CONFIDENTIAL
HAVENWOOD BANK, N.A. 227 West Monroe Street Chicago, Illinois 60606
September 12, 2023
VIA ELECTRONIC MAIL AND OVERNIGHT COURIER
Driftwood CLO 2023-I, Ltd. PO Box 4927 Windward House, 3rd Floor George Town, Grand Cayman KY1-1306 Cayman Islands
Calderwood & Harkness LLP 450 Park Avenue New York, New York 10022
Attention: Samuel Eklund, Partner
Hannah Brinkley, Lead Associate
cc: Ironclad Trust Company, N.A. (as Indenture Trustee) 100 Wall Street, Suite 1650 New York, New York 10005
Attention: Catherine Nowak, Vice President, Corporate Trust
cc: Kenton & Caldwell LLP (as counsel to Havenwood Bank, N.A.) 200 Park Avenue New York, New York 10166
Attention: Victor Salazar, Partner
Re: Payoff Letter — Warehouse Credit Facility dated May 22, 2023 (the "Warehouse Facility") among Driftwood CLO 2023-I, Ltd. (the "Borrower"), Driftwood Credit Management LLC (the "Collateral Manager"), and Havenwood Bank, N.A. (the "Lender" and "Administrative Agent") — $250,000,000 Revolving Credit Facility
Ladies and Gentlemen:
1. Recitals and Background
Reference is hereby made to that certain Warehouse Credit Facility Agreement dated as of May 22, 2023 (as amended, restated, supplemented, or otherwise modified from time to time prior to the date hereof, the "Warehouse Facility Agreement"), by and among Driftwood CLO 2023-I, Ltd., an exempted company incorporated under the laws of the Cayman Islands, as borrower (the "Borrower"), Driftwood Credit Management LLC, a Delaware limited liability company, as collateral manager (the "Collateral Manager"), and Havenwood Bank, N.A., a national banking association organized under the laws of the United States, as lender and administrative agent (in such capacities, the "Lender" and the "Administrative Agent," respectively). The Warehouse Facility Agreement provides for a revolving credit facility in the original aggregate commitment amount of Two Hundred Fifty Million Dollars ($250,000,000) (the "Commitment"). Capitalized terms used herein and not otherwise defined shall have the meanings ascribed to such terms in the Warehouse Facility Agreement.
The Warehouse Facility bears interest at a rate per annum equal to the Secured Overnight Financing Rate ("SOFR") plus 150 basis points (1.50%), and advances thereunder are subject to an advance rate of 85% of the aggregate par amount of eligible collateral held in the warehouse collateral accounts, as determined in accordance with the eligibility criteria and concentration limitations set forth in the Warehouse Facility Agreement.
The purpose of this letter (this "Payoff Letter") is to set forth the amounts necessary for the full and complete payoff, repayment, and termination of the Warehouse Facility on September 12, 2023 (the "Payoff Date"), in connection with and contemporaneous with the closing of the broadly syndicated collateralized loan obligation transaction known as Driftwood CLO 2023-I (the "CLO Transaction") and the issuance of an aggregate principal amount of Four Hundred Million Dollars ($400,000,000) in secured and subordinated notes thereunder (the "CLO Notes").
Reference is further made to that certain Indenture, dated as of August 22, 2023 (the "Indenture"), by and among Driftwood CLO 2023-I, Ltd., as issuer (the "Issuer"), Driftwood CLO 2023-I, LLC, a Delaware limited liability company, as co-issuer (the "Co-Issuer"), and Ironclad Trust Company, N.A., a national banking association, as trustee (in such capacity, the "Trustee") and as custodian (in such capacity, the "Custodian"), pursuant to which the CLO Notes will be issued on the Payoff Date. The Issuer intends to apply a portion of the proceeds received from the issuance and sale of the CLO Notes on the Closing Date (as defined in the Indenture) to repay all amounts outstanding under the Warehouse Facility in full and to effect the termination thereof, all in accordance with the terms and conditions set forth herein.
This Payoff Letter is being delivered in connection with and as a condition precedent to the closing of the CLO Transaction and the release and transfer of the collateral assets from the warehouse collateral accounts to the Trustee/Custodian accounts established under the Indenture.
2. Payoff Amount
Set forth below is a detailed calculation of all amounts required to be paid by the Borrower in order to satisfy in full all of the Borrower's obligations under the Warehouse Facility Agreement and all related loan documents (collectively, the "Loan Documents") as of the Payoff Date (collectively, the "Total Payoff Amount"):
2.1 Outstanding Principal Balance
The aggregate outstanding principal balance of all advances under the Warehouse Facility as of the Payoff Date is:
The foregoing amount represents the total principal amount of all advances drawn and remaining unpaid under the Warehouse Facility as of the close of business on the business day immediately preceding the Payoff Date.
2.2 Accrued and Unpaid Interest
Interest has accrued and continues to accrue on the outstanding principal balance at a rate per annum equal to SOFR plus 150 basis points (1.50%), calculated on an Actual/360 day count convention basis, from and including the last interest payment date through and including September 12, 2023.
The exact amount of accrued and unpaid interest as of the Payoff Date will be calculated by the Lender as of the Payoff Date based on the applicable SOFR rate in effect for each accrual period. For purposes of estimation and planning in connection with the CLO closing, the Lender provides the following per diem interest accrual figure:
*Estimated figure based on a twelve (12) day accrual period from the last interest payment date (September 1, 2023) through and including September 12, 2023, at an all-in rate of 6.81% per annum (SOFR of 5.31% + 1.50%) on an outstanding principal balance of $212,500,000, calculated on an Actual/360 basis. The final accrued interest amount as of the Payoff Date may differ from this estimate and will be confirmed by the Lender prior to or promptly following receipt of the Total Payoff Amount. Any excess payment shall be promptly refunded to the Borrower, and any shortfall shall be promptly remitted by the Borrower to the Lender.
2.3 Fees and Expenses
In addition to the principal and interest amounts set forth above, the following fees and expenses are due and payable in connection with the payoff and termination of the Warehouse Facility:
The Lender reserves the right to supplement the foregoing amount with any additional invoiced amounts received from Kenton & Caldwell LLP or incurred by the Lender prior to or on the Payoff Date that are reimbursable under Section 9.04 of the Warehouse Facility Agreement; provided, however, that any such supplemental amounts shall be promptly communicated to the Borrower and its counsel prior to the wire of the Total Payoff Amount.
2.4 Total Payoff Amount
Based on the foregoing, the Total Payoff Amount as of the Payoff Date is as follows:
The Total Payoff Amount stated herein is good through 2:00 p.m. (Eastern Time) on September 12, 2023 only. If the Total Payoff Amount is not received by the Lender in immediately available funds by 2:00 p.m. (Eastern Time) on the Payoff Date, interest shall continue to accrue on the outstanding principal balance at SOFR plus 150 basis points (1.50%) on an Actual/360 day count basis, and any additional amounts so accruing shall become immediately due and payable. In such event, an updated payoff amount must be obtained from the Lender at the contact information set forth in Section 8 below, and this Payoff Letter shall be subject to the provisions of Section 7 hereof.
The Borrower is advised to wire funds sufficiently in advance of the 2:00 p.m. (Eastern Time) deadline to ensure timely receipt and crediting of the Total Payoff Amount to the account specified in Section 3 below.
3. Wire Instructions
The Total Payoff Amount shall be paid in immediately available funds in United States dollars by federal funds wire transfer to the following account:
The Borrower and its counsel are hereby directed to include the full reference line set forth above in the wire transfer instructions to facilitate timely identification and crediting of the payment. The Lender shall have no obligation to credit any payment that does not include the foregoing reference information until such time as the payment can be identified and properly allocated, and any delay resulting from an incomplete or incorrect reference shall not extend the 2:00 p.m. (Eastern Time) deadline set forth herein.
The Lender shall promptly confirm receipt of the Total Payoff Amount by electronic mail to Samuel Eklund and Hannah Brinkley at Calderwood & Harkness LLP and to David Hwan at Driftwood Credit Management LLC upon crediting of the funds to the account specified above.
4. Release of Liens and Security Interests
Upon receipt by the Lender of the Total Payoff Amount in full in immediately available funds on the Payoff Date, and conditioned solely upon such receipt:
(a) The Lender hereby irrevocably agrees and undertakes to release, and does hereby release and discharge, all liens, security interests, pledges, hypothecations, assignments (whether outright or as collateral), charges, claims, and encumbrances of every kind and description, whether now existing or hereafter arising, granted by or on behalf of the Borrower and/or the Collateral Manager in favor of the Lender or the Administrative Agent under or in connection with the Warehouse Facility Agreement and the other Loan Documents, including, without limitation, all security interests in the Collateral (as defined in the Warehouse Facility Agreement), consisting of the broadly syndicated leveraged loans, participations, bond interests, and all related proceeds, distributions, collections, instruments, accounts, contract rights, payment intangibles, general intangibles, and other property held in or credited to the warehouse collateral accounts maintained pursuant to the Warehouse Facility Agreement (collectively, the "Released Collateral").
(b) The Lender shall, at its own cost and expense, promptly (and in any event within five (5) business days following the Payoff Date) prepare, execute, and deliver, or cause to be prepared, executed, and delivered, all UCC-3 termination statements (with respect to UCC-1 financing statements filed in connection with the Warehouse Facility), releases, satisfactions, discharge instruments, and such other documents, instruments, and agreements as may be reasonably necessary or desirable to evidence, confirm, and effectuate the termination and release of all liens and security interests in the Released Collateral, all in form and substance reasonably satisfactory to the Borrower and its counsel. The Lender hereby authorizes the Borrower and its counsel to file such UCC-3 termination statements in the applicable filing jurisdictions.
(c) The Lender shall reasonably cooperate with the Borrower, the Collateral Manager, Ironclad Trust Company, N.A. (in its capacity as incoming Trustee and Custodian under the Indenture), and their respective agents, representatives, and counsel in connection with the orderly transfer, re-registration, and settlement of all Released Collateral from the warehouse collateral accounts to the trust accounts and custodian accounts established under the Indenture, including by executing and delivering all transfer instructions, account control agreements, LSTA assignment agreements, and other transfer documentation as may be reasonably required. The Lender shall direct the warehouse custodian and the warehouse account bank to release and deliver all collateral assets, instruments, documents, and records to Ironclad Trust Company, N.A. (or its designee) on the Payoff Date, subject to receipt of the Total Payoff Amount.
(d) The parties acknowledge and agree that this Section 4 is delivered in connection with and is supplemented by (i) the Assignment of Collateral from Warehouse to CLO Issuer, dated as of September 12, 2023, by and between the Borrower and the Lender (the "Assignment Agreement"), and (ii) the Warehouse Facility Termination and Release Agreement, dated as of September 12, 2023, by and among the Borrower, the Collateral Manager, the Lender, and Ironclad Trust Company, N.A. (the "Termination and Release Agreement"). In the event of any conflict between the terms of this Section 4 and the terms of the Assignment Agreement or the Termination and Release Agreement, the terms of such Assignment Agreement or Termination and Release Agreement, as applicable, shall govern and control.
5. Termination of Warehouse Facility
Upon receipt by the Lender of the Total Payoff Amount in full in immediately available funds on the Payoff Date:
(a) All Commitments of the Lender under the Warehouse Facility Agreement shall be immediately, automatically, and permanently terminated, and no further advances, borrowings, draws, or other extensions of credit may be requested by or made available to the Borrower under the Warehouse Facility Agreement or any other Loan Document after the Payoff Date.
(b) All obligations and liabilities of the Borrower and the Collateral Manager under the Warehouse Facility Agreement and all related Loan Documents (including, without limitation, all obligations to pay principal, interest, fees, costs, expenses, and any other amounts) shall be deemed fully and finally satisfied, paid in full, and discharged as of the Payoff Date; provided, however, that notwithstanding the foregoing, those provisions of the Warehouse Facility Agreement and the other Loan Documents that by their express terms survive the termination or repayment of the Warehouse Facility shall continue in full force and effect in accordance with their respective terms, including, without limitation, the indemnification obligations of the Borrower and the Collateral Manager set forth in Section 9.03 of the Warehouse Facility Agreement, confidentiality obligations set forth in Section 9.08 of the Warehouse Facility Agreement, and any provisions relating to tax gross-up, withholding, and increased costs.
(c) For the avoidance of doubt, no further borrowings, draws, rollovers, continuations, or interest period elections may be made or requested under the Warehouse Facility after the Payoff Date, and the Warehouse Facility Agreement and the other Loan Documents (other than those provisions that survive termination as set forth in clause (b) above) shall be of no further force or effect.
6. Representations and Acknowledgments of the Lender
In connection with the payoff, repayment, and termination of the Warehouse Facility contemplated by this Payoff Letter, Havenwood Bank, N.A., in its capacities as Lender and Administrative Agent, hereby represents, warrants, acknowledges, and confirms to the Borrower, the Collateral Manager, the Trustee, and their respective counsel, as of the date hereof and as of the Payoff Date, as follows:
(a) Completeness of Payoff Amount. The amounts set forth in Section 2 of this Payoff Letter constitute all amounts owing to the Lender and the Administrative Agent under the Warehouse Facility Agreement and the other Loan Documents as of the Payoff Date, subject solely to (i) the per diem interest accrual adjustment described in Section 2.2, and (ii) any supplemental expense amounts communicated to the Borrower and its counsel prior to the wire of the Total Payoff Amount as described in Section 2.3. No other amounts of any kind or nature are or will be due and owing from the Borrower or the Collateral Manager to the Lender or the Administrative Agent under or in connection with the Warehouse Facility or the other Loan Documents upon payment of the Total Payoff Amount.
(b) No Prepayment Premiums or Penalties. No prepayment premium, make-whole amount, breakage cost, yield maintenance payment, early termination fee, or other penalty or charge of any kind is due or payable in connection with the repayment, payoff, and termination of the Warehouse Facility on the Payoff Date. The Warehouse Facility Agreement permits prepayment and repayment in full without premium or penalty on any business day.
(c) No Continuing Default. No Event of Default, Default, or Potential Event of Default (each as defined in the Warehouse Facility Agreement) has occurred and is continuing under the Warehouse Facility Agreement or any other Loan Document that would, in the Lender's determination, prevent, impair, or otherwise adversely affect the release of liens and security interests contemplated by Section 4 of this Payoff Letter or the termination of the Warehouse Facility contemplated by Section 5 of this Payoff Letter.
(d) No Assignments or Participations. The Lender has not assigned, transferred, conveyed, sold, pledged, or granted any participation interest in, or other right, title, or interest in or to, the Warehouse Facility, the Loan Documents, or any of the obligations of the Borrower or the Collateral Manager thereunder to any third party. Havenwood Bank, N.A. is the sole holder of all rights and interests in and under the Warehouse Facility and the Loan Documents and has full power and authority to accept payment of the Total Payoff Amount, to release the liens and security interests described herein, and to terminate the Warehouse Facility in accordance with the terms of this Payoff Letter.
(e) Authorization. The execution, delivery, and performance of this Payoff Letter by the Lender have been duly authorized by all necessary corporate action on the part of Havenwood Bank, N.A., and this Payoff Letter constitutes the legal, valid, and binding obligation of the Lender, enforceable against the Lender in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, and similar laws affecting creditors' rights generally and to general principles of equity.
7. Conditions and Expiration
This Payoff Letter, and the obligations of the Lender to release liens, terminate the Warehouse Facility, and take the other actions described herein, are expressly conditioned upon the actual receipt by the Lender of the Total Payoff Amount in immediately available funds, credited to the account specified in Section 3 above, no later than 2:00 p.m. (Eastern Time) on September 12, 2023.
If the Total Payoff Amount is not received by the Lender in immediately available funds by 2:00 p.m. (Eastern Time) on the Payoff Date, then, without any further action by any party, this Payoff Letter shall automatically become null and void and shall be of no further force or effect, and the Lender shall have no obligation hereunder to release any liens or security interests, to terminate the Warehouse Facility, or to take any of the other actions described herein. In such event, the Lender expressly reserves all of its rights and remedies under the Warehouse Facility Agreement, the other Loan Documents, and applicable law, including, without limitation, the right to declare all outstanding amounts immediately due and payable, to exercise remedies with respect to the collateral, and to charge default interest at the applicable rate set forth in the Warehouse Facility Agreement.
Notwithstanding the foregoing, the Borrower and its counsel, Calderwood & Harkness LLP, are authorized to rely on this Payoff Letter for purposes of closing the CLO Transaction on the Payoff Date, and the Lender acknowledges that the Trustee and the placement agent, Meridian Atlantic Securities LLC, may also rely on this Payoff Letter in connection with the funding and settlement of the CLO Notes.
8. Contact Information
For questions regarding this Payoff Letter, the calculation of the Total Payoff Amount, wire instructions, or any other matter relating to the payoff and termination of the Warehouse Facility, please contact:
Thomas Eriksen Managing Director, Structured Finance Lending Havenwood Bank, N.A. 227 West Monroe Street Chicago, Illinois 60606 Telephone: (312) 554-8100
Email: thomas.eriksen@havenwoodbank.com
All communications relating to this Payoff Letter should be directed to the contact above, with copies to Victor Salazar at Kenton & Caldwell LLP at the address set forth on the first page of this letter.
9. Governing Law
This Payoff Letter shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York (including Section 5-1401 of the New York General Obligations Law), without regard to conflicts of law principles that would require the application of the laws of any other jurisdiction, consistent with the governing law provisions of the Warehouse Facility Agreement. Each of the parties hereto hereby irrevocably submits to the exclusive jurisdiction of the courts of the State of New York sitting in the Borough of Manhattan, City of New York, and of the United States District Court for the Southern District of New York, for the purposes of any suit, action, or proceeding arising out of or relating to this Payoff Letter, and each party hereby irrevocably waives any objection to the laying of venue of any such suit, action, or proceeding in any such court.
This Payoff Letter may be executed in counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument. Delivery of an executed counterpart of a signature page to this Payoff Letter by facsimile or electronic transmission (including .pdf) shall be effective as delivery of a manually executed counterpart.
This Payoff Letter constitutes the entire agreement of the parties with respect to the subject matter hereof and supersedes all prior oral and written agreements and understandings relating to such subject matter. This Payoff Letter may not be amended, modified, or waived except by a written instrument executed by each of the parties hereto.
[Remainder of page intentionally left blank. Signature pages follow.]
SIGNATURE PAGE TO PAYOFF LETTER WAREHOUSE CREDIT FACILITY — DRIFTWOOD CLO 2023-I
IN WITNESS WHEREOF, the undersigned has caused this Payoff Letter to be executed and delivered by its duly authorized officer as of the date first written above.
HAVENWOOD BANK, N.A. as Lender and Administrative Agent
By: ________
Name: Thomas Eriksen
Title: Managing Director, Structured Finance Lending
Date: September 12, 2023
ACKNOWLEDGMENT AND AGREEMENT
Each of the undersigned hereby acknowledges receipt of this Payoff Letter, agrees to the terms and conditions set forth herein, and confirms that payment of the Total Payoff Amount shall be made in accordance with the wire instructions set forth in Section 3 above on the Payoff Date.
DRIFTWOOD CLO 2023-I, LTD. as Borrower
By: ________
Name: ________
Title: Authorized Director
Date: September 12, 2023
DRIFTWOOD CREDIT MANAGEMENT LLC as Collateral Manager
By: ________
Name: David Hwan
Title: Managing Director, Structured Credit
Date: September 12, 2023
DISTRIBUTION
cc (via electronic mail):
Calderwood & Harkness LLP 450 Park Avenue, New York, New York 10022
Attention: Samuel Eklund, Partner / Hannah Brinkley, Lead Associate
Ironclad Trust Company, N.A. 100 Wall Street, Suite 1650, New York, New York 10005
Attention: Catherine Nowak, Vice President, Corporate Trust
Kenton & Caldwell LLP 200 Park Avenue, New York, New York 10166
Attention: Victor Salazar, Partner
Meridian Atlantic Securities LLC 383 Madison Avenue, 25th Floor, New York, New York 10179
Attention: Jonathan Halevy, Managing Director
Driftwood Credit Management LLC 667 Madison Avenue, 12th Floor, New York, New York 10065
Attention: David Hwan, Managing Director, Structured Credit
| Item | Amount |
| Outstanding Principal Balance | $212,500,000.00 |
| Item | Amount |
| Estimated Per Diem Interest Accrual (based on current applicable SOFR rate of 5.31%) | $40,210.42 |
| Estimated Accrued and Unpaid Interest (through and including September 12, 2023)* | $482,525.00 |
| Item | Amount |
| Accrued and unpaid commitment fee (0.25% per annum on unused commitment, pro rata) | $7,812.50 |
| Administrative agent fee (quarterly, prorated through the Payoff Date) | $6,250.00 |
| Legal fees and expenses of Kenton & Caldwell LLP, as counsel to the Lender, in connection with the Warehouse Facility and the preparation and negotiation of this Payoff Letter, the related release documents, and the collateral transfer documentation | $87,500.00 |
| Other reimbursable out-of-pocket expenses of the Lender (including UCC search and filing fees, account transfer costs, and miscellaneous administrative costs) | $3,475.00 |
| Total Fees and Expenses | $105,037.50 |
| Component | Amount |
| (i) Outstanding Principal Balance | $212,500,000.00 |
| (ii) Estimated Accrued and Unpaid Interest | $482,525.00 |
| (iii) Accrued Fees | $14,062.50 |
| (iv) Reimbursable Expenses (including legal fees) | $90,975.00 |
| Total Payoff Amount | $213,087,562.50 |
| Bank Name: | Havenwood Bank, N.A. |
| Bank Address: | 227 West Monroe Street, Chicago, Illinois 60606 |
| ABA Routing Number: | 071-923-847 |
| Account Name: | Havenwood Bank, N.A. — Warehouse Lending, Driftwood CLO 2023-I Payoff Account |
| Account Number: | 8832-0041-7756 |
| Reference: | Driftwood CLO 2023-I / Warehouse Facility Payoff / September 12, 2023 |
| Attention: | Thomas Eriksen, Managing Director, Structured Finance Lending |