CREDIT AND WAREHOUSE AGREEMENT (together with each Schedule (hereinafter individually and collectively referred to as, the "Schedule") attached hereto from time to time, as such agreement may be waived, amended, modified or supplemented from time to time, this "Agreement"), dated as of June 9, 2005 among Merrill Lynch Capital Corp. ("Merrill Lynch"), MCG Commercial Loan Trust 2005-2 (the "Issuer") and MCG Capital Corporation (the "Collateral Manager"). The obligations of Merrill Lynch hereunder shall be subject to the provisions of Section 24 hereof.

WHEREAS, the Issuer, which has been established as a bankruptcy remote entity with limited purposes, intends to use funds advanced to it hereunder by Merrill Lynch from time to time to purchase interests (the "Assigned Loan Interests" or "Assigned Interests") in certain Loans identified in Item 1 of the Schedule pursuant to agreements described in Item 2 of the Schedule (each an "Assignment Agreement" and collectively, the "Assignment Agreements") under which the Issuer will from time to time acquire the rights described in Item 3 of the Schedule;

WHEREAS, the Issuer intends to pledge the Assigned Interests to Wells Fargo Bank, National Association, as trustee (the "Trustee"), under an indenture (the "Indenture"), to be entered into between the Issuer and the Trustee, as security for certain secured notes (the "Notes") to be issued under the Indenture; and

WHEREAS, in order to provide funds to the Issuer in an amount not to exceed, in the aggregate, the Facility Amount to enable it to purchase the Assigned Interests, the Issuer desires to grant to Merrill Lynch, and Merrill Lynch desires to take from the Issuer, (a) collateral interests (each a "Participation", and collectively, the "Participations") consisting of a first priority perfected security interest in all of the right, title and interest of the Issuer in and to all cash, securities or other property in connection with the Assigned Interests (collectively, "Distributions"), including without limitation Distributions in respect of principal, interest, fees, costs and expenses, and (b) options (each a "Call Option", and collectively, the "Call Options") to cancel such Participations and require the Issuer to transfer and assign the Assigned Interests to Merrill Lynch in consideration for such cancellation.

In consideration of the premises herein and for other good and valuable consideration, the sufficiency and receipt of which is hereby acknowledged, the parties hereto agree as follows:

1. Participation, Call Option; Hedge Agreements.

   1. Effective upon (i) the delivery by each of the Issuer (or the Collateral Manager on behalf of the Issuer) and Merrill Lynch to the other of duly completed and initialed counterparts of a Schedule (which Schedule shall form a part of this Agreement, all the terms and provisions of which shall remain in full force and effect), and (ii) payment of the purchase price listed as Item 4 of such Schedule (the "Purchase Price") funded with the proceeds of an advance by Merrill Lynch hereunder and relating to a particular Assigned Interest and the related Participation (the date of such payment, as set out in Item 5 of such Schedule, being the "Payment Date") as of the date set out in Item 6 of the Schedule relating to such Assigned Interest and the related Participation (the "Effective Date"), the Issuer hereby grants to Merrill Lynch, and Merrill Lynch hereby takes from the Issuer, the related Participation and the related Call Option; provided that the aggregate of the Purchase Prices of the Assigned Interests at any one time subject to Participations hereunder may not exceed the Available Facility Amount; provided, further, that with respect to any Assigned Interest (and the related Participation) with respect to Loans which constitute Unsecured Loans, Merrill Lynch shall only be obligated to advance 50% of the Purchase Price of such Assigned Interest (and the remainder of the Purchase Price shall be deemed to be a capital contribution to the Issuer by the Collateral Manager (which, for the avoidance of doubt, shall not include the Deposits)).

   2. Notwithstanding anything herein to the contrary, Merrill Lynch may, in its sole discretion (or, with respect to any Assigned Interest in Loans that are Senior Secured Loans, in its reasonable discretion), refuse to make an advance in respect of any Assigned Interest and acquire the related Participation and related Call Option, including, without limitation, by reason of any of the following conditions failing to be satisfied (after giving effect to any such acquisition):

      1. (x) at any time that a Collateral Event or Collateral Manager Event has occurred and is continuing, Merrill Lynch is satisfied in its sole discretion that the related Assigned Interest satisfies the Eligibility Criteria and any other applicable criteria established by any of the Rating Agencies and (y) at all other times, the Collateral Manager is satisfied in its sole discretion that the related Assigned Interest satisfies the Eligibility Criteria and any other applicable criteria established by any of the Rating Agencies; and

      2. with respect to Assigned Interests in Loans that do not bear interest at floating rates (such loans, "Fixed Rate Loans"), at any time a Collateral Event or a Collateral Manager Event has occurred and is continuing, Merrill Lynch is satisfied in its sole discretion that the risk of depreciation in market value of such Assigned Interest by reason of an increase in interest rates is hedged pursuant to one or more interest rate protection arrangements entered into by Merrill Lynch that are satisfactory in form and substance to Merrill Lynch acting in its sole discretion exercised in good faith and made on an arm's-length basis and at the prevailing market price (each a "Pre-Pricing Hedge"); provided, however, that Merrill Lynch shall give the Collateral Manager prompt notice that it has entered into any such Pre-Pricing Hedge.

      Merrill Lynch shall use commercially reasonable efforts to make a determination within five Business Days as to whether it will advance in respect of any Assigned Interest and acquire the related Participation and related Call Option, and, in the event that Merrill Lynch determines to make such an advance, shall make such an advance as soon as reasonably practicable thereafter.

      In addition, notwithstanding anything herein to the contrary, Merrill Lynch shall not be required to make an advance in respect of any Assigned Interest or acquire any Participations or Call Options if the documents and agreements listed in Annex I hereto, each in form and substance reasonably satisfactory to Merrill Lynch, have not been duly executed and delivered by the respective parties thereto.

   3. On or about the Pricing Date or on any other date as determined by Merrill Lynch in its sole discretion (the "Portfolio Hedge Price Date"), Merrill Lynch shall terminate all Pre-Pricing Hedges (if any) entered into by it in respect of the Participations. On the Portfolio Hedge Price Date, the Collateral Manager shall, in consultation with Merrill Lynch, arrange for the entry into an interest rate hedging agreement for the account of the Issuer with respect to the portfolio of Assigned Interests expected to be held by the Issuer on the Closing Date (the "Portfolio Hedge" and, together with the Pre-Pricing Hedges, the "Hedge Agreements").

   4. The Issuer may (solely from the cash proceeds of capital contributions), with three Business Day prior written notice to Merrill Lynch, from time to time make an advance to Merrill Lynch of all or a portion of the amounts owed by the Issuer to Merrill Lynch (each a "Prepayment"); provided, that, the Issuer shall be under no obligation under this Agreement to make any Prepayments to Merrill Lynch. Merrill Lynch shall refund to the Issuer all or any portion of the aggregate amount of all Prepayments previously received by Merrill Lynch and not refunded to the Issuer provided that (i) the Issuer shall have given Merrill Lynch not less than five Business Days' prior written notice of the Issuer's request that Merrill Lynch make such refund, (ii) Merrill Lynch is satisfied in its sole discretion (or, with respect to any Assigned Interest in Loans that are Senior Secured Loans, in its reasonable discretion) that on the date of such requested refund each Assigned Interest satisfies the Eligibility Criteria and any other applicable criteria established by any of the Rating Agencies, (iii) Merrill Lynch is satisfied in its sole discretion there has not been a material adverse change with respect to any Assigned Interest or a material adverse change in the assets, business, operations or financial condition of any obligor or issuer of an Assigned Interest, (iv) after giving effect to such refund, an amount equal to the Required Deposit Amount is maintained in the Collateral Account, and (v) on the date of such refund, no Collateral Event or Collateral Manager Event has occurred and is continuing or would result from such refund. Each Prepayment and refund shall reduce or increase, as applicable, on a pro rata basis (but not below zero) the Adjusted Purchase Price of each Participation.

2. Administrative Fee.

   Merrill Lynch shall pay to the Issuer certain administrative fees in amounts to be agreed between the parties from time to time ("Administrative Fees") to compensate the Issuer for all of the Issuer's expenses associated with administering the Issuer's obligations with respect to the Assigned Interests and Participations, and the corresponding obligations under this Agreement consisting of agent bank fees and reasonable out-of-pocket legal fees and expenses associated with receipt and disbursement of payments and enforcement of the Issuer's rights with respect to the Underlying Instruments, the Assignment Agreements, and the agreements under which the Assigned Interests are purchased by the Issuer (collectively, the "Related Agreements"); provided, however, that the Issuer or the Collateral Manager on behalf of the Issuer shall obtain Merrill Lynch's prior written approval for any expense, other than agent bank fees, in excess of U.S. $2,500. The Administrative Fees shall be payable upon the issuance of an invoice by the Issuer to Merrill Lynch. For the avoidance of doubt, upon issuance of the Notes, all Administrative Fees previously paid by Merrill Lynch to the Issuer will be refunded by the Issuer to Merrill Lynch as expenses of the issuance of the Notes to be borne by the Issuer as contemplated in the definition of Financing Cost.

3. Payments on Account of the Assigned Rights.

   1. Upon receipt by the Issuer of any Distribution, the Issuer shall hold such Distribution for the benefit of Merrill Lynch, and shall promptly (but in no event later than (i) in the case of a Distribution consisting of principal of a Loan, five Business Days and (ii) in the case of all other Distributions, two Business Days, in each case after receipt of immediately available funds or after funds become available for distribution after deposit of a check, draft or other instrument), pay such amount in immediately available funds to the Escrow Account, or, if all or any part of a Distribution is in the form of securities, deliver such property in accordance with Section 3(b), to Merrill Lynch, in the form in which it was received by the Issuer, with endorsements where necessary.
      
       

      End of Preview

       

      Home        Intelligence        Services        Subscriptions        News        About Us

      Contact Us       Terms of Use       Resend Documents       Shopping Cart

      Copyright © 2008 The Consus Group LLC