UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM  10-Q
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2014
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 0-54251
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
(Exact Name of Registrant as Specified in its Charter)

Maryland
 
27-2614444
(State or Other Jurisdiction of
Incorporation or Organization)
 
(I.R.S. Employer
Identification No.)
 
 
 
405 Park Avenue, 3rd Floor
New York, New York
 
10022
(Address of Principal Executive Office)
 
(Zip Code)

(212) 415-6500
(Registrant’s Telephone Number, Including Area Code)

Not applicable
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes o
No x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (check one):
Large accelerated filer o
 
Accelerated filer o
 
 
 
Non-accelerated filer x
 
Smaller reporting company o
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  
 Yes o No x
The number of shares of the registrant's common stock, $0.001 par value, outstanding as of August 14, 2014 was 138,166,767.


BUSINESS DEVELOPMENT CORPORATION OF AMERICA
FORM  10-Q FOR THE SIX MONTHS ENDED JUNE 30, 2014
TABLE OF CONTENTS
 
 
 
 
Page
PART I
  
Notes to Consolidated Financial Statements  as of June 30, 2014 (Unaudited)
Item 2. Management's Discussion and Analysis  of Financial Condition and Results of Operations
PART II
 


PART I
Item 1. Consolidated Financial Statements.

BUSINESS DEVELOPMENT CORPORATION OF AMERICA
  CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(in thousands except share and per share data)
 
June 30,
 
December 31,
 
2014
 
2013
ASSETS
(Unaudited)
 
 
Investments, at fair value:
 
 
 
Control Investments, at fair value (amortized cost of $54,548 and $34,132, respectively)
$
54,599

 
$
34,132

Affiliate Investments, at fair value (amortized cost of $403,503 and $150,729, respectively)
400,355

 
154,209

Non-affiliate Investments, at fair value (amortized cost of $1,311,240 and $501,416, respectively)
1,319,171

 
507,435

Investments, at fair value (amortized cost of $1,769,291 and $686,277, respectively)
1,774,125

 
695,776

Cash and cash equivalents
83,668

 
12,995

Cash collateral on deposit with custodian
—

 
76,874

Interest receivable
19,873

 
7,527

Dividend receivable
797

 
738

Receivable for unsettled trades
65,507

 
36,158

Prepaid expenses and other assets
7,154

 
1,003

Deferred credit facility financing costs, net
5,227

 
2,278

Due from affiliate
3,860

 
1,059

Receivable due on total return swap
—

 
4,053

Unrealized gain on total return swap
—

 
3,180

Total assets
$
1,960,211

 
$
841,641

 
 
 
 
LIABILITIES
 

 
 

Revolving credit facilities
$
475,312

 
$
132,687

Interest and credit facility fees payable
1,099

 
715

Payable for unsettled trades
170,023

 
67,003

Stockholder distributions payable
9,114

 
4,578

Management fees payable
5,758

 
2,689

Accrued capital gains incentive fees
2,890

 
2,802

Subordinated income incentive fees payable
2,642

 
2,577

Accounts payable and accrued expenses
789

 
599

Payable for common stock repurchases
225

 
88

Total liabilities
$
667,852

 
$
213,738

 
 
 
 
Commitments and contingencies (Note 7)
 
 
 
 
 
 
 
NET ASSETS
 
 
 
Preferred stock, $.001 par value, 50,000,000 shares authorized, none issued and outstanding
$
—

 
$
—

Common stock, $.001 par value, 450,000,000 shares authorized, 130,592,469 and 63,671,644 shares issued and outstanding, respectively
131

 
64

Capital in excess of par value
1,274,474

 
611,703

Accumulated (over) distributed net investment income
(3,222
)
 
(509
)
Accumulated under distributed realized gains
15,142

 
3,966

Net unrealized appreciation
4,834

 
12,679

Total Business Development Corporation of America net assets
1,291,359

 
627,903

Non-controlling interest
1,000

 
—

Total net assets
1,292,359

 
627,903

 
 
 
 
Total liabilities and net assets
$
1,960,211

 
$
841,641

 
 
 
 
Net asset value per share
$
9.89

 
$
9.86

The accompanying notes are an integral part of these statements.

1


BUSINESS DEVELOPMENT CORPORATION OF AMERICA
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands except per share data)
(Unaudited)
 
 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
 
 
2014
 
2013
 
2014
 
2013
Investment income:
 
 
 
 
 
 
 
 
Interest from investments
 
 
 
 
 
 
 
 
Control investments
 
$
1,187

 
$
403

 
$
2,152

 
$
403

Affiliate investments
 
8,436

 
114

 
12,725

 
191

Non-control/non-affiliate investments
 
16,138

 
4,519

 
27,660

 
8,678

Total interest from investments
 
25,761

 
5,036

 
42,537

 
9,272

Interest from cash and cash equivalents
 
6

 
2

 
11

 
3

Total interest income
 
25,767

 
5,038

 
42,548

 
9,275

Other income
 
3,976

 
138

 
5,685

 
256

Total investment income
 
29,743

 
5,176

 
48,233

 
9,531

 
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 

 
 
 
 
Management fees
 
5,763

 
1,211

 
9,395

 
2,037

Subordinated income incentive fees
 
2,642

 
1,100

 
3,420

 
1,829

Capital gains incentive fees
 
245

 
568

 
226

 
899

Interest and credit facility financing expenses
 
1,735

 
467

 
3,029

 
769

Professional fees
 
1,499

 
574

 
2,241

 
812

Other administrative
 
234

 
13

 
275

 
71

Insurance
 
57

 
57

 
115

 
111

Directors fees
 
19

 
17

 
36

 
33

Expenses before expense waivers and reimbursements from Adviser
 
12,194

 
4,007

 
18,737

 
6,561

Waiver of management and incentive fees
 
—

 
—

 
—

 
(406
)
Total expenses net of expense waivers and reimbursements from Adviser
 
12,194

 
4,007

 
18,737

 
6,155

 
 
 
 
 
 
 
 
 
Net investment income
 
17,549

 
1,169

 
29,496

 
3,376

 
 
 
 
 
 
 
 
 
Realized and unrealized gain on investments and total return swap:
 
 
 
 
 
 
 
 
Net realized gain from investments
 
2,320

 
739

 
5,796

 
1,734

Net realized gain from total return swap
 
9,107

 
2,874

 
14,558

 
4,669

Net change in unrealized appreciation (depreciation) on investments
 
(1,093
)
 
2,100

 
(4,665
)
 
2,758

Net change in unrealized appreciation (depreciation) on total return swap
 
(3,278
)
 
30

 
(3,179
)
 
2,314

Net realized and unrealized gain on investments and total return swap
 
7,056

 
5,743

 
12,510

 
11,475

 
 
 
 
 
 
 
 
 
Net increase in net assets resulting from operations
 
$
24,605

 
$
6,912

 
$
42,006

 
$
14,851

 
 
 
 
 
 
 
 
 
Per share information - basic and diluted
 
 
 
 
 
 
 
 
Net investment income
 
$
0.15

 
$
0.04

 
$
0.30

 
$
0.14

Net increase in net assets resulting from operations
 
$
0.21

 
$
0.25

 
$
0.43

 
$
0.63

Weighted average shares outstanding
 
115,859,732

 
28,159,751

 
97,258,326

 
23,574,852


The accompanying notes are an integral part of these statements.

2

BUSINESS DEVELOPMENT CORPORATION OF AMERICA
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
(dollars in thousands except share and per share data)
(Unaudited)

 
For the Six Months Ended June 30,
 
2014
 
2013
Operations:
 
 
 
Net investment income
$
29,496

 
$
3,376

Net realized gain from investments
5,796

 
1,734

Net realized gain from total return swap
14,558

 
4,669

Net change in unrealized appreciation (depreciation) on investments
(4,665
)
 
2,758

Net change in unrealized appreciation (depreciation) on total return swap
(3,179
)
 
2,314

Net increase in net assets from operations
42,006

 
14,851

Stockholder distributions:
 
 
 

Distributions from net investment income
(29,496
)
 
(3,376
)
(Over) distributed net investment income
—

 
(149
)
Distributions from net realized gain from investments and total return swap
(12,551
)
 
(6,403
)
Net decrease in net assets from stockholder distributions
(42,047
)
 
(9,928
)
Capital transactions:
 
 
 

Issuance of common stock, net of issuance costs
646,847

 
180,276

Reinvestment of stockholder distributions
17,839

 
3,013

Repurchases of common stock
(1,189
)
 
(458
)
Net increase in net assets from capital transactions
663,497

 
182,831

Total increase in Business Development Corporation of America net assets
663,456

 
187,754

Increase in non-controlling interest
1,000

 
—

Total increase in net assets
664,456

 
187,754

Net assets at beginning of period
627,903

 
140,685

Net assets at end of period
$
1,292,359

 
$
328,439

 
 
 
 
Net asset value per common share
$
9.89

 
$
9.69

Common shares outstanding at end of period
130,592,469

 
33,900,183

 
 
 
 
Accumulated (over) under distributed net investment income
$
(3,222
)
 
$
548

Accumulated under distributed realized gains
$
15,142

 
$
—




The accompanying notes are an integral part of these statements.

3
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(Unaudited)

 
For the Six Months Ended June 30,
 
2014
 
2013
Operating activities:
 
 
 
Net increase in net assets from operations
$
42,006

 
$
14,851

Adjustments to reconcile net increase in net assets from operations to net cash used in operating activities:
 
 
 
Paid-in-kind interest income
(1,109
)
 
(203
)
Net accretion of discount on investments
(947
)
 
(246
)
Amortization of deferred financing costs
370

 
121

Sales and repayments of investments
403,957

 
135,161

Purchase of investments
(1,479,119
)
 
(302,768
)
Net realized gain from investments
(5,796
)
 
(1,734
)
Net unrealized (appreciation) depreciation on investments
4,665

 
(2,758
)
Net unrealized (appreciation) depreciation on total return swap
3,179

 
(2,314
)
(Increase) decrease in operating assets:
 
 
 
Cash collateral on deposit with custodian
76,874

 
(33,077
)
Interest receivable
(12,347
)
 
(1,700
)
Dividend receivable
(59
)
 
—

Receivable due on total return swap
4,053

 
(798
)
Prepaid expenses and other assets
(6,151
)
 
(625
)
Receivable for unsettled trades
(29,348
)
 
6,413

Increase in operating liabilities:
 
 
 
Payable for unsettled trades
103,019

 
19,940

Management and incentive fees payable
3,223

 
2,845

Interest and credit facility fees payable
384

 
190

Accounts payable and accrued expenses
189

 
61

Payable for common stock repurchases
137

 
—

Net cash used in operating activities
(892,820
)
 
(166,641
)
 
 
 
 
Financing activities:
 

 
 

Proceeds from issuance of shares of common stock, net
646,847

 
180,276

Repurchases of common stock
(1,189
)
 
(633
)
Decrease (increase) in deferred offering costs receivable
(3,899
)
 
1,151

Proceeds from revolving credit facility
392,626

 
18,000

Payments on revolving credit facility
(50,000
)
 
(29,720
)
Payments of financing cost
(3,319
)
 
(882
)
Payments to (proceeds from) affiliate
1,097

 
(891
)
Stockholder distributions
(19,670
)
 
(5,649
)
Increase in non-controlling interest
1,000

 
—

Net cash provided by financing activities
963,493

 
161,652

 
 
 
 
Net increase (decrease) in cash and cash equivalents
70,673

 
(4,989
)
Cash and cash equivalents, beginning of period
12,995

 
14,180

Cash and cash equivalents, end of period
$
83,668

 
$
9,191


4
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(Unaudited)

 
For the Six Months Ended June 30,
 
2014
 
2013
 
 
 
 
Supplemental information:
 

 
 

Interest paid during the period
$
1,726

 
$
453

Supplemental non-cash information:
 
 
 
Payable for common stock repurchases
$
225

 
$
—

DRIP distribution payable
$
4,533

 
$
893

Cash distribution payable
$
4,581

 
$
1,396

DRIP distribution paid
$
17,840

 
$
3,013


The accompanying notes are an integral part of these statements.

5
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
CONSOLIDATED SCHEDULE OF INVESTMENTS
(dollars in thousands)


June 30, 2014
(Unaudited)
Portfolio Company (a) (q)
 
Industry
 
Investment Coupon Rate/Maturity
 
Principal / Number of Shares
 
Amortized Cost
 
Fair Value (c)
 
% of Net Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
Senior Secured First Lien Debt - 83.5% (b)
 
 
 
 
 
 
 
 
 
 
 
 
Ability Networks Inc. (aa)
 
Health Care Providers & Services
 
L+5.00% (6.00%), 5/14/2021
 
$
15,000

 
$
14,822

 
$
14,925

 
1.2
%
ABRA, Inc. (j) (z)
 
Automotive
 
L+6.00% (7.25%), 5/10/2018
 
12,642

 
12,523

 
12,498

 
1.0
%
Adventure Interactive Corp. (z) (ab)
 
Media
 
L+8.19% (9.44%), 3/22/2018
 
19,874

 
19,624

 
19,678

 
1.5
%
AM General LLC (aa)
 
Aerospace & Defense
 
L+9.00% (10.25%), 3/22/2018
 
6,300

 
5,609

 
5,796

 
0.4
%
American Importing Company, Inc. (z)
 
Food Products
 
L+5.75% (7.00%), 5/23/2018
 
10,890

 
10,805

 
10,878

 
0.8
%
Amneal Pharmaceuticals LLC (aa)
 
Biotechnology
 
L+4.75% (5.75%), 11/1/2019
 
11,910

 
11,960

 
11,960

 
0.9
%
Amports, Inc. (ab)
 
Automotive
 
L+5.00% (6.00%), 5/19/2020
 
15,000

 
14,889

 
14,888

 
1.2
%
Answers.com (z)
 
Internet Software & Services
 
L+5.50% (6.50%),12/20/2018
 
14,625

 
14,492

 
14,625

 
1.1
%
AP Gaming I, LLC (z)
 
Hotels, Restaurants & Leisure
 
L+8.25% (9.25%), 12/20/2020
 
9,950

 
9,673

 
10,050

 
0.8
%
Aricent, Inc. (aa)
 
Diversified Consumer Services
 
L+4.50% (5.50%), 4/14/2021
 
7,000

 
7,070

 
7,079

 
0.5
%
Avaya, Inc. (z) (aa)
 
Communications Equipment
 
L+5.50% (6.50%), 3/31/2018
 
18,823

 
18,566

 
18,740

 
1.5
%
BBTS Borrower LP (z) (aa)
 
Oil, Gas & Consumable Fuels
 
L+6.50% (7.75%), 6/4/2019
 
24,688

 
24,782

 
24,891

 
1.9
%
Caesar's Entertainment Resort Properties, LLC (aa)
 
Hotels, Restaurants & Leisure
 
L+6.00% (7.00%), 10/11/2020
 
11,940

 
11,985

 
12,005

 
1.0
%
Caesars Growth Properties Holdings, LLC (aa)
 
Hotels, Restaurants & Leisure
 
L+5.25% (6.25%), 5/8/2021
 
8,000

 
7,993

 
7,995

 
0.6
%
Chicken Soup for the Soul Publishing, LLC (z) (ab)
 
Publishing
 
L+6.00% (7.25%), 1/8/2019
 
30,000

 
29,660

 
29,803

 
2.3
%
Clover Technologies Group, LLC. (z) (aa)
 
Commercial Services & Supplies
 
L+4.50% (5.50%), 5/8/2020
 
22,500

 
22,424

 
22,464

 
1.7
%
Collision Holding Company, LLC
 
Automotive
 
L+7.75% (9.00%), 5/10/2018
 
2,352

 
2,330

 
2,348

 
0.2
%
ConvergeOne Holdings Corp. (aa)
 
Diversified Consumer Services
 
L+5.00% (6.00%), 6/17/2020
 
20,000

 
19,800

 
19,934

 
1.5
%
Corner Investment Propco, LLC (aa)
 
Hotels, Restaurants & Leisure
 
L+9.75% (11.00%), 11/2/2019
 
9,000

 
9,225

 
9,225

 
0.7
%
Creative Circle, LLC (z)
 
Professional Services
 
L+4.50% (5.50%), 6/25/2020
 
20,000

 
19,800

 
19,800

 
1.5
%
ECI Acquisition Holdings, Inc. (k) (z)
 
Technology - Enterprise Solutions
 
L+5.25% (8.50%), 3/11/2019
 
12,382

 
12,324

 
12,285

 
1.0
%
Epic Health Services, Inc. (z)
 
Health Care Providers & Services
 
L+5.25% (6.50%), 10/16/2019
 
13,650

 
13,532

 
13,551

 
1.0
%
ERG Holding Company (z) (ad)
 
Health Care Providers & Services
 
L+6.75% (8.00%), 4/4/2019
 
14,726

 
14,446

 
14,421

 
1.1
%
Excelitas Technologies Corp. (z) (aa)
 
Electronic Equipment, Instruments & Components
 
L+5.00% (6.00%), 11/2/2020
 
24,549

 
24,548

 
24,693

 
1.9
%
Expera Specialty Solutions, LLC (z) (aa)
 
Paper & Forest Products
 
L+6.25% (7.50%), 12/26/2018
 
14,850

 
14,769

 
14,961

 
1.2
%
EZE Trucking, Inc. (d) (n) (z)
 
Road & Rail
 
L+11.75% (12.00%), 7/31/2018
 
12,480

 
12,430

 
12,014

 
1.0
%
Global Telecom & Technology, Inc. (z)
 
Internet Software & Services
 
L+5.50% (6.50%), 3/31/2016
 
7,200

 
7,128

 
7,196

 
0.6
%
GTCR Valor Companies, Inc. (aa)
 
Software
 
L+5.00% (6.00%), 5/30/2021
 
6,831

 
6,762

 
6,788

 
0.5
%

6
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
CONSOLIDATED SCHEDULE OF INVESTMENTS
(dollars in thousands)


June 30, 2014
(Unaudited)
Portfolio Company (a) (q)
 
Industry
 
Investment Coupon Rate/Maturity
 
Principal / Number of Shares
 
Amortized Cost
 
Fair Value (c)
 
% of Net Assets
Hanna Anderson, LLC (z)
 
Retailers (except food & drug)
 
L+7.25% (8.25%), 4/21/2019
 
$
15,000

 
$
14,856

 
$
14,908

 
1.2
%
Henniges Automotive Holdings, Inc (aa)
 
Automotive
 
L+5.00% (6.00%), 6/12/2021
 
13,000

 
12,870

 
13,098

 
1.0
%
Ikaria Acquisitions, Inc. (aa)
 
Biotechnology
 
L+4.00% (5.00%), 2/12/2021
 
13,500

 
13,581

 
13,578

 
1.1
%
ILC Dover LP (z)
 
Aerospace & Defense
 
L+5.50% (6.50%), 3/20/2020
 
14,906

 
14,835

 
14,800

 
1.1
%
InMotion Entertainment Group, LLC (z) (ae)
 
Retailers (except food & drug)
 
L+7.75% (9.00%), 10/1/2018
 
10,000

 
9,835

 
9,936

 
0.8
%
IntegraMed America, Inc. (z)
 
Health Care Providers & Services
 
L+7.25% (8.50%), 9/20/2017
 
3,876

 
3,821

 
3,818

 
0.3
%
Integrity Neutraceuticals (z) (ab)
 
Food Products
 
L+8.75% (9.75%), 12/17/2018
 
35,000

 
34,326

 
34,570

 
2.7
%
IPC Systems, Inc. (aa)
 
Diversified Telecommunication Services
 
L+5.00% (6.00%), 11/8/2020
 
13,500

 
13,525

 
13,525

 
1.0
%
Jackson Hewitt, Inc. (z) (aa)
 
Diversified Consumer Services
 
L+8.50% (10.00%), 10/16/2017
 
21,032

 
20,928

 
20,874

 
1.6
%
K2 Pure Solutions NoCal, L.P. (z)
 
Chemicals
 
L+6.00% (7.00%), 8/19/2019
 
10,000

 
9,828

 
9,859

 
0.8
%
Kahala Ireland OpCo LLC (o)
 
Aerospace & Defense
 
L+8.00% (13.00%), 12/23/2028
 
14,240

 
14,240

 
14,240

 
1.1
%
Kahala US OpCo LLC (d) (o)
 
Aerospace & Defense
 
L+8.00% (13.00%), 12/23/2028
 
20,490

 
20,490

 
20,490

 
1.6
%
Land Holdings I, LLC
 
Hotels, Restaurants & Leisure
 
12.00%, 6/26/2019
 
30,000

 
29,401

 
29,400

 
2.3
%
Liquidnet Holdings, Inc (z) (aa)
 
Capital Markets
 
L+6.75% (7.75%), 5/22/2019
 
19,000

 
18,868

 
18,834

 
1.5
%
MCS AMS Sub-Holdings LLC (aa)
 
Real Estate Management & Development
 
L+6.00% (7.00%), 10/15/2019
 
14,719

 
14,242

 
14,240

 
1.1
%
Med-Data Incorporated (ab)
 
Health Care Providers & Services
 
L+7.25% (8.25%), 11/22/2018
 
14,608

 
14,402

 
14,422

 
1.1
%
Miller Heiman, Inc. (z) (aa)
 
Media
 
L+5.75% (6.75%), 9/30/2019
 
28,819

 
27,888

 
27,695

 
2.1
%
Motorsports Aftermarket Group (aa)
 
Automotive
 
L+4.00% (5.00%), 5/14/2021
 
25,000

 
23,280

 
23,500

 
1.8
%
National Technical Systems, Inc. (v) (z)
 
Professional Services
 
L+6.00% (7.25%), 11/22/2018
 
18,703

 
18,565

 
18,560

 
1.4
%
New Media Holdings II, LLC
 
Publishing
 
L+6.25% (7.25%), 6/3/2020
 
22,000

 
21,564

 
21,560

 
1.7
%
NextCare, Inc. (m) (z) (ab)
 
Health Care Providers & Services
 
L+5.75% (7.00%), 10/10/2017
 
19,412

 
19,165

 
19,176

 
1.5
%
North Atlantic Trading Company, Inc. (aa)
 
Food Products
 
L+6.50% (7.75%), 1/13/2020
 
19,903

 
19,846

 
20,027

 
1.5
%
NXT Capital, LLC (z) (aa)
 
Commercial Banks
 
L+5.25% (6.25%), 9/4/2018
 
19,850

 
19,816

 
19,949

 
1.5
%
Otter Box Holdings, Inc. (aa)
 
Electronic Equipment, Instruments & Components
 
L+4.75% (5.75%), 6/3/2020
 
15,000

 
14,890

 
14,860

 
1.1
%
Pelican Products, Inc. (aa)
 
Containers, Packaging and Glass
 
L+4.25% (5.25%), 4/10/2020
 
9,975

 
10,037

 
10,037

 
0.8
%
PeopLease Holdings, LLC (z)
 
Commercial Services & Supplies
 
L+10.00% (11.00%), 12/26/2018
 
10,000

 
9,820

 
10,218

 
0.8
%
Premier Dental Services, Inc. (z) (aa)
 
Health Care Providers & Services
 
L+5.00% (6.00%), 11/1/2018
 
24,890

 
24,765

 
24,921

 
1.9
%
Pre-Paid Legal Services, Inc. (z) (aa)
 
Diversified Consumer Services
 
L+5.00% (6.25%), 7/1/2019
 
18,575

 
18,636

 
18,760

 
1.5
%

7
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
CONSOLIDATED SCHEDULE OF INVESTMENTS
(dollars in thousands)


June 30, 2014
(Unaudited)
Portfolio Company (a) (q)
 
Industry
 
Investment Coupon Rate/Maturity
 
Principal / Number of Shares
 
Amortized Cost
 
Fair Value (c)
 
% of Net Assets
RedPrairie Corp. (aa)
 
Software
 
L+5.00% (6.00%), 12/21/2018
 
$
17,413

 
$
17,388

 
$
17,405

 
1.3
%
Resco Products, Inc. (z)
 
Steel
 
L+6.00% (6.25%), 9/7/2016
 
10,000

 
9,880

 
9,875

 
0.8
%
SI Organization, Inc. (aa) (af)
 
Aerospace & Defense
 
L+4.75% (5.75%), 11/23/2019
 
11,923

 
11,945

 
11,945

 
0.9
%
St. George's University Scholastic Services LLC (aa)
 
Diversified Consumer Services
 
L+7.00% (8.50%), 12/20/2017
 
5,617

 
5,652

 
5,652

 
0.4
%
Sterling Infosystems, Inc. (aa)
 
Business Equipment & Services
 
L+4.50% (5.50%), 5/13/2021
 
7,500

 
7,528

 
7,519

 
0.6
%
STG-Fairway Acquisitions, Inc. (aa)
 
Professional Services
 
L+5.00% (6.25%), 2/28/2019
 
14,867

 
14,823

 
14,812

 
1.1
%
SunGard Availability Services Capital, Inc. (aa)
 
Business Equipment & Services
 
L+5.00% (6.00%), 3/29/2019
 
9,975

 
9,876

 
9,894

 
0.8
%
TASC Advisory Services (aa)
 
Aerospace & Defense
 
L+5.50% (6.50%), 5/22/2020
 
7,000

 
6,852

 
6,851

 
0.5
%
The Tennis Channel Holdings, Inc. (d) (ab)
 
Media
 
L+8.50% (8.81%), 5/29/2017
 
15,518

 
15,173

 
15,221

 
1.2
%
Therakos, Inc. (aa)
 
Biotechnology
 
L+6.25% (7.50%), 12/27/2017
 
7,298

 
7,325

 
7,325

 
0.6
%
Totes Isotoner Corp (aa)
 
Retailers (except food & drug)
 
L+4.25% (5.25%), 5/1/2021
 
10,000

 
10,000

 
10,006

 
0.8
%
Trimark USA, LLC (z)
 
Food Products
 
L+6.25% (7.25%), 5/11/2019
 
13,466

 
13,340

 
13,466

 
1.0
%
Trojan Battery (z)
 
Automotive
 
L+4.75% (5.75%), 6/12/2021
 
22,000

 
21,780

 
21,890

 
1.7
%
United Central Industrial Supply Company, LLC (z) (aa)
 
Commercial Services & Supplies
 
L+6.25% (7.50%), 10/9/2018
 
8,865

 
8,744

 
8,865

 
0.7
%
US Shipping LLC (aa)
 
Marine
 
L+7.75% (9.00%), 4/30/2018
 
11,619

 
11,807

 
11,798

 
0.9
%
Valence Surface Technologies (ac)
 
Aerospace & Defense
 
L+5.50% (6.50%), 6/13/2019
 
8,928

 
8,863

 
8,862

 
0.7
%
Vestcom International, Inc. (aa)
 
Media
 
L+4.50% (5.75%), 12/26/2018
 
8,615

 
8,619

 
8,619

 
0.7
%
WBL SPE I., LLC (l)
 
Consumer Finance
 
15.00%, 9/30/2016
 
4,500

 
4,455

 
4,500

 
0.3
%
Sub Total Senior Secured First Lien Debt
 
 
 
 
 
 
 
$
1,076,341

 
$
1,079,851

 
83.5
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Senior Secured Second Lien Debt - 13.5% (b)
 
 
 
 
 
 
 
 
 
 
 
 
Ability Networks Inc. (ab)
 
Health Care Providers & Services
 
L+8.25% (9.25%), 5/16/2022
 
$
15,000

 
$
14,852

 
$
15,000

 
1.2
%
Boston Market Corporation (ab)
 
Hotels, Restaurants & Leisure
 
L+7.63% (8.63%), 12/16/2018
 
24,875

 
24,542

 
24,634

 
1.9
%
CIG Financial, LLC
 
Consumer Finance
 
10.50%, 6/30/2019
 
15,000

 
14,850

 
14,850

 
1.1
%
CPX Interactitve Holdings, LP
 
Publishing
 
L+10.00% (11.00%), 3/26/2018
 
20,000

 
18,748

 
18,487

 
1.4
%
CREDITCORP (ab)
 
Consumer Finance
 
12.00%, 7/15/2018
 
13,250

 
13,176

 
14,045

 
1.1
%
H.D. Vest, Inc. (ab)
 
Diversified Consumer Services
 
L+8.00% (9.25%), 6/18/2019
 
8,750

 
8,660

 
8,734

 
0.7
%
High Ridge Brands Co.
 
Retailers (except food & drug)
 
L+8.50% (9.50%), 4/11/2020
 
22,500

 
22,175

 
22,163

 
1.7
%
Interblock USA L.C. (ab)
 
Electronic Equipment, Instruments & Components
 
L+8.75% (9.75%), 3/28/2018
 
23,000

 
22,569

 
22,508

 
1.7
%
Linc Energy Finance USA, Inc. (ab)
 
Oil, Gas & Consumable Fuels
 
12.50%, 10/31/2017
 
9,000

 
8,880

 
9,925

 
0.8
%
NCP Finance Limited Partnership (aa) (ab)
 
Consumer Finance
 
L+9.75% (11.00%), 10/1/2018
 
17,865

 
17,679

 
17,776

 
1.4
%

8
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
CONSOLIDATED SCHEDULE OF INVESTMENTS
(dollars in thousands)


June 30, 2014
(Unaudited)
Portfolio Company (a) (q)
 
Industry
 
Investment Coupon Rate/Maturity
 
Principal / Number of Shares
 
Amortized Cost
 
Fair Value (c)
 
% of Net Assets
Zimbra, Inc. (ab)
 
Software
 
10.75%, 7/1/2016
 
$
6,000

 
$
5,977

 
$
6,145

 
0.5
%
Sub Total Senior Secured Second Lien Debt
 
 
 
 
 
 
 
$
172,108

 
$
174,267

 
13.5
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Subordinated Debt - 3.7% (b)
 
 
 
 
 
 
 
 
 
 
 
 
Gold, Inc. (d) (ab)
 
Textiles, Apparel & Luxury Goods
 
15.00%, 6/30/2019
 
$
12,163

 
$
11,952

 
$
11,974

 
0.9
%
Park Ave RE Holdings, LLC (d) (o)
 
Real Estate Management & Development
 
L+8.00% (13.00%), 12/29/2017
 
5,158

 
5,158

 
5,158

 
0.4
%
S.B. Restaurant Co., Inc. (d) (e) (t)
 
Hotels, Restaurants & Leisure
 
1/10/2018
 
4,050

 
3,974

 
—

 
—
%
S.B. Restaurant Co., Inc. - Senior Subordinated Debt (e) (t)
 
Hotels, Restaurants & Leisure
 
1/10/2018
 
134

 
88

 
—

 
—
%
Vestcom Acquisition, Inc. (ab)
 
Media
 
12.00%, 6/26/2019
 
7,500

 
7,438

 
7,621

 
0.6
%
Visionary Integration Professionals, LLC (ab)
 
IT Services
 
13.00%, 12/3/2018
 
11,128

 
10,044

 
10,094

 
0.8
%
Xplornet Communications, Inc.
 
Diversified Telecommunication Services
 
13.00%, 10/25/2020
 
10,648

 
10,648

 
10,578

 
0.8
%
Zimbra, Inc.
 
Software
 
12.00%, 7/10/2018
 
2,000

 
2,000

 
2,000

 
0.2
%
Sub Total Subordinated Debt
 
 
 
 
 
 
 
$
51,302

 
$
47,425

 
3.7
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Collateralized Securities - 24.1% (b)
 
 
 
 
 
 
 
 
 
 
 
 
Apidos XVI CLO, LTD. Subordinated Notes (p)
 
Diversified Investment Vehicles
 
1/19/2025
 
$
15,000

 
$
13,650

 
$
13,519

 
1.0
%
B&M CLO 2014-1, LTD. Subordinated Notes (p)
 
Diversified Investment Vehicles
 
4/16/2026
 
40,250

 
35,420

 
34,651

 
2.7
%
CVP Cascade CLO, LTD. Subordinated Notes (p)
 
Diversified Investment Vehicles
 
1/16/2026
 
31,000

 
24,843

 
23,896

 
1.8
%
CVP Cascade CLO-2, LTD. Subordinated Notes (e) (p)
 
Diversified Investment Vehicles
 
1/13/2015
 
18,000

 
18,000

 
18,000

 
1.4
%
Figueroa CLO 2014-1, LTD. Subordinated Notes (e) (p) (aj)
 
Diversified Investment Vehicles
 
6/30/2021
 
18,600

 
18,600

 
18,600

 
1.4
%
Garrison Funding 2013 - 1 Ltd. Subordinated Notes (e) (p)
 
Diversified Investment Vehicles
 
9/30/2023
 
15,000

 
15,000

 
15,000

 
1.2
%
MidOcean Credit CLO II, LLC (p)
 
Diversified Investment Vehicles
 
1/15/2024
 
37,600

 
34,058

 
33,011

 
2.6
%
MidOcean Credit CLO III, LLC (e) (p)
 
Diversified Investment Vehicles
 
7/22/2026
 
40,250

 
35,420

 
35,420

 
2.7
%
NewStar Arlington Senior Loan Program LLC Subordinated Notes (p)
 
Diversified Investment Vehicles
 
7/25/2025
 
31,603

 
29,514

 
29,498

 
2.3
%
Ocean Trails CLO V, LTD. (e) (p) (ag)
 
Diversified Investment Vehicles
 
5/23/2021
 
15,000

 
15,000

 
15,000

 
1.2
%
OFSI Fund VI, Ltd. - Subordinated Notes (s) (p)
 
Diversified Investment Vehicles
 
3/20/2025
 
38,000

 
32,895

 
31,542

 
2.4
%
Related Fee Agreements (s)
 
Diversified Investment Vehicles
 
 
 
8,570

 
8,287

 
8,209

 
0.6
%
Silver Spring CLO, Ltd. (e) (p) (ah)
 
Diversified Investment Vehicles
 
9/30/2014
 
5,560

 
5,560

 
5,560

 
0.4
%
WhiteHorse VIII, Ltd. CLO Subordinated Notes (p)
 
Diversified Investment Vehicles
 
5/1/2026
 
36,000

 
30,690

 
30,065

 
2.4
%
Sub Total Collateralized Securities
 
 
 
 
 
 
 
$
316,937

 
$
311,971

 
24.1
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity/Other - 12.5% (b)
 
 
 
 
 
 
 
 
 
 
 
 
Carlyle GMS Finance, Inc. (i)
 
Diversified Investment Vehicles
 
 
 
$
2,371

 
$
2,371

 
$
2,371

 
0.2
%

9
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
CONSOLIDATED SCHEDULE OF INVESTMENTS
(dollars in thousands)


June 30, 2014
(Unaudited)
Portfolio Company (a) (q)
 
Industry
 
Investment Coupon Rate/Maturity
 
Principal / Number of Shares
 
Amortized Cost
 
Fair Value (c)
 
% of Net Assets
CPX Interactive Holdings, LP - Series A Convertible Preferred Shares (d) (e) (u)
 
Publishing
 
8.00%
 
6

 
$
6,000

 
$
6,000

 
0.5
%
CPX Interactive Holdings, LP - Warrants (e) (u)
 
Publishing
 
 
 
317

 
1,087

 
1,202

 
0.1
%
Crowley Holdings, Inc. - Series A Preferred Stock (d)
 
Marine
 
12.00%
 
25

 
25,262

 
25,480

 
2.0
%
Danish CRJ LTD. (e) (p) (r)
 
Aerospace & Defense
 
 
 
$
500

 
500

 
500

 
—
%
Evolution Research Group - Preferred Equity (e)
 
Health Care Providers & Services
 
8.00%
 
$
500

 
500

 
421

 
—
%
Fifth Street Senior Loan Fund I, LLC (e) (p) (al)
 
Diversified Investment Vehicles
 
 
 
$
19,357

 
19,357

 
19,357

 
1.5
%
HIG Integrity Nutraceuticals (e)
 
Food Products
 
 
 
$
1,630

 
1,630

 
1,636

 
0.1
%
Kahala Ireland OpCo LLC. (e) (o) (y)
 
Aerospace & Defense
 
 
 
$
100

 
100

 
100

 
—
%
Kahala US OpCo LLC (e) (o) (x)
 
Aerospace & Defense
 
13.00%
 
$
6,757

 
6,757

 
6,196

 
0.5
%
MBLOX Inc. - Warrants (e)
 
Internet Software & Services
 
 
 
1,531

 
—

 
721

 
0.1
%
NMFC Senior Loan Program I, LLC (e) (p) (ai)
 
Diversified Investment Vehicles
 
 
 
$
25,000

 
25,000

 
25,000

 
2.0
%
Park Ave Holdings, LLC. (e) (o) (w)
 
Real Estate Management & Development
 
13.00%
 
$
7,802

 
7,802

 
8,415

 
0.7
%
PennantPark Credit Opportunity Fund, LP (g) (p)
 
Diversified Investment Vehicles
 
 
 
$
10,000

 
10,000

 
10,923

 
0.8
%
S.B. Restaurant Co., Inc. - Warrants (e)
 
Hotels, Restaurants & Leisure
 
 
 
—

 
—

 
—

 
—
%
SkyCross Inc. - Warrants (e)
 
Electronic Equipment, Instruments & Components
 
 
 
2,254

 
—

 
450

 
—
%
South Grand MM CLO I, LLC (p) (ak)
 
Diversified Investment Vehicles
 
 
 
$
22,209

 
21,903

 
22,209

 
1.7
%
Tennenbaum Waterman Fund, L.P. (f)
 
Diversified Investment Vehicles
 
 
 
$
8,396

 
8,396

 
8,307

 
0.6
%
The SAVO Group, Ltd. - Warrants (e)
 
Internet Software & Services
 
 
 
138

 
—

 
785

 
0.1
%
THL Credit Greenway Fund II LLC (h) (p)
 
Diversified Investment Vehicles
 
 
 
$
11,277

 
11,277

 
11,907

 
0.9
%
Visionary Integration Professionals, LLC - Warrants (e) (u)
 
IT Services
 
 
 
657

 
911

 
1,077

 
0.1
%
World Business Lenders, LLC (e)
 
Consumer Finance
 
 
 
$
3,750

 
3,750

 
3,359

 
0.3
%
Xplornet Communications Inc. - Warrants (e)
 
Diversified Telecommunication Services
 
 
 
10

 
—

 
2,623

 
0.2
%
Zimbra, Inc. - Warrants (Second Lien Debt) (e)
 
Software
 
 
 
535

 
—

 
248

 
—
%
Zimbra, Inc. - Warrants (Third Lien Bridge Note) (e)
 
Software
 
 
 
1,000

 
—

 
1,324

 
0.1
%
Sub Total Equity/Other
 
 
 
 
 
 
 
$
152,603

 
$
160,611

 
12.5
%
 
 
 
 
 
 
 
 
 
 
 
 
 
TOTAL INVESTMENTS - 137.3% (b)
 
 
 
 
 
 
 
$
1,769,291

 
$
1,774,125

 
137.3
%

10
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
CONSOLIDATED SCHEDULE OF INVESTMENTS
(dollars in thousands)


_____________

(a)
All of the Company's investments are issued by eligible portfolio companies, as defined in the Investment Company Act of 1940, as amended (the "1940 Act"), except Apidos XVI CLO, LTD. Subordinated Notes, B&M CLO 2014-1, LTD. Subordinated Notes, Caesar's Entertainment Resort Properties, LLC, Caesar's Growth Properties Holdings, LLC, Carlyle GMS Finance, Inc., Corner Investment Propco, LLC, CVP Cascade CLO, LTD. Subordinated Notes, CVP Cascade CLO-2, LTD. Subordinated Notes, Danish CRJ LTD., Fifth Street Senior Loan Fund I, LLC, Figueroa CLO 2014-1, LTD. Subordinated Notes, Garrison Funding 2013-1 Ltd. Subordinated Notes, Global Telecom & Technology, Inc., Kahala Ireland OpCo LLC, Liquidnet Holdings, Inc., MidOcean Credit CLO II, LLC, MidOcean Credit CLO III, LLC, New Media Holdings II, LLC, NewStar Arlington Senior Loan Program, LLC Subordinated Notes, NMFC Senior Loan Program I, LLC, NXT Capital LLC, Ocean Trails CLO V, LTD., OFSI Fund VI, Ltd. Subordinated Notes, PennantPark Credit Opportunity Fund LP, Related Fee Agreements, Silver Spring CLO, Ltd., South Grand MM CLO I, LLC, St. George's University Scholastic Services LLC, Tennenbaum Waterman Fund, L.P., THL Credit Greenway Fund II LLC, WhiteHorse VIII, Ltd. CLO Subordinated Notes, and Xplornet Communications, Inc.
(b)
Percentages are based on net assets of $ 1,292,359 thousand as of June 30, 2014 .
(c)
Because there is no readily available market value for these investments, the fair value of these investments is determined in good faith by the Company's board of directors as required by the 1940 Act. (See Note 3 to the financial statements).
(d)
Terms of loan include PIK interest.
(e)
Non-income producing at June 30, 2014 .
(f)
The Company has committed to fund $10.0 million in Tennenbaum Waterman Fund, L.P. over a period ending no later than September 2015. The remaining commitment as of June 30, 2014 was $1.6 million.
(g)
The investment is subject to a three year lock-up restriction on withdrawals in year 4.
(h)
The Company has committed to fund $20.0 million in THL Credit Greenway II LLC over a period ending no later than March 2015. The remaining commitment as of June 30, 2014 was $8.1 million.
(i)
The Company has committed to fund $10.0 million in Carlyle GMS Finance, Inc. The remaining commitment as of June 30, 2014 was $7.6 million.
(j)
The Company has committed to fund a delayed draw term loan of $2.4 million in ABRA, Inc. The remaining commitment as of June 30, 2014 was $0.2 million.
(k)
The Company has committed to fund a delayed draw term loan of $2.6 million in ECI Acquisition Holdings, Inc. The remaining commitment as of June 30, 2014 was $2.6 million.
(l)
The Company has committed to fund a delayed draw term loan of $15.0 million in WBL SPE I, LLC. The remaining commitment as of June 30, 2014 was $10.5 million.
(m)
The Company has committed to fund a delayed draw term loan of $7.8 million in NextCare, Inc. The remaining commitment as of June 30, 2014 was $5.0 million.
(n)
The Company has committed to fund a delayed draw term loan of $2.0 million in EZE Trucking, Inc. The remaining commitment as of June 30, 2014 was $2.0 million.
(o)
The Company's investments are classified in accordance with the requirements of the 1940 Act. Under the 1940 Act, “Control Investments” are defined as investments in companies in which the Company owns more than 25% of the voting securities, maintains greater than 50% of the board representation or has the power to exercise control over the management or policies of such portfolio company.
(p)
The Company's investments are classified in accordance with the requirements of the 1940 Act. Under the 1940 Act, “Affiliated Investments” are defined as those non-control investments in companies in which the Company owns between 5% and 25% of the voting securities.
(q)
The Company's investments are classified in accordance with the requirements of the 1940 Act. Under the 1940 Act, "Non-affiliated Investments" are defined as investments that are neither Control Investments nor Affiliated Investments. The Company classifies all investments within the Consolidated Schedule of Investments which are not classified as Control Investments or Affiliated Investments as Non-affiliated Investments.
(r)
The Company's investment is held through the Consolidated Holding Company, Kahala Aviation Holdings, LLC, which owns 49% of the operating company, Danish CRJ LTD.
(s)
Related Fee Agreements consists of one investment with a fair value of $1,512 thousand that is classified as a Non-affiliated Investment and three investments with a total fair value of $6,697 thousand that are classified as Affiliated Investments.
(t)
The investment is on non-accrual status as of June 30, 2014 .
(u)
Investments are held in the taxable wholly-owned, consolidated subsidiary, 54 th Street Equity Holdings, Inc.
(v)
The Company has committed to fund a delayed draw term loan of $7.5 million in National Technical Systems, Inc. The remaining commitment as of June 30, 2014 was $1.3 million.
(w)
The Company's investment is held through the consolidated subsidiary, Park Ave RE, Inc., which owns 100% of the equity of the operating company, Park Ave RE Holdings, LLC.
(x)
The Company's investment is held through the consolidated subsidiaries, Kahala Aviation Holdings, LLC and Kahala Aviation US, Inc. which own 100% of the equity of the operating company, Kahala US OpCo LLC.
(y)
The Company's investment is held through the consolidated subsidiaries, Kahala Aviation Holdings, LLC and Kahala Luxco, which own 100% of the equity of the operating company, Kahala Ireland OpCo LLC.
(z)
The Company's investment or a portion thereof is pledged as collateral under the Wells Fargo Credit Facility. Individual investments can be divided into parts which are pledged to separate credit facilities.
(aa)
The Company's investment or a portion thereof is pledged as collateral under the Citi Credit Facility. Individual investments can be divided into parts which are pledged to separate credit facilities.
(ab)
The Company's investment or a portion thereof is pledged as collateral under the Deutsche Bank Credit Facility. Individual investments can be divided into parts which are pledged to separate credit facilities.
(ac)
The Company has committed to fund a delayed draw term loan of $1.4 million in Valence Surface Technologies. The remaining commitment as of June 30, 2014 was $1.1 million.
(ad)
The Company has committed to fund a delayed draw term loan of $10.2 million in ERG Holding Company. The remaining commitment as of June 30, 2014 was $10.2 million.
(ae)
The Company has committed to fund a delayed draw term loan of $2.2 million in InMotion Entertainment Group, LLC. The remaining commitment as of June 30, 2014 was $2.1 million.
(af)
The Company has committed to fund a delayed draw term loan of $1.6 million in SI Organization, Inc. The remaining commitment as of June 30, 2014 was $1.6 million.
(ag)
The Company has committed to fund a collateralized security of $40.0 million in Ocean Trails CLO V, Ltd. The remaining commitment as of June 30, 2014 was $25.0 million.

11
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
CONSOLIDATED SCHEDULE OF INVESTMENTS
(dollars in thousands)


(ah)
The Company has committed to fund a collateralized security of $25.0 million in Silver Spring CLO, Ltd. The remaining commitment as of June 30, 2014 was $19.4 million.
(ai)
The Company has committed to fund $50.0 million in NMFC Senior Loan Program I, LLC. The remaining commitment as of June 30, 2014 was $25.0 million.
(aj)
The Company has committed to fund a collateralized security of $37.2 million in Figueroa CLO 2014-1, Ltd. The remaining commitment as of June 30, 2014 was $18.6 million.
(ak)
The Company has committed to fund $35.0 million in South Grand MM CLO I, LLC. The remaining commitment as of June 30, 2014 was $12.8 million.
(al)
The Company has committed to fund $35.0 million in Fifth Street Senior Loan Fund I, LLC. The remaining commitment as of June 30, 2014 was $15.6 million.










12
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
CONSOLIDATED SCHEDULE OF INVESTMENTS
(dollars in thousands)


The following table shows the portfolio composition by industry grouping based on fair value at June 30, 2014 (dollars in thousands):

 
At June 30, 2014
 
Investments at
Fair Value
 
Percentage of
Total Portfolio
Diversified Investment Vehicles
$
412,045

 
23.2
%
Health Care Providers & Services
120,655

 
6.8
%
Hotels, Restaurants & Leisure
93,309

 
5.3
%
Aerospace & Defense
89,780

 
5.1
%
Automotive
88,222

 
5.0
%
Diversified Consumer Services
81,033

 
4.5
%
Food Products
80,577

 
4.5
%
Media
78,834

 
4.4
%
Publishing
77,052

 
4.3
%
Electronic Equipment, Instruments & Components
62,511

 
3.5
%
Retailers (except food & drug)
57,013

 
3.2
%
Consumer Finance
54,530

 
3.1
%
Professional Services
53,172

 
3.0
%
Commercial Services & Supplies
41,547

 
2.3
%
Marine
37,278

 
2.1
%
Oil, Gas & Consumable Fuels
34,816

 
2.0
%
Software
33,910

 
1.9
%
Biotechnology
32,863

 
1.9
%
Real Estate Management & Development
27,813

 
1.5
%
Diversified Telecommunication Services
26,726

 
1.5
%
Internet Software & Services
23,327

 
1.3
%
Commercial Banks
19,949

 
1.1
%
Capital Markets
18,834

 
1.1
%
Communications Equipment
18,740

 
1.1
%
Business Equipment & Services
17,413

 
1.0
%
Paper & Forest Products
14,961

 
0.8
%
Technology - Enterprise Solutions
12,285

 
0.7
%
Road & Rail
12,014

 
0.7
%
Textiles, Apparel & Luxury Goods
11,974

 
0.7
%
IT Services
11,171

 
0.6
%
Containers, Packaging and Glass
10,037

 
0.6
%
Steel
9,875

 
0.6
%
Chemicals
9,859

 
0.6
%
Total
$
1,774,125

 
100.0
%













13
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
CONSOLIDATED SCHEDULE OF INVESTMENTS
(dollars in thousands)


December 31, 2013
Portfolio Company (a) (q)
 
Industry
 
Investment Coupon Rate/Maturity
 
Principal / Number of Shares
 
Amortized Cost
 
Fair Value (c)
 
% of Net Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
Senior Secured First Lien Debt - 53.2% (b)
 
 
 
 
 
 
 
 
 
 
 
 
Adventure Interactive Corp.
 
Media
 
L+6.75% (8.00%), 3/22/2018
 
$
19,873

 
$
19,590

 
$
19,575

 
3.1
%
American Dental Partners, Inc.
 
Health Care Providers & Services
 
L+5.00% (6.00%), 2/9/2018
 
3,895

 
3,836

 
3,817

 
0.6
%
American Importing Company, Inc.
 
Food Products
 
L+5.75% (7.00%), 5/23/2018
 
10,945

 
10,849

 
10,933

 
1.7
%
Answers.com
 
Internet Software & Services
 
L+5.50% (6.50%), 12/20/2018
 
15,000

 
14,850

 
14,850

 
2.4
%
AP Gaming I, LLC
 
Hotels, Restaurants & Leisure
 
L+8.25% (9.25%), 12/18/2020
 
10,000

 
9,700

 
9,700

 
1.5
%
Avaya, Inc.
 
Communications Equipment
 
L+4.50% (4.79%), 10/26/2017
 
3,933

 
3,616

 
3,842

 
0.6
%
BBTS Borrower LP
 
Oil, Gas & Consumable Fuels
 
L+6.50% (7.75%), 6/4/2019
 
5,955

 
5,900

 
5,985

 
1.0
%
Creative Circle, LLC
 
Professional Services
 
L+5.25% (6.50%), 9/28/2017
 
7,697

 
7,573

 
7,735

 
1.2
%
CST Industries, Inc.
 
Machinery
 
L+6.25% (7.75%), 5/23/2017
 
3,700

 
3,667

 
3,608

 
0.6
%
Epic Health Services
 
Health Care Providers & Services
 
L+5.25% (6.50%), 10/16/2018
 
14,000

 
13,865

 
13,899

 
2.2
%
Excelitas Technologies Corp.
 
Electronic Equipment, Instruments & Components
 
L+5.00% (6.00%), 10/25/2020
 
7,402

 
7,329

 
7,433

 
1.2
%
Expera Specialty Solutions, LLC
 
Paper & Forest Products
 
L+6.25% (7.50%), 7/28/2018
 
7,960

 
7,812

 
8,040

 
1.3
%
EZE Trucking, Inc. (d) (n)
 
Road & Rail
 
L+11.75% (12.00%), 7/31/2018
 
12,411

 
12,354

 
12,147

 
1.9
%
FairPay Solutions Inc. Term Loan A
 
Health Care Providers & Services
 
L+5.75% (7.00%), 1/16/2015
 
2,350

 
2,337

 
2,350

 
0.4
%
FairPay Solutions Inc. Term Loan B
 
Health Care Providers & Services
 
L+6.50% (8.00%), 1/16/2015
 
7,500

 
7,459

 
7,500

 
1.2
%
Global Telecom & Technology, Inc.
 
Internet Software & Services
 
L+5.50% (6.50%), 3/31/2016
 
7,600

 
7,524

 
7,559

 
1.2
%
HIG Integrity Neutraceuticals
 
Food Products
 
L+8.75% (9.75%), 12/17/2018
 
23,000

 
22,658

 
22,655

 
3.6
%
Ikaria Acquisitions, Inc.
 
Biotechnology
 
L+6.00% (7.25%), 7/31/2018
 
5,850

 
5,769

 
5,876

 
0.9
%
Jackson Hewitt, Inc.
 
Diversified Consumer Services
 
L+8.50% (10.00%), 10/16/2017
 
13,328

 
13,254

 
13,195

 
2.1
%
K2 Pure Solutions NoCal, L.P.
 
Chemicals
 
L+6.00% (7.00%), 8/19/2019
 
10,000

 
9,812

 
9,728

 
1.5
%
Kahala US OpCo LLC (o)
 
Aerospace & Defense
 
L+8.00% (13.00%), 12/23/2028
 
15,860

 
15,860

 
15,860

 
2.5
%
Miller Heiman
 
Media
 
L+5.75% (6.75%), 9/30/2018
 
15,250

 
14,810

 
15,174

 
2.4
%
Mitel Networks Corp.
 
Communications Equipment
 
L+5.75% (7.00%), 2/27/2019
 
3,570

 
3,538

 
3,570

 
0.6
%
National Technical Systems, Inc.
 
Professional Services
 
L+5.50% (6.75%), 11/22/2018
 
12,500

 
12,378

 
12,375

 
2.0
%
NextCare, Inc. (m)
 
Health Care Providers & Services
 
L+5.50% (6.75%), 10/10/2017
 
17,492

 
17,246

 
17,272

 
2.8
%
NXT Capital LLC
 
Commercial Banks
 
L+5.25% (6.25%), 9/4/2018
 
9,975

 
9,881

 
9,875

 
1.6
%
Park Ave RE Holdings, LLC (o)
 
Real Estate Management & Development
 
L+8.00% (13.00%), 12/31/2017
 
9,750

 
9,750

 
9,750

 
1.6
%

14
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
CONSOLIDATED SCHEDULE OF INVESTMENTS
(dollars in thousands)


December 31, 2013
Portfolio Company (a) (q)
 
Industry
 
Investment Coupon Rate/Maturity
 
Principal / Number of Shares
 
Amortized Cost
 
Fair Value (c)
 
% of Net Assets
PeopLease Holdings, LLC
 
Commercial Services & Supplies
 
L+10.00% (11.00%), 12/26/2018
 
$
10,000

 
$
9,801

 
$
9,800

 
1.6
%
Premier Dental Services Inc.
 
Health Care Providers & Services
 
L+7.00% (8.25%), 11/1/2018
 
3,960

 
3,861

 
3,985

 
0.6
%
Pre-Paid Legal Services, Inc.
 
Diversified Consumer Services
 
L+5.00% (6.25%), 7/1/2019
 
7,313

 
7,247

 
7,354

 
1.2
%
Riverboat Corp. of Mississippi
 
Hotels, Restaurants & Leisure
 
L+8.75% (10.00%), 11/29/2016
 
10,000

 
9,846

 
10,025

 
1.6
%
Source Refrigeration & HVAC, Inc.
 
Commercial Services & Supplies
 
L+5.25% (6.75%), 4/30/2017
 
2,783

 
2,752

 
2,735

 
0.4
%
The Tennis Channel Holdings, Inc. (d)
 
Media
 
L+8.50% (8.81%), 5/23/2017
 
15,209

 
14,814

 
14,787

 
2.4
%
Trinity Consultants Holdings, Inc.
 
Commercial Services & Supplies
 
L+5.00% (6.25%), 4/15/2018
 
3,082

 
3,062

 
3,079

 
0.5
%
United Central Industrial Supply Company, LLC
 
Commercial Services & Supplies
 
L+6.25% (7.50%), 10/12/2018
 
3,960

 
3,827

 
3,762

 
0.6
%
WBL SPE I., LLC (l)
 
Consumer Finance
 
15.00%, 9/30/2016
 
3,750

 
3,713

 
3,750

 
0.6
%
Sub Total Senior Secured First Lien Debt
 
 
 
 
 
 
 
$
332,140

 
$
333,580

 
53.2
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Senior Secured Second Lien Debt - 14.5% (b)
 
 
 
 
 
 
 
 
 
 
 
 
Boston Market
 
Hotels, Restaurants & Leisure
 
L+7.75% (8.75%), 12/13/2018
 
$
25,000

 
$
24,628

 
$
24,625

 
3.9
%
CREDITCORP
 
Consumer Finance
 
12.00%, 7/15/2018
 
13,250

 
13,168

 
13,250

 
2.1
%
Eureka Hunter Holdings, LLC
 
Oil, Gas & Consumable Fuels
 
12.50%, 8/16/2018
 
5,000

 
5,000

 
4,969

 
0.8
%
H.D. Vest, Inc.
 
Diversified Consumer Services
 
L+8.00% (9.25%), 6/18/2019
 
8,750

 
8,650

 
8,641

 
1.4
%
Linc Energy Finance USA, Inc.
 
Oil, Gas & Consumable Fuels
 
12.50%, 10/31/2017
 
9,000

 
8,866

 
9,853

 
1.6
%
MBLOX Inc.
 
Internet Software & Services
 
10.75%, 9/28/2016
 
7,000

 
6,970

 
7,011

 
1.1
%
NCP Finance Limited Partnership
 
Consumer Finance
 
L+9.75% (11.00%), 9/25/2015
 
7,980

 
7,827

 
7,940

 
1.3
%
SkyCross, Inc.
 
Electronic Equipment, Instruments & Components
 
11.85%, 4/1/2017
 
5,000

 
4,976

 
4,979

 
0.8
%
Teleflex Marine, Inc. (d)
 
Marine
 
13.50%, 8/24/2017
 
3,332

 
3,272

 
3,399

 
0.5
%
Zimbra, Inc.
 
Software
 
10.75%, 7/11/2016
 
6,000

 
5,974

 
6,137

 
1.0
%
Sub Total Senior Secured Second Lien Debt
 
 
 
 
 
 
 
$
89,331

 
$
90,804

 
14.5
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Subordinated Debt - 9.5% (b)
 
 
 
 
 
 
 
 
 
 
 
 
Gold, Inc. (d)
 
Textiles, Apparel & Luxury Goods
 
15.00%, 12/31/2017
 
$
12,163

 
$
11,938

 
$
11,977

 
1.9
%
S.B. Restaurant Co., Inc. - Senior Subordinated Debt (d) (e)
 
Hotels, Restaurants & Leisure
 
1/10/2018
 
134

 
88

 
88

 
—
%
S.B. Restaurant Co., Inc. (d) (e) (r)
 
Hotels, Restaurants & Leisure
 
14.00%, 1/10/2018
 
4,050

 
3,974

 
2,024

 
0.3
%
The SAVO Group, Ltd.
 
Internet Software & Services
 
10.95%, 3/28/2017
 
5,000

 
4,978

 
5,005

 
0.8
%
Varel International Energy Mezzanine Funding Corp. (d)
 
Oil, Gas & Consumable Fuels
 
14.00%, 1/15/2018
 
10,395

 
10,311

 
11,251

 
1.8
%

15
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
CONSOLIDATED SCHEDULE OF INVESTMENTS
(dollars in thousands)


December 31, 2013
Portfolio Company (a) (q)
 
Industry
 
Investment Coupon Rate/Maturity
 
Principal / Number of Shares
 
Amortized Cost
 
Fair Value (c)
 
% of Net Assets
Vestcom Acquisition, Inc.
 
Media
 
12.00%, 6/26/2019
 
$
7,500

 
$
7,434

 
$
7,525

 
1.2
%
Visionary Integration Professionals, LLC
 
IT Services
 
13.00%, 12/3/2018
 
11,017

 
9,844

 
9,831

 
1.6
%
Xplornet Communications, Inc.
 
Diversified Telecommunication Services
 
13.00%, 12/25/2020
 
10,000

 
10,000

 
10,000

 
1.6
%
Zimbra, Inc.
 
Software
 
12.00%, 7/10/2018
 
2,000

 
2,000

 
2,000

 
0.3
%
Sub Total Subordinated Debt
 
 
 
 
 
 
 
$
60,567

 
$
59,701

 
9.5
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Collateralized Securities - 16.9% (b)
 
 
 
 
 
 
 
 
 
 
 
 
Apidos XVI CLO, LTD. Subordinated Notes (e) (p)
 
Diversified Investment Vehicles
 
1/19/2025
 
$
15,000

 
$
13,650

 
$
13,650

 
2.2
%
Catamaran CLO 2013-1 Ltd. Subordinated Notes (p)
 
Diversified Investment Vehicles
 
1/27/2025
 
19,500

 
17,940

 
20,404

 
3.2
%
CVP Cascade CLO-1, LTD. Subordinated Notes (e) (p)
 
Diversified Investment Vehicles
 
12/20/2020
 
31,000

 
28,086

 
28,086

 
4.5
%
Garrison Funding 2013 - 1 Ltd. Subordinated Notes (e) (p)
 
Diversified Investment Vehicles
 
9/30/2023
 
15,000

 
15,000

 
15,000

 
2.4
%
JMP Credit Advisors CLO II Ltd. Subordinated Notes (p)
 
Diversified Investment Vehicles
 
4/30/2023
 
6,000

 
5,700

 
6,099

 
1.0
%
MC Funding Ltd. Preferred Shares
 
Diversified Investment Vehicles
 
12/20/2020
 
4,000

 
3,366

 
2,163

 
0.3
%
MidOcean Credit CLO II, Ltd. Subordinated Notes (e) (p)
 
Diversified Investment Vehicles
 
1/15/2024
 
20,543

 
20,543

 
20,543

 
3.3
%
Sub Total Collateralized Securities
 
 
 
 
 
 
 
$
104,285

 
$
105,945

 
16.9
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity/Other - 16.7% (b)
 
 
 
 
 
 
 
 
 
 
 
 
Carlyle GMS Finance, Inc. (e) (i)
 
Diversified Investment Vehicles
 
 
 
$
2,221

 
$
2,221

 
$
2,173

 
0.3
%
Crowley Holdings Preferred, LLC - Series A Preferred Shares (d)
 
Marine
 
12.00%
 
25

 
25,000

 
25,000

 
4.0
%
HIG Integrity Neutraceuticals
 
Food Products
 
 
 
$
850

 
850

 
850

 
0.1
%
Kahala Aviation Holdings, LLC (e) (o) (j) (t)
 
Aerospace & Defense
 
 
 
—

 
—

 
—

 
—
%
Kahala Aviation Holdings, LLC - Preferred Shares (e) (o) (t)
 
Aerospace & Defense
 
13.00%
 
$
5,271

 
5,271

 
5,271

 
0.8
%
MBLOX Inc. - Warrants (e)
 
Internet Software & Services
 
 
 
1,531

 
—

 
705

 
0.1
%
NewStar Arlington Fund LLC (p)
 
Diversified Investment Vehicles
 
 
 
$
30,000

 
30,000

 
30,000

 
4.8
%
Park Ave RE, Inc. (e) (o) (s)
 
Real Estate Management & Development
 
 
 
$
33

 
33

 
33

 
—
%
Park Ave RE, Inc. - Preferred Shares (e) (o) (s)
 
Real Estate Management & Development
 
8.00%
 
$
3,218

 
3,218

 
3,218

 
0.5
%
PennantPark Credit Opportunities Fund, LP (g) (p)
 
Diversified Investment Vehicles
 
 
 
$
10,000

 
10,000

 
10,550

 
1.7
%

16
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
CONSOLIDATED SCHEDULE OF INVESTMENTS
(dollars in thousands)


December 31, 2013
Portfolio Company (a) (q)
 
Industry
 
Investment Coupon Rate/Maturity
 
Principal / Number of Shares
 
Amortized Cost
 
Fair Value (c)
 
% of Net Assets
Precision Dermatology, Inc. - Warrants (e)
 
Pharmaceuticals
 
 
 
$
218

 
$
—

 
$
—

 
—
%
S.B. Restaurant Co., Inc. - Warrants (e)
 
Hotels, Restaurants & Leisure
 
 
 
—

 
—

 
—

 
—
%
SkyCross, Inc. - Warrants (e)
 
Electronic Equipment, Instruments & Components
 
 
 
1,127

 
—

 
450

 
0.1
%
South Grand MM CLO I, LLC (e) (p)
 
Diversified Investment Vehicles
 
 
 
$
872

 
872

 
872

 
0.1
%
Tennenbaum Waterman Fund, L.P. (e) (f)
 
Diversified Investment Vehicles
 
 
 
$
8,891

 
8,891

 
9,611

 
1.5
%
The SAVO Group, Ltd. - Warrants (e)
 
Internet Software & Services
 
 
 
138

 
—

 
1,302

 
0.2
%
THL Credit Greenway Fund II LLC (h) (p)
 
Diversified Investment Vehicles
 
 
 
$
8,938

 
8,938

 
9,005

 
1.4
%
Visionary Integration Professionals, LLC - Warrants (e)
 
IT Services
 
 
 
657

 
910

 
910

 
0.1
%
World Business Lenders, LLC (e)
 
Consumer Finance
 
 
 
$
3,750

 
3,750

 
3,751

 
0.6
%
Xplornet Communications Inc. - Warrants (e)
 
Diversified Telecommunication Services
 
 
 
10

 
—

 
—

 
—
%
Zimbra, Inc. - Warrants (Second Lien Debt) (e)
 
Software
 
 
 
535

 
—

 
447

 
0.1
%
Zimbra, Inc. - Warrants (Third Lien Bridge Note) (e)
 
Software
 
 
 
1,000

 
—

 
1,598

 
0.3
%
Sub Total Equity/Other
 
 
 
 
 
 
 
$
99,954

 
$
105,746

 
16.7
%
 
 
 
 
 
 
 
 
 
 
 
 
 
TOTAL INVESTMENTS - 110.8% (b)
 
 
 
 
 
 
 
$
686,277

 
$
695,776

 
110.8
%
     

17
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
CONSOLIDATED SCHEDULE OF INVESTMENTS
(dollars in thousands)


______________

(a)
All of the Company's investments are issued by eligible portfolio companies, as defined in the 1940 Act, except Apidos XVI CLO, LTD. Subordinated Notes, Carlyle GMS Finance, Inc., Catamaran CLO 2013-1 Ltd. Subordinated Notes, CVP Cascade CLO-1, LTD. Subordinated notes, Garrison Funding 2013-1 Ltd. Subordinated Notes, JMP Credit Advisors CLO II Ltd. Subordinated Notes, MC Funding Ltd. Preferred Shares, MidOcean Credit CLO II, Ltd., Mitel Networks Corp., NewStar Arlington Fund, LLC, NXT Capital LLC, PennantPark Credit Opportunities Fund LP, South Grand MM CLO I, LLC, Tennenbaum Waterman Fund, L.P., THL Credit Greenway Fund II LLC, and Xplornet Communications, Inc.
(b)
Percentages are based on net assets of $ 627,903 thousand as of December 31, 2013 .
(c)
Because there is no readily available market value for these investments, the fair value of these investments is determined in good faith by the Company's board of directors as required by the 1940 Act. (See Note 3 to the financial statements).
(d)
Terms of loan include PIK interest.
(e)
Non-income producing at December 31, 2013.
(f)
The Company has committed to fund $10.0 million in Tennenbaum Waterman Fund, L.P. over a period ending no later than September 2015. The remaining commitment as of December 31, 2013 was $1.1 million.
(g)
The investment is subject to a three year lock-up restriction on withdrawals in year 4.
(h)
The Company has committed to fund $20.0 million in THL Credit Greenway II LLC over a period ending no later than March 2015. The remaining commitment as of December 31, 2013 was $11.1 million.
(i)
The Company has committed to fund $10.0 million in Carlyle GMS Finance, Inc. The remaining commitment as of December 31, 2013 was $7.8 million.
(j)
In accordance with subscription agreement executed with Kahala Aviation Holdings, LLC, dated December 23, 2013, the Company owns 84 common units of shares.
(k)
The Company has committed to fund a delayed draw term loan of $7.5 million in National Technical Systems, Inc. The remaining commitment as of December 31, 2013 was $7.5 million.
(l)
The Company has committed to fund a delayed draw term loan of $15.0 million in WBL SPE I, LLC. The remaining commitment as of December 31, 2013 was $11.3 million.
(m)
The Company has committed to fund a delayed draw term loan of $10.9 million in NextCare, Inc. The remaining commitment as of December 31, 2013 was $4.8 million.
(n)
The Company has committed to fund a delayed draw term loan of $2.0 million in EZE Trucking, Inc. The remaining commitment as of December 31, 2013 was $2.0 million.
(o)
The Company's investments are classified in accordance with the requirements of the 1940 Act. Under the 1940 Act, “Control Investments” are defined as investments in companies in which the Company owns more than 25% of the voting securities, maintains greater than 50% of the board representation or has the power to exercise control over the management or policies of such portfolio company.
(p)
The Company's investments are classified in accordance with the requirements of the 1940 Act. Under the 1940 Act, “Affiliated Investments” are defined as those non-control investments in companies in which the Company owns between 5% and 25% of the voting securities.
(q)
The Company's investments are classified in accordance with the requirements of the 1940 Act. Under the 1940 Act, "Non-affiliated Investments" are defined as investments that are neither Control Investments nor Affiliated Investments. The Company classifies all investments within the Consolidated Schedule of Investments which are not classified as Control Investments or Affiliated Investments as Non-affiliated Investments.
(r)
The investment is on non-accrual status as of December 31, 2013.
(s)
Park Ave RE, Inc. owns 100% of the equity of an operating company, Park Ave RE Holdings, LLC.
(t)
Through a taxable entity, Kahala Aviation Holdings, LLC owns 100% of the equity in an operating company, Kahala US OpCo LLC.




    

18
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
CONSOLIDATED SCHEDULE OF INVESTMENTS
(dollars in thousands)


The following table shows the portfolio composition by industry grouping based on fair value at December 31, 2013 (dollars in thousands):

 
At December 31, 2013
 
Investments at
Fair Value
 
Percentage of
Total Portfolio
Diversified Investment Vehicles
$
168,156

 
24.2
%
Media
57,061

 
8.2

Health Care Providers & Services
48,823

 
7.0

Hotels, Restaurants & Leisure
46,462

 
6.7

Internet Software & Services
36,432

 
5.2

Food Products
34,438

 
4.9

Oil, Gas & Consumable Fuels
32,058

 
4.6

Diversified Consumer Services
29,190

 
4.2

Consumer Finance
28,691

 
4.1

Marine
28,399

 
4.1

Aerospace & Defense
21,131

 
3.0

Professional Services
20,110

 
2.9

Commercial Services & Supplies
19,376

 
2.8

Real Estate Management & Development
13,001

 
1.9

Electronic Equipment, Instruments & Components
12,862

 
1.9

Road & Rail
12,147

 
1.8

Textiles, Apparel & Luxury Goods
11,977

 
1.7

IT Services
10,741

 
1.5

Software
10,182

 
1.5

Diversified Telecommunication Services
10,000

 
1.4

Commercial Banks
9,875

 
1.4

Chemicals
9,728

 
1.4

Paper & Forest Products
8,040

 
1.2

Communications Equipment
7,412

 
1.1

Biotechnology
5,876

 
0.8

Machinery
3,608

 
0.5

Total
$
695,776

 
100.0
%
























19
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
(Unaudited)


Note 1 — Organization and Basis of Presentation

Business Development Corporation of America (the “Company”), incorporated in Maryland on May 5, 2010, is an externally managed, non-diversified closed-end investment company that elected to be treated as a regulated investment company (“RIC”) for U.S. federal income tax purposes beginning with the taxable year ended December 31, 2011 and that has elected to be treated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). The Company is, therefore, required to comply with certain regulatory requirements as promulgated under the 1940 Act. The Company is managed by BDCA Adviser, LLC (the “Adviser”) pursuant to the terms of the Investment Advisory and Management Services Agreement, as amended (the “Investment Advisory Agreement”). The Adviser was formed in Delaware as a private investment management firm and is registered as an investment adviser under the Investment Advisers Act of 1940, as amended (the “Advisers Act”). The Adviser oversees the management of the Company's activities and is responsible for making investment decisions for its portfolio.

On January 25, 2011, the Company commenced its initial public offering (the “IPO”) on a “reasonable best efforts basis” of up to 150.0 million shares of common stock, $0.001 par value per share, at an initial offering price of $10.00 per share, subject to certain volume and other discounts, pursuant to a registration statement on Form N-2 (File No. 333-166636) (the “Registration Statement”) filed with the U.S. Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended. The Company sold 22,222 shares of common stock to its Adviser, an entity wholly owned by AR Capital, LLC (formerly known as American Realty Capital II, LLC) (the “Sponsor”) on July 8, 2010 at $9.00 per share, which represents the initial public offering price of $10.00 per share minus selling commissions of $0.70 per share and dealer manager fees of $0.30 per share.  On August 25, 2011, the Company had raised sufficient funds to break escrow on its IPO and commenced operations as of that date. As of June 30, 2014 , the Company had issued 130.6 million shares of common stock for gross proceeds of $1.4 billion including the shares purchased by the Sponsor and shares issued under the Company's distribution reinvestment plan ("DRIP"). As of June 30, 2014 , the Company had repurchased 0.3 million shares of common stock for payments of $ 2.8 million.
    
On July 13, 2012, the Company, through a wholly-owned, consolidated subsidiary, 405 TRS I, LLC (“405 Sub”), entered into a total return swap agreement (“TRS”) with Citibank, N.A. (“Citi”), which was subsequently amended on October 17, 2012, December 7, 2012, May 10, 2013, July 18, 2013, October 15, 2013 and May 6, 2014, increasing the maximum possible exposure under the TRS to $450.0 million. The Company terminated its amended and restated TRS with Citi on June 27, 2014.

On June 27, 2014, the Company, through a wholly-owned, special purpose financing subsidiary, BDCA-CB Funding, LLC (formerly 405 TRS I, LLC) (“CB Funding”), entered into a revolving credit facility ("Citi Credit Facility") with Citi as administrative agent and U.S. Bank National Association ("U.S. Bank") as collateral agent, account bank and collateral custodian. The Citi Credit Facility provides for borrowings over a twenty four month period in an aggregate principal amount of up to $400 million on a committed basis, subject to the administrative agent’s right to approve the assets acquired by the CB Funding and pledged as collateral under the Citi Credit Facility.

In connection with the Citi Credit Facility, on June 27, 2014, CB Funding entered into an Agreement and Plan of Merger (the “Merger Agreement”) with 405 Loan Funding LLC (“Loan Funding”), an affiliate of Citi formed for the purpose of holding loans underlying a TRS with CB Funding. Pursuant to the terms of the Merger Agreement, CB Funding acquired such loans through the merger of Loan Funding with and into CB Funding. Pursuant to the Merger Agreement, CB Funding paid approximately $389.0 million for the assets held by Loan Funding.

On July 24, 2012, the Company, through a wholly-owned, consolidated special purpose financing subsidiary, BDCA Funding I, LLC (“Funding I”), entered into a revolving credit facility (the “Wells Fargo Credit Facility”) with Wells Fargo Bank, National Association as lender, Wells Fargo Securities as administrative agent (together, “Wells Fargo”) and U.S. Bank, as collateral agent, account bank and collateral custodian. The Wells Fargo Credit Facility, which was subsequently amended on April 26, 2013, September 9, 2013, and June 30, 2014, provides for borrowings in an aggregate principal amount of up to $300.0 million on a committed basis, with a term of 60 months.


20
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
(Unaudited)

On February 21, 2014, the Company, through a newly-formed, wholly-owned, consolidated special purpose financing subsidiary, BDCA 2L Funding I, LLC ("2L Funding I"), entered into a revolving credit facility with Deutsche Bank AG, New York Branch as administrative agent and U.S. Bank as collateral agent and collateral custodian (the "Deutsche Bank Credit Facility"). The Deutsche Bank Credit Facility provides for borrowings in an aggregate principal amount of up to $60.0 million on a committed basis, with a 36 month term.
    
The Company has formed and expects to continue to form consolidated subsidiaries (the “Consolidated Holding Companies”) to hold equity securities of portfolio companies. These Consolidated Holding Companies enable the Company to hold equity securities of portfolio companies organized as pass-through entities while continuing to satisfy the requirements of a RIC under the Code. Any tax payable by a Consolidated Holding Company is included as an expense in the Company's Consolidated Statements of Operations. As of June 30, 2014, 54th Street Equity Holdings, Inc., Kahala Aviation Holdings, LLC, Kahala Aviation US, Inc., Kahala Luxco, and Park Ave RE, Inc. were the only Consolidated Holding Companies.
    
The Company's investment objective is to generate both current income and to a lesser extent long-term capital appreciation through debt and equity investments. The Company anticipates that during its offering period it will invest largely in first and second lien senior secured loans and mezzanine debt issued by middle market companies. The Company may also purchase, directly or through the TRS, interests in loans through secondary market transactions in the "over-the-counter" market for institutional loans. First and second lien secured loans generally are senior debt instruments that rank ahead of subordinated debt and equity in bankruptcy priority and are generally secured by liens on the operating assets of a borrower which may include inventory, receivables, plant, property and equipment. Mezzanine debt is subordinated to senior loans and is generally unsecured. The Company defines middle market companies as those with annual revenues between $10 million and $1 billion. The Company may also invest in the equity and junior debt tranches of collateralized loan obligation investment vehicles (“Collateralized Securities”). Structurally, Collateralized Securities are entities that are formed to manage a portfolio of senior secured loans made to companies whose debt is rated below investment grade or, in limited circumstances, unrated. The senior secured loans within these Collateralized Securities are limited to senior secured loans which meet specified credit and diversity criteria and are subject to concentration limitations in order to create a diverse investment portfolio. The Company expects that each investment will range between approximately $1 million and $25 million, although this investment size will vary proportionately with the size of its capital base. As the Company increases its capital base during the offering period, it intends to have a substantial portion of its assets invested in customized direct loans to and equity securities of middle market companies. In most cases, companies to whom the Company provides customized financing solutions will be privately held at the time the Company invests in them.
 
The Company has entered into a fund administration servicing agreement and a fund accounting servicing agreement with U.S. Bancorp Fund Services, LLC (the “Administrator”). The Administrator provides services, such as accounting, financial reporting, legal and compliance support and investor relations support, necessary for the Company to operate. On August 13, 2012, the Company entered into a custody agreement with U.S. Bank. Under the custody agreement, U.S. Bank holds all of the portfolio securities and cash of the Company for certain of its subsidiaries, and transfers such securities or cash pursuant to the Company’s instructions. The custody agreement is terminable by either party, without penalty, on not less than ninety days prior notice to the other party.

Realty Capital Securities, LLC (the “Dealer Manager”), an entity under common ownership with the Sponsor, serves as the dealer manager of the Company’s IPO. The Adviser and the Dealer Manager are related parties and receive compensation and fees for services related to the IPO and for the investment and management of the Company’s assets. The Adviser receives fees during the offering, operational and liquidation stages, and the Dealer Manager receives fees during the offering stage.

Note 2 — Summary of Significant Accounting Policies

Basis of Presentation

The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP").

The Company consolidates the following: Funding I, 2L Funding I, CB Funding, and the Consolidated Holding Companies. All significant intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Valuation of Portfolio Investments

Portfolio investments are reported on the balance sheet at fair value. On a quarterly basis, the Company performs an analysis of each investment to determine fair value as follows:

Securities for which market quotations are readily available on an exchange are valued at the reported closing price on the valuation date. The Company may also obtain quotes with respect to certain of the Company's investments from pricing services or brokers or dealers in order to value assets. When doing so, the Company determines whether the quote obtained is sufficient according to U.S. GAAP to determine the fair value of the security. If determined adequate, the Company uses the quote obtained.

Investments without a readily determined market value are primarily valued using a market approach, an income approach, or both approaches, as appropriate. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities (including a business). The income approach uses valuation techniques to convert future amounts (for example, cash flows or earnings) to a single present amount (discounted). The measurement is based on the value indicated by current market expectations about those future amounts. In following these approaches, the types of factors that the Company may take into account in fair value pricing the Company's investments include, as relevant: 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, the nature and realizable value of any collateral, the portfolio company's ability to make payments, its earnings and discounted cash flows, the markets in which the portfolio company does business, comparisons of financial ratios of peer companies that are public, M&A comparables, and enterprise values, among other factors. When available, broker quotations and/or quotations provided by pricing services are considered as an input in the valuation process.

For an investment in an investment fund that does not have a readily determinable fair value, the Company measures the fair value of the investment predominately based on the net asset value per share of the investment fund if the net asset value of the investment fund is calculated in a manner consistent with the measurement principles of Financial Accounting Standards Board ("FASB"), Accounting Standards Codification ("ASC"), Topic 946, Financial Services-Investment Companies, as of the Company's measurement date. However, in determining the fair value of the Company's investment, the Company may make adjustments to the net asset value per share in certain circumstances, based on the Company's analysis of any restrictions on redemption of the shares of the investment as of the measurement date.
    
The value of our TRS was primarily based on the increase or decrease in the value of the loans underlying the TRS, as determined by Citi based upon indicative pricing by an independent third-party pricing service.

For investments in Collateralized Securities, the Company models both the assets and liabilities of each Collateralized Securities' capital structure. The model uses a waterfall engine to store the collateral data, generate collateral cash flows from the assets, and distribute the cash flows to the liability structure based on the priority of payments. The waterfall cash flows are discounted using rates that incorporate risk factors such as default risk, interest rate risk, downgrade risk, and credit spread risk, among others. In addition, the Company considers broker quotations and/or quotations provided by pricing services as an input to determining fair value when available. 

As part of the Company's quarterly valuation process the Adviser may be assisted by an independent valuation firm engaged by the Company's board of directors. The audit committee of the Company's board of directors reviews each preliminary valuation and the Adviser and an independent valuation firm (if applicable) will supplement the preliminary valuation to reflect any comments provided by the audit committee. The board of directors then discusses the valuations and determines the fair value of each investment, in good faith, based on the input of the Adviser, the independent valuation firm (to the extent applicable) and the audit committee of the board of directors.

21
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
(Unaudited)


Because there is not a readily available market value for most of the investments in its portfolio, the Company values substantially all of its portfolio investments at fair value as determined in good faith by its board of directors, as described herein. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the Company's investments may fluctuate from period to period. Additionally, the fair value of the Company's investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values that the Company may ultimately realize. Further, such investments are generally subject to legal and other restrictions on resale or otherwise are less liquid than publicly traded securities. If the Company was required to liquidate a portfolio investment in a forced or liquidation sale, the Company could realize significantly less than the value at which the Company has recorded it.
    
Investment Classification

The Company classifies its investments in accordance with the requirements of the 1940 Act. Under the 1940 Act, "control" is defined as the power to exercise a controlling influence over the management or policies of a company, unless such power is solely the result of an official position with such company. In addition, any person "who owns beneficially, either directly or through one or more controlled companies, more than 25 per centum of the voting securities of a company shall be presumed to control such company. Any person who does not so own more than 25 per centum of the voting securities of any company shall be presumed not to control such company." Using this definition, the Company has determined to treat “Control Investments” as investments in companies in which the Company owns more than 25% of the voting securities, maintains greater than 50% of the board representation or has the power to exercise control over the management or policies of such portfolio company. Consistent with the 1940 Act, “Affiliated Investments” are defined as those non-control investments in companies in which the Company owns between 5% and 25% of the voting securities. Consistent with the 1940 Act, “Non-affiliated Investments” are defined as investments that are neither Control Investments nor Affiliated Investments.

Where appropriate, prior period financial statements have been reclassified to disclose the Company's Control Investments and Affiliate Investments as defined above. In addition, prior period financial statements have been reclassified to present investment industry classifications in a consistent manner with the current year.

Cash and Cash Equivalents

Cash and cash equivalents include short-term, liquid investments in a money market fund. Cash and cash equivalents are carried at cost which approximates fair value. Per Section 12(d)(1)(A) of the 1940 Act, the Company may not invest in another registered investment company, including a money market fund, if any of the following occur:

•
the Company owns more than 3% of the money market fund;

•
the Company holds securities in the money market fund having an aggregate value in excess of 5% of the value of the total assets of the Company; or

•
the Company holds securities in money market funds and other registered investment companies having an aggregate value in excess of 10% of the value of the total assets of the Company.

Offering Costs

The Company has incurred certain costs in connection with the registration of shares of its common stock. These costs principally relate to professional fees, printing fees, fees paid to the SEC and fees paid to the Financial Industry Regulatory Authority. Offering costs are recorded as a reduction to contributed capital.

Pursuant to the Investment Advisory Agreement, the Company and the Adviser have agreed that the Company will not be liable for offering costs to the extent that together with all prior offering costs the amounts exceed 1.5% of the aggregate gross proceeds from the Company’s on-going offering.


22
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
(Unaudited)

Deferred Financing Costs

Financing costs incurred in connection with the Company’s revolving credit facilities with Wells Fargo and Deutsche Bank are capitalized and amortized into expense using the straight-line method over the life of the respective facility. See Note 5 - Borrowings - for details on the credit facilities.

Distributions

The Company has declared and paid cash distributions to stockholders on a monthly basis since it commenced operations. The amount of each such distribution will be subject to the discretion of the board of directors and applicable legal restrictions related to the payment of distributions. The Company will calculate each stockholder’s specific distribution amount for the month using record and declaration dates and accrue distributions on the date the Company accepts a subscription for shares of the Company’s common stock. From time to time, the Company may also pay interim distributions, including capital gains distributions, at the discretion of the Company’s board of directors. The Company’s distributions may exceed earnings, especially during the period before it has substantially invested the proceeds from the offering. As a result, a portion of the distributions made by the Company may represent a return of capital for U.S. federal income tax purposes. A return of capital is a return of each stockholder’s investment rather than earnings or gains derived from the Company’s investment activities.

The Company may fund cash distributions to stockholders from any sources of funds available to the Company, including expense payments from the Adviser that are subject to reimbursement, as well as offering proceeds and borrowings. The Company has not established limits on the amount of funds it may use from available sources to make distributions.

Distribution Reinvestment Program

The Company has adopted an “opt in” DRIP pursuant to which investors may elect to have the full amount of their cash distributions reinvested in additional shares of the Company’s common stock. Participants in the Company’s DRIP are free to elect or revoke reinstatement in the DRIP within a reasonable time as specified in the plan. If an investor does not elect to participate in the plan, the investor will automatically receive any distributions the Company declares in cash. The Company expects to coordinate distribution payment dates so that the same price that is used for the closing date immediately following such distribution payment date will be used to calculate the purchase price for purchasers under the DRIP. The investors’ reinvested distributions will purchase shares at a price equal to 90% of the price that shares are sold in the offering at the closing immediately following the distribution payment date.

Revenue Recognition

Interest Income

Investment transactions are accounted for on the trade date. Interest income, adjusted for amortization of premium and accretion of discount, is recorded on an accrual basis. Discounts and premiums on investments purchased are accreted/amortized over the expected life of the respective investment using the effective yield method. The amortized cost of investments represents the original cost adjusted for the accretion of discounts and amortizations of premium on investments.

The Company has a number of investments in Collateralized Securities. Interest income from investments in the "equity" class of these Collateralized Securities (in the Company's case, preferred shares or subordinated notes) is recorded based upon an estimation of an effective yield to expected maturity utilizing assumed cash flows in accordance with ASC Topic 325-40-35, Beneficial Interests in Securitized Financial Assets. The Company monitors the expected cash inflows from its equity investments in Collateralized Securities, including the expected principal repayments. The effective yield is determined and updated quarterly.
Payment-in-Kind Interest

The Company holds debt investments in its portfolio that contain a payment-in-kind (“PIK”) interest provision. The PIK interest, which represents contractually deferred interest added to the investment balance that is generally due at maturity, is generally recorded on the accrual basis.


23
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
(Unaudited)

Non-accrual income

Investments are placed on non-accrual status when principal or interest/dividend payments are past due 30 days or more and/or when there is reasonable doubt that principal or interest will be collected. Accrued cash and un-capitalized PIK interest is generally reversed when an investment is placed on non-accrual status. Previously capitalized PIK interest is not reversed when an investment is placed on non-accrual status. Interest payments received on non-accrual investments may be recognized as income or applied to principal depending upon management's judgment of the ultimate outcome. Non-accrual investments are restored to accrual status when past due principal and interest is paid and, in management's judgment, are likely to remain current.

Net Realized Gains or Losses and Net Change in Unrealized Appreciation or Depreciation

Gains or losses on the sale of investments are calculated using the specific identification method. The Company measures realized gains or losses by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment, without regard to unrealized appreciation or depreciation previously recognized, but considering unamortized upfront fees and prepayment penalties. Net change in unrealized appreciation or depreciation will reflect the change in portfolio investment values during the reporting period, including any reversal of previously recorded unrealized appreciation or depreciation, when gains or losses are realized.

Income Taxes

The Company has elected to be treated for federal income tax purposes as a RIC under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). Generally, a RIC is exempt from federal income taxes if it distributes to stockholders at least 90% of ‘‘Investment Company Taxable Income,’’ as defined in the Code, each year. Distributions paid up to one year after the current tax year can be carried back to the prior tax year for determining the distributions paid in such tax year. The Company intends to make sufficient distributions to maintain its RIC status each year. The Company is also subject to nondeductible federal excise taxes if it does not distribute at least 98% of net ordinary income each calendar year, 98.2% of capital gain net income for the one year period ending on October 31 of such calendar year, if any, and any recognized and undistributed income from prior years for which it paid no federal income taxes. The Company will generally endeavor each year to avoid any federal excise taxes.

Share Repurchase Program

The Company’s board of directors has adopted a Share Repurchase Program (“SRP”) that enables the Company’s stockholders to sell their shares to the Company in limited circumstances. On September 12, 2012, the Company commenced its first quarterly tender offer pursuant to the SRP. The Company intends to conduct tender offers on a quarterly basis on such terms as may be determined by its board of directors in its complete and absolute discretion unless, in the judgment of the independent directors of its board of directors, such repurchases would not be in the Company’s best interests or would violate applicable law.

The Company currently intends to limit the number of shares to be repurchased during any calendar year to the number of shares it can repurchase with the proceeds it receives from the sale of shares under its DRIP. At the discretion of the Company’s board of directors, the Company may also use cash on hand, cash available from borrowings and cash from liquidation of investments as of the end of the applicable period to repurchase shares. In addition, as of the date of this filing, the Company will limit the number of shares to be repurchased in any calendar year to 10% of the weighted average number of shares outstanding in the prior calendar year, or 2.5% in each quarter, though the actual number of shares that the Company offers to repurchase may be less in light of the limitations noted above. The Company will offer to repurchase such shares on each date of repurchase at a price equal to 92.5% of the share price in effect on each date of repurchase, which will be determined in the same manner that the Company determined the offering price per share for purposes of its continuous public offering. The Company’s board of directors may amend, suspend or terminate the repurchase program at any time upon 30 days’ notice.

As of June 30, 2014 , the Company had repurchased 0.3 million shares of common stock for payments of $ 2.8 million. As of June 30, 2013 , the Company had repurchased 0.07 million shares of common stock for payments of $0.7 million.


24
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
(Unaudited)

New Accounting Pronouncement

In June 2013, the FASB issued Accounting Standards Update (“ASU”) 2013-08, Financial Services – Investment Companies (ASC Topic 946), which affects the scope, measurement and disclosure requirements for investment companies under U.S. GAAP. The amendments: (i) change the approach to the investment company assessment in ASC Topic 946, clarify the characteristics of an investment company, and provide comprehensive guidance for assessing whether an entity is an investment company; (ii) require an investment company to measure non-controlling ownership interests in other investment companies at fair value rather than the equity method of accounting; and (iii) require the following additional disclosures (a) the fact that the entity is an investment company and is applying the guidance in ASC Topic 946, (b) information about changes, if any, in an entity’s status as an investment company, and (c) information about financial support provided or contractually required to be provided by an investment company to any of its investees. This guidance is effective for interim an annual reporting periods beginning on or after December 15, 2013. Management has reviewed the impact of this accounting pronouncement but does not believe it has a material impact on the Company.

  Note 3 — Fair Value of Financial Instruments

Accounting guidance establishes a hierarchal disclosure framework which prioritizes and ranks the level of market price observability of inputs used in measuring investments at fair value. Market price observability is affected by a number of factors, including the type of investment and the characteristics specific to the investment. Investments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.

The Company determines fair value based on quoted prices when available or through the use of alternative approaches, such as discounting the expected cash flows using market interest rates commensurate with the credit quality and duration of the investment. This alternative approach also reflects the contractual terms of the derivatives, if any, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. The guidance defines three levels of inputs that may be used to measure fair value:

•
Level 1—Quoted prices in active markets for identical assets and liabilities that the reporting entity has the ability to access at the measurement date.

•
Level 2—Inputs other than quoted prices included within Level 1 that are observable for the asset and liability or can be corroborated with observable market data for substantially the entire contractual term of the asset or liability.

•
Level 3—Unobservable inputs that reflect the entity’s own assumptions about the assumptions that market participants would use in the pricing of the asset or liability and are consequently not based on market activity, but rather through particular valuation techniques.

The determination of where an asset or liability falls in the above hierarchy requires significant judgment and factors specific to the asset or liability. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company evaluates its hierarchy disclosures each quarter and depending on various factors, it is possible that an asset or liability may be classified differently from quarter to quarter.

All of the Company’s investment portfolio at June 30, 2014 was comprised of debt and equity instruments for which Level 1 inputs, such as quoted prices, were not available. Therefore, at June 30, 2014 , the investments were valued at fair value as determined in good faith using the valuation policy approved by the board of directors using Level 2 and Level 3 inputs. The Company evaluates the source of inputs, including any markets in which the Company's investments are trading, in determining fair value. Due to the inherent uncertainty in the valuation process, the estimate of fair value of the Company’s investment portfolio at June 30, 2014 may differ materially from values that would have been used had a ready market for the securities existed.


25
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
(Unaudited)

In addition to using the above inputs in investment valuations, the Company continues to employ the valuation policy approved by the board of directors. Portfolio investments are reported on the balance sheet at fair value. On a quarterly basis the Company performs an analysis of each investment to determine fair value as described below.

Securities for which market quotations are readily available on an exchange are valued at the reported closing price on the valuation date. The Company may also obtain quotes with respect to certain of the Company's investments from pricing services or brokers or dealers in order to value assets. When doing so, the Company determines whether the quote obtained is sufficient according to U.S. GAAP to determine the fair value of the security. If determined adequate, the Company uses the quote obtained.

Investments without a readily determined market value are primarily valued using a market approach, an income approach, or both approaches, as appropriate. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities (including a business). The income approach uses valuation techniques to convert future amounts (for example, cash flows or earnings) to a single present amount (discounted). The measurement is based on the value indicated by current market expectations about those future amounts. In following these approaches, the types of factors that the Company may take into account in fair value pricing the Company's investments include, as relevant: 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, the nature and realizable value of any collateral, the portfolio company's ability to make payments, its earnings and discounted cash flows, the markets in which the portfolio company does business, comparisons of financial ratios of peer companies that are public, M&A comparables, and enterprise values, among other factors. When available, broker quotations and/or quotations provided by pricing services are considered as an input in the valuation process.

For an investment in an investment fund that does not have a readily determinable fair value, the Company measures the fair value of the investment predominately based on the net asset value per share of the investment fund if the net asset value of the investment fund is calculated in a manner consistent with the measurement principles of ASC Topic 946, Financial Services-Investment Companies, as of the Company's measurement date. However, in determining the fair value of the Company's investment, the Company may make adjustments to the net asset value per share in certain circumstances, based on the Company's analysis of any restrictions on redemption of the shares of the investment as of the measurement date. The value of our TRS is primarily based on the increase or decrease in the value of the loans underlying the TRS, as determined by Citi based upon indicative pricing by an independent third-party pricing service.

For investments in Collateralized Securities, the Company models both the assets and liabilities of each Collateralized Securities' capital structure. The model uses a waterfall engine to store the collateral data, generate collateral cash flows from the assets, and distribute the cash flows to the liability structure based on priority of payments. The waterfall cash flows are discounted using rates that incorporate risk factors such as default risk, interest rate risk, downgrade risk, and credit spread risk, among others. In addition, the Company considers broker quotations and/or quotations provided by pricing services as an input to determining fair value when available. 

As part of the Company's quarterly valuation process, the Adviser may be assisted by an independent valuation firm engaged by the Company's board of directors. The audit committee of the board of directors reviews each preliminary valuation and the Adviser and an independent valuation firm (if applicable) will supplement the preliminary valuation to reflect any comments provided by the audit committee. The board of directors then discusses the valuations and determines the fair value of each investment, in good faith, based on the input of the Adviser, the independent valuation firm (to the extent applicable) and the audit committee of the board of directors.

Determination of fair values involves subjective judgments and estimates. Accordingly, the notes to the consolidated financial statements refer to the uncertainty with respect to the possible effect of such valuations, and any change in such valuations on the consolidated financial statements.


26
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
(Unaudited)

As of June 30, 2014 , the Company had one portfolio company, which represented two portfolio investments, on non-accrual status with a total principal amount of $4.2 million, amortized cost of $4.1 million, and no fair value which represented 0.2% and 0.2% of the investment portfolio total principal and amortized cost, respectively. The Company did not have any portfolio investments on non-accrual status as of June 30, 2013. Refer to Note 2 - Summary of Significant Accounting Policies - in the consolidated financial statements included in this report for additional details regarding the Company’s non-accrual policy.

For discussion of the fair value measurement of the Company's borrowings, refer to Note 5 - Borrowings - in the consolidated financial statements included in this report.

The following table presents fair value measurements of investments, by major class, as of June 30, 2014 , according to the fair value hierarchy (dollars in thousands) :
 
Fair Value Measurements
 
Level 1
 
Level 2
 
Level 3
 
Total
Senior Secured First Lien Debt
$
—

 
$
672,633

 
$
407,218

 
$
1,079,851

Senior Secured Second Lien Debt
—

 
65,480

 
108,787

 
174,267

Subordinated Debt
—

 
—

 
47,425

 
47,425

Collateralized Securities
—

 
—

 
311,971

 
311,971

Equity/Other
—

 
—

 
160,611

 
160,611

Total
$
—

 
$
738,113

 
$
1,036,012

 
$
1,774,125


The following table presents fair value measurements of investments, by major class, as of December 31, 2013, according to the fair value hierarchy (dollars in thousands) :

 
Fair Value Measurements
 
Level 1
 
Level 2
 
Level 3
 
Total
Senior Secured First Lien Debt
$
—

 
$
137,825

 
$
195,755

 
$
333,580

Senior Secured Second Lien Debt
—

 
39,684

 
51,120

 
90,804

Subordinated Debt
—

 
—

 
59,701

 
59,701

Collateralized Securities
—

 
—

 
105,945

 
105,945

Equity/Other
—

 
—

 
105,746

 
105,746

Total Return Swap
—

 
3,180

 
—

 
3,180

Total
$
—

 
$
180,689

 
$
518,267

 
$
698,956


    

27
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
(Unaudited)

The following table provides a reconciliation of the beginning and ending balances for investments that use Level 3 inputs for the six months ended June 30, 2014 (dollars in thousands):

 
Senior Secured First Lien Debt
 
Senior Secured Second Lien Debt
 
Subordinated Debt
 
Collateralized Securities
 
Equity/Other
 
Total
Balance as of December 31, 2013
$
195,755

 
$
51,120

 
$
59,701

 
$
105,945

 
$
105,746

 
$
518,267

Net unrealized gains
975

 
(376
)
 
(3,013
)
 
(6,623
)
 
2,215

 
(6,822
)
Purchases and other adjustments to cost
292,543

 
78,391

 
15,317

 
331,854

 
103,616

 
821,721

Sales and redemptions
(72,392
)
 
(20,457
)
 
(34,429
)
 
(123,222
)
 
(51,556
)
 
(302,056
)
Net realized gain
87

 
109

 
99

 
4,017

 
590

 
4,902

Net transfers in and/or out
(9,750
)
 
—

 
9,750

 
—

 
—

 
—

Balance as of June 30, 2014
$
407,218

 
$
108,787

 
$
47,425

 
$
311,971

 
$
160,611

 
$
1,036,012

Unrealized gains (losses) for the
     period relating to those Level 3
     assets that were still held by
     the Company at the end of the
     period:
 
 
 
 
 
 
 
 
 
 
 
          Net change in unrealized
             gain:
$
1,026

 
$
(235
)
 
$
(2,046
)
 
$
(4,964
)
 
$
2,214

 
$
(4,005
)

Purchases represent the acquisition of new investments at cost. Redemptions represent principal payments received during the period.

For the six months ended June 30, 2014 , there were no transfers out of Level 1, Level 2, or Level 3.

Transfers between levels, if any, are recognized at the beginning of the period in which transfers occur.


28
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
(Unaudited)


The following table provides a reconciliation of the beginning and ending balances for investments that use Level 3 inputs for the year ended December 31, 2013 (dollars in thousands):

 
Senior Secured First Lien Debt
 
Senior Secured Second Lien Debt
 
Subordinated Debt
 
Collateralized Securities
 
Equity/Other
 
Total
Balance as of December 31, 2012
$
25,190

 
$
8,258

 
$
3,939

 
$
8,533

 
$
6,112

 
$
52,032

Net unrealized gains (losses)
(236
)
 
300

 
(880
)
 
1,637

 
5,434

 
6,255

Purchases and other adjustments to cost
215,368

 
42,562

 
56,642

 
135,289

 
97,293

 
547,154

Sales and redemptions
(35,197
)
 
—

 
—

 
(41,066
)
 
(3,093
)
 
(79,356
)
Net realized gain
418

 
—

 
—

 
1,552

 
—

 
1,970

Net transfers in and/or out
(9,788
)
 
—

 
—

 
—

 
—

 
(9,788
)
Balance as of December 31, 2013
$
195,755

 
$
51,120

 
$
59,701

 
$
105,945

 
$
105,746

 
$
518,267

Unrealized gains (losses) for the
     period relating to those Level 3
     assets that were still held by
     the Company at the end of the
     period:
 
 
 
 
 
 
 
 
 
 

          Net change in unrealized
             gain (loss):
$
(110
)
 
$
300

 
$
(880
)
 
$
1,899

 
$
5,434

 
$
6,643


Purchases represent the acquisition of new investments at cost. Redemptions represent principal payments received during the period.

For the year ended December 31, 2013, there were no transfers out of Level 1 to Level 2 or out of Level 2 to Level 3.

For the year ended December 31, 2013, an investment in 1 portfolio company was transferred from Level 3 to Level 2 as the number and/or reliability of market quotes became available for this investment and has been subsequently used for valuation purposes.

Transfers between levels, if any, are recognized at the beginning of the period in which transfers occur.

The composition of the Company’s investments as of June 30, 2014 , at amortized cost and fair value, were as follows (dollars in thousands):

 
Investments at
Amortized Cost
 
Investments at
Fair Value
 
Fair Value
Percentage of
Total Portfolio
Senior Secured First Lien Debt
$
1,076,341

 
$
1,079,851

 
60.9
%
Senior Secured Second Lien Debt
172,108

 
174,267

 
9.8
%
Subordinated Debt
51,302

 
47,425

 
2.7
%
Collateralized Securities
316,937

 
311,971

 
17.6
%
Equity/Other
152,603

 
160,611

 
9.0
%
Total
$
1,769,291

 
$
1,774,125

 
100.0
%

29
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
(Unaudited)

The composition of the Company’s investments as of December 31, 2013, at amortized cost and fair value, were as follows (dollars in thousands):

 
Investments at
Amortized Cost
 
Investments at
Fair Value
 
Fair Value
Percentage of
Total Portfolio
Senior Secured First Lien Debt
$
332,140

 
$
333,580

 
47.9
%
Senior Secured Second Lien Debt
89,331

 
90,804

 
13.1

Subordinated Debt
60,567

 
59,701

 
8.6

Collateralized Securities
104,285

 
105,945

 
15.2

Equity/Other
99,954

 
105,746

 
15.2

Total
$
686,277

 
$
695,776

 
100.0
%

Significant Unobservable Inputs

The following table summarizes the significant unobservable inputs used to value the majority of the Level 3 investments as of June 30, 2014 (dollars in thousands). The table is not intended to be all-inclusive, but instead identifies the significant unobservable inputs relevant to the determination of fair values.
 
 
 
 
Range
 
 
Asset Category
 
Fair Value
 
Primary Valuation Technique
 
Unobservable Inputs
 
Minimum
 
Maximum
 
Weighted Average  (a)
Senior Secured First Lien Debt (b)
 
$
344,194

 
Yield Analysis
 
Market Yield
 
6.50
%
 
15.00
%
 
9.66
%
Senior Secured Second Lien Debt (c)
 
71,774

 
Yield Analysis
 
Market Yield
 
8.63
%
 
12.50
%
 
10.39
%
Subordinated Debt
 
47,425

 
Yield Analysis
 
Market Yield
 
11.50
%
 
14.00
%
 
12.81
%
Collateralized Securities (d)
 
69,740

 
Discounted Cash Flow
 
Discount Rate
 
10.81
%
 
15.22
%
 
14.27
%
Equity/Other (e)
 
60,537

 
Market Multiple Analysis
 
EBITDA Multiple
 
1.0x

 
9.7x

 
4.4x

Equity/Other (e)
 
22,209

 
Discounted Cash Flow
 
Market Yield
 
14.46
%
 
14.46
%
 
14.46
%
 
 
$
615,879

 
 
 
 
 
 
 
 
 
 
______________
    
(a)
Weighted averages are calculated based on fair value of investments.

(b)  
The remaining $63.0 million of senior secured first lien debt were valued at their respective acquisition prices as the investments closed near the period ending June 30, 2014 .

(c)  
The remaining $37.0 million of senior secured second lien debt were valued at their respective acquisition prices as the investments closed near the period ending June 30, 2014 .

(d)  
The remaining $242.2 million of collateralized securities were valued based on recent transactions close to the period ending June 30, 2014 .

(e)  
The remaining $77.9 million of equity/other investments were valued based on the net asset values published by the respective fund.

30
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
(Unaudited)

The following table summarizes the significant unobservable inputs used to value the majority of the Level 3 investments as of December 31, 2013 (dollars in thousands). The table is not intended to be all-inclusive, but instead identifies the significant unobservable inputs relevant to the determination of fair values.

 
 
 
 
Range
 
 
Asset Category
 
Fair Value
 
Primary Valuation Technique
 
Unobservable Inputs
 
Minimum
 
Maximum
 
Weighted Average  (a)
Senior Secured First Lien Debt (b)
 
$
105,740

 
Yield Analysis
 
Market Yield
 
6.25
%
 
15.00
%
 
8.46
%
Senior Secured Second Lien Debt (c)
 
26,495

 
Yield Analysis
 
Market Yield
 
10.75
%
 
13.50
%
 
12.23
%
Subordinated Debt (d)
 
39,870

 
Yield Analysis
 
Market Yield
 
11.50
%
 
14.00
%
 
12.47
%
Collateralized Securities (e)
 
6,099

 
Discounted Cash Flow
 
Market Yield
 
11.00
%
 
11.00
%
 
11.00
%
Equity/Other (f)
 
7,803

 
Market Multiple Analysis
 
EBITDA Multiple
 
1.2x

 
6.9x

 
1.8x

Equity/Other (f)
 
30,000

 
Discounted Cash Flow
 
Market Yield
 
12.58
%
 
12.58
%
 
12.58
%
 
 
$
216,007

 
 
 
 
 
 
 
 
 
 
______________
    
(a)  
Weighted averages are calculated based on fair value of investments.

(b)  
The remaining $90.0 million of senior secured first lien debt were valued at their respective acquisition prices as the investments closed near year end.

(c)  
The remaining $24.6 million of senior secured second lien debt were valued at their respective acquisition prices as the investments closed near year end.

(d)  
The remaining $19.8 million of subordinated debt were valued at their respective acquisition prices as the investments closed near year end.

(e)  
The remaining $99.8 million of collateralized securities were valued based on recent transactions close to year end.

(f)  
The remaining $68.0 million of equity/other investments consisted of $36.6 million which were valued at their respective acquisition prices as the investments closed near year end and $31.4 million which were valued based on the net asset values published by the respective fund.

Significant increases or decreases in any of the above unobservable inputs in isolation would result in a significantly lower or higher fair value measurement for such assets.

Note 4 — Related Party Transactions and Arrangements

The Sponsor, including its wholly owned subsidiary, the Adviser, owns 0.16 million shares of the Company’s outstanding common stock as of June 30, 2014 .


31
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
(Unaudited)

Management and Incentive Fee Compensation to the Adviser
 
The Adviser and its affiliates receive fees for services relating to the investment and management of the Company’s assets. The Adviser is entitled to an annual base management fee calculated at an annual rate of 1.5% of the Company’s average gross assets. The management fee is payable quarterly in arrears, and shall be calculated based on the average value of the Company’s gross assets at the end of the two most recently completed calendar quarters. The management fee for any partial month or quarter will be appropriately prorated. In addition, any management fees waived by the Adviser are not subject to recoupment at a later date.
 
The incentive fee consists of two parts. The first part, which is referred to as the subordinated incentive fee on income, is calculated and payable quarterly in arrears based on 20% of “pre-incentive fee net investment income” but only after the payment of a certain preferred return rate to investors, as defined in the Investment Advisory Agreement, for the immediately preceding quarter of 1.75%  per quarter, or an annualized rate of 7.0% , subject to a "catch-up" feature. The second part of the incentive fee, which is referred to as the incentive fee on capital gains, is an incentive fee on capital gains earned on liquidated investments from the Company’s portfolio and is determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Advisory Agreement). This fee equals 20.0% of the Company’s incentive fee capital gains, which equals the Company’s realized capital gains on a cumulative basis from inception, calculated as of the end of each calendar year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gain incentive fees. Incentive fees waived by the Adviser are not subject to recoupment at a later date.

For the three and six months ended June 30, 2014 , the Company incurred $ 5.8 million and $ 9.4 million, respectively, of management fees, $ 2.6 million and $ 3.4 million, respectively, of subordinated incentive fees on income, and $ 0.2 million and $ 0.2 million, respectively, of capital gains incentive fees under the Investment Advisory Agreement, of which the Adviser did not waive any portion of such fees.
    
For the three and six months ended June 30, 2013 , the Company incurred $1.2 million and $2.0 million, respectively of management fees, $1.1 million and $1.8 million, respectively, of subordinated incentive fees on income, and $0.6 million and $0.9 million, respectively, of capital gains incentive fees under the Investment Advisory Agreement, of which the Adviser waived $0.0 million and $0.4 million, respectively, of such fees.
    
For accounting purposes only, the Company is required under U.S. GAAP to also accrue a theoretical capital gains incentive fee based upon unrealized capital appreciation on investments held at the end of each period. The accrual of this theoretical capital gains incentive fee assumes all unrealized capital appreciation and depreciation is realized in order to reflect a capital gains incentive fee that would theoretically be payable to the Adviser. For the three and six months ended June 30, 2014 , the Company incurred $0.9 million and $0.5 million of theoretical capital gains incentive fees, respectively. For the three and six months ended June 30, 2013 , the Company incurred $0.2 million and $0.7 million of theoretical capital gains incentive fees, respectively. The amounts actually paid to the Adviser are consistent with the Advisers Act and formula reflected in the Investment Advisory Agreement which specifically excludes consideration of unrealized capital appreciation.

As a result of discussions with the SEC staff, the Company determined to no longer include TRS earnings in the computation of subordinated incentive fees, which was effective from January 1, 2014 through the termination of the TRS on June 27, 2014. The Adviser did not receive any additional fees as a result of the termination of the TRS, other than as a result of the increase in the Company’s assets and the fact that, effective June 27, 2014, realized gains and income received on loans formerly underlying the TRS beginning on the date on which the loans came on to the Company’s balance sheet will be included in the incentive fee calculation under the Investment Advisory Agreement. Any gains or income realized as a result of the termination of the TRS, however, will not be considered in the calculation of the incentive fee due to Adviser under the Investment Advisory Agreement.


32
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
(Unaudited)

Expense Support Agreement

The Adviser and its affiliates may incur and pay costs and fees on behalf of the Company. The Company and its Adviser have entered into the Expense Support Agreement, whereby the Adviser may pay the Company up to 100% of all operating expenses (“Expense Support Payment”) for any period beginning on the effective date of the Registration Statement, until the Adviser and the Company mutually agree otherwise. The Expense Support Payment for any month shall be paid by the Adviser to the Company in any combination of cash or other immediately available funds and/or offsets against amounts due from the Company to the Adviser.

Operating expenses subject to this agreement include expenses as defined by U.S. GAAP, including, without limitation, advisory fees payable and interest on indebtedness for such period, if any.

Pursuant to the Expense Support Agreement, the Company will reimburse the Adviser for Expense Support Payments within three years of the date that the expense support payment obligation was incurred by the Adviser, subject to the conditions described below. The amount of any reimbursement during any calendar quarter will be limited to an amount that does not cause the Company's other operating expenses to exceed 1.5% of its net assets attributable to common shares after taking such reimbursement payment into account.
     
In addition, the Company will only make reimbursement payments if its “operating expense ratio” (as described in footnote 1 to the table below) is equal to or less than its operating expense ratio at the time the corresponding expense payment was incurred and if the annualized rate of the Company's regular cash distributions to stockholders is equal to or greater than the annualized rate of its regular cash distributions to stockholders at the time the corresponding expense payment was incurred.

Below is a table that provides information regarding expense support payment obligations incurred by the Adviser pursuant to the Expense Support Agreement as well as other information relating to the Company's ability to reimburse the Adviser for such payments. The amounts presented in the first column below are subject to reimbursement to the Adviser pursuant to the terms of the Expense Support Agreement (dollars in thousands):

Quarter Ended
 
Amount of Expense Payment Obligation
 
Operating Expense Ratio as of the Date Expense Payment Obligation Incurred (1)
 
Annualized Distribution Rate as of the Date Expense Payment Obligation Incurred (2)
 
Eligible for Reimbursement Through
March 31, 2011
 
$
—

 
—
%
 
—
%
 
N/A (3)
June 30, 2011
 
—

 
—

 
—

 
N/A (3)
September 30, 2011
 
571

 
2.88

 
8.11

 
September 30, 2014
December 31, 2011
 
131

 
1.97

 
7.90

 
December 31, 2014
March 31, 2012
 
78

 
0.90

 
7.88

 
March 31, 2015
June 30, 2012
 
189

 
0.30

 
7.75

 
June 30, 2015
______________

(1)
"Operating Expense Ratio" is expressed as a percentage of net assets and includes all expenses borne by the Company, except for organizational and offering expenses, base management and incentive fees owed to our Adviser and interest expense.

(2)  
"Annualized Distribution Rate" equals the annualized rate of distributions paid to stockholders based on the amount of the regular cash distribution paid immediately prior to the date the expense support payment obligation was incurred by our Adviser. "Annualized Distribution Rate" does not include special cash or stock distributions paid to stockholders.

(3)  
"N/A"- Not Applicable


33
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
(Unaudited)

If an Expense Support Payment has not been reimbursed within three years of the date such Expense Support Payment was incurred, the Company’s obligation to pay such Expense Support Payment shall automatically terminate and be of no further effect.
 
The Company has recorded $ 3.9 million as due from affiliate and $1.1 million as due from affiliate on the consolidated statements of assets and liabilities as of June 30, 2014 and December 31, 2013 , respectively, which reflect the netting of amounts due from the Adviser and affiliates and amounts due from the Company. On August 24, 2012, the Adviser made a payment to the Company in the amount of $0.8 million for $1.0 million of operating expenses pursuant to the Expense Support Agreement netted against $0.2 million due from the Company to the Adviser as reimbursement for payments made by the Adviser on behalf of the Company. As of June 30, 2014 , the Adviser had assumed on a cumulative basis, $1.0 million of operating expenses pursuant to the Expense Support Agreement.

Offering Costs

Pursuant to the Investment Advisory Agreement, the Company and the Adviser have agreed that the Company will not be liable for offering expenses to the extent that, together with all prior offering expenses, the amounts exceed 1.5% of the aggregate gross proceeds from the Company’s on-going offering. As of June 30, 2014 , offering costs in the amount of $5.4 million have been incurred in excess of the 1.5% limit and are the responsibility of the Adviser; however, the Company may, but is not obligated to, pay certain amounts back to the Adviser over time. As of December 31, 2013, offering costs in the amount of $1.6 million have been incurred in excess of the 1.5% limit and are the responsibility of the Adviser.

Other Affiliates

The Company's transfer agent, American National Stock Transfer, LLC, is an entity under common ownership with the Sponsor. The business was formed on November 2, 2012 and began providing certain transfer agency services for the Company on March 15, 2013.

The Dealer Manager, an entity under common ownership with the Sponsor, serves as the dealer manager of the Company's IPO. The Dealer Manager receives fees for services related to the IPO during the offering stage. The investment banking and capital markets division of the Dealer Manager provides strategic advisory services and earns fees for these services.

The following table reflects the fees incurred and payable to our Dealer Manager, the Adviser and transfer agent as of and for the six months ended June 30, 2014 (dollars in thousands):

 
 
Incurred for the Six Months Ended
 
Payable as of
 
 
June 30, 2014
 
June 30, 2014
Selling commissions and dealer manager fees (1)
 
$
64,838

 
$
—

Offering costs
 
13,139

 
471

Management and incentive fees
 
13,041

 
11,290

Investment banking advisory fees (2)
 
329

 
—

Total related party fees
 
$
91,347

 
$
11,761



34
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
(Unaudited)

The following table reflects the fees incurred and unpaid to our Dealer Manager, the Adviser and transfer agent as of and for the year ended December 31, 2013 (dollars in thousands):

 
 
Incurred for the Year Ended
 
Payable as of
 
 
December 31, 2013
 
December 31, 2013
Selling commissions and dealer manager fees (1)
 
$
45,000

 
$
—

Offering costs
 
4,198

 
198

Management and incentive fees
 
13,549

 
8,068

Investment banking advisory fees (2)
 
548

 
—

Total related party fees
 
$
63,295

 
$
8,266

______________

(1)
Selling commissions and dealer manager fees are not reflected in the Company's financial statements.

(2)  
Investment banking advisory fees were paid to the Dealer Manager for strategic advisory services provided to the Company.

Note 5 — Borrowings

Wells Fargo Credit Facility

On July 24, 2012, the Company, through a wholly-owned, consolidated special purpose financing subsidiary, Funding I, entered into a revolving credit facility with Wells Fargo and U.S. Bank as collateral agent, account bank and collateral custodian. The Wells Fargo Credit Facility, which was subsequently amended on April 26, 2013, September 9, 2013, and June 30, 2014, provides for borrowings in an aggregate principal amount of up to $300.0 million on a committed basis, with a term of 60 months.

The Company may contribute cash or loans to Funding I from time to time to retain a residual interest in any assets contributed through its ownership of Funding I or will receive fair market value for any loans sold to Funding I. Funding I may purchase additional loans from various sources. Funding I has appointed the Company as servicer to manage its portfolio of loans. Funding I's obligations under the Wells Fargo Credit Facility are secured by a first priority security interest in substantially all of the assets of Funding I, including its portfolio of loans. The obligations of Funding I under the Wells Fargo Credit Facility are non-recourse to the Company.

The Wells Fargo Credit Facility will be priced at the one month maturity London Interbank Offered Rate ("LIBOR"), with no LIBOR floor, plus a spread ranging between 1.75% and 2.50% per annum, depending on the composition of the portfolio of loans owned by Funding I for the relevant period. Interest is payable quarterly in arrears. Funding I will be subject to a non-usage fee to the extent the aggregate principal amount available under the Wells Fargo Credit Facility has not been borrowed. The non-usage fee per annum for the first six months is 0.50%; thereafter, the non-usage fee per annum is 0.50% for the first 20% of the unused balance and 2.0% for the portion of the unused balance that exceeds 20%. For the three and six months ended June 30, 2014 , the Company incurred $0.2 million and $0.3 million, respectively, of non-usage fees. For the three and six months ended June 30, 2013 , the Company incurred $0.3 million and $0.3 million, respectively, of non-usage fees. Any amounts borrowed under the Wells Fargo Credit Facility will mature, and all accrued and unpaid interest thereunder will be due and payable in April 2018.

Borrowings under the Wells Fargo Credit Facility are subject to compliance with a borrowing base, pursuant to which the amount of funds advanced to Funding I varies depending upon the types of loans in Funding I's portfolio. As of June 30, 2014 , the Company was in compliance with regards to the Wells Fargo Credit Facility covenants. The Wells Fargo Credit Facility may be prepaid in whole or in part, subject to customary breakage costs. In the event that the Wells Fargo Credit Facility is terminated prior to the first anniversary, an additional amount is payable to Wells Fargo equal to 2.00% of the maximum amount of the Wells Fargo Credit Facility.


35
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
(Unaudited)

The Wells Fargo Credit Facility contains customary default provisions for facilities of this type pursuant to which Wells Fargo may terminate the rights, obligations, power and authority of the Company, in its capacity as servicer of the portfolio assets under the Wells Fargo Credit Facility, including, but not limited to, non-performance of Wells Fargo Credit Facility obligations, insolvency, defaults of certain financial covenants and other events with respect to the Company that may be adverse to Wells Fargo and the secured parties under the Wells Fargo Credit Facility.

In connection with the Wells Fargo Credit Facility, Funding I has made certain representations and warranties, is required to comply with various covenants, reporting requirements and other customary requirements for similar facilities and is subject to certain customary events of default. Upon the occurrence and during the continuation of an event of default, Wells Fargo may declare the outstanding advances and all other obligations under the Wells Fargo Credit Facility immediately due and payable. During the continuation of an event of default, Funding I must pay interest at a default rate.

Borrowings of Funding I will be considered borrowings of the Company for purposes of complying with the asset coverage requirements under the 1940 Act applicable to BDCs.

As of June 30, 2014 , the Company had gross deferred financing costs of $2.9 million, net of accumulated amortization of $0.7 million in connection with the Wells Fargo Credit Facility. As of December 31, 2013, the Company had gross deferred financing costs of $2.3 million, net of accumulated amortization of $0.4 million in connection with the Wells Fargo Credit Facility. At June 30, 2014 , $174.7 million was drawn on the Wells Fargo Credit Facility. At December 31, 2013, $132.7 million was drawn on the Wells Fargo Credit Facility. For the three and six months ended June 30, 2014 , the Company incurred interest expense related to the outstanding borrowings on the Wells Fargo Credit Facility in the amount of $0.8 million and $1.7 million, respectively. For the year ended December 31, 2013, the Company incurred interest expense related to the outstanding borrowings on the Wells Fargo Credit Facility in the amount of $1.2 million.

Deutsche Bank Credit Facility

On February 21, 2014, the Company, through 2L Funding I, entered into the Deutsche Bank Credit Facility with Deutsche Bank as lender and as administrative agent and U.S. Bank as collateral agent and collateral custodian.

The Deutsche Bank Credit Facility provides for borrowings in an aggregate principal amount of up to $60.0 million with a term of 36 months. The Deutsche Bank Credit Facility will be priced at LIBOR plus 4.25%, with no LIBOR floor. The undrawn rate is 0.75%. 2L Funding Sub I will be subject to a minimum utilization of 50% of the loan amount in the first 12-months and 65% of the loan amount thereafter, measured quarterly. If the utilized portion of the loan amount is less than the foregoing thresholds, such shortfalls shall bear interest at LIBOR plus 4.25%. For the three and six months ended June 30, 2014 , the Company incurred $0.2 million and $0.3 million, respectively, of non-usage fees. The Company did not incur any non-usage fees for the three and six months ended June 30, 2013 as the Company had not entered into the Deutsche Bank Credit Facility as of June 30, 2013 . The Deutsche Bank Credit Facility provides for monthly interest payments for each drawn loan. Any amounts borrowed under the Deutsche Bank Credit Facility will mature, and all accrued and unpaid interest thereunder will be due and payable, in January 2017. 2L Funding I paid a structuring fee and incurred certain other customary costs and expenses in connection with obtaining the Deutsche Bank Credit Facility.

Borrowings under the Deutsche Bank Credit Facility are subject to compliance with a borrowing base. The Deutsche Bank Credit Facility may be prepaid in whole or in part, subject to a prepayment fee. The Deutsche Bank Credit Facility contains customary default provisions including, but not limited to, non-payment of principal, interest or other obligations under the Deutsche Bank Credit Facility, insolvency, defaults of certain financial covenants and other events with respect to us that may be adverse to Deutsche Bank and the secured parties under the facility.

In connection with the Deutsche Bank Credit Facility, 2L Funding I has made certain representations and warranties and is required to comply with various covenants, reporting requirements and other customary requirements for similar facilities. Upon the occurrence and during the continuation of an event of default, subject, in certain instances, to applicable cure periods, Deutsche Bank may declare the outstanding advances and all other obligations under the Deutsche Bank Credit Facility immediately due and payable. During the continuation of an event of default, 2L Funding I must pay interest at a default rate.


36
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
(Unaudited)

Borrowings of 2L Funding I will be considered borrowings of the Company for purposes of complying with the asset coverage requirements under the 1940 Act applicable to business development companies.

As of June 30, 2014 , the Company had gross deferred financing costs of $0.9 million, net of accumulated amortization of $0.1 million in connection with the Deutsche Bank Credit Facility. At June 30, 2014 , $30.0 million was drawn on the Deutsche Bank Credit Facility. For the three and six months ended June 30, 2014 , the Company incurred interest expense related to the outstanding borrowings on the Deutsche Bank Credit Facility in the amount of $0.3 million and $0.3 million, respectively. For the year ended December 31, 2013, the Company incurred no interest expense related to the outstanding borrowings on the Deutsche Bank Credit Facility.

Citi Credit Facility

On June 27, 2014, the Company, through a wholly-owned, special purpose financing subsidiary, CB Funding, entered into the Citi Credit Facility as administrative agent and U.S. Bank as collateral agent, account bank and collateral custodian. The Citi Credit Facility provides for borrowings over a twenty four month period in an aggregate principal amount of up to $400 million on a committed basis, subject to the administrative agent’s right to approve the assets acquired by CB Funding and pledged as collateral under the Citi Credit Facility.

The Citi Credit Facility will be priced at LIBOR, with no LIBOR floor, plus a spread of 1.70% per annum for the first twenty four months and 2.00% per annum thereafter. Interest is payable quarterly in arrears. CB Funding will be subject to a non-usage fee to the extent the aggregate principal amount available under the Citi Credit Facility has not been borrowed. Any amounts borrowed under the Citi Credit Facility along with any accrued and unpaid interest thereunder will mature, and will be due and payable, in three years. CB Funding paid a structuring fee and incurred certain other customary costs and expenses in connection with obtaining the Citi Credit Facility.
 
In connection with the Citi Credit Facility, on June 27, 2014, CB Funding entered into a Merger Agreement with Loan Funding, an affiliate of Citi formed for the purpose of holding loans underlying a TRS with CB Funding. Pursuant to the terms of the Merger Agreement, CB Funding acquired such loans through the merger of Loan Funding with and into CB Funding. Pursuant to the Merger Agreement, CB Funding paid approximately $389.0 million for the assets held by Loan Funding.

Borrowings of CB Funding will be considered borrowings of the Company for purposes of complying with the asset coverage requirements under the 1940 Act applicable to business development companies.

As of June 30, 2014 , the Company had gross deferred financing costs of $2.3 million, net of accumulated amortization of $0.01 million in connection with the Citi Credit Facility. At June 30, 2014 , $270.6 million was drawn on the Citi Credit Facility. For the three and six months ended June 30, 2014 , the Company incurred interest expense related to the outstanding borrowings on the Citi Credit Facility in the amount of $0.1 million and $0.1 million, respectively. For the year ended December 31, 2013, the Company incurred no interest expense related to the outstanding borrowings on the Citi Credit Facility.

The weighted average annualized interest cost for all borrowings for the six months ended June 30, 2014 and June 30, 2013 was 2.58% and 2.51%, respectively. The average daily debt outstanding for the six months ended June 30, 2014 and June 30, 2013 was $162.6 million and $26.8 million, respectively. The maximum debt outstanding for the six months ended June 30, 2014 and June 30, 2013 was $475.3 million and $33.9 million, respectively.


37
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
(Unaudited)

The Company is required to disclose the fair value of financial instruments for which it is practicable to estimate that value. The fair value of short-term financial instruments such as cash and cash equivalents, due to affiliates and accounts payable approximate their carrying value on the accompanying statements of assets and liabilities due to their short-term nature. The fair values of the Company’s remaining financial instruments that are not reported at fair value on the accompanying statements of assets and liabilities are reported below (amounts in thousands):

 
Level
 
Carrying Amount at June 30, 2014
 
Fair Value at June 30, 2014
Wells Fargo Credit Facility
3
 
$
174,687

 
$
174,687

Deutsche Bank Credit Facility
3
 
$
30,000

 
$
30,000

Citi Credit Facility
3
 
$
270,625

 
$
270,625

 
 
 
$
475,312

 
$
475,312


 
Level
 
Carrying Amount at December 31, 2013
 
Fair Value at December 31, 2013
Wells Fargo Credit Facility
3
 
$
132,687

 
$
132,687


Note 6 — Total Return Swap

On July 13, 2012, the Company, through its wholly-owned subsidiary, 405 Sub, entered into a TRS with Citi, which was most recently amended on May 6, 2014, to increase the aggregate market value of the portfolio of loans selected by 405 Sub. The Company terminated its amended and restated TRS with Citi on June 27, 2014.
 
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 TRS, which may include a specified security, basket of securities or securities indices during the specified period, in return for periodic payments based on a fixed or variable interest rate. The TRS effectively added leverage to the Company's 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. The TRS enabled the Company, through its ownership of 405 Sub, to obtain the economic benefit of owning the loans subject to the TRS, without actually owning them, in return for an interest-type payment to Citi.

The obligations of 405 Sub under the TRS were non-recourse to the Company and the Company's exposure to the TRS was limited to the amount that it contributed to 405 Sub in connection with the TRS. Generally, that amount was the amount that 405 Sub was required to post as cash collateral for each loan (which in most instances was approximately 25% of the market value of a loan at the time that such loan was purchased). There was no cash collateral on deposit as of June 30, 2014 as the TRS was terminated on June 27, 2014. The cash collateral on deposit as of December 31, 2013 was $ 76.9 million. As amended, the TRS provided that 405 Sub could have selected a portfolio of loans with a maximum aggregate market value (determined at the time such loans become subject to the TRS) of $450.0 million.
 
405 Sub paid interest to Citi for each loan at a rate equal to one-month LIBOR plus 1.20% per annum. Upon the termination or repayment of any loan selected by 405 Sub under the Agreement, 405 Sub would deduct the appreciation of such loan's value from any interest owed to Citi or pay the depreciation amount to Citi in addition to remaining interest payments.

On June 27, 2014, the Company terminated the TRS and CB Funding entered into a Merger Agreement with Loan Funding, an affiliate of Citi formed for the purpose of holding the loans underlying the TRS. Pursuant to the terms of the Merger Agreement, CB Funding acquired such loans through the merger of Loan Funding with and into CB Funding (the “Merger”) for approximately $389.0 million. The Company recorded such loans at a cost equal to the respective fair values as of June 27, 2014 and as a result, the $4.0 million of unrealized gain on the TRS at the termination date was realized which resulted in an offsetting unrealized loss and realized gain on the TRS. The $4.0 million gain equates to fair value of the loans underlying the TRS as of June 27, 2014 less the respective costs of such assets as purchased through the TRS.
 
Previously, the Adviser has not recognized incentive fees based on the returns or capital gains of the TRS and therefore will not receive any additional fees as a direct result of the Merger or termination of the TRS. However, such loans are now

38
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
(Unaudited)

included in the Company's portfolio of investments and subject to any fees applicable under the Investment Advisory Agreement.
    
At June 30, 2014 , the receivable and realized gain on the total return swap on the consolidated statements of assets and liabilities and consolidated statements of operations consisted of the following (dollars in thousands):

 
Net Receivable
 
Net Realized Gains
Interest and other income from TRS portfolio
$
4,138

 
$
11,366

TRS interest expense
—

 
(2,187
)
Gains on TRS asset sales
—

 
5,379

Net realized gain from TRS
$
4,138

 
$
14,558


At June 30, 2013 , the receivable and realized gain on the total return swap on the consolidated statements of assets and liabilities and consolidated statements of operations consisted of the following (dollars in thousands):

 
Net Receivable
 
Net Realized Gains
Interest and other income from TRS portfolio
$
2,505

 
$
5,345

TRS interest expense
(430
)
 
(926
)
Gains on TRS asset sales
9

 
250

Net realized gain from TRS
$
2,084

 
$
4,669

    
The Company valued its TRS in accordance with the agreements between 405 Sub and Citi, which collectively established the TRS and are collectively referred to herein as the "TRS Agreement". Pursuant to the TRS Agreement, the value of the TRS is based on the increase or decrease in the value of the loans underlying the TRS, together with accrued interest income, interest expense and certain other expenses incurred under the TRS. The loans underlying the TRS are valued by Citi. Citi bases its valuation primarily on the indicative bid prices provided by an independent third-party pricing service. Bid prices reflect the highest price that market participants may be willing to pay. These valuations are sent to the Company for review and testing. The Company's management reviews and approves the value of the TRS, as well as the value of the loans underlying the TRS, on a quarterly basis as part of their quarterly valuation process. To the extent the Company's management has any questions or concerns regarding the valuation of the loans underlying the TRS, such valuations will be discussed or challenged pursuant to the terms of the TRS.

The fair value of the TRS is reflected as an unrealized gain or loss on the total return swap on the consolidated statements of assets and liabilities. The change in value of the TRS is reflected in the consolidated statements of operations as net unrealized appreciation (depreciation) on the total return swap.

The Company did not hold the TRS at June 30, 2014 . As of December 31, 2013, the fair value of the TRS was $3.2 million.

As of December 31, 2013, 405 Sub had exposure to 32 underlying loans with a total notional amount of $293.0 million and posted $ 76.9 million in cash collateral held by Citibank, which is reflected in cash collateral on deposit with custodian on the consolidated statements of assets and liabilities.
    
For purposes of the asset coverage ratio test applicable to the Company as a BDC, the Company had agreed with the staff of the SEC to treat the outstanding notional amount of the TRS, less the initial amount of any cash collateral posted by 405 Sub under the TRS, as a senior security for the life of that instrument.

Further, for purposes of Section 55(a) under the 1940 Act, the Company had agreed with the staff of the SEC to treat each loan underlying the TRS as a qualifying asset if the obligor on such loan is an eligible portfolio company and as a non-qualifying asset if the obligor is not an eligible portfolio company.
    
The following is a summary of the underlying loans subject to the TRS as of December 31, 2013 (dollars in thousands):

39
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
(Unaudited)

Underlying Loan (a)
 
Industry
 
Investment Coupon Rate/Maturity Date
 
Principal
 
Notional Amount
 
Market Value
 
Unrealized Appreciation (Depreciation)
Senior Secured First Lien Debt
 
 
 
 
 
 
 
 
 
 
 
 
AM General LLC
 
Aerospace & Defense
 
L+9.00%, 3/22/2018
 
$
6,650

 
$
6,451

 
$
5,752

 
$
(699
)
American Dental Partners, Inc.
 
Health Care Providers & Services
 
L+5.00%, 2/9/2018
 
3,388

 
3,184

 
3,320

 
136

Amneal Pharmaceuticals LLC
 
Biotechnology
 
L+4.75%, 11/1/2019
 
11,970

 
11,850

 
12,030

 
180

BBTS Borrower LP
 
Oil, Gas & Consumable Fuels
 
L+6.50%, 6/4/2019
 
18,858

 
18,733

 
18,952

 
219

Caesar's Entertainment Resort Properties, LLC
 
Hotels, Restaurants & Leisure
 
L+6.00%, 10/11/2020
 
12,000

 
11,760

 
11,925

 
165

Clover Technologies Group, LLC (aka 4L Holdings)
 
Commercial Services & Supplies
 
L+5.50%, 5/7/2018
 
11,330

 
11,272

 
11,273

 
1

Corner Investment Propco, LLC
 
Hotels, Restaurants & Leisure
 
L+9.75%, 11/2/2019
 
9,000

 
8,932

 
9,135

 
203

Excelitas Technologies Corp.
 
Electronic Equipment, Instruments & Components
 
L+5.00%, 11/2/2020
 
17,271

 
17,098

 
17,343

 
245

Expera Specialty Solutions, LLC
 
Paper & Forest Products
 
L+6.25%, 12/21/2018
 
6,965

 
6,826

 
7,035

 
209

Hearthside Food Solutions, LLC
 
Food Products
 
L+5.25%, 6/7/2018
 
5,444

 
5,418

 
5,444

 
26

Ikaria Acquisitions, Inc.
 
Biotechnology
 
L+6.00%, 7/3/2018
 
13,650

 
13,445

 
13,710

 
265

Jackson Hewitt, Inc.
 
Diversified Consumer Services
 
L+8.50%, 10/16/2017
 
9,266

 
9,008

 
9,173

 
165

Jacobs Entertainment, Inc.
 
Hotels, Restaurants & Leisure
 
L+5.00%, 10/29/2018
 
3,950

 
3,891

 
3,930

 
39

Keystone Automotive Operations Inc
 
Distributors
 
L+5.75%, 8/8/2019
 
9,975

 
9,825

 
10,000

 
175

Liquidnet Holdings, Inc.
 
Capital Markets
 
L+8.00%, 5/8/2017
 
8,181

 
8,100

 
8,058

 
(42
)
MCS AMS Sub-Holdings LLC
 
Real Estate Management & Development
 
L+6.00%, 10/15/2019
 
15,000

 
14,550

 
14,475

 
(75
)
Miller Heiman
 
Media
 
L+5.75%, 9/30/2018
 
13,750

 
13,338

 
13,681

 
343

Mitel Networks Corp.
 
Communications Equipment
 
L+5.75%, 2/27/2019
 
5,355

 
5,301

 
5,355

 
54

NXT Capital LLC
 
Commercial Banks
 
L+5.25%, 9/4/2018
 
10,000

 
9,900

 
9,900

 
—

Plato Learning, Inc.
 
Diversified Consumer Services
 
L+4.75%, 5/17/2018
 
2,400

 
2,392

 
2,392

 
—

Premier Dental Services Inc.
 
Health Care Providers & Services
 
L+7.00%, 11/1/2018
 
4,950

 
4,802

 
4,981

 
179

Pre-Paid Legal Services, Inc.
 
Diversified Consumer Services
 
L+5.00%, 7/1/2019
 
12,690

 
12,567

 
12,762

 
195

RedPrairie Corp.
 
Software
 
L+10.00%, 12/21/2018
 
17,500

 
17,500

 
17,549

 
49

St. George's University Scholastic Services LLC
 
Diversified Consumer Services
 
L+7.00%, 12/20/2017
 
6,517

 
6,387

 
6,550

 
163

STG-Fairway Acquisitions, Inc.
 
Professional Services
 
L+5.00%, 2/28/2019
 
11,965

 
11,845

 
11,943

 
98

Therakos, Inc.
 
Biotechnology
 
L+6.25%, 12/27/2017
 
7,481

 
7,444

 
7,487

 
43

United Central Industrial Supply Company, LLC
 
Commercial Services & Supplies
 
L+6.25%, 10/9/2018
 
4,950

 
4,752

 
4,702

 
(50
)
US Shipping LLC
 
Marine
 
L+7.75%, 4/30/2018
 
11,940

 
11,858

 
12,209

 
351

Varel International Ind., LP
 
Oil, Gas & Consumable Fuels
 
L+7.75%, 7/17/2017
 
4,850

 
4,753

 
4,923

 
170

Vestcom International, Inc.
 
Media
 
L+5.75%, 12/26/2018
 
7,444

 
7,332

 
7,453

 
121


40
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
(Unaudited)

Underlying Loan (a)
 
Industry
 
Investment Coupon Rate/Maturity Date
 
Principal
 
Notional Amount
 
Market Value
 
Unrealized Appreciation (Depreciation)
Sub Total Senior Secured First Lien Debt
 
 
 
 
 
 
 
$
280,514

 
$
283,442

 
$
2,928

 
 
 
 
 
 
 
 
 
 
 
 
 
Senior Secured Second Lien Debt
 
 
 
 
 
 
 
 
 
 
 
 
NCP Finance Limited Partnership
 
Consumer Finance
 
L+9.75%, 10/1/2018
 
$
9,975

 
$
9,776

 
$
9,925

 
$
149

RedPrairie Corp.
 
Software
 
L+10.00%, 12/14/2019
 
3,000

 
2,690

 
2,793

 
103

Sub Total Senior Secured Second Lien Debt
 
 
 
 
 
 
 
$
12,466


$
12,718


$
252

Total
 
 
 
 
 
 
 
$
292,980


$
296,160


$
3,180

______________

(a)  
All of the companies that issued the underlying loans that are subject to the TRS are eligible portfolio companies, as defined in the 1940 Act, except Caesar's Entertainment Resort Properties, LLC, Corner Investment Propco, LLC, Mitel Networks Corp., NXT Capital LLC, and St. George's University Scholastic Services LLC.

Note 7 — Commitments and Contingencies

Commitments

In the ordinary course of business, the Company may enter into future funding commitments. As of June 30, 2014 , the Company had unfunded commitments on delayed draw term loans of $36.3 million, unfunded equity commitments of $70.8 million, and unfunded commitments on collateralized securities of $63.0 million. As of December 31, 2013, the Company had unfunded commitments on delayed draw term loans of $25.6 million and unfunded equity commitments of $20.0 million. The unfunded commitments are disclosed in the Company's Consolidated Schedule of Investments.

Litigation
 
In the ordinary course of business, the Company may become subject to litigation or claims. There are no material legal proceedings pending or known to be contemplated against the Company.
 
Indemnifications

In the ordinary course of its business, the Company may enter into contracts or agreements that contain indemnifications or warranties. Future events could occur that lead to the execution of these provisions against the Company. Based on its history and experience, management feels that the likelihood of such an event is remote.

Note 8 — Economic Dependency
 
Under various agreements, the Company has engaged or will engage the Adviser and its affiliates to provide certain services that are essential to the Company, including asset management services, asset acquisition and disposition decisions, the sale of shares of the Company’s common stock available for issuance, as well as other administrative responsibilities for the Company including accounting services and investor relations.
  
As a result of these relationships, the Company is dependent upon the Adviser and its affiliates. In the event that these companies were unable to provide the Company with the respective services, the Company would be required to find alternative providers of these services.


41
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
(Unaudited)

Note 9 — Common Stock

On August 25, 2011, the Company had raised sufficient funds to break escrow on its IPO and through June 30, 2014 , the Company had sold 130.6 million shares of common stock for gross proceeds of $1.4 billion , including shares purchased by the Sponsor and shares issued under the DRIP. As of June 30, 2014 , the Company had repurchased 0.3 million shares of common stock for payments of $ 2.8 million.

The following table reflects the common stock activity for the six months ended June 30, 2014 (dollars in thousands except share amounts):

 
 
Shares
 
Value
Shares Sold
 
65,264,138

 
$
722,821

Shares Issued through DRIP
 
1,769,824

 
17,840

Share Repurchases
 
(113,135
)
 
(1,189
)
 
 
66,920,827

 
$
739,472


The following table reflects the common stock activity for the six months ended June 30, 2013 (dollars in thousands except share amounts):

 
 
Shares
 
Value
Shares Sold
 
18,694,305

 
$
201,212

Shares Issued through DRIP
 
307,693

 
3,013

Share Repurchases
 
(45,030
)
 
(458
)
 
 
18,956,968

 
$
203,767

    
Note 10 — Share Repurchase Program

The Company intends to conduct quarterly tender offers pursuant to its share repurchase program. The Company’s board of directors will consider the following factors, among others, in making its determination regarding whether to cause the Company to offer to repurchase shares and under what terms:

 
•
the effect of such repurchases on the Company's qualification as a RIC (including the consequences of any
 
 
necessary asset sales);
 
•
the liquidity of the Company's assets (including fees and costs associated with disposing of assets);
 
•
the Company's investment plans and working capital requirements;
 
•
the relative economies of scale with respect to the Company's size;
 
•
the Company's history in repurchasing shares or portions thereof; and
 
•
the condition of the securities markets.
    

42
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
(Unaudited)

The Company currently intends to limit the number of shares to be repurchased during any calendar year to the number of shares it can repurchase with the proceeds it receives from the sale of shares under its DRIP. At the discretion of the Company’s board of directors, the Company may also use cash on hand, cash available from borrowings and cash from liquidation of securities investments as of the end of the applicable period to repurchase shares. In addition, as of September 30, 2013, the Company will limit the number of shares to be repurchased in any calendar year to 10% of the weighted average number of shares outstanding in the prior calendar year, or 2.5% in each quarter, though the actual number of shares that the Company offers to repurchase may be less in light of the limitations noted above. The Company will offer to repurchase such shares on each date of repurchase at a price equal to 92.5% of the public offering price in effect on each date of repurchase, which will be determined in the same manner that the Company determined the public offering price per share for purposes of its continuous public offering. The Company’s board of directors may amend, suspend or terminate the repurchase program at any time upon 30 days’ notice. The first quarterly tender offer commenced on September 12, 2012 and was completed on October 8, 2012. The following table reflects certain information regarding the quarterly tender offers that we have conducted to date:
 
Quarterly Offer Date
 
Repurchase Date
 
Shares Repurchased
 
Repurchase Price Per Share
 
Aggregate Consideration for Repurchased Shares (in thousands)
September 12, 2012
 
October 8, 2012
 
—

 
$
9.71

 
$
—

December 13, 2012
 
January 15, 2013
 
10,732

 
$
9.90

 
$
106.22

March 27, 2013
 
April 25, 2013
 
29,624

 
$
10.18

 
$
301.58

July 15, 2013
 
August 13, 2013
 
30,365

 
$
10.18

 
$
308.97

October 22, 2013
 
November 21, 2013
 
55,255

 
$
10.36

 
$
572.44

February 4, 2014
 
March 6, 2014
 
68,969

 
$
10.36

 
$
714.52

June 6, 2014 (1)
 
 
 
 
 
$
10.36

 
 
______________

(1) The seventh quarterly tender offer commenced on June 6, 2014 and is expected to be completed on July 11, 2014. The Company offered to purchase up to a maximum of 909,761 shares at $10.36 which is 92.5% of the current public offering price of $11.20.

Note 11 — Net Increase in Net Assets

Basic earnings per share is computed by dividing earnings available to common stockholders by the weighted average number of shares outstanding during the period. Other potentially dilutive shares, and the related impact to earnings, are considered when calculating earnings per share on a diluted basis. The Company had no potentially dilutive securities as of June 30, 2014 and 2013.

The following information sets forth the computation of the weighted average basic and diluted net increase in net assets per share from operations for the three and six months ended June 30, 2014 , and June 30, 2013 (dollars in thousands except share and per share amounts):

 
 
For the three months ended June 30,
 
For the three months ended June 30,
 
For the six months ended June 30,
 
For the six months ended June 30,
 
 
2014
 
2013
 
2014
 
2013
Basic and diluted
 
 
 
 
 
 
 
 
Net increase in net assets from operations
 
$
24,605

 
$
6,912

 
$
42,006

 
$
14,851

Weighted average common shares outstanding
 
115,859,732

 
28,159,751

 
97,258,326

 
23,574,852

Net increase in net assets resulting from operations per share - basic and diluted
 
$
0.21

 
$
0.25

 
$
0.43

 
$
0.63

    

43
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
(Unaudited)

The table below shows changes in the Company's offering price and distribution rates since the commencement of our public offering.
Announcement Date
 
New Public Offering Price
 
Effective Date
 
Daily Distribution Amount per share
 
Annualized Distribution Rate
November 14, 2011
 
$
10.26

 
November 16, 2011
 
0.002221920
 
7.90
%
May 1, 2012
 
$
10.44

 
June 1, 2012
 
0.002215850
 
7.75
%
August 14, 2012
 
$
10.50

 
September 4, 2012
 
0.002246575
 
7.81
%
September 24, 2012
 
$
10.60

 
October 16, 2012
 
0.002246575
 
7.74
%
October 15, 2012
 
$
10.70

 
November 1, 2012
 
0.002273973
 
7.76
%
February 5, 2013
 
$
10.80

 
February 18, 2013
 
0.002293151
 
7.75
%
February 25, 2013
 
$
10.90

 
March 1, 2013
 
0.002314384
 
7.75
%
April 3, 2013
 
$
11.00

 
April 16, 2013
 
0.002335616
 
7.75
%
August 15, 2013
 
$
11.10

 
August 16, 2013
 
0.002356849
 
7.75
%
October 29, 2013
 
$
11.20

 
November 1, 2013
 
0.002378082
 
7.75
%

Note 12 — Distributions

The Company has declared and paid cash distributions to stockholders on a monthly basis since it commenced operations. From time to time, the Company may also pay interim distributions at the discretion of its board of directors. The Company may fund its cash distributions to stockholders from any sources of funds available to it, including offering proceeds, borrowings, net investment income from operations, capital gains proceeds from the sale of assets and non-capital gains proceeds from the sale of assets. The Company’s distributions may exceed its earnings, especially during the period before the Company has substantially invested the proceeds from its IPO. As a result, a portion of the distributions the Company will make may represent a return of capital for tax purposes. As of June 30, 2014 , the Company had accrued $ 9.1 million in stockholder distributions that were unpaid. As of December 31, 2013, the Company had accrued $ 4.6 million in stockholder distributions that were unpaid.
    
The following table reflects the cash distributions per share that the Company has paid on its common stock to date (dollars in thousands except per share amounts):
Record Date
Payment Date
 
Per share
 
Distributions Paid in Cash
 
Distributions Paid Through the DRIP
 
Total Distributions Paid
2011:
 
 
 
 
 
 
 
 
 
September 30, 2011
October 3, 2011
 
$
0.07

 
$
13

 
$
13

 
$
26

October 31, 2011
November 1, 2011
 
0.07

 
20

 
14

 
34

November 30, 2011
December 1, 2011
 
0.06

 
25

 
17

 
42

December 31, 2011
January 3, 2012
 
0.06

 
35

 
21

 
56

 
 
 
 
 
$
93

 
$
65

 
$
158

2012:
 
 
 
 
 
 
 
 
 
January 31, 2012
February 1, 2012
 
$
0.06

 
$
47

 
$
26

 
$
73

February 29, 2012
March 1, 2012
 
0.06

 
80

 
34

 
114

March 31, 2012
April 2, 2012
 
0.06

 
118

 
48

 
166

April 30, 2012
May 1, 2012
 
0.06

 
157

 
65

 
222

May 31, 2012
June 1, 2012
 
0.07

 
289

 
91

 
380

June 30, 2012
July 2, 2012
 
0.06

 
313

 
113

 
426


44
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
(Unaudited)

Record Date
Payment Date
 
Per share
 
Distributions Paid in Cash
 
Distributions Paid Through the DRIP
 
Total Distributions Paid
July 31, 2012
August 1, 2012
 
$
0.07

 
$
361

 
$
146

 
$
507

August 31, 2012
September 4, 2012
 
0.07

 
394

 
173

 
567

September 30, 2012
October 1, 2012
 
0.06

 
429

 
203

 
632

October 31, 2012
November 1, 2012
 
0.07

 
505

 
247

 
752

November 30, 2012
December 3, 2012
 
0.07

 
612

 
287

 
899

December 17, 2012
December 27, 2012
 
0.09

 
917

 
462

 
1,379

December 31, 2012
January 2, 2013
 
0.07

 
682

 
341

 
1,023

 
 
 
 
 
$
4,904

 
$
2,236

 
$
7,140

2013:
 
 
 
 
 
 
 
 
 
January 31, 2013
February 1, 2013
 
$
0.07

 
$
787

 
$
395

 
$
1,182

February 28, 2013
March 1, 2013
 
0.06

 
797

 
408

 
1,205

March 31, 2013
April 1, 2013
 
0.07

 
1,008

 
525

 
1,533

April 30, 2013
May 1, 2013
 
0.07

 
1,098

 
590

 
1,688

May 31, 2013
June 1, 2013
 
0.07

 
1,276

 
755

 
2,031

June 30, 2013
July 1, 2013
 
0.07

 
1,396

 
893

 
2,289

July 31, 2013
August 1, 2013
 
0.07

 
1,608

 
1,071

 
2,679

August 31, 2013
September 1, 2013
 
0.07

 
1,764

 
1,285

 
3,049

September 30, 2013
October 1, 2013
 
0.07

 
1,868

 
1,408

 
3,276

October 31, 2013
November 1, 2013
 
0.07

 
2,092

 
1,673

 
3,765

November 30, 2013
December 2, 2013
 
0.07

 
2,225

 
1,799

 
4,024

December 31, 2013
January 2, 2014
 
0.07

 
2,504

 
2,074

 
4,578

 
 
 
 
 
$
18,423

 
$
12,876

 
$
31,299

2014:
 
 
 
 
 
 
 
 
 
January 31, 2014
February 4, 2014
 
$
0.07

 
$
2,717

 
$
2,317

 
$
5,034

February 28, 2014
March 3, 2014
 
0.06

 
2,751

 
2,399

 
5,150

March 31, 2014
April 1, 2014
 
0.07

 
3,499

 
3,197

 
6,696

April 30, 2014
May 1, 2014
 
0.07

 
3,816

 
3,610

 
7,426

May 30, 2014
June 2, 2014
 
0.07

 
4,383

 
4,244

 
8,627

June 30, 2014
July 1, 2014
 
0.07

 
4,581

 
4,533

 
9,114

July 31, 2014
August 1, 2014
 
0.07

 
5,031

 
4,985

 
10,016

 
 
 
 
 
$
26,778

 
$
25,285

 
$
52,063

 
 
 
 
 
$
50,198

 
$
40,462

 
$
90,660

The following table reflects the stock distributions per share that the Company declared on its common stock to date:

Date Declared
 
Record Date
 
Payment Date
 
Per Share
 
Distribution Percentage
 
Shares Issued
March 29, 2012
 
May 1, 2012
 
May 2, 2012
 
$
0.05

 
0.49
%
 
25,709


The Company has not established any limit on the extent to which it may use borrowings, if any, or proceeds from its IPO to fund distributions (which may reduce the amount of capital it ultimately invests in assets). There can be no assurance that the Company will be able to sustain distributions at any particular level.

On March 1, 2012, the price for newly-issued shares under the DRIP issued to stockholders was changed from 95% to 90% of the stock price that the shares are sold in the offering as of the date the distribution is made.

45
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
(Unaudited)


Note 13 — Financial Highlights

The following is a schedule of financial highlights for the six months ended June 30, 2014 and June 30, 2013 :
 
For the Six Months Ended June 30,
 
For the Six Months Ended June 30,
 
2014
 
2013
Per share data:
 

 
 

Net asset value, beginning of period
$
9.86

 
$
9.41

 
 
 
 
Results of operations (1)
       Net investment income
0.30

 
0.14

Net realized and unrealized appreciation (depreciation) on investments
0.01

 
0.19

Net realized and unrealized appreciation on total return swap
0.12

 
0.30

Net increase in net assets resulting from operations
0.43

 
0.63

 
 
 
 
Stockholder distributions (2)
       Distributions from net investment income
(0.30
)
 
(0.14
)
(Over) distributed net investment income
—

 
(0.01
)
Distributions from net realized gain on investments and total return swap
(0.13
)
 
(0.27
)
Net decrease in net assets resulting from stockholder distributions
(0.43
)
 
(0.42
)
 
 
 
 
Capital share transactions
       Issuance of common stock (3)
0.15

 
0.20

Repurchases of common stock
(0.01
)
 
—

Offering costs
(0.11
)
 
(0.13
)
Net increase in net assets resulting from capital share transactions
0.03

 
0.07

Net asset value, end of period
$
9.89

 
$
9.69

Shares outstanding at end of period
130,592,469

 
33,900,183

Total return (5)
4.63
%
 
6.70
%
Ratio/Supplemental data:
 

 
 

Net assets, end of period (in thousands)
$
1,292,359

 
$
328,439

Ratio of net investment income to average net assets (4)(7)
6.26
%
 
3.00
%
Ratio of operating expenses to average net assets (4)(7)
3.98
%
 
5.47
%
Ratio of incentive fees to average net assets (7)
0.38
%
 
2.06
%
Ratio of credit facility related expenses to average net assets (7)
0.64
%
 
6.80
%
Portfolio turnover rate (6)
35.44
%
 
64.77
%
 
 
 
 
______________

46
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts, percentages and as otherwise indicated)
(Unaudited)


(1)  
The per share data was derived by using the weighted average shares outstanding during the period. Net investment income per share excluding the expense waiver and reimbursements equals $ 0.13 for the six months ended June 30, 2013 .

(2)  
The per share data for distributions reflects the actual amount of distributions declared per share during the period.

(3)  
The issuance of common stock on a per share basis reflects the incremental net asset value changes as a result of the issuance of shares of common stock in the Company’s continuous offering.

(4)  
For the six months ended June 30, 2013 , excluding the expense waiver and reimbursement, the ratio of net investment income, operating expenses and incentive fees to average net assets was 2.64% , 5.84% , and 2.43% , respectively.

(5)  
Total return is calculated assuming a purchase of shares of common stock at the current net asset value on the first day and a sale at the current net asset value on the last day of the periods reported. Distributions, if any, are assumed for purposes of this calculation to be reinvested at prices obtained under the DRIP. The total return based on net asset value for the six months ended June 30, 2013 , includes the effect of the expense waiver and reimbursement which equaled 0.18% .

(6)  
Portfolio turnover rate is calculated using the lesser of year-to-date purchases or sales over the average of the invested assets at fair value. Not annualized.

(7)  
Ratios are annualized, except for incentive fees.

Note 14 – Subsequent Events

The Company has evaluated subsequent events through the filing of this Form 10-Q and determined that there have been no events that have occurred that would require adjustments to the Company’s disclosures in the consolidated financial statements except for the following:

On July 1, 2014, the Company's registration statement on Form N-2 (File No. 333-193241) for the extension of its continuous public offering (the "Extension") was declared effective by the SEC. Simultaneously with the effectiveness of the Extension, the Company's IPO terminated. Under the Extension, the Company can offer up to 101,100,000 shares of its common stock.

From July 1, 2014 to August 13, 2014, th e Company has issued 7.7 million shares of common stock including shares issued pursuant to the DRIP. Total gross proceeds from these issuances including proceeds from shares issued pursuant to the DRIP were $83.8 million.

On July 11, 2014, the Company’s seventh quarterly tender offer was completed and a total of approximately 117,425 shares were validly tendered and not withdrawn pursuant to the offer. In accordance with the terms of the offer, the Company purchased all of the shares validly tendered and not withdrawn at a price equal to $10.36 per share (an amount equal to 92.5% of the public offering price as of July 1, 2014, which was $11.20 per share) for an aggregate purchase price of approximately $1.2 million.



47
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

SCHEDULE OF INVESTMENTS AND ADVANCES TO AFFILIATES
(dollars in thousands)
(Unaudited)




Schedule 12-14
Portfolio Company (1)
 
Type of Asset
 
Amount of dividends and interest included in income
 
Beginning Fair Value December 31, 2013
 
Gross additions
 
Gross reductions
 
Realized Gain/(Loss)
 
Change in Unrealized Gain (Loss)
 
Fair Value at June 30, 2014
Control Investments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Kahala US OpCo LLC
 
Senior Secured First Lien Debt
 
$
1,278

 
$
15,860

 
$
8,549

 
$
(3,919
)
 
$
—

 
$
—

 
$
20,490

Kahala Ireland OpCo LLC
 
Senior Secured First Lien Debt
 
21

 
—

 
14,240

 
—

 
—

 
—

 
14,240

Kahala Ireland OpCo LLC.
 
Equity/Other
 
—

 
—

 
100

 
—

 
—

 
—

 
100

Kahala US OpCo LLC
 
Equity/Other
 
—

 
—

 
6,890

 
(133
)
 
—

 
(561
)
 
6,196

Kahala Aviation Holdings, LLC (2) (3)
 
Equity/Other
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Kahala Aviation Holdings, LLC - Preferred Shares (3)
 
Equity/Other
 
—

 
5,271

 
2,525

 
(7,796
)
 
—

 
—

 
—

Park Ave RE Holdings, LLC
 
Subordinated Debt
 
853

 
9,750

 
14,338

 
(18,930
)
 
—

 
—

 
5,158

Park Ave Holdings, LLC.
 
Equity/Other
 
—

 
—

 
7,809

 
(6
)
 
 
 
612

 
8,415

Park Ave RE, Inc. (3)
 
Equity/Other
 
—

 
33

 
46

 
(79
)
 
—

 
—

 
—

Park Ave RE, Inc. - Preferred Shares (3)
 
Equity/Other
 
—

 
3,218

 
4,591

 
(7,809
)
 
—

 
—

 
—

  Total Control Investments
 
 
 
$
2,152

 
$
34,132

 
$
59,088

 
$
(38,672
)
 
$
—

 
$
51

 
$
54,599

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Affiliate Investments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Apidos XVI CLO, LTD. Subordinated Notes
 
Collateralized Securities
 
$
629

 
$
13,650

 
$
—

 
$
—

 
$
—

 
$
(131
)
 
$
13,519

B&M CLO 2014-1, LTD. Subordinated Notes
 
Collateralized Securities
 
1,103

 
—

 
35,420

 
—

 
—

 
(769
)
 
34,651

Catamaran CLO 2013-1 Ltd. Subordinated Notes
 
Collateralized Securities
 
247

 
20,404

 
—

 
(21,176
)
 
3,236

 
(2,464
)
 
—

CVP Cascade CLO-1, LTD. Subordinated Notes
 
Collateralized Securities
 
2,352

 
28,086

 
—

 
(3,243
)
 
—

 
(947
)
 
23,896

CVP Cascade CLO-2, LTD. Subordinated Notes
 
Collateralized Securities
 
—

 
—

 
18,000

 
—

 
—

 
—

 
18,000

Danish CRJ LTD. - Equity
 
Equity/Other
 
 
 
—

 
500

 
 
 
 
 
—

 
500

Fifth Street Senior Loan Fund I, LLC
 
Equity/Other
 
—

 
—

 
19,357

 
—

 
—

 
—

 
19,357

Figueroa CLO 2014-1, LTD. Subordinated Notes
 
Collateralized Securities
 
—

 
—

 
18,600

 
—

 
—

 
—

 
18,600

Garrison Funding 2013-1 Ltd. Subordinated Notes
 
Collateralized Securities
 
—

 
15,000

 
—

 
—

 
—

 
—

 
15,000

JMP Credit Advisors CLO II Ltd. Subordinated Notes
 
Collateralized Securities
 
28

 
6,099

 
—

 
(6,100
)
 
400

 
(399
)
 
—

MidOcean Credit CLO II, LLC
 
Collateralized Securities
 
2,051

 
—

 
34,058

 
—

 
—

 
(1,047
)
 
33,011

MidOcean Credit CLO II, Ltd. Subordinated Notes
 
Collateralized Securities
 
184

 
20,543

 
—

 
(20,543
)
 
—

 
—

 
—

MidOcean Credit CLO III, LLC
 
Collateralized Securities
 
—

 
—

 
37,180

 
(1,820
)
 
60

 
—

 
35,420

NMFC Senior Loan Program I, LLC
 
Equity/Other
 
—

 
—

 
25,000

 
—

 
—

 
—

 
25,000

NewStar Arlington Fund, LLC
 
Equity/Other
 
1,704

 
30,000

 
214

 
(30,214
)
 
—

 
—

 
—

NSLP 2014-1A Subordinated - CLO
 
Collateralized Securities
 
16

 
—

 
29,514

 
—

 
—

 
(16
)
 
29,498

Ocean Trails CLO V, LTD.
 
Collateralized Securities
 
—

 
—

 
15,000

 
—

 
—

 
—

 
15,000

OFSI Fund VI, Ltd. Subordinated Notes
 
Collateralized Securities
 
1,362

 
—

 
32,895

 
—

 
—

 
(1,353
)
 
31,542

OFSI Fund VI, Ltd. Warehouse
 
Collateralized Securities
 
123

 
—

 
17,000

 
(17,000
)
 
—

 
—

 
—

PennantPark Credit Opportunities Fund, LP
 
Equity/Other
 
—

 
10,550

 
—

 
—

 
—

 
373

 
10,923


48
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

SCHEDULE OF INVESTMENTS AND ADVANCES TO AFFILIATES
(dollars in thousands)
(Unaudited)




Portfolio Company (1)
 
Type of Asset
 
Amount of dividends and interest included in income
 
Beginning Fair Value December 31, 2013
 
Gross additions
 
Gross reductions
 
Realized Gain/(Loss)
 
Change in Unrealized Gain (Loss)
 
Fair Value at June 30, 2014
Related Fee Agreements
 
Collateralized Securities
 
$
461

 
$
—

 
$
6,818

 
$
—

 
$
—

 
$
(121
)
 
$
6,697

Shackleton 2014-V CLO, LTD. Subordinated Notes
 
Collateralized Securities
 
994

 
—

 
35,000

 
(35,000
)
 
—

 
—

 
—

Silver Spring CLO, Ltd.
 
Collateralized Securities
 
—

 
—

 
5,560

 
—

 
—

 
—

 
5,560

South Grand MM CLO I, LLC
 
Equity/Other
 
769

 
872

 
21,337

 
—

 
—

 
—

 
22,209

THL Credit Greenway Fund II LLC
 
Equity/Other
 
554

 
9,005

 
2,962

 
(622
)
 
—

 
562

 
11,907

WhiteHorse VIII, Ltd. CLO Subordinated Notes
 
Collateralized Securities
 
625

 
—

 
30,690

 
—

 
—

 
(625
)
 
30,065

Total Affiliate Investments
 
 
 
$
13,202

 
$
154,209

 
$
385,105

 
$
(135,718
)
 
$
3,696

 
$
(6,937
)
 
$
400,355

Total Control & Affiliate Investments
 
 
 
$
15,354

 
$
188,341

 
$
444,193

 
$
(174,390
)
 
$
3,696

 
$
(6,886
)
 
$
454,954

This schedule should be read in connection with the Company’s Consolidated Financial Statements, including the Consolidated Schedules of Investments and Notes to the Consolidated Financial Statements.
______________________________________________________
(1)
The principal amount and ownership detail are shown in the Consolidated Schedules of Investments.
(2)  
In accordance with the subscription agreement executed with Kahala Aviation Holdings, LLC dated December 23, 2013, the Company owns 84 common units of shares.
(3)  
The company consolidated Kahala Aviation Holdings, LLC and Park Ave RE, Inc. within its Consolidated Financial Statements beginning in the period ended June 30, 2014.


49
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

SCHEDULE OF INVESTMENTS AND ADVANCES TO AFFILIATES
(dollars in thousands)
(Unaudited)




Schedule 12-14
Portfolio Company (1)
 
Type of Asset
 
Amount of dividends and interest included in income
 
Beginning Fair Value December 31, 2012
 
Gross additions
 
Gross reductions
 
Realized Gain/(Loss)
 
Change in Unrealized Gain (Loss)
 
Fair Value at December 31, 2013
Control Investments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
—

Kahala US OpCo LLC
 
Senior Secured First Lien Debt
 
$
51

 
$
—

 
$
15,860

 
$
—

 
$
—

 
$
—

 
$
15,860

Kahala Aviation Holdings, LLC (2)
 
Equity/Other
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Kahala Aviation Holdings, LLC - Preferred Shares
 
Equity/Other
 
—

 
—

 
5,271

 
—

 
—

 
—

 
5,271

Park Ave RE Holdings, LLC
 
Senior Secured First Lien Debt
 
4

 
—

 
9,750

 
—

 
—

 
—

 
9,750

Park Ave RE, Inc.
 
Equity/Other
 
—

 
—

 
33

 
—

 
—

 
—

 
33

Park Ave RE, Inc. - Preferred Shares
 
Equity/Other
 
—

 
—

 
3,218

 
—

 
—

 
—

 
3,218

Total Control Investments
 
 
 
$
55

 
$
—

 
$
34,132

 
$
—

 
$
—

 
$
—

 
$
34,132

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Affiliate Investments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Apidos XVI CLO, LTD. Subordinated Notes
 
Collateralized Securities
 
$
—

 
$
—

 
$
18,200

 
$
(4,675
)
 
$
125

 
$
—

 
$
13,650

Catamaran CLO 2013-1 Ltd. Subordinated Notes
 
Collateralized Securities
 
1,780

 
—

 
23,000

 
(5,790
)
 
730

 
2,464

 
20,404

CVP Cascade CLO, LTD. Subordinated Notes
 
Collateralized Securities
 
—

 
—

 
28,086

 
—

 
—

 
—

 
28,086

Garrison Funding 2013-1 Ltd. Subordinated Notes
 
Collateralized Securities
 
385

 
—

 
15,000

 
—

 
—

 
—

 
15,000

JMP Credit Advisors CLO II Ltd. Subordinated Notes
 
Collateralized Securities
 
513

 
—

 
5,700

 
—

 
—

 
399

 
6,099

MidOcean Credit CLO II, Ltd. Subordinated Notes
 
Collateralized Securities
 
—

 
—

 
20,543

 
—

 
—

 
—

 
20,543

NewStar Arlington Fund, LLC
 
Equity/Other
 
1,093

 
—

 
30,000

 
—

 
—

 
—

 
30,000

PennantPark Credit Opportunities Fund, LP
 
Equity/Other
 
438

 
5,137

 
5,000

 
—

 
—

 
413

 
10,550

Shackleton 2013-IV CLO, LTD. Subordinated Notes
 
Collateralized Securities
 
1,765

 
—

 
24,760

 
(24,760
)
 
—

 
—

 
—

South Grand MM CLO I, LLC
 
Equity/Other
 
—

 
—

 
872

 
—

 
—

 
—

 
872

THL Credit Greenway Fund II LLC
 
Equity/Other
 
606

 
—

 
11,630

 
(2,693
)
 
—

 
68

 
9,005

Total Affiliate Investments
 
 
 
$
6,580

 
$
5,137

 
$
182,791

 
$
(37,918
)
 
$
855

 
$
3,344

 
$
154,209

Total Control & Affiliate Investments
 
 
 
$
6,635

 
$
5,137

 
$
216,923

 
$
(37,918
)
 
$
855

 
$
3,344

 
$
188,341

This schedule should be read in connection with the Company’s Consolidated Financial Statements, including the Consolidated Schedules of Investments and Notes to the Consolidated Financial Statements.
_____________________________________________________
(1)  
The principal amount and ownership detail are shown in the Consolidated Schedules of Investments.
(2)  
In accordance with the subscription agreement executed with Kahala Aviation Holdings, LLC dated December 23, 2013, the Company owns 84 common units of shares.


50


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

The following discussion and analysis should be read in conjunction with the accompanying consolidated financial statements of Business Development Corporation of America and the notes thereto, and other financial information included elsewhere in this Quarterly Report on Form 10-Q. We are externally managed by our adviser, BDCA Adviser, LLC (the "Adviser").

The forward-looking statements contained in this Quarterly Report on Form 10-Q may include statements as to:
•
our future operating results;
•
our business prospects and the prospects of our portfolio companies;
•
the impact of the investments that we expect to make;
•
the ability of our portfolio companies to achieve their objectives;
•
our expected financings and investments;
•
the adequacy of our cash resources and working capital;
•
the timing of cash flows, if any, from the operations of our portfolio companies;
•
our repurchase of shares;
•
actual and potential conflicts of interest with our Adviser 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 to qualify and maintain our qualification as a regulated investment company (“RIC”) and a business development company (“BDC”); and
•
the impact on our business of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the rules and regulations issued thereunder.

In addition, words such as “anticipate,” “believe,” “expect” and “intend” indicate a forward-looking statement, although not all forward-looking statements include these words. The forward-looking statements contained in this Quarterly Report on Form 10-Q involve risks and uncertainties. Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors discussed in Part I, Item 1A "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2013. Other factors that could cause actual results to differ materially include:
•
changes in the economy;
•
risks associated with possible disruption in our operations or the economy generally due to terrorism or natural disasters; and
•
future changes in laws or regulations and conditions in our operating areas.

You should not place undue reliance on these forward-looking statements. The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statement to reflect events or circumstances occurring after the date of this Quarterly Report on Form 10-Q.

Overview

We are a specialty finance company incorporated in Maryland in May 2010. We are an externally managed, non-diversified closed-end investment company that has elected to be treated as a business development company ("BDC") under the Investment Company Act of 1940, as amended (the "1940 Act"). We are therefore required to comply with certain regulatory requirements. We have elected to be treated for U.S. federal income tax purposes, and intend to qualify annually hereafter, as a regulated investment company ("RIC") under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). We are managed by the Adviser, a private investment firm that is registered as an investment adviser under the Investment Advisers Act of 1940, as amended (the "Advisers Act"). The Adviser oversees the management of our activities and is responsible for making investment decisions with respect to our portfolio. Our Adviser is controlled by Nicholas S. Schorsch, our chairman and chief executive officer, and William M. Kahane, one of our directors, through their ownership of AR Capital, LLC (formerly known as American Realty Capital II, LLC) (the "Sponsor").


51


On January 25, 2011, we commenced our initial public offering (the "IPO") on a “reasonable best efforts basis” of up to 150.0 million shares of common stock, $0.001 par value per share, at an initial offering price of $10.00 per share, subject to certain volume and other discounts, pursuant to a registration statement on Form N-2 (File No. 333-166636) (the “Registration Statement”) filed with the U.S. Securities and Exchange Commission (the "SEC") under the Securities Act of 1933, as amended. We sold 22,222 shares of common stock to our Adviser on July 8, 2010 at $9.00 per share, which represents the initial public offering price of $10.00 per share minus selling commissions of $0.70 per share and dealer manager fees of $0.30 per share. On August 25, 2011, we raised sufficient funds to break escrow on our IPO and commenced operations as of that date. As of June 30, 2014 , we had issued 130.6 million shares of common stock for gross proceeds of $ 1.4 billion including the shares purchased by the Sponsor and shares issued under our distribution reinvestment plan ("DRIP"). As of June 30, 2014 , we had repurchased 0.3 million shares of common stock for payments of $ 2.8 million.

On July 13, 2012, we, through a wholly-owned, consolidated subsidiary, 405 TRS I, LLC ("405 Sub"), entered into a total return swap agreement ("TRS") with Citibank, N.A. ("Citi"), which was subsequently amended on October 17, 2012, December 7, 2012, May 10, 2013, July 18, 2013, October 15, 2013 and May 6, 2014, to increase the aggregate market value of the portfolio of loans selected by 405 Sub to $450.0 million. We terminated the amended and restated TRS with Citi on June 27, 2014.

On June 27, 2014, we, through a wholly-owned, special purpose financing subsidiary, BDCA-CB Funding, LLC (“CB Funding”), entered into the Citi Credit Facility as administrative agent and U.S. Bank National Association ("U.S. Bank") as collateral agent, account bank and collateral custodian. The Citi Credit Facility provides for borrowings over a twenty four month period in an aggregate principal amount of up to $400 million on a committed basis, subject to the administrative agent’s right to approve the assets acquired by CB Funding and pledged as collateral under the Citi Credit Facility.

In connection with the Citi Credit Facility, on June 27, 2014, CB Funding entered into an Agreement and Plan of Merger (the “Merger Agreement”) with 405 Loan Funding LLC (“Loan Funding”), an affiliate of Citi formed for the purpose of holding loans underlying a TRS with CB Funding. Pursuant to the terms of the Merger Agreement, CB Funding acquired such loans through the merger of Loan Funding with and into CB Funding. Pursuant to the Merger Agreement, CB Funding paid approximately $389.0 million for the assets held by Loan Funding.

On July 24, 2012, we, through a wholly-owned, consolidated special purpose financing subsidiary, BDCA Funding I, LLC ("Funding I"), entered into a revolving credit facility (the "Wells Fargo Credit Facility") with Wells Fargo Bank, National Association as lender, Wells Fargo Securities as administrative agent (together, "Wells Fargo") and U.S. Bank as collateral agent, account bank and collateral custodian. The Wells Fargo Credit Facility, which was subsequently amended on April 26, 2013, September 9, 2013, and June 30, 2014, provides for borrowings in an aggregate principal amount of up to $300.0 million on a committed basis, with a term of 60 months. Funding I is included within our consolidated financial statements. The consolidated financial statements include both our accounts and the accounts of Funding I. All significant intercompany transactions have been eliminated in consolidation.

On February 21, 2014, we, through a newly-formed, wholly-owned, consolidated special purpose financing subsidiary, BDCA 2L Funding I, LLC ("2L Funding I"), entered into a revolving credit facility with Deutsche Bank AG, New York Branch as administrative agent and U.S. Bank as collateral agent and collateral custodian (the "Deutsche Bank Credit Facility"). The Deutsche Bank Credit Facility provides for borrowings in an aggregate principal amount of up to $60.0 million on a committed basis, with a 36 month term.

We have formed and expect to continue to form consolidated subsidiaries (the “Consolidated Holding Companies”). These Consolidated Holding Companies enable us to hold equity securities of portfolio companies organized as pass-through entities while continuing to satisfy the requirements of a RIC under the Code.
    

52


Our investment objective is to generate both current income and to a lesser extent long-term capital appreciation through debt and equity investments. We anticipate that during our offering period we will invest largely in first and second lien senior secured loans and mezzanine debt issued by middle market companies. We may also purchase, directly and through the TRS, interests in loans through secondary market transactions in the "over-the-counter" market for institutional loans. First and second lien secured loans generally are senior debt instruments that rank ahead of subordinated debt and equity in bankruptcy priority and are generally secured by liens on the operating assets of a borrower which may include inventory, receivables, plant, property and equipment. Mezzanine debt is subordinated to senior loans and is generally unsecured. We define middle market companies as those with annual revenues between $10 million and $1 billion. We may also invest in the equity and junior debt tranches of collateralized loan obligation investment vehicles ("Collateralized Securities"). Structurally, Collateralized Securities are entities that are formed to manage a portfolio of senior secured loans made to companies whose debt is rated below investment grade or, in limited circumstances, unrated. The senior secured loans within these Collateralized Securities are limited to senior secured loans which meet specified credit and diversity criteria and are subject to concentration limitations in order to create a diverse investment portfolio. We expect that our investments will generally range between approximately $1 million and $25 million, although this investment size will vary proportionately with the size of our capital base. As we increase our capital base during our offering period, we will invest in, and ultimately intend to have a substantial portion of our assets invested in, customized direct loans to and equity securities of middle market companies. In most cases, companies to whom we provide customized financing solutions will be privately held at the time we invest in them.

As a BDC, we are required to comply with certain regulatory requirements. For instance, we have to invest at least 70% of our total assets in “qualifying assets,” including securities of U.S. operating companies whose securities are not listed on a national securities exchange, U.S. operating companies with listed securities that have equity market capitalizations of less than $250 million, cash, cash equivalents, U.S. government securities and high-quality debt investments that mature in one year or less. In addition, we are only allowed to borrow money such that our asset coverage, which, as defined in the 1940 Act, measures the ratio of total assets less total liabilities (excluding borrowings) to total borrowings, equals at least 200% after such borrowing, with certain limited exceptions.

Investment Advisory and Administration Agreement

Pursuant to the Investment Advisory Agreement we have with the Adviser, we pay the Adviser a fee for its services consisting of two components - a management fee and an incentive fee. The management fee is calculated at an annual rate of 1.5% of our average gross assets and is payable quarterly in arrears.

The incentive fee consists of two parts. The first part, which we refer to as the subordinated incentive fee on income, is calculated and payable quarterly in arrears based on our pre-incentive fee net investment income for the immediately preceding quarter. The payment of the subordinated incentive fee on income is subject to payment of a preferred return to investors each quarter, expressed as a quarterly rate of return on adjusted capital at the beginning of the most recently completed calendar quarter, of 1.75% (7.00% annualized), subject to a “catch up” feature.

The second part of the incentive fee, referred to as the incentive fee on capital gains, is an incentive fee on capital gains earned on liquidated investments from the portfolio and is determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Advisory Agreement). This fee equals 20.0% of our incentive fee capital gains, which equals our realized capital gains on a cumulative basis from inception, calculated as of the end of each calendar year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gain incentive fees. Realized gains received from loans underlying the total return swap we have with Citi will not be included for purposes of evaluating the incentive fee on capital gains.
 
We have entered into a fund administration servicing agreement and a fund accounting servicing agreement with U.S. Bancorp Fund Services, LLC (the “Administrator”). The Administrator provides services, such as accounting, financial reporting, legal and compliance support and investor relations support, necessary to operate. On August 13, 2012, we entered into a custody agreement with U.S. Bank. Under the custody agreement, U.S. Bank will hold all of our portfolio securities and cash for certain of our subsidiaries, and will transfer such securities or cash pursuant to our instructions. The custody agreement is terminable by either party, without penalty, on not less than ninety days prior notice to the other party. Realty Capital Securities, LLC (the “Dealer Manager”), an affiliate of the Sponsor, serves as the dealer manager of the IPO. The Adviser and the Dealer Manager are related parties and receive compensation and fees for services related to the IPO and for the investment and management of our assets. The Adviser receives fees during the offering, operational and liquidation stages while the Dealer Manager receives fees during the offering stage. The Adviser pays to the Administrator a portion of the fees payable to the Adviser for the performance of these support services.


53


Significant Accounting Estimates and Critical Accounting Policies
 
Our consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Critical accounting policies 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. In preparing the consolidated financial statements, management has made estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting periods. In preparing the consolidated financial statements, management has utilized available information, including our past history, industry standards and the current economic environment, among other factors, in forming its 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. As our expected operating plans occur we will describe additional critical accounting policies in the notes to our consolidated financial statements in addition to those discussed below.

Set forth below is a summary of the significant accounting estimates and critical accounting policies that management believes are important to the preparation of our consolidated financial statements. Certain of our accounting estimates are particularly important for an understanding of our financial position and results of operations and require the application of significant judgment by our management. As a result, these estimates are subject to a degree of uncertainty. These significant accounting estimates include:

Valuation of Portfolio Investments

Portfolio investments are reported on the consolidated statements of assets and liabilities at fair value. On a quarterly basis, the Company performs an analysis of each investment to determine fair value as follows:

Securities for which market quotations are readily available on an exchange are valued at the reported closing price on the valuation date. The Company may also obtain quotes with respect to certain of the Company's investments from pricing services or brokers or dealers in order to value assets. When doing so, the Company determines whether the quote obtained is sufficient according to U.S. GAAP to determine the fair value of the security. If determined adequate, the Company uses the quote obtained.

Investments without a readily determined market value are primarily valued using a market approach, an income approach, or both approaches, as appropriate. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities (including a business). The income approach uses valuation techniques to convert future amounts (for example, cash flows or earnings) to a single present amount discounted). The measurement is based on the value indicated by current market expectations about those future amounts. In following these approaches, the types of factors that the Company may take into account in fair value pricing the Company's investments include, as relevant: 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, the nature and realizable value of any collateral, the portfolio company's ability to make payments, its earnings and discounted cash flows, the markets in which the portfolio company does business, comparisons of financial ratios of peer companies that are public, M&A comparables, and enterprise values, among other factors. When available, broker quotations and/or quotations provided by pricing services are considered as an input in the valuation process.

For an investment in an investment fund that does not have a readily determinable fair value, the Company measures the fair value of the investment predominately based on the net asset value per share of the investment fund if the net asset value of the investment fund is calculated in a manner consistent with the measurement principles of Financial Accounting Standards Board ("FASB"), Accounting Standards Codification ("ASC"), Topic 946, Financial Services-Investment Companies, as of the Company's measurement date. However, in determining the fair value of the Company's investment, the Company may make adjustments to the net asset value per share in certain circumstances, based on the Company's analysis of any restrictions on redemption of the shares of the investment as of the measurement date.

The value of our TRS was primarily based on the increase or decrease in the value of the loans underlying the TRS, as determined by Citi based upon indicative pricing by an independent third-party pricing service.


54


For investments in Collateralized Securities, the Company models both the assets and liabilities of each Collateralized Securities' capital structure. The model uses a waterfall engine to store the collateral data, generate collateral cash flows from the assets, and distribute the cash flows to the liability structure based on the priority of payments. The waterfall cash flows are discounted using rates that incorporate risk factors such as default risk, interest rate risk, downgrade risk, and credit spread risk, among others. In addition, the Company considers broker quotations and/or quotations provided by pricing services as an input to determining fair value when available.

As part of the Company's quarterly valuation process, the Adviser may be assisted by an independent valuation firm engaged by the Company's board of directors. The audit committee of the Company's board of directors reviews each preliminary valuation and the Adviser and an independent valuation firm (if applicable) will supplement the preliminary valuation to reflect any comments provided by the audit committee. The board of directors then discusses the valuations and determines the fair value of each investment, in good faith, based on the input of the Adviser, the independent valuation firm (to the extent applicable) and the audit committee of the board of directors.

Because there is not a readily available market value for most of the investments in its portfolio, the Company values substantially all of its portfolio investments at fair value as determined in good faith by its board of directors, as described herein. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the Company's investments may fluctuate from period to period. Additionally, the fair value of the Company's investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values that the Company may ultimately realize. Further, such investments are generally subject to legal and other restrictions on resale or otherwise are less liquid than publicly traded securities. If the Company was required to liquidate a portfolio investment in a forced or liquidation sale, the Company could realize significantly less than the value at which the Company has recorded it.

Income Taxes

We have elected to be treated for federal income tax purposes, and intend to qualify thereafter, as a RIC under Subchapter M of the Code. Generally, a RIC is exempt from federal income taxes if it distributes at least 90% of its ‘‘investment company taxable income,’’ as defined in the Code, each year. Distributions paid up to one year after the current tax year can be carried back to the prior tax year for determining the distributions paid in such tax year. We intend to distribute sufficient distributions to maintain our RIC status each year. We are also subject to nondeductible federal excise taxes if we do not distribute at least 98% of net ordinary income each calendar year and 98.2% of capital gain net income for the one year period ending on October 31 of such calendar year, if any, and any recognized and undistributed income from prior years for which we paid no federal income taxes. We will generally endeavor each year to avoid any federal excise taxes.

New Accounting Pronouncement

In June 2013, the FASB issued Accounting Standards Update (“ASU”) 2013-08, Financial Services – Investment Companies (ASC Topic 946), which affects the scope, measurement and disclosure requirements for investment companies under U.S. GAAP. The amendments: (i) change the approach to the investment company assessment in ASC Topic 946, clarify the characteristics of an investment company, and provide comprehensive guidance for assessing whether an entity is an investment company; (ii) require an investment company to measure non-controlling ownership interests in other investment companies at fair value rather than the equity method of accounting; and (iii) require the following additional disclosures (a) the fact that the entity is an investment company and is applying the guidance in ASC Topic 946, (b) information about changes, if any, in an entity’s status as an investment company, and (c) information about financial support provided or contractually required to be provided by an investment company to any of its investees. This guidance is effective for interim an annual reporting periods beginning on or after December 15, 2013. Management has reviewed the impact of this accounting pronouncement but does not believe it has a material impact on the Company.

Net Realized Gains or Losses and Net Change in Unrealized Appreciation or Depreciation

We measure realized gains or losses by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment, without regard to unrealized appreciation or depreciation previously recognized, but considering unamortized upfront fees and prepayment penalties. Net change in unrealized appreciation or depreciation reflects the change in portfolio investment values during the reporting period, including any reversal of previously recorded unrealized appreciation or depreciation, when gains or losses are realized.


55


Portfolio and Investment Activity

During the six months ended June 30, 2014 , we made $ 1.5 billion of investments in new portfolio companies and had $ 404.0 million in aggregate amount of exits and repayments, resulting in net investment activity of $1.1 billion for the period.

Our portfolio composition, based on fair value at June 30, 2014 was as follows:
 
June 30, 2014
 
Percentage of
Total Portfolio
 
Weighted Average Current Yield for Total Portfolio (1)
Senior Secured First Lien Debt
60.9
%
 
7.5
%
Senior Secured Second Lien Debt
9.8

 
10.2

Subordinated Debt
2.7

 
13.6

Collateralized Securities (2)
17.6

 
16.4

Equity/Other
9.0

 
N/A

Total
100.0
%
 
9.3
%
______________

(1) Excludes the effect of the amortization or accretion of loan premiums or discounts.

(2) Weighted average current yield for Collateralized Securities is based on the estimation of effective yield to expected maturity for each security as calculated in accordance with ASC Topic 325-40-35, Beneficial Interests in Securitized Financial Assets (see Note 2 - Summary of Significant Accounting Policies).

During the year ended December 31, 2013, we made $815.9 million of investments in new portfolio companies and had $270.0 million in aggregate amount of exits and repayments, resulting in net investment activity of $545.9 million for the period.


56


Our portfolio composition, based on fair value, including the value of the TRS underlying loans, at December 31, 2013 was as follows:
 
                                           At December 31, 2013
 
 
Percentage of Total Portfolio (1)
 
Weighted Average Current Yield for Total Portfolio (1) (2)
 
Percentage of TRS Underlying Loans
 
Weighted Average Current Yield for TRS Underlying Loans
 
Percentage of Total Portfolio Including TRS Underlying Loans
 
Weighted Average Current Yield for Total Portfolio Including TRS Underlying Loans (2)
Senior Secured First Lien Debt
47.9
%
 
8.3
%
 
95.7
%
 
7.7
%
 
62.2
%
 
8.0
%
Senior Secured Second Lien Debt
13.1

 
10.7

 
4.3

 
11.3

 
10.4

 
11.3

Subordinated Debt
8.6

 
13.9

 
—

 
—

 
6.0

 
13.3

Collateralized Securities (3)
15.2

 
12.0

 
—

 
—

 
10.7

 
12.0

Equity/Other
15.2

 
N/A

 
—

 
N/A

 
10.7

 
N/A

Total
100.0
%
 
8.4
%
 
100.0
%
 
7.8
%
 
100.0
%
 
9.3
%
______________

(1) Does not include TRS underlying loans.

(2) Excludes the effect of the amortization or accretion of loan premiums or discounts.

(3) Weighted average current yield for Collateralized Securities is based on the estimation of effective yield to expected maturity for each security as calculated in accordance with ASC Topic 325-40-35, Beneficial Interests in Securitized Financial Assets (see Note 2 - Summary of Significant Accounting Policies).


57


The following table shows the portfolio composition by industry grouping based on fair value at June 30, 2014 (dollars in thousands):
 
At June 30, 2014
 
Investments at
Fair Value
 
Percentage of Total Portfolio
Diversified Investment Vehicles (1)
$
412,045

 
23.2
%
Health Care Providers & Services
120,655

 
6.8

Hotels, Restaurants & Leisure
93,309

 
5.3

Aerospace & Defense
89,780

 
5.1

Automotive
88,222

 
5.0

Diversified Consumer Services
81,033

 
4.5

Food Products
80,577

 
4.5

Media
78,834

 
4.4

Publishing
77,052

 
4.3

Electronic Equipment, Instruments & Components
62,511

 
3.5

Retailers (except food & drug)
57,013

 
3.2

Consumer Finance
54,530

 
3.1

Professional Services
53,172

 
3.0

Commercial Services & Supplies
41,547

 
2.3

Marine
37,278

 
2.1

Oil, Gas & Consumable Fuels
34,816

 
2.0

Software
33,910

 
1.9

Biotechnology
32,863

 
1.9

Real Estate Management & Development
27,813

 
1.5

Diversified Telecommunication Services
26,726

 
1.5

Internet Software & Services
23,327

 
1.3

Commercial Banks
19,949

 
1.1

Capital Markets
18,834

 
1.1

Communications Equipment
18,740

 
1.1

Business Equipment & Services
17,413

 
1.0

Paper & Forest Products
14,961

 
0.8

Road & Rail
12,285

 
0.7

Technology - Enterprise Solutions
12,014

 
0.7

Textiles, Apparel & Luxury Goods
11,974

 
0.7

IT Services
11,171

 
0.6

Containers, Packaging and Glass
10,037

 
0.6

Steel
9,875

 
0.6

Chemicals
9,859

 
0.6

Total
$
1,774,125

 
100.0
%
______________

(1) Diversified Investment Vehicles consists of Collateralized Securities and equity investments in funds.


58


The following table shows the portfolio composition by industry grouping, including the TRS underlying loans, based on fair value at December 31, 2013 (dollars in thousands):
 
At December 31, 2013
 
Investments at
Fair Value (1)
 
Percentage of Total Portfolio (1)
 
Value of TRS Underlying Loans (2)
 
Percentage of TRS Underlying Loans
 
Total Investments at Fair Value including the value of TRS Underlying Loans
 
Percentage of Total Portfolio Including the value of TRS Underlying Loans
Diversified Investment Vehicles (3)
$
168,156

 
24.2
%
 
$
—

 
—
%
 
$
168,156

 
16.9
%
Media
57,061

 
8.2

 
21,134

 
7.1

 
78,195

 
7.9

Hotels, Restaurants & Leisure
46,462

 
6.7

 
24,990

 
8.4

 
71,452

 
7.2

Diversified Consumer Services
29,190

 
4.2

 
30,876

 
10.4

 
60,066

 
6.1

Health Care Providers & Services
48,823

 
7.0

 
8,301

 
2.8

 
57,124

 
5.8

Oil, Gas & Consumable Fuels
32,058

 
4.6

 
23,875

 
8.1

 
55,933

 
5.6

Marine
28,399

 
4.1

 
12,209

 
4.1

 
40,608

 
4.1

Food Products
34,438

 
5.0

 
5,444

 
1.9

 
39,882

 
4.0

Biotechnology
5,876

 
0.8

 
33,227

 
11.2

 
39,103

 
3.9

Consumer Finance
28,691

 
4.1

 
9,925

 
3.4

 
38,616

 
3.9

Internet Software & Services
36,432

 
5.2

 
—

 
—

 
36,432

 
3.7

Commercial Services & Supplies
19,376

 
2.8

 
15,975

 
5.4

 
35,351

 
3.6

Professional Services
20,110

 
2.9

 
11,943

 
4.0

 
32,053

 
3.2

Software
10,182

 
1.5

 
20,342

 
6.9

 
30,524

 
3.1

Electronic Equipment, Instruments & Components
12,862

 
1.9

 
17,343

 
5.9

 
30,205

 
3.0

Real Estate Management & Development
13,001

 
1.9

 
14,475

 
4.9

 
27,476

 
2.8

Aerospace & Defense
21,131

 
3.0

 
5,752

 
1.9

 
26,883

 
2.7

Commercial Banks
9,875

 
1.4

 
9,900

 
3.3

 
19,775

 
2.0

Paper & Forest Products
8,040

 
1.2

 
7,035

 
2.4

 
15,075

 
1.5

Communications Equipment
7,412

 
1.1

 
5,355

 
1.8

 
12,767

 
1.3

Road & Rail
12,147

 
1.7

 
—

 
—

 
12,147

 
1.2

Textiles, Apparel & Luxury Goods
11,977

 
1.7

 
—

 
—

 
11,977

 
1.2

IT Services
10,741

 
1.5

 
—

 
—

 
10,741

 
1.1

Diversified Telecommunication Services
10,000

 
1.4

 
—

 
—

 
10,000

 
1.0

Distributors
—

 
—

 
10,000

 
3.4

 
10,000

 
1.0

Chemicals
9,728

 
1.4

 
—

 
—

 
9,728

 
1.0

Capital Markets
—

 
—

 
8,059

 
2.7

 
8,059

 
0.8

Machinery
3,608

 
0.5

 
—

 
—

 
3,608

 
0.4

Total
$
695,776

 
100.0
%
 
$
296,160

 
100.0
%
 
$
991,936

 
100.0
%
______________

(1) Does not include TRS underlying loans.
(2) The TRS underlying loans are held by our counterparty to the TRS, Citi. The values of the TRS underlying loans shown are based primarily on the indicative bid prices provided by an independent third-party pricing service to Citi.
(3) Diversified Investment Vehicles consists of Collateralized Securities and equity investments in funds.

    
The following table presents the fair value measurements at June 30, 2014 for Level 3 investments (dollars in thousands):

59


Portfolio Company
 
Type of Asset
 
Fair Value
 
Fair Value Percentage of Total Portfolio
ABRA, Inc.
 
Senior Secured First Lien Debt
 
$
12,498

 
0.7
%
Adventure Interactive Corp.
 
Senior Secured First Lien Debt
 
19,678

 
1.1

American Importing Company, Inc.
 
Senior Secured First Lien Debt
 
10,878

 
0.6

Apidos XVI CLO, LTD. Subordinated Notes
 
Collateralized Securities
 
13,519

 
0.8

B&M CLO 2014-1, LTD. Subordinated Notes
 
Collateralized Securities
 
34,651

 
2.0

Boston Market Corporation
 
Senior Secured Second Lien Debt
 
24,634

 
1.4

Carlyle GMS Finance, Inc.
 
Equity/Other
 
2,371

 
0.1

Chicken Soup for the Soul Publishing, LLC
 
Senior Secured First Lien Debt
 
29,803

 
1.7

CIG Financial, LLC
 
Senior Secured Second Lien Debt
 
14,850

 
0.8

Collision Holding Company, LLC
 
Senior Secured First Lien Debt
 
2,348

 
0.1

ConvergeOne Holdings Corp.
 
Senior Secured First Lien Debt
 
19,934

 
1.1

CPX Interactitve Holdings, LP
 
Senior Secured Second Lien Debt
 
18,487

 
1.0

CPX Interactive Holdings, LP - Series A Convertible Preferred Shares
 
Equity/Other
 
6,000

 
0.3

CPX Interactive Holdings, LP - Warrants
 
Equity/Other
 
1,202

 
0.1

Crowley Holdings, Inc. - Series A Preferred Stock
 
Equity/Other
 
25,480

 
1.4

CVP Cascade CLO, LTD. Subordinated Notes
 
Collateralized Securities
 
23,896

 
1.3

CVP Cascade CLO-2, LTD. Subordinated Notes
 
Collateralized Securities
 
18,000

 
1.0

Danish CRJ LTD.
 
Equity/Other
 
500

 
—

ECI Acquisition Holdings, Inc.
 
Senior Secured First Lien Debt
 
12,285

 
0.7

Epic Health Services, Inc.
 
Senior Secured First Lien Debt
 
13,551

 
0.8

ERG Holding Company
 
Senior Secured First Lien Debt
 
14,421

 
0.8

Evolution Research Group - Preferred Equity
 
Equity/Other
 
421

 
—

EZE Trucking, Inc.
 
Senior Secured First Lien Debt
 
12,014

 
0.7

Fifth Street Senior Loan Fund I, LLC
 
Equity/Other
 
19,357

 
1.1

Figueroa CLO 2014-1, LTD. Subordinated Notes
 
Collateralized Securities
 
18,600

 
1.0

Garrison Funding 2013 - 1 Ltd. Subordinated Notes
 
Collateralized Securities
 
15,000

 
0.8

Global Telecom & Technology, Inc.
 
Senior Secured First Lien Debt
 
7,196

 
0.4

Gold, Inc.
 
Subordinated Debt
 
11,974

 
0.7

Hanna Anderson, LLC
 
Senior Secured First Lien Debt
 
14,908

 
0.8

HIG Integrity Nutraceuticals
 
Equity/Other
 
1,636

 
0.1

High Ridge Brands Co.
 
Senior Secured Second Lien Debt
 
22,163

 
1.2

ILC Dover LP
 
Senior Secured First Lien Debt
 
14,800

 
0.8

InMotion Entertainment Group, LLC
 
Senior Secured First Lien Debt
 
9,936

 
0.6

IntegraMed America, Inc.
 
Senior Secured First Lien Debt
 
3,818

 
0.2

Integrity Neutraceuticals
 
Senior Secured First Lien Debt
 
34,570

 
1.9

Interblock USA L.C.
 
Senior Secured Second Lien Debt
 
22,508

 
1.3

K2 Pure Solutions NoCal, L.P.
 
Senior Secured First Lien Debt
 
9,859

 
0.6

Kahala Ireland OpCo LLC
 
Senior Secured First Lien Debt
 
14,240

 
0.8

Kahala Ireland OpCo LLC
 
Equity/Other
 
100

 
—

Kahala US OpCo LLC
 
Senior Secured First Lien Debt
 
20,490

 
1.2

Kahala US OpCo LLC
 
Equity/Other
 
6,196

 
0.3

Land Holdings I, LLC
 
Senior Secured First Lien Debt
 
29,400

 
1.7

MBLOX Inc. - Warrants
 
Equity/Other
 
721

 
—

Med-Data Incorporated
 
Senior Secured First Lien Debt
 
14,422

 
0.8

MidOcean Credit CLO II, LLC
 
Collateralized Securities
 
33,011

 
1.9

MidOcean Credit CLO III, LLC
 
Collateralized Securities
 
35,420

 
2.0

National Technical Systems, Inc.
 
Senior Secured First Lien Debt
 
18,560

 
1.0

NewStar Arlington Senior Loan Program LLC Subordinated Notes
 
Collateralized Securities
 
29,498

 
1.7

NextCare, Inc.
 
Senior Secured First Lien Debt
 
19,176

 
1.1

NMFC Senior Loan Program I, LLC
 
Equity/Other
 
25,000

 
1.4

Ocean Trails CLO V, LTD.
 
Collateralized Securities
 
15,000

 
0.8


60


Portfolio Company
 
Type of Asset
 
Fair Value
 
Fair Value Percentage of Total Portfolio
OFSI Fund VI, Ltd. - Subordinated Note
 
Collateralized Securities
 
$
31,542

 
1.8
%
Park Ave Holdings, LLC
 
Equity/Other
 
8,415

 
0.5

Park Ave Re Holdings, LLC
 
Subordinated Debt
 
5,158

 
0.3

PennantPark Credit Opportunity Fund, LP
 
Equity/Other
 
10,923

 
0.6

PeopLease Holdings, LLC
 
Senior Secured First Lien Debt
 
10,218

 
0.6

Related Fee Agreements
 
Collateralized Securities
 
8,209

 
0.5

Resco Products, Inc.
 
Senior Secured First Lien Debt
 
9,875

 
0.6

S.B. Restaurant Co., Inc.
 
Subordinated Debt
 
—

 
—

S.B. Restaurant Co., Inc. - Warrants
 
Equity/Other
 
—

 
—

S.B. Restaurant Co., Inc. - Senior Subordinate Debt
 
Subordinated Debt
 
—

 
—

Silver Spring CLO, Ltd.
 
Collateralized Securities
 
5,560

 
0.3

SkyCross Inc. - Warrants
 
Equity/Other
 
450

 
—

South Grand MM CLO I, LLC
 
Equity/Other
 
22,209

 
1.3

Tennenbaum Waterman Fund, L.P.
 
Equity/Other
 
8,307

 
0.5

The SAVO Group, Ltd. - Warrants
 
Equity/Other
 
785

 
—

The Tennis Channel Holdings, Inc.
 
Senior Secured First Lien Debt
 
15,221

 
0.9

THL Credit Greenway Fund II LLC
 
Equity/Other
 
11,907

 
0.7

Vestcom Acquisition, Inc.
 
Subordinated Debt
 
7,621

 
0.4

Vestcom International, Inc.
 
Senior Secured First Lien Debt
 
8,619

 
0.5

Visionary Integration Professionals, LLC
 
Subordinated Debt
 
10,094

 
0.6

Visionary Integration Professionals, LLC - Warrants
 
Equity/Other
 
1,077

 
0.1

WBL SPE I., LLC
 
Senior Secured First Lien Debt
 
4,500

 
0.3

WhiteHorse VIII, Ltd. CLO Subordinated Notes
 
Collateralized Securities
 
30,065

 
1.8

World Business Lenders, LLC
 
Equity/Other
 
3,359

 
0.2

Xplornet Communications Inc. - Warrants
 
Equity/Other
 
2,623

 
0.1

Xplornet Communications, Inc.
 
Subordinated Debt
 
10,578

 
0.6

Zimbra, Inc.
 
Senior Secured Second Lien Debt
 
6,145

 
0.3

Zimbra, Inc.
 
Subordinated Debt
 
2,000

 
0.1

Zimbra, Inc. - Warrants (Second Lien Debt)
 
Equity/Other
 
248

 
—

Zimbra, Inc. - Warrants (Third Lien Bridge Note)
 
Equity/Other
 
1,324

 
0.1

Total Level 3 investments
 
 
 
$
1,036,012

 
58.4
%
Total Level 2 investments
 
 
 
$
738,113

 
41.6
%
Total Investments
 
 
 
$
1,774,125

 
100.0
%

The following table presents the fair value measurements at December 31, 2013 for Level 3 investments (dollars in thousands):
Portfolio Company
 
Type of Asset
 
Fair Value
 
Fair Value Percentage of Total Portfolio
Adventure Interactive Corp.
 
Senior Secured First Lien Debt
 
$
19,575

 
2.9
%
American Importing Company, Inc.
 
Senior Secured First Lien Debt
 
10,933

 
1.6

Apidos XVI CLO, LTD. Subordinated Notes
 
Collateralized Securities
 
13,650

 
2.0

Boston Market
 
Senior Secured Second Lien Debt
 
24,625

 
3.5

Carlyle GMS Finance, Inc.
 
Equity/Other
 
2,173

 
0.3

Catamaran CLO 2013-1 Ltd. Subordinated Notes
 
Collateralized Securities
 
20,404

 
2.9

Crowley Holdings Preferred, LLC - Series A Preferred Shares
 
Equity/Other
 
25,000

 
3.6

CVP Cascade CLO-1, LTD. Subordinated Notes
 
Collateralized Securities
 
28,086

 
4.0

Epic Health Services
 
Senior Secured First Lien Debt
 
13,899

 
2.0

Eureka Hunter Holdings, LLC
 
Senior Secured Second Lien Debt
 
4,969

 
0.7

EZE Trucking, Inc.
 
Senior Secured First Lien Debt
 
12,147

 
1.7

FairPay Solutions Inc. Term Loan A
 
Senior Secured First Lien Debt
 
2,350

 
0.3

FairPay Solutions Inc. Term Loan B
 
Senior Secured First Lien Debt
 
7,500

 
1.1

Garrison Funding 2013 - 1 Ltd. Subordinated Notes
 
Collateralized Securities
 
15,000

 
2.2


61


Portfolio Company
 
Type of Asset
 
Fair Value
 
Fair Value Percentage of Total Portfolio
Global Telecom & Technology, Inc.
 
Senior Secured First Lien Debt
 
$
7,559

 
1.1
%
Gold, Inc.
 
Subordinated Debt
 
11,977

 
1.7

HIG Integrity Neutraceuticals
 
Equity/Other
 
850

 
0.1

HIG Integrity Neutraceuticals
 
Senior Secured First Lien Debt
 
22,655

 
3.3

JMP Credit Advisors CLO II Ltd. Subordinated Notes
 
Collateralized Securities
 
6,099

 
0.9

K2 Pure Solutions NoCal, L.P.
 
Senior Secured First Lien Debt
 
9,728

 
1.4

Kahala Aviation Holdings, LLC
 
Equity/Other
 
—

 
—

Kahala Aviation Holdings, LLC Preferred Shares
 
Equity/Other
 
5,271

 
0.8

Kahala US OpCo LLC
 
Senior Secured First Lien Debt
 
15,860

 
2.3

MBLOX Inc.
 
Senior Secured Second Lien Debt
 
7,011

 
1.0

MBLOX Inc. - Warrants
 
Equity/Other
 
705

 
0.1

MC Funding Ltd. Preferred Shares
 
Collateralized Securities
 
2,163

 
0.3

MidOcean Credit CLO II, Ltd. Subordinated Notes
 
Collateralized Securities
 
20,543

 
3.0

National Technical Systems, Inc.
 
Senior Secured First Lien Debt
 
12,375

 
1.8

NewStar Arlington Fund LLC
 
Equity/Other
 
30,000

 
4.3

NextCare, Inc.
 
Senior Secured First Lien Debt
 
17,272

 
2.5

Park Ave RE Holdings, LLC
 
Senior Secured First Lien Debt
 
9,750

 
1.4

Park Ave RE, Inc.
 
Equity/Other
 
33

 
—

Park Ave RE, Inc. - Preferred Shares
 
Equity/Other
 
3,218

 
0.5

PennantPark Credit Opportunities Fund, LP
 
Equity/Other
 
10,550

 
1.5

PeopLease Holdings, LLC
 
Senior Secured First Lien Debt
 
9,800

 
1.4

Precision Dermatology, Inc. - Warrants
 
Equity/Other
 
—

 
—

S.B. Restaurant Co., Inc. - Warrants
 
Equity/Other
 
—

 
—

S.B. Restaurant Co., Inc. - Senior Subordinated Debt
 
Subordinated Debt
 
88

 
—

S.B. Restaurant Co., Inc.
 
Subordinated Debt
 
2,025

 
0.3

SkyCross, Inc. - Warrants
 
Equity/Other
 
450

 
0.1

SkyCross, Inc.
 
Senior Secured Second Lien Debt
 
4,979

 
0.7

Source Refrigeration & HVAC, Inc.
 
Senior Secured First Lien Debt
 
2,735

 
0.4

South Grand MM CLO I, LLC
 
Equity/Other
 
872

 
0.1

Teleflex Marine, Inc.
 
Senior Secured Second Lien Debt
 
3,399

 
0.5

Tennenbaum Waterman Fund, L.P.
 
Equity/Other
 
9,611

 
1.4

The SAVO Group, Ltd.
 
Subordinated Debt
 
5,005

 
0.7

The SAVO Group, Ltd. - Warrants
 
Equity/Other
 
1,302

 
0.2

The Tennis Channel Holdings, Inc.
 
Senior Secured First Lien Debt
 
14,787

 
2.1

THL Credit Greenway Fund II LLC
 
Equity/Other
 
9,005

 
1.3

Trinity Consultants Holdings, Inc.
 
Senior Secured First Lien Debt
 
3,079

 
0.4

Varel International Energy Mezzanine Funding Corp.
 
Subordinated Debt
 
11,251

 
1.6

Vestcom Acquisition, Inc.
 
Subordinated Debt
 
7,525

 
1.1

Visionary Integration Professionals, LLC
 
Subordinated Debt
 
9,831

 
1.4

Visionary Integration Professionals, LLC - Warrants
 
Equity/Other
 
910

 
0.1

WBL SPE I., LLC
 
Senior Secured First Lien Debt
 
3,750

 
0.5

World Business Lenders, LLC
 
Equity/Other
 
3,751

 
0.5

Xplornet Communications, Inc.
 
Subordinated Debt
 
10,000

 
1.4

Xplornet Communications, Inc. - Warrants
 
Equity/Other
 
—

 
—

Zimbra, Inc.
 
Senior Secured Second Lien Debt
 
6,137

 
0.9

Zimbra, Inc.
 
Subordinated Debt
 
2,000

 
0.3

Zimbra, Inc. - Warrants (Second Lien Debt)
 
Equity/Other
 
447

 
0.1

Zimbra, Inc. - Warrants (Third Lien Bridge Note)
 
Equity/Other
 
1,598

 
0.2

Total Level 3 investments
 
 
 
$
518,267

 
74.5
%
Total Level 2 investments (1)
 
 
 
$
177,509

 
25.5
%
Total Investments
 
 
 
$
695,776

 
100.0
%
______________

62



(1) Does not include TRS underlying loans.

    
The following table presents the percentage of amortized cost by loan market for investments as of June 30, 2014 :
 
Amortized Cost as of June 30, 2014
 
Investments per Total Portfolio
Middle Market (1)
69.2
%
Large Corporate (2)
4.3

Other (3)
26.5

Total
100.0
%
______________

(1) Middle market represents companies whose annual revenues are between $10 million and $1 billion.

(2) Large corporate represents companies whose annual revenues are in excess of $1 billion.

(3) Other represents collateralized securities and equity investments.

The following table presents the percentage of amortized cost by loan market for investments including the TRS underlying loans as of December 31, 2013:
 
Amortized Cost as of December 31, 2013
 
Investments per Total Portfolio
 
TRS Underlying Loans
 
Total Portfolio including TRS Underlying Loans
Middle Market (1)
67.4
%
 
90.9
%
 
74.4
%
Large Corporate (2)
2.8

 
9.1

 
4.7

Other (3)
29.8

 
—

 
20.9

Total
100.0
%
 
100.0
%
 
100.0
%
______________

(1) Middle market represents companies whose annual revenues are between $10 million and $1 billion.

(2) Large corporate represents companies whose annual revenues are in excess of $1 billion.

(3) Other represents collateralized securities and equity investments.


63


The following table presents the percentage of fair value by loan market for investments as of June 30, 2014 :

 
Fair Value as of June 30, 2014
 
Investments per Total Portfolio
Middle Market (1)
69.1
%
Large Corporate (2)
4.3

Other (3)
26.6

Total
100.0
%
______________

(1) Middle market represents companies whose annual revenues are between $10 million and $1 billion.

(2) Large corporate represents companies whose annual revenues are in excess of $1 billion.

(3) Other represents collateralized securities and equity investments.

The following table presents the percentage of fair value by loan market for investments including the TRS underlying loans as of December 31, 2013:

 
Fair Value as of December 31, 2013
 
Investments per Total Portfolio
 
TRS Underlying Loans
 
Total Portfolio including TRS Underlying Loans
Middle Market (1)
66.7
%
 
91.2
%
 
74.0
%
Large Corporate (2)
2.8

 
8.8

 
4.6

Other (3)
30.5

 
—

 
21.4

Total
100.0
%
 
100.0
%
 
100.0
%
______________

(1) Middle market represents companies whose annual revenues are between $10 million and $1 billion.

(2) Large corporate represents companies whose annual revenues are in excess of $1 billion.

(3) Other represents collateralized securities and equity investments.

Portfolio Asset Quality

Our Adviser employs an investment rating system to categorize our investments. In addition to various risk management and monitoring tools, our Adviser grades the credit risk of all debt investments on a scale of 1 to 5 no less frequently than quarterly. This system is intended primarily to reflect the underlying risk of a portfolio debt investment relative to the inherent risk at the time the original debt investment was made (i.e., at the time of acquisition), although it may also take into account under certain circumstances the performance of the portfolio company's business, the collateral coverage of the investment and other relevant factors.

64


 Loan Rating
 
Summary Description
1
  
Debt investment exceeding fundamental performance expectations and/or capital gain expected. Trends and risk factors since the time of investment are favorable.
 
 
2
  
Performing consistent with expectations and a full return of principal and interest expected. Trends and risk factors are neutral to favorable. All investments are initially rated a “2”.
 
 
3
  
Performing debt investment requiring closer monitoring. Trends and risk factors show some deterioration.
 
 
4
  
Underperforming debt investment. Some loss of interest or dividend expected, but still expecting a positive return on investment. Trends and risk factors are negative.
 
 
5
  
Underperforming debt investment with expected loss of interest and some principal.

The weighted average risk ratings of our investments based on amortized cost were 2.04 as of June 30, 2014 and 2.03 as of December 31, 2013.
    
As of June 30, 2014 , we had one portfolio company, which represented two portfolio investments, on non-accrual status. These investments had a total principal of $4.2 million, which represented 0.2% of our portfolio and had no fair value as of June 30, 2014 . We are currently evaluating potential value recovery alternatives for these investments. As of December 31, 2013, we had one portfolio investment on non-accrual status. This investment had a principal of $4.0 million and fair value of $2.0 million as of December 31, 2013, which represented 0.6% and 0.3%, respectively, of our portfolio.

RESULTS OF OPERATIONS

Operating results for the three and six months ended June 30, 2014 and June 30, 2013 were as follows (dollars in thousands):
 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
 
2014
 
2013
 
2014
 
2013
Total investment income
$
29,743

 
$
5,176

 
$
48,233

 
$
9,531

Total expenses, net
12,194

 
4,007

 
18,737

 
6,155

Net investment income
$
17,549

 
$
1,169

 
$
29,496

 
$
3,376


  Investment Income

For the three and six months ended June 30, 2014 , total investment income was $ 29.7 million and $ 48.2 million, respectively, and was attributable to interest income from investments in portfolio companies. For the three and six months ended June 30, 2013 , total investment income was $5.2 million and $9.5 million, respectively, and was attributable to interest income from investments in portfolio companies. The increase in total investment income was due to the higher level of investments in portfolio companies during the period ended June 30, 2014 as compared to the period ended June 30, 2013 . During the six months ended June 30, 2014 , the average portfolio fair value was $1.2 billion with a 9.3% weighted average current yield while the average portfolio fair value and weighted average current yield were $222.4 million and 10.0%, respectively for the same period in 2013.


65


Operating Expenses

The composition of our operating expenses for the three and six months ended June 30, 2014 and June 30, 2013 were as follows (dollars in thousands):

 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
 
2014
 
2013
 
2014
 
2013
Management fees
$
5,763

 
$
1,211

 
$
9,395

 
$
2,037

Subordinated income incentive fees
2,642

 
1,100

 
3,420

 
1,829

Capital gains incentive fees
245

 
568

 
226

 
899

Interest and credit facility financing expenses
1,735

 
467

 
3,029

 
769

Professional fees
1,499

 
574

 
2,241

 
812

Other administrative
234

 
13

 
275

 
71

Insurance
57

 
57

 
115

 
111

Directors fees
19

 
17

 
36

 
33

Operating expenses before expense waivers and reimbursements from Adviser
12,194

 
4,007

 
18,737

 
6,561

Waiver of management and incentive fees
—

 
—

 
—

 
(406
)
Total operating expenses net of expense waivers and reimbursements from Adviser
$
12,194

 
$
4,007

 
$
18,737

 
$
6,155


Interest and credit facility expenses for the three and six months ended June 30, 2014 were comprised of amortization of deferred financing costs and non-usage fees related to the Wells Fargo Credit Facility, Deutsche Bank Credit Facility and Citi Credit Facility, along with $0.8 million and $1.7 million, respectively, of interest expense on the balance drawn on the Wells Fargo Credit Facility, $0.3 million and $0.3 million, respectively, of interest expense on the balance drawn on the Deutsche Bank Credit Facility, and $0.1 million and $0.1 million, respectively, of interest expense on the balance drawn on the Citi Credit Facility. We entered into the Deutsche Bank Credit Facility and Citi Credit Facility during the six month period ended June 30, 2014 and thus did not have interest and credit facility expenses during the comparable period in 2013. The interest expense on the balance drawn on the Wells Fargo Credit Facility was based on an average daily debt outstanding of $144.0 million at a weighted average annualized cost of 2.41% for the six months ended June 30, 2014 . The interest expense on the balance drawn on the Deutsche Bank Credit Facility was based on an average daily debt outstanding of $11.2 million at a weighted average annualized cost of 4.50% for the six months ended June 30, 2014 . The interest expense on the balance drawn on the Citi Credit Facility was based on an average daily debt outstanding of $7.5 million at a weighted average annualized cost of 2.85% for the six months ended June 30, 2014 . For the three and six months ended June 30, 2014 , we incurred $ 5.8 million and $ 9.4 million, respectively, of management fees, of which the Adviser did not waive any such fees. For the three and six months ended June 30, 2014 , we incurred $2.9 million and $3.6 million, respectively, of incentive fees, of which the Adviser did not waive any such fees.

Interest and credit facility expenses for the three and six months ended June 30, 2013 were comprised of amortization of deferred financing costs and non-usage fees related to our Wells Fargo Credit Facility along with $0.1 million and $0.3 million, respectively, of interest expense on the balance drawn on the Wells Fargo Credit Facility. The interest expense on the balance drawn on the Wells Fargo Credit Facility was based on an average debt outstanding of $26.9 million at a weighted average annualized cost of 2.51% for the six months ended June 30, 2013 . For the three and six months ended June 30, 2013 , we incurred $1.2 million and $2.0 million, respectively, of management fees, of which the Adviser did not waive any such fees. For the three and six months ended June 30, 2013 , we incurred $1.7 million and $2.7 million, respectively, of incentive fees, of which the Adviser waived $0.0 million and $0.4 million, respectively.


66


 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
 
2014
 
2013
 
2014
 
2013
Net realized gain from investments
$
2,320

 
$
739

 
$
5,796

 
$
1,734

Net realized gain from total return swap
9,107

 
2,874

 
14,558

 
4,669

Net unrealized appreciation (depreciation) on investments
(1,093
)
 
2,100

 
(4,665
)
 
2,758

Net unrealized appreciation (depreciation) on total return swap
(3,278
)
 
30

 
(3,179
)
 
2,314

Net realized and unrealized gain on investments and total return swap
$
7,056

 
$
5,743

 
$
12,510

 
$
11,475



Net Realized Gain and Net Change in Unrealized Appreciation (Depreciation) on Investments

Net realized gain and change in unrealized appreciation (depreciation) on investments resulted in a net gain of $1.2 million and $1.1 million, respectively, for the three and six months ended June 30, 2014 compared to a net gain of $2.8 million and $4.5 million, respectively, for the same periods in 2013. We look at net realized gains and change in unrealized appreciation (depreciation) together as movement in unrealized appreciation or depreciation can be the result of realizations.

The net gain for the three months ended June 30, 2014 was primarily driven by the $2.6 unrealized appreciation on an equity investment in a portfolio company that was exceeding expectations partially offset by smaller scale unrealized depreciation on investments across the portfolio. The net gain for the six months ended June 30, 2014 was driven by the $2.6 million unrealized appreciation of the equity investment along with the net short-term gain of $1.0 million on the sale of one investment. These gains were partially offset by an unrealized depreciation of $(2.1) million on the two portfolio investments in non-accrual status. In total, we sold $250.5 million and $404.0 million, respectively, of assets during the three and six month periods ended June 30, 2014.

The net gain for the three months ended June 30, 2013 was primarily driven by the unrealized appreciation of $1.5 million on a collateralized security investment that was exceeding performance expectations along with smaller scale net realized gains and unrealized appreciation across the remainder of the portfolio. Similar to the three months ended June 30, 2013, the net gain for the six months ended on the same date was driven by the $1.5 million unrealized appreciation on the collateralized security investment along with smaller scale net realized gains and unrealized appreciation across the remainder of the portfolio. Total asset sales for the three and six months ended June 30, 2013 were $64.5 million and $135.2 million, respectively.

Net Realized Gain and Net Change in Unrealized Appreciation on Total Return Swap

Net realized gain and change in unrealized appreciation on the total return swap resulted in a net gain of $5.8 million and $11.4 million, respectively, for the three and six months ended June 30, 2014 compared to a net gain of $2.9 million and $7.0 million, respectively, for the same period in 2013. We look at net realized gains and change in unrealized appreciation (depreciation) together as movement in unrealized appreciation or depreciation can be the result of realizations.

The net gain for the three months ended June 30, 2014 was primarily driven by interest income of $5.9 million earned on the loans held under the TRS which had an average total notional value of $354.6 million for the period from April 1, 2014 through the termination of the TRS on June 27, 2014. The interest income was partially offset by $(1.2) million of interest expense on the TRS. The net gain for the six months ended June 30, 2014 was driven by interest income of $11.4 million earned on the loans held under the TRS which had an average total notional value of $348.1 million for the period from January 1, 2014 through the termination of the TRS on June 27, 2014 and this was partially offset by $(2.2) million of interest expense on the TRS. In addition, at the termination of the TRS the transfer of the portfolio of loans underlying the TRS to CB Funding was treated as a sale transaction with the portfolio being sold at its fair value on that date. As a result of the termination, the $4.0 million of unrealized gain on the TRS at the termination date was realized which resulted in an offsetting unrealized loss and realized gain on the TRS.

67


The net gain for the three months ended June 30, 2013 was primarily driven by $3.2 million in interest income earned on the loans held under the TRS which had an average total notional value of $159.9 million for the three month period. This was partially offset by $(0.5) million in interest expense. The net gain for the six months ended June 30, 2013 was driven by a $2.3 million change in unrealized appreciation across our loans held under the TRS due to overall increases in market prices. In addition, we had $5.3 million in interest income earned on the loans held under the TRS which had an average total notional value of $128.3 million for the six month period. This was partially offset by $(0.9) million in interest expense. Please see Note 6 - Total Return Swap - for more information about the TRS.

At June 30, 2014 , the receivable and realized gain on the total return swap on the consolidated statements of assets and liabilities and consolidated statements of operations consisted of the following (dollars in thousands):
 
Net Receivable
 
Net Realized Gains
Interest and other income from TRS portfolio
$
4,138

 
$
11,366

TRS interest expense
—

 
(2,187
)
Gains on TRS asset sales
—

 
5,379

Net realized gain from TRS
$
4,138

 
$
14,558

    
At June 30, 2013 , the receivable and realized gain on the total return swap on the consolidated statements of assets and liabilities and consolidated statements of operations consisted of the following (dollars in thousands):
 
Net Receivable
 
Net Realized Gains
Interest and other income from TRS portfolio
$
2,505

 
$
5,345

TRS interest expense
(430
)
 
(926
)
Gains on TRS asset sales
9

 
250

Net realized gain from TRS
$
2,084

 
$
4,669


Cash Flows for the Six Months Ended June 30, 2014

For the six months ended June 30, 2014 , net cash used in operating activities was $ 892.8 million. The level of cash flows used in or provided by operating activities is affected by the timing of purchases, redemptions and sales of portfolio
investments, among other factors. The increase in cash flows used in operating activities for the six months ended June 30, 2014 was primarily due to $ 1.5 billion for purchases of investments partially offset by cash provided by operating activities of $ 404.0 million for sales and repayments of investments, $ 103.0 million from an increase in unsettled trades payable, and $ 42.0 million from a net increase in net assets from operations. The purchase and sales activity is driven by the increase in investment activity resulting from the continuous equity capital raising and growing capital base.

Net cash provided by financing activities of $ 963.5 million during the six months ended June 30, 2014 was primarily related to net proceeds from the issuance of common stock of $ 646.8 million and net proceeds from the Wells Fargo Credit Facility, the Deutsche Bank Credit Facility, and the Citi Credit Facility of $342.6 million, partially offset by payments of stockholder distributions of $ 19.7 million. Consistent with the increase in investment activity, the proceeds from the issuance of common stock are the result of our increasing equity raise capabilities.

Cash Flows for the Six Months Ended June 30, 2013

For the six months ended June 30, 2013 , net cash used in operating activities was $166.6 million. The level of cash flows used in or provided by operating activities is affected by the timing of purchases, redemptions and sales of portfolio investments, among other factors. The increase in cash flows used in operating activities for the six months ended June 30, 2013 was primarily due to $302.8 million for purchases of investments partially offset by $135.2 million for repayments of investments and $14.9 million from a net increase in net investment income. The purchase and sales activity is driven by the increase in investment activity resulting from the continuous equity capital raising and growing capital base.
Net cash provided by financing activities of $161.7 million during the six months ended June 30, 2013 was primarily related to net proceeds from the issuance of common stock of $180.3 million and proceeds from the Wells Fargo Credit Facility of $18.0 million. These inflows were partially offset by principal repayments on debt of $29.7 million and payments of stockholder distributions of $5.6 million. Consistent with the increase in investment activity, the proceeds from the issuance of common stock are the result of our increasing equity raise capabilities.


68


Liquidity and Capital Resources
 
We generate cash from the net proceeds of our ongoing continuous public offering and from cash flows from fees, interest and dividends earned from our investments, as well as proceeds from sales of our investments. The Registration Statement offering for sale up to $1.5 billion of shares of our common stock (150.0 million shares at an initial offering price of $10.00 per share) (the "Offering"), was declared effective on January 27, 2011. As of June 30, 2014 , we had issued 130.6 million shares of our common stock for gross proceeds of $ 1.4 billion including shares issued to the Sponsor and shares issued under the DRIP.
 
Our principal demands for funds in both the short-term and long-term are for portfolio investments, either directly or indirectly through investment interests, such as the TRS, for the payment of operating expenses, distributions to our investors, repurchases under our share repurchase program, and for the payment of principal and interest on our outstanding indebtedness. Generally, capital needs for investment activities will be met through net proceeds received from the sale of common stock through our public offering. We may also from time to time enter into other agreements with third parties whereby third parties will contribute to specific investment opportunities. Items other than investment acquisitions are expected to be met from a combination of the proceeds from the sale of common stock, cash flows from operations, and, during our IPO, reimbursements from the Adviser.

We have entered into the Expense Support Agreement with our Adviser, whereby the Adviser may pay the Expense Support Payment for any period beginning on the effective date of the Registration Statement, until we and the Adviser mutually agree otherwise. The purpose of the Expense Support Agreement was to reduce our offering and operating expenses until we had achieved economies of scale sufficient to ensure that we were able to bear a reasonable level of expense in relation to our investment income. The Expense Support Payment for any month shall be paid to us by the Adviser in cash and/or offsets against amounts due from us to the Adviser. Operating expenses subject to this agreement include expenses as defined by U.S. GAAP, including, without limitation, advisory fees payable and interest on indebtedness for such period, if any. As of June 30, 2014 , the Adviser had made cumulative payments to the Company for $1.0 million of expenses pursuant to the Expense Support Agreement. During the six months ended June 30, 2014 , the Adviser made no payments to the Company for expenses pursuant to the Expense Support Agreement. See Note 4 - Related Party Transactions and Arrangements - Expense Support Agreement - in our consolidated financial statements included in this report for additional information on this arrangement, including Expense Payments made by our Adviser pursuant to the terms of this agreement and the ability of the Adviser to be reimbursed for Expense Payments made to us.

Other potential future sources of capital include proceeds from secured or unsecured financings from banks or other lenders, proceeds from private offerings, proceeds from the sale of investments and undistributed funds from operations. However, our ability to incur additional debt will be dependent on a number of factors, including our degree of leverage, the value of our unencumbered assets and borrowing restrictions that may be imposed by lenders. Our ability to raise proceeds in our public offering will be dependent on a number of factors as well, including general market conditions for BDCs and market perceptions about us.

In January 2011, we entered into an agreement to obtain a revolving line of credit in the amount of $10.0 million with Main Street. The line of credit bore a variable interest rate based on the London Interbank Offered Rate ("LIBOR") plus 3.50%. On July 24, 2012, we used working capital and certain proceeds from the total return swap of our subsidiary, 405 Sub, to repay all of the obligations under our credit facility with Main Street. We were not required to pay any prepayment penalty in connection with such repayment.

Total Return Swap

On July 13, 2012, we, through a wholly-owned subsidiary, 405 Sub, entered into a TRS with Citi, which was subsequently amended on October 17, 2012, December 7, 2012, May 10, 2013, July 18, 2013, October 15, 2013 and May 6, 2014, to increase the aggregate market value of the portfolio of loans selected by 405 Sub. On June 27, 2014, we terminated the amended and restated TRS with Citi.
    
On June 27, 2014, we terminated the TRS and CB Funding entered into a Merger Agreement with Loan Funding, an affiliate of Citi formed for the purpose of holding the loans underlying the TRS. Pursuant to the terms of the Merger Agreement, CB Funding acquired such loans through the merger of Loan Funding with and into CB Funding (the “Merger”) for approximately $389.0 million. We recorded such loans at a cost equal to the respective fair values as of June 27, 2014 and as a result, the $4.0 million of unrealized gain on the TRS at the termination date was realized which resulted in an offsetting unrealized loss and realized gain on the TRS. The $4.0 million gain equates to fair value of the loans underlying the TRS as of June 27, 2014 less the respective costs of such assets as purchased through the TRS.
 

69


Previously, the Adviser has not recognized incentive fees based on the returns or capital gains of the TRS and therefore will not receive any additional fees as a direct result of the Merger or termination of the TRS. However, such loans are now included in our portfolio of investments and subject to any fees applicable under the Investment Advisory 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 the specified period, in return for periodic payments based on a fixed or variable interest rate. The TRS effectively added leverage to our 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. The TRS enabled us, through our ownership of 405 Sub, to obtain the economic benefit of owning the loans subject to the TRS, without actually owning them, in return for an interest type payment to Citi.

The obligations of 405 Sub under the TRS were non-recourse to us and our exposure to the TRS was limited to the amount that we contributed to 405 Sub in connection with the TRS. Generally, that amount was the amount that 405 Sub was required to post as cash collateral for each loan (which in most instances is approximately 25% of the market value of a loan at the time that such loan was purchased). As amended, the TRS provided that 405 Sub could have selected a portfolio of loans with a maximum aggregate market value (determined at the time such loans become subject to the TRS) of $450.0 million.

405 Sub paid interest to Citi for each loan at a rate equal to one-month or three-month LIBOR, depending on the terms of the underlying loan, plus 1.20% per annum. Upon the termination or repayment of any loan selected by 405 Sub under the Agreement, 405 Sub would deduct the appreciation of such loan's value from any interest owed to Citi or pay the depreciation amount to Citi in addition to remaining interest payments.

See Note 6 – Total Return Swap – in our consolidated financial statements included in this report for additional disclosure on the TRS with Citi.

Wells Fargo Credit Facility

On July 24, 2012, we, through a newly-formed, wholly-owned special purpose financing subsidiary, Funding I, entered into a revolving credit facility with Wells Fargo and U.S. Bank, as collateral agent, account bank and collateral custodian. The Wells Fargo Credit Facility, which was subsequently amended on April 26, 2013, September 9, 2013, and June 30, 2014, provides for borrowings in an aggregate principal amount of up to $300.0 million on a committed basis, with a term of 60 months.

We may contribute cash or loans to Funding I from time to time to retain a residual interest in any assets contributed through its ownership of Funding I or will receive fair market value for any loans sold to Funding I. Funding I may purchase additional loans from various sources. Funding I has appointed us as servicer to manage its portfolio of loans. Funding I's obligations under the Wells Fargo Credit Facility are secured by a first priority security interest in substantially all of the assets of Funding I, including its portfolio of loans. The obligations of Funding I under the Wells Fargo Credit Facility are non-recourse to us.

The Wells Fargo Credit Facility will be priced at one month maturity LIBOR, with no LIBOR floor, plus a spread ranging between 1.75% and 2.50% per annum, depending on the composition of the portfolio of loans owned by Funding I for the relevant period. Interest is payable quarterly in arrears. Funding I will be subject to a non-usage fee to the extent the aggregate principal amount available under the Wells Fargo Credit Facility has not been borrowed. The non-usage fee per annum for the first six months is 0.50%; thereafter, the non-usage fee per annum is 0.50% for the first 20% of the unused balance and 2.0% for the portion of the unused balance that exceeds 20%. Any amounts borrowed under the Wells Fargo Credit Facility will mature, and all accrued and unpaid interest thereunder will be due and payable in April 2018.

Borrowings under the Wells Fargo Credit Facility are subject to compliance with a borrowing base, pursuant to which the amount of funds advanced to Funding I varies depending upon the types of loans in Funding I's portfolio. As of December 31, 2013, we were in compliance with regards to the Wells Fargo Credit Facility covenants. The Wells Fargo Credit Facility may be prepaid in whole or in part, subject to customary breakage costs. In the event that the Wells Fargo Credit Facility is terminated prior to the first anniversary, an additional amount is payable to Wells Fargo equal to 2.00% of the maximum amount of the Wells Fargo Credit Facility.


70


The Wells Fargo Credit Facility contains customary default provisions for facilities of this type pursuant to which Wells Fargo may terminate our rights, obligations, power and authority, in our capacity as servicer of the portfolio assets under the Wells Fargo Credit Facility, including, but not limited to, non-performance of Wells Fargo Credit Facility obligations, insolvency, defaults of certain financial covenants and other events with respect to us that may be adverse to Wells Fargo and the secured parties under the Wells Fargo Credit Facility.

In connection with the Wells Fargo Credit Facility, Funding I has made certain representations and warranties, is required to comply with various covenants, reporting requirements and other customary requirements for similar facilities and is subject to certain customary events of default. Upon the occurrence and during the continuation of an event of default, Wells Fargo may declare the outstanding advances and all other obligations under the Wells Fargo Credit Facility immediately due and payable. During the continuation of an event of default, Funding I must pay interest at a default rate.

Borrowings of Funding I will be considered our borrowings for purposes of complying with the asset coverage requirements under the 1940 Act, applicable to BDCs.

Our cash is deposited in either commercial bank accounts or custody accounts and may be deposited in short-term, highly liquid investments that we believe provide appropriate safety of principal.

As of June 30, 2014 , we had $174.7 million outstanding under the Wells Fargo Credit Facility.

See Note 5 – Borrowings – in our consolidated financial statements included in this report for additional disclosure on the Wells Fargo Credit Facility.

Deutsche Bank Credit Facility

On February 21, 2014, we, through 2L Funding I, entered into the Deutsche Bank Credit Facility with Deutsche Bank as lender and as administrative agent and U.S. Bank as collateral agent and collateral custodian.

The Deutsche Bank Credit Facility provides for borrowings in an aggregate principal amount of up to $60.0 million with a term of 36 months. The Deutsche Bank Credit Facility will be priced at LIBOR plus 4.25%, with no LIBOR floor. The undrawn rate is 0.75%. 2L Funding Sub I will be subject to a minimum utilization of 50% of the loan amount in the first 12-months and 65% of the loan amount thereafter, measured quarterly. If the utilized portion of the loan amount is less than the foregoing thresholds, such shortfalls shall bear interest at LIBOR plus 4.25%. The Deutsche Bank Credit Facility provides for monthly interest payments for each drawn loan. Any amounts borrowed under the Deutsche Bank Credit Facility will mature, and all accrued and unpaid interest thereunder will be due and payable, in January 2017. 2L Funding I paid a structuring fee and incurred certain other customary costs and expenses in connection with obtaining the Deutsche Bank Credit Facility.

Borrowings under the Deutsche Bank Credit Facility are subject to compliance with a borrowing base. The Deutsche Bank Credit Facility may be prepaid in whole or in part, subject to a prepayment fee. The Deutsche Bank Credit Facility contains customary default provisions including, but not limited to, non-payment of principal, interest or other obligations under the Deutsche Bank Credit Facility, insolvency, defaults of certain financial covenants and other events with respect to us that may be adverse to Deutsche Bank and the secured parties under the facility.
    
In connection with the Deutsche Bank Credit Facility, 2L Funding I has made certain representations and warranties and is required to comply with various covenants, reporting requirements and other customary requirements for similar facilities. Upon the occurrence and during the continuation of an event of default, subject, in certain instances, to applicable cure periods, Deutsche Bank may declare the outstanding advances and all other obligations under the Deutsche Bank Credit Facility immediately due and payable. During the continuation of an event of default, 2L Funding I must pay interest at a default rate.

Borrowings of 2L Funding I will be considered our borrowings for purposes of complying with the asset coverage requirements under the 1940 Act applicable to business development companies.

As of June 30, 2014 , we had $30.0 million outstanding under the Deutsche Bank Credit Facility.

See Note 5 – Borrowings – in our consolidated financial statements included in this report for additional disclosure on the Deutsche Bank Credit Facility.


71


Citi Credit Facility
    
On June 27, 2014, we, through a wholly-owned, special purpose financing subsidiary, BDCA-CB Funding, LLC, entered into the Citi Credit Facility as administrative agent and U.S. Bank as collateral agent, account bank and collateral custodian. The Citi Credit Facility provides for borrowings over a twenty four month period in an aggregate principal amount of up to $400 million on a committed basis, subject to the administrative agent’s right to approve the assets acquired by CB Funding and pledged as collateral under the Citi Credit Facility.

The Citi Credit Facility will be priced at LIBOR, with no LIBOR floor, plus a spread of 1.70% per annum for the first twenty four months and 2.00% per annum thereafter. Interest is payable quarterly in arrears. CB Funding will be subject to a non-usage fee to the extent the aggregate principal amount available under the Citi Credit Facility has not been borrowed. Any amounts borrowed under the Citi Credit Facility along with any accrued and unpaid interest thereunder will mature, and will be due and payable, in three years. CB Funding paid a structuring fee and incurred certain other customary costs and expenses in connection with obtaining the Citi Credit Facility.
 
In connection with the Citi Credit Facility, on June 27, 2014, CB Funding entered into a Merger Agreement with Loan Funding, an affiliate of Citi formed for the purpose of holding loans underlying a TRS with CB Funding. Pursuant to the terms of the Merger Agreement, CB Funding acquired such loans through the merger of Loan Funding with and into CB Funding. Pursuant to the Merger Agreement, CB Funding paid approximately $389.0 million for the assets held by Loan Funding.

Borrowings of CB Funding will be considered our borrowings for purposes of complying with the asset coverage requirements under the 1940 Act applicable to business development companies.

As of June 30, 2014 , we had $270.6 million outstanding under the Citi Credit Facility.

See Note 5 – Borrowings – in our consolidated financial statements included in this report for additional disclosure on the Citi Credit Facility.

Distributions

We have declared and paid cash distributions to our stockholders on a monthly basis since we commenced operations. As of June 30, 2014 , the annualized yield for distributions declared was 7.75% based on our then current public offering price of $11.20 per share. From time to time, we may also pay interim distributions at the discretion of our board of directors. Our distributions may exceed our earnings, especially during the period before we have substantially invested the proceeds from our IPO. As a result, a portion of the distributions we make may represent a return of capital for tax purposes.

The table below shows the components of the distributions we have declared and/or paid during the six months ended June 30, 2014 and June 30, 2013 (dollars in thousands). As of June 30, 2014 , we had $ 9.1 million of distributions accrued and unpaid.
    
 
For the Six Months Ended June 30,
 
2014
 
2013
Distributions declared
$
42,047

 
$
9,928

Distributions paid
$
37,510

 
$
8,662

Portion of distributions paid in cash
$
19,670

 
$
5,648

Portion of distributions paid in DRIP shares
$
17,840

 
$
3,014


On March 1, 2012, the price for newly-issued shares under the DRIP issued to stockholders was changed from 95% to 90% of the offering price that the shares are sold as of the date the distribution is made. The DRIP purchase price based on the current offering price of $11.20 per share is $10.08.

On March 29, 2012, we declared a special common stock distribution equal to $0.05 per share. The distribution was paid to stockholders of record on May 1, 2012.


72


On December 20, 2012, we announced that, pursuant to the authorization of our board of directors, we declared a special cash distribution equal to $0.0925 per share, to be paid to stockholders of record at the close of business on December 17, 2012, payable on December 27, 2012. This special cash distribution was paid exclusive of, and in addition to, our monthly distribution.

We may fund our cash distributions to stockholders from any sources of funds available to us including expense payments from our Adviser that are subject to reimbursement to it as well as offering proceeds and borrowings. We have not established limits on the amount of funds we may use from available sources to make distributions. Prior to June 30, 2012, a substantial portion of our distributions resulted from Expense Support Payments made by our Adviser that are subject to reimbursement by us within three years from the date such payment obligations were incurred. The purpose of this arrangement could be to avoid such distributions being characterized as returns of capital for GAAP or tax purposes. Despite this, we may still have distributions which could be characterized as a return of capital for tax purposes . However, during the year ended December 31, 2012, no portion of our distributions was characterized as a return of capital for tax purposes. You should understand that any such distributions were not based on our investment performance and can only be sustained if we achieve positive investment performance in future periods and/or our Adviser continues to make such reimbursements. You should also understand that our future reimbursements of such Expense Support Payments will reduce the distributions that you would otherwise receive. 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 all. The Adviser has no obligation to make Expense Support Payments in future periods. For the fiscal year ended December 31, 2012, if Expense Support Payments of $0.3 million were not made by our Adviser, approximately 4% percent of the distribution rate would have been a return of capital. No Expense Support Payments were made by our Adviser during the fiscal year ended December 31, 2013 or the six months ended June 30, 2014 .

We consider our entire managed investment portfolio to include the investments in our portfolio included in our Consolidated Schedule of Investments as well as assets held in our TRS portfolio, which are considered off-balance sheet. Our Adviser selects and underwrites all of these investments and we measure our performance based on our entire managed portfolio. Our net investment income also does not include the interest income and expense related to the TRS portfolio. In accordance with U.S. GAAP, interest income and expense related to the TRS are accounted for as a component of “Net realized gain from total return swap.” The following table sets forth the computation of adjusted net investment income (loss) for our entire managed portfolio by adding the interest income from the TRS, the short-term realized gains, and the theoretical incentive fees on unrealized capital gains to the net investment income for the six months ended June 30, 2014 and 2013 (dollars in thousands):
 
For the Six Months Ended June 30,
 
2014
 
2013
Net investment income
$
29,496

 
$
3,376

TRS net investment income (1)
9,179

 
4,419

Operating gains (short-term) (2)
5,886

 
1,732

Incentive fees on unrealized gains (3)
626

 
748

Adjusted net investment income
$
45,187

 
$
10,275

______________

(1)  
TRS net investment income includes the interest income and expense related to the TRS portfolio. See Note 6 - Total Return Swap - for more information about the TRS.

(2)  
Operating gains include short-term realized gains that result primarily from active portfolio management activities. As a RIC, short-term capital gains represent operating income available for distribution and are considered ordinary income.

(3)  
Incentive fees on unrealized gains are the U.S. GAAP-required theoretical incentive fees accrued based upon unrealized portfolio appreciation. These fees reduce net investment income but are not contractually due to the Adviser. See Note 4 - Related Party Transactions and Agreements - for additional details on the theoretical capital gains incentive fees.


73


The following table sets forth the distributions made during the six months ended June 30, 2014 and 2013 (dollars in thousands):
 
For the Six Months Ended June 30,
 
2014
 
2013
Monthly distributions
$
42,047

 
$
9,928

Total distributions
$
42,047

 
$
9,928


Election as a RIC

We have elected to be treated as a RIC under Subchapter M of the Code commencing with our taxable year ended December, 31 2011, and intend to maintain our qualification as a RIC thereafter. As a RIC, we generally will not have to pay corporate-level U.S. federal income taxes on any income that we distribute to our stockholders from our tax earnings and profits. To maintain our qualification as a RIC, we must, among other things, meet certain source-of-income and asset diversification requirements. In addition, in order to maintain RIC tax treatment, we must distribute to our stockholders, for each taxable year, at least 90% of our “investment company taxable income,” which is generally our net ordinary income plus the excess, if any, of realized net short-term capital gain over realized net long-term capital loss, or the annual distribution requirement. Even if we qualify as a RIC, we generally will be subject to corporate-level U.S. federal income tax on our undistributed taxable income and could be subject to U.S federal excise, state, local and foreign taxes. We will be subject to a 4% nondeductible U.S. Federal excise tax on certain undistributed income of RICs unless we distribute in a timely manner an amount at least equal to 98% of net ordinary income each calendar year and 98.2% of capital gain net income for the one year period ending on October 31 of such calendar year, if any, and any recognized and undistributed income from prior years for which we paid no federal income taxes. We will generally endeavor each year to avoid any federal excise taxes.

Inflation

The impact of inflation on our portfolio depends on the type of securities we hold. When inflation occurs, the value of our equity securities may fall in the short term.  However in the long term, a company’s revenue and earnings and, therefore, the value of the equity investment, should at least increase at the same pace as inflation. The effect of inflation on debt securities is more immediate and direct as inflation may decrease the value of fixed rate debt securities. However, not all debt securities are affected equally, the longer the term of the debt security, the more volatile the value of the investment. The process through which we will value the investments in our portfolio on a quarterly basis, market quotations and our multi-step valuation process as described in our significant accounting policies, will take the effect of inflation into account.  

  Related-Party Transactions and Agreements
 
We have entered into agreements with affiliates of our Adviser, whereby we pay certain fees or reimbursements to our Adviser or its affiliates in connection with asset and service fees, reimbursement of operating costs and offering related costs. See Note 4 - Related Party Transactions and Arrangements - for a discussion of the various related-party transactions, agreements and fees.

Contractual Obligations

The following table shows our payment obligations for repayment of debt and other contractual obligations at June 30, 2014 (dollars in thousands):

 
 
 
Payment Due by Period
 
Total
 
Less than 1 year
 
1 - 3 years
 
3- 5 years
 
More than 5 years
Wells Fargo Credit Facility (1)
$
174,687

 
$
—

 
$
—

 
$
174,687

 
$
—

Deutsche Bank Credit Facility (2)
$
30,000

 
$
—

 
$
30,000

 
$
—

 
$
—

Citi Credit Facility (3)
$
270,625

 
$
—

 
$
270,625

 
$
—

 
$
—

Total contractual obligations
$
475,312

 
$
—

 
$
300,625

 
$
174,687

 
$
—

______________


74


(1)  
As of June 30, 2014 , we had $125.3 million of unused borrowing capacity under the Wells Fargo Credit Facility, subject to borrowing base limits.

(2)  
As of June 30, 2014 , we had $30.0 million of unused borrowing capacity under the Deutsche Bank Credit Facility, subject to borrowing base limits.

(3)  
As of June 30, 2014 , we had $129.4 million of unused borrowing capacity under the Citi Credit Facility, subject to borrowing base limits.


Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. We previously had the TRS as discussed in Note 6 – Total Return Swap – but it was terminated on June 27, 2014.

ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The market risk associated with financial instruments and derivative financial instruments is the risk of loss from adverse changes in market prices or interest rates. Our market risk arises primarily from interest rate risk relating to interest rate fluctuations. Many factors including governmental monetary and tax policies, domestic and international economic and political considerations and other factors that are beyond our control contribute to interest rate risk. To meet our short and long-term liquidity requirements, we borrow funds at a combination of fixed and variable rates. Our interest rate risk management objectives are to limit the impact of interest rate changes in earnings and cash flows and to lower our overall borrowing costs. To achieve these objectives, from time to time, we may enter into interest rate hedge contracts such as swaps, collars and treasury lock agreements, subject to the requirements of the 1940 Act, in order to mitigate our interest rate risk with respect to various debt instruments. While hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in benefits of lower interest rates with respect to our portfolio of investments with fixed interest rates. During the periods covered by this report, we did not engage in interest rate hedging activities. We would not hold or issue these derivative contracts for trading or speculative purposes. We do not have any foreign operations and thus we are not exposed to foreign currency fluctuations.

As of June 30, 2014 , our debt included variable-rate debt, bearing a variable interest rate at the LIBOR plus 2.24% at June 30, 2014 with a carrying value of $475.3 million. The following table quantifies the potential changes in interest income net of interest expense should interest rates increase by 100 or 200 basis points or decrease by 25 basis points assuming that our current balance sheet was to remain constant and no actions were taken to alter our existing interest rate sensitivity.

Change in Interest Rates
 
Estimated Percentage Change in Interest Income net of Interest Expense
(-) 25 Basis Points
 
0.86
 %
Base Interest Rate
 
—
 %
(+) 100 Basis Points
 
(1.94
)%
(+) 200 Basis Points
 
2.78
 %

Because we may borrow money to make investments, our net investment income may be dependent on the difference between the rate at which we borrow funds and the rate at which we invest these funds. In periods of increasing interest rates, our cost of funds would increase, which may reduce our net investment income. As a result, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income.
    
ITEM 4.  CONTROLS AND PROCEDURES

Disclosure Controls and Procedures
 

75


In accordance with Rules 13a-15(b) and 15d-15(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q and determined that our disclosure controls and procedures are effective as of the end of the period covered by the Quarterly Report on Form 10-Q.

Change in Internal Control Over Financial Reporting
 
No change occurred in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) during the quarter ended June 30, 2014 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.



PART II

ITEM 1. LEGAL PROCEEDINGS

Neither we nor our Adviser are currently subject to any material legal proceedings.

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I., “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2013, which could materially affect our business, financial condition and/or operating results. The risks described in our Annual Report on Form 10-K are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results. There have been no material changes from the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2013.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

76



ITEM 6. EXHIBITS
The following exhibits are included, or incorporated by reference, in this Quarterly Report on Form 10-Q for the quarter ended June 30, 2014 (and are numbered in accordance with Item 601 of Regulation S-K).

Exhibit No.
Description
 
 
1.1
Dealer Manager Agreement with Realty Capital Securities, LLC, dated July 1, 2014 (filed herewith).
 
 
1.2
Form of Soliciting Dealer Agreement (filed herewith).
 
 
3.1
Second Articles of Amendment and Restatement of the Registrant (previously filed as Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013 filed on August 13, 2013 and herein incorporated by reference).
 
 
3.2
Bylaws (previously filed as Exhibit (b) to the Company’s Pre-Effective Amendment No. 1 to its Registration Statement on Form N-2/A (File No. 333-166636) (the "Prior Registration Statement") filed on November 24, 2010 and herein incorporated by reference).
 
 
10.1
Second Amended and Restated Investment Advisory and Management Services Agreement dated June 5, 2013 by and between the Company and the Adviser (previously filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2013 filed on August 13, 2013 and herein incorporated by reference).
 
 
10.2
Amended and Restated Subscription Escrow Agreement with Wells Fargo Bank (previously filed as Exhibit (k)(1) to the Company's Post Effective Amendment No. 3 to its Prior Registration Statement filed on November 4, 2011 and herein incorporated by reference).
 
 
10.3
Fund Administration Servicing Agreement by and between the Company and U.S. Bancorp Fund Services, LLC (previously filed as Exhibit 10.9 to the Company's Annual Report on Form 10-K for the year ended December 31, 2010 filed on March 31, 2011 and herein incorporated by reference).
 
 
10.4
Fund Accounting Servicing Agreement by and between the Company and U.S. Bancorp Fund Services, LLC (previously filed as Exhibit 10.10 to the Company's Annual Report on Form 10-K for the year ended December 31, 2010 filed on March 31, 2011 and herein incorporated by reference).
 
 
10.5
Distribution Reinvestment Plan (previously filed as Exhibit E to the Company's Pre-Effective Amendment No. 1 to its Prior Registration Statement filed on November 24, 2010 and herein incorporated by reference).
 
 
10.6
Custody Agreement dated August 13, 2012 by and between the Company and U.S. Bank National Association (previously filed as Exhibit 10.11 to the Company's Current Report on Form 8-K filed on August 17, 2012 and herein incorporated by reference).

 
 
10.7
Expense Support Agreement dated November 9, 2011 by and between the Company and Adviser (previously filed as Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2011 filed on November 14, 2011 and herein incorporated by reference).
 
 
10.8
ISDA 2002 Master Agreement, together with the Schedule thereto and Credit Support Annex to such Schedule, by and between 405 TRS I, LLC and Citibank, N.A, each dated as of July 13, 2012 (previously filed as Exhibit 10.13 to the Company's Current Report on Form 8-K filed on August 7, 2012 and herein incorporated by reference).

 
 
10.9
Confirmation Letter Agreement by and between 405 TRS I, LLC and Citibank, N.A., amended and restated as of October 15, 2013 (previously filed as Exhibit 10.21 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2013 filed on November 13, 2013 and herein incorporated by reference).

 
 
10.10
Loan and Servicing Agreement, together with Exhibits thereto, among BDCA Funding I, LLC, the Company, Wells Fargo Securities, LLC, Wells Fargo Bank, National Association, Lenders and Lenders Agents from time to time party hereto and U.S. Bank National Association, each dated as of July 24, 2012 (previously filed as Exhibit 10.15 to the Company's Current Report on Form 8-K filed on August 7, 2012 and herein incorporated by reference).

 
 
10.11
Purchase and Sale Agreement by and between the Company and BDCA Funding I, LLC, dated as of July 24, 2012 (previously filed as Exhibit 10.16 to the Company's Current Report on Form 8-K filed on August 7, 2012 and herein incorporated by reference).

 
 

77


10.12
Collection Account Agreement by and among U.S. Bank National Association, Wells Fargo Securities, LLC, BDCA Funding I, LLC and the Company, dated as of July 24, 2012 (previously filed as Exhibit 10.17 to the Company's Current Report on Form 8-K filed on August 7, 2012 and herein incorporated by reference).

 
 
10.13
Amendment No. 1 to Loan and Servicing Agreement, among BDCA Funding I, LLC, the Company, Wells Fargo Securities, LLC and Wells Fargo Bank, National Association, dated as of January 14, 2013 (previously filed as Exhibit 10.16 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2013 filed on May 15, 2013 and herein incorporated by reference).

 
 
10.14
Amendment No. 2 to Loan and Servicing Agreement, among BDCA Funding I, LLC, the Company, Wells Fargo Securities, LLC and Wells Fargo Bank, National Association, dated as of April 26, 2013 (previously filed as Exhibit 10.17 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2013 filed on May 15, 2013 and herein incorporated by reference).

 
 
10.15
Amendment No. 1 to Purchase and Sale Agreement, entered into by and between BDCA Funding I, LLC, the Company, Wells Fargo Securities, LLC and Wells Fargo Bank, National Association and U.S. Bank National Association, dated as of April 26, 2013 (previously filed as Exhibit 10.18 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2013 filed on May 15, 2013 and herein incorporated by reference).

 
 
10.16
Confirmation Letter Agreement by and between 405 TRS I, LLC and Citibank, N.A., amended and restated as of July 18, 2013 (previously filed as Exhibit 10.19 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2013 filed on August 13, 2013 and herein incorporated by reference).
 
 
10.17
Amendment No. 3 to Loan and Servicing Agreement, among BDCA Funding I, LLC, the Company, Wells Fargo Securities, LLC and Wells Fargo Bank, National Association, dated as of September 9, 2013 (previously filed as Exhibit 10.20 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2013 filed on November 13, 2013 and herein incorporated by reference).
 
 
10.18
Confirmation Letter Agreement by and between 405 TRS I, LLC and Citibank, N.A., amended and restated as of October 15, 2013 (previously filed as Exhibit 10.21 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2013 filed on November 13, 2013 and herein incorporated by reference).
 
 
10.19
Loan financing and Servicing Agreement dated February 21, 2014 between BDCA 2L Funding I, LLC, as Borrower; Business Development Corporation of America, as Equityholder and as Servicer; the Lenders From Time to Time Parties Hereto; Deutsche Bank AG, New York Branch, as Administrative Agent, the Other Agents Party Hereto; and U.S. Bank National Association as Collateral Agent and as Collateral Custodian (previously filed as Exhibit 10.22 to the Company's Annual Report on form 10-K for the year ended December 31, 2013 filed on March 19, 2014 and herein incorporated by reference).
 
 
10.20
Sale and Contribution Agreement dated February 21, 2014 between Business Development Corporation of America, as Seller and BDCA 2L Funding I, LLC, as Purchaser (previously filed as Exhibit 10.23 to the Company's Annual Report on Form 10-K filed on March 19, 2014 and herein incorporated by reference).
 
 
10.21
Securities Account Control Agreement dated February 21, 2014 between BDCA 2L Funding I, LLC, as Pledgor, U.S. Bank National Association, as Secured Party; and U.S. Bank National Association, as Securities Intermediary (previously filed as Exhibit 10.24 to the Company's Annual Report on Form 10-K filed on March 19, 2014 and herein incorporated by reference).
 
 
10.22
Confirmation Letter Agreement by and between 405 TRS I, LLC and Citibank, N.A., amended and restated as of May 6, 2014 (previously filed as Exhibit 10.25 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2014 filed on May 15, 2014 and herein incorporated by reference).
 
 
10.23
Credit and Security Agreement, dated as of June 27, 2014, by and between BDCA-CB Funding LLC, the financial institutions and other lenders from time to time party thereto, Citibank, N.A., as administrative agent, U.S. Bank National Association, as collateral agent and custodian, and Business Development Corporation of America, as collateral manager (previously filed as exhibit 10.1 to the Company’s Current Report on Form 8-K filed on July 2, 2014 and herein incorporated by reference).
 
 
10.24
Account Control Agreement, dated as of June 27, 2014, by and between BDCA-CB Funding, LLC, as pledger, U.S. Bank National Association as collateral agent and securities intermediary(previously filed as exhibit 10.2 to the Company’s Current Report on Form 8-K filed on July 2, 2014 and herein incorporated by reference).
 
 
10.25
Collateral Administration Agreement, dated as of June 27, 2014, between BDCA-CB Funding, LLC, as borrower, Business Development Corporation of America, as collateral manager, Citibank, N.A., as administrative agent, and U.S. Bank National Association, as collateral administrator (previously filed as exhibit 10.3 to the Company’s Current Report on Form 8-K filed on July 2, 2014 and herein incorporated by reference).
 
 

78


10.26
Sale and Contribution Agreement, dated as of June 27, 2014, between Business Development Corporation of America, as seller, and BDCA-CB Funding, LLC, as purchaser(previously filed as exhibit 10.4 to the Company’s Current Report on Form 8-K filed on July 2, 2014 and herein incorporated by reference).
 
 
10.27
Agreement and Plan of Merger, dated as of June 27, 2014, by and among BDCA-CB Funding LLC, 405 Loan Funding LLC and Citibank, N.A. (previously filed as exhibit 10.5 to the Company’s Current Report on Form 8-K filed on July 2, 2014 and herein incorporated by reference).
 
 
10.28
Termination Acknowledgment (TRS), dated as of June 27, 2014, by and between BDCA-CB Funding LLC and Citibank, N.A., as counterparty, secured party and bank(previously filed as exhibit 10.6 to the Company’s Current Report on Form 8-K filed on July 2, 2014 and herein incorporated by reference).
 
 
10.29
Amendment No. 4 to Loan and Servicing Agreement, dated as of June 30, 2014 (as amended), by and among BDCA Funding I, LLC, the Company, Wells Fargo Securities, LLC and Wells Fargo Bank, National Association, and U.S. Bank National Association (filed herewith).
 
 
14
Code of Ethics (previously filed as Exhibit 14 to the Company's Annual Report on Form 10-K filed on March 19, 2014 and herein incorporated by reference).
 
 
21
Subsidiaries of the Registrant (filed herewith).
 
 
31.1
Certification of the Principal Executive Officer of the Company pursuant to Securities Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
 
 
31.2
Certification of the Principal Financial Officer of the Company pursuant to Securities Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
 
 
32
Written statement of the Principal Executive Officer and Principal Financial Officer of the Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).

79


SIGNATURES
 
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized this 14 th day of August 2014.
 
 
 
 
 
BUSINESS DEVELOPMENT CORPORATION OF AMERICA
 
 
By:
/s/ Nicholas S. Schorsch
Name: Nicholas S. Schorsch
Title: Chief Executive Officer and Chairman of the Board of Directors
* * * * *
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
 
 
 
 
 
Signature
 
Title
 
Date
 
 
 
 
 
/s/ Nicholas S. Schorsch
Nicholas S. Schorsch
 
Chief Executive Officer and Chairman of the Board of Directors
(Principal Executive Officer)
 
August 14, 2014
/s/ Nicholas Radesca
Nicholas Radesca
 
Chief Financial Officer, Treasurer and Secretary
(Principal Financial and Accounting Officer)
 
August 14, 2014
/s/ Peter M. Budko
Peter M. Budko
 
President and Chief Operating Officer
 
August 14, 2014
/s/ William M. Kahane
William M. Kahane
 
Director
 
August 14, 2014
/s/ Edward G. Rendell
Edward G. Rendell
 
Independent Director
 
August 14, 2014
/s/ Leslie D. Michelson
Leslie D. Michelson
 
Independent Director
 
August 14, 2014
/s/ William G. Stanley
William G. Stanley
 
Independent Director
 
August 14, 2014



80

Exhibit 1.1

Business Development Corporation of America
UP TO 101,100,000 SHARES OF COMMON STOCK


EXCLUSIVE DEALER MANAGER AGREEMENT

July 1, 2014
Realty Capital Securities, LLC

Three Copley Place, Suite 3300

Boston, Massachusetts 02116
Ladies and Gentlemen:
Business Development Corporation of America (the “ Company ”) is a Maryland corporation that has elected to be treated as a business development company (“ BDC ”) under the Investment Company Act of 1940 and the rules and regulations thereunder (collectively, the “ Investment Company Act ” ). The Company proposes to offer up to 101,100,000 shares of common stock, $0.001 par value per share (the “ Shares ”) on a continuous basis, for an initial purchase price of $11.20 per Share, with a minimum initial investment of $1,000, in the offering (the “ Offering ”), all upon the other terms and subject to the conditions set forth in the Prospectus (as defined below).
The Company is managed by BDCA Adviser, LLC, a Delaware limited liability company (the “ Advisor ”) pursuant to Second Amended and Restated Investment Advisory and Management Services Agreement dated June 5, 2013 by and between the Company and the Advisor (the “ Advisory Agreement ”) included as an exhibit to the Registration Statement (as defined below).
The Company has entered into an administration agreement (the “ Administration Agreement ”).
Upon the terms and subject to the conditions contained in this Exclusive Dealer Manager Agreement (this “ Agreement ”), the Company hereby appoints Realty Capital Securities, LLC, a Delaware limited liability company (the “ Dealer Manager ”), to act as the exclusive dealer manager for the Offering, and the Dealer Manager desires to accept such engagement.
In connection with the Offering, the Company has prepared and filed with the Securities and Exchange Commission (the “ Commission ”) a registration statement (File No. 333- 193241) on Form N-2 for the registration of the Shares under the Securities Act of 1933, as amended (the “ Securities Act ”), and the rules and regulations of the Commission promulgated thereunder (the “ Securities Act Rules and Regulations ”); and may prepare and file one or more amendments to such registration statement. The registration statement on Form N-2 and the prospectus contained therein, as finally amended at the date the registration statement is declared effective by the Commission (the “ Effective Date ”) are respectively hereinafter referred to as the “ Registration





Statement ” and the “ Prospectus ”, except that (i) if the Company files a post-effective amendment to such registration statement, then the term “Registration Statement” shall, from and after the declaration of the effectiveness of such post-effective amendment by the Commission, refer to such registration statement as amended by such post-effective amendment, and the term “Prospectus” shall refer to the amended prospectus then on file with the Commission, and (ii) if the Company files a prospectus or prospectus supplement pursuant to Rule 497 of the Securities Act Rules and Regulations which differs from the prospectus on file at the time the Registration Statement or the most recent post-effective amendment thereto, if any, shall have become effective, then the term “Prospectus” shall refer to such prospectus or include such prospectus supplement, as applicable, filed pursuant to Rule 497, as the case may be, from and after the date on which it shall have been filed. The term “preliminary Prospectus” as used herein shall mean a preliminary prospectus related to the Shares as contemplated by Rule 430 or Rule 430A of the Securities Act Rules and Regulations included at any time as part of the Registration Statement. As used herein, the terms “Registration Statement”, “preliminary Prospectus” and “Prospectus” shall include the documents, if any, incorporated by reference therein. If any portion of the Company’s annual report on Form 10-K is specifically incorporated by reference into the Prospectus pursuant to Instruction F of Form N-2, then the term “Prospectus” shall include such information incorporated by reference therein. As used herein, the term “Effective Date” also shall refer to the effective date of each post-effective amendment to the Registration Statement, unless the context otherwise requires.
1.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE ADVISOR . The Company and the Advisor hereby represent, warrant and agree as follows:
(a)
DOCUMENTS INCORPORATED BY REFERENCE. The information from the Company’s annual reports on Form 10-K specifically incorporated by reference into the Prospectus, if applicable, will comply in all material respects with the requirements of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”) and the rules and regulations of the Commission promulgated thereunder (the “ Exchange Act Rules and Regulations ”), and, as of the Effective Date of any post-effective amendment that includes information incorporated by reference, such information so incorporated will not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.
(b)
COMPLIANCE WITH THE SECURITIES ACT, ETC. During the term of this Agreement:
(i)
on (A) each applicable Effective Date, (B) the date of the preliminary Prospectus, (C) the date of the Prospectus and (D) the date any supplement to the Prospectus is filed with the Commission, the Registration Statement, the Prospectus and any amendments or supplements thereto, as applicable, have complied, and will comply, in all material respects with the Securities Act, the Securities Act Rules and Regulations, the Exchange Act, the

2



Exchange Act Rules and Regulations and the Investment Company Act applicable to business development companies; and
(ii)
the Registration Statement does not, and any amendment thereto will not, in each case as of the applicable Effective Date, include any untrue statement of material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading and the Prospectus does not, and any amendment or supplement thereto will not, as of the applicable filing date, include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they are made, not misleading; provided , however , that the foregoing representations will not extend to any statements contained in, incorporated by reference in or omitted from the Registration Statement, the Prospectus or any amendment or supplement thereto that are based upon written information furnished to the Company by the Dealer Manager expressly for use therein.
(c)
SECURITIES MATTERS. There has not been (i) any request by the Commission for any further amendment to the Registration Statement or the Prospectus or for any additional information, (ii) any issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the institution or, to the Company’s knowledge, threat of any proceeding for that purpose, or (iii) any notification with respect to the suspension of the qualification of the Shares for sale in any jurisdiction or any initiation or, to the Company’s knowledge, threat of any proceeding for such purpose. The Company is in compliance in all material respects with all federal and state securities laws, rules and regulations applicable to it and its activities, including, without limitation, with respect to the Offering and the sale of the Shares.
(d)
CORPORATION STATUS. The Company is a corporation duly formed and validly existing under the General Corporation Law of Maryland, with all requisite power and authority to enter into this Agreement and to carry out its obligations hereunder.
(e)
AUTHORIZATION OF AGREEMENT. This Agreement has been duly and validly authorized, executed and delivered by or on behalf of the Company and constitutes a valid and binding agreement of the Company enforceable in accordance with its terms (except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws of the United States, any state or any political subdivision thereof which affect creditors’ rights generally or by equitable principles relating to the availability of remedies or except to the extent that the enforceability of the indemnity and contribution provisions contained in this Agreement may be limited under applicable securities laws).
The execution and delivery of this Agreement and the performance of this Agreement, the consummation of the transactions contemplated herein and the fulfillment of the terms hereof, do not and will not conflict with, or result in a breach of any of the terms and

3



provisions of, or constitute a default under: (i) the Company’s declaration of trust, charter, by-laws, or other organizational documents, as the case may be; (ii) any indenture, mortgage, deed of trust, voting trust agreement, note, lease or other agreement or instrument to which the Company is a party or by which the Company or any of its properties is bound except, for purposes of this clause (ii) only, for such conflicts, breaches or defaults that do not result in and could not reasonably be expected to result in, individually or in the aggregate, a Company MAE (as defined below in this Section 1(e) ); or (iii) any statute, rule or regulation or order of any court or other governmental agency or body having jurisdiction over the Company or any of its properties. No consent, approval, authorization or order of any court or other governmental agency or body has been or is required for the performance of this Agreement or for the consummation by the Company of any of the transactions contemplated hereby (except (x) as have been obtained under the Securities Act, the Exchange Act, from the Financial Industry Regulatory Authority (“ FINRA ”) or as may be required under state securities or applicable blue sky laws in connection with the offer and sale of the Shares or under the laws of states in which the Company may own real properties in connection with its qualification to transact business in such states or as may be required by subsequent events which may occur, (y) the election of the Company to be regulated as a BDC under the Investment Company Act and (z) registration of the Advisor under the Advisers Act (as defined in Section 1(s) ). The Company is not in violation of its declaration of trust, charter, by-laws or other organizational documents, as the case may be.
As used in this Agreement, “ Company MAE ” means any event, circumstance, occurrence, fact, condition, change or effect, individually or in the aggregate, that is, or could reasonably be expected to be, materially adverse to (i) the condition, financial or otherwise, earnings, business affairs or business prospects of the Company, (ii) the ability of the Company to perform its obligations under this Agreement or the validity or enforceability of this Agreement or the Shares or (iii) the value of the Shares.
(f)
ACTIONS OR PROCEEDINGS. As of the initial Effective Date, there are no actions, suits or proceedings against, or investigations of, the Company pending or, to the knowledge of the Company, threatened, before any court, arbitrator, administrative agency or other tribunal (i) asserting the invalidity of this Agreement, (ii) seeking to prevent the issuance of the Shares or the consummation of any of the transactions contemplated by this Agreement, (iii) that might materially and adversely affect the performance by the Company of its obligations under or the validity or enforceability of, this Agreement or the Shares, (iv) that might result in a Company MAE, or (v) seeking to affect adversely the federal income tax attributes of the Shares except as described in the Prospectus. The Company promptly will give notice to the Dealer Manager of the occurrence of any action, suit, proceeding or investigation of the type referred to above arising or occurring on or after the initial Effective Date.
(g)
DEPOSIT ACCOUNT. The Company shall deposit (or cause to be deposited) all subscription funds to a designated deposit account in the name of the Company (the “ Deposit Account ”) at a bank which shall be subject to the reasonable prior approval

4



of the Dealer Manager. The Deposit Account shall be subject to a deposit control agreement executed by the depositary, the Company, and the Dealer Manager, which shall be substantially in the form included as an exhibit to the Registration Statement (the “ Control Agreement ”). As used herein, “ Person ” or “ Persons ” means any individual, firm, corporation, partnership, trust, incorporated or unincorporated association, joint venture, joint stock company, limited liability company, governmental authority or agency, or other entity of any kind.
(h)
SALES LITERATURE. Any supplemental sales literature or advertisement (including, without limitation any “broker-dealer use only” material), regardless of how labeled or described, used in addition to the Prospectus in connection with the Offering which previously has been, or hereafter is, furnished or approved by the Company (collectively, “ Approved Sales Literature ”), shall, to the extent required, be filed with and approved by the appropriate securities agencies and bodies, provided that the Dealer Manager will make all FINRA filings, to the extent required. Any and all Approved Sales Literature did not or will not at the time provided for use include any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading.
(i)
AUTHORIZATION OF SHARES. The Shares have been duly authorized and, when issued and sold as contemplated by the Prospectus and upon payment therefor as provided in this Agreement and the Prospectus, will be validly issued, fully paid and nonassessable and will conform to the description thereof contained in the Prospectus.
(j)
INVESTMENT COMPANY. The Company is and, after giving effect to the Offering of the Shares, will continue to be a non-diversified, closed-end management investment company that has elected to be treated as a BDC under the Investment Company Act, and has not withdrawn such election, and the SEC has not ordered that such election be withdrawn nor to the Company’s knowledge have proceedings to effectuate such withdrawal been initiated or threatened by the SEC.
(k)
TAXES. Any taxes, fees and other governmental charges in connection with the execution and delivery of this Agreement or the execution, delivery and sale of the Shares have been or will be paid when due.
(l)
TAX RETURNS. The Company has filed all material federal, state and foreign income tax returns required to be filed by or on behalf of the Company on or before the due dates therefor (taking into account all extensions of time to file) and has paid or provided for the payment of all such material taxes indicated by such tax returns and all assessments received by the Company to the extent that such taxes or assessments have become due.
(m)
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM. The accountants who have certified certain financial statements appearing in the

5



Prospectus are an independent registered public accounting firm within the meaning of the Securities Act and the Securities Act Rules and Regulations. Such accountants have not been engaged by the Company to perform any “prohibited activities” (as defined in Section 10A of the Exchange Act).
(n)
INTERNAL CONTROLS. The Company maintains a system of internal accounting and other controls sufficient to provide reasonable assurances regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, including policies and procedures that: (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of the Company’s management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.
(o)
PREPARATION OF THE FINANCIAL STATEMENTS. The financial statements filed with the Commission as a part of the Registration Statement and included in the Prospectus present fairly the financial position of the Company as of and at the dates indicated and the results of their operations and cash flows for the periods specified. Such financial statements have been prepared in conformity with generally accepted accounting principles as applied in the United States applied on a consistent basis throughout the periods involved, except as may be expressly stated in the related notes thereto. No other financial statements or supporting schedules are required to be included in the Registration Statement or any applicable Prospectus.
(p)
MATERIAL ADVERSE CHANGE. Since the respective dates as of which information is given in the Registration Statement and the Prospectus, except as may otherwise be stated therein or contemplated thereby, there has not occurred a Company MAE, whether or not arising in the ordinary course of business.
(q)
GOVERNMENT PERMITS. The Company possesses such certificates, authorities or permits issued by the appropriate state, federal or foreign regulatory agencies or bodies necessary to conduct the business now operated by them, other than those the failure of which to possess or own would not have, individually or in the aggregate, and could not, individually or in the aggregate, reasonably be expected to result in a Company MAE. The Company has not received any notice of proceedings relating to the revocation or modification of any such certificate, authority or permit which, individually or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would result in a Company MAE.

6



(r)
ADVISOR; ADVISORY AGREEMENT AND ADMINISTRATOR; ADMINISTRATION AGREEMENT.
(i)
The Advisor is a limited liability company duly formed and validly existing under the laws of the State of Delaware, with all requisite power and authority to enter into this Agreement and to carry out its obligations hereunder. The Administrator is a limited liability company duly formed and validly existing under the laws of the State of Delaware.
(ii)
Each of this Agreement, the Advisory Agreement and the Administration Agreement is duly and validly authorized, executed and delivered by or on behalf of the Advisor or the Administrator, as the case may be, and constitutes a valid and binding agreement of the Advisor or the Administrator, as the case may be, enforceable in accordance with its terms (except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws of the United States, any state or any political subdivision thereof which affect creditors’ rights generally or by equitable principles relating to the availability of remedies or except to the extent that the enforceability of the indemnity and contribution provisions contained in this Agreement may be limited under applicable securities laws).
(iii)
The execution and delivery of each of this Agreement, the Advisory Agreement and Administration Agreement and the performance thereunder by the Advisor or the Administrator, as the case may be, do not and will not (i) conflict with, or result in a breach of any of the terms and provisions of, or constitute a default under: (1) the Advisor’s or the Administrator’s charter or by-laws, or other organizational documents, or (2) any indenture, mortgage, deed of trust, voting trust agreement, note, lease or other agreement or instrument to which the Advisor or the Administrator is a party or by which the Advisor or the Administrator or any of their properties is bound except, for purposes of this clause (2) only, for such conflicts, breaches or defaults that could not reasonably be expected to have or result in, individually or in the aggregate, (A) a material adverse effect on the condition, financial or otherwise, earnings, business affairs or business prospects of the Advisor or the Administrator, or (B) a Company MAE; or (ii) result in and could not reasonably be expected to result in, individually or in the aggregate, in any material respect any conflict with, breach of, or default under, any statute, rule or regulation or order of any court or other governmental agency or body having jurisdiction over the Advisor or the Administrator or any of their properties. No consent, approval, authorization or order of any court or other governmental agency or body has been or is required for the performance of the Advisory Agreement by the Advisor or the Administration Agreement by the Administrator except (i) such as have been already obtained under the Securities Act or the Investment Company Act or (ii) as may be required under state securities laws. The Advisor and the Administrator are not in

7



violation of their respective limited liability company agreements or other organizational documents.
(iv)
There is no action, suit, proceeding, inquiry or investigation before or brought by any court or governmental agency or body, domestic or foreign, now pending, or, to the knowledge of the Advisor, threatened against or affecting the Advisor, or to the knowledge of the Administrator, threatened against or affecting the Administrator.
(v)
The Advisor and the Administrator possess such certificates, authorities or permits issued by the appropriate state, federal or foreign regulatory agencies or bodies necessary to conduct the business now operated by it, other than those the failure to possess or own would not have or result in, individually or in the aggregate, (A) a material adverse effect on the condition, financial or otherwise, earnings, business affairs or business prospects of the Advisor or the Administrator, as the case may be, (B) a Company MAE, or (C) a material adverse effect on the performance of the services under the Advisory Agreement by the Advisor or the Administration Agreement by the Administrator, and the Advisor and the Administrator have not received any notice of proceedings relating to the revocation or modification of any such certificate, authority or permit.
(s)
BUSINESS DEVELOPMENT COMPANY.
(i)
The terms of the Advisory Agreement and the Administration Agreement, including compensation terms comply in all material respects with all applicable provisions of the Investment Company Act and the Investment Advisers Act of 1940, as amended, and the rules and regulations thereunder (collectively, the “ Advisers Act ”).
(ii)
No Person is serving or acting as an officer, director or investment adviser of the Company, except in accordance with the provisions of the Investment Company Act and the Advisers Act and the applicable published rules and regulations thereunder.
(iii)
The provisions of the corporate charter and bylaws of the Company and the investment objectives, policies and restrictions described in the Prospectus are and will be consistent in all material respects with the requirements of the Investment Company Act applicable to a BDC.
(iv)
The Company’s current business operations and investments and contemplated business operations and investments are in compliance in all material respects with the provisions of the Investment Company Act and the rules and regulations of the SEC thereunder applicable to BDCs and the rules and regulations of the SEC thereunder, except as will not have, singly or in the aggregate, a Company MAE.

8



(v)
The approval of the Advisory Agreement by each of the board of directors and the initial stockholders of the Company has been made in accordance with the requirements of Section 15 of the Investment Company Act applicable to companies that have elected to be regulated as BDCs under the Investment Company Act.
2.
REPRESENTATIONS AND WARRANTIES OF THE DEALER MANAGER . The Dealer Manager represents and warrants to the Company during the term of this Agreement that:
(a)
ORGANIZATION STATUS. The Dealer Manager is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware, with all requisite power and authority to enter into this Agreement and to carry out its obligations hereunder.
(b)
AUTHORIZATION OF AGREEMENT. This Agreement has been duly authorized, executed and delivered by the Dealer Manager, and assuming due authorization, execution and delivery of this Agreement by the Company and the Advisor, will constitute a valid and legally binding agreement of the Dealer Manager enforceable against the Dealer Manager in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency or similar laws affecting the enforcement of creditors’ rights generally or by equitable principles relating to enforceability and except that rights to indemnity and contribution hereunder may be limited by applicable law and public policy.
(c)
ABSENCE OF CONFLICT OR DEFAULT. The execution and delivery of this Agreement, the consummation of the transactions herein contemplated and compliance with the terms of this Agreement by the Dealer Manager will not conflict with or constitute a default under (i) its organizational documents, (ii) any indenture, mortgage, deed of trust or lease to which the Dealer Manager is a party or by which it may be bound, or to which any of the property or assets of the Dealer Manager is subject, or (iii) any rule, regulation, writ, injunction or decree of any government, governmental instrumentality or court, domestic or foreign, having jurisdiction over the Dealer Manager or its assets, properties or operations, except in the case of clause (ii) or (iii) for such conflicts or defaults that would not individually or in the aggregate have or reasonably be expected to have a material adverse effect on the condition (financial or otherwise), business affairs, properties or results of operations of the Dealer Manager.
(d)
BROKER-DEALER REGISTRATION; FINRA MEMBERSHIP. The Dealer Manager is, and during the term of this Agreement will be, duly registered as a broker-dealer pursuant to the provisions of the Exchange Act and the Exchange Act Rules and Regulations, a member in good standing of FINRA, and a broker or dealer duly registered as such in those states where the Dealer Manager is required to be registered in order to carry out the Offering as contemplated by this Agreement. Moreover, the Dealer Manager’s employees and representatives have all required licenses and registrations to act under this Agreement. There is no provision in the

9



Dealer Manager’s FINRA membership agreement that would restrict the ability of the Dealer Manager to carry out the Offering as contemplated by this Agreement.
(e)
DISCLOSURE. The information under the caption “Plan of Distribution” in the Prospectus insofar as it relates to the Dealer Manager, and all other information furnished to the Company by the Dealer Manager in writing specifically for use in the Registration Statement, any preliminary Prospectus or the Prospectus, does not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.
3.
OFFERING AND SALE OF THE SHARES . Upon the terms and subject to the conditions set forth in this Agreement, the Company hereby appoints the Dealer Manager as its agent and exclusive distributor to solicit and to retain the Soliciting Dealers (as defined in Section 3(a) ) to solicit subscriptions for the Shares at the subscription price to be paid in cash. The Dealer Manager hereby accepts such agency and exclusive distributorship and agrees to use its reasonable best efforts to sell or cause to be sold the Shares in such quantities and to such Persons in accordance with such terms as are set forth in this Agreement, the Prospectus and the Registration Statement. Unless this Agreement is earlier terminated pursuant to Section 10 , the Dealer Manager shall use such reasonable best efforts during the Offering Period (as defined below).
As used in this Agreement, “ Offering Period ” means the period commencing on the initial Effective Date and ending on the earliest to occur of the following: (1) the acceptance by the Company of subscriptions for 101,100,000 Shares; and (2) the liquidation or dissolution of the Company.
The number of Shares, if any, to be reserved for sale by each Soliciting Dealer may be determined, from time to time, by the Dealer Manager upon prior consultation with the Company. In the absence of such determination, the Company shall, subject to the provisions of Section 3(b) , accept Subscription Agreements based upon a first-come, first accepted reservation or other similar method. Under no circumstances will the Dealer Manager be obligated to underwrite or purchase any Shares for its own account and, in soliciting purchases of Shares, the Dealer Manager shall act solely as the Company’s agent and not as an underwriter or principal.
(a)
SOLICITING DEALERS. The Shares offered and sold through the Dealer Manager under this Agreement shall be offered and sold only by the Dealer Manager and other securities dealers the Dealer Manager may retain (collectively the “ Soliciting Dealers ”); provided, however, that (i) the Dealer Manager reasonably believes that all Soliciting Dealers are registered with the Commission, members of FINRA and are duly licensed or registered by the regulatory authorities in the jurisdictions in which they will offer and sell Shares or exempt from broker dealer registration with the Commission and all other applicable regulatory authorities, (ii) all such engagements are evidenced by written agreements, the terms and conditions of which substantially conform to the form of Soliciting Dealers Agreement approved by the Company and the Dealer Manager (the “ Soliciting Dealers Agreement ”), and (iii)

10



the Company shall have previously approved each Soliciting Dealer (such approval not to be unreasonably withheld or delayed).
(b)
SUBSCRIPTION DOCUMENTS. Each Person desiring to purchase Shares through the Dealer Manager, or any other Soliciting Dealer, will be required to complete and execute the subscription documents described in the Prospectus.
Payments for Shares shall be made by checks payable to “BUSINESS DEVELOPMENT CORPORATION OF AMERICA”. The Selected Dealer shall forward original checks together with an original Subscription Agreement, executed and initialed by the subscriber as provided for in the Subscription Agreement, to the address provided in the Subscription Agreement.

(c)
COMPLETED SALE. A sale of a Share shall be deemed by the Company to be completed for purposes of Section 3(d) if and only if (i) the Company has received a properly completed and executed subscription agreement, together with payment of the full purchase price of each purchased Share, from an investor who satisfies the applicable suitability standards and minimum purchase requirements set forth in the Registration Statement as determined by the Soliciting Dealer, or the Dealer Manager, as applicable, in accordance with the provisions of this Agreement, (ii) the Company has accepted such subscription, and (iii) such investor has been admitted as a shareholder of the Company. In addition, no sale of Shares shall be completed until at least five (5) business days after the date on which the subscriber receives a copy of the Prospectus. The Dealer Manager hereby acknowledges and agrees that the Company, in its sole and absolute discretion, may accept or reject any subscription, in whole or in part, for any reason whatsoever or no reason, and no commission or dealer manager fee will be paid to the Dealer Manager with respect to that portion of any subscription which is rejected.
(d)
DEALER-MANAGER COMPENSATION.
(i)
Subject to the volume discounts and other special circumstances described in or otherwise provided in the “Plan of Distribution” section of the Prospectus or this Section 3(d) , the Company agrees to pay the Dealer Manager selling commissions in the amount of seven percent (7%) of the selling price of each Share for which a sale is completed from the Shares offered in the Offering. Alternatively, if the Soliciting Dealer elects to receive selling commissions equal to seven and one-half percent (7.5%) in accordance with the Soliciting Dealers Agreement, the Company agrees to pay the Dealer Manager selling commissions in the amount of seven and one-half percent (7.5%) of the selling price of each Share for which a sale is completed from the Shares offered in the Primary Offering, two and one-half percent (2.5%) of which selling commissions shall be payable at the time of such sale and one percent (1%) of which shall be paid on each anniversary of the closing of such sale up to and including the fifth

11



anniversary of the closing of such sale. The Company will pay reduced selling commissions or may eliminate commissions on certain sales of Shares, including the reduction or elimination of selling commissions in accordance with, and on the terms set forth in, the Prospectus. The Dealer Manager will reallow all the selling commissions, subject to federal and state securities laws, to the Soliciting Dealer who sold the Shares, as described more fully in the Soliciting Dealers Agreement. In no event shall the Dealer Manager be entitled to payment of any compensation in connection with the Offering that is not completed according to this Agreement; provided, however, that the reimbursement of out-of-pocket accountable expenses actually incurred by the Dealer Manager or person associated with the Dealer Manager shall not be presumed to be unfair or unreasonable and shall be payable under normal circumstances.
(ii)
Subject to the special circumstances described in or otherwise provided in the “Plan of Distribution” section of the Prospectus or this Section 3(d) , as compensation for acting as the dealer manager, the Company will pay the Dealer Manager, a dealer manager fee in the amount of three percent (3%) of the selling price of each Share for which a sale is completed from the Shares offered in the Offering (the “ Dealer Manager Fee ”). Notwithstanding, the Dealer Manager Fee will be reduced to two and one-half percent (2.5%) if the selling commission is 7.5% as described above. The Dealer Manager may retain or re-allow all or a portion of the Dealer Manager Fee, subject to federal and state securities laws, to the Soliciting Dealer who sold the Shares, as described more fully in the Soliciting Dealers Agreement.
(iii)
All sales commissions payable to the Dealer Manager will be paid as dictated by industry practice after the investor subscribing for the Shares is admitted as a shareholder of the Company, in an amount equal to the sales commissions payable with respect to such Shares.
(iv)
In no event shall the total aggregate underwriting compensation payable to the Dealer Manager and any Soliciting Dealers participating in the Offering, including, but not limited to, selling commissions and the Dealer Manager Fee exceed ten percent (10.0%) of gross offering proceeds from the Offering in the aggregate.
In connection with the minimum amount offered by the Company pursuant to the Prospectus and FINRA’s 10% underwriting compensation limitation under FINRA Rule 2310 (“ FINRA’s 10% cap ”), the Dealer Manager shall advance all of the fixed expenses, including, but not limited to, wholesaling salaries, salaries of dual employees allocated to wholesaling activities, and other fixed expenses, (including, but not limited to, wholesaling expense reimbursements and the Dealer Manager’s legal expenses associated with

12



filing the Offering with FINRA), that are required to be included within FINRA’s 10% cap to ensure that the aggregate underwriting compensation paid in connection with the Offering does not exceed FINRA’s 10% cap.

The Dealer Manager shall repay to the Company any excess amounts received over FINRA’s 10% cap if the Offering is abruptly terminated after receiving the minimum amount offered by the Company pursuant to the Prospectus and before reaching the maximum amount of offered by the Company pursuant to the Prospectus.

No compensation in connection with the offering may be paid to the Dealer Manager, the Soliciting Dealers or their affiliates out of the proceeds of the offering prior to the release of such proceeds from escrow. However, if any such payments are made from sources other than proceeds of the Offering, they shall be made only on the basis of bona fide transactions.

(v)
Notwithstanding anything to the contrary contained herein, if the Company pays any selling commission to the Dealer Manager for sale by a Soliciting Dealer of one or more Shares and the subscription is rescinded as to one or more of the Shares covered by such subscription, then the Company shall decrease the next payment of selling commissions or other compensation otherwise payable to the Dealer Manager by the Company under this Agreement by an amount equal to the commission rate established in this Section 3(d) , multiplied by the number of Shares as to which the subscription is rescinded. If no payment of selling commissions or other compensation is due to the Dealer Manager after such withdrawal occurs, then the Dealer Manager shall pay the amount specified in the preceding sentence to the Company within a reasonable period of time not to exceed thirty (30) days following receipt of notice by the Dealer Manager from the Company stating the amount owed as a result of rescinded subscriptions.
(e)
REASONABLE BONA FIDE DUE DILIGENCE EXPENSES. The Company or the Advisor shall reimburse the Dealer Manager or any Soliciting Dealer for reasonable bona fide due diligence expenses incurred by the Dealer Manager or any Soliciting Dealer. The Company shall only reimburse the Dealer Manager or any Soliciting Dealer for such approved bona fide due diligence expenses to the extent such expenses have actually been incurred and are supported by detailed and itemized invoice(s) provided to the Company.
4.
CONDITIONS TO THE DEALER MANAGER’S OBLIGATIONS . The Dealer Manager’s obligations hereunder shall be subject to the following terms and conditions (and if all such conditions are not satisfied or waived by the Dealer Manager on or before the initial Effective Date or at any time thereafter until the Termination Date, then no funds shall be releasedfrom the Deposit Account):

13



(a)
The representations and warranties on the part of the Company and the Advisor contained in this Agreement hereof shall be true and correct in all material respects and the Company and the Advisor shall have complied with their covenants, agreements and obligations contained in this Agreement in all material respects;
(b)
The Registration Statement shall have become effective and no stop order suspending the effectiveness of the Registration Statement shall have been issued by the Commission and, to the best knowledge of the Company and the Advisor, no proceedings for that purpose shall have been instituted, threatened or contemplated by the Commission; and any request by the Commission for additional information (to be included in the Registration Statement or Prospectus or otherwise) shall have been complied with to the reasonable satisfaction of the Dealer Manager.
(c)
The Registration Statement and the Prospectus, and any amendment or any supplement thereto, shall not contain any untrue statement of material fact, or omit to state a material fact that is required to be stated therein or is necessary to make the statements therein not misleading.
(d)
At or prior to the fifth business day following the Effective Date of each post-effective amendment to the Registration Statement that includes or incorporates by reference new audited financial statements for the Company, the Dealer Manager shall have received from Grant Thornton LLP or such other independent registered public accountants for the Company, (i) a letter, dated the applicable date, addressed to the Dealer Manager, in form and substance satisfactory to the Dealer Manager, containing statements and information of the type ordinarily included in accountant’s “comfort letters” to placement agents or dealer managers, delivered according to Statement of Auditing Standards No. 72 (or any successor bulletin), with respect to the audited financial statements and certain financial information contained in the Registration Statement and the Prospectus, and (ii) confirming that they are (A) independent registered public accountants as required by the Securities Act, and (B) in compliance with the applicable requirements relating to the qualification of accountants under Rule 2-01 of Regulation S-X.
(e)
At or prior to the fifth business day following (i) the request by the Dealer Manager in connection with any third party due diligence investigation, and (ii) the Effective Date of each post-effective amendment to the Registration Statement (other than post-effective amendments filed solely pursuant to Rule 462(d) under the Securities Act and other than the post-effective amendments referred to in Section 4(d) ), the Dealer Manager shall have received from Grant Thornton LLP or such other independent public or certified public accountants for the Company, a letter, dated such date, in form and substance satisfactory to the Dealer Manager, to the effect that they reaffirm the statements made in the most recent letter furnished pursuant to Section 4(d) , except that the specified date referred to therein for the carrying out of procedures shall be no more than three business days prior to the date of the letter furnished pursuant to this Section 4(e) .

14



(f)
On the Effective Date, the Dealer Manager shall have received the opinion of Sutherland Asbill & Brennan LLP, counsel for the Company, and a supplemental “negative assurances” letter from such counsel, each dated as of the Effective Date, and each in the form and substance reasonably satisfactory to the Dealer Manager.
(g)
At or prior to the Effective Date and at or prior to the fifth business day following the effective date of each post-effective amendment to the Registration Statement (other than post-effective amendments filed solely pursuant to Rule 462(d) under the Securities Act), the Dealer Manager shall have received a written certificate executed by the Chief Executive Officer or President of the Company and the Chief Financial Officer of the Company, dated as of the applicable date, to the effect that: (i) the representations and warranties of the Company and the Advisor set forth in this Agreement are true and correct in all material respects with the same force and effect as though expressly made on and as of the applicable date; and (ii) the Company and the Advisor have complied in all material respects with all the agreements hereunder and satisfied all the conditions on their part to be performed or satisfied hereunder at or prior to the applicable date.
5.
COVENANTS OF THE COMPANY AND THE ADVISOR . The Company and the Advisor covenant and agree with the Dealer Manager as follows:
(a)
REGISTRATION STATEMENT. The Company will use commercially reasonable efforts (i) to cause the Registration Statement and any subsequent amendments thereto to become effective as promptly as possible, and (ii) on an ongoing basis, maintain effective status with the Commission thereafter. The Company will furnish a copy of any proposed amendment or supplement of the Registration Statement or the Prospectus to the Dealer Manager. The Company will comply in all material respects with all federal and state securities laws, rules and regulations which are required to be complied with in order to permit the continuance of offers and sales of the Shares in accordance with the provisions hereof and of the Prospectus.
(b)
BUSINESS DEVELOPMENT COMPANY. Except as otherwise provided for in this Agreement, the Company will not withdraw Form N-54A – Notification of Election to be Subject to Sections 55 through 65 of the Investment Company Act of 1940 filed Pursuant to Section 54(a) of the Act (the “ Notification of Election ”) or take any action to cause the Commission to order such Notification of Election to be withdrawn. Such Notification of Election (i) contains all statements required to be stated therein in accordance with, and complies in all material respects with the requirements of, the Investment Company Act and (ii) does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein not misleading. The Company will use its best efforts to maintain its status as a BDC; provided, however, the Company may change the nature of its business so as to cease to be, or to withdraw its election as, a BDC, with the approval of the Company’s board of directors and a vote of its stockholders as required by Section 58 of the Investment Company Act.

15



(c)
INVESTMENT ADVISOR. The Advisor is registered as an investment adviser under the Advisers Act and is not prohibited by the Advisers Act or the Investment Company Act from acting under the Advisory Agreement for the Company as contemplated by the Prospectus. There does not exist any proceeding or, to the Advisor’s knowledge, any facts or circumstances the existence of which could lead to any proceeding which might adversely affect the registration of the Advisor with the Commission
(d)
SUBCHAPTER M. The Company will use its best efforts to qualify for and elect to be treated as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended, and to maintain such qualification and election in effect for each full fiscal year during which it is a BDC under the Investment Company Act; provided that, at the discretion of the Company’s board of directors, it may elect not to be so treated.
(e)
COMMISSION ORDERS. If the Commission shall issue any stop order or any other order preventing or suspending the use of the Prospectus, or shall institute any proceedings for that purpose, then the Company will promptly notify the Dealer Manager and use its commercially reasonable efforts to prevent the issuance of any such order and, if any such order is issued, to use commercially reasonable efforts to obtain the removal thereof as promptly as possible.
(f)
BLUE SKY QUALIFICATIONS. The Company will use commercially reasonable efforts to qualify the Shares for offering and sale under the securities or blue sky laws of such jurisdictions as the Dealer Manager and the Company shall mutually agree upon and to make such applications, file such documents and furnish such information as may be reasonably required for that purpose. the Company will furnish the Dealer Manager with a copy of such papers filed by the Company in connection with any such qualification. The Company will promptly advise the Dealer Manager of the issuance by such securities administrators of any stop order preventing or suspending the use of the Prospectus or of the institution of any proceedings for that purpose, and will use its commercially reasonable efforts to prevent the issuance of any such order and if any such order is issued, to use its commercially reasonable efforts to obtain the removal thereof as promptly as possible. The Company will furnish the Dealer Manager with a Blue Sky Survey dated as of the initial Effective Date, which will be supplemented to reflect changes or additions to the information disclosed in such survey.
(g)
AMENDMENTS AND SUPPLEMENTS. If, at any time when a Prospectus relating to the Shares is required to be delivered under the Securities Act, any event shall have occurred to the knowledge of the Company, or the Company receives notice from the Dealer Manager that it believes such an event has occurred, as a result of which the Prospectus or any Approved Sales Literature as then amended or supplemented would include any untrue statement of a material fact, or omit to state a material fact necessary to make the statements therein not misleading in light of

16



the circumstances existing at the time it is so required to be delivered to a subscriber, or if it is necessary at any time to amend the Registration Statement or supplement the Prospectus relating to the Shares to comply with the Securities Act, then the Company will promptly notify the Dealer Manager thereof (unless the information shall have been received from the Dealer Manager) and will prepare and file with the Commission an amendment or supplement which will correct such statement or effect such compliance to the extent required, and shall make available to the Dealer Manager thereof sufficient copies for its own use and/or distribution to the Soliciting Dealers.
(h)
REQUESTS FROM COMMISSION. The Company will promptly advise the Dealer Manager of any request made by the Commission or a state securities administrator for amending the Registration Statement, supplementing the Prospectus or for additional information.
(i)
COPIES OF REGISTRATION STATEMENT. The Company will furnish the Dealer Manager with one signed copy of the Registration Statement, including its exhibits, and such additional copies of the Registration Statement, without exhibits, and the Prospectus and all amendments and supplements thereto, which are finally approved by the Commission, as the Dealer Manager may reasonably request for sale of the Shares.
(j)
QUALIFICATION TO TRANSACT BUSINESS. The Company will take all steps necessary to ensure that at all times the Company will validly exist as a Maryland corporation and will be qualified to do business in all jurisdictions in which the conduct of its business requires such qualification and where such qualification is required under local law.
(k)
AUTHORITY TO PERFORM AGREEMENTS. The Company undertakes to obtain all consents, approvals, authorizations or orders of any court or governmental agency or body which are required for the Company’s performance of this Agreement and under its charter and by-laws for the consummation of the transactions contemplated hereby and thereby, respectively, or the conducting by the Company of the business described in the Prospectus.
(l)
SALES LITERATURE. The Company will furnish to the Dealer Manager as promptly as shall be practicable upon request any Approved Sales Literature (provided that the use of said material has been first approved for use by all appropriate regulatory agencies). Any supplemental sales literature or advertisement, regardless of how labeled or described, used in addition to the Prospectus in connection with the Offering which is furnished or approved by the Company (including, without limitation, Approved Sales Literature shall, to the extent required, be filed with and, to the extent required, approved by the appropriate securities agencies and bodies, provided that the Dealer Manager will make all FINRA filings, to the extent required. The Company will prepare (or cause to be prepared) all Approved Sales Literature. Each of the Company and the Advisor will

17



not (and will cause its affiliates to not) (i) show or give to any investor or prospective investor or reproduce any material or writing that is marked “broker-dealer use only” or otherwise bearing a legend denoting that it is not to be used in connection with the sale of Shares to members of the public; and (2) show or give to any investor or prospective investor in a particular jurisdiction any material or writing if such material bears a legend denoting that it is not to be used in connection with the sale of Shares to members of the public in such jurisdiction.
(m)
CERTIFICATES OF COMPLIANCE. The Company shall provide, from time to time upon request of the Dealer Manager, certificates of its chief executive officer and chief financial officer of compliance by the Company of the requirements of this Agreement.
(n)
USE OF PROCEEDS. The Company will apply the proceeds from the sale of the Shares as set forth in the Prospectus.
(o)
CUSTOMER INFORMATION. Each of the Company and the Advisor shall:
(vi)
abide by and comply with (A) the privacy standards and requirements of the Gramm-Leach-Bliley Act of 1999 (the “ GLB Act ”), (B) the privacy standards and requirements of any other applicable federal or state law, and (C) its own internal privacy policies and procedures, each as may be amended from time to time;
(vii)
refrain from the use or disclosure of nonpublic personal information (as defined under the GLB Act) of all customers who have opted out of such disclosures except as necessary to service the customers or as otherwise necessary or required by applicable law; and
(viii)
determine which customers have opted out of the disclosure of nonpublic personal information by periodically reviewing and, if necessary, retrieving an aggregated list of such customers from the Soliciting Dealers (the “ List ”) to identify customers that have exercised their opt-out rights. If either party uses or discloses nonpublic personal information of any customer for purposes other than servicing the customer, or as otherwise required by applicable law, that party will consult the List to determine whether the affected customer has exercised his or her opt-out rights. Each party understands that it is prohibited from using or disclosing any nonpublic personal information of any customer that is identified on the List as having opted out of such disclosures.
(p)
DEALER MANAGER’S REVIEW OF PROPOSED AMENDMENTS AND SUPPLEMENTS. Prior to amending or supplementing the Registration Statement, any preliminary prospectus or the Prospectus (including any amendment or supplement through incorporation of any report filed under the Exchange Act), the Company shall furnish to the Dealer Manager for review, a reasonable amount of

18



time prior to the proposed time of filing or use thereof, a copy of each such proposed amendment or supplement, and the Company shall not file or use any such proposed amendment or supplement without the Dealer Manager’s consent, which consent shall not be unreasonably withheld or delayed.
(q)
CERTAIN PAYMENTS. Without the prior consent of the Dealer Manager, none of the Company, the Advisor or any of their respective affiliates will make any payment (cash or non-cash) to any associated Person or registered representative of the Dealer Manager.
(r)
DEPOSIT ACCOUNT. The Company will deposit all subscription funds in the Deposit Account. At all times until the Termination Date, the Deposit Account shall be subject to the Control Agreement.
(s)
REGULATORY FILINGS. Notwithstanding anything herein to the contrary, the Company shall provide the Dealer Manager for its prior approval (not to be unreasonably withheld) with a copy of any notice, filing, application, registration, document, correspondence or other information that the Company proposes to deliver, make or file with any governmental authority or agency (federal, state or otherwise) or with FINRA in connection with the Offering, this Agreement or any of the transactions completed hereby.
6.
COVENANTS OF THE DEALER MANAGER . The Dealer Manager covenants and agrees with the Company as follows:
(a)
COMPLIANCE WITH LAWS; PROSPECTUS DELIVERY. With respect to the Dealer Manager’s participation and the participation by each Soliciting Dealer in the offer and sale of the Shares (including, without limitation, any resales and transfers of Shares), the Dealer Manager agrees, and each Soliciting Dealer in its Soliciting Dealer Agreement will agree, to comply in all material with all applicable requirements of (i) the Securities Act, the Securities Act Rules and Regulations, the Exchange Act, the Exchange Act Rules and Regulations and all other federal regulations applicable to the Offering, the sale of Shares and with, (ii) all applicable state securities or blue sky laws and regulations in effect from time to time, and (iii) the Rules of the FINRA applicable to the Offering, from time to time in effect, specifically including, but not in any way limited to, Conduct Rules 2340, 2420, 2730, 2740 and 2750 and FINRA Rule 2310 therein. The Dealer Manager will not offer the Shares for sale in any jurisdiction unless and until it has been advised that the Shares are either registered in accordance with, or exempt from, the securities and other laws applicable thereto.
In addition, the Dealer Manager shall, in accordance with applicable law or as prescribed by any state securities administrator, provide, or require in the Soliciting Dealer Agreement that the Soliciting Dealer shall provide, to any prospective investor copies of the Prospectus and any supplements thereto during the course of the Offering and prior to the sale. The Company may provide the Dealer Manager with certain Approved Sales Literature to be

19



used by the Dealer Manager and the Soliciting Dealers in connection with the solicitation of purchasers of the Shares. The Dealer Manager agrees not to deliver the Approved Sales Literature to any Person prior to the initial Effective Date. If the Dealer Manager elects to use such Approved Sales Literature after the initial Effective Date, then the Dealer Manager agrees that such material shall not be used by it in connection with the solicitation of purchasers of the Shares and that it will direct Soliciting Dealers not to make such use unless accompanied or preceded by the Prospectus, as then currently in effect, and as it may be amended or supplemented in the future. The Dealer Manager agrees that it will not use any Approved Sales Literature other than those provided to the Dealer Manager by the Company for use in the Offering. The use of any other sales material is expressly prohibited.
(b)
NO ADDITIONAL INFORMATION. In offering the Shares for sale, the Dealer Manager shall not, and each Soliciting Dealer shall agree not to, give or provide any information or make any representation other than those contained in the Prospectus or the Approved Sales Literature. The Dealer Manager will not (i) show or give to any investor or prospective investor or reproduce any material or writing that is supplied to it by the Company and marked “broker-dealer use only” or otherwise bearing a legend denoting that it is not to be used in connection with the sale of Shares to members of the public; and (ii) show or give to any investor or prospective investor in a particular jurisdiction any material or writing that is supplied to it by the Company if such material bears a legend denoting that it is not to be used in connection with the sale of Shares to members of the public in such jurisdiction.
(c)
SALES OF SHARES. The Dealer Manager shall, and each Soliciting Dealer shall agree to, solicit purchases of the Shares only in the jurisdictions in which the Dealer Manager and such Soliciting Dealer are legally qualified to so act and in which the Dealer Manager and each Soliciting Dealer have been advised by the Company in writing that such solicitations can be made.
(d)
SUBSCRIPTION AGREEMENT. The Dealer Manager will comply in all material respects with the subscription procedures and “Plan of Distribution” set forth in the Prospectus. Subscriptions will be submitted by the Dealer Manager and each Soliciting Dealer to the Company only on the form which is included as an appendix or exhibit to the Prospectus. The Dealer Manager understands and acknowledges, and each Soliciting Dealer shall acknowledge, that the Subscription Agreement must be executed and initialed by the subscriber as provided for by the Subscription Agreement.
(e)
SUITABILITY. The Dealer Manager will offer Shares, and in its agreement with each Soliciting Dealer will require that the Soliciting Dealer offer Shares, only to Persons that it has reasonable grounds to believe meet the financial qualifications set forth in the Prospectus or in any suitability letter or memorandum sent to it by the Company and will only make offers to Persons in the states in which it is advised in writing by the Company that the Shares are qualified for sale or that such qualification is not required. In offering Shares, the Dealer Manager will comply,

20



and in its agreements with the Soliciting Dealers, the Dealer Manager will require that the Soliciting Dealers comply, with the provisions of all applicable rules and regulations relating to suitability of investors, including without limitation the FINRA Conduct Rules and the provisions of Article III.C. and III.E. of the Omnibus Guidelines of the North American Securities Administrators Association, Inc., as revised and amended on May 7, 2007 and as may be further revised and amended (the “ NASAA Guidelines ”). The Dealer Manager agrees that in recommending the purchase of the Shares to an investor, the Dealer Manager and each Person associated with the Dealer Manager that make such recommendation shall have, and each Soliciting Dealer in its Soliciting Dealer Agreement shall agree with respect to investors to which it makes a recommendation shall agree that it shall have, reasonable grounds to believe, on the basis of information obtained from the investor concerning the investor’s investment objectives, other investments, financial situation and needs, and any other information known by the Dealer Manager, the Person associated with the Dealer Manager or the Soliciting Dealer that: (i) the investor is or will be in a financial position appropriate to enable the investor to realize to a significant extent the benefits described in the Prospectus, including the tax benefits where they are a significant aspect of the Company; (ii) the investor has a fair market net worth sufficient to sustain the risks inherent in the program, including loss of investment and lack of liquidity; and (iii) an investment in the Shares offered in the Offering is otherwise suitable for the investor. The Dealer Manager agrees as to investors to whom it makes a recommendation with respect to the purchase of the Shares in the Offering (and each Soliciting Dealer in its Soliciting Dealer Agreement shall agree, with respect to Investors to whom it makes such recommendations) to maintain in the files of the Dealer Manager (or the Soliciting Dealer, as applicable) documents disclosing the basis upon which the determination of suitability was reached as to each investor. In making the determinations as to financial qualifications and as to suitability required by the NASAA Guidelines, the Dealer Manager and Soliciting Dealers may rely on (A) representations from investment advisers who are not affiliated with a Soliciting Dealer, banks acting as trustees or fiduciaries, and (B) information it has obtained from a prospective investor, including such information as the investment objectives, other investments, financial situation and needs of the Person or any other information known by the Dealer Manager (or Soliciting Dealer, as applicable), after due inquiry. Notwithstanding the foregoing, the Dealer Manager shall not, and each Soliciting Dealer shall agree not to, execute any transaction in the Company in a discretionary account without prior written approval of the transaction by the customer.
(f)
SUITABILITY RECORDS. The Dealer Manager shall, and each Soliciting Dealer shall agree to, maintain, for at least six years or for a period of time not less than that required in order to comply with all applicable federal, state and other regulatory requirements, whichever is later, a record of the information obtained to determine that an investor meets the suitability standards imposed on the offer and sale of the Shares (both at the time of the initial subscription and at the time of any additional subscriptions) and a representation of the investor that the investor is investing for

21



the investor’s own account or, in lieu of such representation, information indicating that the investor for whose account the investment was made met the suitability standards. The Company agrees that the Dealer Manager can satisfy its obligation by contractually requiring such information to be maintained by the investment advisers or banks referred to in Section 6(e) .
(g)
SOLICITING DEALER AGREEMENTS. All engagements of the Soliciting Dealers will be evidenced by a Soliciting Dealer Agreement.
(h)
ELECTRONIC DELIVERY. If it intends to use electronic delivery to distribute the Prospectus to any Person, it will comply, with all applicable requirements of the Commission, the Blue Sky laws and/or FINRA and any other laws or regulations related to the electronic delivery of documents.
(i)
COORDINATION. The Company and the Dealer Manager shall have the right, but not the obligation, to meet with key personnel of the other on an ongoing and regular basis to discuss the conduct of the officers.
(j)
AML COMPLIANCE. Although acting as a wholesale distributor and not itself selling shares directly to investors, the Dealer Manager represents to the Company that it has established and implemented anti-money laundering compliance programs (“ AML Program ”) in accordance with applicable law, including applicable FINRA Conduct Rules, Exchange Act Rules and Regulations and the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act (USA PATRIOT Act) of 2001, as amended (the “ USA PATRIOT Act ”), specifically including, but not limited to, Section 352 of the International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001 (the “ Money Laundering Abatement Act ”, and together with the USA PATRIOT Act, the “ AML Rules ”), reasonably expected to detect and cause the reporting of suspicious transactions in connection with the offering and sale of the Shares. The Dealer Manager further represents that it is currently in compliance with all AML Rules, specifically including, but not limited to, the Customer Identification Program requirements under Section 326 of the Money Laundering Abatement Act, and the Dealer Manager hereby covenants to remain in compliance with such requirements and shall, upon request by the Company, provide a certification to the Company that, as of the date of such certification (i) its AML Program is consistent with the AML Rules, and (ii) it is currently in compliance with all AML Rules, specifically including, but not limited to, the Customer Identification Program requirements under Section 326 of the Money Laundering Abatement Act.
(k)
COOPERATION. Upon the expiration or earlier termination of this Agreement, the Dealer Manager will use reasonable efforts to cooperate with the Company and any other party that may be necessary to accomplish an orderly transfer and transfer to a successor dealer manager of the operation and management of the services the Dealer Manager is providing to the Company under this Agreement, provided that the Company shall not be in breach or default of this Agreement. The Dealer Manager

22



will not be entitled to receive any additional fee in connection with the foregoing provisions of this Section 6(k) , but the Company will pay or reimburse the Dealer Manager for any out-of-pocket expenses reasonably incurred by the Dealer Manager in connection therewith.
(l)
CUSTOMER INFORMATION. The Dealer Manager will use commercially reasonable efforts to provide the Company with any and all subscriber information that the Company requests in order for the Company to comply with the requirements under Section 5(m) .
7.
EXPENSES .
(a)
Subject to Sections 7(b) and 7(c) , the Dealer Manager shall pay all its own costs and expenses incident to the performance of its obligations under this Agreement.
(b)
The Company agrees to pay all costs and expenses related to:
(i)
the registration of the offer and sale of the Shares with the Commission;
(ii)
expenses of printing the Registration Statement and the Prospectus and any amendment or supplement thereto as herein provided;
(iii)
fees and expenses incurred in connection with any required filing with the FINRA;
(iv)
all the expenses of agents of the Company, excluding the Dealer Manager, incurred in connection with performing marketing and advertising services for the Company; and
(v)
expenses of qualifying the Shares for offering and sale under state blue sky and securities laws, and expenses in connection with the preparation and printing of the Blue Sky Survey.
(c)
The Company shall reimburse the Dealer Manager and Soliciting Dealers for approved or deemed approved reasonable bona fide due diligence expenses in accordance with Section 3(e) .
8.
INDEMNIFICATION .
(a)
INDEMNIFIED PARTIES DEFINED. For the purposes of this Agreement, an “ Indemnified Party ” shall mean a Person entitled to indemnification under Section 8 , as well as such Person’s officers, directors (including with respect to the Company, any Person named in the Registration Statement with his consent as about to become a director), employees, members, partners, affiliates, agents and representatives, and each Person, if any, who controls such Person within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act.

23



(b)
INDEMNIFICATION OF THE DEALER MANAGER AND SOLICITING DEALERS. The Company will indemnify, defend and hold harmless the Dealer Manager and the Soliciting Dealers, and their respective Indemnified Parties, from and against any losses, claims, expenses (including reasonable legal and other expenses incurred in investigating and defending such claims or liabilities), damages or liabilities, joint or several, to which any such Soliciting Dealers or the Dealer Manager, or their respective Indemnified Parties, may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, expenses, damages or liabilities (or actions in respect thereof) arise out of or are based upon: (i) in whole or in part, any material inaccuracy in a representation or warranty contained herein by the Company or the Advisor, any material breach of a covenant contained herein by the Company or the Advisor, or any material failure by the Company or the Advisor to perform, its obligations hereunder or to comply with state or federal securities laws applicable to the Offering; (ii) any untrue statement or alleged untrue statement of a material fact contained (A) in any Registration Statement or any post-effective amendment thereto or in the Prospectus or any amendment or supplement to the Prospectus, (B) in any Approved Sales Literature or (C) in any blue sky application or other document executed by the Company or on its behalf specifically for the purpose of qualifying any or all of the Shares for sale under the securities laws of any jurisdiction or based upon written information furnished by the Company under the securities laws thereof (any such application, document or information being hereinafter called a “ Blue Sky Application ”); or (iii) the omission or alleged omission to state a material fact required to be stated in the Registration Statement or any post-effective amendment thereof to make the statements therein not misleading or the omission or alleged omission to state a material fact required to be stated in the Prospectus or any amendment or supplement to the prospectus to make the statements therein, in light of the circumstances under which they were made, not misleading, and the Company will reimburse each Soliciting Dealer or the Dealer Manager, and their respective Indemnified Parties, for any reasonable legal or other expenses incurred by such Soliciting Dealer or the Dealer Manager, and their respective Indemnified Parties, in connection with investigating or defending such loss, claim, expense, damage, liability or action; provided, however , that the Company will not be liable in any such case to the extent that any such loss, claim, expense, damage or liability arises out of, or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with written information furnished to the Company by the Dealer Manager expressly for use in the Registration Statement or any post-effective amendment thereof or the Prospectus or any such amendment thereof or supplement thereto. This indemnity agreement will be in addition to any liability which the Company may otherwise have.
Notwithstanding the foregoing, as required by the Company’s charter and Section II.G. of the NASAA Guidelines, the indemnification and agreement to hold harmless provided in this Section 8(b) is further limited to the extent that no such indemnification by the Company of a Soliciting Dealer or the Dealer Manager, or their respective Indemnified Parties, shall

24



be permitted under this Agreement for, or arising out of, an alleged violation of federal or state securities laws, unless one or more of the following conditions are met: (a) there has been a successful adjudication on the merits of each count involving alleged securities law violations as to the particular Indemnified Party; (b) such claims have been dismissed with prejudice on the merits by a court of competent jurisdiction as to the particular Indemnified Party; or (c) a court of competent jurisdiction approves a settlement of the claims against the particular Indemnified Party and finds that indemnification of the settlement and the related costs should be made, and the court considering the request for indemnification has been advised of the position of the Commission and of the published position of any state securities regulatory authority in which the securities were offered or sold as to indemnification for violations of securities laws.
(c)
DEALER MANAGER INDEMNIFICATION OF THE COMPANY AND ADVISOR. The Dealer Manager will indemnify, defend and hold harmless the Company, the Advisor, each of their Indemnified Parties and each Person who has signed the Registration Statement, from and against any losses, claims, expenses (including the reasonable legal and other expenses incurred in investigating and defending any such claims or liabilities), damages or liabilities to which any of the aforesaid parties may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, expenses, damages (or actions in respect thereof) arise out of or are based upon: (i) in whole or in part, any material inaccuracy in a representation or warranty contained herein by the Dealer Manager or any material breach of a covenant contained herein by the Dealer Manager; (ii) any untrue statement or any alleged untrue statement of a material fact contained (A) in any Registration Statement or any post-effective amendment thereto or in the Prospectus or any amendment or supplement to the Prospectus, (B) in any Approved Sales Literature, or (C) any Blue Sky Application; or (iii) the omission or alleged omission to state a material fact required to be stated in the Registration Statement or any post-effective amendment thereof to make the statements therein not misleading, or the omission or alleged omission to state a material fact required to be stated in the Prospectus or any amendment or supplement to the Prospectus to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however , that in each case described in clauses (ii) and (iii) to the extent, but only to the extent, that such untrue statement or omission was made in reliance upon and in conformity with written information furnished to the Company by the Dealer Manager expressly for use in the Registration Statement or any such post-effective amendments thereof or the Prospectus or any such amendment thereof or supplement thereto; or (iv) any use of sales literature, including “broker-dealer use only” materials, by the Dealer Manager that is not Approved Sales Literature. The Dealer Manager will reimburse the aforesaid parties for any reasonable legal or other expenses incurred in connection with investigation or defense of such loss, claim, expense, damage, liability or action. This indemnity agreement will be in addition to any liability which the Dealer Manager may otherwise have.

25



(d)
SOLICITING DEALER INDEMNIFICATION OF THE COMPANY. By virtue of entering into the Soliciting Dealer Agreement, each Soliciting Dealer severally will agree to indemnify, defend and hold harmless the Company, the Dealer Manager, each of their respective Indemnified Parties, and each Person who signs the Registration Statement, from and against any losses, claims, expenses, damages or liabilities to which the Company, the Dealer Manager, or any of their respective Indemnified Parties, or any Person who signed the Registration Statement, may become subject, under the Securities Act or otherwise, as more fully described in the Soliciting Dealer Agreement.
(e)
ACTION AGAINST PARTIES; NOTIFICATION. Promptly after receipt by any Indemnified Party under this Section 8 of notice of the commencement of any action, such Indemnified Party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 8 , promptly notify the indemnifying party of the commencement thereof; provided, however , that the failure to give such notice shall not relieve the indemnifying party of its obligations hereunder except to the extent it shall have been actually prejudiced by such failure. In case any such action is brought against any Indemnified Party, and it notifies an indemnifying party of the commencement thereof, the indemnifying party will be entitled, to the extent it may wish, jointly with any other indemnifying party similarly notified, to participate in the defense thereof, with separate counsel. Such participation shall not relieve such indemnifying party of the obligation to reimburse the Indemnified Party for reasonable legal and other expenses incurred by such Indemnified Party in defending itself, except for such expenses incurred after the indemnifying party has deposited funds sufficient to effect the settlement, with prejudice, of, and unconditional release of all liabilities from, the claim in respect of which indemnity is sought. Any such indemnifying party shall not be liable to any such Indemnified Party on account of any settlement of any claim or action effected without the consent of such indemnifying party, such consent not to be unreasonably withheld or delayed.
(f)
REIMBURSEMENT OF FEES AND EXPENSES. An indemnifying party under Section 8 of this Agreement shall be obligated to reimburse an Indemnified Party for reasonable legal and other expenses as follows:
(i)
In the case of the Company indemnifying the Dealer Manager, the advancement of Company funds to the Dealer Manager for legal expenses and other costs incurred as a result of any legal action for which indemnification is being sought shall be permissible (in accordance with Section II.G. of the NASAA Guidelines) only if all of the following conditions are satisfied: (A) the legal action relates to acts or omissions with respect to the performance of duties or services on behalf of the Company; (B) the legal action is initiated by a third party who is not a shareholder of the Company or the legal action is initiated by a shareholder of the Company acting in his or her capacity as such and a court of competent jurisdiction specifically approves such advancement; and (C) the Dealer Manager undertakes to repay

26



the advanced funds to the Company, together with the applicable legal rate of interest thereon, in cases in which the Dealer Manager is found not to be entitled to indemnification.
(ii)
In any case of indemnification other than that described in Section 8(f)(i) above, the indemnifying party shall pay all legal fees and expenses reasonably incurred by the Indemnified Party in the defense of such claims or actions; provided , however , that the indemnifying party shall not be obligated to pay legal expenses and fees to more than one law firm in connection with the defense of similar claims arising out of the same alleged acts or omissions giving rise to such claims notwithstanding that such actions or claims are alleged or brought by one or more parties against more than one Indemnified Party. If such claims or actions are alleged or brought against more than one Indemnified Party, then the indemnifying party shall only be obliged to reimburse the expenses and fees of the one law firm (in addition to local counsel) that has been participating by a majority of the indemnified parties against which such action is finally brought; and if a majority of such indemnified parties is unable to agree on which law firm for which expenses or fees will be reimbursable by the indemnifying party, then payment shall be made to the first law firm of record representing an Indemnified Party against the action or claim. Such law firm shall be paid only to the extent of services performed by such law firm and no reimbursement shall be payable to such law firm on account of legal services performed by another law firm.
9.
CONTRIBUTION .
(a)
If the indemnification provided for in Section 8 is for any reason unavailable to or insufficient to hold harmless an Indemnified Party in respect of any losses, liabilities, claims, damages or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount of such losses, liabilities, claims, damages and expenses incurred by such Indemnified Party, as incurred, (i) in such proportion as is appropriate to reflect the relative benefits received by the Company, the Dealer Manager and the Soliciting Dealer, respectively, from the proceeds received in the Offering pursuant to this Agreement and the relevant Soliciting Dealer Agreement, or (ii) if the allocation provided by clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company, the Dealer Manager and the Soliciting Dealer, respectively, in connection with the statements or omissions which resulted in such losses, liabilities, claims, damages or expenses, as well as any other relevant equitable considerations.
(b)
The relative benefits received by the Company, the Dealer Manager and the Soliciting Dealer, respectively, in connection with the proceeds received in the Offering pursuant to this Agreement and the relevant Soliciting Dealer Agreement shall be

27



deemed to be in the same respective proportion as the total net proceeds from the Offering pursuant to this Agreement and the relevant Soliciting Dealer Agreement (before deducting expenses), received by the Company, and the total selling commissions and dealer manager fees received by the Dealer Manager and the Soliciting Dealer, respectively, in each case as set forth on the cover of the Prospectus bear to the aggregate offering price of the Shares sold in the Offering as set forth on such cover.
(c)
The relative fault of the Company, the Dealer Manager and the Soliciting Dealer, respectively, shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact related to information supplied by the Company, by the Dealer Manager or by the Soliciting Dealer, respectively, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.
(d)
The Company, the Dealer Manager and the Soliciting Dealer (by virtue of entering into the Soliciting Dealer Agreement) agree that it would not be just and equitable if contribution pursuant to this Section 9 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable contributions referred to above in this Section 9 . The aggregate amount of losses, liabilities, claims, damages and expenses incurred by an Indemnified Party and referred to above in this Section 9 shall be deemed to include any legal or other expenses reasonably incurred by such Indemnified Party in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission or alleged omission.
(e)
Notwithstanding the provisions of this Section 9 , the Dealer Manager and the Soliciting Dealer shall not be required to contribute any amount by which the total price at which the Shares sold in the Offering to the public by them exceeds the amount of any damages which the Dealer Manager and the Soliciting Dealer have otherwise been required to pay by reason of any untrue or alleged untrue statement or omission or alleged omission.
(f)
No party guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any party who was not guilty of such fraudulent misrepresentation.
(g)
For the purposes of this Section 9 , the Dealer Manager’s officers, directors, employees, members, partners, agents and representatives, and each Person, if any, who controls the Dealer Manager within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act shall have the same rights to contribution of the Dealer Manager, and each officers, directors, employees, members, partners, agents and representatives of the Company, each officer of the Company who signed the Registration Statement and each Person, if any, who controls the Company, within

28



the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act shall have the same rights to contribution of the Company. The Soliciting Dealers’ respective obligations to contribute pursuant to this Section 9 are several in proportion to the number of Shares sold by each Soliciting Dealer in the Offering and not joint.
10.
TERMINATION OF THIS AGREEMENT .
(a)
TERM; EXPIRATION. This Agreement shall become effective on the initial Effective Date and the obligations of the parties hereunder shall not commence until the initial Effective Date; provided , however , that the obligations of the parties under Sections 3(e) , 7 , 8 , 9 and 11 and this Section 10 shall commence on, and shall be effective as of, the date that this Agreement is executed. Unless earlier terminated pursuant to Section 10(b) or 10(c) , this Agreement shall expire at the end of the Offering Period (subject to reinstatement of the Offering Period pursuant to the provisions of Section 3 ). This Agreement (i) may be earlier terminated by the Company pursuant to Section 10(b) , and (ii) may be earlier terminated by the Dealer Manager pursuant to Section 10(c) .
Notwithstanding the foregoing and anything herein to the contrary, any reinstatement of the Offering Period pursuant to the provisions of Section 3 shall be deemed to rescind any expiration of this Agreement. Any such reinstatement of the Offering Period shall not affect the ability of the Company or the Dealer Manager subsequently to terminate this Agreement pursuant to Section 10(b) or 10(c) , respectively.
The date upon which this Agreement shall have expired or been terminated earlier shall be referred to in this Agreement as the “ Termination Date ”.
(b)
TERMINATION OF AGREEMENT BY THE COMPANY. This Agreement may be terminated at any time, without the payment of any penalty, upon 60 days prior written notice, by the Company upon the occurrence of any of the following events:
(i)
The Dealer Manager or any of its affiliates materially breaches this Agreement; provided , however, that the party in breach of this Agreement shall have thirty (30) calendar days after the receipt of notice of such breach from the non-breaching party to cure such breach;
(ii)
Any fraud, criminal conduct or willful misconduct by the Dealer Manager in any action or failure to act undertaken by such party pertaining to or having a detrimental effect upon the Dealer Manager’s ability to perform its duties provided that Dealer Manager does not cure any such act thirty (30) calendar days after the receipt of notice of such act (or at such later time as stated in the notice) from the Company;
(iii)
The entry of a decree or order for relief by a court of competent jurisdiction in respect of the Dealer Manager in any involuntary case under any applicable

29



bankruptcy, insolvency or other similar law now or hereafter in effect, or appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of the Dealer Manager or for any substantial part of its property or an order winding up or liquidating such party’s affairs;
(iv)
The commencement of a voluntary case by the Dealer Manager under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consent by the Dealer Manager to the entry of an order for relief in an involuntary case under any such law, or consent to the appointment of or the taking of possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of the Dealer Manager or of any substantial part of its property, or the making of any general assignment for the benefit of creditors, or its admission of insolvency or its failure generally to pay its debts as they become due;
(v)
The aggregate amount of Shares to be offered by the Company under the Offering has been issued and sold or the Offering is terminated or discontinued; and
(vi)
The Company issues and offers for sale Shares in excess of the Offering and no subsequent agreement for the sale of such additional Shares is executed between the Company, the Company and their affiliates, on the one hand, and the Dealer Manager and its affiliates, on the other.
(c)
TERMINATION OF AGREEMENT BY THE DEALER MANAGER. This Agreement may be terminated at any time, without the payment of any penalty, upon 60 days prior written notice, by Dealer Manager upon the occurrence of any of the following events:
(i)
The Company or any of its affiliates materially breaches this Agreement; provided , however, that the party in breach of this Agreement shall have thirty (30) calendar days after the receipt of notice of such breach from the non-breaching party to cure such breach;
(ii)
Any fraud, criminal conduct or willful misconduct by the Company pertaining to or having a detrimental effect on Dealer Manager, provided that the Company does not cure any such act thirty (30) calendar days after the receipt of notice of such act (or at such later time as stated in the notice) from the Dealer Manager;
(iii)
The entry of a decree or order for relief by a court of competent jurisdiction in respect of the Company in any involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of the Company or for any substantial part of its property or an order winding up or liquidating such party’s affairs;

30



(iv)
The commencement of a voluntary case by the Company under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consent by the Dealer Manager to the entry of an order for relief in an involuntary case under any such law, or consent to the appointment of or the taking of possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of the Company or of any substantial part of its property, or the making of any general assignment for the benefit of creditors, or its admission of insolvency or its failure generally to pay its debts as they become due;
(v)
The aggregate amount of Shares to be offered under the Offering has been issued and sold;
(vi)
The Company issues and offers for sale Shares in excess of the Offering and no subsequent agreement for the sale of such additional Shares is executed between the Company and its affiliates, on the one hand, and the Dealer Manager and its affiliates, on the other;
(vii)
(x) The Company shall not have obtained all applicable and material consents or approvals with respect to, and shall not have made all applicable and material filings or registrations with, any governmental entity (collectively, the “ Consents ”); and (y) the Company directly and indirectly, as applicable, shall have failed to exercise its commercially reasonable efforts in good faith to obtain all such Consents as are necessary for the Company to conduct its operations no later than the one year anniversary of the date on which the Registration Statement is filed;
(viii)
The Effective Date has not occurred on or before the one year-anniversary of the date on which the Registration Statement is filed;
(ix)
There shall have occurred a Company MAE, whether or not arising in the ordinary course of business;
(x)
A stop order suspending the effectiveness of the Registration Statement shall have been issued by the Commission and is not rescinded within 20 business days after the issuance thereof; and
(xi)
A material action, suit, proceeding or investigation (i) asserting the invalidity of this Agreement, (ii) seeking to prevent the issuance of Shares or the consummation of any of the transactions contemplated by this Agreement, (iii) that might materially and adversely affect the performance by the Company of its obligations under or the validity or enforceability of, this

31



Agreement or the Shares, (iv) that might result in a Company MAE, or (v) seeking to affect adversely the federal income tax attributes of the Shares.
(d)
DELIVERY OF RECORDS UPON EXPIRATION OR EARLY TERMINATION. Upon the expiration or early termination of this Agreement for any reason, the Dealer Manager shall (i) promptly forward any and all funds, if any, in its possession which were received from investors for the sale of Shares into the Deposit Account for the deposit of investor funds, (ii) to the extent not previously provided to the Company, provide a list of all investors who have subscribed for or purchased shares and all broker-dealers with whom the Dealer Manager has entered into a Soliciting Dealer Agreement, (iii) notify Soliciting Dealers of such termination, and (iv) promptly deliver to the Company copies of any sales literature designed for use specifically for the Offering that it is then in the process of preparing. Upon expiration or earlier termination of this Agreement, the Company shall pay to the Dealer Manager all compensation to which the Dealer Manager is or becomes entitled under Section 3(d) at such time as such compensation becomes payable.
11.
MISCELLANEOUS .
(a)
SURVIVAL. The following provisions of the Agreement shall survive the expiration or earlier termination of this Agreement: Section 3(d) ; Section 5(m) ; Section 7 ; Section 8 ; Section 9 ; Section 10 ; and Section 11 . Notwithstanding anything else that may be to the contrary herein, the expiration or earlier termination of this Agreement shall not relieve a party for liability for any breach occurring prior to such expiration or earlier termination.
(b)
NOTICES. All notices, consents, approvals, waivers or other communications required or permitted hereunder (each a “ Notice ”) shall be in writing and shall be: (i) delivered personally or by commercial messenger; (ii) sent by a recognized overnight courier service; or (iii) sent by facsimile transmission, provided confirmation of receipt is received by sender and such Notice is sent or delivered contemporaneously by an additional method provided hereunder; in each case above provided such Notice is addressed to the intended recipient thereof as set forth below:

32



If to the Company:
Business Development Corporation of America, Inc.
405 Park Avenue
New York, NY 10022
Facsimile No: (212) 421-5799
Attention: Jesse C. Galloway
General Counsel

with a copy to (which shall not constitute a Notice):

Sutherland Asbill & Brennan LLP
700 Sixth Street, NW, Suite 700
Washington, DC 20001-3980
Facsimile No: 202.637.3593
Attention: Steven Boehm, Esq.

If to the Dealer Manager:


Realty Capital Securities, LLC
 
Three Copley Place, Suite 300
 
Boston, MA 02116
 
Facsimile No.: (857) 207-3399
Attention: Louisa Quarto
 
President
with a copy to (which shall not constitute a Notice):
Sutherland Asbill & Brennan LLP
700 Sixth Street, NW, Suite 700
Washington, DC 20001-3980
Facsimile No: 202.637.3593
Attention: Steven Boehm, Esq.
Any party may change its address specified above by giving each party Notice of such change in accordance with this Section 11(b) .
(c)
SUCCESSORS AND ASSIGNS. No party shall assign (voluntarily, by operation of law or otherwise) this Agreement or any right, interest or benefit under this Agreement without the prior written consent of each other party. Subject to the foregoing, this Agreement shall be fully binding upon, inure to the benefit of, and be enforceable by, the parties hereto and their respective successors and assigns.
(d)
INVALID PROVISION. The invalidity or unenforceability of any provision of this Agreement shall not affect the other provisions hereof, and this Agreement shall be construed in all respects as if such invalid or unenforceable provision were omitted.

33



(e)
APPLICABLE LAW. This Agreement and any disputes relative to the interpretation or enforcement hereto shall be governed by and construed under the internal laws, as opposed to the conflicts of laws provisions, of the State of New York.
(f)
WAIVER. EACH OF THE PARTIES HERETO WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE) RELATED TO OR ARISING OUT OF THIS AGREEMENT. The parties hereto each hereby irrevocably submits to the exclusive jurisdiction of the courts of the State of New York and the Federal courts of the United States of America located in the Borough of Manhattan, New York City, in respect of the interpretation and enforcement of the terms of this Agreement, and in respect of the transactions contemplated hereby, and each hereby waives, and agrees not to assert, as a defense in any action, suit or proceeding for the interpretation or enforcement hereof, that it is not subject thereto or that such action, suit or proceeding may not be brought or is not maintainable in said courts or that the venue thereof may not be appropriate or that this Agreement may not be enforced in or by such courts, and the parties hereto each hereby irrevocably agrees that all claims with respect to such action or proceeding shall be heard and determined in such a New York State or Federal court.
(g)
ATTORNEYS’ FEES. If a dispute arises concerning the performance, meaning or interpretation of any provision of this Agreement or any document executed in connection with this Agreement, then the prevailing party in such dispute shall be awarded any and all costs and expenses incurred by the prevailing party in enforcing, defending or establishing its rights hereunder or thereunder, including, without limitation, court costs and attorneys and expert witness fees. In addition to the foregoing award of costs and fees, the prevailing also shall be entitled to recover its attorneys’ fees incurred in any post-judgment proceedings to collect or enforce any judgment.
(h)
NO PARTNERSHIP. Nothing in this Agreement shall be construed or interpreted to constitute the Dealer Manager or the Soliciting Dealers as being in association with or in partnership with the Company or one another, and instead, this Agreement only shall constitute the Dealer Manager as a broker authorized by the Company to sell and to manage the sale by others of the Shares according to the terms set forth in the Registration Statement, the Prospectus or this Agreement. Nothing herein contained shall render the Dealer Manager or the Company liable for the obligations of any of the Soliciting Dealers or one another.
(i)
THIRD PARTY BENEFICIARIES. Except for the Persons referred to in Section 8 and Section 9 , there shall be no third party beneficiaries of this Agreement, and no provision of this Agreement is intended to be for the benefit of any Person not a party to this Agreement, and no third party shall be deemed to be a beneficiary of any provision of this Agreement. Except for the Persons referred to in Section 8 and Section 9 , no third party shall by virtue of any provision of this Agreement have a

34



right of action or an enforceable remedy against any party to this Agreement. Each of the Persons referred to in Section 8 and Section 9 shall be a third party beneficiary of this Agreement.
(j)
ENTIRE AGREEMENT. This Agreement contains the entire agreement and understanding among the parties hereto with respect to the subject matter hereof, and supersedes all prior and contemporaneous agreements, understandings, inducements and conditions, express or implied, oral or written, of any nature whatsoever with respect to the subject matter hereof. The express terms hereof control and supersede any course of performance and/or usage of the trade inconsistent with any of the terms hereof. This Agreement may not be modified or amended other than by an agreement in writing.
(k)
NONWAIVER. The failure of any party to insist upon or enforce strict performance by any other party of any provision of this Agreement or to exercise any right under this Agreement shall not be construed as a waiver or relinquishment to any extent of such party’s right to assert or rely upon any such provision or right in that or any other instance; rather, such provision or right shall be and remain in full force and effect.
(l)
ACCESS TO INFORMATION. The Company may authorize the Company’s transfer agent to provide information to the Dealer Manager and each Soliciting Dealer regarding recordholder information about the clients of such Soliciting Dealer who have invested with the Company on an on-going basis for so long as such Soliciting Dealer has a relationship with such clients. The Dealer Manager shall require in the Soliciting Dealer Agreement that Soliciting Dealers not disclose any password for a restricted website or portion of website provided to such Soliciting Dealer in connection with the Offering and not disclose to any Person, other than an officer, director, employee or agent of such Soliciting Dealers, any material downloaded from such a restricted website or portion of a restricted website.
(m)
COUNTERPARTS. This Agreement may be executed (including by facsimile transmission) with counterpart signature pages or in counterpart copies, each of which shall be deemed an original but all of which together shall constitute one and the same instrument comprising this Agreement.
(n)
ABSENCE OF FIDUCIARY RELATIONSHIPS. The parties acknowledge and agree that (i) the Dealer Manager’s responsibility to the Company or the Advisor is solely contractual in nature, and (ii) the Dealer Manager does not owe the Company, the Advisor, any of their respective affiliates or any other Person any fiduciary (or other similar) duty as a result of this Agreement or any of the transactions contemplated hereby.
(o)
DEALER MANAGER INFORMATION. Prior to the initial Effective Date, the parties will expressly acknowledge and agree as to the information furnished to the Company by the Dealer Manager expressly for use in the Registration Statement.

35



(p)
PROMOTION OF DEALER MANAGER RELATIONSHIP. The Company and the Dealer Manager will cooperate with each other in good faith in connection with the promotion or advertisement of their relationship in any release, communication, sales literature or other such materials and shall not promote or advertise their relationship without the approval of the other party in advance, which shall not be unreasonably withheld or delayed.
(q)
TITLES AND SUBTITLES. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.
If the foregoing is in accordance with your understanding of our agreement, kindly sign and return it to us, whereupon this instrument will become a binding agreement between you and the Company in accordance with its terms.


36



IN WITNESS WHEREOF, the parties hereto have each duly executed this Dealer Manager Agreement as of the day and year set forth above.
COMPANY :

BUSINESS DEVELOPMENT CORPORATION OF AMERICA, INC.


By: /s/ Nicholas S. Schorsch        
Name:     NICHOLAS S. SCHORSCH
Title:    PRESIDENT

ADVISOR :
BDCA Adviser, LLC

By: American Realty Capital II Advisors, LLC, Managing Member of BDCA Adviser, LLC
By: /s/ Nicholas S. Schorsch        
Name: NICHOLAS S. SCHORSCH     
Title: MANAGER    



Accepted as of the date first above written:
DEALER MANAGER :
REALTY CAPITAL SECURITIES, LLC
By: /s/ Louisa Quarto        
Name:    LOUISA QUARTO
Title:    PRESIDENT






Exhibit 1.2

BUSINESS DEVELOPMENT CORPORATION OF AMERICA, INC.

SOLICITING DEALER AGREEMENT


Ladies and Gentlemen:

Realty Capital Securities, LLC (the “ Dealer Manager ”) entered into an exclusive dealer manager agreement, dated as of July 1, 2014 (the “ Dealer Manager Agreement ”), with Business Development Corporation of America, Inc. a Maryland corporation that intends to elect to be treated as a business development company under the Investment Company Act of 1940, as amended, (the “ Company ”), pursuant to which the Dealer Manager agreed to use its reasonable best efforts to solicit subscriptions in connection with the public offering (the “ Offering ”) of up to 101,100,000 shares of the Company’s common stock, par value $0.001 per share (the “Shares”), on a continuous basis, for a purchase price of $11.20 per Share, with a minimum initial investment of $1,000, commencing on the Effective Date (as defined below). Unless otherwise defined herein, capitalized terms used herein shall have the respective meanings therefor as in the Dealer Manager Agreement.

In connection with the performance of the Dealer Manager’s obligations under Section 3 of the Dealer Manager Agreement, the Dealer Manager is authorized to retain the services of securities dealers (the “ Soliciting Dealers ”) who are members of the Financial Industry Regulatory Authority (“ FINRA ”) to solicit subscriptions for Shares in connection with the Offering. You are hereby invited to become a Soliciting Dealer and, as such, to use your reasonable best efforts to solicit subscribers for the Shares, in accordance with the following terms and conditions of this soliciting dealer agreement (this “ Agreement ”):

1.     Registration Statement .

(a)            A registration statement on Form N-2 (File No. 333- 193241), including a preliminary prospectus, has been prepared by the Company and was filed with the Securities and Exchange Commission (the “ Commission ”) on January 9, 2014, in accordance with the applicable requirements of the Securities Act of 1933, as amended (the “ Securities Act ”), and the applicable rules and regulations of the Commission promulgated thereunder (the “ Securities Act Rules and Regulations ”) for the registration of the Offering. The Company has prepared and filed such amendments thereto and such amended prospectus as may have been required to the date hereof, and will file such additional amendments and supplements thereto as may hereafter be required.  The registration statement on Form N-2 and the prospectus contained therein, as finally amended at the date the registration statement is declared effective by the Commission (the “ Effective Date ”) are respectively hereinafter referred to as the “ Registration Statement ” and the “ Prospectus ”, except that (i) if the Company files a post-effective amendment to such registration statement, then the term “Registration Statement” shall, from and after the declaration of the effectiveness of such post-effective amendment by the Commission, refer to such registration statement as amended by such post-effective amendment, and the term “Prospectus” shall refer to the amended prospectus then on file with the Commission, and (ii) if the prospectus filed by the Company pursuant to Rule 497 of the Securities Act Rules and Regulations shall differ from the prospectus on file at the time the Registration Statement or the most recent post-effective amendment thereto, if any, shall have become effective, then the term “Prospectus” shall refer to such prospectus filed pursuant Rule 497, as the case may be, from and after the date on which it shall have been filed. As used herein, the terms “Registration Statement”, “preliminary Prospectus” and “Prospectus” shall include the documents, if any, incorporated by reference therein.   As used herein, the term “Effective Date” also shall refer to the effective date of each post-effective amendment to the Registration Statement, unless the context otherwise requires.
2.     Compliance with Applicable Rules and Regulations; License and Association Membership .

Upon the effectiveness of this Agreement, the undersigned dealer will become one of the “Soliciting Dealers” referred to in the Dealer Manager Agreement and is referred to herein as “ Soliciting Dealer ”). Soliciting Dealer agrees that solicitation and other activities by it hereunder shall comply with, and shall be undertaken only in accordance with, the terms of the Dealer Manager Agreement, the terms of this Agreement, the Securities Act, the Securities Act Rules and Regulations, the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”) and the applicable rules and regulations promulgated thereunder (the “ Exchange Act Rules and Regulations ”), the Blue Sky Survey (as defined below), the Rules of Fair Practice of FINRA, the FINRA Conduct Rules (including, without limitation, Rules 2340, 2420, 2730, 2740, 2750 and 2810 of the FINRA Conduct Rules), and the provisions of Article III.C. and III.E. of the Omnibus Guidelines of the North American Securities Administrators Association, Inc., as revised and amended on May 7, 2007 and as may be further revised and amended (the “ NASAA Guidelines ”).

Soliciting Dealer’s acceptance of this Agreement constitutes a representation to the Company and to the Dealer Manager that Soliciting Dealer is a properly registered or licensed broker-dealer, duly authorized to sell Shares under federal and state securities laws and regulations in all states where it offers or sells Shares, and that it is a member in good standing of FINRA.  Soliciting Dealer represents and warrants that it is currently licensed as a broker-dealer in the jurisdictions identified on Schedule 1 to this Agreement and that its independent contractors and registered representatives have the appropriate licenses to offer and sell the Shares in such jurisdictions. This Agreement shall automatically terminate with no further action by either party if Soliciting Dealer ceases to be a member in good standing of FINRA or with the securities commission of the state in which Soliciting Dealer’s principal office is located.  Soliciting Dealer agrees to notify the Dealer Manager immediately if Soliciting Dealer ceases to be a member in good standing of FINRA or with the securities commission of any state in which Soliciting Dealer is currently registered or licensed.
 
3.     Limitation of Offer; Investor Suitability .

(a)           Soliciting Dealer will offer Shares only (i) to persons that meet the financial qualifications set forth in the Prospectus or in any suitability letter or memorandum sent to it by the Company or the Dealer Manager, and (ii) in accordance with Section 8 , to persons in the jurisdictions in which it is advised in writing by the Company or the Dealer Manager that the Shares are qualified for sale or that qualification is not required (the “ Blue Sky Survey ”).  Notwithstanding the qualification of Shares for sale in any respective jurisdiction (or exemption therefrom), Soliciting Dealer will not offer Shares and will not permit any of its registered representatives to offer Shares in any jurisdiction unless both Soliciting Dealer and such registered representative are duly licensed to transact securities business in such jurisdiction.  In offering Shares, Soliciting Dealer shall comply with the provisions of the Rules of Fair Practice set forth in the FINRA Manual, as well as other applicable rules and regulations relating to suitability of investors, including, but not limited to, the provisions of Section III.C. of the NASAA Guidelines.

In offering the sale of Shares to any person, Soliciting Dealer will have reasonable grounds (as required by Rule 2310(b)(2)(B)(i) of the FINRA Rules) to believe (based on such information obtained from the investor concerning the investor’s age, investment objectives, other investments, financial situation, needs or any other information known by Soliciting Dealer after due inquiry) that:  (A) such person is in a financial position appropriate to enable such person to realize to a significant extent the benefits described in the Prospectus, including the tax benefits where they are a significant aspect of the Company; (B) the investor has a fair market net worth sufficient to sustain the risks inherent in the program, including loss of investment and lack of liquidity; (C) the purchase of the Shares is otherwise suitable for such person; and (D) such person has either: (1) a minimum annual gross income of $70,000 and a minimum net worth (exclusive of home, home furnishings and automobiles) of $70,000; or (2) a minimum net worth (determined with the foregoing exclusions) of $250,000 and meets the higher suitability standards, if applicable, imposed by the state in which the investment by such investor is made.   Soliciting Dealer further will use its best efforts to determine the suitability and appropriateness of an investment in the Shares of each proposed investor solicited by a person associated with Soliciting Dealer by reviewing documents and records disclosing the basis upon which the determination as to suitability was reached as to each proposed investor, whether such documents and records relate to accounts which have been closed, accounts which are currently maintained or accounts hereinafter established.  In making the determinations as to financial qualifications and as to suitability required by the NASAA Guidelines, Soliciting Dealer may rely on (x) representations from investment advisers who are not affiliated with Soliciting Dealer, banks acting as trustees or fiduciaries, and (y) information it has obtained from a prospective investor, including such information as the investment objectives, other investments, financial situation and needs of the person or any other information known by Soliciting Dealer after due inquiry.  Notwithstanding the foregoing, Soliciting Dealer shall not execute any transaction in the Company in a discretionary account without prior written approval of the transaction by the customer.

(b)           Soliciting Dealer shall maintain, for at least six years or for a period of time not less than that required in order to comply with all applicable federal, state and other regulatory requirements, whichever is later, a record of the information obtained to determine that an investor meets the suitability standards imposed on the offer and sale of the Shares (both at the time of the initial subscription and at the time of any additional subscriptions) and a representation of the investor that the investor is investing for the investor’s own account or, in lieu of such representation, information indicating that the investor for whose account the investment was made met the suitability standards. Soliciting Dealer may satisfy its obligation by contractually requiring such information to be maintained by the investment advisers or banks discussed above.  Soliciting Dealer further agrees to comply with the record keeping requirements of the Exchange Act, including, but not limited to, Rules 17a-3 and 17a-4 promulgated under the Exchange Act.  Soliciting Dealer agrees to make such documents and records available to the Dealer Manager and the Company upon request, and representatives of the Commission, FINRA and applicable state securities administrators upon Soliciting Dealer’s receipt of an appropriate document subpoena or other appropriate request for documents from any such agency.

4.     Delivery of Prospectus and Approved Sales Literature .

(a)           Soliciting Dealer will:  (i) deliver a Prospectus, as then supplemented or amended, to each person who subscribes for Shares at least five business days prior to the tender of such person’s subscription agreement (the “ Subscription Agreement ”); (ii) promptly comply with the written request of any person for a copy of the Prospectus, as then supplemented or amended, during the period between the initial Effective Date and the termination of the Offering; (iii) deliver to any person, in accordance with applicable law or as prescribed by any state securities administrator, a copy of any prescribed document included within or incorporated by reference in the Registration Statement and any supplements thereto during the course of the Offering; (iv) not use any sales materials in connection with the solicitation of purchasers of the Shares except Approved Sales Literature; (v) to the extent the Company provides Approved Sales Literature, not use such materials unless accompanied or preceded by the Prospectus, as then currently in effect, and as may be supplemented in the future; and (vi) not give or provide any information or make any representation or warranty other than information or representations contained in the Prospectus or the Approved Sales Literature.  Soliciting Dealer will not publish, circulate or otherwise use any other advertisement or solicitation material in connection with the Offering without the Dealer Manager’s express prior written approval.

(b)           Nothing contained in this Agreement shall be deemed or construed to make Soliciting Dealer an employee, agent, representative or partner of the Dealer Manager or the Company, and Soliciting Dealer is not authorized to act for the Dealer Manager or the Company.

(c)           Soliciting Dealer will not send or provide supplements to the Prospectus or any Approved Sales Literature to any investor unless it has previously sent or provided a Prospectus and all supplements thereto to that investor or has simultaneously sent or provided a Prospectus and all supplements thereto with such Prospectus supplement or Approved Sales Literature.

(d)           Soliciting Dealer will not show to or provide any investor or reproduce any material or writing which is supplied to it by the Dealer Manager and marked “broker-dealer use only” or otherwise bearing a legend denoting that it is not to be used in connection with the offer or sale of Shares to members of the public.

(e)           The Dealer Manager will supply Soliciting Dealer with reasonable quantities of the Prospectus (including any supplements thereto), as well as any Approved Sales Literature, for delivery to investors.

(f)           Soliciting Dealer shall furnish a copy of any revised preliminary Prospectus to each person to whom it has furnished a copy of any previous preliminary Prospectus, and further agrees that it will mail or otherwise deliver all preliminary and final Prospectuses required for compliance with the provisions of Rule 15c2-8 under the Exchange Act.

5.     Submission of Orders; Right to Reject Orders .

(a)           Subject to certain individual state requirements as described in the Prospectus, Shares may be sold only to investors who initially purchase a minimum of $1,000 in Shares or, unless prohibited by state law, a husband and wife may jointly contribute funds from their separate individual retirement accounts, or IRAs, provided that each such contribution is made in increments of $500. With respect to Soliciting Dealer’s participation in any resales or transfers of the Shares, Soliciting Dealer agrees to comply with any applicable requirements set forth in Section 2 and to fulfill the obligations pursuant to Rule 2810 of the FINRA Rules of Conduct.

(b)           Payments for Shares shall be made payable to “Business Development Corporation of America, Inc.”   Soliciting Dealer shall forward original checks together with an original Subscription Agreement, executed and initialed by the subscriber as provided for in the Subscription Agreement, to Business Development Corporation of America, Inc., c/o DST Systems, Inc., at the address provided in the Subscription Agreement.

Notwithstanding the foregoing, in accordance with the applicable Exchange Act Rules and Regulations, if Soliciting Dealer has net capital of $250,000 or more it may instruct its customers to make their checks payable to Soliciting Dealer.  In such case, Soliciting Dealer shall issue a check made payable to the the Company in accordance with the foregoing provisions of this Section 5(b) , as applicable.

(c)           All orders, whether initial or additional, are subject to acceptance by and shall become effective upon confirmation by the Company or the Dealer Manager, each of which reserve the right to reject any order in their sole discretion for any or no reason.  Orders not accompanied by the required instrument of payment for Shares may be rejected.  Issuance and delivery of a Share will be made only after a sale of a Share is deemed by the Company to be completed in accordance with Section 3(c) of the Dealer Manager Agreement. If an order is rejected, cancelled or rescinded for any reason, then Soliciting Dealer will return to the Dealer Manager any selling commissions or dealer manager fees theretofore paid with respect to such order, and, if Soliciting Dealer fails to so return any such selling commissions, the Dealer Manager shall have the right to offset amounts owned against future commissions or dealer manager fees due and otherwise payable to Soliciting Dealer (it being understood and agreed that such right to offset shall not be in limitation of any other rights or remedies that the Dealer Manager may have in connection with such failure).

6.     Soliciting Dealer Compensation .

(a)            Subject to the terms and conditions set forth herein and in the Dealer Manager Agreement and, subject to the volume discounts and other special circumstances described in the “Plan of Distribution” section of the Prospectus, the Dealer Manager shall pay to Soliciting Dealer a selling commission of up to 7.0% of the gross proceeds from the Shares sold by it and accepted and confirmed by the Company. The Dealer Manager shall receive a Dealer Manager fee of 3% of gross offering proceeds. Alternatively, a Soliciting Dealer may elect to receive a fee equal to 7.5% of gross proceeds from the sale of Shares by such Soliciting Dealer, with 2.5% thereof paid at the time of such sale and 1% thereof paid on each anniversary of the closing of such sale up to and including the fifth anniversary of the closing of such sale, in which event, a portion of the Dealer Manager fee will be reallowed such that the combined selling commission and Dealer Manager fee do not exceed 10% of gross proceeds of the Offering. If the Selected Dealer receives a 7.5% sales commission, then the Dealer Manager will receive a 2.5% Dealer Manager fee. For purposes of this Section 6(a) , Shares are “sold” only if an executed Subscription Agreement is accepted by the Company and the Company has thereafter distributed the commission to the Dealer Manager in connection with such transaction.

(b)          Notwithstanding the foregoing, it is understood and agreed that no commission shall be payable with respect to particular Shares if the Dealer Manager or the Company rejects a proposed subscriber’s Subscription Agreement.  Accordingly, Soliciting Dealer shall have no authority to issue a confirmation (pursuant to Exchange Act Rule 10b-10) to any subscriber; such authority residing solely in the Dealer Manager, as the Dealer Manager and processing broker-dealer.

(c)           The Dealer Manager may, in its sole discretion, re-allow a portion of the Dealer Manager Fee received by it to Soliciting Dealer.  The Dealer Manager may, in its sole discretion, request the Company to reimburse, to Soliciting Dealer for reasonable accountable bona fide due diligence expenses, provided such expenses have actually been incurred, are supported by detailed and itemized invoices provided to the Company and the Company had theretofore given its prior written approval of incurrence of such expenses.

(d)            Notwithstanding anything herein to the contrary, Soliciting Dealer will not be entitled to receive any Dealer Manager Fee which would cause the aggregate amount of selling commissions, dealer manager fees and other forms of underwriting compensation (as defined in accordance with applicable FINRA rules) received by the Dealer Manager and all Soliciting Dealers to exceed 10.0% of the gross proceeds raised from the sale of Shares in the Offering.

(e)           The Company will not be liable or responsible to any Soliciting Dealer for the payment of any selling commissions or any reallowance of fees to Soliciting Dealer, it being the sole and exclusive responsibility of the Dealer Manager for the payment of selling commissions or any reallowance to Soliciting Dealer.  Soliciting Dealer acknowledges and agrees that the Dealer Manager’s liability for commissions payable to Soliciting Dealer is limited solely to commissions received by the Dealer Manager from the Company in connection with Soliciting Dealer’s sale of Shares.

7.     Reserved Shares .

The number of Shares, if any, to be reserved for sale by each Soliciting Dealer may be decided by the mutual agreement, from time to time, of the Dealer Manager and the Company.  The Dealer Manager reserves the right to notify Soliciting Dealer by United States mail or by other means of the number of Shares reserved for sale by Soliciting Dealer, if any. Such Shares will be reserved for sale by Soliciting Dealer until the time specified in the Dealer Manager’s notification to Soliciting Dealer. Sales of any reserved Shares after the time specified in the notification to Soliciting Dealer or any requests for additional Shares will be subject to rejection in whole or in part.

8.     Blue Sky Qualification .

(a)           The Dealer Manager will inform Soliciting Dealer as to the jurisdictions in which the Dealer Manager has been advised by the Company that the Shares have been qualified for sale or are exempt under the respective securities or “blue sky” laws of such jurisdictions; but the Dealer Manager has not assumed and will not assume any obligation or responsibility as to Soliciting Dealer’s right to act as a broker and/or dealer with respect to the Shares in any such jurisdiction. Soliciting Dealer agrees that Soliciting Dealer will not make any offers or sell any Shares except in states in which the Dealer Manager may advise Soliciting Dealer that the Offering has been qualified or is exempt and in which Soliciting Dealer is legally qualified to make offers and further agrees to assure that each person to whom Soliciting Dealer sells Shares (at both the time of the initial purchase as well as at the time of any subsequent purchases) meets any special suitability standards which apply to sales in a particular jurisdiction, as described in the Blue Sky Survey and the Subscription Agreement.  Neither the Dealer Manager nor the Company assume any obligation or responsibility in respect of the qualification of the Shares covered by the Prospectus under the laws of any jurisdiction or Soliciting Dealer’s qualification to act as a broker and/or dealer with respect to the Shares in any jurisdiction. The Blue Sky Survey which has been or will be furnished to Soliciting Dealer indicates the jurisdictions in which it is believed that the offer and sale of Shares covered by the Prospectus is exempt from, or requires action under, the applicable blue sky or securities laws thereof, and what action, if any, has been taken with respect thereto.

(b)           It is understood and agreed that under no circumstances will Soliciting Dealer, as a Soliciting Dealer, engage in any activities hereunder in any jurisdiction in which Soliciting Dealer may not lawfully so engage or in any activities in any jurisdiction with respect to the Shares in which Soliciting Dealer may lawfully so engage unless Soliciting Dealer have complied with the provisions hereof.

9.     Dealer Manager’s Authority . Subject to the Dealer Manager Agreement, the Dealer Manager shall have full authority to take such action as it may deem advisable with respect to all matters pertaining to the Offering or arising thereunder. The Dealer Manager shall not be under any liability to Soliciting Dealer (except for (a) its own lack of good faith, and (b) for obligations expressly assumed by us hereunder) for or in respect of the validity or value of or title to, the Shares; the form of, or the statements contained in, or the validity of, the Registration Statement, the Prospectus or any amendment or supplement thereto, or any other instrument executed by the Company or by others; the form or validity of the Dealer Manager Agreement or this Agreement; the delivery of the Shares; the performance by the Company or by others of any agreement on its or their part; the qualification of the Shares for sale under the laws of any jurisdiction; or any matter in connection with any of the foregoing; provided, however, that nothing in this paragraph shall be deemed to relieve the Company or the Dealer Manager from any liability imposed by the Securities Act. No obligations or liability on the part of the Company or the Dealer Manager shall be implied or inferred herefrom.

10.     Indemnification .

(a)           Under the Dealer Manager Agreement, the Company has agreed to indemnify Soliciting Dealer and the Dealer Manager and each person, if any, who controls Soliciting Dealer or the Dealer Manager, in certain instances and against certain liabilities, including liabilities under the Securities Act in certain circumstances. Soliciting Dealer hereby agrees to indemnify the Company and each person who controls it as provided in the Dealer Manager Agreement and to indemnify the Dealer Manager to the extent and in the manner that Soliciting Dealer agrees to indemnify the Company in the Dealer Manager Agreement.

(b)           In furtherance of, and not in limitation of the foregoing, Soliciting Dealer will indemnify, defend and hold harmless the Dealer Manager and the Company, and their officers, directors, employees, members, partners, affiliates, agents and representatives, and each person, if any, who controls such entity within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, and each person who has signed the Registration Statement (“ Indemnified Parties ”), from and against any losses, claims, damages or liabilities to which any of the Indemnified Parties, and each person who signed the Registration Statement, may become subject, under the Securities Act or the Exchange Act, or otherwise, insofar as such losses, claims and expenses (including the reasonable legal and other expenses incurred in  investigating and defending any such claims or liabilities), damages or liabilities (or actions in respect thereof) arise out of or are based upon (i) in whole or in part, any material inaccuracy in the representations or warranties contained in this Agreement or any material breach of a covenant contained herein by Soliciting Dealer, or (ii) any untrue statement or any alleged untrue statement of a material fact contained (A) in any Registration Statement or any post-effective amendment thereto or in the Prospectus or any amendment or supplement to the Prospectus, or (B) in any Approved Sales Literature, or (C) any blue sky application or other document executed by the Company or on its behalf specifically for the purpose of qualifying any or all of the Shares for sale under the securities laws of any jurisdiction or based upon written information furnished by the Company under the securities laws thereof, or (iii) the omission or alleged omission to state a material fact required to be stated in the Registration Statement or any post-effective amendment thereof to make the statements therein not misleading or the omission or alleged omission to state a material fact required to be stated in the Prospectus or any amendment or supplement to the Prospectus to make the statements therein, in light of the circumstances under which they were made, not misleading, provided, however , that in each case described in clauses (ii) and (iii) to the extent, but only to the extent, that such untrue statement or omission was made in reliance upon and in conformity with written information furnished to the Company or the Dealer Manager by Soliciting Dealer specifically for use with reference to Soliciting Dealer in the preparation of the Registration Statement or any such post-effective amendments thereof or the Prospectus or any such amendment thereof or supplement thereto, (iv) any use of sales literature, including “broker dealer use only” materials, by Soliciting Dealer that is not Approved Sales Literature, (v) any untrue statement made by Soliciting Dealer or Soliciting Dealer’s representatives or agents or omission by Soliciting Dealer or Soliciting Dealer’s representatives or agents to state a fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading in connection with the offer and sale of the Shares in each case, other than statements or omissions made in conformity with the Registration Statement, Prospectus, Approved Sales Literature or any other materials or information furnished by or on behalf of the Company, or (vi) any failure by Soliciting Dealer to comply with applicable laws governing money laundry abatement and anti-terrorist financing efforts in connection with the Offering, including applicable FINRA Rules, Exchange Act Rules and Regulations and the USA PATRIOT Act.  Soliciting Dealer will reimburse the aforesaid parties for any reasonable legal or other expenses incurred in connection with investigation or defense of such loss, claim, damage, liability or action.  This indemnity agreement will be in addition to any liability which Soliciting Dealer may otherwise have.

(c)           Promptly after receipt by any indemnified party under this Section 10 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 10 , promptly notify the indemnifying party of the commencement thereof; provided, however , the failure to give such notice shall not relieve the indemnifying party of its obligations hereunder except to the extent it shall have been prejudiced by such failure.  In case any such action is brought against any indemnified party, and it notifies an indemnifying party of the commencement thereof, the indemnifying party will be entitled, to the extent it may wish, jointly with any other indemnifying party similarly notified, to participate in the defense thereof, with separate counsel.  Such participation shall not relieve such indemnifying party of the obligation to reimburse the indemnified party for reasonable legal and other expenses incurred by such indemnified party in defending itself, except for such expenses incurred after the indemnifying party has deposited funds sufficient to effect the settlement, with prejudice, of, and unconditional release of all liabilities from, the claim in respect of which indemnity is sought.  Any such indemnifying party shall not be liable to any such indemnified party on account of any settlement of any claim or action effected without the consent of such indemnifying party, such consent not to be unreasonably withheld or delayed.

(d)           An indemnifying party under this Section 10 shall be obligated to reimburse an indemnified party for reasonable legal and other expenses as follows: the indemnifying party shall pay all legal fees and expenses reasonably incurred by the indemnified party in the defense of such claims or actions; provided, however, that the indemnifying party shall not be obligated to pay legal expenses and fees to more than one law firm in connection with the defense of similar claims arising out of the same alleged acts or omissions giving rise to such claims notwithstanding that such actions or claims are alleged or brought by one or more parties against more than one indemnified party.  If such claims or actions are alleged or brought against more than one indemnified party, then the indemnifying party shall only be obliged to reimburse the expenses and fees of the one law firm (in addition to local counsel) that has been participating by a majority of the indemnified parties against which such action is finally brought; and in the event a majority of such indemnified parties is unable to agree on which law firm for which expenses or fees will be reimbursable by the indemnifying party, then payment shall be made to the first law firm of record representing an indemnified party against the action or claim.  Such law firm shall be paid only to the extent of services performed by such law firm and no reimbursement shall be payable to such law firm on account of legal services performed by another law firm.

11.     Contribution .

If the indemnification provided for in Section 10 is for any reason unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, liabilities, claims, damages or expenses referred to therein, the contributions provisions set forth in Section 9 of the Dealer Manager Agreement shall be applicable.

12.     Company as Party to Agreement .

The Company shall be a third party beneficiary of Soliciting Dealer’s representations, warranties, covenants and agreements contained in Sections 10 and 11 .  The Company shall have all enforcement rights in law and in equity with respect to those portions of this Agreement as to which it is third party beneficiary.

13.     Privacy Laws; Compliance .

(a)           Soliciting Dealer agrees to: (i) abide by and comply with (A) the privacy standards and requirements of the Gramm-Leach-Bliley Act of 1999 (the “ GLB Act ”); (B) the privacy standards and requirements of any other applicable federal or state law; and (C) Soliciting Dealer’s own internal privacy policies and procedures, each as may be amended from time to time; (ii) refrain from the use or disclosure of nonpublic personal information (as defined under the GLB Act) of all customers, except as necessary to service the customers or as otherwise necessary or required by applicable law; and (iii) determine which customers have opted out of the disclosure of nonpublic personal information by periodically reviewing and, if necessary, retrieving an aggregated list of such customers (the “ List ”) as provided by each to identify customers that have exercised their opt-out rights.  If either party uses or discloses nonpublic personal information of any customer for purposes other than servicing the customer, or as otherwise required by applicable law, that party will consult the List to determine whether the affected customer has exercised his or her opt-out rights.  Each party understands that it is prohibited from using or disclosing any nonpublic personal information of any customer that is identified on the List as having opted out of such disclosures.

14.     Anti-Money Laundering Compliance Programs .

Soliciting Dealer represents to the Dealer Manager and to the Company that it has established and implemented anti-money laundering compliance programs in accordance with applicable law, including applicable FINRA Conduct Rules, rules and regulations promulgated under the Exchange Act and the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act (USA PATRIOT Act) of 2001, as amended (the “ USA PATRIOT Act ”), specifically including, but not limited to, Section 352 of the International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001 (the “ Money Laundering Abatement Act ,” and together with the USA PATRIOT Act, the “ AML Rules ”) reasonably expected to detect and cause the reporting of suspicious transactions in connection with the offering and sale of the Shares.  Soliciting Dealer further represents that it currently is in compliance with all AML Rules, specifically including, but not limited to, the Customer Identification Program requirements under Section 326 of the Money Laundering Abatement Act, and Soliciting Dealer hereby covenants to remain in compliance with such requirements and shall, upon request by the Dealer Manager or the Company, provide a certification to the Dealer Manager or the Company that, as of the date of such certification (a) its AML Program is consistent with the AML Rules, and (b) it is currently in compliance with all AML Rules, specifically including, but not limited to, the Customer Identification Program requirements under Section 326 of the Money Laundering Abatement Act.  Upon request by the Dealer Manager at any time, Soliciting Dealer will (i) furnish a written copy of its AML Program to the Dealer Manager for review, and (ii) furnish a copy of the findings and any remedial actions taken in connection with its most recent independent testing of its AML Program.

15.     Miscellaneous .

(a)           Soliciting Dealer hereby authorizes and ratifies the execution and delivery of the Dealer Manager Agreement by the Dealer Manager as Dealer Manager for itself and on behalf of all Soliciting Dealers (including Soliciting Dealer party hereto) and authorizes the Dealer Manager to agree to any variation of its terms or provisions and to execute and deliver any amendment, modification or supplement thereto. Soliciting Dealer hereby agrees to be bound by all provisions of the Dealer Manager Agreement relating to Soliciting Dealers. Soliciting Dealer also authorizes the Dealer Manager to exercise, in the Dealer Manager’s discretion, all the authority or discretion now or hereafter vested in the Dealer Manager by the provisions of the Dealer Manager Agreement and to take all such actions as the Dealer Manager may believe desirable in order to carry out the provisions of the Dealer Manager Agreement and of this Agreement.

(b)           This Agreement, except for the provisions of Sections 9 , 10 , 11 , 12 and 13 and this Section 15 , may be terminated at any time by either party hereto by two days’ prior written notice to the other party and, in all events, this Agreement shall terminate on the termination date of the Dealer Manager Agreement, except for the provisions of Sections 9 , 10 , 11 , 12 and 13 and this Section 15 .

(c)           Any communications from Soliciting Dealer should be in writing addressed to the Dealer Manager at:

Realty Capital Securities, LLC
Three Copley Place, Suite 3300
Boston, Massachusetts 02116
Facsimile No.: (857) 207-3399
Attention: Louisa Quarto
          President

with a copy to:

Sutherland Asbill & Brennan LLP
700 Sixth Street, NW, Suite 700
Washington, DC 20001-3980
Facsimile No: 202.637.3593
Attention: Steven Boehm, Esq.

Any notice from the Dealer Manager to Soliciting Dealer shall be deemed to have been duly given if mailed, communicated by electronic delivery or facsimile or delivered by overnight courier to Soliciting Dealer at Soliciting Dealer’s address shown below.

(d)           Nothing herein contained shall constitute the Dealer Manger, Soliciting Dealer, the other Soliciting Dealers or any of them as an association, partnership, limited liability company, unincorporated business or other separate entity.

(e)           If this Agreement is executed before the initial Effective Date, then the Dealer Manager will notify Soliciting Dealer in writing when the initial Effective Date has occurred.  Soliciting Dealer agrees that Soliciting Dealer will not make any offers to sell the Shares or solicit purchasers for the Shares until Soliciting Dealer has received such written notice of the initial Effective Date from the Dealer Manager or the Company. This Agreement shall be effective for all sales by Soliciting Dealer on and after the initial Effective Date.

(f)           The Company may authorize the Company’s transfer agent to provide information to the Dealer Manager and Soliciting Dealer regarding record holder information about the clients of Soliciting Dealer who have invested with the Company on an on-going basis for so long as Soliciting Dealer has a relationship with such client.  Soliciting Dealer shall not disclose any password for a restricted website or portion of a website provided to Soliciting Dealer in connection with the Offering and shall not disclose to any person, other than an officer, director, employee or agent of Soliciting Dealer, any material downloaded from such restricted website or portion of a restricted website.

(g)           Soliciting Dealer shall have no right to assign this Agreement or any of its rights hereunder or to delegate any of its obligations.  Any purported assignment or delegation by Soliciting Dealer shall be null and void.  The Dealer Manager shall have the right to assign any or all of its rights and obligations under this Agreement by written notice, and Soliciting Dealer shall be deemed to have consented to such assignment by execution hereof.  Dealer Manager shall provide written notice of any such assignment to Soliciting Dealer.

(h)    This Agreement may be executed (including by facsimile transmission) with counterpart signature pages or in counterpart copies, each of which shall be deemed an original but all of which together shall constitute one and the same instrument comprising this Agreement.

(i)    The invalidity or unenforceability of any provision of this Agreement shall not affect the other provisions hereof, and this Agreement shall be construed in all respects as if such invalid or unenforceable provision were omitted.

(j)    The failure of any party to insist upon or enforce strict performance by any other party of any provision of this Agreement or to exercise any right under this Agreement shall not be construed as a waiver or relinquishment to any extent of such party’s right to assert or rely upon any such provision or right in that or any other instance; rather, such provision or right shall be and remain in full force and effect.

[Signatures on following page]

If the foregoing is in accordance with Soliciting Dealer’s understanding and agreement, please sign and return the attached duplicate of this Agreement. Soliciting Dealer’s indicated acceptance thereof shall constitute a binding agreement between Soliciting Dealer and the Dealer Manager.

Very truly yours,

REALTY CAPITAL SECURITIES, LLC

By: /s/ Louisa Quarto    
Name: LOUISA QUARTO
Title: PRESIDENT

__________, 2014

The undersigned dealer confirms its agreement to act as a Soliciting Dealer pursuant to all the terms and conditions of the above Soliciting Dealer Agreement and the attached Dealer Manager Agreement. The undersigned dealer hereby represents that the it will comply with the applicable requirements of the Securities Act and the Exchange Act and the published rules and regulations of the Commission thereunder, and applicable blue sky or other state securities laws. The undersigned dealer represents and warrants that the undersigned dealer is duly registered as a broker-dealer under the provisions of the Exchange Act and the Exchange Act Rules and Regulations or is exempt from such registration.  The undersigned dealer confirms that it and each salesperson acting on its behalf are members in good standing of FINRA and duly licensed by each regulatory authority in each jurisdiction in which the undersigned dealer or such salesperson will offer and sell Shares, or are exempt from registration with such authorities. The undersigned dealer hereby represents that it will comply with the Rules of FINRA and all rules and regulations promulgated by FINRA.

Dated: ________, 2014
__________________________________
Name of Soliciting Dealer
__________________________________
Federal Identification Number

By: _______________________________
Name:
Title:

Kindly have checks representing commissions forwarded as follows (if different than above): (Please type or print.)

Name of Firm:                        __________________________________

Address:                        __________________________________
Street
__________________________________
City
__________________________________
State and Zip Code
__________________________________
(Area Code) Telephone No.
Attention:    ____________________________
SCHEDULE 1
TO
SOLICITING DEALER AGREEMENT WITH
REALTY CAPITAL SECURITIES, LLC

Soliciting Dealer represents and warrants that it is currently licensed as a broker-dealer in the following jurisdictions:
 
Alabama
Nebraska
 
 
 
 
Alaska
Nevada
 
 
 
 
Arizona
New Hampshire
 
 
 
 
Arkansas
New Jersey
 
 
 
 
California
New Mexico
 
 
 
 
Colorado
New York
 
 
 
 
Connecticut
North Carolina
 
 
 
 
Delaware
North Dakota
 
 
 
 
District of Columbia
Ohio
 
 
 
 
Florida
Oklahoma
 
 
 
 
Georgia
Oregon
 
 
 
 
Hawaii
Pennsylvania
 
 
 
 
Idaho
Puerto Rico
 
 
 
 
Illinois
Rhode Island
 
 
 
 
Indiana
South Carolina
 
 
 
 
Iowa
South Dakota
 
 
 
 
Kansas
Tennessee
 
 
 
 
Kentucky
Texas
 
 
 
 
Louisiana
Utah
 
 
 
 
Maine
£
Vermont
 
 
 
 
Maryland
Virgin Islands
 
 
 
 
Massachusetts
Virginia
 
 
 
 
Michigan
Washington
 
 
 
 
Minnesota
West Virginia
 
 
 
 
Mississippi
Wisconsin
 
 
 
 
Missouri
Wyoming
 
 
 
 
Montana
 
 
 



1

EXHIBIT 10.29

AMENDMENT NO. 4 TO
LOAN AND SERVICING AGREEMENT
THIS AMENDMENT NO. 4 TO LOAN AND SERVICING AGREEMENT , dated as of June 30, 2014 (this “ Amendment ”) is entered into by and among BDCA Funding I, LLC, as the borrower (in such capacity, the “ Borrower ”), Business Development Corporation of America, as the servicer (in such capacity, the “ Servicer ”), Wells Fargo Bank, National Association, as the required lender (in such capacity, the “ Required Lender ”), and Wells Fargo Securities, LLC, as the administrative agent (in such capacity, the “ Administrative Agent ”). Capitalized terms used but not defined herein have the meanings provided in the Agreement (as defined below).
R E C I T A L S
WHEREAS , reference is made to the Loan and Servicing Agreement, dated as of July 24, 2012 (as amended by certain Amendment No. 1 to the Loan and Servicing Agreement, dated as of January 14, 2013, certain Amendment No. 2 to the Loan and Servicing Agreement, dated as of April 26, 2013 and certain Amendment No. 3 to the Loan and Servicing Agreement, dated as of September 6, 2013, each by and among the Borrower, the Servicer, the Lender and the Administrative Agent and as further amended, modified, waived, supplemented or restated from time to time, the “ Agreement ”), by and among the Borrower, the Servicer, the Conduit Lenders, the Institutional Lenders, the Lender Agents, the Administrative Agent, and U.S. Bank National Association, as the collateral agent, the account bank and the collateral custodian; and
WHEREAS , the parties hereto desire to further amend the Agreement in certain respects as specified herein, pursuant to and in accordance with Section 11.01 of the Agreement;
NOW, THEREFORE , based upon the above Recitals, the mutual premises and agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:
SECTION 1. AMENDMENT .
The Agreement is hereby amended to delete the stricken text (indicated textually in the same manner as the following example: stricken text ) and to add the bold and double-underlined text (indicated textually in the same manner as the following example: bold and double-underlined text ) as set forth on the pages of the Agreement attached as Exhibit A hereto.
SECTION 2. AGREEMENT IN FULL FORCE AND EFFECT AS AMENDED .
Except as specifically amended hereby, all provisions of the Agreement shall remain in full force and effect. After this Amendment becomes effective, all references to the Agreement and corresponding references thereto or therein such as “hereof”, “herein”, or words of similar effect referring to the Agreement shall be deemed to mean the Agreement as amended hereby. This Amendment shall not be deemed to expressly or impliedly waive, amend or supplement any provision of the Agreement other than as expressly set forth herein.
SECTION 3. REPRESENTATIONS .
Each of the Borrower and the Servicer, severally for itself only, represents and warrants as of the date of this Amendment as follows:
(i) it is duly incorporated or organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or organization;
(ii) the execution, delivery and performance by it of this Amendment and the Agreement as amended hereby are within its powers, have been duly authorized, and do not contravene (A) its charter, by-laws, or other organizational documents, or (B) any Applicable Law;
(iii) no consent, license, permit, approval or authorization of, or registration, filing or declaration with any governmental authority, is required in connection with the execution, delivery, performance, validity or enforceability of this Amendment and the Agreement as amended hereby by or against it;
(iv) this Amendment has been duly executed and delivered by it;
(v) each of this Amendment and the Agreement as amended hereby constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally or by general principles of equity; and
(vi) there is no Unmatured Event of Default, Event of Default or Servicer Termination Event.
SECTION 4. CONDITIONS TO EFFECTIVENESS .
The effectiveness of this Amendment is conditioned upon: (i) payment of the invoiced outstanding fees and disbursements of the Administrative Agent and the Lenders (if any); (ii) delivery of opinions of counsel as reasonably requested by, and in form and substance satisfactory to, the Administrative Agent and (iii) delivery of executed signature pages by all parties hereto to the Administrative Agent.
SECTION 5. MISCELLANEOUS .
(a) This Amendment may be executed in any number of counterparts (including by facsimile or e-mail), and by the different parties hereto on the same or separate counterparts, each of which shall be deemed to be an original instrument but all of which together shall constitute one and the same agreement.
(b) The descriptive headings of the various sections of this Amendment are inserted for convenience of reference only and shall not be deemed to affect the meaning or construction of any of the provisions hereof.
(c) This Amendment may not be amended or otherwise modified except as provided in the Agreement.
(d) The failure or unenforceability of any provision hereof shall not affect the other provisions of this Amendment.
(e) Whenever the context and construction so require, all words used in the singular number herein shall be deemed to have been used in the plural number, and vice versa, and the masculine gender shall include the feminine and neuter and the neuter shall include the masculine and feminine.
(f) This Amendment and the Agreement represent the final agreement among the parties with respect to the matters set forth therein and may not be contradicted by evidence of prior, contemporaneous or subsequent oral agreements among the parties. There are no unwritten oral agreements among the parties with respect to such matters.
(g) THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE CHOICE OF LAW PROVISIONS SET FORTH IN THE AGREEMENT AND SHALL BE SUBJECT TO THE WAIVER OF JURY TRIAL AND NOTICE PROVISIONS OF THE AGREEMENT.
[Remainder of Page Intentionally Left Blank]


IN WITNESS WHEREOF , the parties have caused this Amendment No. 4 to be executed by their respective officers thereunto duly authorized, as of the date first above written.
BDCA FUNDING I, LLC,
as the Borrower

By: BUSINESS DEVELOPMENT
CORPORATION OF AMERICA, Member of
BDCA Funding I, LLC
By:     /s/ Robert K. Grunewald
    Name: Robert K. Grunewald
    Title: Chief Investment Officer
BUSINESS DEVELOPMENT
CORPORATION OF AMERICA,
as the Servicer
By:     /s/ Robert K. Grunewald
    Name: Robert K. Grunewald
    Title: Chief Investment Officer


[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as the Required Lender
By:     /s/ Raj Shah
    Name: Raj Shah
    Title: Managing Director
WELLS FARGO SECURITIES, LLC,
as the Administrative Agent
By:     /s/ Mike Romanzo
    Name: Mike Romanzo, CFA
    Title: Director

EXHIBIT A
[To Be Attached]












    
Up to U.S. $ 200,000,000 300,000,000
LOAN AND SERVICING AGREEMENT
Dated as of July 24, 2012
Among
BDCA FUNDING I, LLC,
as the Borrower
BUSINESS DEVELOPMENT CORPORATION OF AMERICA,
as the Servicer and the Seller
WELLS FARGO SECURITIES, LLC,
as the Administrative Agent
EACH OF THE CONDUIT LENDERS AND INSTITUTIONAL LENDERS FROM TIME TO TIME PARTY HERETO,
as the Lenders
EACH OF THE LENDER AGENTS FROM TIME TO TIME PARTY HERETO,
as the Lender Agents
and
U.S. BANK NATIONAL ASSOCIATION,
as the Collateral Agent, Account Bank and Collateral Custodian
    


ARTICLE I.
DEFINITIONS    1
Section 1.01
Certain Defined Terms    1
Section 1.02
Other Terms    34
Section 1.03
Computation of Time Periods    34
Section 1.04
Interpretation     34 35
ARTICLE II.
THE FACILITY    35
Section 2.01
Variable Funding Note and Advances    35
Section 2.02
Procedure for Advances    36
Section 2.03
Determination of Yield    37
Section 2.04
Remittance Procedures    37
Section 2.05
Instructions to the Collateral Agent and the Account Bank    41
Section 2.06
Borrowing Base Deficiency Payments    42
Section 2.07
Substitution and Sale of Loan Assets; Affiliate Transactions     42 43
Section 2.08
Payments and Computations, Etc    46
Section 2.09
Non-Usage Fee    47
Section 2.10
Increased Costs; Capital Adequacy     47 48
Section 2.11
Taxes    49
Section 2.12
Collateral Assignment of Agreements    50
Section 2.13
Grant of a Security Interest     50 51
Section 2.14
Evidence of Debt    51
Section 2.15
Survival of Representations and Warranties    51
Section 2.16
Release of Loan Assets     51 52
Section 2.17
Treatment of Amounts Received by the Borrower    52
Section 2.18
Prepayment; Termination    52
Section 2.19
Extension of Reinvestment Period    53
Section 2.20
Collections and Allocations    53
Section 2.21
Reinvestment of Principal Collections     54 55
Section 2.22
Additional Lenders    55
ARTICLE III.
CONDITIONS PRECEDENT    56
Section 3.01
Conditions Precedent to Effectiveness    56
Section 3.02
Conditions Precedent to All Advances    57
Section 3.03
Advances Do Not Constitute a Waiver    59
Section 3.04
Conditions to Pledges of Loan Assets    59
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES    60
Section 4.01
Representations and Warranties of the Borrower    60
Section 4.02
Representations and Warranties of the Borrower Relating to the Agreement and the Collateral Portfolio    68
Section 4.03
Representations and Warranties of the Servicer    69
Section 4.04
Representations and Warranties of the Collateral Agent    73
Section 4.05
Representations and Warranties of each Lender    74
Section 4.06
Representations and Warranties of the Collateral Custodian    74
ARTICLE V.
GENERAL COVENANTS    75
Section 5.01
Affirmative Covenants of the Borrower    75
Section 5.02
Negative Covenants of the Borrower    81
Section 5.03
Affirmative Covenants of the Servicer    84
Section 5.04
Negative Covenants of the Servicer    88
Section 5.05
Affirmative Covenants of the Collateral Agent    90
Section 5.06
Negative Covenants of the Collateral Agent    90
Section 5.07
Affirmative Covenants of the Collateral Custodian    90
Section 5.08
Negative Covenants of the Collateral Custodian    91
ARTICLE VI.
ADMINISTRATION AND SERVICING OF CONTRACTS    91
Section 6.01
Appointment and Designation of the Servicer    91
Section 6.02
Duties of the Servicer    93
Section 6.03
Authorization of the Servicer    96
Section 6.04
Collection of Payments; Accounts    97
Section 6.05
Realization Upon Loan Assets    98
Section 6.06
Servicing Compensation    99
Section 6.07
Payment of Certain Expenses by Servicer    99
Section 6.08
Reports to the Administrative Agent; Account Statements; Servicing Information    99
Section 6.09
Annual Statement as to Compliance    101
Section 6.10
Annual Independent Public Accountant’s Servicing Reports    101
Section 6.11
The Servicer Not to Resign    101
ARTICLE VII.
EVENTS OF DEFAULT    102
Section 7.01
Events of Default    102
Section 7.02
Additional Remedies of the Administrative Agent    105
ARTICLE VIII.
INDEMNIFICATION    107
Section 8.01
Indemnities by the Borrower    107
Section 8.02
Indemnities by Servicer     110 111
Section 8.03
Legal Proceedings    112
Section 8.04
After-Tax Basis    113
ARTICLE IX.
THE ADMINISTRATIVE AGENT AND LENDER AGENTS    113
Section 9.01
The Administrative Agent    113
Section 9.02
The Lender Agents    117
ARTICLE X.
COLLATERAL AGENT    119
Section 10.01
Designation of Collateral Agent    119
Section 10.02
Duties of Collateral Agent    119
Section 10.03
Merger or Consolidation     121 122
Section 10.04
Collateral Agent Compensation    122
Section 10.05
Collateral Agent Removal    122
Section 10.06
Limitation on Liability    122
Section 10.07
Collateral Agent Resignation    124
ARTICLE XI.
MISCELLANEOUS    124
Section 11.01
Amendments and Waivers    124
Section 11.02
Notices, Etc    125
Section 11.03
No Waiver; Remedies    125
Section 11.04
Binding Effect; Assignability; Multiple Lenders    125
Section 11.05
Term of This Agreement    126
Section 11.06
GOVERNING LAW; JURY WAIVER    126
Section 11.07
Costs, Expenses and Taxes    126
Section 11.08
No Proceedings    127
Section 11.09
Recourse Against Certain Parties    127
Section 11.10
Execution in Counterparts; Severability; Integration    129
Section 11.11
Consent to Jurisdiction; Service of Process    129
Section 11.12
Characterization of Conveyances Pursuant to the Purchase and Sale Agreement    129
Section 11.13
Confidentiality    131
Section 11.14
Non-Confidentiality of Tax Treatment    132
Section 11.15
Waiver of Set Off    132
Section 11.16
Headings and Exhibits    132
Section 11.17
Ratable Payments    132
Section 11.18
Failure of Borrower or Servicer to Perform Certain Obligations    133
Section 11.19
Power of Attorney    133
Section 11.20
Delivery of Termination Statements, Releases, etc    133
ARTICLE XII.
COLLATERAL CUSTODIAN    133
Section 12.01
Designation of Collateral Custodian    133
Section 12.02
Duties of Collateral Custodian    134
Section 12.03
Merger or Consolidation     137 136
Section 12.04
Collateral Custodian Compensation    137
Section 12.05
Collateral Custodian Removal    137
Section 12.06
Limitation on Liability    137
Section 12.07
Collateral Custodian Resignation    138
Section 12.08
Release of Documents    139
Section 12.09
Return of Required Loan Documents     139 140
Section 12.10
Access to Certain Documentation and Information Regarding the Collateral Portfolio; Audits of Servicer    140
Section 12.11
Collateral Custodian as Agent of Collateral Agent    140

LIST OF SCHEDULES AND EXHIBITS
SCHEDULES
SCHEDULE I
Conditions Precedent Documents
SCHEDULE II
Prior Names, Tradenames, Fictitious Names and “Doing Business As” Names
SCHEDULE III
Eligibility Criteria
SCHEDULE IV
Agreed-Upon Procedures for Independent Public Accountants
SCHEDULE V
Loan Asset Schedule
EXHIBITS
EXHIBIT A
Form of Approval Notice
EXHIBIT B
Form of Assignment of Mortgage
EXHIBIT C
Form of Borrowing Base Certificate
EXHIBIT D
Form of Disbursement Request
EXHIBIT E
Form of Joinder Supplement
EXHIBIT F        Form of Notice of Borrowing
EXHIBIT G        Form of Notice of Reduction (Reduction of Advances Outstanding)
EXHIBIT H        [Reserved]
EXHIBIT I        Form of Variable Funding Note
EXHIBIT J        Form of Notice of Lien Release Dividend and Request for Consent
EXHIBIT K        Form of Certificate of Closing Attorneys
EXHIBIT L        Form of Servicing Report
EXHIBIT M        Form of Servicer’s Certificate (Servicing Report)
EXHIBIT N        Form of Release of Required Loan Documents
EXHIBIT O        Form of Transferee Letter
EXHIBIT P        Form of Power of Attorney for Servicer
EXHIBIT Q        Form of Power of Attorney for Borrower
EXHIBIT R        Form of Servicer’s Certificate (Loan Asset Register)

ANNEXES
ANNEX A        Commitments
This LOAN AND SERVICING AGREEMENT is made as of July 24, 2012, among:
(1)    BDCA FUNDING I, LLC, a Delaware limited liability company (together with its successors and assigns in such capacity, the “ Borrower ”);
(2)    BUSINESS DEVELOPMENT CORPORATION OF AMERICA, a Maryland corporation, as the Servicer (as defined herein) and the Seller (as defined herein);
(3)    EACH OF THE CONDUIT LENDERS FROM TIME TO TIME PARTY HERETO, as a Conduit Lender;
(4)    EACH OF THE INSTITUTIONAL LENDERS FROM TIME TO TIME PARTY HERETO, as an Institutional Lender;
(5)    EACH OF THE LENDER AGENTS FROM TIME TO TIME PARTY HERETO, as a Lender Agent;
(6)    WELLS FARGO SECURITIES, LLC, as Administrative Agent (“ Administrative Agent ”); and
(7)    U.S. BANK NATIONAL ASSOCIATION, as the Collateral Agent (together with its successors and assigns in such capacity, the “ Collateral Agent ”), the Account Bank (as defined herein) and the Collateral Custodian (together with its successors and assigns in such capacity, the “ Collateral Custodian ”).
PRELIMINARY STATEMENT
The Lenders have agreed, on the terms and conditions set forth herein, to provide a secured revolving credit facility which shall provide for Advances under the Variable Funding Note(s) from time to time in an aggregate principal amount not to exceed the Borrowing Base. The proceeds of the Advances will be used to finance the Borrower’s purchase, on a “true sale” basis, of Eligible Loan Assets from the Seller, approved by the Administrative Agent, pursuant to the Purchase and Sale Agreement between the Borrower and the Seller. Accordingly, the parties agree as follows:
ARTICLE I.

DEFINITIONS
SECTION 1.01      Certain Defined Terms .
(a)      Certain capitalized terms used throughout this Agreement are defined above or in this Section 1.01 .
(b)      As used in this Agreement and the exhibits and schedules thereto (each of which is hereby incorporated herein and made a part hereof), the following terms shall 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, and the rules and regulations promulgated thereunder.
“ Account Bank ” means U.S. Bank National Association, in its capacity as the “Account Bank” pursuant to the Collection Account Agreement.
“ Action ” has the meaning assigned to that term in Section 8.03 .
“ Additional Amount ” has the meaning assigned to that term in Section 2.11(a) .
“ Adjusted Borrowing Value ” means for any Loan Asset, for any date of determination, an amount equal to the lowest of: (i) the Outstanding Balance of such Loan Asset at such time, (ii) the Advance Date Assigned Value of such Loan Asset at such time multiplied by the Outstanding Balance of such Loan Asset at such time and (iii) the Assigned Value of such Loan Asset at such time multiplied by the Outstanding Balance of such Loan Asset at such time; provided that, the parties hereby agree that the Adjusted Borrowing Value of any Loan Asset that is no longer an Eligible Loan Asset shall be zero; provided further that (a) no accrued or PIK Interest shall be included in the Outstanding Balance of any Eligible Loan Asset and (b) the aggregate Adjusted Borrowing Value for all Loan Assets with respect to a each of the three largest Obligors and its Affiliates shall not exceed $20,000,000 and for any other single Obligor and its Affiliates shall not exceed $15,000,000 (for the avoidance of doubt, companies owned by the same private equity sponsor shall not be considered “Affiliates” for purposes of this definition).
“ Administrative Agent ” means Wells Fargo Securities, LLC, in its capacity as administrative agent for the Lender Agents, together with its successors and assigns, including any successor appointed pursuant to Article IX .
“ Advance ” means each loan advanced by the Lenders to the Borrower on an Advance Date pursuant to Article II .
“ Advance Date ” means, with respect to any Advance, the date on which such Advance is made.
“ Advance Date Assigned Value ” means, with respect to any Loan Asset, the value (expressed as a percentage of the Outstanding Balance of such Loan Asset) equal to the lesser of (i) the purchase price paid by the Borrower to acquire such Loan Asset (expressed exclusive of accrued interest) and (ii) the Assigned Value as of the date of contribution of such Loan Asset into the Collateral Portfolio.
“ Advances Outstanding ” means, at any time, the sum of the principal amounts of Advances loaned to the Borrower for the initial and any subsequent borrowings pursuant to Sections 2.01 and 2.02 as of such time, reduced by the aggregate Available Collections received and distributed as repayment of principal amounts of Advances outstanding pursuant to Section 2.04 at or prior to such time and any other amounts received by the Lenders to repay the principal amounts of Advances outstanding pursuant to Section 2.18 or otherwise at or prior to such time; provided that the principal amounts of Advances outstanding shall not be reduced by any Available Collections or other amounts if at any time such Available Collections or other amounts are rescinded or must be returned for any reason.
“ Affected Party ” has the meaning assigned to that term in Section 2.10 .
“ Affiliate ” when used with respect to a Person, means any other Person controlling, controlled by or under common control with such Person. For the purposes of this definition, “control,” when used with respect to any specified Person, means the power to vote 20% or more of the voting securities of such Person or to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing; provided that for purposes of determining whether any Loan Asset is an Eligible Loan Asset or for purposes of Section 5.01(b)(xix) , the term Affiliate shall not include any Affiliate relationship which may exist solely as a result of direct or indirect ownership of, or control by, a common Financial Sponsor.
“ Agented Note ” means any Loan Asset originated as a part of a syndicated loan transaction that has been closed (without regard to any contemporaneous or subsequent syndication of such Loan Asset) prior to such Loan Asset becoming part of the Collateral Portfolio.
“ Agreement ” means this Loan and Servicing Agreement, as the same may be amended, restated, supplemented and/or otherwise modified from time to time hereafter.
“ Applicable Law ” means for any Person all existing and future laws, rules, regulations (including proposed, temporary and final income tax regulations), statutes, treaties, codes, ordinances, permits, certificates, orders, licenses of and interpretations by any Governmental Authority applicable to such Person (including, without limitation, predatory lending laws, usury laws, the Federal Truth-in‑Lending Act, the Equal Credit Opportunity Act, the Fair Credit Billing Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the Federal Trade Commission Act, the Magnuson-Moss Warranty Act, the Federal Reserve Board’s Regulations “B” and “Z”, the Servicemembers Civil Relief Act of 2003 and state adaptations of the National Consumer Act and of the Uniform Consumer Credit Code and all other consumer credit laws and equal credit opportunity and disclosure laws) 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 Percentage ” means 65 67.5 % for Middle Market Loans (or a higher percentage as determined by the Administrative Agent in its sole discretion) or 70% for Broadly Syndicated Loans , as applicable .
“ Applicable Spread ” shall be determined in accordance with the following formula, rounded to four decimal places ( provided that, in lieu of the following formula, at any time after the occurrence of and during the continuance of an Event of Default, the Applicable Spread shall be 4.25% per annum for all Advances):
Applicable Spread = (PFR H x Percentage H ) + (PFR L x Percentage L )

where:
PFR H     =    2.50%;

PFR L     =    1.75%;

Percentage H     =    100% - Percentage L ;

Percentage L     =    Average AB L / Average AB Agg (expressed as a percentage) ;

Average AB L     =    (Beginning AB L + Ending AB L )/2;

Beginning AB L  
=    aggregate Adjusted Borrowing Value of all Broadly Syndicated Loans on the first day of the related Collection Period;

Ending AB L  
=    aggregate Adjusted Borrowing Value of all Broadly Syndicated Loans on the last day of the related Collection Period;

Average AB Agg  
=    (Beginning AB Agg + Ending AB Agg )/2;

Beginning AB Agg  
=    aggregate Adjusted Borrowing Value of all Loan Assets on the first day of the related Collection Period; and

Ending AB Agg  
=    aggregate Adjusted Borrowing Value of all Loan Assets on the last day of the related Collection Period.

“ Approval Notice ” means, with respect to any Eligible Loan Asset, the written notice, in substantially the form attached hereto as Exhibit A , evidencing the approval by the Administrative Agent, in its sole discretion, of the conveyance of such Eligible Loan Asset by the Seller to the Borrower pursuant to the terms of the Purchase and Sale Agreement and the Loan Assignment by which the Seller effects such conveyance.
“ Asset Coverage Ratio ” means the ratio, determined on a consolidated basis, without duplication, in accordance with GAAP, of (a) the fair value of the total assets of BDCA and its Subsidiaries as required by, and in accordance with, the 1940 Act and any orders of the SEC issued to BDCA to be determined by the Board of Directors of BDCA and reviewed by its auditors, less all liabilities (other than Indebtedness, including Indebtedness hereunder) of BDCA and its Subsidiaries, to (b) the aggregate amount of Indebtedness of BDCA and its Subsidiaries; provided that the calculation of the Asset Coverage Ratio shall not include Subsidiaries that are not required to be included by the 1940 Act as affected by such orders of the SEC issued to BDCA including, if set forth in any such order, any Subsidiary which is a small business investment company which is licensed by the Small Business Administration to operate under the Small Business Investment Act of 1958.
“ Assigned Documents ” has the meaning assigned to that term in Section 2.12 .
“ Assigned Value ” means, with respect to each Loan Asset, as of any date of determination and expressed as a percentage of the Outstanding Balance of such Loan Asset, the value determined by the Administrative Agent, in its sole discretion, of such Loan Asset, subject to the following terms:
(a) If a Value Adjustment Event of the type described in clauses (ii) , (iv) or (vi) of the definition thereof with respect to such Loan Asset occurs, the Assigned Value of such Loan Asset will be zero.
(b) If a Value Adjustment Event of the type described in clauses (i) , (iii) or (v) of the definition thereof with respect to such Loan Asset occurs, “Assigned Value” may be amended by the Administrative Agent, in its sole discretion; provided that the Assigned Value of any Priced Loan Asset shall not be less than the price quoted therefor (if any) by such nationally recognized pricing service as selected by the Administrative Agent. In the event the Borrower disagrees with the Administrative Agent’s determination of the Assigned Value of a Loan Asset, the Borrower may (at its expense) retain any nationally recognized valuation firm or at least two independent approved dealers, in each case, reasonably acceptable to the Administrative Agent to value such Loan Asset and if the value determined by such firm or approved dealers is greater than the Administrative Agent’s determination of the Assigned Value, such firm’s valuation shall become the Assigned Value of such Loan Asset; provided that the Assigned Value of such Loan Asset shall be the value assigned by the Administrative Agent until such firm has determined its value. The Assigned Value of any Loan Asset may be increased at the sole discretion of the Administrative Agent upon improvement in the Net Leverage Ratio or the Interest Coverage Ratio of such Loan Asset, as the case may be, as part of a Value Adjustment Event; provided that such Assigned Value may not increase above the Advance Date Assigned Value. The Administrative Agent shall promptly notify the Servicer of any change effected by the Administrative Agent of the Assigned Value of any Loan Asset.
“ Assignment of Mortgage ” means an assignment of the Mortgage, notice of transfer or equivalent instrument in recordable form sufficient under the laws of the jurisdiction wherein the related mortgaged property is located to effect the assignment of the Mortgage to the Collateral Agent, which assignment, notice of transfer or equivalent instrument may be in the form of one or more blanket assignments covering the Loan Assets secured by mortgaged properties located in the same jurisdiction, if permitted by Applicable Law, substantially in the form of Exhibit B .
“ Available Collections ” means, all cash collections and other cash proceeds with respect to any Loan Asset, including, without limitation, all Principal Collections, all Interest Collections, all proceeds of any sale or disposition with respect to such Loan Asset, cash proceeds or other funds received by the Borrower or the Servicer with respect to any Underlying Collateral (including from any guarantors), all other amounts on deposit in the Collection Account from time to time, and all proceeds of Permitted Investments with respect to the Collection Account.
“ Bankruptcy Code ” means Title 11, United States Code, 11 U.S.C. §§ 101 et seq ., as amended from time to time.
“ Bankruptcy Event ” shall be deemed to have occurred with respect to a Person if either:
(i) a case or other proceeding shall be commenced, without the application or consent of such Person, in any court, seeking the liquidation, reorganization, debt arrangement, dissolution, winding up, or composition or readjustment of debts of such Person, the appointment of a trustee, receiver, custodian, liquidator, 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 any 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 Bankruptcy Code or other Bankruptcy Laws; or
(ii) 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, assignee, trustee, custodian, sequestrator (or other similar official) for such Person or all or substantially all of its assets, 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.
“ 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.
“ Bankruptcy Proceeding ” means any case, action or proceeding before any court or other Governmental Authority relating to any Bankruptcy Event.
“ Base Rate ” means, on any date, a fluctuating per annum interest rate equal to the higher of (a) the Prime Rate or (b) the Federal Funds Rate plus 1.5%.
“ BDCA ” means Business Development Corporation of America, a Maryland corporation.
“ BDCA Affiliate Merger Transaction ” has the meaning specified in Section 5.04(a) .
“ BDCA Competitor ” means any specialty finance company which derives substantially all of its revenue from lending to and providing investment in middle market companies.
“BDCA Merger Party ” shall mean any Person that (a) is an Affiliate of BDCA (other than the Borrower) on the Closing Date or (b) becomes an Affiliate of BDCA after the Closing Date and was either (i) a newly formed Person which (x) has not entered into any merger, consolidation or acquisition prior to the applicable BDCA Affiliate Merger Transaction and (y) since its inception has been an Affiliate of BDCA or (ii) an existing Person when it became an Affiliate of BDCA but, immediately prior to such BDCA Affiliate Merger Transaction, had been an Affiliate of BDCA for at least two years.
“ Borrower ” has the meaning assigned to that term in the preamble hereto.
“ Borrowing Base ” means, as of any date of determination, an amount equal to the lesser of:
(a)      (i) the aggregate sum of the products of (A) the Applicable Percentage for each Eligible Loan Asset as of such date and (B) the Adjusted Borrowing Value of such Eligible Loan Asset as of such date, plus (ii) the amount on deposit in the Principal Collection Account as of such date; or
(b)      (i) the aggregate Adjusted Borrowing Value of all Eligible Loan Assets as of such date minus (ii) the Minimum Equity Amount, plus (iii) the amount on deposit in the Principal Collection Account as of such date; or
(c)      the Maximum Facility Amount;
provided that, for the avoidance of doubt, any Loan Asset which at any time is no longer an Eligible Loan Asset (including, for purposes of such determination, not just the date such Loan Asset was first included in the Collateral Portfolio but also any date thereafter on which the representations and warranties set forth in Schedule III are not satisfied) shall not be included in the calculation of “Borrowing Base.”
“ 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 C hereto, prepared by the Servicer.
“ Borrowing Base Deficiency ” means, as of any date of determination, the extent to which the aggregate Advances Outstanding on such date exceeds the Borrowing Base.
“ Breakage Fee ” means, for Advances which are repaid (in whole or in part) on any date other than a Payment Date, the breakage costs, if any, related to such repayment, based upon the assumption that the Lender funded its loan commitment in the London Interbank Eurodollar market and using any reasonable attribution or averaging methods which the Lender deems appropriate and practical, it hereby being understood that the amount of any loss, costs or expense payable by the Borrower to any Lender as Breakage Fee shall be determined in the respective Lender Agent’s reasonable discretion and shall be conclusive absent manifest error.
“ Broadly Syndicated Loan ” means any loan, at the time such loan is transferred to the Borrower, (i) that has a tranche size (including any last-out component but excluding any second lien or unsecured tranche) of $250,000,000 or greater, (ii) the Obligor of which has an EBITDA (as defined in the applicable underlying loan documentation) for the prior twelve calendar months of $50,000,000 or greater, (iii) that is not (and cannot by its terms become) subordinate in right of payment to any obligation of the Obligor in any Bankruptcy Proceeding, (iv) that is secured by a pledge of collateral, which security interest is validly perfected and first priority under Applicable Law (subject to liens permitted under the applicable credit agreement that are reasonable and customary for similar loans, and liens accorded priority by law in favor of the United States or any state or agency), (v) that is publicly rated by S&P and Moody’s (or the underlying Obligor is publicly rated by S&P and Moody’s), (vi) for which the Servicer determines in good faith that the value of the collateral securing the loan (or the enterprise value of the underlying business asset) on or about the time of origination equals or exceeds the outstanding principal balance of the loan plus the aggregate outstanding balances of all other loans of equal or higher seniority secured by the same collateral and (vii) that the Administrative Agent determines, in its sole discretion, is a Broadly Syndicated Loan.
“ Business Day ” means a day of the year other than (i) Saturday or Sunday or (ii) any other day on which commercial banks in New York, New York or the city in which the offices of the Collateral Agent are authorized or required by Applicable Law to close; provided , that, if any determination of a Business Day shall relate to an Advance bearing interest at LIBOR, the term “Business Day” shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market. For avoidance of doubt, if the offices of the Collateral Agent are authorized by Applicable Law to close but remain open, such day shall not be a “Business Day”.
“ Capital Lease Obligations ” means, with respect to any entity, the obligations of such entity to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such entity under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP.
“ Change of Control ” shall be deemed to have occurred if any of the following occur:
(a)      the Management Agreement shall fail to be in full force and effect;
(b)      the creation or imposition of any Lien on any limited liability company membership interest in the Borrower (other than pursuant to the Pledge Agreement);
(c)      the failure by BDCA to own 100% of the limited liability company membership interests in the Borrower; or
(d)      the dissolution, termination or liquidation in whole or in part, transfer or other disposition, in each case, of all or substantially all of the assets of, BDCA.
“ Change of Tax Law ” means any change in application or public announcement of an official position under or any change in or amendment to the laws (or any regulations or rulings promulgated thereunder) of any jurisdiction in which an Obligor is organized, or any political subdivision or taxing authority of any of the foregoing, affecting taxation, or any proposed change in such laws or change in the official application, enforcement or interpretation of such laws, regulations or rulings (including a holding by a court of competent jurisdiction), or any other action taken by a taxing authority or court of competent jurisdiction in the relevant jurisdiction, or the official proposal of any such action.
“ Closing Date ” means July 24, 2012.
“ Code ” means the Internal Revenue Code of 1986, as amended.
“ Collateral Agent ” has the meaning assigned to that term in the preamble hereto.
“ Collateral Agent Expenses ” means the expenses set forth in the U.S. Bank Fee Letter and any other accrued and unpaid expenses (including reasonable attorneys' fees, costs and expenses) and indemnity amounts payable by the Borrower to the Collateral Agent under the Transaction Documents.
“ Collateral Agent Fees ” means the fees set forth in the U.S. Bank Fee Letter, as such fee letter may be amended, restated, supplemented and/or otherwise modified from time to time.
“ Collateral Agent Termination Notice ” has the meaning assigned to that term in Section 10.05 .
“ Collateral Custodian ” means U.S. Bank National Association, not in its individual capacity, but solely as collateral custodian pursuant to the terms of this Agreement.
“ Collateral Custodian Expenses ” means the expenses set forth in the U.S. Bank Fee Letter and any other accrued and unpaid expenses (including reasonable attorneys' fees, costs and expenses) and indemnity amounts payable by the Borrower to the Collateral Custodian under the Transaction Documents.
“ Collateral Custodian Fees ” means the fees set forth in the U.S. Bank Fee Letter, as such fee letter may be amended, restated, supplemented and/or otherwise modified from time to time.
“ Collateral Custodian Termination Notice ” has the meaning assigned to that term in Section 12.05 .
“ Collateral Portfolio ” means all right, title, and interest (whether now owned or hereafter acquired or arising, and wherever located) of the Borrower in the property identified below in clauses (i) through (iv) and all accounts, cash and currency, chattel paper, tangible chattel paper, electronic chattel paper, copyrights, copyright licenses, equipment, fixtures, contract rights, general intangibles, instruments, certificates of deposit, certificated securities, uncertificated securities, financial assets, securities entitlements, commercial tort claims, deposit accounts, inventory, investment property, letter-of-credit rights, software, supporting obligations, accessions, or other property consisting of, arising out of, or related to any of the following (in each case, excluding the Retained Interest and the Excluded Amounts):
(i)      the Loan Assets, and all monies due or to become due in payment under such Loan Assets on and after the related Cut-Off Date, including, but not limited to, all Available Collections;
(ii)      the Portfolio Assets with respect to the Loan Assets referred to in clause (i) ;
(iii)      the Collection Account and all Permitted Investments purchased with funds on deposit in the Collection Account; and
(iv)      all income and Proceeds of the foregoing.
“ Collection Account ” means a trust account (comprised of the Interest Collection Account and the Principal Collection Account) in the name of the Borrower for the benefit of and under the sole dominion and control of the Collateral Agent for the benefit of the Secured Parties; provided , that the funds deposited therein (including any interest and earnings thereon) from time to time shall constitute the property and assets of the Borrower, and the Borrower shall be solely liable for any Taxes payable with respect to the Collection Account.
“ Collection Account Agreement ” means that certain Collection Account Agreement, dated the date of this Agreement, among the Borrower, the Servicer, the Account Bank, the Administrative Agent and the Collateral Agent, which agreement relates to the Collection Account, as such agreement may from time to time be amended, supplemented or otherwise modified in accordance with the terms thereof.
“ Collection Date ” means the date on which the aggregate outstanding principal amount of the Advances have been repaid in full and all Yield and Fees and all other Obligations have been paid in full, and the Borrower shall have no further right to request any additional Advances.
“ Collection Period ”: With respect to the first Payment Date, the period from and including the Closing Date to and including the Determination Date immediately preceding the first Payment Date; and thereafter, the period from but excluding the Determination Date preceding the previous Payment Date to and including the Determination Date immediately preceding the current Payment Date.
“ Commercial Paper Notes ” means, any short-term promissory notes of any Conduit Lender issued by such Conduit Lender in the commercial paper market.
“ Commitment ” means, with respect to each Lender, (i) prior to the end of the Reinvestment Period, the dollar amount set forth opposite such Lender’s name on Annex A hereto (as such amount may be revised from time to time) or the amount set forth as such Lender’s “Commitment” on Schedule I to the Joinder Supplement relating to such Lender, as applicable and (ii) on or after the Reinvestment Period, such Lender’s Pro Rata Share of the aggregate Advances Outstanding.
“ Conduit Lender ” means each commercial paper conduit as may from time to time become a Lender hereunder by executing and delivering a Joinder Supplement to the Administrative Agent and the Borrower as contemplated by Section 2.22 .
“ 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.
“ Cut-Off Date ” means, with respect to each Loan Asset, the date such Loan Asset is Pledged hereunder.
“ Determination Date ” means, the fifth Business Day after the end of each calendar month.
“ Disbursement Request ” means a disbursement request from the Borrower to the Administrative Agent and the Collateral Agent in the form attached hereto as Exhibit D in connection with a disbursement request from the Principal Collection Account in accordance with Section 2.21 .
“ EBITDA ” means, with respect to any period and any Loan Asset, the meaning of “EBITDA,” “Adjusted EBITDA” or any comparable definition in the Loan Agreement for each such Loan Asset (together with all 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 earnings from continuing operations for such period plus interest expense, income taxes and unallocated depreciation and amortization for such period (to the extent deducted in determining earnings from continuing operations for such period), and any other item the Borrower and the Administrative Agent mutually deem to be appropriate.
“ Eligible Loan Asset ” means, at any time, a Loan Asset in respect of which each of the representations and warranties contained in Section 4.02 and Schedule III hereto is true and correct.
“ 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. Environmental Laws include, without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. § 9601 et seq .), the Hazardous Material Transportation Act (49 U.S.C. § 331 et seq .), the Resource Conservation and Recovery Act (42 U.S.C. § 6901 et seq .), the Federal Water Pollution Control Act (33 U.S.C. § 1251 et seq .), the Clean Air Act (42 U.S.C. § 7401 et seq .), the Toxic Substances Control Act (15 U.S.C. § 2601 et seq .), the Safe Drinking Water Act (42 U.S.C. § 300, et seq .), the Environmental Protection Agency’s regulations relating to underground storage tanks (40 C.F.R. Parts 280 and 281), and the Occupational Safety and Health Act (29 U.S.C. § 651 et seq .), and the rules and regulations thereunder, each as amended or supplemented from time to time.
“ Equity Security ” means (i) any equity security or any other security that is not eligible for purchase by the Borrower as a Loan Asset, (ii) any security purchased as part of a “unit” with a Loan Asset and that itself is not eligible for purchase by the Borrower as a Loan Asset and (iii) any obligation that, at the time of commitment to acquire such obligation, was eligible for purchase by the Borrower as a Loan Asset but that, as of any subsequent date of determination, no longer is eligible for purchase by the Borrower as a Loan Asset, for so long as such obligation fails to satisfy such requirements.
“ Equityholder ” means BDCA, which will own the entire equity interest in the Borrower, with such equity holdings to be evidenced by membership interests. The Equityholder shall provide the Minimum Equity Amount to the Borrower by way of a capital contribution to 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 the Borrower, (b) a trade or business (whether or not incorporated) under common control (within the meaning of Section 414(c) of the Code) with the Borrower or (c) a member of the same affiliated service group (within the meaning of Section 414(m) of the Code) as the Borrower, any corporation described in clause (a) above or any trade or business described in clause (b) above.
“ Eurodollar Disruption Event ” means the occurrence of any of the following: (a) Wells Fargo shall have notified the Administrative Agent of a determination by Wells Fargo or any of its assignees or participants that it would be contrary to law or to the directive of any central bank or other Governmental Authority (whether or not having the force of law) to obtain United States dollars in the London interbank market to fund any Advance, (b) Wells Fargo shall have notified the Administrative Agent of the inability, for any reason, of Wells Fargo or any of its respective assignees or participants to determine LIBOR, (c) Wells Fargo shall have notified the Administrative Agent of a determination by Wells Fargo or any of its respective assignees or participants that the rate at which deposits of United States dollars are being offered to Wells Fargo or any of its respective assignees or participants in the London interbank market does not accurately reflect the cost to Wells Fargo or its assignee or participant of making, funding or maintaining any Advance or (d) Wells Fargo shall have notified the Administrative Agent of the inability of Wells Fargo or any of its respective assignees or participants to obtain United States dollars in the London interbank market to make, fund or maintain any Advance.
“ Event of Default ” has the meaning assigned to that term in Section 7.01 .
“ Excepted Persons ” has the meaning assigned to that term in Section 11.13(a) .
“ Exchange Act ” means the United States Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“ Excluded Amounts ” means any amount received in the Collection Account with respect to any Loan Asset retransferred or substituted for upon the occurrence of a Warranty Event or that is otherwise replaced by a Substitute Eligible Loan Asset, or that is otherwise sold or transferred by the Borrower pursuant to Section 2.07 , to the extent such amount is attributable to a time after the effective date of such replacement or sale.
“ Excluded Collections ” means, with respect to any Loan Asset included as part of the Collateral Portfolio, any amounts attributable to (a) the payment of any Tax, fee or other charge imposed by any Governmental Authority on such Loan Asset or on any Underlying Collateral, (b) the reimbursement of insurance premiums, and (c) any escrows relating to Taxes, insurance and other amounts in connection with Loan Assets which are held in an escrow account for the benefit of the Obligor and the secured party pursuant to escrow arrangements under a Loan Agreement.
“ Excluded Taxes ” has the meaning assigned to that term in Section 2.11(a) .
“ Facility Maturity Date ” means the earliest to occur of (i) the Stated Maturity Date, (ii) the date of the declaration, or automatic occurrence, of the Facility Maturity Date pursuant to Section 7.01 , (iii) the Collection Date or (iv) the occurrence of the termination of this Agreement pursuant to Section 2.18(b) hereof.
“ FDIC ” means the Federal Deposit Insurance Corporation, and any successor thereto.
“ Federal Funds Rate ” means, for any period, a fluctuating interest per annum rate equal, for each day during such period, to the weighted average of the overnight federal funds rates as in Federal Reserve Board Statistical Release H.15(519) or any successor or substitute publication selected by the Administrative Agent (or, if such day is not a Business Day, for the next preceding Business Day), or, if for any reason such rate is not available on any day, the rate determined, in the sole discretion of the Administrative Agent, to be the rate at which overnight federal funds are being offered in the national federal funds market at 9:00 a.m. on such day.
“ Fees ” means (i) the Non-Usage Fee and (ii) the fees payable to each Lender or Lender Agent pursuant to the terms of any Lender Fee Letter.
“ Financial Asset ” has the meaning specified in Section 8-102(a)(9) of the UCC.
“ Financial Sponsor ” means any Person, including any Subsidiary of such Person, whose principal business activity is acquiring, holding, and selling investments (including controlling interests) in otherwise unrelated companies that each are distinct legal entities with separate management, books and records and bank accounts, whose operations are not integrated with one another and whose financial condition and creditworthiness are independent of the other companies so owned by such Person.
“ Fixed Rate Loan Asset ” means a Loan Asset other than a Floating Rate Loan Asset.
“ Floating Rate Loan Asset ” means a Loan Asset under which the interest rate payable by the Obligor thereof is based on a prime rate or the London Interbank Offered Rate, plus some specified interest percentage in addition thereto, and which provides that such interest rate will reset immediately upon any change in the related prime rate or the London Interbank Offered Rate.
“Fourth Amendment Effective Date” means June 30, 2014.
“ GAAP ” means generally accepted accounting principles as in effect from time to time in the United States.
“ Governmental Authority ” means, with respect to any Person, any nation or government, any state or other political subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, any body or entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government and any court or arbitrator having jurisdiction over such Person.
“ Hazardous Materials ” means all materials subject to any Environmental Law, including, without limitation, 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.
“ Indebtedness ” means:
(i)      with respect to any Obligor under any Loan Asset, for the purposes of the definition of the Interest Coverage Ratio and the Net Leverage Ratio, the meaning of “Indebtedness” or any comparable definition in the Loan Agreement for each such Loan Asset, and in any case that “Indebtedness” or such comparable definition is not defined in such Loan Agreement, without duplication, (a) all obligations of such entity for borrowed money or with respect to deposits or advances of any kind, (b) all obligations of such entity evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such entity under conditional sale or other title retention agreements relating to property acquired by such entity, (d) all obligations of such entity in respect of the deferred purchase price of property or services (excluding current accounts payable incurred in the ordinary course of business), (e) all indebtedness of others secured by (or for which the holder of such indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such entity, whether or not the indebtedness secured thereby has been assumed, (f) all guarantees by such entity of indebtedness of others, (g) all Capital Lease Obligations of such entity, (h) all obligations, contingent or otherwise, of such entity as an account party in respect of letters of credit and letters of guaranty and (i) all obligations, contingent or otherwise, of such entity in respect of bankers’ acceptances; and
(ii)      for all other purposes, 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 current liabilities 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 obligations of such Person under leases that have been or should be, in accordance with GAAP, recorded as capital leases, (c) all obligations of such Person in respect of acceptances issued or created for the account of such Person, (d) all liabilities secured by any Lien on any property owned by such Person even though such Person has not assumed or otherwise become liable for the payment thereof, (e) all indebtedness, obligations or liabilities of that Person in respect of derivatives and (f) all obligations under direct or indirect 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 (e) of this clause (ii) .
“ Indemnified Amounts ” has the meaning assigned to that term in Section 8.01 .
“ Indemnified Party ” has the meaning assigned to that term in Section 8.01 .
“ Indemnifying Party ” has the meaning assigned to that term in Section 8.03 .
“ Independent Manager ” an individual who has at least three (3) years prior experience as an independent director, independent manager or independent member who is provided by CT Corporation, Corporation Service Company, National Registered Agents, Inc., Lord Securities Corporation or, if none of those companies is then providing professional independent directors or independent managers, another nationally recognized company reasonably approved by the Administrative Agent, in each case, that is not an Affiliate of Member and that provides professional independent directors and Independent Managers and other corporate services in the ordinary course of its business, and which individual is duly appointed as a member of the board of directors or board of managers of such corporation or limited liability company and is not, has never been, and will not while serving as independent director or Independent Manager be, any of the following:
(i)      a member, partner, equity holder, manager, director, officer or employee of the Borrower, the Seller or any of its Affiliates (other than as an independent director or independent manager of any Affiliate that is a single-purpose bankruptcy remote entity;
(ii)      a creditor, supplier or service provider (including provider of professional services) to the Borrower, the Seller or any of its Affiliates (other than a nationally-recognized company that routinely provides professional independent directors or independent managers and other corporate services in the ordinary course of its business);
(iii)      a family member of any such member, partner, equity holder, manager, director, officer, employee, creditor, supplier or service provider; or
(iv)      a Person that controls (whether directly, indirectly or otherwise) any Person described in any of the preceding clauses (i), (ii) or (iii).
A natural Person who otherwise satisfies the preceding definition other than clause (i) by reason of being the independent director or independent manager of a “special purpose entity” affiliated with Seller shall not be disqualified from serving as an independent director or independent manager of the Borrower provided that the fees that such individual earns from serving as independent directors or Independent Managers of Affiliates of Member in any given year constitute in the aggregate less than 5% of such individual’s annual income for that year.
“ Indorsement ” has the meaning specified in Section 8-102(a)(11) of the UCC, and “ Indorsed ” has a corresponding meaning.
“ Initial Advance ” means the first Advance made pursuant to Article II .
“ Institutional Lender ” means (i) Wells Fargo and (ii) each financial institution other than a Conduit Lender which may from time to time become a Lender hereunder by executing and delivering a Joinder Supplement to the Administrative Agent and the Borrower as contemplated by Section 2.22 .
“ Instrument ” has the meaning specified in Section 9-102(a)(47) of the UCC.
“ Insurance Policy ” means, with respect to any Loan Asset, an insurance policy covering liability and physical damage to, or loss of, the Underlying Collateral.
“ Insurance Proceeds ” means any amounts received on or with respect to a Loan Asset under any Insurance Policy or with respect to any condemnation proceeding or award in lieu of condemnation, other than (i) any such amount received which is required to be used to restore, improve or repair the related real estate or required to be paid to the Obligor under the Loan Agreement or (ii) prior to an Event of Default hereunder and with prior notice to the Administrative Agent, any such amount for which the Borrower has elected, in its reasonable business discretion, to be used to restore, improve or repair the related real estate or otherwise to be paid to the Obligor under the Loan Agreement.
“ Interest ” means, with respect to any period and any Loan Asset, for the Obligor on such Loan Asset and any of its parents or Subsidiaries that are obligated under the Loan Agreement for such Loan Asset (determined on a consolidated basis without duplication in accordance with GAAP), the meaning of “Interest” or any comparable definition in the Loan Agreement for each such Loan Asset and in any case that “Interest” or such comparable definition is not defined in such Loan Agreement, all interest in respect of Indebtedness (including the interest component of any payments in respect of Capital Lease Obligations) accrued or capitalized during such period (whether or not actually paid during such period).
“ Interest Collection Account ” means a sub-account (account number 163757-201 at the Account Bank) of the Collection Account into which Interest Collections shall be segregated.
“ Interest Collections ” means, (i) with respect to any Loan Asset, all payments and collections attributable to interest on such Loan Asset, including, without limitation, all scheduled payments of interest and payments of interest relating to principal prepayments, all guaranty payments attributable to interest and proceeds of any liquidations, sales, dispositions or securitizations attributable to interest on such Loan Asset and (ii) amendment fees, late fees, waiver fees, prepayment fees or other amounts received in respect of Loan Assets.
“ Interest Coverage Ratio ” means, with respect to any Loan Asset for any Relevant Test Period, the meaning of “Interest Coverage Ratio” or any comparable definition in the Loan Agreement for each such Loan Asset, and in any case that “Interest Coverage Ratio” or such comparable definition is not defined in such Loan Agreement, the ratio of (a) EBITDA to (b) Interest.
“ Joinder Supplement ” means an agreement among the Borrower, a Lender, its Lender Agent and the Administrative Agent in the form of Exhibit E to this Agreement (appropriately completed) delivered in connection with a Person becoming a Lender hereunder after the Closing Date.
“ Judgment Cap ” means, (i) $1,000,000 at any time that the Shareholders’ Equity of BDCA is less than $100,000,000, (ii) $2,500,000 at any time that the Shareholders’ Equity of BDCA is greater or equal to $100,000,000 but less than $250,000,000 and (iii) $5,000,000 at any time that the Shareholders’ Equity of BDCA is greater than or equal to $250,000,000.
“ Lender ” means any Institutional Lender or Conduit Lender, and/or any other Person to whom an Institutional Lender or Conduit 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 .
“ Lender Agent ” means, with respect to (i) Wells Fargo, Wells Fargo; (ii) each Conduit Lender which may from time to time become party hereto, the Person designated as the “Lender Agent” with respect to such Conduit Lender in the applicable Joinder Supplement and (iii) each Institutional Lender which may from time to time become a party hereto, each shall be deemed to be its own Lender Agent, and, in each case, each of their respective successors and assigns.
“ Lender Fee Letter ” means each fee letter agreement that shall be entered into by and among the Borrower, the Servicer, the applicable Lender and its related Lender Agent in connection with the transactions contemplated by this Agreement, as amended, modified, waived, supplemented, restated or replaced from time to time.
“ LIBOR ” means, for any day during the Remittance Period, with respect to any Advance (or portion thereof) (a) the rate per annum appearing on Reuters Screen LIBOR01 Page (or any successor or substitute page) as the London interbank offered rate for deposits in dollars at approximately 11:00 a.m., London time, for such day, provided, if such day is not a Business Day, the immediately preceding Business Day, for a one-month maturity; and (b) if no rate specified in clause (a) of this definition so appears on Reuters Screen LIBOR01 Page (or any successor or substitute page), the interest rate per annum at which dollar deposits of $5,000,000 and for a one-month maturity are offered by the principal London office of Wells Fargo in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, for such day.
“ 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 agreement to give any financing statement perfecting a security interest under the UCC or comparable law of any jurisdiction.
“ Lien Release Dividend ” has the meaning assigned to that term in Section 2.07(g) .
“ Lien Release Dividend Date ” means the date specified by the Borrower, which date may be any Business Day, provided written notice is given in accordance with Section 2.07(g) .
“ Liquidity Agreement ” means any agreement entered into in connection with this Agreement pursuant to which a Liquidity Bank agrees to make purchases from or advances to, or purchase assets from, any Conduit Lender in order to provide liquidity support for such Conduit Lender’s Advances hereunder.
“ Liquidity Bank ” means the Person or Persons who provide liquidity support to any Conduit Lender pursuant to a Liquidity Agreement in connection with the issuance by such Conduit Lender of Commercial Paper Notes.
“ Loan Agreement ” means the loan agreement, credit agreement or other agreement pursuant to which a Loan Asset has been issued or created and each other agreement that governs the terms of or secures the obligations represented by such Loan Asset or of which the holders of such Loan Asset are the beneficiaries.
“ Loan Asset ” means any loan originated or acquired by the Seller in the ordinary course of its business, which loan includes, without limitation, (i) the Required Loan Documents and Loan Asset File and (ii) all right, title and interest of the Seller in and to the loan and any Underlying Collateral, but excluding, in each case, the Retained Interest and Excluded Amounts and which loan was acquired by the Borrower from the Seller under the Purchase and Sale Agreement and owned by the Borrower on the initial Advance Date (as set forth on the Loan Asset Schedule delivered on the initial Advance Date) or acquired by the Borrower from the Seller under the Purchase and Sale Agreement after the initial Advance Date pursuant to the delivery of a Loan Assignment and listed on Schedule I to the Loan Assignment. For the avoidance of doubt, and without limiting the foregoing, the term “Loan Asset” shall, for all purposes of this Agreement, be deemed to include any loan acquired directly by the Borrower from a third party in a transaction arranged and underwritten by the Seller or any loan acquired by the Borrower in a transaction in which the Borrower is the designee of the Seller under the instruments of conveyance relating to the applicable loan.
“ Loan Asset Checklist ” means an electronic or hard copy, as applicable, of a checklist delivered by or on behalf of the Borrower to the Collateral Custodian, for each Loan Asset, of all Required Loan Documents to be included within the respective Loan Asset File, which shall specify whether such document is an original or a copy.
“ Loan Asset File ” means, with respect to each Loan Asset, a file containing (a) each of the documents and items as set forth on the Loan Asset Checklist with respect to such Loan Asset and (b) duly executed originals (to the extent required by the Servicing Standard) and copies of any other Records relating to such Loan Assets and Portfolio Assets pertaining thereto.
“ Loan Asset Register ” has the meaning assigned to that term in Section 5.03(l) .
“ Loan Asset Schedule ” means the schedule of Loan Agreements evidencing Loan Assets delivered by the Borrower to the Collateral Custodian and the Administrative Agent. Each such schedule shall set forth, as to any Eligible Loan Asset to be Pledged hereunder, the applicable information specified on Schedule V , which shall also be provided to the Collateral Custodian in electronic format acceptable to the Collateral Custodian.
“ Loan Assignment ” has the meaning set forth in the Purchase and Sale Agreement.
“ Make-Whole Premium ” means, in the event that this Agreement is terminated pursuant to Section 2.18(b) prior to the one year anniversary of the Closing Date, an amount, payable pro rata to each Lender Agent (for the account of the applicable Lender), equal to 2.00% of the Maximum Facility Amount; provided that, the Make-Whole Premium shall be calculated without giving effect to the proviso in the definition of “Maximum Facility Amount”.
“ Management Agreement ” means the Amended and Restated Investment Advisory and Management Services Agreement, dated as of June 23, 2011, between BDCA and BDCA Adviser, LLC.
“ Margin Stock ” means “margin stock” as such term is defined in Regulation T, U or X of the Federal Reserve Board.
“ Material Adverse Effect ” means, with respect to any event or circumstance, a material adverse effect on (a) the business, condition (financial or otherwise), operations, performance or properties of the Seller, the Servicer or the Borrower, (b) the validity, enforceability or collectability of this Agreement or any other Transaction Document or the validity, enforceability or collectability of the Loan Assets generally or any material portion of the Loan Assets, (c) the rights and remedies of the Collateral Agent, the Collateral Custodian, the Account Bank, the Administrative Agent, any Lender, any Lender Agent and the Secured Parties with respect to matters arising under this Agreement or any other Transaction Document, (d) the ability of each of the Borrower and the Servicer, to perform their respective obligations under this Agreement or any other Transaction Document or (e) the status, existence, perfection, priority or enforceability of the Collateral Agent’s, the Administrative Agent’s or the other Secured Parties’ lien on the Collateral Portfolio.
“ Material Modification ” means any amendment or waiver of, or modification or supplement to, a Loan Agreement governing a Loan Asset executed or effected on or after the Cut-Off Date for such Loan Asset which:
(a)      reduces or forgives any or all of the principal amount due under such Loan Asset;
(b)      delays or extends the maturity date for such Loan Asset;
(c)      waives one or more interest payments, permits any interest due in cash to be deferred or capitalized and added to the principal amount of such Loan Asset (other than any deferral or capitalization already allowed by the terms of the Loan Agreement of any PIK Loan Asset) or reduces the amount of interest due when the Interest Coverage Ratio under such Loan Agreement is less than 150% (prior to giving effect to such reduction in interest expense);
(d)      contractually or structurally subordinates such Loan Asset by operation of a priority of payments, turnover provisions, the transfer of assets in order to limit recourse to the related Obligor or the granting of Liens (other than Permitted Liens) on any of the Underlying Collateral securing such Loan Asset;
(e)      substitutes, alters or releases the Underlying Collateral securing such Loan Asset and any such substitution, alteration or release, as determined in the reasonable discretion of the Administrative Agent, materially and adversely affects the value of such Loan Asset, provided, that the foregoing shall not apply to any release in conjunction with a relatively contemporaneous disposition by the Obligor accompanied by a mandatory reinvestment of net proceeds or mandatory repayment of the applicable loan facility with the net proceeds; or
(f)      amends, waives, forbears, supplements or otherwise modifies (i) the meaning of “Net Leverage Ratio,” “Interest Coverage Ratio” or “Permitted Liens” or any respective comparable definitions in the Loan Agreement for such Loan Asset or (ii) any term or provision of such Loan Agreement referenced in or utilized in the calculation of the “Net Leverage Ratio,” “Interest Coverage Ratio” or “Permitted Liens” or any respective comparable definitions for such Loan Asset, in either case in a manner that, in the reasonable judgment of the Administrative Agent, is materially adverse to the Secured Parties.
“ Maximum Facility Amount ” means the aggregate Commitments as then in effect, which amount shall not exceed $ 200,000,000 300,000,000 ; provided that at all times after the Reinvestment Period, the Maximum Facility Amount shall mean the aggregate Advances Outstanding at such time.
“ Middle Market Loan ” means any Loan Asset that is not a Broadly Syndicated Loan.
“ Minimum Equity Amount ” means $ 50,000,000. 70,000,000.
“ Monthly Reporting Date ” means the date that is two Business Days prior to the 15 th day of each calendar month or, if such day is not a Business Day, the next succeeding Business Day, commencing in September 2012.
“ Moody’s ” means Moody’s Investors Service, Inc. (or its successors in interest).
“ Mortgage ” means the mortgage, deed of trust or other instrument creating a Lien on an interest in real property securing a Loan Asset, including the assignment of leases and rents related thereto.
“ Multiemployer Plan ” means a “multiemployer plan” as defined in Section 4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate contributed or had any obligation to contribute on behalf of its employees at any time during the current year or the preceding five years.
“ Net Leverage Ratio ” means, with respect to any Loan Asset for any Relevant Test Period, the meaning of “Net Leverage Ratio” or any comparable definition in the Loan Agreement for each such Loan Asset, and in any case that “Net Leverage Ratio” or such comparable definition is not defined in such Loan Agreement, the ratio of (a) Indebtedness minus Unrestricted Cash to (b) EBITDA.
“ Non-Usage Fee ” has the meaning assigned to that term in Section 2.09(a) .
“ Non-Usage Fee Rate ” has the meaning assigned to that term in Section 2.09(a) .
“ Noteless Loan Asset ” means a Loan Asset with respect to which the Loan Agreements (i) do not require the Obligor to execute and deliver a promissory note to evidence the indebtedness created under such Loan Asset or (ii) require any holder of the indebtedness created under such Loan Asset to affirmatively request a promissory note from the related Obligor.
“ Notice and Request for Consent ” has the meaning assigned to that term in Section 2.07(g)(i) .
“ Notice of Borrowing ” means an irrevocable written notice of borrowing from the Borrower to the Administrative Agent and each Lender Agent in the form attached hereto as Exhibit F .
“ Notice of Reduction ” means a notice of a reduction of the Advances Outstanding pursuant to Section 2.18 , in the form attached hereto as Exhibit G .
“ 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 Lender Agents, the Administrative Agent, the Account Bank, the Collateral Agent or the Collateral Custodian arising under this Agreement and/or any other Transaction Document and shall include, without limitation, all liability for principal of and interest on the Advances, indemnifications and other amounts due or to become due by the Borrower to the Lenders, the Lender Agents, the Administrative Agent, the Collateral Agent, the Collateral Custodian and the Account Bank under this Agreement and/or any other Transaction Document, including, without limitation, any amounts payable under any Lender Fee Letter, any Make-Whole Premium and costs and expenses payable by the Borrower to the Lenders, the Lender Agents, the Administrative Agent, the Account Bank, the Collateral Agent or the Collateral Custodian, including reasonable attorneys’ fees, costs and expenses, including without limitation, interest, fees and other obligations that accrue after the commencement of a Bankruptcy Proceeding (in each case, whether or not allowed as a claim in such Bankruptcy Proceeding).
“ Obligor ” means, collectively, each Person obligated to make payments under a Loan Agreement, including any guarantor thereof.
“ Officer’s Certificate ” means a certificate signed by the president, the secretary, an assistant secretary, the chief financial officer or any vice president, as an authorized officer, of any Person.
“ Opinion of Counsel ” means a written opinion of counsel, which opinion and counsel are acceptable to the Administrative Agent in its sole discretion.
“ Outstanding Balance ” means the principal balance of a Loan Asset, expressed exclusive of PIK Interest and accrued interest.
“ Payment Date ” means the 15 th day of each of January, April, July and October or, if such day is not a Business Day, the next succeeding Business Day, commencing on the 15 th day of October; provided , that the final Payment Date shall occur on the Collection Date.
“ Payment Duties ” has the meaning assigned to that term in Section 10.02(b)(ii) .
“ Pension Plan ” has the meaning assigned to that term in Section 4.01(w) .
“ Permitted Investments ” means any of (i) Wells Fargo Advantage Money Market Funds – Government Money Market Fund or (ii) Wells Fargo Money Market Deposit Account.
“ Permitted Liens ” means any of the following as to which no enforcement, collection, execution, levy or foreclosure proceeding shall have been commenced: (a) Liens for state, municipal or other local Taxes if such Taxes shall not at the time be due and payable 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 and (c) Liens granted pursuant to or by the Transaction Documents.
“ Person ” means an individual, 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.
“ PIK Interest ” means interest accrued on a Loan Asset that is added to the principal amount of such Loan Asset instead of being paid as interest as it accrues.
“ PIK Loan Asset ” means a Loan Asset which provides for a portion of the interest that accrues thereon to be added to the principal amount of such Loan Asset for some period of the time prior to such Loan Asset requiring the current cash payment of such previously capitalized interest, which cash payment shall be treated as an Interest Collection at the time it is received.
“ Pledge ” means the pledge of any Eligible Loan Asset or other Portfolio Asset pursuant to Article II .
“ Pledge Agreement ” means that certain Pledge Agreement, dated as of the Closing Date, between the Seller, as pledgor, and the Collateral Agent, as pledgee, as such Pledge Agreement may from time to time be amended, restated, supplemented or otherwise modified from time to time in accordance with the terms thereof.
“ Portfolio Assets ” means all Loan Assets owned by the Borrower, together with all proceeds thereof and other assets or property related thereto, including all right, title and interest of the Borrower in and to:
(a)      any amounts on deposit in any cash reserve, collection, custody or lockbox accounts securing the Loan Assets;
(b)      all rights with respect to the Loan Assets to which the Borrower (as assignee of the Seller) is entitled as lender under the applicable Loan Agreement;
(c)      the Collection Account, together with all cash and investments in each of the foregoing other than amounts earned on investments therein;
(d)      any Underlying Collateral securing a Loan Asset and all Recoveries related thereto, all payments paid in respect thereof and all monies due, to become due and paid in respect thereof accruing after the applicable Cut-Off Date and all liquidation proceeds;
(e)      all Required Loan Documents, the Loan Asset Files related to any Loan Asset, any Records, and the documents, agreements, and instruments included in the Loan Asset Files or Records;
(f)      all insurance proceeds with respect to any Loan Asset;
(g)      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 any Loan Asset, together with all UCC financing statements, mortgages or similar filings signed or authorized by an Obligor relating thereto;
(h)      the Purchase and Sale Agreement (including, without limitation, rights of recovery of the Borrower against the Seller) and the assignment to the Collateral Agent, for the benefit of the Secured Parties, of all UCC financing statements filed by the Borrower against the Seller under or in connection with the Purchase and Sale Agreement;
(i)      all records (including computer records) with respect to the foregoing; and
(j)      all collections, income, payments, proceeds and other benefits of each of the foregoing.
“ Priced Loan Asset ” means any Loan Asset that has an observable quote from LoanX Mark-It Partners or Loan Pricing Corporation, or from another pricing service selected by the Administrative Agent in its sole discretion.
“ Prime Rate ” means the rate announced by Wells Fargo from time to time as its prime rate in the United States, such rate to change as and when such designated rate changes. The Prime Rate is not intended to be the lowest rate of interest charged by Wells Fargo or any other specified financial institution in connection with extensions of credit to debtors.
“ Principal Collection Account ” means a sub-account (account number 163757-202 at the Account Bank) of the Collection Account into which Principal Collections shall be segregated.
“ Principal Collections ” means (i) any amounts deposited by the Borrower in accordance with Section 2.06(a)(i) or Section 2.07(c)(i) and (ii) with respect to any Loan Asset, all amounts received which are not Interest Collections, including, without limitation, all Recoveries, all Insurance Proceeds, all scheduled payments of principal and principal prepayments and all guaranty payments and proceeds of any liquidations, sales, dispositions or securitizations, in each case, attributable to the principal of such Loan Asset.
“ Pro Rata Share ” means, with respect to each Lender, the percentage obtained by dividing the Commitment of such Lender (as determined under clause (i) of the definition of “Commitment”), by the aggregate Commitments of all the Lenders (as determined under clause (i) of the definition of “Commitment”).
“ Proceeds ” means, with respect to any Collateral Portfolio, all property that is receivable or received when such Collateral Portfolio 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 Portfolio.
“ Prohibited Transferee ” means any hedge fund, any so-called vulture fund or loan-to-own fund, any distressed debt fund or any other fund that is similar to any of the foregoing.
“ Purchase and Sale Agreement ” means that certain Purchase and Sale Agreement, dated as of the Closing Date, between the Seller, as the seller, and the Borrower, as the purchaser, as amended, modified, waived, supplemented, restated or replaced from time to time.
“ Records ” means all documents relating to the Loan Assets, including books, records and other information executed in connection with the origination or acquisition of the Collateral Portfolio or maintained with respect to the Collateral Portfolio and the related Obligors that the Borrower, the Seller or the Servicer have generated, in which the Borrower or the Seller have acquired an interest pursuant to the Purchase and Sale Agreement or in which the Borrower or the Seller have otherwise obtained an interest.
“ Recoveries ” means, as of the time any Underlying Collateral with respect to any Loan Asset subject to clause (ii) or (iv) of the definition of “Value Adjustment Event”, as applicable, is sold, discarded or abandoned (after a determination by the Servicer that such Underlying Collateral has little or no remaining value) or otherwise determined to be fully liquidated by the Servicer in accordance with the Servicing Standard, the proceeds from the sale of the Underlying Collateral, the proceeds of any related Insurance Policy, any other recoveries with respect to such Loan Asset, as applicable, the Underlying Collateral, and amounts representing late fees and penalties, net of any amounts received that are required under such Loan Asset, as applicable, to be refunded to the related Obligor.
“ Register ” has the meaning assigned to that term in Section 2.14 .
“ Reinvestment Period ” shall mean the date commencing on the Closing Date and ending on the day preceding the earlier of (i) April 26, 2015 (or such later date to the extent the Reinvestment Period is extended in accordance with Section 2.19(b)), (ii) the occurrence of an Event of Default (past any applicable notice or cure period provided in the definition thereof) and (iii) the date of any voluntary termination by the Borrower pursuant to Section 2.18(b) .
“ Reinvestment Period Extension ” has the meaning set forth in Section 2.19(b).
“ Release Date ” has the meaning set forth in Section 2.07(c) .
“ Relevant Test Period ” means, with respect to any Loan Asset, the relevant test period for the calculation of Net Leverage Ratio or Interest Coverage Ratio, as applicable, for such Loan Asset in the Loan Agreements or, if no such period is provided for therein, for Obligors delivering monthly financing statements, each period of the last 12 consecutive reported calendar months, and for Obligors delivering quarterly financing statements, each period of the last four consecutive reported fiscal quarters of the principal Obligor on such Loan Asset; provided that with respect to any Loan Asset for which the relevant test period is not provided for in the Loan Agreement, if an Obligor is a newly-formed entity as to which 12 consecutive calendar months have not yet elapsed, “Relevant Test Period” shall initially include the period from the date of formation of such Obligor to the end of the twelfth calendar month or fourth fiscal quarter (as the case may be) from the date of formation, and shall subsequently include each period of the last 12 consecutive reported calendar months or four consecutive reported fiscal quarters (as the case may be) of such Obligor.
“ Remittance Period ” means, (i) as to the initial Payment Date, the period beginning on the Closing Date and ending on, and including, the Determination Date immediately preceding such Payment Date and (ii) as to any subsequent Payment Date, the period beginning on the first day after the most recently ended Remittance Period and ending on, and including, the Determination Date immediately preceding such Payment Date, or, with respect to the final Remittance Period, the Collection Date.
“ Replacement Servicer ” has the meaning assigned to that term in Section 6.01(c) .
“ Reporting Date ” means the date that is two Business Days prior to the Payment Date of each calendar quarter, commencing in October 2012.
“ Required Lenders ” means (i) Wells Fargo (as a Lender hereunder) and its successors and assigns and (ii) the Lenders representing an aggregate of at least 51% of the aggregate Commitments of the Lenders then in effect.
“ Required Loan Documents ” means, for each Loan Asset, originals (except as otherwise indicated) of the following documents or instruments, all as specified on the related Loan Asset Checklist:
(a)      (i) other than in the case of a Noteless Loan Asset, the original or, if accompanied by an original “lost note” affidavit and indemnity, a copy of, the underlying promissory note, endorsed by the Borrower or the prior holder of record either in blank or to the Collateral Agent (and evidencing an unbroken chain of endorsements from each prior holder thereof evidenced in the chain of endorsements either in blank or to the Collateral Agent), with any endorsement to the Collateral Agent to be in the following form: “U.S. Bank National Association, as Collateral Agent for the Secured Parties” and (ii) in the case of a Noteless Loan Asset (A) a copy of each transfer document or instrument relating to such Noteless Loan Asset evidencing the assignment of such Noteless Loan Asset to the Seller and from the Seller to the Borrower and from the Borrower either to the Collateral Agent or in blank, and (B) a copy of the Loan Asset Register with respect to such Noteless Loan Asset, as described in Section 5.03(l)(ii) ;
(b)      copies (or originals, solely to the extent in the possession of the Borrower) of each of the following, to the extent applicable to the related Loan Asset; any related loan agreement, credit agreement, note purchase agreement, security agreement (if separate from any Mortgage), sale and servicing agreement, acquisition agreement, subordination agreement, intercreditor agreement or similar instruments, guarantee, Insurance Policy, assumption or substitution agreement or similar material operative document, in each case, together with any amendment or modification thereto, as set forth on the Loan Asset Checklist;
(c)      if any Loan Asset is secured by a Mortgage, in each case, as set forth in the Loan Asset Checklist:
(i) either (A) the original Mortgage, the original assignment of leases and rents, if any, and the originals of all intervening assignments, if any, of the Mortgage and assignments of leases and rents with evidence of recording thereon, (B) copies thereof certified by the Servicer, by closing counsel or by a title company or escrow company to be true and complete copies thereof where the originals have been transmitted for recording until such time as the originals are returned by the public recording office; provided that the Borrower shall have an obligation to deliver originals under this clause (c)(i) solely to the extent that Borrower obtained such originals from the Seller or the third-party from whom the Borrower purchased the related Loan Asset; provided further that, solely for purposes of the Review Criteria, the Collateral Custodian shall have no duty to ascertain whether any certification set forth in subsection (c)(ii) has been received, other than a certification which has been clearly delineated as being provided by the Servicer or (C) copies certified by the public recording offices where such documents were recorded to be true and complete copies thereof in those instances where the public recording offices retain the original or where the original recorded documents are lost; and
(ii) other than with respect to any Agented Note, to the extent the Borrower is the sole lender under the Loan Agreement, an Assignment of Mortgage and of any other material recorded security documents (including any assignment of leases and rents) in recordable form, executed by the Borrower or the prior holder of record, in blank or to the Collateral Agent (and evidencing an unbroken chain of assignments from the prior holder of record to the Collateral Agent), with any assignment to the Collateral Agent to be in the following form: “U.S. Bank National Association, as Collateral Agent for the Secured Parties”;
(d)      with respect to any Loan Asset originated by the Seller and with respect to which the Seller acts as administrative agent (or in a comparable capacity), either (i) copies of the UCC-1 Financing Statements, if any, and any related continuation statements, each showing the Obligor as debtor and the Collateral Agent as total assignee or showing the Obligor, as debtor and the Seller as secured party and each with evidence of filing thereon, or (ii) copies of any such financing statements certified by the Servicer to be true and complete copies thereof in instances where the original financing statements have been sent to the appropriate public filing office for filing, in each case, as set forth in the Loan Asset Checklist.
“ Required Reports ” means, collectively, the Servicing Report required pursuant to Section 6.08(b) , the Servicer’s Certificate required pursuant to Section 6.08(c) , the financial statements of the Servicer required pursuant to Section 6.08(d) , the tax returns of the Borrower and the Servicer required pursuant to Section 6.08(e) , the financial statements and valuation reports of each Obligor required pursuant to Section 6.08(f) , the annual statements as to compliance required pursuant to Section 6.09 , and the annual independent public accountant’s report required pursuant to Section 6.10 .
“ Responsible Officer ” means, with respect to any Person, 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 (i) any dividend or other distribution, direct or indirect, on account of any class of membership interests of the Borrower now or hereafter outstanding, except a dividend paid solely in interests of that class of membership interests or in any junior class of membership interests of the Borrower, (ii) any redemption, retirement, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any class of membership interests of the Borrower now or hereafter outstanding, (iii) any payment made to redeem, purchase, repurchase or retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire membership interests of the Borrower now or hereafter outstanding and (iv) any payment of management fees by the Borrower. For the avoidance of doubt, (x) payments and reimbursements due to the Servicer in accordance with this Agreement or any other Transaction Document do not constitute Restricted Junior Payments and (y) distributions by the Borrower to holders of its membership interests of Loan Assets or of cash or other proceeds relating thereto which have been substituted by the Borrower in accordance with this Agreement shall not constitute Restricted Junior Payments.
“ Retained Interest ” means, with respect to any Agented Note that is transferred to the Borrower, (i) all of the obligations, if any, of the agent(s) under the documentation evidencing such Agented Note and (ii) the applicable portion of the interests, rights and obligations under the documentation evidencing such Agented Note that relate to such portion(s) of the indebtedness that is owned by another lender.
“ Review Criteria ” has the meaning assigned to that term in Section 12.02(b)(i) .
“ S&P ” means Standard & Poor’s Ratings Group, a division of The McGraw-Hill Companies, Inc. (or its successors in interest).
“ Scheduled Payment ” means each scheduled payment of principal and/or interest required to be made by an Obligor on the related Loan Asset, as adjusted pursuant to the terms of the related Loan Agreement.
“ SEC ” means the Securities and Exchange Commission.
“ Second Amendment Effective Date ” means April 26, 2013.
“ Secured Party ” means each of the Administrative Agent, each Lender (together with its successors and assigns), each Lender Agent, each Affected Party, each Indemnified Party, the Collateral Custodian, the Collateral Agent and the Account Bank.
“ Securities Act ” means the U.S. Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“ Seller ” means BDCA, in its capacity as the Seller hereunder and as the seller under the Purchase and Sale Agreement, together with its successors and assigns in such capacity.
“ Servicer ” means at any time the Person then authorized, pursuant to Section 6.01 to manage, service, administer, and collect on the Loan Assets and exercise rights and remedies in respect of the same.
“ Servicer’s Certificate ” has the meaning assigned to that term in Section 6.08(c) .
“ Servicer Pension Plan ” has the meaning set forth in Section 4.03(o) .
“ Servicer Termination Event ” means the occurrence of any one or more of the following events:
(a)      any failure by the Servicer to make any payment, transfer or deposit into the Collection Account (including, without limitation, with respect to bifurcation and remittance of Interest Collections and Principal Collections), as required by this Agreement or any Transaction Document which continues unremedied for a period of three Business Days;
(b)      any failure on the part of the Servicer duly to (i) observe or perform in any material respect any other covenants or agreements of the Servicer set forth in this Agreement or the other Transaction Documents to which the Servicer is a party (including, without limitation, any delegation of the Servicer’s duties that is not permitted by Section 6.01 of this Agreement) or (ii) comply in any material respect with the Servicing Standard regarding the servicing of the Collateral Portfolio, and, in each case, the same continues unremedied for a period of 30 days (if such failure can be remedied) after the earlier to occur of (A) the date on which written notice of such failure requiring the same to be remedied shall have been given to the Servicer by the Administrative Agent or the Collateral Agent (at the direction of the Administrative Agent) and (B) the date on which a Responsible Officer of the Servicer acquires knowledge thereof;
(c)      the failure of the Servicer to make any payment when due (after giving effect to any related grace period) under one or more agreements for borrowed money to which it is a party in an aggregate amount in excess of United States $ 1,000,000, 5,000,000, individually or in the aggregate, or the occurrence of any event or condition that has resulted in the acceleration of such amount of recourse debt whether or not waived;
(d)      a Bankruptcy Event shall occur with respect to the Servicer;
(e)      BDCA assigns its rights or obligations as “Servicer” hereunder in a manner not in accordance with Section 11.04(a) ;
(f)      at the end of any fiscal quarter, BDCA fails to maintain the Asset Coverage Ratio at greater than or equal to 2:1;
(g)      BDCA permits Shareholders’ Equity (as reflected in its 10Q or 10K without any deductions) at the last day of any of its fiscal quarter to be less than $49,500,000 plus 80% of the net proceeds of the sale of equity interests by BDCA after the Closing Date;
(h)      any failure by the Servicer to deliver (i) any required Servicing Report on or before the date occurring two Business Days after the date such report is required to be made or given, as the case may be or (ii) any other Required Reports hereunder on or before the date occurring five Business Days after the date such report is required to be made or given, as the case may be, in each case, under the terms of this Agreement;
(i)      any change in the management of the Servicer (whether by resignation, termination, disability, death or lack of day-to-day management) relating to any three of Peter Budko, Robert Grunewald, William Kahane and Nicholas Schorsch failing to be an employee or partner of BDCA or AR Capital, LLC, as applicable, that is actively involved in the management of BDCA’s daily activities including, but not limited to, general management, management of the Collateral Portfolio, underwriting, and the credit approval process and credit monitoring activities, and such individuals are not replaced with other individuals reasonably acceptable to the Administrative Agent within 60 days of such event;
(j)      any representation, warranty or certification made by the Servicer in any Transaction Document or in any certificate delivered pursuant to any Transaction Document shall prove to have been incorrect in any respect when made, which has a Material Adverse Effect on the Collateral Agent or any Secured Party and which continues to be unremedied for a period of 30 days after the earlier to occur of (i) the date on which written notice of such incorrectness requiring the same to be remedied shall have been given to the Servicer by the Administrative Agent or the Collateral Agent (at the direction of the Administrative Agent) or (ii) the date on which a Responsible Officer of the Servicer acquires knowledge thereof;
(k)      any financial or other information reasonably requested by the Administrative Agent, a Lender Agent or the Collateral Agent is not provided as requested within a reasonable amount of time following such request;
(l)      the rendering against the Servicer of one or more final judgments, decrees or orders for the payment of money in excess of the Judgment Cap, United States $5,000,000, individually or in the aggregate, and the continuance of such judgment, decree or order unsatisfied and in effect for any period of more than 45 consecutive days without a stay of execution;
(m)      any change in the control of the Servicer that takes the form of either a merger or consolidation that does not comply with the provisions of Section 5.04(a) of this Agreement;
(n)      the occurrence of an Event of Default has occurred and is continuing (past any applicable notice or cure period provided in the definition thereof);
(o)      the failure by BDCA to own 100% of the membership interests in the Borrower; or
(p)      any other event which a reasonable commercial lender would determine has caused, or which may cause, a Material Adverse Effect on the assets, liabilities, financial condition, business or operations of the Servicer or the ability of the Servicer to meet its obligations under the Transaction Documents to which it is a party.
“ Servicer Termination Notice ” has the meaning assigned to that term in Section 6.01(b).
“ Servicing Fees ” means the fee payable to the Servicer on each Payment Date in arrears in respect of each Remittance Period, which fee shall be equal to the product of (i) 0.50%, (ii) the arithmetic mean of the aggregate Outstanding Balance of all Eligible Loan Assets on the first day and on the last day of the related Remittance Period and (iii) the actual number of days in such Remittance Period divided by 360; provided that the rate set forth in clause (i) hereof may be increased up to 0.75% at the discretion of the Administrative Agent in the event that a successor Servicer is appointed pursuant to Section 6.01(c) .
“ Servicing File ” means, for each Loan Asset, (a) copies of each of the Required Loan Documents and (b) any other portion of the Loan Asset File which is not part of the Required Loan Documents.
“ Servicing Report ” has the meaning assigned to that term in Section 6.08(b) .
“ Servicing Standard ” means, with respect to any Loan Assets included in the Collateral Portfolio, to service and administer such Loan Assets on behalf of the Secured Parties in accordance with Applicable Law, the terms of this Agreement, the Loan Agreements, all customary and usual servicing practices for loans like the Loan Assets and, to the extent consistent with the foregoing, (a)(i) if the Servicer is the originator or an Affiliate thereof, the higher of: (A) the customary and usual servicing practices that a prudent loan investor or lender would use in servicing loans like the Loan Assets for its own account and (B) the same care, skill, prudence and diligence with which the Servicer services and administers loans for its own account or for the account of others and (ii) if the Servicer is not the originator or an Affiliate thereof, the same care, skill, prudence and diligence with which the Servicer services and administers loans for its own account or for the account of others; (b) with a view to maximize the value of the Loan Assets; and (c) without regard to (i) the Servicer’s obligations to incur servicing and administrative expenses with respect to a Loan Asset, (ii) the Servicer’s right to receive compensation for its services hereunder or with respect to any particular transaction, (iii) the ownership by the Servicer or any Affiliate thereof of any Loan Assets or (iv) the ownership, servicing or management for others by the Servicer of any other loans or property by the Servicer.
“ Shareholders’ Equity ” means, at any date, the amount determined on a consolidated basis, without duplication, in accordance with GAAP, of shareholders equity for the Servicer at such date.
“ Solvent ” means, as to any Person at any time, having a state of affairs such that all of the following conditions are met: (a) the fair value of the property of such Person is greater than the amount of such Person’s liabilities (including disputed, contingent and unliquidated liabilities) as such value is established and liabilities evaluated for purposes of Section 101(32) of the Bankruptcy Code; (b) the present fair saleable value of the property of such Person in an orderly liquidation of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts and other liabilities as they become absolute and matured; (c) such Person is able to realize upon its property and pay its debts and other liabilities (including disputed, contingent and unliquidated liabilities) as they mature in the normal course of business; (d) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay as such debts and liabilities mature; and (e) such Person is not engaged in a business or a transaction, and does not propose to engage in a business or a transaction, for which such Person’s property assets would constitute unreasonably small capital.
“ State ” means one of the fifty states of the United States or the District of Columbia.
“ Stated Maturity Date ” means April 26, 2018 (as extended in accordance with Section 2.19(a)).
“Structuring Fee ” means the fee set forth in the Lender Fee Letter, as such fee letter may be amended, restated, supplemented and/or otherwise modified from time to time.
“ Subsidiary ” means with respect to a person, a corporation, partnership or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership 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, partnership or other entity 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 Eligible Loan Asset ” means each Eligible Loan Asset that is Pledged by the Borrower to the Collateral Agent, on behalf of the Secured Parties, pursuant to Section 2.07(a) or Section 2.07(c)(ii) .
“ Taxes ” means any present or future taxes, levies, imposts, duties, charges, assessments or fees of any nature (including interest, penalties, and additions thereto) that are imposed by any Governmental Authority.
“ Third Amendment Effective Date ” means September 9, 2013.
“ Transaction Documents ” means this Agreement, the Variable Funding Note(s), any Joinder Supplement, the Purchase and Sale Agreement, the Collection Account Agreement, the U.S. Bank Fee Letter, each Lender Fee Letter, the Pledge Agreement and each document, instrument or agreement related to any of the foregoing.
“ Transferee Letter ” has the meaning assigned to that term in Section 11.04(a) .
“ UCC ” means the Uniform Commercial Code as from time to time in effect in the specified jurisdiction.
“ Underlying Collateral ” means, with respect to a Loan Asset, any property or other assets designated and pledged or mortgaged as collateral to secure repayment of such Loan Asset, as applicable, including, without limitation, mortgaged property and/or a pledge of the stock, membership or other ownership interests in the related Obligor and all proceeds from any sale or other disposition of such property or other assets.
“ United States ” means the United States of America.
“ Unmatured Event of Default ” means any event that, if it continues uncured, will, with lapse of time, notice or lapse of time and notice, constitute an Event of Default.
“ Unrestricted Cash ” the meaning of “Unrestricted Cash” or any comparable definition in the Loan Agreements for each Loan Asset, and in any case that “Unrestricted Cash” or such comparable definition is not defined in such Loan Agreement, all cash available for use for general corporate purposes and not held in any reserve account or legally or contractually restricted for any particular purposes or subject to any lien (other than blanket liens permitted under or granted in accordance with such Loan Agreement).
“ Unused Portion ” has the meaning assigned to that term in Section 2.09(a) .
“U.S. Bank ” means U.S. Bank National Association.
“ U.S. Bank Fee Letter ” means the U.S. Bank Fee Letter, dated as of the Closing Date, between the Collateral Agent, the Collateral Custodian, the Account Bank and the Borrower, as such letter may be amended, modified, supplemented, restated or replaced from time to time.
“ Value Adjustment Event ” means, with respect to any Loan Asset, the occurrence of any one or more of the following events after the related Cut-Off Date:
(i)      (A) The Interest Coverage Ratio for any Relevant Test Period with respect to such Loan Asset is (I) less than or equal to 85% of the Interest Coverage Ratio with respect to such Loan Asset as calculated on the applicable Cut-Off Date and (II) less than 1.50 or (B) the Net Leverage Ratio for any Relevant Test Period of the related Obligor with respect to such Loan Asset (I) is more than 0.50x higher than such Net Leverage Ratio as calculated on the applicable Cut-Off Date or (II) is more than 3.50x as of the applicable date of determination;
(ii)      an Obligor payment default under any Loan Asset (after giving effect to any grace and/or cure period set forth in the Loan Agreement, but not to exceed five days);
(iii)      any other Obligor default under any Loan Asset for which the Borrower (or agent or required lenders pursuant to the Loan Agreement, as applicable) has elected to exercise any of its rights and remedies under the applicable Loan Agreement in case of the default thereunder (including, but not limited to, acceleration of the debt);
(iv)      a Bankruptcy Event with respect to the related Obligor;
(v)      the occurrence of a Material Modification (in accordance with clauses (b) - (f) of the definition thereof) with respect to such Loan Asset;
(vi)      the occurrence of a Material Modification (in accordance with clause (a) of the definition thereof) with respect to such Loan Asset; or
(vii)      the failure of the Borrower or the Servicer to deliver any “loan level” financial reporting package with respect to such Loan Asset at least 45 days after the end of each month (if required in accordance with the related Loan Agreement), 60 days after the end of each quarter and 120 days after the end of each fiscal year, as applicable (unless waived or otherwise agreed to by the Administrative Agent in its sole discretion).
“ Variable Funding Note ” has the meaning assigned to such term in Section 2.01(a) .
“ Warranty Event ” means, as to any Loan Asset, the discovery that as of the related Cut-Off Date for such Loan Asset there existed a breach of any representation or warranty relating to such Loan Asset (other than any representation or warranty that the Loan Asset satisfies the criteria of the definition of Eligible Loan Asset) and the failure of the Borrower to cure such breach, or cause the same to be cured, within 10 days after the earlier to occur of the Borrower’s receipt of notice thereof from the Administrative Agent or the Borrower becoming aware thereof (without duplication of the grace period set forth in Section 2.07(c) ); provided that, any Loan Asset approved by the Administrative Agent in accordance with Section 11 of Schedule III on the applicable Cut-Off Date shall not be a Warranty Loan Asset due to the failure of such Loan Asset to satisfy the requirements of Section 11 of Schedule III on any date thereafter .
“ Warranty Loan Asset ” means any Loan Asset that fails to satisfy any criteria of the definition of Eligible Loan Asset as of the Cut-Off Date for such Loan Asset or a Loan Asset with respect to which a Warranty Event has occurred.
“ Wells Fargo ” shall mean Wells Fargo Bank, N.A., and its successors and assigns.
“ Yield ” means with respect to any Remittance Period, the sum for each day in such Remittance Period determined in accordance with the following formula:
YR x L
D
where:    YR     =    the Yield Rate applicable on such day;
L    =    the Advances Outstanding on such day; and
D    =    360 or, to the extent the Yield Rate is the Base Rate, 365 or 366 days, as applicable;
provided that (i) no provision of this Agreement shall require the payment or permit the collection of Yield in excess of the maximum permitted by Applicable Law and (ii) Yield shall not be considered paid by any distribution if at any time such distribution is later required to be rescinded by any Lender to the Borrower or any other Person for any reason including, without limitation, such distribution becoming void or otherwise avoidable under any statutory provision or common law or equitable action, including, without limitation, any provision of the Bankruptcy Code.
“ Yield Rate ” means, as of any date of determination, an interest rate per annum equal to LIBOR for such date plus the Applicable Spread; provided that if Wells Fargo shall have notified the Administrative Agent that a Eurodollar Disruption Event has occurred, the Yield Rate shall be equal to the Base Rate plus the Applicable Spread until such Lender Agent shall have notified the Administrative Agent that such Eurodollar Disruption Event has ceased, at which time the Yield Rate shall again be equal to LIBOR for such date plus the Applicable Spread. For the avoidance of doubt, the Yield Rate will be calculated by application of the sum of LIBOR and the Applicable Spread to the Advances Outstanding on the basis of a 360-day year and the actual number of days in the applicable interest accrual period and shall be payable on each Payment Date
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 word “from” means “from and including” and the words “to” and “until” 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;
(b)      reference to any Person includes such Person’s successors and assigns but, if applicable, only if such successors and assigns are permitted 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)      reference to any time means New York, New York time;
(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; and
(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.
ARTICLE II.     

THE FACILITY
SECTION 2.01      Variable Funding Note and Advances .
(a)      Variable Funding Note . The Borrower has heretofore delivered or shall, on the date hereof (and on the terms and subject to the conditions hereinafter set forth), deliver, to each Lender Agent, at the address set forth on the signature pages of this Agreement, and on the effective date of any Joinder Supplement, to each additional Lender Agent, at the address set forth in the applicable Joinder Supplement, a duly executed variable funding note (the “ Variable Funding Note ”), in substantially the form of Exhibit I , in an aggregate face amount equal to the applicable Lender’s Commitment as of the Closing Date or the effective date of any Joinder Supplement, as applicable, and otherwise duly completed. Interest shall accrue on the Variable Funding Note, and the Variable Funding Note shall be payable, as described herein.
(b)      Advances . On the terms and conditions hereinafter set forth, from time to time from the Closing Date until the end of the Reinvestment Period, the Lenders shall make Advances under the Variable Funding Note, secured by the Collateral Portfolio, to the Borrower for the purpose of purchasing Eligible Loan Assets. Under no circumstances shall any Lender be required to make any Advance if after giving effect to such Advance and the addition to the Collateral Portfolio of the Eligible Loan Assets being acquired by the Borrower using the proceeds of such Advance, (i) an Event of Default has occurred or would result therefrom or an Unmatured Event of Default exists or would result therefrom or (ii) the aggregate Advances Outstanding would exceed the Borrowing Base. Notwithstanding anything to the contrary herein, no Lender shall be obligated to provide the Borrower with aggregate funds in connection with an Advance that would exceed the lesser of (A) such Lender’s unused Commitment then in effect and (B) the aggregate unused Commitments then in effect.
(c)      Notations on Variable Funding Note . Each Lender Agent is hereby authorized to enter on a schedule attached to the Variable Funding Note with respect to each Conduit Lender and each Institutional Lender a notation (which may be computer generated) with respect to each Advance under the Variable Funding Note made by the applicable Lender of: (i) the date and principal amount thereof and (ii) each repayment of principal thereof, and any such recordation shall constitute prima facie evidence of the accuracy of the information so recorded. The failure of any Lender Agent to make any such notation on the schedule attached to any Variable Funding Note shall not limit or otherwise affect the obligation of the Borrower to repay the Advances in accordance with their respective terms as set forth herein.
SECTION 2.02      Procedure for Advances .
(a)      During the Reinvestment Period, the Lenders will make Advances on any Business Day at the request of the Borrower, subject to and in accordance with the terms and conditions of Sections 2.01 and 2.02 and subject to the provisions of Article III hereof.
(b)      Each Advance shall be made by irrevocable written notice from the Borrower to the Administrative Agent and each Lender Agent, with a copy to the Collateral Agent and the Collateral Custodian, in the form of a Notice of Borrowing; provided that such Notice of Borrowing shall be deemed to have been received by the Administrative Agent and each Lender Agent on a Business Day if delivered no later than 2:00 p.m. on such Business Day and if not delivered by such time, shall be deemed to have been received on the following Business Day. The Borrower or the Servicer shall provide electronic copies of all Loan Agreements and other loan documents and information with respect to each proposed Loan Asset, if any, to a website that the Administrative Agent has approved and to which the Administrative Agent and each Lender Agent have access. Each Notice of Borrowing shall include a duly completed Borrowing Base Certificate (updated to the date such Advance is requested and giving pro forma effect to the Advance requested and the use of the proceeds thereof), and shall specify:
(i)      the aggregate amount of such Advance, which amount shall not cause the Advances Outstanding to exceed the Borrowing Base; provided that, the amount of such Advance must be at least equal to $500,000;
(ii)      the proposed date of such Advance; and
(iii)      a representation that all conditions precedent for an Advance described in Article III hereof have been satisfied.
On the date of each Advance, upon satisfaction of the applicable conditions set forth in Article III, each Lender shall, in accordance with instructions received by 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 account which the Borrower has designated in writing.
(c)      The Advances shall bear interest at the Yield Rate.
(d)      Subject to Section 2.18 and the other terms, conditions, provisions and limitations set forth herein (including, without limitation, the payment of the Make-Whole Premium, as applicable), the Borrower may borrow, repay or prepay and reborrow Advances without any penalty, fee or premium on and after the Closing Date and prior to the end of the Reinvestment Period.
(e)      A determination by Wells Fargo of the existence of any Eurodollar Disruption Event (any such determination to be communicated to the Borrower by written notice from the Administrative Agent promptly after the Administrative Agent learns of such event), or of the effect of any Eurodollar Disruption Event on its making or maintaining Advances at LIBOR, shall be conclusive absent manifest error.
(f)      The obligation of each Conduit Lender and each Institutional Lender to remit its Pro Rata Share of any Advance shall be several from that of each other Lender and the failure of any Conduit Lender or Institutional Lender to so make such amount available to the Borrower shall not relieve any other Lender of its obligation hereunder.
SECTION 2.03      Determination of Yield . Each applicable Lender Agent shall determine the Yield for its portion of the Advances (including unpaid Yield related thereto, if any, due and payable on a prior Payment Date) to be paid by the Borrower on each Payment Date for the related Remittance Period and shall advise the Servicer thereof on the third Business Day prior to such Payment Date.
SECTION 2.04      Remittance Procedures . The Servicer, as agent for the Administrative Agent and the Lender Agents, shall instruct the Collateral Agent and, if the Servicer fails to do so, the Administrative Agent may instruct the Collateral Agent, to apply funds on deposit in the Collection Account as described in this Section 2.04 ; provided that, at any time after delivery of Notice of Exclusive Control (as defined in the Collection Account Agreement), the Administrative Agent shall instruct the Collateral Agent to apply funds on deposit in the Collection Account as described in this Section 2.04 .
(a)      Payment Date Transfers During Reinvestment Period and Absent an Event of Default . During the Reinvestment Period, so long as no Event of Default has occurred and, in any case, prior to the declaration, or automatic occurrence, of the Facility Maturity Date, the Collateral Agent shall (as directed pursuant to the first paragraph of this Section 2.04 ) transfer collected funds held by the Account Bank in the Collection Account, in accordance with the Servicing Report, to the following Persons in the following amounts, calculated as of the Determination Date, and priority:
(i)      pari passu to (A) the Collateral Agent, in payment in full of all accrued Collateral Agent Fees and Collateral Agent Expenses, (B) the Collateral Custodian in payment in full of all accrued Collateral Custodian Fees and Collateral Custodian Expenses and (C) the Account Bank in payment in full of all accrued fees and expenses due under the U.S. Bank Fee Letter; provided that amounts payable with respect to Collateral Agent Expenses, Collateral Custodian Expenses and the Account Bank pursuant to this clause (i) (and Sections 2.04(b)(i), (c)(i) and (d)(i) , if applicable) shall not, collectively, exceed $100,000 per annum;
(ii)      to the Servicer, in payment in full of all accrued Servicing Fees;
(iii)      pro rata , in accordance with the amounts due under this clause, to each Lender Agent, for the account of the applicable Lender, all Yield and the Non-Usage Fee that is accrued and unpaid as of the last day of the related Remittance Period;
(iv)      pro rata , to each Lender Agent (for the account of the applicable Lender) and the Administrative Agent, all accrued and unpaid fees, expenses (including reasonable attorneys’ fees, costs and expenses) and indemnity amounts payable by the Borrower to the Administrative Agent, any Lender Agent or any Lender under the Transaction Documents;
(v)      to pay the Advances Outstanding to the extent required to satisfy any outstanding Borrowing Base Deficiency;
(vi)      pari passu to (A) the Collateral Agent, in payment in full of all accrued Collateral Agent Expenses to the extent not previously paid, (B) the Collateral Custodian in payment in full of all accrued Collateral Custodian Expenses to the extent not previously paid, and (C) the Account Bank in payment in full of all accrued expenses to the extent not previously paid;
(vii)      to pay the Advances Outstanding, together with the Make-Whole Premium (to the extent payable pursuant to the definition thereof), in connection with any complete refinancing or termination of this Agreement in accordance with Section 2.18(b) ;
(viii)      to pay any other amounts due (other than with respect to the repayment of Advances) under this Agreement and the other Transaction Documents (including any indemnity amounts due from the Borrower hereunder and thereunder not previously paid pursuant to Section 2.04(a)(iv) );
(ix)      to the Servicer, in respect of all reasonable expenses (except allocated overhead) incurred in connection with the performance of its duties hereunder; and
(x)      to the Borrower, any remaining amounts.
(b)      Interest Payments after the Reinvestment Period but Prior to an Event of Default . After the Reinvestment Period but prior to the occurrence of an Event of Default or the Facility Maturity Date, the Collateral Agent shall (as directed pursuant to the first paragraph of this Section 2.04 ) transfer Interest Collections held by the Account Bank in the Collection Account, in accordance with the Servicing Report, to the following Persons in the following amounts, calculated as of the Determination Date, and priority:
(i)      pari passu to (A) the Collateral Agent, in payment in full of all accrued Collateral Agent Fees and Collateral Agent Expenses, (B) the Collateral Custodian in payment in full of all accrued Collateral Custodian Fees and Collateral Custodian Expenses and (C) the Account Bank in payment in full of all accrued fees and expenses due under the U.S. Bank Fee Letter; provided that amounts payable with respect to Collateral Agent Expenses, Collateral Custodian Expenses and the Account Bank pursuant to this clause (i) (and Sections 2.04(a)(i), (c)(i) and (d)(i) , if applicable) shall not, collectively, exceed $100,000 per annum;
(ii)      to the Servicer, in payment in full of all accrued Servicing Fees;
(iii)      pro rata , in accordance with the amounts due under this clause, to each Lender Agent, for the account of the applicable Lender, all Yield and the Non-Usage Fee that is accrued and unpaid as of the last day of the related Remittance Period;
(iv)      pro rata , to each Lender Agent (for the account of the applicable Lender) and the Administrative Agent, as applicable, all accrued and unpaid fees, expenses (including reasonable attorneys’ fees, costs and expenses) and indemnity amounts payable by the Borrower to the Administrative Agent, any Lender Agent or any Lender under the Transaction Documents;
(v)      to pay the Advances Outstanding to the extent required to satisfy any outstanding Borrowing Base Deficiency;
(vi)      pari passu to (a) the Collateral Agent, in payment in full of all accrued Collateral Agent Expenses to the extent not previously paid, (b) the Collateral Custodian in payment in full of all accrued Collateral Custodian Expenses to the extent not previously paid and (c) the Account Bank in payment in full of all accrued expenses to the extent not previously paid;
(vii)      to pay the Advances Outstanding, together with the Make-Whole Premium (to the extent payable pursuant to the definition thereof), in connection with any complete refinancing or termination of this Agreement in accordance with Section 2.18(b) ;
(viii)      to pay any other amounts due (other than with respect to the repayment of Advances) under this Agreement and the other Transaction Documents (including any indemnity amounts due from the Borrower hereunder and thereunder not previously paid pursuant to Section 2.04(b)(iv) );
(ix)      to the Servicer, in respect of all reasonable expenses (except allocated overhead) incurred in connection with the performance of its duties hereunder; and
(x)      to the Borrower, any remaining amounts.
(c)      Principal Payments after the Reinvestment Period but Prior to an Event of Default . After the Reinvestment Period but prior to an Event of Default or the Facility Maturity Date, the Collateral Agent shall (as directed pursuant to the first paragraph of this Section 2.04 ) transfer Principal Collections held by the Account Bank in the Collection Account, in accordance with the Servicing Report, to the following Persons in the following amounts, calculated as of the Determination Date, and priority:
(i)      to pay amounts due under Section 2.04(b)(i) through (iv) , to the extent not paid thereunder;
(ii)      to pay the Advances Outstanding, including any applicable Make-Whole Premium (to the extent payable pursuant to the definition thereof), until paid in full;
(iii)      pari passu to (a) the Collateral Agent, in payment in full of all accrued Collateral Agent Expenses to the extent not previously paid, (b) the Collateral Custodian in payment in full of all accrued Collateral Custodian Expenses to the extent not previously paid and (c) the Account Bank in payment in full of all accrued expenses to the extent not previously paid;
(iv)      to pay any other amounts due under this Agreement and the other Transaction Documents (including any indemnity amounts due from the Borrower hereunder and thereunder not previously paid pursuant to Sections 2.04(b)(iv) and (viii) );
(v)      to the Servicer, in respect of all reasonable expenses (except allocated overhead) incurred in connection with the performance of its duties hereunder; and
(vi)      to the Borrower, any remaining amounts.
(d)      Payment Date Transfers Upon the Occurrence of an Event of Default . If an Event of Default has occurred and is continuing or, in any case, after the declaration, or automatic occurrence, of the Facility Maturity Date, the Collateral Agent shall (as directed pursuant to the first paragraph of this Section 2.04 ) transfer collected funds held by the Account Bank in the Collection Account, in accordance with the Servicing Report, to the following Persons in the following amounts, calculated as of the Determination Date, and priority:
(i)      pari passu to (a) the Collateral Agent, in payment in full of all accrued Collateral Agent Fees and Collateral Agent Expenses, (b) the Collateral Custodian in payment in full of all accrued Collateral Custodian Fees and Collateral Custodian Expenses and (c) the Account Bank in payment in full of all accrued fees and expenses due under the U.S. Bank Fee Letter; provided that amounts payable with respect to Collateral Agent Expenses, Collateral Custodian Expenses and the Account Bank pursuant to this clause (i) (and Sections 2.04(a)(i), (b)(i) and (c)(i) , if applicable) shall not, collectively, exceed $100,000 per annum;
(ii)      to the Servicer, in payment in full of all accrued Servicing Fees;
(iii)      pro rata , in accordance with the amounts due under this clause, to each Lender Agent, for the account of the applicable Lender, all Yield and the Non-Usage Fee that is accrued and unpaid as of the last day of the related Remittance Period;
(iv)      pro rata , to each Lender Agent (for the account of the applicable Lender) and the Administrative Agent, as applicable, all accrued and unpaid fees, expenses (including reasonable attorneys’ fees, costs and expenses) and indemnity amounts payable by the Borrower to the Administrative Agent, any Lender Agent or any Lender under the Transaction Documents;
(v)      to pay the Advances Outstanding, including any applicable Make-Whole Premium (to the extent payable pursuant to the definition thereof), until paid in full;
(vi)      pari passu to (a) the Collateral Agent, in payment in full of all accrued Collateral Agent Expenses to the extent not previously paid, (b) the Collateral Custodian in payment in full of all accrued Collateral Custodian Expenses to the extent not previously paid and (c) the Account Bank in payment in full of all accrued expenses to the extent not previously paid;
(vii)      to pay any other amounts due under this Agreement and the other Transaction Documents (including any indemnity amounts due from the Borrower hereunder and thereunder not previously paid pursuant to Section 2.04(d)(iv) );
(viii)      to the Servicer, in respect of all reasonable expenses (except allocated overhead) incurred in connection with the performance of its duties hereunder; and
(ix)      to the Borrower, any remaining amounts.
(e)      Insufficiency of Funds . For the sake of clarity, the parties hereby agree that if the funds on deposit in the Collection Account are insufficient to pay any amounts due and payable on a Payment Date or otherwise, the Borrower shall nevertheless remain 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.
SECTION 2.05      Instructions to the Collateral Agent and the Account Bank . All instructions and directions given to the Collateral Agent or the Account Bank by the Servicer, the Borrower or the Administrative Agent pursuant to Section 2.04 shall be in writing (including instructions and directions transmitted to the Collateral Agent or the Account Bank by telecopy or e-mail), and such written instructions and directions shall be delivered with a written certification that such instructions and directions are in compliance with the provisions of Section 2.04 . The Servicer and the Borrower shall immediately transmit to the Administrative Agent by telecopy or e-mail a copy of all instructions and directions given to the Collateral Agent or the Account Bank by such party pursuant to Section 2.04 . The Administrative Agent shall promptly transmit to the Servicer and the Borrower by telecopy or e‑mail a copy of all instructions and directions given to the Collateral Agent or the Account Bank by the Administrative Agent, pursuant to Section 2.04 . If either the Administrative Agent or Collateral Agent disagrees with the computation of any amounts to be paid or deposited by the Borrower or the Servicer under Section 2.04 or otherwise pursuant to this Agreement, or upon their respective instructions, it shall so notify the Borrower, the Servicer and the Collateral Agent in writing and in reasonable detail to identify the specific disagreement. If such disagreement cannot be resolved within two Business Days, the determination of the Administrative Agent as to such amounts shall be conclusive and binding on the parties hereto absent manifest error. In the event the Collateral Agent or the Account Bank receives instructions from the Servicer or the Borrower which conflict with any instructions received by the Administrative Agent, the Collateral Agent or the Account Bank, as applicable, shall rely on and follow the instructions given by the Administrative Agent.
SECTION 2.06      Borrowing Base Deficiency Payments .
(a)      In addition to any other obligation of the Borrower to cure any Borrowing Base Deficiency pursuant to the terms of this Agreement, if, on any day prior to the Collection Date, any Borrowing Base Deficiency exists, then the Borrower shall, within three Business Days from the date of such Borrowing Base Deficiency, eliminate such Borrowing Base Deficiency in its entirety by effecting one or more (or any combination thereof) of the following actions in order to eliminate such Borrowing Base Deficiency as of such date of determination: (i) deposit cash in United States dollars into the Principal Collection Account, (ii) repay Advances (together with any Breakage Fees and all accrued and unpaid costs and expenses of the Administrative Agent, the Lender Agents and the Lenders, in each case, in respect of the amount so prepaid), and/or (iii) subject to the approval of the Administrative Agent, in its sole discretion, Pledge additional Eligible Loan Assets; provided , that if the Borrower requests to Pledge another Eligible Loan Asset within one Business Day of such Borrowing Base Deficiency and the Administrative Agent does not either reject such Loan Asset or approve such Loan Asset within one Business Day of the Borrower’s request to Pledge such Loan Asset, then the Administrative Agent may, in its sole discretion, elect in writing to extend the three Business Day grace period set forth in this Section 2.06 for up to seven Business Days.
(b)      No later than 2:00 p.m. on the Business Day prior to the proposed repayment of Advances or Pledge of additional Eligible Loan Assets pursuant to Section 2.06(a) , the Borrower (or the Servicer on its behalf) shall deliver (i) to the Administrative Agent (with a copy to the Collateral Agent and the Collateral Custodian), notice of such repayment or Pledge and a duly completed Borrowing Base Certificate, updated to the date such repayment or Pledge is being made and giving pro forma effect to such repayment or Pledge, and (ii) to the Administrative Agent, if applicable, a description of any Eligible Loan Asset and each Obligor of such Eligible Loan Asset to be Pledged and added to the updated Loan Asset Schedule. Any notice pertaining to any repayment or any Pledge pursuant to this Section 2.06 shall be irrevocable.
SECTION 2.07      Substitution and Sale of Loan Assets; Affiliate Transactions .
(a)      Substitutions . The Borrower may, with the consent of the Administrative Agent in its sole discretion, replace any Loan Asset as a Loan Asset so long as (i) no event has occurred, or would result from such substitution, which constitutes an Event of Default and no event has occurred and is continuing, or would result from such substitution, which constitutes an Unmatured Event of Default or a Borrowing Base Deficiency and (ii) simultaneously therewith, the Borrower Pledges (in accordance with all of the terms and provisions contained herein) a Substitute Eligible Loan Asset.
(b)      Discretionary Sales . The Borrower shall be permitted to sell Loan Assets to Persons other than the Seller or its Affiliates from time to time; provided that (i) the proceeds of such sale shall be deposited into the Collection Account to be disbursed in accordance with Section 2.04 , (ii) no event has occurred, or would result from such sale, which constitutes an Event of Default and no event has occurred and is continuing, or would result from such sale, which constitutes an Unmatured Event of Default or a Borrowing Base Deficiency and (iii) the prior written consent of the Administrative Agent shall be required if such Loan Asset is sold for an amount which is less than the Adjusted Borrowing Value.
(c)      Repurchase or Substitution of Warranty Loan Assets . If on any day a Loan Asset is (or becomes) a Warranty Loan Asset, no later than 10 Business Days following the earlier of knowledge by the Borrower of such Loan Asset becoming a Warranty Loan Asset or receipt by the Borrower from the Administrative Agent or the Servicer of written notice thereof, the Borrower shall either:
(i)      make a deposit to the Collection Account (for allocation pursuant to Section 2.04 ) in immediately available funds in an amount equal to (A) the Advance Date Assigned Value multiplied by the Outstanding Balance of such Loan Asset and (B) any expenses or fees with respect to such Loan Asset and costs and damages incurred by the Administrative Agent or by any Lender in connection with any violation by such Loan Asset of any predatory or abusive lending law which is an Applicable Law (a notification regarding the amount of such expenses or fees to be provided by the Administrative Agent to the Borrower); provided that the Administrative Agent shall have the right to determine whether the amount so deposited is sufficient to satisfy the foregoing requirements; or
(ii)      with the prior written consent of the Administrative Agent, in its sole discretion, substitute for such Warranty Loan Asset a Substitute Eligible Loan Asset.
Upon confirmation of the deposit of the amounts set forth in Section 2.07(c)(i) into the Collection Account or the delivery by the Borrower of a Substitute Eligible Loan Asset for each Warranty Loan Asset (the date of such confirmation or delivery, the “ Release Date ”), such Warranty Loan Asset and related Portfolio Assets shall be removed from the Collateral Portfolio and, as applicable, the Substitute Eligible Loan Asset and related Portfolio Assets shall be included in the Collateral Portfolio. On the Release Date of each Warranty Loan Asset, the Collateral Agent, for the benefit of the Secured Parties, shall automatically and without further action be deemed to release to the Borrower, without recourse, representation or warranty, all the right, title and interest and any Lien of the Collateral Agent, for the benefit of the Secured Parties in, to and under the Warranty Loan Asset and any related Portfolio Assets and all future monies due or to become due with respect thereto.
(d)      Conditions to Sales, Substitutions and Repurchases . Any sales, substitutions or repurchases effected pursuant to Sections 2.07(a) , (b) , or (c) shall be subject to the satisfaction of the following conditions (as certified in writing to the Administrative Agent and Collateral Agent by the Borrower):
(i)      the Borrower shall deliver a Borrowing Base Certificate to the Administrative Agent in connection with such sale, substitution or repurchase;
(ii)      the Borrower shall deliver a list of all Loan Assets to be sold, substituted, repurchased;
(iii)      no selection procedures adverse to the interests of the Administrative Agent, the Lender Agents or the Lenders were utilized by the Borrower in the selection of the Loan Assets to be sold, repurchased or substituted;
(iv)      the Borrower shall give one Business Day’s notice of such sale, substitution or repurchase;
(v)      the Borrower shall notify the Administrative Agent of any amount to be deposited into the Collection Account in connection with any sale, substitution or repurchase;
(vi)      the representations and warranties contained in Sections 4.01 , 4.02 and 4.03 shall continue to be correct in all material respects, except to the extent relating to an earlier date;
(vii)      any repayment of Advances Outstanding in connection with any sale, substitution or repurchase of Loan Assets hereunder shall comply with the requirements set forth in Section 2.18 ; and
(viii)      the Borrower and the Servicer (on behalf of the Borrower) shall agree to pay the reasonable attorneys’ fees and expenses of the Administrative Agent, each Lender, each Lender Agent, Collateral Agent and the Collateral Custodian in connection with any such sale, substitution or repurchase (including, but not limited to, expenses incurred in connection with the release of the Lien of the Collateral Agent on behalf of the Secured Parties and any other party having an interest in the Loan Asset in connection with such sale, substitution or repurchase).
(e)      Affiliate Transactions . The Seller (or an Affiliate thereof) shall not reacquire from the Borrower and the Borrower shall not transfer to the Seller or to Affiliates of the Seller, and none of the Seller nor any Affiliates thereof will have a right or ability to purchase, the Loan Assets without the prior written consent of the Administrative Agent.
(f)      Limitations on Sales and Substitutions . The Outstanding Balance of all Loan Assets (other than Warranty Loan Assets) transferred pursuant to Section 2.07(e) or substituted pursuant to Section 2.07(a) during the 12-month period immediately preceding the proposed date of sale (or such lesser number of months that shall have elapsed since April 26, 2013 as of such date) does not exceed 20% of the Maximum Facility Amount.
(g)      Lien Release Dividend . Notwithstanding any provision contained in this Agreement to the contrary, provided no Event of Default has occurred and no Unmatured Event of Default exists, on a Lien Release Dividend Date, the Borrower may dividend to BDCA, as its sole member, certain Loan Assets that were sold by the Seller to the Borrower, or portions thereof (each, a “ Lien Release Dividend ”), subject to the following terms and conditions, as certified by the Borrower to the Administrative Agent (with a copy to the Collateral Agent and the Collateral Custodian):
(i)      The Borrower shall have given the Administrative Agent, with a copy to the Collateral Agent and the Collateral Custodian, at least five Business Days prior written notice requesting that the Administrative Agent consent to the effectuation of a Lien Release Dividend, in the form of Exhibit J hereto (a “ Notice and Request for Consent ”), which consent shall be given in the sole and absolute discretion of the Administrative Agent; provided that, if the Administrative Agent shall not have responded to the Notice and Request for Consent by 11:00 a.m. on the day that is one Business Day prior to the proposed Lien Release Dividend Date, the Administrative Agent shall be deemed not to have given its consent;
(ii)      On any Lien Release Dividend Date, no more than four Lien Release Dividends shall have been made during the 12-month period immediately preceding the proposed Lien Release Dividend Date;
(iii)      After giving effect to the Lien Release Dividend on the Lien Release Dividend Date, (A) no Borrowing Base Deficiency, Event of Default or Unmatured Event of Default shall exist, (B) the representations and warranties contained in Sections 4.01 , 4.02 and 4.03 hereof shall continue to be correct in all material respects, except to the extent relating to an earlier date, (C) the eligibility of any Loan Asset remaining as part of the Collateral Portfolio after the Lien Release Dividend will be re-determined as of the Lien Release Dividend Date, (D) no claim shall have been asserted or proceeding commenced challenging the enforceability or validity of any of the Required Loan Documents and (E) there shall have been no material adverse change as to the Servicer or the Borrower;
(iv)      Such Lien Release Dividend must be in compliance with Applicable Law and may not (A) be made with the intent to hinder, delay or defraud any creditor of the Borrower or (B) leave the Borrower, immediately after giving effect to the Lien Release Dividend, (1) insolvent, (2) with insufficient funds to pay its obligations as and when they become due or (3) with inadequate capital for its present and anticipated business and transactions;
(v)      On or prior to the Lien Release Dividend Date, the Borrower shall have (A) delivered to the Administrative Agent, with a copy to the Collateral Agent and the Collateral Custodian, a list specifying all Loan Assets or portions thereof to be transferred pursuant to such Lien Release Dividend and the Administrative Agent shall have approved the same in its sole discretion and (B) obtained all authorizations, consents and approvals required to effectuate the Lien Release Dividend;
(vi)      A portion of a Loan Asset may be transferred pursuant to a Lien Release Dividend provided that (A) such transfer does not have an adverse effect on the portion of such Loan Asset remaining as a part of the Collateral Portfolio, any other aspect of the Collateral Portfolio, the Lenders, the Lender Agents, the Administrative Agent or any other Secured Party and (B) a new promissory note (other than with respect to a Noteless Loan Asset) for the portion of the Loan Asset remaining as a part of the Collateral Portfolio has been executed, and the original thereof has been endorsed to the Collateral Agent and delivered to the Collateral Custodian;
(vii)      Each Loan Asset, or portion thereof, as applicable, shall be transferred at a value equal to the Outstanding Balance thereof, exclusive of any accrued and unpaid interest or PIK Interest thereon;
(viii)      The Borrower shall deliver a Borrowing Base Certificate (including a calculation of the Borrowing Base after giving effect to such Lien Release Dividend) to the Administrative Agent;
(ix)      The Borrower shall have paid in full an aggregate amount equal to the sum of all amounts due and owing to the Administrative Agent, the Lenders, the Lender Agents, the Collateral Agent or the Collateral Custodian, as applicable, under this Agreement and the other Transaction Documents, to the extent accrued to such date (including, without limitation, Breakage Fees) with respect to the Loan Assets to be transferred pursuant to such Lien Release Dividend and incurred in connection with the transfer of such Loan Assets pursuant to such Lien Release Dividend; and
(x)      The Borrower, or the Servicer (on behalf of the Borrower), shall pay the reasonable attorneys’ fees and expenses of the Administrative Agent, the Lenders, the Lender Agents, the Collateral Agent and the Collateral Custodian in connection with any Lien Release Dividend (including, but not limited to, expenses incurred in connection with the release of the Lien of the Collateral Agent, on behalf of the Secured Parties, and any other party having an interest in the Loan Assets in connection with such Lien Release Dividend).
SECTION 2.08      Payments and Computations, Etc .
(a)      All amounts to be paid or deposited by the Borrower or the Servicer hereunder shall be paid or deposited in accordance with the terms hereof no later than 5:00 p.m. on the day when due in lawful money of the United States in immediately available funds to the Collection Account or such other account as is designated by the Administrative Agent. The Borrower or the Servicer, as applicable, shall, to the extent permitted by law, pay to the Secured Parties interest on all amounts not paid or deposited when due to any of the Secured Parties hereunder at 4.0 2.5 % per annum above the Base Rate (other than with respect to any advances outstanding, which shall accrue at the Yield Rate), payable on demand, from the date of such nonpayment until such amount is paid in full (as well after as before judgment); provided , that such interest rate shall not at any time exceed the maximum rate permitted by Applicable Law. Any Obligation hereunder shall not be reduced by any distribution of any portion of Available Collections if at any time such distribution is rescinded or required to be returned by any Lender to the Borrower or any other Person for any reason. All computations of interest and all computations of Yield and other fees hereunder shall be made on the basis of a year of 360 days for the actual number of days (including the first but excluding the last day) elapsed, other than calculations with respect to the Base Rate, which shall be based on a year consisting of 365 or 366 days, as applicable.
(b)      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 such extension of time shall in such case be included in the computation of payment of Yield or any fee payable hereunder, as the case may be.
(c)      If any Advance requested by the Borrower and approved by the Lender Agents and the Administrative Agent pursuant to Section 2.02 is not for any reason whatsoever, except as a result of the gross negligence or willful misconduct of, or failure to fund such Advance on the part of, the Lenders, the Administrative Agent or an Affiliate thereof, made or effectuated, as the case may be, on the date specified therefor, the Borrower shall indemnify such Lender against any loss, cost or expense incurred by such Lender related thereto (other than any such loss, cost or expense solely due to the gross negligence or willful misconduct or failure to fund such Advance on the part of the Lenders, the Administrative Agent or an Affiliate thereof), including, without limitation, any loss (including cost of funds and reasonable out-of-pocket expenses), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund Advances or maintain the Advances. Any such Lender shall provide to the Borrower documentation setting forth the amounts of any loss, cost or expense referred to in the previous sentence, such documentation to be conclusive absent manifest error.
SECTION 2.09      Non-Usage Fee .
The Borrower shall pay, in accordance with Section 2.04 , pro rata to each Lender (either directly or through the applicable Lender Agent), a non-usage fee (the “ Non-Usage Fee ”) payable in arrears for each Remittance Period, equal to the sum of the products for each day during such Remittance Period of (i) one divided by 360, (ii) the applicable Non-Usage Fee Rate (as defined below) and (iii) the aggregate Commitments minus the Advances Outstanding on such day (such amount, the “ Unused Portion ”). The Non-Usage Fee Rate (the “ Non-Usage Fee Rate ”) shall be, (i) from the period beginning on September 9, 2013 June 30, 2014 to and including March 9, December 30, 2014, 0.50% for any Unused Portion of the aggregate Commitments and (ii) thereafter, (x) 0.50% on any Unused Portion up to or equal to an amount equal to 20% of the Maximum Facility Amount and (y) 2.00% on any Unused Portion in excess of such amount equal to 20% of the Maximum Facility Amount.
SECTION 2.10      Increased Costs; Capital Adequacy.
(a)      If, due to either (i) the introduction of or any change following the date hereof (including, without limitation, any change by way of imposition or increase of reserve requirements) in or in the interpretation, administration or application following the date hereof of any Applicable Law (including, without limitation, any Applicable Law resulting in any interest payments paid to any Lender under this Agreement being subject to any Tax, except for Excluded Taxes), in each case, whether foreign or domestic or (ii) the compliance with any guideline or request following the date hereof from any central bank or other Governmental Authority (whether or not having the force of law), there shall be any increase in the cost to the Administrative Agent, any Lender, any Lender Agent, any Liquidity Bank or any Affiliate, participant, successor or assign thereof (each of which shall be an “ Affected Party ”) of agreeing to make or making, funding or maintaining any Advance (or any reduction of the amount of any payment (whether of principal, interest, fee, compensation or otherwise) to any Affected Party hereunder), as the case may be, or there shall be any reduction in the amount of any sum received or receivable by an Affected Party under this Agreement, under any other Transaction Document or any Liquidity Agreement, the Borrower shall, from time to time, after written demand by the Administrative Agent (which demand shall be accompanied by a statement setting forth in reasonable detail the basis for such demand), on behalf of such Affected Party, pay to the Administrative Agent, on behalf of such Affected Party, additional amounts sufficient to compensate such Affected Party for such increased costs or reduced payments within 10 days after such demand; provided , that the amounts payable under this Section 2.10 shall be without duplication of amounts payable under Section 2.11 and shall not include any Excluded Taxes.
(b)      If either (i) the introduction of or any change following the date hereof in or in the interpretation, administration or application following the date hereof of any Applicable Law or (ii) the compliance by any Affected Party with any law, guideline, rule, regulation, directive or request following the date hereof, from any central bank, any Governmental Authority or agency, including, without limitation, compliance by an Affected Party with any request or directive regarding capital adequacy, has or would have the effect of reducing the rate of return on the capital of any Affected Party, as a consequence of its obligations hereunder or any related document or arising in connection herewith or therewith to a level below that which any such Affected Party could have achieved but for such introduction, change or compliance (taking into consideration the policies of such Affected Party with respect to capital adequacy), by an amount deemed by such Affected Party to be material, then, from time to time, after demand by such Affected Party (which demand shall be accompanied by a statement setting forth in reasonable detail the basis for such demand), the Borrower shall pay the Administrative Agent on behalf of such Affected Party such additional amounts as will compensate such Affected Party for such reduction. For the avoidance of doubt, any increase in cost and/or reduction in Yield with respect to any Affected Party caused by regulatory capital allocation adjustments due to FAS 166, 167 and subsequent statements and interpretations shall constitute a circumstance on which such Affected Party may base a claim for reimbursement under this Section 2.10 .
(c)      If as a result of any event or circumstance similar to those described in clause (a) or (b) of this Section 2.10 , any Affected Party is required to compensate a bank or other financial institution providing liquidity support, credit enhancement or other similar support to such Affected Party in connection with this Agreement or the funding or maintenance of Advances hereunder, then within ten days after demand by such Affected Party, the Borrower shall pay to such Affected Party such additional amount or amounts as may be necessary to reimburse such Affected Party for any amounts payable or paid by it.
(d)      In determining any amount provided for in this Section 2.10 , the Affected Party may use any reasonable averaging and attribution methods. The Administrative Agent, on behalf of any Affected Party making a claim under this Section 2.10 , shall submit to the Borrower a certificate setting forth in reasonable detail the basis for and the computations of such additional or increased costs, which certificate shall be conclusive absent manifest error.
(e)      Failure or delay on the part of any Affected Party to demand compensation pursuant to this Section 2.10 shall not constitute a waiver of such Affected Party’s right to demand or receive such compensation.
(a)      If at any time the Borrower shall be liable for the payment of any additional amounts in accordance with this Section 2.10, then the Borrower shall have the option to terminate this Agreement (in accordance with the provisions of Section 2.18(b) but without the payment of any Make-Whole Premium); provided, that such option to terminate shall in no event relieve the Borrower of paying any amounts owing pursuant to this Section 2.10 in accordance with the terms hereof.
SECTION 2.11      Taxes .
(a)      All payments made by an Obligor in respect of a Loan Asset and all payments made by the Borrower, including any allocations or distributions to the Equityholder, or made by the Servicer on behalf of the Borrower under this Agreement will be made free and clear of and without deduction or withholding for or on account of any Taxes. If any Taxes are required to be withheld from any amounts payable to any Indemnified Party, then the amount payable 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 for or on account of any Taxes (including, without limitation, any Taxes on such increase) is not less than the amount that would have been paid had no such deduction or withholding been made. The foregoing obligation to pay Additional Amounts with respect to payments required to be made by the Borrower or Servicer under this Agreement will not, however, apply with respect to Taxes imposed on or measured by net income or franchise Taxes imposed on any Indemnified Party by a taxing jurisdiction in which any such Person is organized, conducts business or is paying Taxes (as the case may be) (“ Excluded Taxes ”).
(b)      The Borrower will indemnify, from funds available to it pursuant to Section 2.04 (and to the extent the funds available for indemnification provided by the Borrower is insufficient the Servicer, on behalf of the Borrower, will indemnify) each Indemnified Party for the full amount of Taxes payable by such Person in respect of Additional Amounts and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto. All payments in respect of this indemnification shall be made within 10 days from the date a written invoice therefor is delivered to the Borrower.
(c)      Within 30 days after the date of any payment by the Borrower or by the Servicer on behalf of the Borrower of any Taxes, the Borrower or the Servicer, as applicable, will furnish to the Administrative Agent and the Lender Agents at the applicable address set forth on this Agreement, appropriate evidence of payment thereof.
(d)      If any assignee of a Lender is not created or organized under the laws of the United States or a political subdivision thereof, such Lender shall deliver to the Borrower, with a copy to the Administrative Agent, (i) within 15 days after becoming an assignee hereunder, two (or such other number as may from time to time be prescribed by Applicable Law) duly completed copies of IRS Form W-8BEN or Form W-8ECI (or any successor forms or other certificates or statements that may be required from time to time by the relevant United States taxing authorities or Applicable Law), as appropriate, to permit the Borrower to make payments hereunder for the account of such Lender without deduction or withholding of United States federal income or similar Taxes and (ii) upon the obsolescence of or after the occurrence of any event requiring a change in, any form or certificate previously delivered pursuant to this Section 2.11(d) , copies (in such numbers as may from time to time be prescribed by Applicable Law or regulations) of such additional, amended or successor forms, certificates or statements as may be required under Applicable Law to permit the Borrower or the Servicer to make payments hereunder for the account of such Lender without deduction or withholding of United States federal income or similar Taxes. The Borrower and the Servicer shall not be required to pay any Additional Amounts with respect to any such Lender that has failed to comply with this Section 2.11(d) .
(e)      If, in connection with an agreement or other document providing liquidity support, credit enhancement or other similar support to any Lender in connection with this Agreement or the funding or maintenance of Advances hereunder, such Lender is required to compensate a bank or other financial institution in respect of Taxes under circumstances similar to those described in this Section 2.11 , then, within 10 days after demand by each applicable Lender, the Servicer shall pay (or to the extent the Servicer does not make such payment the Borrower shall pay) to such Lender such additional amount or amounts as may be necessary to reimburse such Lender for any amounts paid by them.
Without prejudice to the survival of any other agreement of the Borrower and the Servicer hereunder, the agreements and obligations of the Borrower and the Servicer contained in this Section 2.11 shall survive the termination of this Agreement.
SECTION 2.12      Collateral Assignment of Agreements . The Borrower hereby collaterally assigns to the Collateral Agent, for the benefit of the Secured Parties, all of the Borrower’s right and title to and interest in, to and under (but not any obligations under) the Purchase and Sale Agreement (and any UCC financing statements filed under or in connection therewith), the Loan Agreements related to each Loan Asset, all other agreements, documents and instruments evidencing, securing or guarantying any Loan Asset and all other agreements, documents and instruments related to any of the foregoing but excluding any Excluded Amounts or Retained Interest (the “ Assigned Documents ”). In furtherance and not in limitation of the foregoing, the Borrower hereby collaterally assigns to the Collateral Agent, for the benefit of the Secured Parties, its right to indemnification under Article IX of the Purchase and Sale Agreement. The Borrower confirms that, upon the occurrence and during the continuance of an Event of Default and until the Collection Date, the Collateral Agent (at the direction of the Administrative Agent) on behalf of the Secured Parties shall have the sole right to enforce the Borrower’s rights and remedies under the Purchase and Sale Agreement and any UCC financing statements filed under or in connection therewith for the benefit of the Secured Parties. The parties hereto agree that such collateral assignment to the Collateral Agent, for the benefit of the Secured Parties, shall terminate upon the Collection Date.
SECTION 2.13      Grant of a Security Interest . To secure the prompt, complete and indefeasible 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 (a) collaterally assigns and pledges to the Collateral Agent, on behalf of the Secured Parties, and (b) grants a security interest to the Collateral Agent, on behalf of the Secured Parties, in all of the Borrower’s right, title and interest in, to and under (but none of the obligations under) all of the Collateral Portfolio, whether now existing or hereafter arising or acquired by the Borrower, and wherever the same may be located. For the avoidance of doubt, the Collateral Portfolio shall not include any Excluded Amounts, and the Borrower does not hereby assign, pledge or grant a security interest in any such amounts. Anything herein to the contrary notwithstanding, (a) the Borrower shall remain liable under the Collateral Portfolio 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, (b) the exercise by the Collateral Agent, for the benefit of the Secured Parties, of any of its rights in the Collateral Portfolio shall not release the Borrower from any of its duties or obligations under the Collateral Portfolio, and (c) none of the Administrative Agent, the Collateral Agent, any Lender (nor its successors and assigns), any Lender Agent, any Liquidity Bank nor any Secured Party shall have any obligations or liability under the Collateral Portfolio by reason of this Agreement, nor shall the Administrative Agent, the Collateral Agent, any Lender (nor its successors and assigns), any Lender Agent, any Liquidity Bank nor any 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 2.14      Evidence of Debt . 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 acceptance agreement and participation agreement delivered to and accepted by it and a register for the recordation of the names and addresses and interests of the Lenders (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 each Lender Agent shall treat each person whose name is recorded in the Register as a Lender under this Agreement for all purposes of this Agreement. The Register shall be available for inspection by the Borrower or any Lender Agent at any reasonable time and from time to time upon reasonable prior notice.
SECTION 2.15      Survival of Representations and Warranties . It is understood and agreed that the representations and warranties set forth in Sections 4.01 , 4.02 and 4.03 are made and are true and correct on the date of this Agreement and on each Cut-Off Date unless such representations and warranties are made as of a specific date.
SECTION 2.16      Release of Loan Assets .
(a)      The Borrower may obtain the release of (i) any Loan Asset (and the related Portfolio Assets pertaining thereto) released pursuant to a Lien Release Dividend or sold or substituted in accordance with the applicable provisions of Section 2.07 and any Portfolio Assets pertaining to such Loan Asset and (ii) any Collateral Portfolio that expires by its terms and all amounts in respect thereof have been paid in full by the related agent, administrative agent or Obligor and deposited in the Collection Account. The Collateral Agent, for the benefit of the Secured Parties, shall at the sole expense of the Servicer and at the direction of the Administrative Agent, execute such documents and instruments of release as may be prepared by the Servicer on behalf of the Borrower, give notice of such release to the Collateral Custodian (in the form of Exhibit N ) (unless the Collateral Custodian and Collateral Agent are the same Person) 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. Upon receiving such notification by the Collateral Agent as described in the immediately preceding sentence, if applicable, the Collateral Custodian shall release and ship for delivery the Required Loan Documents to the Borrower.
(b)      Promptly after the Collection Date has occurred, each Lender and the Administrative Agent, in accordance with their respective interests, shall release to the Borrower, for no consideration but at the sole expense of the Borrower, their respective remaining interests in the Portfolio Assets, free and clear of any Lien resulting solely from an act by the Collateral Agent, any Lender or the Administrative Agent but without any other representation or warranty, express or implied, by or recourse against any Lender or the Administrative Agent.
SECTION 2.17      Treatment of Amounts Received by the Borrower . Amounts received by the Borrower pursuant to Section 2.07 on account of Loan Assets shall be treated as payments of Principal Collections or Interest Collections, as applicable, on Loan Assets hereunder.
SECTION 2.18      Prepayment; Termination .
(a)      Except as expressly permitted or required herein, including, without limitation, any repayment necessary to cure a Borrowing Base Deficiency, Advances may be prepaid in whole or in part, at the option of the Borrower, at any time by the Borrower (or the Servicer, on the Borrower’s behalf) delivering a Notice of Reduction (which notice shall include a Borrowing Base Certificate) to the Administrative Agent, the Collateral Agent and the Lender Agents at least one Business Day prior to such reduction. Upon any prepayment, the Borrower shall also pay in full any other accrued and unpaid costs and expenses of Administrative Agent, Lender Agents and Lenders related to such prepayment; provided that no reduction in Advances Outstanding shall be given effect unless (i) sufficient funds have been remitted to pay all such amounts in full, as determined by the Administrative Agent, in its sole discretion and (ii) no event has occurred or would result from such prepayment which would constitute an Event of Default or an Unmatured Event of Default. The Administrative Agent shall apply amounts received from the Borrower pursuant to this Section 2.18(a) to the payment of any Breakage Fees and to the pro rata reduction of the Advances Outstanding. Any notice relating to any repayment pursuant to this Section 2.18(a) shall be irrevocable.
(b)      The Borrower may, at its option, terminate this Agreement and the other Transaction Documents upon three Business Days’ prior written notice to the Administrative Agent and the Lender Agents and upon payment in full of all outstanding Advances, all accrued and unpaid Yield, any Breakage Fees, all accrued and unpaid costs and expenses of the Administrative Agent, Lender Agents and Lenders, payment of the Make-Whole Premium pro rata to each Lender Agent (for the account of the applicable Lender) and payment of all other Obligations (other than unmatured contingent indemnification obligations). Any termination of this Agreement shall be subject to Section 11.05 .
(c)      The Borrower hereby acknowledges and agrees that the Make-Whole Premium constitutes additional consideration for the Lenders to enter into this Agreement.
SECTION 2.19      Extension of Reinvestment Period.
(a)      The Borrower may, within 60 days but not less than 30 days prior to the Stated Maturity Date, request that the Lenders extend the Stated Maturity Date for an additional period of time, up to one year. Such date may be extended upon the written consent of the Administrative Agent, each Lender, the Borrower and the Servicer. The Borrower confirms that any of the Lenders or the Administrative Agent, in their sole and absolute discretion, may elect not to extend the Stated Maturity Date.
(b)    The Borrower may, within 30 days but not less than 15 days prior to the date set forth in clause (i) of the definition of “Reinvestment Period,” request that the Lenders extend the date set forth in clause (i) of the definition of “Reinvestment Period” for an additional period of time, not to exceed one year. Such date may be extended upon the written consent of the Administrative Agent, each Lender, the Borrower and the Servicer (such extension, the “ Reinvestment Period Extension” ). The Borrower confirms that any of the Lenders or the Administrative Agent, in their sole and absolute discretion, may elect to not consent to the extension of the Reinvestment Period.
SECTION 2.20      Collections and Allocations .
(a)      The Collateral Agent, acting at the direction of the Servicer, shall promptly identify all Available Collections received in the Collection Account as being on account of Interest Collections, Principal Collections, Excluded Collections or Excluded Amounts and shall segregate all Principal Collections or Interest Collections and transfer the same to the Principal Collection Account and/or the Interest Collection Account, as applicable, and shall forward, subject to and in accordance with Section 2.20(c) hereunder, all Excluded Collections and Excluded Amounts to the Servicer. The Servicer shall comply with its obligations specified in Section 5.03(q) . If, notwithstanding such compliance, the Servicer receives any collections directly, the Servicer shall transfer, or cause to be transferred, any such collections (other than Excluded Amounts) received directly by it (if any) to the Collection Account by the close of business within two Business Days after such collections are received; provided , that the Servicer shall identify to the Collateral Agent any collections (other than Excluded Amounts) received directly by the Servicer as being on account of Interest Collections or Principal Collections. The Collateral Agent shall further provide to the Servicer a statement as to the amount of Principal Collections and Interest Collections on deposit in the Principal Collection Account and the Interest Collection Account no later than three Business Days after each Determination Date for inclusion in the Servicing Report delivered pursuant to Section 6.08(b) . It is understood and agreed that the Servicer shall remain liable for the proper allocation of the aforementioned collections into the appropriate accounts.
(b)      On the Cut-Off Date with respect to any Loan Asset, the Servicer will deposit or will cause the Borrower to deposit into the Collection Account all Available Collections received in respect of Eligible Loan Assets being transferred to and included as part of the Collateral Portfolio on such date.
(c)      With the prior written consent of the Administrative Agent (a copy of which will be provided by the Servicer to the Collateral Agent), the Servicer may direct the Collateral Agent to withdraw from the Collection Account any deposits thereto constituting Excluded Amounts or Excluded Collections if the Servicer has, prior to such withdrawal and consent, delivered to the Administrative Agent ( with a copy to the Collateral Agent) a report setting forth the calculation of such Excluded Amounts and/or Excluded Collections, as applicable, in form and substance satisfactory to the Administrative Agent in its sole discretion.
(d)      Prior to the delivery of a Notice of Exclusive Control (as defined in the Collection Account Agreement), the Servicer shall, pursuant to written instruction (which may be in the form of standing instructions), direct the Collateral Agent to invest, or cause the investment of, funds on deposit in the Collection Account in Permitted Investments, from the date of this Agreement until the Collection Date. Absent any such written instruction, such funds shall not be invested. A Permitted Investment acquired with funds deposited in the Collection Account shall mature not later than the Business Day immediately preceding any Payment Date, and shall not be sold or disposed of prior to its maturity. All such Permitted Investments shall be registered in the name of the Account Bank or its nominee for the benefit of the Administrative Agent or the Collateral Agent, and shall otherwise comply with the assumptions of the legal opinions of Moore & Van Allen PLLC and Sutherland Asbill & Brennan LLP dated the Closing Date and delivered in connection with this Agreement; provided that compliance shall be the responsibility of the Borrower and the Servicer and not the Collateral Agent and Account Bank. All income and gain realized from any such investment, as well as any interest earned on deposits in the Collection Account shall be distributed in accordance with the provisions of Article II . The Servicer shall deposit in the Collection Account (with respect to investments made hereunder of funds held therein) an amount equal to the amount of any actual loss incurred, in respect of any such investment, immediately upon realization of such loss. None of the Account Bank, the Collateral Agent, the Administrative Agent, any Lender Agent or any Lender shall be liable for the amount of any loss incurred, in respect of any investment, or lack of investment, of funds held in the Collection Account, other than with respect to fraud or their own gross negligence or willful misconduct. The parties hereto acknowledge that the Collateral Agent or any of its Affiliates may receive compensation with respect to the Permitted Investments.
(e)      Until the Collection Date, neither the Borrower nor the Servicer shall have any rights of direction or withdrawal with respect to amounts held in the Collection Account, except to the extent explicitly set forth in Sections 2.04 , 2.20(d) or 2.21 .
SECTION 2.21      Reinvestment of Principal Collections .
On the terms and conditions hereinafter set forth as certified in writing to the Collateral Agent, the Lender Agents and Administrative Agent, prior to the end of the Reinvestment Period, the Servicer may, to the extent of any Principal Collections on deposit in the Principal Collection Account:
(a)      withdraw such funds for the purpose of reinvesting in additional Eligible Loan Assets to be Pledged hereunder; provided that the following conditions are satisfied:
(i)      all conditions precedent set forth in Section 3.04 have been satisfied;
(ii)      no Event of Default has occurred, or would result from such withdrawal and reinvestment, and no Unmatured Event of Default or Borrowing Base Deficiency exists or would result from such withdrawal and reinvestment;
(iii)      the representations and warranties contained in Sections 4.01 , 4.02 and 4.03 shall continue to be correct in all material respects, except to the extent relating to an earlier date;
(iv)      the Servicer provides same day written notice to the Administrative Agent and the Collateral Agent by facsimile or email (to be received no later than 1:00 p.m. on such day) of the request to withdraw Principal Collections and the amount of such request;
(v)      the notice required in clause (iv) shall be accompanied by a Disbursement Request and a Borrowing Base Certificate, each executed by the Borrower and a Responsible Officer of the Servicer; and
(vi)      the Collateral Agent provides to the Administrative Agent by facsimile or email (to be received no later than 1:30 p.m. on that same day) a statement reflecting the total amount on deposit as of the opening of business on such day in the Principal Collection Account; or
(b)      withdraw such funds for the purpose of making payments in respect of the Advances Outstanding at such time in accordance with and subject to the terms of Section 2.18 .
SECTION 2.22      Additional Lenders .
The Borrower may, with the written consent of the Administrative Agent, add additional Persons as Lenders. Each additional Lender and its applicable Lender Agent shall become a party hereto by executing and delivering to the Administrative Agent and the Borrower a Joinder Supplement and a Transferee Letter.
ARTICLE III.     

CONDITIONS PRECEDENT
SECTION 3.01      Conditions Precedent to Effectiveness .
(a)      This Agreement shall be effective upon satisfaction of the conditions precedent that:
(i)      all reasonable up-front expenses and fees (including reasonable attorneys’ fees, documented out of pocket expenses, the Structuring Fee, any fees required under any Lender Fee Letter and the U.S. Bank Fee Letter) that are invoiced at or prior to the Closing Date shall have been paid in full and all other acts and conditions (including, without limitation, the obtaining of any necessary consents, all required legal opinions and regulatory approvals and the making of any required filings, recordings or registrations) required to be done and performed and to have happened prior to the execution, delivery and performance of this Agreement and all related Transaction Documents and to constitute the same legal, valid and binding obligations, enforceable in accordance with their respective terms, shall have been done and performed and shall have happened in due and strict compliance with all Applicable Law;
(ii)      in the reasonable judgment of the Administrative Agent and each Lender Agent, there not having been any change in Applicable Law which adversely affects any Lender’s or the Administrative Agent’s entering into the transactions contemplated by the Transaction Documents or any Material Adverse Effect or material disruption after May 31, 2012 in the financial, banking or commercial loan or capital markets generally;
(iii)      any and all information submitted to each Lender, Lender Agent and the Administrative Agent by the Borrower, the Seller or the Servicer or any of their Affiliates is true, accurate, complete in all material respects and not misleading in any material respect;
(iv)      each Lender Agent shall have received all documentation and other information requested by such Lender Agent in its sole discretion and/or required by regulatory authorities with respect to the Borrower, the Seller and the Servicer (and each Affiliate or any other key personnel) under applicable “know your customer” and anti-money laundering rules and regulations, including, without limitation, the USA PATRIOT Act, all in form and substance reasonably satisfactory to each Lender Agent;
(v)      the Administrative Agent shall have received on or before the date of such effectiveness the items listed in Schedule I , each in form and substance satisfactory to the Administrative Agent and each Lender Agent;
(vi)      since May 31, 2012, no material adverse change on the business, assets, financial conditions or performance of the Servicer and its subsidiaries, including the Borrower, on a consolidated basis, or any material portion of the initial proposed Eligible Loan Assets has occurred;
(vii)      the results of Administrative Agent’s financial, legal, tax and accounting due diligence relating to the Seller, the Borrower, the Servicer, the Eligible Loan Assets and the transactions contemplated hereunder are satisfactory to Administrative Agent;
(viii)      in the judgment of each Lender, Lender Agent and the Administrative Agent, there has not been any material adverse change in the Seller’s, the Borrower’s or the Servicer’s underwriting, servicing, collection, operating and reporting procedures and systems since the completion of due diligence;
(ix)      BDCA has Shareholder’s Equity of at least $50,000,000; and
(x)      each applicable Lender Agent shall have received a duly executed copy of its Variable Funding Note, in a principal amount equal to the Commitment of the related Lender.
(b)      By its execution and delivery of this Agreement, each of the Borrower and the Servicer hereby certifies that each of the conditions precedent to the effectiveness of this Agreement set forth in this Section 3.01 have been satisfied; provided , that with respect to conditions precedent that expressly require the consent or approval of the Administrative Agent or another party (other than the Borrower or the Servicer), the foregoing certification is only to the knowledge of the Borrower and the Servicer, as applicable, with respect to such consents or approvals.
SECTION 3.02      Conditions Precedent to All Advances . Each Advance (including the Initial Advance, except as explicitly set forth below) to the Borrower from the Lenders shall be subject to the further conditions precedent that:
(a)      On the Advance Date of such Advance, the following statements shall be true and correct, and the Borrower, by accepting any amount of such Advance, shall be deemed to have certified that:
(iv)      the Servicer (on behalf of the Borrower) shall have delivered to the Administrative Agent and each Lender Agent (with a copy to the Collateral Custodian and the Collateral Agent) no later than 2:00 p.m. on the date of such Advance): (A) a Notice of Borrowing, (B) a Borrowing Base Certificate, (C) a Loan Asset Schedule and (D) a Loan Assignment in the form of Exhibit A to the Purchase and Sale Agreement (including Schedule I thereto) and containing such additional information as may be reasonably requested by the Administrative Agent;
(v)      the Borrower shall have delivered to the Collateral Custodian (with a copy to the Administrative Agent), no later than 2:00 p.m. on the related Advance Date, a faxed or e-mailed copy of the duly executed original promissory notes of the Loan Assets (and, in the case of any Noteless Loan Asset, a fully executed assignment agreement) and if any Loan Assets are closed in escrow, a certificate (in the form of Exhibit K ) from the closing attorneys of such Loan Assets certifying the possession of the Required Loan Documents; provided that, notwithstanding the foregoing, the Borrower shall cause the Loan Asset Checklist and the Required Loan Documents to be in the possession of the Collateral Custodian within five Business Days of any related Advance Date as to any Loan Assets;
(vi)      the representations and warranties contained in Sections 4.01 , 4.02 and 4.03 are true and correct in all material respects, and there exists no breach of any covenant contained in Sections 5.01 , 5.02 , 5.03 and 5.04 before and after giving effect to the Advance to take place on such Advance Date and to the application of proceeds therefrom, on and as of such day as though made on and as of such date (other than any representation and warranty that is made as of a specific date);
(vii)      on and as of such Advance Date, after giving effect to such Advance and the addition to the Collateral Portfolio of the Eligible Loan Assets being acquired by the Borrower using the proceeds of such Advance, the Advances Outstanding does not exceed the Borrowing Base;
(viii)      no Event of Default has occurred, or would result from such Advance, and no Unmatured Event of Default or Borrowing Base Deficiency exists or would result from such Advance;
(ix)      no event has occurred and is continuing, or would result from such Advance, which constitutes a Servicer Termination Event or any event which, if it continues uncured, will, with notice or lapse of time, constitute a Servicer Termination Event;
(x)      since the Closing Date, no material adverse change has occurred in the ability of the Servicer, Seller or the Borrower to perform its obligations under any Transaction Document;
(xi)      no Liens exist in respect of Taxes which are prior to the lien of the Collateral Agent on the Eligible Loan Assets to be Pledged on such Advance Date; and
(xii)      all terms and conditions of the Purchase and Sale Agreement required to be satisfied in connection with the assignment of each Eligible Loan Asset being Pledged hereunder on such Advance Date (and the Portfolio Assets related thereto), including, without limitation, the perfection of the Borrower’s interests therein, shall have been satisfied in full, and all filings (including, without limitation, UCC filings) required to be made by any Person and all actions required to be taken or performed by any Person in any jurisdiction to give the Collateral Agent, for the benefit of the Secured Parties, a first priority perfected security interest (subject only to Permitted Liens) in such Eligible Loan Assets and the Portfolio Assets related thereto and the proceeds thereof shall have been made, taken or performed.
(b)      The Administrative Agent shall have approved in its sole and absolute discretion each of the Eligible Loan Assets identified in the applicable Loan Asset Schedule for inclusion in the Collateral Portfolio on the applicable Advance Date.
(c)      No Applicable Law shall prohibit, and no order, judgment or decree of any Governmental Authority shall prohibit or enjoin, the making of such Advances by any Lender or the proposed Pledge of Eligible Loan Assets in accordance with the provisions hereof.
(d)      The proposed Advance Date shall take place during the Reinvestment Period and the Facility Maturity Date has not yet occurred.
(e)      The Borrower shall have paid all fees then required to be paid, including all fees required hereunder and under the applicable Lender Fee Letters and the U.S. Bank Fee Letter and shall have reimbursed the Lenders, the Administrative Agent, each Lender Agent, the Collateral Custodian, the Account Bank and the Collateral Agent for all reasonable fees, costs and expenses of closing the transactions contemplated hereunder and under the other Transaction Documents, including the reasonable attorney fees and any other legal and document preparation costs incurred by the Lenders, the Administrative Agent and each Lender Agent.
The failure of the Borrower to satisfy any of the foregoing conditions precedent in respect of any Advance shall give rise to a right of the Administrative Agent and the applicable Lender Agent, which right may be exercised at any time on the demand of the applicable Lender Agent, to rescind the related Advance and direct the Borrower to pay to the applicable Lender Agent for the benefit of the applicable Lender an amount equal to the Advances made during any such time that any of the foregoing conditions precedent were not satisfied.
SECTION 3.03      Advances Do Not Constitute a Waiver . No Advance made hereunder shall constitute 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 Pledges of Loan Assets . Each Pledge of an additional Eligible Loan Asset pursuant to Section 2.06 , a Substitute Eligible Loan Asset pursuant to Section 2.07(a) or (c) , an additional Eligible Loan Asset pursuant to Section 2.21 or any other Pledge of a Loan Asset hereunder shall be subject to the further conditions precedent that (as certified to the Collateral Agent by the Borrower):
(a)      the Servicer (on behalf of the Borrower) shall have delivered to the Administrative Agent and each Lender Agent (with a copy to the Collateral Custodian and the Collateral Agent) no later than 2:00 p.m. on the related Cut-Off Date: (A) a Borrowing Base Certificate, (B) a Loan Asset Schedule and (C) a Loan Assignment in the form of Exhibit A to the Purchase and Sale Agreement (including Schedule I thereto) and containing such additional information as may be reasonably requested by the Administrative Agent;
(b)      the Borrower shall have delivered to the Collateral Custodian (with a copy to the Administrative Agent), no later than 2:00 p.m. on the related Cut-Off Date, a faxed or e-mailed copy of the duly executed original promissory notes of the Loan Assets (and, in the case of any Noteless Loan Asset, a fully executed assignment agreement) and if any Loan Assets are closed in escrow, a certificate (in the form of Exhibit K ) from the closing attorneys of such Loan Assets certifying the possession of the Required Loan Documents; provided that, notwithstanding the foregoing, the Borrower shall cause the Loan Asset Checklist and the Required Loan Documents to be in the possession of the Collateral Custodian within five Business Days of any related Cut-Off Date as to any Loan Assets;
(c)      no Liens exist in respect of Taxes which are prior to the lien of the Collateral Agent on the Eligible Loan Assets to be Pledged on such Cut-Off Date;
(d)      all terms and conditions of the Purchase and Sale Agreement required to be satisfied in connection with the assignment of each Eligible Loan Asset being Pledged hereunder on such Cut-Off Date (and the Portfolio Assets related thereto), including, without limitation, the perfection of the Borrower’s interests therein, shall have been satisfied in full, and all filings (including, without limitation, UCC filings) required to be made by any Person and all actions required to be taken or performed by any Person in any jurisdiction to give the Collateral Agent, for the benefit of the Secured Parties, a first priority perfected security interest (subject only to Permitted Liens) in such Eligible Loan Assets and the Portfolio Assets related thereto and the proceeds thereof shall have been made, taken or performed;
(e)      the Administrative Agent shall have approved in its sole and absolute discretion each of the Eligible Loan Assets identified in the applicable Loan Asset Schedule for inclusion in the Collateral Portfolio on the applicable Cut-Off Date;
(f)      no Event of Default has occurred, or would result from such Pledge, and no Unmatured Event of Default exists, or would result from such Pledge (other than, with respect to any Pledge of an Eligible Loan Asset necessary to cure a Borrowing Base Deficiency in accordance with Section 2.06 , an Unmatured Event of Default arising solely pursuant to such Borrowing Base Deficiency); and
(g)      the representations and warranties contained in Sections 4.01 , 4.02 and 4.03 are true and correct in all material respects, and there exists no breach of any covenant contained in Sections 5.01 , 5.02 , 5.03 and 5.04 before and after giving effect to the Pledge to take place on such Cut-Off Date, on and as of such day as though made on and as of such date (other than any representation and warranty that is made as of a specific date).
ARTICLE IV.     

REPRESENTATIONS AND WARRANTIES
SECTION 4.01      Representations and Warranties of the Borrower . The Borrower hereby represents and warrants, as of the Closing Date, as of each applicable Cut-Off Date, as of each applicable Advance Date, as of each Reporting Date and as of each other date provided under this Agreement or the other Transaction Documents on which such representations and warranties are required to be (or deemed to be) made (unless a specific date is specified below):
(f)      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 and has the power and all licenses 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 each jurisdiction where the transaction of such business or its ownership of the Loan Assets and the Collateral Portfolio requires such qualification.
(g)      Power and Authority; Due Authorization; Execution and Delivery . The Borrower has the power, authority and legal right to make, deliver and perform this Agreement and each of the Transaction Documents to which it is a party and all of the transactions contemplated hereby and thereby, and has taken all necessary action to authorize the execution, delivery and performance of this Agreement and each of the Transaction Documents to which it is a party, and to grant to the Collateral Agent, for the benefit of the Secured Parties, a first priority perfected security interest in the Collateral Portfolio on the terms and conditions of this Agreement, subject only to Permitted Liens.
(h)      Binding Obligation . This Agreement and each of the Transaction Documents to which the Borrower is a party constitutes the legal, valid and binding obligation of the Borrower, enforceable against it 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 (whether such enforceability is considered in a proceeding in equity or at law).
(i)      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 Loan Assets or the transfer of an ownership interest or security interest in such Loan Assets, other than such as have been met or obtained and are in full force and effect.
(j)      No Violation . The execution, delivery and performance of this Agreement and all other agreements and instruments executed and delivered or to be executed and delivered pursuant hereto or thereto in connection with the Pledge of the Collateral Portfolio will not (i) create any Lien on the Collateral Portfolio other than Permitted Liens, (ii) violate any Applicable Law or the certificate of formation or limited liability company agreement of the Borrower or (iii) violate any contract or other agreement to which the Borrower is a party or by which the Borrower or any property or assets of the Borrower may be bound.
(k)      No Proceedings . There is no litigation or administrative proceeding or investigation pending or, to the knowledge 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 to which the Borrower is a party, (ii) seeking to prevent the consummation of any of the transactions contemplated by this Agreement or any other Transaction Document to which the Borrower is a party or (iii) seeking any determination or ruling that could reasonably be expected to have a Material Adverse Effect.
(l)      Selection Procedures . In selecting the Loan Assets to be Pledged pursuant to this Agreement, no selection procedures were employed which are intended to be adverse to the interests of the Lenders.
(m)      Pledge of Collateral Portfolio . Except as otherwise expressly permitted by the terms of this Agreement, no item of Collateral Portfolio has been sold, transferred, assigned or pledged by the Borrower to any Person, other than as contemplated by Article II and the Pledge of such Collateral Portfolio to the Collateral Agent, for the benefit of the Secured Parties, pursuant to the terms of this Agreement.
(n)      Indebtedness . The Borrower has no Indebtedness or other indebtedness, secured or unsecured, direct or contingent (including guaranteeing any obligation), other than (i) Indebtedness incurred under the terms of the Transaction Documents and (ii) Indebtedness incurred pursuant to certain ordinary business expenses arising pursuant to the transactions contemplated by this Agreement and the other Transaction Documents.
(o)      Sole Purpose . The Borrower has been formed solely for the purpose of engaging in transactions of the types contemplated by this Agreement and has not engaged in any business activity other than the negotiation, execution and to the extent applicable, performance of this Agreement and the transactions contemplated by the Transaction Documents.
(p)      No Injunctions . No injunction, writ, restraining order or other order of any nature adversely affects the Borrower’s performance of its obligations under this Agreement or any Transaction Document to which the Borrower is a party.
(q)      Taxes . The Borrower has filed or caused to be filed (on a consolidated basis or otherwise) on a timely basis all tax returns (including, without limitation, all foreign, federal, state, local and other tax returns) required to be filed by it, is not liable for Taxes payable by any other Person and has paid or made adequate provisions for the payment of all Taxes, assessments and other governmental charges due and payable from the Borrower except for those Taxes being contested in good faith by appropriate proceedings and in respect of which it has established proper reserves on its books. No Tax lien or similar adverse claim has been filed, and no claim is being asserted, with respect to any such Tax, assessment or other governmental charge. Any Taxes, fees and other governmental charges due and payable by the Borrower, as applicable, in connection with the execution and delivery of this Agreement and the other Transaction Documents and the transactions contemplated hereby or thereby have been paid or shall have been paid if and when due.
(r)      Location . The Borrower’s location (within the meaning of Article 9 of the UCC) is Delaware. The chief executive office of the Borrower (and the location of the Borrower’s records regarding the Collateral Portfolio (other than those delivered to the Collateral Custodian)) is located at the address set forth under its name on the signature pages hereto (or at such other address as shall be designated by such party in a written notice to the other parties hereto).
(s)      Tradenames . Except as permitted hereunder, the Borrower’s legal name is as set forth in this Agreement. Except as permitted hereunder, the Borrower has not changed its name since its formation; does not have tradenames, fictitious names, assumed names or “doing business as” names other than as disclosed on Schedule II (as such schedule may be updated from time to by the Administrative Agent upon receipt of a notice delivered to the Administrative Agent pursuant to Section 5.02(r) ); the Borrower’s only jurisdiction of formation is Delaware, and, except as permitted hereunder, the Borrower has not changed its jurisdiction of formation.
(t)      Solvency . The Borrower is not the subject of any Bankruptcy Proceedings or Bankruptcy Event. The Borrower is Solvent, and the transactions under this Agreement and any other Transaction Document to which the Borrower is a party do not and will not render the Borrower not Solvent. The Borrower is paying its debts as they become due (subject to any applicable grace period); and the Borrower, after giving effect to the transactions contemplated hereby, will have adequate capital to conduct its business.
(u)      No Subsidiaries . The Borrower has no Subsidiaries.
(v)      Value Given . The Borrower has given fair consideration and reasonably equivalent value to the Seller in exchange for the purchase of the Loan Assets (or any number of them) from the Seller pursuant to the Purchase and Sale Agreement. No such transfer has been made for or on account of an antecedent debt owed by the Borrower to the Seller and no such transfer is or may be voidable or subject to avoidance under any section of the Bankruptcy Code.
(w)      Reports Accurate . All Servicer’s Certificates, Servicing Reports, Notices of Borrowing, Borrowing Base Certificates and other written or electronic information, exhibits, financial statements, documents, books, records or reports furnished by the Servicer to the Administrative Agent, the Collateral Agent, the Lenders, the Lender Agents, or the Collateral Custodian in connection with this Agreement are, as of their date, accurate, true and correct in all material respects and no such document or certificate omits to state a material fact or any fact necessary to make the statements contained therein not misleading; provided that, solely with respect to written or electronic information furnished by the Borrower or the Servicer which was provided to the Borrower or the Servicer from an Obligor with respect to a Loan Asset, such information need only be accurate, true and correct to the knowledge of the Borrower or the Servicer, as applicable; provided, further, that the foregoing proviso shall not apply to any information presented in a Servicer’s Certificate, Servicing Report, Notice of Borrowing or Borrowing Base Certificate.
(x)      Exchange Act Compliance; Regulations T, U and X . None of the transactions contemplated herein or in the other Transaction Documents (including, without limitation, the use of proceeds from the sale of the Collateral Portfolio) will violate or result in a violation of Section 7 of the Exchange Act, or any regulations issued pursuant thereto, including, without limitation, 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.
(y)      No Adverse Agreements . There are no agreements in effect adversely affecting the rights of the Borrower to make, or cause to be made, the grant of the security interest in the Collateral Portfolio contemplated by Section 2.13 .
(z)      Event of Default/Unmatured Event of Default . No event has occurred which constitutes an Event of Default, and no event has occurred and is continuing which constitutes an Unmatured Event of Default (other than any Event of Default or Unmatured Event of Default which has previously been disclosed to the Administrative Agent as such).
(aa)      Servicing Standard . Each of the Loan Assets was underwritten or acquired and is being serviced in conformance with the standard underwriting, credit, collection, operating and reporting procedures and systems of the Servicer or the Seller.
(bb)      ERISA . The present value of all benefits vested under each “employee pension benefit plan,” as such term is defined in Section 3(2) of ERISA, that is subject to Title IV of ERISA, Section 412 of the Code or Section 302 of ERISA (other than any Multiemployer Plan) and that is, or at any time during the preceding six years was, maintained by the Borrower or any ERISA Affiliate of the Borrower, or open to participation by employees of the Borrower or of any ERISA Affiliate of the Borrower, as from time to time in effect (each, a “ Pension Plan ”), does not exceed the value of the assets of the Pension Plan allocable to such vested benefits (based on the value of such assets as of the last annual valuation date). No prohibited transactions, failure to meet the minimum funding standard set forth in Section 302(a) of ERISA and Section 412(a) of the Code (with respect to any Pension Plan other than a Multiemployer Plan), withdrawals or reportable events have occurred with respect to any Pension Plan that, in the aggregate, could subject the Borrower to any material tax, penalty or other liability. No notice of intent to terminate a Pension Plan has been filed, nor has any Pension Plan been terminated under Section 4041(f) of ERISA, nor has the Pension Benefit Guaranty Corporation instituted proceedings to terminate, or appoint a trustee to administer a Pension Plan and no event has occurred or condition exists that might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan.
(cc)      Allocation of Charges . There is not any agreement or understanding between the Servicer and the Borrower (other than as expressly set forth herein or as consented to by the Administrative Agent) providing for the allocation or sharing of obligations to make payments or otherwise in respect of any taxes, fees, assessments or other governmental charges; provided that it is understood and acknowledged that the Borrower will be consolidated with the Servicer for tax purposes.
(dd)      Broker-Dealer . The Borrower is not a broker-dealer or subject to the Securities Investor Protection Act of 1970, as amended.
(ee)      Instructions to Obligors . The Collection Account is the only account to which any agent, administrative agent or Obligor has been instructed by the Borrower, or the Servicer on the Borrower’s behalf, to send Principal Collections and Interest Collections on the Collateral Portfolio. The Borrower has not granted any Person other than the Collateral Agent, on behalf of the Secured Parties, an interest in the Collection Account. The Borrower acknowledges that all Available Collections received in error by it or its Affiliates with respect to the Collateral Portfolio Pledged hereunder are held and shall be held in trust for the benefit of the Collateral Agent, on behalf of the Secured Parties, and shall promptly (and within two Business Days of receipt thereof) be deposited into the Collection Account as required herein.
(ff)      Purchase and Sale Agreement . The Purchase and Sale Agreement and the Loan Assignment contemplated therein are the only agreements pursuant to which the Borrower acquires the Collateral Portfolio.
(gg)      Investment Company Act . The Borrower is not required to register as an “investment company” under the provisions of the 1940 Act.
(hh)      Compliance with Law . The Borrower has complied in all material respects with all Applicable Law to which it may be subject, and no item of the Collateral Portfolio contravenes any Applicable Law (including, without limitation, 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).
(ii)      Set-Off, etc . No Loan Asset has been compromised, adjusted, extended, satisfied, subordinated, rescinded, set-off or modified by the Borrower, the Seller or the Obligor thereof, and no Collateral Portfolio 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 Portfolio or otherwise, by the Borrower, the Seller or the Obligor with respect thereto, except, in each case, for amendments, extensions and modifications, if any, to such Collateral Portfolio otherwise permitted pursuant to Section 6.04(a) and in accordance with the Servicing Standard.
(jj)      Full Payment . As of the applicable Cut-Off Date thereof, the Borrower has no knowledge of any fact which should lead it to expect that any Loan Asset will not be paid in full.
(kk)      Environmental . With respect to each item of Underlying Collateral as of the applicable Cut-Off Date for the Loan Asset related to such Underlying Collateral, to the actual knowledge of a Responsible Officer of the Borrower: (a) the related Obligor’s operations comply in all respects with all applicable Environmental Laws; (b) 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 (c) 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 Loan Asset related to such Underlying Collateral, none of the Borrower, the Seller nor the Servicer has received any written or verbal 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, nor does any such Person have knowledge or reason to believe that any such notice will be received or is being threatened.
(ll)      USA PATRIOT Act . Neither the Borrower nor any Affiliate of the Borrower is (i) a country, territory, organization, person or entity named on an Office of Foreign Asset Control (OFAC) list; (ii) a Person that resides or has a place of business in a country or territory named on such lists or which is designated as a “Non-Cooperative Jurisdiction” by the Financial Action Task Force on Money Laundering, or whose subscription funds are transferred from or through such a jurisdiction; (iii) a “Foreign Shell Bank” within the meaning of the USA PATRIOT Act, i.e. , a foreign bank that does not have a physical presence in any country and that is not affiliated with a bank that has a physical presence and an acceptable level of regulation and supervision; or (iv) a person or entity that resides in or is organized under the laws of a jurisdiction designated by the United States Secretary of the Treasury under Sections 311 or 312 of the USA PATRIOT Act as warranting special measures due to money laundering concerns.
(mm)      Confirmation from Seller . Pursuant to Section 10.12 of the Purchase and Sale Agreement, the Borrower has received in writing from the Seller confirmation that the Seller will not cause the Borrower to file a voluntary bankruptcy petition under the Bankruptcy Code.
(nn)      Accuracy of Representations and Warranties . Each representation or warranty by the Borrower contained herein or in any certificate or other document furnished by the Borrower pursuant hereto or in connection herewith is true and correct in all respects.
(oo)      Reaffirmation of Representations and Warranties . On each day that any Advance is made hereunder, the Borrower shall be deemed to have certified that all representations and warranties described in Sections 4.01 and 4.02 are correct on and as of such day as though made on and as of such day, except for any such representations or warranties which are made as of a specific date.
(pp)      Security Interest .
(i)      This Agreement creates a valid and continuing security interest (as defined in the applicable UCC) in the Collateral Portfolio in favor of the Collateral 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;
(ii)      the Collateral Portfolio is comprised of “instruments”, “security entitlements”, “general intangibles”, “tangible chattel paper”, “accounts”, “certificated securities”, “uncertificated securities”, “securities accounts”, “deposit accounts”, “supporting obligations” or “insurance” (each as defined in the applicable UCC), real property and/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(kk) ;
(iii)      with respect to Collateral Portfolio that constitute “security entitlements”:
a.      all of such security entitlements have been credited to the Collection Account and the securities intermediary for the Collection Account has agreed to treat all assets credited to the Collection Account as “financial assets” within the meaning of the applicable UCC;
b.      the Borrower has taken all steps necessary to cause the securities intermediary to identify in its records the Collateral Agent, for the benefit of the Secured Parties, as the Person having a security entitlement against the securities intermediary in the Collection Account; and
c.      the Collection Account is not in the name of any Person other than the Borrower, subject to the lien of the Collateral Agent, for the benefit of the Secured Parties. The securities intermediary of the Collection Account, which is a “securities account” under the UCC, has agreed to comply with the entitlement orders and instructions of the Borrower, the Servicer and the Collateral Agent (acting at the direction of the Administrative Agent) in accordance with the Transaction Documents, including causing cash to be invested in Permitted Investments; provided that, upon the delivery of a Notice of Exclusive Control (as defined under the Collection Account Agreement) by the Collateral Agent (acting at the direction of the Administrative Agent), the securities intermediary has agreed to only follow the entitlement orders and instructions of the Collateral Agent, on behalf of the Secured Parties, including with respect to the investment of cash in Permitted Investments.
(iv)      the Collection Account constitutes a “securities account” as defined in the applicable UCC;
(v)      the Borrower owns and has good and marketable title to (or with respect to assets securing any Loan Assets, a valid security interest in) the Collateral Portfolio free and clear of any Lien (other than Permitted Liens) of any Person;
(vi)      the Borrower has received all consents and approvals required by the terms of any Loan Asset to the granting of a security interest in the Loan Assets hereunder to the Collateral Agent, on behalf of the Secured Parties;
(vii)      the Borrower has caused the filing of all appropriate financing statements in the proper filing office in the appropriate jurisdictions under Applicable Law in order to perfect the security interest in the Collateral Portfolio and that portion of the Loan Assets in which a security interest may be perfected by filing granted to the Collateral Agent, on behalf of the Secured Parties, under this Agreement; provided that filings in respect of real property shall not be required;
(viii)      other than as expressly permitted by the terms of this Agreement and the security interest granted to the Collateral 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 Portfolio. 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 Portfolio other than any financing statement (A) relating to the security interests granted to the Borrower under the Purchase and Sale Agreement or (B) that has been terminated and/or fully and validly assigned to the Collateral Agent on or prior to the date hereof. The Borrower is not aware of the filing of any judgment or Tax lien filings against the Borrower;
(ix)      all original executed copies of each underlying promissory note or copies of each Loan Asset Register, as applicable, that constitute or evidence each Loan Asset has been, or subject to the delivery requirements contained herein, will be delivered to the Collateral Custodian;
(x)      other than in the case of Noteless Loan Assets, the Borrower has received, or subject to the delivery requirements contained herein will receive, a written acknowledgment from the Collateral Custodian that the Collateral Custodian, as the agent of the Collateral Agent, is holding the underlying promissory notes that constitute or evidence the Loan Assets solely on behalf of and for the Collateral Agent, for the benefit of the Secured Parties; provided that the acknowledgement of the Collateral Custodian set forth in Section 12.11 may serve as such acknowledgement and that the Borrower shall need no further acknowledgement from the Collateral Custodian;
(xi)      none of the underlying promissory notes, or Loan Asset Registers, as applicable, that constitute or evidence the Loan Assets has any marks or notations indicating that they have been pledged (other than with respect to any pledge which has been released), assigned or otherwise conveyed to any Person other than the Collateral Agent, on behalf of the Secured Parties;
(xii)      with respect to any Collateral Portfolio that constitutes a “certificated security,” such certificated security has been delivered to the Collateral Custodian, on behalf of the Secured Parties and, if in registered form, has been specially Indorsed to the Collateral Agent, for the benefit of the Secured Parties, or in blank by an effective Indorsement or has been registered in the name of the Collateral Agent, for the benefit of the Secured Parties, upon original issue or registration of transfer by the Borrower of such certificated security; and
(xiii)      with respect to any Collateral Portfolio that constitutes an “uncertificated security”, that the Borrower shall cause the issuer of such uncertificated security to register the Collateral Agent, on behalf of the Secured Parties, as the registered owner of such uncertificated security.
SECTION 4.02      Representations and Warranties of the Borrower Relating to the Agreement and the Collateral Portfolio . The Borrower hereby represents and warrants, as of the Closing Date, as of each applicable Cut-Off Date, as of each applicable Advance Date, as of each Reporting Date and any date which Loan Assets are Pledged hereunder and as of each other date provided under this Agreement or the other Transaction Documents on which such representations and warranties are required to be (or deemed to be) made:
(a)      Valid Transfer and Security Interest . This Agreement constitutes a grant of a security interest in all of the Collateral Portfolio to the Collateral Agent, for the benefit of the Secured Parties, which, upon the delivery of the Required Loan Documents to the Collateral Custodian, the crediting of Loan Assets to the Collection Account and the filing of the financing statements, shall be a valid and first priority perfected security interest in the Loan Assets forming a part of the Collateral Portfolio and in that portion of the Loan Assets in which a security interest may be perfected by filing subject only to Permitted Liens. Neither the Borrower nor any Person claiming through or under Borrower shall have any claim to or interest in the Collection Account, except for the interest of the Borrower in such property as a debtor for purposes of the UCC.
(b)      Eligibility of Collateral Portfolio . (i) The Loan Asset Schedule and the information contained in each Notice of Borrowing, is an accurate and complete listing of all the Loan Assets contained in the Collateral Portfolio as of the related Cut-Off Date and the information contained therein with respect to the identity of such item of Collateral Portfolio and the amounts owing thereunder is true and correct as of the related Cut-Off Date, (ii) each Loan Asset designated on any Borrowing Base Certificate as an Eligible Loan Asset and each Loan Asset included as an Eligible Loan Asset in any related calculation of Borrowing Base or Borrowing Base Deficiency is an Eligible Loan Asset as of the date of such certificate or calculation and (iii) with respect to each item of Collateral Portfolio, 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 transfer of a security interest in each item of Collateral Portfolio to the Collateral Agent, for the benefit of the Secured Parties, have been duly obtained, effected or given and are in full force and effect. For the avoidance of doubt, any inaccurate representation that a Loan Asset is an Eligible Loan Asset hereunder or under the Purchase and Sale Agreement or any representation set forth in Section 4.01(dd) or 4.02(b) of this Agreement or in Section 4.1(n) or 4.2(b) of the Purchase and Sale Agreement shall not constitute an Event of Default if the Borrower complies with Section 2.07(d) hereunder and the Seller complies with Section 6.1 of the Purchase and Sale Agreement (subject, however, to the 10 day grace period set forth in such provision); provided that any such Loan Asset will not be included in the calculation of the Borrowing Base during such 10 day period.
(c)      No Fraud . Each Loan Asset was originated or acquired without any fraud or misrepresentation by the Seller or, to the best of the Borrower’s knowledge, on the part of the Obligor.
SECTION 4.03      Representations and Warranties of the Servicer . The Servicer hereby represents and warrants, as of the Closing Date, as of each applicable Cut-Off Date, as of each applicable Advance Date, as of each Reporting Date and as of each other date provided under this Agreement or the other Transaction Documents on which such representations and warranties are required to be (or deemed to be) made:
(h)      Organization and Good Standing . The Servicer has been duly organized and is validly existing as a corporation in good standing under the laws of the State of Maryland (except as such jurisdiction is changed as permitted hereunder), with all requisite corporate power and authority to own or lease its properties and to conduct its business as such business is presently conducted and to enter into and perform its obligations pursuant to this Agreement.
(i)      Due Qualification . The Servicer is duly qualified to do business as a corporation and is in good standing as a corporation, and has obtained all necessary licenses and approvals in all jurisdictions in which the ownership or lease of its property and or the conduct of its business requires such qualification, licenses or approvals.
(j)      Power and Authority; Due Authorization; Execution and Delivery . The Servicer (i) has all necessary power, authority and legal right to (A) execute and deliver this Agreement and the other Transaction Documents to which it is a party, (B) carry out the terms of the Transaction Documents to which it is a party, and (ii) has duly authorized by all necessary corporate action the execution, delivery and performance of this Agreement and the other Transaction Documents to which it is a party. This Agreement and each other Transaction Document to which the Servicer is a party have been duly executed and delivered by the Servicer.
(k)      Binding Obligation . This Agreement and each other Transaction Document to which the Servicer is a party constitutes a legal, valid and binding obligation of the Servicer enforceable against the Servicer in accordance with its respective terms, except as such enforceability may be limited by Bankruptcy Laws and general principles of equity (whether considered in a suit at law or in equity).
(l)      No Violation . The consummation of the transactions contemplated by this Agreement and the other Transaction Documents to which it is a party and the fulfillment of the terms hereof and thereof 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, the Servicer’s articles of incorporation or by-laws or any material contractual obligation of the Servicer, (ii) result in the creation or imposition of any Lien upon any of the Servicer’s properties pursuant to the terms of any such contractual obligation, other than this Agreement, or (iii) violate any Applicable Law.
(m)      No Proceedings . There is no litigation, proceeding or investigation pending or, to the knowledge of the Servicer, threatened against the Servicer, before any Governmental Authority (i) asserting the invalidity of this Agreement or any other Transaction Document to which the Servicer is a party, (ii) seeking to prevent the consummation of any of the transactions contemplated by this Agreement or any other Transaction Document to which the Servicer is a party or (iii) seeking any determination or ruling that could reasonably be expected to have a Material Adverse Effect.
(n)      All Consents Required . All approvals, authorizations, consents, orders, licenses or other actions of any Person or of any Governmental Authority (if any) required for the due execution, delivery and performance by the Servicer of this Agreement and any other Transaction Document to which the Servicer is a party have been obtained.
(o)      Reports Accurate . No Borrowing Base Certificate, information, exhibit, financial statement, document, book, record or report furnished by the Servicer to the Administrative Agent, the Collateral Agent, the Lenders, the Lender Agents, or the Collateral Custodian in connection with this Agreement is inaccurate in any material respect as of the date it is dated, 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 misleading; provided that, solely with respect to written or electronic information furnished by the Servicer which was provided to the Servicer from an Obligor with respect to a Loan Asset, such information need only be accurate, true and correct in all material respects to the knowledge of the Servicer; provided, further, that the foregoing proviso shall not apply to any information presented in a Servicer’s Certificate, Servicing Report, Notice of Borrowing or Borrowing Base Certificate.
(p)      Servicing Standard . The Servicer has complied in all respects with the Servicing Standard with regard to the servicing of the Loan Assets.
(q)      Collections . The Servicer acknowledges that all Available Collections received by it or its Affiliates with respect to the Collateral Portfolio transferred or Pledged hereunder are held and shall be held in trust for the benefit of the Secured Parties until deposited into the Collection Account within two Business Days from receipt as required herein.
(r)      Solvency . The Servicer is not the subject of any Bankruptcy Proceedings or Bankruptcy Event. The transactions under this Agreement and any other Transaction Document to which the Servicer is a party do not and will not render the Servicer not Solvent.
(s)      Taxes . The Servicer has filed or caused to be filed all tax returns that are required to be filed by it (subject to any extensions to file properly obtained by the same). The Servicer has paid or made adequate provisions for the payment of all Taxes and all assessments made against it or any of its property (other than any amount of Tax the validity of which is currently 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 Servicer), and no Tax lien has been filed and no claim is being asserted, with respect to any such Tax, assessment or other charge.
(t)      Exchange Act Compliance; Regulations T, U and X . None of the transactions contemplated herein or the other Transaction Documents (including, without limitation, the use of the Proceeds from the sale of the Collateral Portfolio) will violate or result in a violation of Section 7 of the Exchange Act, or any regulations issued pursuant thereto, including, without limitation, Regulations T, U and X of the Board of Governors of the Federal Reserve System, 12 C.F.R., Chapter II.
(u)      Security Interest . The Servicer will take all steps necessary to ensure that the Borrower has granted a security interest (as defined in the UCC) to the Collateral Agent, for the benefit of the Secured Parties, in the Collateral Portfolio, which is enforceable in accordance with Applicable Law upon execution and delivery of this Agreement. Upon the filing of UCC-1 financing statements naming the Collateral Agent as secured party and the Borrower as debtor, the Collateral Agent, for the benefit of the Secured Parties, shall have a valid and first priority perfected security interest in the Loan Assets and that portion of the Collateral Portfolio in which a security interest may be perfected by filing (except for any Permitted Liens). All filings (including, without limitation, such UCC filings) as are necessary for the perfection of the Secured Parties’ security interest in the Loan Assets and that portion of the Collateral Portfolio in which a security interest may be perfected by filing have been (or prior to the applicable Advance will be) made.
(v)      ERISA . The present value of all benefits vested under each “employee pension benefit plan,” as such term is defined in Section 3(2) of ERISA, that is subject to Title IV of ERISA, Section 412 of the Code or Section 302 of ERISA (other than any Multiemployer Plan) and that is, or at any time during the preceding six years was, maintained by the Servicer or any ERISA Affiliate of the Servicer, or open to participation by employees of the Servicer or of any ERISA Affiliate of the Servicer, as from time to time in effect (each, a “ Servicer Pension Plan ”), does not exceed the value of the assets of the Servicer Pension Plan allocable to such vested benefits (based on the value of such assets as of the last annual valuation date). No prohibited transactions, failure to meet the minimum funding standard set forth in Section 302(a) of ERISA and Section 412(a) of the Code (with respect to any Servicer Pension Plan other than a Multiemployer Plan), withdrawals or reportable events have occurred with respect to any Servicer Pension Plan that, in the aggregate, could subject the Servicer to any material tax, penalty or other liability. No notice of intent to terminate a Servicer Pension Plan has been filed, nor has any Servicer Pension Plan been terminated under Section 4041(f) of ERISA, nor has the Pension Benefit Guaranty Corporation instituted proceedings to terminate, or appoint a trustee to administer a Servicer Pension Plan and no event has occurred or condition exists that might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Servicer Pension Plan.
(w)      USA PATRIOT Act . Neither the Servicer nor any Affiliate of the Servicer is (i) a country, territory, organization, person or entity named on an OFAC list; (ii) a Person that resides or has a place of business in a country or territory named on such lists or which is designated as a “Non-Cooperative Jurisdiction” by the Financial Action Task Force on Money Laundering, or whose subscription funds are transferred from or through such a jurisdiction; (iii) a “Foreign Shell Bank” within the meaning of the USA PATRIOT Act, i.e ., a foreign bank that does not have a physical presence in any country and that is not affiliated with a bank that has a physical presence and an acceptable level of regulation and supervision; or (iv) a person or entity that resides in or is organized under the laws of a jurisdiction designated by the United States Secretary of the Treasury under Sections 311 or 312 of the USA PATRIOT Act as warranting special measures due to money laundering concerns.
(x)      Environmental . With respect to each item of Underlying Collateral as of the related Cut-Off Date, to the actual knowledge of a Responsible Officer of the Servicer: (a) the related Obligor’s operations comply in all material respects with all applicable Environmental Laws; (b) 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 (c) 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 related Cut-Off Date. The Servicer has not received any written or verbal 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, nor does the Servicer, have knowledge or reason to believe that any such notice will be received or is being threatened.
(y)      No Injunctions . No injunction, writ, restraining order or other order of any nature adversely affects the Servicer’s performance of its obligations under this Agreement or any Transaction Document to which the Servicer is a party.
(z)      Instructions to Obligors . The Collection Account is the only account to which any agent, administrative agent or Obligor has been instructed by the Servicer on the Borrower’s behalf to send Principal Collections and Interest Collections on the Collateral Portfolio.
(aa)      Allocation of Charges . There is not any agreement or understanding between the Servicer and the Borrower (other than as expressly set forth herein or as consented to by the Administrative Agent) providing for the allocation or sharing of obligations to make payments or otherwise in respect of any taxes, fees, assessments or other governmental charges; provided that it is understood and acknowledged that the Borrower will be consolidated with the Servicer for tax purposes.
(bb)      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).
(cc)      Broker-Dealer . The Servicer is not a broker-dealer or subject to the Securities Investor Protection Act of 1970, as amended.
(dd)      Compliance with Applicable Law . The Servicer has complied in all material respects with all Applicable Law to which it may be subject, and no item in the Collateral Portfolio contravenes in any respect any Applicable Law.
SECTION 4.04      Representations and Warranties of the Collateral Agent . The Collateral Agent in its individual capacity and as Collateral Agent represents and warrants as follows:
(a)      Organization; Power and Authority . It is a duly organized and validly existing national banking association in good standing under the laws of the United States. It has full corporate power, authority and legal right to execute, deliver and perform its obligations as Collateral Agent under this Agreement.
(b)      Due Authorization . The execution and delivery of this Agreement and the consummation of the transactions provided for herein have been duly authorized by all necessary association action on its part, either in its individual capacity or as Collateral Agent, as the case may be.
(c)      No Conflict . The execution and delivery of this Agreement, the performance of the transactions contemplated hereby and the fulfillment of the terms hereof will not conflict with, result in any material breach of its articles of incorporation or bylaws or any of the terms and provisions of, or constitute (with or without notice or lapse of time or both) a default under any indenture, contract, agreement, mortgage, deed of trust, or other instrument to which the Collateral Agent is a party or by which it or any of its property is bound.
(d)      No Violation . The execution and delivery of this Agreement, the performance of the transactions contemplated hereby and the fulfillment of the terms hereof will not conflict with or violate, in any respect, any Applicable Law.
(e)      All Consents Required . All approvals, authorizations, consents, orders or other actions of any Person or Governmental Authority applicable to the Collateral Agent, required in connection with the execution and delivery of this Agreement, the performance by the Collateral Agent of the transactions contemplated hereby and the fulfillment by the Collateral Agent of the terms hereof have been obtained.
(f)      Validity, Etc . The Agreement constitutes the legal, valid and binding obligation of the Collateral Agent, enforceable against the Collateral Agent in accordance with its terms, except as such enforceability may be limited by applicable Bankruptcy Laws and general principles of equity (whether considered in a suit at law or in equity).
SECTION 4.05      Representations and Warranties of each Lender . Each Lender hereby individually represents and warrants, as to itself, that it, acting for its own account, in the aggregate owns and invests on a discretionary basis, not less than $25,000,000 in investments. Notwithstanding any provision herein to the contrary, the parties hereto intend that the Advances made hereunder shall constitute a “loan” and not a “security” for purposes of Section 8-102(15) of the UCC.
SECTION 4.06      Representations and Warranties of the Collateral Custodian . The Collateral Custodian in its individual capacity and as Collateral Custodian represents and warrants as follows:
(a)      Organization; Power and Authority . It is a duly organized and validly existing national banking association in good standing under the laws of the United States. It has full corporate power, authority and legal right to execute, deliver and perform its obligations as Collateral Custodian under this Agreement.
(b)      Due Authorization . The execution and delivery of this Agreement and the consummation of the transactions provided for herein have been duly authorized by all necessary association action on its part, either in its individual capacity or as Collateral Custodian, as the case may be.
(c)      No Conflict . The execution and delivery of this Agreement, the performance of the transactions contemplated hereby and the fulfillment of the terms hereof will not conflict with, result in any breach of its articles of incorporation or bylaws or any of the terms and provisions of, or constitute (with or without notice or lapse of time or both) a default under any indenture, contract, agreement, mortgage, deed of trust, or other instrument to which the Collateral Custodian is a party or by which it or any of its property is bound.
(d)      No Violation . The execution and delivery of this Agreement, the performance of the transactions contemplated hereby and the fulfillment of the terms hereof will not conflict with or violate, in any respect, any Applicable Law.
(e)      All Consents Required . All approvals, authorizations, consents, orders or other actions of any Person or Governmental Authority applicable to the Collateral Custodian, required in connection with the execution and delivery of this Agreement, the performance by the Collateral Custodian of the transactions contemplated hereby and the fulfillment by the Collateral Custodian of the terms hereof have been obtained.
(f)      Validity, Etc . The Agreement constitutes the legal, valid and binding obligation of the Collateral Custodian, enforceable against the Collateral Custodian in accordance with its terms, except as such enforceability may be limited by applicable Bankruptcy Laws and general principles of equity (whether considered in a suit at law or in equity).
ARTICLE V.     

GENERAL COVENANTS
SECTION 5.01      Affirmative Covenants of the Borrower .
From the Closing Date until the Collection Date:
(d)      Organizational Procedures and Scope of Business . The Borrower will observe all organizational procedures required by its certificate of formation, limited liability company agreement and the laws of its jurisdiction of formation. Without limiting the foregoing, the Borrower will limit the scope of its business to: (i) the acquisition of Loan Assets and the ownership and management of the Portfolio Assets and the related assets in the Collateral Portfolio; (ii) the sale, transfer or other disposition of Loan Assets as and when permitted under the Transaction Documents; (iii) entering into and performing under the Transaction Documents; (iv) consenting or withholding consent as to proposed amendments, waivers and other modifications of the Loan 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 Loan 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; (vi) acquiring Portfolio Assets directly from third-parties (other than BDCA) on an arms-length basis, for consideration in cash; (vii) contracting with third–parties to provide services as may be required from time to time by the Borrower in connection with the Transaction Documents, including, without limitation, legal, investment, accounting, data processing, administrative and management services; (viii) taking any and all other action necessary to maintain the existence of the Borrower as a limited liability company in good standing under the laws of the State of Delaware and/or to qualify the Borrower to do business as a foreign limited liability company in any other state in which such qualification is required; and (ix) engaging in those lawful activities, including entering into other agreements and any amendments, supplements or restatements to the Transaction Documents to which it is a party or such other agreements and issuing any other instruments, that are necessary, convenient or advisable to accomplish the foregoing or are incidental thereto or in connection therewith.
(e)      Special Purpose Entity Requirements . The Borrower will at all times: (i) maintain at least one Independent Manager; (ii) maintain its own separate books and records and bank accounts; (iii) hold itself out to the public and all other Persons as a legal entity separate from the Seller and any other Person (although, in connection with certain advertising and marketing, the Borrower may be identified as a Subsidiary of BDCA); (iv) file its own tax returns, if any, as may be required under Applicable Law, to the extent (1) not part of a consolidated group filing a consolidated return or returns or (2) not treated as a division for tax purposes of another taxpayer, and pay any Taxes so required to be paid under Applicable Law in accordance with the terms of this Agreement; (v) except as contemplated by the Transaction Documents, not commingle its assets with assets of any other Person; (vi) conduct its business in its own name and strictly comply with all organizational formalities to maintain its separate existence (although, in connection with certain advertising and marketing, the Borrower may be identified as a Subsidiary of BDCA); (vii) maintain separate financial statements, except to the extent that the Borrower’s financial and operating results are consolidated with those of BDCA in consolidated financial statements; (viii) pay its own liabilities only out of its own funds; (ix) maintain an arm’s-length relationship with its Affiliates and the Seller; (x) pay the salaries of its own employees, if any; (xi) not hold out its credit or assets as being available to satisfy the obligations of others; (xii) allocate fairly and reasonably any overhead for shared office space; (xiii) use separate stationery, invoices and checks (although, in connection with certain advertising and marketing, the Borrower may be identified as a Subsidiary of BDCA); (xiv) except as expressly permitted by this Agreement, not pledge its assets as security for the obligations of any other Person; (xv) correct any known misunderstanding regarding its separate identity; (xvi) maintain adequate capital in light of its contemplated business purpose, transactions and liabilities and pay its operating expenses and liabilities from its own assets; (xvii) observe in all respects all Delaware limited liability company formalities; (xviii) not acquire the obligations or any securities of its Affiliates; and (xix) cause the directors, officers, agents and other representatives of the Borrower to act at all times with respect to the Borrower consistently and in furtherance of the foregoing and in the best interests of the Borrower. Where necessary, the Borrower will obtain proper authorization from its members for limited liability company action.
(f)      Preservation of Company Existence . The Borrower will maintain its limited liability company existence in good standing under the laws of its jurisdiction of formation and will promptly obtain and thereafter maintain qualifications to do business as a foreign limited liability company in any other state in which it does business and in which it is required to so qualify under Applicable Law.
(g)      Compliance with Legal Opinions . The Borrower shall take all other actions necessary to maintain the accuracy of the factual assumptions set forth in the legal opinions of Moore & Van Allen PLLC, as special counsel to the Borrower, issued in connection with the Purchase and Sale Agreement and relating to the issues of substantive consolidation and true sale of the Loan Assets.
(h)      Deposit of Collections . The Borrower shall promptly (but in no event later than two Business Days after receipt) deposit or cause to be deposited into the Collection Account any and all Available Collections received by the Borrower, the Servicer or any of their Affiliates.
(i)      Disclosure of Purchase Price . The Borrower shall disclose to the Administrative Agent and the Lender Agents the purchase price for each Loan Asset proposed to be transferred to the Borrower pursuant to the terms of the Purchase and Sale Agreement.
(j)      Obligor Defaults and Bankruptcy Events . The Borrower shall give, or shall cause the Servicer to give, notice to the Administrative Agent and the Lender Agents within three Business Days of the Borrower’s, the Seller’s or the Servicer’s actual knowledge of the occurrence of any default by an Obligor under any Loan Asset or any Bankruptcy Event with respect to any Obligor under any Loan Asset.
(k)      Required Loan Documents . The Borrower shall deliver to the Collateral Custodian a hard copy of the Required Loan Documents and the Loan Asset Checklist pertaining to each Loan Asset within five Business Days of the Cut-Off Date pertaining to such Loan Asset.
(l)      Taxes . The Borrower will file or cause to be filed its tax returns and pay any and all Taxes imposed on it or its property as required by the Transaction Documents (except as contemplated in Section 4.01(l) ).
(m)      Notice of Event of Default . The Borrower shall notify the Administrative Agent and each Lender Agent (with a copy to the Collateral Agent) of the occurrence of any Event of Default or Unmatured Event of Default under this Agreement promptly upon obtaining actual knowledge of such event. In addition, no later than two Business Days following the Borrower’s knowledge or notice of the occurrence of any Event of Default or Unmatured Event of Default, the Borrower will provide to the Collateral Agent, the Administrative Agent and each Lender 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.
(n)      Notice of Material Events . The Borrower shall promptly notify the Administrative Agent and each Lender Agent of any event or other circumstance that is reasonably likely to have a Material Adverse Effect.
(o)      Notice of Income Tax Liability . The Borrower shall furnish to the Administrative Agent and each Lender Agent telephonic, email or facsimile notice within 10 Business Days (confirmed in writing within five Business Days thereafter) of the receipt of revenue agent reports or other written proposals, determinations or assessments of the Internal Revenue Service or any other taxing authority which propose, determine or otherwise set forth positive adjustments (i) to the Tax liability of BDCA or any “affiliated group” (within the meaning of Section 1504(a)(l) of the Code) of which BDCA is a member in an amount equal to or greater than $1,000,000 in the aggregate or (ii) to the Tax liability of the Borrower itself in an amount equal to or greater than $500,000 in the aggregate. Any such notice shall specify the nature of the items giving rise to such adjustments and the amounts thereof.
(p)      Notice of Auditors’ Management Letters . The Borrower shall promptly notify the Administrative Agent and each Lender Agent after the receipt of any auditors’ management letters received by the Borrower or by its accountants.
(q)      Notice of Breaches of Representations and Warranties under this Agreement . The Borrower shall promptly notify the Administrative Agent, the Collateral Agent and each Lender Agent if any representation or warranty set forth in Section 4.01 or 4.02 was materially incorrect at the time it was given or deemed to have been given and at the same time deliver to the Collateral Agent, the Administrative Agent and the Lender Agents a written notice setting forth in reasonable detail the nature of such facts and circumstances. In particular, but without limiting the foregoing, the Borrower shall notify the Collateral Agent, the Administrative Agent and each Lender Agent in the manner set forth in the preceding sentence with respect to any representation or warranty that a Loan Asset is an Eligible Loan Asset on or before the related date of determination of any facts or circumstances within the knowledge of the Borrower which would render any of the said representations and warranties untrue at the date when such representations and warranties were made or deemed to have been made.
(r)      Notice of Breaches of Representations and Warranties under the Purchase and Sale Agreement . The Borrower confirms and agrees that the Borrower will, upon receipt of notice or discovery thereof, promptly send to the Administrative Agent, each Lender Agent and the Collateral Agent a notice of (i) any material breach of any representation, warranty, agreement or covenant under the Purchase and Sale Agreement or (ii) any event or occurrence that, upon notice, or upon the passage of time or both, would constitute such a material breach.
(s)      Notice of Proceedings . The Borrower shall notify the Administrative Agent and each Lender Agent, as soon as possible and in any event within three Business Days, after the Borrower receives notice or obtains knowledge thereof, of any settlement of, material judgment (including a material judgment with respect to the liability phase of a bifurcated trial) in or commencement of any material labor controversy, material litigation, material action, material suit or material proceeding before any Governmental Authority that could reasonably be expected to have a Material Adverse Effect on the Collateral Portfolio, the Transaction Documents, the Collateral Agent’s, for the benefit of the Secured Parties, interest in the Collateral Portfolio, or the Borrower, the Servicer or the Seller or any of their Affiliates. For purposes of this Section 5.01(p) , (i) any settlement, judgment, labor controversy, litigation, action, suit or proceeding affecting the Collateral Portfolio, the Transaction Documents, the Collateral Agent’s, for the benefit of the Secured Parties, interest in the Collateral Portfolio, or the Borrower in excess of $500,000 shall be deemed to be material and (ii) any settlement, judgment, labor controversy, litigation, action, suit or proceeding affecting the Servicer or the Seller or any of their Affiliates (other than the Borrower) in excess of $1,000,000 shall be deemed to be material.
(t)      Notice of ERISA Reportable Events . The Borrower shall promptly notify the Administrative Agent and each Lender Agent after receiving notice of any “reportable event” (as defined in Title IV of ERISA, other than an event for which the reporting requirements have been waived by regulations) with respect to the Borrower (or any ERISA Affiliate thereof) and provide them with a copy of such notice.
(u)      Notice of Accounting Changes . As soon as possible and in any event within three Business Days after the effective date thereof, the Borrower will provide to the Administrative Agent and each Lender Agent notice of any change in the accounting policies of the Borrower.
(v)      Additional Documents . The Borrower shall provide the Administrative Agent and each Lender Agent with copies of such documents as the Administrative Agent or any Lender Agent may reasonably request evidencing the truthfulness of the representations set forth in this Agreement.
(w)      Protection of Security Interest . With respect to the Collateral Portfolio acquired by the Borrower, the Borrower will (i) acquire such Collateral Portfolio pursuant to and in accordance with the terms of the Purchase and Sale Agreement, (ii) (at the expense of the Servicer, on behalf of the Borrower) take all action necessary to perfect, protect and more fully evidence the Borrower’s ownership of such Collateral Portfolio free and clear of any Lien other than the Lien created hereunder and Permitted Liens, including, without limitation, (A) with respect to the Loan Assets and that portion of the Collateral Portfolio in which a security interest may be perfected by filing, filing and maintaining (at the expense of the Servicer, on behalf of the Borrower), effective financing statements against the Seller 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) and (B) executing or causing to be executed such other instruments or notices as may be necessary or appropriate, (iii) (at the expense of the Servicer, on behalf 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 Collateral Agent (for the benefit of the Secured Parties) in the Borrower’s interests in all of the Collateral Portfolio being Pledged hereunder including the filing of a UCC financing statement in the applicable jurisdiction adequately describing the Collateral Portfolio (which may include an “all asset” filing), and naming the Borrower as debtor and the Collateral 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), (iv) permit the Administrative Agent or any Lender Agent or their respective agents or representatives to visit the offices of the Borrower during normal office hours and upon reasonable advance notice examine and make copies of all documents, books, records and other information concerning the Collateral Portfolio and discuss matters related thereto with any of the officers or employees of the Borrower having knowledge of such matters, and (v) take all additional action that the Administrative Agent, any Lender Agent or the Collateral Agent may reasonably request to perfect, protect and more fully evidence the respective first priority perfected security interests of the parties to this Agreement in the Collateral Portfolio, or to enable the Administrative Agent or the Collateral Agent to exercise or enforce any of their respective rights hereunder.
(x)      Liens . The Borrower will promptly notify the Administrative Agent and the Lender Agents of the existence of any Lien on the Collateral Portfolio (other than Permitted Liens) and the Borrower shall defend the right, title and interest of the Collateral Agent, for the benefit of the Secured Parties, in, to and under the Collateral Portfolio against all claims of third parties.
(y)      Other Documents . At any time from time to time upon prior written request of the Administrative Agent or any Lender Agent, at the sole expense of the Borrower, the Borrower will promptly and duly execute and deliver such further instruments and documents and take such further actions as the Administrative Agent or any Lender Agent may reasonably request for the purposes of obtaining or preserving the full benefits of this Agreement including the first priority security interest (subject only to Permitted Liens) granted hereunder and of the rights and powers herein granted (including, among other things, authorizing the filing of such UCC financing statements as the Administrative Agent may request).
(z)      Compliance with Law. The Borrower shall at all times comply in all material respects with all Applicable Law applicable to Borrower or any of its assets (including, without limitation, Environmental Laws, and all federal securities laws), and Borrower shall do or cause to be done all things necessary to preserve and maintain in full force and effect its legal existence, and all licenses material to its business.
(aa)      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.
(bb)      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.
(cc)      Performance of Covenants . The Borrower shall observe, perform and satisfy all the material terms, provisions, covenants and conditions required to be observed, performed or satisfied by it, and shall pay when due all costs, fees and expenses required to be paid by it, under the Transaction Documents. The Borrower shall pay and discharge all Taxes, levies, liens and other charges on it or its assets and on the Collateral Portfolio that, in each case, in any manner would create any lien or charge upon the Collateral Portfolio, except for any such Taxes as are being appropriately contested in good faith by appropriate proceedings diligently conducted and with respect to which adequate reserves have been provided in accordance with GAAP.
(dd)      Tax Treatment . The Borrower, the Seller and the Lenders shall 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 to file any and all tax forms in a manner consistent therewith.
(ee)      Maintenance of Records . The Borrower will maintain records with respect to the Collateral Portfolio and the conduct and operation of its business with no less a degree of prudence than if the Collateral Portfolio were held by the Borrower for its own account and will furnish the Administrative Agent and each Lender Agent, upon the reasonable request by the Administrative Agent and each Lender Agent, information with respect to the Collateral Portfolio and the conduct and operation of its business.
(ff)      Obligor Notification Forms . The Borrower shall furnish the Collateral Agent and the Administrative Agent with an appropriate power of attorney authorizing the Collateral Agent and the Administrative Agent to send, after the occurrence of an Event of Default, (at the Administrative Agent’s discretion on the Collateral Agent’s behalf, after the occurrence of an Event of Default) Obligor notification forms to give notice to the Obligors of the Collateral Agent’s interest in the Collateral Portfolio and the obligation to make payments as directed by the Administrative Agent on the Collateral Agent’s behalf.
(gg)      Officer’s Certificate . On each anniversary of the date of this Agreement, the Borrower shall deliver an Officer’s Certificate, in form and substance acceptable to the Lender Agents and the Administrative Agent, providing (i) a certification, based upon a review and summary of UCC search results, that there is no other interest in the Collateral Portfolio perfected by filing of a UCC financing statement other than in favor of the Collateral Agent and (ii) a certification, based upon a review and summary of tax and judgment lien searches satisfactory to the Administrative Agent, that there is no other interest in the Collateral Portfolio based on any tax or judgment lien.
(hh)      Continuation Statements . The Borrower shall, not earlier than six months and not later than three months prior to the fifth anniversary of the date of filing of the financing statement referred to in Schedule I hereto or any other financing statement filed pursuant to this Agreement or in connection with any Advance hereunder, unless the Collection Date shall have occurred:
(i)      authorize and deliver and file or cause to be filed an appropriate continuation statement with respect to such financing statement; and
(ii)      deliver or cause to be delivered to the Collateral Agent, the Administrative Agent and the Lender Agents an opinion of the counsel for the Borrower, in form and substance reasonably satisfactory to the Administrative Agent, confirming and updating the opinion delivered pursuant to Schedule I with respect to perfection and otherwise to the effect that the security interest hereunder continues to be an enforceable and perfected security interest, subject to no other Liens of record except as provided herein or otherwise permitted hereunder, which opinion may contain usual and customary assumptions, limitations and exceptions.
(ii)      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 treated as other than an entity disregarded from its owner under Treasury Regulation Section 301.7701-3(c).
SECTION 5.02      Negative Covenants of the Borrower .
From the Closing Date until the Collection Date:
(ee)      Special Purpose Entity Requirements . Except as otherwise permitted by this Agreement, the Borrower shall not (i) guarantee any obligation of any Person, including any Affiliate; (ii) engage, directly or indirectly, in any business, other than the actions required or permitted to be performed under the Transaction Documents; (iii) incur, create or assume any Indebtedness, other than Indebtedness incurred under the Transaction Documents; (iv) make or permit to remain outstanding any loan or advance to, or own or acquire any stock or securities of, any Person, except that the Borrower may invest in those Loan Assets and other investments permitted under the Transaction Documents and may make any advance required or expressly permitted to be made pursuant to any provisions of the Transaction Documents and permit the same to remain outstanding in accordance with such provisions; (v) become insolvent or fail to pay its debts and liabilities from its assets when due; (vi) create, form or otherwise acquire any Subsidiaries or (vii) release, sell, transfer, convey or assign any Loan Asset unless in accordance with the Transaction Documents.
(ff)      Requirements for Material Actions . The Borrower shall not fail to provide (and at all times the Borrower’s organizational documents shall reflect) that the unanimous consent of all members (including the consent of the Independent Manager(s)) is required for the Borrower to (i) dissolve or liquidate, in whole or part, or institute proceedings to be adjudicated bankrupt or insolvent, (ii) institute or consent to the institution of Bankruptcy Proceedings against it, (iii) file a petition seeking or consent to reorganization or relief under any applicable Bankruptcy Law, (iv) seek or consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator, custodian or any similar official for the Borrower, (v) make any assignment for the benefit of the Borrower’s creditors, (vi) admit in writing its inability to pay its debts generally as they become due or (vii) take any action in furtherance of any of the foregoing.
(gg)      Protection of Title . The Borrower shall not take any action which would directly or indirectly impair or adversely affect Borrower’s title to the Collateral Portfolio.
(hh)      Transfer Limitations . 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 Portfolio to any person other than the Collateral Agent for the benefit of the Secured Parties, or engage in financing transactions or similar transactions with respect to the Collateral Portfolio with any person other than the Administrative Agent and the Lenders, in each case, except as otherwise expressly permitted by the terms of this Agreement.
(ii)      Liens . The Borrower shall not create, incur or permit to exist any lien, encumbrance or security interest in or on any of the Collateral Portfolio subject to the security interest granted by the Borrower pursuant to this Agreement, other than Permitted Liens.
(jj)      Organizational Documents . The Borrower shall not modify or terminate any of the organizational or operational documents of the Borrower without the prior written consent of the Administrative Agent.
(kk)      Reserved .
(ll)      Merger, Acquisitions, Sales, etc . The Borrower shall not change its organizational structure, enter into any transaction of merger or consolidation or amalgamation, or asset sale (other than pursuant to Section 2.07 ), or liquidate, wind up or dissolve itself (or suffer any liquidation, winding up or dissolution) without the prior written consent of the Administrative Agent.
(mm)      Use of Proceeds . The Borrower shall not use the proceeds of any Advance other than to finance the purchase by the Borrower from the Seller, on a “true sale” basis, of the Collateral Portfolio pursuant to the terms of the Purchase and Sale Agreement or to acquire Loan Assets from a third party on an arm’s length basis.
(nn)      Limited Assets . The Borrower shall not hold or own any assets that are not part of the Collateral Portfolio.
(oo)      Tax Treatment . The Borrower shall not elect to be treated as a corporation for U.S. federal income tax purposes (and shall not allow the Seller to elect to treat it as a corporation for U.S. federal income tax purposes) and shall take all reasonable steps necessary to avoid being treated as a corporation for U. S. federal income tax purposes.
(pp)      Extension or Amendment of Collateral Portfolio . The Borrower will not, and will not permit the Servicer, except as otherwise permitted in Section 6.04(a) and in accordance with the Servicing Standard, extend, amend or otherwise modify the terms of any Loan Asset (including the Underlying Collateral).
(qq)      Purchase and Sale Agreement . The Borrower will not amend, modify, waive or terminate any provision of the Purchase and Sale Agreement except in accordance with Section 10.3 thereof.
(rr)      Restricted Junior Payments . The Borrower shall not make any Restricted Junior Payment, except that, so long as no Event of Default or Unmatured Event of Default has occurred and is continuing or would result therefrom, the Borrower may declare and make distributions to its member on its membership interests, including as permitted by Section 2.07(b).
(ss)      ERISA Matters . The Borrower will not (a) engage, and will exercise its best efforts not to permit any ERISA Affiliate to engage, in any prohibited transaction (within the meaning of ERISA Section 406(a) or (b) or Code Section 4975) for which an exemption is not available or has not previously been obtained from the United States Department of Labor, (b) fail to meet the minimum funding standard set forth in Section 302(a) of ERISA and Section 412(a) of the Code with respect to any Pension Plan other than a Multiemployer Plan, (c) fail to make any payments to a Multiemployer Plan that the Borrower or any ERISA Affiliate may be required to make under the agreement relating to such Multiemployer Plan or any law pertaining thereto, (d) terminate any Pension Plan so as to result, directly or indirectly in any liability to the Borrower, or (e) permit to exist any occurrence of any reportable event described in Title IV of ERISA with respect to any Pension Plan, other than an event for which reporting requirements have been waived by regulations.
(tt)      Instructions to Obligors . The Borrower will not make any change, or permit the Servicer to make any change, in its instructions to Obligors regarding payments to be made with respect to the Collateral Portfolio to the Collection Account, unless the Administrative Agent has consented to such change.
(uu)      Taxable Mortgage Pool Matters . The sum of the Outstanding Balances of all Loan Assets owned by the Borrower and that are principally secured by an interest in real property (within the meaning of Treasury Regulation Section 301.7701(i)-1(d)(3)) shall not at any time exceed 35% of the aggregate Outstanding Balance of all Loan Assets.
(vv)      Change of Jurisdiction, Location, Names or Location of Loan Asset Files . The Borrower shall not change the jurisdiction of its formation, make any change to its corporate name or use any tradenames, fictitious names, assumed names, “doing business as” names or other names (other than those listed on Schedule II, as such schedule may be revised from time to time to reflect name changes and name usage permitted under the terms of this Section 5.02(r) after compliance with all terms and conditions of this Section 5.02(r) related thereto) unless, prior to the effective date of any such change in the jurisdiction of its formation, name change or use, the Borrower receives prior written consent from the Administrative Agent of such change and delivers to the Administrative Agent such financing statements as the Administrative Agent may request to reflect such name change or use, together with such Opinions of Counsel and other documents and instruments as the Administrative Agent may request in connection therewith. The Borrower will not change the location of its chief executive office unless prior to the effective date of any such change of location, the Borrower notifies the Administrative Agent of such change of location in writing. The Borrower will not move, or consent to the Collateral Custodian or the Servicer moving, the Loan Asset Files from the location thereof on the Closing Date, unless the Administrative Agent shall consent to such move in writing and the Servicer shall provide the Administrative Agent with such Opinions of Counsel and other documents and instruments as the Administrative Agent may request in connection therewith.
(ww)      Allocation of Charges . There will not be any agreement or understanding between the Servicer and the Borrower (other than as expressly set forth herein or as consented to by the Administrative Agent) providing for the allocation or sharing of obligations to make payments or otherwise in respect of any Taxes, fees, assessments or other governmental charges; provided that it is understood and acknowledged that the Borrower will be consolidated with the Servicer for tax purposes.
SECTION 5.03      Affirmative Covenants of the Servicer .
From the Closing Date until the Collection Date:
(g)      Compliance with Law . The Servicer will comply in all material respects with all Applicable Law, including those with respect to servicing the Collateral Portfolio or any part thereof.
(h)      Preservation of Company Existence . The Servicer will preserve and maintain its corporate existence, rights, franchises and privileges in the jurisdiction of its formation, and qualify and remain qualified in good standing as a corporation in each jurisdiction where the failure to preserve and maintain such existence, rights, franchises, privileges and qualification could reasonably be expected to have a Material Adverse Effect.
(i)      Obligations and Compliance with Collateral Portfolio . Subject to the Servicing Standard, the Servicer will duly fulfill and comply with all obligations on the part of the Borrower to be fulfilled or complied with under or in connection with the administration of each item of Collateral Portfolio and will do nothing to impair the rights of the Collateral Agent, for the benefit of the Secured Parties, or of the Secured Parties in, to and under the Collateral Portfolio. It is understood and agreed that the Servicer does not hereby assume any obligations of the Borrower in respect of any Advances or assume any responsibility for the performance by the Borrower of any of its obligations hereunder or under any other agreement executed in connection herewith that would be inconsistent with the limited recourse undertaking of the Servicer, in its capacity as seller, under Section 2.1(e) of the Purchase and Sale Agreement.
(j)      Keeping of Records and Books of Account .
(i)      The Servicer will maintain and implement administrative and operating procedures (including, without limitation, an ability to recreate records evidencing Collateral Portfolio in the event of the destruction of the originals thereof), and keep and maintain all documents, books, records and other information reasonably necessary or advisable for the collection of all Collateral Portfolio and the identification of the Collateral Portfolio.
(ii)      The Servicer shall permit the Administrative Agent, each Lender Agent or their respective agents or representatives, to visit the offices of the Servicer during normal office hours and upon reasonable advance notice and examine and make copies of all documents, books, records and other information concerning the Collateral Portfolio and the Servicer’s servicing thereof and discuss matters related thereto with any of the officers or employees of the Servicer having knowledge of such matters.
(iii)      The Servicer will on or prior to the date hereof, mark its master data processing records and other books and records relating to the Collateral Portfolio with a legend, acceptable to the Administrative Agent describing (A) the sale of the Collateral Portfolio from the Seller to the Borrower and (B) the Pledge from the Borrower to the Collateral Agent, for the benefit of the Secured Parties.
(k)      Preservation of Security Interest . The Servicer (at its own expense, on behalf of the Borrower) will file such financing and continuation statements and any other documents that may be required by any Applicable Law to preserve and protect fully the first priority perfected security interest of the Collateral Agent, for the benefit of the Secured Parties, in, to and under the Loan Assets and that portion of the Collateral Portfolio in which a security interest may be perfected by filing.
(l)      [Reserved] .
(m)      Events of Default . The Servicer shall notify the Administrative Agent and each Lender Agent (with a copy to the Collateral Agent) of the occurrence of any Event of Default or Unmatured Event of Default under this Agreement promptly upon obtaining actual knowledge of such event. In addition, no later than two Business Days following the Servicer’s knowledge or notice of the occurrence of any Event of Default or Unmatured Event of Default, the Servicer will provide to the Collateral Agent, the Administrative Agent and each Lender Agent a written statement of a Responsible Officer of the Servicer setting forth the details of such event and the action that the Servicer proposes to take with respect thereto.
(n)      Taxes . The Servicer will file its tax returns and pay any and all Taxes imposed on it or its property as required under the Transaction Documents (except as contemplated by Section 4.03(l) ).
(o)      Other . The Servicer will promptly furnish to the Collateral Agent, the Administrative Agent and each Lender Agent such other information, documents, records or reports respecting the Collateral Portfolio or the condition or operations, financial or otherwise, of the Borrower or the Servicer as the Collateral Agent, any Lender Agent or the Administrative Agent may from time to time reasonably request in order to protect the interests of the Administrative Agent, the Lender Agents, the Collateral Agent or Secured Parties under or as contemplated by this Agreement.
(p)      Proceedings Related to the Borrower, the Seller and the Servicer and the Transaction Documents . The Servicer shall notify the Administrative Agent and each Lender Agent as soon as possible and in any event within three Business Days after any executive officer of the Servicer receives notice or obtains knowledge thereof of any settlement of, judgment (including a judgment with respect to the liability phase of a bifurcated trial) in or commencement of any labor controversy, litigation, action, suit or proceeding before any Governmental Authority that could reasonably be expected to have a Material Adverse Effect on the Borrower, the Seller or the Servicer (or any of their Affiliates) or the Transaction Documents. For purposes of this Section 5.03(j) , (i) any settlement, judgment, labor controversy, litigation, action, suit or proceeding affecting the Transaction Documents or the Borrower in excess of $500,000 shall be deemed to be expected to have such a Material Adverse Effect and (ii) any settlement, judgment, labor controversy, litigation, action, suit or proceeding affecting the Servicer or the Seller or any of their Affiliates (other than the Borrower) in excess of the Judgment Cap shall be deemed to be expected to have such a Material Adverse Effect.
(q)      Deposit of Collections . The Servicer shall promptly (but in no event later than two Business Days after receipt) deposit or cause to be deposited into the Collection Account any and all Available Collections received by the Borrower, the Servicer or any of their Affiliates.
(r)      Loan Asset Register .
(i)      The Servicer shall maintain, or cause to be maintained, with respect to each Noteless Loan Asset a register (which may be in physical or electronic form and readily identifiable as the loan asset register) (each, a “ Loan Asset Register ”) in which it will record, or cause to be recorded, (A) the amount of such Noteless Loan Asset, (B) the amount of any principal or interest due and payable or to become due and payable from the Obligor thereunder, (C) the amount of any sum in respect of such Noteless Loan Asset received from the Obligor, (D) the date of origination of such Noteless Loan Asset and (E) the maturity date of such Noteless Loan Asset.
(ii)      At any time a Noteless Loan Asset is included as part of the Collateral Portfolio pursuant to this Agreement, the Servicer shall deliver to the Administrative Agent, the Collateral Agent and the Collateral Custodian a copy of the related Loan Asset Register, together with a certificate of a Responsible Officer of the Servicer (in the form of Exhibit R ) certifying to the accuracy of such Loan Asset Register as of the applicable Cut-Off Date.
(s)      Special Purpose Entity Requirements . The Servicer shall take such actions as are necessary to cause the Borrower to be in compliance with the special purpose entity requirements set forth in Sections 5.01(a) and (b) and 5.02(a) and (b) .
(t)      Accounting Changes . As soon as possible and in any event within three Business Days after the effective date thereof, the Servicer will provide to the Administrative Agent and the Lender Agents notice of any change in the accounting policies of the Servicer.
(u)      Proceedings Related to the Collateral Portfolio . The Servicer shall notify the Administrative Agent and each Lender Agent as soon as possible and in any event within three Business Days, after any Responsible Officer of the Servicer receives notice or obtains knowledge of any settlement of, judgment (including a judgment with respect to the liability phase of a bifurcated trial) in or commencement of any labor controversy, litigation, action, suit or proceeding before any Governmental Authority that could reasonably be expected to have a Material Adverse Effect on the interests of the Collateral Agent or the Secured Parties in, to and under the Collateral Portfolio. For purposes of this Section 5.03(o) , any settlement, judgment, labor controversy, litigation, action, suit or proceeding affecting the Collateral Portfolio or the Collateral Agent’s or the Secured Parties’ interest in the Collateral Portfolio in excess of $1,000,000 or more shall be deemed to be expected to have such a Material Adverse Effect.
(v)      Compliance with Legal Opinions . The Servicer shall take all other actions necessary to maintain the accuracy of the factual assumptions set forth in the legal opinions of Moore & Van Allen PLLC, as special counsel to the Servicer, issued in connection with the Transaction Documents and relating to the issues of substantive consolidation and true sale of the Loan Assets.
(w)      Instructions to Agents and Obligors . The Servicer shall direct, or shall cause the Seller to direct, any agent or administrative agent for any Loan Asset to remit all payments and collections with respect to such Loan Asset, and, if applicable, to direct the Obligor with respect to such Loan Asset to remit all such payments and collections with respect to such Loan Asset directly to the Collection Account. The Borrower and the Servicer shall take commercially reasonable steps to ensure, and shall cause the Seller to take commercially reasonable steps to ensure, that only funds constituting payments and collections relating to Loan Assets shall be deposited into the Collection Account.
(x)      Capacity as Servicer . The Servicer will ensure that, at all times when it is dealing with or in connection with the Loan Assets in its capacity as Servicer, it holds itself out as Servicer, and not in any other capacity.
(y)      Notice of Breaches of Representations and Warranties under the Purchase and Sale Agreement . The Servicer confirms and agrees that the Servicer will, upon receipt of notice or discovery thereof, promptly send to the Administrative Agent, each Lender Agent and the Collateral Agent a notice of (i) any material breach of any representation, warranty, agreement or covenant under the Purchase and Sale Agreement or (ii) any event or occurrence that, upon notice, or upon the passage of time or both, would constitute such a material breach, in each case, promptly upon learning thereof.
(z)      Audits . Prior to the Closing Date and periodically thereafter at the discretion of the Administrative Agent and each Lender Agent, the Servicer shall allow the Administrative Agent and each Lender Agent (during normal office hours and upon reasonable advance notice) to review the Servicer’s collection and administration of the Collateral Portfolio in order to assess compliance by the Servicer with the Servicing Standard, as well as with the Transaction Documents and to conduct an audit of the Collateral Portfolio and Required Loan Documents (to the extent in the possession of the Servicer or if such Required Loan Documents are in not in the possession of the Servicer or the Collateral Custodian so long as they can be obtained without incurring unreasonable cost or expense) in conjunction with such a review. Such review shall be reasonable in scope and shall be completed in a reasonable period of time. Prior to the occurrence of an Event of Default, the Servicer shall be required to bear the expense of only two such reviews within any 12-month period and any additional reviews shall be at the expense of the Administrative Agent and each Purchaser Agent. On and after the occurrence of an Event of Default, the Servicer shall be required to bear the expense of all such reviews.
(aa)      Notice of Breaches of Representations and Warranties under this Agreement . The Servicer shall promptly notify the Collateral Agent, the Administrative Agent and the Lender Agents if any representation or warranty set forth in Section 4.03 was materially incorrect at the time it was given or deemed to have been given and at the same time deliver to the Collateral Agent, the Administrative Agent and the Lender Agents a written notice setting forth in reasonable detail the nature of such facts and circumstances. In particular, but without limiting the foregoing, the Servicer shall notify the Administrative Agent and each Lender Agent in the manner set forth in the preceding sentence with respect to any representation or warranty that a Loan Asset is an Eligible Loan Asset on or before the related date of determination of any facts or circumstances within the knowledge of the Servicer which would render any of the said representations and warranties untrue at the date when such representations and warranties were made or deemed to have been made.
(bb)      Insurance Policies . The Servicer has caused, and will cause, to be performed any and all acts reasonably required to be performed to preserve the rights and remedies of the Collateral Agent and the Secured Parties in any Insurance Policies applicable to Loan Assets (to the extent the Servicer or an Affiliate of the Servicer is the agent or servicer under the applicable Loan Agreement) including, without limitation, in each case, any necessary notifications of insurers, assignments of policies or interests therein, and establishments of co-insured, joint loss payee and mortgagee rights in favor of the Collateral Agent and the Secured Parties; provided that, unless the Borrower is the sole lender under such Loan Agreement, the Servicer shall only take such actions that are customarily taken by or on behalf of a lender in a syndicated loan facility to preserve the rights of such lender.
(cc)      Disregarded Entity . The Servicer shall cause the Borrower to be disregarded as an entity separate from its owner pursuant to Treasury Regulation Section 301.7701-3(b) and shall cause that neither the Borrower nor any other Person on its behalf shall make an election to be treated as other than an entity disregarded from its owner under Treasury Regulation Section 301.7701-3(c).
SECTION 5.04      Negative Covenants of the Servicer .
From the Closing Date until the Collection Date:
(a)      Mergers, Acquisition, Sales, etc . The Servicer will not consolidate with or merge into any other Person or convey or transfer its properties and assets substantially as an entirety to any Person, unless the Servicer is the surviving entity and unless:
(x)      the Servicer has delivered to the Administrative Agent and each Lender Agent an Officer’s Certificate and an Opinion of Counsel each stating that any such consolidation, merger, conveyance or transfer and any supplemental agreement executed in connection therewith comply with this Section 5.04 and that all conditions precedent herein provided for relating to such transaction have been complied with and, in the case of the Opinion of Counsel, that such supplemental agreement is legal, valid and binding with respect to the Servicer and such other matters as the Administrative Agent may reasonably request;
(xi)      the Servicer shall have delivered notice of such consolidation, merger, conveyance or transfer to the Administrative Agent and each Lender Agent;
(xii)      after giving effect thereto, no Event of Default or Servicer Termination Event or event that with notice or lapse of time would constitute either an Event of Default or a Servicer Termination Event shall have occurred; and
(xiii)      the Administrative Agent shall have consented in writing to such consolidation, merger, conveyance or transfer.
Notwithstanding the foregoing or anything to the contrary contained in this Agreement, from time to time, without the consent or approval of the Administrative Agent or any other Secured Party or the satisfaction of any of the conditions set forth in clauses (i), (iii) or (iv) above, the Servicer may consolidate or merge with any BDCA Merger Party, and/or any BDCA Merger Party may convey or transfer its properties and assets substantially as an entirety to the Servicer (so long as the Servicer is BDCA) (any such transaction, a “ BDCA Affiliate Merger Transaction ”); provided that, in each case, the Servicer is the surviving entity in any such transaction or transactions; provided, further, that the Servicer shall, upon the request of the Administrative Agent, deliver an Opinion of Counsel that this Agreement and any supplemental agreement executed in connection therewith is legal, valid and binding with respect to the Servicer after the consummation of such BDCA Affiliate Merger Transaction.
(b)      Change of Name or Location of Loan Asset Files . The Servicer shall not (i) change its name, move the location of its principal place of business and chief executive office, change the offices where it keeps records concerning the Collateral Portfolio from the address set forth under its name on the signature pages hereto, or change the jurisdiction of its formation, or (ii) move, or consent to the Collateral Custodian moving, the Required Loan Documents and Loan Asset Files from the location thereof on the initial Advance Date, unless the Administrative Agent shall consent of such move in writing and the Servicer shall provide the Administrative Agent with such Opinions of Counsel and other documents and instruments as the Administrative Agent may request in connection therewith and has taken all actions required under the UCC of each relevant jurisdiction in order to continue the first priority perfected security interest of the Collateral Agent, for the benefit of the Secured Parties, in, to and under the Loan Assets and that portion of the Collateral Portfolio in which a security interest may be perfected by filing.
(c)      Change in Payment Instructions to Obligors . The Servicer will not make any change in its instructions to Obligors regarding payments to be made with respect to the Collateral Portfolio to the Collection Account, unless the Administrative Agent has consented to such change.
(d)      Extension or Amendment of Loan Assets . The Servicer will not, except as otherwise permitted in Section 6.04(a) , extend, amend or otherwise modify the terms of any Loan Asset (including the Underlying Collateral).
(e)      Taxable Mortgage Pool Matters . The Servicer will manage the portfolio and advise the Borrower with respect to purchases from the Seller so as to not at any time allow the sum of the Outstanding Balances of all Loan Assets owned by the Borrower and that are principally secured by an interest in real property (within the meaning of Treasury Regulation Section 301.7701(i)-1(d)(3)) to exceed 35% of the aggregate Outstanding Balance of all Loan Assets.
(f)      Allocation of Charges . There will not be any agreement or understanding between the Servicer and the Borrower (other than as expressly set forth herein or as consented to by the Administrative Agent) providing for the allocation or sharing of obligations to make payments or otherwise in respect of any Taxes, fees, assessments or other governmental charges; provided that it is understood and acknowledged that the Borrower will be consolidated with the Servicer for tax purposes.
SECTION 5.05      Affirmative Covenants of the Collateral Agent .
From the Closing Date until the Collection Date:
(g)      Compliance with Law . The Collateral Agent will comply in all material respects with all Applicable Law.
(h)      Preservation of Existence . The Collateral Agent 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 5.06      Negative Covenants of the Collateral Agent .
From the Closing Date until the Collection Date, the Collateral Agent will not make any changes to the Collateral Agent Fees without the prior written approval of the Administrative Agent and, so long as no Event of Default has occurred and is continuing, the Borrower.
SECTION 5.07      Affirmative Covenants of the Collateral Custodian .
From the Closing Date until the Collection Date:
(b)      Compliance with Law . The Collateral Custodian will comply in all material respects with all Applicable Law.
(c)      Preservation of Existence . The Collateral Custodian 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.
(d)      Location of Required Loan Documents . Subject to Article XII of this Agreement, the Required Loan Documents shall remain at all times in the possession of the Collateral Custodian at the address set forth under its name on the signature pages hereto unless notice of a different address is given in accordance with the terms hereof or unless the Administrative Agent agrees to allow certain Required Loan Documents to be released to the Servicer on a temporary basis in accordance with the terms hereof, except as such Required Loan Documents may be released pursuant to the terms of this Agreement.
SECTION 5.08      Negative Covenants of the Collateral Custodian .
From the Closing Date until the Collection Date:
(f)      Required Loan Documents . The Collateral Custodian will not dispose of any documents constituting the Required Loan Documents in any manner that is inconsistent with the performance of its obligations as the Collateral Custodian pursuant to this Agreement and will not dispose of any Collateral Portfolio except as contemplated by this Agreement.
(g)      No Changes in Collateral Custodian Fees . The Collateral Custodian will not make any changes to the Collateral Custodian Fees without the prior written approval of the Administrative Agent and, so long as no Event of Default has occurred and is continuing, the Borrower.
ARTICLE VI.     

ADMINISTRATION AND SERVICING OF CONTRACTS
SECTION 6.01      Appointment and Designation of the Servicer .
(xx)      Initial Servicer . The Borrower, each Lender Agent and the Administrative Agent hereby appoint BDCA, pursuant to the terms and conditions of this Agreement, as Servicer, with the authority to manage, service, administer and exercise rights and remedies, on behalf of the Borrower, in respect of the Collateral Portfolio. Until the Administrative Agent gives BDCA a Servicer Termination Notice, BDCA hereby accepts such appointment and agrees to perform the duties and responsibilities of the Servicer pursuant to the terms hereof. The Servicer and the Borrower hereby acknowledge that the Administrative Agent and the Secured Parties are third party beneficiaries of the obligations undertaken by the Servicer hereunder.
(yy)      Servicer Termination Notice . The Borrower, the Servicer, each Lender Agent and the Administrative Agent hereby agree that, upon the occurrence of a Servicer Termination Event, the Administrative Agent, by written notice to the Servicer (with a copy to the Collateral Agent) (a “ Servicer Termination Notice ”), may terminate all of the rights, obligations, power and authority of the Servicer under this Agreement. On and after the receipt by the Servicer of a Servicer Termination Notice pursuant to this Section 6.01(b) , the Servicer shall continue to perform all servicing functions under this Agreement until the date specified in the Servicer Termination Notice or otherwise specified by the Administrative Agent in writing or, if no such date is specified in such Servicer Termination Notice or otherwise specified by the Administrative Agent, until a date mutually agreed upon by the Servicer and the Administrative Agent and shall be entitled to receive, to the extent of funds available therefor pursuant to Section 2.04 , the Servicing Fees therefor until such date. After such date, the Servicer agrees that it will terminate its activities as Servicer hereunder in a manner that the Administrative Agent believes will facilitate the transition of the performance of such activities to a successor Servicer, and the successor Servicer shall assume each and all of the Servicer’s obligations to service and administer the Collateral Portfolio, on the terms and subject to the conditions herein set forth, and the Servicer shall use its best efforts to assist the successor Servicer in assuming such obligations.
(zz)      Appointment of Replacement Servicer . At any time following the delivery of a Servicer Termination Notice, the Administrative Agent may, at its discretion, (i) appoint Wells Fargo (or an Affiliate thereof) as Servicer under this Agreement and, in such case, all authority, power, rights and obligations of the Servicer shall pass to and be vested in Wells Fargo (or an Affiliate thereof) or (ii) appoint a new 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 in its sole discretion. In the event that Wells Fargo (or an Affiliate thereof) or a Replacement Servicer has not accepted its appointment at the time when the Servicer ceases to act as Servicer, the Administrative Agent shall petition a court of competent jurisdiction to appoint any established financial institution, having a net worth of not less than United States $50,000,000 and whose regular business includes the servicing of Collateral Portfolio, as the Replacement Servicer hereunder.
([[)      Liabilities and Obligations of Replacement Servicer . Upon its appointment, Wells Fargo (or an Affiliate thereof) or the Replacement Servicer, as applicable, shall be the successor in all respects to the Servicer with respect to the servicing functions under this Agreement and shall be subject to all the responsibilities, duties and liabilities relating thereto placed on the Servicer by the terms and provisions hereof, and all references in this Agreement to the Servicer shall be deemed to refer to Wells Fargo (or an Affiliate thereof) or the Replacement Servicer, as applicable; provided , that Wells Fargo (or an Affiliate thereof) or Replacement Servicer, as applicable, shall have (i) no liability with respect to any action performed by the terminated Servicer prior to the date that Wells Fargo (or an Affiliate thereof) or Replacement Servicer, as applicable, becomes the successor to the Servicer or any claim of a third party based on any alleged action or inaction of the terminated Servicer, (ii) no obligation to perform any advancing obligations, if any, of the Servicer unless it elects to in its sole discretion, (iii) no obligation to pay any Taxes required to be paid by the Servicer ( provided that Wells Fargo (or an Affiliate thereof) or Replacement Servicer, as applicable, shall pay any income Taxes for which it is liable), (iv) no obligation to pay any of the fees and expenses of any other party to the transactions contemplated hereby and (v) no liability or obligation with respect to any Servicer indemnification obligations of any prior Servicer, including the original Servicer. The indemnification obligations of Wells Fargo (or an Affiliate thereof) or the Replacement Servicer, as applicable, upon becoming a Replacement Servicer, are expressly limited to those arising on account of its failure to act in good faith and with reasonable care under the circumstances. In addition, Wells Fargo (or an Affiliate thereof) or Replacement Servicer, as applicable, shall have no liability relating to the representations and warranties of the Servicer contained in Section 4.03 .
(aaa)      Authority and Power . All authority and power granted to the Servicer under this Agreement shall automatically cease and terminate upon termination of this Agreement and shall pass to and be vested in the Borrower and, without limitation, the Borrower is hereby authorized and empowered to execute and deliver, on behalf of the 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. The Servicer agrees to cooperate with the Borrower in effecting the termination of the responsibilities and rights of the Servicer to conduct servicing of the Collateral Portfolio.
(bbb)      Subcontracts . The Servicer may, with the prior written consent of the Administrative Agent, subcontract with any other Person for servicing, administering or collecting the Collateral Portfolio; provided , that (i) the Servicer shall select any such Person with reasonable care and shall be solely responsible for the fees and expenses payable to any such Person, (ii) the Servicer shall not be relieved of, and shall remain liable for, the performance of the duties and obligations of the Servicer pursuant to the terms hereof without regard to any subcontracting arrangement and (iii) any such subcontract shall be terminable upon the occurrence and during the continuance of a Servicer Termination Event. The Administrative Agent hereby acknowledges that the Servicer has engaged BDCA Adviser, LLC in accordance with terms of the Management Agreement, a copy of which has been previously delivered to the Administrative Agent.
(ccc)      Waiver . The Borrower acknowledges that the Administrative Agent or any of its Affiliates may act as the Collateral Agent and/or the Servicer, and the Borrower waives any and all claims against the Administrative Agent, each Lender Agent or any of their respective Affiliates, the Collateral Agent and the Servicer (other than claims relating to such party’s gross negligence or willful misconduct) 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.
SECTION 6.02      Duties of the Servicer .
(dd)      Duties . The Servicer shall take or cause to be taken all such actions as may be necessary or advisable to service, administer and collect on the Collateral Portfolio from time to time, all in accordance with Applicable Law and the Servicing Standard. Prior to the occurrence of a Servicer Termination Event, but subject to the terms of this Agreement (including, without limitation, Section 6.04 ), the Servicer has the sole and exclusive authority to make any and all decisions with respect to the Collateral Portfolio and take or refrain from taking any and all actions with respect to the Collateral Portfolio. Without limiting the foregoing (and, in all cases, subject to Section 6.02(b) ), the duties of the Servicer shall include the following:
(i)      supervising the Collateral Portfolio, including communicating with Obligors, executing amendments, providing consents and waivers, enforcing and collecting on the Collateral Portfolio and otherwise managing the Collateral Portfolio on behalf of the Borrower;
(ii)      maintaining all necessary managing and servicing records with respect to the Collateral Portfolio and providing such reports to the Administrative Agent and each Lender Agent (with a copy to the Collateral Agent and the Collateral Custodian) in respect of the managing and servicing of the Collateral Portfolio (including information relating to its performance under this Agreement) as may be required hereunder or as the Administrative Agent or any Lender Agent may reasonably request;
(iii)      maintaining and implementing administrative and operating procedures (including, without limitation, an ability to recreate servicing records evidencing the Collateral Portfolio in the event of the destruction of the originals thereof) and keeping and maintaining all documents, books, records and other information reasonably necessary or advisable for the collection of the Collateral Portfolio;
(iv)      within a reasonable period of time following any request, delivering to the Administrative Agent, each Lender Agent, the Collateral Agent or the Collateral Custodian, from time to time, such information and servicing records (including information relating to its performance under this Agreement) as the Administrative Agent, each Lender Agent, Collateral Custodian or the Collateral Agent may from time to time reasonably request;
(v)      identifying each Loan Asset clearly and unambiguously in its servicing records to reflect that such Loan Asset is owned by the Borrower and that the Borrower is Pledging a security interest therein to the Secured Parties pursuant to this Agreement;
(vi)      notifying the Administrative Agent and each Lender Agent of any material action, suit, proceeding, dispute, offset, deduction, defense or counterclaim (1) that is or is threatened to be asserted by an Obligor with respect to any Loan Asset (or portion thereof) of which it has knowledge or has received notice; or (2) that could reasonably be expected to have a Material Adverse Effect;
(vii)      using its best efforts to maintain the perfected security interest of the Collateral Agent, for the benefit of the Secured Parties, in the Collateral Portfolio;
(viii)      except to the extent held by the Collateral Custodian in accordance with Section 12.02(b), maintaining the Loan Asset File with respect to Loan Assets included as part of the Collateral Portfolio; provided that, so long as the Servicer is in possession of any Required Loan Documents, the Servicer will hold such Required Loan Documents in a fireproof safe or fireproof file cabinet;
(ix)      directing the Collateral Agent to make payments pursuant to the terms of the Servicing Report in accordance with Section 2.04 ;
(x)      directing the sale or substitution of Collateral Portfolio in accordance with Section 2.07 ;
(xi)      providing assistance to the Borrower with respect to the purchase and sale of and payment for the Loan Assets;
(xii)      instructing the Obligors and the administrative agents on the Loan Assets to make payments directly into the Collection Account established and maintained with the Collateral Agent;
(xiii)      delivering the Loan Asset Files and the Loan Asset Schedule to the Collateral Custodian; and
(xiv)      complying with such other duties and responsibilities as may be required of the Servicer by this Agreement.
(b)    It is acknowledged and agreed that in circumstances in which a Person other than the Borrower, the Seller (so long as the Seller is also the Servicer) or the Servicer acts as lead agent with respect to any Loan Asset, the Servicer shall perform its servicing duties hereunder only to the extent a lender under the related loan syndication Loan Agreements has the right to do so. Notwithstanding anything to the contrary contained herein, it is acknowledged and agreed that the performance by the Servicer of its duties hereunder shall be limited insofar as such performance would conflict with or result in a breach of any of the express terms of the related Loan Agreements; provided that the Servicer shall (i) provide prompt written notice to the Administrative Agent upon becoming aware of such conflict or breach, (ii) have determined that there is no other commercially reasonable performance that it could render consistent with the express terms of the Loan Agreements which would result in all or a portion of the managing and servicing duties being performed in accordance with this Agreement, and (iii) undertake all commercially reasonable efforts to mitigate the effects of such non-performance including performing as much of the managing and servicing duties as possible and performing such other commercially reasonable and/or similar duties consistent with the terms of the Loan Agreements.
(a)      Notwithstanding anything to the contrary contained herein, the exercise by the Administrative Agent, the Collateral Agent, each Lender Agent and the Secured Parties of their rights hereunder shall not release the Servicer, the Seller or the Borrower from any of their duties or responsibilities with respect to the Collateral Portfolio. The Secured Parties, the Administrative Agent, each Lender Agent and the Collateral Agent shall not have any obligation or liability with respect to any Collateral Portfolio, nor shall any of them be obligated to perform any of the obligations of the Servicer hereunder.
(b)      Any payment by an Obligor in respect of any indebtedness owed by it to the Seller or the Borrower shall, except as otherwise specified by such Obligor or otherwise required by contract or law and unless otherwise instructed by the Administrative Agent, be applied as a collection of a payment by such Obligor (starting with the oldest such outstanding payment due) to the extent of any amounts then due and payable thereunder before being applied to any other receivable or other obligation of such Obligor.
(c)      At any time when a Replacement Servicer is appointed pursuant to Section 6.1(c) , the Seller shall, at the Collateral Agent’s, the Collateral Custodian’s or the Administrative Agent’s request, assemble all of the Loan Asset Files and make the same available to the Collateral Agent, the Collateral Custodian or the Administrative Agent at a place selected by the Collateral Agent, the Collateral Custodian, the Administrative Agent or their designee.
(d)      On and after the date that a Replacement Servicer is appointed pursuant to Section 6.1(c), the existing Servicer shall assist the Replacement Servicer in assuming each and all of the Servicer’s obligations to service and administer the Collateral Portfolio in accordance with this Agreement and comply with reasonable instructions from the Administrative Agent with respect thereto.
SECTION 6.03      Authorization of the Servicer .
(a)      Each of the Borrower, the Administrative Agent, each Lender Agent and each Lender hereby authorizes the Servicer (including any successor thereto) to take any and all reasonable steps in its name and on its behalf necessary or desirable in the determination of the Servicer and not inconsistent with the sale of the Collateral Portfolio by the Seller to the Borrower under the Purchase and Sale Agreement and, thereafter, the Pledge by the Borrower to the Collateral Agent on behalf of the Secured Parties hereunder, to collect all amounts due under any and all Collateral Portfolio, including, without limitation, endorsing any of their names on checks and other instruments representing Interest Collections and Principal 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 Portfolio and, after the delinquency of any Collateral Portfolio and to the extent permitted under and in compliance with Applicable Law, to commence proceedings with respect to enforcing payment thereof, to the same extent as the Seller could have done if it had continued to own such Collateral Portfolio. The Seller, the Borrower and the Collateral Agent on behalf of the Secured Parties shall furnish the Servicer (and any successors thereto) with any powers of attorney and other documents necessary or appropriate to enable the Servicer to carry out its managing, servicing and administrative duties hereunder, and shall cooperate with the Servicer to the fullest extent in order to ensure the collectability of the Collateral Portfolio. In no event shall the Servicer be entitled to make the Secured Parties, the Administrative Agent, the Collateral Agent, any Lender or any Lender Agent a party to any litigation without such party’s express prior written consent, or to make the Borrower a party to any litigation (other than any routine foreclosure or similar collection procedure) without the Administrative Agent’s and each Lender Agent’s consent.
(b)      After the declaration of the Facility Maturity Date, at the direction of the Administrative Agent, the Servicer shall take such action as the Administrative Agent may deem necessary or advisable to enforce collection of the Collateral Portfolio; provided , that the Administrative Agent may, at any time that an Event of Default has occurred, notify any Obligor with respect to any Collateral Portfolio of the assignment of such Collateral Portfolio to the Collateral Agent on behalf of the Secured Parties and direct that payments of all amounts due or to become due 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 may enforce collection of any such Collateral Portfolio, and adjust, settle or compromise the amount or payment thereof.
SECTION 6.04      Collection of Payments; Accounts .
(a)      Collection Efforts, Modification of Collateral Portfolio . The Servicer will use its commercially reasonable efforts and judgment to collect or cause to be collected, all payments called for under the terms and provisions of the Loan Assets included in the Collateral Portfolio as and when the same become due, all in accordance with the Servicing Standard. The Servicer may not waive, modify or otherwise vary any provision of an item of Collateral Portfolio in a manner that would impair the collectability of the Collateral Portfolio or in any manner contrary to the Servicing Standard.
(b)      Acceleration . If consistent with the Servicing Standard, the Servicer shall accelerate or vote to accelerate, as applicable, the maturity of all or any Scheduled Payments and other amounts due under any Loan Asset after such Loan Asset becomes defaulted.
(c)      Taxes and other Amounts . The Servicer will use its best efforts to collect all Excluded Collections relating to each Loan Asset to the extent required to be paid to the Borrower for such application under the applicable Loan Agreement and remit such amounts to the appropriate Governmental Authority or insurer as required by the Loan Agreements.
(d)      Payments to Collection Account . On or before the applicable Cut-Off Date, the Servicer shall have instructed any agent, administrative agent or Obligor to make all payments in respect of the Collateral Portfolio directly to the Collection Account; provided that the Servicer is not required to so instruct any Obligor which is solely a guarantor or other surety (or an Obligor that is not designated as the “lead borrower” or another such similar term) unless and until the Servicer calls on the related guaranty or secondary obligation.
(e)      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) except as otherwise expressly provided herein and in the Collection Account Agreement, prior to the delivery of a Notice of Exclusive Control (as defined in the Collection Account Agreement), the Borrower, the Servicer and the Collateral Agent (acting at the direction of the Administrative Agent) shall be entitled to exercise the rights that comprise each Financial Asset held in the Collection Account which is a securities account; provided that after the delivery of a Notice of Exclusive Control (as defined in the Collection Account Agreement), such rights shall be exclusively held by the Collateral Agent (acting at the direction of the Administrative Agent). Each of the parties hereto hereby agrees to cause the securities intermediary that holds any money or other property for the Borrower in the Collection Account that is a securities account to agree with the parties hereto that (A) the cash and other property (subject to Section 6.04(f) below with respect to any property other than investment property, as defined in Section 9-102(a)(49) of the UCC) is to be treated as a Financial Asset under Article 8 of the UCC and (B) 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 Account Bank’s jurisdiction (within the meaning of Section 9-304 of the UCC) and the securities intermediary’s jurisdiction (within the meaning of Section 8-110 of the UCC). All securities or other property underlying any Financial Assets credited to the Collection Account in the form of securities or instruments shall be registered in the name of the Account Bank or if in the name of the Borrower or the Collateral Agent, Indorsed to the Account Bank, Indorsed in blank, or credited to another securities account maintained in the name of the Account Bank, and in no case will any Financial Asset credited to the Collection Account be registered in the name of the Borrower, payable to the order of the Borrower or specially Indorsed to the Borrower, except to the extent the foregoing have been specially Indorsed to the Account Bank or Indorsed in blank.
(f)      Loan Agreements . Notwithstanding any term hereof (or any term of the UCC that might otherwise be construed to be applicable to a “securities intermediary” as defined in the UCC) to the contrary, none of the Collateral Agent, the Collateral Custodian nor any securities intermediary shall be under any duty or obligation in connection with the acquisition by the Borrower, or the grant by the Borrower to the Collateral Agent, of any Loan Asset in the nature of a loan or a participation in a loan 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, or otherwise to examine the Loan Agreements, in order to determine or compel compliance with any applicable requirements of or restrictions on transfer (including without limitation any necessary consents). The Collateral Custodian shall hold any Instrument delivered to it evidencing any Loan Asset granted to the Collateral Agent hereunder as custodial agent for the Collateral Agent in accordance with the terms of this Agreement.
(g)      Adjustments . If (i) the Servicer makes a deposit into the Collection Account in respect of an Interest Collection or Principal Collection of a Loan Asset and such Interest Collection or Principal Collection was received by the Servicer in the form of a check that is not honored for any reason or (ii) the Servicer makes a mistake with respect to the amount of any Interest Collection or Principal Collection and deposits an amount that is less than or more than the actual amount of such Interest Collection or Principal Collection, the Servicer shall appropriately adjust the amount subsequently deposited into the Collection Account to reflect 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.
SECTION 6.05      Realization Upon Loan Assets . The Servicer will use reasonable efforts consistent with the Servicing Standard to foreclose upon or repossess, as applicable, or otherwise comparably convert the ownership of any Underlying Collateral relating to a defaulted Loan Asset as to which no satisfactory arrangements can be made for collection of delinquent payments. The Servicer will comply with the Servicing Standard and Applicable Law in realizing upon such Underlying Collateral, and employ practices and procedures including reasonable efforts consistent with the Servicing Standard to enforce all obligations of Obligors 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. Without limiting the generality of the foregoing, unless the Administrative Agent has specifically given instruction to the contrary, the Servicer may cause the sale of any such Underlying Collateral to the Servicer or 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 Servicer delivered to the Administrative Agent setting forth the Loan 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. In any case in which any such Underlying Collateral has suffered damage, the Servicer will not expend funds in connection with any repair or toward the foreclosure or repossession of such Underlying Collateral unless it reasonably determines that such repair and/or foreclosure or repossession will increase the Recoveries by an amount greater than the amount of such expenses. The Servicer will remit to the Collection Account the Recoveries received in connection with the sale or disposition of Underlying Collateral relating to a defaulted Loan Asset.
SECTION 6.06      Servicing Compensation . As compensation for its activities hereunder and reimbursement for its expenses, the Servicer shall be entitled to be paid the Servicing Fees and reimbursed its reasonable out-of-pocket expenses as provided in Section 2.04 .
SECTION 6.07      Payment of Certain Expenses by Servicer . The Servicer will be required to pay all expenses incurred by it in connection with its activities under this Agreement, including fees and disbursements of its independent accountants, Taxes imposed on the Servicer, expenses incurred by the Servicer in connection with payments and reports pursuant to this Agreement, and all other fees and expenses not expressly stated under this Agreement for the account of the Borrower. The Servicer will be required to pay all reasonable fees and expenses owing to any bank or trust company in connection with the maintenance of the Collection Account. The Servicer may be reimbursed for any reasonable out-of-pocket expenses incurred hereunder (including out-of-pocket expenses paid by the Servicer on behalf of the Borrower), subject to the availability of funds pursuant to Section 2.04 ; provided , that, to the extent funds are not available for such reimbursement, the Servicer shall be required to pay such expenses for its own account and shall not be entitled to any payment therefor other than the Servicing Fees.
SECTION 6.08      Reports to the Administrative Agent; Account Statements; Servicing Information .
(a)      Notice of Borrowing . On each Advance Date and on each reduction of Advances Outstanding pursuant to Section 2.18 , the Borrower (and the Servicer on its behalf) will provide a Notice of Borrowing or a Notice of Reduction, as applicable, and a Borrowing Base Certificate, each updated as of such date, to the Administrative Agent and each Lender Agent (with a copy to the Collateral Agent).
(b)      Servicing Report . On each Monthly Reporting Date, the Servicer will provide to the Borrower, each Lender Agent, the Administrative Agent, the Collateral Agent and any Liquidity Bank, a monthly statement including (i) a Borrowing Base Certificate calculated as of the most recent Determination Date, (ii) a summary prepared with respect to each Obligor and with respect to each Loan Asset for such Obligor prepared as of the most recent Determination Date that will be required to set forth only (A) calculations of the Net Leverage Ratio and the Interest Coverage Ratio for each such Loan Asset for the most recently ended Relevant Test Period for each such Loan Asset and (B) whether or not each such Loan Asset shall have become subject to an amendment, restatement, supplement, waiver or other modification and whether such amendment, restatement, supplement, waiver or other modification is a Material Modification and, (iii) with respect to the report delivered on a Monthly Reporting Date that is also a Reporting Date, the amounts to be remitted pursuant to Section 2.04 to the applicable parties (which shall include any applicable wiring instructions of the parties receiving payment) (such monthly statement, a “ Servicing Report ”), with respect to related calendar month signed by a Responsible Officer of the Servicer and the Borrower and substantially in the form of Exhibit L .
(c)      Servicer’s Certificate . Together with each Servicing Report, the Servicer shall submit to the Administrative Agent, each Lender Agent, the Collateral Agent and any Liquidity Bank a certificate substantially in the form of Exhibit M (a “ Servicer’s Certificate ”), signed by a Responsible Officer of the Servicer, which shall include a certification by such Responsible Officer that no Event of Default or Unmatured Event of Default has occurred.
(d)      Financial Statements . The Servicer will submit to the Administrative Agent, each Lender Agent, any Liquidity Bank and the Collateral Agent, (i) within 60 days after the end of each of its first three fiscal quarters (excluding the fiscal quarter ending on the date specified in clause (ii) ), commencing September 30, 2012, consolidated unaudited financial statements of the Servicer for the most recent fiscal quarter, and (ii) within 90 days after the end of each fiscal year, commencing with the fiscal year ended December 31, 2012, consolidated audited financial statements of the Servicer, audited by a firm of nationally recognized independent public accountants, as of the end of such fiscal year. Notwithstanding the foregoing, the requirement to deliver financial statements in this Section 6.08(d) will be satisfied at any such time as such financial statements are publicly posted on the official web site of BDCA, appropriately filed with the United States SEC or upon receipt of such information through e-mail (with confirmation of receipt) or another delivery method acceptable to the Administrative Agent.
(e)      Tax Returns . Upon demand by the Administrative Agent, each Lender Agent or any Liquidity Bank, the Servicer shall deliver, copies of all federal, state and local tax returns and reports filed by the Borrower, the Seller and the Servicer, or in which the Borrower, the Seller or Servicer was included on a consolidated or combined basis (excluding sales, use and similar Taxes).
(f)      Obligor Financial Statements; Valuation Reports; Other Reports . The Servicer will deliver to the Administrative Agent, the Lender Agents and the Collateral Agent, with respect to each Obligor, (i) to the extent received by the Borrower and/or the Servicer pursuant to the Loan Agreement, the complete financial reporting package with respect to such Obligor and with respect to each Loan Asset for such Obligor provided to the Borrower and/or the Servicer either monthly or quarterly, as the case may be, by such Obligor, which delivery shall be made within 10 Business Days after Servicer’s or Borrower’s receipt thereof, and (ii) asset and portfolio level monitoring reports prepared by the Servicer with respect to the Loan Assets, which delivery shall be made within 60 days of the end of each calendar month. The Servicer will promptly deliver to the Administrative Agent and any Lender Agent, upon reasonable request and to the extent received by the Borrower and/or the Servicer, all other documents and information required to be delivered by the Obligors to the Borrower with respect to any Loan Asset included in the Collateral Portfolio.
(g)      Amendments to Loan Assets . The Servicer will deliver to the Administrative Agent, the Lender Agents and the Collateral Custodian a copy of any amendment, restatement, supplement, waiver or other modification to the Loan Agreement of any Loan Asset (along with any internal documents prepared by the Servicer and provided to its investment committee in connection with such amendment, restatement, supplement, waiver or other modification) within 10 Business Days of the effectiveness of such amendment, restatement, supplement, waiver or other modification.
(h)      Website Access to Information . Notwithstanding anything to the contrary contained herein, information required to be delivered or submitted to any Secured Party pursuant to Section 5.03(i) and this Article VI shall be deemed to have been delivered on the date upon which such information is posted on http://arlcap.virtualpremise.com (or other replacement website to which the Administrative Agent and Lender Agents have access) or is received through e-mail (with confirmation of receipt) or another delivery method acceptable to the Administrative Agent and the Lender Agents.
SECTION 6.09      Annual Statement as to Compliance . The Servicer will provide to the Administrative Agent, each Lender Agent and the Collateral Agent within 90 days following the end of each fiscal year of the Servicer, commencing with the fiscal year ending on December 31, 2012, a fiscal report signed by a Responsible Officer of the Servicer certifying that (a) a review of the activities of the Servicer, and the Servicer’s performance pursuant to this Agreement, for the fiscal period ending on the last day of such fiscal year has been made under such Person’s supervision and (b) the Servicer has performed or has caused to be performed in all material respects all of its obligations under this Agreement throughout such year and no Servicer Termination Event has occurred.
SECTION 6.10      Annual Independent Public Accountant’s Servicing Reports . The Servicer will cause a firm of nationally recognized independent public accountants (who may also render other services to the Servicer) to furnish to the Administrative Agent, each Lender Agent and the Collateral Agent within 90 days following the end of each fiscal year of the Servicer, commencing with the fiscal year ending on December 31, 2012, a report covering such fiscal year to the effect that such accountants have applied certain agreed-upon procedures (a copy of which procedures are attached hereto as Schedule IV , it being understood that the Servicer and the Administrative Agent will provide an updated Schedule IV reflecting any further amendments to such Schedule IV prior to the issuance of the first such agreed-upon procedures report, a copy of which shall replace the then existing Schedule IV ) to certain documents and records relating to the Collateral Portfolio under any Transaction Document, compared the information contained in the Servicing Reports and the Servicer’s Certificates delivered during the period covered by such report with such documents and records and that no matters came to the attention of such accountants that caused them to believe that such managing and servicing was not conducted in compliance with this Article VI , except for such exceptions as such accountants shall believe to be immaterial and such other exceptions as shall be set forth in such statement.
SECTION 6.11      The Servicer Not to Resign . The Servicer shall not resign from the obligations and duties hereby imposed on it except upon the 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 Servicer could take to make the performance of its duties hereunder permissible under Applicable Law. Any such determination permitting the resignation of the Servicer shall be evidenced as to clause (i) above by an Opinion of Counsel to such effect delivered to the Administrative Agent and each Lender Agent. No such resignation shall become effective until a Replacement Servicer shall have assumed the responsibilities and obligations of the Servicer in accordance with Section 6.02 .
ARTICLE VII.     

EVENTS OF DEFAULT
SECTION 7.01      Events of Default . If any of the following events (each, an “ Event of Default ”) shall occur:
(e)      the Borrower or the Seller 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 $500,000 (with respect to the Borrower) or otherwise $1,000,000 and any such failure continues unremedied for two Business Days and such default is not cured within the applicable cure period, if any, provided for under such agreement; or
(f)      any failure on the part of the Borrower or the Seller duly to observe or perform in any material respect any other covenants or agreements of the Borrower or the Seller set forth in this Agreement or the other Transaction Documents to which the Borrower or the Seller is a party and the same continues 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 requiring the same to be remedied shall have been given to the Borrower or the Servicer by the Administrative Agent or Collateral Agent and (ii) the date on which the Borrower or the Servicer acquires knowledge thereof; or
(g)      the occurrence of a Bankruptcy Event relating to the Seller or the Borrower; or
(h)      the occurrence of a Servicer Termination Event (other than any Servicer Termination Event identified in clause (h) thereof) past any applicable notice or cure period provided in the definition thereof, or (1) the Servicer fails to deliver any Required Report (excluding any report delivered on each Monthly Reporting Date detailed in (2) below) and the same continues unremedied for a period of thirty days or (2) the Servicer fails to deliver any report on a Monthly Reporting Date and the same continues unremedied for a period of five Business Days, 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 or the Servicer by the Administrative Agent or Collateral Agent and (ii) the date on which the Borrower or the Servicer acquires knowledge thereof; or
(i)      (1) the rendering of one or more final judgments, decrees or orders by a court or arbitrator of competent jurisdiction for the payment of money in excess individually or in the aggregate of $500,000 or more against the Borrower, 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 of such judgment, decree or order and caused the execution of same to be stayed during the pendency of the appeal or (2) the Borrower shall have made payments of amounts in excess of $500,000, in the settlement of any litigation, claim or dispute (excluding payments made from insurance proceeds); or
(j)      the rendering against the Seller of one or more final judgments, decrees or orders for the payment of money in excess of the Judgment Cap, $5,000,000, individually or in the aggregate, and the continuance of such judgment, decree or order unsatisfied and in effect for any period of more than 45 consecutive days without a stay of execution;
(k)      the Borrower shall fail to qualify as a bankruptcy-remote entity based upon customary criteria such that reputable counsel could no longer render a substantive nonconsolidation opinion with respect to the Borrower and the Servicer; or
(l)      (1)    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, the Seller, or the Servicer,
(2)    the Borrower, the Seller or the Servicer or any other party shall, directly or indirectly, contest in any manner the effectiveness, validity, binding nature or enforceability of any Transaction Document or any lien or security interest thereunder, or
(3)    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 except as otherwise expressly permitted to be released in accordance with the applicable Transaction Document; or
(m)      the Advances Outstanding on any day exceeds the Borrowing Base and has not been remedied within three Business Days in accordance with Section 2.06 ; provided that, during the period of time that such event remains unremedied, any payments required to be made by the Servicer on a Payment Date shall be made under Section 2.04(d) ; or
(n)      failure on the part of the Borrower, the Seller or the Servicer to make any payment or deposit or otherwise perform any covenant, agreement or obligation with respect to the management and distribution of funds as required by the terms of any Transaction Document (other than Section 2.06 ) (including, without limitation, with respect to bifurcation and remittance of Interest Collections and Principal Collections, or any other payment or deposit required to be made by the terms of the Transaction Documents, including, without limitation, to any Secured Party, Affected Party or Indemnified Party) and such failure is not cured within three Business Days; or
(o)      the Borrower shall become required to register as an “investment company” within the meaning of the 1940 Act or the arrangements contemplated by the Transaction Documents shall require registration as an “investment company” within the meaning of the 1940 Act; or
(p)      the Internal Revenue Service shall file notice of a lien pursuant to Section 6323 of the Code with regard to any assets of the Borrower or the Seller and such lien shall not have been released within five Business Days, or the Pension Benefit Guaranty Corporation shall file notice of a lien pursuant to Section 4068 of ERISA with regard to any of the assets of the Borrower or the Seller and such lien shall not have been released within five Business Days; provided , that no Event of Default shall result from this clause (l) to the extent any such liens applicable to the Seller are being contested in good faith by appropriate proceedings and for which adequate reserves have been established in accordance with GAAP (if so required); or
(q)      any Change of Control shall occur; or
(r)      any representation, warranty or certification made by the Borrower or the Seller in any Transaction Document or in any certificate delivered pursuant to any Transaction Document shall prove to have been incorrect in any respect when made, which has a Material Adverse Effect on the Collateral Agent or any Secured Party and which continues to be unremedied for a period of 30 days after the earlier to occur of (i) the date on which written notice of such incorrectness requiring the same to be remedied shall have been given to the Borrower or the Seller by the Administrative Agent or the Collateral Agent (which shall be given at the direction of the Administrative Agent) and (ii) the date on which a Responsible Officer of the Borrower or the Seller acquires knowledge thereof; or
(s)      failure to pay, on the Facility Maturity Date, the outstanding principal of all outstanding Advances, if any, and all Yield and all Fees accrued and unpaid thereon together with all other Obligations, including, but not limited to, any Make-Whole Premium; or
(t)      an event has occurred which constitutes an Event of Default under and pursuant to the terms of the Pledge Agreement (past any applicable notice and/or cure period provided therein); or
(u)      without limiting the generality of Section 7.01(j) , failure of the Borrower to pay Yield or the Non-Usage Fee within three Business Days of any Payment Date or within three Business Days of when otherwise due; or
(v)      the Borrower ceases to have a valid, perfected ownership interest in all of the Collateral Portfolio; or
(w)      the Seller fails to transfer to the Borrower the applicable Loan Assets and the related Portfolio Assets on an Advance Date ( provided that the Lenders shall have funded the related Advance) unless the related Advance is repaid in full with accrued and unpaid Yield thereon within five Business Days; or
(x)      the Borrower makes any assignment or attempted assignment of its respective rights or obligations under this Agreement or any other Transaction Document without satisfying the requirements of Section 11.04(a) ; or
(y)      the Borrower fails to be 100% owned by the Equityholder; or
(z)      (i) failure of the Borrower to maintain at least one Independent Manager, (ii) the removal of any Independent Manager of the Borrower without “cause” (as such term is defined in the organizational document of the Borrower) or without giving prior written notice to the Administrative Agent and the Lender Agents, each as required in the organizational documents of the Borrower or (iii) an Independent Manager of the Borrower which is not from a pre-approved nationally recognized service reasonably acceptable to the Administrative Agent shall be appointed without the consent of the Administrative Agent;
then the Administrative Agent or all of the Lenders, may, by notice to the Borrower, declare the Facility Maturity Date to have occurred and after such declaration of the Facility Maturity Date, the Borrower, Servicer or Seller, as applicable, shall no longer have any right to remedy or cure any Event of Default; provided further , that, in the case of any event described in Section 7.01(c) , the Facility Maturity Date shall be deemed to have occurred automatically upon the occurrence of such event. Upon any such declaration or automatic occurrence, (i) the Borrower shall cease purchasing Loan Assets from the Seller under the Purchase and Sale Agreement, (ii) the Administrative Agent or all of the Lenders may declare the Variable Funding Note 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, and (iii) all proceeds and distributions in respect of the Portfolio Assets shall be distributed by the Collateral Agent (at the direction of the Administrative Agent) as described in Section 2.04(d) ( 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 2.04(f) ). In addition, upon any such declaration or upon any such automatic occurrence, the Collateral Agent, on behalf of the Secured Parties and at the direction of the Administrative Agent, shall have, in addition to all other rights and remedies under this Agreement or otherwise, all other rights and remedies provided under the UCC of the applicable jurisdiction and other Applicable Law, which rights shall be cumulative. Without limiting any obligation of the Servicer hereunder, the Borrower confirms and agrees that the Collateral Agent, on behalf of the Secured Parties and at the direction of the Administrative Agent, (or any designee thereof, including, without limitation, the Servicer), following an Event of Default, shall, at its option, have the sole right to enforce the Borrower’s rights and remedies under each Assigned Document, but without any obligation on the part of the Administrative Agent, the Lenders, the Lender Agents or any of their respective Affiliates to perform any of the obligations of the Borrower under any such Assigned Document. If any Event of Default shall have occurred, the Yield Rate shall be increased pursuant to the increase set forth in the definition of “Applicable Spread”, effective as of the date of the occurrence of such Event of Default, and shall apply after the occurrence of such Event of Default.
Furthermore, any “materiality” qualifier in any covenant, representation or warranty in any Transaction Document shall be disregarded for the Events of Default in Section 7.01 (b) and (n). For the avoidance of doubt, the “materiality” qualifier set forth in Section 7.01(b) and (n) shall not be impacted or negated by this paragraph.
SECTION 7.02      Additional Remedies of the Administrative Agent .
(c)      If, (i) upon the Administrative Agent’s or the Lenders’ declaration that the Advances made to the Borrower hereunder are immediately due and payable pursuant to Section 7.01 upon the occurrence of an Event of Default or (ii) on the Facility Maturity Date, the aggregate outstanding principal amount of the Advances, all accrued and unpaid Fees and Yield and any other Obligations are not immediately paid in full, then the Collateral Agent (acting as directed by the Administrative Agent) or the Administrative Agent, in addition to all other rights specified hereunder, shall have the right, in its own name and as agent for the Lenders and Lender Agents, to immediately sell (at the Servicer’s expense) in a commercially reasonable manner, in a recognized market (if one exists) at such price or prices as the Administrative Agent may reasonably deem satisfactory, any or all of the Collateral Portfolio and apply the proceeds thereof to the Obligations.
(d)      The parties recognize that it may not be possible to sell all of the Collateral Portfolio on a particular Business Day, or in a transaction with the same purchaser, or in the same manner because the market for the assets constituting the Collateral Portfolio may not be liquid. Accordingly, the Administrative Agent may elect, in its sole discretion, the time and manner of liquidating any of the Collateral Portfolio, and nothing contained herein shall obligate the Administrative Agent to liquidate any of the Collateral Portfolio on the date the Administrative Agent or all of the Lender Agents declares the Advances made to the Borrower hereunder to be immediately due and payable pursuant to Section 7.01 or to liquidate all of the Collateral Portfolio in the same manner or on the same Business Day.
(e)      If the Collateral Agent (acting as directed by the Administrative Agent) or the Administrative Agent proposes to sell the Collateral Portfolio or any part thereof in one or more parcels at a public or private sale, at the request of the Collateral Agent or the Administrative Agent, as applicable, the Borrower and the Servicer shall make available to (i) the Administrative Agent, on a timely basis, all information (including any information that the Borrower and the Servicer is required by law or contract to be kept confidential) relating to the Collateral Portfolio subject to sale, including, without limitation, copies of any disclosure documents, contracts, financial statements of the applicable Obligors, covenant certificates and any other materials requested by the Administrative Agent, and (ii) each prospective bidder, on a timely basis, all reasonable information relating to the Collateral Portfolio subject to sale, including, without limitation, copies of any disclosure documents, contracts, financial statements of the applicable Obligors, covenant certificates and any other materials reasonably requested by each such bidder.
(f)      Each of the Borrower and the Servicer agrees, to the full extent that it may lawfully so agree, that neither it nor anyone claiming through or under it will set up, claim or seek to take advantage of any appraisement, valuation, stay, extension or redemption law now or hereafter in force in any locality where any Collateral Portfolio may be situated in order to prevent, hinder or delay the enforcement or foreclosure of this Agreement, or the absolute sale of any of the Collateral Portfolio or any part thereof, or the final and absolute putting into possession thereof, immediately after such sale, of the purchasers thereof, and each of the Borrower and the Servicer, for itself and all who may at any time claim through or under it, hereby waives, to the full extent that it may be lawful so to do, the benefit of all such laws, and any and all right to have any of the properties or assets constituting the Collateral Portfolio marshaled upon any such sale, and agrees that the Collateral Agent, or the Administrative Agent on its behalf, or any court having jurisdiction to foreclose the security interests granted in this Agreement may sell the Collateral Portfolio as an entirety or in such parcels as the Collateral Agent (acting at the direction of the Administrative Agent) or such court may determine.
(g)      Any amounts received from any sale or liquidation of the Collateral Portfolio pursuant to this Section 7.02 in excess of the Obligations will be applied by the Collateral Agent (as directed by the Administrative Agent) in accordance with the provisions of Section 2.04(d) , or as a court of competent jurisdiction may otherwise direct.
(h)      The Administrative Agent, the Lender Agents and the Lenders shall have, in addition to all the rights and remedies provided herein and provided by applicable federal, state, foreign, and local laws (including, without limitation, the rights and remedies of a secured party under the UCC of any applicable state, to the extent that the UCC is applicable, and the right to offset any mutual debt and claim), all rights and remedies available to the Lenders at law, in equity or under any other agreement between any Lender and the Borrower.
(i)      Except as otherwise expressly provided in this Agreement, no remedy provided for by this Agreement shall be exclusive of any other remedy, 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 Event of Default.
(j)      Each of the Borrower and the Servicer hereby irrevocably appoints each of the Collateral Agent and the Administrative Agent its true and lawful attorney (with full power of substitution) in its name, place and stead and at is expense, in connection with the enforcement of the rights and remedies provided for in this Agreement, including without limitation the following powers: (a) to give any necessary receipts or acquittance for amounts collected or received hereunder, (b) to make all necessary transfers of the Collateral Portfolio in connection with any such sale or other disposition made pursuant hereto, (c) 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, the Borrower and the Servicer hereby ratifying and confirming all that such attorney (or any substitute) shall lawfully do hereunder and pursuant hereto, and (d) to sign any agreements, orders or other documents in connection with or pursuant to any Transaction Document. Nevertheless, if so requested by the Collateral Agent or the Administrative Agent, the Borrower shall ratify and confirm any such sale or other disposition by executing and delivering to the Collateral Agent or the Administrative Agent or all proper bills of sale, assignments, releases and other instruments as may be designated in any such request.
ARTICLE VIII.     

INDEMNIFICATION
SECTION 8.01      Indemnities by the Borrower .
(k)      Without limiting any other rights which the Affected Parties, the Secured Parties, the Administrative Agent, the Lenders, the Lender Agents, the Collateral Agent, the Account Bank, the Collateral Custodian or any of their respective Affiliates may have hereunder or under Applicable Law, the Borrower hereby agrees to indemnify the Affected Parties, the Secured Parties, Administrative Agent, the Lenders, the Lender Agents, the Collateral Agent, the Account Bank, the Collateral Custodian and each of their respective Affiliates, assigns, officers, directors, employees and agents (each, an “ Indemnified Party ” for purposes of this Article VIII ) from and against any and all damages, losses, claims, liabilities and related reasonable costs and expenses, including reasonable attorneys’ fees, costs and expenses (all of the foregoing being collectively referred to as “ Indemnified Amounts ”), awarded against or actually incurred by such Indemnified Party arising out of or as a result of this Agreement or in respect of any of the Collateral Portfolio, excluding, however, Indemnified Amounts to the extent resulting solely from (a) gross negligence, bad faith or willful misconduct on the part of an Indemnified Party or (b) Loan Assets which are uncollectible due to the Obligor’s financial inability to pay. Without limiting the foregoing, the Borrower shall indemnify each Indemnified Party for Indemnified Amounts relating to or resulting from any of the following (to the extent not resulting from the conditions set forth in (a) or (b) above):
(i)      any Loan Asset treated as or represented by the Borrower to be an Eligible Loan Asset which is not at the applicable time an Eligible Loan Asset, or the purchase by any party or origination of any Loan Asset which violates Applicable Law;
(ii)      reliance on any representation or warranty made or deemed made by the Borrower, the Servicer (if BDCA or one of its Affiliates is the Servicer) or any of their respective officers under or in connection with this Agreement or any Transaction Document, which shall have been false or incorrect in any respect when made or deemed made or delivered;
(iii)      the failure by the Borrower or the Servicer (if BDCA or one of its Affiliates is the Servicer) to comply with any term, provision or covenant contained in this Agreement or any agreement executed in connection with this Agreement, or with any Applicable Law with respect to any item of Collateral Portfolio, or the nonconformity of any item of Collateral Portfolio with any such Applicable Law;
(iv)      the failure to vest and maintain vested in the Collateral Agent, for the benefit of the Secured Parties, a first priority perfected security interest in the Collateral Portfolio, free and clear of any Lien other than Permitted Liens, whether existing at the time of the related Advance or at any time thereafter;
(v)      on each Business Day prior to the Collection Date, the occurrence of a Borrowing Base Deficiency and the same continues unremedied for three Business Days or such longer period of time as contemplated by Section 2.06(a) ;
(vi)      the failure to file, or any delay in filing, financing statements, continuation statements or other similar instruments or documents under the UCC of any applicable jurisdiction or other Applicable Law with respect to any Loan Assets included in the Collateral Portfolio or the other Portfolio Assets related thereto, whether at the time of any Advance or at any subsequent time;
(vii)      any dispute, claim, offset or defense (other than the discharge in bankruptcy of an Obligor) to the payment of any Loan Asset included in the Collateral Portfolio (including, without limitation, a defense based on such Loan Asset (or the Loan Agreement evidencing such Loan Asset) not being a legal, valid and binding obligation of such Obligor enforceable against it in accordance with its terms), or any other claim resulting from the sale of the merchandise or services related to such Collateral Portfolio or the furnishing or failure to furnish such merchandise or services;
(viii)      any failure of the Borrower or the Servicer (if BDCA or one of its Affiliates is the Servicer) to perform its duties or obligations in accordance with the provisions of the Transaction Documents to which it is a party or any failure by BDCA, the Borrower or any Affiliate thereof to perform its respective duties under any Collateral Portfolio;
(ix)      any inability to obtain any judgment in, or utilize the court or other adjudication system of, any state in which an Obligor may be located as a result of the failure of the Borrower or the Seller to qualify to do business or file any notice or business activity report or any similar report;
(x)      any action taken by the Borrower or the Servicer in the enforcement or collection of the Collateral Portfolio which results in any claim, suit or action of any kind pertaining to the Collateral Portfolio or which reduces or impairs the rights of the Administrative Agent, Lender Agent or Lender with respect to any Loan Asset or the value of any such Loan Asset;
(xi)      any products liability claim or personal injury or property damage suit or other similar or related claim or action of whatever sort arising out of or in connection with the Underlying Collateral or services that are the subject of any Collateral Portfolio;
(xii)      any claim, suit or action of any kind arising out of or in connection with Environmental Laws relating to the Borrower or the Collateral Portfolio, including any vicarious liability;
(xiii)      the failure by the Borrower to pay when due any Taxes for which the Borrower is liable, including, without limitation, sales, excise or personal property Taxes payable in connection with the Collateral Portfolio;
(xiv)      any repayment by the Administrative Agent, the Lender Agents, the Lenders or a Secured Party of any amount previously distributed in payment of Advances or payment of Yield or Fees or any other amount due hereunder, in each case which amount the Administrative Agent, the Lender Agents, the Lenders or a Secured Party believes in good faith is required to be repaid;
(xv)      except in the case of any Excluded Collections or Excluded Amounts, the commingling by the Borrower or the Servicer of payments and collections required to be remitted to the Collection Account with other funds;
(xvi)      any investigation, litigation or proceeding related to this Agreement (or the Transaction Documents), or the use of proceeds of Advances or the Collateral Portfolio, or the administration of the Loan Assets by the Borrower or the Servicer (to the extent the Servicer is an Affiliate of the Borrower);
(xvii)      any failure by the Borrower to give reasonably equivalent value to Seller in consideration for the transfer by the Seller to the Borrower of any item of Collateral Portfolio or any attempt by any Person to void or otherwise avoid any such transfer under any statutory provision or common law or equitable action, including, without limitation, any provision of the Bankruptcy Code;
(xviii)      the use of the proceeds of any Advance in a manner other than as provided in this Agreement and the Transaction Documents; and/or
(xix)      any failure of the Borrower, the Servicer or any of their respective agents or representatives to remit to the Collection Account within two Business Days of receipt, payments and collections with respect to the Collateral Portfolio remitted to the Borrower, the Servicer or any such agent or representative (other than such a failure on the part of Wells Fargo or any of its Affiliates in the capacity of Servicer, if applicable).
(l)      Any amounts subject to the indemnification provisions of this Section 8.01 shall be paid by the Borrower to the Administrative Agent on behalf of the applicable Indemnified Party on the Payment Date following the Administrative Agent’s written demand therefor on behalf of the applicable Indemnified Party (and the Administrative Agent shall pay such amounts to the applicable Indemnified Party promptly after the receipt by the Administrative Agent of such amounts). The Administrative Agent, on behalf of any Indemnified Party making a request for indemnification under this Section 8.01 , shall submit to the Borrower a certificate setting forth in reasonable detail the basis for and the computations of the Indemnified Amounts with respect to which such indemnification is requested, which certificate shall be conclusive absent demonstrable error.
(m)      If for any reason the indemnification provided above in this Section 8.01 is unavailable to the Indemnified Party or is insufficient to hold an Indemnified Party harmless in respect of any losses, claims, damages or liabilities, 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 or the Servicer, as the case may be, on the other hand but also the relative fault of such Indemnified Party as well as any other relevant equitable considerations.
(n)      If the Borrower has made any payments in respect of Indemnified Amounts to the Administrative Agent on behalf of an Indemnified Party pursuant to this Section 8.01 and such Indemnified Party thereafter collects any of such amounts from others, such Indemnified Party will promptly repay such amounts collected to the Borrower, without interest.
(o)      The obligations of the Borrower under this Section 8.01 shall survive the resignation or removal of the Administrative Agent, the Lenders, the Lender Agents, the Servicer, the Collateral Agent, the Account Bank or the Collateral Custodian and the termination of this Agreement.
SECTION 8.02      Indemnities by Servicer .
(h)      Without limiting any other rights which any Indemnified Party may have hereunder or under Applicable Law, the Servicer hereby agrees to indemnify each Indemnified Party from and against any and all Indemnified Amounts, awarded against or incurred by any Indemnified Party as a consequence of any of the following, excluding, however, Indemnified Amounts to the extent resulting from gross negligence, bad faith or willful misconduct on the part of any Indemnified Party claiming indemnification hereunder:
(iv)      the inclusion, in any computations made by it in connection with any Borrowing Base Certificate or other report prepared by it hereunder, of any Loan Assets which were not Eligible Loan Assets as of the date of any such computation;
(v)      reliance on any representation or warranty made or deemed made by the Servicer or any of its officers under or in connection with this Agreement or any other Transaction Document, any Servicing Report, Servicer’s Certificate or any other information or report delivered by or on behalf of the Servicer pursuant hereto, which shall have been false, incorrect or misleading in any respect when made or deemed made or delivered;
(vi)      the failure by the Servicer to comply with (A) any term, provision or covenant contained in this Agreement or any other Transaction Document, or any other agreement executed in connection with this Agreement, or (B) any Applicable Law applicable to it with respect to any Portfolio Assets;
(vii)      any litigation, proceedings or investigation against the Servicer;
(viii)      any action or inaction by the Servicer that causes the Collateral Agent, for the benefit of the Secured Parties, not to have a first priority perfected security interest in the Collateral Portfolio, free and clear of any Lien other than Permitted Liens, whether existing at the time of the related Advance or any time thereafter;
(ix)      except in the case of any Excluded Collections or Excluded Amounts, the commingling by the Servicer of payments and collections required to be remitted to the Collection Account with other funds;
(x)      any failure of the Servicer or any of its agents or representatives (including, without limitation, agents, representatives and employees of such Servicer acting pursuant to authority granted under Section 6.01 ) to remit to Collection Account, payments and collections with respect to Loan Assets remitted to the Servicer or any such agent or representative within two Business Days of receipt;
(xi)      the failure by the Servicer to perform any of its duties or obligations in accordance with the provisions of this Agreement or any other Transaction Document or errors or omissions related to such duties;
(xii)      failure or delay in assisting a successor Servicer in assuming each and all of the Servicer’s obligations to service and administer the Collateral Portfolio, or failure or delay in complying with instructions from the Administrative Agent with respect thereto (solely to the extent the Administrative Agent is permitted to give the related instructions under the terms of the Transaction Documents); and/or
(xiii)      any of the events or facts giving rise to a breach of any of the Servicer’s representations, warranties, agreements and/or covenants set forth in Article IV , Article V or Article VI .
(i)      Any Indemnified Amounts shall be paid by the Servicer to the Administrative Agent, for the benefit of the applicable Indemnified Party, within two Business Days following receipt by the Servicer of the Administrative Agent’s written demand therefor (and the Administrative Agent shall pay such amounts to the applicable Indemnified Party promptly after the receipt by the Administrative Agent of such amounts).
(j)      If the Servicer has made any indemnity payments to the Administrative Agent, on behalf of an Indemnified Party pursuant to this Section 8.02 and such Indemnified Party thereafter collects any of such amounts from others, such Indemnified Party will promptly repay such amounts collected to the Servicer, without interest.
(k)      The Servicer shall have no liability for making indemnification hereunder to the extent any such indemnification constitutes recourse for Loan Assets which are not collected, not paid or uncollectible on account of the insolvency, bankruptcy or financial inability to pay of the related Obligor.
(l)      The obligations of the Servicer under this Section 8.02 shall survive the resignation or removal of the Administrative Agent, the Lenders, the Lender Agents, the Collateral Agent, the Account Bank or the Collateral Custodian and the termination of this Agreement.
(m)      Any indemnification pursuant to this Section 8.02 shall not be payable from the Collateral Portfolio.
Each applicable Indemnified Party shall deliver to the Indemnifying Party under Sections 8.01 and 8.02 , 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.
SECTION 8.03      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 (subject to the exclusion in the first sentence of Section 8.01 , the first sentence of Section 8.02 or Section 8.02(d) , as applicable), the Indemnifying Party may assume the defense of the Action at its expense with counsel reasonably acceptable to 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 reasonable attorneys’ 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, or that the Indemnifying Party is not conducting the defense of the Action in a manner reasonably protective of the interests of the Indemnified Party, the reasonable attorneys’ fees and expenses of the Indemnified Party shall be paid by the Indemnifying Party; provided , further , that the Indemnifying Party shall not, in connection with any one Action or separate but substantially similar or related Actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the fees or expenses of more than one separate firm of attorneys (and any required local counsel) for such Indemnified Party, which firm (and local counsel, if any) shall be designated in writing to the Indemnifying Party by the Indemnified 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.
SECTION 8.04      After-Tax Basis . Indemnification under Sections 8.01 and 8.02 shall be in an amount necessary to make the Indemnified Party whole after taking into account any Tax consequences to the Indemnified Party of the receipt of the indemnity provided hereunder, including the effect of such Tax or refund on the amount of Tax measured by net income or profits that is or was payable by the Indemnified Party.
ARTICLE IX.     

THE ADMINISTRATIVE AGENT AND LENDER AGENTS
SECTION 9.01      The Administrative Agent .
(n)      Appointment . Each Lender Agent and each Secured Party hereby appoints and authorizes the Administrative Agent as its agent hereunder and hereby further authorizes the Administrative Agent to appoint additional agents to act on its behalf and for the benefit of each Lender Agent and each Secured Party. Each Lender Agent and each Secured Party further authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the other Transaction Documents as are delegated to the Administrative Agent by the terms hereof and thereof, together with such powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary contained elsewhere in this Agreement or in any other Transaction Document, the Administrative Agent shall not have any duties or responsibilities except those expressly set forth in this Agreement, nor shall the Administrative Agent have or be deemed to have any fiduciary relationship with any Lender or Lender Agent, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Transaction Document or otherwise exist against the Administrative Agent. Without limiting the generality of the foregoing sentence, the use of the term “agent” in this Agreement 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. Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties.
(o)      Delegation of Duties . The Administrative Agent may execute any of its duties under this Agreement or any other Transaction Document by or through agents, employees or attorneys in fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Administrative Agent shall not be responsible for the negligence or misconduct of any agent or attorney in fact that it selects with reasonable care
(p)      Administrative Agent’s Reliance, Etc . Neither the Administrative Agent nor any of its directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it or them as Administrative Agent under or in connection with this Agreement or any of the other Transaction Documents, except for its or their own gross negligence or willful misconduct. Each Lender, Lender Agent and each Secured Party hereby waives any and all claims against the Administrative Agent or any of its Affiliates for any action taken or omitted to be taken by the Administrative Agent or any of its Affiliates under or in connection with this Agreement or any of the other Transaction Documents, except for its or their own gross negligence or willful misconduct. Without limiting the foregoing, the Administrative Agent: (i) may consult with legal counsel (including counsel for the Borrower or the Seller), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (ii) makes no warranty or representation and shall not be responsible for any statements, warranties or representations made in or in connection with this Agreement; (iii) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement or any of the other Transaction Documents on the part of the Borrower, the Seller, or the Servicer or to inspect the property (including the books and records) of the Borrower, the Seller, or the Servicer; (iv) shall not be responsible for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement, any of the other Transaction Documents or any other instrument or document furnished pursuant hereto or thereto; and (v) shall incur no liability under or in respect of this Agreement or any of the other Transaction Documents by acting upon any notice (including notice by telephone), consent, certificate or other instrument or writing (which may be by email or facsimile) believed by it to be genuine and signed or sent by the proper party or parties.
(q)      Actions by Administrative Agent . The Administrative Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Transaction Document unless it shall first receive such advice or concurrence of the Lender Agents as it deems appropriate and, if it so requests, it shall first be indemnified to its satisfaction by the Lenders and Lender Agents against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other Transaction Document in accordance with a request or consent of the Lender Agents; provided, that, notwithstanding anything to the contrary herein, the Administrative Agent shall not be required to take any action hereunder if the taking of such action, in the reasonable determination of the Administrative Agent, shall be in violation of any Applicable Law or contrary to any provision of this Agreement or shall expose the Administrative Agent to liability hereunder or otherwise. In the event the Administrative Agent requests the consent of a Lender Agent pursuant to the foregoing provisions and the Administrative Agent does not receive a consent (either positive or negative) from such Person within ten Business Days of such Person’s receipt of such request, then such Lender or Lender Agent shall be deemed to have declined to consent to the relevant action.
(r)      Notice of Event of Default, Unmatured Event of Default or Servicer Termination Event . The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of an Event of Default, Unmatured Event of Default or Servicer Termination Event unless the Administrative Agent has received written notice from a Lender, Lender Agent, the Borrower or the Servicer referring to this Agreement, describing such Event of Default, Unmatured Event of Default or Servicer Termination Event and stating that such notice is a “Notice of Event of Default,” “Notice of Unmatured Event of Default” or “Notice of Servicer Termination Event,” as applicable. The Agent shall (subject to Section 9.01(c) ) take such action with respect to such Event of Default, Unmatured Event of Default or Servicer Termination Event as may be requested by the Lender Agents acting jointly or as the Administrative Agent shall deem advisable or in the best interest of the Lender Agents.
(s)      Credit Decision with Respect to the Administrative Agent . Each Lender Agent and each Secured Party acknowledges that none of the Administrative Agent or any of its Affiliates has made any representation or warranty to it, and that no act by the Administrative Agent hereinafter taken, including any consent to and acceptance of any assignment or review of the affairs of the Borrower, the Servicer, the Seller or any of their respective Affiliates or review or approval of any of the Collateral Portfolio, shall be deemed to constitute any representation or warranty by any of the Administrative Agent or its Affiliates to any Lender Agent as to any matter, including whether the Administrative Agent has disclosed material information in its possession. Each Lender Agent and each Secured Party acknowledges that it has, independently and without reliance upon the Administrative Agent, or any of the Administrative Agent’s Affiliates, and based upon such documents and information as it has deemed appropriate, made its own evaluation and decision to enter into this Agreement and the other Transaction Documents to which it is a party. Each Lender Agent and each Secured Party also acknowledges that it will, independently and without reliance upon the Administrative Agent, or any of the Administrative Agent’s Affiliates, and based on such documents and information as it shall deem appropriate at the time, continue to make its own decisions in taking or not taking action under this Agreement and the other Transaction Documents to which it is a party. Each Lender Agent and each Secured Party hereby agrees that the Administrative Agent shall not have any duty or responsibility to provide any Lender Agent with any credit or other information concerning the business, prospects, operations, property, financial and other condition or creditworthiness of the Borrower, the Servicer, the Seller or their respective Affiliates which may come into the possession of the Administrative Agent or any of its Affiliates.
(t)      Indemnification of the Administrative Agent . Each Lender Agent agrees to indemnify the Administrative Agent (to the extent not reimbursed by the Borrower or the Servicer), ratably in accordance with the Pro Rata Share of its related Lender, 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 Administrative Agent 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 Administrative Agent hereunder or thereunder; provided that the Lender Agents shall not be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Administrative Agent’s gross negligence or willful misconduct; provided, further, that no action taken in accordance with the directions of the Lender Agents shall be deemed to constitute gross negligence or willful misconduct for purposes of this Article IX . Without limitation of the foregoing, each Lender Agent agrees to reimburse the Administrative Agent, ratably in accordance with the Pro Rata Share of its related Lender, promptly upon demand for any reasonable out-of-pocket expenses (including reasonable attorneys’ fees, costs and expenses) incurred by the Administrative Agent 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 Lender Agents or Lenders hereunder and/or thereunder and to the extent that the Administrative Agent is not reimbursed for such expenses by the Borrower or the Servicer.
(u)      Successor Administrative Agent . The Administrative Agent may resign at any time, effective upon the appointment and acceptance of a successor Administrative Agent as provided below, by giving at least five days’ written notice thereof to each Lender Agent and the Borrower and may be removed at any time with cause by the Lender Agents and the Borrower acting jointly. Upon any such resignation or removal, the Lender Agents acting jointly (so long as no Event of Default has occurred and is continuing, with the consent of the Borrower) shall appoint a successor Administrative Agent. Each Lender Agent agrees that it shall not unreasonably withhold or delay its approval of the appointment of a successor Administrative Agent. If no such successor Administrative Agent shall have been so appointed, and shall have accepted such appointment, within 30 days after the retiring Administrative Agent’s giving of notice of resignation or the removal of the retiring Administrative Agent, then the retiring Administrative Agent may, on behalf of the Secured Parties, appoint a successor Administrative Agent which successor Administrative Agent shall be either (i) a commercial bank organized under the laws of the United States or of any state thereof and have a combined capital and surplus of at least $50,000,000 or (ii) an Affiliate of such a bank. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations under this Agreement. After any retiring Administrative Agent’s resignation or removal hereunder as Administrative Agent, the provisions of this Article IX shall continue to inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement.
(v)      Payments by the Administrative Agent . Unless specifically allocated to a specific Lender Agent pursuant to the terms of this Agreement, all amounts received by the Administrative Agent on behalf of the Lender Agents shall be paid by the Administrative Agent to the Lender Agents in accordance with their related Lender’s respective Pro Rata Shares in the applicable Advances Outstanding, or if there are no Advances Outstanding in accordance with their related Lender’s most recent Commitments, on the Business Day received by the Administrative Agent, unless such amounts are received after 12:00 noon on such Business Day, in which case the Administrative Agent shall use its reasonable efforts to pay such amounts to each Lender Agent on such Business Day, but, in any event, shall pay such amounts to such Lender Agent not later than the following Business Day.
SECTION 9.02      The Lender Agents.
(a)      Authorization and Action . Each Lender, respectively, hereby designates and appoints its applicable Lender Agent to act as its agent hereunder and under each other Transaction Document, and authorizes such Lender Agent to take such actions as agent on its behalf and to exercise such powers as are delegated to such Lender Agent by the terms of this Agreement and the other Transaction Documents, together with such powers as are reasonably incidental thereto. No Lender Agent shall have any duties or responsibilities, except those expressly set forth herein or in any other Transaction Document, or any fiduciary relationship with its related Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities on the part of such Lender Agent shall be read into this Agreement or any other Transaction Document or otherwise exist for such Lender Agent. In performing its functions and duties hereunder and under the other Transaction Documents, each Lender Agent shall act solely as agent for its related Lender and does not assume nor shall be deemed to have assumed any obligation or relationship of trust or agency with or for the Borrower or the Servicer or any of the Borrower’s or the Servicer’s successors or assigns. No Lender Agent shall be required to take any action that exposes such Lender Agent to personal liability or that is contrary to this Agreement, any other Transaction Document or Applicable Law. The appointment and authority of each Lender Agent hereunder shall terminate upon the indefeasible payment in full of all Obligations. Each Lender Agent hereby authorizes the Administrative Agent to file any UCC financing statement deemed necessary by the Administrative Agent on behalf of such Lender Agent (the terms of which shall be binding on such Lender Agent).
(b)      Delegation of Duties . Each Lender Agent may execute any of its duties under this Agreement and each other Transaction Document by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. No Lender Agent shall be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care.
(c)      Exculpatory Provisions . Neither any Lender Agent nor any of its directors, officers, agents or employees shall be (i) liable for any action lawfully taken or omitted to be taken by it or them under or in connection with this Agreement or any other Transaction Document (except for its, their or such Person’s own gross negligence or willful misconduct), or (ii) responsible in any manner to its related Lender for any recitals, statements, representations or warranties made by the Borrower or the Servicer contained in Article IV , any other Transaction Document or any certificate, report, statement or other document referred to or provided for in, or received under or in connection with, this Agreement or any other Transaction Document, or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement, any other Transaction Document or any other document furnished in connection herewith or therewith, or for any failure of the Borrower or the Servicer to perform its obligations hereunder or thereunder, or for the satisfaction of any condition specified in this Agreement, or for the perfection, priority, condition, value or sufficiency of any collateral pledged in connection herewith. No Lender Agent shall be under any obligation to its related Lender to ascertain or to inquire as to the observance or performance of any of the agreements or covenants contained in, or conditions of, this Agreement or any other Transaction Document, or to inspect the properties, books or records of the Borrower or the Servicer. No Lender Agent shall be deemed to have knowledge of any Event of Default or Unmatured Event of Default unless such Lender Agent has received notice from the Borrower or its related Lender.
(d)      Reliance by Lender Agent . Each Lender Agent shall in all cases be entitled to rely, and shall be fully protected in relying, upon any document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Borrower), independent accountants and other experts selected by such Lender Agent. Each Lender Agent shall in all cases be fully justified in failing or refusing to take any action under this Agreement or any other Transaction Document unless it shall first receive such advice or concurrence of its related Lender as it deems appropriate and it shall first be indemnified to its satisfaction by its related Lender; provided that, unless and until such Lender Agent shall have received such advice, such Lender Agent may take or refrain from taking any action, as the Lender Agent shall deem advisable and in the best interests of its related Lender. Each Lender Agent shall in all cases be fully protected in acting, or in refraining from acting, in accordance with a request of its related Lender, and such request and any action taken or failure to act pursuant thereto shall be binding upon its related Lender.
(e)      Non-Reliance on Lender Agent . Each Lender expressly acknowledges that neither its related Lender Agent, nor any of its officers, directors, employees, agents, attorneys-in-fact or affiliates has made any representations or warranties to it and that no act by such Lender Agent hereafter taken, including, without limitation, any review of the affairs of the Borrower or the Servicer, shall be deemed to constitute any representation or warranty by such Lender Agent. Each Lender represents and warrants to its related Lender Agent that it has and will, independently and without reliance upon its related Lender Agent, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, prospects, financial and other conditions and creditworthiness of the Borrower and made its own decision to enter into this Agreement, the other Transaction Documents and all other documents related hereto or thereto.
(f)      Lender Agents are in their Respective Individual Capacities . Each Lender Agent and its Affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Borrower or any Affiliate of the Borrower as though such Lender Agent were not a Lender Agent hereunder. With respect to Advances pursuant to this Agreement, each Lender Agent shall have the same rights and powers under this Agreement in its individual capacity as any Lender and may exercise the same as though it were not a Lender Agent, and the terms “Lender,” and “Lenders,” shall include the Lender Agent in its individual capacity.
(g)      Successor Lender Agent . Each Lender Agent may, upon five days’ notice to the Borrower and its related Lender, and such Lender Agent will, upon the direction of its related Lender resign as the Lender Agent for such Lender. If any Lender Agent shall resign, then its related Lender during such five day period shall appoint a successor agent. If for any reason no successor agent is appointed by such Lender during such five day period, then effective upon the termination of such five day period, and the Borrower shall make all payments in respect of the Obligations due to such Lender directly to such Lender, and for all purposes shall deal directly with such Lender. After any retiring Lender Agent’s resignation hereunder as a Lender Agent, the provisions of Articles VIII and IX shall inure to its benefit with respect to any actions taken or omitted to be taken by it while it was a Lender Agent under this Agreement.
ARTICLE X.     

COLLATERAL AGENT
SECTION 10.01      Designation of Collateral Agent.
(h)      Initial Collateral Agent . Each of the Borrower, the Lender Agents and the Administrative Agent hereby designate and appoint the Collateral Agent to act as its agent for the purposes of perfection of a security interest in the Collateral Portfolio and hereby authorizes the Collateral Agent to take such actions on its behalf and on behalf of each of the Secured Parties and to exercise such powers and perform such duties as are expressly granted to the Collateral Agent by this Agreement. The Collateral Agent hereby accepts such agency appointment to act as Collateral Agent pursuant to the terms of this Agreement, until its resignation or removal as Collateral Agent pursuant to the terms hereof.
(i)      Successor Collateral Agent . Upon the Collateral Agent’s receipt of a Collateral Agent Termination Notice from the Administrative Agent of the designation of a successor Collateral Agent pursuant to the provisions of Section 10.05 , the Collateral Agent agrees that it will terminate its activities as Collateral Agent hereunder.
(j)      Secured Party . The Administrative Agent, the Lender Agents and the Lenders hereby appoint U.S. Bank, in its capacity as Collateral Agent hereunder, as their agent for the purposes of perfection of a security interest in the Collateral Portfolio. U.S. Bank, in its capacity as Collateral Agent hereunder, hereby accepts such appointment and agrees to perform the duties set forth in Section 10.02(b) .
SECTION 10.02      Duties of Collateral Agent .
(a)      Appointment . The Borrower, the Lender Agents and the Administrative Agent each hereby appoints U.S. Bank to act as Collateral Agent, for the benefit of the Secured Parties. The Collateral Agent hereby accepts such appointment and agrees to perform the duties and obligations with respect thereto set forth herein.
(b)      Duties . On or before the initial Advance Date, and until its removal pursuant to Section 10.05 , the Collateral Agent shall perform, on behalf of the Secured Parties, the following duties and obligations:
(i)      The Collateral Agent shall calculate amounts to be remitted pursuant to Section 2.04 to the applicable parties and notify the Servicer and the Administrative Agent in the event of any discrepancy between the Collateral Agent’s calculations and the Servicing Report (such dispute to be resolved in accordance with Section 2.05 );
(ii)      The Collateral Agent shall make payments pursuant to the terms of the Servicing Report or as otherwise directed in accordance with Sections 2.04 or 2.05 (the “ Payment Duties ”).
(iii)      The Collateral Agent shall provide to the Servicer a copy of all written notices and communications identified as being sent to it in connection with the Loan Assets and the other Collateral Portfolio held hereunder which it receives from the related Obligor, participating bank and/or agent bank. In no instance shall the Collateral Agent be under any duty or obligation to take any action on behalf of the Servicer in respect of the exercise of any voting or consent rights, or similar actions, unless it receives specific written instructions from the Servicer, prior to the occurrence of an Event of Default or the Administrative Agent, after the occurrence of Event of Default, in which event the Collateral Agent shall vote, consent or take such other action in accordance with such instructions.
(c)      (1)    The Administrative Agent, each Lender Agent and each Secured Party further authorizes the Collateral Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the other Transaction Documents as are expressly delegated to the Collateral Agent by the terms hereof and thereof, together with such powers as are reasonably incidental thereto. In furtherance, and without limiting the generality of the foregoing, each Secured Party hereby appoints the Collateral Agent (acting at the direction of the Administrative Agent) as its agent to execute and deliver all further instruments and documents, and take all further action that the Administrative Agent deems necessary or desirable in order to perfect, protect or more fully evidence the security interests granted by the Borrower hereunder, or to enable any of them to exercise or enforce any of their respective rights hereunder, including, without limitation, the execution by the Collateral Agent as secured party/assignee of such financing or continuation statements, or amendments thereto or assignments thereof, relative to all or any of the Loan Assets now existing or hereafter arising, and such other instruments or notices, as may be necessary or appropriate for the purposes stated hereinabove. Nothing in this Section 10.02(c) shall be deemed to relieve the Borrower or the Servicer of their respective obligations to protect the interest of the Collateral Agent (for the benefit of the Secured Parties) in the Collateral Portfolio, including to file financing and continuation statements in respect of the Collateral Portfolio in accordance with Section 5.01(t) .
(i)      The Administrative Agent may direct the Collateral Agent to take any such incidental action hereunder. With respect to other actions which are incidental to the actions specifically delegated to the Collateral Agent hereunder, the Collateral Agent shall not be required to take any such incidental action hereunder, but shall be required to act or to refrain from acting (and shall be fully protected in acting or refraining from acting) upon the direction of the Administrative Agent; provided that the Collateral Agent shall not be required to take any action hereunder at the request of the Administrative Agent, any Secured Party or otherwise if the taking of such action, in the reasonable determination of the Collateral Agent, (A) shall be in violation of any Applicable Law or contrary to any provisions of this Agreement or (B) shall expose the Collateral Agent to liability hereunder or otherwise (unless it has received indemnity which it reasonably deems to be satisfactory with respect thereto). In the event the Collateral Agent requests the consent of the Administrative Agent and the Collateral Agent does not receive a consent (either positive or negative) from the Administrative Agent within 10 Business Days of its receipt of such request, then the Administrative Agent shall be deemed to have declined to consent to the relevant action.
(ii)      Except as expressly provided herein, the Collateral Agent shall not be under any duty or obligation to take any affirmative action to exercise or enforce any power, right or remedy available to it under this Agreement (x) unless and until (and to the extent) expressly so directed by the Administrative Agent or (y) prior to the Facility Maturity Date (and upon such occurrence, the Collateral Agent shall act in accordance with the written instructions of the Administrative Agent pursuant to clause (x)). The Collateral Agent shall not be liable for any action taken, suffered or omitted by it in accordance with the request or direction of any Secured Party, to the extent that this Agreement provides such Secured Party the right to so direct the Collateral Agent, or the Administrative Agent. The Collateral Agent shall not be deemed to have notice or knowledge of any matter hereunder, including an Event of Default, unless a Responsible Officer of the Collateral Agent has knowledge of such matter or written notice thereof is received by the Collateral Agent.
(d)      If, in performing its duties under this Agreement, the Collateral Agent is required to decide between alternative courses of action, the Collateral Agent may request written instructions from the Administrative Agent as to the course of action desired by it. If the Collateral Agent does not receive such instructions within two Business Days after it has requested them, the Collateral Agent may, but shall be under no duty to, take or refrain from taking any such courses of action. The Collateral Agent shall act in accordance with instructions received after such two Business Day period except to the extent it has already, in good faith, taken or committed itself to take, action inconsistent with such instructions. The Collateral Agent shall be entitled to rely on the advice of legal counsel and independent accountants in performing its duties hereunder and shall be deemed to have acted in good faith if it acts in accordance with such advice.
(e)      Concurrently herewith, the Administrative Agent directs the Collateral Agent and the Collateral Agent is authorized to enter into the Pledge Agreement and Collection Account Agreement. For the avoidance of doubt, all of the Collateral Agent’s rights, protections and immunities provided herein shall apply to the Collateral Agent for any actions taken or omitted to be taken under the Pledge Agreement and Collection Account Agreement in such capacity.
SECTION 10.03      Merger or Consolidation .
Any Person (i) into which the Collateral Agent may be merged or consolidated, (ii) that may result from any merger or consolidation to which the Collateral Agent shall be a party or (iii) that may succeed to the properties and assets of the Collateral Agent substantially as a whole, which Person in any of the foregoing cases executes an agreement of assumption to perform every obligation of the Collateral Agent hereunder, shall be the successor to the Collateral Agent under this Agreement without further act of any of the parties to this Agreement.
SECTION 10.04      Collateral Agent Compensation .
As compensation for its Collateral Agent activities hereunder, the Collateral Agent shall be entitled to the Collateral Agent Fees and Collateral Agent Expenses from the Borrower, payable to the extent of funds available therefor pursuant to the provisions of Section 2.04 . The Collateral Agent’s entitlement to receive the Collateral Agent Fees shall cease on the earlier to occur of: (i) its removal as Collateral Agent pursuant to Section 10.05 or (ii) the termination of this Agreement.
SECTION 10.05      Collateral Agent Removal .
The Collateral Agent may be removed, with or without cause, by the Administrative Agent by notice given in writing to the Collateral Agent (the “ Collateral Agent Termination Notice ”); provided , notwithstanding its receipt of a Collateral Agent Termination Notice, the Collateral Agent shall continue to act in such capacity until a successor Collateral Agent has been appointed by the Administrative Agent and, so long as no Event of Default has occurred and is continuing and the Borrower has agreed to act as Collateral Agent hereunder; provided that the Collateral Agent shall continue to receive the amounts payable in accordance with Section 10.04 while so serving as the Collateral Agent prior to a successor Collateral Agent being appointed.
SECTION 10.06      Limitation on Liability .
(a)      The Collateral Agent may conclusively rely on and shall be fully protected in acting upon any certificate, instrument, opinion, notice, letter, telegram or other document delivered to it and that in good faith it reasonably believes to be genuine and that has been signed by the proper party or parties. The Collateral Agent may rely conclusively on and shall be fully protected in acting upon (a) the written instructions of any designated officer of the Administrative Agent or (b) the verbal instructions of the Administrative Agent.
(b)      The Collateral Agent may consult counsel satisfactory to it and the advice or opinion of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with the advice or opinion of such counsel.
(c)      The Collateral Agent shall not be liable for any error of judgment, or for any act done or step taken or omitted by it, in good faith, or for any mistakes of fact or law, or for anything that it may do or refrain from doing in connection herewith except in the case of its willful misconduct or grossly negligent performance or omission of its duties.
(d)      The Collateral Agent makes no warranty or representation and shall have no responsibility (except as expressly set forth in this Agreement) as to the content, enforceability, completeness, validity, sufficiency, value, genuineness, ownership or transferability of the Collateral Portfolio, and will not be required to and will not make any representations as to the validity or value (except as expressly set forth in this Agreement) of any of the Collateral Portfolio. The Collateral Agent shall not be obligated to take any legal action hereunder that might in its judgment involve any expense or liability unless it has been furnished with an indemnity reasonably satisfactory to it.
(e)      The Collateral Agent shall have no duties or responsibilities except such duties and responsibilities as are specifically set forth in this Agreement and no covenants or obligations shall be implied in this Agreement against the Collateral Agent. Notwithstanding any provision to the contrary elsewhere in the Transaction Documents, the Collateral Agent shall not have any fiduciary relationship with any party hereto or any Secured Party in its capacity as such, and no implied covenants, functions, obligations or responsibilities shall be read into this Agreement, the other Transaction Documents or otherwise exist against the Collateral Agent. Without limiting the generality of the foregoing, it is hereby expressly agreed and stipulated by the other parties hereto that the Collateral Agent shall not be required to exercise any discretion hereunder and shall have no investment or management responsibility.
(f)      The Collateral Agent shall not be required to expend or risk its own funds in the performance of its duties hereunder.
(g)      It is expressly agreed and acknowledged that the Collateral Agent is not guaranteeing performance of or assuming any liability for the obligations of the other parties hereto or any parties to the Collateral Portfolio.
(h)      Subject in all cases to the last sentence of Section 2.05 , in case any reasonable question arises as to its duties hereunder, the Collateral Agent may, prior to the occurrence of an Event of Default or the Facility Maturity Date, request instructions from the Servicer and may, after the occurrence of an Event of Default or the Facility Maturity Date, request instructions from the Administrative Agent, and shall be entitled at all times to refrain from taking any action unless it has received instructions from the Servicer or the Administrative Agent, as applicable. The Collateral Agent shall in all events have no liability, risk or cost for any action taken pursuant to and in compliance with the instruction of the Administrative Agent. In no event shall the Collateral Agent be liable for special, indirect or consequential loss or damage of any kind whatsoever (including but not limited to lost profits), even if the Collateral Agent has been advised of the likelihood of such loss or damage and regardless of the form of action.
(i)      The Collateral Agent shall not be liable for the acts or omissions of the Collateral Custodian under this Agreement and shall not be required to monitor the performance of the Collateral Custodian. Notwithstanding anything herein to the contrary, the Collateral Agent shall have no duty to perform any of the duties of the Collateral Custodian under this Agreement. In the event the Collateral Custodian is also the Collateral Agent, the Collateral Custodian is entitled to all of the rights, protections and benefits of the Collateral Agent.
SECTION 10.07      Collateral Agent Resignation .
The Collateral Agent may resign at any time by giving not less than 90 days written notice thereof to the Administrative Agent and with the consent of the Administrative Agent, which consent shall not be unreasonably withheld. Upon receiving such notice of resignation, the Administrative Agent and, so long as no Event of Default has occurred and is continuing, the Borrower shall, within a reasonable amount of time of receiving such notice, appoint a successor collateral agent or collateral agents by written instrument, in duplicate, executed by the Administrative Agent, one copy of which shall be delivered to the Collateral Agent so resigning and one copy to the successor collateral agent or collateral agents, together with a copy to the Borrower, Servicer and Collateral Custodian. If no successor collateral agent shall have been appointed and an instrument of acceptance by a successor Collateral Agent shall not have been delivered to the Collateral Agent within 45 days after the giving of such notice of resignation, the resigning Collateral Agent may petition any court of competent jurisdiction for the appointment of a successor Collateral Agent. Notwithstanding anything herein to the contrary, the Collateral Agent may not resign prior to a successor Collateral Agent being appointed.
ARTICLE XI.     

MISCELLANEOUS
SECTION 11.01      Amendments and Waivers .
(f)      (i) No amendment or modification of any provision of this Agreement shall be effective without the written agreement of the Borrower, the Servicer, the Required Lenders, the Administrative Agent and, solely if such amendment or modification would adversely affect the rights and obligations of the Collateral Agent, the Account Bank or the Collateral Custodian, the written agreement of the Collateral Agent, the Account Bank or the Collateral Custodian, as applicable and (ii) no termination or waiver of any provision of this Agreement or consent to any departure therefrom by the Borrower or the Servicer shall be effective without the written concurrence of the Administrative Agent and the Required 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 any outstanding Advances, or the Yield thereon, (ii) postponing any date for any payment of any Advance, or the Yield thereon, (iii) modifying the provisions of Section 2.22, (iv) modifying the provisions of this Section 11.01 or (v) extending the Stated Maturity Date or clause (i) of the definition of “Reinvestment Period”.
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 under its name on the signature pages hereto or at such other address as shall be designated by such party in a written notice to the other parties hereto. Notices and other communications sent to an e-mail address or fax number shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement), provided that if such notice or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next Business Day for the recipient, and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (i) of notification that such notice or communication is available and identifying the website address therefor. Notices and communications sent by other means shall be effective when received.
SECTION 11.03      No Waiver; Remedies . No failure on the part of the Administrative Agent, the Collateral Agent, any Lender or any Lender Agent 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, the Servicer, the Administrative Agent, each Lender, the Lender Agents, the Collateral Agent, the Account Bank, the Collateral Custodian and their respective successors and permitted assigns. Prior to the occurrence of an Event of Default, unless the Borrower shall otherwise consent, a Lender and its respective successors and permitted assigns may only assign, grant a security interest or sell a participation in, its rights and obligations hereunder to an Affiliate who is not a Prohibited Transferee. After an Event of Default has occurred, a Lender may assign its rights and obligations hereunder to any Person. Any Conduit Lender shall not need prior consent to at any time assign, or grant a security interest or sell a participation interest in, any Advance (or portion thereof) to a Liquidity Bank that is a Lender, Lender Agent or an Affiliate thereof or any commercial paper conduit sponsored by a Liquidity Bank that is a Lender, Lender Agent or an Affiliate thereof. Any such assignee shall execute and deliver to the Servicer, the Borrower and the Administrative Agent a fully-executed Transferee Letter substantially in the form of Exhibit O hereto (a “ Transferee Letter ”) and a fully-executed Joinder Supplement. The parties to any such assignment, grant or sale of a participation interest shall execute and deliver to the related Lender Agent for its acceptance and recording in its books and records, such agreement or document as may be satisfactory to such parties and the applicable Lender Agent. None of the Borrower, the Seller or the 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 each Lender Agent and the Administrative Agent, which consent may be withheld by any Lender Agent or the Administrative Agent in the exercise of its sole and absolute discretion.
(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, without limitation, rights to payment of principal and interest) under this Agreement to secure obligations of such Lender to a Federal Reserve Bank, 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 substitute any such pledgee or grantee for such Lender as a party hereto.
(c)      Each Affected Party and each Indemnified Party shall be an express third party beneficiary of this Agreement.
SECTION 11.05      Term of This Agreement . This Agreement, including, without limitation, the Borrower’s representations and covenants set forth in Articles IV and V and the Servicer’s representations, covenants and duties set forth in Articles IV , V and VI , shall remain in full force and effect until the Collection Date; provided that the rights and remedies with respect to any breach of any representation and warranty made or deemed made by the Borrower or the Servicer pursuant to Articles III and IV and the indemnification and payment provisions of Articles VIII , IX and XI and the provisions of Sections 2.10 , 2.11 , 11.07 , 11.08 and 11.09 shall be continuing and shall survive any termination of this Agreement.
SECTION 11.06      GOVERNING LAW; JURY WAIVER . THIS AGREEMENT SHALL, IN ACCORDANCE WITH SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK, BE 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 granted to the Collateral Agent, the Account Bank, the Administrative Agent, the Lenders, the Lender Agents, the Collateral Custodian and their respective Affiliates under Sections 8.01 and 8.02 hereof, each of the Borrower, the Servicer and the Seller agrees to pay on demand all out-of-pocket costs and expenses of the Administrative Agent, the Lenders, the Lender Agents, the Collateral Agent, the Account Bank and the Collateral Custodian incurred in connection with the preparation, execution, delivery, administration (including periodic auditing), 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, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the Administrative Agent, the Lenders, the Lender Agents, the Collateral Agent, the Account Bank and the Collateral Custodian with respect thereto and with respect to advising the Administrative Agent, the Lenders, the Lender Agents, the Collateral Agent, the Account Bank and the Collateral Custodian as to their respective rights and remedies under this Agreement and the other documents to be delivered hereunder or in connection herewith, and all out-of-pocket costs and expenses, if any (including reasonable attorneys’ fees, costs and expenses), incurred by the Administrative Agent, the Lenders, the Lender Agents, the Collateral Agent, the Account Bank or the Collateral Custodian in connection with the enforcement or potential enforcement of this Agreement or any Transaction Document by such Person and the other documents to be delivered hereunder or in connection herewith.
(b)      The Borrower, the Servicer and the Seller shall pay on demand any and all stamp, sales, excise and other Taxes and fees payable or determined to be payable to any Governmental Authority in connection with the execution, delivery, filing and recording of this Agreement, the other Transaction Documents or any other document providing liquidity support, credit enhancement or other similar support to the Lenders in connection with this Agreement or the funding or maintenance of Advances hereunder.
(c)      The Servicer shall pay on demand all other out-of-pocket costs, expenses and Taxes (excluding Taxes imposed on or measured by net income) incurred by the Administrative Agent, the Lenders, the Lender Agents, the Collateral Agent, the Collateral Custodian and the Account Bank, including, without limitation, all costs and expenses incurred by the Administrative Agent, the Lender Agents and the Lenders in connection with periodic audits of the Borrower’s, the Seller’s or the Servicer’s books and records; provided , prior to the occurrence of an Event of Default, the Servicer shall be required to bear the expense of no more than two such reviews within any 12-month period and any additional reviews shall be at the expense of the Administrative Agent and each Purchaser Agent.
SECTION 11.08      No Proceedings .
(a)      Each of the parties hereto (other than the Administrative Agent with the consent of the Lender Agents) agree that it will not institute against, or join any other Person in instituting against, the Borrower any proceedings of the type referred to in the definition of Bankruptcy Event so long as there shall not have elapsed one year and one day (or such longer preference period as shall then be in effect) since the Collection Date.
(b)      Each of the parties hereto (other than any Conduit Lender) hereby agrees that it will not institute against, or join any other Person in instituting against, any Conduit Lender, the Administrative Agent, or any Liquidity Banks any Bankruptcy Proceeding so long as any commercial paper issued by such Conduit Lender shall be outstanding and there shall not have elapsed one year and one day (or such longer preference period as shall then be in effect) since the last day on which any such commercial paper shall have been outstanding.
SECTION 11.09      Recourse Against Certain Parties .
(a)      No recourse under or with respect to any obligation, covenant or agreement (including, without limitation, the payment of any fees or any other obligations) of the Administrative Agent, the Lenders, the Lender Agents or any Secured Party as contained in this Agreement or any other agreement, instrument or document entered into by the Administrative Agent, the Lenders, the Lender Agents or any Secured Party pursuant hereto or in connection herewith shall be had against any administrator of the Administrative Agent, the Lenders, the Lender Agents or any Secured Party or any incorporator, affiliate, stockholder, officer, employee or director of the Administrative Agent, the Lenders, the Lender Agents or any Secured Party 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 Administrative Agent, the Lenders, the Lender Agents or any Secured Party pursuant hereto or in connection herewith are, in each case, solely the corporate obligations of such party (and nothing in this Section 11.09 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, the Lender Agents or any Secured Party or any incorporator, stockholder, affiliate, officer, employee or director of the Administrative Agent 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 Administrative Agent, the Lenders, the Lender Agents or any Secured Party 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 Administrative Agent, the Lenders, the Lender Agents or any Secured Party and each incorporator, stockholder, affiliate, officer, employee or director of the Administrative Agent, the Lenders, the Lender Agents or any Secured Party or of any such administrator, or any of them, for breaches by the Administrative Agent, the Lenders, the Lender Agents or any Secured Party 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 the Borrower, the Seller or the Servicer or any other Person against the Administrative Agent, the Lenders, the Lender Agents or any Secured Party 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 Borrower, the Seller and the Servicer each hereby waives, releases, and agrees not to sue upon any claim for any such damages, whether or not accrued and whether or not known or suspected.
(c)      No obligation or liability to any Obligor under any of the Loan Assets is intended to be assumed by the Administrative Agent, the Lenders, the Lender Agents or any Secured Party under or as a result of this Agreement and the transactions contemplated hereby.
(d)      Notwithstanding anything in this Agreement to the contrary, no Conduit Lender shall have any obligation to pay any amount required to be paid by it hereunder in excess of any amount available to such Conduit Lender after paying or making provision for the payment of its Commercial Paper Notes. All payment obligations of each Conduit Lender hereunder are contingent on the availability of funds in excess of the amounts necessary to pay its Commercial Paper Notes; and each of the other parties hereto agrees that it will not have a claim under Section 101(5) of the Bankruptcy Code if and to the extent that any such payment obligation owed to it by a Conduit Lender exceeds the amount available to such Conduit Lender to pay such amount after paying or making provision for the payment of its Commercial Paper Notes.
(e)      The provisions of this Section 11.09 shall survive the termination of this Agreement.
SECTION 11.10      Execution in Counterparts; Severability; Integration . This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by e-mail in portable document format (.pdf) or facsimile shall be effective as delivery of a manually executed counterpart of this Agreement. 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 Servicer to the Administrative Agent and the Lender Agents.
SECTION 11.11      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 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 Servicer, as applicable, at its address specified in Section 11.02 or at such other address as the Administrative Agent shall have been notified in accordance herewith. Nothing in this Section 11.11 shall affect the right of the Lenders, the Lender Agents or the Administrative Agent to serve legal process in any other manner permitted by law.
SECTION 11.12      Characterization of Conveyances Pursuant to the Purchase and Sale Agreement .
(a)      It is the express intent of the parties hereto that the conveyance of the Eligible Loan Assets by the Seller to the Borrower as contemplated by the Purchase and Sale Agreement be, and be treated for all purposes (other than consolidated accounting purposes and subject to the tax characterization of the Borrower and the Advances described in Sections 5.01(aa) and 5.02(k) ) as, a sale by the Seller of such Eligible Loan Assets. It is, further, not the intention of the parties that such conveyance be deemed a pledge of the Eligible Loan Assets by the Seller to the Borrower to secure a debt or other obligation of the Seller. However, in the event that, notwithstanding the intent of the parties, the Eligible Loan Assets are held to continue to be property of the Seller, then the parties hereto agree that: (i) the Purchase and Sale Agreement shall also be deemed to be a security agreement under Applicable Law; (ii) as set forth in the Purchase and Sale Agreement, the transfer of the Eligible Loan Assets provided for in the Purchase and Sale Agreement shall be deemed to be a grant by the Seller to the Borrower of a first priority security interest (subject only to Permitted Liens) in all of the Seller’s right, title and interest in and to the Eligible Loan Assets and all amounts payable to the holders of the Eligible Loan Assets in accordance with the terms thereof and all proceeds of the conversion, voluntary or involuntary, of the foregoing into cash, instruments, securities or other property, including, without limitation, all amounts from time to time held or invested in the Collection Account, whether in the form of cash, instruments, securities or other property; (iii) the possession by the Borrower (or the Collateral Custodian on its behalf) of Loan Assets and such other items of property as constitute instruments, money, negotiable documents or chattel paper shall be, subject to clause (iv) , for purposes of perfecting the security interest pursuant to the UCC; and (iv) acknowledgements from Persons holding such property shall be deemed acknowledgements from custodians, bailees or agents (as applicable) of the Borrower for the purpose of perfecting such security interest under Applicable Law. The parties further agree that any assignment of the interest of the Borrower pursuant to any provision hereof shall also be deemed to be an assignment of any security interest created pursuant to the terms of the Purchase and Sale Agreement. The Borrower shall, to the extent consistent with this Agreement and the other Transaction Documents, take such actions as may be necessary to ensure that, if the Purchase and Sale Agreement was deemed to create a security interest in the Eligible Loan Assets, such security interest would be deemed to be a perfected security interest of first priority (subject only to Permitted Liens) under Applicable Law and will be maintained as such throughout the term of this Agreement.
(b)      It is the intention of each of the parties hereto that the Eligible Loan Assets conveyed by the Seller to the Borrower pursuant to the Purchase and Sale Agreement shall constitute assets owned by the Borrower and shall not be part of the Seller’s estate in the event of the filing of a bankruptcy petition by or against the Seller under any bankruptcy or similar law.
(c)      The Borrower agrees to treat, and shall cause the Seller to treat, for all purposes (other than consolidated accounting purposes and subject to the tax characterization of the Borrower and the Advances described in Sections 5.01(aa) and 5.02(k)) , the transactions effected by the Purchase and Sale Agreement as sales of assets to the Borrower. The Borrower and the Servicer each hereby agree to cause the Seller to reflect in the Seller’s financial records and to include a note in the publicly filed annual and quarterly financial statements of BDCA indicating that: (i) assets related to transactions (including transactions pursuant to the Transaction Documents) that do not meet SFAS 140 requirements for accounting sale treatment are reflected in the consolidated balance sheet of BDCA, as finance receivables pledged and non-recourse, secured borrowings and (ii) those assets are owned by a special purpose entity that is consolidated in the financial statements of BDCA, and the creditors of that special purpose entity have received ownership and/or security interests in such assets and such assets are not intended to be available to the creditors of sellers (or any affiliate of the sellers) of such assets to that special purpose entity.
SECTION 11.13      Confidentiality .
(a)      Each of the Administrative Agent, the Lenders, the Lender Agents, the Servicer, the Collateral Agent, the Borrower, the Account Bank, the Seller and the Collateral Custodian shall maintain and shall cause each of its employees and officers to maintain the confidentiality of the Agreement and all information with respect to the other parties, including all information regarding the business of the Borrower and the Servicer hereto and their respective businesses obtained by it or them in connection with the structuring, negotiating and execution of the transactions contemplated herein, except that each such party and its officers and employees may (i) disclose such information to its external accountants, investigators, auditors, attorneys or other agents, including any valuation firm engaged by such party in connection with any due diligence or comparable activities with respect to the transactions and Loan Assets contemplated herein and the agents of such Persons (“ Excepted Persons ”); provided that each Excepted Person shall, as a condition to any such disclosure, agree for the benefit of the Administrative Agent, the Lenders, the Lender Agents, the Servicer, the Collateral Agent, the Borrower, the Account Bank, the Seller and the Collateral Custodian that such information shall be used solely in connection with such Excepted Person’s evaluation of, or relationship with, the Borrower and its affiliates, (ii) disclose the existence of the Agreement, but not the financial terms thereof, (iii) disclose such information as is required by Applicable Law and (iv) disclose the Agreement and such information in any suit, action, proceeding or investigation (whether in law or in equity or pursuant to arbitration) involving any of the Transaction Documents for the purpose of defending itself, reducing its liability, or protecting or exercising any of its claims, rights, remedies, or interests under or in connection with any of the Transaction Documents. Notwithstanding the foregoing provisions of this Section 11.13(a) , the Servicer may, subject to Applicable Law and the terms of any Loan Agreements, make available copies of the documents in the Servicing Files and such other documents it holds in its capacity as Servicer pursuant to the terms of this Agreement, to any of its creditors. It is understood that the financial terms that may not be disclosed except in compliance with this Section 11.13(a) include, without limitation, all fees and other pricing terms, and all Events of Default, Servicer Termination Events, and priority of payment provisions.
(b)      Anything herein to the contrary notwithstanding, the Borrower and the Servicer each hereby consents to the disclosure of any nonpublic information with respect to it (i) to the Administrative Agent, the Lenders, the Lender Agents, the Account Bank, the Collateral Agent or the Collateral Custodian by each other, (ii) by the Administrative Agent, the Lenders, the Lender Agents, the Account Bank, the Collateral Agent and the Collateral Custodian 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, the Lender Agents, the Account Bank, the Collateral Agent and the Collateral Custodian to any 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 Conduit 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 Lender Agents, the Administrative Agent, the Collateral Agent, the Account Bank and the Collateral Custodian may disclose any such nonpublic information as required pursuant to any Applicable Law or order of any judicial, administrative or regulatory authority or proceedings (whether or not having the force or effect of law).
(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 Law, (B) to any government agency or regulatory body having or claiming authority to regulate or oversee any respects of the Lenders’, the Lender Agents’, the Administrative Agent’s, the Collateral Agent’s, the Account Bank’s or the Collateral Custodian’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, any Lender Agent, the Collateral Agent, the Collateral Custodian or the Account Bank or an officer, director, employer, shareholder or affiliate of any of the foregoing is a party, (D) in any preliminary or final offering circular, registration statement or contract or other document approved in advance by the Borrower, the Servicer or the Seller, or (E) to any affiliate, independent or internal auditor, agent, employee or attorney of the Collateral Agent or the Collateral Custodian having a need to know the same, provided that the disclosing party advises such recipient of the confidential nature of the information being disclosed; or (iii) any other disclosure authorized by the Borrower, Servicer or the Seller.
SECTION 11.14      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, without limitation of any kind, the tax treatment and tax structure of the transaction and all materials of any kind (including, without limitation, 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 11.14 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 11.15      Waiver of Set Off .
Each of the parties hereto hereby waives any right of setoff it may have or to which it may be entitled under this Agreement from time to time against the Administrative Agent, the Lenders, the Lender Agents or their respective assets.
SECTION 11.16      Headings 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.
SECTION 11.17      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 Breakage Fees, Section 2.10 or 2.11 ) 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 (i) the amount of such Lender’s required repayment to (ii) 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 11.18      Failure of Borrower or Servicer to Perform Certain Obligations .
If the Borrower or the Servicer, as applicable, fails to perform any of its agreements or obligations under Section 5.01(t) , 5.02(r) or 5.03(e) , 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 or the Servicer (on behalf of the Borrower), as applicable, upon the Administrative Agent’s demand therefor.
SECTION 11.19      Power of Attorney . The Borrower, after an Event of Default, irrevocably authorizes the Administrative Agent and appoints the Administrative Agent as its attorney-in-fact to act on behalf of the Borrower (i) to file financing statements necessary or desirable in the Administrative Agent’s sole discretion to perfect and to maintain the perfection and priority of the interest of the Secured Parties in the Collateral Portfolio and (ii) to file a carbon, photographic or other reproduction of this Agreement or any financing statement with respect to the Collateral Portfolio as a financing statement in such offices as the Administrative Agent in its sole discretion deems necessary or desirable to perfect and to maintain the perfection and priority of the interests of the Secured Parties in the Collateral Portfolio. This appointment is coupled with an interest and is irrevocable.
SECTION 11.20      Delivery of Termination Statements, Releases, etc . Upon payment in full of all of the Obligations (other than unmatured contingent indemnification obligations) and the termination of this Agreement, the Administrative Agent and the Collateral Agent shall deliver to the Borrower termination statements, reconveyances, releases and other documents necessary or appropriate to evidence the termination of the Pledge and other Liens securing the Obligations, all at the expense of the Borrower.
ARTICLE XII.     

COLLATERAL CUSTODIAN
SECTION 12.01      Designation of Collateral Custodian .
(a)      Initial Collateral Custodian . The role of Collateral Custodian with respect to the Required Loan Documents shall be conducted by the Person designated as Collateral Custodian hereunder from time to time in accordance with this Section 12.01 . Each of the Borrower, the Lender Agents and the Administrative Agent hereby designate and appoint the Collateral Custodian to act as its agent and hereby authorizes the Collateral Custodian to take such actions on its behalf and to exercise such powers and perform such duties as are expressly granted to the Collateral Custodian by this Agreement. The Collateral Custodian hereby accepts such agency appointment to act as Collateral Custodian pursuant to the terms of this Agreement, until its resignation or removal as Collateral Custodian pursuant to the terms hereof.
(b)      Successor Collateral Custodian . Upon the Collateral Custodian’s receipt of a Collateral Custodian Termination Notice from the Administrative Agent of the designation of a successor Collateral Custodian pursuant to the provisions of Section 12.05 , the Collateral Custodian agrees that it will terminate its activities as Collateral Custodian hereunder.
SECTION 12.02      Duties of Collateral Custodian .
(i)      Appointment . The Borrower, the Lender Agents and the Administrative Agent each hereby appoints U.S. Bank to act as Collateral Custodian, for the benefit of the Secured Parties. The Collateral Custodian hereby accepts such appointment and agrees to perform the duties and obligations with respect thereto set forth herein.
(j)      Duties . From the Closing Date until its removal pursuant to Section 12.05 , the Collateral Custodian shall perform, on behalf of the Secured Parties, the following duties and obligations:
(vii)      The Collateral Custodian shall take and retain custody of the Required Loan Documents delivered by the Borrower pursuant to Sections 3.02(a) and 3.04(b) in accordance with the terms and conditions of this Agreement, all for the benefit of the Secured Parties. Within five Business Days of its receipt of any Required Loan Documents, the related Loan Asset Schedule and a hard copy of the Loan Asset Checklist, the Collateral Custodian shall review the Required Loan Documents to confirm that (A) such Required Loan Documents have been executed (either an original or a copy, as indicated on the Loan Asset Checklist) and have no mutilated pages, (B) filed stamped copies of the UCC and other filings (required by the Required Loan Documents) are included, (C) if listed on the Loan Asset Checklist, a copy of an Insurance Policy with respect to any real or personal property constituting the Underlying Collateral is included and (D) the related original balance (based on a comparison to the note or assignment agreement, as applicable), Loan Asset number and Obligor name, as applicable, with respect to such Loan Asset is referenced on the related Loan Asset Schedule (such items (A) through (D) collectively, the “ Review Criteria ”). In order to facilitate the foregoing review by the Collateral Custodian, in connection with each delivery of Required Loan Documents hereunder to the Collateral Custodian, the Servicer shall provide to the Collateral Custodian a hard copy (which may be preceded by an electronic copy, as applicable) of the related Loan Asset Checklist which contains the Loan Asset information with respect to the Required Loan Documents being delivered, identification number and the name of the Obligor with respect to such Loan Asset. Notwithstanding anything herein to the contrary, the Collateral Custodian’s obligation to review the Required Loan Documents shall be limited to reviewing such Required Loan Documents based on the information provided on the Loan Asset Checklist. If, at the conclusion of such review, the Collateral Custodian shall determine that (i) the original balance of the Loan Asset with respect to which it has received Required Loan Documents is less than as set forth on the Loan Asset Schedule, the Collateral Custodian shall notify the Administrative Agent and the Servicer of such discrepancy within one Business Day, or (ii) any Review Criteria is not satisfied, the Collateral Custodian shall within one Business Day notify the Servicer of such determination and provide the Servicer with a list of the non-complying Loan Assets and the applicable Review Criteria that they fail to satisfy. The Servicer shall have five Business Days after notice or knowledge thereof to correct any non-compliance with any Review Criteria. In addition, if requested in writing (in the form of Exhibit N ) by the Servicer and approved by the Administrative Agent within 10 Business Days of the Collateral Custodian’s delivery of such report, the Collateral Custodian shall return any Loan Asset which fails to satisfy a Review Criteria to the Borrower. Other than the foregoing, the Collateral Custodian shall not have any responsibility for reviewing any Required Loan Documents . Notwithstanding anything to the contrary contained herein, the Collateral Custodian shall have no duty or obligation with respect to any Loan Asset checklist delivered to it in electronic form .
(viii)      In taking and retaining custody of the Required Loan Documents, the Collateral Custodian shall be deemed to be acting as the agent of the Secured Parties; provided that the Collateral Custodian makes no representations as to the existence, perfection or priority of any Lien on the Required Loan Documents or the instruments therein; and provided , further , that, the Collateral Custodian’s duties shall be limited to those expressly contemplated herein.
(ix)      All Required Loan Documents shall be kept in fire resistant vaults, rooms or cabinets at the locations specified on the address of the Collateral Custodian on the signature pages attached hereto, or at such other office as shall be specified to the Administrative Agent and the Servicer by the Collateral Custodian in a written notice delivered at least 30 days prior to such change. All Required Loan Documents shall be placed together with an appropriate identifying label and maintained in such a manner so as to permit retrieval and access. The Collateral Custodian shall segregate the Required Loan Documents on its inventory system and will not commingle the physical Required Loan Documents with any other files of the Collateral Custodian other than those, if any, relating to BDCA and its Affiliates and subsidiaries; provided , however , the Collateral Custodian shall segregate any commingled files upon written request of the Administrative Agent and the Borrower.
(x)      On the 12 th calendar day of every month (or if such day is not a Business Day, the next succeeding Business Day), the Collateral Custodian shall provide a written report to the Administrative Agent and the Servicer (in a form mutually agreeable to the Administrative Agent and the Collateral Custodian) identifying each Loan Asset for which it holds Required Loan Documents and the applicable Review Criteria that any Loan Asset fails to satisfy.
(xi)      Notwithstanding any provision to the contrary elsewhere in the Transaction Documents, the Collateral Custodian shall not have any fiduciary relationship with any party hereto or any Secured Party in its capacity as such, and no implied covenants, functions, obligations or responsibilities shall be read into this Agreement, the other Transaction Documents or otherwise exist against the Collateral Custodian. Without limiting the generality of the foregoing, it is hereby expressly agreed and stipulated by the other parties hereto that the Collateral Custodian shall not be required to exercise any discretion hereunder and shall have no investment or management responsibility.
(k)      (1)    The Collateral Custodian agrees to cooperate with the Administrative Agent and the Collateral Agent and deliver any Required Loan Documents to the Collateral Agent or Administrative Agent (pursuant to a written request in the form of Exhibit N ), as applicable, as requested in order to take any action that the Administrative Agent deems necessary or desirable in order to perfect, protect or more fully evidence the security interests granted by the Borrower hereunder, or to enable any of them to exercise or enforce any of their respective rights hereunder, including any rights arising with respect to Article VII . In the event the Collateral Custodian receives instructions from the Collateral Agent, the Servicer or the Borrower which conflict with any instructions received by the Administrative Agent, the Collateral Custodian shall rely on and follow the instructions given by the Administrative Agent.
(i)      The Administrative Agent may direct the Collateral Custodian to take any such incidental action hereunder. With respect to other actions which are incidental to the actions specifically delegated to the Collateral Custodian hereunder, the Collateral Custodian shall not be required to take any such incidental action hereunder, but shall be required to act or to refrain from acting (and shall be fully protected in acting or refraining from acting) upon the direction of the Administrative Agent; provided that the Collateral Custodian shall not be required to take any action hereunder at the request of the Administrative Agent, any Secured Party or otherwise if the taking of such action, in the reasonable determination of the Collateral Custodian, (A) shall be in violation of any Applicable Law or contrary to any provisions of this Agreement or (B) shall expose the Collateral Custodian to liability hereunder or otherwise (unless it has received indemnity which it reasonably deems to be satisfactory with respect thereto). In the event the Collateral Custodian requests the consent of the Administrative Agent and the Collateral Custodian does not receive a consent (either positive or negative) from the Administrative Agent within 10 Business Days of its receipt of such request, then the Administrative Agent shall be deemed to have declined to consent to the relevant action.
(ii)      The Collateral Custodian shall not be liable for any action taken, suffered or omitted by it in accordance with the request or direction of any Secured Party, to the extent that this Agreement provides such Secured Party the right to so direct the Collateral Custodian, or the Administrative Agent. The Collateral Custodian shall not be deemed to have notice or knowledge of any matter hereunder, including an Event of Default, unless a Responsible Officer of the Collateral Custodian has knowledge of such matter or written notice thereof is received by the Collateral Custodian.
SECTION 12.03      Merger or Consolidation .
Any Person (i) into which the Collateral Custodian may be merged or consolidated, (ii) that may result from any merger or consolidation to which the Collateral Custodian shall be a party or (iii) that may succeed to the properties and assets of the Collateral Custodian substantially as a whole, which Person in any of the foregoing cases executes an agreement of assumption to perform every obligation of the Collateral Custodian hereunder, shall be the successor to the Collateral Custodian under this Agreement without further act of any of the parties to this Agreement.
SECTION 12.04      Collateral Custodian Compensation .
As compensation for its Collateral Custodian activities hereunder, the Collateral Custodian shall be entitled to the Collateral Custodian Fees and Collateral Custodian Expenses from the Borrower, payable pursuant to the extent of funds available therefor pursuant to the provisions of Section 2.04 . The Collateral Custodian’s entitlement to receive the Collateral Custodian Fees shall cease on the earlier to occur of: (i) its removal as Collateral Custodian pursuant to Section 12.05 , (ii) its resignation as Collateral Custodian pursuant to Section 12.07 or (iii) the termination of this Agreement.
SECTION 12.05      Collateral Custodian Removal .
The Collateral Custodian may be removed, with or without cause, by the Administrative Agent by notice given in writing to the Collateral Custodian (the “ Collateral Custodian Termination Notice ”); provided , notwithstanding its receipt of a Collateral Custodian Termination Notice, the Collateral Custodian shall continue to act in such capacity and shall continue to receive compensation of the amounts set forth in Section 12.04 above until a successor Collateral Custodian has been appointed and has agreed to act as Collateral Custodian hereunder.
SECTION 12.06      Limitation on Liability .
(d)      The Collateral Custodian may conclusively rely on and shall be fully protected in acting upon any certificate, instrument, opinion, notice, letter, telegram or other document delivered to it and that in good faith it reasonably believes to be genuine and that has been signed by the proper party or parties. The Collateral Custodian may rely conclusively on and shall be fully protected in acting upon (i) the written instructions of any designated officer of the Administrative Agent or (ii) the verbal instructions of the Administrative Agent.
(e)      The Collateral Custodian may consult counsel satisfactory to it and the advice or opinion of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with the advice or opinion of such counsel.
(f)      The Collateral Custodian shall not be liable for any error of judgment, or for any act done or step taken or omitted by it, in good faith, or for any mistakes of fact or law, or for anything that it may do or refrain from doing in connection herewith except in the case of its willful misconduct or grossly negligent performance or omission of its duties as related to this Agreement.
(g)      The Collateral Custodian makes no warranty or representation and shall have no responsibility (except as expressly set forth in this Agreement) as to the content, enforceability, completeness, validity, sufficiency, value, genuineness, ownership or transferability of the Collateral Portfolio, and will not be required to and will not make any representations as to the validity or value (except as expressly set forth in this Agreement) of any of the Collateral Portfolio. The Collateral Custodian shall not be obligated to take any legal action hereunder that might in its judgment involve any expense or liability unless it has been furnished with an indemnity reasonably satisfactory to it.
(h)      The Collateral Custodian shall have no duties or responsibilities except such duties and responsibilities as are specifically set forth in this Agreement and no covenants or obligations shall be implied in this Agreement against the Collateral Custodian.
(i)      The Collateral Custodian shall not be required to expend or risk its own funds in the performance of its duties hereunder.
(j)      It is expressly agreed and acknowledged that the Collateral Custodian is not guaranteeing performance of or assuming any liability for the obligations of the other parties hereto or any parties to the Collateral Portfolio.
(k)      In no event shall the Collateral Custodian be liable for any failure or delay in the performance of its obligations hereunder because of circumstances beyond its control, including, but not limited to, acts of God, flood, war (whether declared or undeclared), terrorism, fire, riot, embargo, government action, including any laws, ordinances, regulations, governmental action or the like which delay, restrict or prohibit the providing of the services contemplated by this Agreement. The Collateral Custodian will, however, take all reasonable steps to minimize service interruptions for any period that such interruption continues beyond the Collateral Custodian’s control.
(l)      Subject in all cases to the last sentence of Section 12.02(c)(i) , in case any reasonable question arises as to its duties hereunder, the Collateral Custodian may, prior to the occurrence of an Event of Default or the Facility Maturity Date, request instructions from the Servicer and may, after the occurrence of and during the continuance of an Event of Default or the Facility Maturity Date, request instructions from the Administrative Agent, and shall be entitled at all times to refrain from taking any action unless it has received instructions from the Servicer or the Administrative Agent, as applicable. The Collateral Custodian shall in all events have no liability, risk or cost for any action taken pursuant to and in compliance with the instruction of the Administrative Agent. In no event shall the Collateral Custodian be liable for special, indirect or consequential loss or damage of any kind whatsoever (including but not limited to lost profits), even if the Collateral Custodian has been advised of the likelihood of such loss or damage and regardless of the form of action.
SECTION 12.07      Collateral Custodian Resignation .
Collateral Custodian may resign and be discharged from its duties or obligations hereunder, not earlier than 90 days after delivery to the Administrative Agent of written notice of such resignation specifying a date when such resignation shall take effect. Upon the effective date of such resignation, or if the Administrative Agent gives Collateral Custodian written notice of an earlier termination hereof, Collateral Custodian shall (i) be reimbursed for any costs and expenses Collateral Custodian shall incur in connection with the termination of its duties under this Agreement and (ii) deliver all of the Required Loan Documents in the possession of Collateral Custodian to the Administrative Agent or to such Person as the Administrative Agent may designate to Collateral Custodian in writing upon the receipt of a request in the form of Exhibit N ; provided that the Borrower shall consent to any successor Collateral Custodian appointed by the Administrative Agent (such consent not to be unreasonably withheld). Notwithstanding anything herein to the contrary, the Collateral Custodian may not resign prior to a successor Collateral Custodian being appointed.
SECTION 12.08      Release of Documents .
(f)      Release for Servicing . From time to time and as appropriate for the enforcement or servicing of any of the Collateral Portfolio, the Collateral Custodian is hereby authorized (unless and until such authorization is revoked by the Administrative Agent), upon written receipt from the Servicer of a request for release of documents and receipt in the form annexed hereto as Exhibit N , to release to the Servicer within two Business Days of receipt of such request, the related Required Loan Documents or the documents set forth in such request and receipt to the Servicer; provided that, the Servicer must get the Administrative Agent’s consent for the release of any underlying promissory notes and applicable assignments. All documents so released to the Servicer shall be held by the Servicer in trust for the benefit of the Collateral Agent, on behalf of the Secured Parties in accordance with the terms of this Agreement. The Servicer shall return to the Collateral Custodian the Required Loan Documents or other such documents (i) promptly upon the request of the Administrative Agent or (ii) when the Servicer’s need therefor in connection with such foreclosure or servicing no longer exists, unless the Loan Asset shall be liquidated, in which case, the Servicer shall deliver an additional request for release of documents to the Collateral Custodian and receipt certifying such liquidation from the Servicer to the Collateral Agent, all in the form annexed hereto as Exhibit N .
(g)      Limitation on Release . In the event the Administrative Agent revokes the authorization granted in Section 12.08(a), the Collateral Agent shall be authorized to release to the Servicer the Required Loan Documents only to the extent that the Administrative Agent has consented to such release. Promptly after delivery to the Collateral Custodian of any request for release of documents, the Servicer shall provide notice of the same to the Administrative Agent. Any additional Required Loan Documents or documents requested to be released by the Servicer may be released only upon written authorization of the Administrative Agent. The limitations of this paragraph shall not apply to the release of Required Loan Documents to the Servicer pursuant to the immediately succeeding subsection.
(h)      Release for Payment . Upon receipt by the Collateral Custodian of the Servicer’s request for release of documents and receipt in the form annexed hereto as Exhibit N (which certification shall include a statement to the effect that all amounts received in connection with such payment or repurchase have been credited to the Collection Account as provided in this Agreement), the Collateral Custodian shall promptly release the related Required Loan Documents to the Servicer.
SECTION 12.09      Return of Required Loan Documents .
The Borrower may, with the prior written consent of the Administrative Agent (such consent not to be unreasonably withheld), require that the Collateral Custodian return each Required Loan Document (a) delivered to the Collateral Custodian in error or (b) released from the Lien of the Collateral Agent hereunder pursuant to Section 2.16 , in each case, by submitting to the Collateral Custodian and the Administrative Agent a written request in the form of Exhibit N (signed by both the Borrower and the Administrative Agent) specifying the Collateral Portfolio to be so returned and reciting that the conditions to such release have been met (and specifying the Section or Sections of this Agreement being relied upon for such release). The Collateral Custodian shall upon its receipt of each such request for return executed by the Borrower and the Administrative Agent promptly, but in any event within five Business Days, return the Required Loan Documents so requested to the Borrower.
SECTION 12.10      Access to Certain Documentation and Information Regarding the Collateral Portfolio; Audits of Servicer .
The Collateral Custodian shall provide to the Administrative Agent and each Lender Agent access to the Required Loan Documents and all other documentation regarding the Collateral Portfolio including in such cases where the Administrative Agent and each Lender Agent is required in connection with the enforcement of the rights or interests of the Secured Parties, or by applicable statutes or regulations, to review such documentation, such access being afforded without charge but only (i) upon two Business Days prior written request, (ii) during normal business hours and (iii) subject to the Servicer’s and the Collateral Custodian’s normal security and confidentiality procedures. Prior to the Closing Date and periodically thereafter at the discretion of the Administrative Agent and each Lender Agent, the Administrative Agent and each Lender Agent may review the Servicer’s collection and administration of the Collateral Portfolio in order to assess compliance by the Servicer with the Servicing Standard, as well as with this Agreement and may conduct an audit of the Collateral Portfolio and the Required Loan Documents in conjunction with such a review. Such review shall be (subject to Section 5.03(d)(ii) and 5.03(t) ) reasonable in scope and shall be completed in a reasonable period of time. Without limiting the foregoing provisions of this Section 12.10 , from time to time on request of the Administrative Agent, the Collateral Custodian shall permit certified public accountants or other auditors acceptable to the Administrative Agent to conduct, at the expense of the Servicer (on behalf of the Borrower), a review of the Required Loan Documents and all other documentation regarding the Collateral Portfolio.
SECTION 12.11      Collateral Custodian as Agent of Collateral Agent .
The Collateral Custodian agrees that, with respect to any Required Loan Documents at any time or times in its possession or held in its name, the Collateral Custodian shall be the agent of the Collateral Agent, for the benefit of the Secured Parties, for purposes of perfecting (to the extent not otherwise perfected) the Collateral Agent’s security interest in the Collateral Portfolio and for the purpose of ensuring that such security interest is entitled to first priority status under the UCC.
[Signature pages to follow.]

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written.
THE BORROWER:
BDCA FUNDING I, LLC

By:

Name: Brian S. Block Nicholas Radesca
Title: Chief Financial Officer and Treasurer
BDCA Funding I, LLC
c/o Business Development Corporation of America
405 Park Avenue, 12th Floor
New York, NY 10022
Attention:        General Counsel
Facsimile No:    (646) 861-7804
Confirmation No:    (212) 415-6500
Email:        jgalloway@arclarp.com





[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]
THE SERVICER:
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

By:

Name: Brian S. Block Nicholas Radesca
Title: Chief Financial Officer and Treasurer
Business Development Corporation of America
405 Park Avenue, 12th Floor
New York, NY 10022
Attention:        General Counsel
Facsimile No:    (646) 861-7804
Confirmation No:    (212) 415-6500
Email:        jgalloway@arclarp.com


[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]
THE SELLER:
BUSINESS DEVELOPMENT CORPORATION OF AMERICA

By:

Name: Brian S. Block Nicholas Radesca
Title: Chief Financial Officer and Treasurer
Business Development Corporation of America
405 Park Avenue, 12th Floor
New York, NY 10022
Attention:        General Counsel
Facsimile No:    (646) 861-7804
Confirmation No:    (212) 415-6500
Email:        jgalloway@arclarp.com

[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]
THE ADMINISTRATIVE AGENT:
WELLS FARGO SECURITIES, LLC

By:

Name:
Title:
Wells Fargo Securities, LLC
301 S. College Street, D1053-082
Charlotte, North Carolina 28288
Attention: Kevin Sunday
Facsimile No.: (704) 715-0089
Confirmation No: (704) 715-8582

INSTITUTIONAL LENDER:
WELLS FARGO BANK, N.A.

By:

Name:
Title:
Wells Fargo Bank, N.A.
One Wells Fargo Center, Mail Code: NC0600
Charlotte, North Carolina 28288
Attention: Kevin Sunday
Facsimile No.: (704) 715-0067
Confirmation No: (704) 374-6230
[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]
THE COLLATERAL AGENT:
U.S. BANK NATIONAL ASSOCIATION

By:

Name: Jeffrey B. Stone
Title: Vice President



U.S. Bank National Association
One Federal Street, 3 rd Floor
Boston, MA 02110
Attention:    Jeffrey B. Stone, Vice President
Facsimile No:    (866) 373-5984
Confirmation No:    (617) 603-6538
Email:    Jeffrey.stone@usbank.com
[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]
THE ACCOUNT BANK:
U.S. BANK NATIONAL ASSOCIATION

By:

Name: Jeffrey B. Stone
Title: Vice President


U.S. Bank National Association
One Federal Street, 3 rd Floor
Boston, MA 02110
Attention:    Jeffrey B. Stone, Vice President
Facsimile No:    (866) 373-5984
Confirmation No:    (617) 603-6538
Email:    Jeffrey.stone@usbank.com





[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]

THE COLLATERAL CUSTODIAN:
U.S. BANK NATIONAL ASSOCIATION

By:

Name:
Title:


U.S. Bank National Association
1719 Range Way
Florence, South Carolina 29501
Attention:    Steve Garrett
Facsimile No:    (843) 673-0162
Confirmation No:    (843) 676-8901
Email:    steven.garrett@usbank.com

With a copy to:

U.S. Bank National Association
One Federal Street, 3 rd Floor
Boston, MA 02110
Attention:    Jeffrey B. Stone, Vice President
Facsimile No:    (866) 373-5984
Confirmation No:    (617) 603-6538
Email:    Jeffrey.stone@usbank.com




















 
Document comparison by Workshare Compare on Thursday, August 07, 2014 6:32:59 PM
Input:
Document 1 ID
interwovenSite://NA_IMANAGE/BUSINESS/18969459/1
Description
#18969459v1<BUSINESS> - BDC of America, LLC - Loan and Servicing Agreement (conformed to Amendment 3)
Document 2 ID
interwovenSite://NA_IMANAGE/BUSINESS/19124510/7
Description
#19124510v7<BUSINESS> - BDC of America, LLC - Loan and Servicing Agreement (conformed to Amendment 4)
Rendering set
standard

Legend:
Insertion
Deletion
Moved from
Moved to
Style change
Format change
Moved deletion
Inserted cell
 
Deleted cell
 
Moved cell
 
Split/Merged cell
 
Padding cell
 

Statistics:
 
Count
Insertions
54
Deletions
43
Moved from
0
Moved to
0
Style change
0
Format changed
0
Total changes
97

CHAR1\1371762v1


CHAR1\1371762v1
Exhibit 21


Subsidiaries of Business Development Corporation of America


Name                                      Domicile
54 th Street Equity Holdings, Inc.                        Delaware
BDCA-CB Funding, LLC                            Delaware
BDCA Funding I, LLC                            Delaware
BDCA 2L Funding I, LLC                            Delaware
Kahala Aviation Holdings, LLC                        Delaware
Kahala Aviation US, Inc.                            Delaware
Kahala Luxco                                Luxembourg
Park Ave RE, Inc.                                Delaware






Exhibit 31.1

I, Nicholas S. Schorsch, certify that:

1.
I have reviewed this Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2014 of Business Development Corporation of America;

2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:
August 14, 2014
/s/ Nicholas S. Schorsch
 
 
Nicholas S. Schorsch
 
 
Chief Executive Officer and
Chairman of the Board of Directors
(Principal Executive Officer)




Exhibit 31.2
 
I, Nicholas Radesca, certify that:

1.
I have reviewed this Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2014 of Business Development Corporation of America;

2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:
August 14, 2014
/s/ Nicholas Radesca
 
 
Nicholas Radesca
Chief Financial Officer, Treasurer and Secretary
(Principal Financial and Accounting Officer)




Exhibit 32
 
SECTION 1350 CERTIFICATIONS
 
This Certificate is being delivered pursuant to the requirements of Section 1350 of Chapter 63 (Mail Fraud) of Title 18 (Crimes and Criminal Procedures) of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed for purposes of Section 18 of the Securities Act of 1934, as amended.
 
The undersigned, who are the Principal Executive Officer and Principal Financial Officer of Business Development Corporation of America (the “Company”), each hereby certify as follows:
 
To the best of his knowledge, the quarterly report of Form 10-Q of the Company, which accompanies this Certificate, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and all information contained in this quarterly report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
Dated this  14 th day of August 2014
 
/s/ Nicholas S. Schorsch
Nicholas S. Schorsch
Chief Executive Officer and Chairman of the Board of Directors
(Principal Executive Officer)
 
/s/ Nicholas Radesca
Nicholas Radesca
Chief Financial Officer, Treasurer and Secretary
(Principal Financial and Accounting Officer)