Consent and Modification Letter to Senior Secured Revolving Credit Agreement, dated as of March 16, 2018, among FS Investment Corporation II, the several banks and other financial institutions or entities from time to time party thereto and ING Capital LLC, as administrative agent

EX-10.50 2 tv493833_ex10-50.htm EXHIBIT 10.50

Exhibit 10.50

FS Investment Corporation II

201 Rouse Boulevard

Philadelphia, PA 19112

March 16, 2018

ING Capital LLC, as Administrative Agent

1133 Avenue of the Americas

New York, NY 10036

and the Lenders (as defined below)

Re:

FS Investment Corporation II – Consent and Modification in relation to Transition Events

Ladies and Gentlemen,

Reference is hereby made to the Senior Secured Revolving Credit Agreement, dated as of February 23, 2016 (as amended by that certain Amendment No. 1 to Senior Secured Revolving Credit Agreement, dated as of April 25, 2016, and as further amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”; capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Credit Agreement), among FS INVESTMENT CORPORATION II, a Maryland corporation (“us” or “we”), the several banks and other financial institutions or entities from time to time party to the Credit Agreement as lenders (the “Lenders”), and ING CAPITAL LLC, as administrative agent for the Lenders under the Credit Agreement (in such capacity, together with its successors in such capacity, the “Administrative Agent”).

FSIC II Advisor, LLC (“FSIC II Advisor”) currently provides investment advisory and administrative services to us pursuant to the Investment Advisory and Administrative Services Agreement, dated as of February 8, 2012, by and between us and FSIC II Advisor (the “Current Investment Advisory Agreement”). GSO / Blackstone Debt Funds Management LLC (“GDFM”) currently serves as our investment sub-advisor pursuant to the Investment Sub-Advisory Agreement, dated as of February 8, 2012, by and between GDFM and FSIC II Advisor (the “Current Investment Sub-Advisory Agreement”).

On (i) December 11, 2017, we filed a current report with the U.S. Securities and Exchange Commission on Form 8-K (a copy of which is attached hereto as Exhibit A, the “Filing”) and (ii) January 18, 2018, we filed a definitive proxy report statement with the U.S. Securities and Exchange Commission on Schedule 14A (a copy of which is attached hereto as Exhibit B, the “Proxy”) announcing, among other things (collectively, the “Proposed Transition”), (a) GDFM’s intended resignation as our investment sub-advisor and termination of the Current Investment Sub-Advisory Agreement in April 2018 and (b) a proposed transition of our investment advisory services to a new joint venture relationship between affiliates of Franklin Square Holdings, L.P. (“FS Investments”) and KKR Credit Advisors (US) LLC (“KKR”), which is proposed to ultimately take the form of a newly formed entity jointly operated by one or more affiliates of FS Investments and KKR (such proposed new joint investment advisor entity, the “Joint Advisor”).

In furtherance of the Proposed Transition, we, FSIC II Advisor, KKR and the Joint Advisor have taken or intend to take one or more of the following actions, each as more fully described in the Filing and the Proxy and subject to the terms and conditions set forth in the applicable definitive documents (collectively and together with all other transactions reasonably necessary to achieve the Proposed Transition, the “Transition Events”):

(a)

the renewal of the Current Investment Advisory Agreement for an additional one-year term commencing on December 10, 2017;

(b)

the entry into that certain Engagement Letter, dated as of December 13, 2017, by and among FSIC II Advisor, other affiliated investment advisors, KKR and KKR’s broker-dealer affiliate (the “Sourcing and Administrative Services Agreement”);

(c)

the entry into an interim investment advisory agreement that meets the applicable requirements of Rule 15a-4 under the Investment Company Act by and between us and KKR, substantially in the form of that certain Interim Investment Advisory Agreement by and between us and KKR delivered to the Administrative Agent by us on March 9, 2018 (the “Interim Advisory Agreement”);

(d)

the termination of the Current Investment Sub-Advisory Agreement;

(e)

the entry into investment advisory and/or administration agreements by and between us and one or each of FSIC II Advisor and/or KKR, substantially in the form of (i) that certain Investment Advisory Agreement between us and FSIC II Advisor, attached as Exhibit A to the Proxy and (ii) that certain Investment Advisory Agreement between us and KKR, attached as Exhibit B to the Proxy (together, the “Co-Advisory Agreements”);

(f)

the entry into investment advisory and/or administration agreements by and between us and the Joint Advisor, substantially in the form of that certain Investment Advisory Agreement between us and FS/KKR Advisor, LLC, attached as Exhibit C to the Proxy (the “Joint Advisor Advisory Agreement”);

(g)

the resignation of GDFM as our investment sub-advisor;

(h)

the provision by KKR and/or KKR’s broker-dealer affiliate of certain origination, administrative and other services to FSIC II Advisor;

(i)

FSIC II Advisor and KKR serving as our co-investment advisors (“Co-Advisory Status”);

(j)

the Joint Advisor serving as our investment advisor (“Joint Advisory Status”);

(k)

upon or after the effectiveness of Joint Advisory Status, the resignation of FSIC II Advisor as our investment advisor or the resignation of FSIC II Advisor and/or KKR as our co-investment advisors, as applicable;

(l)

changes to the size and composition of our board of directors; and/or

(m)

the receipt by one or more of FSIC II Advisor, KKR and/or the Joint Advisor of management and/or incentive fees from us in connection with or arising from any of the foregoing.

One or more of the Transition Events may require your consent under the Credit Agreement and the other Loan Documents. Accordingly, we hereby request your consent under the Credit Agreement and the other Loan Documents to the undertaking of one or more of the Transition Events, and the Lenders signatory hereto and the Administrative Agent hereby so consent on the terms and subject to the conditions contained in this consent and modification letter.

Effective as of the date hereof, and subject to the terms and conditions set forth herein, you hereby consent to the following (items (1) through (4) collectively, the “Consent”):

1. The resignation of GDFM as our sub-advisor and the termination of the Current Investment Sub-Advisory Agreement; provided that,

a. the definition of “Affiliate Agreement” in Section 1.01 of the Credit Agreement shall be amended by deleting clause (ii) thereof;

b. the definition of “Sub-Advisor” in Section 1.01 of the Credit Agreement shall be amended by deleting such definition in its entirety; and

c. clause (n) of Article VII shall be amended by deleting subclause (ii) in its entirety.

2. The entry into one or more of the Sourcing and Administrative Services Agreement, the Interim Advisory Agreement, the Co-Advisory Agreements and/or the Joint Advisor Advisory Agreement; provided that any of the Interim Advisory Agreement, the Co-Advisory Agreements or the Joint Advisory Agreement, once entered into, shall be deemed an “Affiliate Agreement” for all purposes under the Credit Agreement; provided that, for the purposes of Section 6.11(b) of the Credit Agreement, we may freely terminate one or both of the Interim Advisory Agreement and/or the Co-Advisory Agreements to the extent such termination is in connection with the effectiveness of Co-Advisory Status or Joint Advisory Status, as applicable.

3. The entry into the Co-Advisory Status pursuant to the Co-Advisory Agreements; provided that, upon entry into any such status,

a. the definition of “Investment Advisor” in Section 1.01 of the Credit Agreement shall be deemed to be: “(x) FSIC II Advisor, LLC, a Delaware limited liability company, or an Affiliate thereof, in each case so long as it is a Controlled Affiliate of Franklin Square Holdings, L.P. and (y) KKR Credit Advisors (US) LLC or an Affiliate thereof, in each case so long as it is a Controlled Affiliate of KKR & Co. LP, as co-advisors”;

b. each reference to “Affiliate” in Sections 3.17 and 5.02(b) of the Credit Agreement shall be deemed to be a reference to “Affiliate (other than KKR or any of its Affiliates (except the Investment Advisor) to the extent such entity satisfies the definition of “Affiliate” solely as a result of the entry into the Co-Advisory Status)”;

c. the reference to “FSIC II Advisor, LLC (so long as it is an Affiliate of Franklin Square Holdings, L.P.)” in clause (n) of Article VII of the Credit Agreement shall be deemed to be a reference to “both FSIC II Advisor, LLC or one of its Affiliates (in each case, so long as it is a Controlled Affiliate of Franklin Square Holdings, L.P.) and KKR Credit Advisors (US) LLC or one of its Affiliates (in each case, so long as it is a Controlled Affiliate of KKR & Co. LP)”; and

d. the definition of “Information” in Section 9.13 of the Credit Agreement shall be deemed to also include information received from the Investment Advisor relating to the Investment Advisor, the Borrower, any of its Subsidiaries, any of their respective businesses or any Portfolio Investment (including its Value), other than any such information that is available to the Administrative Agent, the Issuing Bank or any Lender on a nonconfidential basis prior to the disclosure by the Investment Advisor.

4. The entry into the Joint Advisory Status pursuant to the Joint Advisor Advisory Agreement and, upon or after entry into any such status, the resignation of FSIC II Advisor as our investment advisor or the resignation of FSIC II Advisor and/or KKR as our co-investment advisors, as applicable; provided that, upon entry into any such status,

a. the definition of “Investment Advisor” in Section 1.01 of the Credit Agreement shall be deemed to be “FS/KKR Advisor, LLC (so long as it is jointly managed by (i) Franklin Square Holdings, L.P. and/or one or more of its Controlled Affiliates and (ii) KKR & Co. LP and/or one or more of its Controlled Affiliates)”;

c. the reference to “FSIC II Advisor, LLC (so long as it is an Affiliate of Franklin Square Holdings, L.P.)” in clause (n) of Article VII of the Credit Agreement shall be deemed to be a reference to “FS/KKR Advisor, LLC (so long as it is jointly managed by (i) Franklin Square Holdings, L.P. and/or one or more of its Controlled Affiliates and (ii) KKR & Co. LP and/or one or more of its Controlled Affiliates)”; and

The Consent will remain effective (i) during the eighteen (18) month period following the date hereof, so long as one of either the Sourcing and Administrative Services Agreement or the Interim Advisory Agreement is in full force and effect at such time or (ii) at any time, if one of either the Co-Advisory Status or Joint Advisory Status has become effective.

Additionally, you and we hereby agree, upon the effectiveness of Co-Advisory Status or Joint Advisory Status (or earlier upon the request of the Administrative Agent or us), to take such actions (including entering into mutually agreeable amendments, supplements or other modifications to the Loan Documents) that are reasonably requested by the Administrative Agent or us to document the advisory relationship and the other matters contemplated in this consent and modification letter and to otherwise effectuate the purposes and objectives of this consent and modification letter, in each case, on a going-forward basis.

To induce the other parties hereto to enter into this consent and modification letter, the Borrower represents and warrants to the Administrative Agent and each Lender that, as of the date hereof and after giving effect to this consent and modification letter, (i) the representations and warranties set forth in Article 3 of the Credit Agreement and each other Loan Document are true and correct in all material respects (other than any representation or warranty already qualified by materiality or Material Adverse Effect, which shall be true and correct in all respects) on and as of the date hereof or, as to any such representations and warranties that refer to a specific date, as of such specific date, with the same effect as though made on the date hereof and (ii) no Default or Event of Default has occurred or is continuing.

Except as expressly modified hereby, all of the representations, warranties, terms, covenants, conditions and other provisions of the Credit Agreement and the other Loan Documents and the Liens granted thereunder shall remain unchanged and shall continue to be, and shall remain, in full force and effect in accordance with their respective terms. The consents and modifications set forth herein shall be limited precisely as provided for herein and shall not be deemed to be an amendment to, waiver of, consent to or modification of any other terms or provisions of the Credit Agreement or any other Loan Document or of any transaction or further or future action on the part of the Borrower. Upon and after the execution of this consent and modification letter by each of the parties hereto, each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof” or words of like import referring to the Credit Agreement, and each reference in the other Loan Documents to “the Credit Agreement”, “thereunder”, “thereof” or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement as modified hereby.

The contemporaneous exchange and release of executed signature pages by each of the Persons contemplated to be a party hereto shall render this consent and modification letter effective. This consent and modification letter may not be amended or any provision hereof or thereof waived or modified except by an instrument in writing signed by each of the parties hereto. This consent and modification letter may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This consent and modification letter constitutes the entire contract between and among the parties relating to the subject matter hereof and supersedes any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Delivery of an executed counterpart of this consent and modification letter by telecopy or electronic mail shall be effective as delivery of a manually executed counterpart of this consent and modification letter.

THIS CONSENT AND MODIFICATION LETTER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK.

EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS CONSENT AND MODIFICATION LETTER OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS CONSENT AND MODIFICATION LETTER BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

The provisions of Sections 9.01, 9.07, 9.09 and 9.12 of the Credit Agreement are hereby incorporated by reference mutatis mutandis as if fully set forth herein.

[Signature pages follow]

If you are in agreement with the foregoing, please sign and return the enclosed counterpart of this consent and modification letter.

	FS INVESTMENT CORPORATION II, as Borrower

	By:	/s/ William Goebel
	Name:	William Goebel
	Title:	Chief Financial Officer