Exhibit 10.19

EXECUTION COPY

PURCHASE AND SALE AGREEMENT

by and between

FIFTH STREET FUNDING II, LLC,

as the Purchaser

and

FIFTH STREET FINANCE CORP.,

as the Seller

Dated as of September 16, 2011

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TABLE OF CONTENTS

 

     Page  

ARTICLE I. DEFINITIONS

     1   

Section 1.1.     General

     1   

Section 1.2.     Specific Terms

     2   

Section 1.3.     Other Terms

     5   

Section 1.4.     Computation of Time Periods

     5   

Section 1.5.     Certain References

     5   

ARTICLE II. SALE AND PURCHASE OF THE ELIGIBLE LOAN ASSETS AND OTHER PORTFOLIO
ASSETS

     5   

Section 2.1.     Sale and Purchase of the Eligible Loan Assets and the Other
Portfolio Assets

     5   

Section 2.2.     Purchase Price

     8   

Section 2.3.     Payment of Purchase Price

     8   

Section 2.4.     Nature of the Sales

     9   

ARTICLE III. CONDITIONS OF SALE AND PURCHASE

     10   

Section 3.1.     Conditions Precedent to Effectiveness

     10   

Section 3.2.     Conditions Precedent to All Purchases

     11   

ARTICLE IV. REPRESENTATIONS AND WARRANTIES

     12   

Section 4.1.     Representations and Warranties of the Seller

     12   

Section 4.2.     Representations and Warranties of the Seller Relating to the
Agreement and the Sale Portfolio

     20   

Section 4.3.     Representations and Warranties of the Purchaser

     21   

ARTICLE V. COVENANTS OF THE SELLER

     23   

Section 5.1.     Protection of Title of the Purchaser

     23   

Section 5.2.     Affirmative Covenants of the Seller

     26   

Section 5.3.     Negative Covenants of the Seller

     30   

ARTICLE VI. REPURCHASES AND SUBSTITUTION BY THE SELLER

     32   

Section 6.1.     Repurchase of Loan Assets

     32   

Section 6.2.     Substitution of Loan Assets

     33   

Section 6.3.     Repurchase Limitations

     34   

ARTICLE VII. ADDITIONAL RIGHTS AND OBLIGATIONS IN RESPECT OF THE SALE PORTFOLIO

     34   

Section 7.1.     Rights of the Purchaser

     34   

Section 7.2.     Rights With Respect to Loan Asset Files

     35   

 

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TABLE OF CONTENTS

(cont’d)

 

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Section 7.3. Notice to Collateral Agent, Administrative Agent and each Lender

     35   

ARTICLE VIII. SELLER TERMINATION EVENTS

     35   

Section 8.1. Seller Termination Events

     35   

Section 8.2. Survival of Certain Provisions

     37   

ARTICLE IX. INDEMNIFICATION

     38   

Section 9.1. Indemnification by the Seller

     38   

Section 9.2. Assignment of Indemnities

     41   

ARTICLE X. MISCELLANEOUS

     41   

Section 10.1. Liability of the Seller

     41   

Section 10.2. Limitation on Liability

     41   

Section 10.3. Amendments; Limited Agency

     41   

Section 10.4. Waivers; Cumulative Remedies

     41   

Section 10.5. Notices

     42   

Section 10.6. Merger and Integration

     42   

Section 10.7. Severability of Provisions

     42   

Section 10.8. GOVERNING LAW; JURY WAIVER

     42   

Section 10.9. Consent to Jurisdiction; Service of Process

     42   

Section 10.10. Costs, Expenses and Taxes

     43   

Section 10.11. Counterparts

     43   

Section 10.12. Bankruptcy Non-Petition and Limited Recourse; Claims

     43   

Section 10.13. Binding Effect; Assignability

     44   

Section 10.14. Waiver of Setoff

     44   

Section 10.15. Headings and Exhibits

     44   

Section 10.16. Rights of Inspection

     45   

Section 10.17. Subordination

     45   

Section 10.18. Confidentiality

     45   

SCHEDULES AND EXHIBITS

Schedule I    —  Sale Portfolio List

Exhibit A      —  Form of Loan Assignment

Exhibit B      —  Form of Officer’s Purchase Date Certificate

Exhibit C      —  Form of Power of Attorney for Seller

 

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PURCHASE AND SALE AGREEMENT

THIS PURCHASE AND SALE AGREEMENT, dated as of September 16, 2011, by and between
FIFTH STREET FINANCE CORP., a Delaware corporation, as the seller (the “Seller”)
and FIFTH STREET FUNDING II, LLC, a Delaware limited liability company, as the
purchaser (the “Purchaser”).

W I T N E S S E T H:

WHEREAS, the Purchaser has agreed to Purchase (as hereinafter defined) from the
Seller from time to time, and the Seller has agreed to Sell (as hereinafter
defined) to the Purchaser from time to time, certain Loan Assets and Portfolio
Assets related thereto on the terms set forth herein;

WHEREAS, it is contemplated that the Loan Assets and Portfolio Assets Purchased
hereunder may be Pledged by the Purchaser pursuant to the Loan and Servicing
Agreement (as defined herein) and the related Transaction Documents, to the
Collateral Agent, for the benefit of the Secured Parties; and

WHEREAS, the Seller agrees that all representations, warranties, covenants and
agreements made by the Seller herein with respect to the Sale Portfolio shall
also be for the benefit of any Secured Party.

NOW, THEREFORE, in consideration of the premises and the mutual agreements
hereinafter contained, and for other good and valuable consideration, the
receipt of which is hereby acknowledged, the Purchaser and the Seller, intending
to be legally bound, hereby agree as follows:

ARTICLE I.

DEFINITIONS

Section 1.1. General. The specific terms defined in this Article include the
plural as well as the singular. Words herein importing a gender include the
other gender. References herein to “writing” include printing, typing,
lithography and other means of reproducing words in visible form. References to
agreements and other contractual instruments include all subsequent amendments
thereto or changes therein entered into in accordance with their respective
terms and not prohibited by this Agreement or the Loan and Servicing Agreement
(as hereinafter defined). References herein to Persons include their successors
and assigns permitted hereunder or under the Loan and Servicing Agreement. The
terms “include” or “including” mean “include without limitation” or “including
without limitation”. The words “herein”, “hereof” and “hereunder” and other
words of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision, and Article, Section, Schedule
and Exhibit references, unless otherwise specified, refer to Articles and
Sections of and Schedules and Exhibits to this Agreement. References to any
Applicable Law means such Applicable Law as amended, modified, codified,
replaced or reenacted, in whole or in part, and in effect from time to time,
including rules and regulations promulgated thereunder, and reference to any
Section or other provision of any Applicable Law means that provision of such
Applicable Law

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from time to time in effect and constituting the substantive amendment,
modification, codification, replacement or reenactment of such Section or other
provision. Capitalized terms used herein but not defined herein shall have the
respective meanings assigned to such terms in the Loan and Servicing Agreement,
provided that, if, within such definition in the Loan and Servicing Agreement a
further term is used which is defined herein, then such further term shall have
the meaning given to such further term herein.

Section 1.2. Specific Terms. Whenever used in this Agreement, the following
words and phrases, unless the context otherwise requires, shall have the
following meanings:

“Agreement” means this Purchase and Sale Agreement, as the same may be amended,
restated, waived, supplemented and/or otherwise modified from time to time
hereafter.

“Available Collections” means all cash collections and other cash proceeds with
respect to any Loan Asset, including, without limitation, all Principal
Collections, all Interest Collections, all proceeds of any sale or disposition
with respect to such Loan Asset, cash proceeds or other funds received by the
Seller or the Servicer with respect to any Underlying Collateral (including from
any guarantors).

“Early Termination” has the meaning specified in Section 8.1.

“Facility Financing Statements” has the meaning specified in Section 3.1(iv).

“Indemnified Amounts” has the meaning specified in Section 9.1(a).

“Indemnified Party” has the meaning specified in Section 9.1(a).

“Loan and Servicing Agreement” means that certain Loan and Servicing Agreement,
dated as of the Closing Date, by and among the Purchaser, as the Borrower, the
Seller, as the Servicer and the Transferor, Sumitomo Mitsui Banking Corporation,
as the Administrative Agent and as Collateral Agent, and each of the Lenders
from time to time party thereto, as such may be amended, restated, supplemented
or otherwise modified from time to time pursuant to the terms thereof.

“Loan Asset” means any commercial loan listed on Schedule I hereto, as the same
may be amended, supplemented, restated or replaced from time to time, and all
accounts, payment intangibles, instruments and other property related to the
foregoing.

“Loan Assignment” means a Loan Assignment executed by the Seller, substantially
in the form of Exhibit A attached hereto.

“Non-Consolidation/True Sale Opinion” has the meaning specified in
Section 4.1(hh).

“Pension Plan” has the meaning specified in Section 4.1(r).

 

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“Portfolio Assets” means all Loan Assets owned by the Seller, together with all
proceeds thereof and other assets or property related thereto, including all
right, title and interest of the Seller in and to:

(a) any amounts on deposit in any cash reserve, collection, custody or lockbox
accounts securing the Loan Assets;

(b) all rights with respect to the Loan Assets to which the Seller is entitled
as lender under the applicable Loan Agreement;

(c) any Underlying Collateral securing a Loan Asset and all Recoveries related
thereto, all payments paid in respect thereof and all monies due, to become due
and paid in respect thereof accruing after the applicable Cut-Off Date and all
liquidation proceeds;

(d) all Required Loan Documents, the Loan Asset Files related to any Loan Asset,
any Records, and the documents, agreements, and instruments included in the Loan
Asset Files or Records;

(e) all Insurance Policies with respect to any Loan Asset;

(f) all Liens, guaranties, indemnities, warranties, letters of credit, accounts,
bank accounts and property subject thereto from time to time purporting to
secure or support payment of any Loan Asset, together with all UCC financing
statements, mortgages or similar filings signed or authorized by an Obligor
relating thereto;

(g) all records (including computer records) with respect to the foregoing; and

(h) all collections, income, payments, proceeds and other benefits of each of
the foregoing.

“Purchase” means a purchase by the Purchaser of a Loan Asset and the related
Portfolio Assets from the Seller pursuant to Article II.

“Purchase Date” has the meaning specified in Section 2.1(b).

“Purchase Price” has the meaning specified in Section 2.2.

“Purchaser” has the meaning specified in the Preamble.

“Purchaser Restricted Junior Payment” means (i) any dividend or other
distribution, direct or indirect, on account of any class of membership
interests of the Purchaser now or hereafter outstanding, except a dividend paid
solely in interests of that class of membership interests or in any junior class
of membership interests of the Purchaser; (ii) any redemption, retirement,
sinking fund or similar payment, purchase or other acquisition for value, direct
or indirect, of any class of membership interests of the Purchaser now or
hereafter outstanding, (iii) any payment made to redeem, purchase, repurchase or
retire, or to obtain the surrender of, any outstanding warrants, options or
other rights to acquire membership interests of the Purchaser now or hereafter
outstanding, and (iv) any payment of management fees by the

 

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Purchaser. For the avoidance of doubt, (x) payments and reimbursements due to
the Servicer in accordance with the Transaction Documents do not constitute
Purchaser Restricted Junior Payments, and (y) distributions by the Purchaser to
holders of its membership interests of Loan Assets or of cash or other proceeds
relating thereto which have been substituted by the Purchaser in accordance with
the Loan and Servicing Agreement shall not constitute Purchaser Restricted
Junior Payments.

“Replaced Loan Asset” has the meaning specified in Section 6.2(b)(i).

“Repurchase Price” means, with respect to a Loan Asset to be repurchased
pursuant to Article VI hereof, (i) an amount equal to the greatest of (a) the
Purchase Price less all Principal Collections received in respect of such Loan
Asset from the Purchase Date to the date of repurchase hereunder hereunder plus
any such Principal Collections that the Purchaser shall have been required to
repay to the Obligor with respect to such Loan Asset plus any advances that the
Purchaser shall have made with respect to such Loan Asset after the Purchaser’s
purchase thereof, (b) the product of the initial Assigned Value and the
Outstanding Balance of such Loan Asset and (c) the amount (if any) to be paid or
deposited by the Purchaser pursuant to and in accordance with
Section 2.07(c)(i)(x) of the Loan and Servicing Agreement, plus (ii) any
expenses or fees with respect to such Loan Asset and costs and damages incurred
by the Administrative Agent or by any Lender in connection with any violation by
such Loan Asset of any predatory or abusive lending law which is an Applicable
Law.

“Sale” and “Sell” have the meanings specified in Section 2.1(a), and the term
“Sold” shall have the corresponding meaning.

“Sale Portfolio” means all right, title, and interest (whether now owned or
hereafter acquired or arising, and wherever located) of the Seller in the
property identified below in clauses (i) through (iii) and all accounts, cash
and currency, chattel paper, tangible chattel paper, electronic chattel paper,
copyrights, copyright licenses, equipment, fixtures, contract rights, general
intangibles (including payment intangibles), instruments, certificates of
deposit, certificated securities, uncertificated securities, financial assets,
securities entitlements, commercial tort claims, deposit accounts, inventory,
investment property, letter-of-credit rights, software, supporting obligations,
accessions, or other property consisting of, arising out of, or related to any
of the following (in each case excluding the Retained Interest and the Excluded
Amounts):

(i) the Loan Assets, and all monies due or to become due in payment under such
Loan Assets on and after the related Cut-Off Date, including, but not limited
to, all Available Collections;

(ii) the Portfolio Assets with respect to the Loan Assets referred to in clause
(i); and

(iii) all income and Proceeds of the foregoing.

“Schedule I” means the schedule of all Sale Portfolio that is Sold by the Seller
to the Purchaser on a Purchase Date, as supplemented on any subsequent Purchase
Date by the “Schedule I” attached to the applicable Loan Assignment, and
incorporated herein by reference,

 

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as such schedule may be supplemented and amended from time to time pursuant to
the terms hereof, which schedule shall, together with all supplements and
amendments thereto, be included in and made part of the Loan Asset Schedule
attached to the Loan and Servicing Agreement.

“SEC” has the meaning specified in Section 5.2(n)(i).

“Seller Purchase Event” means with respect to any Loan Asset, the occurrence of
a breach of the Seller’s representations and warranties under Section 4.2 on the
Cut-Off Date for such Loan Asset.

“Seller Termination Event” has the meaning specified in Section 8.1(a).

“Substitute Eligible Loan Asset” has the meaning specified in Section 6.2(a).

“Substitution” has the meaning specified in Section 6.2(a).

“Transfer Taxes” means any tax, fee or governmental charge payable by the
Purchaser, the Seller or any other Person to any federal, state or local
government arising from or otherwise related to the Sale of any Loan Asset, the
related Underlying Collateral (if any) and/or any other related Portfolio Assets
from the Seller to the Purchaser under this Agreement (excluding taxes measured
by net income).

Section 1.3. Other Terms. All accounting terms used but not specifically defined
herein shall be construed in accordance with GAAP. All terms used in Article 9
of the UCC in the State of New York, and used but not specifically defined
herein, are used herein as defined in such Article 9.

Section 1.4. Computation of Time Periods. Unless otherwise stated in this
Agreement, in the computation of a period of time from a specified date to later
specified date, the word “from” means “from and including” and the words “to”
and “until” each mean “to but excluding”. Reference to days or days without
further qualification means calendar days. Reference to any time means New York,
New York time.

Section 1.5. Certain References. All references to the Outstanding Balance of a
Loan Asset as of a Purchase Date shall refer to the close of business on such
day.

ARTICLE II.

SALE AND PURCHASE OF THE ELIGIBLE LOAN ASSETS

AND OTHER PORTFOLIO ASSETS

Section 2.1. Sale and Purchase of the Eligible Loan Assets and the Other
Portfolio Assets.

(a) Subject to the terms and conditions of this Agreement (including the
conditions to Purchase set forth in Article III), on and after the Closing Date,
the Seller hereby agrees to (i) sell, transfer and otherwise convey
(collectively, “Sell” and any such sale, transfer and/or other conveyance, a
“Sale”), from time to time, to the Purchaser, without recourse (except

 

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to the extent specifically provided herein), and the Purchaser hereby agrees to
purchase, all right, title and interest of the Seller (whether now owned or
hereafter acquired or arising, and wherever located) in and to certain Sale
Portfolio designated by the Seller and (ii) transfer or cause the deposit into
the Collection Account of all Available Collections received by the Seller on
account of any Sale Portfolio hereunder on and after the Purchase Date with
respect to such Sale Portfolio, in each case, within two Business Days of the
receipt thereof. The Seller hereby acknowledges that each Sale to the Purchaser
hereunder is absolute and irrevocable, without reservation or retention of any
interest whatsoever by the Seller.

(b) The Seller shall on any Business Day prior to a Seller Termination Event
(each a “Purchase Date”) execute and deliver to the Purchaser a proposed Loan
Assignment identifying the Sale Portfolio to be Sold by the Seller to the
Purchaser on such Purchase Date. From and after such Purchase Date, the Sale
Portfolio listed on Schedule I to the related Loan Assignment shall be deemed to
be listed on Schedule I hereto and constitute part of the Sale Portfolio
hereunder.

(c) On or before any Purchase Date with respect to the Sale Portfolio to be
acquired by the Purchaser on such date, the Seller shall provide the Purchaser
with an Officer’s Certificate, in the form of Exhibit B hereto, signed by a duly
authorized Responsible Officer certifying, as of such Purchase Date, to each of
the items in Section 4.2.

(d) On and after each Purchase Date hereunder and upon payment of the Purchase
Price therefor, the Purchaser shall own the Sale Portfolio Sold by the Seller to
the Purchaser on such Purchase Date, and the Seller shall not take any action
inconsistent with such ownership and shall not claim any ownership interest in
such Sale Portfolio.

(e) Except as specifically provided in this Agreement, the Sale and Purchase of
the Sale Portfolio under this Agreement shall be without recourse to the Seller;
it being understood that the Seller shall be liable to the Purchaser for all
representations, warranties, covenants and indemnities made by the Seller
pursuant to the terms of this Agreement, all of which obligations are limited so
as not to constitute recourse to the Seller for the credit risk of the Obligors.

(f) Neither the Purchaser nor any assignee of the Purchaser (including the
Secured Parties) shall have any obligation or liability to any Obligor or client
of the Seller (including any obligation to perform any obligation of the Seller,
including with respect to any other related agreements) in respect of the Sale
Portfolio (other than with respect to funding obligations to Obligors pursuant
to the terms of the applicable Loan Agreement for Revolving Loan Assets and
Delayed Draw Loan Assets, as applicable, which shall solely be an obligation of
the Purchaser and not any of the Secured Parties). No such obligation or
liability is intended to be assumed by the Purchaser or any assignee of the
Purchaser (including the Secured Parties) and any such assumption is expressly
disclaimed. Without limiting the generality of the foregoing, the Sale of the
Sale Portfolio by the Seller to the Purchaser pursuant to this Agreement does
not constitute and is not intended to result in a creation or assumption by the
Purchaser or any assignee of the Purchaser (including the Secured Parties), of
any obligation of the Seller, as lead agent, collateral agent or paying agent
under any Agented Note.

 

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(g) In connection with each Purchase of Sale Portfolio hereunder, the Seller
shall cause to be delivered to the Collateral Custodian (with a copy to the
Administrative Agent), no later than 2:00 p.m. one Business Day prior to the
related Purchase Date, a faxed or e-mailed copy of the duly executed original
promissory notes of the Loan Assets (and, in the case of any Noteless Loan
Asset, a fully executed assignment agreement) and the Seller shall cause the
Loan Asset Checklist and the Required Loan Documents to be in the possession of
the Collateral Custodian within five Business Days after the related Purchase
Date.

(h) In accordance with the Loan and Servicing Agreement and the Custody
Agreement, certain documents relating to the Sale Portfolio shall be delivered
to and held in trust by the Collateral Custodian for the benefit of the
Purchaser and its assignees, and the Purchaser hereby instructs the Seller to
cause such documents to be delivered to the Collateral Custodian. Such delivery
to the Collateral Custodian of such documents and the possession thereof by the
Collateral Custodian is at the will of the Purchaser and its assignees and in a
custodial capacity for their benefit only.

(i) The Seller shall provide all information, and any other reasonable
assistance, to the Servicer, the Collateral Custodian and the Collateral Agent
necessary for the Servicer, the Collateral Custodian and the Collateral Agent,
as applicable, to conduct the management, administration and collection of the
Sale Portfolio Purchased hereunder in accordance with the terms of the Loan and
Servicing Agreement and the Custody Agreement.

(j) In connection with the Purchase by the Purchaser of Sale Portfolio as
contemplated by this Agreement, the Seller further agrees that it shall, at its
own expense, indicate clearly and unambiguously in its computer files on or
prior to each Purchase Date, and its financial statements, that such Sale
Portfolio has been purchased by the Purchaser in accordance with this Agreement.

(k) The Seller further agrees to deliver to the Purchaser on or before each
Purchase Date a computer file containing a true, complete and correct list of
all Loan Assets to be Sold hereunder on such Purchase Date, identified by
Obligor’s name and Outstanding Balance as of the related Cut–Off Date. Such file
or list shall be marked as Schedule I to the applicable Loan Assignment and
shall be delivered to the Purchaser as confidential and proprietary, and is
hereby incorporated into and made a part of Schedule I to this Agreement, as
such Schedule I may be supplemented and amended from time to time.

(l) The Seller shall, at all times, continue to fulfill its obligations under,
and in strict conformance with, the terms of all Loan Agreements (other than
with respect to funding obligations to Obligors in connection with Revolving
Loan Assets and Delayed Draw Loan Assets, as applicable) related to any Sale
Portfolio purchased hereunder, including without limitation any obligations
pertaining to any Retained Interest.

(m) The Seller and the Purchaser each acknowledge with respect to itself that
the representations and warranties of the Seller in Sections 4.1 and 4.2 hereof
and of the Purchaser in Section 4.3 hereof, and the covenants and agreements of
the Seller herein, including without limitation, in Article V and Article VI
hereof, will run to and be for the benefit of the Purchaser and the Collateral
Agent (on behalf of the Secured Parties), and the Collateral Agent

 

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(on behalf of the Secured Parties) may enforce directly (without joinder of the
Purchaser when enforcing against the Seller) the obligations of the Seller or
the Purchaser, as applicable, with respect to breaches of such representations,
warranties, covenants and all other obligations as set forth in this Agreement.

Section 2.2. Purchase Price.

The purchase price for each item of Sale Portfolio Sold to the Purchaser
hereunder (the “Purchase Price”) shall be in a dollar amount equal to the fair
market value of such Loan Asset as determined from time to time by the Seller
and the Purchaser. Each of the Purchaser and the Seller hereby agree that the
fair market value of each Loan Asset Sold hereunder as of the related Purchase
Date shall be an amount that is not less than the greater of (i) the initial
Assigned Value thereof multiplied by the Outstanding Balance of such Loan Asset
on the related Purchase Date, (ii) the Fair Market Value of such Loan Asset, and
(iii) with respect to any Loan Asset acquired by the Seller at a discount the
purchase price paid by the Seller.

Section 2.3. Payment of Purchase Price.

(a) The Purchase Price for any Sale Portfolio Sold by the Seller to the
Purchaser on any Purchase Date shall be paid in a combination of:
(i) immediately available funds; and (ii) if the Purchaser does not have
sufficient funds to pay the full amount of the Purchase Price (after taking into
account the proceeds the Purchaser expects to receive pursuant to the Advances
under the Loan and Servicing Agreement), by means of a capital contribution by
the Seller to the Purchaser.

(b) The portion of such Purchase Price to be paid in immediately available funds
shall be paid by wire transfer on the applicable Purchase Date to an account
designated by the Seller on or before such Purchase Date or by means of proper
accounting entries being entered upon the accounts and records of the Seller and
the Purchaser on the applicable Purchase Date.

(c) In connection with each delivery of a Loan Assignment, the Seller hereunder
shall be deemed to have certified, with respect to the Sale Portfolio to be Sold
by it on such day, that its representations and warranties contained in Sections
4.1 and 4.2 are true and correct in all respects on and as of such day, with the
same effect as though made on and as of such day (other than any representation
or warranty that is made as of a specific date), that no Event of Default has
occurred or would result therefrom and no Unmatured Event of Default exists or
would result therefrom.

(d) Upon the payment of the Purchase Price for any Purchase, title to the Sale
Portfolio included in such Purchase shall vest in the Purchaser, whether or not
the conditions precedent to such Purchase and the other covenants and agreements
contained herein were in fact satisfied; provided that the Purchaser shall not
be deemed to have waived any claim it may have under this Agreement for the
failure by the Seller in fact to satisfy any such condition precedent, covenant
or agreement.

 

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Section 2.4. Nature of the Sales.

(a) It is the express intent of the parties hereto that the Sale of the Sale
Portfolio by the Seller to the Purchaser hereunder be, and be treated for all
purposes (other than tax and accounting purposes) as an absolute sale by the
Seller (free and clear of any Lien, security interest, charge or encumbrance
other than Permitted Liens) of such Sale Portfolio. It is, further, not the
intention of the parties that such Sale be deemed a pledge of the Sale Portfolio
by the Seller to the Purchaser to secure a debt or other obligation of the
Seller. However, in the event that, notwithstanding the intent of the parties,
the Sale Portfolio is held to continue to be property of the Seller, then the
parties hereto agree that: (i) this Agreement shall also be deemed to be, and
hereby is, a “security agreement” within the meaning of Article 9 of the UCC;
(ii) the transfer of the Sale Portfolio provided for in this Agreement shall be
deemed to be a grant by the Seller to the Purchaser of a first priority security
interest (subject only to Permitted Liens) in all of the Seller’s right, title
and interest in and to the Sale Portfolio and all amounts payable to the holders
of the Sale Portfolio in accordance with the terms thereof and all proceeds of
the conversion, voluntary or involuntary, of the foregoing into cash,
instruments, securities or other property, including, without limitation, all
amounts from time to time held or invested in the Controlled Accounts, whether
in the form of cash, instruments, securities or other property, to secure the
prompt and complete payment of a loan deemed to have been made in an amount
equal to the aggregate Purchase Price of the Sale Portfolio together with all of
the other obligations of the Seller hereunder; (iii) the possession by the
Purchaser (or the Collateral Custodian on behalf of the Collateral Agent, for
the benefit of the Secured Parties) of Sale Portfolio and such other items of
property as constitute instruments, money, negotiable documents or chattel paper
shall be, subject to clause (iv), for purposes of perfecting the security
interest pursuant to the UCC; and (iv) acknowledgements from Persons holding
such property shall be deemed acknowledgements from custodians, bailees or
agents (as applicable) of the Purchaser for the purpose of perfecting such
security interest under Applicable Law. The parties further agree in such event
that any assignment of the interest of the Purchaser pursuant to any provision
hereof shall also be deemed to be an assignment of any security interest created
pursuant to the terms of this Agreement. The Purchaser shall, to the extent
consistent with this Agreement and the other Transaction Documents, take such
actions as may be necessary to ensure that, if this Agreement were deemed to
create a security interest in the Sale Portfolio, such security interest would
be deemed to be a perfected security interest of first priority (subject only to
Permitted Liens) under Applicable Law and will be maintained as such throughout
the term of this Agreement. The Purchaser shall have, in addition to the rights
and remedies which it may have under this Agreement, all other rights and
remedies provided to a secured creditor under the UCC and other Applicable Law,
which rights and remedies shall be cumulative.

(b) It is the intention of each of the parties hereto that the Sale Portfolio
Sold by the Seller to the Purchaser pursuant to this Agreement shall constitute
assets owned by the Purchaser and shall not be part of the Seller’s estate in
the event of the filing of a bankruptcy petition by or against the Seller under
any bankruptcy or similar law.

(c) The Purchaser agrees to treat, and shall cause the Seller to treat, for all
purposes (other than tax and accounting purposes), the transactions effected by
this Agreement as sales of assets to the Purchaser. The Seller agrees to reflect
in the Seller’s financial records and to include a note in the publicly filed
annual and quarterly financial statements of Fifth Street

 

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indicating that: (i) assets related to transactions (including transactions
pursuant to the Transaction Documents) that do not meet SFAS 140 requirements
for accounting sale treatment are reflected in the consolidated balance sheet of
Fifth Street as finance receivables pledged and non-recourse, secured borrowings
and (ii) those assets are owned by a special purpose entity that is consolidated
in the financial statements of Fifth Street, and the creditors of that special
purpose entity have received ownership and/or security interests in such assets
and such assets are not intended to be available to the creditors of sellers (or
any affiliate of the sellers) of such assets to that special purpose entity.

ARTICLE III.

CONDITIONS OF SALE AND PURCHASE

Section 3.1. Conditions Precedent to Effectiveness. This Agreement shall be
effective upon the satisfaction of the conditions precedent that the Purchaser
shall have received on or before the Closing Date, in form and substance
satisfactory to the Purchaser, all of the following:

(i) a copy of this Agreement duly executed by each of the parties hereto;

(ii) a certificate of the secretary or assistant secretary of the Seller, dated
the Closing Date, certifying (A) the names and true signatures of the incumbent
officers of the Seller authorized to sign on behalf of the Seller this
Agreement, the Loan Assignments and all other documents to be executed by the
Seller hereunder or in connection herewith (on which certificate the Purchaser
and its assignees may conclusively rely until such time as the Purchaser and
such assignees shall receive from the Seller, a revised certificate meeting the
requirements of this Section 3.1(ii)), (B) that the copy of the certificate of
incorporation of the Seller is a complete and correct copy and that such
certificate of incorporation has not been amended, modified or supplemented and
is in full force and effect, (C) that the copy of the by-laws of the Seller are
a complete and correct copy, and that such by-laws have not been amended,
modified or supplemented and are in full force and effect, and (D) the
resolutions of the board of directors of the Seller approving and authorizing
the execution, delivery and performance by the Seller of this Agreement, the
Loan Assignments and all other documents to be executed by the Seller hereunder
or in connection herewith;

(iii) a good standing certificate, dated as of a recent date for the Seller,
issued by the Secretary of State of the Seller’s State of incorporation;

(iv) filed (with the Secretary of State of the State of Delaware), original
copies of proper financing statements (the “Facility Financing Statements”)
describing the Sale Portfolio, and naming the Seller as the “Debtor/Seller”, the
Purchaser as “Secured Party/Buyer” and the Collateral Agent, for the benefit of
the Secured Parties, as “Total Assignee”, or other similar instruments or
documents, in form and substance sufficient for filing under the UCC or any
comparable law of any and all jurisdictions as may be necessary to perfect the
Purchaser’s ownership interest in all Sale Portfolio;

 

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(v) copies of properly authorized termination statements or statements of
release (on Form UCC-3) or other similar instruments or documents, if any, in
form and substance sufficient for filing under the UCC or any comparable law of
any and all jurisdictions as may be necessary to release all security interests
and similar rights of any Person in the Sale Portfolio previously granted by the
Seller;

(vi) copies of tax and judgment lien searches in all jurisdictions reasonably
requested by the Purchaser or its assignees and requests for information (or a
similar UCC search report certified by a party acceptable to the Purchaser and
its assigns), dated a date reasonably near to the Closing Date, and with respect
to such requests for information or UCC searches, listing all effective
financing statements which name the Seller (under its present name and any
previous name) as debtor and which are filed in the State of Delaware, together
with copies of such financing statements (none of which shall cover any Sale
Portfolio);

(vii) all instruments in connection with the transactions contemplated by this
Agreement shall be satisfactory in form and substance to the Purchaser, each
Lender and the Administrative Agent, and the Purchaser, each Lender and the
Administrative Agent shall have received from the Seller copies of all documents
(including, without limitation, records of corporate proceedings, approvals and
opinions) relevant to the transactions herein contemplated as the Purchaser,
each Lender and the Administrative Agent may have requested;

(viii) any necessary third party consents to the closing of the transactions
contemplated hereby, in form and substance satisfactory to the Purchaser;

(ix) the Seller shall have paid all fees then required to be paid by it on the
Closing Date; and

(x) one or more favorable Opinions of Counsel from counsel to the Seller with
respect to the perfection and enforceability of the security interest hereunder
and such other matters as the Purchaser or any assignee thereof may reasonably
request.

Section 3.2. Conditions Precedent to All Purchases. The Purchase to take place
on the initial Purchase Date and each Purchase to take place on a subsequent
Purchase Date hereunder shall be subject to the further conditions precedent
that:

(a) The following statements shall be true:

(i) The representations and warranties of the Seller contained in Sections 4.1
and 4.2 shall be true and correct on and as of such Purchase Date in all
respects, before and after giving effect to the Purchase to take place on such
Purchase Date and to the application of proceeds therefrom, as though made on
and as of such date (other than any representation and warranty that is made as
of a specific date);

(ii) The Seller is in compliance in all respects with each of its covenants and
other agreements set forth herein;

 

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(iii) No Seller Termination Event (or event which, with the passage of time or
the giving of notice, or both, would constitute a Seller Termination Event)
shall have occurred or would result from such Purchase;

(iv) The Facility Maturity Date has not yet occurred; and

(v) No Applicable Law shall prohibit or enjoin, and no order, judgment or decree
of any federal, state or local court or governmental body, agency or
instrumentality shall prohibit or enjoin, the making of any such Purchase by the
Purchaser in accordance with the provisions hereof.

(b) The Purchaser shall have received a duly executed and completed Loan
Assignment along with a Schedule I that is true, accurate and complete in all
respects as of the related Cut-Off Date.

(c) The Seller shall have delivered to the Collateral Custodian on behalf of the
Purchaser and any assignee thereof each item required to be contained in the
Required Loan Documents and the Loan Asset Checklist of any of the Loan Assets
or Portfolio Assets related thereto being acquired by the Purchaser within five
Business Days of the related Purchase Date.

(d) The Seller shall have taken all steps necessary under all Applicable Law in
order to Sell to the Purchaser the Sale Portfolio being Purchased on such
Purchase Date and, upon the Sale of such Sale Portfolio from the Seller to the
Purchaser pursuant to the terms hereof, the Purchaser will have acquired good
and marketable title to and a valid and perfected ownership interest in such
Sale Portfolio, free and clear of any Lien, security interest, charge or
encumbrance (other than Permitted Liens); provided that if such item of Sale
Portfolio contains a restriction of transferability, the applicable Loan
Agreement provides that any consents necessary for future assignments shall not
be unreasonably withheld by the applicable Obligor and/or agent, and the rights
to enforce rights and remedies in respect of the same under the applicable Loan
Agreement inure to the benefit of the holder of such Loan Asset (subject to the
rights of any applicable agent or other lenders).

(e) The Seller shall have received a copy of an Approval Notice executed by the
Administrative Agent evidencing the approval of the Administrative Agent, in its
sole and absolute discretion of the Sale to the Purchaser of the Eligible Loan
Assets identified on Schedule I to the applicable Loan Assignment on the
applicable Purchase Date.

ARTICLE IV.

REPRESENTATIONS AND WARRANTIES

Section 4.1. Representations and Warranties of the Seller. The Seller makes the
following representations and warranties, on which the Purchaser relies in
acquiring the Sale Portfolio Purchased hereunder and each of the Secured Parties
relies upon in entering into the Loan and Servicing Agreement. As of each
Purchase Date and each Reporting Date (unless a specific date is specified
below), the Seller represents and warrants to the Purchaser for the benefit of
the Purchaser and each of its successors and assigns (and as to any Loan Assets,
only with respect to the Loan Assets being purchased on such Purchase Date)
that:

 

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(a) Organization and Good Standing. The Seller has been duly organized and is
validly existing as a corporation in good standing under the laws of the State
of Delaware (subject to Section 5.1(f)), with all requisite corporate power and
authority to own or lease its properties and to conduct its business as such
business is presently conducted, and had at all relevant times, and now has, all
necessary power, authority and legal right to acquire and own the Sale Portfolio
and to Sell such Sale Portfolio to the Purchaser hereunder.

(b) Due Qualification. The Seller is duly qualified to do business and has
obtained all necessary licenses and approvals, in all jurisdictions in which the
ownership or lease of its property or the conduct of its business requires such
qualification, licenses and/or approvals.

(c) Power and Authority; Due Authorization; Execution and Delivery. The Seller
(i) has all necessary corporate power, authority and legal right to (a) execute
and deliver this Agreement, each Loan Assignment and the other Transaction
Documents to which it is a party and (b) carry out the terms of this Agreement,
each Loan Assignment and the other Transaction Documents to which it is a party
and (ii) has duly authorized by all necessary corporate action the execution,
delivery and performance of this Agreement, each Loan Assignment and the other
Transaction Documents to which it is a party and the sale and assignment of an
ownership interest in the Sale Portfolio on the terms and conditions herein
provided. This Agreement, each Loan Assignment and each other Transaction
Document to which the Seller is a party have been duly executed and delivered by
the Seller.

(d) Valid Conveyance; Binding Obligations. This Agreement, each Loan Assignment
and the Transaction Documents to which the Seller is party have been and, in the
case of each Loan Assignment delivered after the Closing Date, will be, duly
executed and delivered by the Seller, and this Agreement, together with the
applicable Loan Assignment in each case, shall effect valid Sales of Sale
Portfolio, enforceable against the Seller and creditors of and purchasers from
the Seller, and this Agreement, each Loan Assignment and such Transaction
Documents shall constitute legal, valid and binding obligations of the Seller
enforceable against the Seller in accordance with their respective terms, except
as enforceability may be limited by Bankruptcy Laws and general principles of
equity (whether such enforceability is considered in a proceeding in equity or
at law).

(e) No Violation. The execution, delivery and performance of this Agreement,
each Loan Assignment, the other Transaction Documents to which it is a party and
all other agreements and instruments executed and delivered or to be executed
and delivered by the Seller pursuant hereto or thereto in connection with the
Sale of the Sale Portfolio will not (i) conflict with, result in any breach of
any of the terms and provisions of, or constitute (with or without notice or
lapse of time or both) a default under, the Seller’s certificate of
incorporation or by-laws or any contractual obligation of the Seller,
(ii) result in the creation or imposition of any Lien (other than Permitted
Liens) upon any of the Seller’s properties pursuant to the terms of any such
contractual obligation, other than this Agreement, or (iii) violate any
Applicable Law.

(f) No Proceedings. There is no litigation, proceeding or investigation pending
or, to the knowledge of the Seller, threatened against the Seller, before any
Governmental Authority (i) asserting the invalidity of this Agreement, any Loan
Assignment or

 

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any other Transaction Document to which the Seller is a party, (ii) seeking to
prevent the consummation of any of the transactions contemplated by this
Agreement, any Loan Assignment or any other Transaction Document to which the
Seller is a party or (iii) seeking any determination or ruling that could
reasonably be expected to have a Material Adverse Effect.

(g) No Consents. The Seller is not required to obtain the consent or approval of
any other party or any consent, license, approval or authorization, or
registration or declaration with, any Governmental Authority, bureau or agency
in connection with the execution, delivery, performance, validity or
enforceability of this Agreement or any Loan Assignment, except those which have
been obtained.

(h) State of Organization, Etc. Except as permitted hereunder, the Seller’s
legal name is as set forth in this Agreement. Except as permitted hereunder, the
Seller has not changed its name since its incorporation; does not have
tradenames, fictitious names, assumed names or “doing business as” names. Except
as permitted hereunder, the location of the Seller’s records regarding the Sale
Portfolio (other than those delivered to the Collateral Custodian) is at the
address of the Seller set forth in Section 10.05 of this Agreement. The Seller’s
only jurisdiction of incorporation is Delaware, and, except as permitted
hereunder, the Seller has not changed its jurisdiction of incorporation.

(i) Bulk Sales. The execution, delivery and performance of this Agreement and
the transactions contemplated hereby do not require compliance with any “bulk
sales” act or similar law by the Seller.

(j) Solvency. The Seller is not the subject of any Bankruptcy Proceedings or
Bankruptcy Event. The Seller is Solvent and will not become insolvent after
giving effect to the transactions contemplated by this Agreement and the other
Transaction Documents. The Seller after giving effect to the transactions
contemplated by this Agreement and the other Transaction Documents, will have an
adequate amount of capital to conduct its business in the foreseeable future.

(k) Origination of Loan Assets. The Eligible Loan Assets included in the Sale
Portfolio were originated pursuant to and in accordance with the Investment
Policies.

(l) Compliance with Laws. The Seller has complied in all respects with all
Applicable Law to which it may be subject, and no item of Sale Portfolio
contravenes any Applicable Law.

(m) Taxes. The Seller has filed or caused to be filed all tax returns that are
required to be filed by it (subject to any extensions to file properly obtained
by the same). The Seller has paid or made adequate provisions for the payment of
all Taxes and all assessments made against it or any of its property (other than
any amount of Tax the validity of which is currently being contested in good
faith by appropriate proceedings and with respect to which reserves in
accordance with GAAP have been provided on the books of the Seller), and no tax
lien has been filed and, to the Seller’s knowledge, no claim is being asserted,
with respect to any such Tax, assessment or other charge.

 

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(n) Exchange Act Compliance; Regulations T, U and X. None of the transactions
contemplated herein or in the other Transaction Documents (including, without
limitation, the use of the proceeds from the Sale of the Sale Portfolio) will
violate or result in a violation of Section 7 of the Exchange Act, or any
regulations issued pursuant thereto, including, without limitation, Regulations
T, U and X of the Board of Governors of the Federal Reserve System, 12 C.F.R.,
Chapter II. The Seller does not own or intend to carry or purchase, and no
proceeds from the Sale of the Sale Portfolio will be used to carry or purchase,
any Margin Stock or to extend “purpose credit” within the meaning of Regulation
U.

(o) Loan Assignments. Each Loan Assignment is accurate in all respects.

(p) No Liens, Etc. The Sale Portfolio to be acquired by Purchaser hereunder is
owned by the Seller free and clear of any Lien, security interest, charge or
encumbrance (subject only to Permitted Liens), and the Seller has the full
right, corporate power and lawful authority to Sell the same and interests
therein and, upon the Sale thereof hereunder, the Purchaser will have acquired
good and marketable title to and a valid and perfected ownership interest in
such Sale Portfolio, free and clear of any Lien, security interest, charge or
encumbrance (subject only to Permitted Liens); provided that if such item of
Sale Portfolio contains a restriction of transferability, the applicable Loan
Agreement provides that any consents necessary for future assignments shall not
be unreasonably withheld by the applicable Obligor and/or agent, and the rights
to enforce rights and remedies in respect of the same under the applicable Loan
Agreement inure to the benefit of the holder of such Loan Asset (subject to the
rights of any applicable agent or other lenders). No effective financing
statement reflecting the Seller or the Seller’s predecessor in interest, as a
“Debtor”, or other instrument similar in effect covering all or any part of any
Sale Portfolio Purchased hereunder is on file in any recording office, except
such as may have been filed in favor of the Collateral Agent as “Secured Party”
or “Assignee”, in each case, for the benefit of the Secured Parties pursuant to
the Loan and Servicing Agreement.

(q) Information True and Correct. All information heretofore furnished by or on
behalf of the Seller to the Purchaser or any assignee thereof in connection with
this Agreement or any transaction contemplated hereby is true and complete and
does not omit to state a material fact necessary to make the statements
contained therein, in light of the circumstances under which they were made, not
misleading; provided that, solely with respect to written or electronic
information furnished by or on behalf of the Seller which was provided to the
Seller from an Obligor with respect to a Loan Asset, such information need only
be accurate, true and correct to the knowledge of the Seller; provided, further,
that the foregoing proviso shall not apply to any information presented in a
Servicer’s Certificate, Servicing Report, Notice of Borrowing or Borrowing Base
Certificate.

(r) ERISA Compliance. The present value of all benefits vested under each
“employee pension benefit plan”, as such term is defined in Section 3(2) of
ERISA, other than a Multiemployer Plan, that is subject to Title IV of ERISA and
is sponsored or maintained by the Seller or any ERISA Affiliate of the Seller ,
or to which the Seller or any ERISA Affiliate of the Seller contributes or has
an obligation to contribute, or has any liability (each, a “Pension Plan”), does
not exceed the value of the assets of the Pension Plan allocable to such vested
benefits (based on the value of such assets as of the last annual valuation
date) determined in

 

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accordance with the assumptions used for funding such Pension Plan pursuant to
Sections 412 and 430 of the Code. No prohibited transactions, failure to meet
the minimum funding standard set forth in Section 302(a) of ERISA and
Section 412(a) of the Code (with respect to any Pension Plan other than a
Multiemployer Plan), withdrawals or reportable events have occurred with respect
to any Pension Plan that, in the aggregate, could subject the Seller to any
material tax, penalty or other liability. No notice of intent to terminate a
Pension Plan has been filed, nor has any Pension Plan been terminated under
Section 4041(f) of ERISA, nor has the Pension Benefit Guaranty Corporation
instituted proceedings to terminate, or appoint a trustee to administer, a
Pension Plan and no event has occurred or condition exists that might constitute
grounds under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Pension Plan.

(s) Investment Company Status. The Seller is an “investment company” that has
elected to be regulated as a “business development company” within the meaning
of the 1940 Act. The Seller conducts its business and other activities in
compliance in all respects with the applicable provisions of the 1940 Act and
any applicable rules, regulations or orders issued by the SEC thereunder.

(t) Intent of The Seller. The Seller has not sold, contributed, transferred,
assigned or otherwise conveyed any interest in any Sale Portfolio to the
Purchaser with any intent to hinder, delay or defraud any of the Seller’s
creditors.

(u) Value Given. The Seller has received reasonably equivalent value from the
Purchaser in exchange for the Sale of such Sale Portfolio Sold hereunder. No
such Sale has been made for or on account of an antecedent debt owed by the
Seller and no such transfer is or may be voidable or subject to avoidance under
any section of the Bankruptcy Code.

(v) Accounting. Other than for tax and consolidated accounting purposes, the
Seller will not account for or treat (whether in financial statements or
otherwise) the transactions contemplated hereby in any manner other than as a
sale of the Sale Portfolio by the Seller to the Purchaser.

(w) No Broker-Dealers. The Seller is not a broker-dealer or subject to the
Securities Investor Protection Act of 1970, as amended.

(x) Special Purpose Entity. The Purchaser is an entity with assets and
liabilities separate and distinct from those of the Seller and any Affiliates
thereof, and the Seller hereby acknowledges that the Administrative Agent, the
Lenders, the Collateral Agent, the Collateral Custodian and the other Secured
Parties are entering into the transactions contemplated by the Loan and
Servicing Agreement in reliance upon the Purchaser’s identity as a legal entity
that is separate from the Seller and from each other Affiliate of the Seller.
Therefore, from and after the date of execution and delivery of this Agreement,
the Seller shall take all reasonable steps, including, without limitation, all
steps that the Administrative Agent and the Collateral Agent may from time to
time request, to maintain the Purchaser’s identity as a separate legal entity
and to make it manifest to third parties that the Purchaser is an entity with
assets and liabilities distinct from those of the Seller and each other
Affiliate thereof and not just a division of the Seller or any such other
Affiliate (other than for tax purposes). Without limiting

 

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the generality of the foregoing and in addition to the other covenants set forth
herein, the Seller shall take all reasonable steps to ensure that the Purchaser
has not and will not take, refrain from taking, or fail to take (as applicable)
any action described in Section 9(j) of its limited liability company operating
agreement and Sections 5.01(a), 5.01(b), 5.02(a) and 5.02(b) of the Loan and
Servicing Agreement; provided that, for the avoidance of doubt, the Seller shall
not be required to expend any of its own funds to cause the Purchaser to be in
compliance with subsection 5.02(a)(v) of the Loan and Servicing Agreement or
subsection 5.01(b)(xvii) of the Loan and Servicing Agreement (it being
understood that this proviso shall in no way affect the obligation of Seller to
manage the activities and liabilities of the Purchaser such that the Purchaser
maintains compliance with either of the foregoing subsections).

(y) Sale Agreement. This Agreement and the Loan Assignments contemplated herein
are the only agreements or arrangements pursuant to which the Seller Sells the
Sale Portfolio Sold by it to the Purchaser.

(z) Security Interest.

(i) This Agreement creates a valid and continuing security interest (as defined
in the applicable UCC) in the Sale Portfolio in favor of the Purchaser, which
security interest is prior to all other Liens (except for Permitted Liens), and
is enforceable as such against creditors of and purchasers from the Seller;

(ii) the Loan Assets, along with the related Loan Asset Files, constitute either
a “general intangible” (including a “payment intangible”), an “instrument,” an
“account,” “securities entitlement,” “tangible chattel paper”, “certificated
security,” “uncertificated security,” “supporting obligation,” or “insurance”
(each as defined in the applicable UCC), real property and/or such other
category of collateral under the applicable UCC as to which the Seller has
complied with its obligations under this Section 4.1(z).

(iii) the Seller owns and has good and marketable title to (or with respect to
assets securing any Loan Assets, a valid security interest in) the Sale
Portfolio Sold by it to the Purchaser hereunder on such Purchase Date, free and
clear of any Lien (other than Permitted Liens) of any Person;

(iv) the Seller has received all consents and approvals required by the terms of
any Loan Asset, to the Sale thereof and the granting of a security interest in
the Loan Assets hereunder to the Purchaser;

(v) the Seller has caused the filing of all appropriate financing statements in
the proper filing office in the appropriate jurisdictions under Applicable Law
in order to perfect the security interest in that portion of the Sale Portfolio
in which a security interest may be perfected by filing granted hereunder to the
Purchaser; provided that filings in respect of real property shall not be
required;

(vi) other than (i) as expressly permitted by the terms of this Agreement and
the Loan and Servicing Agreement and (ii) the security interest granted to the
Purchaser and the Collateral Agent, on behalf of the Secured Parties, the Seller
has

 

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not pledged, assigned, sold, granted a security interest in or otherwise
conveyed any of the Sale Portfolio. The Seller has not authorized the filing of
and is not aware of any financing statements against the Seller that include a
description of collateral covering the Sale Portfolio other than any financing
statement (A) relating to the security interest granted to the Purchaser under
this Agreement, or (B) that has been terminated and/or fully and validly
assigned to the Collateral Agent on or prior to the date hereof. The Seller is
not aware of the filing of any judgment or tax lien filings against the Seller;

(vii) all original executed copies of each underlying promissory note or copies
of each Loan Asset Register, as applicable, that constitute or evidence each
Loan Asset have been, or subject to the delivery requirements contained herein,
will be delivered to the Collateral Custodian;

(viii) other than in the case of Noteless Loan Assets, the Seller has received,
or subject to the delivery requirements herein will receive, a written
acknowledgment from the Collateral Custodian that the Collateral Custodian, as
the bailee of the Collateral Agent, is holding the underlying promissory notes
that constitute or evidence the Loan Assets solely on behalf of and for the
Collateral Agent, for the benefit of the Secured Parties;

(ix) none of the underlying promissory notes or Loan Asset Registers, as
applicable, that constitute or evidence the Loan Assets has any marks or
notations indicating that they have been pledged, assigned or otherwise conveyed
to any Person other than the Collateral Agent, on behalf of the Secured Parties;

(x) with respect to any Sale Portfolio that constitutes a “certificated
security”, such certificated security has been delivered to the Collateral
Custodian, on behalf of the Secured Parties and, if in registered form, has been
specifically Indorsed in blank by an effective Indorsement or has been
registered in the name of the Purchaser, subject to the Lien of the Collateral
Agent, for the benefit of the Secured Parties, upon original issue or
registration or transfer by the Purchaser of such certificated security;

(xi) with respect to any Sale Portfolio that constitutes an “uncertificated
security”, that the Seller shall cause the issuer of such uncertificated
security to register the Collateral Agent, on behalf of the Secured Parties, as
the registered owner of such uncertificated security; and

(xii) with respect to any Sale Portfolio that constitutes “security
entitlements”:

(A) all of such security entitlements have been credited to one of the
Controlled Accounts and the securities intermediary for each Controlled Account
has agreed to treat all assets credited to such Controlled Account as “financial
assets” within the meaning of the applicable UCC; and

(B) the Seller has taken all steps necessary to cause the securities
intermediary to identify in its records the Purchaser, subject to the lien of
the Collateral Agent, for the benefit of the Secured Parties, as the Persons

 

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having a security entitlement against the securities intermediary in each of the
Controlled Accounts;

(C) the Controlled Accounts are not in the name of any Person other than the
Purchaser, subject to the lien of the Collateral Agent, for the benefit of the
Secured Parties. The securities intermediary of any Controlled Account which is
a “securities account” under the UCC has agreed to comply with the entitlement
orders and instructions of the Purchaser, the Servicer and the Collateral Agent
(acting at the direction of the Administrative Agent) in accordance with the
Transaction Documents, including causing cash to be invested in Permitted
Investments; provided that upon the delivery of a Notice of Exclusive Control
(as defined in the Control Agreement) by the Collateral Agent (acting at the
direction of the Administrative Agent), the securities intermediary has agreed
to only follow the entitlement orders and instructions of the Collateral Agent,
on behalf of the Secured Parties, including with respect to the investment of
cash in Permitted Investments.

(aa) Notice to Agents and Obligors. The Seller has directed any agent,
administrative agent or Obligor for any Loan Asset to remit all payments and
collections with respect to such Loan Asset directly to the Collection Account.

(bb) Collections. The Collection Account is the only account to which Obligors
have been instructed to send Interest Collections and Principal Collections on
the Sale Portfolio Sold by the Seller. The Seller acknowledges that it has been
instructed by the Purchaser to deposit into the Collection Account the
Repurchase Price relating to any Loan Asset required to be repurchased
hereunder. The Seller acknowledges that all Interest Collections and Principal
Collections received by it or its Affiliates with respect to the Sale Portfolio
Purchased by the Purchaser as contemplated by this Agreement, along with any
funds it is required to deposit into the Collection Account to effect any
repurchase of any Loan Asset required hereunder, are held and shall be held in
trust for the benefit of the Purchaser (or its assignees) until deposited into
the Collection Account as required by the Loan and Servicing Agreement.

(cc) Set–Off, Etc. No Sale Portfolio has been compromised, adjusted, extended,
satisfied, subordinated, rescinded, set–off or modified by the Seller or the
Obligor thereof, and no Loan Asset in the Sale Portfolio is subject to
compromise, adjustment, extension, satisfaction, subordination, rescission,
set–off, counterclaim, defense, abatement, suspension, deferment, deduction,
reduction, termination or modification, whether arising out of transactions
concerning the Sale Portfolio or otherwise, by the Seller or the Obligor with
respect thereto, except for amendments, extensions or modifications to such Sale
Portfolio otherwise permitted under Section 6.04(a) of the Loan and Servicing
Agreement and in accordance with the Servicing Standard.

(dd) Ownership of the Purchaser. The Seller owns, directly or indirectly, 100%
of the membership interests of the Purchaser, free and clear of any Lien. Such
membership interests are validly issued, fully paid and non–assessable, and
there are no options, warrants or other rights to acquire membership interests
of the Purchaser.

 

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(ee) Confirmation from the Seller. The Seller hereby provides written
confirmation to the Purchaser that the Seller will not cause the Purchaser to
file a voluntary petition under the Bankruptcy Code.

(ff) USA PATRIOT Act. Neither the Seller nor any Affiliate of the Seller is
(i) a country, territory, organization, person or entity named on an Office of
Foreign Asset Control (OFAC) list, (ii) a Person that resides or has a place of
business in a country or territory named on such lists or which is designated as
a “Non-Cooperative Jurisdiction” by the Financial Action Task Force on Money
Laundering, or whose subscription funds are transferred from or through such a
jurisdiction; (iii) a “Foreign Shell Bank” within the meaning of the USA PATRIOT
Act, i.e., a foreign bank that does not have a physical presence in any country
and that is not affiliated with a bank that has a physical presence and an
acceptable level of regulation and supervision; or (iv) a person or entity that
resides in or is organized under the laws of a jurisdiction designated by the
United States Secretary of the Treasury under Sections 311 or 312 of the USA
PATRIOT Act as warranting special measures due to money laundering concerns.

(gg) Covenants; Seller Termination Event. All covenants, agreements and
undertakings of the Seller hereunder have been fully performed. No event has
occurred which constitutes a Seller Termination Event and no event has occurred
and is continuing which, with the passage of time or the giving of notice, or
both would constitute a Seller Termination Event (other than any Seller
Termination Event which has previously been disclosed to the Administrative
Agent as such).

(hh) Opinion. The statements of fact in the section heading “Assumptions” in the
non-consolidation and true sale opinion (the “Non-Consolidation/True Sale
Opinion”) of Rutan & Tucker, LLP, dated as of the date hereof are true and
correct in all respects.

(ii) Accuracy of Representations and Warranties. Each representation or warranty
by the Seller contained (i) herein or (ii) in any certificate or other document
furnished by the Seller to the Purchaser or the Administrative Agent in writing
pursuant hereto or in connection herewith is, as of its date, true and correct
in all respects.

(jj) Representations and Warranties for Benefit of the Purchaser’s Assignees.
The Seller hereby makes each representation and warranty contained in this
Agreement and the other Transaction Documents to which it is a party and that
have been executed and delivered on or prior to such Purchase Date to, and for
the benefit of the Purchaser (and its assignees), the Administrative Agent, the
Lenders, the Collateral Agent, the Collateral Custodian and the other Secured
Parties as if the same were set forth in full herein.

It is understood and agreed that the representations and warranties provided in
this Section 4.1 shall survive (x) the Sale of the Sale Portfolio to the
Purchaser and (y) and the grant of a first priority perfected security interest
in, to and under the Sale Portfolio pursuant to the Loan and Servicing Agreement
by the Purchaser. Upon discovery by the Seller or the Purchaser of a breach of
any of the foregoing representations and warranties, the party discovering such
breach shall give prompt written notice thereof to the other and to the
Administrative Agent and each Lender immediately upon obtaining knowledge of
such breach.

 

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Section 4.2. Representations and Warranties of the Seller Relating to the
Agreement and the Sale Portfolio. The Seller makes the following representations
and warranties, on which the Purchaser relies in acquiring the Sale Portfolio
Purchased hereunder and each of the Secured Parties relies upon in entering into
the Loan and Servicing Agreement. As of each Purchase Date and each Reporting
Date, the Seller represents and warrants to the Purchaser for the benefit of the
Purchaser and each of its successors and assigns (and as to any Loan Assets,
only with respect to the Loan Assets being purchased on such Purchase Date)
that:

(a) Binding Obligation, Valid Transfer and Security Interest. This Agreement,
together with the Loan Assignments, constitutes a valid transfer to the
Purchaser of all right, title and interest in, to and under all Sale Portfolio,
free and clear of any Lien of any Person claiming through or under the Seller or
its Affiliates, except for Permitted Liens. If the conveyances contemplated by
this Agreement are determined to be a transfer for security, then this Agreement
constitutes a grant of a security interest in all Sale Portfolio to the
Purchaser which upon the delivery of the Required Loan Documents and the filing
of the financing statements shall be a first priority perfected security
interest in all Sale Portfolio, subject only to Permitted Liens. Neither the
Seller nor any Person claiming through or under the Seller shall have any claim
to or interest in the Controlled Accounts; provided if this Agreement
constitutes only a grant of a security interest in such property, then the
Seller shall have the rights in such property as a debtor for purposes of the
UCC.

(b) Eligibility of Sale Portfolio. (i) Schedule I is an accurate and complete
listing of all the Sale Portfolio as of the related Cut–Off Date and the
information contained therein with respect to the identity of such Sale
Portfolio and the amounts owing thereunder is true and correct as of the related
Cut–Off Date, (ii) each item of the Sale Portfolio Purchased by the Purchaser
hereunder is an Eligible Loan Asset, and (iii) with respect to each item of the
Sale Portfolio all consents, licenses, approvals or authorizations of or
registrations or declarations of any Governmental Authority or any Person
required to be obtained, effected or given by the Seller in connection with the
transfer of an ownership interest or security interest in each item of Sale
Portfolio to the Purchaser have been duly obtained, effected or given and are in
full force and effect.

(c) No Fraud. Each Eligible Loan Asset was originated without any fraud or
misrepresentation by the Seller or, to the best of the Seller’s knowledge, on
the part of the Obligor.

(d) Full Payment. As of the related Purchase Date thereof, the Seller has no
knowledge of any fact which should lead it to expect that any Sale Portfolio
will not be paid in full.

(e) Environmental. With respect to each item of Underlying Collateral as of the
Cut-Off Date for the Loan Asset related to such Underlying Collateral, to the
actual knowledge of a Responsible Officer of the Seller (a) the related
Obligor’s operations comply in all material respects with all applicable
Environmental Laws; (b) none of the related Obligor’s operations is the subject
of a Federal or state investigation evaluating whether any remedial action,
involving expenditures, is needed to respond to a release of any Hazardous
Materials into the environment; and (c) the related Obligor does not have any
material contingent liability in

 

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connection with any release of any Hazardous Materials into the environment. As
of the Cut-Off Date for the Loan Asset related to such Underlying Collateral,
the Seller has not received any written or verbal notice of, or inquiry from any
Governmental Authority regarding, any violation, alleged violation,
non-compliance, liability or potential liability regarding environmental matters
or compliance with Environmental Laws with regard to any of the Underlying
Collateral, nor does the Seller have knowledge or reason to believe that any
such notice will be received or is being threatened.

It is understood and agreed that the representations and warranties provided in
this Section 4.2 shall survive (x) the Sale of the Sale Portfolio to the
Purchaser, (y) the grant of a first priority perfected security interest in, to
and under the Sale Portfolio pursuant to the Loan and Servicing Agreement by the
Purchaser and (z) the termination of this Agreement and the Loan and Servicing
Agreement. Upon discovery by the Seller or the Purchaser of a breach of any of
the foregoing representations and warranties, the party discovering such breach
shall give prompt written notice thereof to the other and to the Administrative
Agent and each Lender immediately upon obtaining knowledge of such breach.

Section 4.3. Representations and Warranties of the Purchaser. The Purchaser
makes the following representations and warranties, on which the Seller relies
in selling the Sale Portfolio Sold hereunder and each of the Secured Parties
relies upon in entering into the Loan and Servicing Agreement. As of each
Purchase Date and each Reporting Date, the Purchaser represents and warrants to
the Seller for the benefit of the Seller and each of its successors and assigns
(and as to any Loan Assets, only with respect to the Loan Assets being purchased
on such Purchase Date) that:

(a) Organization and Good Standing. The Purchaser has been duly organized and is
validly existing and in good standing as a limited liability company under the
laws of the State of Delaware or such other jurisdiction as permitted under the
terms of the Transaction Documents, with the power and authority to own or lease
its properties and to conduct its business as such properties are currently
owned and such business is currently conducted, and had at all relevant times,
and has, all necessary power, authority and legal right to acquire and own the
Sale Portfolio.

(b) Due Qualification. The Purchaser is duly qualified to do business and has
obtained all necessary licenses and approvals in all jurisdictions in which the
ownership or lease of its property or the conduct of its business requires such
qualification, licenses and/or approvals.

(c) Power and Authority; Due Authorization; Execution and Delivery. The
Purchaser (i) has all necessary limited liability company power, authority and
legal right to (a) execute and deliver this Agreement and the other Transaction
Documents to which it is a party and (b) carry out the terms of this Agreement
and the other Transaction Documents to which it is a party and (ii) has duly
authorized by all necessary limited liability company action the execution,
delivery and performance of this Agreement and the other Transaction Documents
to which it is a party and the Purchase of the Sale Portfolio on the terms and
conditions herein provided. This Agreement and each other Transaction Document
to which the Purchaser is a party have been duly executed and delivered by the
Purchaser.

 

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(d) No Consent Required. The Purchaser is not required to obtain the consent of
any other Person, or any consent, license, approval or authorization or
registration or declaration with, any Governmental Authority, bureau or agency
in connection with the execution, delivery or performance of this Agreement,
each Loan Assignment and the Transaction Documents to which it is a party,
except for such as have been obtained, effected or made.

(e) Binding Obligation. This Agreement and each other Transaction Document to
which the Purchaser is a party constitutes a legal, valid and binding obligation
of the Purchaser, enforceable against the Purchaser in accordance with its
respective terms, subject, as to enforceability, to applicable Bankruptcy Laws
and general principles of equity (whether such enforceability is considered in a
proceeding in equity or at law).

(f) No Violation. The consummation of the transactions contemplated by this
Agreement, each Loan Assignment and the other Transaction Documents to which it
is a party and the fulfillment of the terms hereof and thereof will not
(i) conflict with, result in any breach of any of the terms and provisions of,
or constitute (with or without notice or lapse of time or both) a default under,
the Purchaser’s certificate of formation, operating agreement or any contractual
obligation of the Purchaser, (ii) result in the creation or imposition of any
Lien (other than Permitted Liens) upon any of the Purchaser’s properties
pursuant to the terms of any such contractual obligation, other than this
Agreement, or (iii) violate any Applicable Law.

(g) Value Given. The Purchaser has given reasonably equivalent value to the
Seller in exchange for the Sale of such Sale Portfolio, which amount the
Purchaser hereby agrees is the fair market value of such Sale Portfolio. No such
Sale has been made for or on account of an antecedent debt owed by the Seller
and no such transfer is or may be voidable or subject to avoidance under any
section of the Bankruptcy Code.

(h) No Proceedings. There is no litigation, proceeding or investigation pending
or, to the knowledge of the Purchaser, threatened against the Purchaser, before
any Governmental Authority (i) asserting the invalidity of this Agreement, any
Loan Assignment or any other Transaction Document to which the Purchaser is a
party, (ii) seeking to prevent the consummation of any of the transactions
contemplated by this Agreement, any Loan Assignment or any other Transaction
Document to which the Purchaser is a party or (iii) seeking any determination or
ruling that could reasonably be expected to have a Material Adverse Effect.

(i) Sale Agreement. This Agreement and the Loan Assignments contemplated herein
are the only agreements or arrangements pursuant to which the Purchaser
Purchases the Sale Portfolio Sold to it by the Seller.

(j) Investment Company Act. The Purchaser is not required to register as an
“investment company” under the provisions of the 1940 Act.

(k) Compliance with Law. The Purchaser has complied in all respects with all
Applicable Law to which it may be subject, and no item of Sale Portfolio
contravenes any Applicable Law.

 

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(l) Opinions. The statements of fact in the section heading “Assumptions” in the
Non-Consolidation/True Sale Opinion are true and correct in all respects.

(m) Receipt of Repurchase Price. The Collection Account is the only account to
which the Seller has been instructed to deposit the Repurchase Price relating to
any Loan Asset required to be repurchased hereunder. The Purchaser acknowledges
that any funds received by it attributable to the repurchase of any Loan Asset
hereunder are held and shall be held in trust for the benefit of the
Administrative Agent (or its assignees) until deposited by the Purchaser into
the Collection Account as required by the Loan and Servicing Agreement.

ARTICLE V.

COVENANTS OF THE SELLER

Section 5.1. Protection of Title of the Purchaser.

(a) On or prior to the Closing Date, the Seller shall have filed or caused to be
filed UCC-1 financing statements, naming the Seller as “Debtor/Seller”, naming
the Purchaser as “Secured Party/Buyer”, and naming the Collateral Agent, for the
benefit of the Secured Parties, as “Total Assignee”, and describing the Sale
Portfolio to be acquired by the Purchaser, with the office of the Secretary of
State of the state of the jurisdiction of organization of the Seller. From time
to time thereafter, the Seller shall file such financing statements and cause to
be filed such continuation statements, all in such manner and in such places as
may be required by law (or deemed desirable by the Purchaser or any assignee
thereof) to fully perfect, preserve, maintain and protect the ownership interest
of the Purchaser under this Agreement and the security interest of the
Collateral Agent for the benefit of the Secured Parties under the Loan and
Servicing Agreement and the Custody Agreement, in the Sale Portfolio acquired by
the Purchaser hereunder, as the case may be, and in the proceeds thereof. The
Seller shall deliver (or cause to be delivered) to the Purchaser, the Collateral
Agent, the Collateral Custodian, the Servicer, the Lenders and the
Administrative Agent file-stamped copies of, or filing receipts for, any
document filed as provided above, as soon as available following such filing.
The Seller agrees that it will from time to time, at its expense, take all
actions, that the Purchaser, the Collateral Agent or the Administrative Agent
may reasonably request in order to perfect, protect or more fully evidence the
Purchases hereunder and the security and/or interest granted in the Sale
Portfolio, or to enable the Purchaser, the Collateral Agent, the Administrative
Agent or the Secured Parties to exercise and enforce their rights and remedies
hereunder or under any Transaction Document.

(b) On or prior to each Purchase Date hereunder, the Seller shall take all steps
necessary under all Applicable Law in order to Sell to the Purchaser the Sale
Portfolio being acquired by the Purchaser on such Purchase Date to the Purchaser
so that, upon the Sale of such Sale Portfolio from the Seller to the Purchaser
pursuant to the terms hereof on such Purchase Date, the Purchaser will have
acquired good and marketable title to and a valid and perfected ownership
interest in such Sale Portfolio, free and clear of any Lien, security interest,
charge or encumbrance or restrictions on transferability (subject only to
Permitted Liens). On or prior to each Purchase Date hereunder, the Seller shall
take all steps required under Applicable Law in order for the Purchaser to grant
to the Collateral Agent, for the benefit of the Secured Parties, a

 

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first priority perfected security interest (subject only to Permitted Liens) in
the Sale Portfolio being Purchased by the Purchaser on such Purchase Date and,
from time to time thereafter, the Seller shall take all such actions as may be
required by Applicable Law to fully preserve, maintain and protect the
Purchaser’s ownership interest in, and the Collateral Agent’s first priority
perfected security interest in (subject only to Permitted Liens), the Sale
Portfolio which have been acquired by the Purchaser hereunder.

(c) The Seller shall direct any agent or administrative agent for any Sale
Portfolio originated or acquired by the Seller to remit all payments and
collections with respect to such Sale Portfolio and direct the Obligor with
respect to such Sale Portfolio to remit all such payments and collections
directly to the Collection Account. The Seller will not make any change, or
permit the Servicer to make any change, in its instructions to Obligors
regarding payments to be made to the Seller or the Servicer or payments to be
made to the Collection Account, unless the Purchaser and the Administrative
Agent have consented to such change. The Seller shall ensure that only (x) funds
constituting payments and collections relating to Sale Portfolio and (y) funds
constituting amounts due to the Purchaser in connection with the repurchase of a
Loan Asset required hereunder shall be deposited into the Collection Account. In
the event any payments relating to any Sale Portfolio are remitted directly to
the Seller or any Affiliate of the Seller, the Seller will remit (or will cause
all such payments to be remitted) directly to the Collection Account within two
Business Days following receipt thereof, and, at all times prior to such
remittance, the Seller will itself hold or, if applicable, will cause such
payments to be held in trust for the exclusive benefit of the Purchaser and its
assignees. Until so deposited, all such Interest Collections, all such Principal
Collections and any amounts required to be paid to the Purchaser in connection
with a repurchase of a Loan Asset hereunder shall be held in trust for the
Purchaser or its assignees by the Seller.

(d) At any time after the occurrence of an Event of Default, the Purchaser, the
Collateral Agent or the Administrative Agent may direct the Seller or the
Servicer to notify the Obligors, at Seller’s expense, of the Purchaser’s (or its
assigns) or the Secured Parties’ interest in the Sale Portfolio under this
Agreement and may direct that payments of all amounts due or that become due
under any or all of the Sale Portfolio be made directly to the Purchaser (or its
assigns), the Collateral Agent or the Administrative Agent.

(e) The Seller shall, not earlier than six months and not later than three
months prior to the fifth anniversary of the date of filing of the financing
statement referred to in Section 3.1 or any other financing statement filed
pursuant to this Agreement or in connection with any Purchase hereunder, unless
the Collection Date shall have occurred:

(i) file or cause to be filed an appropriate continuation statement with respect
to such financing statement; and

(ii) deliver or cause to be delivered to the Purchaser, the Collateral Agent,
the Administrative Agent and each Lender an opinion of the counsel for Seller,
in form and substance reasonably satisfactory to the Purchaser, the Collateral
Agent and the Administrative Agent, confirming and updating the opinion
delivered pursuant to Section 3.1 with respect to perfection and otherwise to
the effect that the security interest hereunder continues to be an enforceable
and perfected security interest, subject to no

 

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other Liens of record except as provided herein or otherwise permitted
hereunder, which opinion may contain usual and customary assumptions,
limitations and exceptions.

(f) The Seller shall not (x) make any change to its corporate name or use any
tradenames, fictitious names, assumed names, “doing business as” names or other
names, change the offices where it keeps records concerning the Sale Portfolio
from the address set forth in Section 10.05 of this Agreement, or change the
jurisdiction of its incorporation, or (y) move, or consent to the Collateral
Custodian moving, the Required Loan Documents and Loan Asset Files from the
location required under the Transaction Documents, unless, in each case, the
Seller shall provide the Administrative Agent with such Opinions of Counsel and
other documents and instruments as the Administrative Agent may request in
connection therewith and has taken all actions required under the UCC of each
relevant jurisdiction in order to continue the first priority perfected security
interest of the Purchaser in the Sale Portfolio.

(g) The Seller shall at all times maintain each office from which it services
Sale Portfolio and its principal executive office within the United States of
America.

(h) The Seller shall mark its master data processing records so that, from and
after the time of Sale under this Agreement of Sale Portfolio to the Purchaser
and the grant of a security interest in such Sale Portfolio by the Purchaser to
the Collateral Agent for the benefit of the Secured Parties under the Loan and
Servicing Agreement, the Seller’s master data processing records (including
archives) that refer to such Sale Portfolio shall indicate clearly that such
Sale Portfolio has been Purchased by the Purchaser hereunder and Pledged by the
Purchaser to the Collateral Agent, on behalf of the Secured Parties, under the
Loan and Servicing Agreement. Indication of the Collateral Agent’s security
interest for the benefit of the Secured Parties in the Sale Portfolio shall be
deleted from or modified on the Seller’s computer systems when, and only when,
such Sale Portfolio shall be (i) paid off by the related Obligor,
(ii) repurchased or substituted by the Seller in accordance with Section 6.1 or
6.2 hereof or (iii) released by the Collateral Agent pursuant to Section 2.16 of
the Loan and Servicing Agreement.

(i) If the Seller fails to perform any of its obligations hereunder, the
Purchaser, the Collateral Agent or the Administrative Agent may (but shall not
be required to) perform, or cause performance of, such obligation; and the
Purchaser’s, the Collateral Agent’s or the Administrative Agent’s costs and
expenses incurred in connection therewith shall be payable by the Seller as
provided in Section 9.1. The Seller irrevocably authorizes the Purchaser, the
Collateral Agent or the Administrative Agent at any time and from time to time
at the Purchaser’s, the Collateral Agent’s or the Administrative Agent’s sole
discretion and appoints the Purchaser, the Collateral Agent and the
Administrative Agent as its attorney–in–fact pursuant to a Power of Attorney
substantially in the form of Exhibit C to act on behalf of the Seller (i) to
file financing statements on behalf of the Seller, as debtor, necessary or
desirable in the Purchaser’s, the Collateral Agent’s or the Administrative
Agent’s sole discretion to perfect and to maintain the perfection and priority
of the interest of the Purchaser or the Collateral Agent in the Sale Portfolio
and (ii) to file a carbon, photographic or other reproduction of this Agreement
or any financing statement with respect to the Sale Portfolio as a financing
statement in such offices as the Purchaser, the Collateral Agent or the
Administrative Agent in their sole discretion deem necessary or desirable to
perfect and to maintain the perfection and priority of the interests

 

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of the Purchaser or the Collateral Agent in the Sale Portfolio. This appointment
is coupled with an interest and is irrevocable.

Section 5.2. Affirmative Covenants of the Seller.

From the date hereof until the Collection Date:

(a) Compliance with Law. The Seller will comply in all respects with all
Applicable Law, including those applicable to the Seller as a result of its
interest in the Sale Portfolio or any part thereof.

(b) Preservation of Company Existence. The Seller will preserve and maintain its
corporate existence, rights, franchises and privileges in the jurisdiction of
its incorporation, and qualify and remain qualified in good standing as a
corporation in each jurisdiction where the failure to preserve and maintain such
existence, rights, franchises, privileges and qualification could reasonably be
expected to have a Material Adverse Effect.

(c) Performance and Compliance with Sale Portfolio. The Seller will, at its
expense, timely and fully perform and comply in all respects with all
provisions, covenants and other promises required to be observed by it under the
Sale Portfolio and all other agreements related to such Sale Portfolio.

(d) Keeping of Records and Books of Account. The Seller will maintain and
implement administrative and operating procedures (including, without
limitation, an ability to recreate records evidencing the Sale Portfolio in the
event of the destruction of the originals thereof), and keep and maintain all
documents, books, records and other information reasonably necessary or
advisable for the collection of all or any portion of the Sale Portfolio.

(e) Separate Identity. The Seller acknowledges that the Administrative Agent,
the Collateral Agent, the Collateral Custodian, the Lenders and the other
Secured Parties are entering into the transactions contemplated by this
Agreement, the Loan and Servicing Agreement and the other Transaction Documents
in reliance upon the Purchaser’s identity as a legal entity that is separate
from the Seller and each other Affiliate of the Seller. Therefore, from and
after the date of execution and delivery of this Agreement, the Seller will take
all reasonable steps including, without limitation, all steps that the
Administrative Agent or the Collateral Agent may from time to time reasonably
request to maintain the Purchaser’s identity as a legal entity that is separate
from the Seller and each other Affiliate of the Seller and to make it manifest
to third parties that the Purchaser is an entity with assets and liabilities
distinct from those of the Seller and each other Affiliate thereof (other than
for tax purposes) and not just a division of the Seller or any such other
Affiliate. Without limiting the generality of the foregoing and in addition to
the other covenants set forth herein, the Seller agrees that:

(i) the Seller will take all other actions necessary on its part to ensure that
the Purchaser is at all times in compliance with the criteria and the
restrictions set forth in Section 9(j) of the limited liability company
operating agreement of the Purchaser and Sections 5.01(a), 5.01(b), 5.02(a) and
5.02(b) of the Loan and Servicing Agreement; provided that, for the avoidance of
doubt, the Seller shall not be required to expend any of its own funds to cause
the Purchaser to be in compliance with subsection

 

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5.02(a)(v) of the Loan and Servicing Agreement or subsection 5.01(b)(xvii) of
the Loan and Servicing Agreement (it being understood that this proviso shall in
no way affect the obligation of Seller to manage the activities and liabilities
of the Purchaser such that the Purchaser maintains compliance with either of the
foregoing subsections);

(ii) the Seller shall maintain corporate records and books of account separate
from those of the Purchaser;

(iii) the annual financial statements of the Seller shall disclose the effects
of the Seller’s transactions in accordance with GAAP and the annual financial
statements of the Seller shall not reflect in any way that the assets of the
Purchaser, including, without limitation, the Sale Portfolio, could be available
to pay creditors of the Seller or any other Affiliate of the Seller;

(iv) the resolutions, agreements and other instruments underlying the
transactions described in this Agreement shall be continuously maintained by the
Seller as official records;

(v) the Seller shall maintain an arm’s–length relationship with the Purchaser
and will not hold itself out as being liable for the debts of the Purchaser;

(vi) the Seller shall keep its assets and its liabilities wholly separate from
those of the Purchaser;

(vii) the Seller will avoid the appearance, and promptly correct any known
misperception of any of the Seller’s creditors, that the assets of the Purchaser
are available to pay the obligations and debts of the Seller; and

(viii) to the extent that the Seller services the Loan Assets and performs other
services on the Purchaser’s behalf, the Seller will clearly identify itself as
an agent of the Purchaser in the performance of such duties.

(f) Taxes. The Seller will file or cause to be filed its tax returns and pay any
and all Taxes imposed on it or its property as required by the Transaction
Documents (except as contemplated in Section 4.1(m)).

(g) Cooperation with Requests for Information or Documents. The Seller will
cooperate fully with all reasonable requests of the Purchaser and its assigns
regarding the provision of any information or documents, necessary or desirable,
including the provision of such information or documents in electronic or
machine–readable format, to allow each of the Purchaser and its assignees to
carry out their responsibilities under the Transaction Documents.

(h) Payment, Performance and Discharge of Obligations. The Seller will pay,
perform and discharge all of its obligations and liabilities, including, without
limitation, all Taxes, assessments and governmental charges upon its income and
properties, when due, unless and only to the extent that such obligations,
liabilities, Taxes, assessments and governmental charges shall be contested in
good faith and by appropriate proceedings and that, to the extent required by
GAAP, proper and adequate book reserves relating thereto are established by the

 

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Seller and then only to the extent that a bond is filed in cases where the
filing of a bond is necessary to avoid the creation of a Lien against any of its
properties.

(i) Notices.

(i) Income Tax Liability. The Seller will furnish telephonic or facsimile notice
to the Purchaser, the Collateral Agent, the Administrative Agent and each Lender
within 10 Business Days (confirmed in writing within five Business Days
thereafter) of the receipt of revenue agent reports or other written proposals,
determinations or assessments of the Internal Revenue Service or any other
taxing authority which propose, determine or otherwise set forth positive
adjustments (i) to the Tax liability of the Seller or any “affiliated group”
(within the meaning of Section 1504(a)(l) of the Code) of which the Seller is a
member in an amount equal to or greater than $5,000,000 in the aggregate, or
(ii) to the Tax liability of the Purchaser in an amount equal to or greater than
$500,000 in the aggregate. Any such notice shall specify the nature of the items
giving rise to such adjustments and the amounts thereof.

(ii) Auditors’ Management Letters. Promptly after the receipt thereof, the
Seller will provide the Purchaser, the Collateral Agent, the Administrative
Agent and each Lender with any auditors’ management letters that are received by
the Seller or by its accountants.

(iii) Representations and Covenants. Promptly, upon receipt of notice or
discovery thereof, the Seller will furnish notice to the Purchaser, the
Collateral Agent, the Administrative Agent and each Lender (i) if any
representation or warranty set forth in Section 4.1 or Section 4.2 was incorrect
at the time it was given or deemed to have been given or (ii) of the breach of
any covenant under Section 5.1, Section 5.2 or Section 5.3 and at the same time
deliver to the Purchaser, the Collateral Agent, the Administrative Agent and
each Lender a written notice setting forth in reasonable detail the nature of
such facts and circumstances. In particular, but without limiting the foregoing,
the Seller shall notify the Purchaser, the Collateral Agent, the Administrative
Agent and each Lender in the manner set forth in the preceding sentence before
any Purchase Date of any facts or circumstances within the knowledge of the
Seller which would render any of the said representations and warranties untrue
at the date when such representations and warranties were made or deemed to have
been made.

(iv) ERISA. Promptly after receiving notice of any “reportable event” (as
defined in Title IV of ERISA, other than an event for which the reporting
requirements have been waived by regulations) with respect to the Seller (or any
ERISA Affiliate thereof), the Seller will provide a copy of such notice to the
Purchaser, the Collateral Agent, the Administrative Agent and each Lender.

(v) Proceedings. As soon as possible and in any event within three Business
Days, after the Seller receives notice or obtains knowledge thereof, the Seller
will provide the Purchaser, the Collateral Agent, the Administrative Agent and
each Lender with notice of any settlement of, material judgment (including a
material judgment with respect to the liability phase of a bifurcated trial) in
or commencement of

 

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any material labor controversy, material litigation, material action, material
suit or material proceeding before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
affecting the Sale Portfolio, the Transaction Documents, the Collateral Agent’s,
for the benefit of the Secured Parties, interest in the Sale Portfolio, or the
Purchaser, the Servicer, the Seller or the Transferor or any of their
Affiliates. For purposes of this Section 5.2(i), (i) any settlement, judgment,
labor controversy, litigation, action, suit or proceeding affecting the Sale
Portfolio, the Transaction Documents, the Collateral Agent’s, for the benefit of
the Secured Parties, interest in the Sale Portfolio, or the Purchaser in excess
of $500,000 shall be deemed to be material and (ii) any settlement, judgment,
labor controversy, litigation, action, suit or proceeding affecting the Seller
or any of its Affiliates (other than the Purchaser) in excess of $10,000,000
shall be deemed to be material.

(vi) Material Events. The Seller will, promptly upon becoming aware thereof,
notify the Purchaser, the Collateral Agent, the Administrative Agent and each
Lender of any event or other circumstance that is reasonably likely to have a
Material Adverse Effect.

(vii) Events of Default. The Seller will provide the Purchaser, the Collateral
Agent, the Administrative Agent and each Lender with immediate written notice of
the occurrence of each Event of Default of which the Seller has knowledge or has
received notice. In addition, no later than two Business Days following the
Seller’s knowledge or notice of the occurrence of any Event of Default or
Unmatured Event of Default, the Seller will provide to the Purchaser, the
Collateral Agent, the Administrative Agent and each Lender a written statement
of a Responsible Officer of the Seller setting forth the details of such event
and the action that the Seller proposes to take with respect thereto.

(viii) Seller Termination Event and Seller Purchase Event. The Seller will
provide the Purchaser, the Collateral Agent, the Administrative Agent and each
Lender with immediate written notice of the occurrence of each Seller
Termination Event and each Seller Purchase Event of which the Seller has
knowledge or has received notice.

(j) Other. The Seller will furnish to the Purchaser, the Collateral Agent, the
Administrative Agent and each Lender promptly, from time to time such other
information, documents, records or reports respecting the Sale Portfolio or the
condition or operations, financial or otherwise, of the Seller as the Purchaser,
the Collateral Agent, the Administrative Agent and each Lender may from time to
time reasonably request in order to protect the interests of the Purchaser, the
Administrative Agent, the Collateral Agent, the Lenders or the Secured Parties
under or as contemplated by this Agreement and the other Transaction Documents.

(k) Costs and Expenses. The Seller shall pay all reasonable, documented costs
and disbursements in connection with the performance of its obligations
hereunder.

(l) Annual Certificates. Within two Business Days of (w) any request by the
Administrative Agent, (x) any extension of the Reinvestment Period under the
Loan and Servicing Agreement, (y) any material amendment of any Transaction
Document or (z) any

 

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filing of any UCC financing statement or continuation statement with respect to
the Seller or the Sale Portfolio (other than in connection with the execution of
this Agreement as of the Closing Date), the Seller shall deliver an Officer’s
Certificate, in form and substance acceptable to the Purchaser, the
Administrative Agent and each Lender, providing (i) a certification, based upon
a review and summary of UCC search results reasonably satisfactory to the
Purchaser and the Administrative Agent, that there is no other interest in the
Sale Portfolio perfected by filing of a UCC financing statement other than in
favor of the Purchaser and the Collateral Agent pursuant to the terms of the
Transaction Documents and (ii) a certification, based upon a review and summary
of tax and judgment lien searches satisfactory to the Purchaser and the
Administrative Agent, that there is no other interest in the Sale Portfolio
based on any tax or judgment lien.

(m) Opinion. The Seller will comply in all respects with any requirements for
future action set forth in the section heading “Assumptions” in the
Non-Consolidation/True Sale Opinion, with respect to the Transaction Documents.

(n) Copies of Other Information. The Seller will deliver to the Purchaser, the
Collateral Agent, the Administrative Agent and each Lender:

(i) promptly, but in any event within ten Business Days after the filing
thereof, a copy of (a) each report or other filing made by the Seller or any of
its Affiliates with the Securities and Exchange Commission (the “SEC”) and
required by the SEC to be delivered to the shareholders of the Seller or any
such Affiliate, and (b) each report and final registration statement of the
Seller or any Affiliate filed with the SEC; and

(ii) promptly, from time to time, such other information, documents, records or
reports respecting the Sale Portfolio or the conditions or operations, financial
or otherwise, of the Seller (including, without limitation, reports and notices
relating to the Seller’s actions under and compliance with ERISA and the 1940
Act) as the Purchaser, the Collateral Agent, the Administrative Agent or each
Lender may from time to time request in order to perform their obligations
hereunder or under any other Transaction Document or to protect the interests of
the Purchaser under or as contemplated by this Agreement and the other
Transaction Documents.

(o) Disregarded Entity. The Seller shall cause the Purchaser to be disregarded
as an entity separate from its owner pursuant to Treasury Regulation
Section 301.7701-3(b) and shall cause that neither the Purchaser nor any other
Person on its behalf shall make an election to be treated as other than an
entity disregarded from its owner under Treasury Regulation
Section 301.7701-3(c).

Section 5.3. Negative Covenants of the Seller.

From the date hereof until the Collection Date:

(a) Sale Portfolio Not to be Evidenced by Instruments. The Seller will take no
action to cause any Sale Portfolio that is not, as of the related Purchase Date,
as the case may be, evidenced by an instrument, to be so evidenced except in
connection with the enforcement or collection of such Sale Portfolio.

 

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(b) Security Interests. Except as otherwise permitted herein and in the Loan and
Servicing Agreement, the Seller will not sell, pledge, assign or transfer to any
other Person, or grant, create, incur, assume or suffer to exist any Lien on any
Sale Portfolio Sold by the Seller to the Purchaser hereunder, whether now
existing or hereafter transferred hereunder, or any interest, therein, and the
Seller will not sell, pledge, assign or suffer to exist any Lien (except for
Permitted Liens) on its interest in the Sale Portfolio Sold by the Seller to the
Purchaser hereunder. The Seller will promptly notify the Purchaser, the
Collateral Agent, each Lender and the Administrative Agent of the existence of
any Lien on any Sale Portfolio and the Seller shall defend the right, title and
interest of the Purchaser and the Collateral Agent, on behalf of the Secured
Parties, in, to and under the Sale Portfolio against all claims of third
parties; provided that nothing in this Section 5.3(b) shall prevent or be deemed
to prohibit the Seller from suffering to exist Permitted Liens upon any of the
Sale Portfolio.

(c) Mergers, Acquisitions, Sales, Etc. The Seller will not consolidate with or
merge into any other Person or convey or transfer its properties and assets
substantially as an entirety to any Person, or sell or assign with or without
recourse any Sale Portfolio or any interest therein (other than in the ordinary
course of business or as permitted pursuant to this Agreement or the Transaction
Documents).

(d) Transfer of Purchaser Membership Interests. The Seller shall not transfer,
pledge, participate or otherwise encumber its membership interests in the
Purchaser without the prior written consent of the Administrative Agent and the
delivery of an acceptable (in the Administrative Agent’s reasonable discretion)
non-consolidation opinion.

(e) Restricted Payments. The Seller shall not cause or permit the Purchaser to
make any Purchaser Restricted Junior Payment, except that, so long as no Event
of Default or Unmatured Event of Default has occurred or would result therefrom,
the Purchaser may declare and make distributions to its member on its membership
interests.

(f) Accounting of Purchases. Other than for tax and consolidated accounting
purposes, the Seller will not account for or treat (whether in financial
statements or otherwise) the transactions contemplated hereby in any manner
other than as a sale of the Loan Assets to the Purchaser.

(g) ERISA Matters. The Seller will not (a) engage, and will exercise its best
efforts not to permit any ERISA Affiliate to engage, in any prohibited
transaction (within the meaning of ERISA Section 406(a) or (b) or Code
Section 4975) for which an exemption is not available or has not previously been
obtained from the United States Department of Labor, (b) fail to meet the
minimum funding standard set forth in Section 302(a) of ERISA and Section 412(a)
of the Code with respect to any Pension Plan other than a Multiemployer Plan,
(c) fail to make any payments to a Multiemployer Plan that the Seller or any
ERISA Affiliate may be required to make under the agreement relating to such
Multiemployer Plan or any law pertaining thereto, (d) terminate any Pension Plan
so as to result, directly or indirectly, in any liability to the Seller, or
(e) permit to exist any occurrence of any reportable event described in Title IV
of ERISA with respect to any Pension Plan other than an event for which the
reporting requirements have been waived by regulations.

 

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(h) Extension or Amendment of Sale Portfolio. The Seller will not, except as
otherwise permitted in Section 6.04(a) of the Loan and Servicing Agreement,
extend, amend or otherwise modify, or permit the Servicer to extend, amend or
otherwise modify, the terms of any Sale Portfolio.

(i) Limitation on Financing Activities. The Seller shall not, directly or
indirectly, advance or loan to the Purchaser any funds pursuant to any financial
accommodation. For the avoidance of doubt, this clause (i) shall not prohibit
the Seller from contributing Loan Assets to the Purchaser as contemplated herein
or providing cash equity contributions to the Purchaser.

(j) Organizational Documents. The Seller will not cause or permit the Purchaser
to amend, modify, waive or terminate any provision of the Purchaser’s operating
agreement without the prior written consent of the Administrative Agent.

ARTICLE VI.

REPURCHASES AND SUBSTITUTION BY THE SELLER

Section 6.1. Repurchase of Loan Assets. In the event of the occurrence of a
Seller Purchase Event, the Seller will within 15 Business Days of the discovery
by or notice (from any Person) to the Seller of the Seller Purchase Event,
(i) purchase each Loan Asset hereunder which is affected by or related to such
Seller Purchase Event from the Purchaser, and the Seller shall pay to the
Purchaser (by means of a deposit to the Collection Account) the Repurchase Price
of such Loan Asset as of the date of the purchase thereof from the Purchaser or
(ii) with the consent of the Administrative Agent and subject to the
satisfaction of the conditions in Section 6.2, substitute for such Loan Asset, a
Substitute Eligible Loan Asset. It is understood and agreed that the obligation
of the Seller to purchase the Loan Assets or substitute a Substitute Eligible
Loan Asset for the Loan Assets which are affected by or related to such Seller
Purchase Event is not intended to, and shall not, constitute a guaranty of the
collectability or payment of any Loan Asset which is not collected, not paid or
uncollectible on account of the insolvency, bankruptcy or financial inability to
pay of the related Obligor. Upon deposit in the Collection Account of the
Repurchase Price for any Loan Asset purchased by the Seller, the Purchaser
shall, automatically and without further action be deemed to transfer, assign
and set over to the Seller, without recourse, representation or warranty of any
kind, except as to the absence of Liens, charges or encumbrances created by or
arising solely as a result of actions of the Purchaser or the Collateral Agent,
all the right, title and interest of the Purchaser, in, to and under such Loan
Asset and all future monies due or to become due with respect thereto, the
Underlying Collateral, all Proceeds of such Loan Asset and Recoveries and
Insurance Proceeds relating thereto, all rights to security for such Loan Asset
and all Proceeds and products of the foregoing. The Purchaser shall (and shall
request the Collateral Agent to), at the sole expense of the Seller, execute
such documents and instruments of transfer as may be prepared by the Seller and
take such other actions as may be reasonably requested by the Seller in order to
effect the transfer of such Loan Asset pursuant to this Section 6.1. Such Sale
shall be a sale outright, and not for security.

 

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Section 6.2. Substitution of Loan Assets.

(a) The Seller shall have the right, but not the obligation, subject to the
prior written consent of the Administrative Agent and the Purchaser, in their
sole discretion, to substitute one or more Eligible Loan Assets (“Substitute
Eligible Loan Asset”) for a Loan Asset (each such act, a “Substitution”).

(b) The Substitution shall not occur unless the following conditions are
satisfied as of the date of such Substitution:

(i) the Seller has recommended to the Purchaser and the Administrative Agent
(with a copy to the Collateral Agent and the Collateral Custodian) in writing
that the Loan Asset to be replaced should be replaced (each, a “Replaced Loan
Asset”);

(ii) no event has occurred, or would result from such Substitution, which
constitutes an Event of Default and no event has occurred and is continuing, or
would result from such Substitution, which constitutes an Unmatured Event of
Default or a Borrowing Base Deficiency;

(iii) each Substitute Eligible Loan Asset is an Eligible Loan Asset on the date
of Substitution;

(iv) solely in the case of Substitutions pursuant to this Section 6.2 undertaken
because a Seller Purchase Event has occurred, the sum of the initial Assigned
Value multiplied by the Outstanding Balances of such Substitute Eligible Loan
Assets shall be equal or greater than the sum of the initial Assigned Value of
the Replaced Loan Assets multiplied by the Outstanding Balance thereof;

(v) all representations and warranties contained in Sections 4.1 and 4.2 shall
be true and correct in all respects as of the date of Substitution (other than
any representation and warranty that is made as of a specific date);

(vi) the Loan Assets were selected for sale, repurchase or substitution in a
manner consistent with and pursuant to the Investment Policies;

(vii) (A) the Outstanding Balance of all Loan Assets (other than Warranty Loan
Assets), sold pursuant to Section 2.07(e) of the Loan and Servicing Agreement,
substituted pursuant to this Section 6.2 or released pursuant to Section 2.07(g)
of the Loan and Servicing Agreement for dividend from the Purchaser to the
Seller during the term of the Loan and Servicing Agreement shall not exceed 20%
of the Maximum Facility Amount and (B) the Outstanding Balance of all Defaulted
Loan Assets (other than Warranty Loan Assets) sold pursuant to Section 2.07(e)
of the Loan and Servicing Agreement, substituted pursuant to this Section 6. 2
or released pursuant to Section 2.07(g) of the Loan and Servicing Agreement for
dividend from the Purchaser to the Seller during the term of the Loan and
Servicing Agreement shall not exceed 10% of the Maximum Facility Amount;

 

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(viii) each Loan Asset that is replaced pursuant to the terms of this
Section 6.2 shall be substituted only with another Eligible Loan Asset that
meets the foregoing conditions;

(ix) all terms, provisions, representations, warranties and covenants hereunder
with respect to Loan Assets that have been Sold by the Seller to the Purchaser
hereunder shall apply equally to Substitute Eligible Loan Assets; and

(x) the Seller shall deliver to the Purchaser on the date of such Substitution a
certificate of a Responsible Officer certifying that each of the foregoing is
true and correct as of such date.

(c) In addition, in connection with such Substitution, the Seller shall deliver
or cause to be delivered to the Collateral Custodian the related Required Loan
Documents. On the date any such Substitution is completed, the Purchaser shall,
automatically and without further action, release and shall transfer to the
Seller, free and clear of any Lien created pursuant to this Agreement, all of
the right, title and interest of the Purchaser in, to and under such Replaced
Loan Asset, and the Purchaser shall be deemed to represent and warrant that it
has the company authority and has taken all necessary company action to
accomplish such transfer, but without any other representation and warranty,
express or implied.

Section 6.3. Repurchase Limitations. The Seller and the Purchaser agree that the
Seller and any Affiliate of the Seller may repurchase any Sale Portfolio from
the Purchaser in the case of a repurchase or Substitution of any Sale Portfolio
pursuant to Sections 6.1 or 6.2.

ARTICLE VII.

ADDITIONAL RIGHTS AND OBLIGATIONS IN

RESPECT OF THE SALE PORTFOLIO

Section 7.1. Rights of the Purchaser.

(a) After the occurrence or declaration of the Facility Maturity Date, the
Seller hereby authorizes the Purchaser, the Servicer, the Collateral Agent and
the Administrative Agent and/or their respective designees or assignees to take
any and all steps in Seller’s name and on behalf of the Seller that the
Purchaser, the Servicer, the Collateral Agent or the Administrative Agent and/or
their respective designees or assignees determine are necessary or appropriate
to collect all amounts due under any and all Sale Portfolio and to enforce or
protect the Purchaser’s, the Collateral Agent’s and the Administrative Agent’s
rights under this Agreement, including endorsing the name of the Seller on
checks and other instruments representing Interest Collections and Principal
Collections and enforcing such Sale Portfolio.

(b) Except as set forth in Sections 6.1 and 6.2 with respect to the repurchase
or Substitution of certain Loan Assets, the Purchaser shall have no obligation
to account for, replace, substitute or return any Sale Portfolio to the Seller.
The Purchaser shall have no obligation to account for or to return Interest
Collections or Principal Collections, or any interest or other finance charge
collected pursuant thereto, to the Seller, irrespective of whether such

 

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Interest Collections and Principal Collections and charges are in excess of the
Purchase Price for such Sale Portfolio.

(c) The Purchaser shall have the right to further assign, transfer, deliver,
hypothecate, subdivide or otherwise deal with the Sale Portfolio and all of the
Purchaser’s right, title and interest in, to and under this Agreement, pursuant
to the Loan and Servicing Agreement.

(d) The Purchaser shall have the sole right to retain any gains or profits
created by buying, selling or holding the Sale Portfolio and shall have the sole
risk of and responsibility for losses or damages created by such buying, selling
or holding.

Section 7.2. Rights With Respect to Loan Asset Files.

At any time when a Servicer other than Fifth Street Finance Corp. has been
designated pursuant to Article VI of the Loan and Servicing Agreement, the
Seller shall, at the Purchaser’s, the Collateral Agent’s, the Collateral
Custodian’s or the Administrative Agent’s request, assemble all of the Loan
Asset Files which evidence the Sale Portfolio originated by the Seller, or which
are otherwise necessary or desirable to collect such Sale Portfolio, and make
the same available to the Purchaser, the Collateral Agent, the Collateral
Custodian or the Administrative Agent at a place selected by the Purchaser, the
Collateral Agent, the Collateral Custodian, the Administrative Agent or their
designee.

Section 7.3. Notice to Collateral Agent, Administrative Agent and each Lender.

The Seller agrees that, concurrently with its delivery to the Purchaser, copies
of all notices, reports, documents and other information required to be
delivered by the Seller to the Purchaser hereunder shall be delivered by the
Seller to the Collateral Agent, the Administrative Agent and each Lender.

ARTICLE VIII.

SELLER TERMINATION EVENTS

Section 8.1. Seller Termination Events.

(a) If any of the following events (each a “Seller Termination Event”) shall
have occurred:

(i) the Seller shall fail to pay (A) any amount due pursuant to Section 6.1 in
accordance with the provisions thereof or (B) any other amount required to be
paid by the Seller hereunder within two Business Days of the date when due; or

(ii) the Seller shall fail to observe or perform any covenant or agreement in
any material respect applicable to it contained herein (other than as specified
in paragraph (i) of this Section 8.1); and such failure shall continue
unremedied for a period of 30 days (if such failure can be remedied) after the
earlier to occur of (i) the date on which written notice of such failure
requiring the same to be remedied shall have been given to the Seller by the
Administrative Agent, the Collateral Agent (at the

 

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direction of the Administrative Agent) or the Purchaser and (ii) the date on
which the Seller acquires knowledge thereof; or

(iii) any representation, warranty or certification made by the Seller in this
Agreement or any Transaction Document or in any statement, record, certificate,
financial statement or other document delivered pursuant to this Agreement or
any Transaction Document shall prove to have been incorrect when made in any
material respect, and continues to be unremedied for a period of 30 days after
the earlier to occur of (i) the date on which written notice of such
incorrectness requiring the same to be remedied shall have been given to the
Seller by the Administrative Agent, the Collateral Agent (at the direction of
the Administrative Agent) or the Purchaser and (ii) the date on which a
Responsible Officer of the Seller acquires knowledge thereof; provided that a
Seller Termination Event shall not be deemed to have occurred under this
paragraph (iii) based upon a Seller Purchase Event if the Seller shall have
complied with the provisions of Section 6.1 in respect thereof; or

(iv) (A) a court having jurisdiction in the premises shall enter a decree or
order for relief in respect of the Seller in an involuntary case under the
Bankruptcy Code or any other Bankruptcy Laws, which decree or order is not
stayed or any other similar relief shall be granted under any applicable federal
or state law now or hereafter in effect and shall not be stayed; (B) (1) any
involuntary case is commenced against the Seller under any Bankruptcy Law now or
hereafter in effect, a decree or order of a court having jurisdiction in the
premises for the appointment of a receiver, liquidator, sequestrator, trustee,
custodian or other officer having similar powers over the Seller, or over all or
a substantial part of the property of the Seller, shall have been entered, an
interim receiver, trustee or other custodian of the Seller for all or a
substantial part of the property of the Seller is involuntarily appointed, a
warrant of attachment, execution or similar process is issued against any
substantial part of the property of the Seller, and (2) any event referred to in
clause (B)(1) above continues for 60 days unless dismissed, bonded or disclosed;
(C) the Seller shall at its request have a decree or an order for relief entered
with respect to it or commence a voluntary case under any Bankruptcy Law now or
hereafter in effect, or shall consent to the entry of a decree or an order for
relief in an involuntary case, or to the conversion of an involuntary case to a
voluntary case, under any such Bankruptcy Law, consent to the appointment of or
taking possession by a receiver, trustee or other custodian for all or a
substantial part of its property; (D) the making by the Seller of any general
assignment for the benefit of creditors; (E) the inability or failure of the
Seller generally to pay its debts as such debts become due; or (F) the board of
directors of the Seller authorizes action to approve any of the foregoing; or

(v) the occurrence of (A) an Event of Default set forth in Section 7.01 of the
Loan and Servicing Agreement (past any applicable notice or cure period provided
in the definition thereof) or (B) the Facility Maturity Date; or

(vi) the Seller has been terminated as Servicer following a Servicer Termination
Event with respect to the Servicer under the Loan and Servicing Agreement; or

 

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(vii) a notice of Lien shall have been filed by the Pension Benefit Guaranty
Corporation against the Seller under Section 430(k) of the Code or
Section 303(k) of ERISA for a failure to make a required installment or other
payment to a plan to which Section 430(k) of the Code or Section 303(k) of ERISA
applies unless there shall have been delivered to the Administrative Agent and
each Lender proof of release of such Lien; or

(viii) any Lien in an amount equal to or greater than $1,000,000 has been
asserted against or imposed on, any real or personal property of the Seller
pursuant to the Comprehensive Environmental Response, Compensation, and
Liability Act, 42 U.S.C. § 9607(1), or any equivalent or comparable state law,
relating to or arising from the costs of, response to, or investigation,
remediation or monitoring of, any environmental contamination resulting from the
current or past operations of the Seller; or

(ix) a Federal tax notice of Lien, in an amount equal to or greater than
$1,000,000, shall have been filed against the Seller unless there shall have
been delivered to the Administrative Agent and each Lender proof of release of
such Lien;

then, (A) in the case of any Seller Termination Event described in paragraph
(iv), (v)(A), (vi), (vii), (viii) or (ix) above, the obligation of the Purchaser
to Purchase Sale Portfolio from the Seller shall thereupon automatically
terminate without further notice of any kind, the receipt of which by the Seller
is hereby waived by the Seller, (B) in the case of any Seller Termination Event
described in paragraph (v)(B) above, the obligation of the Purchaser to Purchase
Sale Portfolio from the Seller shall thereupon terminate without notice of any
kind, which is hereby waived by the Seller unless both the Purchaser and the
Seller agree in writing that such event shall not trigger an Early Termination
(as hereinafter defined) hereunder, and (C) in the case of any other Seller
Termination Event, so long as such Seller Termination Event shall be continuing,
the Purchaser or the Administrative Agent may terminate its obligation to
Purchase Sale Portfolio from the Seller by written notice to the Seller (any
termination pursuant to clause (A), (B) or (C) of this Article VIII is herein
called an “Early Termination”); provided that, in the event of any involuntary
petition or proceeding as described in paragraphs (iv)(A) and (iv)(B) above, the
Purchaser shall not Purchase Sale Portfolio from the Seller unless such
involuntary petition or proceeding is dismissed, bonded or discharged within 60
days of the filing of such petition or the commencement of such proceeding.

Section 8.2. Survival of Certain Provisions.

Notwithstanding any provision contained herein to the contrary, the Seller’s and
the Purchaser’s representations, covenants and obligations set forth in Articles
IV, V, VI, and VII, as applicable, create and constitute the continuing
obligation of the parties hereto in accordance with its terms, and shall remain
in full force and effect until the Collection Date; provided that the rights and
remedies with respect to any breach of any representation and warranty made or
deemed made by the Seller pursuant to Articles III and IV and the provisions of
Sections 6.1 and 6.2, the rights and obligations under Article VII, the
indemnification provisions of Article IX and the provisions of Sections 5.1,
10.2, 10.8, 10.9, 10.10, 10.12, 10.13, 10.14 and 10.17 shall be continuing and
shall survive any termination of this Agreement.

 

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ARTICLE IX.

INDEMNIFICATION.

Section 9.1. Indemnification by the Seller.

(a) Without limiting any other rights which the Purchaser, any assignee of the
Purchaser or any such Persons’ respective shareholders, officers, employees,
agents, or Affiliates (each, an “Indemnified Party”) may have hereunder or under
Applicable Law, the Seller hereby agrees to indemnify any Indemnified Party from
and against any and all costs, expenses, losses, damages, claims, and
liabilities, including attorneys’ fees and disbursements (all of the foregoing,
being collectively referred to as, “Indemnified Amounts”), awarded against or
incurred by such Indemnified Party or other non-monetary damages of any such
Indemnified Party or any of them arising out of or as a result of this Agreement
excluding, however, (a) any such amounts resulting solely from any gross
negligence, bad faith or willful misconduct on the part of the applicable
Indemnified Party or (b) Loan Assets that are uncollectible due to the Obligor’s
financial inability to pay. Without limiting the foregoing, the Seller shall
indemnify each Indemnified Party for Indemnified Amounts relating to or
resulting from any of the following (to the extent not resulting from the
conditions set forth in (a) or (b) above) in relation to such Indemnified Party:

(i) reliance on any representation or warranty made or deemed made by the Seller
or any of its respective officers under or in connection with this Agreement or
any Transaction Document, which shall have been false or incorrect in any
respect when made or deemed made or delivered;

(ii) any Person’s use, ownership or operation of any Underlying Collateral to
the extent that such use, ownership or operation took place prior to the
Purchase Date with respect to the related Sale Portfolio;

(iii) any action taken by the Seller, other than in accordance with this
Agreement, in respect of any portion of the Sale Portfolio;

(iv) any Taxes (other than Taxes based upon the net or gross income of an
Indemnified Party and Taxes that would constitute Excluded Amounts) that may at
any time be asserted against any Indemnified Party with respect to the
transactions contemplated in this Agreement, including, without limitation, any
sales, gross receipts, general corporation, tangible or intangible personal
property, privilege, stamp or license Taxes and costs and expenses in defending
against the same, arising by reason of the acts to be performed by the Seller
under this Agreement and imposed against such Indemnified Party. Without
limiting the foregoing, in the event that the Purchaser, the Collateral Agent,
the Collateral Custodian, the Account Bank, the Servicer, any Lender, or the
Administrative Agent receives actual notice of any Transfer Taxes arising out of
the Sale of any Sale Portfolio from the Seller to the Purchaser under this
Agreement, on written demand by such party, or upon the Seller otherwise being
given notice thereof, the Seller shall pay, and otherwise indemnify and hold the
Purchaser, the Collateral Agent, the Collateral Custodian, the Account Bank, the
Servicer, each Lender and the

 

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Administrative Agent harmless, on an after-tax basis, from and against any and
all such Transfer Taxes (it being understood that the Purchaser, the Collateral
Agent, the Collateral Custodian, the Account Bank, the Servicer, the Lenders and
the Administrative Agent shall have no contractual obligation to pay such
Transfer Taxes);

(v) the failure by the Seller to pay when due any Taxes due by the Seller for
which the Seller is liable, including without limitation, sales, excise or
personal property Taxes payable in connection with the Sale Portfolio;

(vi) the gross negligence, willful misconduct or bad faith of the Seller in the
performance of its duties under this Agreement or by reason of reckless
disregard of the Seller’s obligations and duties under this Agreement;

(vii) any failure of the Seller to perform its duties or obligations in
accordance with the provisions of this Agreement or any of the other Transaction
Documents to which it is a party or any failure by the Seller or any Affiliate
thereof to perform its respective duties under any Sale Portfolio;

(viii) the failure of any Sale Portfolio to comply with all requirements of
Applicable Law as of its Purchase Date;

(ix) the failure by the Seller to comply with all requirements of Section 6.1
hereof;

(x) the failure by the Seller to comply with any term, provision or covenant
contained in this Agreement or any agreement executed in connection with this
Agreement, any Transaction Document or with any Applicable Law with respect to
any item of Sale Portfolio, or the nonconformity of any item of Sale Portfolio
with any such Applicable Law;

(xi) any representation or warranty made or deemed made by the Seller, or any of
its officers, under or in connection with this Agreement or any other
Transaction Document, which shall have been false, incorrect or misleading in
any respect when made or deemed made or delivered;

(xii) the failure to vest and maintain vested in the Purchaser an undivided
ownership interest in the Sale Portfolio, together with all Interest Collections
and Principal Collections, free and clear of any Lien (other than Permitted
Liens) whether existing at the time of any Purchase or at any time thereafter;

(xiii) the failure to file, or any delay in filing, financing statements,
continuation statements or other similar instruments or documents under the UCC
of any applicable jurisdiction or other Applicable Law with respect to any Sale
Portfolio, whether at the time of any Purchase or at any subsequent time;

(xiv) any dispute, claim, offset or defense (other than the discharge in
bankruptcy of an Obligor) of an Obligor to the payment with respect to any Loan
Asset in the Sale Portfolio (including, without limitation, a defense based on
the such Loan Asset

 

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(or the Loan Agreement evidencing such Loan Asset) not being a legal, valid and
binding obligation of such Obligor enforceable against it in accordance with its
terms);

(xv) any failure of the Seller to perform its duties or obligations in
accordance with the provisions of the Transaction Documents to which it is a
party or any failure by Fifth Street, the Seller or any Affiliate thereof to
perform its respective duties under any Sale Portfolio;

(xvi) any inability to obtain any judgment in, or utilize the court or other
adjudication system of, any state in which an Obligor may be located as a result
of the failure of the Seller to qualify to do business or file any notice or
business activity report or any similar report;

(xvii) any action taken by the Seller in the enforcement or collection of any
Sale Portfolio which results in any claim, suit or action of any kind pertaining
to the Sale Portfolio or which reduces or impairs the rights of the Purchaser
with respect to any Loan Asset or the value of any such Loan Asset;

(xviii) any products liability claim or personal injury or property damage suit
or other similar or related claim or action of whatever sort arising out of or
in connection with the Underlying Collateral or services that are the subject of
any Sale Portfolio;

(xix) any claim, suit or action of any kind arising out of or in connection with
Environmental Laws relating to the Seller or the Sale Portfolio including any
vicarious liability;

(xx) the commingling of Interest Collections and Principal Collections on the
Sale Portfolio at any time with other funds of the Seller;

(xxi) any investigation, litigation or proceeding related to this Agreement (or
the Transaction Documents) or the use of proceeds by the Seller or the security
interest in the Sale Portfolio granted hereunder;

(xxii) any failure by the Purchaser to give reasonably equivalent value to the
Seller in consideration for the transfer by the Seller to the Purchaser of any
item of the Sale Portfolio or any attempt by any Person to void or otherwise
avoid any such transfer under any statutory provision or common law or equitable
action, including, without limitation, any provision of the Bankruptcy Code;

(xxiii) the failure of the Seller or any of its agents or representatives to
remit to the Purchaser Interest Collections and Principal Collections on the
Sale Portfolio remitted to the Seller or any such agent or representative as
provided in this Agreement; or

(xxiv) failure or delay in assisting a successor Servicer in assuming each and
all of the Servicer’s obligations to service and administer the Collateral
Portfolio in

 

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accordance with the Loan and Servicing Agreement, or failure or delay in
complying with instructions from the Administrative Agent with respect thereto.

(b) Any amounts subject to the indemnification provisions of this Section 9.1
shall be paid by the Seller to the Indemnified Party within two Business Days
following such Person’s demand therefor.

(c) If for any reason the indemnification provided above in this Section 9.1 is
unavailable to the Indemnified Party or is insufficient to hold an Indemnified
Party harmless in respect of any losses, claims, damages or liabilities, then
the Seller shall contribute to the amount paid or payable by such Indemnified
Party as a result of such losses, claims, damages or liabilities in such
proportion as is appropriate to reflect not only the relative benefits received
by such Indemnified Party, on the one hand, and the Seller as the case may be,
on the other hand, but also the relative fault of such Indemnified Party as well
as any other relevant equitable considerations.

(d) Indemnification under this Section 9.1 shall be in an amount necessary to
make the Indemnified Party whole after taking into account any tax consequences
to the Indemnified Party of the receipt of the indemnity provided hereunder,
including the effect of such Tax or refund on the amount of Tax measured by net
income or profits that is or was payable by the Indemnified Party.

(e) The obligations of the Seller under this Section 9.1 shall survive the
termination of this Agreement.

Section 9.2. Assignment of Indemnities.

The Seller acknowledges that, pursuant to the Loan and Servicing Agreement, the
Purchaser shall assign its rights of indemnity hereunder to the Collateral
Agent, on behalf of the Secured Parties. Upon such assignment, (a) the
Collateral Agent, on behalf of the Secured Parties, shall have all rights of the
Purchaser hereunder and may in turn assign such rights, and (b) the obligations
of the Seller under this Article IX shall inure to the Collateral Agent, on
behalf of the Secured Parties. The Seller agrees that, upon such assignment, the
Collateral Agent, on behalf of the Secured Parties, may enforce directly,
without joinder of the Purchaser, the indemnities set forth in this Article IX.

ARTICLE X.

MISCELLANEOUS

Section 10.1. Liability of the Seller. The Seller shall be liable in accordance
herewith only to the extent of the obligations in this Agreement specifically
undertaken by the Seller and with respect to its representations and warranties
expressly set forth hereunder.

Section 10.2. Limitation on Liability. No claim may be made by the Seller or any
other Person against the Lenders, the Collateral Agent, the Collateral
Custodian, the Administrative Agent or any other Secured Party or their
respective Affiliates, directors, officers, employees, attorneys or agents for
any special, indirect, consequential or punitive damages in respect of any

 

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claim for breach of contract or any other theory of liability arising out of or
related to the transactions contemplated by this Agreement, or any act, omission
or event occurring in connection therewith; and the Seller hereby waives,
releases and agrees not to sue upon any claim for any such damages, whether or
not accrued and whether or not known or suspected to exist in its favor.

Section 10.3. Amendments; Limited Agency. Except as provided in this
Section 10.3, no amendment, waiver or other modification of any provision of
this Agreement shall be effective unless signed by the Purchaser and the Seller
and consented to in writing by the Administrative Agent, the Collateral Agent
and the Required Lenders. The Purchaser shall provide not less than ten Business
Days’ prior written notice of any such amendment to the Administrative Agent,
the Collateral Agent, each Lender.

Section 10.4. Waivers; Cumulative Remedies. No failure or delay on the part of
the Purchaser (or any assignee thereof) or the Seller, in exercising any power,
right, privilege or remedy under this Agreement shall operate as a waiver
thereof, nor shall any single or partial exercise of any such power, right,
privilege or remedy preclude any other or future exercise thereof or the
exercise of any other power, right, privilege or remedy. The powers, rights,
privileges and remedies herein provided are cumulative and not exhaustive of any
powers, rights, privileges and remedies provided by law. Any waiver of this
Agreement shall be effective only in the specific instance and for the specific
purpose for which it is given.

Section 10.5. Notices. All demands, notices and other communications hereunder
shall, unless otherwise stated herein, be in writing (which shall include
facsimile communication and communication by e-mail in portable document format
(.pdf)) and faxed, e-mailed or delivered, to each party hereto, as follows,

To the Purchaser:

Fifth Street Funding II, LLC

10 Bank Street, 12th Floor

White Plains, NY 10606

Attention: Bernard D. Berman

Facsimile: (914) 328-4214

Phone: (914) 286-6800

To the Seller:

Fifth Street Finance Corp.

10 Bank Street, 12th Floor

White Plains, NY 10606

Attention: Bernard D. Berman

Facsimile: (914) 328-4214

Phone: (914) 286-6800

or at such other address as shall be designated by such party in a written
notice to the other parties hereto. Notices and communications by facsimile and
e-mail shall be effective when sent

 

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(and shall be followed by hard copy sent by regular mail), and notices and
communications sent by other means shall be effective when received.

Section 10.6. Merger and Integration. Except as specifically stated otherwise
herein, this Agreement, the Loan and Servicing Agreement and the other
Transaction Documents set forth the entire understanding of the parties relating
to the subject matter hereof, and all prior understandings, written or oral, are
superseded by this Agreement, the Loan and Servicing Agreement and the
Transaction Documents. This Agreement may not be modified, amended, waived or
supplemented except as provided herein.

Section 10.7. Severability of Provisions. If any one or more of the covenants,
provisions or terms of this Agreement shall be for any reason whatsoever held
invalid, then such covenants, provisions or terms shall be deemed severable from
the remaining covenants, provisions or terms of this Agreement and shall in no
way affect the validity or enforceability of the other provisions of this
Agreement.

Section 10.8. GOVERNING LAW; JURY WAIVER. THIS AGREEMENT SHALL, IN ACCORDANCE
WITH SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK, BE
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. EACH OF THE PARTIES HERETO
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION ARISING DIRECTLY OR INDIRECTLY OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE TRANSACTIONS
CONTEMPLATED HEREUNDER.

Section 10.9. Consent to Jurisdiction; Service of Process.

(a) Each party hereto hereby irrevocably submits to the non-exclusive
jurisdiction of any New York State or Federal court sitting in New York City in
any action or proceeding arising out of or relating to this Agreement, and each
party hereto hereby irrevocably agrees that all claims in respect of such action
or proceeding may be heard and determined in such New York State court or, to
the extent permitted by law, in such Federal court. The parties hereto hereby
irrevocably waive, to the fullest extent they may effectively do so, the defense
of an inconvenient forum to the maintenance of such action or proceeding. The
parties hereto agree that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law.

(b) Each of the Seller and the Purchaser agrees that service of process may be
effected by mailing a copy thereof by registered or certified mail, postage
prepaid, to the Seller or the Purchaser, as applicable, at its address specified
in Section 10.5. Nothing in this Section 10.9 shall affect the right of the
Seller or the Purchaser to serve legal process in any other manner permitted by
law.

Section 10.10. Costs, Expenses and Taxes.

(a) In addition to the rights of indemnification granted to the Purchaser and
its Affiliates and officers, directors, employees and agents thereof under
Article IX hereof, the Seller agrees to pay on demand all reasonable
out-of-pocket costs and expenses of the Purchaser

 

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or its assignees incurred in connection with the preparation, execution,
delivery, enforcement, administration (including periodic auditing), renewal,
amendment or modification of, any waiver or consent issued in connection with,
this Agreement and the other documents to be delivered hereunder or in
connection herewith, including, without limitation, the reasonable fees and
out–of–pocket expenses of counsel with respect thereto and with respect to
advising the Purchaser or its assignees as to its rights and remedies under this
Agreement and the other documents to be delivered hereunder or in connection
herewith, and all reasonable out-of-pocket costs and expenses, if any (including
reasonable counsel fees and expenses), incurred by the Purchaser or its
assignees in connection with the enforcement of this Agreement and the other
documents to be delivered hereunder or in connection herewith.

(b) The Seller shall pay on demand any and all stamp, sales, excise and other
Taxes and fees payable or determined to be payable to any Governmental Authority
in connection with the execution, delivery, filing and recording of this
Agreement and the other documents to be delivered hereunder.

(c) The Seller shall pay on demand all other reasonable out-of-pocket costs,
expenses and Taxes (excluding Taxes imposed on or measured by net income)
incurred by the Purchaser or its assignees in connection with the execution,
delivery, filing and recording of this Agreement and the other documents to be
delivered hereunder, including, without limitation, all costs and expenses
incurred by the Purchaser or its assignees in connection with periodic audits of
the Seller’s books and records.

Section 10.11. Counterparts. For the purpose of facilitating the execution of
this Agreement and for other purposes, this Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts shall
be deemed to be an original, and all of which counterparts shall constitute but
one and the same instrument. Delivery of an executed counterpart of a signature
page to this Agreement by facsimile or e-mail in portable document format (.pdf)
shall be effective as delivery of a manually executed counterpart of this
Agreement.

Section 10.12. Bankruptcy Non-Petition and Limited Recourse; Claims. The Seller
hereby agrees that it will not institute against, or join any other Person in
instituting against, the Purchaser any Bankruptcy Proceeding so long as there
shall not have elapsed one year and one day (or such longer preference period as
shall then be in effect) since the Collection Date. The Seller hereby
acknowledges that (i) the Purchaser has no assets other than the Sale Portfolio
and rights and interests in the Transaction Documents and rights incidental
thereto, (ii) the Purchaser shall, immediately upon Purchase hereunder, grant a
security interest in the Sale Portfolio to the Collateral Agent, on behalf of
the Secured Parties, pursuant to the Loan and Servicing Agreement, and
(iii) Available Collections generated by the Sale Portfolio will be applied to
payment of the Purchaser’s obligations under the Loan and Servicing Agreement.
In addition, the Seller shall have no recourse for any amounts payable or any
other obligations arising under this Agreement against any officer, member,
director, employee, partner, Affiliate or security holder of the Purchaser or
any of its successors or assigns.

The provisions of this Section 10.12 are a material inducement for the Purchaser
to enter into this Agreement and the transactions contemplated hereby and for
the Administrative Agent and the Secured Parties to enter into the Loan and
Servicing Agreement and the

 

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transactions contemplated thereby and are an essential term hereof. The
Purchaser may seek and obtain specific performance of such provisions (including
injunctive relief), including, without limitation, in any bankruptcy,
reorganization, arrangement, winding-up, insolvency, moratorium or liquidation
proceedings, or other proceedings United States federal or state bankruptcy laws
or any similar laws.

Section 10.13. Binding Effect; Assignability.

(a) This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns.

(b) Notwithstanding anything to the contrary contained herein, this Agreement
may not be assigned by the Purchaser or the Seller except as permitted by this
Section 10.13 or the Loan and Servicing Agreement. Simultaneously with the
execution and delivery of this Agreement, the Purchaser will assign all of its
right, title and interest in this Agreement to the Collateral Agent, for the
benefit of the Secured Parties, to which assignment the Seller hereby expressly
consents. Upon assignment, the Seller agrees to perform its obligations
hereunder for the benefit of the Collateral Agent, for the benefit of the
Secured Parties, under the Loan and Servicing Agreement and the Collateral
Agent, in such capacity, shall be a third party beneficiary hereof. Upon such
assignment, the Collateral Agent, for the benefit of the Secured Parties, under
the Loan and Servicing Agreement may enforce the provisions of this Agreement,
exercise the rights of the Purchaser and enforce the obligations of the Seller
hereunder without joinder of the Purchaser.

(c) The Administrative Agent, each Lender, the Collateral Custodian, the
Collateral Agent and the other Secured Parties shall be third-party
beneficiaries of this Agreement.

Section 10.14. Waiver of Setoff.

(a) The Seller’s obligations under this Agreement shall not be affected by any
right of setoff, counterclaim, recoupment, defense or other right the Seller
might have against the Purchaser, the Administrative Agent, the Lenders, the
Collateral Agent, the Collateral Custodian, the other Secured Parties or any
assignee of such Persons, all of which rights are hereby waived by the Seller.

(b) The Purchaser shall have the right to set–off against the Seller any amounts
to which the Seller may be entitled hereunder and to apply such amounts to any
claims the Purchaser may have against the Seller from time to time under this
Agreement. Upon any such set–off, the Purchaser shall give notice of the amount
thereof and the reasons therefor to the Seller.

Section 10.15. Headings and Exhibits. The headings herein are for purposes of
references only and shall not otherwise affect the meaning or interpretation of
any provision hereof. The schedules and exhibits attached hereto and referred to
herein shall constitute a part of this Agreement and are incorporated into this
Agreement for all purposes.

 

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Section 10.16. Rights of Inspection. The Purchaser, the Administrative Agent,
each Lender and their respective representatives and assigns may conduct at any
reasonable time, with reasonable notice, and from time to time, and the Seller
will fully cooperate with, a reasonable number of field examinations and audits
of the inventory, the Loan Assets and business affairs of the Seller each
calendar year. Each such inspection shall be at the sole expense of the Seller.
The Purchaser and its representatives and successors and assigns acknowledge
that in exercising the rights and privileges conferred in this Section 10.16, it
or its representatives or assigns may, from time to time, obtain knowledge of
information, practices, books, correspondence and records of a confidential
nature and in which the Seller has a proprietary interest. The Purchaser and its
representatives and successors and assigns each agree that (i) it shall retain
in strict confidence and shall use its reasonable efforts to ensure that its
representatives retain in strict confidence and will not disclose without the
prior written consent of the Seller any or all of such information, practices,
books, correspondence and records furnished to them and (ii) that it will not,
and will use its reasonable efforts to ensure that its representatives and
assigns will not, make any use whatsoever (other than for the purposes
contemplated by this Agreement) of any of such information, practices, books,
correspondence and records without the prior written consent of the Seller,
unless such information is generally available to the public or is required by
law to be disclosed.

Section 10.17. Subordination. After giving effect to any payment relating to any
indebtedness, obligation or claim the Seller may from time to time hold or
otherwise have against the Purchaser or any assets or properties of the
Purchaser, whether arising hereunder or otherwise existing, the Borrowing Base
at such time must exceed the Obligations owed by the Purchaser to the Secured
Parties under the Loan and Servicing Agreement. The Seller hereby agrees that at
any time during which the condition set forth in the preceding sentence shall
not be satisfied, the Seller shall be subordinate in right of payment to the
prior payment of any indebtedness or obligation of the Purchaser owing to each
Lender, the Collateral Agent, the Collateral Custodian, the Administrative Agent
or any other Secured Party under the Loan and Servicing Agreement.

Section 10.18. Confidentiality. Each of the parties hereto hereby agrees with
the confidentiality provisions set forth in Sections 11.13 and 11.14 of the Loan
and Servicing Agreement.

[Signature pages to follow.]

 

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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
by their respective officers as of the day and year first above written.

 

FIFTH STREET FUNDING II, LLC,

as the Purchaser

By:        Name:   Title:

Fifth Street Funding II, LLC

Purchase and Sale Agreement

--------------------------------------------------------------------------------

FIFTH STREET FINANCE CORP., as the Seller By:        Name:   Title:

Fifth Street Funding II, LLC

Purchase and Sale Agreement