly or indirectly, is in control of a Person described in clause (a) above. For purposes of this definition, control of a Person shall mean the general partner and the direct or indirect (i) ownership of, or power to vote, 10% or more of the issued and outstanding Equity Interests having ordinary voting power for the election of directors or managers, as applicable, of such Person or other Persons performing similar functions for such Person or (ii) power to direct or cause the direction of the management and policies of such Person whether by ownership of Equity Interests, contract or otherwise.

 

Indebtedness” means with respect to any Person at any date, (a) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services (other than accounts payable incurred in the ordinary course of business and payable in accordance with customary trade practices) or that is evidenced by a note, bond, debenture or similar instrument or other evidence of indebtedness customary for indebtedness of that type, (b) all liabilities secured by any Lien on any property owned by such Person whether or not such Person has assumed or otherwise become liable for the payment thereof, (c) all indebtedness, obligations or liabilities of that Person in respect of derivatives, (d) all obligations of such person for the reimbursement of any obligor in respect of letters of credit, bankers’ acceptances and similar credit transactions and (e) all obligations under guaranties in respect of obligations (contingent or otherwise) to purchase or otherwise acquire, or to otherwise assure a creditor against loss in respect of, indebtedness or obligations of others of the kind referred to in clauses (a) through (d) above.

 

Indemnified Amounts” has the meaning assigned to that term in Section 10.01(a).

 

Indemnified Party” has the meaning assigned to that term in Section 10.01(a).

 

Indemnified Taxes” means (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of the Borrower under any Transaction Document and (b) to the extent not otherwise described in (a), Other Taxes.

 

Indemnifying Party” has the meaning assigned to that term in Section 10.02.

 

Indorsement” has the meaning specified in Section 8-102(a)(11) of the UCC, and “Indorsed” has a corresponding meaning.

 

Industry Sector” means any industry category or subcategory of “Global Industry Classification Standard”, as in effect on the Closing Date or incorporating modifications reasonably acceptable to the Majority Lenders, or any comparable classification system reasonably acceptable to the Borrower and the Majority Lenders (and in the case of any such comparable classification system, references to an industry sector set forth herein shall be deemed to refer to such sector in such successor classification system as the Borrower and the Majority Lenders may agree).

 

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Information” has the meaning assigned to that term in Section 11.11(e).

 

Initial Advance” means the first Advance made to the Borrower pursuant to Article II.

 

Initial Advance Date” means the date of funding of the Initial Advance.

 

Initial Lender” means:

 

(a) so long as it holds a Commitment or any portion of an Advance,

 

(i) Massachusetts Mutual Life Insurance Company,

 

(ii) MassMutual Ascend Life Insurance Company and

 

(b) otherwise, the Majority Lenders; provided that

 

(x) if the Commitments are held by Massachusetts Mutual Life Insurance Company and MassMutual Ascend Life Insurance Company, any determination, action, right or obligation of the Initial Lender pursuant to this Agreement and any other Transaction Document shall be exercised by Massachusetts Mutual Life Insurance Company and MassMutual Ascend Life Insurance Company, acting jointly, and

 

(y) if the Commitments are held by one of (but not each of) Massachusetts Mutual Life Insurance Company or MassMutual Ascend Life Insurance Company, any determination, action, right or obligation of the Initial Lender pursuant to this Agreement and any other Transaction Document shall be exercised by either Massachusetts Mutual Life Insurance Company or MassMutual Ascend Life Insurance Company, as applicable.

 

Initial Portfolio Asset” means each Loan Asset identified as an “Initial Portfolio Asset” as set forth on Schedule I on the Closing Date.

 

Insurance Policy” means, with respect to any Portfolio Asset, an insurance policy covering liability and physical damage to, or loss of, the Underlying Collateral for such Portfolio Asset.

 

Insurance Proceeds” means any amounts received on or with respect to a Portfolio Asset under any Insurance Policy or with respect to any condemnation proceeding or award in lieu of condemnation.

 

Interest Collections” means, with respect to any Portfolio Asset, all Collections attributable to dividends, capital gains, cash Distributions and interest on such Portfolio Asset deposited into a Collection Account (including Interest Collections attributable to the portion of the Outstanding Principal Balance of a Portfolio Asset, if any, that represents interest which has accrued in kind and has been added to the principal balance of such Portfolio Asset), including all Scheduled Payments of interest and payments of interest relating to principal prepayments, all gains realized on equity, all royalties, all guaranty payments attributable to interest and proceeds of any liquidations, sales or dispositions attributable to interest on such Portfolio Asset. Interest Collections expressly includes any amendment fees, late fee, waiver fees, extension fees, prepayment fees or other fees (other than Fees) received in respect of a Portfolio Asset.

 

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Interest Period” means, with respect to any Advance, as determined by the Facility Servicer, (a) initially, the period commencing on the Advance Date with respect to such Advance to but excluding the Payment Date with respect to the first Payment Date to occur after the date of such Advance and (b) thereafter, each successive period from and including each Payment Date to but excluding the following Payment Date; provided that, if an Interest Period would extend beyond the Stated Maturity Date, then such Interest Period shall end on the Stated Maturity Date.

 

Inter-Period Payment Date” has the meaning assigned to that term in the definition of “Payment Date”.

 

Key Covenant” means a “Key Covenant” as defined in the Fund Report.

 

Lender” means, collectively, the Initial Lender and any other Person to whom any Lender assigns any part of its rights and obligations under this Agreement and the other Transaction Documents in accordance with the terms of Section 11.04 and any other party that becomes a lender pursuant to an Assignment and Assumption Agreement.

 

Lender Covered Entity” means (a) Lender and its subsidiaries and (b) each Person that, directly or indirectly, is in control of a Person described in clause (a) above. For purposes of this definition, control of a Person shall mean the direct or indirect (i) ownership of, or power to vote, 25% or more of the issued and outstanding Equity Interests having ordinary voting power for the election of directors of such Person or other Persons performing similar functions for such Person or (ii) power to direct or cause the direction of the management and policies of such Person whether by ownership of Equity Interests, contract or otherwise.

 

Leverage Excluded Loan Assets” has the meaning assigned to that term in paragraph (d) of the definition of “Eligible Portfolio Asset”.

 

Lien” means any mortgage or deed of trust, pledge, hypothecation, collateral assignment, deposit arrangement, encumbrance, lien (statutory or other), charge, claim, preference, priority or other security interest or preferential arrangement in the nature of a security interest of any kind or nature whatsoever (including any conditional sale, lease or other title retention agreement, sale subject to a repurchase obligation, any easement, right of way or other encumbrance on title to real property, and any financing lease having substantially the same economic effect as any of the foregoing), or the filing of or financing statement perfecting a security interest under the UCC or comparable law of any jurisdiction.

 

Liquidity Agreement” has the meaning assigned to that term in Section 11.04(b).

 

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Loan Agreement” means the loan agreement, credit agreement or other agreement pursuant to which a Portfolio Asset or an Underlying Loan Obligation of a Portfolio Asset, as applicable, has been issued or created and each other agreement that governs the terms of or secures the obligations represented by such Portfolio Asset or Underlying Loan Obligation or of which the holders of such Portfolio Asset are the beneficiaries, including any co-lender or servicing agreement entered into by an applicable Counterparty Lender or Underlying Agent.

 

Loan Asset” means any debt interest or debt participation interest in the debt obligations of any applicable Obligor owned directly by the Borrower, which debt interest or debt participation interest includes:

 

(a) the Portfolio Asset File with respect therefor,

 

(b) all right, title and interest in and to:

 

(i) such debt interest, the related Loan Agreement and any Underlying Collateral, or

 

(ii) such debt participation interest, the related Participation Agreement and, subject to the terms thereof, the related Loan Agreement and any Underlying Collateral;

 

(c) subject to the terms of any applicable Participation Agreement, any amounts on deposit in any cash reserve, collection, custody or lockbox accounts securing such Loan Assets;

 

(d) all rights with respect to the Loan Assets to which the Borrower is entitled as lender under the applicable Loan Agreement or as a loan participant under the applicable Participation Agreement;

 

(e) subject to the terms of any applicable Participation Agreement, any Underlying Collateral securing the Loan Assets and all Recoveries related thereto, all payments paid in respect thereof and all monies due, to become due and paid in respect thereof, and all net liquidation proceeds;

 

(f) subject to the terms of any applicable Participation Agreement, all Liens, guaranties, indemnities, warranties, letters of credit, accounts, bank accounts and property subject thereto from time to time purporting to secure or support payment of the Loan Assets (or the Underlying Loan Obligations, as applicable), together with all UCC financing statements, mortgages or similar filings signed or authorized by an Obligor relating thereto;

 

(g) each Portfolio Asset Assignment with respect to the Loan Assets (including any rights of the Borrower against the Transferor thereunder) and the assignment to the Administrative Agent, for the benefit of the Secured Parties, of all UCC financing statements, if any, filed by the Borrower against the Transferor under or in connection with such Portfolio Asset Assignment;

 

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(h) all Records (including computer records) with respect to the foregoing;

 

(i) all Collections, income, payments, proceeds and other benefits of each of the foregoing.

 

Loan Asset Delayed Draw” means, with respect to any Loan Asset, the Borrower’s contractual obligation to provide funding with respect to such Loan Asset after the Cut-Off Date therefor.

 

LTM EBITDA” has the meaning assigned to that term in the definition of “Eligible Portfolio Asset”.

 

LTV” means, as of any date of determination, the ratio (expressed as a percentage) of (a) the aggregate amount of Advances Outstanding as of such date to (b) the Aggregate Total Portfolio Value as of such date.

 

LTV Certificate” means, a certificate setting forth the calculation of LTV as of the applicable date of determination, substantially in the form of Exhibit A-2, prepared by the Borrower and in form and substance reasonably acceptable to the Facility Servicer.

 

Majority Lenders” means the Lenders representing an aggregate of more than 50% of the aggregate Commitments provided that (i) the sum of the aggregate unpaid principal amount of the Advances Outstanding held or deemed held by the Borrower, Holdings, or any of their Affiliates shall be excluded for purposes of making a determination of Majority Lenders at any time, and (ii) the Commitments of any Defaulting Lender shall be disregarded in determining Majority Lenders at any time.

 

Market Trigger Event” means, as at any date of determination, any of the following events shall have occurred: (a) the LTV exceeds 65%, (b) at any time on or after the date which is 18 months after the Closing Date, there are fewer than 50 Distinct Obligors with respect to all Performing Loan Assets, (c) at any time on or after the date which is 18 months prior to the Stated Maturity Date, the aggregate outstanding principal amount of Advances advanced to the Borrower hereunder is greater than zero, or (d) a Rating Event has occurred and a Rating Event Cure has not occurred.

 

MassMutual Fee Letter” means that certain Fee Letter dated as of the Closing Date, between the Administrative Agent, the Facility Servicer, the Lenders as of the Closing Date and the Borrower, as amended, restated, supplemented or otherwise modified from time to time in accordance with the terms hereof, entered in connection with the transactions contemplated by this Agreement.

 

Material Adverse Effect” means a material adverse effect on (a) the business, financial condition, operations, liabilities (actual or contingent), performance or properties of the Borrower, (b) the validity or enforceability of this Agreement or any other Transaction Document or the validity or enforceability of the Portfolio Assets generally or any material portion of the Portfolio Assets, (c) the rights and remedies of the Facility Servicer, the Administrative Agent, any Lender or any other Secured Parties with respect to matters arising under this Agreement or any other Transaction Document, (d) the ability of the Borrower to perform its obligations under this Agreement or any other Transaction Document or (e) the existence, perfection, priority or enforceability of the Administrative Agent’s or the other Secured Parties’ Lien on the Collateral; provided that, there shall be no Material Adverse Effect to the Borrower to the extent such Material Adverse Effect arises from the action (or inaction) of the Facility Servicer, the Administrative Agent or a Lender.

 

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Material Modification” means

 

(a) with respect to a Loan Asset, any amendment or waiver of, or modification or supplement to, or termination, cancellation or release of, a Loan Agreement for a Portfolio Asset or for the Underlying Loan Obligation for a Portfolio Asset, as applicable, executed or effected on or after the applicable Cut-Off Date that:

 

(i) forgives, excuses, reduces, waives or modifies such Loan Agreement or the related loan documents in a manner which would reduce the outstanding principal amount of the amount due thereunder;

 

(ii) extends the scheduled date for payment of principal, interest, fees or other amounts payable under such Loan Agreement or the related loan documents beyond six (6) months from the original scheduled date for each Loan Asset;

 

(iii) amends, modifies or waives a Key Covenant in such Loan Agreement or such Underlying Loan Obligation, as applicable; or

 

(iv) (i) if such Loan Asset is a Senior Loan, results in such Loan Asset failing to satisfy clause (a) of the definition of “Senior Loan”, and (ii) if such Loan Asset is a Second Lien Loan, results in such Loan Asset failing to satisfy clause (a) of the definition of “Second Lien Loan”, including, in each case, pursuant to a DIP Facility;

 

(b) with respect to an Equity Investment, any modification to any Equity Investment Agreement;

 

in each case, where such modification would have a material and an adverse impact to the Lenders, the Borrower or any Eligible Portfolio Asset of the Borrower.

 

Maturity Date” means, the earlier to occur of (a) the Stated Maturity Date, (b) the date the Advances are accelerated upon the occurrence of an Event of Default, or (c) the occurrence of the termination of this Agreement pursuant to Section 2.04(f).

 

Maximum Availability” means, on any date, the lesser of (a) the Maximum Facility Amount on such date and (b) the Borrowing Base on such date.

 

Maximum Facility Amount” means, at any time, an amount equal to the aggregate Commitments of the Lenders at such time, as may be decreased in accordance with Section 2.04. The Maximum Facility Amount on the Closing Date is $200,000,000.

 

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Maximum LTV Percentage” means, if as of any date of determination, LTV as of such date exceeds the “Maximum LTV Percentage” as set forth below as of such date:

 

Years after the Closing Date  Maximum LTV Percentage 
From the Closing Date until 31 March, 2026              58%
From 1 April, 2026 until 31 March, 2028   50%
From 1 April, 2028 until 31 March, 2029   45%
From 1 April, 2029 until 31 March, 2031   30%
Thereafter   0%

 

Maximum Rate” has the meaning assigned to that term in Section 2.05(i).

 

Minimum Usage Amount” means, for the period from the Closing Date until the date that is eighteen (18) months after the Closing Date, an amount equal to zero percent (0%) of the Maximum Facility Amount as of such date, and (y) thereafter, an amount equal to seventy-five percent (75%) of the Maximum Facility Amount as of such date.

 

Multiemployer Plan” means a “multiemployer plan” as defined in Section 4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate of the Borrower contributed or had any obligation to contribute on behalf of its employees at any time during the current year or the preceding five years.

 

NAIC” means the National Association of Insurance Commissioners.

 

NAV Reporting Package” means:

 

(a) in the period from the Closing Date to the date on which the first reporting package is delivered to the Administrative Agent in accordance with Section 5.01(x)(iii), a reporting package, in the form approved by the Administrative Agent on or prior to the Closing Date, setting out the calculation of Portfolio Asset Value with respect to each Portfolio Asset and Total Portfolio Value as determined by the RIA as of February 28, 2023, and

 

(b) at any time after the first reporting package is delivered to the Administrative Agent after the Closing Date, the reporting package most recently delivered by the Borrower to the Administrative Agent, in each case, in the form approved by the Administrative Agent on or prior to the Closing Date, which shall include, (i) the calculation of Portfolio Asset Value with respect to each Portfolio Asset and Total Portfolio Value as determined by the RIA as of the calendar month then ended, (ii) a Borrowing Base Certificate and LTV Certificate as of the calendar month then ended, including a roll forward and reconciliation with respect thereto (to the extent available), and (iii) an updated Schedule I, identifying any Portfolio Assets acquired or disposed of by the Borrower during such calendar month.

 

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New Valuation” has the meaning assigned to that term in Section 5.01(e)(i).

 

Non-Defaulting Lender” means, at any time, each Lender that is not a Defaulting Lender at such time.

 

Non-U.S. Domiciled Person” means any Person having its principal place of business and headquarters outside of the United States, or a Person that does not derive a material portion of its revenue from within the United States.

 

Notice of Borrowing” means a written notice of borrowing from the Borrower to the Administrative Agent substantially in the form of Exhibit B.

 

Notice of Exclusive Control” has the meaning specified in the Account Control Agreement.

 

Obligations” means all present and future indebtedness and other liabilities and obligations (howsoever created, arising or evidenced, whether direct or indirect, absolute or contingent, or due or to become due) of the Borrower to the Lenders, the Administrative Agent, the Facility Servicer, or any other Secured Party arising under this Agreement or any other Transaction Document and shall include all liability for principal of and interest on the Advances, Fees, indemnifications and other amounts due or to become due by the Borrower to the Lenders, the Administrative Agent, the Facility Servicer, and any other Secured Party under this Agreement or any other Transaction Document, including any Fee Letter and reasonable and documented costs and expenses payable by the Borrower to the Lenders, the Administrative Agent, the Facility Servicer, or any other Secured Party, including reasonable attorneys’ fees, costs and expenses, including interest, fees and other obligations that accrue after the commencement of an insolvency proceeding (in each case whether or not allowed as a claim in such insolvency proceeding).

 

Obligor” means, collectively, (a) with respect to any Loan Asset, each Person obligated to make payments under a Loan Agreement, including any guarantor thereof, and (b) with respect to any Equity Investment, each Person who has issued Equity Interests of any Equity Investment held or acquired directly by the Borrower.

 

Operating Account” means the Accounts established with the Account Bank in the name of the Borrower and subject to an Account Control Agreement under the “control” (within the meaning of Section 9-104 or 9-106 of the UCC, as applicable) of the Administrative Agent for the benefit of the Secured Parties.

 

Organizational Documents” means, for any Person, its constituent or organizational documents and any governmental or other filings related thereto, including: (a) in the case of any limited partnership, exempted limited partnership or other form of business entity, the limited partnership agreement, exempted limited partnership agreement, statutory statement or other applicable agreement of formation and any agreement, instrument, filing or notice with respect thereto filed in connection with its formation with the secretary of state, registrar or other department in the state or jurisdiction of its formation; (b) in the case of any limited liability company, the articles of formation, certificate of registration, articles of association, limited liability company agreement and/or operating agreement for such Person and any agreement, instrument, filing or notice with respect thereto filed in connection with its formation with the secretary of state, registrar or other department in the state or jurisdiction of its formation; (c) in the case of a corporation or an exempted company, the certificate of incorporation and the memorandum of association and articles of association and/or the bylaws (or equivalent) for such Person and any agreement, instrument, filing or notice with respect thereto filed in connection with its formation with the secretary of state, registrar or other department in the state or jurisdiction of its formation; (d) each subscription agreement, shareholder agreement, or other similar document governing the relationship between or among the Borrower and Holdings, as applicable, including, in each case, any side letters relating thereto (excluding any investment advisory agreement subject to Section 15(c) of the 1940 Act), and (e) each Equity Investment Agreement, including, in each case, any side letters relating thereto.

 

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Other Taxes” has the meaning assigned to that term in Section 11.07(b).

 

Outstanding Principal Balance” means, at any time (i) for any Loan Asset, the outstanding principal amount of such Loan Asset at such time, including any Delayed Draw for such Portfolio Asset that has been funded by the lenders (howsoever described) thereunder at such time and including all interest on such Loan Asset that has been capitalized and added to principal and (ii) for any Equity Investment, the Portfolio Asset Value, in each case, as reported in the Fund Report.

 

Participant” has the meaning assigned to that term in Section 11.04(d).

 

Participant Register” has the meaning assigned to that term in Section 2.03(c).

 

Participating Member States” means any member state of the European Union that has the Euro as its lawful currency in accordance with legislation of the European Union relating to Economic and Monetary Union.

 

Participation Agreement” means, for any Portfolio Asset that consists of a loan participation interest, the participation agreement or other agreement pursuant to which the Borrower participates in the Underlying Loan Obligation for such Portfolio Asset.

 

Partnership Default Trigger Event” means (a) a default by the Borrower directly or indirectly in its material payment obligations relating to any Equity Investments (including failure of the Borrower to fund any duly called Equity Investment Capital Call in respect of such Equity Investment that remains uncured pursuant to the Organizational Documents of the issuer of such Equity Investment), or (b) the Borrower has been declared a “defaulting partner” (or similar term or concept) under any Equity Investment Agreement with respect to any of its Eligible Portfolio Assets, and, such circumstance or event has not been cured pursuant to the terms of the applicable Equity Investment Agreement or effectively waived pursuant to the terms of the applicable Equity Investment Agreement within thirty (30) days of such circumstance or event occurring.

 

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Payment Date” means:

 

(a) with respect to any unscheduled inter-period payments made at the Borrower’s option, any date specified by the Borrower in accordance with Section 2.08(g) (such unscheduled payment date, an “Inter-Period Payment Date”),

 

(b) with respect to regularly scheduled payment dates, the eighth (8th) day of each calendar month (commencing on May 8, 2023) or, if such day is not a Business Day, the next succeeding Business Day (such regularly scheduled payment date, a “Scheduled Payment Date”), and

 

(c) the Maturity Date.

 

Payment Date Report” means, with respect to a Payment Date, a report of the type described in Section 8.08(a)(ii) prepared in relation to that Payment Date and substantially in the form attached hereto as Exhibit G.

 

Performing Loan Asset” means each Portfolio Asset that is not subject to an Underlying Obligor Default.

 

Permitted Investment” means, at any time, negotiable instruments or securities or other investments that, as of any date of determination, mature by their terms on or prior to the Business Day preceding the next Scheduled Payment Date and evidence:

 

(a) cash denominated in U.S. Dollars and held in accounts with depository banks in the United States;

 

(b) direct interest bearing obligations of, and interest bearing obligations guaranteed as to timely payment of principal and interest by, the United States or any agency or instrumentality of the United States, the obligations of which are backed by the full faith and credit of the United States;

 

(c) demand and time deposits in any depositary institution or trust company incorporated under the laws of the United States of America or any State thereof and subject to supervision and examination by federal and/or State banking authorities so long as such demand or time deposits are covered by an extended Federal Deposit Insurance Corporation (the “FDIC”) insurance program where 100% of the deposits are insured by the FDIC, which is backed by the full faith and credit of the United States; and

 

(d) shares or other securities of registered money market funds which funds have and maintain, at all times (i) the highest credit ratings from Standard & Poor’s or Moody’s and (ii) have assets of at least $5,000,000,000.

 

Permitted Liens” means any of the following: (a) Liens for Taxes if such Taxes shall not at the time be due or if a Person shall currently be contesting the validity thereof in good faith by appropriate proceedings and with respect to which reserves in accordance with GAAP have been provided on the books of such Person; (b) Liens imposed by law, such as materialmen’s, warehousemen’s, mechanics’, carriers’, workmen’s and repairmen’s Liens and other similar Liens, arising by operation of law in the ordinary course of business for sums that are not overdue or are being contested in good faith by appropriate proceedings and with respect to which reserves in accordance with GAAP have been provided on the books of the applicable Person; (c) Liens granted pursuant to or by the Transaction Documents; (d) with respect to the Underlying Collateral for any Portfolio Asset, (i) Liens in favor of the lenders, lead agent, administrative agent, collateral agent or similar agent for the benefit of all holders of indebtedness relating to such Portfolio Asset (or the Underlying Loan Obligation as applicable) and (ii) “permitted liens” as defined in the Loan Agreement for such Portfolio Asset or such comparable definition or provision of “permitted liens” is not defined therein; (e) Liens routinely imposed on all securities or deposit accounts by the Account Bank, to the extent permitted under the Account Control Agreement; and (f) Liens attaching to securities being purchased or sold of clearing agencies and broker-dealers, and similar Liens incurred in the ordinary course of business; provided that such Liens (x) attach only to the securities being purchased or sold and (y) secure only obligations incurred in connection with such purchase or sale and not any obligation in connection with margin financing.

 

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Person” means, an individual, limited partnership, partnership, corporation (including a statutory or business trust), limited liability company, joint stock company, trust, unincorporated association, sole proprietorship, joint venture, government (or any agency or political subdivision thereof) or other entity.

 

Plan Asset Event” has the meaning assigned to that term in Section 5.02(m).

 

Plan Asset Regulations” means 29 C.F.R. § 2510.3-101, as modified by Section 3(42) of ERISA.

 

Plan Assets” means “plan assets” within the meaning of the Plan Asset Regulations.

 

Platform” means Debt Domain, Intralinks, Syndtrak or a substantially similar electronic transmission system established and maintained by the Borrower.

 

Pledged Equity” means (i) with respect to Holdings, all Equity Interests in the Borrower, and (ii) with respect to the Borrower, all Equity Investments made, or owned, by the Borrower.

 

Portfolio Asset” means each (a) Loan Asset, and (b) Equity Investment, in each case owned by the Borrower, and all of the Borrower’s right, title and interest owned in connection therewith.

 

Portfolio Asset Assignment” means an assignment, participation agreement or other agreement pursuant to which any Loan Asset not originated by the Borrower is Transferred to the Borrower, substantially based upon the form document for assignments required by the related Loan Agreement.

 

Portfolio Asset Checklist” means with respect to each Portfolio Asset, an electronic copy of a checklist substantially in the form of Exhibit C delivered by or on behalf of the Borrower to the Facility Servicer.

 

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Portfolio Asset File” means, with respect to each Portfolio Asset, an electronic file maintained on the Platform containing copies of each of the Required Portfolio Asset Documents set forth on the Portfolio Asset Checklist with respect to such Portfolio Asset.

 

Portfolio Asset Reduction Value” has the meaning assigned to that term in Section 5.01(e)(i).

 

Portfolio Asset Schedule” means (a) a schedule of the Portfolio Assets setting forth for each such Portfolio Asset (i) the Portfolio Asset number for such Portfolio Asset, (ii) the Obligors for such Portfolio Asset, (iii) with respect to each Loan Asset, the current principal balance of (A) such Loan Asset and (B) the Underlying Loan Obligation for such Loan Asset, as applicable, (iv) the Loan Agreement, Participation Agreement or Equity Investment Agreement, as applicable, for such Portfolio Asset, (v) whether such Portfolio Asset is an Eligible Portfolio Asset, and (vi) the other information specified for a Portfolio Asset as set forth on Schedule I, as delivered by the Borrower to the Administrative Agent and as updated from time to time as provided herein (the Portfolio Asset Schedule being deemed modified and delivered by the delivery of a Borrowing Base Certificate), or (b) a collateral report, in form and substance reasonably satisfactory to the Administrative Agent (acting at the direction of Majority Lenders) containing the information described in clauses (a)(i) through (a)(vii) above.

 

Portfolio Asset Value” means, with respect to a Portfolio Asset, as of any date of determination, the fair market value of such Portfolio Asset as most recently reported prior to such date by the RIA and furnished to the Administrative Agent, the Facility Servicer and each Lender pursuant to Section 5.01(x)(iii) for the most recent calendar month then ended, in each case, as determined in accordance with the RIA Valuation Policy, and as may be adjusted from time to time pursuant to Section 5.01(e).

 

Portfolio Average LTM EBITDA” means, as of any date of determination, the weighted average of the LTM EBITDA for all Eligible Portfolio Asset Obligors as of such date in each case excluding all EBITDA Excluded Loan Assets.

 

Portfolio Leverage Ratio” means, as of any date of determination, the ratio of average of the net debt / LTM EBITDA of all Eligible Portfolio Asset Obligors as of such date, and in each case excluding all Leverage Excluded Loan Assets.

 

Prime Rate” means the rate of interest per annum last quoted by The Wall Street Journal as the “Prime Rate” in the U.S. or, if The Wall Street Journal ceases to quote such rate, the highest per annum interest rate published by the Federal Reserve Board in Federal Reserve Statistical Release H.15 (519) (Selected Interest Rates) as the “bank prime loan” rate or, if such rate is no longer quoted therein, any similar rate quoted therein (as determined by the Administrative Agent) (at the direction of the Majority Lenders) or any similar release by the Federal Reserve Board (as determined by the Administrative Agent) (at the direction of the Majority Lenders). Any change in the Prime Rate shall take effect at the opening of business on the day such change is publicly announced or quoted as being effective. Notwithstanding the foregoing or any other provision of this Agreement, the rate determined pursuant to this definition shall not be less than the Floor.

 

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Principal Collections” means, collectively with respect to the Borrower, any cash Collections of the Borrower deposited in a Collection Account in accordance with the terms hereof that are not Interest Collections, including (a) all Recoveries, (b) all Insurance Proceeds or other proceeds of any liquidations or Sales of a Portfolio Asset, and (c) all Scheduled Payments of principal, principal prepayments, guaranty payments, return of capital or other payments that reduce the Outstanding Principal Balance of a Portfolio Asset.

 

Private Rating Letter” means a letter issued by an Acceptable Rating Agency in connection with any private debt rating for the Advances, which (a) sets forth the Debt Rating for the Advances, (b) refers to the Private Placement Number issued by Standard & Poor’s CUSIP Bureau Service in respect of the Advances, (c) addresses the likelihood of payment of both principal and interest on the Advances (which requirement shall be deemed satisfied if either (x) such letter includes confirmation that the rating reflects the Acceptable Rating Agency’s assessment of the Borrower’s ability to make timely payment of principal and interest on the Advances (or a similar statement), or (y) such letter is silent as to the Acceptable Rating Agency’s assessment of the likelihood of payment of both principal and interest and does not include any indication to the contrary), (d) includes such other information describing the relevant terms of the Advances as may be required from time to time by the SVO or any other Governmental Authority in the United States, United Kingdom, European Union, Cayman Islands and Canada having jurisdiction over any holder of any Advances, and (e) shall not be subject to confidentiality provisions or other restrictions which would prevent or limit the letter from being shared with the SVO or any other Governmental Authority in the United States, United Kingdom, European Union, Cayman Islands and Canada having jurisdiction over any holder of any Advances.

 

Private Rating Rationale Report” means, with respect to any Private Rating Letter, a report issued by the Acceptable Rating Agency in connection with such Private Rating Letter setting forth an analytical review of the Advances explaining the transaction structure, methodology relied upon, and, as appropriate, analysis of the credit, legal, and operational risks and mitigants supporting the assigned Private Rating for the Advances, in each case, on the letterhead of the Acceptable Rating Agency or its controlled website and generally consistent with the work product that an Acceptable Rating Agency would produce for a similar publicly rated security, and otherwise in form and substance generally required by the SVO or any other Governmental Authority in the United States, United Kingdom, European Union, Cayman Islands and Canada having jurisdiction over any holder of any Advances from time to time. Such report shall not be subject to confidentiality provisions or other restrictions which would prevent or limit the report from being shared with the SVO or any other Governmental Authority in the United States, United Kingdom, European Union, Cayman Islands and Canada having jurisdiction over any holder of any Advances.

 

Pro Rata Share” means, with respect to any Lender as of any date of determination, the ratio of such Lender’s Commitment to the aggregate Commitments of all Lenders as of such date.

 

Proceeds” means, with respect to the Collateral, all property that is receivable or received when such Collateral is collected, sold, liquidated, foreclosed, exchanged, or otherwise disposed of, whether such disposition is voluntary or involuntary, and includes all rights to payment with respect to any insurance relating to such Collateral.

 

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Proposed Amendment” has the meaning assigned to that term in Section 5.01(y).

 

Proposed Payment Date Report” has the meaning assigned to that term in Section 8.08(a)(ii).

 

Qualified Purchaser” has the meaning assigned to that term in the 1940 Act.

 

Rating Agent” means, at any time, the Acceptable Rating Agency that has prepared the Private Rating Letter most recently delivered to the Administrative Agent prior to that time being, as at the Closing Date, Kroll Bond Rating Agency, LLC.

 

Rating Event” means (i) the Borrower’s failure at any time after the Closing Date to maintain an investment grade Debt Rating or (ii) a period of longer than 365 days (366 days in a leap year) have elapsed since the date of issuance of the most recent investment grade Debt Rating.

 

Rating Event Cure” means (a) the Borrower obtaining an investment grade Debt Rating; provided such investment grade Debt Rating is not more than 365 days (366 days in a leap year) old, (b) the aggregate principal amount of Advances Outstanding being zero and all Commitments hereunder having expired or terminated or (c) the Administrative Agent (at the direction of the Majority Lenders) waiving the Rating Event.

 

Recipient” means (a) the Administrative Agent, and (b) any Lender, as applicable.

 

Records” means all documents relating to the Portfolio Assets, including books, records and other information executed in connection with the Transfer of and maintenance of the Portfolio Assets comprised in the Collateral or maintained with respect to the Collateral and the related Obligors that the Borrower has generated, or in which the Borrower has otherwise obtained an interest, including documents under which the Borrower has acquired an interest pursuant to a Portfolio Asset Assignment.

 

Recoveries” means, as of the time any Underlying Collateral for any Portfolio Asset is Sold, discarded or abandoned (after a determination in good faith by the Borrower, the Counterparty Lender or Underlying Agent, as applicable, that such Underlying Collateral has little or no remaining value) or otherwise determined in good faith to be fully liquidated by the Borrower or such Counterparty Lender or Underlying Agent, the Proceeds from the Sale of such Underlying Collateral, the Insurance Proceeds of any related Insurance Policy or any other recoveries (including interest proceeds recovered) with respect to such Underlying Collateral and amounts representing late fees and penalties, net of any amounts received that are required under the Loan Agreement for the applicable Portfolio Asset to be refunded to the related Obligor.

 

Register” has the meaning assigned to that term in Section 2.03(b).

 

Registered” means, with respect to any debt obligation, a debt obligation that is in registered form within the meaning of Section 5f.103-1(c) of the United States Treasury Regulations and Section 1.163-5(b) of the proposed United States Treasury Regulations.

 

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Related Parties” means, with respect to any Person, such Person’s Affiliates and the partners, directors, officers, employees, agents, trustees, administrators, managers, advisors and representatives of such Person and of such Person’s Affiliates.

 

Release Date” has the meaning assigned to that term in Section 2.10(c).

 

Relevant Governmental Body” means, the Board of Governors of the Federal Reserve System or the Federal Reserve Bank of New York, or a committee officially endorsed or convened by the Board of Governors of the Federal Reserve System or the Federal Reserve Bank of New York, or any successor thereto.

 

Removal Effective Date” has the meaning assigned to that term in Section 7.06(b).

 

Replacement Servicer” has the meaning assigned to that term in Section 8.01(e).

 

Reportable Compliance Event” means any Lender Covered Entity, Borrower Covered Entity or Holdings Covered Entity becomes a Sanctioned Person, or is charged by indictment, criminal complaint or similar charging instrument, arraigned, or custodially detained in connection with any Anti-Terrorism Laws and Sanctions, Anti-Corruption Laws, or Anti-Money Laundering Laws or any predicate crime to any Anti-Terrorism Laws and Sanctions, Anti-Corruption Laws, or Anti-Money Laundering Laws.

 

Reporting Date” means, with respect to a Payment Date, the date that is four (4) Business Days prior to such Payment Date.

 

Required Portfolio Asset Documents” means, for each Portfolio Asset the following documents or instruments, all as specified on the related Portfolio Asset Checklist for each (a) Loan Asset, to the extent applicable, copies of the executed (i) guaranty, (ii) loan agreement, (iii) note purchase agreement, (iv) security agreement and/or (v) promissory note, and (b) Equity Investment, to the extent applicable, copies of the executed (i) Equity Investment Agreement, (ii) subscription agreement and (iii) all side letters relating thereto.

 

Resolution Authority” means an EEA Resolution Authority or, with respect to any UK Financial Institution, a UK Resolution Authority.

 

Responsible Officer” means any duly authorized officer of such Person with direct responsibility for the administration of this Agreement and also, with respect to a particular matter, any other duly authorized officer of such Person to whom such matter is referred because of such officer’s knowledge of and familiarity with the particular subject.

 

Restricted Junior Payment” means, with respect to any Person:

 

(a) any dividend or other distribution, direct or indirect, on account of any class of equity interests of such Person, including limited partnership interests, now or hereafter issued, except a dividend or other distribution paid solely in interests of that class of membership interests or in any junior class of equity interests of the Borrower, (b) any redemption, retirement, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any class of equity interests of such Person, including limited partnership interests, now or hereafter outstanding, or (c) any payment made to redeem, purchase, repurchase or retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire equity interests of such Person, including limited partnership interests, now or hereafter outstanding.

 

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Revolving Loan Note” has the meaning assigned to such term in Section 2.03(a).

 

RIA” means StepStone Group Private Debt LLC, acting solely in its capacity as registered investment advisor to Holdings.

 

RIA Valuation Policy” means the valuation policy of the RIA as of the Closing Date, delivered pursuant to Section 3.01(a), as amended from time to time in accordance with Section 5.01(y).

 

RIA Valuation Policy Amendment” has the meaning assigned to that term in Section 5.01(y).

 

Sale” has the meaning assigned to that term in Section 2.10(a).

 

Sanctioned Country” means a country or territory that is, or whose government is, the subject of a comprehensive sanctions program maintained by any applicable Governmental Authority pursuant to Anti-Terrorism Laws and Sanctions (at the time of this Agreement, Cuba, Iran, North Korea, Syria, the so-called Donetsk People’s Republic, the so-called Luhansk People’s Republic and the Crimea region of Ukraine).

 

Sanctioned Person” means any individual person, group, regime, or entity listed or otherwise recognized as a specially designated, prohibited, sanctioned or debarred person, group, regime, or entity, or fully subject to restrictions or prohibitions (including but not limited to the blocking of property or rejection of transactions), under any order or directive of any applicable Governmental Authority or otherwise subject to, or specially designated under, any sanctions program maintained by any applicable Governmental Authority pursuant to Anti-Terrorism Laws and Sanctions.

 

Scheduled Payment” means each scheduled distribution or payment of principal or interest required to be made by an Obligor on a Portfolio Asset or Underlying Loan Obligation, as applicable, as adjusted pursuant to the terms of the related Loan Agreement.

 

Scheduled Payment Date” has the meaning assigned to that term in the definition of “Payment Date”.

 

SEC” means the U.S. Securities and Exchange Commission, or any successor thereto.

 

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Second Lien Loan” means:

 

(a) a term loan (including any term loan, revolving credit facility, delayed draw term, or a participation thereof, but excluding any Holding Company Loan):

 

(i) that is not (and that cannot by its terms become) subordinate in right of payment to any other Borrowed Money Indebtedness of the applicable Obligor, other than a Senior Loan,

 

(ii) all of the obligations in respect of which are secured by a valid second-priority security interest or lien in, to or on substantially all of the Obligor’s and its Subsidiaries’ assets (with customary exceptions), which is not (and which cannot by its terms become) subordinate in right of Lien priority to other Liens (other than permitted first-lien obligations under the applicable loan documents and to other to Liens customarily allowed to be prior in priority to the Liens securing second lien loans): and

 

(iii) the collateral for which has a value that, together with other attributes of the Obligor (including its general financial condition, ability to generate cash flow available for debt service and other demands for that cash flow) is adequate (in the commercially reasonable judgment of the Borrower) at the time of acquisition to repay such loan in accordance with its terms and to repay all other obligations of equal or higher seniority in right of payment secured by a lien or security interest ranking equally with or higher than the liens securing such loan in the same collateral, and

 

(b) any other asset reasonably determined by the Initial Lender, in consultation with the Borrower, to constitute a Second Lien Loan.

 

Secured Party” means each of the Administrative Agent, each Lender, the Facility Servicer (together with its permitted successors and assigns), and each other Indemnified Party; provided that in any context requiring a Secured Party to give direction to the Administrative Agent, such reference to Secured Party shall not include the Administrative Agent.

 

Senior Loan” means (a) a term loan (including any term loan, revolving credit facility, delayed draw term loan or unitranche loan, or a participation thereof, but excluding any Holding Company Loan) that (i) is not (and that cannot by its terms become) subordinate in right of payment to any other Borrowed Money Indebtedness of the applicable Obligor, (ii) all of the obligations in respect of which are secured by a valid first-priority security interest or lien in, to or on substantially all of the Obligor’s and its Subsidiaries’ assets (with customary exceptions), which is not (and which cannot by its terms become) subordinate in right of Lien priority to other Liens (other than to Liens customarily allowed to be prior in priority to the Liens securing first lien loans), and (iii) the collateral for which has a value that, together with other attributes of the Obligor (including its general financial condition, ability to generate cash flow available for debt service and other demands for that cash flow) is adequate (in the commercially reasonable judgment of the Borrower) at the time of acquisition to repay such loan in accordance with its terms and to repay all other obligations of equal or higher seniority in right of payment secured by a first lien or first priority security interest in the same collateral and (b) any other asset reasonably determined by the Initial Lender, in consultation with the Borrower, to constitute a Senior Loan.

 

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Servicer Termination Event” means the occurrence of any one or more of the following events:

 

(a) a Bankruptcy Event shall occur with respect to the Facility Servicer;

 

(b) the Facility Servicer shall assign its rights or obligations hereunder (other than as expressly provided herein) to any Person without the consent of the Administrative Agent (acting at the direction of the Majority Lenders);

 

(c) any failure in any material respect by the Facility Servicer to observe or perform any covenant or other agreement of the Facility Servicer set forth in this Agreement or the other Transaction Documents, which continues to be unremedied for a period of 30 days (if such failure can be remedied) after the earlier to occur of (i) the date on which written notice of such failure shall have been given to the Facility Servicer by the Administrative Agent (acting at the direction of the Majority Lenders) or the Borrower and (ii) the date on which a Responsible Officer of the Facility Servicer acquires knowledge thereof (or such extended period of time reasonably approved by the Borrower not to exceed 60 days in the aggregate; provided that the Facility Servicer is diligently proceeding in good faith to cure such failure or breach);

 

(d) any representation, warranty or certification made by the Facility Servicer in any Transaction Document or in any certificate delivered pursuant to any Transaction Document shall prove to have been incorrect when made, which has resulted in a Material Adverse Effect; and

 

(e) with respect to the Facility Servicer, Massachusetts Mutual Life Insurance Company ceases to be a Lender hereunder without the prior written consent of the Borrower.

 

Servicer Termination Expenses” has the meaning assigned to that term in Section 8.01(b).

 

Servicer Termination Notice” has the meaning assigned to that term in Section 8.01(b).

 

Servicing Report” has the meaning assigned to that term in Section 8.08(a)(i).

 

Servicing Standard” means, with respect to any Portfolio Assets included in the Collateral, with respect to the Facility Servicer, to service and administer such Portfolio Assets by or on behalf of the Borrower in accordance with Applicable Law, the terms of this Agreement, the Loan Agreements, the Equity Investment Agreements and all customary and usual servicing practices for loans or loan participations like the Portfolio Assets.

 

Similar Law” has the meaning assigned to that term in Section 4.01(s).

 

SOFR” means a rate equal to the secured overnight financing rate as administered by the SOFR Administrator.

 

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SOFR Administrator” means the Federal Reserve Bank of New York (or a successor administrator of the secured overnight financing rate).

 

State” means, one of the fifty states of the United States or the District of Columbia.

 

Stated Maturity Date” means March 31, 2033, as such date may have been extended pursuant to Section 2.04(i).

 

Subsidiary” means, with respect to a Person, a corporation, partnership or other entity (whether or not a body corporate) of which Equity Interests having ordinary voting power (other than Equity Interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, company, partnership or other entity (whether or not a body corporate) are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such person.

 

Substitute Asset” has the meaning assigned to that term in Section 2.10(b).

 

Substitution” has the meaning assigned to that term in Section 2.10(b).

 

Substitution Date” has the meaning assigned to that term in Section 2.10(b).

 

SVO” means the Securities Valuation Office of the NAIC.

 

Tax Compliance Certificate” has the meaning assigned to that term in Section 2.13(e).

 

Taxes” means any present or future taxes, levies, imposts, duties, deductions, charges, withholdings (including backup withholding), assessments or fees (including interest, penalties, and additions thereto) that are imposed by any Governmental Authority.

 

Term SOFR” means a rate per annum equal to the Term SOFR Reference Rate (rounded upward to the next one-sixteenth (1/16th) of one percent (0.0625%), if necessary) for a tenor of three months on the day (such day, the “Term SOFR Determination Day”) that is two (2) U.S. Government Securities Business Days prior to the first day of the relevant Interest Period, as such rate is published by the Term SOFR Administrator; provided, however, that, if as of 5:00 p.m. on any Term SOFR Determination Day the Term SOFR Reference Rate for the applicable tenor has not been published by the Term SOFR Administrator and a Benchmark Replacement Date with respect to the Term SOFR Reference Rate has not occurred, then Term SOFR will be the Term SOFR Reference Rate for such tenor as published by the Term SOFR Administrator on the first preceding U.S. Government Securities Business Day for which such Term SOFR Reference Rate for such tenor was published by the Term SOFR Administrator so long as such first preceding U.S. Government Securities Business Day is not more than three (3) U.S. Government Securities Business Days prior to such Term SOFR Determination Day.

 

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Term SOFR Administrator” means the CME Group Benchmark Administration Limited (CBA) (or a successor administrator of the Term SOFR Reference Rate selected by the Administrative Agent in its reasonable discretion).

 

Term SOFR Determination Day” has the meaning specified in the definition of “Term SOFR.”

 

Term SOFR Reference Rate” means the forward-looking term rate based on SOFR.

 

Total Portfolio Value” means, as of any date of determination, (a)(i) solely for the purposes of determining Eligible Portfolio Assets, from the Closing Date until the last day of the Commitment Period, the greater of (A) the aggregate Portfolio Asset Value of all Eligible Portfolio Assets as of such date, as adjusted from time to time pursuant to Section 5.01(e) and (B) an amount equal to (x) the Maximum Facility Amount divided by (y) the Advance Rate, and (ii) thereafter, the aggregate Portfolio Asset Value of all Eligible Portfolio Assets as of such date, as adjusted from time to time pursuant to Section 5.01(e) and (b) for all other purposes hereunder, the aggregate Portfolio Asset Value of all Eligible Portfolio Assets as of such date, as adjusted from time to time pursuant to Section 5.01(e).

 

Transaction Documents” means this Agreement, any Revolving Loan Note, the Account Control Agreement, the Collateral Custodian Tri-Party Agreement, the Fee Letters, each Assignment and Assumption Agreement, each Participation Agreement and each agreement, instrument, certificate or other document related to any of the foregoing.

 

Transfer” means (a) the acquisition by, or the transfer or assignment to, the Borrower of a Portfolio Asset, and all rights, title and interest with respect thereto or (b) the origination of a Loan Asset and related Portfolio Assets by the Borrower pursuant to a Loan Agreement or Participation Agreement, as applicable.

 

Transferor” means any assignor or transferor of a Loan Asset and all rights, title and interest with respect thereto in connection with any Transfer.

 

U.S. Dollars” means, and the convention “$” signifies, the lawful money of the United States of America.

 

UCC” means the Uniform Commercial Code as from time to time in effect in the specified jurisdiction.

 

UK Financial Institution” means any BRRD Undertaking (as such term is defined under the PRA Rulebook (as amended from time to time) promulgated by the United Kingdom Prudential Regulation Authority) or any person falling within IFPRU 11.6 of the FCA Handbook (as amended from time to time) promulgated by the United Kingdom Financial Conduct Authority, which includes certain credit institutions and investment firms, and certain affiliates of such credit institutions or investment firms.

 

UK Resolution Authority” means the Bank of England or any other public administrative authority having responsibility for the resolution of any UK Financial Institution.

 

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Unadjusted Benchmark Replacement” means the applicable Benchmark Replacement excluding the related Benchmark Replacement Adjustment.

 

Underlying Agent” means, with respect to a Portfolio Asset, any administrative agent, trustee or other similar agent or representative, if any, appointed by the lenders or holders party to the Loan Agreement for such Portfolio Asset, to administer such Portfolio Asset or the Underlying Loan Obligations for such Portfolio Asset, as applicable.

 

Underlying Collateral” means, with respect to a Portfolio Asset, any property or other assets pledged or mortgaged as collateral to secure repayment of such Portfolio Asset or the Underlying Loan Obligation for such Portfolio Asset, as applicable, including, mortgaged property and all proceeds from any sale or other disposition of such property or other assets.

 

Underlying Loan Obligation” means, with respect to a Portfolio Asset consisting of a loan participation, the loan obligations of any applicable Obligor in which such Portfolio Asset is participating.

 

Underlying Obligor Default” means, with respect to any Loan Asset following the Cut-Off Date relating thereto, the occurrence of one or more of the following events (any of which may occur more than once):

 

(a) an Obligor payment default in respect of principal or interest has occurred and is continuing with respect to a Loan Asset (after giving effect to any grace or cure period or notice requirement set forth in the applicable Loan Agreement);

 

(b) any other event of default or similar event or circumstance under the Loan Agreement for such Loan Asset for which the Borrower (or agent or required lenders pursuant to the applicable Loan Agreement, as applicable) has elected to exercise any of its rights and remedies (including the acceleration of the loan relating thereto), unless otherwise agreed to in writing by the Majority Lenders; or

 

(c) a Bankruptcy Event with respect to any related Obligor.

 

Unfunded Exposure Account” means the bank account established with the Account Bank in the name of the Borrower into which certain Unfunded Exposure Advances shall be deposited by the Borrower in accordance with the terms of this Agreement and subject to the Account Control Agreement and under the “control” (within the meaning of Section 9-104 or 9-106 of the UCC, as applicable) of the Administrative Agent for the benefit of the Secured Parties.

 

Unfunded Exposure Advance” means any Advance requested by the Borrower pursuant to Section 3.02(c), the proceeds of which the Borrower specifies in any Notice of Borrowing are to be (a) applied in discharge of a Delayed Draw within five (5) Business Days of the date of such Advance, or (b) credited on the date of such Advance to the Unfunded Exposure Account and to be applied in the discharge of a future obligation to fund a Delayed Draw.

 

United States” means the United States of America.

 

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

 

Unused Commitment Fee” has the meaning assigned to that term in Section 2.05(c).

 

Utilization Fees” means, for any period of determination during the Commitment Period, the positive difference, if any, between (a) the amount of interest that would have accrued under this Agreement for such period on the Advances Outstanding if the Advances Outstanding for such period were equal to the Minimum Usage Amount, and (b) the amount of interest that actually accrued under this Agreement for such period on the Advances Outstanding.

 

U.S. Government Securities Business Day” means any day except for (a) a Saturday, (b) a Sunday or (c) a day on which the Securities Industry and Financial Markets Association, or any successor thereto, recommends that the fixed income departments of its members be closed for the entire day for purposes of trading in United States government securities.

 

Valuation Suspension” means a suspension of the determination of the “net asset value” (or other analogous term) of the Portfolio Assets pursuant to the Borrower’s Organizational Documents, as applicable, or any offering materials with respect to the Borrower or the Portfolio Assets.

 

Withdrawal Date” has the meaning assigned to that term in Section 2.07(e).

 

Withholding Agent” means, the Borrower, the Facility Servicer and the Administrative Agent, as applicable.

 

Write-Down and Conversion Powers” means, with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule.

 

Section 1.02 Other Terms. All accounting terms used but not specifically defined herein shall be construed in accordance with GAAP. All terms used in Article 9 of the UCC in the State of New York, and used but not specifically defined herein, are used herein as defined in such Article 9.

 

Section 1.03 Computation of Time Periods. Unless otherwise stated in this Agreement, in the computation of a period of time from a specified date to a later specified date, the words “from”, and “commencing on” mean “from and including” and the words “to”, “until” and “ending on” each mean “to but excluding”.

 

Section 1.04 Interpretation. In each Transaction Document, unless a contrary intention appears:

 

(a) the singular number includes the plural number and vice versa;

 

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(b) reference to any Person includes such Person’s successors and assigns but only if such successors and assigns are not prohibited by the Transaction Documents;

 

(c) reference to any gender includes each other gender;

 

(d) reference to day or days without further qualification means calendar days;

 

(e) the term “or” is not exclusive;

 

(f) reference to the words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”;

 

(g) reference to any agreement (including any Transaction Document), document or instrument means such agreement, document or instrument as amended, modified, waived, supplemented, restated or replaced and in effect from time to time in accordance with the terms thereof and, if applicable, the terms of the other Transaction Documents, and reference to any promissory note includes any promissory note that is an extension or renewal thereof or a substitute or replacement therefor;

 

(h) reference to any Applicable Law means such Applicable Law as amended, modified, codified, replaced or reenacted, in whole or in part, and in effect from time to time, including rules and regulations promulgated thereunder and reference to any Section or other provision of any Applicable Law means that provision of such Applicable Law from time to time in effect and constituting the substantive amendment, modification, codification, replacement or reenactment of such Section or other provision;

 

(i) if payment or performance of any obligation of the Borrower hereunder is due on a date which is not a Business Day, the required date for payment or performance shall be the next Business Day;

 

(j) unless otherwise specified, all references herein to times of day shall be references to New York City time (daylight or standard, as applicable);

 

(k) references to “hereto” shall, unless otherwise stated, be construed as a reference to “to this Agreement”.

 

Section 1.05 Advances to Constitute Loans. Notwithstanding any provision herein to the contrary, the parties hereto intend that the Advances made hereunder constitute a “loan” and not a “security” for purposes of Section 8-102(15) of the UCC.

 

Section 1.06 Rates. The Administrative Agent does not warrant or accept responsibility for, and shall not have any liability with respect to (a) the continuation of, administration of, submission of, calculation of or any other matter related to the Alternate Base Rate, the Term SOFR Reference Rate, Term SOFR or any component definition thereof or rates referred to in the definition thereof, or any alternative, successor or replacement rate thereto (including any Benchmark Replacement), including whether the composition or characteristics of any such alternative, successor or replacement rate (including any Benchmark Replacement) will be similar to, or produce the same value or economic equivalence of, or have the same volume or liquidity as, the Alternate Base Rate, the Term SOFR Reference Rate, Term SOFR or any other Benchmark prior to its discontinuance or unavailability, or (b) the effect, implementation or composition of any Conforming Changes. The Administrative Agent and its affiliates or other related entities may engage in transactions that affect the calculation of the Alternate Base Rate, the Term SOFR Reference Rate, Term SOFR, any alternative, successor or replacement rate (including any Benchmark Replacement) or any relevant adjustments thereto, in each case, in a manner adverse to the Borrower. The Administrative Agent may select information sources or services in its reasonable discretion to ascertain the Alternate Base Rate, the Term SOFR Reference Rate, Term SOFR or any other Benchmark, in each case pursuant to the terms of this Agreement, and shall have no liability to the Borrower, any Lender or any other person or entity for damages of any kind, including direct or indirect, special, punitive, incidental or consequential damages, costs, losses or expenses (whether in tort, contract or otherwise and whether at law or in equity), for any error or calculation of any such rate (or component thereof) provided by any such information source or service.

 

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ARTICLE II
THE FACILITY

 

Section 2.01 Advances.

 

(a) On the terms and conditions hereinafter set forth, the Borrower may at its option, from time to time, on any Business Day during the Commitment Period, request that the Lenders make Advances in U.S. Dollars in an amount which, after giving effect to such Advances, would not cause the aggregate Advances Outstanding to exceed the Maximum Availability on such Business Day (after giving effect to any Transfer made with the proceeds of such Advance, except with respect to any Unfunded Exposure Advance).

 

(b) Notwithstanding anything contained in this Section 2.01 or elsewhere in this Agreement to the contrary:

 

(i) other than with respect to an Unfunded Exposure Advance, if a Market Trigger Event has occurred and is continuing, each Lender may, by written notice to the Borrower, decline to make any Advance hereunder or suspend such Lender’s commitment to make Advances, in each case, until the Commitment Period has been reinstated in accordance with this Section 2.01, and

 

(ii) no Lender shall be obligated to make any Advance in an amount that would result in the outstanding amount of such Lender’s Advances exceeding such Lender’s Commitment.

 

(c) Each Advance to be made hereunder shall be made by the Lenders in accordance with their respective Pro Rata Shares. If the Commitment Period has been suspended as a result of a Market Trigger Event as provided in clause (b) of this Section 2.01, the Commitment Period shall be reinstated (i) upon delivery by the Borrower to the Administrative Agent of an LTV Certificate and evidence satisfactory to the Administrative Agent demonstrating that the Market Trigger Event which gave rise to such suspension is no longer continuing, or (ii) notwithstanding the occurrence of such Market Trigger Event, if the LTV is not in excess of the then applicable Maximum LTV Percentage, with the consent of the Administrative Agent (acting at the direction of the Majority Lenders); provided that any such consent shall only be granted following receipt by the Administrative Agent and the Facility Servicer of an LTV Certificate delivered by the Borrower demonstrating the LTV is not in excess of the then applicable Maximum LTV Percentage.

 

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(d) Each Lender shall make available its Pro Rata Share of any Unfunded Exposure Advance requested by the Borrower on any Business Day during the Commitment Period prior to the Administrative Agent declaring the Maturity Date to have occurred pursuant to Section 6.01, regardless of whether a Market Trigger Event, Partnership Default Trigger Event or Event of Default (other than an Event of Default pursuant to Sections 6.01(a) or 6.01(d)) has occurred and is continuing on such Business Day.

 

Section 2.02 Procedure for Advances.

 

(a) The Borrower shall request an Advance by delivery of a Notice of Borrowing to the Administrative Agent, with a copy to the Facility Servicer no later than 10:00 a.m. three (3) U.S. Government Business Days prior to the proposed date of such Advance (or such shorter period of time agreed to by the Initial Lender in connection with the Initial Advance, or by the Lenders in their sole discretion in connection with any other Advance). Each Notice of Borrowing must be accompanied by a duly completed Borrowing Base Certificate and LTV Certificate giving pro forma effect to the Advance requested and specify:

 

(i) the amount of such Advance, which must be in U.S. Dollars and at least equal to $2,000,000;

 

(ii) the proposed date of such Advance (which must be a Business Day);

 

(iii) with respect to any Advance other than the Initial Advance, the purpose for which the proceeds of such Advance are to be used which must be a purpose permitted pursuant to Section 5.02(h);

 

(iv) if a Market Trigger Event or Event of Default has occurred and is continuing on the date of such Notice of Borrowing and the proceeds of such Advance are to constitute an Unfunded Exposure Advance, that such Advance is an Unfunded Exposure Advance;

 

(v) if all or any part of the proceeds of such Advance are to be applied (directly or indirectly) in connection with the Transfer of a Portfolio Asset, the Borrower shall provide the Administrative Agent with (A) a description of such Portfolio Asset and whether such Portfolio Asset is (i) a Delayed Draw Portfolio Asset and (ii) a Senior Loan or a Second Lien Loan, and (B) if such Portfolio Asset is a Delayed Draw Portfolio Asset, the maximum Delayed Draw commitment required to be made thereunder; and

 

(vi) that all conditions precedent for such Advance described in Article III have been satisfied or waived, as applicable, with respect to that Advance.

 

(b) Promptly upon receipt of a Notice of Borrowing, the Administrative Agent shall notify the Lenders of the requested Advance, and each Lender shall make the Advance on the terms and conditions set forth herein. On the Advance Date of such Advance, upon satisfaction of the applicable conditions set forth in Article III, each Lender shall, in accordance with instructions received by the Administrative Agent from the Borrower, make available to the Borrower, in same day funds, an amount equal to such Lender’s Pro Rata Share of such Advance, by payment into the Operating Account or any other account as request by the Borrower.

 

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(c) The obligation of each Lender to remit its Pro Rata Share of any Advance is several from that of each other Lender and the failure of any Lender to make such amount available to the Borrower shall not relieve any other Lender of its obligations hereunder.

 

(d) Each Advance shall be in a principal amount of $2,000,000 or a whole multiple of $500,000 in excess thereof, or if less, the remainder of the Commitment.

 

(e) The Facility Servicer shall promptly notify the Borrower, the Administrative Agent and the Lenders of the interest rate applicable to any Interest Period upon determination of such interest rate.

 

(f) If all or any portion of an Advance is an Unfunded Exposure Advance, the Borrower shall transfer an amount equal that portion of such Advance which is an Unfunded Exposure Advance to the Unfunded Exposure Account on the date of receipt of such Advance except to the extent that portion of such Advance is applied towards discharging a Delayed Draw on such date.

 

(g) If the Borrower rescinds any request prior to the funding of the applicable proposed Advance, the Borrower shall pay the Breakage Fees, if any, resulting from such rescission.

 

Section 2.03 Evidence of Debt.

 

(a) If requested by a Lender, the Borrower shall promptly deliver a duly executed revolving loan note (the “Revolving Loan Note”) to such Lender in substantially the form of Exhibit D.

 

(b) The Administrative Agent shall maintain, solely for this purpose as the agent of the Borrower, at its address referred to in Section 11.02, a copy of each Assignment and Assumption Agreement delivered to and accepted by it and a register for the recordation of the names and addresses of the Lenders, the Commitments of the Lenders, and the principal amounts of (and stated interest on) the Advances owing to each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Borrower, the Administrative Agent, each Lender and the other parties hereto shall treat each Person whose name is recorded in the Register as a Lender under this Agreement for all purposes of this Agreement. A copy of the Register shall be provided electronically to the Borrower or any Lender promptly following a request therefor.

 

(c) Each Lender that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of the Borrower, maintain a register on which it enters the name and address of each participant and the principal amounts of (and stated interest on) each participant’s interest in the loans or other obligations under the Transaction Documents (the “Participant Register”); provided that (a) no Lender shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any participant or any information relating to a participant’s interest in any commitments, loans or its other obligations under any Transaction Document) to any Person except to the extent that such disclosure is necessary to establish that such commitment, loan or other obligation is in Registered form and (b) the Administrative Agent shall have no liability or obligation to make determinations with respect to the rights of Participants hereunder. The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary.

 

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Section 2.04 Repayment; Termination of Commitments; Extension of Stated Maturity Date.

 

(a) During the Commitment Period, subject to the terms and conditions hereof, the Borrower may borrow, repay and reborrow Advances without any penalty, fee or premium by delivering written notice thereof to the Administrative Agent no later than 2:00 p.m., at least two (2) Business Days prior to such prepayment; provided that, there shall be no more than six (6) such repayments of the Advances by the Borrower in any fiscal quarter, unless otherwise agreed to by the Initial Lender.

 

(b) After the Commitment Period, any Advance or any portion thereof, once repaid, may not be reborrowed.

 

(c) On the Maturity Date, the Borrower shall repay to the Lenders, in accordance with their respective Pro Rata Shares, the Advances Outstanding on the Maturity Date, together with all accrued and unpaid interest thereon.

 

(d) All amounts and payments with respect to the Advances or other Obligations hereunder shall be made in U.S. Dollars.

 

(e) The Borrower may, at any time after the sixth (6th) anniversary of the Closing Date, at its option, prepay all or part of the Advances Outstanding, without premium or penalty, by delivering written notice thereof (which notice shall include a Borrowing Base Certificate giving pro forma effect to such prepayment requested) to the Administrative Agent no later than 2:00 p.m., at least two (2) U.S. Government Business Days prior to such prepayment, in the case of a partial prepayment, and at least three (3) U.S. Government Business Days prior to such prepayment in the case of a prepayment in full. Any prepayment pursuant to this Section 2.04(e) shall permanently reduce the Maximum Facility Amount in an amount equal to the amount of the Advances Outstanding prepaid and there shall be no more than six (6) such prepayments in any fiscal quarter unless otherwise agreed by the Initial Lender. Such notice of prepayment may be revoked at the option of the Borrower provided that a written notice of revocation is delivered to the Administrative Agent at least one (1) Business Day prior to the intended prepayment date.

 

(f) Upon any prepayment of Advances pursuant to this Section 2.04, the Borrower shall also pay in full any accrued and unpaid interest of the Secured Parties related to such Advances and, in the event of a prepayment of all the Advances Outstanding, such costs and expenses of the Secured Parties and all other Obligations, if any, (other than contingent indemnification obligations and other obligations that survive the termination of this Agreement, in each case, not then due and owing) then owing by the Borrower. If the Borrower repays Advances on any day other than a Payment Date, the Borrower shall pay the Breakage Fees, if any, resulting from such repayment following receipt of a certificate from any affected Lender delivered pursuant to Section 2.05(k).

 

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(g) The Administrative Agent shall apply amounts received from the Borrower pursuant to this Section 2.04 (i) first, to the payment of all accrued and unpaid interest due and owing to the Lenders in accordance with the Lenders’ respective Pro Rata Shares, until paid in full with respect to such portion of the Advances Outstanding being repaid by the Borrower, (ii) second, to payment of such portion of the Advances Outstanding being prepaid by the Borrower, and (iii) third, in the event of a prepayment of all the Advances Outstanding, to payment of such costs and expenses of the Secured Parties and all other Obligations, if any, (other than contingent indemnification obligations and other obligations that survive the termination of this Agreement, in each case, not then due and owing) then owing by the Borrower.

 

(h) Upon repayment in full in cash of the Advances Outstanding and all other Obligations pursuant to this Agreement, this Agreement and the other Transaction Documents shall terminate.

 

Section 2.05 Interest and Fees.

 

(a) Subject to Section 2.17, the Borrower shall pay interest on the Advances Outstanding at a rate per annum equal to Term SOFR for the applicable Interest Period plus the Applicable Spread; provided that if Term SOFR as so determined would be less than the Floor, then Term SOFR shall be deemed to be the Floor. Interest is payable on each Payment Date as and to the extent provided in Section 2.08.

 

(b) The outstanding amount of each Advance shall automatically be continued in whole to the next applicable Interest Period upon the expiration of the then current Interest Period with respect thereto.

 

(c) The Borrower shall pay to the Administrative Agent an unused commitment fee (the “Unused Commitment Fee”) on the daily unused amount of the Maximum Facility Amount, if any, during the Commitment Period, which shall accrue at a rate per annum equal to 0.40% on the average daily unused amount of the Maximum Facility Amount during the Commitment Period, subject to the remainder of this Section 2.05(c). The Unused Commitment Fee shall accrue (x) initially, for the period commencing on the Closing Date and continuing to but excluding the first Payment Date to occur after the Closing Date, and (y) thereafter, for each successive period from and including each Payment Date continuing to but excluding the earlier of the following Payment Date and the end of the Commitment Period.

 

(d) Accrued Unused Commitment Fees are payable in arrears on each Payment Date, as calculated on each relevant Reporting Date, as and to the extent provided in Section 2.08. For purposes of computing Unused Commitment Fees, commencing on the Closing Date, if the average daily Advances Outstanding for the relevant period of determination is less than the Minimum Usage Amount for such period, then the average daily Advances Outstanding for such period shall be deemed to be the Minimum Usage Amount. All accrued and unpaid Unused Commitment Fees as at the Stated Maturity Date are payable in arrears on the Stated Maturity Date. For purposes of computing Unused Commitment Fees, the Commitment of any Lender at any time is deemed to be used to the extent of the aggregate principal amount at such time of its outstanding Advances. All Unused Commitment Fees are fully earned and nonrefundable upon payment.

 

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(e) The Borrower shall pay to the Administrative Agent, for the benefit of the Secured Parties, Utilization Fees, if any, which shall accrue (x) initially, for the period commencing on the Closing Date and continuing to but excluding the first Payment Date to occur after the Closing Date, and (y) thereafter, for each successive period from and including each Payment Date continuing to but excluding the earlier of the following Payment Date and the end of the Commitment Period. Utilization Fees shall be payable in arrears on each Payment Date by the Borrower to the Administrative Agent, for the benefit of the Secured Parties, as and to the extent provided in Section 2.08. Accrued and unpaid Utilization Fees as at the Stated Maturity Date are payable in arrears on the Stated Maturity Date. All Utilization Fees are fully earned and nonrefundable upon payment.

 

(f) The Borrower shall pay the fees set forth in the Fee Letters on the terms and conditions provided therein.

 

(g) If any amount payable by the Borrower under this Agreement or any other Transaction Document is not paid when due, whether at stated maturity, by acceleration or otherwise, such amount shall thereafter bear interest at the Default Rate. Upon the request of the Majority Lenders, if any Event of Default has occurred and is continuing, the Borrower shall pay interest on the principal amount of all Advances outstanding hereunder at the Default Rate.

 

(h) All computations of interest and all computations of interest and fees hereunder shall be made on the basis of a year of 360 days (or, in the case of interest calculated by reference to clause (a) of the definition of Alternate Base Rate, on the basis of a year of 365 or 366 days, as applicable) for the actual number of days (including the first but excluding the last day) elapsed.

 

(i) Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Advance, together with all fees, charges and other amounts that are treated as interest on such Advance under Applicable Law (collectively, “charges”), exceed the maximum lawful rate (the “Maximum Rate”) that may be contracted for, charged, taken, received or reserved by the Lender holding such Advance in accordance with Applicable Law, the rate of interest payable in respect of such Advance hereunder, together with all charges payable in respect thereof, shall be limited to the Maximum Rate. To the extent lawful, the interest and charges that would have been paid in respect of such Advance but were not paid as a result of the operation of this Section 2.05(i) shall be cumulated and the interest and charges payable to such Lender in respect of other Advance or periods shall be increased (but not above the amount collectible at the Maximum Rate therefor) until such cumulated amount shall have been received by such Lender. Any amount collected by such Lender that exceeds the maximum amount collectible at the Maximum Rate shall be applied to the reduction of the principal balance of such Advance or refunded to the Borrower so that at no time shall the interest and charges paid or payable in respect of such Advance exceed the maximum amount collectible at the Maximum Rate.

 

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(j) In connection with the use or administration of Term SOFR, the Administrative Agent will have the right to make Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Transaction Document, any amendments implementing such Conforming Changes will become effective without any further action or consent of any other party to this Agreement or any other Transaction Document. The Administrative Agent will promptly notify the Borrower and the Lenders of the effectiveness of any Conforming Changes in connection with the use or administration of Term SOFR.

 

(k) In connection with any demand for payment of Breakage Fees, a Lender shall provide to the Borrower, with a copy to the Administrative Agent, a certificate setting forth in reasonable detail the basis for such demand, the amount required to be paid by the Borrower to such Lender and the computations made by such Lender to determine such amount, such certificate to be prima facie evidence of such amount. Any such amount payable by the Borrower shall not be duplicative of any amounts (a) previously paid under this Section 2.05 or (b) included in the calculation of Term SOFR.

 

Section 2.06 Payments and Computations, Etc.

 

(a) On each Reporting Date, the Administrative Agent shall notify the Facility Servicer and the Borrower of the interest payable on the Advances hereunder on such Payment Date. All amounts to be paid or applied by the Borrower in accordance with this Agreement shall be paid or applied so that funds are received by the Administrative Agent no later than 10:00 a.m. on the day when due in lawful money of the United States in immediately available funds to the account specified in writing by the Administrative Agent to the Facility Servicer and the Borrower. Any Obligation hereunder shall not be reduced by any payment if, at any time, such payment is rescinded or required to be returned by any Lender to the Borrower or any other Person for any reason. The Administrative Agent shall distribute any amount received by it on any day which is required to be distributed on that day to the Lenders by no later than 2:00 p.m. on that day.

 

(b) Except as otherwise set forth herein, whenever any payment hereunder shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day and any fees and interest shall be calculated as of such succeeding Business Day.

 

(c) To the extent that (i) any payment by or on behalf of the Borrower is made to the Administrative Agent, the Facility Servicer or any Lender, or (ii) the Administrative Agent, the Facility Servicer or any Lender exercises its right of setoff, and such payment or the proceeds of such setoff (as applicable) or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by the Administrative Agent or such Lender in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any proceeding under any Bankruptcy Law or otherwise, then (A) to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such setoff had not occurred and (B) each Lender severally agrees to pay to the Administrative Agent or the Facility Servicer, as applicable, upon demand its applicable share (without duplication) of any amount so recovered from or repaid by the Administrative Agent or the Facility Servicer, as applicable.

 

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Section 2.07 Collections and Allocations.

 

(a) The Borrower shall direct (i) any agent or administrative agent for any Loan Asset that is not a loan participation interest (except for such Loan Assets that are actively cash managed or have a separate lockbox for payments pursuant to the terms of the related Portfolio Asset documents) to remit all Collections with respect to such Loan Asset and, if applicable, to direct the Obligors with respect to such Loan Asset to remit all Collections with respect to such Loan Asset to a Collection Account, (ii) any Counterparty Lender to direct the Obligor (or such Counterparty Lender or the Underlying Agent) for any Loan Asset that is a loan participation interest to remit all Collections with respect to any such Portfolio Asset and Underlying Loan Obligation directly to a Collection Account and (iii) pursuant to a payment direction letter (a copy of which shall be provided to the Administrative Agent as part of the next Payment Date Report), the Obligors with respect to each of the Equity Investments held by such Obligors to remit all Collections with respect to such Portfolio Assets to a Collection Account. To the extent any amounts are received by the Borrower directly and are not remitted into the Collection Account in accordance with the preceding sentence, (y) the Borrower shall, and shall cause its Affiliates to, deposit all Available Collections received by the Borrower or its Affiliates into the Collection Account within two (2) Business Days after receipt thereof by the Borrower or any of its Affiliates and (z) the Borrower shall, and shall cause its Affiliates to, hold in trust for the benefit of the Administrative Agent, for the benefit of the Secured Parties, all such Available Collections until so deposited into the Collection Account.

 

(b) The Borrower shall further include a statement as to the amount of Available Collections, all Principal Collections, all Interest Collections and Excluded Amounts on deposit in each Collection Account on each Reporting Date immediately preceding a Proposed Payment Date Report delivered pursuant to Section 8.08(a).

 

(c) Prior to the delivery of a Notice of Exclusive Control by the Administrative Agent (or its designee) to the Borrower and the Account Bank, the Borrower may make withdrawals from the Operating Account so long as no Event of Default has occurred and is continuing or will result therefrom. The Administrative Agent (or its designee) shall not deliver a Notice of Exclusive Control unless an Event of Default has occurred and is continuing.

 

(d) Prior to the delivery of a Notice of Exclusive Control by the Administrative Agent to the Borrower and the Account Bank, the Borrower may make a withdrawal from the Unfunded Exposure Account on any date:

 

(i) in an amount equal to the amount required to be applied by it to discharge any Delayed Draw due on that date, so long as no Event of Default under Sections 6.01(a) or 6.01(d) has occurred and is continuing or will result therefrom; and

 

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(ii) at any other time, if the Borrower determines that any amounts standing to the credit of the Unfunded Exposure Account are not required to be reserved for the purposes of funding future Delayed Draws, provided that the Borrower either (x) applies the amounts withdrawn in prepayment of Advances Outstanding and any related interest, costs, expenses and fees, or (y) applies the amounts withdrawn to the Transfer of any Portfolio Asset on the date of such withdrawal, provided that all actions required to be taken or performed under Section 3.04 with respect to such Transfer (if any) have been taken or satisfied in all material respects.

 

(e) Following the delivery of a Notice of Exclusive Control by the Administrative Agent to the Borrower and the Account Bank, and provided that no Event of Default pursuant to Sections 6.01(a) or 6.01(d) has occurred and is continuing, the Borrower may, by notice in writing to the Administrative Agent (a “Delayed Draw Funding Notice”) not later than two (2) Business Days prior to the proposed date of withdrawal (the “Withdrawal Date”), request that the Administrative Agent direct the Account Bank to pay as directed by the Borrower in the Delayed Draw Funding Notice, on the Withdrawal Date, such amount (the “Delayed Draw Funding Amount”) as is necessary to discharge any Delayed Draw required to be discharged on any date in the period commencing on the Withdrawal Date and ending on the date that is five (5) Business Days after that Withdrawal Date.

 

(f) Amounts to be withdrawn from the Borrower Accounts to pay any Delayed Draw Funding Amount in accordance with Section 2.07(g) shall be withdrawn (x) first from the Unfunded Exposure Account, and (y) second, if the amounts standing to the credit of such account are insufficient to pay the full Delayed Draw Funding Amount, the balance shall be withdrawn from the Collection Account.

 

(g) The Borrower shall not have any right to make withdrawals from the Collection Account.

 

(h) So long as no Event of Default has occurred and is continuing or would result therefrom:

 

(i)   upon the full or partial discharge of the debt obligations of an Obligor in respect of a Loan Asset, whether such prepayment is partial or in full, the Borrower may apply Collections in an amount equal to the amount paid by the applicable Obligor (directly or indirectly) to the Borrower, in prepayment of Advances and all interest, fees, costs and expenses relating thereto, in accordance with Section 2.04, and/or

 

(ii) where funds are to be withdrawn from the Unfunded Exposure Account pursuant to Sections 2.07(d)(ii) the Borrower may apply such amount withdrawn from the Unfunded Exposure Account in prepayment of Advances and all interest, fees, costs and expenses relating thereto, in accordance with Section 2.04, provided that, in each case:

 

(A) there shall be no more than six (6) such prepayments of the Advances by the Borrower in any fiscal quarter unless otherwise agreed to by the Initial Lender, and

 

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(B) at least two (2) Business Days prior to the date of such prepayment the Borrower shall have delivered a notice of prepayment to the Administrative Agent and the Facility Servicer, which notice shall include a Borrowing Base Certificate, giving pro forma effect to such prepayment and setting forth the amounts due and payable by the Borrower pursuant to Sections 2.08(a)(i) through (iii) for the Scheduled Payment Date immediately following such prepayment date and certifying that the Borrower will have sufficient amounts in the Collection Account (including, amounts expected to be received prior to such Payment Date in the good faith determination of the Borrower) to pay such amounts in full.

 

(i) During the continuance of an Event of Default following the delivery of a Notice of Exclusive Control by the Administrative Agent to the Facility Servicer and the Account Bank, the Administrative Agent may withdraw from the Collection Account any deposits therein (including amounts constituting Excluded Amounts) in accordance with the terms of this Agreement and the other Transaction Documents and the Borrower shall not have any right to make withdrawals from such Collection Account

 

(j) If (i) the Borrower makes a deposit into the Collection Account and such Collection was received by the Borrower in the form of a check that is not honored for any reason or (ii) the Borrower makes a mistake with respect to the amount of any Collection and deposits an amount that is less than or more than the actual amount of such Collection, the Borrower shall notify the Administrative Agent of such dishonored check or mistake. Any Scheduled Payment in respect of which a dishonored check is received shall be deemed not to have been paid.

 

(k) Other than as otherwise expressly permitted in this Agreement, the Borrower may only invest or cause the investment of available funds on deposit in the Collection Account in Permitted Investments maturing on or before the Business Day prior to the next Scheduled Payment Date.

 

(l) The Borrower shall not have any Account unless such Account is listed on Schedule V and is subject to an Account Control Agreement pursuant to the terms hereof.

 

Section 2.08 Remittance Procedures. On each Payment Date, based on the Payment Date Report, the Borrower shall apply funds on deposit in the Collection Account in the following order and priority:

 

(a) Application of Collections (Interest Collections). The Administrative Agent shall (as directed pursuant to the first paragraph of this Section 2.08) transfer all Interest Collections held by the Account Bank in the Collection Account, in accordance with the Payment Date Report, to the following Persons in the following amounts, calculated as of the most recent Reporting Date, in the following order and priority:

 

(i) first, to the payment of, or reservation for, Borrower’s reasonable and customary operating expenses, including amounts payable to the RIA, the RIA and service providers, Borrower Taxes, registration and filing fees then due and owing by the Borrower (or in the case of expenses reserved for, payable prior to the next Scheduled Payment Date) that are attributable solely to the operations of the Borrower;

 

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(ii) second, to the Administrative Agent for distribution to the following Persons (x) to the Administrative Agent, (y) to the Facility Servicer and (z), to the Account Bank of the Borrower (or, if directed by the Administrative Agent to pay any such ratable amount directly to the applicable Person, to such Person), in each case, in payment in full of all accrued fees, expenses and indemnities due and payable to such Persons by the Borrower under this Agreement, under any other Transaction Document or any Fee Letter, as applicable;

 

(iii) third, to the Administrative Agent for distribution to each Lender and each other Secured Party, as applicable (or if directed by the Administrative Agent to pay any such ratable amount directly to the Lender and other Secured Party, to such Lender or Secured Party as applicable), to pay such Lender’s and other Secured Party’s, as applicable, Pro Rata Share of accrued and Unpaid Commitment Fees, Utilization Fees, other fees and interest owing to such Lender or such other Secured Party, as applicable, and any amounts in respect of expense reimbursement or indemnities, in each case (including any such accrued and unpaid interest, fees or other amounts from a prior period), under this Agreement, under any other Transaction Document or any Fee Letter, as applicable;

 

(iv) fourth, if a Market Trigger Event or Event of Default has occurred and is continuing, to the Administrative Agent for distribution to each Lender (or if directed by the Administrative Agent to pay such ratable amount directly to the Lender, to such Lender), for payment in or towards repayment of such Lender’s Pro Rata Share of the Advances Outstanding until (x) repaid in full, in the case of an Event of Default or Market Event not capable of cure by repayment of Advances Outstanding or (y) such Market Trigger Event or Event of Default is deemed no longer to be continuing after giving pro forma effect to such repayment;

 

(v) fifth, to the Borrower or as the Borrower may direct (including, to the extent permitted hereunder, (A) to make a Restricted Junior Payment, and (B) for the reservation of Delayed Draws), any remaining amounts.

 

(b) Application of Collections (Principal Collections). The Administrative Agent shall (as directed pursuant to the first paragraph of this Section 2.08) transfer all Principal Collections held by the Account Bank in the Collection Account, in accordance with the Payment Date Report, to the following Persons in the following amounts, calculated as of the most recent Reporting Date, in the following order and priority:

 

(i) first, to the payment of, or reservation for, Borrower’s reasonable and customary operating expenses, including amounts payable to the RIA, the RIA and service providers, Borrower Taxes, registration and filing fees then due and owing by the Borrower (or in the case of expenses reserved for, payable prior to the next Scheduled Payment Date) that are attributable solely to the operations of the Borrower;

 

(ii) second, to the Administrative Agent for distribution to the following Persons (x) to the Administrative Agent, (y) to the Facility Servicer and (z) to the Account Bank of the Borrower (or, if directed by the Administrative Agent to pay any such ratable amount directly to the applicable Person, to such Person), in each case, in payment in full of all accrued fees, expenses and indemnities due and payable to such Persons by the Borrower under this Agreement, under any other Transaction Document or any Fee Letter, as applicable;

 

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(iii) third, to the Administrative Agent for distribution to each Lender and each other Secured Party, as applicable (or if directed by the Administrative Agent to pay any such ratable amount directly to the Lender and other Secured Party, to such Lender or Secured Party as applicable), to pay such Lender’s and other Secured Party’s, as applicable, pro rata share of accrued and Unpaid Commitment Fees, Utilization Fees, other fees and interest owing to such Lender or such other Secured Party, as applicable, and any amounts in respect of expense reimbursement or indemnities, in each case (including any such accrued and unpaid interest, fees or other amounts from a prior period), under this Agreement, under any other Transaction Document or any Fee Letter, as applicable;

 

(iv) fourth, if a Market Trigger Event or Event of Default has occurred and is continuing, to the Administrative Agent for distribution to each Lender (or if directed by the Administrative Agent to pay such ratable amount directly to the Lender, to such Lender), to repay such Lender’s Pro Rata Share of the Advances Outstanding in an aggregate amount such that such Market Trigger Event or Event of Default is deemed no longer to be continuing after giving pro forma effect to such repayment;

 

(v) fifth, if no Market Trigger Event or Event of Default has occurred and is continuing (or if a Market Trigger Event which is continuing is deemed no longer to be continuing after giving effect to the repayments under clause (a)(iv) above) or would result therefrom, prior to the end of the Commitment Period, to the Borrower or as the Borrower may direct (y) to the extent that the Borrower elects to do so, purchase Portfolio Assets, and/or (z) if the Borrower has exercised its right to prepay all or any part of the Advances Outstanding and such prepayment is due on the applicable Payment Date, to prepay each Lender’s Pro Rata Share of the Advances Outstanding as of such date in an aggregate amount equal to the amount specified in the applicable prepayment notice, together with all other amounts due and payable on such Advances in accordance with the terms of this Agreement;

 

(vi) sixth, if no Market Trigger Event or Event of Default has occurred and is continuing (or if a Market Trigger Event which is continuing is deemed no longer to be continuing after giving effect to the repayments under clause (a)(iv) above) or would result therefrom, and the Borrower has not otherwise repaid each Lender’s Pro Rata Share of the Advances Outstanding pursuant to clause (a)(v) above, to repay each Lender’s Pro Rata Share of the Advances Outstanding as of such date in such amount as may be required to ensure that the LTV is not greater than the then-applicable Maximum LTV Percentage;

 

(vii) seventh, to the Borrower or as the Borrower may direct (including, to the extent permitted hereunder, (A) to make a Restricted Junior Payment, and (B) for the reservation of Delayed Draws), any remaining amounts.

 

(c) Insufficiency of Funds. If the funds on deposit in the Collection Account are insufficient to pay any amounts otherwise due and payable on a Payment Date or otherwise, the Borrower nevertheless remains responsible for, and shall pay when due, all amounts payable under this Agreement and the other Transaction Documents in accordance with the terms of this Agreement and the other Transaction Documents, together with interest accrued as set forth in Section 2.05(g) from the date when due until paid hereunder.

 

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(i) [Reserved].

 

(d) Notwithstanding anything herein to the contrary, at any time after the Administrative Agent has declared an Event of Default pursuant to Section 6.01(a) or 6.01(d), the Administrative Agent may (and at the direction of the Majority Lenders shall) instruct the Account Bank to transfer all amounts standing to the credit of the Unfunded Exposure Account to the Collection Account to be applied in accordance with Section 2.08(c).

 

(e) Instructions to the Account Bank. From the date of this Agreement until the Facility Termination Date, the Borrower shall provide, or ensure that the Account Bank provides, the Administrative Agent access to an electronic transmission system established with the Account Bank for the purpose of monitoring activities in the Collection Account. If, for any reason, such electronic transmission system is unavailable, all instructions and directions given to the Account Bank by the Facility Servicer, the Borrower or the Administrative Agent (as applicable) pursuant to this Section 2.08 shall be in writing (including instructions and directions transmitted to the Account Bank by facsimile or e-mail) and the Facility Servicer and the Borrower shall transmit to the Administrative Agent by facsimile or e-mail a copy of all instructions and directions given to the Account Bank by such party pursuant to this Section 2.08 concurrently with the delivery thereof. The Administrative Agent shall transmit to the Facility Servicer and the Borrower by facsimile or e-mail a copy of all instructions and directions given to the Account Bank by the Administrative Agent pursuant to this Section 2.08 concurrently with the delivery thereof.

 

(f) No Presentment. Payment by the Administrative Agent to the Lenders in accordance with the terms hereof shall not require presentment of any Revolving Loan Note.

 

(g) Restricted Junior Payments and Inter-Period Payment Dates. The Borrower shall deliver written notice to the Administrative Agent not less than five (5) Business Days prior to any date other than a Scheduled Payment Date on which it proposes to make a Restricted Junior Payment, such notice to be accompanied by a pro forma Borrowing Base Certificate and LTV Certificate, and a Proposed Payment Date Report with respect to the proposed Inter-Period Payment Date on which such Restricted Junior Payment is to be made. The Borrower may deliver such notice to the Administrative Agent not more than twelve (12) times in any calendar year. Nothing in this Section 2.08(g) shall limit the Borrower’s ability to make a Restricted Junior Payment on a Scheduled Payment Date to the extent otherwise permitted by the terms of this Agreement.

 

Section 2.09 Grant of a Security Interest.

 

(a) To secure the prompt and complete payment in full when due, whether by lapse of time, acceleration or otherwise, of the Obligations and the performance by the Borrower of all of the covenants and obligations to be performed by it pursuant to this Agreement and each other Transaction Document, whether now or hereafter existing, due or to become due, direct or indirect, or absolute or contingent, the Borrower hereby grants a security interest to the Administrative Agent, its successors and assigns, for the benefit of the Secured Parties, in all of the Borrower’s right, title and interest in, to and under (but none of the obligations under) the following, whether now owned or hereinafter acquired (collectively, the “Collateral”): (A) (i) all accounts, money, cash and currency, chattel paper, tangible chattel paper, electronic chattel paper, intellectual property, goods, equipment, fixtures, contract rights, general intangibles, documents, instruments, certificates of deposit, certificated securities, uncertificated securities, financial assets, securities entitlements, commercial tort claims, securities accounts, deposit accounts, inventory, investment property, letter-of-credit rights, software, supporting obligations, accessions or other property consisting of Portfolio Assets, (ii) the Portfolio Assets and all Collections with respect thereto; (iii) all Records relating to the Portfolio Assets; (iv) all Proceeds of the foregoing; (v) the Collection Account, the Operating Account and the Unfunded Exposure Account, (vi) its Pledged Equity, and (vi) all proceeds and products of the foregoing.

 

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(b) To secure the prompt and complete payment in full when due, whether by lapse of time, acceleration or otherwise, of the Obligations and the performance by the Loan Parties of all of the covenants and obligations to be performed pursuant to this Agreement and each other Transaction Document, whether now or hereafter existing, due or to become due, direct or indirect, or absolute or contingent, Holdings hereby grants a security interest to the Administrative Agent, for the benefit of the Secured Parties, in all of Holding’s right, title and interest in and to, whether now owned or hereinafter acquired, its Pledged Equity, and all documents, instruments, proceeds, supporting obligations and products of any of the foregoing.

 

(c) Anything herein to the contrary notwithstanding, (i) the Borrower shall remain liable under the Collateral to the extent set forth therein to perform all of its duties and obligations thereunder to the same extent as if this Agreement had not been executed, (ii) the exercise by the Administrative Agent, for the benefit of the Secured Parties, of any of its rights in the Collateral or the Pledged Equity does not release the Borrower or Holdings (as applicable) from any of its duties or obligations under the Collateral or with respect to the Pledged Equity (as applicable) and (iii) none of the Administrative Agent, any Lender or any other Secured Party shall have any obligations or liability under the Collateral or Pledged Equity by reason of this Agreement, nor shall the Administrative Agent, any Lender or any other Secured Party be obligated to perform any of the obligations or duties of the Borrower thereunder or to take any action to collect or enforce any claim for payment assigned hereunder.

 

Section 2.10 Sale and Substitution.

 

(a) Sales. The Borrower may sell or otherwise transfer or dispose of any Portfolio Asset (a “Sale”), so long as:

 

(i) unless the Majority Lenders otherwise consent, the Proceeds from such Sale (expressed as a percentage of the lower of par and the purchase price) shall be an amount at least equal to 95% of the most recent Portfolio Asset Value of such Portfolio Asset subject to such Sale it being acknowledged that if less than all of a given Portfolio Asset is to be the subject of a Sale, the Borrower shall be in compliance with paragraph (i) if the Proceeds of such Sale are an amount at least equal to 95% of the Portfolio Asset Value or value, as applicable, attributable to that portion of such Portfolio Asset subject to such Sale; and

 

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(ii) immediately before and after giving effect to such Sale: (w) the aggregate Advances Outstanding shall not exceed the Maximum Availability as of such date, (x) no Market Trigger Event shall have occurred and be continuing, (y) no Event of Default or Unmatured Event of Default shall have occurred and be continuing, and (z) the LTV shall not have exceed the then applicable Maximum LTV Percentage; and

 

(iii)   the net cash proceeds from such Sale are deposited in a Collection Account; provided that, so long as LTV is equal to or less than 58%, the net cash proceeds from such Sale may be used either or both (x) to prepay Advances in accordance with Section 2.04, and/or (y) to make Restricted Junior Payments subject to Section 2.08.

 

(b) Substitution. Subject to the conditions set forth in this Section 2.10(b) and subject to the other restrictions contained herein, at any time during the Commitment Period, the Borrower may, replace any Portfolio Asset with one or more Eligible Portfolio Assets, or one or more Portfolio Assets that have been approved by the Initial Lenders, that will, upon such substitution, constitute Portfolio Assets (each, a “Substitute Asset” and each such replacement, a “Substitution”); provided that (y) such replacement and Substitution shall not occur after the end of the Commitment Period unless otherwise consented to by the Majority Lenders in their sole discretion, or waived by the Administrative Agent (acting at the direction of the Majority Lenders), and (z) no such replacement shall occur unless each of the following conditions is satisfied as of the date of such replacement and substitution (the “Substitution Date”) (which satisfaction shall be deemed to be certified by the Borrower to the Administrative Agent):

 

(i)   the Borrower shall deliver to the Administrative Agent a completed Borrowing Base Certificate and a list of all Substitute Assets to be subject of a Substitution;

 

(ii) after giving effect to any such Substitution on the Substitution Date, (x) the aggregate Advances Outstanding shall not exceed the Maximum Availability as of such date, (y) all representations and warranties contained in Section 4.01, Section 4.02 and Section 4.05 hereof shall continue to be true and correct in all material respects except to the extent relating to an earlier date;

 

(iii)   immediately before and after giving effect to such Substitution: (x) no Market Trigger Event shall have occurred and be continuing; (y) no Event of Default or Unmatured Event of Default shall have occurred and be continuing, and (z) the LTV shall not have exceed the then applicable Maximum LTV Percentage; and

 

(iv)   the net cash proceeds from such Substitution, if any, are deposited in the Collection Account; provided that, so long as LTV is equal to or less than 58%, the net cash proceeds from such Substitution may be used either or both (x) to prepay Advances in accordance with Section 2.04, and/or (y) to make Restricted Junior Payments subject to Section 2.08.

 

(c) Release of Lien. Upon confirmation from the Borrower and verification by the Administrative Agent via the electronic transmission system established with the Account Bank for the purpose of monitoring activities in the Collection Account, that (i) in the case of a Sale, the net proceeds of any Sale have been deposited into the Collection Account or such net proceeds have been applied in accordance with the proviso set forth in Section 2.10(a)(iii), and, in each case, provided that the other terms and conditions set forth in this Section 2.10 for a Sale have been satisfied on or prior to such date, or (ii) in the case of a Substitution, a Substitute Asset has been transferred to the Borrower pursuant to Section 2.10(b) or the net cash proceeds from such Substitution, if any, have been applied in accordance with the proviso set forth in Section 2.10(b)(iv), and, in each case, provided that the other terms and conditions set forth in this Section 2.10 for a Substitution have been satisfied on or prior to such date (such date, a “Release Date”), the Portfolio Assets subject of such Sale or Substitution shall be removed from the Collateral. Subject to compliance by the Borrower with the immediately prior sentence, on the Release Date of each Portfolio Asset the Administrative Agent, for the benefit of the Secured Parties, shall automatically and without further action be deemed to have released all right, title and interest and any Lien of the Administrative Agent, for the benefit of the Secured Parties in, to and under such Portfolio Assets and all future monies due or to become due with respect thereto, without recourse, representation or warranty of any kind or nature.

 

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(d) Application of Amounts Deposited in the Collection Account. Amounts deposited by the Borrower in the Collection Account pursuant to this Section 2.10 shall be applied as provided in Section 2.08(a) or Section 2.08(c), as applicable.

 

Section 2.11 Release of Portfolio Assets. The Borrower may obtain the release from the Lien of the Administrative Agent granted under the Transaction Documents of (a) any Portfolio Asset that is removed from the Collateral in accordance with the applicable provisions of Section 2.10, or (b) any Loan Asset that terminates or expires by its terms and for which all amounts in respect thereof have been paid in full by the related Obligors and deposited in the Collection Account. The Administrative Agent, for the benefit of the Secured Parties, shall at the sole expense of the Borrower, execute such documents and instruments of release as may be delivered to it by the Borrower and take other such actions as shall reasonably be requested by the Borrower to effect such release of the Lien created pursuant to this Agreement.

 

Section 2.12 Increased Costs.

 

(a) If any Change in Law shall:

 

(i)   impose, modify or deem applicable any reserve (including pursuant to regulations issued from time to time by the Federal Reserve Board for determining the maximum reserve requirement (including any emergency, special, supplemental or other marginal reserve requirement) with respect to eurocurrency funding (currently referred to as “Eurocurrency liabilities” in Regulation D)), special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended or participated in by, any Lender;

 

(ii) subject any Recipient to any Taxes (other than (A) Taxes indemnified by the Borrower under Section 2.13 (including Other Taxes), and (B) Excluded Taxes) on its Advances, Commitments or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto; or

 

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(iii) impose on any Lender any other condition, cost or expense (other than Taxes) affecting this Agreement or Advances made by such Lender;

 

and the result of any of the foregoing shall be to increase the cost to such Lender or such other Recipient of making, continuing or maintaining any Advance or of maintaining its obligation to make any such Advance, or to increase the cost to such Lender, or to reduce the amount of any sum received or receivable by such Lender or other Recipient hereunder (whether of principal, interest or any other amount) then, upon request of such Lender or other Recipient, the Borrower will pay to such Lender or other Recipient, as the case may be, such additional amount or amounts as will compensate such Lender or other Recipient, as the case may be, for such additional costs incurred or reduction suffered.

 

(b) If any Lender determines that any Change in Law affecting such Lender or any lending office of such Lender or such Lender’s holding company, if any, regarding capital or liquidity requirements, has or would have the effect of reducing the rate of return on such Lender’s capital or on the capital of such Lender’s holding company, if any, as a consequence of this Agreement, the Commitments of such Lender or the Advances made by such Lender to a level below that which such Lender or such Lender’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s policies and the policies of such Lender’s holding company with respect to capital adequacy), then from time to time the Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender or such Lender’s holding company for any such reduction suffered.

 

(c) [Reserved.]

 

(d) Failure or delay on the part of any Lender, the Facility Servicer or the Administrative Agent to demand compensation pursuant to this Section 2.12 shall not constitute a waiver of such Lender’s, the Facility Servicer’s or the Administrative Agent’s right to demand such compensation; provided that the Borrower shall not be required to compensate a Lender, the Facility Servicer or the Administrative Agent pursuant to this Section 2.12 for any increased costs incurred or reductions suffered more than nine months prior to the date that such Lender, the Facility Servicer or the Administrative Agent notifies the Borrower of the Change in Law giving rise to such increased costs or reductions, and of such Lender’s, the Facility Servicer’s or the Administrative Agent’s intention to claim compensation therefor (except that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the nine-month period referred to above shall be extended to include the period of retroactive effect thereof).

 

Section 2.13 Taxes.

 

(a) All payments made by the Borrower or, at the direction of the Borrower, or on behalf of the Borrower (including payments made by the Facility Servicer from the Collection Account on behalf of the Borrower (to the extent amounts are available in the Collection Account)) under this Agreement or any other Transaction Document will be made free and clear of and without deduction or withholding for or on account of any Taxes, except as required by Applicable Law. If the Withholding Agent shall be required by Applicable Law to withhold or deduct any Indemnified Taxes from any amounts payable to any Recipient (as determined in the good faith discretion of an applicable Withholding Agent), then the amount payable by or on behalf of the Borrower to such Person will be increased (the amount of such increase, the “Additional Amount”) such that every net payment made under this Agreement after withholding or deduction for or on account of any Indemnified Taxes (including any Taxes on such increase) is not less than the amount that would have been paid had no such deduction or withholding been made. Any amounts deducted or withheld pursuant to this Section 2.13(a) will be timely paid by the applicable Withholding Agent to the applicable Governmental Authority in accordance with Applicable Law. The foregoing obligation to pay Additional Amounts with respect to payments required to be made by the Borrower (or Facility Servicer on the Borrower’s behalf, solely as provided in this Section 2.13(a), and at all times subject to Section 2.13(d)) under this Agreement will not, however, apply with respect to Excluded Taxes.

 

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(b) Without duplication of any other amount payment under Section 2.13(a) or otherwise under this Agreement, the Borrower will indemnify each Recipient for the full amount of Indemnified Taxes payable by such Person in respect of, or required to be deducted or withheld from, payments made by or on behalf of the Borrower hereunder, including Indemnified Taxes imposed or assessed on or attributable to Additional Amounts and including penalties, interest and expenses arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by a Recipient (with a copy to the Administrative Agent), or by the Administrative Agent on behalf of a Recipient, shall be conclusive absent manifest error. All payments in respect of this indemnification shall be made within 15 days from the date a written invoice therefor is delivered to the Borrower, with a copy to the Facility Servicer.

 

(c) Each Lender will indemnify the Administrative Agent and the Facility Servicer for (i) the full amount of Indemnified Taxes attributable to such Lender (but only to the extent that the Borrower has not already indemnified the Administrative Agent and the Facility Servicer for such Indemnified Taxes and without limiting any obligation of the Borrower to do so), (ii) any Taxes attributable to such Lender’s failure to comply with the provisions of Section 2.03 relating to the maintenance of a Participant Register and (iii) any Excluded Taxes attributable to such Lender, in each case, that are payable or paid by the Administrative Agent and the Facility Servicer in connection with any Transaction Document, and any reasonable expenses arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Lender by the Administrative Agent and the Facility Servicer, shall be conclusive absent manifest error. All payments in respect of this indemnification shall be made within 15 days from the date a written invoice therefor is delivered to the Lender.

 

(d) Within 15 days after the date of any payment by the Borrower or, at the direction of the Borrower, by the Facility Servicer from the Collection Account of the Borrower on behalf of the Borrower (to the extent amounts are available in the Collection Account) to the applicable Governmental Authority of any Taxes pursuant to this Sections 2.13 and 11.07(b), the Borrower or the Facility Servicer, as applicable, will furnish to the Administrative Agent at the applicable address set forth on this Agreement, the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent to the extent received by the Facility Servicer or the Borrower, as applicable. In no case or circumstance is the Facility Servicer liable to pay any Taxes, and if it pays any such amounts, it will solely be on behalf of the Borrower, from the Collection Account held by the Borrower to the extent amounts are available therein.

 

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(e) Each Lender (including any assignee thereof) that is not a “United States person” within the meaning of Section 7701(a)(30) of the Code (a “Non-U.S. Lender”) shall deliver to the Borrower, the Facility Servicer and the Administrative Agent, on or before the date on which such Non-U.S. Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower, the Facility Servicer and the Administrative Agent), two (2) properly completed and duly executed copies of whichever (if any) of the following is applicable for claiming complete exemption from, or a reduced rate of, U.S. federal withholding tax on any payment by or on behalf of the Borrower under this Agreement: (i) U.S. Internal Revenue Service Form W-8BEN or W-8BEN-E (claiming the benefits of an applicable tax treaty), W-8IMY, W-8EXP or W-8ECI or (ii) in the case of a Non-U.S. Lender claiming exemption from U.S. federal withholding tax under Section 871(h) or 881(c) of the Code with respect to payments of “portfolio interest” a statement substantially in the form of Exhibit E to the effect that such Lender is eligible for a complete exemption from withholding of U.S. Taxes under Section 871(h) or 881(c) of the Code (a “Tax Compliance Certificate”) and a Form W-8BEN or W-8BEN-E, in each case (A) with any required attachments (including, with respect to any Lender that provides an U.S. Internal Revenue Service Form W-8IMY, any of the forms or other documentation described in clauses (i) and (ii) above for any of the direct or indirect owners of such Lender) and (B) any subsequent versions thereof or successors thereto. In addition, each Lender (including any assignee thereof) that is not a Non-U.S. Lender shall deliver to the Borrower, the Facility Servicer and the Administrative Agent two (2) copies of U.S. Internal Revenue Service Form W-9, properly completed and duly executed and claiming complete exemption, or shall otherwise establish an exemption, from U.S. backup withholding. Such forms shall be delivered by each Lender on or prior to the date it becomes a party to this Agreement. If reasonably requested by the Borrower, the Facility Servicer or the Administrative Agent, each Lender shall deliver such other documentation reasonably requested by the Borrower, the Facility Servicer or the Administrative Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements. In addition, each Lender shall deliver such forms promptly upon the obsolescence, expiration or invalidity of any form previously delivered by such Lender. Each Lender shall promptly notify the Borrower, the Facility Servicer and the Administrative Agent at any time it determines that it is no longer in a position to provide any previously delivered certificate to the Borrower, the Facility Servicer or the Administrative Agent (or any other form of certification adopted by the U.S. taxing authorities for such purpose). Notwithstanding any other provision of this paragraph, a Lender shall not be required to deliver any form pursuant to this paragraph that such Lender is not legally able to deliver. For the purposes of this Section 2.13(e), “Lender” shall include any other recipients of payments on the Collateral as directed by any Lender to the Facility Servicer.

 

(f)   A Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which the Borrower is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement shall deliver to the applicable Withholding Agent, at the time or times prescribed by Applicable Law or reasonably requested by the applicable Withholding Agent, such properly completed and executed documentation or information prescribed by Applicable Law as will permit such payments to be made without withholding or at a reduced rate (or otherwise permit the applicable Withholding Agent to determine the applicable rate of withholding); provided that such Lender is legally entitled to complete, execute and deliver such documentation and in such Lender’s reasonable judgment such completion, execution or submission (other than such documentation set forth in Section 2.13(e) and (g)) would not subject such Lender to any material unreimbursed cost or expense or would not materially prejudice the legal or commercial position of such Lender.

 

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(g) If a payment made to a Lender under any Transaction Document would be subject to U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to the Borrower, the Administrative Agent and the Facility Servicer at the time or times prescribed by law and at such time or times reasonably requested by the Borrower or Facility Servicer such documentation prescribed by Applicable Law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Borrower, Administrative Agent or Facility Servicer as may be necessary for the Borrower, Administrative Agent and Facility Servicer to comply with its obligations under FATCA and to determine that such Lender has complied with such Lender’s obligations under FATCA or to determine the amount, if any, to deduct and withhold from such payment. Solely for purposes of this Section 2.13(g), “FATCA” shall include any amendments made to FATCA after the date of this Agreement.

 

(h) If any Recipient determines, in its sole discretion, exercised in good faith, that it has received a refund of any Taxes for which it was indemnified by the Borrower, or the Facility Servicer on behalf of the Borrower, in each case, pursuant to this Section 2.13 or with respect to which the Borrower, Administrative Agent or the Facility Servicer on behalf of the Borrower, in each case, has paid Additional Amounts pursuant to this Section 2.13, it shall pay to the Borrower an amount equal to such refund (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrower, Administrative Agent or the Facility Servicer on behalf of the Borrower, in each case, under this Section 2.13 with respect to the Taxes or Additional Amounts giving rise to such refund), net of all reasonable out-of-pocket expenses (including additional Taxes, if any) of such Recipient, as the case may be, incurred in obtaining such refund, and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund). The Borrower, upon the request of such Recipient, shall repay to such Recipient the amount paid over pursuant to this Section 2.13(h) (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) in the event that such Recipient is required to repay such refund to such Governmental Authority. Notwithstanding anything to the contrary in this Section 2.13(h), in no event will the Recipient be required to pay any amount to the Borrower pursuant to this Section 2.13(h) the payment of which would place the Recipient in a less favorable net after-Tax position than the Recipient would have been in if the Tax subject to indemnification and giving rise to such refund had not been deducted, withheld or otherwise imposed and the indemnification payments or additional amounts with respect to such Tax had never been paid. This paragraph shall not be construed to require any Recipient to make available its Tax returns (or any other information relating to its Taxes that it deems confidential) to the Borrower or any other Person.

 

(i) Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the parties hereto contained in this Section 2.13 shall survive the resignation or replacement of the Administrative Agent, any assignment of rights by or replacement of any Lender, the termination of Commitments, the repayment, satisfaction or discharge of all obligations under any Transaction Document or the termination of this Agreement.

 

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Section 2.14 Market Trigger Event Cure. Notwithstanding anything to the contrary herein, if, at any time, a Market Trigger Event of the type described in paragraph (a) of the definition of Market Trigger Event occurs, the Borrower may cure such Market Trigger Event upon written notice to the Facility Servicer of its intent so to cure, and, no later than two (2) Business Days after providing notice thereof, the Borrower shall cause any or a combination of: (i) cash to be deposited into the Collection Account (the “Cure Contributions”) or (ii) repayment of Advances Outstanding, collectively, in an amount equal to the amount required to cure such Market Trigger Event.

 

Section 2.15 Mitigation Obligations; Replacement of Lenders.

 

(a) If any Lender requests compensation under Section 2.12, or requires the Borrower to pay any Indemnified Taxes or Additional Amounts to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.13, then such Lender shall (at the request of Borrower) use reasonable efforts to designate a different lending office for funding or booking its Advances hereunder or to assign its rights and obligations hereunder to another of its offices, branches or Affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.12 or Section 2.13, as the case may be, in the future, and (ii) in each case, would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable and documented out-of-pocket costs and expenses incurred by any Lender in connection with any such designation or assignment.

 

(b) If any Lender requests compensation under Section 2.12, or if the Borrower is required to pay any Indemnified Taxes or Additional Amounts to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.13 and, in each case, such Lender has declined or is unable to designate a different lending office in accordance with Section 2.15(a), or if any Lender is a Defaulting Lender, then the Borrower may, at its sole expense and effort, upon written notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in, and consents required by, Section 11.04), all of its interests, rights (other than its existing rights to payments pursuant to Section 2.12 or Section 2.13) and obligations under this Agreement and the related Transaction Documents to an Eligible Assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided, that:

 

(i)   such Lender shall have received payment of an amount equal to the outstanding principal of its Advances and participations, accrued interest thereon, accrued fees and all other amounts payable to it hereunder and under the other Transaction Documents from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts);

 

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(ii) in the case of any such assignment resulting from a claim for compensation under Section 2.12 or payments required to be made pursuant to Section 2.13, such assignment will result in a reduction in such compensation or payments thereafter; and

 

(iii)   such assignment does not conflict with Applicable Law.

 

Any Lender shall not be required to make any such assignment or delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.

 

Section 2.16 Defaulting Lenders.

 

(a) Defaulting Lender Adjustments. Notwithstanding anything to the contrary contained in this Agreement, if any Lender becomes a Defaulting Lender, then, until such time as such Lender is no longer a Defaulting Lender, to the extent permitted by Applicable Law:

 

(i)   Waivers and Amendments. Such Defaulting Lender’s right to approve or disapprove any amendment, waiver or consent with respect to this Agreement shall be restricted as set forth in the definition of Majority Lenders and Section 11.01.

 

(ii) Defaulting Lender Waterfall. Any payment of principal, interest, fees or other amounts received by the Administrative Agent for the account of such Defaulting Lender (whether voluntary or mandatory, at maturity, pursuant to Article VI or otherwise) or received by the Administrative Agent from a Defaulting Lender pursuant to Section 11.13 shall be applied at such time or times as may be determined by the Facility Servicer as follows: first, to the payment of any amounts owing by such Defaulting Lender to the Administrative Agent and the Facility Servicer hereunder; second, as the Borrower may request (so long as no Unmatured Event of Default or Event of Default has occurred and is continuing), to the funding of any Advance in respect of which such Defaulting Lender has failed to fund its portion thereof as required by this Agreement, as determined by the Facility Servicer; third, if so determined by the Facility Servicer and the Borrower, to be held in a deposit account and released pro rata in order to satisfy such Defaulting Lender’s potential future funding obligations with respect to Advances under this Agreement; fourth, as such amounts are provided to the Administrative Agent, to the payment of any amounts owing to the Lenders as a result of any judgment of a court of competent jurisdiction obtained by any Lender against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement; fifth, as such amounts are provided to the Administrative Agent, so long as no Unmatured Event of Default or Event of Default has occurred and it continuing, to the payment of any amounts owing to the Borrower as a result of any judgment of a court of competent jurisdiction obtained by the Borrower against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement; and sixth, as such amounts are provided to the Administrative Agent, to such Defaulting Lender or as otherwise directed by a court of competent jurisdiction; provided that if (A) such payment is a payment of the principal amount of any Advances in respect of which such Defaulting Lender has not fully funded its appropriate share and (B) such Advances were made at a time when the conditions set forth in Section 3.02 were satisfied or waived, such payment shall be applied solely to pay the Advances of all Non-Defaulting Lenders on a pro rata basis prior to being applied to the payment of any Advances of such Defaulting Lender until such time as all Advances are held by the Lenders pro rata in accordance with the Commitments. Any payments, prepayments or other amounts paid or payable to a Defaulting Lender that are applied (or held) to pay amounts owed by a Defaulting Lender pursuant to this Section shall be deemed paid to and redirected by such Defaulting Lender, and each Lender irrevocably consents thereto.

 

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(iii) Unused Commitment Fees. No Defaulting Lender shall be entitled to receive any Unused Commitment Fee pursuant to Section 2.06(c) for any period during which that Lender is a Defaulting Lender (and the Borrower shall not be required to pay any such fee that otherwise would have been required to have been paid to that Defaulting Lender).

 

(b) Defaulting Lender Cure. If the Borrower and (if not a Defaulting Lender) the Initial Lender agree in writing that a Lender is no longer a Defaulting Lender, the Borrower will so notify the parties hereto, whereupon as of the effective date specified in such notice and subject to any conditions set forth therein, that Lender will, to the extent applicable, purchase at par that portion of outstanding Advances of the other Lenders or take such other actions as the Administrative Agent may determine to be necessary to cause the Advances to be held pro rata by the Lenders in accordance with the Commitments, whereupon, such Lender will cease to be a Defaulting Lender; provided that (i) no adjustments will be made retroactively with respect to fees accrued or payments made by or on behalf of the Borrower while that Lender was a Defaulting Lender and (ii) except to the extent otherwise expressly agreed by the affected parties, no change hereunder from Defaulting Lender to Lender will constitute a waiver or release of any claim of any party hereunder arising from that Lender’s having been a Defaulting Lender.

 

(c) Termination of Defaulting Lender. The Borrower may terminate the unused amount of the Commitment of any Lender that is a Defaulting Lender upon not less than ten (10) Business Days’ prior notice to the Administrative Agent (which shall promptly notify the Lenders thereof), and in such event the provisions of Section 2.16(a)(ii) will apply to all amounts thereafter paid by the Borrower for the account of such Defaulting Lender under this Agreement (whether on account of principal, interest, fees, indemnity or other amounts); provided that (i) no Event of Default shall have occurred and be continuing and (ii) such termination shall not be deemed to be a waiver or release of any claim the Borrower, the Administrative Agent or any Lender may have against such Defaulting Lender.

 

Section 2.17 Benchmark Provisions.

 

(a) Inability to Determine Rates. Subject to anything to the contrary set out in Section 2.17(c), if, on or prior to the first day of any Interest Period for any Advances bearing interest at Term SOFR:

 

(i)   the Administrative Agent determines (which determination shall be conclusive and binding absent manifest error) that “Term SOFR” cannot be determined pursuant to the definition thereof, or

 

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(ii) the Majority Lenders determine that for any reason in connection with any Advance bearing interest at Term SOFR, that Term SOFR for any Interest Period with respect to an Advance bearing interest at Term SOFR does not adequately and fairly reflect the cost to such Lenders of making and maintaining such Advance, and the Majority Lenders have provided notice of such determination to the Administrative Agent,

 

then, in each case, the Administrative Agent will promptly so notify the Borrower and each Lender.

 

Upon notice thereof by the Administrative Agent to the Borrower, any obligation of the Lenders to make Advances bearing interest at Term SOFR shall be suspended (to the extent of the affected Advances bearing interest at Term SOFR or affected Interest Periods) until the Administrative Agent (with respect to clause (b), at the instruction of the Majority Lenders) revokes such notice.  Upon receipt of such notice, (i) the Borrower may revoke any pending request for a borrowing of Advances bearing interest at Term SOFR (to the extent of the affected Advances bearing interest at Term SOFR or affected Interest Periods) or, failing that, the Borrower will be deemed to have converted any such request into a request for a Borrowing of or conversion to Advances bearing interest at the Alternate Base Rate plus the Applicable Spread in the amount specified therein and (ii) any outstanding affected Advances bearing interest at Term SOFR will be deemed to have been converted into Advances bearing interest at the Alternate Base Rate plus the Applicable Spread at the end of the applicable Interest Period.  Upon any such conversion, the Borrower shall also pay accrued interest on the amount so converted, together with any Breakage Fees payable pursuant to Section 2.05(k).

 

(b) Illegality. If any Lender determines that any Applicable Law has made it unlawful, or that any Governmental Authority has asserted that it is unlawful, for any Lender or its applicable lending office to make, maintain or fund Advances whose interest is determined by reference to SOFR, the Term SOFR Reference Rate, Term SOFR or Term SOFR, or to determine or charge interest based upon SOFR, the Term SOFR Reference Rate, Term SOFR or Term SOFR, then, upon notice thereof by such Lender to the Borrower (through the Administrative Agent) (an “Illegality Notice”), any obligation of the Lenders to make Advances bearing interest at Term SOFR shall be suspended until each affected Lender notifies the Administrative Agent and the Borrower that the circumstances giving rise to such determination no longer exist. Upon receipt of an Illegality Notice, the Borrower shall, if necessary to avoid such illegality, upon demand from any Lender (with a copy to the Administrative Agent), prepay or, if applicable, convert all Advances bearing interest at Term SOFR to Advances bearing interest at the Alternate Base Rate plus the Applicable Spread, on the last day of the Interest Period therefor, if all affected Lenders may lawfully continue to maintain such Advances bearing interest at Term SOFR to such day, or immediately, if any Lender may not lawfully continue to maintain such Advances bearing interest at Term SOFR to such day. No Breakage Fees will be payable upon any such prepayment or conversion.

 

(c) Benchmark Replacement Setting.

 

(i) Benchmark Replacement. Notwithstanding anything to the contrary herein or in any other Transaction Document, upon the occurrence of a Benchmark Transition Event, the Administrative Agent (at the direction of the Majority Lenders) and the Borrower may amend this Agreement to replace the then-current Benchmark with a Benchmark Replacement. Any such amendment with respect to a Benchmark Transition Event will become effective at 5:00 p.m. on the fifth (5th) Business Day after the Administrative Agent has posted such proposed amendment to all affected Lenders and the Borrower so long as the Administrative Agent has not received, by such time, written notice of objection to such amendment from Lenders comprising the Majority Lenders. No replacement of a Benchmark with a Benchmark Replacement pursuant to this Section 2.17(c)(i) will occur prior to the applicable Benchmark Transition Start Date.

 

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(ii) Benchmark Replacement Conforming Changes. In connection with the use, administration, adoption or implementation of a Benchmark Replacement, the Administrative Agent (at the direction of the Majority Lenders) will have the right to make Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Transaction Document, any amendments implementing such Conforming Changes will become effective without any further action or consent of any other party to this Agreement or any other Transaction Document.

 

(iii)   Notices; Standards for Decisions and Determinations. The Administrative Agent will promptly notify the Borrower and the Lenders of (A) the implementation of any Benchmark Replacement and (B) the effectiveness of any Conforming Changes in connection with the use, administration, adoption or implementation of a Benchmark Replacement. The Administrative Agent will notify the Borrower of (x) the removal or reinstatement of any tenor of a Benchmark pursuant to Section 2.17(c)(vi) and (y) the commencement of any Benchmark Unavailability Period. Any determination, decision or election that may be made by the Administrative Agent (at the direction of the Majority Lenders) or, if applicable, any Lender (or group of Lenders) pursuant to this Section 2.17(c), including any determination with respect to a tenor, rate or adjustment or of the occurrence or non-occurrence of an event, circumstance or date and any decision to take or refrain from taking any action or any selection, will be conclusive and binding absent manifest error and may be made in its or their sole discretion and without consent from any other party to this Agreement or any other Transaction Document, except, in each case, as expressly required pursuant to this Section 2.17(c).

 

(iv)   Unavailability of Tenor of Benchmark. Notwithstanding anything to the contrary herein or in any other Transaction Document, at any time (including in connection with the implementation of a Benchmark Replacement), (A) if the then-current Benchmark is a term rate (including the Term SOFR Reference Rate) and either (I) any tenor for such Benchmark is not displayed on a screen or other information service that publishes such rate from time to time as selected by the Administrative Agent in its reasonable discretion or (II) the regulatory supervisor for the administrator of such Benchmark has provided a public statement or publication of information announcing that any tenor for such Benchmark is not or will not be representative, then the Administrative Agent may modify the definition of “Interest Period” (or any similar or analogous definition) for any Benchmark settings at or after such time to remove such unavailable or non-representative tenor and (B) if a tenor that was removed pursuant to clause (A) above either (I) is subsequently displayed on a screen or information service for a Benchmark (including a Benchmark Replacement) or (II) is not, or is no longer, subject to an announcement that it is not or will not be representative for a Benchmark (including a Benchmark Replacement), then the Administrative Agent may modify the definition of “Interest Period” (or any similar or analogous definition) for all Benchmark settings at or after such time to reinstate such previously removed tenor.

 

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(v) Benchmark Unavailability Period. Upon the Borrower’s receipt of notice of the commencement of a Benchmark Unavailability Period, (A) the Borrower may revoke any pending request for a borrowing of Advances bearing an interest rate of Term SOFR to be made during any Benchmark Unavailability Period and, failing that, the Borrower will be deemed to have converted any such request for a borrowing of an Advance bearing interest at the Alternate Base Rate plus the Applicable Spread and (B) any outstanding affected Advances bearing interest at Term SOFR will be deemed to have been converted to an Advance bearing interest at the Alternate Base Rate plus the Applicable Spread at the end of the applicable Interest Period.

 

ARTICLE III
CONDITIONS PRECEDENT

 

Section 3.01 Conditions Precedent to Effectiveness.

 

(a) This Agreement becomes effective upon, and no Lender is obligated to make any Advance, nor is any Lender, the Facility Servicer or the Administrative Agent obligated to take, fulfill or perform any other action hereunder until, the satisfaction or waiver of the following conditions precedent:

 

(i) this Agreement, all other Transaction Documents and all other agreements, instruments, certificates and other documents listed on Schedule II have been duly executed by, the parties hereto and thereto and delivered to the Administrative Agent;

 

(ii) all up-front expenses and fees (including reasonable and documented out-of-pocket legal fees and any fees required under the Fee Letters) that are required to be paid hereunder or by the Fee Letters and are invoiced at least three (3) Business Days prior to the Closing Date have been paid in full;

 

(iii) the Borrower has provided the Facility Servicer and the Initial Lender with a copy of the RIA Valuation Policy as in effect on the Closing Date;

 

(iv) the representations contained in Sections 4.01, 4.02 and 4.05 are true and correct in all material respects (except that any representation qualified as to “materiality” or “Material Adverse Effect” shall be true and correct in all respects as so qualified) (as certified by the Borrower);

 

(v) the Borrower has received all material governmental, shareholder/partner/general partner and third party consents and approvals necessary or reasonably required in connection with the transactions contemplated by this Agreement and the other Transaction Documents and all applicable waiting periods have expired without any action being taken by any Person that could reasonably be expected to restrain, prevent or impose any material adverse conditions on the Borrower or such other transactions or that could seek or threaten any of the foregoing, and no law or regulation is applicable which could reasonably be expected to have such effect;

 

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(vi) no action, proceeding or investigation has been instituted or, to the knowledge of a Responsible Officer of the Borrower, after due inquiry, threatened or proposed before any Governmental Authority to enjoin, restrain, or prohibit, or to obtain substantial damages in respect of, or which is related to or arises out of this Agreement or the other Transaction Documents or the consummation of the transactions contemplated hereby or thereby, or which, in the Initial Lenders’ sole discretion, would make it inadvisable to consummate the transactions contemplated by this Agreement or the other Transaction Documents or the consummation of the transactions contemplated hereby or thereby;

 

(vii) the Borrower shall have, at its own sole cost and expense, obtained an investment grade Debt Rating, and the Initial Lender shall have a received a copy of any rating letter issued in connection therewith; and

 

(viii) the Administrative Agent has received all documentation and other information requested by the Administrative Agent acting at the direction of the Majority Lenders or required by regulatory authorities with respect to the Borrower and the Facility Servicer under applicable “know your customer” and Anti-Money Laundering Laws, including the USA PATRIOT Act, all in form and substance reasonably satisfactory to the Administrative Agent.

 

For purposes of determining compliance with the conditions specified in this Section, each Lender that has signed this Agreement and the Administrative Agent shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to a Lender or the Administrative Agent unless the Borrower shall have received notice from such Lender or the Administrative Agent prior to the proposed Closing Date specifying its objection thereto.

 

Section 3.02 Conditions Precedent to Advances.

 

(a) Each Lender’s obligation to fund the Initial Advance on the Initial Advance Date is subject to the following conditions precedent having been satisfied or waived:

 

(i) the Collection Account has been established pursuant to an Account Control Agreement;

 

(ii) after giving effect to the use of proceeds for such Initial Advance, the Borrower will, with respect to the Portfolio Assets constituting Eligible Portfolio Assets (other than Closing Date Participations), have valid ownership interests in such initial pool of Eligible Portfolio Assets and all actions required to be taken or performed under Section 3.04 with respect to the Transfer of such Eligible Portfolio Assets have been, or will be simultaneously with such Transfer, taken or satisfied; and

 

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(iii) the conditions precedent forth in Section 3.02(c) shall have been satisfied or waived.

 

(b) Each Lender’s obligation to fund an Advance (other than the Initial Advance and any Unfunded Exposure Advance) on any Advance Date is subject to the following conditions precedent having been satisfied or waived:

 

(i)   with respect to an Advance to be made to the Borrower in connection with the Transfer of Portfolio Assets (whether by origination, acquisition, transfer or assignment):

 

(A) upon giving effect to the use of proceeds of such Advance:

 

(1) the Borrower will, with respect to any Portfolio Assets, obtain or maintain, as applicable, valid ownership interests in such Portfolio Assets, and

 

(2) On the Advance Date of an Advance (including the Initial Advance) other than an Unfunded Exposure Advance, the following statements are true and correct and the Borrower by accepting such Advance is deemed to have certified that:

 

(ii) the Borrower has delivered to the Administrative Agent (A) a Notice of Borrowing and (B) a Borrowing Base Certificate and LTV Certificate, to the extent required by Section 2.02;

 

(iii) on and as of such Advance Date, after giving effect to such Advance and the transactions related thereto, including the use of proceeds thereof, the Advances Outstanding do not exceed the Maximum Availability on such Advance Date;

 

(iv) no Unmatured Event of Default or Event of Default has occurred and is continuing, or would result from such Advance or application of proceeds therefrom;

 

(v) the representations contained in Sections 4.01, 4.02 and 4.05 are true and correct in all material respects (except that any representation qualified as to “materiality” or “Material Adverse Effect” shall be true and correct in all respects as so qualified) before and after giving effect to such Advance and to the application of proceeds therefrom, on and as of such day as though made on and as of such date (or, in the case of any such representation expressly stated to have been made as of a specific date, as of such specific date);

 

(vi) all expenses and fees (including reasonable and documented out-of-pocket legal fees and any fees required under the Fee Letters) that are required to be paid hereunder or by the Fee Letters have been paid in full;

 

(vii) with respect to any Portfolio Asset to be purchased with all or any part of such Advance, all actions required to be taken or performed (including the filing of UCC financing statements) to give the Administrative Agent, for the benefit of the Secured Parties, a first priority perfected security interest (subject only to Permitted Liens) in such Portfolio Asset and the proceeds thereof have been taken or performed; and

 

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(viii) with respect to any Transfer to be funded with all or any part of such Advance, no Event of Default exists or would result from such Transfer; and

 

(ix) On or prior to the Advance Date for any Advance, the Borrower has provided to the Administrative Agent and the Facility Servicer (which may be provided electronically) the Portfolio Asset Schedule detailing each of the Eligible Portfolio Assets included in the Borrowing Base Certificate delivered in connection with such Advance.

 

(c) On the Advance Date of an Unfunded Exposure Advance, the following statements are true and correct and the Borrower by accepting such Advance is deemed to have certified that:

 

(i) the Borrower has delivered to the Administrative Agent (A) a Notice of Borrowing and (B) a Borrowing Base Certificate and LTV Certificate, to the extent required by Section 2.02;

 

(ii) on and as of such Advance Date, after giving effect to such Advance and the transactions related thereto, including the use of proceeds thereof, the Advances Outstanding do not exceed the Maximum Availability on such Advance Date;

 

(iii) the representations contained in Sections 4.01, 4.02 and 4.05 are true and correct in all material respects (except that any representation qualified as to “materiality” or “Material Adverse Effect” shall be true and correct in all respects as so qualified) before and after giving effect to such Advance and to the application of proceeds therefrom, on and as of such day as though made on and as of such date (or, in the case of any such representation expressly stated to have been made as of a specific date, as of such specific date);

 

(iv) all expenses and fees (including reasonable and documented out-of-pocket legal fees and any fees required under the Fee Letters) that are required to be paid hereunder or by the Fee Letters have been paid in full;

 

(v) the entire amount of such Advance is to be (A) deposited by the Borrower on the date of such Advance in the Unfunded Exposure Account, or (B) applied by the Borrower on the date of such Advance in discharging a Delayed Draw; and

 

(vi) no Event of Default pursuant to Sections 6.01(a) or 6.01(d) has occurred and is continuing.

 

Section 3.03 Advances Do Not Constitute a Waiver. No Advance made hereunder constitutes a waiver of any condition to any Lender’s obligation to make such an Advance unless such waiver is in writing and executed by such Lender.

 

Section 3.04 Conditions to Transfers of Portfolio Assets. The Borrower shall not Transfer a Portfolio Asset after the Closing Date, unless (i) no Event of Default exists or would result from such Transfer and (ii) the Borrower has delivered to the Administrative Agent no later than 12:00 p.m. on the date that is one Business Day prior to (A) the related Cut-Off Date, in the case of a Transfer, or (B) the date on which it is proposed such subscription agreement should be entered into, as applicable (x) a Borrowing Base Certificate, (y) LTV Certificate and (z) a Portfolio Asset Schedule, in each case reflecting the Transfer of such Portfolio Asset or entry into such subscription agreement, as applicable.

 

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ARTICLE IV
REPRESENTATIONS

 

Section 4.01 Representations of the Borrower. The Borrower hereby represents to the Secured Parties as of the Closing Date and each Advance Date, and as follows:

 

(a) Organization, Good Standing and Due Qualification. The Borrower is a limited liability company duly organized, validly existing and in good standing under the laws of Delaware, with all requisite power and authority necessary to own the Collateral and to conduct its business as such business is presently conducted and to enter into and perform its obligations pursuant to this Agreement and the other Transaction Documents to which it is a party. The Borrower is duly qualified to do business as a limited liability company, and has obtained all licenses, registrations and approvals under the laws of Delaware, and in all other jurisdictions necessary to own its assets and to transact the business in which it is engaged, and is duly qualified, and in good standing under the laws of Delaware, and in each other jurisdiction where the transaction of such business or its ownership of the Portfolio Assets and the other Collateral and the conduct of its business requires such qualification except as would not reasonably be expected to have a Material Adverse Effect.

 

(b) Power and Authority; Due Authorization; Execution and Delivery. The Borrower, (i) has the power, authority and legal right to: (A) execute and deliver this Agreement and the other Transaction Documents to which it is a party, and (B) perform and carry out the terms of this Agreement and the other Transaction Documents to which it is a party and the transactions contemplated thereby, and (ii) has taken all necessary action to: (A) authorize the execution, delivery and performance of this Agreement and each of the other Transaction Documents to which it is a party, (B) grant to the Administrative Agent, for the benefit of the Secured Parties, a first priority perfected security interest in the Collateral on the terms and conditions of this Agreement and the other Transaction Documents to which it is party, subject only to Permitted Liens and (C) authorize the Facility Servicer to perform the actions contemplated herein. This Agreement and each other Transaction Document to which the Borrower is a party have been duly executed and delivered by the Borrower.

 

(c) Binding Obligation. This Agreement and each of the other Transaction Documents to which the Borrower is a party constitutes the legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with their respective terms, except as the enforceability hereof and thereof may be limited by Bankruptcy Laws, and by general principles of equity.

 

(d) All Consents Required. No consent of any other party and no consent, license, approval or authorization of, or registration or declaration with, any Governmental Authority, bureau or agency is required in connection with the execution, delivery or performance by the Borrower of this Agreement or any Transaction Document to which it is a party or the validity or enforceability of this Agreement or any such Transaction Document or the transfer of an ownership interest in the Portfolio Assets or grant of a security interest in the Collateral, other than such as have been met or obtained and are in full force and effect.

 

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(e) No Violation. The execution, delivery and performance by it of this Agreement and the other Transaction Documents to which it is party and all other agreements and instruments executed and delivered or to be executed and delivered by it in connection with the Transfer of any Portfolio Asset will not: (i) conflict with, result in any breach of any of the terms and provisions of, or constitute (with or without notice or lapse of time or both) a default under, its Organizational Documents, (ii) result in the creation or imposition of any Lien on the Collateral other than Permitted Liens, (iii) violate any Applicable Law in any material respect, or (iv) violate, in any material respect, any material contract or other material agreement to which the Borrower is a party or by which the Borrower or any property or assets of the Borrower may be bound.

 

(f) No Proceedings. There is no litigation, proceeding or investigation pending or, to the knowledge of a Responsible Officer of the Borrower, threatened against the Borrower or any properties of the Borrower, before any Governmental Authority: (i) asserting the invalidity of this Agreement or any other Transaction Document, (ii) seeking to prevent the consummation of any of the transactions contemplated by this Agreement or any other Transaction Document, or (iii) that could reasonably be expected to be adversely determined, and, if so determined, either individually or in the aggregate could reasonably be expected to have a Material Adverse Effect.

 

(g) No Liens. The Collateral is owned by the Borrower free and clear of any Liens except for Permitted Liens.

 

(h) Transfer of Collateral. Except as otherwise expressly permitted by the terms of this Agreement, no item of Collateral has been Sold, assigned or pledged by the Borrower to any Person, other than in accordance with Article II and the grant of a security interest therein to the Administrative Agent, for the benefit of the Secured Parties, pursuant to the terms of this Agreement.

 

(i) Sole Purpose. The Borrower has been formed solely for the purpose of, and has not engaged in any business activity other than, (i) the acquisition of commercial loans and Equity Investments and the pledge and financing thereof, and (ii) transactions incidental thereto and activities of the type expressly permitted under Section 5.01(a). The Borrower is not party to any agreements other than its Organizational Documents, the material contracts referred to in the Borrower’s offering materials, this Agreement and the other Transaction Documents to which it is a party, the subscription agreements, the Required Portfolio Asset Documents and other agreements listed on the Portfolio Asset Checklist for each Portfolio Asset in respect of which the Borrower is a lender or loan participant.

 

(j) Separate Entity. The Borrower is operated as an entity with assets and liabilities distinct from those of Holdings (other than for tax purposes), and any Affiliates thereof, and the Borrower hereby acknowledges that the Administrative Agent and the Lenders are entering into the transactions contemplated by this Agreement in reliance upon the Borrower’s identity as a separate legal entity from Holdings, and from each such other Affiliate of Holdings (other than for tax purposes).

 

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(k) No Injunctions. To the knowledge of a Responsible Officer of the Borrower, after due inquiry, no injunction, writ, restraining order or other order of any nature materially adversely affects the Borrower’s performance of its obligations under this Agreement or any Transaction Document to which the Borrower is a party.

 

(l) Taxes. All tax returns (including all foreign, federal, State, local and other tax returns whether filed on a standalone or group basis) required to be filed by, on behalf of or with respect to the income and assets of the Borrower (including the Collateral) have been timely filed and the Borrower is not liable for Taxes payable by any other Person, in each case, except as could not reasonably be expected to have a Material Adverse Effect. The Borrower has paid or made adequate provisions for the payment of all Taxes levied or imposed against it, its income or any of its property (including the Collateral) except for those Taxes being contested in good faith by appropriate proceedings and in respect of which it has established proper reserves in accordance with GAAP on its books or as could not reasonably be expected to have a Material Adverse Effect.

 

(m) Location. Except as permitted pursuant to Section 5.02(p), the Borrower’s location (within the meaning of Article 9 of the UCC) is Delaware. Except as permitted pursuant to Section 5.02(p), the principal place of business and chief executive office of the Borrower (and the location of the Borrower’s records regarding the Collateral) is located at the address set forth under its name in Schedule III.

 

(n) Tradenames. Except as permitted pursuant to Section 5.02(p), the Borrower’s legal name is as set forth in this Agreement. Except as permitted pursuant to Section 5.02(p), the Borrower has not changed its name since its formation; does not have tradenames, fictitious names, assumed names or “doing business as” names. The Borrower’s only jurisdiction of formation is Delaware, and, except as permitted pursuant to Section 5.02(p), the Borrower has not changed its jurisdiction of formation.

 

(o) No Subsidiaries. The Borrower does not directly own or hold Equity Interests in any other Person other than any Portfolio Asset comprising Equity Interests.

 

(p) Reports Accurate. All Notices of Borrowing, Borrowing Base Certificates, LTV Certificates and other written or electronic information, exhibits, financial statements, documents, books, records or reports furnished by the Borrower to the Administrative Agent or the Facility Servicer in connection with this Agreement and the other Transaction Documents are accurate, true and correct in all material respects as of the date of this Agreement, and no such document contains any material misstatement of fact or omits to state a material fact or any fact necessary to make the statements contained therein not materially misleading as of the date hereof; provided that, solely with respect to written or electronic information (other than information presented in a Notice of Borrowing, Borrowing Base Certificate or LTV Certificate) furnished by the Borrower which was provided to the Borrower directly or indirectly from an Obligor or any of its Affiliates or representatives with respect to a Portfolio Asset, such information need only be accurate, true and correct in all material respects to the knowledge of the Borrower.

 

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(q) Exchange Act Compliance; Regulations T, U and X. None of the transactions contemplated herein or in the other Transaction Documents (including the use of proceeds from the sale of any item in the Collateral) will violate or result in a violation of Section 7 of the Exchange Act or Regulations T, U and X of the Board of Governors of the Federal Reserve System, 12 C.F.R., Chapter II. The Borrower does not own or intend to carry or purchase, and no proceeds from the Advances will be used to carry or purchase, any “margin stock” within the meaning of Regulation U or to extend “purpose credit” within the meaning of Regulation U.

 

(r) Event of Default or Unmatured Event of Default. No event has occurred which constitutes an Event of Default or an Unmatured Event of Default, in each case, which has not been previously disclosed to the Administrative Agent in writing.

 

(s) ERISA. It has no ERISA Affiliates. None of the Borrower or Holdings maintains, sponsors or contributes to (or have an obligation to contribute to), or in the past six years maintained, sponsored or contributed to (or had an obligation to contribute to) any Employee Plan or Multiemployer Plan. None of the Borrower, Holdings or any ERISA Affiliate has established or has any liability (contingent or otherwise) with respect to any Employee Plan or Multiemployer Plan. Each of the Borrower and Holdings satisfies an exception under the Plan Asset Regulations so that its underlying assets do not constitute Plan Assets and neither Borrower nor Holdings holds “plan assets” subject to laws or regulations similar to Section 406 of ERISA or Section 4975 of the Code (“Similar Law”).

 

(t) Broker-Dealer. The Borrower is not a broker-dealer or subject to the Securities Investor Protection Act of 1970.

 

(u) Instructions for Collections. The Collection Account is the only account to which the Obligors or any agent, administrative agent, Counterparty Lender or Underlying Agent, as applicable have been instructed to send Collections or amounts with respect to the Portfolio Assets. The Borrower has not granted any Person other than the Administrative Agent, for the benefit of the Secured Parties, an interest in the Borrower Accounts.

 

(v) Portfolio Asset Assignments. The Portfolio Asset Assignments are the only agreements pursuant to which the Borrower has acquired Portfolio Assets. The Borrower accounts for each Transfer of a Portfolio Asset under a Portfolio Asset Assignment as a full Transfer of such Portfolio Asset in the books and Records of the Borrower.

 

(w) Investment Company Act. Assuming the Lenders are Qualified Purchasers, the Borrower is not required to register as an “investment company” under the provisions of the 1940 Act.

 

(x) Compliance with Applicable Law. Except as would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect, the Borrower has complied with all Applicable Law to which it may be subject, and no item of the Collateral contravenes any Applicable Law (including all applicable predatory and abusive lending laws, laws, rules and regulations relating to licensing, truth in lending, fair credit billing, fair credit reporting, equal credit opportunity, fair debt collection practices and privacy).

 

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(y) Collections. All Collections received by the Borrower or its Affiliates with respect to the Collateral are held in trust for the benefit of the Administrative Agent, for the benefit of the Secured Parties, until deposited into the Collection Account as provided herein.

 

(z) Set-Off etc. No Portfolio Asset has, as of the applicable Cut-Off Date, been compromised, adjusted, extended, satisfied, subordinated, rescinded, set-off or modified by the Borrower, or the Obligor thereof, and no item in the Collateral, as of the applicable Cut-Off Date, is subject to compromise, adjustment, extension, satisfaction, subordination, rescission, set-off, counterclaim, defense, abatement, suspension, deferment, deduction, reduction, termination or modification, whether arising out of transactions concerning the Collateral or otherwise, by the Borrower or the Obligor with respect thereto, except, in each case, for amendments, extensions and modifications, if any, permitted pursuant to Section 11.01.

 

(aa) Environmental. As of the applicable Cut-Off Date for the Portfolio Asset related to each item of Underlying Collateral, to the actual knowledge of a Responsible Officer of the Borrower at such date, except as expressly provided in the Portfolio Asset Schedule for such Portfolio Asset prior to the Cut-Off Date relating to such Loan Asset to which that Portfolio Asset Schedule relates: (i) the related Obligor’s operations comply in all material respects with all applicable Environmental Laws; (ii) none of the related Obligor’s operations is the subject of a Federal or State investigation evaluating whether any remedial action, involving expenditures, is needed to respond to a release of any Hazardous Materials into the environment; and (iii) the related Obligor does not have any material contingent liability in connection with any release of any Hazardous Materials into the environment. As of the applicable Cut-Off Date for the Portfolio Asset related to such Underlying Collateral, the Borrower has not received any written notice of, or inquiry from any Governmental Authority regarding, any violation, alleged violation, non-compliance, liability or potential liability regarding environmental matters or compliance with Environmental Laws with regard to any of the Underlying Collateral.

 

(bb) Anti-Terrorism Laws and Sanctions / International Trade Law Compliance / Anti-Money Laundering Laws. As of the date of this Agreement and each Payment Date and at all times until this Agreement has been terminated and all amounts hereunder have been indefeasibly paid in full in cash, that: (i) neither the Borrower nor, to the knowledge of any Responsible Officer of the Borrower, any other Borrower Covered Entity: (A) is a Sanctioned Person; (B) has any of its assets in a Sanctioned Country or in the possession, custody or control of a Sanctioned Person in violation of any Anti-Terrorism Laws and Sanctions; (C) does business in or with, or derives any of its income from investments in or transactions with, any Sanctioned Country or Sanctioned Person in violation of any Anti-Terrorism Laws and Sanctions; or (D) engages in any dealings or transactions prohibited by any Anti-Terrorism Laws and Sanctions or Anti-Corruption Laws; (ii) the proceeds of this Agreement will not be used, directly or knowingly indirectly, by the Borrower, or to the Borrower’s knowledge by any other Person, to fund any operations in, finance any investments or activities in, or, make any payments to, a Sanctioned Country or Sanctioned Person in violation of any Applicable Law; (iii) the funds used to pay the Facility Servicer, to the extent received from the Borrower, are not directly or, knowingly, indirectly derived from any unlawful activity; and (iv) to the Borrower’s knowledge, each Borrower Covered Entity is in compliance with, and no Borrower Covered Entity directly or knowingly indirectly engages in any dealings or transactions prohibited by, any Anti-Terrorism Laws and Sanctions, Anti-Corruption Laws, or Anti-Money Laundering Laws. The Borrower covenants and agrees that it shall promptly notify the Facility Servicer in writing upon a Responsible Officer of the Borrower obtaining knowledge of the occurrence of a Reportable Compliance Event with respect to the Borrower or, any other Borrower Covered Entity, except to the extent such notice is prohibited by Applicable Law.

 

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(cc) Security Interest.

 

(i) The Pledged Equity issued by the Borrower has been duly and validly authorized and issued by the Borrower to Holdings and such ownership is recorded in the register of limited partnership interests of the Borrower.

 

(ii) This Agreement creates a valid and continuing security interest (as defined in the applicable UCC) in the Collateral in favor of the Administrative Agent, on behalf of the Secured Parties, which security interest is prior to all other Liens (except for Permitted Liens), and is enforceable as such against creditors of and purchasers from the Borrower except to the extent that the enforceability thereof may be limited by applicable Bankruptcy Law and general principles of equity.

 

(iii) [Reserved].

 

(iv) The Collateral comprises “instruments”, “financial assets”, “security entitlements”, “general intangibles”, “chattel paper”, “accounts”, “certificated securities”, “uncertificated securities”, “securities accounts”, “deposit accounts”, “supporting obligations” or “insurance” (each as defined in the applicable UCC), and the proceeds of the foregoing, or such other category of collateral under the applicable UCC as to which the Borrower has complied with its obligations under this Section 4.01(cc).

 

(v) No Borrower Account is in the name of any Person other than the Borrower, subject to the lien of the Administrative Agent, for the benefit of the Secured Parties.

 

(vi) Each Borrower Account constitutes a “securities account” or “deposit account”, as applicable as defined in the applicable UCC.

 

(vii) The Borrower, the Account Bank, the Facility Servicer and the Administrative Agent, on behalf of the Secured Parties, have entered into an Account Control Agreement with respect to each Borrower Account currently established.

 

(viii) The Borrower has authorized the filing of all appropriate financing statements and register entries in the proper filing office in the appropriate jurisdictions under Applicable Law and/or the books and records of the Borrower in order to perfect the security interest in the Collateral and that portion of the Portfolio Assets in which a security interest granted to the Administrative Agent, on behalf of the Secured Parties, under this Agreement may be perfected by filing; provided that filings in respect of real property shall not be required.

 

(ix) As of the Closing Date and at any other time, as expressly permitted by the terms of the Transaction Documents, this Agreement and the security interest granted to the Administrative Agent, on behalf of the Secured Parties, pursuant to this Agreement, the Borrower has not pledged, assigned, sold, granted a security interest in or otherwise conveyed any of the Collateral. The Borrower has not authorized the filing of and is not aware of any financing statements against the Borrower that include a description of collateral covering the Collateral other than any financing statement (A) that has been terminated or fully and validly assigned to the Administrative Agent, (B) reflecting the transfer of assets on a Release Date pursuant to (and simultaneously with or subsequent to) the consummation of any transaction contemplated under (and in compliance with the conditions set forth in) Section 2.10 or (C) with respect to any Permitted Lien. The Borrower is not aware of the filing of any judgment or Tax lien filings against the Borrower, other than Permitted Liens.

 

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(x) None of the underlying promissory notes or related loan registers, Participation Agreements or related participant registers, or Equity Investment Agreements, as applicable, that constitute or evidence the Portfolio Assets has any marks or notations indicating that they have been pledged, assigned or otherwise conveyed to any Person other than the Administrative Agent, on behalf of the Secured Parties.

 

(xi) With respect to any Collateral that constitutes a “certificated security,” such certificated security has been delivered to the Administrative Agent, on behalf of the Secured Parties and, if in registered form, has been specially Indorsed to the Administrative Agent, for the benefit of the Secured Parties, or in blank by an effective Indorsement or has been registered in the name of the Administrative Agent, for the benefit of the Secured Parties, upon original issue or registration of transfer by the Borrower of such certificated security.

 

(xii) With respect to any Collateral that constitutes an “uncertificated security”, the Borrower either (x) has caused the issuer of such uncertificated security to register the Administrative Agent, on behalf of the Secured Parties, as the registered owner of such uncertificated security or (y) has caused the issuer of such uncertificated security or its administrator to agree to comply with instructions of the Administrative Agent without further consent of the Borrower.

 

Section 4.02 Representations of the Borrower Relating to the Agreement and the Collateral. The Borrower hereby represents to the Secured Parties as of the Closing Date, as of each applicable Cut-Off Date, each Advance Date, and on and as of each other date as required pursuant to this Agreement, as follows:

 

(a) Eligibility of Collateral. (i) The Portfolio Asset Schedule, each Borrowing Base Certificate, each LTV Certificate, each Fund Report, each NAV Reporting Package and the information contained in each Notice of Borrowing is an accurate and complete listing of all the Portfolio Assets as of the date specified in such schedule, certificate or report and the information contained therein is true and correct in all material respects as of such date, (ii) each such Portfolio Asset designated on the Portfolio Asset Schedule or any Borrowing Base Certificate as an Eligible Portfolio Asset and each such Portfolio Asset included as an Eligible Portfolio Asset in any calculation of the Borrowing Base is an Eligible Portfolio Asset of the kind (i.e., Senior Loan or Second Lien Loan) specified therein, (iii) the Borrower has complied in all material respects with the requirements of this Agreement, including Article IX, with respect to each Portfolio Asset, and (iv) with respect to each item of Collateral, all consents, licenses, approvals or authorizations of or registrations or declarations of any Governmental Authority or any Person required to be obtained, effected or given by the Borrower in connection with the grant of a security interest in each item of Collateral to the Administrative Agent, for the benefit of the Secured Parties, have been duly obtained, effected or given and are in full force and effect. Any inaccurate representation that a Portfolio Asset is an Eligible Portfolio Asset hereunder shall not constitute an Event of Default if the aggregate Advances Outstanding do not exceed the Maximum Availability assuming such Portfolio Asset was not included as an Eligible Portfolio Asset in the calculation of the Borrowing Base.

 

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(b) No Fraud. To the knowledge of any Responsible Officer of the Borrower as of the date of Transfer of a Portfolio Asset, such Portfolio Asset was originated without any fraud or material misrepresentation on the part of the Obligor or Transferor, if any, of such Portfolio Asset.

 

Section 4.03 Representations of the Facility Servicer. The Facility Servicer hereby represents, solely with respect to itself, as of the Closing Date, as of each applicable Cut-Off Date, as of each applicable Advance Date and as of each Reporting Date (except as otherwise specified), as follows:

 

(a) Organization; Power and Authority. It is a duly organized and validly existing as a mutual life insurance company in good standing under the laws of Massachusetts in the case of the Facility Servicer. It has full power, authority and legal right to execute, deliver and perform its obligations as the Facility Servicer under this Agreement and the other Transaction Documents to which it is a party.

 

(b) Due Authorization. The execution and delivery of this Agreement and the other Transaction Documents to which it is a party and the consummation of the transactions provided for herein and therein have been duly authorized by all necessary organizational action on its part.

 

(c) No Conflict. The execution and delivery of this Agreement and the other Transaction Documents to which it is a party, the performance of the transactions contemplated hereby or thereby and the fulfillment of the terms hereof or thereof will not conflict with, result in any breach of its Organizational Documents or any of the terms and provisions of, or constitute (with or without notice or lapse of time or both) a default under any material indenture, contract, agreement, mortgage, deed of trust, or other instrument to which the Facility Servicer is a party or by which it or any of its property is bound.

 

(d) No Violation. The execution and delivery of this Agreement and the other Transaction Documents, the performance of the transactions contemplated hereby and thereby and the fulfillment of the terms hereof and thereof will not conflict with or violate, in any material respect, any Applicable Law if compliance therewith is necessary (i) to ensure the enforceability of any Portfolio Asset or (ii) for the Facility Servicer to perform its obligations under this Agreement in accordance with the terms hereof.

 

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(e) All Consents Required; No Proceedings or Injunction. All approvals, authorizations, consents, orders or other actions of any Person or Governmental Authority applicable to the Facility Servicer, required in connection with the execution and delivery of this Agreement and the other Transaction Documents to which it is a party, the performance by the Facility Servicer of the transactions contemplated hereby and thereby and the fulfillment by the Facility Servicer of the terms hereof and thereof have been obtained to the extent reasonably necessary (i) to ensure the enforceability of any Portfolio Asset or (ii) for Facility Servicer to perform its obligations under this Agreement in accordance with the terms hereof. There is no litigation, proceeding or investigation pending or, to the knowledge of the Facility Servicer, threatened against the Facility Servicer, before any Governmental Authority (A) asserting the invalidity of this Agreement or any other Transaction Document to which it is a party or (B) seeking to prevent the consummation of any of the transactions contemplated by this Agreement or any other Transaction Document to which it is a party. No injunction, writ, restraining order or other order of any nature materially and adversely affects the Facility Servicer’s performance of its obligations under this Agreement or any Transaction Document to which the Facility Servicer is a party.

 

(f) Validity, Etc. The Agreement and the other Transaction Documents to which it is a party constitute the legal, valid and binding obligation of the Facility Servicer, enforceable against the Facility Servicer in accordance with its terms, except as such enforceability may be limited by applicable Bankruptcy Laws and general principles of equity.

 

(g) Reports Accurate. All Servicing Reports and other written or electronic information, exhibits, financial statements, documents, books, records or reports, in all cases, prepared and furnished by the Facility Servicer to the Administrative Agent in connection with this Agreement are, as of their date, accurate, true and correct in all material respects, and no such document contains any material misstatement of fact or omits to state a material fact or any fact necessary to make the statements contained therein not materially misleading; provided, that, for the purposes of the production by the Facility Servicer of any reports, documents or information required under this Agreement, the Facility Servicer may conclusively rely (absent bad faith or manifest error, and without investigation, inquiry, independent verification or any duty or obligation to recompute, verify, or recalculate any of the amounts and other information contained in) on any reports, documents or information provided to it by any Obligor or any other third party without any liability to the Facility Servicer for such reliance.

 

(h) Servicing Standard. The Facility Servicer has complied in all material respects with the Servicing Standard with regard to the servicing of the Portfolio Assets.

 

(i) Collections. All Collections received by the Borrower or its Affiliates with respect to the Collateral are held in trust for the benefit of the Administrative Agent, for the benefit of the Secured Parties, until deposited into the Collection Account as provided herein.

 

(j) Servicer Termination Event. No event has occurred which constitutes a Servicer Termination Event (other than any Servicer Termination Event which has previously been disclosed to the Administrative Agent as such).

 

 

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Section 4.04 Representations of each Lender.

 

(a) Due Organization, Qualification and Authority; Enforceability. Each Lender hereby individually represents, as to itself, that it (i) is duly organized, validly existing and in good standing under the laws of its formation, and is duly qualified to transact business, in good standing and licensed in each jurisdiction to the extent necessary to perform its duties and obligations under this Agreement in accordance with the terms of this Agreement, (ii) has the full power, authority and legal right to execute and deliver this Agreement and to perform in accordance herewith and (iii) has duly authorized the execution, delivery and performance of this Agreement and has duly executed and delivered this Agreement. This Agreement constitutes the valid, legal, binding obligation of each Lender, except as the enforceability hereof may be limited by Bankruptcy Laws and by general principles of equity.

 

(b) Anti-Terrorism Laws and Sanctions / International Trade Law Compliance. Each Lender hereby individually represents, as to itself, that (i) as of the date of this Agreement (or the date of the Assignment and Assumption Agreement, as applicable), each Payment Date, and at all times until this Agreement has been terminated and all amounts hereunder have been paid in full, that (A) neither Lender nor, to the knowledge, after due inquiry and reasonable investigation, of a Responsible Officer of the Lender, any other Lender Covered Entity (1) is a Sanctioned Person, (2) has any of its assets in a Sanctioned Country or in the possession, custody or control of a Sanctioned Person in violation of any Anti-Terrorism Laws and Sanctions, (3) does business in or with, or derives any of its income from investments in or transactions with, any Sanctioned Country or Sanctioned Person in violation of any Anti-Terrorism Laws and Sanctions or (4) engages in any dealings or transactions prohibited by any Anti-Terrorism Laws and Sanctions or Anti-Corruption Laws and (B) to the knowledge, after due inquiry and reasonable investigation, of such Lender, each Lender Covered Entity is in compliance with, and no Lender Covered Entity directly or indirectly engages in any dealings or transactions prohibited by, any Anti-Terrorism Laws and Sanctions or Anti-Corruption Laws and (ii) (A) the proceeds of this Agreement will not be used, directly or knowingly indirectly, by Lender, or to Lender’s knowledge by any other Person, to fund any operations in, finance any investments or activities in, or, make any payments to, a Sanctioned Country or Sanctioned Person in violation of any Anti-Terrorism Laws and Sanctions and (B) the funds used to pay the Administrative Agent, to the extent received from such Lender, are not directly or, knowingly, indirectly derived from any unlawful activity. Each Lender covenants and agrees that it shall promptly notify the Facility Servicer in writing upon the occurrence of a Reportable Compliance Event with respect to the Lender or, to the knowledge, after due inquiry and reasonable investigation, of a Responsible Officer of the Lender, any other Lender Covered Entity, except to the extent such notice is prohibited by Applicable Law.

 

(c) [Reserved].

 

Section 4.05 Representations of Holdings. Holdings hereby represents to the Secured Parties solely in respect of itself as of the Closing Date and each Advance Date (except as otherwise specified) as follows:

 

(a) Organization, Good Standing and Due Qualification. Holdings is a limited liability company duly organized, validly existing and in good standing under the laws of the Delaware, with all requisite power and authority necessary to grant a security interest in its Pledged Equity and to conduct its business as such business is presently conducted and to enter into and perform its obligations pursuant to this Agreement and the other Transaction Documents to which it is a party. Holdings is duly qualified to do business as a limited liability company, and has obtained all licenses, registrations and approvals under the laws of Delaware, and in all other jurisdictions necessary to own its assets and to transact the business in which it is engaged, and is duly qualified, and in good standing under the laws of Delaware, and in each other jurisdiction where the transaction of such business or its ownership of the Portfolio Assets and the Collateral and the conduct of its business requires such qualification except as would not reasonably be expected to have a Material Adverse Effect.

 

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(b) Power and Authority; Due Authorization; Execution and Delivery. Holdings (i) has the power, authority and legal right to (A) execute and deliver this Agreement and the other Transaction Documents to which it is a party and (B) perform and carry out the terms of this Agreement and the other Transaction Documents to which it is a party and the transactions contemplated thereby, and (ii) has taken all necessary action to (A) authorize the execution, delivery and performance of this Agreement and each of the other Transaction Documents to which it is a party and (B) grant to the Administrative Agent, for the benefit of the Secured Parties, a first priority perfected security interest in its Pledged Equity on the terms and conditions of this Agreement and the other Transaction Documents to which it is a party, subject only to Permitted Liens. This Agreement and each other Transaction Document to which Holdings is a party have been duly executed and delivered by the Borrower.

 

(c) Binding Obligation. This Agreement and each of the other Transaction Documents to Holdings is a party constitutes the legal, valid and binding obligation of Holdings, enforceable against Holdings in accordance with their respective terms, except as the enforceability hereof and thereof may be limited by Bankruptcy Laws, and by general principles of equity.

 

(d) All Consents Required. No consent of any other party and no consent, license, approval or authorization of, or registration or declaration with, any Governmental Authority, bureau or agency is required in connection with the execution, delivery or performance by Holdings of this Agreement or any Transaction Document to which it is a party or the validity or enforceability of this Agreement or any such Transaction Document or grant of a security interest in its Pledged Equity, other than such as have been waived, met or obtained and are in full force and effect.

 

(e) No Violation. The execution, delivery and performance of this Agreement and the other Transaction Documents will not (i) conflict with, result in any breach of any of the terms and provisions of, or constitute (with or without notice or lapse of time or both) a default under, its Organizational Documents (ii) result in the creation or imposition of any Lien on its Pledged Equity other than Permitted Liens, (iii) violate any Applicable Law in any material respect or (iv) violate any material contract or other material agreement to which Holdings is a party or by which the or any property or assets of Holdings may be bound.

 

(f)   No Proceedings; No Injunctions. There is no litigation, proceeding or investigation pending or, to the knowledge of a Responsible Officer of Holdings, threatened against Holdings or any properties of Holdings before any Governmental Authority (i) asserting the invalidity of this Agreement or any other Transaction Document, (ii) seeking to prevent the consummation of any of the transactions contemplated by this Agreement or any other Transaction Document or (iii) that could reasonably be expected to be adversely determined, and, if so determined, either individually or in the aggregate could reasonably be expected to have a Material Adverse Effect. No injunction, writ, restraining order or other order of any nature adversely affects, in any material respect, Holdings’ performance of its obligations under this Agreement or any Transaction Document to which Holdings is a party.

 

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(g) No Liens. Holdings’ Pledged Equity is owned by Holdings free and clear of any Liens except for Permitted Liens.

 

(h) Investment Company Act. Holdings is not required to register as an “investment company” under the provisions of the 1940 Act.

 

(i) Compliance with Applicable Law. Except as would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect, Holdings has complied with all Applicable Law to which it may be subject.

 

(j) Security Interest.

 

(i) The Pledged Equity issued by the Borrower has been duly and validly authorized and issued by the Borrower.

 

(ii) This Agreement creates a valid and continuing security interest (as defined in the applicable UCC) in its Pledged Equity in favor of the Administrative Agent, on behalf of the Secured Parties, which security interest is prior to all other Liens (except for Permitted Liens), and is enforceable as such against creditors of and purchasers from Holdings. Holdings is the sole legal and beneficial owner of its Pledged Equity.

 

(iii) Holdings has authorized the filing of all appropriate financing statements and register entities in the proper filing office in the appropriate jurisdictions under Applicable Law in order to perfect the security interest in its Pledged Equity.

 

(iv) Other than as expressly permitted by the terms of the Transaction Documents, this Agreement and the security interest granted to the Administrative Agent, on behalf of the Secured Parties, pursuant to this Agreement, Holdings has not pledged, assigned, sold, granted a security interest in or otherwise conveyed any of its Pledged Equity. Holdings has not authorized the filing of and is not aware of any financing statements against Holdings that include a description of collateral covering its Pledged Equity. Holdings is not aware of the filing of any judgment or Tax lien filings against Holdings, other than Permitted Liens.

 

(v) Holdings consents to the transfer of any of its Pledged Equity to the Administrative Agent or its designee, following, and during the occurrence of, an Event of Default and to the substitution of the Administrative Agent or its designee as a member in the Borrower with all the rights and powers related thereto, subject to the terms of this Agreement.

 

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(vi) Its Pledged Equity shall not be represented by a certificate unless (A) the Organizational Documents of the Borrower expressly provides that such interest shall be a “security” within the meaning of Article 8 of the UCC of the applicable jurisdiction and (B) such certificate shall be delivered as provided in clause (vii) below.

 

(vii) If any portion of its Pledged Equity constitutes a “certificated security,” such certificated security has been delivered to the Administrative Agent, on behalf of the Secured Parties and, if in registered form, has been specially Indorsed to the Administrative Agent, for the benefit of the Secured Parties, or in blank by an effective Indorsement or has been registered in the name of the Administrative Agent, for the benefit of the Secured Parties, upon original issue or registration of transfer by Holdings of such certificated security.

 

(viii) If any portion of its Pledged Equity constitutes an “uncertificated security”, the Borrower hereby agrees to comply with instructions of the Administrative Agent with respect to such Pledged Equity without further consent of Holdings.

 

(ix) Except as permitted pursuant to Section 5.08(e), Holdings’ location (within the meaning of Article 9 of the UCC) is Delaware. Except as permitted pursuant to Section 5.08(e), the principal place of business and chief executive office of Holdings (and the location of Holdings’ records regarding its Pledged Equity) is located at the address set forth under its name in Schedule III.

 

(k) No Plan Assets; Prohibited Transactions. Holdings satisfied an exception under the Plan Asset Regulations so that its underlying assets do not constitute Plan Assets and Holdings does not hold “plan assets” subject to Similar Law. The execution, delivery and performance of this Agreement and the other Transaction Documents, including exercise of rights with respect to the Collateral and performance of its duties by the Facility Servicer and the borrowing and repayment of amounts under this Agreement do not and will not constitute a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975(c)(1)(A)-(D) of the Code or a violation of Similar Law.

 

(l) ERISA. Holdings has no ERISA Affiliates. None of the Borrower, Holdings or any ERISA Affiliate maintains, sponsors or contributes to (or have an obligation to contribute to), or in the past six years maintained, sponsored or contributed to (or have an obligation to contribute to) any Employee Plan or Multiemployer Plan. None of the Borrower, Holdings or any ERISA Affiliate has established or has any liability (contingent or otherwise) with respect to any Employee Plan or Multiemployer Plan.

 

(m) Anti-Terrorism Laws and Sanctions / International Trade Law Compliance / Anti-Money Laundering Laws. As of the date of this Agreement, each Payment Date and at all times until this Agreement has been terminated and all amounts hereunder have been paid in full, that: (i) neither Holdings nor, to the knowledge, after due inquiry and reasonable investigation, of a Responsible Officer of Holdings, any other Holdings Covered Entity: (A) is a Sanctioned Person, (B) has any of its assets in a Sanctioned Country or in the possession, custody or control of a Sanctioned Person in violation of any Anti-Terrorism Laws and Sanctions, (C) does business in or with, or derives any of its income from investments in or transactions with, any Sanctioned Country or Sanctioned Person in violation of any Anti-Terrorism Laws and Sanctions or (D) engages in any dealings or transactions prohibited by any Anti-Terrorism Laws and Sanctions, Anti-Corruption Laws, or Anti-Money Laundering Laws; (ii) the proceeds of this Agreement will not be used, directly or knowingly indirectly, by the Borrower, or to any of the Borrower’s knowledge by any other Person, to fund any operations in, finance any investments or activities in, or, make any payments to, a Sanctioned Country or Sanctioned Person in violation of any Law; (iii) the funds used to pay the Facility Servicer, to the extent received from Holdings, are not directly or knowingly indirectly derived from any unlawful activity; and (iv) to Holdings’ knowledge, each Holdings Covered Entity is in compliance with, and no Holdings Covered Entity directly or knowingly indirectly engages in any dealings or transactions prohibited by, any Anti-Terrorism Laws and Sanctions, Anti-Corruption Laws, or Anti-Money Laundering Laws. Holdings covenants and agrees that it shall promptly notify the Facility Servicer in writing upon a Responsible Officer of Holdings obtaining knowledge of the occurrence of a Reportable Compliance Event with respect to Holdings or, to the knowledge, after due inquiry and reasonable investigation, of a Responsible Officer of Holdings, any other Holdings Covered Entity, except to the extent such notice is prohibited by Applicable Law.

 

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ARTICLE V
GENERAL COVENANTS

 

Section 5.01 Affirmative Covenants of the Borrower. From the Closing Date until the Facility Termination Date:

 

(a) Organizational Procedures and Scope of Business. The Borrower will observe all organizational procedures required by its Organizational Documents and the laws of its jurisdiction of formation. Without limiting the foregoing, the Borrower will limit the scope of its business to those set forth in its Organizational Documents, including: (i) the acquisition and origination of and investments in Portfolio Assets; (ii) the Sale of Portfolio Assets in which it has an interest as and when permitted under the Transaction Documents; (iii) entering into and performing its obligations under the Transaction Documents; (iv) consenting or withholding consent to proposed amendments, waivers and other modifications of the Loan Agreements and Equity Investment Agreements to the extent not in conflict with the terms of this Agreement or any other Transaction Document; (v) exercising any rights (including but not limited to voting rights and rights arising in connection with a Bankruptcy Event with respect to an Obligor or the consensual or non-judicial restructuring of the debt or equity of an Obligor) or remedies in connection with the Portfolio Assets and participating in the committees (official or otherwise) or other groups formed by creditors of an Obligor to the extent not in conflict with the terms of this Agreement or any other Transaction Document; and (vi) engaging in any activity and to exercise any powers that are related or incidental to the foregoing and necessary, convenient or advisable to accomplish the foregoing.

 

(b) [Reserved].

 

(c) Preservation of Company Existence. Subject to Section 5.02(g) and Section 5.02(p), the Borrower will preserve and maintain its legal existence, rights, franchises and privileges in the jurisdiction of its formation and will promptly obtain and thereafter maintain qualifications to do business as a limited partnership in any other jurisdiction in which it does business and in which it is required to so qualify under Applicable Law except where the failure to so qualify would not reasonably be expected to have a Material Adverse Effect.

 

(d) Deposit of Misdirected Collections. The Borrower shall promptly (but in no event later than two (2) Business Days after receipt and identification thereof) deposit or cause to be deposited into the Collection Account any and all Collections received by the Borrower.

 

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(e) Material Modifications, Valuation Suspensions and Underlying Obligor Defaults.

 

(i) Concurrently with the delivery of the NAV Reporting Package required to be delivered pursuant to Section 5.01(x)(iii) (a “Relevant NAV Reporting Package”), the Borrower shall give notice to the Administrative Agent and the Facility Servicer of any Material Modification or any Valuation Suspension with respect to any Portfolio Asset which it has become aware of in the period since the then most recent NAV Reporting Package was delivered to the Administrative Agent. With respect to each Portfolio Asset subject to a Material Modification not approved by the Majority Lenders or Valuation Suspension, the Portfolio Asset Value shall, subject to paragraph (iii) below, be automatically reduced to a value equal to 50% of the outstanding par value of such Portfolio Asset (the “Portfolio Asset Reduction Value”) until the date that is ninety-one (91) days after such Material Modification or Valuation Suspension, as applicable, is reported to the Administrative Agent in accordance with this Section 5.01(e); provided that thereafter, the value shall remain 50%, until such Portfolio Asset is assigned an Approved Firm Valuation (each such Approved Firm Valuation, a “New Valuation”). The Borrower shall calculate the Borrowing Base after giving effect to the Portfolio Asset Reduction Value and, subsequently, the New Valuation and shall deliver a Borrowing Base Certificate to the Administrative Agent and the Facility Servicer within three (3) Business Days of (A) the date on which the Portfolio Asset Reduction Value takes effect, and (B) receipt by it of a New Valuation with respect to a Portfolio Asset subject to a Material Modification or Valuation Suspension, as applicable. The Borrower acknowledges that such reduction may cause a Market Trigger Event.

 

(ii) Prior to any New Valuation being assigned to a Portfolio Asset pursuant to clause (i) of this Section 5.01(e), the Majority Lenders may, in their sole discretion, either (x) adjust the outstanding par value of such Portfolio Asset Value to a value greater than the Portfolio Asset Reduction Value, or (y) determine to waive any such adjustment to the Portfolio Asset Value until such Portfolio Asset is assigned a New Valuation.

 

(iii) If the occurrence of a Material Modification or Valuation Suspension is notified to the Administrative Agent and the Facility Servicer pursuant to paragraph (i) above with respect to any one or more Portfolio Assets, the Portfolio Asset Reduction Value shall thereafter (x) be applied only to that portion of the aggregate Portfolio Asset Value of those Portfolio Assets which exceeds an amount equal to 1% of the Total Portfolio Value as stated in the Relevant NAV Reporting Package (prior to application of the Portfolio Asset Reduction Value) and (y) shall be reflected in each subsequent NAV Reporting Package required to be delivered pursuant to Section 5.01(x)(iii) until, with respect to any Portfolio Asset to which a Portfolio Asset Reduction has been applied, such time as a New Valuation shall be assigned to such Portfolio Asset.

 

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(iv) Concurrently with the delivery of a Relevant NAV Reporting Package, the Borrower shall give written notice to the Administrative Agent, the Lenders and the Facility Servicer of any occurrence of (A) any Underlying Obligor Default, and (B) any Partnership Default Trigger Event which it has become aware of in the period since the then most recent NAV Reporting Package was delivered to the Administrative Agent.

 

(v) With respect to any such Underlying Obligor Default, or Partnership Default:

 

(A) if a Partnership Default Trigger Event under clause (b) or (c) of the definition thereof has occurred and is continuing, the Portfolio Asset Value of each Affected Portfolio Asset shall be reduced to the Portfolio Asset Reduction Value;

 

(B) if any Partnership Default Trigger Event under clause (b) or (c) of the definition thereof shall continue for more than 30 days, the Portfolio Asset Value of each Affected Portfolio Asset shall be reduced to zero;

 

(C) if a Partnership Default Trigger Event under clause (a) of the definition thereof has occurred and is continuing, then the Portfolio Asset Value of each Affected Portfolio Asset shall automatically be reduced to zero;

 

(D) if an Underlying Obligor Default under clauses (a) or (b) of the definition thereof has occurred and is continuing, the Portfolio Asset Value of the related Loan Asset shall be reduced to the Portfolio Asset Reduction Value with effect from the date on which such Underlying Obligor Default is reported to the Administrative Agent in accordance with this clause (iv); and

 

(E) (i) if an Underlying Obligor Default or Partnership Default Trigger Event has occurred and is continuing for more than 30 days, or (ii) an Underlying Obligor Default under clause (c) of the definition thereof has occurred and is continuing, the Portfolio Asset Value of the related Loan Asset shall automatically be reduced to zero with effect from the date such Underlying Obligor Default is reported to the Administrative Agent in accordance with this clause (iv).

 

(vi) The Majority Lenders may, in their sole discretion, either (x) adjust the outstanding Portfolio Asset Value of any Affected Portfolio Asset to a value greater than the Portfolio Asset Reduction Value, or (y) waive any such adjustment to the Portfolio Asset Value pursuant to clause (v) of this Section 5.01(e).

 

(vii) The Borrower shall give written notice to the Administrative Agent, the Lenders and the Facility Servicer of the occurrence of any Valuation Suspension, promptly, and in any event no later than two (2) Business Days, after obtaining knowledge or notice thereof. If a Valuation Suspension has occurred and is continuing, the Portfolio Asset Value of each Affected Portfolio Asset shall be reduced to the Portfolio Asset Reduction Value, and if such Valuation Suspension has occurred and is continuing for more than 30 days, then, the Portfolio Asset Value of each Affected Portfolio Asset shall automatically be reduced to zero.

 

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(f) Platform; Portfolio Asset File; Required Portfolio Asset Documents. The Borrower shall at all times maintain a Platform and grant the Facility Servicer access thereto. The Borrower shall deliver by posting such file on the Platform to the Facility Servicer the Portfolio Asset File not later than five (5) Business Days after the Cut-Off Date pertaining to such Portfolio Asset (or such later date as the Facility Servicer may agree).

 

(g) Notice of Event of Default. The Borrower shall provide written notice to the Administrative Agent of the occurrence of each Unmatured Event of Default or Event of Default of which the Borrower has knowledge or has received notice, promptly (and in any event not later than two (2) Business Days) after becoming aware or being notified of such occurrence and no later than three (3) Business Days after the date on which the Borrower gives such written notice, the Borrower will provide to the Administrative Agent a written statement of a Responsible Officer of the Borrower setting forth the details of such event and the action that the Borrower proposes to take with respect thereto.

 

(h) Notice of Material Events. The Borrower shall promptly notify the Administrative Agent of (i) any material action, suit, proceeding, dispute, offset, deduction, defense or counterclaim that is or is threatened to be asserted by an Obligor with respect to any Portfolio Asset (or portion thereof) of which it has knowledge or has received notice or (ii) any event or other circumstance known to the Borrower that could reasonably be expected to result in a Material Adverse Effect.

 

(i) Notice of Litigation. The Borrower shall promptly notify the Administrative Agent of the filing or commencement of any action, suit, investigation or proceeding by or before any arbitrator or Governmental Authority against or affecting the Borrower or any Affiliate thereof, including pursuant to any applicable Environmental Laws, that could reasonably be expected to be adversely determined, and, if so determined, could reasonably be expected to result in liability of the Borrower in an aggregate amount exceeding $5,000,000.

 

(j) Notice of Accounting Changes. Promptly and in any event within three (3) Business Days after the effective date thereof, the Borrower will provide to the Administrative Agent notice of any material change in the accounting policies of the Borrower.

 

(k) Additional Information; Additional Documents. The Borrower shall provide the Administrative Agent with any financial or other information reasonably requested by the Administrative Agent (including, on behalf of any Lender or any of their representatives or agents) evidencing the truthfulness of the representations set forth in this Agreement promptly after receipt of such request. Notwithstanding anything to the contrary in this provision, the Borrower and its Affiliates will not be required to disclose, permit the inspection, examination or making copies or abstracts of, or discuss, any document, information or other matter (i) that constitutes non-financial trade secrets or non-financial proprietary information, (ii) in respect of which disclosure to the Administrative Agent or any Lender (or their respective representatives or agents) is prohibited by contract, law, rule, regulation or order or (iii) that in the Borrower’s or Affiliate’s reasonable judgment, would compromise any attorney-client privilege, privilege afforded to attorney work product or similar privilege; provided, that, the Borrower shall make available redacted versions of requested documents if to do so will not compromise such privilege or, if unable to do so consistent with the preservation of such privilege, shall make commercially reasonable efforts to disclose information responsive to the requests of the Administrative Agent in a manner that will protect such privilege.

 

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(l) Protection of Security Interest. The Borrower will take all action reasonably necessary to perfect, protect and more fully evidence the Borrower’s ownership of the Collateral free and clear of any Lien other than the Lien created hereunder and Permitted Liens, including (i) with respect to that portion of the Collateral in which a security interest may be perfected by filing, filing and maintaining (at the expense of the Borrower) effective financing statements against any Transferor in all necessary or appropriate filing offices, (including any amendments thereto or assignments thereof) and filing continuation statements, amendments or assignments with respect thereto in such filing offices, (including any amendments thereto or assignments thereof), (ii) making appropriate entries in its register of security interest, (iii) executing or causing to be executed such other instruments or notices as may be necessary or reasonably appropriate, (iv) at the expense of the Borrower, take all action necessary to cause a valid, subsisting and enforceable first priority perfected security interest, subject only to Permitted Liens, to exist in favor of the Administrative Agent (for the benefit of the Secured Parties) in the Borrower’s interests in the Collateral, including the filing of a UCC financing statement in the applicable jurisdiction adequately describing the Collateral (which may include an “all asset” filing), and naming the Borrower as debtor and the Administrative Agent as the secured party, and filing continuation statements, amendments or assignments with respect thereto in such filing offices (including any amendments thereto or assignments thereof) and (v) take all additional action that the Facility Servicer or the Administrative Agent may reasonably request to perfect, protect and more fully evidence the respective first priority (subject to Permitted Liens) perfected security interests of the parties to this Agreement in the Collateral, or to enable the Facility Servicer or the Administrative Agent to exercise or enforce any of their respective rights hereunder.

 

(m) Liens. The Borrower will promptly notify the Administrative Agent of the existence of any material Lien on the Collateral known to the Borrower (other than Permitted Liens) and the Borrower shall defend the right, title and interest of the Administrative Agent, for the benefit of the Secured Parties, in, to and under the Collateral against all claims of third parties to the extent commercially reasonable to do so (as determined by the Borrower in its reasonable discretion), other than with respect to Permitted Liens.

 

(n) No Changes in Fees. The Borrower will not make any changes to the Fees or amend, restate, supplement or otherwise modify the Fee Letters in any material respect without the prior written approval of the Initial Lender and the Majority Lenders.

 

(o) Compliance with Applicable Law. Except as would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect, the Borrower shall at all times comply with all Applicable Law (including Environmental Laws, and all federal securities laws).

 

(p) Proper Records. The Borrower shall at all times keep proper books of records and accounts in which full, true and correct entries shall be made of its transactions in accordance with GAAP and set aside on its books from its earning for each fiscal year all such proper reserves in accordance with GAAP. The Borrower shall account for the Transfer to it from the Transferor of any Portfolio Asset under each Portfolio Asset Assignment as a Transfer of such Portfolio Asset in its books and Records.

 

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(q) Satisfaction of Obligations. The Borrower shall pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all its obligations of whatever nature, except where the amount or validity thereof is currently being contested in good faith by appropriate proceedings and reserves with respect thereto have been provided on the books of the Borrower.

 

(r) Payment of Taxes. The Borrower shall pay and discharge all income and other material Taxes on it or its assets and on the Collateral except for Permitted Liens and Taxes as are being contested in good faith by appropriate proceedings diligently conducted and with respect to which adequate reserves have been provided in accordance with GAAP.

 

(s) Tax Treatment. The Borrower shall, and the Lenders intend to, treat the Advances advanced hereunder as indebtedness of the Borrower (or, so long as the Borrower is treated as a disregarded entity for U.S. federal income tax purposes, as indebtedness of the entity of which it is considered to be a part) for U.S. federal income tax purposes and shall file any and all tax forms in a manner consistent therewith, except as required by applicable law.

 

(t) Notification Forms. After the occurrence and during the continuance of an Event of Default, the Borrower shall furnish the Facility Servicer and Administrative Agent with an appropriate power of attorney to send (at the direction of the Majority Lenders to the Administrative Agent) notification forms to the Obligors or any agent, administrative agent, Counterparty Lender or Underlying Agent of the Administrative Agent’s interest in the Collateral and the obligation to make payments as directed by the Administrative Agent.

 

(u) Disregarded Entity. The Borrower will be disregarded as an entity separate from its owner pursuant to Treasury Regulation Section 301.7701-3(b), and neither the Borrower nor any other Person on its behalf shall make an election to be, or take any other action that is reasonably likely to result in the Borrower being, treated as other than an entity disregarded from its owner under Treasury Regulation Section 301.7701-3(c).

 

(v) Access to Records. From time to time and, at any time when no Event of Default has occurred and is continuing, upon not less than five (5) Business Days advance notice, the Borrower shall permit the Administrative Agent or any Person designated by the Administrative Agent and at the sole cost and expense of the Borrower, to, during normal hours, visit and inspect not more than once per calendar year if no Event of Default has occurred and is continuing and, otherwise, at reasonable intervals its and any Person to which it delegates any of its duties under the Transaction Documents books, records and accounts relating to its business, financial condition, operations, assets and its performance under the Transaction Documents, and to make copies thereof or abstracts therefrom, and to discuss the foregoing with its and such Person’s officers, partners, employees and accountants, all as often as the Administrative Agent may reasonably request; provided that (i) the Administrative Agent shall use all reasonable efforts to coordinate their inspections and (ii) so long as an Event of Default is not continuing, the Borrower shall be responsible for the cost and expense of no more than one site visit in any calendar year.

 

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(w) Anti-Money Laundering and International Trade Laws. The Borrower shall have in effect policies and procedures designed to promote compliance by such Borrower and its directors, managers, officers, employees, and agents with applicable Anti-Money Laundering Laws, Anti-Terrorism Laws and Sanctions, and Anti-Corruption Laws.

 

(x) Financial Reporting. The Borrower will deliver to the Administrative Agent, the Facility Servicer and each Lender, as soon as available, and in any event:

 

(i) within 120 days after the end of each fiscal year of Holdings, commencing with the fiscal year ended December 31, 2023, the financial statements of Holdings as of the end of such fiscal year audited by a firm of nationally recognized independent public accountants prepared in accordance with GAAP consistently applied, together with a detailed unaudited breakdown of the Borrower’s financial position as of the end of such fiscal year;

 

(ii) within 45 days after the end of each fiscal quarter of the RIA, commencing with the fiscal quarter ending December 31, 2023 (x) a copy of the RIA Valuation Policy, identifying any RIA Valuation Policy Amendments since the RIA Valuation Policy was last provided to the Administrative Agent, the Facility Servicer and the Lenders, and (y) a copy of the Fund Report for the most recent fiscal quarter; provided that if the Facility Servicer determines (acting reasonably) that the Portfolio Asset Value with respect to any Portfolio Asset and the Total Portfolio Value as reported in the Fund Report is not accurate, the Facility Servicer may provide the Borrower with prompt written notice thereof and request that the Borrower obtain an Approved Firm Valuation within 15 Business Days after receipt of such notice by the Borrower.

 

(iii) within the period ending on the later of (x) 22 Business Days and (y) 30 calendar days, after the end of each calendar month, commencing with the calendar month ended April 30, 2023, the NAV Reporting Package; provided that if the Facility Servicer determines that the Portfolio Asset Value with respect to any Portfolio Asset and the Total Portfolio Value as determined by the RIA is not accurate, the Facility Servicer shall provide the Borrower with prompt written notice thereof and request that the Borrower obtain an Approved Firm Valuation within fifteen (15) Business Days after receipt of such notice by the Borrower.

 

(y) Changes to RIA Valuation Policy. The Borrower shall notify the Administrative Agent and the Facility Servicer in writing not less than five (5) Business Days prior to effecting any material change, amendment or modification to the RIA Valuation Policy or any Key Covenant that affects any Advance made hereunder (each, such change, amendment or modification, a “Proposed Amendment”) and provide a copy of any such Proposed Amendment to the Administrative Agent and the Facility Servicer. The Majority Lenders shall promptly (and in any event, not later than three (3) Business Days after receiving a Proposed Amendment) either consent to such Proposed Amendment or incorporate changes thereto after consultation with the Borrower (such Proposed Amendment as consented to or changed by the Majority Lenders, and as acknowledged by the Majority Lenders in writing, a “RIA Valuation Policy Amendment”). An RIA Valuation Policy Amendment acknowledged by the Majority Lenders in writing shall thereafter be effective as an amendment to the RIA Valuation Policy as in effect prior to the date of such RIA Valuation Policy Amendment; provided that any RIA Valuation Policy Amendment that is not approved by the Majority Lenders may still become effective, but for purposes of this Agreement the RIA Valuation Policy shall remain in effect without giving effect to such amendment.

 

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(z) Rating Event. The Borrower shall obtain and maintain an investment grade Debt Rating at all times, from and including the Closing Date, through and including the Maturity Date, and annually (and for the avoidance of doubt, a new investment grade Debt Rating shall be obtained not less frequently than once every 365 days (366 days in a leap year)), provide a copy of any rating letter issued in connection therewith to the Initial Lender. The Borrower shall promptly (within 3 Business Days of becoming aware of such change) notify the Initial Lender and the Administrative Agent of any change in such investment grade Debt Rating. The Borrower shall provide written notice to the Initial Lender upon the occurrence of the Rating Event and following the occurrence of a Rating Event Cure. No later than three (3) Business Days prior to the date of a Rating Event Cure, the Borrower shall provide written notice thereof to the Initial Lender, unless a Rating Event Cure occurs as a result of a change in the Borrower’s Debt Rating, in which case the Borrower shall promptly provide written notice thereof to the Initial Lender.

 

(aa) Borrower Covenants with respect to the Collateral. The Borrower shall, pursuant to the terms and conditions of this Agreement, administer and exercise rights and remedies in respect of the Collateral and take such actions as are required of it hereunder, under the other Transaction Documents and under Applicable Law. Without limiting the foregoing, the Borrower shall:

 

(i) maintain all necessary information and records with respect to the Collateral together with such other information with respect to the Collateral as may be required or requested hereunder, including by keeping and maintaining all documents, books, records and other information reasonably necessary or advisable for the collection of the Collateral;

 

(ii) identify each Portfolio Asset clearly and unambiguously in its records to reflect that such Portfolio Asset has been Transferred and is owned by the Borrower and provide such records to the Administrative Agent and each Lender (with a copy to the Facility Servicer);

 

(iii) maintain and implement administrative and operating procedures (including an ability to recreate servicing records received from the RIA, the Underlying Agents, or pursuant to this Agreement, as applicable, in the event of the destruction of the originals thereof);

 

(iv) promptly deliver to the Administrative Agent or the Facility Servicer, from time to time, such information and records (to the extent such information and records are received by the Borrower or could otherwise, using commercially reasonable endeavors, be procured from the RIA, the Underlying Agents, the RIA or any other Person or pursuant to this Agreement), as the Administrative Agent or the Facility Servicer may from time to time reasonably request;

 

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(v) monitor and record in the records for the Collateral, any interest rate adjustments in connection with the Loan Agreements to the extent notice thereof is provided to the Borrower; and

 

(vi) direct the sale of Collateral in accordance with Section 2.10.

 

(bb) Borrower Covenants with respect to realization on the Borrower Portfolio Assets.

 

(i) The Borrower will use its commercially reasonable efforts to foreclose upon or repossess, as applicable, or otherwise comparably convert the ownership of any Underlying Collateral relating to a defaulted Portfolio Asset as to which no satisfactory arrangements can be made for collection of delinquent payments, and may, exercising its reasonably good faith judgment to maximize value, hold for value, sell or transfer any equity or other securities which it shall have received in connection with a default, workout, restructuring or plan of reorganization with respect to such Portfolio Asset. The Borrower will comply with Applicable Law in realizing upon such Underlying Collateral, and employ practices and procedures to enforce all obligations of Obligors by foreclosing upon, repossessing and causing the sale of such Underlying Collateral at public or private sale in circumstances other than those described in the preceding sentence.

 

(ii) Without limiting the generality of the foregoing, unless an Event of Default has occurred and is continuing and the Administrative Agent (acting at the direction of the Majority Lenders) has specifically given instruction to the contrary, the Borrower may cause the sale of any such Underlying Collateral to its Affiliates for a purchase price equal to the then fair value thereof, any such sale to be evidenced by a certificate of a Responsible Officer of the Borrower delivered to the Administrative Agent setting forth the Portfolio Asset, the Underlying Collateral, the sale price of the Underlying Collateral and certifying that such sale price is the fair value of such Underlying Collateral. The Borrower shall remit to the Collection Account, the Recoveries received in connection with the sale or disposition of Underlying Collateral relating to a defaulted Portfolio Asset.

 

(iii) Consistent with the applicable Loan Agreement or Participation Agreement, the Borrower will monitor efforts of each Counterparty Lender or Underlying Agent with respect to any Loan Asset as to which no satisfactory arrangements can be made for collection of delinquent payments, and any analysis by such Counterparty Lender or Underlying Agent proposing a course of action to maximize value with respect to any related Underlying Collateral, including whether to hold for value, sell or transfer any equity or other securities it has received in connection with a default, workout, restructuring or plan of reorganization with respect to the related Underlying Loan Obligations.

 

(iv) After the occurrence and during the continuance of an Event of Default, with respect to each Loan Asset, the Borrower will comply with the applicable Loan Agreement or Participation Agreement and Applicable Law in directing a Counterparty Lender or Underlying Agent to realize upon Underlying Collateral, and employ practices and procedures, including commercially reasonable efforts to enforce all obligations of such Counterparty Lender under such Participation Agreement, to direct the related Underlying Agent to enforce the obligations of Obligors by foreclosing upon, repossessing and causing the sale of such Underlying Collateral at public or private sale.

 

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(v) After the declaration of the Maturity Date, at the direction of the Administrative Agent (acting at the direction of the Majority Lenders), the Borrower shall take such action as the Administrative Agent may deem necessary or advisable to enforce collection of the Portfolio Assets; provided that the Administrative Agent may (at the direction of the Majority Lenders), at any time that an Event of Default has occurred and is continuing, notify the Obligor, Counterparty Lender or Underlying Agent, as applicable, with respect to any Portfolio Asset of the assignment of such Portfolio Asset to the Administrative Agent for the benefit of the Secured Parties and direct that payments of all amounts due or to become due thereunder be made directly to the Administrative Agent or any servicer, collection agent or account designated by the Administrative Agent and, upon such notification and at the expense of the Borrower, the Administrative Agent (acting at the direction of the Majority Lenders) may enforce collection of any such Portfolio Asset, and adjust, settle or compromise the amount or payment thereof.

 

(cc) Consent Agreement. The Borrower shall obtain Consent Agreements on each Equity Investment included as an Eligible Portfolio Asset. The Borrower shall promptly upon the written request of the Administrative Agent (acting at the direction of the Lenders), take, or cause to be taken, all actions, and to do, or to cause to be done, and to assist and cooperate with the Administrative Agent in doing all things necessary under Applicable Law, in each case as so requested by the Administrative Agent, to enable the Administrative Agent to exercise or enforce any of its respective rights hereunder or under the Consent Agreements (other than to register, or cause the registration of, any of the Portfolio Assets or Pledged Equity under federal or state securities laws), including to (i) obtain from any governmental entity any actions, non-actions, clearances, waivers, filings, permits, licenses or orders (collectively, “Governmental Filings”) required to be obtained by the Borrower, the Portfolio Funds, the Portfolio Sponsors or any of their respective Affiliates in connection with such exercise or enforcement, (ii) make all Governmental Filings necessary or advisable, and thereafter promptly make any other required submissions and responses, in connection therewith, (iii) provide the Administrative Agent and the Facility Servicer with prior notice of any substantive communication with, and any proposed understanding, undertaking or agreement with, any governmental entity regarding any such Governmental Filings (unless prohibited by law), (iv) keep the Administrative Agent informed in all material respects of any material communication received by the Borrower, any Portfolio Fund or any Portfolio Sponsor, or given by the Borrower, any Portfolio Fund or any Portfolio Sponsor to, any governmental entity in connection therewith (unless prohibited by law); and (v) not participate independently in any meetings with any governmental entity in respect of any such Governmental Filings or any governmental investigations or other inquiries relating thereto without giving the Administrative Agent prior written notice of the meeting and, unless prohibited by such governmental entity, the opportunity to attend or participate.

 

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(dd) Post-Closing Account Access. Notwithstanding Section 2.08(e), to the extent not provided as of the Closing Date, the Borrower shall, on or before the later of (i) ten (10) Business Days from the Closing Date and (ii) such later date as agreed to in writing by the Administrative Agent, provide or ensure that the Account Bank provides the Administrative Agent and its designee with online access to each Account on the Account Bank’s online platform to extent required in the applicable Account Control Agreement for each such Account.

 

Section 5.02 Negative Covenants of the Borrower. From the Closing Date until the Facility Termination Date:

 

(a) [Reserved].

 

(b) Protection of Title. Except as otherwise permitted under this Agreement, the Borrower shall not take any action which would directly or indirectly materially impair or adversely affect the Borrower’s title to the Collateral.

 

(c) Transfer Limitations. Except as permitted pursuant to Section 2.10, the Borrower shall not transfer, assign, convey, grant, bargain, sell, set over, deliver or otherwise dispose of, or pledge or hypothecate, directly or indirectly, any interest in the Collateral to any Person other than the Administrative Agent for the benefit of the Secured Parties or in connection with Permitted Liens, or engage in financing transactions or similar transactions with respect to the Collateral with any Person other than pursuant to this Agreement.

 

(d) Indebtedness; Liens. The Borrower shall not create, incur, assume or suffer to exist any Indebtedness other than the Obligations. The Borrower shall not create, incur or permit to exist any Lien in or on any of the Collateral subject to the Lien granted by the Borrower pursuant to this Agreement, other than Permitted Liens.

 

(e) Organizational Documents. The Borrower shall not modify or terminate, or permit the modification or termination of, any of the Borrower’s Organizational Documents, or in any manner that would materially and adversely affect the interests of the Lenders without the prior written consent of the Majority Lenders.

 

(f) Sole Purpose. The Borrower shall not engage in any business activity other than the acquisition of commercial loans, the pledge and financing thereof and transactions incidental thereto and activities of the type expressly permitted under Section 5.01(a).

 

(g) Merger, Acquisitions, Sales, etc. The Borrower shall not change its organizational structure, enter into any transaction of merger or consolidation or amalgamation or Sale (other than pursuant to Section 2.10), or liquidate, wind up or dissolve itself (or suffer any liquidation, winding up or dissolution) in any manner that would materially and adversely affect the interests of the Lenders without the prior written consent of the Majority Lenders.

 

(h) Use of Proceeds. The Borrower shall not use the proceeds of the Advances other than to (i) finance the Borrower’s origination and/or purchase of Eligible Portfolio Assets, (ii) fund Delayed Draws, (iii) pay fees and expenses of the Borrower (other than interest payments due hereunder), (iv) make Restricted Junior Payments subject to the terms of this Agreement, and (v) to make payments into the Unfunded Exposure Account in accordance with the terms of this Agreement. The Borrower shall not, directly or indirectly, use the proceeds of the Advances in any other manner that would result in a violation of any Anti-Terrorism Laws and Sanctions or Anti-Corruption Laws by any Person or that reasonably could result in any Person becoming a Sanctioned Person.

 

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(i) Limited Assets. The Borrower shall not hold or own any assets other than Portfolio Assets, the Borrower Accounts and any rights incidental thereto, or as otherwise contemplated by Section 5.01(a).

 

(j) Tax Treatment. Neither the Borrower nor any other Person on the Borrower’s behalf shall make an election to be, or take any other action that is reasonably likely to result in the Borrower being treated as a corporation for U.S. federal income tax purposes and the Borrower shall take all steps necessary to avoid being treated as a corporation for U.S. federal income tax purposes.

 

(k) Portfolio Asset Assignments. The Borrower will not amend, modify, waive or terminate any provision of any Portfolio Asset Assignment in any manner that would materially and adversely affect the interests of the Lenders without the prior written consent of the Majority Lenders.

 

(l) Restricted Junior Payments. The Borrower shall not make any Restricted Junior Payment (i) at any time that an Event of Default has occurred or would result therefrom, and (ii) other than on a Payment Date.

 

(m) Plan Assets. Each of the Borrower and Holdings shall take any action (or omit to take any action) as necessary (A) to prevent the assets of such party being deemed Plan Assets or “plan assets” subject to Similar Law and (B) to ensure that no transaction or service contemplated under this agreement or the other Transaction Documents, including exercise of rights with respect to the Collateral and performance of its duties by the Facility Servicer, will constitute or result in a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code or a violation of Similar Law. Each of the Borrower and Holdings shall promptly provide notice to the Administrative Agent in writing if it has reason to believe its assets constitute or are likely to constitute Plan Assets or “plan assets” subject to Similar Law (a “Plan Asset Event”).

 

(n) ERISA. None of the Borrower, Holdings or any ERISA Affiliate shall establish, maintain, contribute to, become obligated to make contributions to or incur any liability with respect to any Employee Plan or Multiemployer Plan.

 

(o) Instructions Regarding Payments. The Borrower will not make any change in its instructions to (i) in the case of any Loan Asset, the Obligors or any agent, administrative agent, Counterparty Lender or Underlying Agent, as applicable, and/or (ii) in the case of any Equity Investment, the relevant Person who has issued Equity Interests of any Equity Investment regarding payments to be made to the Collection Account, unless the Majority Lenders have consented in writing to such change.

 

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(p) Change of Jurisdiction, Location, Names or Location of Portfolio Asset Files. The Borrower shall not change the jurisdiction of its formation, change the location of its principal place of business and chief executive office or make any change to its name or use any tradenames, fictitious names, assumed names, “doing business as” names or other names unless, prior to the effective date of any such change in the jurisdiction of its formation, change in location or name change or use, the Borrower provides at least 10 days prior written notice thereof and delivers to the Administrative Agent such financing statements as the Administrative Agent may request to reflect such change in the jurisdiction of its formation, change in location or name change or use, together any other documents and instruments as the Administrative Agent may reasonably request in connection therewith.

 

Section 5.03 Affirmative Covenants of the Facility Servicer. From the Closing Date until the Facility Termination Date:

 

(a) Compliance with Applicable Law. The Facility Servicer will comply in all material respects with all Applicable Law.

 

(b) Preservation of Existence. The Facility Servicer will preserve and maintain its existence, rights, franchises and privileges in the jurisdiction of its formation and qualify and remain qualified in good standing in each jurisdiction where failure to preserve and maintain such existence, rights, franchises, privileges and qualification could reasonably be expected to have a Material Adverse Effect.

 

Section 5.04 Negative Covenants of the Facility Servicer. From the Closing Date until the Facility Termination Date:

 

(a) Required Portfolio Asset Documents. The Facility Servicer will not dispose of any documents constituting the Required Portfolio Asset Documents in any manner that is inconsistent with the performance of its obligations as the Facility Servicer pursuant to this Agreement and will not dispose of any Collateral except, in each case, as contemplated by this Agreement or as is consistent with the Servicing Standard.

 

(b) [Reserved]

 

Section 5.05 Affirmative Covenants of Holdings. From the Closing Date until the Facility Termination Date:

 

(a) Preservation of Company Existence. Holdings will preserve and maintain its existence, rights, franchises and privileges in the jurisdiction of its formation and will promptly obtain and thereafter maintain qualifications to do business as a foreign limited partnership in any other State in which it does business and in which it is required to so qualify under Applicable Law unless the failure to be so qualified would not reasonably be expected to result in a Material Adverse Effect.

 

(b) Protection of Security Interest. Holdings shall take all action that the Facility Servicer or the Administrative Agent may reasonably request to perfect, protect and more fully evidence the first priority (subject to Permitted Liens) perfected security interest of the Administrative Agent, for the benefit of the Secured Parties, in its Pledged Equity, or to enable the Administrative Agent to exercise or enforce any of its rights hereunder.

 

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(c) Liens. Holdings will promptly notify the Administrative Agent of the existence of any Lien on its Pledged Equity known to a Responsible Officer of Holdings (other than Permitted Liens) and Holdings shall defend the right, title and interest of the Administrative Agent, for the benefit of the Secured Parties, in and to its Pledged Equity against all claims of third parties to the extent commercially reasonable to do so (as determined by Holdings in its reasonable discretion), other than with respect to Permitted Liens.

 

(d) Compliance with Applicable Law. Except as would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect, Holdings shall at all times comply with all Applicable Law (including Environmental Laws, and all federal securities laws).

 

Section 5.06 Negative Covenants of Holdings. From the Closing Date until the Facility Termination Date:

 

(a) Protection of Title. Except as otherwise permitted under this Agreement, Holdings shall not take any action, which would directly or indirectly materially impair or adversely affect Holdings’ title to its Pledged Equity.

 

(b) Transfer Limitations. Holdings shall not transfer, assign, convey, grant, bargain, sell, set over, deliver or otherwise dispose of, or pledge or hypothecate, directly or indirectly, any interest in its Pledged Equity to any Person other than the Administrative Agent for the benefit of the Secured Parties, other than Permitted Liens, or engage in financing transactions or similar transactions with respect to its Pledged Equity with any Person other than the Administrative Agent.

 

(c) Liens. Holdings shall not create, incur or permit to exist any Lien in or on any of its Pledged Equity, other than Permitted Liens.

 

(d) Organizational Documents. Holdings shall not modify or terminate any of its Organizational Documents in any manner that would materially and adversely affect the Administrative Agent’s security interest in its Pledged Equity.

 

(e) Change of Jurisdiction, Location or Names. Holdings shall not change the jurisdiction of its formation, change the location of its principal place of business and chief executive office or make any change to its name, unless, prior to the effective date of any such change in the jurisdiction of its formation, change in location or name change or use, Holdings provides at least 10 days prior written notice thereof and delivers to the Administrative Agent such financing statements as the Administrative Agent (acting at the direction of the Majority Lenders) may request to reflect such change in the jurisdiction of its formation, change in location or name change or use, together any other documents and instruments as the Administrative Agent (acting at the direction of the Majority Lenders) may reasonably request in connection therewith.

 

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ARTICLE VI

EVENTS OF DEFAULT

 

Section 6.01 Events of Default. If any of the following events (each, an “Event of Default”) occurs:

 

(a) the Borrower fails to make any payment of (i) any Obligation (other than the payment of any amount upon the Maturity Date) when due and such failure is not cured within five (5) days or (ii) any Obligation on the Maturity Date;

 

(b) the Borrower defaults in making any payment required to be made under one or more agreements for borrowed money to which it is a party in an aggregate principal amount in excess of $5,000,000 and any such failure continues unremedied for 15 days, or another event of default is declared under any such agreement, in each case, and such default is not cured or remedied within the applicable cure period, if any, provided for under such agreement;

 

(c) any failure on the part of the Borrower or Holdings duly to observe or perform any of its covenants or agreements set forth in this Agreement or the other Transaction Documents to which it is a party (other than covenants or agreements with respect to which another clause of this Section 6.01 expressly relates or Section 5.01(z), which shall not, on its own, constitute an Event of Default under this clause (c)) and the same continues unremedied for a period of 15 days (if such failure can be remedied) after the earlier to occur of (i) the date on which written notice of such failure requiring the same to be remedied shall have been given to the Borrower by the Administrative Agent or any Lender and (ii) the date on which a Responsible Officer of the Borrower acquires knowledge thereof; provided that if, during any calendar year, the Borrower fails on two (2) occasions, to observe or perform any of its covenants or agreements set forth in Section 5.01(x), any subsequent failure to observe or perform such covenants or agreements during such calendar year shall constitute an immediate Event of Default;

 

(d) the occurrence of a Bankruptcy Event or a Plan Asset Event relating to the Borrower or Holdings;

 

(e) the rendering of one or more final judgments, decrees or orders by a court or arbitrator of competent jurisdiction against the Borrower or Holdings for the payment of money in excess of $5,000,000 in the aggregate (unless such judgment is covered by third party insurance as to which the insurer has been notified of such judgment, decree or order and has not denied or failed to acknowledge coverage) where the Borrower or Holdings, as applicable, shall not have either (i) discharged or provided for the discharge of any such judgment, decree or order in accordance with its terms or (ii) perfected a timely appeal, decree or order and caused the execution of the same to be stayed during the pendency of the appeal;

 

(f) any failure on the part of the Borrower to duly to observe or perform any covenants or agreements of the Borrower set forth in Section 5.01(c) (solely with respect to existence) or Section 5.02 or any failure on the part of Holdings duly to observe any of the covenants or agreements of Holdings set forth in Section 5.08;

 

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(g) (i) any Transaction Document, or any Lien or security interest granted thereunder, shall (except in accordance with its terms), in whole or in part, terminate, cease to be effective or cease to be the legally valid, binding and enforceable obligation of the Borrower or Holdings; provided that, there shall be no Event of Default under this clause (g)(i) to the extent such Event of Default arises solely from the action (or inaction) of the Account Bank, the Facility Servicer, the Administrative Agent or a Lender, (ii) the Borrower, Holdings, the Equityholder or any of their Affiliates shall, directly or indirectly, contest in writing in any manner the effectiveness, validity, binding nature or enforceability of any Transaction Document or any Lien or security interest thereunder, or (iii) any security interest securing any obligation under any Transaction Document shall, in whole or in part, cease to be a first priority perfected security interest (subject to Permitted Liens) except as otherwise expressly permitted to be released in accordance with the applicable Transaction Document; provided that there shall be no Event of Default under this clause (g)(iii) to the extent such Event of Default arises from the action (or inaction) of the Account Bank, the Facility Servicer, the Administrative Agent or a Lender;

 

(h) any Change of Control shall occur; or

 

(i) any representation, warranty or certification made by the Borrower or Holdings in any Transaction Document or in any agreement, instrument, certificate or other document delivered pursuant to any Transaction Document shall prove to have been incorrect in any material respect when made, then the Administrative Agent at the direction of the Majority Lenders, may, by written notice to the Borrower, declare the Maturity Date to have occurred; provided, that, in the case of any event described in Section 6.01(d), the Maturity Date is deemed to have occurred automatically upon the occurrence of such event.

 

Upon the occurrence and during the continuation of any Event of Default, (i) the Lenders may decline to make any Advance hereunder or terminate their respective commitments to make Advances hereunder, (ii) the Administrative Agent at the direction of the Majority Lenders may declare the Advances to be immediately due and payable in full (without presentment, demand, protest or notice of any kind all of which are hereby waived by the Borrower) and any other Obligations to be immediately due and payable; provided that, in the case of any event described in Section 6.01(d), the Advances and other Obligations become immediately due and payable in full (without presentment, demand, protest or notice of any kind all of which are hereby waived by the Borrower) without the need of any notice to the Borrower upon the occurrence of such event, and (iii) all amounts on deposit in the Borrower Accounts shall be distributed by the Account Bank, acting at the direction of the Administrative Agent as described in Section 2.08(c) (provided that the Borrower shall in any event remain liable to pay such Advances and all such amounts and Obligations immediately in accordance with Section 2.08(c)).

 

In addition, upon the occurrence and during the continuation of any Event of Default, the Lenders and the Administrative Agent, on behalf of the Secured Parties, shall have, in addition to all other rights and remedies under this Agreement, the other Transaction Documents or otherwise, all other rights and remedies provided under the UCC of the applicable jurisdiction and other Applicable Law, which rights shall be cumulative.

 

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Section 6.02 Pledged Equity.

 

(a) Except as otherwise set forth in Section 6.02(b) or 6.02(c):

 

(i) Holdings shall be entitled to exercise any and all voting or other consensual rights and powers inuring to an owner of its Pledged Equity or any part thereof and Holdings agrees that it shall exercise such rights for purposes not in contravention of the terms of this Agreement and the other Transaction Documents; and

 

(ii) Holdings shall be entitled to receive and retain any and all dividends and other distributions paid on or distributed in respect of its Pledged Equity (without any obligation to contribute such amounts to the Collection Account), to the extent and only to the extent that such dividends and other distributions are not prohibited by the terms and conditions of this Agreement and Applicable Law; provided that any non-cash dividends or other distributions that would constitute its Pledged Equity, shall be and become part of its Pledged Equity, and, if received by Holdings, shall not be commingled by Holdings with any of its other property but shall be held separate and apart therefrom, shall be held in trust for the benefit of the Administrative Agent and the Secured Parties and Holdings shall promptly take all steps reasonably necessary to ensure the validity, perfection and priority (subject to Permitted Liens), including promptly delivering the same to the Administrative Agent in the same form as so received (with any necessary endorsement reasonably requested by the Administrative Agent). So long as no Event of Default has occurred and is continuing, the Administrative Agent shall cooperate with Holdings with respect to making exchanges of Pledged Equity in connection with any exchange or redemption of such Pledged Equity not prohibited by this Agreement, which such cooperation shall include delivery of any such Pledged Equity in exchange for replacement Pledged Equity. Without limitation of the foregoing, the Borrower agrees to reimburse the Administrative Agent for any costs or expenses incurred due to the provisions of this Section 6.02(a)(ii).

 

(b) Upon the occurrence and during the continuance of an Event of Default (and after the delivery of written notice to Holdings) or upon the occurrence of any event described in Section 6.01(d) (without notice), all rights of Holdings to dividends or other distributions that Holdings is authorized to receive pursuant to Section 6.02(a)(ii) shall cease, and all such rights shall thereupon become vested in the Administrative Agent, which shall have the sole and exclusive right and authority to receive and retain such dividends or other distributions.

 

(c) All dividends or other distributions received by Holdings contrary to the provisions of Section 6.02(b) shall be held in trust for the benefit of the Administrative Agent, shall be segregated from other property or funds of Holdings and shall be promptly delivered to the Administrative Agent in the same form as so received (with any necessary endorsement reasonably requested by the Administrative Agent).

 

(d) Any and all money and other property paid over to or received by the Administrative Agent pursuant to the provisions of Section 6.02(b) shall be retained by the Administrative Agent in the Collection Account and shall be applied in accordance with the terms of this Agreement.

 

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(e) After all Events of Default have been waived or are no longer continuing, the Administrative Agent shall promptly repay to Holdings (without interest) all dividends or other distributions that Holdings would otherwise be permitted to retain pursuant to the terms of Section 6.02(a)(ii) and that remain in such account.

 

(f) Upon the occurrence and during the continuance of an Event of Default (and after the delivery of written notice to Holdings and the Borrower) or upon the occurrence of any event described in Section 6.01(d) (without notice), then (i) all rights of Holdings and the Borrower to exercise the voting and consensual rights and powers it is entitled to exercise pursuant to Section 6.02(a)(i) and Section 6.02(a)(iii), respectively, shall cease, and all such rights shall thereupon become vested in the Administrative Agent, which shall have the sole and exclusive right and authority to exercise such voting and consensual rights and powers; provided, that, unless otherwise directed by the Majority Lenders, the Administrative Agent shall have the right from time to time following and during the continuance of an Event of Default to permit Holdings to exercise such rights and (ii) in order to permit the Administrative Agent to exercise the voting and other consensual rights which it may be entitled to exercise pursuant hereto and to receive all dividends and other distributions which it may be entitled to receive hereunder, Holdings and the Borrower, as applicable, shall promptly execute and deliver (or cause to be executed and delivered) to the Administrative Agent all proxies, dividend payment orders and other instruments as the Administrative Agent may from time to time reasonably request.

 

(g) After all Events of Default referred to in paragraph (f) above have been waived or are no longer continuing, Holdings or the Borrower, as applicable, shall have the exclusive right to exercise the voting or consensual rights and powers that Holdings and the Borrower are entitled to exercise pursuant to the terms of Section 6.02(a)(i) and Section 6.02(a)(ii), respectively.

 

(h) Any notice given by the Administrative Agent to the Borrower under this Section 6.02 shall be given in writing.

 

Section 6.03 Additional Remedies.

 

(a) Upon the occurrence and during the continuance of an Event of Default, and without limiting the remedies provided in this Article VI, the Administrative Agent shall, at the direction of the Majority Lenders:

 

(i) sell or otherwise dispose of any of the Collateral or the Pledged Equity at public or private sales and take possession of the proceeds of any such sale or disposition,

 

(ii) instruct the obligor or obligors on any account, agreement, instrument or other obligation constituting Collateral or Pledged Equity to make any payment required by the terms of such account, agreement, instrument or other obligation to or at the direction of the Administrative Agent,

 

(iii) give Notice of Exclusive Control or any other instruction under the Account Control Agreement and take any permitted action therein with respect to Collateral subject thereto,

 

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(iv) in accordance with Section 6.02, transfer and register in its name or in the name of its nominee the whole or any part of the Pledged Equity, exchange certificates or instruments representing or evidencing Pledged Equity for certificates or instruments of smaller or larger denominations, exercise the voting and all other rights as a holder with respect thereto, including exchange, subscription or any other rights, privileges or options pertaining to any Pledged Equity, and otherwise act with respect to the Pledged Equity as though the Administrative Agent was the absolute owner thereof, and

 

(v) in accordance with Section 6.02, collect and receive all cash dividends, interest, principal and other distributions made on any Pledged Equity.

 

(b) Any Collateral or Pledged Equity to be sold or otherwise disposed of pursuant to this Article VI may be sold or disposed of in one or more parcels at public or private sale or sales, which sales may be adjourned or continued from time to time with or without notice upon such terms and conditions, including price, as the Administrative Agent may deem commercially reasonable, for cash or on credit or for future delivery without assumption of any credit risk. Any sale or disposition of Collateral or Pledged Equity may be made without the Administrative Agent giving warranties of any kind with respect to such sale or disposition and the Administrative Agent may specifically disclaim any warranties of title or the like. The Administrative Agent may comply with any applicable State or federal law requirements in connection with a sale or disposition of the Collateral or Pledged Equity and compliance will not be considered to adversely affect the commercial reasonableness of any such sale or disposition. If any notice of a proposed sale or disposition of the Collateral or Pledged Equity is required by law, such notice is deemed commercially reasonable and proper if given at least ten (10) days before such sale or disposition. The Administrative Agent has the right upon any public sale of Collateral or Pledged Equity and, to the extent permitted by law, upon any such private sale of Collateral or Pledged Equity, to purchase the whole or any part of the Collateral or Pledged Equity so sold or disposed of free of any right of equity redemption, which equity redemption the Borrower hereby waives. Upon any sale or disposition of Collateral or Pledged Equity, the Administrative Agent has the right to deliver and transfer to the purchaser or transferee thereof the Collateral or Pledged Equity so sold or disposed of.

 

(c) This Agreement (including this Article VI) shall be subject to the special servicing activities provisions in Section 8.05.

 

(d) Upon the occurrence and during the continuance of an Event of Default, the Administrative Agent may (and at the direction of the Majority Lenders shall) direct the Borrower to (and the Borrower shall promptly comply) instruct any Counterparty Lender to elevate the loan participation interest in respect of any Portfolio Asset that is a loan participation or transfer the underlying loan to the Administrative Agent or a designee of the Administrative Agent.

 

ARTICLE VII
THE ADMINISTRATIVE AGENT

 

Section 7.01 Appointment and Authority. Each of the Lenders hereby irrevocably appoints Massachusetts Mutual Life Insurance Company to act on its behalf as the Administrative Agent hereunder and under the other Transaction Documents and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto. The provisions of this Article VII are solely for the benefit of the Administrative Agent, the Lenders and the other Secured Parties, neither the Borrower nor Holdings shall have rights as a third-party beneficiary of any of such provisions (except Section 7.06(a)). It is understood and agreed that the use of the term “agent” herein or in any other Transaction Documents (or any other similar term) with reference to the Administrative Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any Applicable Law, whether before or after an Event of Default. Instead such term is used as a matter of market custom, and is intended to create or reflect only an administrative relationship between contracting parties.

 

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Section 7.02 Rights as a Lender. The Person serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender (to the extent it is also a Lender) as any other Lender and may exercise the same as though it were not the Administrative Agent, and the term “Lender” or “Lenders” shall, unless otherwise expressly indicated or unless the context otherwise requires, include the Person serving as the Administrative Agent hereunder in its capacity as Lender, if applicable. Such Person and its Affiliates may accept deposits from, lend money to, own securities of, act as the financial advisor or in any other advisory capacity for, and generally engage in any kind of business with, the Borrower, Holdings or any Subsidiary or other Affiliate thereof as if such Person were not the Administrative Agent hereunder and without any duty to account therefor to the Lenders.

 

Section 7.03 Exculpatory Provisions.

 

(a) The Administrative Agent shall not have any duties or obligations except those expressly set forth herein and in the other Transaction Documents, and its duties hereunder shall be administrative in nature. Without limiting the generality of the foregoing, the Administrative Agent:

 

(i) shall not be subject to any fiduciary or other implied duties, regardless of whether an Event of Default or Unmatured Event of Default has occurred and is continuing;

 

(ii) shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Transaction Documents that the Administrative Agent is required to exercise as directed in writing by the Majority Lenders (or such other number or percentage of the Lenders as shall be expressly provided for herein or in the other Transaction Documents); provided that the Administrative Agent shall not be required to take any action that, in its opinion or the opinion of its counsel, may expose the Administrative Agent to liability or that is contrary to any Transaction Document or Applicable Law, including any action that may be in violation of the automatic stay under any Bankruptcy Law or that may effect a forfeiture, modification or termination of property of a Defaulting Lender in violation of any Bankruptcy Law; and

 

(iii) shall not, except as expressly set forth herein and in the other Transaction Documents, have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower, Holdings or any of their respective Affiliates that is communicated to or obtained by the Person serving as the Administrative Agent or any of its Affiliates in any capacity.

 

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(b) The Administrative Agent shall not be liable for any action taken or not taken by it (i) with the consent or at the request of the Majority Lenders (or such other number or percentage of the Lenders as shall be necessary, or as the Administrative Agent shall believe in good faith shall be necessary, under the circumstances as provided in Article VI and Section 11.01), or (ii) in the absence of its own gross negligence or willful misconduct as determined by a court of competent jurisdiction by final and nonappealable judgment. The Administrative Agent shall be deemed not to have knowledge of any Event of Default or Unmatured Event of Default unless and until notice describing such Event of Default or Unmatured Event of Default is given to the Administrative Agent in writing by the Borrower, Holdings or a Lender.

 

(c) The Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other Transaction Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Event of Default or Unmatured Event of Default, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Transaction Document or any other agreement, instrument or document, or (v) the satisfaction of any condition set forth in Article III or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent.

 

(d) Anything herein to the contrary notwithstanding, whenever reference is made in this Agreement or the other Transaction Documents to any action by, consent, designation, specification, requirement or approval of, notice, request or other communication from, or other direction given or action to be undertaken or to be (or not to be) suffered or omitted by the Administrative Agent or to any election, decision, opinion, acceptance, use of judgment, expression of satisfaction or other exercise of discretion, rights or remedies to be made (or not to be made) by the Administrative Agent, it is understood that in all cases the Administrative Agent shall be acting, giving, withholding, suffering, omitting, taking or otherwise undertaking and exercising the same (or shall not be undertaking and exercising the same) as directed by the Majority Lenders. This provision is intended solely for the benefit of the Administrative Agent and its successors and permitted assigns and is not intended to and will not entitle the other parties hereto to any defense, claim or counterclaim, or confer any rights or benefits on any party hereto.

 

(e) The Administrative Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Transaction Document in its reasonable discretion unless it shall first receive such advice or concurrence of the Majority Lenders as it deems appropriate.

 

(f)   No provision of this Agreement or any other Transaction Document or any agreement or instrument contemplated hereby or thereby, the transactions contemplated hereby or thereby shall require the Administrative Agent to (i) expend or risk its own funds or provide indemnities in the performance of any of its duties hereunder or the exercise of any of its rights or power or (ii) otherwise incur any financial liability in the performance of its duties or the exercise of any of its rights or powers unless, in each case, the Administrative Agent has reasonable assurances that it will be reimbursed for such expenditures or incurrences.

 

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(g) The Administrative Agent shall not incur any liability for not performing any act or fulfilling any duty, obligation or responsibility hereunder or under any other Transaction Document by reason of any occurrence of any act or provision of any present or future law or regulation or governmental authority, any act of God or war, civil unrest, local or national disturbance or disaster, any act of terrorism, or the unavailability of the Federal Reserve Bank wire or facsimile or other wire or communication facility.

 

Section 7.04 Reliance by Administrative Agent. The Administrative Agent shall be entitled to rely conclusively upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, opinion, statement, instrument, document or other writing (including any electronic message, Internet or intranet website posting or other distribution) believed by it to be genuine and to have been signed, sent or otherwise authenticated by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper Person, and shall not incur any liability for relying thereon. In determining compliance with any condition hereunder to the making of an Advance that by its terms must be fulfilled to the satisfaction of a Lender, the Administrative Agent may presume that such condition is satisfactory to such Lender unless the Administrative Agent shall have received notice to the contrary from such Lender prior to the making of such Advance. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower or Holdings), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice or opinion of any such counsel, accountants or experts.

 

Section 7.05 Delegation of Duties. The Administrative Agent may perform any and all of its duties and exercise its rights and powers hereunder or under any other Transaction Document by or through any one or more agents, sub-agents or attorneys appointed by the Administrative Agent. The Administrative Agent and any such agents, sub-agent or attorneys may perform any and all of its duties and exercise its rights and powers by or through their respective Related Parties. The exculpatory provisions of this Article shall apply to any such party and to the Related Parties of the Administrative Agent and any such party. The Administrative Agent shall not be responsible for the negligence or misconduct of any agent, sub-agents or attorney appointed by it with due care.

 

Section 7.06 Resignation of Administrative Agent.

 

(a) The Administrative Agent may, at any time, give notice of its resignation to the Lenders and the Borrower. Upon receipt of any such notice of resignation, the Initial Lender shall have the right to appoint a successor (with the consent of the Borrower (unless an Event of Default has occurred and is continuing), such consent not to be unreasonably withheld, conditioned or delayed). If no such successor shall have been so appointed by the Initial Lender and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation (or such earlier day as shall be agreed by the Initial Lender) (the “Resignation Effective Date”), then the retiring Administrative Agent may (but shall not be obligated to), on behalf of the Lenders, petition a court of competent jurisdiction for the appointment of a successor Administrative Agent. Whether or not a successor has been appointed, such resignation shall become effective in accordance with such notice on the Resignation Effective Date. Notwithstanding anything to the contrary contained herein, no Defaulting Lender shall be appointed as a successor to the Administrative Agent.

 

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(b) The Majority Lenders may, to the extent permitted by Applicable Law, by giving 30 days prior notice in writing to the Borrower and the Administrative Agent, remove the Administrative Agent and appoint a successor (with the consent of the Borrower (unless an Event of Default has occurred and is continuing), such consent not to be unreasonably withheld, conditioned or delayed). If no such successor shall have been so appointed by the Majority Lenders and shall have accepted such appointment within 30 days (or such earlier day as shall be agreed by the Majority Lenders) (the “Removal Effective Date”), then such removal shall nonetheless become effective in accordance with such notice on the Removal Effective Date.

 

(c) With effect from the Resignation Effective Date or the Removal Effective Date, as applicable (i) the retiring Administrative Agent shall be discharged from its duties and obligations hereunder and under the other Transaction Documents and (ii) except for any fees, expenses and indemnity payments owed to the retiring Administrative Agent, all payments, communications and determinations provided to be made by, to or through the Administrative Agent shall instead be made by or to each Lender directly, until such time, if any, as the Initial Lender appoints a successor Administrative Agent as provided for above. Upon the acceptance of a successor’s appointment as Administrative Agent hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring (or removed) Administrative Agent (other than as provided in Section 2.13(i)) and other than any rights to fees, expenses and indemnity payments owed to the retiring or removed Administrative Agent as of the Resignation Effective Date or the Removal Effective Date, as applicable, and the retiring or removed Administrative Agent shall be discharged from all of its duties and obligations hereunder or under the other Transaction Documents (if not already discharged therefrom as provided above in this Section). The fees payable by the Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor. After the retiring or removed Administrative Agent’s resignation or removal hereunder and under the other Transaction Documents, the provisions of this Article VII and Sections 10.01 and 11.07 shall continue in effect for the benefit of such retiring or removed Administrative Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while the retiring or removed Administrative Agent was acting as Administrative Agent and the Administrative Agent shall be entitled to any fees accrued and payable up to the Resignation Effective Date or Removal Effective Date to the extent not previously paid.

 

Section 7.07 Non-Reliance on Agents and Other Lenders. Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender or any of their Related Parties and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender or any of their Related Parties and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Transaction Document or any related agreement or any document furnished hereunder or thereunder.

 

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Section 7.08 Reimbursement by Lenders. To the extent that the Borrower for any reason fails to indefeasibly pay any amount required under Article X or Section 11.07 to be paid by it to the Administrative Agent (or any sub-agent thereof) or any Related Party of any of the foregoing, each Lender severally agrees to pay to the Administrative Agent (or any such sub-agent) or such Related Party, as the case may be, such Lender’s Pro Rata Share (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought based on each Lender’s Pro Rata Share at such time) of such unpaid amount (including any such unpaid amount in respect of a claim asserted by such Lender); provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent (or any such sub-agent) in its capacity as such, or against any Related Party of any of the foregoing acting for the Administrative Agent (or any such sub-agent) in connection with such capacity. The obligations of the Lenders to make payments pursuant to Section 7.08 are several and not joint. The failure of any Lender to make any such payment on any date required hereunder shall not relieve any other Lender of its corresponding obligation to do so on such date, and no Lender shall be responsible for the failure of any other Lender to so make its payment under Section 7.08.

 

Section 7.09 Administrative Agent May File Proofs of Claim. In case of the pendency of any proceeding under any Bankruptcy Law or any other judicial proceeding relative to the Borrower or Holdings, the Administrative Agent (irrespective of whether the principal of any Advance shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall have made any demand on the Borrower) shall be entitled and empowered (but not obligated) by intervention in such proceeding or otherwise:

 

(a) to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Advances and all other Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Secured Parties (including any claim for the reasonable compensation, expenses, disbursements and advances of the Secured Parties and their respective agents and counsel and all other amounts due the Secured Parties under Section 11.07) allowed in such judicial proceeding; and

 

(b) to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same;

 

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender to make such payments to the Administrative Agent and, in the event that the Administrative Agent shall consent to the making of such payments directly to the Lenders, to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its agents and counsel, and any other amounts due the Administrative Agent under Section 11.07.

 

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Section 7.10 Collateral Matters.

 

(a) Each Lender authorizes the Administrative Agent to release any Lien on any collateral granted to or held by the Administrative Agent, for the benefit of the Secured Parties, under this Agreement or any other Transaction Document including the Collateral and Pledged Equity (i) as provided in Section 2.11 or (ii) if approved, authorized or ratified in writing in accordance with Section 11.01. Upon request by the Administrative Agent at any time, the Majority Lenders will confirm in writing the Administrative Agent’s authority to release its interest in particular types or items of property. In each case as specified in this Section 7.10, the Administrative Agent will, at the Borrower’s expense, execute and deliver to the Facility Servicer such documents as the Facility Servicer may reasonably request to evidence the release of such item of Collateral and Pledged Equity from the assignment and security interest granted under this Agreement or the other Transaction Documents in accordance with the terms of the Transaction Documents and this Section 7.10.

 

(b) The Administrative Agent shall not be responsible for, or have a duty to ascertain or inquire into, any representation or warranty regarding the existence, value or collectability of the Collateral, the existence, priority or perfection of the Administrative Agent’s Lien thereon, or any certificate prepared by the Borrower or the Facility Servicer in connection therewith, nor shall the Administrative Agent be responsible or liable to the Lenders for any failure to monitor or maintain any portion of the Collateral.

 

(c) It is understood and agreed that the Administrative Agent (i) shall have no responsibility with respect to the determination of whether any Pledged Equity is certificated or uncertificated, and (ii)  shall only be responsible for holding Pledged Equity to the extent actually received.

 

Section 7.11 Erroneous Payments.

 

(a) Each Lender hereby agrees that (i) if the Administrative Agent notifies such Lender that the Administrative Agent has determined in its sole discretion that any funds received by such Lender from the Administrative Agent or any of its Affiliates were erroneously or mistakenly transmitted to, or otherwise erroneously or mistakenly received by, such Lender (whether or not known to such Lender) (whether as a payment, prepayment or repayment of principal, interest, fees or otherwise; individually and collectively, an “Erroneous Payment”) and demands the return of such Erroneous Payment (or a portion thereof) such Lender shall promptly, but in no event later than one Business Day thereafter, return to the Administrative Agent the amount of any such Erroneous Payment (or portion thereof) as to which such a demand was made, in same day funds (in the currency so received), together with interest thereon in respect of each day from and including the date such Erroneous Payment (or portion thereof) was received by such Lender to the date such amount is repaid to the Administrative Agent in same day funds at the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation from time to time in effect, and (ii) to the extent permitted by applicable law, such Lender shall not assert any right or claim to the Erroneous Payment, and hereby waives any claim, counterclaim, defense or right of set-off or recoupment with respect to any demand, claim or counterclaim by the Administrative Agent for the return of any Erroneous Payments received, including waiver of any defense based on “discharge for value” or any similar theory or doctrine. A notice of the Administrative Agent to any Lender under this clause (a) shall be conclusive, absent manifest error.

 

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(b) Without limiting the immediately preceding clause (a), each Lender hereby further agrees that if it receives a payment from the Administrative Agent (or any of its Affiliates) (i) that is in a different amount than, or on a different date from, that specified in a notice of payment sent by the Administrative Agent, (ii) that was not preceded or accompanied by notice of payment, or (iii) that such Lender otherwise becomes aware was transmitted, or received, in error or by mistake (in whole or in part), then in each case, if an error has been made each such Lender is deemed to have knowledge of such error at the time of receipt of such Erroneous Payment, and to the extent permitted by applicable law, such Lender shall not assert any right or claim to the Erroneous Payment, and hereby waives, any claim, counterclaim, defense or right of set-off or recoupment with respect to any demand, claim or counterclaim by the Administrative Agent for the return of any Erroneous Payments received, including waiver of any defense based on “discharge for value” or any similar theory or doctrine. Each Lender agrees that, in each such case, it shall promptly (and, in all events, within one Business Day of its knowledge (or deemed knowledge) of such error) notify the Administrative Agent of such occurrence and, upon demand from the Administrative Agent, it shall promptly, but in all events no later than one Business Day thereafter, return to the Administrative Agent the amount of any such Erroneous Payment (or portion thereof) as to which such a demand was made in same day funds (in the currency so received), together with interest thereon in respect of each day from and including the date such Erroneous Payment (or portion thereof) was received by such Lender to the date such amount is repaid to the Administrative Agent in same day funds at the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation from time to time in effect.

 

(c) The Borrower and Holdings hereby agree that (i) in the event an Erroneous Payment (or portion thereof) is not recovered from any Lender that has received such Erroneous Payment (or portion thereof) for any reason (and without limiting the Administrative Agent’s rights and remedies under this Section 7.11), the Administrative Agent shall be subrogated to all the rights of such Lender with respect to such amount, and (ii) an Erroneous Payment shall not pay, prepay, repay, discharge or otherwise satisfy any Obligations owed by the Borrower or Holdings except to the extent that the funds used to make such Erroneous Payment were received from the Borrower or Holdings in repayment of the Obligations.

 

(d) In addition to any rights and remedies of the Administrative Agent provided by law, Administrative Agent shall have the right, without prior notice to any Lender, any such notice being expressly waived by such Lender to the extent permitted by applicable law, with respect to any Erroneous Payment for which a demand has been made in accordance with this Section 7.11 and which has not been returned to the Administrative Agent, to set off and appropriate and apply against such amount any and all deposits (general or special, time or demand, provisional or final but excluding trust accounts), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by Administrative Agent or any of its Affiliate, branch or agency thereof to or for the credit or the account of such Lender. Administrative Agent agrees promptly to notify the Lender after any such setoff and application made by Administrative Agent; provided that the failure to give such notice shall not affect the validity of such setoff and application.

 

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(e) Each party’s obligations under this Section 7.11 shall survive the resignation or replacement of the Administrative Agent, the termination of the Commitments or the repayment, satisfaction or discharge of all Obligations (or any portion thereof) under this Agreement or any other Transaction Document.

 

ARTICLE VIII
ADMINISTRATION AND SERVICING OF COLLATERAL

 

Section 8.01 Appointment and Designation of the Facility Servicer.

 

(a) Initial Facility Servicer. The Borrower and the Lenders hereby appoint Massachusetts Mutual Life Insurance Company, pursuant to the terms and conditions of this Agreement, as Facility Servicer, with the authority to take the actions required of it hereunder and under the other Transaction Documents. Massachusetts Mutual Life Insurance Company hereby accepts such appointment and agrees to perform the duties and responsibilities of the Facility Servicer pursuant to the terms hereof until such time as it resigns or is removed as Facility Servicer pursuant to the terms hereof. The Facility Servicer and the Borrower hereby acknowledge that the Administrative Agent and the Secured Parties are third party beneficiaries of the obligations undertaken by the Facility Servicer hereunder.

 

(b) Servicer Termination Notice. The Borrower, the Facility Servicer and the Administrative Agent hereby agree that, upon the occurrence of a Servicer Termination Event, the Administrative Agent, by written notice to the Facility Servicer (a “Servicer Termination Notice”), may (and shall, upon the direction of the Majority Lenders) terminate all of the rights, obligations, power and authority of the Facility Servicer under this Agreement. On and after the receipt by the Facility Servicer of a Servicer Termination Notice pursuant to this Section 8.01(b), the Facility Servicer shall continue to perform all servicing functions under this Agreement until the date that is 30 days after the date of such notice or until a date mutually agreed upon by the Facility Servicer and the Administrative Agent or the Majority Lenders. The Facility Servicer shall be entitled to receive, to the extent of funds available therefor pursuant to Section 2.08, any fees, amounts, expenses or indemnities it is entitled to pursuant to the provisions of this Agreement and any Fee Letter accrued until such termination date (collectively, the “Servicer Termination Expenses”). To the extent amounts held in the Collection Account of the Borrower and paid in accordance with Section 2.08 are insufficient to pay the Servicer Termination Expenses, the Borrower (and to the extent the Borrower fails to so pay, the Lenders based on their Pro Rata Share) agrees to pay the Servicer Termination Expenses within 10 Business Days of receipt of an invoice therefor. After the earlier of (i) the termination date specified in the Servicer Termination Notice and (ii) 30 days thereafter as provided above, the Facility Servicer agrees that it will terminate its activities as Facility Servicer hereunder in a manner that the Administrative Agent reasonably believes will facilitate the transition of the performance of such activities to a Replacement Servicer, and the Replacement Servicer shall assume each and all of the Facility Servicer’s obligations under this Agreement and the other Transaction Documents, on the terms and subject to the conditions herein set forth, and the Facility Servicer shall use its commercially reasonable efforts to assist the Replacement Servicer in assuming such obligations.

 

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(c) Appointment of Replacement Servicer. At any time following the delivery of a Servicer Termination Notice or receipt of any notice of resignation under Section 8.09, the Administrative Agent (acting at the direction of the Majority Lenders) may, with the consent of the Borrower (such consent not to be unreasonably withheld or delayed and such consent not being required if an Event of Default has occurred and is continuing), appoint a new Facility Servicer (the “Replacement Servicer”), which appointment shall take effect upon the Replacement Servicer accepting such appointment by a written assumption in a form satisfactory to the Administrative Agent (acting at the direction of the Majority Lenders) and, if no Event of Default has occurred and is continuing at such time, the Borrower (such consent not to be unreasonably withheld or delayed). Any Replacement Servicer shall be an established financial institution or registered investment advisory firm, having a net worth of not less than $50,000,000 and whose regular business includes the servicing of assets similar to the Collateral.

 

(d) Liabilities and Obligations of Replacement Servicer. Upon its appointment, any Replacement Servicer shall be the successor in all respects to the Facility Servicer it is replacing with respect to servicing functions under this Agreement of the Facility Servicer and shall be subject to all the responsibilities, duties and liabilities relating thereto placed on the Facility Servicer by the terms and provisions hereof, and all references in this Agreement to the Facility Servicer shall be deemed to refer to the Replacement Servicer; provided that any Replacement Servicer shall have (i) no liability with respect to any action performed by the prior Facility Servicer prior to the date that the Replacement Servicer becomes the successor to the Facility Servicer or any claim of a third party based on any alleged action or inaction of the prior Facility Servicer, (ii) no obligation with respect to any Taxes on behalf of the Borrower, except for any payment made out of the Collection Account as provided in Section 2.13, (iii) no obligation to pay any of the fees and expenses of any other party to the transactions contemplated hereby and (iv) no liability or obligation with respect to any Facility Servicer indemnification obligations of any prior Facility Servicer. The indemnification obligations of the Replacement Servicer upon becoming a Facility Servicer are expressly limited to those arising on account of its gross negligence or willful misconduct or the failure to perform materially in accordance with its duties and obligations set forth in this Agreement. In addition, the Replacement Servicer shall have no liability relating to the representations of the prior Facility Servicer contained in Section 4.03.

 

(e) Authority and Power. All authority and power granted to the Facility Servicer under this Agreement shall automatically cease and terminate on the Facility Termination Date and shall pass to and be vested in the Borrower thereafter and, without limitation, the Borrower is hereby authorized and empowered to execute and deliver, on behalf of the Facility Servicer, as attorney-in-fact or otherwise, all documents and other instruments, and to do and accomplish all other acts or things necessary or appropriate to effect the purposes of such transfer of servicing rights.

 

(f) Waiver. The Borrower acknowledges that the Administrative Agent or any of its Affiliates may act as a Replacement Servicer, and the Borrower waives any and all claims against the Administrative Agent, each Lender or any of their respective Affiliates and the Facility Servicer (other than claims relating to such party’s gross negligence or willful misconduct as determined in a final decision by a court of competent jurisdiction) relating in any way to the custodial or collateral administration functions having been performed by the Administrative Agent or any of its Affiliates in accordance with the terms and provisions (including the standard of care) set forth in the Transaction Documents.

 

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Section 8.02 Duties of the Facility Servicer.

 

(a) The Facility Servicer may execute any of its duties and exercise its rights and powers under this Agreement or any other Transaction Document by or through sub-agents or attorneys in fact appointed by the Facility Servicer and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Facility Servicer shall not be responsible for the negligence or misconduct of any sub-agent or attorney in fact that it selects with reasonable care.

 

(b) Notwithstanding anything to the contrary contained herein, the exercise by the Administrative Agent and the Secured Parties of their rights hereunder shall not release the Borrower from any of its duties or responsibilities with respect to the Collateral. The Secured Parties and the Administrative Agent shall not have any obligation or liability with respect to any Collateral, nor shall any of them be obligated to perform any of the obligations of the Borrower hereunder.

 

(c) Any payment by an Obligor or a Counterparty Lender in respect of any Indebtedness or Underlying Loan Obligation owed by it to the Borrower shall, except as otherwise specified by such Obligor or the applicable Participation Agreement or otherwise required by contract or law and unless otherwise instructed by the Administrative Agent (acting at the direction of the Initial Lender), be applied as a collection of a payment by such Obligor or Counterparty Lender to the extent of any amounts then due and payable thereunder (starting with the oldest such outstanding payment due) before being applied to any other receivable or other obligation of such Obligor or Counterparty Lender.

 

(d) The Facility Servicer is not required to take any action under this Agreement or any other Transaction Document that, in its opinion or the opinion of its counsel, that is contrary to any Applicable Law. The Facility Servicer shall not be liable for any action taken or not taken by it under this Agreement or any other Transaction Document with the consent or at the request of the Majority Lenders (or all Lenders, as applicable and as set forth in Sections 6.03 and 11.01). In the event the Facility Servicer requests the consent of a Lender pursuant to the foregoing provisions and the Facility Servicer does not receive a response (either positive or negative) from such Person within ten (10) Business Days of such Person’s receipt of such request, then such Lender shall be deemed to have provided its consent to the relevant action. For all purposes of this Agreement and the other Transaction Documents, the Borrower and the Lenders, as the case may be, shall direct the Administrative Agent, the Facility Servicer and the Account Bank, as applicable, as to what lender consent is required thereunder for a particular amendment, waiver or consent.

 

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Section 8.03 Authorization of the Facility Servicer.

 

(a) Each of the Borrower, the Administrative Agent and each Lender hereby authorizes the Facility Servicer (including any successor thereto) after the occurrence of an Event of Default to take any and all reasonable steps in its name and on its behalf necessary or desirable in the determination of the Facility Servicer and not inconsistent with the security interest of the Administrative Agent, for the benefit of the Secured Parties, in the Collateral, to, collect all amounts due under the Collateral, including endorsing any of their names on checks and other instruments representing Collections, executing and delivering any and all instruments of satisfaction or cancellation, or of partial or full release or discharge, and all other comparable instruments, with respect to the Collateral and, after the delinquency of any Portfolio Asset, and to the extent permitted under and in compliance with Applicable Law, to commence proceedings with respect to enforcing payment thereof. The Borrower and the Administrative Agent on behalf of the Secured Parties shall furnish the Facility Servicer (and any successors thereto) with any powers of attorney and other documents necessary or appropriate to enable the Facility Servicer to carry out its servicing and administrative duties hereunder, and shall cooperate with the Facility Servicer to the fullest extent in order to facilitate the collectability of the Collateral. In no event shall the Facility Servicer be entitled to make the Secured Parties, the Administrative Agent, the Borrower or any Lender a party to any litigation without such party’s express prior written consent. In the performance of its obligations hereunder, the Facility Servicer shall not be obligated to take, or to refrain from taking, any action which the Borrower or any Lender requests that the Facility Servicer take or refrain from taking to the extent that the Facility Servicer determines in its reasonable and good faith judgment that such action or inaction (i) may cause a violation of Applicable Laws, regulations, codes, ordinances, court orders or restrictive covenants with respect to any Portfolio Asset, the Borrower or any Obligor, (ii) may cause a violation of any provision of this Agreement, a Fee Letter or a Required Portfolio Asset Document or any other Transaction Document or (iii) may be a violation of the Servicing Standard.

 

Section 8.04 Collection of Payments; Accounts.

 

(a) Collection Account. Each of the parties hereto hereby agrees that (i) the Collection Account is intended to be a “securities account” within the meaning of the UCC, and (ii) only the Administrative Agent and the Borrower shall be entitled to exercise the rights with respect to the Collection Account and have the right to direct the disposition of funds in the Collection in accordance with Section 2.08. Each of the parties hereto hereby agrees to cause the Account Bank to agree with the parties hereto that regardless of any provision in any other agreement, for purposes of the UCC, with respect to the Collection Account, New York shall be deemed to be the Securities Intermediary’s jurisdiction or the Account Bank’s jurisdiction, as applicable (within the meaning of Section 8-110 or 9-305 of the UCC, respectively).

 

(b) Loan and Participation Agreements. Notwithstanding any term hereof to the contrary, the Administrative Agent shall not be under any duty or obligation in connection with the acquisition by the Borrower of, or the grant of a security interest by the Borrower to the Administrative Agent in, any Portfolio Asset, to examine or evaluate the sufficiency of the documents or instruments delivered to it by or on behalf of the Borrower under the related Loan Agreements, Participation Agreements, Equity Investment Agreements or otherwise to examine the Loan Agreements, Participation Agreements or Equity Investment Agreements, in order to determine or compel compliance with any applicable requirements of or restrictions on transfer (including any necessary consents).

 

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Section 8.05 Realization Upon Portfolio Assets.

 

(a) Notwithstanding anything to the contrary herein, the Administrative Agent and the Facility Servicer shall not take any action with respect to the Collateral, nor shall either of them be required to take any actions, relating to any special servicing activities (it being understood and agreed that the Facility Servicer or the Administrative Agent shall determine whether any obligations or actions of the Facility Servicer or the Administrative Agent expressly set forth in this Agreement or the other Transaction Documents shall constitute special servicing activities), except to the extent (i) agreed to between the Borrower, the Lenders, the Facility Servicer and the Administrative Agent, pursuant to a separate fee letter agreement, and (ii) the parties to such fee agreement agree to address any conflicts presented by such performance of special servicing activities reasonably requested by the Facility Servicer and the Administrative Agent including that, if the Facility Servicer agrees to perform such special servicing activities on behalf of the Borrower, the Administrative Agent shall not be required to take any direction or instruction from the Lenders.

 

Section 8.06 Facility Servicer Compensation. As compensation for its Facility Servicer activities hereunder, the Facility Servicer shall be entitled to Fees from the Borrower, payable pursuant to the extent of funds available therefor pursuant to the provisions of Section 2.08, provided that if such amounts are insufficient then Sections 8.10 and 11.07 shall be applicable. The Facility Servicer’s entitlement to receive Fees shall cease on the earlier to occur of (i) its removal as Facility Servicer as provided in Section 8.01(b), (ii) its resignation as Facility Servicer as provided in Section 8.09 and (iii) the termination of this Agreement; provided that the Facility Servicer shall be entitled to any fees accrued and payable up to such date to the extent not previously paid.

 

Section 8.07 Payment of Certain Expenses by Facility Servicer. The Borrower will be required to pay all reasonable and documented fees and expenses owing to the Account Bank in connection with the maintenance of such Collection Account of the Borrower. The Facility Servicer shall be reimbursed for any reasonable and documented out-of-pocket expenses incurred hereunder (including reasonable and documented out-of-pocket expenses paid by the Facility Servicer on behalf of the Borrower), subject to the availability of funds pursuant to Section 2.08; provided that, to the extent funds are not available for such reimbursement, the Facility Servicer shall be entitled to repayment of such expenses from the Borrower and if the Borrower fails to so reimburse the Facility Servicer, the Facility Servicer shall be entitled to be reimbursed by the Lenders (and each Lender hereby agrees to so reimburse the Facility Servicer as provided herein) within 10 Business Days of receipt of an invoice therefor.

 

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Section 8.08 Reports to the Administrative Agent Account Statements; Servicing Information.

 

(a) Servicing Report.

 

(i) On each Reporting Date, the Borrower will provide to the Administrative Agent, the Facility Servicer and the Account Bank a monthly statement including (A) a summary prepared with respect to each Obligor and with respect to each Portfolio Asset for such Obligor prepared as of the most recent Reporting Date and substantially in the form of Exhibit F (such monthly statement, together with the amounts set forth in clauses (C) through (D) below, collectively, a “Servicing Report”), (B) each amendment, restatement, supplement, waiver or other modification to a Portfolio Asset or the Underlying Loan Obligations relating to a Portfolio Asset entered into since the Closing Date for the initial Servicing Report or the Reporting Date for the last Servicing Report in all other cases (for this clause (B), all only to the extent received by the Borrower), (C) the Outstanding Principal Balance of all Eligible Portfolio Assets as of the Reporting Date, and (D) whether a Market Trigger Event has occurred and is continuing.

 

(ii) On each Reporting Date, the Borrower will provide to the Administrative Agent a report (the “Proposed Payment Date Report”) that includes (A) the amounts to be remitted pursuant to Section 2.08, besides those which are calculated by the Administrative Agent or Facility Servicer, to the applicable parties on the Payment Date following such Reporting Date (which shall include any applicable wiring instructions of the parties receiving payment) with respect to the related Payment Date, (B) the identification of any Excluded Amounts, and (C) whether a Notice of Exclusive Control has been delivered. The Facility Servicer shall promptly (and, in any event, not later than two (2) Business Days after receiving a Proposed Payment Date Report) either consent to such Proposed Payment Date Report or incorporate changes thereto after consultation with the Borrower (such Proposed Payment Date Report as consented to or changed by the Facility Servicer, and as acknowledged by the Facility Servicer in writing, a “Payment Date Report”).

 

(b) Obligor Financial Statements; Valuation Reports; Other Reports. Notwithstanding anything to the contrary herein, the Borrower shall deliver to the Administrative Agent and the Facility Servicer, with respect to each Obligor, any documents and information periodically provided to the Borrower in respect of any Portfolio Asset within 45 days after the end of each quarter in which the Borrower receives such information.

 

(c) Amendments to Portfolio Assets. The Borrower will deliver to the Administrative Agent and the Facility Servicer a copy of any amendment, restatement, supplement, waiver or other modification to the Loan Agreement or Equity Investment Agreement of any Portfolio Asset within 45 days after the end of each quarter (in each case, to the extent received by the Borrower). The Facility Servicer shall also deliver to the Lenders any notice or other correspondence that it receives hereunder or with respect to any Portfolio Asset, in each case, to the extent it deems such material in accordance with the Servicing Standard, promptly upon receipt thereof.

 

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(d) Delivery Methods. Notwithstanding anything to the contrary contained herein, information required to be delivered or submitted to any Secured Party pursuant to this Agreement shall be deemed to have been delivered on the date upon which such information is received through e-mail or another delivery method reasonably acceptable to the Administrative Agent.

 

Section 8.09 The Facility Servicer Not to Resign. The Facility Servicer shall not resign from the obligations and duties hereby imposed on it except (a) upon the Facility Servicer’s determination that (i) the performance of its duties hereunder is or becomes impermissible under Applicable Law and (ii) there is no reasonable action that the Facility Servicer could take to make the performance of its duties hereunder permissible under Applicable Law or (b) Massachusetts Mutual Life Insurance Company, as initial Facility Servicer hereunder, may resign as Facility Servicer, in each case upon prior notice to the other parties hereto upon the selection of a Replacement Servicer for such Facility Servicer or (c) upon at least 60 days’ prior notice to the other parties hereto. If no successor servicer shall have been appointed and an instrument of acceptance by a successor Facility Servicer shall not have been delivered to the Facility Servicer within 30 days after the giving of such notice of resignation, the resigning Facility Servicer may petition any court of competent jurisdiction for the appointment of a successor Facility Servicer. No such resignation shall become effective until a Replacement Servicer shall have assumed the responsibilities and obligations of the Facility Servicer in accordance with Section 8.02. In the case of the Facility Servicer, any Fees then due and owing to the Facility Servicer and accrued through such date, including any expenses or indemnities it is entitled to pursuant to the provisions of this Agreement and any Fee Letter, shall be due and payable on such discharge date and shall be paid from amounts in the Collection Account in accordance with Section 2.08 and if such amounts are insufficient to pay such amounts then due and owing, shall be paid by the Borrower (or the Lenders if the Borrower fails to so pay such amounts) within 10 Business Days of receipt of an invoice therefor.

 

Section 8.10 Indemnification of the Facility Servicer. Each Lender agrees to indemnify the Facility Servicer from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against the Facility Servicer in any way relating to or arising out of this Agreement or any of the other Transaction Documents, or any action taken or omitted by the Facility Servicer hereunder or thereunder; provided that (a) the Lenders shall not be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Facility Servicer’s gross negligence or willful misconduct as determined in a final decision by a court of competent jurisdiction and (b) no action taken in accordance with the directions of the Majority Lenders, Lenders or the Borrower shall be deemed to constitute gross negligence or willful misconduct for purposes of this Article VIII. Without limitation of the foregoing, each Lender agrees to reimburse the Facility Servicer, promptly upon demand, for any Fees due to it hereunder, out-of-pocket expenses (including counsel fees) incurred by the Facility Servicer in connection with the administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement and the other Transaction Documents, to the extent that such expenses are incurred in the interests of or otherwise in respect of the Facility Servicer or Lenders hereunder or thereunder and to the extent that the Facility Servicer is not reimbursed for such expenses by the Borrower under Section 2.08.

 

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Section 8.11 Rights as a Lender. The Person serving as the Facility Servicer hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Facility Servicer, and the term “Lender” or “Lenders” shall, unless otherwise expressly indicated or unless the context otherwise requires, include the Person serving as the Facility Servicer hereunder in its individual capacity. Such Person and its Affiliates may accept deposits from, lend money to, own securities of, act as the financial advisor or in any other advisory capacity for, and generally engage in any kind of business with, the Borrower and Holdings, or any Subsidiary or other Affiliate thereof as if such Person were not the Facility Servicer hereunder and without any duty to account therefor to the Lenders.

 

ARTICLE IX
[Reserved]

 

ARTICLE X
INDEMNIFICATION

 

Section 10.01 Indemnities by the Borrower.

 

(a) Without limiting any other rights which the Secured Parties or any of their respective Affiliates may have hereunder or under Applicable Law, the Borrower shall indemnify the Secured Parties and each of their respective Affiliates, assigns, officers, directors, employees, designees, agents, and sub-agents (each, an “Indemnified Party” for purposes of this Article X) from and against any and all damages, losses, claims, liabilities and related reasonable and documented costs and expenses, including reasonable and documented attorneys’ fees and disbursements (all of the foregoing being collectively referred to as “Indemnified Amounts”), incurred by or asserted such Indemnified Party arising out of or as a result of (i) this Agreement or the other Transaction Documents or in respect of any of the Collateral, (ii) any Advance or the use or proposed use of the proceeds therefrom or (iii) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory, whether brought by a third party or by the Borrower, and regardless of whether any Indemnified Party is a party thereto, excluding, however, Indemnified Amounts to the extent resulting from gross negligence, bad faith or willful misconduct on the part of any Indemnified Party as determined in a final decision by a court of competent jurisdiction. This Section 10.01 shall not apply with respect to Taxes other than any Taxes that represent losses, claims, damages, etc. arising from any non-Tax claim.

 

(b) Any amounts subject to the indemnification provisions of this Section 10.01 shall be paid by the Borrower to the applicable Indemnified Party within thirty days following receipt by the Borrower of the written demand therefor on behalf of the applicable Indemnified Party. Any request for indemnification under this Section 10.01 shall be in the form of a notice setting forth in reasonable detail the basis for and the computations of the Indemnified Amounts with respect to which such indemnification is requested.

 

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(c) If for any reason the indemnification provided above in this Section 10.01 is unavailable to the Indemnified Party or is insufficient to hold an Indemnified Party harmless in respect of any losses, claims, damages or liabilities (in each case, other than as a result of the express limitations set forth therein), then the Borrower shall contribute to the amount paid or payable by such Indemnified Party as a result of such losses, claims, damages or liabilities in such proportion as is appropriate to reflect not only the relative benefits received by such Indemnified Party on the one hand and the Borrower on the other hand but also the relative fault of such Indemnified Party as well as any other relevant equitable considerations.

 

(d) If the Borrower has made any payments in respect of Indemnified Amounts to the Indemnified Party pursuant to this Section 10.01 and such Indemnified Party thereafter collects any of such amounts from others, such Indemnified Party will promptly repay such amounts collected to the Borrower in an amount equal to the amount it has collected from others in respect of such Indemnified Amounts, without interest.

 

(e) The obligations of the Borrower under this Section 10.01 shall survive the resignation or removal of the Administrative Agent or the Facility Servicer or the termination of this Agreement.

 

Section 10.02 Legal Proceedings. In the event an Indemnified Party becomes involved in any action, claim, or legal, governmental or administrative proceeding (an “Action”) for which it seeks indemnification hereunder, the Indemnified Party shall promptly notify the other party or parties against whom it seeks indemnification (the “Indemnifying Party”) in writing of the nature and particulars of the Action; provided that its failure to do so shall not relieve the Indemnifying Party of its obligations hereunder except to the extent such failure has a material adverse effect on the Indemnifying Party. Upon written notice to the Indemnified Party acknowledging in writing that the indemnification provided hereunder applies to the Indemnified Party in connection with the Action, the Indemnifying Party may assume the defense of the Action at its expense with counsel reasonably acceptable to the Indemnified Party, but shall not settle or compromise such Action without the written consent of the Indemnified Party. The Indemnified Party shall have the right to retain separate counsel in connection with the Action, and the Indemnifying Party shall not be liable for the legal fees and expenses of the Indemnified Party after the Indemnifying Party has done so; provided that if the Indemnified Party determines in good faith that there may be a conflict between the positions of the Indemnified Party and the Indemnifying Party in connection with the Action, the reasonable and documented out-of-pocket legal fees and expenses of the Indemnified Party shall be paid by the Indemnifying Party. If the Indemnifying Party elects to assume the defense of the Action, it shall have full control over the conduct of such defense; provided that the Indemnifying Party and its counsel shall, as reasonably requested by the Indemnified Party or its counsel, consult with and keep them informed with respect to the conduct of such defense. The Indemnifying Party shall not settle an Action without the prior written approval of the Indemnified Party unless such settlement provides for the full and unconditional release of the Indemnified Party from all liability in connection with the Action. The Indemnified Party shall reasonably cooperate with the Indemnifying Party in connection with the defense of the Action. Each applicable Indemnified Party shall deliver to the Indemnifying Party within a reasonable time after such Indemnified Party’s receipt thereof, copies of all notices and documents (including court papers) received by such Indemnified Party relating to the claim giving rise to the Indemnified Amounts.

 

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ARTICLE XI

MISCELLANEOUS

 

Section 11.01 Amendments and Waivers.

 

(a) Except as set forth herein, (i) no amendment or modification of any provision of this Agreement or any other Transaction Document shall be effective without the written agreement of the Borrower, Holdings and the Majority Lenders (with a copy thereof provided to the Administrative Agent) and, solely if such amendment or modification would adversely affect the rights or obligations of the Administrative Agent or the Facility Servicer, the written agreement of the Administrative Agent or the Facility Servicer, as applicable, and (ii) no termination or waiver of any provision of this Agreement or any other Transaction Document or consent to any departure therefrom by the Borrower or the Facility Servicer shall be effective without the written concurrence of the Administrative Agent and the Majority Lenders. Any waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

 

(b) Notwithstanding the provisions of Section 11.01(a), the written consent of all of the Lenders shall be required for any amendment, modification or waiver (i) reducing (without payment thereon) the principal amount due and owing under any outstanding Advance or the interest thereon, (ii) postponing any date for any payment of any Advance or the interest thereon, (iii) modifying the provisions of this Section 11.01 or the definition of Majority Lenders or any other provision specifying the number or percentage of Lenders required to amend, waive or otherwise modify any rights or make any determination or grant any consent, (iv) extending the Stated Maturity Date or Commitment Period, (v) of any provision of Section 2.08(a) through (d), (vi) extend or increase any Commitment of any Lender, (vii) change Section 11.15 in a manner that would alter the pro rata sharing of payments required thereby without the written consent of each Lender directly and adversely affected thereby, (viii) waive any condition set forth in Section 3.02 or (ix) consent to the Borrower’s assignment or transfer of its rights and obligations under this Agreement or any other Transaction Document or release all or substantially all of the Collateral except as expressly authorized in this Agreement.

 

(c) Notwithstanding anything herein to the contrary, no Defaulting Lender shall have any right to approve or disapprove any amendment, waiver or consent hereunder (and any amendment, waiver or consent that by its terms requires the consent of all the Lenders or each affected Lender may be effected with the consent of the applicable Lenders other than Defaulting Lenders), except that (A) the Commitment of any Defaulting Lender may not be increased or extended, or the maturity of any of its Advances may not be extended, the rate of interest on any of its Advances may not be reduced and the principal amount of any of its Advances may not be forgiven, in each case without the consent of such Defaulting Lender, and (B) any amendment, waiver or consent requiring the consent of all the Lenders or each affected Lender that by its terms affects any Defaulting Lender more adversely than the other affected Lenders shall require the consent of such Defaulting Lender.

 

(d) For so long as any Advances shall remain outstanding, the Borrower shall deliver to the Rating Agent promptly and, in any event, within 5 Business Days of such notice or document being effective, or required to be delivered hereunder, as applicable: (i) notice attaching a copy of any amendment entered into pursuant to this Section 11.01; (ii) notice of any Majority Lender consent to substitution of Portfolio Assets under Section 2.10(b); (iii) notice of any transfers of Portfolio Assets under Section 3.04; (iv) notices delivered under Section 5.01(e)(g)(h)(i)(x) and (y); (v) notice of the occurrence of any of the event under Section 5.02(e)(g)(h)(k) or (o), (vi) notice of appointment of replacement servicer under Section 8.01(c) and (vii) copies of the Servicing Reports and Payment Date Reports delivered under Section 8.08(a).

 

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Section 11.02 Notices, Etc. All notices and other communications hereunder shall, unless otherwise stated herein, be in writing (which shall include facsimile communication and communication by e-mail) and faxed, e-mailed or delivered, to each party hereto, at its address set forth on Schedule III or at such other address as shall be designated by such party in a written notice to the other parties hereto. Notices and communications by facsimile and e-mail shall be effective when sent (and shall be followed by hard copy sent by regular mail), and notices and communications sent by other means shall be effective when received. Each of the Borrower and Holdings irrevocably confirms that the RIA may execute all agreements, documents, instruments, certificates and notices in connection with the transactions contemplated by the Transaction Documents on behalf of the Borrower or Holdings including, without limitation, any modifications, amendments, extensions or expansions thereof, and perform all such actions on behalf of the Borrower and/or Holdings that the RIA may deem necessary or desirable and the Administrative Agent and each of the other Loan Parties may rely on any such document signed by the RIA as being binding on the Borrower and/or Holdings (as applicable).

 

Section 11.03 No Waiver Remedies. No failure on the part of the Administrative Agent or any Lender to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law.

 

Section 11.04 Binding Effect; Assignability; Multiple Lenders.

 

(a) This Agreement shall be binding upon and inure to the benefit of the Borrower, Holdings, the Facility Servicer, the Administrative Agent, each Lender and their respective successors and permitted assigns. Each Lender and their respective successors and assigns may assign, or grant a security interest in, (i) this Agreement and such Lender’s rights and obligations hereunder and interest herein in whole or in part, or (ii) any Advance (or portion thereof) to any Eligible Assignee; provided that unless an Event of Default has occurred and is continuing, the consent of the Borrower (such consent not to be unreasonably withheld) shall be required for a Lender to assign to any Person that is not an Affiliate of such Lender. Any such assignee shall (i) execute and deliver to the Facility Servicer, the Borrower and the Administrative Agent a fully-executed Assignment and Assumption Agreement and all documentation and information with respect to the assignee that is required under applicable “know your customer” and Anti-Money Laundering Laws, including the USA PATRIOT ACT, including any tax forms, and (ii) pay a registration and processing fee of U.S. $3,500. Upon receipt of all of the foregoing and conditioned upon such receipt and if applicable, upon the Borrower consenting to such assignment, from and after the effective date specified in the Assignment and Assumption Agreement, the Administrative Agent shall record or cause to be recorded in Register the information contained in such Assignment and Assumption Agreement. Neither the Borrower nor the Facility Servicer may assign, or permit any Lien to exist upon, any of its rights or obligations hereunder or under any Transaction Document or any interest herein or in any Transaction Document without the prior written consent of the Majority Lenders unless otherwise contemplated hereby. Each Lender may sell a participation in its interests hereunder as provided in Section 11.04(d). No assignment or sale of a participation under this Section 11.04 shall be effective unless and until properly recorded in the Register or Participant Register, as applicable, pursuant to Section 2.03.

 

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(b) Notwithstanding any other provision of this Section 11.04, any Lender may at any time pledge or grant a security interest in all or any portion of its rights (including rights to payment of principal and interest) under this Agreement to secure obligations of such Lender to a Federal Reserve Bank (a “Liquidity Agreement”), without notice to or consent of the Borrower or the Administrative Agent; provided that no such pledge or grant of a security interest shall release such Lender from any of its obligations hereunder or under such Liquidity Agreement, or substitute any such pledgee or grantee for such Lender as a party hereto or to such Liquidity Agreement, as the case may be.

 

(c) Each Indemnified Party shall be an express third party beneficiary of this Agreement.

 

(d) Any Lender may at any time, without the consent of, or notice to the Borrower or without the consent of, but with notice to, the Administrative Agent, sell participations to any Person (other than a natural Person, or a holding company, investment vehicle or trust for, or owned and operated for the primary benefit of, a natural Person, or the Borrower or any of the Borrower’s Affiliates) (each, a “Participant”) in all or a portion of such Lender’s rights or obligations under this Agreement (including all or a portion of its Commitment or the Advances owing to it); provided that (i) such Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) the Borrower, the Administrative Agent and Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement, and (iv) such Lender shall register such participation in its Participant Register pursuant to Section 2.03(c). The Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.12 and 2.13 (subject to the requirements and limitations therein, including the requirements under Section 2.13(e), (f) or (g) (it being understood that the documentation required under Section 2.13(e), (f) or (g) shall be delivered to the participating Lender)) to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (a) of this Section. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in Section 11.01(b) that affects such Participant.

 

Section 11.05 Term of This Agreement. This Agreement, including the Borrower’s representations and covenants set forth in Articles IV and V, Holdings’ representations and covenants set forth in Articles IV and V, the Facility Servicer’s representations, covenants and duties set forth in Articles IV, V and VIII shall remain in full force and effect until this Agreement has been terminated by the Borrower and the Facility Termination Date has occurred; provided that any representation made or deemed made hereunder survive the execution and delivery hereof and the provisions of Section 2.06, Section 2.12, Section 2.13, Section 11.07, Section 11.08 and Article VII, Article VIII, Article IX and Article X shall be continuing and shall survive any termination of this Agreement.

 

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Section 11.06 GOVERNING LAW; JURY WAIVER. THIS AGREEMENT IS GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. EACH OF THE PARTIES HERETO WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION ARISING DIRECTLY OR INDIRECTLY OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREUNDER.

 

Section 11.07 Costs, Expenses and Taxes.

 

(a) In addition to the rights of indemnification hereunder, the Borrower shall pay on demand: (i) all reasonable and documented out-of-pocket costs and expenses of the Administrative Agent (or any sub-Agent thereof), the Facility Servicer and the Lenders incurred in connection with the pre-closing due diligence, preparation, execution, delivery, administration, syndication, renewal, amendment or modification of, any waiver or consent issued in connection with, this Agreement, the Transaction Documents and the other documents to be delivered hereunder or in connection herewith, including accounting costs and fees and the reasonable and documented out-of-pocket fees and expenses for separate counsel for the Administrative Agent (or any sub-agent thereof), the Lenders, and the Facility Servicer in each jurisdiction and in the event of an actual or perceived conflict of interest, one additional primary counsel (plus local counsel in each relevant jurisdiction to the extent reasonably determined to be advisable by Administrative Agent (or any sub-agent thereof)), the Lenders, and the Facility Servicer, in each case, for the conflicted parties (taken as a whole), (ii) all costs and expenses associated with obtaining an Approved Firm Valuation or determining Portfolio Asset Value or Total Portfolio Value hereunder, (iii) the reasonable fees, disbursements and other charges of ratings agencies in connection with the initial rating of the Advances by an Acceptable Rating Agency and in connection with the maintenance of such rating, and (iv) all reasonable and documented out-of-pocket costs and expenses, if any (including reasonable and documented out-of-pocket counsel fees and expenses), incurred by the Administrative Agent (or any sub-agent thereof), the Lenders or the Facility Servicer in connection with the enforcement or potential enforcement of its rights under this Agreement or any other Transaction Document and the other documents to be delivered hereunder or in connection herewith or in connection with the Advances made hereunder, including all such out of pocket expenses incurred during any workout, restructuring or negotiations in respect of such Advances.

 

(b) The Borrower shall pay promptly in accordance with Applicable Law any and all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes payable or determined to be payable to any Governmental Authority in connection with the execution, delivery, performance, enforcement or registration of, receipt or perfection of a security interest under, filing and recording of this Agreement, or any other Transaction Documents, or otherwise in connection with this agreement or any Transaction Document, except any such Taxes or fees that are imposed as the result of any present or former connection between any Recipient and the jurisdiction imposing such Tax (other than connections arising from such Recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Transaction Document, or sold or assigned an interest in any loan made pursuant to this Agreement) with respect to an assignment (“Other Taxes”).

 

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Section 11.08 Recourse Against Certain Parties; Non-Petition.

 

(a) No recourse under or with respect to any obligation, covenant or agreement (including the payment of any fees or any other obligations) of the Facility Servicer, the Administrative Agent, the Lenders, any Secured Party or the RIA, as contained in this Agreement or any other agreement, instrument or document entered into by the Facility Servicer, the Administrative Agent, the Lenders, any Secured Party or the RIA pursuant hereto or in connection herewith shall be held against any administrator of the Facility Servicer, the Administrative Agent, the Lenders, any Secured Party or the RIA, or any incorporator, Affiliate, stockholder, officer, employee or director of the Facility Servicer, the Administrative Agent, the Lenders, any Secured Party or the RIA, or of any such administrator, as such, by the enforcement of any assessment or by any legal or equitable proceeding, by virtue of any statute or otherwise; it being expressly agreed and understood that the agreements of each party hereto contained in this Agreement and all of the other agreements, instruments and documents entered into by the Facility Servicer, the Administrative Agent, the Lenders, any Secured Party or the RIA pursuant hereto or in connection herewith are, in each case, solely the corporate obligations of such party (and nothing in this Section 11.08 shall be construed to diminish in any way such corporate obligations of such party), and that no personal liability whatsoever shall attach to or be incurred by any administrator of the Administrative Agent, the Lenders, any Secured Party or the RIA, or any incorporator, stockholder, Affiliate, officer, employee or director of the Facility Servicer, the Administrative Agent, the Lenders, any Secured Party or the RIA, or of any such administrator, as such, or any of them, under or by reason of any of the obligations, covenants or agreements of the Facility Servicer, the Administrative Agent, the Lenders, any Secured Party or the RIA contained in this Agreement or in any other such instruments, documents or agreements, or are implied therefrom, and that any and all personal liability of every such administrator of the Facility Servicer, the Administrative Agent, the Lenders, any Secured Party or the RIA and each incorporator, stockholder, Affiliate, officer, employee or director of the Facility Servicer, the Administrative Agent, the Lenders, any Secured Party or the RIA or of any such administrator, or any of them, for breaches by the Facility Servicer, the Administrative Agent, the Lenders, any Secured Party or the RIA of any such obligations, covenants or agreements, which liability may arise either at common law or in equity, by statute or constitution, or otherwise, is hereby expressly waived as a condition of and in consideration for the execution of this Agreement.

 

(b) Notwithstanding any contrary provision set forth herein, no claim may be made by any Person against the Borrower, the Facility Servicer, the Administrative Agent, the Lenders, any Secured Party or the RIA or their respective Affiliates, directors, officers, employees, attorneys or agents for any special, indirect, consequential or punitive damages in respect to any claim for breach of contract or any other theory of liability arising out of or related to the transactions contemplated by this Agreement, or any act, omission or event occurring in connection therewith, and the parties hereto hereby waive, release, and agree not to sue upon any claim for any such damages, whether or not accrued and whether or not known or suspected. In no event shall any Secured Party or any affiliate, officer, director, employee or agent thereof have any liability to Borrower, or any other Person or entity for damages of any kind, including direct or indirect, special, incidental or consequential damages, losses, or expenses (whether in tort, contract or otherwise) arising out of any Person’s transmission of communications through a website or the Platform, as applicable.

 

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(c) No obligation or liability to any Obligor under any of the Portfolio Assets is intended to be assumed by the Facility Servicer, the Administrative Agent, the Lenders, any Secured Party or the RIA under or as a result of this Agreement and the transactions contemplated hereby.

 

(d) The provisions of this Section 11.08 survive the termination of this Agreement.

 

Section 11.09 Execution in Counterparts; Severability; Integration.

 

(a) This Agreement may be executed in any number of counterparts and by the different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement. Each of the parties hereto consents to the use of electronic signatures and electronic contracts in connection with this Agreement, any other Transaction Document and the transactions contemplated hereby and thereby, but expressly excluding each Revolving Loan Note. Delivery of an executed counterparty of a signature page to this Agreement or any other Transaction Documents (other than any Revolving Loan Note) by emailed pdf. or any other electronic means that reproduces an image of the actual executed signature page shall be effective as delivery of a manually executed counterpart of this Agreement or such other Transaction Document.  The words “execution,” “execute”, “signed,” “signature,” and words of like import in or related to any document to be signed in connection with this Agreement and the transactions contemplated hereby shall be deemed to include electronic signatures approved by the Transaction Parties, the Facility Servicer and the Administrative Agent (and electronic signatures utilizing the DocuSign platform shall be deemed approved), or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act; provided that nothing herein shall require any party hereto to accept electronic signatures in any form or format without its prior written consent.

 

(b) The parties hereto hereby agree that this Section 11.09 shall apply in equal force and have the same enforceability, validity and admissibility to each other Transaction Document and any amendment, restatement, modification, reaffirmation, assignment and acceptance or other document related to this Agreement or such other Transaction Document whether or not expressly stated therein. Even though the parties hereto agree that such electronic signatures are legally enforceable and intended to be effective for all purposes, the signing parties agree if requested by any party hereto to promptly deliver to such party the original document bearing an original manual signature, in order to reduce the risk of fraud, comply with potentially applicable regulations, or for other operational or risk management purposes.

 

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(c) In the event that 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. This Agreement and any agreements or letters (including Fee Letters) executed in connection herewith contains the final and complete integration of all prior expressions by the parties hereto with respect to the subject matter hereof and shall constitute the entire agreement among the parties hereto with respect to the subject matter hereof, superseding all prior oral or written understandings other than any Fee Letter delivered by the Facility Servicer to the Administrative Agent prior to the Closing Date.

 

Section 11.10 Consent to Jurisdiction; Service of Process.

 

(a) Each party hereto hereby irrevocably submits to the non-exclusive jurisdiction of any New York State or Federal court sitting in New York City in any action or proceeding arising out of or relating to the Transaction Documents, and each party hereto hereby irrevocably agrees that all claims in respect of such action or proceeding may be heard and determined in such New York State court or, to the extent permitted by law, in such Federal court. The parties hereto hereby irrevocably waive, to the fullest extent they may effectively do so, the defense of an inconvenient forum to the maintenance of such action or proceeding. The parties hereto agree that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.

 

(b) Each of the Borrower and the Facility Servicer agrees that service of process may be effected by mailing a copy thereof by registered or certified mail, postage prepaid, to the Borrower or the Facility Servicer, as applicable, at its address specified in Schedule III hereto or at such other address as the Administrative Agent shall have been notified in accordance herewith. Nothing in this Section 11.10 shall affect the right of the Lenders or the Administrative Agent to serve legal process in any other manner permitted by law.

 

Section 11.11 Confidentiality.

 

(a) Each of the Administrative Agent, the Lenders, the Facility Servicer shall maintain and shall cause each of its Affiliates, employees, officers, directors and agents to maintain the confidentiality of all Information (as defined below), including all Information regarding the business of the Obligors, the Borrower, the Facility Servicer and their respective businesses obtained by it or them in connection with the structuring, negotiating and execution of the transactions contemplated herein or the Portfolio Assets, except that Information may be disclosed (i) to its Affiliates, investors (including the direct or indirect limited partners of the Borrower), accountants, investigators, auditors, attorneys or other agents, including any rating agency or valuation firm engaged by such party in connection with any due diligence or comparable activities with respect to the transactions and Portfolio Assets contemplated herein, and the agents of such Persons, taxing authorities and governmental agencies (“Excepted Persons”); provided that each Excepted Person is informed of the confidential nature of such Information and instructed to keep such Information confidential or otherwise is subject to a binding contractual requirement of confidentiality, (ii) as is required by Applicable Law, (iii) in accordance with the Servicing Standard, (iv) when required by any law, regulation, ordinance, court order or subpoena, (v) to the extent the Facility Servicer is disseminating general statistical information relating to the loans being serviced by the Facility Servicer hereunder so long as the Facility Servicer does not identify the Borrower or any Lender or (vi) in connection with the exercise of any remedies hereunder or under any other Required Portfolio Asset Document or any Action or proceeding relating to this Agreement or any other Required Portfolio Asset Document or the enforcement of rights hereunder or thereunder. Notwithstanding the foregoing provisions of this Section 11.11(a), the Facility Servicer may, subject to Applicable Law and the terms of any Loan Agreements, make available copies of the documents in the Portfolio Asset Files and such other documents it holds in its capacity as Facility Servicer pursuant to the terms of this Agreement, to any of its creditors.

 

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(b) Anything herein to the contrary notwithstanding, the Borrower hereby consents to the disclosure of any Information with respect to it (i) to the Administrative Agent, the Lenders, or the Facility Servicer by each other, (ii) by the Administrative Agent, the Lenders and the Facility Servicer to any prospective or actual assignee or participant of any of them provided such Person agrees to hold such information confidential, or (iii) by the Administrative Agent, the Lenders and the Facility Servicer to any rating agency, commercial paper dealer or provider of a surety, guaranty or credit or liquidity enhancement to any Lender or any Person providing financing to, or holding Equity Interests in, any Lender, as applicable, and to any officers, directors, employees, outside accountants and attorneys of any of the foregoing, provided each such Person is informed of the confidential nature of such information. In addition, the Lenders, the Administrative Agent and the Facility Servicer may disclose any such Information as required pursuant to any law, rule, regulation, direction, request or order of any judicial, administrative or regulatory authority or proceedings (whether or not having the force or effect of law) provided that, where permissible, the Person receiving any such request, direction or order shall notify the Borrower before making such disclosure.

 

(c) Notwithstanding anything herein to the contrary, the foregoing shall not be construed to prohibit (i) disclosure of any and all Information that is or becomes publicly known, (ii) disclosure of any and all Information (A) if required to do so by any applicable statute, law, rule or regulation, (B) to any government agency or regulatory body having or claiming authority to regulate or oversee any aspects of the Lenders’, the Administrative Agent’s or the Facility Servicer’s business or that of their Affiliates, (C) pursuant to any subpoena, civil investigative demand or similar demand or request of any court, regulatory authority, arbitrator or arbitration to which the Administrative Agent, any Lender or the Facility Servicer or an officer, director, employer, shareholder or Affiliate of any of the foregoing is a party; provided that, where permissible, the Person receiving such subpoena, civil investigation demand or similar demand shall notify the Borrower before making such disclosure and shall not make such disclosure unless compelled to do so by Applicable Law, or (D) in any preliminary or final offering circular, registration statement or contract or other document approved in advance by the Borrower, (iii) any other disclosure authorized by the Borrower, or (iv) disclosure of any and all Information that becomes available to the Administrative Agent, any Lender or the Facility Servicer on a non-confidential basis from a source other than the Borrower its Affiliates, the RIA or any of their agents relating to the Borrower, Holdings, the RIA, and/or any of their respective Affiliates who did not acquire such information as a result of a breach of this Section 11.11.

 

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(d) The parties hereto may disclose the existence of the Agreement, but not the financial terms hereof, including all fees and other pricing terms, all Events of Default, Servicer Termination Events, and priority of payment provisions, in each case except in compliance with this Section 11.11.

 

(e) Information” means all information received from the Borrower, its Affiliates, the RIA or any of their agents relating to the Borrower, Holdings, the RIA, and/or any of their respective Affiliates or businesses, other than any such information that is available to the Administrative Agent, the Facility Servicer or any Lender on a non-confidential basis prior to disclosure by the Borrower, its Affiliates, the RIA or any of their agents relating to the Borrower, Holdings, the RIA, and/or any of their respective Affiliates, as applicable. Any Person required to maintain the confidentiality of Information as provided in this Section 11.11 shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.

 

Section 11.12 Non-Confidentiality of Tax Treatment. All parties hereto agree that each of them and each of their employees, representatives, and other agents may disclose to any and all Persons, in connection with this Agreement, the tax treatment and tax structure of the transaction and all materials of any kind (including opinions or other tax analyses) that are provided to any of them relating to such tax treatment and tax structure. “Tax treatment” and “tax structure” shall have the same meaning as such terms have for purposes of Treasury Regulation Section 1.6011-4; provided that with respect to any document or similar item that in either case contains information concerning the tax treatment or tax structure of the transaction as well as other information, the provisions of this Section 11.12 shall only apply to such portions of the document or similar item that relate to the tax treatment or tax structure of the transactions contemplated hereby.

 

Section 11.13 Waiver of Set Off. If an Event of Default has occurred and is continuing, each Lender and each of its Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by Applicable Law, to set off and apply any and all deposits (general or special, time or demand, provisional or final, in whatever currency) at any time held, and other obligations (in whatever currency) at any time owing, by such Lender or any such Affiliate, to or for the credit or the account of the Borrower against any and all of the Obligations, irrespective of whether or not such Lender or Affiliate shall have made any demand under this Agreement or any other Transaction Document and although such Obligations may be contingent or unmatured or are owed to a branch office or Affiliate of such Lender different from the branch office or Affiliate holding such deposit or obligated on such Indebtedness. Each Lender shall notify the Borrower and the Administrative Agent promptly after any such setoff and application; provided that the failure to give such notice shall not affect the validity of such setoff and application.

 

Section 11.14 Headings, Schedules and Exhibits. The headings herein are for purposes of references only and shall not otherwise affect the meaning or interpretation of any provision hereof. The schedules and exhibits attached hereto and referred to herein shall constitute a part of this Agreement and are incorporated into this Agreement for all purposes.

 

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Section 11.15 Ratable Payments. If any Lender, whether by setoff or otherwise, shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of setoff, or otherwise) on account of Advances owing to it (other than pursuant to Section 2.12 or Section 2.13) in excess of its ratable share of payments on account of the Advances obtained by all the Lenders, such Lender shall forthwith purchase from the other Lenders such participations in the Advances owing to them as shall be necessary to cause such purchasing Lender to share the excess payment ratably with each of them; provided that, if all or any portion of such excess payment is thereafter recovered from such purchasing Lender, such purchase from each Lender shall be rescinded and such Lender shall repay to the purchasing Lender the purchase price to the extent of such recovery together with an amount equal to such Lender’s ratable share (according to the proportion of (a) the amount of such Lender’s required repayment to (b) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered.

 

Section 11.16 Failure of Borrower to Perform Certain Obligations. If the Borrower fails to perform any of its agreements or obligations under Section 5.01(q), the Administrative Agent may (but shall not be required to) itself perform, or cause performance of, such agreement or obligation, and the expenses of the Administrative Agent incurred in connection therewith shall be payable by the Borrower promptly upon the Administrative Agent’s demand therefore.

 

Section 11.17 Power of Attorney.

 

(a) Each of the Borrower and Holdings irrevocably authorizes the Facility Servicer and the Administrative Agent and appoints the Facility Servicer and the Administrative Agent, as applicable, as its attorney-in-fact (each of the Administrative Agent and the Facility Servicer, in such capacities, an “Attorney”), to act on its behalf with respect to the actions described in paragraph (c) of this Section 11.17.

 

(b) No person shall inquire into or seek confirmation from the Borrower or Holdings, as applicable, as to the authority of any Attorney to take any action described in this Section 11.17, or as to the existence of or fulfillment of any condition, which is intended to grant to such Attorney unconditionally the authority to take and perform the actions contemplated herein, and the Borrower and Holdings, as applicable, irrevocably waives any claim against any person or entity that acts in reliance upon or acknowledges the authority granted under this Section 11.17. The power of attorney granted hereby is coupled with an interest and may not be revoked or canceled by either the Borrower or Holdings until the Facility Termination Date.

 

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(c) With effect after the occurrence and during the continuance of an Event of Default, both the Borrower and Holdings, hereby irrevocably constitute and appoint each Attorney (and all officers, employees or agents designated by Attorney), solely in connection with the enforcement of the rights and remedies of the Administrative Agent (on behalf of the Secured Parties), the Lenders and the other Secured Parties under this Agreement and the other Transaction Documents, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the Borrower’s and Holdings’, as applicable, place and stead and at the Borrower’s and Holdings’, as applicable, expense and in the Borrower’s and Holdings’, as applicable, name or in such Attorney’s own name, from time to time in such Attorney’s discretion, to take any and all appropriate action and to execute and deliver any and all documents and instruments that may be necessary or desirable to accomplish the purposes of this Agreement and the other Transaction Documents, and, without limiting the generality of the foregoing, hereby grants to (i) in the case of clauses (a), (b), (c), (g), (j) and (k) below, the Facility Servicer and (ii) in the case of clauses (d), (e), (f), (h), (i) and (l), each Attorney, the power and right, on its behalf, without notice to or assent by it, to do the following, but only after the occurrence and during the continuance of an Event of Default, each in accordance with this Agreement and the other Transaction Documents: (a) open mail for the Borrower’s and Holdings’, as applicable, and ask, demand, collect, give acquittances and receipts for, take possession of, or endorse and receive payment of, any checks, drafts, notes, acceptances, or other instruments for the payment of moneys due, and sign and endorse any invoices, freight or express bills, bills of lading, storage or warehouse receipts, drafts against debtors, assignments, verifications, and notices; (b) effect any repairs to any of the Borrower’s and Holdings’, as applicable, assets, or continue or obtain any insurance and pay all or any part of the premiums therefor and costs thereof, and make, settle and adjust all claims under such policies of insurance, and make all determinations and decisions with respect to such policies; (c) pay or discharge any taxes, Liens, or other encumbrances levied or placed on or threatened against the Borrower and Holding, as applicable, or the Borrower’s and Holdings’, as applicable, property; (d) to the extent related to the Collateral and the transactions contemplated by the Transaction Documents, defend any suit, action or proceeding brought against the Borrower and Holding, as applicable, if the Borrower and Holding, as applicable, does not defend such suit, action or proceeding or if the applicable Attorney reasonably believes that it is not pursuing such defense in a manner that will maximize the recovery to such Attorney, and settle, compromise or adjust any suit, action, or proceeding described above and, in connection therewith, give such discharges or releases as Attorney may deem appropriate; (e) to the extent related to any Collateral, file or prosecute any claim, litigation, suit or proceeding in any court of competent jurisdiction or before any arbitrator, or take any other action otherwise deemed appropriate by Attorney for the purpose of collecting any and all such moneys due to the Borrower and Holding, as applicable, whenever payable and to enforce any other right in respect of the Borrower’s and Holdings’, as applicable, property; (f) to the extent related to any Collateral, sell, transfer, pledge, make any agreement with respect to, or otherwise deal with, any of the Borrower’s and Holdings’, as applicable, property, and execute, in connection with such sale or action, any endorsements, assignments or other instruments of conveyance or transfer in connection therewith; (g) to give any necessary receipts or acquittance for amounts collected or received under this Agreement; (h) to make all necessary transfers of the Collateral in connection with any such sale or other disposition made pursuant to this Agreement; (i) to execute and deliver for value all necessary or appropriate bills of sale, assignments and other instruments in connection with any such sale or other disposition of the Collateral, the Borrower and Holding, as applicable, hereby ratifying and confirming all that such Attorney (or any substitute) shall lawfully do or cause to be done hereunder and pursuant hereto; (j) to send such notification forms as the applicable Attorney deems appropriate to give notice to Obligors of the Secured Parties’ interest in the Collateral; (k) to sign any agreements, orders or other documents in connection with or pursuant to any Transaction Document; (l) to cause the certified public accountants then engaged by the Borrower and Holding, as applicable, to prepare and deliver to the Facility Servicer at any time and from time to time, promptly upon the Facility Servicer’s request, any reports required to be prepared by or on behalf of the Borrower and Holding, as applicable, under the Transaction Documents, all as though the Facility Servicer were the absolute owner of the Borrower’s and Holdings’, as applicable, property for all purposes, and (m) to do, at the applicable Attorney’s option and the Borrower’s and Holdings’, as applicable, expense, at any time or from time to time, all acts and other things that Attorney reasonably deems necessary or desirable (as determined by the Administrative Agent acting at the direction of the Majority Lenders) to perfect and maintain the perfection of and the priority of the interest of the Administrative Agent, for the benefit of the Secured Parties, in the Collateral, or realize upon the Collateral and the Liens of the Administrative Agent, for the benefit of the Secured Parties, thereon (including the execution and filing of UCC financing statements and continuation statements as provided by the terms of this Agreement or any other Transaction Document), all as fully and effectively as the Borrower and Holding, as applicable, might do. This appointment is coupled with an interest and is irrevocable.

 

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Section 11.18 Delivery of Termination Statements, Releases, etc. Upon the occurrence of the Facility Termination Date, the Administrative Agent shall execute and deliver to the Facility Servicer termination statements, reconveyances, releases and other documents and instruments of release as are necessary or appropriate to evidence the termination of the Liens securing the Obligations, all at the expense of the Borrower, and the Facility Servicer shall deliver the same to the Borrower.

 

Section 11.19 Performance Conditions; Resignation of the Facility Servicer. The obligations of the Facility Servicer to effect the transactions contemplated hereby shall be subject to the following conditions:

 

(a) The Facility Servicer shall have (i) completed its due diligence with respect to the Borrower and each Lender in order to satisfy compliance with laws and regulations applicable to financial institutions in connection with this transaction (e.g., the USA PATRIOT Act, OFAC and related regulations) and (ii) been satisfied with the results of such due diligence in its sole discretion.

 

(b) If (i) Holdings or the Borrower, as applicable, is created or organized under the laws of the United States, any State thereof or the District of Columbia, it shall furnish to the Facility Servicer an Internal Revenue Service Form W-9, and (ii) Holdings or the Borrower is not created or organized under the laws of the United States, any State thereof or the District of Columbia, it shall furnish to the Facility Servicer an Internal Revenue Service Form W-8ECI, Form W-8EXP, Form W-8IMY (with appropriate attachments) or Form W-8BEN or W-8BEN-E, or successor forms, in each case, on or before the Closing Date and as may be required from time to time, duly executed by Holdings or the Borrower, as applicable. The Facility Servicer shall not be obligated to make any payment hereunder to Holdings or the Borrower until Holdings or the Borrower shall have furnished to the Facility Servicer the requested forms, certificates, statements or documents (x) establishing a complete exemption from the withholding of United States tax with respect thereto or (y) if not establishing a complete exemption, the Facility Servicer will pay an amount net of any such required withholding tax and the Facility Servicer will not be obligated to gross-up or indemnify the Borrower for any amounts required to be withheld on such payments.

 

(c) In each and every case of a Holdings AML and International Trade Default, or a Borrower AML and International Trade Default, the Facility Servicer may, by notice in writing to the Borrower, in addition to whatever rights the Facility Servicer may have at law or in equity, including injunctive relief and specific performance, immediately resign as Facility Servicer, as applicable, (notwithstanding any provision in Sections 8.09, or otherwise in this Agreement, but subject to the provisions set forth in this Section 11.19(c)), without the Facility Servicer incurring any penalty or fee of any kind whatsoever in connection therewith. Except as otherwise expressly provided in this Agreement, no remedy provided for by this Agreement shall be exclusive of any other remedy, and each and every remedy shall be cumulative and in addition to any other remedy, and no delay or omission to exercise any right or remedy shall impair any such right or remedy or shall be deemed to be a waiver of any Holdings AML and International Trade Default and any Borrower AML and International Trade Default.

 

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(d) The obligations of the Facility Servicer to effect any transaction contemplated hereby shall be subject to (i) Holdings’ compliance with all Applicable Laws, including Anti-Terrorism Laws and Sanctions, and the continued truthfulness and completeness of Holdings’ representations found in Section 4.05(m), (ii) the Borrower’s compliance with all Applicable Laws, including Anti-Terrorism Laws and Sanctions and Anti-Corruption Laws, and the continued truthfulness and completeness of the Borrower’s representations found in Section 4.01(bb) and (iii) each Lender’s compliance with Anti-Terrorism Laws and Sanctions and Anti-Corruption Laws, and the continued truthfulness and completeness of each Lender’s representations found in Section 4.04(b).

 

(e) Upon discovery by Holdings of any Holdings AML and International Trade Default or by the Borrower of the Borrower AML and International Trade Default (but, in each case, regardless of whether any notice has been given as provided in this Agreement or any cure period provided herein has expired), Holdings or the Borrower, as applicable, shall give prompt written notice thereof to the Facility Servicer.

 

(f) On or after the receipt by Holdings or the Borrower and any Lender of a written notice of resignation from the Facility Servicer pursuant to this Section 11.19(f), (i) all payments communications, determinations and other obligations provided to be made by, to or through the Facility Servicer shall instead be made by, to or through each Lender until such time as a successor to the Facility Servicer has been appointed as provided by this Agreement, and (ii) the Facility Servicer’s obligations under this Agreement shall terminate.

 

Section 11.20 Post-Closing Performance Conditions. The parties hereto agree to cooperate with reasonable requests made by any other party hereto after signing this Agreement to the extent reasonably necessary for such party to comply with laws and regulations applicable to financial institutions in connection with this transaction (e.g., the USA PATRIOT Act, OFAC and related regulations).

 

Section 11.21 Judgment Currency. If, for the purposes of obtaining judgment in any court, it is necessary to convert a sum due to any Secured Party in any currency (the “Original Currency”) into another currency (the “Other Currency”), the parties agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which, in accordance with normal banking procedures, such Secured Party could purchase the Original Currency with the Other Currency on the Business Day preceding the day on which final judgment is given or, if permitted by Applicable Law, at such Secured Party’s election, on the day on which the judgment is paid or satisfied. The obligations of the obligated party in respect of any sum due in the Original Currency from it to any Secured Party under any of the Transaction Documents shall, notwithstanding any judgment in any Other Currency, be discharged only to the extent that on the Business Day following receipt by such Secured Party of any sum adjudged to be so due in the Other Currency, such Secured Party may, in accordance with normal banking procedures, purchase the Original Currency with such Other Currency. If the amount of the Original Currency so purchased is less than the sum originally due to the applicable Secured Party in the Original Currency, the obligated party agrees, as a separate obligation and notwithstanding the judgment, to indemnify such Secured Party, against any loss, and, if the amount of the Original Currency so purchased exceeds the sum originally due to the Lender in the Original Currency, such Secured Party shall remit such excess to the applicable obligated party.

 

Section 11.22 USA PATRIOT Act. The parties hereto acknowledge that in accordance with the Customer Identification Program (CIP) requirements established under the USA PATRIOT Act and its implementing regulations, the Administrative Agent in order to help fight the funding of terrorism and money laundering, is required to obtain, verify, and record information that identifies each person or legal entity that establishes a relationship or opens an account with the Administrative Agent. Each party hereby agrees that it shall provide the Administrative Agent with such information as the Administrative Agent may request from time to time in order to comply with any applicable requirements of the USA PATRIOT Act.

 

[Signature Pages Follow]

 

-135-

 

 

Executed as of the date first above written.

 

  Holdings:
   
  STEPSTONE PRIVATE CREDIT FUND LLC
 
  By:  /s/ Joseph Cambareri
  Name:  Joseph Cambareri
  Title: Chief Financial Officer

 

  The Borrower:
   
  SPV FACILITY I LLC
   
  By: /s/ Joseph Cambareri
    Name: Joseph Cambareri
    Title: Chief Financial Officer

 

[Signature Page to Loan and Servicing Agreement]

 

 

 

 

  MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY, as an Initial Lender
   
  By: /s/ Phillip Titolo
    Name: Phillip Titolo
    Title: Head of Direct Private Investments
     
  MASSMUTUAL ASCEND LIFE INSURANCE COMPANY, as an Initial Lender
   
  By: /s/ Kelly Kowalski
    Name: Kelly Kowalski
    Title: Vice President

 

[Signature Page to Loan and Servicing Agreement]

 

 

 

 

  The Administrative Agent:
   
  MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY in its capacity as Administrative Agent
   
  By: /s/ Phillip Titolo
    Name: Phillip Titolo
    Title: Head of Direct Private Investments

 

[Signature Page to Loan and Servicing Agreement]

 

 

 

 

  The Facility Servicer:
   
  MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
     
  By: /s/ Phillip Titolo
    Name: Phillip Titolo
    Title: Head of Direct Private Investments

 

[Signature Page to Loan and Servicing Agreement]

 

 

 

 

ANNEX I

 

INITIAL LENDERS AND COMMITMENTS

 

Initial Lender  Percentage   Commitment 
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY   90%  $180,000,000 
MASSMUTUAL ASCEND LIFE INSURANCE COMPANY   10%  $20,000,000 
Total   100%  $200,000,000 

 

Annex I-1

 

 

SCHEDULE I

 

PORTFOLIO ASSET SCHEDULE

 

See “Exhibit G” Form of Payment Date Report

 

Sch. I-1

 

 

SCHEDULE II

 

CONDITION PRECEDENT DOCUMENTS

 

As required by Section 3.01 of the Agreement, each of the following items must be delivered to the Administrative Agent and the Initial Lenders prior to the effectiveness of the Agreement:

 

(a) a copy of this Agreement and the Account Control Agreement duly executed by each of the parties thereto;

 

(b) a certificate of an officer of the Borrower dated the date of the Agreement, certifying (i) the names and true signatures of the incumbent officers of the Borrower authorized to sign on behalf of the Borrower each of the Transaction Documents to which it is a party (on which certificate the Administrative Agent and the Lenders may conclusively rely until such time as the Administrative Agent has received from the Borrower a revised certificate meeting the requirements of this paragraph (b)(i)), (ii) that the Organizational Documents of the Borrower and each other document delivered under this Schedule II is a true, complete and correct copy of such document and that each such document has not been amended, modified or supplemented and are in full force and effect, and (iii) the authorization document of the managing member approving and authorizing the execution, delivery and performance by such Person of the Transaction Documents to which it is a party;

 

(c) a certificate of an officer of Holdings, dated the date of the Agreement, certifying (i) the names and true signatures of the incumbent officers of Holdings authorized to sign on behalf of Holdings each of the Transaction Documents to which it is a party (on which certificate the Administrative Agent and the Lenders may conclusively rely until such time as the Administrative Agent has receives from Holdings a revised certificate meeting the requirements of this paragraph (c)(i)), (ii) that the Organizational Documents of Holdings, and each other document delivered under this Schedule II is a true, complete and correct copy of such document and that each such document has not been amended, modified or supplemented and are in full force and effect and (iii) the authorization document of the managing member approving and authorizing the execution, delivery and performance by such Person of the Transaction Documents to which it is a party;

 

(d) [reserved].

 

(e) a good standing certificate, dated as of a recent date for the Borrower and Holdings issued by the Secretary of State of Delaware;

 

(f) financing statements describing the Collateral and the Pledged Equity and (i) naming the Borrower and Holdings as debtor and the Administrative Agent, on behalf of the Secured Parties, as secured party and (ii) other, similar instruments or documents, as may be necessary or, in the opinion of the Administrative Agent, desirable under the UCC of all appropriate jurisdictions or any comparable law to perfect the Administrative Agent’s, on behalf of the Secured Parties, interests in the Collateral and the Pledged Equity (including entries in the register of security interests of the Borrower);

 

Sch. II-1

 

 

(g) with respect to any certificated Pledged Equity, delivery of stock powers duly executed in blank or other instruments of transfer reasonably satisfactory to the Administrative Agent;

 

(h) copies of tax, judgment and lien searches in all jurisdictions reasonably requested by the Administrative Agent and requests for information (or a similar UCC search report certified by a party acceptable to the Administrative Agent), dated a date reasonably near to the Closing Date, and, with respect to such requests for information or UCC searches, listing all effective financing statements which name the Borrower and Holdings (under its present name and any previous name) as debtor(s), together with copies of such financing statements;

 

(i) one or more favorable and customary opinions reasonably acceptable to the Majority Lenders and the Administrative Agent, addressed to the Administrative Agent, the Facility Servicer and the Lenders;

 

(j) a copy of each of the other Transaction Documents duly executed by the parties thereto;

 

(k) with respect to Holdings and the Borrower, an Internal Revenue Service Form W9, duly executed by Holdings or the Borrower, as applicable, evidencing such party’s exemption from the backup withholding of United States tax;

 

(l) such other documents as the Administrative Agent or any Lender may reasonably request.

 

Sch. II-2

 

 

SCHEDULE III

 

NOTICE INFORMATION

 

If to the Borrower:

 

SPV FACILITY I LLC
450 Lexington Ave 31st floor, New York, NY 10017, United States

 

Tel: +1 917-741-7185

 

Email: joseph.cambareri@stepstonegroup.com;

    christopher.park@stepstonegroup.com; bstrainyte@stepstoneglobal.com;

    PDLegal@stepstoneglobal.com

 

If to Holdings:

 

STEPSTONE PRIVATE CREDIT FUND LLC
450 Lexington Ave 31st floor, New York, NY 10017, United States

 

Tel: +1 917-741-7185

 

Email: joseph.cambareri@stepstonegroup.com;

     christopher.park@stepstonegroup.com; bstrainyte@stepstoneglobal.com;

     PDLegal@stepstoneglobal.com

 

If to Massachusetts Mutual Life Insurance Company, as Administrative Agent, a Lender and the Facility Servicer:

 

Massachusetts Mutual Life Insurance Company

10 Fan Pier Boulevard

Boston, MA 02210

Telephone: 413-226-0251

Email: DPITeam@massmutual.com and massmutualagency@alterdomus.com

Attention: Sarah Doyle; Investment Management

 

Massachusetts Mutual Life Insurance Company

Attention: Philip Titolo, Jaime Genua

10 Fan Pier Boulevard

Boston, MA 02210

Telephone: 413-226-9057; 413-744-7347

Email: Ptitolo@massmutual.com; NLim10@massmutual.com;

DPITeam@massmutual.com

 

Sch. III-1

 

 

If to any Lender other than the Initial Lender:

 

As set forth in the Assignment and Assumption Agreement for such Lender

 

If to the Rating Agent, for so long as Kroll Bond Rating Agency LLC is the Rating Agent:

 

Kroll Bond Rating Agency, LLC

805 Third Avenue, 29th Floor

New York, NY 10022

Attention: Funds Rating Group

Email: Fundsurveillance@kbra.com

 

Sch. III-2

 

 

SCHEDULE IV

 

FORM OF FUND REPORT

 

Sch. IV-1

 

 

SCHEDULE V

 

BORROWER ACCOUNTS

 

[Intentionally Omitted]

 

Sch. V-1