REVOLVING CREDIT AND SECURITY AGREEMENT

Exhibit 10.12

REVOLVING CREDIT AND SECURITY AGREEMENT

among

HIGHLAND DISTRESSED OPPORTUNITIES, INC.,
as Borrower

LIBERTY STREET FUNDING LLC,
as Conduit Lender

THE BANK OF NOVA SCOTIA,
ACTING THROUGH ITS NEW YORK AGENCY,
as Secondary Lender

and

THE BANK OF NOVA SCOTIA,
ACTING THROUGH ITS NEW YORK AGENCY,
as Agent

Dated as of June 27, 2008

TABLE OF CONTENTS

SCHEDULES

EXHIBITS

REVOLVING CREDIT AND SECURITY AGREEMENT

          REVOLVING CREDIT AND SECURITY AGREEMENT, dated as of June 27, 2008, among LIBERTY STREET FUNDING LLC, as the Conduit Lender, THE BANK OF NOVA SCOTIA, ACTING THROUGH ITS NEW YORK AGENCY and the other Secondary Lenders (as hereinafter defined) from time to time parties hereto, THE BANK OF NOVA SCOTIA, ACTING THROUGH ITS NEW YORK AGENCY, as agent for the Secured Parties (as hereinafter defined) (in such capacity, together with its successors and assigns, the “ Agent ”), and HIGHLAND DISTRESSED OPPORTUNITIES, INC., a Delaware corporation (together with its permitted successors and assigns, the “ Borrower ”).

WITNESSETH :

          WHEREAS, the Borrower desires that the Conduit Lender (as hereinafter defined) and the Secondary Lenders from time to time make advances to the Borrower on the terms and subject to the conditions set forth in this Agreement; and

          WHEREAS, the Conduit Lender and the Secondary Lenders are willing to make such advances to the Borrower for such purposes on the terms and subject to the conditions set forth in this Agreement;

          NOW, THEREFORE, in consideration of the premises and of the mutual covenants herein contained, the parties hereto agree as follows:

ARTICLE I
DEFINITIONS AND RULES OF CONSTRUCTION

          SECTION 1.01. Definitions .

          As used in this Agreement, the following terms shall have the meanings indicated:

          “ Advance ” means each borrowing by the Borrower pursuant to Article II, provided that if the Conduit Lender assigns a portion of any Advance made by it pursuant to an Asset Purchase Agreement or otherwise or any Secondary Lender assigns a portion of any outstanding Advance made by it pursuant to an Assignment and Acceptance, the portion of such Advance retained by such Conduit Lender or Secondary Lender, as the case may be, and the portion of such Advance acquired by such assignee shall each be deemed to constitute separate Advances which were made on the same Borrowing Date for purposes of this Agreement.

          “ Advance Note ” means each promissory note, if any, issued by the Borrower to the Conduit Lender or a Secondary Lender in accordance with the provisions of Section 2.03, substantially in the form of Exhibit A hereto, as the same may from time to time be amended, supplemented, waived or modified.

          “ Advantage Data ” means the secondary market bond pricing service maintained by Advantage Data Inc.

          “ Adverse Claim ” means any Lien or other right, claim, encumbrance or any other type of preferential arrangement in, of or on any Person’s assets or properties in favor of any other Person, other than in the case of the Borrower, Permitted Liens.

          “ Adviser ” means Highland Capital or any replacement investment adviser appointed for the Borrower in accordance with this Agreement.

          “ Advisory Agreement ” means the Investment Advisory and Management Agreement, dated as of February 21, 2007, between Highland Capital and the Borrower, as the same may be amended, supplemented, waived or modified as permitted under this Agreement.

          “ Affected Person ” means each Lender, each Secondary Lender, any other entity which enters into a commitment to make or purchase any Advance or any interest therein or to provide any liquidity or credit enhancement to the Conduit Lender, and any of their respective Affiliates, any corporation controlling any Lender or any Secondary Lender and any permitted assignee or participant of any Lender or any Secondary Lender.

          “ Affiliate ” means, in respect of a referenced Person, (a) another Person controlling, controlled by or under common control with such referenced Person (which in the case of the Conduit Lender and the Agent shall also include any entity which is a special purpose entity that issues promissory notes and has a relationship to the Agent comparable to that of the Conduit Lender) or (b) any officer (exclusive of a “ministerial officer” with no authority to bind a Person), director of or partner in the referenced Person. The terms “control,” “controlling,” “controlled” and the like mean the direct or indirect possession of the power to direct or cause the direction of the management or policies of a Person or the disposition of its assets or properties, whether through ownership, by contract, arrangement or understanding, or otherwise.

          “ Agent ” shall have the meaning assigned to such term in the introduction to this Agreement.

          “ Agent’s Account ” means the special account (account number 2308363CORBK77, ABA No. 02-002-532, Reference: Highland Distressed Opportunities, Inc. Revolving Credit Facility, Attention: Loan Operations) of the Agent maintained at the office of BNS at its Principal Office or to such other account as the Agent shall designate in writing to the Borrower.

          “ Aggregate Custodian’s Advance Amount ” means the sum of (i) the aggregate unpaid Dollar amount of all outstanding Custodian’s Overdraft Advances of cash, (ii) the aggregate Borrowing Base Asset Value of all Custodian’s Overdraft Advances of securities to the extent not reimbursed by the Borrower, in the case of clauses (i) and (ii) above, to the extent not incurred to pay any fee or expense owing to the Custodian (as securities intermediary, collateral agent, Custodian or otherwise), and (iii) the accrued and unpaid interest, if any, on the amounts set forth in clauses (i) and (ii) above.

          “ Agreement ” means this Revolving Credit and Security Agreement, as the same may from time to time be amended, supplemented, waived or modified.

          “ Alternate Base Rate ” means in respect of any Advance for any Settlement Period, a fluctuating interest rate per annum as shall be in effect from time to time, which rate shall be at all times equal to the sum of (i) the Applicable Margin plus (ii) the highest of (a) the Base Rate for such Advance and (b) one-half of one percent (0.5%) per annum above the Federal Funds Rate.

          “ Applicable Account ” means (i) with respect to amounts owing and payable to the Conduit Lender under the Program Documents, the special account (account number 2158-13, ABA No. 026-002532, Reference: Highland Distressed Opportunities, Inc.) of the Conduit Lender maintained at BNS or to such other account as the Agent shall designate in writing to the Borrower, and (ii) with respect to all other amounts owing and payable to any other Secured Party, any Affected Person or any Indemnified Party under the Program Documents, the Agent’s Account.

          “ Applicable Law ” means any Law of any Authority, including, without limitation, all Federal and state banking or securities laws, to which the Person in question is subject or by which it or any of its property is bound.

          “ Applicable Margin ” means, with respect to the Eurodollar Rate, 1.50% per annum and with respect to the Alternate Base Rate, 1.00% per annum.

          “ Asset Coverage Test ” means, as of any date of determination, the Borrower’s “senior securities representing indebtedness” (as defined in Sections 18(g) and 61(a)(4) of the Investment Company Act) have “asset coverage” (as defined in Section 18(h) of the Investment Company Act) of at least 300%, computed on such date of determination regardless of whether or not dividends or distributions are being made on such date, or whether Debt is being incurred on such date, as if each outstanding Advance constituted a “senior security” without regard to whether such Advance is a loan for “temporary purposes” or otherwise excludable from the definition of “senior securities” under Section 18(g) of the Investment Company Act.

          “ Asset Purchase Agreement ” means the Asset Purchase Agreement or similar agreement entered into by a Secondary Lender (other than BNS) concurrently with an Assignment and Acceptance.

          “ Assets ” means a collective reference to all items which would be classified as an “asset” on the balance sheet of the Borrower in accordance with GAAP.

          “ Assignee Rate ” means, in respect of any Advance made by a Secondary Lender, acquired by a Lender (other than the Conduit Lender) or funded by the Conduit Lender through participations, an interest rate per annum equal to the sum of the Applicable Margin plus the Eurodollar Rate for the applicable Settlement Period; provided , however , that in case of:

          (i) any Advance with respect to which, on or prior to the first day of the related Settlement Period, a Lender (other than the Conduit Lender) or Secondary Lender shall have notified the Agent that the introduction of or any change in or in the interpretation of any law or regulation makes it unlawful, or any central bank or other governmental authority asserts that it is unlawful, for such Lender or Secondary Lender to fund such Advance at the Assignee Rate set forth above, the “Assignee Rate”

applicable to such Advance shall be an interest rate per annum equal to the Alternate Base Rate until the date two Business Days after such Lender or such Secondary Lender shall have subsequently notified the Agent that such circumstances no longer exist;

          (ii) any Advance previously funded by the Conduit Lender through the issuance of promissory notes and with respect to which the Agent receives notice that such Advance has ceased to be so funded by the Conduit Lender, for a period of two Business Days following receipt of such notice the “Assignee Rate” applicable to such Advance shall be an interest rate per annum equal to the Alternate Base Rate; and

          (iii) any Advance that is less than $500,000, the “Assignee Rate” applicable to such Advance shall be an interest rate per annum equal to the Alternate Base Rate.

          “ Assignment and Acceptance ” means the Assignment and Acceptance, in substantially the form of Exhibit C hereto, entered into by a Secondary Lender, an Eligible Assignee, the Agent and, if required by the terms of Section 9.06(b) , the Borrower, pursuant to which such Eligible Assignee became a party to this Agreement.

          “ Authority ” means any governmental or quasi-governmental authority (including the National Association of Securities Dealers, the stock exchanges, the SEC and any accounting board or authority (whether or not a part of government) which is responsible for the establishment or interpretation of national or international accounting principles, in each case whether foreign or domestic), whether executive, legislative, judicial, administrative or other, or any combination thereof, including, without limitation, any Federal, state, territorial, county, municipal or other government or governmental or quasi-governmental agency, arbitrator, board, body, branch, bureau, commission, corporation, court, department, instrumentality, master, mediator, panel, referee, system or other political unit or subdivision or other entity of any of the foregoing, whether domestic or foreign.

          “ Base Rate ” means, for any day, the rate of interest in effect for such day as publicly announced from time to time by BNS at its Principal Office as its “reference rate.” Such “reference rate” is set by BNS based upon various factors, including BNS’s costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above or below such announced rate.

          “ Benefit Arrangement ” means an employee benefit plan within the meaning of Section 3(3) of ERISA which is subject to the provisions of Title I of ERISA and is not a Plan or a Multiemployer Plan.

          “ BNS ” means The Bank of Nova Scotia, acting through its New York Agency, and its successors.

          “ Bond Asset ” means any Asset that is a direct interest in a corporate bond obligation.

          “ Borrower ” shall have the meaning assigned to such term in the introduction to this Agreement.

          “ Borrower Obligations ” means all indebtedness, whether absolute, fixed or contingent, at any time or from time to time owing by the Borrower to any Secured Party or any Affected Person under or in connection with this Agreement or any other Program Document, including without limitation, all amounts payable by the Borrower in respect of the Advances, with interest thereon, and the amounts payable under Sections 2.05, 2.06, 2.07, 2.08, 2.09, 2.11, 2.12, 2.13, 7.04(b), 9.03 and 9.04 of this Agreement.

          “ Borrower’s Account ” means the account designated Account No. 340120848373 and ABA No. 031000053 maintained with PFPC or such other account as the Borrower shall designate in writing to the Agent.

          “ Borrowing Base ” means on the date any determination thereof is made, an amount equal to (i) the aggregate Borrowing Base Adjusted Asset Value of all Borrowing Base Eligible Assets as of such date of determination in which the Agent has a valid and perfected first priority security interest free and clear of Adverse Claims, minus (ii) the Borrowing Base Excess Amount as of such date of determination.

          “ Borrowing Base Adjusted Asset Value ” means in respect of any Borrowing Base Eligible Asset, as of any date of determination, an amount equal to the product of (i) the Borrowing Base Asset Value of such Borrowing Base Eligible Asset as of such date, and (ii) the applicable Borrowing Base Advance Rate for such Borrowing Base Eligible Asset.

          “ Borrowing Base Advance Rate ” means (a) in respect of Cash, 100%, (b) in respect of Eligible Government Securities, Eligible Money Market Investments and Eligible Repurchase Agreements, (i) if such Asset has a next-day maturity, 100% and (ii) otherwise, (A) if such Asset is rated by S&P, 90% or (B) if such Asset is not rated by S&P, 89%, (c) in respect of Eligible Commercial Paper, 96.6%, (d) in respect of Class A Loan Assets, 82.7%, (e) in respect of Class B Loan Assets, 76.6%, (f) in respect of Class C Loan Assets, 60.3%,(g) in respect of Class D Loan Assets, 50.5%, (h) in respect of any Bond Asset, Second Lien Loan Asset or Senior Unsecured Loan Asset, the Borrowing Base Advance Rate determined according to Schedule I hereto, (i) in respect of Large Cap Equity Securities, 37.0%, (j) in respect of Mid-Cap Equity Securities, 30.2%, (k) in respect of Small Cap Equity Securities, 15.3% and (l) in respect of Eligible Convertible Securities, the rate set forth in the foregoing clauses (j)-(l) for the Eligible Equity Security into which such security is convertible; provided , that (i) in the case of any Foreign Currency Asset, the Borrowing Base Advance Rate with respect to such Asset shall be the product of (A)(1) the rate determined in accordance with the foregoing sentence minus (2) 5.0% multiplied by (B)(1) if such Foreign Currency Asset is subject to a currency hedge reasonably satisfactory to the Agent, 1.00, (2) if such Foreign Currency Asset is not subject to such a currency hedge but is denominated or payable in a currency specified on Schedule VIII hereto, the foreign currency Borrowing Base Advance Rate specified with respect to such currency on Schedule VIII hereto and (3) otherwise, zero and (ii) in the case of any Emerging Market Equity Security or any Convertible Security convertible into an Emerging Market Equity Security, the Borrowing Base Advance Rate with respect thereto shall be 15%.

          “ Borrowing Base Asset Value ” means, as of any day of determination (a) in respect of Cash, the amount of such Cash, and (b) in respect of any other Asset, the Value of such Asset computed in the manner as such Value is required to be computed by the Borrower in

accordance with valuation procedures adopted by Borrower’s Board of Directors, as from time to time in effect, and in accordance with Applicable Law, including without limitation, the rules, regulations and interpretations of the SEC under the Investment Company Act; provided , that (i) in respect of any Asset that constitutes an Equity Security in respect of which a Permitted Call Option has been sold by the Borrower, the Borrowing Base Asset Value of such Asset shall be the lesser of (A) the Value of such Asset as computed in accordance with clause (b) of this definition, and (B) the amount that the holder of such Permitted Call Option is required to pay to exercise such Permitted Call Option and purchase such Equity Security, (ii) the Borrowing Base Asset Value of any Asset shall be net of the Borrower’s liabilities relating thereto, including without limitation all of the Borrower’s obligations to pay any unpaid portion of the purchase price thereof, (iii) the Borrowing Base Asset Value of any Eligible Repurchase Agreement shall be determined by the cost plus accrued interest and (iv) when calculating the “Borrowing Base Asset Value” of any Asset the Borrower shall calculate such value in good faith using one of the following procedures: (A) a quotation received from a Pricing Service, (B) the average of three quotations received from independent dealers making a market in such security (or, if only two such quotes are available, the lower of such quotes) (at least one of which quotations must be in writing) or (C) the last closing price thereof established on a public trading market; provided, further, that for any Asset for which independent reliable market quotations (which may consist of only an independent dealer quotation) are not available (or which is not otherwise valued for the Borrower by a Pricing Service), the Borrowing Base Asset Value of such Asset shall be deemed zero for purposes of this definition.

          “ Borrowing Base Eligible Asset ” means Cash, any Eligible Money Market Investment, any Eligible Loan Asset, any Eligible Commercial Paper Note, any Eligible Repurchase Agreement, any Eligible Bond Asset, any Eligible Government Security, any Eligible Convertible Security and any Eligible Equity Security (including, without limitation, any such Asset constituting a Foreign Asset) which the Borrower is permitted to purchase in accordance with the Investment Policies and Restrictions which are free and clear of all Adverse Claims; provided , that such Asset (a) does not constitute (i) a Derivatives Transaction, an Illiquid Asset or a Foreign Security System Asset or (ii) an Asset which is the subject of a reverse repurchase agreement, dollar roll, short sale, call option, securities lending transaction or other Derivatives Transaction (other than (A) Permitted Call Options or (B) Derivatives Transactions entered into solely to protect against interest rate or currency risk which have not been entered into for speculative purposes), including, without limitation, any cash or other Asset maintained in a segregated account with the Custodian relating to any outstanding reverse repurchase agreement, put option or other Derivatives Transaction entered into by the Borrower or any cash or Asset subject to a Lien described in clause (viii) of the definition of Permitted Lien and (b) except with respect to Eligible Loan Assets and Cash, has an industry CUSIP, SEDOL or ISIN number that has been provided to the Custodian.

          “ Borrowing Base Excess Amount ” means as of any date any determination thereof is made, an amount equal to the sum (without duplication) of:

     (i) the amount by which the aggregate Borrowing Base Adjusted Asset Value of all Borrowing Base Eligible Assets (other than Cash and Eligible Government Securities) issued or Guaranteed or owing from by any Person (together with all Affiliates of such Person), exceeds five

percent (5%) of the aggregate Borrowing Base Adjusted Asset Value of all Borrowing Base Eligible Assets;

     (ii) the amount by which the aggregate Borrowing Base Adjusted Asset Value of all Borrowing Base Eligible Assets issued or Guaranteed by or owing from one or more Persons in a single Industry Class, exceeds twenty percent (20%) of the aggregate Borrowing Base Adjusted Asset Value of all Borrowing Base Eligible Assets;

     (iii) [ Intentionally Omitted ] ;

     (iv) the amount by which the aggregate Borrowing Base Adjusted Asset Value of all Borrowing Base Eligible Assets which constitute Foreign Assets exceeds twenty percent (20%) of the aggregate Borrowing Base Adjusted Asset Value of all Borrowing Base Eligible Assets;

     (v) the amount by which the aggregate Borrowing Base Adjusted Asset Value of all Borrowing Base Eligible Assets which constitute Foreign Assets relating to Obligors in any single Developed Market (other than the United States of America) exceeds twenty percent (20%) of the aggregate Borrowing Base Adjusted Asset Value of all Borrowing Base Eligible Assets;

     (vi) the amount by which the aggregate Borrowing Base Adjusted Asset Value of all Borrowing Base Eligible Assets which constitute Emerging Market Assets exceeds ten percent (10%) of the aggregate Borrowing Base Adjusted Asset Value of all Borrowing Base Eligible Assets;

     (vii) the amount by which the Borrowing Base Adjusted Asset Value of all Borrowing Base Eligible Assets which constitutes Distressed Loan Assets or Distressed Bond Assets, in the aggregate, exceeds thirty-five percent (35%) of the aggregate Borrowing Base Adjusted Asset Value of all Borrowing Base Eligible Assets; and

     (viii) the amount by which the aggregate Borrowing Base Adjusted Asset Value of all Borrowing Base Eligible Assets which constitutes participations in Loan Assets from individual Selling Institutions exceeds ten percent (10%) of the aggregate Borrowing Base Adjusted Asset Value of all Borrowing Base Eligible Assets.

          “ Borrowing Base Test ” means as of any date of determination that the Borrowing Base shall be equal to or greater than Credits Outstanding.

          “ Borrowing Date ” shall have the meaning assigned to such term in Section 2.02.

          “ Business Day ” means any day on which (i) banks are not authorized or required to close in New York, New York or Philadelphia, Pennsylvania or the New York Stock

Exchange is not authorized or required to close, and (ii) if this definition of “Business Day” is utilized in connection with a Eurodollar Rate Advance, dealings in dollar deposits are carried out in the London interbank market.

          “ Cash ” means United States Dollars immediately available on the day in question and credited to the Collateral Account.

          “ Class A Loan Asset ” means as of any date of determination, a Borrowing Base Eligible Asset which (i) is a Senior Secured Loan Asset, (ii) is not a Distressed Loan Asset, and (iii) has a Borrowing Base Asset Value which is greater than ninety percent (90%) of its par value as of such date of determination.

          “ Class B Loan Asset ” means as of any date of determination, a Borrowing Base Eligible Asset which (i) is a Senior Secured Loan Asset, (ii) is not a Distressed Loan Asset, and (iii) has a Borrowing Base Asset Value which is equal to or less than ninety percent (90%) of its par value as of such date of determination.

          “ Class C Loan Asset ” means as of any date of determination, a Borrowing Base Eligible Asset which (i) is a Senior Secured Loan Asset, (ii) is a Distressed Loan Asset, and (iii) has a Borrowing Base Asset Value which is greater than eighty-five percent (85%) of its par value as of such date of determination.

          “ Class D Loan Asset ” means as of any date of determination, a Borrowing Base Eligible Asset which (i) is a Senior Secured Loan Asset, (ii) is a Distressed Loan Asset, and (iii) has a Borrowing Base Asset Value which is equal to or less than eighty-five percent (85%) of its par value as of such date of determination.

          “ Closing Date ” means the first date on which the conditions precedent specified in Section 3.01 shall have been fully satisfied.

          “ Code ” means the Internal Revenue Code of 1986, as amended from time to time, or any successor statute.

          “ Collateral Account ” shall have the meaning assigned to such term in the Control Agreement.

          “ Conduit Lender ” means Liberty Street Funding LLC, together with its permitted successors and assigns that constitute special purpose entities that issue promissory notes or other debt securities.

          “ Control Agreement ” means the Control Agreement dated as of the date hereof among the Borrower, the Agent and PFPC, as the same may from time to time be amended, supplemented, waived or modified.

          “ Controlling Jurisdiction ” means, with respect to any Asset, (a) the jurisdiction under the laws of which the Borrower is organized, and (b) any other jurisdiction recourse to the courts of which may be necessary for Agent on behalf of the Secured Parties to enforce their

rights as creditors with a first priority perfected security interest the assets which constitute Pledged Collateral.

          “ Convertible Security ” means a security that is convertible or exchangeable into an Equity Security.

          “ CP Rate ” for each day during a Settlement Period for any Advance means to the extent the Conduit Lender funds such Advance on such day by issuing promissory notes, the per annum rate equivalent to the weighted average of the per annum rates paid or payable by the Conduit Lender from time to time as interest on or otherwise (by means of interest rate hedges or otherwise) in respect of those promissory notes issued by the Conduit Lender that are allocated, in whole or in part, by the Agent (on behalf of the Conduit Lender) to fund the making or maintenance of such Advance on such day during such Settlement Period as determined by the Agent (on behalf of the Conduit Lender) and reported to the Borrower, which rates shall reflect and give effect to the commissions of placement agents and dealers in respect of such promissory notes, to the extent such commissions are allocated, in whole or in part, to such promissory notes by the Agent on behalf of the Conduit Lender; provided , however , that if any component of such rate is a discount rate, in calculating the “CP Rate” for such day the Agent shall for such component use the rate resulting from converting such discount rate to an interest bearing equivalent rate per annum.

          “ Credits Outstanding ” means at any time a determination thereof is made, an amount equal to the sum of (i) the outstanding principal amount of all Advances, plus (ii) any unpaid and past due Yield accrued on the outstanding advances, plus (iii) the Yield that would accrue on the aggregate outstanding principal amount of the Advances through the sixty (60) day period following such date of determination, computed by reference to the Assignee Rate based upon the applicable Eurodollar Rates plus the Applicable Margin for a thirty (30) day period in effect as of the time of determination, plus (iv) the Aggregate Custodian’s Advance Amount plus (v) $150,000 plus (vi) an amount equal to the obligations of the Borrower described in clauses (ii) , (iii) , (iv) , (v) , (vi) and (vii) of the definition of “Permitted Debt” (including, without limitation, amounts owing to the Adviser under the Advisory Agreement and Permitted Expenses) reasonably expected to be incurred by the Borrower during the thirty (30) day period following such date of determination.

          “ Custodial Agreement ” means the Custodian Services Agreement, dated as of January 18, 2007, between the Borrower and PFPC, as the same may from time to time be amended, restated, supplemented, waived or modified as permitted under the Program Documents.

          “ Custodian ” means PFPC, as custodian under the Custodial Agreement and as securities intermediary under the Control Agreement, and its permitted successors and assigns in such capacities.

          “ Custodian’s Overdraft Advances ” means any advance of cash, assets or securities by the Custodian pursuant to or in connection with the Custodial Agreement.

          “ Debt ” means with respect to any Person, at any date, without duplication, (i) all “senior securities representing indebtedness” (as defined in Sections 18(g) and 61(a)(4) of the Investment Company Act), (ii) all obligations of such Person for borrowed money, including without limitation, all obligations of such Person which are evidenced by letters of credit or letter of credit reimbursement arrangements, (iii) all obligations of such Person evidenced by bonds, debentures, notes, acceptances or other similar instruments, (iv) all obligations of such Person to pay the deferred purchase price of property or services, (v) all obligations of such Person as lessee which are capitalized in accordance with GAAP, (vi) all Debt of others secured by a Lien on any asset of such Person, whether or not such Debt is assumed by such Person, (vii) payment obligations, fixed or contingent, under investment, financial derivative or similar contracts (other than covered short sales), (viii) all Debt of others Guaranteed by such Person, and (ix) to the extent not otherwise included, all items which in accordance with GAAP would be included in determining total liabilities as shown on the liabilities side of such Person’s balance sheet.

          “ Default ” means any event which, with the passage of time, the giving of notice, or both, would constitute an Event of Default.

          “ Derivatives Transaction ” means any financial futures contract, option, forward contract, warrant, swap, swaption, collar, floor, cap, synthetic security and any other agreement, instrument and derivative and other transactions of a similar nature (whether currency linked, index linked, insurance risk linked, credit linked or otherwise) or any other financial instrument, traded on or off an exchange, the price of which is directly dependent upon the value of one or more underlying securities, equity indices, debt instruments (including Loan Assets), commodities, other derivative instruments, or any agreed upon pricing index or arrangement; provided , that a Structured Finance Asset shall not constitute a Derivatives Transaction.

          “ Developed Market ” means any country which is a member of the Organization for Economic Cooperation and Development and which has a sovereign credit rating for “foreign currency” of at least “AA-” and “Aa3” from S&P and Moody’s, respectively.

          “ Developed Market Asset ” means any Foreign Asset issued or Guaranteed by any Person organized under the laws of a Developed Market, and, in the case of any Loan Asset or Bond Asset, the Obligor of which is organized under the laws of a Developed Market.

          “ DIP Loan Asset ” means a Loan Asset with respect to which (i) the Obligor is a debtor in possession under the Bankruptcy Code and (ii) the related loan was incurred by such Obligor and secured by assets of such Obligor pursuant to Section 364(d) of the Bankruptcy Code.

          “ Distressed Bond Asset ” means, as of any date of determination, a Bond Asset (a) the Obligor of which is the subject of a bankruptcy, insolvency, liquidation or other similar proceeding, (b) which is in default beyond the applicable grace period, if any, as to payment of principal or interest, or (c) which is rated less than “Ca2” by Moody’s or less than “CC” by S&P or which, if unrated, is in the reasonable judgment of the Adviser, of equivalent credit quality; provided, that any such Bond Asset that (i) has a Borrowing Base Asset Value which is greater than eighty percent (80%) of its par value as of such date of determination and (ii) is not in default beyond any applicable grace period as to payment of interest shall not constitute a

Defaulted Bond Asset and (A) if such Bond Asset is secured, such Bond Asset shall constitute a Class B Loan Asset for all purposes hereunder and (B) is such Bond Asset is unsecured, such Bond Asset shall constitute a Bond Asset for all purposes hereunder having ratings from S&P and Moody’s that correspond to ratings provided on bonds trading at a price relative to par similar to such Bond Asset.

          “ Distressed Loan Asset ” means, as of any date of determination, a Loan Asset (a) the Obligor of which is the subject of a bankruptcy, insolvency, liquidation or other similar proceedings, (b) which is in default beyond the applicable grace period, if any, as to payment of principal or interest, (c) which is otherwise classified by the Adviser or the Borrower as “distressed” or “non-performing,” (d) in respect of which the related Obligor is rated less than “Ca2” by Moody’s or less than “CC” by S&P or which, if unrated, is in the reasonable judgment of the Adviser of equivalent credit quality or (e) in respect of which there is a default or a breach of a material provision under the related Loan Documents or a “default” or “event of default” has occurred and is continuing under the related Loan Documents; provided, that any such Loan Asset that (i) has a Borrowing Base Asset Value which is greater than eighty percent (80%) of its par value as of such date of determination and (ii) is not in default beyond any applicable grace period as to payment of interest shall not constitute a Distressed Loan Asset and shall constitute a Class B Loan Asset for all purposes hereunder.

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

          “ Eligible Assignee ” means any financial or other institution acceptable to the Agent.

          “ Eligible Bond Asset ” at any time means a Bond Asset (i) with respect to which the interest payable on the principal amount thereof by the related Obligor is payable in cash; (ii) which is part of an issuance of corporate debt securities with an original aggregate principal amount as of the Origination Date of such Bond Asset which is at least equal to $50,000,000; and (iii) which has a scheduled final maturity date no later than the thirtieth (30th) anniversary after the related Origination Date.

          “ EJV ” means the secondary market fixed income securities pricing service database maintained by Reuters.

          “ Eligible Commercial Paper Note ” means a promissory note (i) issued in the commercial paper market by an obligor having its principal office in the United States of America, having a maturity of not more than 270 days and which (a) is rated at least “A-1” by S&P and at least “P-1” by Moody’s, (ii) custodied with the Custodian or a sub-custodian pursuant to the Custodial Agreement, (iii) subject to the Custodian’s control in accordance with the Control Agreement, (iv) credited to the Collateral Account, and (v) in respect of which all actions have been taken under this Agreement and the Control Agreement to create and perfect in the Agent, for the benefit of the Secured Parties, a first priority perfected security interest.

          “ Eligible Convertible Security ” means a Convertible Security which is convertible or exchangeable into an Eligible Equity Security.

          “ Eligible Equity Security ” means an Equity Security (other than Preferred Stock) that (a) is currently listed on, and has been listed for at least the past fifteen (15) months on, an Eligible Stock Exchange, (b) has a per share trading price of at least $1.00 (c) was issued by an issuer having an equity market capitalization of at least $100,000,000 and (d) is not Restricted Stock.

          “ Eligible Government Securities ” means direct obligations of the United States of America or of its agencies or instrumentalities that are entitled to the full faith and credit of the United States of America and that, other than treasury bills, provide for the periodic payment of interest and the full payment of principal at maturity or call for redemption and are held in an account maintained by the Custodian and in respect of which all actions have been taken under this Agreement and the Control Agreement to create and perfect in the Agent, for the benefit of the Secured Parties, a first priority perfected security interest.

          “ Eligible Loan Asset ” at any time means a Loan Asset:

     (i) with respect to which the interest payable on the principal amount thereof by the related Obligor is payable in cash;

     (ii) in respect of which the Borrower’s interest is not a subparticipation;

     (iii) which has a scheduled final maturity date no later than the tenth (10 ^th ) anniversary after the related Origination Date;

     (iv) constitutes a Senior Secured Loan Asset, Second Lien Loan Asset or Senior Unsecured Loan Asset;

     (v) which is part of a syndicated credit facility with an aggregate outstanding principal amount of all loans under such facility on the Origination Date of such Loan Asset which is at least equal to $50,000,000;

     (vi) which relates to Loan Documents in which the Borrower’s interest (direct or participating) in the aggregate outstanding principal amount of all loans thereunder is no greater than thirty-three and one-third percent (33.33%);

     (vii) in respect of which the related Loan Documents are not subject to any confidentiality arrangement which would preclude the Agent from reviewing such Loan Documents;

     (viii) in which the Borrower’s interest in all collateral security therefor and principal and interest payments thereunder is no less than pro rata and pari passu with all other lenders under (or participants in) the related credit facility or, to the extent such Loan Assets constitutes an interest in a second-lien facility, is no less than pro rata and pari passu with all other lenders under (or participants in) such second-lien facility;

     (ix) in respect of which, if the Borrower’s interest therein is that of a participant, the credit rating of the related Selling Institution is no less than “A-” from S&P and “A3” from Moody’s;

     (x) the pledge of which under Article VII of this Agreement, would not conflict with or constitute a default under or be prohibited by any anti assignment or other provisions contained in the related Loan Documents, except for anti-assignment provisions rendered ineffective by applicable law; and

     (xi) in respect of which the credit rating of the related Transaction Agent or its controlling Affiliate is no less than “A-” from S&P or “A3” from Moody’s.

          “ Eligible Money Market Investment ” means an investment in a money market fund having a rating of “AAAm” or “AAAm-g” from S&P and a rating of “P-1” from Moody’s and held in an account maintained by the Custodian and in respect of which all actions have been taken under this Agreement and the Control Agreement to create and perfect in the Agent, for the benefit of the Secured Parties, a first priority perfected security interest.

          “ Eligible Repurchase Agreement ” means a repurchase agreement with a maturity of less than five (5) days with respect to which the Borrower has purchased the investment which is the subject of such repurchase agreement for cash, entered into by the Borrower with a third party whose short term debt instruments are rated “A-1” or “A-1+” by S&P and “P-1” by Moody’s and held in an account maintained by the Custodian and in respect of which all actions have been taken under this Agreement and the Control Agreement to create and perfect in the Agent, for the benefit of the Secured Parties, a first priority perfected security interest.

          “ Eligible Stock Exchange ” means any of the New York Stock Exchange, the American Stock Exchange, the Philadelphia Stock Exchange, the Boston Stock Exchange, the Washington Stock Exchange, the Midwest Stock Exchange, NASDAQ, and National Market Quotations.

          “ E-Mail Report ” shall have the meaning assigned to such term in Section 9.15.

          “ Equity Securities ” means common stock, Preferred Stock, warrants, trust certificates, real estate investment trusts, membership interests or partnership interests; provided , that any Asset that otherwise constitutes a Structured Finance Asset shall be deemed not to constitute an Equity Security.

          “ Emerging Market Asset ” means any Foreign Asset that is not a Developed Market Asset.

          “ Emerging Market Bond Asset ” means any Bond Asset that is an Emerging Market Asset.

          “ Emerging Market Equity Security ” means any Equity Security that is an Emerging Market Asset.

          “ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder.

          “ ERISA Affiliate ” means, with respect to any Person, any other Person under common control with such Person within the meaning of Section 414(b), (c), (m) or (o) of the Code.

          “ Eurocurrency Liabilities ” shall have the meaning assigned to such term in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time.

          “ Eurodollar Additional Yield ” means additional Yield on the outstanding principal of each Advance during the Settlement Period in respect of such Advance in respect of which Yield is computed by reference to the Eurodollar Rate, for such Settlement Period, at a rate per annum equal at all times during such Settlement Period to the remainder obtained by subtracting (i) the Eurodollar Rate for such Settlement Period from (ii) the rate obtained by dividing such Eurodollar Rate referred to in clause (i) above by that percentage equal to one-hundred percent (100%) minus the Eurodollar Rate Reserve Percentage of the applicable Lender or Secondary Lender, as the case may be, for such Settlement Period.

          “ Eurodollar Rate ” means, for any Eurodollar Rate Advance for any Settlement Period, an interest rate per annum equal to the rate per annum at which deposits in Dollars are offered by the principal office of BNS in London, England to prime banks in the London interbank market at 11:00 A.M. (London time) two (2) Business Days before the first day of such Settlement Period in an amount substantially equal to the outstanding principal amount of such Eurodollar Rate Advance on such first day and for a period substantially equal to such Settlement Period.

          “ Eurodollar Rate Advance ” means an Advance the Yield on which is computed with reference to the Eurodollar Rate.

          “ Eurodollar Rate Reserve Percentage ” for any Settlement Period for any Eurodollar Rate Advance means the reserve percentage applicable during such Settlement Period under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) (or if more than one such percentage shall be applicable, the daily average of such percentages for those days in such Settlement Period during which any such percentage shall be so applicable) for determining the maximum reserve requirement (including, without limitation, any emergency, supplemental or other marginal reserve requirement) for a Lender or any Secondary Lender with respect to liabilities or assets consisting of or including Eurocurrency Liabilities (or any other category of liabilities that includes deposits by reference to which the interest rate on Eurocurrency Liabilities is determined) having a term comparable to such Settlement Period.

          “ Event of Default ” means any of the events, acts or occurrences set forth in Section 6.01.

          “ Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC thereunder, all as from time to time in effect, or any successor law, rules or regulations, and any reference to any statutory or regulatory provision shall be deemed to be a reference to any successor statutory or regulatory provision.

          “ Excluded Taxes ” means with respect to any Person (a) income, franchise or similar Taxes imposed on (or measured by) its net income or net profits by the United States of America, or by the jurisdiction under the laws of which such recipient is organized, in which its principal office is located or in which it is otherwise doing business or, in the case of any Secured Party, in which its applicable lending office is located, (b) any branch profits Taxes imposed by the United States of America or any similar Tax imposed by any other jurisdiction in which the Borrower is located, (c) any withholding Tax that is imposed on amounts payable to such Person at the time such Person becomes a party to this Agreement (or designates a new lending office), except to the extent that such Person (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts from the Borrower pursuant to Section 9.03(a) and (d) Taxes, to the extent the imposition of such Taxes is attributable to such Person’s failure to comply with Section 9.03(e) or any Taxes imposed as a result of such Person’s gross negligence or willful misconduct.

          “ Federal Funds Rate ” means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by BNS from three Federal funds brokers of recognized standing selected by it.

          “ Fee Letter ” means that certain letter agreement dated the date hereof between the Borrower and the Agent, as the same may from time to time be amended, supplemented, waived or modified.

          “ Floating Rate ” means an interest rate calculated by reference to the prime rate, the London interbank offered rate, the certificate of deposit rate, the federal funds rate or any other per annum rate commonly referred to in the United States of America banking industry as a “floating rate”.

          “ Foreign Asset ” means any Asset issued or Guaranteed by any Person organized under the laws of any country other than the United States of America and, in the case of any Loan Asset or Bond Asset, the Obligor of which is organized under the laws of any country other than the United States of America.

          “ Foreign Currency Asset ” means any Asset which is denominated or payable in a currency other than Dollars.

          “ Foreign Security System Asset ” means an Asset held by a sub-custodian of the Custodian which is not located in the United States of America.

          “ GAAP ” means generally accepted accounting principles in the United States of America, in effect from time to time, consistently applied.

          “ Governmental Authorizations ” means all franchises, permits, licenses, approvals, consents and other authorizations of all Authorities.

          “ Governmental Filings ” means all filings, including franchise and similar tax filings, and the payment of all fees, assessments, interests and penalties associated with such filing with all Authorities.

          “ Guarantee ” by any Person means any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Debt or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or other obligation (whether arising by virtue of partnership arrangements, or by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or (ii) entered into for the purpose of assuring in any other manner the obligee of such Debt or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided that the term “Guarantee” shall not include endorsements for collection or deposit in the ordinary course of business. The term “Guarantee” used as a verb has a corresponding meaning.

          “ Highland Capital ” means Highland Capital Management, L.P., a Delaware limited partnership, and its successors.

          “ Illiquid Asset ” means as of any date, any Asset (i) for which there is no established public or private institutional trading market, such that such Asset may be reasonably expected to be sold in such market within fourteen (14) days in the ordinary course of business at a price approximating the Borrowing Base Asset Value of such Asset on such date subject only to fluctuations in the market price therefor, (ii) the fair market value of which is not readily ascertainable from recognized independent sources in the market for such Assets or (iii) otherwise classified as an “illiquid security” by the Borrower or the Adviser.

          “ Indemnified Taxes ” means all Taxes other than Excluded Taxes and Other Taxes.

          “ Industry Class ” means each industry class determined by the Adviser based upon the criteria set forth on Schedule IV hereto, as such Schedule IV may be amended and supplemented from time to time with the prior written consent of the Agent.

          “ Investment Company Act ” means the Investment Company Act of 1940, as amended, and the rules and regulations of the SEC thereunder, as modified or interpreted by orders of the SEC, or other interpretative releases or letters issued by the SEC or its staff, all as from time to time in effect, or any successor law, rules or regulations, and any reference to any statutory or regulatory provision shall be deemed to be a reference to any successor statutory or regulatory provision.

          “ Investment Policies and Restrictions ” means the provisions dealing with investment objectives, policies, distributions, investment restrictions, tender offers, repurchases, leverage and non-diversified status as set forth in the Borrower’s Prospectus in effect on the Closing Date as modified as permitted under this Agreement.

          “ Investor Report ” means the Investor Report of the Borrower substantially in the form of Schedule II hereto.

          “ Large Cap Equity Security ” means any Borrowing Base Eligible Asset that constitutes an Eligible Equity Security issued by an issuer having equity market capitalization of at least $10,000,000,000.

          “ Law ” means any action, code, consent decree, constitution, decree, directive, enactment, finding, guideline, law, injunction, interpretation, judgment, order, ordinance, policy statement, proclamation, promulgation, regulation, requirement, rule, rule of law, rule of public policy, settlement agreement, statute, or writ, of any Authority, or any particular section, part or provision thereof.

          “ Lender ” means the Conduit Lender, together with all Persons which acquire or are obligated to acquire any interest in any Advance from the Conduit Lender under the Asset Purchase Agreement or in the case of BNS, under any similar arrangement, or otherwise.

          “ Lender Termination Date ” means the date which is the earlier to occur of (i) the Secondary Lender Stated Expiration Date, and (ii) the date on which the Total Commitment is reduced to zero or terminated pursuant to the terms hereof, including, without limitation, pursuant to Section 2.10 or Section 6.01 .

          “ Lien ” means any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien or security interest (statutory or other), or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of any financing statement under the UCC or comparable law of any jurisdiction).

          “ Liquidation Fee ” means, in respect of any Advance for any Settlement Period which is funded by the Conduit Lender during which the principal on such Advance is repaid by the Borrower in whole or in part prior to the end of said Settlement Period, the amount, if any, by which (i) the additional Yield (calculated without taking into account any Liquidation Fee or any shortened duration of such Settlement Period) which would have accrued during such Settlement Period on the reduction of the outstanding principal amount of such Advance relating to such Settlement Period had such reductions remained as outstanding principal, exceeds (ii) that income, if any, received by the Conduit Lender’s investing the proceeds of such reductions of principal.

          “ Loan Asset ” means any Asset that is a direct or participation or subparticipation interest in or assignment or novation of a loan or other extension of credit (other than a Bond Asset).

          “ Loan Documents ” means with respect to any Loan Asset, each loan agreement, promissory note, collateral security agreement, participation certificate, guarantee and any other agreement or document evidencing, securing, governing or executed in connection with such Loan Asset, including without limitation, the agreements and instruments in respect of which the Borrower acquired such Loan Asset.

          “ Loan X Service ” means the secondary market loan pricing service maintained by Markit Group Limited.

          “ LSTA/LPC Mark-to-Market Pricing Service ” means the secondary market pricing service for bank loan assets sponsored by The Loan Syndications and Trading Association, Inc. in association with the Loan Pricing Corporation.

          “ Margin Stock ” shall have the meaning assigned to such term in Regulation U.

          “ Margin Stock Percentage ” means, as of any date of determination, the then current percentage of market value assigned by the Board of Governors of the Federal Reserve System under Section 221.7 of Regulation U to Margin Stock (which percentage, as of the Closing Date, is fifty percent (50%)).

          “ Market Maker ” means, with respect to any TRS Eligible Asset, a dealer that is (a) independent of, and unaffiliated with, the Borrower and the Adviser and (b)(i) in the case of an Asset with respect to which the related Obligor is domiciled in the United States of America, a leading dealer in the United States of America secondary loan or bond trading market or (ii) in the case of any other Asset, a leading dealer in the European secondary loan or bond trading market.

          “ Material Adverse Effect ” means (i) a material adverse effect on the ability of the Borrower to fully perform its material obligations under this Agreement or any other Program Document, (ii) a material adverse effect on any Secured Party’s right, title and interest in any material amount of Pledged Collateral or on the rights and remedies of any Secured Party under any Program Document, (iii) a material adverse effect on the validity or enforceability of this Agreement or any other Program Document or (iv) a material adverse effect on the business, financial position, operations, Assets or properties of the Borrower or the Adviser.

          “ Maturity Date ” means (i) with respect to any Advance funded by a Lender, the Lender Termination Date (or if such day is not a Business Day, the Business Day immediately preceding such date), and (ii) with respect to any Advance made by a Secondary Lender, the Secondary Lender Termination Date (or if such day is not a Business Day, the Business Day immediately preceding such date).

          “ Mid-Cap Equity Security ” means any Borrowing Base Eligible Asset that constitutes an Eligible Equity Security issued by an issuer having equity market capitalization that is (i) less than $10,000,000,000 and (ii) equal to or greater than $2,000,000,000.

          “ Moody’s ” means Moody’s Investors Service, Inc., together with its successors.

          “ Moody’s Rating ” means, at any time with respect to any Bond Asset, Second Lien Loan Asset or Senior Unsecured Loan Asset, the rating issued by Moody’s and then in effect with respect to such Asset or, if no such rating is available with respect to such Asset, the rating issued by Moody’s and then in effect with respect to the Obligor thereof; provided , that, with respect to any Emerging Market Bond Asset, the Moody’s Rating shall be the lower of (i) the rating determined in accordance with the foregoing sentence and (ii) the sovereign credit

rating for “foreign currency” assigned by Moody’s to the country in which the related Obligor is organized.

          “ Multiemployer Plan ” means an employee pension benefit plan within the meaning of Section 4001(a)(3) of ERISA.

          “ Municipal Authority ” means any state, territorial, county, municipal or other local government or any governmental agency, corporation, department, instrumentality or other political unit or subdivision or other entity of any of the foregoing.

          “ New York UCC” means the UCC as in effect from time to time in the State of New York.

          “ Notice of Borrowing ” shall have the meaning assigned to such term in Section 2.02.

          “ Notice of Exclusive Control ” shall have the meaning assigned to such term in the Control Agreement.

          “ Obligor ” means (i) in respect of any Loan Asset, the Person primarily obligated under the related Loan Documents to repay the loan or extension of credit which is the subject of such Loan Asset and (ii) in respect of any Bond Asset, the issuer thereof and any other Person primarily obligated to repay the obligations thereunder.

          “ Origination Date ” means (i) in respect of any Loan Asset the initial date on which the proceeds of the loan or other extension of credit which is the subject of such Loan Asset was advanced to the Obligor under the related Loan Documents and (ii) in respect of any Bond Asset, the initial date on which the proceeds of the issuance of such Asset was advanced to the Obligor thereof.

          “ Other Taxes ” has the meaning assigned to such term in Section 9.03(b) .

          “ Percentage ” of any Secondary Lender means, (i) with respect to BNS, the percentage set forth on the signature page to this Agreement, or such amount as reduced by any Assignment and Acceptance entered into with an Eligible Assignee, or (ii) with respect to a Secondary Lender that has entered into an Assignment and Acceptance, the percentage set forth therein as such Secondary Lender’s Percentage, or such amount as reduced by an Assignment and Acceptance entered into between such Secondary Lender and an Eligible Assignee.

          “ Perfection Representations, Warranties and Covenants ” means those perfection representations, warranties and covenants set forth in Exhibit E , attached hereto.

          “ Permitted Call Option ” means a call option in respect of common stock which grants to the buyer of such call option the right to purchase such common stock at a fixed price before a specified date.

          “ Permitted Debt ” means (i) Debt arising under this Agreement or the other Program Documents to the Secured Parties, (ii) accrued expenses and current trade accounts

payable incurred in the ordinary course of the Borrower’s business which are not overdue for a period of more than thirty (30) days or which are being contested in good faith by appropriate proceedings, (iii) Debt in favor of the Custodian relating to Custodian’s Overdraft Advances incurred in the ordinary course of the Borrower’s business, which are not overdue and which do not exceed the amount permitted by Section 5.02(m) , (iv) fee and expense obligations to the Custodian and other similar agents which are providing services in respect of the Borrower’s Assets in each case which have arisen in the ordinary course of the Borrower’s business which are not overdue for a period in excess of thirty (30) days, (v) Debt (other than Debt for borrowed money) arising in connection with transactions in the ordinary course of the Borrower’s business in connection with its purchasing of Assets, Derivatives Transactions, reverse repurchase agreements or dollar rolls to the extent such transactions are permitted under the Investment Company Act and the Borrower’s Investment Policies and Restrictions, (vi) obligations of the Borrower to fund future extensions of credit under the Loan Documents relating to its Loan Assets which do not exceed five percent (5%) of the aggregate Borrowing Base Asset Value of the Borrower’s Assets, which are not overdue, and (vii) Debt in respect of judgments or awards that have been in force for less than the applicable period for taking an appeal so long as such judgments or awards do not constitute an Event of Default and so long as execution is not levied thereunder or in respect of which the Borrower (A) shall at the time in good faith be diligently prosecuting an appeal or proceeding for review and in respect of which a stay of execution shall have been obtained pending such appeal or review, or (B) shall have obtained an unsecured performance bond in respect of such judgment or award.

          “ Permitted Expenses ” shall mean fees, compensation, costs and expenses owing to PFPC secured by a prior security interest ahead of the security interest of Agent in the Pledged Collateral to the extent permitted under Section 10 of the Control Agreement.

          “ Permitted Liens ” means in respect of any Asset of the Borrower, (i) Liens of any Secured Party created by or pursuant to this Agreement or the Control Agreement, (ii) Liens of the Custodian securing the Custodian’s Overdraft Advances to the extent such Custodian’s Overdraft Advances do not exceed the amount permitted by Section 5.02(m), (iii) Liens of the Custodian securing indemnification payments owing by the Borrower in favor of the Custodian in an amount not to exceed $100,000, (iv) Liens of the Custodian for Permitted Expenses which are not overdue for a period of thirty (30) days, (v) Liens of the Custodian which are by the terms of the Control Agreement expressly subordinated to the payment of the Borrower Obligations, (vi) Liens (other than non-possessory Liens which pursuant to Applicable Law are, or may be, entitled to take priority (in whole or in part) over prior, perfected liens and security interests) for taxes, assessments or other governmental charges or levies not at the time delinquent or being diligently contested in good faith by appropriate actions diligently conducted and for which adequate reserves in accordance with GAAP shall have been set aside on the Borrower’s books, (vii) Liens in respect of judgments or awards that have been in force for less than the applicable period for taking an appeal so long as such judgments or awards do not constitute an Event of Default and so long as the Borrower shall at the time in good faith be diligently prosecuting an appeal or proceeding for review and in respect of which a stay of execution shall have been obtained pending such appeal or review, (viii) Liens in respect of Debt permitted under clause (iv) of the definition of Permitted Debt and (ix) Liens on cash or Assets posted as collateral for short sales, trades of credit default swaps and other Derivatives Transactions in the ordinary course of business in accordance with the Investment Policies and Restrictions (including,

without limitation, cash or Assets (x) commingled in a pooled account with cash or Assets deposited therein as collateral for Derivatives Transactions by other Persons administered or managed by the Advisor and (y) subject to a Lien securing obligations of the Borrower and such other Persons with respect to Derivatives Transactions).

          “ Permitted Senior Securities ” means “senior securities” within the meaning of the Investment Company Act which constitute Advances under this Agreement, Derivatives Transactions, repurchase transactions, reverse repurchase transactions or commitments of the Borrower to fund future advances or other extensions of credit under any Loan Document, to the extent the issuance of any such senior security by the Borrower is not in contravention of the Investment Company Act or the Borrower’s Investment Policies and Restrictions.

          “ Person ” means an individual or a corporation (including a business trust), partnership, trust, incorporated or unincorporated association, joint stock company, limited liability company, government (or an agency or political subdivision thereof) or other entity of any kind.

          “ PFPC ” means PFPC Trust Company, a Delaware limited purpose trust company, and its successors.

          “ Plan ” means an employee pension benefit plan (other than a Multiemployer Plan) which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code.

          “ Pledged Collateral ” shall have the meaning assigned to such term in Section 7.01.

          “ Post-Default Rate ” means a rate per annum equal to the Alternate Base Rate as in effect from time to time plus two percent (2.00%).

          “ Preferred Stock ” means a security, including a trust preferred security, which represents an equity interest in an issuer that entitles the holder to receive, in preference to holders of other equity interests (other than other classes of preferred stock) such as common stock, dividends and a fixed share of the proceeds resulting from the liquidation of such issuer.

          “ Pricing Service ” means Advantage Data, EJV, Loan X Service and LSTA/LPC Mark-to-Market Pricing Service.

          “ Principal Office ” means the principal office of BNS presently located at New York, New York or at such other location as the Agent shall designate in writing to the Borrower.

          “ Private Authorizations ” means all franchises, permits, licenses, approvals, consents and other authorizations of all Persons (other than Authorities) including, without limitation, those with respect to trademarks, service marks, trade names, copyrights, computer software programs, technical and other know-how.

          “ Proceeds ” shall have, with reference to any asset or property, the meaning assigned to it under the UCC and, in any event, shall include, but not be limited to, any and all amounts from time to time paid or payable under or in connection with such asset or property.

          “ Program Documents ” means this Agreement, the Advance Notes, the Asset Purchase Agreement, the Control Agreement, the Custodial Agreement, the Advisory Agreement, the Fee Letter and the other agreements, documents and instruments entered into or delivered in connection herewith or therewith.

          “ Program Termination Date ” means the later to occur of (i) the Secondary Lender Termination Date, and (ii) the date that all Borrower Obligations have been finally paid in full; provided , however , that if any payment in respect of any Borrower Obligation made to any Secured Party must be rescinded or returned for any reason whatsoever (including the insolvency or bankruptcy of the Borrower) such Borrower Obligation shall be deemed to be reinstated as though such payment had not been made and the Program Termination Date shall be deemed to have not occurred.

          “ Prospectus ” means with respect to the Borrower the prospectus dated February 21, 2007 filed with the SEC as a part of the Borrower’s registration statement on Form N-2, as amended (or any successor SEC form), and all supplements, amendments and modifications thereto as of the Closing Date, and as further supplemented, amended or modified in accordance with Applicable Law, including, without limitation, the Securities Act and the Investment Company Act.

          “ Rating Agencies ” shall have the meaning assigned to such term in Section 9.09(a).

          “ Rating Agency Condition ” means, with respect to any amendment, modification, supplement, termination or waiver of this Agreement, that prior confirmation has been obtained from each Rating Agency that such action will not result in the reduction, withdrawal or suspension of such Rating Agency’s rating of the Advances.

          “ Rating Termination Event ” means that the Conduit Lender shall not have received a “credit estimate” from Moody’s with respect to this Agreement and the interests of the Conduit Lender hereunder, in form and substance acceptable to the Conduit Lender in its sole discretion, on or prior to August 22, 2008.

          “ Regulation U ” means Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time.

          “ Regulation X ” means Regulation X of the Board of Governors of the Federal Reserve System, as in effect from time to time.

          “ Requested Amount ” shall have the meaning assigned to such term in Section 2.02.

          “ Responsible Officer ” means in respect of any Person, the president, the executive vice president, the senior vice president, any vice president, the treasurer, general

counsel or any other duly authorized officer of such Person; provided that the Agent shall have received a manually signed certificate of the Secretary or Assistant Secretary of such Person as to the incumbency of, and bearing a manual specimen signature of, such duly authorized officer.

          “ Restricted Payments ” means (i) the declaration of any distribution or dividends (other than distributions payable solely in shares of beneficial interest in the Borrower) on, or the payment on account of, or the setting apart of assets for a sinking or other analogous fund for, or the purchase, redemption, retirement or other acquisition of any class of stock of the Borrower or of any warrants, options or other rights to acquire the same (or to make any payment to any Person, such as “phantom stock” payments), whether now or hereafter outstanding, either directly or indirectly, whether in cash, property or in obligations of the Borrower, and (ii) the payment of fees and expenses to the Adviser or the Administrator or any Affiliate of the Adviser or the Administrator, as applicable, as compensation for the provision of managerial, administrative services or otherwise.

          “ Restricted Stock ” means any Equity Security that (i) constitutes a “Restricted Security” (as defined in Rule 144(a)(e) under the Securities Act) or (ii) is traded on Pink Sheets or a similar quotation system for over-the-counter securities.

          “ Revolving Credit Facility ” means any credit facility in respect of which the Borrower has or may have any direct or indirect obligation to fund any additional loans or extensions of credit.

          “ RIC/BDC Requirement ” means each requirement (including, without limitation, Code requirements pertaining to asset diversification) the Borrower must satisfy to maintain its status as a “business development company,” within the meaning of the Investment Company Act and its status as a “regulated investment company” under the Code.

          “ S&P ” means Standard & Poor’s, a division of The McGraw Hill Companies, Inc., together with its successors.

          “ S&P Rating ” means, at any time with respect to any Bond Asset, Second Lien Loan Asset or Senior Unsecured Loan Asset, the rating issued by S&P and then in effect with respect to such Asset or, if no such rating is available with respect to such Asset, the rating issued by S&P and then in effect with respect to the Obligor thereof; provided , that, with respect to any Emerging Market Bond Asset, the S&P Rating shall be the lower of (i) the rating determined in accordance with the foregoing sentence and (ii) the sovereign credit rating for “foreign currency” assigned by S&P to the country in which the related Obligor is organized.

          “ SEC ” means the Securities and Exchange Commission or any other governmental authority of the United States of America at the time administrating the Securities Act, the Investment Company Act or the Exchange Act.

          “ Secondary Lender Commitment ” means (i) with respect to BNS, an amount equal to the Total Commitment, as such amount shall be adjusted by any Assignment and Acceptance entered into between BNS and an Eligible Assignee in accordance with and subject to Section 9.06(b) , or (ii) with respect to a Secondary Lender that has entered into an Assignment and Acceptance, the amount set forth therein as such Secondary Lender’s “Secondary Lender

Commitment” in each case as such amount may be reduced by an Assignment and Acceptance entered into between such Secondary Lender and an Eligible Assignee in accordance with and subject to Section 9.06(b) , and as may be further reduced (or terminated) pursuant to the next sentence. Any reduction (or termination) of the Total Commitment pursuant to the terms of this Agreement shall reduce ratably (or terminate) each Secondary Lender’s Secondary Lender Commitment. References to the unused portion of any Secondary Lender’s Secondary Lender Commitment shall mean, at any time, such Secondary Lender’s Secondary Lender Commitment then in effect, minus the outstanding principal amount of the Advances funded by such Secondary Lender.

          “ Secondary Lender Stated Expiration Date ” means December 1, 2008; provided that prior to such date (or the date so extended pursuant to this proviso), upon the Borrower’s written request to the Agent, which request shall be received by the Agent, not more than sixty (60) days nor less than thirty (30) days prior to the then current Secondary Lender Stated Expiration Date, one or more Secondary Lenders having in the aggregate 100% of the Total Commitment may, in their sole discretion, consent, which consent shall be given not less than twenty (20) days after the date the Agent receives such request to extend the Secondary Lender Stated Expiration Date (the date any such consent is given, the “ Extension Date ”), to the extension of the Secondary Lender Stated Expiration Date to the date occurring 364 days after such Extension Date; provided , however , that any failure of any Secondary Lender to respond to the Borrower’s request for such extension shall be deemed a denial of such request by such Secondary Lender.

          “ Secondary Lender Termination Date ” means the earlier of (i) the Secondary Lender Stated Expiration Date or (ii) the date the Total Commitment shall terminate pursuant to Section 2.10 or Section 6.01 .

          “ Secondary Lenders ” means BNS and each Eligible Assignee that becomes a party to this Agreement pursuant to Section 9.06(b).

          “ Second Lien Loan Asset ” means a Secured Loan Asset (other than a Senior Secured Loan Asset) that (a) is only subordinated in right of payment to a Senior Secured Loan Asset and (b) is secured by a valid second priority perfected security interest in or lien on specified collateral securing the applicable Obligor’s obligation under such Secured Loan Asset that in the opinion of the Adviser has value at least equal to the amount of such Secured Loan Asset, which specified collateral does not consist solely of common stock or shares issued by such Obligor or any Affiliates or intangible assets.

          “ Secured Loan Asset ” means a Loan Asset that is secured by a valid and perfected security interest in specified collateral.

          “ Senior Secured Loan Asset ” means a Secured Loan Asset that is not subordinated by its terms to indebtedness of the applicable Obligor for borrowed money, trade claims, capitalized leases, or other similar obligations, with a first priority security interest in collateral, with a valid and perfected first security interest in collateral that in the opinion of the Adviser has value at least equal to the amount of such Secured Loan Asset and is not a DIP Loan Asset.

          “ Senior Unsecured Loan Asset ” means a Loan Asset that is not (i) subordinated by its terms to indebtedness of the borrower for borrowed money or (ii) secured by a valid and perfected security interest in collateral.

          “ Secured Parties ” means the Agent, the Lenders, the Secondary Lenders and their respective successors and assigns.

          “ Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations of the SEC thereunder, all as from time to time in effect, or any successor law, rules or regulations, and any reference to any statutory or regulatory provisions shall be deemed to be a reference to any successor statutory or regulatory provision.

          “ Security Entitlement ” shall have the meaning assigned to such term in Section 8-102(a)(17) of the UCC.

          “ Selling Institution ” means in respect of any Loan Asset which constitutes a participation interest, the Person which has granted or sold to the Borrower a participation interest in the loan or other extension of credit which is the subject of such Loan Asset.

          “ Settlement Date ” means the date which is two (2) Business Days after the end of each Settlement Period; provided that (i) for purposes of the payment of Yield, with respect to any Settlement Period for which Yield is computed by reference to the Eurodollar Rate, the Settlement Date shall be the last day of the Settlement Period and (ii) for purposes of the payment of any fees, the Settlement Date shall be the date which is two (2) Business Days after the end of each calendar month.

          “ Settlement Period ” means in respect of any Advance:

          (a) in the case of any Advance in respect of which Yield is computed by reference to the CP Rate, the period beginning on the date such Advance was made and ending on the last day of the calendar month in which such Advance was made, and thereafter each successive period commencing on the first day of each calendar month during the term of this Agreement and ending on the last day of such calendar month during the term of this Agreement;

          (b) in the case of any Advance in respect of which Yield is computed by reference to the Eurodollar Rate, the period beginning on either (i) the date such Advance was made as, or converted to, a Eurodollar Rate Advance or (ii) as applicable, the date on which the previous Settlement Period with respect thereto determined in accordance with this paragraph expired, and ending on the numerically corresponding day in the following calendar month; provided , that (A) if any such Settlement Period would end on a day other than a Business Day, such Settlement Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Settlement Period shall end on the next preceding Business Day and (B) any such Settlement Period that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the following calendar month) shall end on the last Business Day of the following calendar month;

          (c) in the case of any Advance in respect of which Yield is computed by reference to the Alternate Base Rate, the period beginning on the date such Advance was made as, or converted to, an Advance accruing Yield at such rate and ending on the last day of the calendar month in which such Advance was made and, thereafter each successive period commencing on the first day of each calendar month during the term of this Agreement and ending on the last day of such calendar month during the term of this Agreement;

provided , however , that in the case of any Settlement Period for any Advance which commences before the Maturity Date for such Advance and would otherwise end on a date occurring after such Maturity Date, such Settlement Period shall end on such Maturity Date and the duration of each Settlement Period which commences on or after the Maturity Date for such Advance may be any period (including, without limitation, a period of one day) as shall be selected from time to time by the Agent; provided , further , that if pursuant to the terms hereof the interest rate applicable to any Advance shall change during the term of any Settlement Period, such Settlement Period shall end on the date of such change of rate.

          “ Small Cap Equity Security ” means any Borrowing Base Eligible Asset that constitutes an Eligible Equity Security issued by an issuer having equity market capitalization of less than $2,000,000,000.

          “ Specified Jurisdiction ” means United States of America, United Kingdom, Germany, France, Switzerland, Belgium, Sweden, Netherlands and Canada.

          “ Structured Finance Asset ” means any Asset that is a debt obligation or pass-through security issued by a special purpose trust or other entity structured to be bankruptcy remote and representing a direct or indirect participation in, or that is secured by, a diversified pool of assets, including, without limitation, commercial or residential real property, commercial loans, bonds, credit card receivables, leases or other financial assets.

          “ Taxes ” means any taxes, levies, imposts, duties, fees, assessments, deductions, withholdings or other charges of whatever nature, including income, receipts, excise, property, sales, use, transfer, license, payroll, withholding, social security, franchise, intangibles, stamp or recording taxes imposed by any taxing Authority, and all interest, penalties and similar liabilities relating thereto.

          “ Termination Event ” means the occurrence of any of the following:

          (a) the Borrower shall purchase any Asset not contemplated by the Prospectus or the Investment Policies and Restrictions in effect on the Closing Date and shall not have sold such Asset within ten (10) Business Days after the earlier of (i) the Borrower or the Adviser obtaining knowledge that such Asset does not comply with the Prospectus or the Investment Policies and Restrictions or (ii) receipt by the Borrower of notice from the Agent detailing such non-compliance;

          (b) the Borrower shall, without the prior written consent of the Agent, engage in any line of business not contemplated by the Prospectus or the Investment Policies and Restrictions in effect on the Closing Date; or

          (c) the Borrower shall, without the prior written consent of the Agent, permit any material change in the Investment Policies and Restrictions in effect on the Closing Date or the fundamental investment objectives, policies and restrictions (as such term is defined in the Investment Company Act) of the Borrower (it being agreed that any such change requiring the consent or approval of the shareholders of the Borrower shall be deemed material for purposes of this paragraph (c) ).

          “ Total Commitment ” means $100,000,000, as such amount may be reduced pursuant to Section 2.10.

          “ Transaction Agent ” means a commercial bank, insurance company, finance company or other financial institution that is acting as agent or trustee under the Loan Documents relating to any Loan Asset.

          “ TRS Adjusted Asset Value ” means, with respect to any TRS Eligible Asset as of any date of determination, an amount equal to the product of (i) the TRS Asset Value of such TRS Eligible Asset as of such date and (ii) the applicable TRS Advance Rate for such TRS Eligible Asset.

          “ TRS Advance Rate ” means (i) in the case of any TRS Class I Asset, 80%, (ii) in the case of any TRS Class II Asset, 70%, (iii) in the case of any TRS Class III Asset, 50%, (iv) in the case of any TRS Class IV Asset, 25%, (v) in the case of any TRS Class V Asset, 25% and (vi) in the case of any other TRS Eligible Asset, zero.

          “ TRS Approved Index ” means any of the following: AEX (Netherlands), ATX (Austria), ASX All Ordinaries (Australia), BEL20 (Belgium), CAC 40 (France), DAX (Germany), Dow Jones Euro Stoxx 50 (Europe), Dow Jones Industrial Average (US), FTSE 100 (UK), Hang Seng (Hong Kong), IBEX 35 (Spain), IPC (Mexico), MIB 30 (Italy), Nasdaq Composite (US), Nikkei 225 (Japan), OMX Helsinki (Finland), OMX Stockholm (Sweden), OBX (Norway), SMI (Switzerland) and S&P/TSX Composite Index.

          “ TRS Asset Value ” means, with respect to any TRS Eligible Asset, (a) with respect to any Bond Asset or Loan Asset, the product of (i) the par amount of such Asset multiplied by (ii)(A) if a TRS Price Quote for such TRS Eligible Asset is available from a Pricing Service, such TRS Price Quote or (B) if a TRS Price Quote for such TRS Eligible Asset is not available from a Pricing Service, (1) if a TRS Price Quote is available for such TRS Eligible Asset from one Market Maker, such TRS Price Quote, (2) if a TRS Price Quote is available for such TRS Eligible Asset from two Market Makers, the average of such TRS Price Quotes, (3) if a TRS Price Quote is available for such TRS Eligible Asset from three Market Makers, the TRS Price Quote remaining after disregarding the highest and lowest TRS Price Quotes and (4) if a TRS Price Quote is available for such TRS Eligible Asset from more than three Market Makers, the arithmetic mean of such TRS Price Quotes and (b) in the case of any Equity Security, the trading price of such Equity Security as quoted on the applicable TRS Approved Index.

          “ TRS Class I Asset ” means any TRS Eligible Asset (a) that is a Bond Asset or Loan Asset, (b) with respect to which the Obligor is organized under the laws of a Specified

Jurisdiction, (c) that (i) has a TRS Price Quote as of such date of not less than 75% provided by a Pricing Service that reflects bid pricing provided by at least two Market Makers or (ii) has at least two separate TRS Price Quotes provided by Market Makers each of which is not less than 75%, (d)(i) in the case of a Loan Asset, that is part of a syndicated credit facility with an aggregate outstanding principal amount of all loans under such facility on the Origination Date of such Loan Asset which is at least equal to $100,000,000 or (ii) in the case of a Bond Asset, that is part of an issuance of corporate debt securities with an original aggregate principal amount as of the Origination Date of such Bond Asset which is at least equal to $100,000,000 and (e) that is rated at least “B-” by S&P and at least “B3” by Moody’s (either though a public or private rating).

          “ TRS Class II Asset ” means any TRS Eligible Asset (a) that is a Bond Asset or Loan Asset, (b) that is not a TRS Class I Asset, (c) with respect to which the Obligor is organized under the laws of a Specified Jurisdiction, (d) that (i) has a TRS Price Quote as of such date of not less than 65% provided by a Pricing Service that reflects bid pricing provided by at least two Market Makers or (ii) has at least two separate TRS Price Quotes provided by Market Makers each of which is not less than 65%, (e)(i) in the case of a Loan Asset, that is part of a syndicated credit facility with an aggregate outstanding principal amount of all loans under such facility on the Origination Date of such Loan Asset which is at least equal to $100,000,000 or (ii) in the case of a Bond Asset, that is part of an issuance of corporate debt securities with an original aggregate principal amount as of the Origination Date of such Bond Asset which is at least equal to $100,000,000 and (f) that is rated at least “CCC” by S&P and at least “Caa2” by Moody’s (either though a public or private rating).

          “ TRS Class III Asset ” means any TRS Eligible Asset (a) that is a Bond Asset or Loan Asset, (b) that is not a TRS Class I Asset or TRS Class II Asset, (c) with respect to which the Obligor is organized under the laws of a Specified Jurisdiction, (d) that (i) has a TRS Price Quote as of such date of not less than 50% provided by a Pricing Service that reflects bid pricing provided by at least one Market Maker or (ii) has at least one TRS Price Quote provided by a Market Maker that is not less than 50%, (e)(i) in the case of a Loan Asset, that is part of a syndicated credit facility with an aggregate outstanding principal amount of all loans under such facility on the Origination Date of such Loan Asset which is at least equal to $75,000,000 or (ii) in the case of a Bond Asset, that is part of an issuance of corporate debt securities with an original aggregate principal amount as of the Origination Date of such Bond Asset which is at least equal to $75,000,000 and (f) that is rated at least “CCC-” by S&P and at least “Caa3” by Moody’s (either though a public or private rating).

          “ TRS Class IV Asset ” means any TRS Eligible Asset (a) that is a Bond Asset or Loan Asset, (b) with respect to which the Obligor is organized under the laws of Japan or Italy, (c) that (i) has a TRS Price Quote as of such date of not less than 75% provided by a Pricing Service that reflects bid pricing provided by at least two Market Makers or (ii) has at least two separate TRS Price Quotes provided by Market Makers each of which is not less than 75%, (d)(i) in the case of a Loan Asset, that is part of a syndicated credit facility with an aggregate outstanding principal amount of all loans under such facility on the Origination Date of such Loan Asset which is at least equal to $100,000,000 or (ii) in the case of a Bond Asset, that is part of an issuance of corporate debt securities with an original aggregate principal amount as of the

Origination Date of such Bond Asset which is at least equal to $100,000,000 and (e) that is rated at least “B-” by S&P and at least “B3” by Moody’s (either though a public or private rating).

          “ TRS Class V Asset ” means any TRS Eligible Asset that is (i) an Equity Security and (ii) quoted on at least one TRS Approved Index.

          “ TRS Eligible Asset ” means any Bond Asset, Loan Asset or Equity Security that has been approved in writing by the Agent, in its sole discretion, as a TRS Eligible Asset, which approval has not been withdrawn; provided , that each Asset set forth on Schedule IX hereto shall constitute a TRS Eligible Asset as of the Closing Date.

          “ TRS Portfolio Excess Amount ” means, as of any date any determination, an amount equal to the sum (without duplication) of:

     (i) the amount by which the aggregate TRS Adjusted Asset Value of all TRS Eligible Assets which constitute Bond Assets or Second Lien Loan Assets exceeds forty percent (40%) of the aggregate TRS Adjusted Asset Value of all TRS Eligible Assets; and

     (ii) the amount by which the aggregate TRS Adjusted Asset Value of all TRS Eligible Assets which constitute Bond Assets or Loan Assets with respect to which a TRS Price Quote is available from only one Market Maker exceeds twenty-five percent (25%) of the aggregate TRS Adjusted Asset Value of all TRS Eligible Assets.

          “ TRS Portfolio Test ” means, as of any date of determination, that the TRS Portfolio Value shall be equal to or greater than the outstanding principal amount of all Advances.

          “ TRS Portfolio Value ” means, as of any date of determination, an amount equal to (i) the aggregate TRS Adjusted Asset Value of all TRS Eligible Assets as of such date of determination in which the Agent has a valid and perfected first priority security interest free and clear of Adverse Claims minus (ii) the TRS Portfolio Excess Amount as of such date of determination plus (iii) the aggregate value of all Cash maintained by the Borrower as of such date of determination in which the Agent has a valid and perfected first priority security interest free and clear of Adverse Claims,

          “ TRS Price Quote ” means, with respect to any Bond Asset or Loan Asset as of any date of determination, a bid price therefor (expressed as a percentage of par value) (i) listed by a Pricing Service on such date or (ii) quoted to the Borrower on such date by a Market Maker selected by the Borrower in its reasonable discretion.

          “ UCC” means the Uniform Commercial Code, as from time to time in effect in the applicable jurisdictions.

          “ Value ” shall have the meaning assigned to such term in Section 2(a)(41) of the Investment Company Act.

          “ Weekly Portfolio Repor t” shall have the meaning assigned to such term in Section 5.01(e)(viii).

          “ Yield ” means for any Advance during any Settlement Period:

          (i) if such Advance will be funded or maintained by the Conduit Lender during such Settlement Period through the issuance of promissory notes, for each day during such Settlement Period,

          (ii) if such Advance will be funded or maintained during such Settlement Period by the Conduit Lender through the sale of a participation, or by a Secondary Lender or a Lender (other than the Conduit Lender), for each day during such Settlement Period,

          where:

provided , further , that Yield for any Advance shall not be considered paid by any distribution to the extent that at any time all or a portion of such distribution is rescinded or must otherwise be returned for any reason.

          SECTION 1.02. Rules of Construction .

          For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires (i) singular words shall connote the plural as well as the singular, and vice versa (except as indicated), as may be appropriate, (ii) the words “herein,” “hereof” and “hereunder” and other words of similar import used in this Agreement refer to this Agreement as a whole and not to any particular appendix, article, schedule, section, paragraph, clause, exhibit or other subdivision, (iii) the headings, subheadings and table of contents set forth in this Agreement are solely for convenience of reference and shall not constitute a part of this Agreement nor shall they affect the meaning, construction or effect of any provision hereof, (iv) references in this Agreement to “including” shall mean including without limiting the generality

of any description preceding such term, and for purposes hereof the rule of ejusdem generis shall not be applicable to limit a general statement, followed by or referable to an enumeration of specific matters, to matters similar to those specifically mentioned, and (v) each of the parties to this Agreement and its counsel have reviewed and revised, or requested revisions to, this Agreement, and the usual rule of construction that any ambiguities are to be resolved against the drafting party shall be inapplicable in the construction and interpretation of this Agreement.

          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” both mean “to but excluding”.

ARTICLE II
ADVANCES TO THE BORROWER

          SECTION 2.01. Advance Facility .

          On the terms and conditions hereinafter set forth, including without limitation, Sections 3.01 and 3.02, the Conduit Lender may, in its sole discretion, make Advances to the Borrower on any Borrowing Date from the date hereof to the Lender Termination Date. On the terms and conditions hereinafter set forth, including without limitation, Sections 3.01 and 3.02 and during the period from the date hereof to the Secondary Lender Termination Date, the Secondary Lenders shall make Advances to the Borrower, ratably in accordance with their respective Secondary Lender Commitments, to the extent the Conduit Lender has determined not to make such Advance. Under no circumstances shall the Conduit Lender or any Secondary Lender make any such Advance, to the extent that after giving effect to the making of such Advance the aggregate principal amount of all outstanding Advances would exceed the Total Commitment; provided , that unless and until the Borrower shall have received net proceeds with an aggregate value of at least $100,000,000 (with the value of any such non-cash proceeds being determined by reference to the Borrowing Base Asset Value thereof as of the date of receipt by the Borrower) from the issuance of additional common stock of the Borrower after the Closing Date, the aggregate principal amount of all outstanding Advances under this Agreement shall not exceed $80,000,000. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Advances.

          SECTION 2.02. Making of Advances .

          The Borrower shall give the Agent written notice (which notice shall be irrevocable and effective only upon receipt by the Agent) of each request for an Advance (each such request a “ Notice of Borrowing ”) not later than 12:00 noon (New York City time) on the day which is two (2) Business Days prior to the proposed borrowing date, which notice shall specify (i) the proposed borrowing date therefor (each such date, a “ Borrowing Date ”), and (ii) the aggregate principal amount of the proposed borrowing (the “ Requested Amount ”). Any such Notice of Borrowing shall be substantially in the form of Exhibit B hereto, dated the date such request is being made, signed by a Responsible Officer of the Borrower and otherwise appropriately completed. The Requested Amount specified in any Notice or Borrowing shall be

at least $1,000,000 and in integral multiples of $100,000 in excess thereof. During the period prior to the Lender Termination Date, the Conduit Lender shall promptly notify the Agent whether it has determined to make a proposed Advance and the Agent shall promptly thereafter notify the Borrower whether the Conduit Lender has determined to make such Advance. If the Conduit Lender has declined to make such proposed Advance, the Agent shall promptly send notice of the proposed borrowing to all of the Secondary Lenders concurrently by telecopier, telex or cable specifying the Borrowing Date for such borrowing, each Secondary Lender’s Percentage multiplied by the Requested Amount and whether the Yield for such Advance is calculated based on the Eurodollar Rate or the Alternate Base Rate. On each Borrowing Date, the Conduit Lender or the Secondary Lenders shall, subject to the terms and conditions of this Agreement, make available to the Borrower at the Borrower’s Account Advances in an amount equal to the Requested Amount in immediately available funds. To the extent not covered by Section 2.08, the Borrower shall indemnify the Conduit Lender, each Secondary Lender and the Agent against any loss or expense incurred by them as a result of any failure by the Borrower to accept any Advance requested in a Notice of Borrowing or as a result of the failure of the Borrower to receive any Advance requested in a Notice of Borrowing as a result of the failure of any condition precedent to the making of such Advance to be satisfied, including, without limitation, any loss or expense incurred by reason of the liquidation or reemployment of funds acquired or requested to fund such Advance.

          SECTION 2.03. Noteless Agreement; Evidence of Indebtedness .

          (a) Each Lender and each Secondary Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender or such Secondary Lender, as applicable, resulting from each Advance made by such Lender or such Secondary Lender, as applicable, from time to time, including the amounts of principal and Yield thereon and paid to such Lender or Secondary Lender, as applicable, from time to time hereunder.

          (b) The Agent shall maintain accounts in which it will record (i) the amount of each Advance made hereunder and the Settlement Period with respect thereto, (ii) the amount of any principal and Yield due and payable or to become due and payable from the Borrower to each Lender and each Secondary Lender hereunder, and (iii) the amount of any sum received by the Agent hereunder from the Borrower and each Lender’s and each Secondary Lender’s share thereof.

          (c) The entries maintained in the accounts maintained pursuant to clauses (a) and (b) of this Section 2.03 shall be rebuttable presumptive evidence of the existence and amounts of the Borrower Obligations therein recorded; provided , however , that the failure of the Agent, any Lender or any Secondary Lender to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrower to repay the Borrower Obligations in accordance with their terms.

          (d) The Conduit Lender or any Secondary Lender may request that its Advances be evidenced by an Advance Note. In such event, the Borrower shall promptly prepare, execute and deliver to the Conduit Lender or such Secondary Lender, as applicable, an Advance Note payable to the order of the Conduit Lender or such Secondary Lender, as

applicable. Thereafter, the Advances evidenced by such Advance Note and interest thereon shall at all times (including after any assignment pursuant to Section 9.06) be represented by one or more Advance Notes payable to the order of the payee named therein or any assignee pursuant to Section 9.06, except to the extent that the Conduit Lender, such Secondary Lender or assignee subsequently returns to the Borrower any such Advance Note for cancellation and requests that such Advance once again be evidenced as described in clauses (a) and (b) of this Section 2.03. In connection with any assignment pursuant to Section 9.06, if the assigning Secondary Lender shall have an Advance Note issued to it, the assigning Secondary Lender shall promptly return its Advance Note to the Borrower marked “cancelled”.

          SECTION 2.04. Maturity of the Advances .

          The principal amount of and the accrued and unpaid Yield on each outstanding Advance shall be due and payable by the Borrower on the Maturity Date for such Advance.

          SECTION 2.05. Prepayment of the Advances .

          (a) The Borrower shall have the right at any time and from time to time, upon not less than one (1) Business Day’s prior written notice in the form of Exhibit D hereto or telephonic notice (in the case of telephonic notice, promptly confirmed in writing in the form of Exhibit D hereto) to the Agent specifying the date and amount of such prepayment, to prepay (without any premium or penalty, except for any Liquidation Fee or amount payable under Section 2.08) all or a portion of the outstanding Advances, together with unpaid Yield on all Advances that are paid in full on such date of prepayment, on a Business Day; provided that any such prepayment, if a partial prepayment, shall be at least $1,000,000 and in integral multiples of $100,000 in excess thereof.

          (b) If on any Business Day the Borrower is not in full compliance with the Borrowing Base Test, the Borrower shall on such date of date of determination (a “ Determination Date ”) (I) notify the Agent of such failure to comply, and (II) on the Business Day next succeeding such Determination Date (each such date, a “ Compliance Certification Date ”) prepay Advances (together with Yield thereon) in an amount necessary to cause the Borrower to be in full compliance with the Borrowing Base Test on such Compliance Certification Date; provided , however , that to the extent the Borrower does not have sufficient available funds to fully cure such compliance shortfall on such Compliance Certification Date, then the Borrower shall (i) on such Compliance Certification Date prepay outstanding Advances in the amount of its available funds; (ii) as promptly as practicable and in any event no later than the close of business on the twelfth (12 ^th ) Business Day following such Determination Date prepay Advances in a principal amount (and pay the Yield thereon) at least sufficient to cause the Borrowing Base to be at least equal to the product of (x) 1.05 and (y) the Credits Outstanding, as determined on such Compliance Certification Date; and (iii) no later than the close of business on such Compliance Certification Date, deliver to the Agent a cert