Credit Events

Borrower default and what a Lender can do about it

Two conditions constitute actionable credit events on a Secured Line of Credit:

• Failing to repay a Credit Position in full by that position's deadline

• Breaching a covenant — in particular the minimum Collateral Ratio where asset collateral is used

Either condition moves the facility's status to LIQUIDATABLE (any past-deadline open position emits an onchain Default event and can be monitored in real time).

Lender recourse when LIQUIDATABLE

Undrawn funds

Any funds not drawn by the Borrower remain withdrawable by Lenders: deposits plus repaid interest, less amounts drawn.

Escrowed collateral

The Admin is programmatically permitted to liquidate escrowed collateral — ERC-20s, ERC-4626 tokens, and Uniswap V3 positions — on behalf of Lenders.

Spigot revenue and Reserves

The Admin can step the revenue split up to 100%, directing all tokens from the Borrower's Revenue Contracts to the facility until Lenders are repaid. Reserves already held in the Spigot are applied to repayment.

Borrower and Lenders can renegotiate at any point — refinancing (new rates, new deadline, new capital) is available even while LIQUIDATABLE, which is the onchain path for a workout.

Insolvency

If the Borrower is permanently unable to repay, the Admin can declare the facility INSOLVENT (only from LIQUIDATABLE). This is the onchain impairment event: it fixes recoverable amounts for accounting purposes — for Lenders, deposit plus repaid interest minus outstanding principal — and lets integrated vaults mark positions accordingly.

Emergency recovery (ABORTED)

Facilities can be deployed with recovery functionality enabled. On such facilities, the Admin and Borrower can by mutual consent move the facility to ABORTED — a terminal emergency state (e.g. responding to an exploit or critical operational failure). Once ABORTED:

• The Admin can recover tokens held in the Line, the Escrow (including Uniswap V3 positions), and the Spigot for orderly out-of-band resolution

• The facility can never be reactivated

If recovery is not enabled at deployment, no party — including the Admin — ever has these powers on that facility.

Status reference

Status	Meaning
UNINITIALIZED	Deployed, modules not yet verified
ACTIVE	Operating normally
LIQUIDATABLE	Credit event — recourse enabled
REPAID	All positions closed; reusable
INSOLVENT	Permanent impairment declared by Admin
ABORTED	Emergency terminal state (recovery-enabled facilities only)