Exhibit 10.2

EXECUTION COPY

AMENDMENT NO. 1 AND WAIVER TO THE

LOAN AND SERVICING AGREEMENT

This AMENDMENT NO. 1 AND WAIVER TO THE LOAN AND SERVICING AGREEMENT (this
“Amendment and Waiver”), is dated as of March 16, 2012, among Fifth Street
Funding II, LLC, as the borrower (in such capacity, the “Borrower”), Fifth
Street Finance Corp., as the transferor (in such capacity, the “Transferor”) and
as the servicer (in such capacity, the “Servicer”), Sumitomo Mitsui Banking
Corporation, as the administrative agent (in such capacity, the “Administrative
Agent”), as lender (in such capacity, the “Lender”) and as the collateral agent
(in such capacity, the “Collateral Agent”). Capitalized terms used but not
defined herein have the meanings provided in the Loan and Servicing Agreement
(as defined below).

R E C I T A L S

WHEREAS, the above-named parties have entered into the Loan and Servicing
Agreement, dated as of September 16, 2011 (such agreement as amended, modified,
supplemented, waived or restated from time to time, the “Loan and Servicing
Agreement”); and

WHEREAS, pursuant to and in accordance with Section 11.01 of the Loan and
Servicing Agreement, the parties hereto desire to amend the Loan and Servicing
Agreement in certain respects and to provide for a one-time waiver of certain
provisions of the Loan and Servicing Agreement, each as provided herein.

NOW, THEREFORE, based upon the above Recitals, the mutual premises and
agreements contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, hereby agree as follows:

SECTION 1. AMENDMENT.

The Loan and Servicing Agreement is hereby amended to delete the stricken text
(indicated textually in the same manner as the following example: stricken text)
and to add the bold and double-underlined text (indicated textually in the same
manner as the following example: bold and double-underlined text) as set forth
on the pages of the Loan and Servicing Agreement attached as Exhibit A hereto.

SECTION 2. WAIVERS.

(a) Each of the parties hereto (other than the Servicer) hereby grants to the
Servicer a one-time waiver of the requirements set forth in Section 6.10 of the
Loan and Servicing Agreement for the fiscal year of the Servicer ending on
September 30, 2011. The Administrative Agent acknowledges that as a result of
such waiver, the non-delivery of the report required to be delivered under
Section 6.10 of the Loan and Servicing Agreement within 90 days of the end of
such fiscal year shall not result in an Event of Default.

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(b) Each of the parties hereto agrees and acknowledges that notwithstanding the
limited waiver granted in Section 2(a), such limited waiver shall not
(i) constitute a waiver of the occurrence or continuance of any other Event of
Default, Unmatured Event of Default or Servicer Termination Event or (ii) be
construed to limit or affect the right of the Administrative Agent or the
Secured Parties to take any action to enforce or interpret any provision of this
Amendment and Waiver or the Loan and Servicing Agreement.

SECTION 3. AGREEMENT IN FULL FORCE AND EFFECT AS AMENDED.

Except as specifically amended hereby, all provisions of the Loan and Servicing
Agreement are hereby ratified and shall remain in full force and effect. After
this Amendment and Waiver becomes effective, all references to the Loan and
Servicing Agreement, and corresponding references thereto or therein such as
“hereof,” “herein,” or words of similar effect referring to the Loan and
Servicing Agreement shall be deemed to mean the Loan and Servicing Agreement as
amended hereby. This Amendment and Waiver shall not be deemed to expressly or
impliedly waive, amend or supplement any provision of the Loan and Servicing
Agreement other than as expressly set forth herein, and shall not constitute a
novation of the Loan and Servicing Agreement.

SECTION 4. REPRESENTATIONS.

Each of the Borrower, the Servicer and the Transferor, severally for itself
only, represents and warrants as of the date of this Amendment and Waiver as
follows:

(i) it is duly incorporated or organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation or organization;

(ii) the execution, delivery and performance by it of this Amendment and Waiver
and the Loan and Servicing Agreement as amended hereby are within its powers,
have been duly authorized, and do not contravene (A) its charter, by-laws, or
other organizational documents, or (B) any Applicable Law;

(iii) no consent, license, permit, approval or authorization of, or
registration, filing or declaration with any governmental authority, is required
in connection with the execution, delivery, performance, validity or
enforceability of this Amendment and Waiver and the Loan and Servicing Agreement
as amended hereby by or against it;

(iv) this Amendment and Waiver has been duly executed and delivered by it;

(v) each of this Amendment and Waiver and the Loan and Servicing Agreement as
amended hereby constitutes its legal, valid and binding obligation enforceable
against it in accordance with its terms, except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors’ rights generally or by general
principles of equity;

(vi) no Unmatured Event of Default, Event of Default or Servicer Termination
Event has occurred or exists that has not been otherwise waived in this
Amendment and Waiver; and

 

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(vii) no Unmatured Event of Default, Event of Default or Servicer Termination
Event will result under the Loan and Servicing Agreement, as amended by this
Amendment and Waiver.

SECTION 5. CONDITIONS TO EFFECTIVENESS.

The effectiveness of this Amendment and Waiver is conditioned upon: (i) payment
of the outstanding fees and disbursements of the Collateral Agent, the
Administrative Agent and the Lender; (ii) payment of the outstanding fees and
disbursements of Dechert LLP, as counsel to the Collateral Agent, the
Administrative Agent and the Lender; (iii) delivery of executed signature pages
by all parties hereto to the Administrative Agent; and (iv) delivery and
execution of certain amendments to the Lender Fee Letter by the parties thereto.

SECTION 6. MISCELLANEOUS.

(a) Without in any way limiting any other obligation hereunder or under the
Transaction Documents, the Borrower agrees to provide, from time to time, any
additional documentation and to execute additional acknowledgements, amendments,
instruments or other agreements as may be reasonably requested and required by
the Administrative Agent to effectuate the foregoing.

(b) This Amendment and Waiver may be executed in any number of counterparts
(including by facsimile), and by the different parties hereto on the same or
separate counterparts, each of which shall be deemed to be an original
instrument but all of which together shall constitute one and the same
agreement.

(c) The descriptive headings of the various sections of this Amendment and
Waiver are inserted for convenience of reference only and shall not be deemed to
affect the meaning or construction of any of the provisions hereof.

(d) This Amendment and Waiver may not be amended or otherwise modified except as
provided in the Loan and Servicing Agreement.

(e) The failure or unenforceability of any provision hereof shall not affect the
other provisions of this Amendment and Waiver or the Loan and Servicing
Agreement.

(f) Whenever the context and construction so require, all words used in the
singular number herein shall be deemed to have been used in the plural number,
and vice versa, and the masculine gender shall include the feminine and neuter
and the neuter shall include the masculine and feminine.

(g) This Amendment and Waiver and the Loan and Servicing Agreement represent the
final agreement among the parties only with respect to the matters expressly set
forth therein and may not be contradicted by evidence of prior, contemporaneous
or subsequent oral agreements among the parties. There are no unwritten oral
agreements among the parties with respect to such matters.

 

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(h) THIS AMENDMENT AND WAIVER AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
UNDER THIS AMENDMENT AND WAIVER SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE CHOICE OF LAW PROVISIONS SET FORTH IN THE
LOAN AND SERVICING AGREEMENT AND SHALL BE SUBJECT TO THE WAIVER OF JURY TRIAL
AND NOTICE PROVISIONS SET FORTH IN THE LOAN AND SERVICING AGREEMENT.

[Remainder of Page Intentionally Left Blank]

 

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IN WITNESS WHEREOF, the parties have caused this Amendment and Waiver to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.

 

FIFTH STREET FUNDING II, LLC, as the Borrower By:  

/s/ Bernard D. Berman

  Name: Bernard D. Berman   Title: President & Secretary

[SIGNATURES CONTINUED ON FOLLOWING PAGE]

 

Fifth Street Funding II, LLC

Amendment No. 1 and Waiver to Loan & Servicing Agreement

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FIFTH STREET FINANCE CORP., as the Servicer and as the Transferor By:  

/s/ Bernard D. Berman

  Name: Bernard D. Berman   Title: President & Secretary

[SIGNATURES CONTINUED ON FOLLOWING PAGE]

 

Fifth Street Funding II, LLC

Amendment No. 1 and Waiver to Loan & Servicing Agreement

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SUMITOMO MITSUI BANKING CORPORATION, as the Administrative Agent By:  

/s/ Ryo Suzuki

  Name: Ryo Suzuki   Title: Managing Director

[SIGNATURES CONTINUED ON FOLLOWING PAGE]

 

Fifth Street Funding II, LLC

Amendment No. 1 and Waiver to Loan & Servicing Agreement

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SUMITOMO MITSUI BANKING CORPORATION, as the Lender By:  

/s/ Ryo Suzuki

  Name: Ryo Suzuki   Title: Managing Director

[SIGNATURES CONTINUED ON FOLLOWING PAGE]

 

Fifth Street Funding II, LLC

Amendment No. 1 and Waiver to Loan & Servicing Agreement

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SUMITOMO MITSUI BANKING CORPORATION, as the Collateral Agent By:  

/s/ Ryo Suzuki

  Name: Ryo Suzuki   Title: Managing Director

 

Fifth Street Funding II, LLC

Amendment No. 1 and Waiver to Loan & Servicing Agreement

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Exhibit A

CONFORMED LOAN AND SERVICING AGREEMENT

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EXECUTION COPY

Conformed through Amendment No. 1

 

 

 

Up to U.S.$200,000,000

LOAN AND SERVICING AGREEMENT

Dated as of September 16, 2011

Among

FIFTH STREET FUNDING II, LLC,

as the Borrower

FIFTH STREET FINANCE CORP.,

as the Servicer and as the Transferor

SUMITOMO MITSUI BANKING CORPORATION,

as the Administrative Agent and as the Collateral Agent

and

EACH OF THE LENDERS FROM TIME TO TIME PARTY HERETO,

as the Lenders

 

 

 

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TABLE OF CONTENTS

 

         Page  

ARTICLE I.

 

DEFINITIONS

     1   

Section 1.01

 

Certain Defined Terms

     1   

Section 1.02

 

Other Terms

     3332   

Section 1.03

 

Computation of Time Periods

     33   

Section 1.04

 

Interpretation

     33   

ARTICLE II.

 

THE FACILITY

     3433   

Section 2.01

 

Variable Funding Note and Advances

     3433   

Section 2.02

 

Procedure for Advances

     3534   

Section 2.03

 

Determination of Yield

     37   

Section 2.04

 

Remittance Procedures

     37   

Section 2.05

 

Instructions to the Collateral Agent

     40   

Section 2.06

 

Borrowing Base Deficiency Payments

     40   

Section 2.07

 

Substitution and Sale of Loan Assets; Affiliate Transactions

     41   

Section 2.08

 

Payments and Computations, Etc

     45   

Section 2.09

 

Non-Usage FeeFees

     46   

Section 2.10

 

Increased Costs; Capital Adequacy

     46   

Section 2.11

 

Taxes

     48   

Section 2.12

 

Collateral Assignment of Agreements

     5150   

Section 2.13

 

Grant of a Security Interest

     51   

Section 2.14

 

Evidence of Debt

     5251   

Section 2.15

 

Survival of Representations and Warranties

     52   

Section 2.16

 

Release of Loan Assets

     52   

Section 2.17

 

Treatment of Amounts Received by the Borrower

     52   

Section 2.18

 

Prepayment; Termination

     5352   

Section 2.19

 

Extension of Stated Maturity Date

     53   

Section 2.20

 

Collections and Allocations

     53   

Section 2.21

 

Additional Lenders

     5554   

ARTICLE III.

 

CONDITIONS PRECEDENT

     55   

Section 3.01

 

Conditions Precedent to Effectiveness

     55   

Section 3.02

 

Conditions Precedent to All Advances

     56   

 

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TABLE OF CONTENTS

(continued)

 

         Page  

Section 3.03

 

Advances Do Not Constitute a Waiver

     58   

Section 3.04

 

Conditions to Pledges of Loan Assets

     58   

ARTICLE IV.

 

REPRESENTATIONS AND WARRANTIES

     59   

Section 4.01

 

Representations and Warranties of the Borrower

     59   

Section 4.02

 

Representations and Warranties of the Borrower Relating to the Agreement and the
Collateral Portfolio

     67   

Section 4.03

 

Representations and Warranties of the Servicer

     68   

Section 4.04

 

Representations and Warranties of each Lender

     72   

ARTICLE V.

 

GENERAL COVENANTS

     72   

Section 5.01

 

Affirmative Covenants of the Borrower

     72   

Section 5.02

 

Negative Covenants of the Borrower

     79   

Section 5.03

 

Affirmative Covenants of the Servicer

     81   

Section 5.04

 

Negative Covenants of the Servicer

     86   

ARTICLE VI.

 

ADMINISTRATION AND SERVICING OF CONTRACTS

     88   

Section 6.01

 

Appointment and Designation of the Servicer

     88   

Section 6.02

 

Duties of the Servicer

     90   

Section 6.03

 

Authorization of the Servicer

     92   

Section 6.04

 

Collection of Payments; Accounts

     93   

Section 6.05

 

Realization Upon Loan Assets

     94   

Section 6.06

 

Servicing Compensation

     95   

Section 6.07

 

Payment of Certain Expenses by Servicer

     95   

Section 6.08

 

Reports to the Administrative Agent; Account Statements; Servicing Information

     95   

Section 6.09

 

Annual Statement as to Compliance

     97   

Section 6.10

 

Annual Independent Public Accountant’s Servicing Reports

     97   

Section 6.11

 

The Servicer Not to Resign

     98   

ARTICLE VII.

 

EVENTS OF DEFAULT

     98   

Section 7.01

 

Events of Default

     98   

Section 7.02

 

Additional Remedies of the Administrative Agent

     101   

ARTICLE VIII.

 

INDEMNIFICATION

     103   

Section 8.01

 

Indemnities by the Borrower

     103   

 

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TABLE OF CONTENTS

(continued)

 

         Page  

Section 8.02

 

Indemnities by Servicer

     106   

Section 8.03

 

Legal Proceedings

     108   

Section 8.04

 

After-Tax Basis

     108109   

ARTICLE IX.

 

THE ADMINISTRATIVE AGENT

     109   

Section 9.01

 

The Administrative Agent

     109   

ARTICLE X.

 

COLLATERAL AGENT

     113112   

Section 10.01

 

Designation of Collateral Agent

     113112   

Section 10.02

 

Duties of Collateral Agent

     113   

Section 10.03

 

Merger or Consolidation

     115   

Section 10.04

 

Collateral Agent Compensation

     116115   

Section 10.05

 

Collateral Agent Removal

     116115   

Section 10.06

 

Limitation on Liability

     116   

Section 10.07

 

Collateral Agent Resignation

     117   

ARTICLE XI.

 

MISCELLANEOUS

     118117   

Section 11.01

 

Amendments and Waivers

     118117   

Section 11.02

 

Notices, Etc

     118   

or at such other address as shall be designated by such party in a written
notice to the other parties hereto

     118   

Section 11.03

 

No Waiver; Remedies

     119   

Section 11.04

 

Binding Effect; Assignability; Multiple Lenders

     119   

Section 11.05

 

Term of This Agreement

     120119   

Section 11.06

 

GOVERNING LAW; JURY WAIVER

     120   

Section 11.07

 

Costs, Expenses and Taxes

     120   

Section 11.08

 

No Proceedings

     121   

Section 11.09

 

Recourse Against Certain Parties

     121   

Section 11.10

 

Execution in Counterparts; Severability; Integration

     122   

Section 11.11

 

Consent to Jurisdiction; Service of Process

     123122   

Section 11.12

 

Characterization of Conveyances Pursuant to the Purchase and Sale Agreement

     123   

Section 11.13

 

Confidentiality

     124   

Section 11.14

 

Non-Confidentiality of Tax Treatment

     126125   

 

iii

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TABLE OF CONTENTS

(continued)

 

         Page  

Section 11.15

 

Waiver of Set Off

     126   

Section 11.16

 

Headings and Exhibits

     126   

Section 11.17

 

Ratable Payments

     126   

Section 11.18

 

Failure of Borrower or Servicer to Perform Certain Obligations

     127126   

Section 11.19

 

Power of Attorney

     127126   

Section 11.20

 

Delivery of Termination Statements, Releases, etc

     127   

 

iv

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LIST OF SCHEDULES AND EXHIBITS

SCHEDULES

 

SCHEDULE I    Conditions Precedent Documents SCHEDULE II    Eligibility Criteria
SCHEDULE III    Agreed-Upon Procedures For Independent Public Accountants
SCHEDULE IV    Loan Asset Schedule SCHEDULE V    Advance Funding Account – Wire
Instructions

EXHIBITS

 

EXHIBIT A    Form of Approval Notice EXHIBIT B    Form of Borrowing Base
Certificate EXHIBIT C    Form of Conversion Notice EXHIBIT D    Form of
Disbursement Request EXHIBIT E    Form of Joinder Supplement EXHIBIT F    Form
of Notice of Borrowing EXHIBIT G    Form of Notice of Reduction (Reduction of
Advances Outstanding) EXHIBIT H    Form of Variable Funding Note EXHIBIT I   
Form of Notice and Request for Consent EXHIBIT J    Form of Servicing Report
EXHIBIT K    Form of Servicer’s Certificate (Servicing Report) EXHIBIT L    Form
of Release of Required Loan Documents EXHIBIT M    Form of Assignment and
Acceptance EXHIBIT N    Form of Power of Attorney for Servicer EXHIBIT O    Form
of Power of Attorney for Borrower EXHIBIT P    Form of Servicer’s Certificate
(Loan Asset Register)

ANNEXES

ANNEX A    Commitments

 

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This LOAN AND SERVICING AGREEMENT is made as of September 16, 2011, among:

(1) FIFTH STREET FUNDING II, LLC, a Delaware limited liability company (together
with its successors and assigns in such capacity, the “Borrower”);

(2) FIFTH STREET FINANCE CORP., a Delaware corporation, as the Servicer (as
defined herein) and as the Transferor (as defined herein);

(3) SUMITOMO MITSUI BANKING CORPORATION, a Japanese banking corporation, as
Administrative Agent (together with its successors and assigns in such capacity,
the “Administrative Agent”) and as the Collateral Agent (together with its
successors and assigns in such capacity, the “Collateral Agent”); and

(4) EACH OF THE LENDERS FROM TIME TO TIME PARTY HERETO, as a Lender.

PRELIMINARY STATEMENT

The Lenders have agreed, on the terms and conditions set forth herein, to
provide a secured revolving credit facility which shall provide for Advances
under the Variable Funding Note(s) from time to time in an aggregate principal
amount not to exceed the Borrowing Base. The proceeds of the Advances will be
used (a) to finance the Borrower’s purchase, on a “true sale” basis, of Eligible
Loan Assets from the Transferor, approved by the Administrative Agent, pursuant
to the Purchase and Sale Agreement between the Borrower and the Transferor,
(b) to fund the Unfunded Exposure Account and (c) to distribute such proceeds to
the Borrower’s parent. Accordingly, the parties agree as follows:

ARTICLE I.

DEFINITIONS

SECTION 1.01 Certain Defined Terms.

(a) Certain capitalized terms used throughout this Agreement are defined above
or in this Section 1.01.

(b) As used in this Agreement and the exhibits and schedules thereto (each of
which is hereby incorporated herein and made a part hereof), the following terms
shall have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):

“1940 Act” means the Investment Company Act of 1940, as amended, and the rules
and regulations promulgated thereunder.

“Account Bank” means U.S. Bank, in its capacity as the “Account Bank” pursuant
to the Control Agreement.

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“Action” has the meaning assigned to that term in Section 8.03.

“Additional Amount” has the meaning assigned to that term in Section 2.11(a).

“Adjusted Borrowing Value” means for any Loan Asset, for any date of
determination, an amount equal to the Assigned Value of such Loan Asset at such
time multiplied by the Outstanding Balance of such Loan Asset; provided that the
parties hereby agree that the Adjusted Borrowing Value of any Loan Asset that is
no longer an Eligible Loan Asset shall be zero.

“Administrative Agent” means Sumitomo Mitsui Banking Corporation, in its
capacity as administrative agent for the Lenders, together with its successors
and assigns, including any successor appointed pursuant to Article IX.

“Advance” means each loan advanced by the Lenders to the Borrower on an Advance
Date pursuant to Article II.

“Advance Date” means, with respect to any Advance, the Business Day on which
such Advance is made.

“Advance Funding Account” means an account in the name of the Borrower (account
number 154426-203 at the Account Bank) with the wire instructions set forth on
Schedule V or such other account or with such other wire instructions as from
time to time the Borrower has designated to the Administrative Agent in writing
with evidence satisfactory to the Administrative Agent confirming that a
Responsible Officer of the Borrower has requested such account or wire
instruction modification in writing.

“Advances Outstanding” means, at any time, the sum of the principal amounts of
Advances loaned to the Borrower for the initial and any subsequent borrowings
pursuant to Sections 2.01 and 2.02 as of such time, reduced by the aggregate
Available Collections received and distributed as repayment of principal amounts
of Advances Outstanding pursuant to Section 2.04 at or prior to such time and
any other amounts received by the Lenders to repay the principal amounts of
Advances Outstanding pursuant to Section 2.18 or otherwise at or prior to such
time; provided that the principal amounts of Advances Outstanding shall not be
reduced by any Available Collections or other amounts if at any time such
Available Collections or other amounts are rescinded or must be returned for any
reason.

“Affected Party” has the meaning assigned to that term in Section 2.10.

“Affiliate” when used with respect to a Person, means any other Person
controlling, controlled by or under common control with such Person. For the
purposes of this definition, “control,” when used with respect to any specified
Person, means the power to vote 20% or more of the voting securities of such
Person or to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms “controlling” and “controlled” have meanings
correlative to the foregoing; provided that for purposes of determining whether
any Loan Asset is an Eligible Loan Asset or for purposes of
Section 5.01(b)(xix), the term Affiliate shall not include any Affiliate
relationship which may exist solely as a result of direct or indirect ownership
or control by a common Financial Sponsor.

 

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“Agented Note” means any Loan Asset (i) originated as a part of a syndicated
loan transaction that has been closed (without regard to any contemporaneous or
subsequent syndication of such Loan Asset) prior to such Loan Asset becoming
part of the Collateral Portfolio and (ii) with respect to which, upon an
assignment of the note under the Purchase and Sale Agreement to the Borrower,
the Borrower, as assignee of the note, will have all of the rights but none of
the obligations of the Transferor with respect to such note and the Underlying
Collateral.

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

“Applicable Law” means for any Person all existing and future laws, rules,
regulations (including temporary and final income tax regulations), statutes,
treaties, codes, ordinances, permits, certificates, orders, licenses of and
interpretations by any Governmental Authority applicable to such Person
(including, without limitation, predatory lending laws, usury laws, the Federal
Truth-in-Lending Act, the Equal Credit Opportunity Act, the Fair Credit Billing
Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the
Federal Trade Commission Act, the Magnuson-Moss Warranty Act, the Federal
Reserve Board’s Regulations “B” and “Z”, the Servicemembers Civil Relief Act of
2003 and state adaptations of the National Consumer Act and of the Uniform
Consumer Credit Code and all other consumer credit laws and equal credit
opportunity and disclosure laws) and applicable judgments, decrees, injunctions,
writs, awards or orders of any court, arbitrator or other administrative,
judicial, or quasi-judicial tribunal or agency of competent jurisdiction.

“Applicable Percentage” means, for each Eligible Loan Asset, 65%.

“Applicable Spread” means, (i) with respect to any rate based on LIBOR,
2.25% per annum and, (ii) with respect to any rate based on the Base Rate,
1.25% per annum; provided that, at any time after the occurrence of an Event of
Default, the Applicable Spread shall be 4.00% per annum.

“Approval Notice” means, with respect to any Eligible Loan Asset, the written
notice, in substantially the form attached hereto as Exhibit A, evidencing the
approval by the Administrative Agent, in its sole discretion, of the conveyance
of such Eligible Loan Asset by the Transferor to the Borrower pursuant to the
terms of the Purchase and Sale Agreement and the Loan Assignment by which the
Transferor effects such conveyance.

“Assigned Documents” has the meaning assigned to that term in Section 2.12.

“Assigned Value” means, with respect to each Loan Asset, as of any date of
determination and expressed as a percentage of the Outstanding Balance of such
Loan Asset, (i) on and after the Cut-Off Date but prior to a Value Adjustment
Event for such Loan Asset, 100.0% and (ii) after any occurrence of a Value
Adjustment Event with respect to such Loan Asset, the value of such Loan Asset
as revised by the Administrative Agent in its good faith business judgment upon
each such occurrence. The Administrative Agent shall promptly notify the
Servicer of any change effected by the Administrative Agent of the Assigned
Value of any Loan Asset.

 

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“Assignment and Acceptance” has the meaning assigned to that term in
Section 11.04(a).

“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
Borrower or the Servicer with respect to any Underlying Collateral (including
from any guarantors), all other amounts on deposit in the Collection Account
from time to time, and all proceeds of Permitted Investments with respect to the
Controlled Accounts; provided that, for the avoidance of doubt, “Available
Collections” shall not include amounts on deposit in the Unfunded Exposure
Account which do not represent proceeds of Permitted Investments.

“Bankruptcy Code” means Title 11, United States Code, 11 U.S.C. §§ 101 et seq.,
as amended from time to time.

“Bankruptcy Event” shall be deemed to have occurred with respect to a Person if
either:

(i) a case or other proceeding shall be commenced, without the application or
consent of such Person, in any court, seeking the liquidation, reorganization,
debt arrangement, dissolution, winding up, or composition or readjustment of
debts of such Person, the appointment of a trustee, receiver, custodian,
liquidator, assignee, sequestrator or the like for such Person or all or
substantially all of its assets, or any similar action with respect to such
Person under any law relating to bankruptcy, insolvency, reorganization, winding
up or composition or adjustment of debts, and such case or proceeding shall
continue undismissed, or unstayed and in effect, for a period of 60 consecutive
days; or an order for relief in respect of such Person shall be entered in an
involuntary case under the federal bankruptcy laws or other similar laws now or
hereafter in effect; or

(ii) such Person shall commence a voluntary case or other proceeding under any
Bankruptcy Laws now or hereafter in effect, or shall consent to the appointment
of or taking possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator (or other similar official) for such Person or all or substantially
all of its assets, or shall make any general assignment for the benefit of
creditors, or shall fail to, or admit in writing its inability to, pay its debts
generally as they become due, or, if a corporation or similar entity, its board
of directors or members shall vote to implement any of the foregoing.

“Bankruptcy Laws” means the Bankruptcy Code and all other applicable
liquidation, conservatorship, bankruptcy, moratorium, rearrangement,
receivership, insolvency, reorganization, suspension of payments, or similar
debtor relief laws from time to time in effect affecting the rights of creditors
generally.

“Bankruptcy Proceeding” means any case, action or proceeding before any court or
other Governmental Authority relating to any Bankruptcy Event.

 

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“Base Rate” means, on any date, a fluctuating per annum interest rate equal to
the higher of (a) the Prime Rate or (b) the Federal Funds Rate plus 0.50%.

“Base Rate Advance” means any Advance (i) not made as a LIBOR Advance in
accordance with Section 2.02(b) and (ii) not converted into a LIBOR Advance in
accordance with Section 2.02(c).

“Base Rate Advances Outstanding” means, at any time, the outstanding Base Rate
Advances.

“Base Rate Yield Rate” means, as of any date of determination, an interest rate
per annum equal to the Base Rate for such date plus the Applicable Spread.

“Borrower” has the meaning assigned to that term in the preamble hereto.

“Borrowing Base” means, as of any date of determination, an amount equal to the
lesser of:

(a) (i) the aggregate sum of the products of (A) the Applicable Percentage for
each Eligible Loan Asset as of such date and (B) the Adjusted Borrowing Value of
such Eligible Loan Asset as of such date, plus (ii) the amount on deposit in the
Principal Collection Account as of such date plus (iii) the amount on deposit in
the Unfunded Exposure Account minus (iv) the Unfunded Exposure Equity Amount; or

(b) (i) the Maximum Facility Amount, minus (ii) the Unfunded Exposure Amount,
plus (iii) amounts on deposit in the Unfunded Exposure Account;

provided that, for the avoidance of doubt, any Loan Asset which at any time is
no longer an Eligible Loan Asset shall not be included in the calculation of
“Borrowing Base”.

“Borrowing Base Certificate” means a certificate setting forth the calculation
of the Borrowing Base as of the applicable date of determination substantially
in the form of Exhibit B hereto, prepared by the Servicer.

“Borrowing Base Deficiency” means, as of any date of determination, the extent
to which the aggregate Advances Outstanding on such date exceeds the Borrowing
Base.

“Breakage Fee” means, for any full or partial repayment of any LIBOR Advance on
any date other than a Payment Date or with less than three Business Days’ prior
written notice to the Administrative Agent, the breakage costs, if any related
to such repayment, which shall be deemed to be the amount determined by the
Administrative Agent to be the excess of (a) the amount of interest that would
have accrued on the principal amount of the LIBOR Advance had such prepayment
not occurred, at the LIBOR rate that would have been applicable to such LIBOR
Advance, for the period from the date of such prepayment to (i) the last day of
the then current Interest Period therefor if on such last day the Administrative
Agent will have had at least three Business Days’ notice of such prepayment and
(ii) if on such last day the Administrative Agent will not have had at least
three Business Days’ notice of such prepayment, the last day of the next
Interest Period therefor, over (b) the amount of interest that would accrue on
such

 

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principal amount for such period at the interest rate which the Administrative
Agent would earn for a deposit in Dollars of a comparable amount and period from
other banks in the Eurocurrency market.

“Business Day” means a day of the year other than (i) Saturday or a Sunday or
(ii) any other day on which commercial banks in New York, New York or the city
in which the offices of the Collateral Agent are located and are authorized or
required by Applicable Law, regulation or executive order to close; provided
that, if any determination of a Business Day shall relate to an LIBOR Advance,
the term “Business Day” shall also exclude any day on which banks are not open
for dealings in Dollar deposits in the London interbank market. For avoidance of
doubt, if the offices of the Collateral Agent are authorized by Applicable Law,
regulation or executive order to close but remain open, such day shall not be a
“Business Day”.

“Change of Control” shall be deemed to have occurred if any of the following
occur:

(a) the Management Agreement shall fail to be in full force and effect; provided
that if, pursuant to a Fifth Street Affiliate Merger Transaction, the services
provided to Fifth Street under the Management Agreement have been assumed by a
Fifth Street Merger Party or by Fifth Street for its own account, then the
foregoing shall not be deemed a “Change of Control”;

(b) the creation or imposition of any Lien on any limited liability company
membership interest in the Borrower;

(c) the failure by Fifth Street to own 100% of the limited liability company
membership interests in the Borrower, free and clear of any Lien other than a
Permitted Lien;

(d) the assignment or transfer by Fifth Street of its rights or obligations as
“Servicer” under this Agreement and any other Transaction Document to an entity
other than an Affiliate of Fifth Street; or

(e) the dissolution, termination or liquidation in whole or in part, transfer or
other disposition, in each case, of all or substantially all of the assets of,
Fifth Street.

“Change of Tax Law” means any change in application or public announcement of an
official position under or any change in or amendment to the laws (or any
regulations or rulings promulgated thereunder) of any jurisdiction in which an
Obligor is organized, or any political subdivision or taxing authority of any of
the foregoing, affecting taxation, or any proposed change in such laws or change
in the official application, enforcement or interpretation of such laws,
regulations or rulings (including a holding by a court of competent
jurisdiction), or any other action taken by a taxing authority or court of
competent jurisdiction in the relevant jurisdiction, or the official proposal of
any such action.

“Closing Date” means September 16, 2011.

“Code” means the Internal Revenue Code of 1986, as amended.

 

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“Collateral Agent” has the meaning assigned to that term in the preamble hereto.

“Collateral Agent Expenses” means all accrued and unpaid expenses (including
reasonable attorneys’ fees, costs and expenses) and indemnity amounts payable by
the Borrower to the Collateral Agent under the Transaction Documents.

“Collateral Agent Fees” means, as of any date of determination, fees in the
amount equal to the product of (x) 0.04% and (y) (i) the Outstanding Balance of
the Loan Assets plus (ii) the amount on deposit in the Principal Collection
Account as of such date plus (iii) the amount on deposit in the Unfunded
Exposure Account as of such date that are payable to the Collateral Agent;
provided that, the Collateral Agent Fees shall not be less than $50,000
annually; provided, further, that, so long as SMBC or its Affiliate is the
Collateral Agent, the Collateral Agent Fees shall be $0.

“Collateral Agent Termination Notice” has the meaning assigned to that term in
Section 10.05.

“Collateral Custodian” means U.S. Bank, not in its individual capacity, but
solely as collateral custodian pursuant to the terms of the Custody Agreement.

“Collateral Custodian Expenses” means the expenses set forth in the U.S. Bank
Fee Letter and all accrued and unpaid expenses (including reasonable attorneys’
fees, costs and expenses) and indemnity amounts payable by the Borrower to the
Collateral Custodian under the Transaction Documents.

“Collateral Custodian Fees” means the fees set forth in the U.S. Bank Fee Letter
that are payable to the Collateral Custodian, as such fee letter may be amended,
restated, supplemented and/or otherwise modified from time to time.

“Collateral Portfolio” means all right, title, and interest (whether now owned
or hereafter acquired or arising, and wherever located) of the Borrower, to and
under 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);

(iii) the Controlled Accounts and all Permitted Investments purchased with funds
on deposit in the Controlled Accounts; and

 

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(iv) all income and Proceeds of the foregoing.

“Collection Account” means a trust account (account number 154426-200 at the
Account Bank) in the name of the Borrower for the benefit of and under the sole
dominion and control of the Collateral Agent for the benefit of the Secured
Parties; provided that the funds deposited therein (including any interest and
earnings thereon) from time to time and subject to the terms thereof shall
constitute the property and assets of the Borrower, and the Borrower shall be
solely liable for any Taxes payable with respect to the Collection Account.

“Collection Date” means the date on which the aggregate outstanding principal
amount of the Advances Outstanding have been repaid in full and all Yield and
Fees and all other Obligations have been paid in full, and the Borrower shall
have no further right to request any additional Advances.

“Commitment” means, with respect to each Lender, (i) prior to the end of the
Reinvestment Period or for purposes of Advances made pursuant to
Section 2.02(f), the Dollar amount set forth opposite such Lender’s name on
Annex A hereto (as such amount may be revised from time to time in accordance
with the terms hereof) or the amount set forth as such Lender’s “Commitment” on
Schedule I to the Joinder Supplement relating to such Lender, as applicable, and
(ii) on or after the Reinvestment Period (other than for purposes of Advances
made pursuant to Section 2.02(f)), such Lender’s Pro Rata Share of the aggregate
Advances Outstanding.

“Control” means the possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise.

“Control Agreement” means that certain securities account control agreement,
dated as of the date hereof, by and among the Borrower, the Servicer, the
Administrative Agent, the Collateral Agent and U.S. Bank, as such agreement may
from time to time be amended, supplemented or otherwise modified in accordance
with the terms thereof.

“Controlled Accounts” means the Collection Account and the Unfunded Exposure
Account.

“Conversion Date” means, with respect to any Advance, the Business Day on which
such Advance was, or is to be, converted from a Base Rate Advance to a LIBOR
Advance.

“Conversion Notice” means, with respect to any Advance, the written notice, in
substantially the form attached hereto as Exhibit C, evidencing the request of
the Borrower to the Administrative Agent to convert such Advance from a Base
Rate Advance into a LIBOR Advance.

“Custodial Account” means a trust account (account number 154426-701 at the
Account Bank) in the name of the Borrower for the benefit of and under the sole
dominion and control of the Collateral Agent for the benefit of the Secured
Parties; provided that the funds deposited therein (including any interest and
earnings thereon) from time to time and subject to the terms thereof shall
constitute the property and assets of the Borrower, and the Borrower shall be
solely liable for any Taxes payable with respect to the Custodial Account.

 

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“Custody Agreement” means that certain Custody Agreement, dated the date of this
Agreement, by and among the Borrower, the Servicer, the Transferor, the
Administrative Agent, the Collateral Agent, and U.S Bank.

“Cut-Off Date” means, with respect to each Loan Asset, the date such Loan Asset
is Pledged hereunder.

“Defaulted Loan Asset” means a Loan Asset which has become subject to a Value
Adjustment Event of the type described in clauses (i) or (ii) of the definition
thereof. If the Value Adjustment Event which gave rise to a Defaulted Loan Asset
is cured, the Borrower may submit such Loan Asset for review by the
Administrative Agent (in its sole discretion) for the purpose of re-classifying
such Loan Asset as a Loan Asset which is no longer a Defaulted Loan Asset.

“Delayed Draw Loan Asset” means a Loan Asset that is fully committed on the
initial funding date of such Loan Asset and is required to be fully funded in
one or more installments on draw dates to occur within one year of the initial
funding of such Loan Asset but which, once all such installments have been made,
has the characteristics of a Term Loan Asset.

“Disbursement Request” means a disbursement request from the Borrower to the
Administrative Agent and the Collateral Agent in the form attached hereto as
Exhibit D in connection with a disbursement request from the Unfunded Exposure
Account in accordance with Section 2.04(d).

“Dollar”, “USD” or “U.S.$” means a dollar or other equivalent unit in such coin
or currency of the United States as at the time shall be legal tender for all
debts, public and private.

“Eligible Loan Asset” means, at any time, a Loan Asset which has been Pledged
hereunder in respect of which each of the representations and warranties
contained in Section 4.02 and Schedule II hereto is true and correct.

“Eligible Replacement” has the meaning assigned to that term in Section 6.01(c).

“Eligible Successor Agent” has the meaning assigned to that term in
Section 9.01(h).

“Environmental Laws” means any and all foreign, federal, state and local laws,
statutes, ordinances, rules, regulations, permits, licenses, approvals,
interpretations and orders of courts or Governmental Authorities, relating to
the protection of human health or the environment, including, but not limited
to, requirements pertaining to the manufacture, processing, distribution, use,
treatment, storage, disposal, transportation, handling, reporting, licensing,
permitting, investigation or remediation of Hazardous Materials. Environmental
Laws include, without limitation, the Comprehensive Environmental Response,
Compensation, and Liability Act (42 U.S.C. § 9601 et seq.), the Hazardous
Material Transportation Act (49 U.S.C. § 331 et seq.), the Resource Conservation
and Recovery Act (42 U.S.C. § 6901 et seq.), the

 

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Federal Water Pollution Control Act (33 U.S.C. § 1251 et seq.), the Clean Air
Act (42 U.S.C. § 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. §
2601 et seq.), the Safe Drinking Water Act (42 U.S.C. § 300, et seq.), the
Environmental Protection Agency’s regulations relating to underground storage
tanks (40 C.F.R. Parts 280 and 281), and the Occupational Safety and Health Act
(29 U.S.C. § 651 et seq.), and the rules and regulations thereunder, each as
amended or supplemented from time to time.

“Equity Security” means (i) any equity security or any other security that is
not eligible for purchase by the Borrower as a Loan Asset, (ii) any security
purchased as part of a “unit” with a Loan Asset and that itself is not eligible
for purchase by the Borrower as a Loan Asset, and (iii) any obligation that, at
the time of commitment to acquire such obligation, was eligible for purchase by
the Borrower as a Loan Asset but that, as of any subsequent date of
determination, no longer is eligible for purchase by the Borrower as a Loan
Asset, for so long as such obligation fails to satisfy such requirements.

“ERISA” means the United States Employee Retirement Income Security Act of 1974,
as amended from time to time.

“ERISA Affiliate” means (a) any corporation that is a member of the same
controlled group of corporations (within the meaning of Section 414(b) of the
Code) as the Borrower, (b) a trade or business (whether or not incorporated)
under common control (within the meaning of Section 414(c) of the Code) with the
Borrower, or (c) a member of the same affiliated service group (within the
meaning of Section 414(m) of the Code) as the Borrower, any corporation
described in clause (a) above or any trade or business described in clause
(b) above.

“Eurodollar Disruption Event” means the occurrence of any of the following:
(a) SMBC shall have notified the Administrative Agent of a determination by SMBC
or any of its assignees or participants that it would be contrary to law or to
the directive of any central bank or other Governmental Authority (whether or
not having the force of law) to obtain Dollars in the London interbank market to
fund any Advance, (b) SMBC shall have notified the Administrative Agent of the
inability, for any reason, of SMBC or any of its respective assignees or
participants to determine LIBOR, (c) SMBC shall have notified the Administrative
Agent of a determination by SMBC or any of its respective assignees or
participants that the rate at which deposits of Dollars are being offered to
SMBC or any of its respective assignees or participants in the London interbank
market does not accurately reflect the cost to SMBC or its assignee or
participant of making, funding or maintaining any Advance or (d) SMBC shall have
notified the Administrative Agent of the inability of SMBC or any of its
respective assignees or participants to obtain Dollars in the London interbank
market to make, fund or maintain any Advance.

“Event of Default” has the meaning assigned to that term in Section 7.01.

“Excepted Persons” has the meaning assigned to that term in Section 11.13(a).

“Exchange Act” means the United States Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.

“Excluded Amounts” means (a) any amount received in the Collection Account with
respect to any Loan Asset included as part of the Collateral Portfolio, which
amount is

 

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attributable to the payment of any Tax, fee or other charge imposed by any
Governmental Authority on such Loan Asset or on any Underlying Collateral and
(b) any amount received in the Collection Account or other Controlled Account
representing (i) any amount representing a reimbursement of insurance premiums,
(ii) any escrows relating to Taxes, insurance and other amounts in connection
with Loan Assets which are held in an escrow account for the benefit of the
Obligor and the secured party pursuant to escrow arrangements under a Loan
Agreement and (iii) any amount received in the Collection Account with respect
to any Loan Asset retransferred or substituted for upon the occurrence of a
Warranty Event or that is otherwise replaced by a Substitute Eligible Loan
Asset, or that is otherwise sold or transferred by the Borrower pursuant to
Section 2.07, to the extent such amount is attributable to a time after the
effective date of such replacement or sale.

“Excluded Taxes” has the meaning assigned to that term in Section 2.11(a).

“Exposure Amount” means, as of any date of determination, with respect to each
Loan Asset owned by the Borrower, the maximum unfunded commitment associated
with such Loan Asset (including, without limitation, any letter of credit
reimbursements).

“Facility Maturity Date” means the earliest to occur of (i) the Stated Maturity
Date, (ii) the date of the declaration, or automatic occurrence, of the Facility
Maturity Date pursuant to Section 7.01, (iii) the Collection Date and (iv) the
occurrence of the termination of this Agreement pursuant to Section 2.18(b)
hereof.

“Fair Market Value” means, with respect to any Loan Asset or item of Collateral
Portfolio, as of each date fair market value information is publicly published
by the Borrower, Servicer or Transferor, as applicable, if such Loan Asset has
been reduced in value on such date below the original principal amount, the
lesser of (i) the fair market value of such Loan Asset as required by, and in
accordance with, the 1940 Act and any orders of the Securities and Exchange
Commission issued to the Transferor, to be determined by the board of directors
of the Transferor and reviewed by its auditors and (ii) the fair value of such
Loan Asset determined in accordance with GAAP.

“FATCA” means Sections 1471 through 1474 of the Code and any regulations or
official interpretations thereof (including any revenue ruling, revenue
procedure, notice or similar guidance issued by the United States Internal
Revenue Service thereunder as a precondition to relief or exemption from taxes
under such provisions).

“Federal Funds Rate” means, for any period, a fluctuating per annum interest
rate equal, for each day during such period, to the rate set forth for such day
opposite the caption “Federal funds (effective)” in Federal Reserve Board
Statistical Release H.15(519) or any successor or substitute publication
selected by the Administrative Agent (or, if such day is not a Business Day, for
the next preceding Business Day), or, if for any reason such rate is not
available on any day, the rate determined, in the sole discretion of the
Administrative Agent, to be the rate at which overnight federal funds are being
offered in the national federal funds market at 9:00 a.m. on such day.

 

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“Federal Reserve Bank” means any of the twelve regional Federal Reserve Banks
chartered under the laws of the United States.

“Fees” means (i) the Non-Usage Fee and (ii) the fees payable to each Lender
pursuant to the terms of any Lender Fee Letter.

“Fifth Street” means Fifth Street Finance Corp.

“Fifth Street Affiliate Merger Transaction” has the meaning specified in
Section 5.04(a) hereof.

“Fifth Street Competitor” means any specialty finance company which derives
substantially all of its revenue from lending to and providing investment in
middle market companies.

“Fifth Street Merger Party” shall mean any Person that (a) is an Affiliate of
Fifth Street (other than the Borrower) on the Closing Date or (b) becomes an
Affiliate of Fifth Street after the Closing Date and was either (i) a newly
formed Person which (x) has not entered into any merger, consolidation or
acquisition prior to the applicable Fifth Street Affiliate Merger Transaction
and (y) since its inception has been an Affiliate of Fifth Street or (ii) an
existing Person when it became an Affiliate of Fifth Street but, immediately
prior to such Fifth Street Affiliate Merger Transaction, had been an Affiliate
of Fifth Street for at least two years.

“Financial Asset” has the meaning specified in Section 8-102(a)(9) of the UCC.

“Financial Sponsor” means any Person, including any Subsidiary of such Person,
whose principal business activity is acquiring, holding, and selling investments
(including controlling interests) in otherwise unrelated companies that each are
distinct legal entities with separate management, books and records and bank
accounts, whose operations are not integrated with one another and whose
financial condition and creditworthiness are independent of the other companies
so owned by such Person.

“Fitch” means Fitch, Inc. or any successor thereto.

“First Amendment Effective Date” means March 16, 2012.

“First Lien Loan Asset” means any Loan Asset that (i) is secured by a valid and
perfected first priority Lien on substantially all of the Obligor’s assets
constituting Underlying Collateral for the Loan Asset, subject to any “permitted
liens” as defined in the applicable Loan Agreement for such Loan Asset or such
comparable definition if “permitted liens” is not defined therein and
(ii) provides that the payment obligation of the Obligor on such Loan Asset is
either senior to, or pari passu with, all other Indebtedness of such Obligor.

“Foreign Lender” means a Lender that is not created or organized under the laws
of the United States or a political subdivision thereof.

“GAAP” means generally accepted accounting principles as in effect from time to
time in the United States.

 

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“Governmental Authority” means, with respect to any Person, any nation or
government, any state or other political subdivision thereof, any central bank
(or similar monetary or regulatory authority) thereof, any body or entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government and any court or arbitrator having
jurisdiction over such Person.

“Hazardous Materials” means all materials subject to any Environmental Law,
including, without limitation, materials listed in 49 C.F.R. § 172.010,
materials defined as hazardous pursuant to § 101(14) of the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended,
flammable, explosive or radioactive materials, hazardous or toxic wastes or
substances, lead-based materials, petroleum or petroleum distillates or asbestos
or material containing asbestos, polychlorinated biphenyls, radon gas, urea
formaldehyde and any substances classified as being “in inventory”, “usable work
in process” or similar classification that would, if classified as unusable, be
included in the foregoing definition.

“Indebtedness” means, with respect to any Person at any date, (a) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services (other than current liabilities incurred in the
ordinary course of business and payable in accordance with customary trade
practices) or that is evidenced by a note, bond, debenture or similar instrument
or other evidence of indebtedness customary for indebtedness of that type,
(b) all obligations of such Person under leases that have been or should be, in
accordance with GAAP, recorded as capital leases, (c) all obligations of such
Person in respect of acceptances issued or created for the account of such
Person, (d) all liabilities secured by any Lien on any property owned by such
Person even though such Person has not assumed or otherwise become liable for
the payment thereof, (e) all indebtedness, obligations or liabilities of that
Person in respect of derivatives, and (f) all obligations under direct or
indirect guaranties in respect of obligations (contingent or otherwise) to
purchase or otherwise acquire, or to otherwise assure a creditor against loss in
respect of, indebtedness or obligations of others of the kind referred to in
clauses (a) through (e).

“Indemnified Amounts” has the meaning assigned to that term in Section 8.01.

“Indemnified Party” has the meaning assigned to that term in Section 8.01.

“Indemnifying Party” has the meaning assigned to that term in Section 8.03.

“Independent Director” means a natural person who, (A) for the five-year period
prior to his or her appointment as Independent Director, has not been, and
during the continuation of his or her service as Independent Director is not:
(i) an employee, director, stockholder, member, manager, partner or officer of
the Borrower or any of their respective Affiliates (other than his or her
service as an Independent Director of the Borrower or other Affiliates that are
structured to be “bankruptcy remote”); (ii) a customer or supplier of the
Borrower or any of their Affiliates (other than his or her service as an
Independent Director of the Borrower); or (iii) any member of the immediate
family of a person described in (i) or (ii), and (B) has, (i) prior experience
as an Independent Director for a corporation or limited liability company whose
charter documents required the unanimous consent of all Independent Directors
thereof before such corporation or limited liability company could consent to
the institution of

 

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bankruptcy or insolvency proceedings against it or could file a petition seeking
relief under any applicable federal or state law relating to bankruptcy and
(ii) at least three years of employment experience with one or more entities
that provide, in the ordinary course of their respective businesses, advisory,
management or placement services to issuers of securitization or structured
finance instruments, agreements or securities. The initial Independent Director
of the Borrower set forth in the Borrower’s operating agreement as of the
Closing Date is hereby approved by the Administrative Agent.

“Indorsement” has the meaning specified in Section 8-102(a)(11) of the UCC, and
“Indorsed” has a corresponding meaning.

“Initial Advance” means the first Advance made pursuant to Article II.

“Initial Payment Date” means the 15th day of October, 2011 (or if such day is
not a Business Day, the next succeeding Business Day).

“Instrument” has the meaning specified in Section 9-102(a)(47) of the UCC.

“Insurance Policy” means, with respect to any Loan Asset, an insurance policy
covering liability and physical damage to, or loss of, the Underlying
Collateral.

“Insurance Proceeds” means any amounts received on or with respect to a Loan
Asset under any Insurance Policy or with respect to any condemnation proceeding
or award in lieu of condemnation, other than (i) any such amount received which
is required to be used to restore, improve or repair the related real estate or
required to be paid to the Obligor under the Loan Agreement or (ii) prior to an
Event of Default hereunder and with prior notice to the Administrative Agent,
any such amount for which the Borrower has elected, in its reasonable business
discretion, to be used to restore, improve or repair the related real estate or
otherwise to be paid to the Obligor under the Loan Agreement.

“Interest Collection Account” means a trust account (account number 154426-201
at the Account Bank) into which Interest Collections shall be deposited.

“Interest Collections” means, (i) with respect to any Loan Asset, all payments
and collections attributable to interest on such Loan Asset, including, without
limitation, all scheduled payments of interest and payments of interest relating
to principal prepayments, all guaranty payments attributable to interest and
proceeds of any liquidations, sales or dispositions attributable to interest on
such Loan Asset and (ii) amendment fees, late fees, waiver fees, prepayment fees
or other amounts received in respect of Loan Assets.

“Interest Period” means with respect to any LIBOR Advance (i) the period
beginning on, and including, the Advance Date or Conversion Date, as applicable,
with respect to such LIBOR Advance and ending on, but excluding, the first
succeeding Payment Date (provided that if the Advance Date or Conversion Date,
as applicable, for any LIBOR Advance occurs on or after the Payment Date Cut-Off
in any calendar month but prior to the Payment Date in such calendar month, the
initial Interest Period for such LIBOR Advance shall end on, but exclude, the
second succeeding Payment Date) and (ii) thereafter, for so long as such LIBOR
Advance or any portion thereof remains outstanding, each period beginning on,
and including, the Payment Date on which the immediately preceding Interest
Period with respect to such LIBOR Advance ended and ending on, but excluding,
the next succeeding Payment Date.

 

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“Investment Polices” means Fifth Street’s written investment policies in effect
on the date hereof (a copy of which has been previously delivered to the
Administrative Agent), as same may be amended from time to time in Fifth
Street’s reasonable business judgment.

“Joinder Supplement” means an agreement among the Borrower, a Lender and the
Administrative Agent in the form of Exhibit E to this Agreement (appropriately
completed) delivered in connection with a Person becoming a Lender hereunder
after the Closing Date.

“Lender” means (i) SMBC, (ii) each financial institution which may from time to
time become a Lender hereunder by executing and delivering a Joinder Supplement
to the Administrative Agent and the Borrower as contemplated by Section 2.21
and/or (iii) any other Person to whom a Lender assigns any part of its rights
and obligations under this Agreement and the other Transaction Documents in
accordance with the terms of Section 11.04.

“Lender Fee Letter” means each fee letter agreement that shall be entered into
by and among the Borrower, the Servicer and the applicable Lender in connection
with the transactions contemplated by this Agreement, as amended, modified,
waived, supplemented, restated or replaced from time to time.

“LIBOR” means, for any day during any Interest Period, with respect to any LIBOR
Advance (or portion thereof), the rate per annum for a one-month maturity
appearing on the Reuters Screen LIBOR01 Page (or any successor or substitute
page) (the “LIBOR Page”) as the London interbank offered rate for deposits in
Dollars at approximately 11:00 a.m., London time, on the LIBOR Determination
Date for such Interest Period; provided that for the initial Interest Period
with respect to any LIBOR Advance, if such Interest Period is shorter than one
month or longer than one month, the Administrative Agent shall have the right to
determine LIBOR for such Interest Period as the rate per annum for a period of
the same duration as such Interest Period appearing on the LIBOR Page as the
London interbank offered rate for deposits in Dollars at approximately 11:00
a.m., London time, on the LIBOR Determination Date for such Interest Period, or
if no rate per annum for deposits in Dollars for a period of such duration is
set forth on the LIBOR Page at such time on such LIBOR Determination Date, the
Administrative Agent shall have the right to determine LIBOR for such Interest
Period by linear interpolation between the rate per annum for deposits in
Dollars for the next shorter period and the rate per annum for deposits in
Dollars for the next longer period set forth on the LIBOR Page at such time on
such LIBOR Determination Date; provided, further, that if the rates that are
described above in this definition are not set forth on the LIBOR Page as of
such times, the Administrative Agent shall determine LIBOR (a) by reference to
such other comparable publicly available information service for displaying
rates for Dollar deposits in the London interbank market as may be selected by
the Administrative Agent, in its sole discretion, or (b) if no such service is
available, as the rate per annum at which Dollar deposits of $5,000,000 for a
relevant maturity are offered by the principal London office of Sumitomo Mitsui
Banking Corporation Europe Limited at approximately 11:00 a.m. London time on
such LIBOR Determination Date for delivery on the first day of such Interest
Period to other banks in the Eurocurrency market.

 

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“LIBOR Advance” means (i) any Advance made as a LIBOR Advance in accordance with
Section 2.02(b) and (ii) any Advance converted from a Base Rate Advance to a
LIBOR Advance in accordance with Section 2.02(c).

“LIBOR Advances Outstanding” means, at any time, the outstanding LIBOR Advances.

“LIBOR Determination Date” means, with respect to each Interest Period, the day
that is two Business Days prior to the first day of such Interest Period.

“LIBOR Yield” means, for any LIBOR Advances Outstanding, and any Interest Period
for each such LIBOR Advance, the sum of the amounts determined for each day in
such Interest Period in accordance with the following formula:

 

YR x L D

 

where:    YR    =    the LIBOR Yield Rate applicable to such LIBOR Advance
during such Interest Period;    L    =    the outstanding principal amount of
such LIBOR Advance on such day; and    D    =    360;

“LIBOR Yield Rate” means, for any LIBOR Advance, as of any date of determination
during any Interest Period applicable to such LIBOR Advance, an interest rate
per annum equal to LIBOR for such LIBOR Advance during such Interest Period plus
the Applicable Spread; provided that if the Administrative Agent determines that
a Eurodollar Disruption Event has occurred, at the election of the
Administrative Agent, the LIBOR Yield Rate shall be equal to the Base Rate plus
the Applicable Spread until the Administrative Agent determines that such
Eurodollar Disruption Event has ceased, at which time the LIBOR Yield Rate shall
again be equal to LIBOR for such LIBOR Advance for such date plus the Applicable
Spread.

“Lien” means any mortgage or deed of trust, pledge, hypothecation, collateral
assignment, deposit arrangement, encumbrance, lien (statutory or other), charge,
claim, preference, priority or other security interest or preferential
arrangement in the nature of a security interest of any kind or nature
whatsoever (including any conditional sale, lease or other title retention
agreement, sale subject to a repurchase obligation, any easement, right of way
or other encumbrance on title to real property, and any financing lease having
substantially the same economic effect as any of the foregoing) or the filing of
or agreement to give any financing statement perfecting a security interest
under the UCC or comparable law of any jurisdiction.

“Lien Release Dividend” has the meaning assigned to that term in
Section 2.07(g).

 

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“Lien Release Dividend Date” means the date specified by the Borrower, which
date may be any Business Day, provided written notice is given in accordance
with Section 2.07(g).

“Loan Agreement” means the loan agreement, credit agreement or other agreement
pursuant to which a Loan Asset has been issued or created and each other
agreement that governs the terms of or secures the obligations represented by
such Loan Asset or of which the holders of such Loan Asset are the
beneficiaries.

“Loan Asset” means any commercial loan, or portion thereof, individually or
collectively, originated or acquired by the Transferor in the ordinary course of
its business, which loan includes, without limitation, (i) the Required Loan
Documents and Loan Asset File, and (ii) all right, title and interest of the
Transferor in and to the loan and any Underlying Collateral, but excluding, in
each case, the Retained Interest and Excluded Amounts and which loan was
acquired by the Borrower from the Transferor under the Purchase and Sale
Agreement and owned by the Borrower on the initial Advance Date (as set forth on
the Loan Asset Schedule delivered on the initial Advance Date) or acquired by
the Borrower from the Transferor under the Purchase and Sale Agreement after the
initial Advance Date pursuant to the delivery of a Loan Assignment and listed on
Schedule I to the Loan Assignment.

“Loan Asset Checklist” means an electronic or hard copy, as applicable, of a
checklist delivered by or on behalf of the Borrower to the Collateral Custodian,
for each Loan Asset, of all Required Loan Documents to be included within the
respective Loan Asset File, which shall specify whether such document is an
original or a copy.

“Loan Asset File” means, with respect to each Loan Asset, a file containing
(a) each of the documents and items as set forth on the Loan Asset Checklist
with respect to such Loan Asset and (b) duly executed originals (to the extent
required herein) and copies of any other Records relating to such Loan Assets
and Portfolio Assets pertaining thereto.

“Loan Asset Register” has the meaning assigned to that term in Section 5.03(k).

“Loan Asset Schedule” means the schedule of Loan Agreements evidencing Loan
Assets delivered by the Borrower to the Collateral Custodian and the
Administrative Agent. Each such schedule shall set forth, as to any Eligible
Loan Asset to be Pledged hereunder, the applicable information specified on
Schedule IV, which shall also be provided to the Collateral Custodian in
electronic format acceptable to the Collateral Custodian.

“Loan Assignment” has the meaning set forth in the Purchase and Sale Agreement.

“Make-Whole Premium” means an amount, payable pro rata to each Lender, equal to,
to the extent the Agreement is terminated after the Non-Call Period but on or
prior to the date which is two years following the Closing Date, 1.00% of the
Maximum Facility Amount; provided that the Make-Whole Premium shall be
calculated without giving effect to the proviso in the definition of “Maximum
Facility Amount”.

 

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“Management Agreement” means the Second Amended and Restated Investment Advisory
Agreement, dated as of May 2, 2011, between Fifth Street and Fifth Street
Management LLC.

“Margin Stock” means “margin stock” as such term is defined in Regulation T, U
or X of the Federal Reserve Board.

“Material Adverse Effect” means, with respect to any event or circumstance, a
material adverse effect on (a) the business, condition (financial or otherwise),
operations, performance or properties of the Transferor, the Servicer or the
Borrower, (b) the validity, enforceability or collectability of this Agreement
or any other Transaction Document or the validity, enforceability or
collectability of the Loan Assets generally or any material portion of the Loan
Assets, (c) the rights and remedies of the Collateral Agent, the Collateral
Custodian, the Account Bank, the Administrative Agent, any Lender and the
Secured Parties with respect to matters arising under this Agreement or any
other Transaction Document, (d) the ability of each of the Borrower and the
Servicer, to perform their respective obligations under this Agreement or any
other Transaction Document, or (e) the status, existence, perfection, priority
or enforceability of the Collateral Agent’s, the Administrative Agent’s or the
other Secured Parties’ lien on the Collateral Portfolio.

“Material Modification” means any amendment or waiver of, or modification or
supplement to, a Loan Agreement governing a Loan Asset executed or effected on
or after the Cut-Off Date for such Loan Asset which:

(a) reduces or forgives any or all of the principal amount due under such Loan
Asset;

(b) delays or extends the maturity date or any principal payment for such Loan
Asset by six (6) months or more or beyond the Facility Maturity Date;

(c) waives one or more interest payments, permits any interest due in cash to be
deferred or capitalized and added to the principal amount of such Loan Asset
(other than any deferral or capitalization already allowed by the terms of the
Loan Agreement of any PIK Loan Asset), or reduces the spread or coupon with
respect to such Loan Asset by more than 2.00%;

(d) contractually or structurally subordinates such Loan Asset, or the Lien of
such Loan Asset, by operation of a priority of payments, turnover provisions,
the transfer of assets in order to limit recourse to the related Obligor or the
granting of Liens (other than Permitted Liens) on any of the Underlying
Collateral securing such Loan Asset; or

(e) substitutes, alters or releases a material portion of the Underlying
Collateral securing such Loan Asset and such substitution, alteration or
release, as determined in the sole discretion of the Administrative Agent,
materially and adversely affects the value of such Loan Asset.

“Maximum Facility Amount” means the aggregate Commitments as then in effect,
which amount shall not exceed $200,000,000; provided that at all times after the
Reinvestment Period, the Maximum Facility Amount shall mean the aggregate
Advances Outstanding at such time.

 

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“Moody’s” means Moody’s Investors Service, Inc. (or its successors in interest).

“Multiemployer Plan” means a “multiemployer plan” as defined in
Section 4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate
contributed or had any obligation to contribute on behalf of its employees at
any time during the current year or the preceding five years.

“Non-Call Period” means the period from the Closing Date to the date which is
one year following the Closing Date.

“Non-Excluded Taxes” means Taxes other than Excluded Taxes.

“Non-Usage Fee” has the meaning assigned to that term in Section 2.09.the Lender
Fee Letter.

“Non-Usage Fee Rate” has the meaning assigned to that term in Section 2.09.

“Noteless Loan Asset” means a Loan Asset with respect to which the Loan
Agreements (i) do not require the Obligor to execute and deliver a promissory
note to evidence the Indebtedness created under such Loan Asset or (ii) require
the Obligor to execute and deliver such promissory note to any holder of the
Indebtedness created under such Loan Asset only if such holder requests the
Obligor to deliver such promissory note, and the Obligor has not been requested
to deliver such promissory note with respect to such Loan Asset held by the
Borrower.

“Notice and Request for Consent” has the meaning assigned to that term in
Section 2.07(g)(i).

“Notice of Borrowing” means an irrevocable written notice of borrowing from the
Borrower to the Administrative Agent and each Lender in the form attached hereto
as Exhibit F.

“Notice of Reduction” means a notice of a reduction of the Advances Outstanding
pursuant to Section 2.18, in the form attached hereto as Exhibit G.

“Obligations” means all present and future Indebtedness and other liabilities
and obligations (howsoever created, arising or evidenced, whether direct or
indirect, absolute or contingent, or due or to become due) of the Borrower to
the Lenders, the Administrative Agent, the Secured Parties, the Account Bank,
the Collateral Agent or the Collateral Custodian arising under this Agreement
and/or any other Transaction Document and shall include, without limitation, all
liability for principal of and interest on the Advances Outstanding, Breakage
Fees, indemnifications and other amounts due or to become due by the Borrower to
the Lenders, the Administrative Agent, the Secured Parties, the Account Bank,
the Collateral Agent and the Collateral Custodian under this Agreement and/or
any other Transaction Document, including, without limitation, any amounts
payable under any Lender Fee Letter, any Make-Whole Premium and costs and
expenses payable by the Borrower to the Lenders, the Administrative Agent, the
Secured Parties, the Account Bank, the Collateral Agent or the Collateral
Custodian,

 

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including reasonable attorneys’ fees, costs and expenses, including without
limitation, interest, fees and other obligations that accrue after the
commencement of an insolvency proceeding (in each case whether or not allowed as
a claim in such insolvency proceeding).

“Obligor” means, collectively, each Person obligated to make payments under a
Loan Agreement, including any guarantor thereof.

“Officer’s Certificate” means a certificate signed by the president, the
secretary, an assistant secretary, the chief financial officer or any vice
president, as an authorized officer, of any Person.

“Opinion of Counsel” means a written opinion of counsel, which opinion and
counsel are acceptable to the Administrative Agent in its sole discretion;
provided that Rutan & Tucker LLP and Sutherland Asbill & Brennan LLP shall be
considered acceptable counsel for purposes of this definition.

“Outstanding Balance” means the principal balance of a Loan Asset, expressed
exclusive of PIK Interest and accrued interest; provided that amortization
payments on a Loan Asset shall first be applied to PIK Interest when determining
the Outstanding Balance of such Loan Asset. For the avoidance of doubt, the
Outstanding Balance with respect to a Revolving Loan Asset or a Delayed Draw
Loan Asset shall be equal to the funded amount of such Revolving Loan Asset or
Delayed Draw Loan Asset.

“Payment Date” means the 15th day of each calendar month or, if such day is not
a Business Day, the next succeeding Business Day, commencing on the Initial
Payment Date; provided that the final Payment Date shall occur on the Collection
Date.

“Payment Date Cut-Off” means, with respect to each Payment Date, the fifth
Business Day prior to such Payment Date.

“Payment Duties” has the meaning assigned to that term in Section 10.02(b)(ii).

“Pension Plan” has the meaning assigned to that term in Section 4.01(x).

“Permitted Investment Required Ratings” means (a) if such obligation or security
(i) has both a long-term and a short-term credit rating from Moody’s, such
ratings are “Aa3” or better (not on credit watch for possible downgrade) and
“P-1” (not on credit watch for possible downgrade), respectively, (ii) has only
a long-term credit rating from Moody’s, such rating is “Aaa” (not on credit
watch for possible downgrade) and (iii) has only a short-term credit rating from
Moody’s, such rating is “P-1” (not on credit watch for possible downgrade) and
(b) “A 1” or better (or, in the absence of a short-term credit rating, “A+” or
better) from S&P.

“Permitted Investments” means either Cash or any Dollar investment that, at the
time it is delivered (directly or through an intermediary or bailee),
(x) matures not later than the earlier of (A) the date that is 60 days after the
date of delivery thereof and (B) the Business Day immediately preceding the
Payment Date immediately following the date of delivery thereof, and (y) is one
or more of the following obligations or securities:

(i) direct Registered obligations of, and Registered obligations the timely
payment of principal and interest on which is fully and expressly guaranteed by,
the United States or any agency or instrumentality of the United States the
obligations of which are expressly backed by the full faith and credit of the
United States;

 

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(ii) demand and time deposits in, certificates of deposit of, trust accounts
with, bankers’ acceptances issued by, or federal funds sold by any depository
institution or trust company incorporated under the laws of the United States
(including the Account Bank) or any state thereof and subject to supervision and
examination by federal and/or state banking authorities or with the
Administrative Agent, in each case payable within 60 days after issuance, so
long as the commercial paper and/or the debt obligations of such depository
institution or trust company (or, in the case of the principal depository
institution in a holding company system, the commercial paper or debt
obligations of such holding company) at the time of such investment or
contractual commitment providing for such investment have the Permitted
Investment Required Ratings;

(iii) unleveraged repurchase obligations (if treated as debt by the Borrower and
the counterparty) with respect to (a) any security described in clause (i) above
or (b) any other Registered security issued or guaranteed by an agency or
instrumentality of the United States, in either case entered into with a
depository institution or trust company (acting as principal) described in
clause (ii) above or entered into with an entity (acting as principal) with, or
whose parent company has (in addition to issuing a guarantee agreement
guaranteeing payment of such entity’s obligations under such repurchase
obligation, which guarantee agreement complies with S&P’s then-current criteria
with respect to guarantees), the Permitted Investment Required Ratings;

(iv) commercial paper or other short-term obligations (other than asset-backed
commercial paper) with the Permitted Investment Required Ratings and that either
bear interest or are sold at a discount from the face amount thereof and have a
maturity of not more than 60 days from their date of issuance;

(v) a Reinvestment Agreement issued by any bank (if treated as a deposit by such
bank), or a Reinvestment Agreement issued by any insurance company or other
corporation or entity, in each case with the Permitted Investment Required
Ratings; provided that such Reinvestment Agreement may be unwound at the option
of the Borrower without penalty; and

(vi) money market funds that have, at all times, credit ratings of “Aaa” and
“MR1+” by Moody’s and “AAAm” or “AAAm-G” by S&P, respectively;

provided that (1) Permitted Investments purchased with funds in the Collection
Account shall be held until maturity except as otherwise specifically provided
herein and shall include only such obligations or securities, other than those
referred to in clause (vi) above, as mature (or are putable at par to the issuer
thereof) no later than the Business Day prior to the next Payment Date unless
such Permitted Investments are issued by the Collateral Agent in its capacity as
a banking institution, in which event such Permitted Investments may mature on
such Payment Date; and (2) none of the foregoing obligations or securities shall
constitute Permitted Investments if (a) such obligation or security has an “f”,
“r”, “p”, “pi”, “q” or “t” subscript

 

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assigned by S&P, (b) all, or substantially all, of the remaining amounts payable
thereunder consist of interest and not principal payments, (c) payments with
respect to such obligations or securities or proceeds of disposition are subject
to withholding taxes by any jurisdiction unless the payor is required to make
“gross-up” payments that cover the full amount of any such withholding tax on an
after-tax basis, (d) such obligation or security is secured by real property,
(e) such obligation or security is purchased at a price greater than 100% of the
principal or face amount thereof, (f) such obligation or security is subject of
a tender offer, voluntary redemption, exchange offer, conversion or other
similar action, (g) in the Servicer’s judgment, such obligation or security is
subject to material non-credit related risks, (h) such obligation is a
structured finance obligation or (i) such obligation or security is represented
by a certificate of interest in a grantor trust. Permitted Investments may
include, without limitation, those investments issued by or made with the
Account Bank or for which the Account Bank or the Collateral Agent or an
Affiliate of the Account Bank or the Collateral Agent provides services and
receives compensation.

“Permitted Liens” means any of the following as to which no enforcement,
collection, execution, levy or foreclosure proceeding shall have been commenced
(a) Liens for state, municipal or other local Taxes if such Taxes shall not at
the time be due and payable or if a Person shall currently be contesting the
validity thereof in good faith by appropriate proceedings and with respect to
which reserves in accordance with GAAP have been provided on the books of such
Person, (b) Liens imposed by law, such as materialmen’s, warehousemen’s,
mechanics’, carriers’, workmen’s and repairmen’s Liens and other similar Liens,
arising by operation of law in the ordinary course of business for sums that are
not overdue or are being contested in good faith and (c) Liens granted pursuant
to or by the Transaction Documents.

“Person” means an individual, partnership, corporation (including a statutory or
business trust), limited liability company, joint stock company, trust,
unincorporated association, sole proprietorship, joint venture, government (or
any agency or political subdivision thereof) or other entity.

“PIK Interest” means interest accrued on a Loan Asset that is added to the
principal amount of such Loan Asset instead of being paid as interest as it
accrues.

“PIK Loan Asset” means a Loan Asset which provides for a portion of the interest
that accrues thereon to be added to the principal amount of such Loan Asset for
some period of the time prior to such Loan Asset requiring the current cash
payment of such previously capitalized interest, which cash payment shall be
treated as an Interest Collection at the time it is received.

“Pledge” means the pledge of any Eligible Loan Asset or other Portfolio Asset
pursuant to Article II.

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

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

 

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(b) all rights with respect to the Loan Assets to which the Transferor and/or
the Borrower, as applicable, is entitled as lender under the applicable Loan
Agreement;

(c) the Controlled Accounts, together with all cash and investments in each of
the foregoing including amounts earned on investments therein;

(d) 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;

(e) 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;

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

(g) 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;

(h) the Purchase and Sale Agreement (including, without limitation, rights of
recovery of the Borrower against the Transferor) and the assignment to the
Collateral Agent, for the benefit of the Secured Parties, of all UCC financing
statements filed by the Borrower against the Transferor under or in connection
with the Purchase and Sale Agreement;

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

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

“Prime Rate” means the rate announced by SMBC from time to time as its prime
rate in the United States at its New York Branch, such rate to change as and
when such designated rate changes. The Prime Rate is not intended to be the
lowest rate of interest charged by SMBC or any other specified financial
institution in connection with extensions of credit to debtors.

“Principal Collection Account” means a trust account (account number 154426-202
at the Account Bank) into which Principal Collections shall be deposited.

“Principal Collections” means (i) any amounts deposited by the Borrower (or the
Transferor on its behalf) in accordance with Section 2.06(a)(i) or
Section 2.07(c)(i) and (ii) with respect to any Loan Asset, all amounts received
which are not Interest Collections, including, without limitation, all
Recoveries, all Insurance Proceeds, all scheduled payments of principal and
principal prepayments and all guaranty payments and proceeds of any
liquidations, sales or

 

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dispositions, in each case, attributable to the principal of such Loan Asset.
For the avoidance of doubt, “Principal Collections” shall not include amounts on
deposit in the Unfunded Exposure Account.

“Pro Rata Share” means, with respect to each Lender, the percentage obtained by
dividing the Commitment of such Lender (as determined under clause (i) of the
definition of “Commitment”), by the aggregate Commitments of all the Lenders (as
determined under clause (i) of the definition of “Commitment”).

“Proceeds” means, with respect to any Collateral Portfolio, all property that is
receivable or received when such Collateral Portfolio is collected, sold,
liquidated, foreclosed, exchanged, or otherwise disposed of, whether such
disposition is voluntary or involuntary, and includes all rights to payment with
respect to any insurance relating to such Collateral Portfolio.

“Purchase and Sale Agreement” means that certain Purchase and Sale Agreement,
dated as of the Closing Date, between the Transferor, as the seller, and the
Borrower, as the purchaser, as amended, modified, waived, supplemented, restated
or replaced from time to time.

“Records” means all documents relating to the Loan Assets, including books,
records and other information executed in connection with the origination or
acquisition of the Collateral Portfolio or maintained with respect to the
Collateral Portfolio and the related Obligors that the Borrower, the Transferor
or the Servicer have generated, in which the Borrower has acquired an interest
pursuant to the Purchase and Sale Agreement or in which the Borrower or the
Transferor have otherwise obtained an interest.

“Recoveries” means, as of the time any Underlying Collateral with respect to any
Loan Asset subject to a payment default, or other default, by the related
Obligor is sold, discarded or abandoned (after a determination by the Servicer
that such Underlying Collateral has little or no remaining value) or otherwise
determined to be fully liquidated by the Servicer in accordance with the
Servicing Standard, the proceeds from the sale of the Underlying Collateral, the
proceeds of any related Insurance Policy, any other recoveries with respect to
such Loan Asset, as applicable, the Underlying Collateral, and amounts
representing late fees and penalties, net of any amounts received that are
required under such Loan Asset, as applicable, to be refunded to the related
Obligor.

“Register” has the meaning assigned to that term in Section 2.14.

“Registered” means, for the purposes of the definition of “Permitted
Investments”, in registered form for U.S. federal income tax purposes and issued
after July 18, 1984; provided that a certificate of interest in a grantor trust
shall not be treated as Registered unless each of the obligations or securities
held by the trust was issued after that date.

“Reinvestment Agreement” means a guaranteed reinvestment agreement from a bank,
insurance company or other corporation or entity having a Permitted Investment
Required Rating; provided that such agreement provides that it is terminable by
the purchaser, without penalty, if the rating assigned to such agreement by
either S&P or Moody’s is at any time lower than such agreement’s Permitted
Investment Required Rating.

 

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“Reinvestment Period” shall mean the date commencing on the Closing Date and
ending on the day preceding the earlier of (i) September 16, 2014, (ii) the
occurrence of an Event of Default (past any applicable notice or cure period
provided in the definition thereof) and (iii) the date of any voluntary
termination by the Borrower pursuant to Section 2.18(b); provided that if any of
the foregoing is not a Business Day, the Reinvestment Period shall end on the
next Business Day.

“Release Date” has the meaning set forth in Section 2.07(c).

“Remittance Period” means, (i) as to the Initial Payment Date, the period
beginning on the Closing Date and ending on, and including, the Payment Date
Cut-Off immediately preceding such Payment Date and (ii) as to any subsequent
Payment Date, the period beginning on the first day after the most recently
ended Remittance Period and ending on, and including, the Payment Date Cut-Off
immediately preceding such Payment Date, or, with respect to the final
Remittance Period, the Collection Date.

“Replacement Servicer” has the meaning assigned to that term in Section 6.01(c).

“Reporting Date” means the date that is three Business Days prior to the Payment
Date of each calendar month, commencing with the Payment Date in October, 2011.

“Required Lenders” means (i) SMBC (as a Lender hereunder) and its successors and
assigns, in the event any such party is a Lender hereunder and (ii) the Lenders
representing an aggregate of at least 51% of the aggregate Commitments of the
Lenders then in effect.

“Required Loan Documents” means, for each Loan Asset, originals (except as
otherwise indicated) of the following documents or instruments, all as specified
on the related Loan Asset Checklist:

(a) (i) other than in the case of a Noteless Loan Asset, the original or, if
accompanied by an original “lost note” affidavit and indemnity, a copy of, the
underlying promissory note, endorsed by the Borrower or the prior holder of
record in blank (and evidencing an unbroken chain of endorsements from each
prior holder thereof evidenced in the chain of endorsements in blank), and
(ii) in the case of a Noteless Loan Asset (x) a copy of each transfer document
or instrument relating to such Noteless Loan Asset evidencing the assignment of
such Noteless Loan Asset to the Transferor and from the Transferor to the
Borrower and from the Borrower in blank, and (y) a copy of the Loan Asset
Register with respect to such Noteless Loan Asset, as described in
Section 5.03(k)(ii);

(b) originals or copies of each of the following, to the extent applicable to
the related Loan Asset; any related Loan Agreement, credit agreement, note
purchase agreement, security agreement (if separate from any mortgage), sale and
servicing agreement, acquisition agreement, subordination agreement,
intercreditor agreement or similar instruments, guarantee, Insurance Policy,
assumption or substitution agreement or similar material operative document, in
each case together with any amendment or modification thereto, as set forth on
the Loan Asset Checklist; and

 

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(c) with respect to any Loan Asset originated by the Transferor or an Affiliate
and with respect to which the Transferor or an Affiliate acts as administrative
agent (or in a comparable capacity), either (i) copies of the UCC-1 Financing
Statements, if any, and any related continuation statements, each showing the
Obligor as debtor and the Collateral Agent as total assignee or showing the
Obligor, as debtor and the Transferor or the applicable Affiliate as secured
party and each with evidence of filing thereon, or (ii) copies of any such
financing statements certified by the Servicer to be true and complete copies
thereof in instances where the original financing statements have been sent to
the appropriate public filing office for filing, in each case as set forth in
the Loan Asset Checklist.

“Required Reports” means, collectively, the asset report and the Servicing
Report required pursuant to Section 6.08(b), the Servicer’s Certificate required
pursuant to Section 6.08(c), the financial statements of the Servicer required
pursuant to Section 6.08(d), the tax returns of the Borrower, the Transferor and
the Servicer required pursuant to Section 6.08(e), the financial statements and
valuation reports of each Obligor required pursuant to Section 6.08(f), the
annual statements as to compliance required pursuant to Section 6.09, and the
annual independent public accountant’s report required pursuant to Section 6.10.

“Responsible Officer” means, with respect to any Person, any duly authorized
officer of such Person with direct responsibility for the administration of this
Agreement and also, with respect to a particular matter, any other duly
authorized officer of such Person to whom such matter is referred because of
such officer’s knowledge of and familiarity with the particular subject.

“Restricted Junior Payment” means (i) any dividend or other distribution, direct
or indirect, on account of any class of membership interests of the Borrower 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 Borrower; (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 Borrower 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 Borrower now or hereafter outstanding, and (iv) any
payment of management fees by the Borrower. For the avoidance of doubt,
(x) payments and reimbursements due to the Servicer in accordance with this
Agreement or any other Transaction Document do not constitute Restricted Junior
Payments and (y) distributions by the Borrower to holders of its membership
interests of Loan Assets or of cash or other proceeds relating thereto which
have been substituted by the Borrower in accordance with this Agreement shall
not constitute Restricted Junior Payments.

“Retained Interest” means, with respect to any Agented Note that is transferred
to the Borrower, (i) all of the obligations, if any, of the agent(s) under the
documentation evidencing such Agented Note and (ii) the applicable portion of
the interests, rights and obligations under the documentation evidencing such
Agented Note that relate to such portion(s) of the indebtedness that is owned by
another lender.

 

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“Revolving Loan Asset” means a Loan Asset that is a line of credit or contains
an unfunded commitment arising from an extension of credit to an Obligor,
pursuant to the terms of which amounts borrowed may be repaid and subsequently
reborrowed.

“S&P” means Standard & Poor’s Ratings Services, a Standard & Poor’s Financial
Services LLC business (or its successors in interest).

“Scheduled Payment” means each scheduled payment of principal and/or interest
required to be made by an Obligor on the related Loan Asset, as adjusted
pursuant to the terms of the related Loan Agreement.

“Secured Party” means each of the Administrative Agent, each Lender (together
with its successors and assigns), each Affected Party, the Collateral Agent and,
to the extent of any Obligations owing to such Person hereunder or under any
other Transaction Document, each of their respective Affiliates, assigns,
officers, directors, employees and agents.

“Securities Act” means the U.S. Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.

“Servicer” means at any time the Person then authorized, pursuant to
Section 6.01 to service, administer, and collect on the Loan Assets and exercise
rights and remedies in respect of the same.

“Servicer Pension Plan” has the meaning set forth in Section 4.03(p).

“Servicer Termination Event” means the occurrence of any one or more of the
following events:

(a) any failure by the Servicer to make any payment, transfer or deposit into
the Collection Account (including, without limitation, with respect to
bifurcation and remittance of Interest Collections and Principal Collections) or
the Unfunded Exposure Account, as required by this Agreement or any Transaction
Document which continues unremedied for a period of two Business Days;

(b) any failure on the part of the Servicer duly to (i) observe or perform in
any material respect any other covenants or agreements of the Servicer set forth
in this Agreement or the other Transaction Documents to which the Servicer is a
party (including, without limitation, any delegation of the Servicer’s duties
that is not permitted by Section 6.01 of this Agreement) or (ii) comply in any
material respect with the Servicing Standard regarding the servicing of the
Collateral Portfolio and in each case the same continues unremedied for a period
of 30 days (if such failure can be remedied) after the earlier to occur of
(x) the date on which written notice of such failure requiring the same to be
remedied shall have been given to the Servicer by the Administrative Agent or
the Collateral Agent (at the direction of the Administrative Agent) and (y) the
date on which a Responsible Officer of the Servicer acquires knowledge thereof;

(c) the failure of the Servicer to make any payment when due (after giving
effect to any related grace period) under one or more agreements for borrowed
money to which it is a party in an aggregate amount in excess of United States
$10,000,000, individually or in the aggregate, or the occurrence of any event or
condition that has resulted in the acceleration of such amount of recourse debt
whether or not waived;

 

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(d) a Bankruptcy Event shall occur with respect to the Servicer;

(e) Fifth Street shall assign its rights or obligations as “Servicer” hereunder
to any Person without the consent of each Lender and the Administrative Agent
(as required in Section 11.04(a) of this Agreement);

(f) any change in the management of the Servicer (whether by resignation,
termination, disability, death or lack of day-to-day management) relating to
either (x) Leonard Tannenbaum or (y) both Bernard Berman and Ivelin Dimitrov, in
each case failing to provide active and material participation in the Servicer’s
or Transferor’s daily activities including, but not limited to, general
management, underwriting, and the credit approval process and credit monitoring
activities, and such persons are not replaced with other individuals reasonably
acceptable to the Administrative Agent within 30 days of such event;

(g) any failure by the Servicer to deliver (i) any required Servicing Report on
or before the date occurring two Business Days after the date such report is
required to be made or given, as the case may be or (ii) any other Required
Reports hereunder on or before the date occurring five Business Days after the
date such report is required to be made or given, as the case may be, in each
case under the terms of this Agreement;

(h) any representation, warranty or certification made by the Servicer in any
Transaction Document or in any document or report delivered pursuant to any
Transaction Document shall prove to have been incorrect when made, which
inaccuracy has a material adverse effect on the Lenders, 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 Servicer by the Administrative Agent, any Lender or
the Collateral Agent (at the direction of the Administrative Agent) and (ii) the
date on which a Responsible Officer of the Servicer acquires knowledge thereof;

(i) any financial or other information reasonably requested by the
Administrative Agent, a Lender or the Collateral Agent is not provided as
requested within a reasonable amount of time following such request;

(j) the rendering against the Servicer of one or more final judgments, decrees
or orders for the payment of money in excess of United States $10,000,000,
individually or in the aggregate, and the continuance of such judgment, decree
or order unsatisfied and in effect for any period of more than 60 consecutive
days without a stay of execution;

(k) any change in the control of the Servicer that takes the form of either a
merger or consolidation that does not comply with the provisions of
Section 5.04(a) of this Agreement;

(l) the occurrence of an Event of Default (past any applicable notice or cure
period provided in the definition thereof); or

 

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(m) the Servicer resigns in contravention of Section 6.11 of this Agreement.

“Servicer Termination Notice” has the meaning assigned to that term in
Section 6.01(b).

“Servicer’s Certificate” has the meaning assigned to that term in
Section 6.08(c).

“Servicing Fees” means the fee payable to the Servicer on each Payment Date in
arrears in respect of each Remittance Period, which fee shall be equal to the
product of (i) 0.50%, (ii) the arithmetic mean of the aggregate Outstanding
Balance of all Eligible Loan Assets on the first day and on the last day of the
related Remittance Period and (iii) the actual number of days in such Remittance
Period divided by 360; provided that the rate set forth in clause (i) hereof may
be increased up to 0.75% at the discretion of the Administrative Agent in the
event that a successor Servicer is appointed pursuant to Section 6.01(c).

“Servicing File” means, for each Loan Asset, (a) copies of each of the Required
Loan Documents and (b) any other portion of the Loan Asset File which is not
part of the Required Loan Documents.

“Servicing Report” has the meaning assigned to that term in Section 6.08(b).

“Servicing Standard” means, with respect to any Loan Assets included in the
Collateral Portfolio, to service and administer such Loan Assets on behalf of
the Secured Parties in accordance with Applicable Law, the terms of this
Agreement, the Loan Agreements, all customary and usual servicing practices for
loans like the Loan Assets and, to the extent consistent with the foregoing,
(a)(i) if the Servicer is the originator or an Affiliate thereof, the higher of:
(A) the customary and usual servicing practices that a prudent loan investor or
lender would use in servicing loans like the Loan Assets for its own account,
and (B) the same care, skill, prudence and diligence with which the Servicer
services and administers loans for its own account or for the account of others
pursuant to and in accordance with the Investment Policies, and (ii) if the
Servicer is not the originator or an Affiliate thereof, the same care, skill,
prudence and diligence with which the Servicer services and administers loans
for its own account or for the account of others; (b) with a view to maximize
the value of the Loan Assets; and (c) without regard to: (i) the Servicer’s
obligations to incur servicing and administrative expenses with respect to a
Loan Asset, (ii) the Servicer’s right to receive compensation for its services
hereunder or with respect to any particular transaction, (iii) the ownership by
the Servicer or any Affiliate thereof of any Loan Assets, or (iv) the ownership,
servicing or management for others by the Servicer of any other loans or
property by the Servicer.

“SMBC” means Sumitomo Mitsui Banking Corporation, a Japanese banking
corporation, in its individual capacity, together with its successors and
assigns.

“Solvent” means, as to any Person at any time, having a state of affairs such
that all of the following conditions are met: (a) the fair value of the property
of such Person is greater than the amount of such Person’s liabilities
(including disputed, contingent and unliquidated liabilities) as such value is
established and liabilities evaluated for purposes of Section 101(32) of the
Bankruptcy Code; (b) the present fair saleable value of the property of such
Person in an orderly liquidation of such Person is not less than the amount that
will be

 

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required to pay the probable liability of such Person on its debts and other
liabilities as they become absolute and matured; (c) such Person is able to
realize upon its property and pay its debts and other liabilities (including
disputed, contingent and unliquidated liabilities) as they mature in the normal
course of business; (d) such Person does not intend to, and does not believe
that it will, incur debts or liabilities beyond such Person’s ability to pay as
such debts and liabilities mature; and (e) such Person is not engaged in a
business or a transaction, and does not propose to engage in a business or a
transaction, for which such Person’s property assets would constitute
unreasonably small capital.

“State” means one of the fifty states of the United States or the District of
Columbia.

“Stated Maturity Date” means September 16, 2018 (or, if such day is not a
Business Day, the next succeeding Business Day) or such later date as results
from the Borrower’s exercise of its one-year extension option or is otherwise
agreed to in writing by the Borrower, the Servicer, the Administrative Agent and
the Lenders pursuant to Section 2.19.

“Subsidiary” means with respect to a person, a corporation, partnership or other
entity of which shares of stock or other ownership interests having ordinary
voting power (other than stock or such other ownership interests having such
power only by reason of the happening of a contingency) to elect a majority of
the board of directors or other managers of such corporation, partnership or
other entity are at the time owned, or the management of which is otherwise
controlled, directly or indirectly through one or more intermediaries, or both,
by such person.

“Substitute Eligible Loan Asset” means each Eligible Loan Asset Pledged by the
Borrower to the Collateral Agent, on behalf of the Secured Parties, pursuant to
Section 2.07(a) or Section 2.07(c)(ii).

“Taxes” means any present or future taxes, levies, imposts, duties, charges,
assessments or fees of any nature (including interest, penalties, and additions
thereto) that are imposed by any Governmental Authority.

“Term Loan Asset” means a Loan Asset that is a term loan that has been fully
funded and does not contain any unfunded commitment on the part of the
Transferor arising from an extension of credit by the Transferor to an Obligor.

“Transaction Documents” means this Agreement, the Variable Funding Note(s), any
Joinder Supplement, the Purchase and Sale Agreement, the Control Agreement, the
Custody Agreement, the U.S. Bank Fee Letter, each Lender Fee Letter and each
document, instrument or agreement related to any of the foregoing.

“Transferor” means Fifth Street, in its capacity as the transferor hereunder and
as the seller under the Purchase and Sale Agreement, together with its
successors and assigns in such capacity.

“UCC” means the Uniform Commercial Code as from time to time in effect in the
relevant jurisdiction.

 

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“Underlying Collateral” means, with respect to a Loan Asset, any property or
other assets designated and pledged or mortgaged as collateral to secure
repayment of such Loan Asset, as applicable, including, without limitation,
mortgaged property and/or a pledge of the stock, membership or other ownership
interests in the related Obligor and all proceeds from any sale or other
disposition of such property or other assets.

“Unfunded Exposure Account” means a trust account (account number 154426-700 at
the Account Bank) in the name of the Borrower and under the sole dominion and
control of the Collateral Agent for the benefit of the Secured Parties; provided
that the funds deposited therein (including any interest and earnings thereon)
from time to time and subject to the terms thereof shall constitute the property
and assets of the Borrower and the Borrower shall be solely liable for any Taxes
payable with respect to the Unfunded Exposure Account.

“Unfunded Exposure Amount” means, as of any date of determination, an amount
equal to the aggregate amount of all Exposure Amounts; provided that the
Unfunded Exposure Amount shall not exceed $30,000,000.

“Unfunded Exposure Amount Shortfall” has the meaning assigned to that term in
Section 2.02(f).

“Unfunded Exposure Equity Amount” means, on any date of determination, an amount
equal to, for each Loan Asset which has any unfunded commitments, the aggregate
sum of the products of (a) the Exposure Amount for each such Loan Asset
multiplied by (b) the difference of (x) 100% minus (y) the Applicable Percentage
for each such Loan Asset.

“United States” means the United States of America.

“Unmatured Event of Default” means any event that, if it continues uncured,
will, with lapse of time, notice or lapse of time and notice, constitute an
Event of Default.

“Unused Portion” has the meaning assigned to that term in Section 2.09.

“U.S. Bank” means U.S. Bank National Association.

“U.S. Bank Fee Letter” means the U.S. Bank Fee Letter, dated as of the Closing
Date, between the Collateral Agent, the Collateral Custodian, the Account Bank,
the Borrower and the Administrative Agent, as such letter may be amended,
modified, supplemented, restated or replaced from time to time.

“Value Adjustment Event” means, with respect to any Loan Asset, the occurrence
of any one or more of the following events after the related Cut-Off Date (any
of which, for the avoidance of doubt, may occur more than once):

(i) an Obligor payment default under any Loan Asset (after giving effect to any
grace and/or cure period set forth in the Loan Agreement, but not to exceed five
days);

(ii) a Bankruptcy Event with respect to the related Obligor; or

 

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(iii) the occurrence of a Material Modification with respect to such Loan Asset.

“Variable Funding Note” has the meaning assigned to such term in
Section 2.01(a).

“Warranty Event” means, as to any Loan Asset, the discovery that as of the
related Cut-Off Date for such Loan Asset there existed a breach of any
representation or warranty relating to such Loan Asset (including that the Loan
Asset failed to satisfy the criteria of the definition of “Eligible Loan
Asset”); provided that any Loan Asset approved by the Administrative Agent in
accordance with Section 2 of Schedule II on the applicable Cut-Off Date shall
not be a Warranty Loan Asset due to the failure of such Loan Asset to satisfy
the requirements of Section 2 of Schedule II on any date thereafter.

“Warranty Loan Asset” means a Loan Asset with respect to which a Warranty Event
has occurred.

“Yield” means the sum of the following, payable on each Payment Date:

(a) the aggregate LIBOR Yield for all LIBOR Advances Outstanding that have an
Interest Period that ends on such Payment Date and for any part of the
outstanding principal amount of a LIBOR Advance that was prepaid on a day other
than a day on which an Interest Period for such LIBOR Advance ended, to the
extent that LIBOR Yield with respect to such prepaid principal remains accrued
and unpaid:

plus,

(b) with respect to any previously ended Remittance Period during which any Base
Rate Advances were outstanding, the sum for each day in such Remittance Period
of amounts determined in accordance with the following formula (but only to the
extent that such amounts were not previously paid to the Lenders):

YR x L

D

 

  where:    YR    =    the Base Rate Yield Rate applicable on such day;      L
   =    the aggregate principal amount of the Base Rate Advances Outstanding on
such day; and      D    =    365 or 366, as applicable;

provided that (i) no provision of this Agreement shall require the payment or
permit the collection of Yield in excess of the maximum permitted by Applicable
Law and (ii) Yield shall not be considered paid by any distribution if at any
time such distribution is later required to be rescinded by any Lender to the
Borrower or any other Person for any reason including, without limitation, such
distribution becoming void or otherwise avoidable under any statutory provision
or common law or equitable action, including, without limitation, any provision
of the Bankruptcy Code.

 

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SECTION 1.02 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 1.03 Computation of Time Periods. Unless otherwise stated in this
Agreement, in the computation of a period of time from a specified date to a
later specified date, the word “from” means “from and including” and the words
“to” and “until” each mean “to but excluding.”

SECTION 1.04 Interpretation.

In each Transaction Document, unless a contrary intention appears:

(a) the singular number includes the plural number and vice versa;

(b) reference to any Person includes such Person’s successors and assigns but,
only if such successors and assigns are not prohibited by the Transaction
Documents;

(c) reference to any gender includes each other gender;

(d) reference to day or days without further qualification means calendar days;

(e) reference to any time means New York, New York time;

(f) reference to the words “include”, “includes” and “including” shall be deemed
to be followed by the phrase “without limitation”;

(g) reference to any agreement (including any Transaction Document), document or
instrument means such agreement, document or instrument as amended, modified,
waived, supplemented, restated or replaced and in effect from time to time in
accordance with the terms thereof and, if applicable, the terms of the other
Transaction Documents, and reference to any promissory note includes any
promissory note that is an extension or renewal thereof or a substitute or
replacement therefor; and

(h) reference 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 from time to time in effect and constituting
the substantive amendment, modification, codification, replacement or
reenactment of such Section or other provision.

 

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ARTICLE II.

THE FACILITY

SECTION 2.01 Variable Funding Note and Advances.

(a) Variable Funding Note. Upon the request of any Lender, the Borrower shall
(on the terms and subject to the conditions hereinafter set forth), deliver, to
such Lender, at the address set forth in Section 11.02 of this Agreement, and
upon the request of any additional Lender, the Borrower shall deliver to such
additional Lender, at the address set forth in the applicable Joinder
Supplement, a duly executed variable funding note (as amended, modified,
supplemented or restated from time to time, the “Variable Funding Note”), in
substantially the form of Exhibit H, in an aggregate face amount equal to the
applicable Lender’s Commitment as of the Closing Date or the effective date of
any Joinder Supplement, as applicable, and otherwise duly completed. If any
Variable Funding Note is issued, interest shall accrue on such Variable Funding
Note, and such Variable Funding Note shall be payable, as described herein.

(b) Advances. On the terms and conditions hereinafter set forth, from time to
time from the Closing Date until the end of the Reinvestment Period, the
Borrower may request that the Lenders make Advances secured by the Collateral
Portfolio, (x) to the Borrower for the purpose of purchasing Eligible Loan
Assets, (y) to the Unfunded Exposure Account in an amount up to the Unfunded
Exposure Amount or (z) to the Borrower for distributions to the Transferor in
connection with prior transfers of unleveraged Eligible Loan Assets to the
Borrower as capital contributions to the Borrower, including with respect to any
Borrowing Base capacity resulting from any repayment of Advances previously made
to Borrower (so long as such distribution is permitted pursuant to
Section 5.02(m) of this Agreement). Other than pursuant to Section 2.02(f),
under no circumstances shall any Lender be required to make any Advance if after
giving effect to such Advance and the addition to the Collateral Portfolio of
the Eligible Loan Assets being acquired by the Borrower using the proceeds of
such Advance, (i) an Event of Default has occurred, or would result therefrom,
or an Unmatured Event of Default exists or would result therefrom or (ii) the
aggregate Advances Outstanding would exceed the Borrowing Base. Notwithstanding
anything to the contrary herein (including Section 2.02(f)), no Lender shall be
obligated to provide the Borrower (or to the Unfunded Exposure Account, if
applicable) with aggregate funds in connection with an Advance that would exceed
the lesser of (x) such Lender’s unused Commitment then in effect and (y) the
aggregate unused Commitments then in effect.

(c) Notations on Variable Funding Note. Each Lender is hereby authorized to
enter on a schedule attached to the Variable Funding Note, if any, with respect
to such Lender a notation (which may be computer generated) with respect to each
Advance under the Variable Funding Note made by such Lender of: (i) the date and
principal amount thereof, and (ii) each repayment of principal thereof, and any
such recordation shall constitute prima facie evidence of the accuracy of the
information so recorded. The failure of any Lender to make any such notation on
the schedule attached to any Variable Funding Note shall not limit or otherwise
affect the obligation of the Borrower to repay the Advances Outstanding in
accordance with their respective terms as set forth herein.

 

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SECTION 2.02 Procedure for Advances.

(a) During the Reinvestment Period, the Lenders will make Advances on any
Business Day at the request of the Borrower, subject to and in accordance with
the terms and conditions of Sections 2.01 and 2.02 and subject to the provisions
of Article III hereof.

(b) For each LIBOR Advance, the Borrower shall deliver an irrevocable written
notice in the form of a Notice of Borrowing to the Administrative Agent and each
Lender no later than 1:00 p.m. at least three Business Days before the Business
Day on which the LIBOR Advance is to be made; provided that if such Notice of
Borrowing is delivered later than 1:00 p.m. on such Business Day, such Notice of
Borrowing shall be deemed to have been received on the following Business Day.
For each Base Rate Advance, the Borrower shall deliver an irrevocable written
notice in the form of a Notice of Borrowing to the Administrative Agent and each
Lender no later than 11:00 a.m. on the Business Day on which such Base Rate
Advance is to be made; provided that if such Notice of Borrowing is delivered
later than 11:00 a.m. on such Business Day, such Notice of Borrowing shall be
deemed to have been received on the following Business Day. The Borrower or the
Servicer shall post all Loan Agreements and other loan documents and information
with respect to each proposed Eligible Loan Asset, if any, to a Deal Interactive
(or other replacement) website to which the Administrative Agent and each Lender
has access. Each Notice of Borrowing shall include a duly completed Borrowing
Base Certificate (updated to the date such Advance is requested and giving pro
forma effect to the Advance requested and the use of the proceeds thereof), and
shall specify:

(i) the aggregate amount of such Advance, which amount shall not cause the
Advances Outstanding to exceed the Borrowing Base; provided that, except with
respect to an Advance pursuant to Section 2.02(f), the amount of such Advance
must be at least equal to $500,000;

(ii) the proposed Advance Date and whether such Advance will be a LIBOR Advance
or a Base Rate Advance;

(iii) a representation that all conditions precedent for an Advance described in
Article III hereof have been satisfied;

(iv) the amount of cash that will be funded by the Transferor into the Unfunded
Exposure Account in connection with any Revolving Loan Asset or Delayed Draw
Loan Asset funded by such Advance, if applicable; and

(v) whether such Advance should be remitted to the Advance Funding Account or
the Unfunded Exposure Account.

On the date of each Advance, upon satisfaction of the applicable conditions set
forth in Article III, each Lender shall, in accordance with instructions
received by the Borrower, either (i) make available to the Borrower, in same day
funds, an amount equal to such Lender’s Pro Rata Share of such Advance, by
payment into the Advance Funding Account or (ii) remit in same day funds an
amount equal to such Lender’s Pro Rata Share of such Advance into the Unfunded
Exposure Account, as applicable; provided that, with respect to an Advance
funded pursuant to Section 2.02(f), each Lender shall remit the Advance equal to
such Lender’s Pro Rata Share of the Unfunded Exposure Amount Shortfall in same
day funds to the Unfunded Exposure Account.

 

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(c) Each LIBOR Advance shall bear interest at the applicable LIBOR Yield Rate.
The Base Rate Advances Outstanding shall bear interest at the Base Rate Yield
Rate. The Borrower may request that the Administrative Agent convert any Base
Rate Advance, in whole and not in part, to a LIBOR Advance by delivering a
Conversion Notice to the Administrative Agent no later than 1:00 p.m. at least
three Business Days’ before the Conversion Date on which such Base Rate Advance
is to be converted into a LIBOR Advance.

(d) Subject to Section 2.18 and the other terms, conditions, provisions and
limitations set forth herein (including, without limitation, the payment of the
Make-Whole Premium and Breakage Fees, as applicable), the Borrower may
(i) borrow, repay or prepay and reborrow Advances without any penalty, fee or
premium on and after the Closing Date and prior to the end of the Reinvestment
Period and (ii) repay or prepay Advances without any penalty, fee or premium
after the end of the Reinvestment Period.

(e) A determination by SMBC of the existence of any Eurodollar Disruption Event
(any such determination to be communicated to the Borrower by written notice
from the Administrative Agent promptly after the Administrative Agent learns of
such event), or of the effect of any Eurodollar Disruption Event on its making
or maintaining Advances at LIBOR, shall be conclusive absent manifest error.

(f) If, on the last day of the Reinvestment Period (or within three Business
Days of the occurrence of an Event of Default if the Reinvestment Period ends
due to the occurrence of an Event of Default), the amount on deposit in the
Unfunded Exposure Account is less than the aggregate Unfunded Exposure Amount,
the Borrower shall request an Advance in the amount of such shortfall (the
“Unfunded Exposure Amount Shortfall”). Following receipt of a Notice of
Borrowing (as described in clause (ii) below), each Lender shall fund such
Unfunded Exposure Amount Shortfall in accordance with Section 2.02(b),
notwithstanding anything to the contrary herein (including, without limitation,
(a) the Borrower’s failure to satisfy any of the conditions precedent set forth
in Section 3.02), (b) the occurrence of an Event of Default or (c) the existence
of (x) an Unmatured Event of Default or (y) a Borrowing Base Deficiency);
provided that:

(i) each Lender may fund such Unfunded Exposure Amount Shortfall in its sole
discretion to the extent that doing so would cause such Lender to make an
Advance that would result in the aggregate outstanding principal amount of such
Lender’s Advances to exceed such Lender’s Commitment;

(ii) the Borrower shall have caused a properly completed Notice of Borrowing
(which shall specify the account details of the Unfunded Exposure Account where
the funds will be made available) to be delivered to the Administrative Agent
(with a copy to the Lenders) on a timely basis; and

(iii) to the extent the Reinvestment Period has ended due to the occurrence of
an Event of Default, each Lender shall have a funding obligation with

 

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respect to the Unfunded Exposure Amount Shortfall under this Section 2.02(f)
solely to the extent that (1) the Borrower shall have, prior to the date of such
funding obligation, deposited an amount not less than the Unfunded Exposure
Equity Amount in the Unfunded Exposure Account pursuant to Section 2.04(b)(iii)
or by an equity contribution by Fifth Street or by any combination of those two
methods and (2) such funds, as of the date of such funding, remain on deposit in
the Unfunded Exposure Account.

For the avoidance of doubt, the Borrower shall not be required to fund the
Unfunded Exposure Account unless and until the occurrence of an Event of Default
or the last day of the Reinvestment Period or as required to prevent the
occurrence of a Borrowing Base Deficiency. For the further avoidance of doubt,
any obligation of a Lender to make an Advance pursuant to this Section 2.02(f)
shall be without prejudice to the obligation of the Borrower to cure any
Borrowing Base Deficiency that exists prior to such Advance or results
therefrom.

(g) The obligation of each Lender to remit its Pro Rata Share of any Advance
shall be several from that of each other Lender and the failure of any Lender to
so make such amount available to the Borrower shall not relieve any other Lender
of its obligation hereunder.

SECTION 2.03 Determination of Yield. Each Lender shall determine the Yield for
its portion of the Advances Outstanding (including unpaid Yield related thereto,
if any, due and payable on a prior Payment Date) to be paid by the Borrower on
each Payment Date and shall advise the Servicer thereof on the third Business
Day prior to such Payment Date.

SECTION 2.04 Remittance Procedures. By delivery of a Servicing Report on a
Reporting Date, the Servicer, as agent for the Administrative Agent and the
Lenders, shall and, if the Servicer fails to do so, the Administrative Agent may
instruct the Collateral Agent, to apply funds on deposit in the Controlled
Accounts on the related Payment Date as described in this Section 2.04; provided
that at any time after delivery of Notice of Exclusive Control (as defined in
the Control Agreement), the Administrative Agent shall instruct the Collateral
Agent to apply funds on deposit in the Controlled Accounts as described in this
Section 2.04.

(a) Interest Payments During Reinvestment Period and Absent an Event of Default.
During the Reinvestment Period, so long as no Event of Default has occurred and,
in any case, prior to the declaration, or automatic occurrence, of the Facility
Maturity Date, the Servicer shall transfer Interest Collections held by the
Account Bank in the Collection Account as of the Payment Date Cut-Off, in
accordance with the Servicing Report, to the following Persons in the following
amounts and priority:

(i) pari passu to (a) the Collateral Agent, in payment in full of all accrued
and unpaid Collateral Agent Fees and Collateral Agent Expenses, (b) the
Collateral Custodian in payment in full of all accrued and unpaid Collateral
Custodian Fees and Collateral Custodian Expenses and (c) the Account Bank in
payment in full of all accrued and unpaid fees and expenses due under the U.S.
Bank Fee Letter;

(ii) to the Servicer, in payment in full of all accrued and unpaid Servicing
Fees;

 

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(iii) to the Administrative Agent, all accrued and unpaid fees, expenses
(including reasonable attorneys’ fees, costs and expenses) and indemnity amounts
payable by the Borrower to the Administrative Agent under the Transaction
Documents;

(iv) pro rata, in accordance with the amounts due under this clause, to each
Lender (A) all Yield payable on such Payment Date in accordance with the
definition of “Yield” and (B) the Non-Usage Fee to the extent that such
Non-Usage Fee is accrued and unpaid as of the last day of the related Remittance
Period;

(v) pro rata, to each Lender, all accrued and unpaid fees (including Breakage
Fees), expenses (including reasonable attorneys’ fees, costs and expenses) and
indemnity amounts payable by the Borrower to any Lender under the Transaction
Documents;

(vi) to pay the Advances Outstanding to the extent required to satisfy any
outstanding Borrowing Base Deficiency;

(vii) to pay any other administrative expenses and amounts due (other than with
respect to the repayment of Advances Outstanding) under this Agreement and the
other Transaction Documents;

(viii) to any applicable Governmental Authority, any Tax or withholding for or
on account of any Tax which could result in a Lien on any of the Collateral
Portfolio; and

(ix) to the Borrower, any remaining amounts.

(b) Principal Payments During the Reinvestment Period and Absent an Event of
Default. During the Reinvestment Period, but so long as no Event of Default has
occurred and, in any case, prior to the declaration, or automatic occurrence, of
the Facility Maturity Date, the Servicer shall transfer Principal Collections
held by the Account Bank in the Collection Account as of the Payment Date
Cut-Off, in accordance with the Servicing Report, to the following Persons in
the following amounts and priority:

(i) to pay amounts due under Section 2.04(a)(i) through (v), to the extent not
paid thereunder;

(ii) to pay the Advances Outstanding to the extent required to satisfy any
outstanding Borrowing Base Deficiency or to avoid a Borrowing Base Deficiency
upon completion of the application of the Principal Collections;

(iii) at the discretion of the Servicer, to the Unfunded Exposure Account in an
amount necessary to cause the amount on deposit in the Unfunded Exposure Account
to equal the Unfunded Exposure Equity Amount;

(iv) to pay any other administrative expenses and amounts due under this
Agreement and the other Transaction Documents;

 

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(v) to any applicable Governmental Authority, any Tax or withholding for or on
account of any Tax which could result in a Lien on any of the Collateral
Portfolio; and

(vi) to the Borrower, any remaining amounts.

(c) Payment Date Transfers After the Reinvestment Period or Following the
Occurrence of an Event of Default. After the expiration of the Reinvestment
Period, or if an Event of Default has occurred or, in any case, after the
declaration, or automatic occurrence, of the Facility Maturity Date, the
Servicer shall transfer collected funds held by the Account Bank in the
Collection Account as of the Payment Date Cut-Off, in accordance with the
Servicing Report, to the following Persons in the following amounts and
priority:

(i) pari passu to (a) the Collateral Agent, in payment in full of all accrued
and unpaid Collateral Agent Fees and Collateral Agent Expenses, (b) the
Collateral Custodian in payment in full of all accrued and unpaid Collateral
Custodian Fees and Collateral Custodian Expenses and (c) the Account Bank in
payment in full of all accrued and unpaid fees and expenses due under the U.S.
Bank Fee Letter;

(ii) to the Servicer, in payment in full of all accrued and unpaid Servicing
Fees;

(iii) to the Administrative Agent, all accrued and unpaid fees, expenses
(including reasonable attorneys’ fees, costs and expenses) and indemnity amounts
payable by the Borrower to the Administrative Agent under the Transaction
Documents;

(iv) pro rata, in accordance with the amounts due under this clause, to each
Lender (A) all Yield payable on such Payment Date in accordance with the
definition of “Yield” and (B) the Non-Usage Fee to the extent that such
Non-Usage Fee is accrued and unpaid as of the last day of the related Remittance
Period;

(v) pro rata, to each Lender, all accrued and unpaid fees (including Breakage
Fees), expenses (including reasonable attorneys’ fees, costs and expenses) and
indemnity amounts payable by the Borrower to any Lender under the Transaction
Documents;

(vi) to the Unfunded Exposure Account in an amount necessary to cause the amount
on deposit in the Unfunded Exposure Account to equal the Unfunded Exposure
Amount; provided that such Unfunded Exposure Amount shall not in any event
exceed $30,000,000;

(vii) to pay the Advances Outstanding, including any applicable Make-Whole
Premium, until paid in full;

(viii) to pay any other administrative expenses and amounts due under this
Agreement and the other Transaction Documents;

 

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(ix) to any applicable Governmental Authority, any Tax or withholding for or on
account of any Tax which could result in a Lien on any of the Collateral
Portfolio; and

(x) to the Borrower, any remaining amounts.

(d) Unfunded Exposure Account. Funds on deposit in the Unfunded Exposure Account
as of any date of determination may be withdrawn to fund draw requests of the
relevant Obligors under any Revolving Loan Asset or Delayed Draw Loan Asset;
provided that, until an Event of Default has occurred, the amount withdrawn to
fund such draw request shall not create any Borrowing Base Deficiency. Any such
draw request made by an Obligor, along with wiring instructions for the
applicable Obligor, shall be forwarded by the Borrower or the Servicer to the
Collateral Agent (with a copy to the Administrative Agent and each Lender) in
the form of a Disbursement Request, and the Collateral Agent shall instruct the
Account Bank to fund such draw request in accordance with the Disbursement
Request. At any time, the Servicer (or, after delivery of Notice of Exclusive
Control (as such term is defined in the Control Agreement), the Administrative
Agent) may cause any amounts on deposit in the Unfunded Exposure Account which
exceed the Unfunded Exposure Amount as of any date of determination to be
deposited into the Principal Collection Account as Principal Collections.

(e) Insufficiency of Funds. For the sake of clarity, the parties hereby agree
that if the funds on deposit in the Collection Account are insufficient to pay
any amounts due and payable on a Payment Date or otherwise, the Borrower shall
nevertheless remain responsible for, and shall pay when due, all amounts payable
under this Agreement and the other Transaction Documents in accordance with the
terms of this Agreement and the other Transaction Documents.

SECTION 2.05 Instructions to the Collateral Agent. To the extent permitted by
Applicable Law, the Administrative Agent shall promptly transmit to the Servicer
and the Borrower by telecopy or e-mail a copy of all instructions and directions
given to the Collateral Agent or the Account Bank by the Administrative Agent,
pursuant to Section 2.04. If either the Administrative Agent or Collateral Agent
disagrees with the computation of any amounts to be paid or deposited by the
Borrower or the Servicer under Section 2.04 or otherwise pursuant to this
Agreement, or upon their respective instructions, it shall so notify the
Borrower, the Servicer and the Collateral Agent in writing and in reasonable
detail to identify the specific disagreement. If such disagreement cannot be
resolved within two Business Days, the determination of the Administrative Agent
as to such amounts shall be conclusive and binding on the parties hereto absent
manifest error. In the event the Collateral Agent or the Account Bank receives
instructions from the Servicer or the Borrower which conflict with any
instructions received by the Administrative Agent, the Collateral Agent or the
Account Bank, as applicable, shall rely on and follow the instructions given by
the Administrative Agent.

SECTION 2.06 Borrowing Base Deficiency Payments.

(a) In addition to any other obligation of the Borrower to cure any Borrowing
Base Deficiency pursuant to the terms of this Agreement, if, on any day prior to
the Collection Date, any Borrowing Base Deficiency exists, then the Borrower
shall, within three Business

 

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Days from the date of such Borrowing Base Deficiency, eliminate such Borrowing
Base Deficiency in its entirety by effecting one or more (or any combination
thereof) of the following actions in order to eliminate such Borrowing Base
Deficiency as of such date of determination: (i) deposit cash in United States
dollars into the Principal Collection Account or Unfunded Exposure Account in
the amount necessary to eliminate such Borrowing Base Deficiency, (ii) repay
Advances Outstanding (together with any Breakage Fees and all accrued and unpaid
costs and expenses of the Administrative Agent and the Lenders, in each case in
respect of the amount so prepaid) in the amount necessary to eliminate such
Borrowing Base Deficiency, and/or (iii) subject to the approval of the
Administrative Agent, in its sole discretion, Pledge additional Eligible Loan
Assets in the amount necessary to eliminate such Borrowing Base Deficiency;
provided that if the Borrower requests to Pledge another Eligible Loan Asset
within one Business Day of such Borrowing Base Deficiency and the Administrative
Agent does not either reject such Loan Asset or approve such Loan Asset within
one Business Day of the Borrower’s request to Pledge such Loan Asset, then the
Administrative Agent may, in its sole discretion, elect in writing to extend the
three Business Day grace period set forth in this Section 2.06 for up to seven
Business Days. If the Administrative Agent does not reply to a request by the
Borrower within any time period provided for such a reply pursuant to this
Section 2.06(a) and does not inform the Borrower that the Administrative Agent
is extending the period for such a reply, such failure to reply shall constitute
a denial of such request.

(b) No later than 2:00 p.m. on the Business Day prior to the proposed repayment
of Advances Outstanding or Pledge of additional Eligible Loan Assets pursuant to
Section 2.06(a), the Borrower (or the Servicer on its behalf) shall deliver
(i) to the Administrative Agent (with a copy to the Collateral Agent and the
Collateral Custodian), notice of such repayment or Pledge and a duly completed
Borrowing Base Certificate, updated to the date such repayment or Pledge is
being made and giving pro forma effect to such repayment or Pledge, and (ii) to
the Administrative Agent, if applicable, a description of any Eligible Loan
Asset and each Obligor of such Eligible Loan Asset to be Pledged and added to
the updated Loan Asset Schedule. Any notice pertaining to any repayment or any
Pledge pursuant to this Section 2.06 shall be irrevocable.

SECTION 2.07 Substitution and Sale of Loan Assets; Affiliate Transactions.

(a) Substitutions. The Borrower may, with the consent of the Administrative
Agent in its sole discretion, replace any Loan Asset with an Eligible Loan Asset
so long as (i) 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 and
(ii) simultaneously therewith, the Borrower Pledges (in accordance with all of
the terms and provisions contained herein) a Substitute Eligible Loan Asset.

(b) Discretionary Sales. The Borrower shall be permitted to sell Loan Assets to
Persons other than the Transferor or its Affiliates from time to time; provided
that (i) the proceeds of such sale shall be deposited into the Collection
Account to be disbursed in accordance with Section 2.04 hereof, (ii) no event
has occurred, or would result from such sale, which constitutes an Event of
Default and no event has occurred and is continuing, or would result from such
sale, which constitutes an Unmatured Event of Default or a Borrowing Base
Deficiency; and (iii) the Administrative Agent shall provide prior written
consent to such sale.

 

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(c) Repurchase or Substitution of Warranty Loan Assets. If on any day a Loan
Asset is (or becomes) a Warranty Loan Asset, no later than 15 Business Days
following the earlier of knowledge by the Borrower of such Loan Asset becoming a
Warranty Loan Asset or receipt by the Borrower from the Administrative Agent or
the Servicer of written notice thereof, the Borrower shall either:

(i) make a deposit to the Collection Account (as Principal Collections for
allocation pursuant to Section 2.04) in immediately available funds in an amount
equal to the sum of (x) the initial Assigned Value with respect to such Loan
Asset multiplied by the Outstanding Balance of such Loan Asset and (y) 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 (a notification regarding the amount of such expenses or fees to be provided
by the Administrative Agent to the Borrower); provided that the Administrative
Agent shall have the right to determine whether the amount so deposited is
sufficient to satisfy the foregoing requirements; or

(ii) with the prior written consent of the Administrative Agent, in its sole
discretion, substitute for such Warranty Loan Asset a Substitute Eligible Loan
Asset.

Upon confirmation of the deposit of the amounts set forth in Section 2.07(c)(i)
into the Collection Account or the delivery by the Borrower of a Substitute
Eligible Loan Asset for each Warranty Loan Asset (the date of such confirmation
or delivery, the “Release Date”), such Warranty Loan Asset and related Portfolio
Assets shall be removed from the Collateral Portfolio and, as applicable, the
Substitute Eligible Loan Asset and related Portfolio Assets shall be included in
the Collateral Portfolio. On the Release Date of each Warranty Loan Asset, the
Collateral Agent, for the benefit of the Secured Parties, shall automatically
and without further action be deemed to release to the Borrower, without
recourse, representation or warranty, all the right, title and interest and any
Lien of the Collateral Agent, for the benefit of the Secured Parties in, to and
under the Warranty Loan Asset and any related Portfolio Assets and all future
monies due or to become due with respect thereto.

(d) Conditions to Sales, Substitutions and Repurchases. Any sales, substitutions
or repurchases effected pursuant to Sections 2.07(a), (b), or (c) shall be
subject to the satisfaction of the following conditions (as certified in writing
to the Administrative Agent and Collateral Agent by the Borrower):

(i) the Borrower shall deliver a Borrowing Base Certificate to the
Administrative Agent in connection with such sale, substitution or repurchase;

(ii) the Borrower shall deliver a list of all Loan Assets to be sold,
substituted or repurchased;

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

 

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(iv) the Borrower shall give one Business Day’s notice of such sale,
substitution or repurchase;

(v) the Borrower shall notify the Administrative Agent of any amount to be
deposited into the Collection Account in connection with any sale, substitution
or repurchase;

(vi) the representations and warranties contained in Sections 4.01, 4.02 and
4.03 hereof shall continue to be correct in all respects, except to the extent
relating to an earlier date;

(vii) any repayment of Advances Outstanding in connection with any sale,
substitution or repurchase of Loan Assets hereunder shall comply with the
requirements set forth in Section 2.18; and

(viii) the Borrower and the Servicer (on behalf of the Borrower) shall agree to
pay the reasonable legal fees and expenses of the Administrative Agent, each
Lender, Collateral Agent and the Collateral Custodian in connection with any
such sale, substitution or repurchase (including, but not limited to, expenses
incurred in connection with the release of the Lien of the Collateral Agent on
behalf of the Secured Parties and any other party having an interest in the Loan
Asset in connection with such sale, substitution or repurchase).

(e) Affiliate Transactions. Notwithstanding anything to the contrary set forth
herein or in any other Transaction Document, the Transferor (or an Affiliate
thereof) shall not reacquire from the Borrower and the Borrower shall not
transfer to the Transferor or to Affiliates of the Transferor, and none of the
Transferor nor any Affiliates thereof shall have a right or ability to purchase,
the Loan Assets other than (i) as permitted by Section 2.07(f) of this
Agreement, or (ii) transfers on an arms’ length basis and for fair market value;
provided that (x) the proceeds of such sale shall be deposited into the
Collection Account to be disbursed in accordance with Section 2.04 hereof,
(y) no event has occurred, or would result from such sale, which constitutes an
Event of Default and no event has occurred and is continuing, or would result
from such sale, which constitutes an Unmatured Event of Default or a Borrowing
Base Deficiency; and (z) the Administrative Agent shall provide prior written
consent to such sale.

(f) Limitations on Sales and Substitutions. (i) The Outstanding Balance of all
Loan Assets (other than Warranty Loan Assets) sold to the Transferor or any
Affiliate pursuant to Section 2.07(e), substituted pursuant to Section 2.07(a)
or released pursuant to a Lien Release Dividend during the term of this
Agreement does not exceed 20% of the Maximum Facility Amount and (ii) the
Outstanding Balance of all Defaulted Loan Assets (other than Warranty Loan
Assets) sold to the Transferor or any Affiliate pursuant to Section 2.07(e),
substituted pursuant to Section 2.07(a) or released pursuant to a Lien Release
Dividend during the term of this Agreement does not exceed 10% of the Maximum
Facility Amount.

(g) Lien Release Dividend. Notwithstanding any provision contained in this
Agreement to the contrary, provided no Event of Default has occurred and no
Unmatured Event of Default exists, on a Lien Release Dividend Date, the Borrower
may dividend to the Transferor

 

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Loan Assets that were sold by the Transferor to the Borrower, or portions
thereof (each, a “Lien Release Dividend”), subject to the following terms and
conditions, as certified by the Borrower and the Transferor to the
Administrative Agent (with a copy to the Collateral Agent and the Collateral
Custodian):

(i) The Borrower and the Transferor shall have given the Administrative Agent,
with a copy to the Collateral Agent and the Collateral Custodian, at least five
Business Days prior written notice requesting that the Administrative Agent
consent to the effectuation of a Lien Release Dividend, in the form of Exhibit I
hereto (a “Notice and Request for Consent”), which consent shall be given in the
sole and absolute discretion of the Administrative Agent; provided that, if the
Administrative Agent shall not have responded to the Notice and Request for
Consent by 11:00 a.m. on the day that is one Business Day prior to the proposed
Lien Release Dividend Date, the Administrative Agent shall be deemed not to have
given its consent;

(ii) On any Lien Release Dividend Date, no more than four Lien Release Dividends
shall have been made during the 12-month period immediately preceding the
proposed Lien Release Dividend Date;

(iii) After giving effect to the Lien Release Dividend on the Lien Release
Dividend Date, (A) no Borrowing Base Deficiency, Event of Default or Unmatured
Event of Default shall exist, (B) the representations and warranties contained
in Sections 4.01, 4.02 and 4.03 hereof shall continue to be correct in all
material respects, except to the extent relating to an earlier date, (C) the
eligibility of any Loan Asset remaining as part of the Collateral Portfolio
after the Lien Release Dividend will be redetermined as of the Lien Release
Dividend Date, (D) no claim shall have been asserted or proceeding commenced
challenging the enforceability or validity of any of the Required Loan Documents
and (E) there shall have been no material adverse change as to the Servicer or
the Borrower;

(iv) Such Lien Release Dividend must be in compliance with Applicable Law and
may not (A) be made with the intent to hinder, delay or defraud any creditor of
the Borrower or (B) leave the Borrower, immediately after giving effect to the
Lien Release Dividend, (x) insolvent, (y) with insufficient funds to pay its
obligations as and when they become due or (z) with inadequate capital for its
present and anticipated business and transactions;

(v) On or prior to the Lien Release Dividend Date, the Borrower shall have
(A) delivered to the Administrative Agent, with a copy to the Collateral Agent
and the Collateral Custodian, a list specifying all Loan Assets or portions
thereof to be transferred pursuant to such Lien Release Dividend and the
Administrative Agent shall have approved the same in its sole discretion and
(B) obtained all authorizations, consents and approvals required to effectuate
the Lien Release Dividend;

(vi) A portion of a Loan Asset may be transferred pursuant to a Lien Release
Dividend provided that (A) such transfer does not have an adverse effect on the
portion of such Loan Asset remaining as a part of the Collateral Portfolio, any
other

 

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aspect of the Collateral Portfolio, the Lenders, the Administrative Agent or any
other Secured Party and (B) a new promissory note (other than with respect to a
Noteless Loan Asset) for the portion of the Loan Asset remaining as a part of
the Collateral Portfolio has been executed, and the original thereof has been
endorsed to the Collateral Agent and delivered to the Collateral Custodian;

(vii) Each Loan Asset, or portion thereof, as applicable, shall be transferred
at a value equal to the Outstanding Balance thereof, exclusive of any accrued
and unpaid interest or PIK Interest thereon;

(viii) The Borrower shall deliver a Borrowing Base Certificate (including a
calculation of the Borrowing Base after giving effect to such Lien Release
Dividend) to the Administrative Agent;

(ix) The Borrower shall have paid in full an aggregate amount equal to the sum
of all amounts due and owing to the Administrative Agent, the Lenders, the
Collateral Agent or the Collateral Custodian, as applicable, under this
Agreement and the other Transaction Documents, if any, to the extent accrued to
such date (including, without limitation, Breakage Fees) with respect to the
Loan Assets to be transferred pursuant to such Lien Release Dividend and
incurred in connection with the transfer of such Loan Assets pursuant to such
Lien Release Dividend; and

(x) The Borrower and the Servicer (on behalf of the Borrower) shall pay the
reasonable legal fees and expenses of the Administrative Agent, the Lenders, the
Collateral Agent and the Collateral Custodian in connection with any Lien
Release Dividend (including, but not limited to, expenses incurred in connection
with the release of the Lien of the Collateral Agent, on behalf of the Secured
Parties, and any other party having an interest in the Loan Assets in connection
with such Lien Release Dividend).

SECTION 2.08 Payments and Computations, Etc.

(a) All amounts to be paid or deposited by the Borrower or the Servicer
hereunder shall be paid or deposited in accordance with the terms hereof no
later than 5:00 p.m. on the day when due in Dollars in immediately available
funds to the Collection Account or such other account as is designated by the
Administrative Agent. The Borrower or the Servicer, as applicable, shall, to the
extent permitted by law, pay to the Secured Parties interest on all amounts not
paid or deposited when due to any of the Secured Parties hereunder at 4.0% per
annum above the Base Rate (other than with respect to any Advances Outstanding,
which shall accrue at the LIBOR Yield Rate or Base Rate Yield Rate, as
applicable), payable on demand, from the date of such nonpayment until such
amount is paid in full (as well after as before judgment); provided that such
interest rate shall not at any time exceed the maximum rate permitted by
Applicable Law. Any Obligation hereunder shall not be reduced by any
distribution of any portion of Available Collections if at any time such
distribution is rescinded or required to be returned by any Lender to the
Borrower or any other Person for any reason. Each LIBOR Advance shall accrue
interest at the applicable LIBOR Yield Rate for such LIBOR Advance during each
applicable Interest Period. All computations of interest and all computations
with respect to the Yield, the LIBOR Yield and the LIBOR Yield Rate with respect
to LIBOR

 

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Advances shall be computed on the basis of a year of 360 days for the actual
number of days elapsed, other than calculations with respect to the Base Rate,
which shall be based on a year consisting of 365 or 366 days, as applicable.
Payments of Yield with respect to each LIBOR Advance shall be payable on each
Payment Date on which an Interest Period for such LIBOR Advance ends. Each Base
Rate Advance shall accrue interest at the Base Rate Yield for each day beginning
on, and including, the Advance Date with respect to such Base Rate Advance and
ending on, but excluding, the Conversion Date for such Base Rate Advance or the
date such Base Rate Advance is repaid in full at the Base Rate Yield. All
computations of interest and all computations with respect to the Yield and Base
Rate Yield with respect to Base Rate Advances shall be computed on the basis of
a year of 365 or 366 days, as the case may be, for the actual number of days
elapsed. Any Base Rate Yield accruing on the days including the first day of a
calendar month and ending on, and including, the Payment Date Cut-Off for such
calendar month, shall be payable on the Payment Date occurring during such
calendar month. Any Base Rate Yield accruing on days after the Payment Date
Cut-Off in any calendar month shall be payable on the Payment Date occurring
during the next calendar month.

(b) Whenever any payment hereunder shall be stated to be due on a day other than
a Business Day, such payment shall be made on the next succeeding Business Day,
and such extension of time shall in such case be included in the computation of
payment of Yield or any fee payable hereunder, as the case may be.

(c) If any Advance requested by the Borrower and approved by the Lenders and the
Administrative Agent pursuant to Section 2.02 is not for any reason whatsoever,
except as a result of the gross negligence or willful misconduct of, or failure
to fund such Advance on the part of, the Lenders, the Administrative Agent or an
Affiliate thereof, made or effectuated, as the case may be, on the date
specified therefor, the Borrower shall indemnify such Lender against any loss,
cost or expense incurred by such Lender related thereto (other than any such
loss, cost or expense solely due to the gross negligence or willful misconduct
or failure to fund such Advance on the part of the Lenders, the Administrative
Agent or an Affiliate thereof), including, without limitation, any loss
(including cost of funds and reasonable out-of-pocket expenses), cost or expense
incurred by reason of the liquidation or reemployment of deposits or other funds
acquired by such Lender to fund Advances or maintain the Advances Outstanding.
Any such Lender shall provide to the Borrower documentation setting forth the
amounts of any loss, cost or expense referred to in the previous sentence, such
documentation to be conclusive absent manifest error.

SECTION 2.09 Non-Usage Fee. The Borrower shall pay, in accordance with
Section 2.04, pro rata to each Lender, a non-usage fee (the “Non-Usage Fee”)
payable in arrears for each Remittance Period, equal to the sum of the products
for each day during such Remittance Period of (i) one divided by 360, (ii) the
applicable Non-Usage Fee Rate (as defined below), and (iii) the aggregate
Commitments minus the Advances Outstanding on such day (such amount, the “Unused
Portion”). The Non-Usage Fee Rate (the “Non-Usage Fee Rate”) shall be (i) during
the first six months following the Closing Date, 0.00% for any Unused Portion of
the aggregate Commitments and (ii) thereafter, 0.50% for any Unused Portion of
the aggregate Commitments.Fees. The Borrower shall pay the Lenders (either
directly or through the Administrative Agent) certain Fees in the amounts and on
the dates set forth in the Lender Fee Letter.

 

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SECTION 2.10 Increased Costs; Capital Adequacy.

(a) If, due to either (i) the introduction of or any change following the date
hereof (including, without limitation, any change by way of imposition or
increase of reserve requirements) in or in the interpretation, administration or
application following the date hereof of any Applicable Law (including, without
limitation, any law or regulation resulting in any interest payments paid to any
Lender under this Agreement being subject to any Tax, except for Taxes on the
overall net income of such Lender), in each case whether foreign or domestic or
(ii) the compliance with any guideline or request following the date hereof from
any central bank or other Governmental Authority (whether or not having the
force of law), there shall be any increase in the cost to the Administrative
Agent, any Lender or any Affiliate, participant, successor or assign thereof
(each of which shall be an “Affected Party”) of agreeing to make or making,
funding or maintaining any Advance (or any reduction of the amount of any
payment (whether of principal, interest, fee, compensation or otherwise) to any
Affected Party hereunder), as the case may be, or there shall be any reduction
in the amount of any sum received or receivable by an Affected Party under this
Agreement, under any other Transaction Document, the Borrower shall, from time
to time, after written demand by the Administrative Agent (which demand shall be
accompanied by a statement setting forth in reasonable detail the basis for such
demand), on behalf of such Affected Party, pay to the Administrative Agent, on
behalf of such Affected Party, additional amounts sufficient to compensate such
Affected Party for such increased costs or reduced payments within 10 days after
such demand; provided that the amounts payable under this Section 2.10 shall be
without duplication of amounts payable under Section 2.11 and shall not include
any Excluded Taxes.

(b) If either (i) the introduction of or any change following the date hereof in
or in the interpretation, administration or application following the date
hereof of any law, guideline, rule or regulation, directive or request or
(ii) the compliance by any Affected Party with any law, guideline, rule,
regulation, directive or request following the date hereof, from any central
bank, any Governmental Authority or agency, including, without limitation,
compliance by an Affected Party with any request or directive regarding capital
adequacy, has or would have the effect of reducing the rate of return on the
capital of any Affected Party, as a consequence of its obligations hereunder or
any related document or arising in connection herewith or therewith to a level
below that which any such Affected Party could have achieved but for such
introduction, change or compliance (taking into consideration the policies of
such Affected Party with respect to capital adequacy), by an amount deemed by
such Affected Party to be material, then, from time to time, after demand by
such Affected Party (which demand shall be accompanied by a statement setting
forth in reasonable detail the basis for such demand), the Borrower shall pay
the Administrative Agent on behalf of such Affected Party such additional
amounts as will compensate such Affected Party for such reduction. For the
avoidance of doubt, any increase in cost and/or reduction in Yield with respect
to any Affected Party caused by regulatory capital allocation adjustments due to
FAS 166, 167 and subsequent statements and interpretations shall constitute a
circumstance on which such Affected Party may base a claim for reimbursement
under this Section 2.10.

(c) If as a result of any event or circumstance similar to those described in
clause (a) or (b) of this Section 2.10, any Affected Party is required to
compensate a bank or other financial institution providing liquidity support,
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support to such Affected Party in connection with this Agreement or the funding
or maintenance of Advances hereunder, then within ten days after demand by such
Affected Party, the Borrower shall pay to such Affected Party such additional
amount or amounts as may be necessary to reimburse such Affected Party for any
amounts payable or paid by it.

(d) In determining any amount provided for in this Section 2.10, the Affected
Party may use any reasonable averaging and attribution methods. The
Administrative Agent, on behalf of any Affected Party making a claim under this
Section 2.10, shall submit to the Borrower a certificate setting forth in
reasonable detail the basis for and the computations of such additional or
increased costs, which certificate shall be conclusive absent manifest error.

(e) Failure or delay on the part of any Affected Party to demand compensation
pursuant to this Section 2.10 shall not constitute a waiver of such Affected
Party’s right to demand or receive such compensation.

(f) If at any time the Borrower shall be liable for the payment of any
additional amounts in accordance with this Section 2.10, then the Borrower shall
have the option to terminate this Agreement (in accordance with the provisions
of Section 2.18(b) but without the payment of any Make-Whole Premium); provided
that such option to terminate shall in no event relieve the Borrower of paying
any amounts owing pursuant to this Section 2.10 in accordance with the terms
hereof.

(g) Notwithstanding anything herein to the contrary, the Dodd-Frank Wall Street
Reform and Consumer Protection Act and all rules and regulations promulgated
thereunder or issued in connection therewith shall be deemed to have been
introduced after the Closing Date, thereby constituting a change for which a
claim for increased costs or additional amounts may be made hereunder with
respect to the Affected Parties, regardless of the date enacted, adopted or
issued.

SECTION 2.11 Taxes.

(a) All payments made by the Borrower or made by the Servicer on behalf of the
Borrower under this Agreement will be made free and clear of and without
deduction or withholding for or on account of any Non-Excluded Taxes. If any
Non-Excluded Taxes are required to be withheld from any amounts payable to any
Indemnified Party, then the amount payable to such Person will be increased (the
amount of such increase, the “Additional Amount”) such that every net payment
made under this Agreement after withholding for or on account of any
Non-Excluded Taxes (including, without limitation, any Non-Excluded Taxes on
such increase) is not less than the amount that would have been paid had no such
deduction or withholding been made. The foregoing obligation to pay Additional
Amounts with respect to payments required to be made by the Borrower or made by
the Servicer on behalf of the Borrower under this Agreement will not, however,
apply with respect to (i) Taxes imposed on or measured by the overall net income
(however denominated) of the Administrative Agent, any Lender, or any other
recipient of any payment to be made hereunder, or profits, franchise and similar
Taxes imposed on the Administrative Agent or such Lender or other recipient (in
lieu of net income or profit taxes) and backup withholding and similar Taxes by
(I) the jurisdiction (or any political subdivision thereof) under the laws of
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its principal office is located or, in the case of any Lender, in which its
applicable lending office or the office to which its interest in the Advances is
assigned is located or (II) any other jurisdiction (or any political subdivision
thereof) as a result of a present or former connection between the
Administrative Agent or such Lender or other recipient and such jurisdiction
imposing such Tax other than a connection arising as a result of any transaction
contemplated under this Agreement, (ii) any branch profits Taxes imposed by the
United States or any similar Tax imposed by any other jurisdiction described in
clause (i) above; (iii) in the case of a Foreign Lender, any United States
federal withholding Tax that is imposed on amounts payable (including, for the
avoidance of doubt, consent, amendment or similar fees) to such Foreign Lender
at the time such Foreign Lender becomes a party hereto or designates a new
lending office (other than a designation made at the request of Borrower),
except to the extent that such Foreign Lender (or its assignor, if any) was
entitled, at the time of designation of a new lending office (or assignment), to
receive Additional Amounts from Borrower with respect to such withholding tax
pursuant to this Section 2.11(a); (iv) in the case of a Foreign Lender who
designates a new lending office, other than pursuant to the request of Borrower,
any United States federal withholding Tax that is imposed on interest payments
pursuant to any applicable law that is in effect at the time of such change in
lending office, except to the extent that such Foreign Lender was entitled,
immediately prior to such change in lending office, to receive additional
amounts or indemnity payments from Borrower with respect to such withholding Tax
pursuant to this Section 2.11(a); (v) any United States federal withholding Tax
which would not have occurred but for such recipient’s failure to comply with
Section 2.11(d); (vi) any Taxes imposed under, or as a result of the failure of
such recipient to satisfy the applicable requirements under, FATCA; and
(vii) interest, penalties, additions to Tax and costs or expenses solely
resulting from the assessment or imposition of Taxes described in clauses
(i) through (vi) of this definition (“Excluded Taxes”).

(b) The Borrower will indemnify, from funds available to it pursuant to
Section 2.04 (and to the extent the funds available for indemnification provided
by the Borrower is insufficient the Servicer, on behalf of the Borrower, will
indemnify) each Indemnified Party for the full amount of Non-Excluded Taxes
payable by such Person in respect of Additional Amounts and any liability
(including penalties, interest and expenses) arising therefrom or with respect
thereto. All payments in respect of this indemnification shall be made within 10
days from the date a written invoice therefor is delivered to the Borrower.

(c) Within 30 days after the date of any payment by the Borrower or by the
Servicer on behalf of the Borrower of any Taxes, the Borrower or the Servicer,
as applicable, will furnish to the Administrative Agent and the Lenders at the
applicable address set forth on this Agreement, appropriate evidence of payment
thereof.

(d) Each Foreign Lender that (a) is a party hereto on the Closing Date or
(b) becomes an assignee of an interest under this Agreement after the Closing
Date (unless such Lender was already a Lender hereunder immediately prior to
such assignment) shall deliver to the Borrower, with a copy to the
Administrative Agent, (i) within 15 days after becoming a Foreign Lender
hereunder, one (or such other number as may from time to time be prescribed by
Applicable Law) duly completed copy of IRS Form W-8BEN or Form W-8ECI (or any
successor forms or other certificates or statements that may be required from
time to time by the relevant United States taxing authorities or Applicable
Law), as appropriate, to permit the

 

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Borrower to make payments hereunder for the account of such Lender without
deduction or withholding of United States federal income or similar Taxes and
(ii) upon the obsolescence of or after the occurrence of any event requiring a
change in, any form or certificate previously delivered pursuant to this
Section 2.11(d), copies (in such numbers as may from time to time be prescribed
by Applicable Law or regulations) of such additional, amended or successor
forms, certificates or statements as may be required under Applicable Law to
permit the Borrower or the Servicer to make payments hereunder for the account
of such Lender without deduction or withholding of United States federal income
or similar Taxes. In addition, any Lender that is not a Foreign Lender and is
not an “exempt recipient” within the meaning of Treasury Regulation
Section 1.6049-4(c) shall deliver to the Borrower, with a copy to the
Administrative Agent, one (or such other number as may from time to time be
prescribed by Applicable Law) duly completed copy of Internal Revenue Service
Form W-9 (or any successor forms or other certificates or statements that may be
required from time to time by the relevant United States taxing authorities or
Applicable Law) as will enable Borrower and Administrative Agent to determine
whether or not such Lender is subject to backup withholding or information
reporting requirements.

(e) If, in connection with an agreement or other document providing liquidity
support, credit enhancement or other similar support to any Lender in connection
with this Agreement or the funding or maintenance of Advances hereunder, such
Lender is required to compensate a bank or other financial institution in
respect of Taxes under circumstances similar to those described in this
Section 2.11, then, within 10 days after demand by each applicable Lender, the
Borrower shall pay to such Lender such additional amount or amounts as may be
necessary to reimburse such Lender for any amounts paid by them.

(f) If a payment made to a Lender hereunder would be subject to United States
federal withholding Tax imposed by FATCA if such Lender fails to comply with the
applicable reporting requirements of FATCA (including those contained in
Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall
deliver to the Borrower and Administrative Agent documentation reasonably
requested by the Borrower and Administrative Agent sufficient for the Borrower
and Administrative Agent to comply with their obligations under FATCA and to
determine that such Lender has complied with such applicable reporting
requirements.

(g) If the Administrative Agent or any Lender determines, in its sole
discretion, that it has received a refund or credit (in lieu of such refund) of
any amounts as to which it has been indemnified by a Borrower or with respect to
which such Borrower has paid additional amounts pursuant to this Section 2.11,
it shall pay to the Borrower an amount equal to such refund (but only to the
extent of indemnity payments made, or additional amounts paid, by the Borrower
under this Section with respect to the amounts giving rise to such refund),
together with any interest paid by the relevant Governmental Authority with
respect to such refund, provided that the Borrower, upon the request of the
Administrative Agent or such Lender, agrees to repay as soon as reasonably
practicable the amount paid over to such Borrower (plus any penalties, interest
or other charges imposed by the relevant Governmental Authority) to the
Administrative Agent or such Lender in the event the Administrative Agent or
such Lender is required to repay such refund to such Governmental Authority.
This subsection shall not be construed to require the Administrative Agent or
any Lender to make available its Tax returns or its books or records (or any
other information relating to its Taxes that it deems confidential) to the
Borrower or any other Person.

 

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(h) Without prejudice to the survival of any other agreement of the Borrower and
the Servicer hereunder, the agreements and obligations of the Borrower, the
Servicer, the Administrative Agent and each Lender contained in this
Section 2.11 shall survive the termination of this Agreement.

SECTION 2.12 Collateral Assignment of Agreements. The Borrower hereby
collaterally assigns to the Collateral Agent, for the benefit of the Secured
Parties, all of the Borrower’s right and title to and interest in, to and under
(but not any obligations under) the Purchase and Sale Agreement (and any UCC
financing statements filed under or in connection therewith), the Loan
Agreements related to each Loan Asset, all other agreements, documents and
instruments evidencing, securing or guarantying any Loan Asset and all other
agreements, documents and instruments related to any of the foregoing but
excluding any Excluded Amounts or Retained Interest (the “Assigned Documents”).
In furtherance and not in limitation of the foregoing, the Borrower hereby
collaterally assigns to the Collateral Agent, for the benefit of the Secured
Parties, its right to indemnification under Article IX of the Purchase and Sale
Agreement. The Borrower confirms that until the Collection Date the Collateral
Agent (at the direction of the Administrative Agent) on behalf of the Secured
Parties shall have the sole right to enforce the Borrower’s rights and remedies
under the Purchase and Sale Agreement and any UCC financing statements filed
under or in connection therewith for the benefit of the Secured Parties. The
parties hereto agree that such collateral assignment to the Collateral Agent,
for the benefit of the Secured Parties, shall terminate upon the Collection
Date.

SECTION 2.13 Grant of a Security Interest. To secure the prompt, complete and
indefeasible payment in full when due, whether by lapse of time, acceleration or
otherwise, of the Obligations and the performance by the Borrower of all of the
covenants and obligations to be performed by it pursuant to this Agreement and
each other Transaction Document, whether now or hereafter existing, due or to
become due, direct or indirect, or absolute or contingent, the Borrower hereby
(a) collaterally assigns and pledges to the Collateral Agent, on behalf of the
Secured Parties, and (b) grants a security interest to the Collateral Agent, on
behalf of the Secured Parties, in all of the Borrower’s right, title and
interest in, to and under (but none of the obligations under) all of the
Collateral Portfolio, whether now existing or hereafter arising or acquired by
the Borrower, and wherever the same may be located. For the avoidance of doubt,
the Collateral Portfolio shall not include any Excluded Amounts, and the
Borrower does not hereby assign, pledge or grant a security interest in any such
amounts. Anything herein to the contrary notwithstanding, (a) the Borrower shall
remain liable under the Collateral Portfolio to the extent set forth therein to
perform all of its duties and obligations thereunder to the same extent as if
this Agreement had not been executed, (b) the exercise by the Collateral Agent,
for the benefit of the Secured Parties, of any of its rights in the Collateral
Portfolio shall not release the Borrower from any of its duties or obligations
under the Collateral Portfolio, and (c) none of the Administrative Agent, the
Collateral Agent, any Lender (nor its successors and assigns) nor any Secured
Party shall have any obligations or liability under the Collateral Portfolio by
reason of this Agreement, nor shall the Administrative Agent, the Collateral
Agent, any Lender (nor its successors and assigns) nor any Secured Party be
obligated to perform any of the obligations or duties of the Borrower thereunder
or to take any action to collect or enforce any claim for payment assigned
hereunder.

 

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SECTION 2.14 Evidence of Debt. The Administrative Agent shall maintain, solely
for this purpose as the agent of the Borrower, at its address referred to in
Section 11.02 a copy of each assignment and acceptance agreement and
participation agreement delivered to and accepted by it and a register for the
recordation of the names and addresses and interests of the Lenders (the
“Register”). The entries in the Register shall be conclusive and binding for all
purposes, absent manifest error, and the Borrower, the Administrative Agent and
each Lender shall treat each person whose name is recorded in the Register as a
Lender under this Agreement for all purposes of this Agreement. The Register
shall be available for inspection by the Borrower or any Lender at any
reasonable time and from time to time upon reasonable prior notice.

SECTION 2.15 Survival of Representations and Warranties. It is understood and
agreed that the representations and warranties set forth in Sections 4.01, 4.02
and 4.03 are made and are true and correct on the date of this Agreement and on
each Cut-Off Date unless such representations and warranties are made as of a
specific date.

SECTION 2.16 Release of Loan Assets.

(a) The Borrower may obtain the release of (i) any Loan Asset (and the related
Portfolio Assets pertaining thereto) released pursuant to a Lien Release
Dividend or sold or substituted in accordance with the applicable provisions of
Section 2.07 and any Portfolio Assets pertaining to such Loan Asset and (ii) any
Collateral Portfolio that expires by its terms and all amounts in respect
thereof have been paid in full by the related Obligor and deposited in the
Collection Account. The Collateral Agent, for the benefit of the Secured
Parties, shall at the sole expense of the Servicer and at the direction of the
Administrative Agent, execute such documents and instruments of release as may
be prepared by the Servicer on behalf of the Borrower, give notice of such
release to the Collateral Custodian (in the form of Exhibit L) (unless the
Collateral Custodian and Collateral Agent are the same Person) and take other
such actions as shall reasonably be requested by the Borrower to effect such
release of the Lien created pursuant to this Agreement. Upon receiving such
notification by the Collateral Agent as described in the immediately preceding
sentence, if applicable, the Collateral Custodian shall deliver the Required
Loan Documents to the Borrower.

(b) Promptly after the Collection Date has occurred, each Lender and the
Administrative Agent, in accordance with their respective interests, shall
release to the Borrower, for no consideration but at the sole expense of the
Borrower, their respective remaining interests in the Portfolio Assets, free and
clear of any Lien resulting solely from an act by the Collateral Agent, any
Lender or the Administrative Agent but without any other representation or
warranty, express or implied, by or recourse against any Lender or the
Administrative Agent.

SECTION 2.17 Treatment of Amounts Received by the Borrower. Amounts received by
the Borrower pursuant to Section 2.07 on account of Loan Assets shall be treated
as payments of Principal Collections or Interest Collections, as applicable, on
Loan Assets hereunder.

 

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SECTION 2.18 Prepayment; Termination.

(a) Except as expressly permitted or required herein, including, without
limitation, any repayment necessary to cure a Borrowing Base Deficiency,
Advances Outstanding may only be reduced in whole or in part at the option of
the Borrower at any time by delivering a Notice of Reduction (which notice shall
include a Borrowing Base Certificate) to the Administrative Agent, the
Collateral Agent and the Lenders at least three Business Days prior to such
reduction. Upon any prepayment, the Borrower shall also pay in full any Breakage
Fees (solely to the extent such prepayment occurs on any day other than a
Payment Date) and other accrued and unpaid costs and expenses of Administrative
Agent and Lenders related to such prepayment; provided that no reduction in
Advances Outstanding shall be given effect unless (i) sufficient funds have been
remitted to pay all such amounts in full, as determined by the Administrative
Agent, in its sole discretion and (ii) no event has occurred, or would result
from, such prepayment which would constitute an Event of Default or an Unmatured
Event of Default. The Administrative Agent shall apply amounts received from the
Borrower pursuant to this Section 2.18(a) to the payment of any Breakage Fees
and to the pro rata reduction of the Advances Outstanding. Any notice relating
to any repayment pursuant to this Section 2.18(a) shall be irrevocable.

(b) The Borrower shall not have an option to terminate this Agreement and the
other Transaction Documents during the Non-Call Period. After the expiration of
the Non-Call Period, the Borrower may, at its option, terminate this Agreement
and the other Transaction Documents upon three Business Days’ prior written
notice to the Administrative Agent and the Lenders and upon payment in full of
all Advances Outstanding, all accrued and unpaid Yield, any Breakage Fees, all
accrued and unpaid costs and expenses of the Administrative Agent and Lenders,
payment of the Make-Whole Premium pro rata to each Lender if such prepayment
occurs prior to the second anniversary of the Closing Date and payment of all
other Obligations (other than unmatured contingent indemnification obligations).
Any termination of this Agreement shall be subject to Section 11.05.

(c) The Borrower hereby acknowledges and agrees that the Make-Whole Premium
constitutes additional consideration for the Lenders to enter into this
Agreement.

SECTION 2.19 Extension of Stated Maturity Date.

The Borrower shall have the option to extend the Stated Maturity Date for one
year beyond September 16, 2018 by giving written notice of such extension to the
Administrative Agent not later than 60 days prior to September 16, 2018.

SECTION 2.20 Collections and Allocations.

(a) The Servicer shall promptly identify any collections received as being on
account of Interest Collections, Principal Collections or other Available
Collections and shall transfer, or cause to be transferred, all Available
Collections received directly by it to the Collection Account by the close of
business on the second Business Day after such Collections are received. Upon
the transfer of Available Collections to the Collection Account, the Servicer
shall segregate Principal Collections and Interest Collections and transfer the
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Principal Collection Account and the Interest Collection Account, respectively.
The Servicer shall further include a statement as to the amount of Principal
Collections and Interest Collections on deposit in the Principal Collection
Account and the Interest Collection Account on each Reporting Date in the
Servicing Report delivered pursuant to Section 6.08(b).

(b) On the Cut-Off Date with respect to any Loan Asset, the Servicer will
deposit into the Collection Account all Available Collections received in
respect of Eligible Loan Assets being transferred to and included as part of the
Collateral Portfolio on such date.

(c) With the prior written consent of the Administrative Agent (a copy of which
will be provided by the Servicer to the Collateral Agent), the Servicer may
withdraw from the Collection Account any deposits thereto constituting Excluded
Amounts if the Servicer has, prior to such withdrawal and consent, delivered to
the Administrative Agent and each Lender a report setting forth the calculation
of such Excluded Amounts in form and substance reasonably satisfactory to the
Administrative Agent.

(d) Prior to Notice of Exclusive Control (as defined in the Control Agreement),
the Servicer shall, pursuant to written instruction (which may be in the form of
standing instructions), and, if the Servicer fails to do so, the Administrative
Agent may cause the investment of, funds on deposit in the Controlled Accounts
in Permitted Investments. Absent any such written instruction, such funds shall
not be invested. A Permitted Investment acquired with funds deposited in the
Collection Account shall mature not later than the Business Day immediately
preceding any Payment Date, and shall not be sold or disposed of prior to its
maturity. A Permitted Investment acquired with funds deposited in the Unfunded
Exposure Account shall mature not later than the next Business Day succeeding
the day of investment, and shall not be sold or disposed of prior to its
maturity. All such Permitted Investments shall be held by the Account Bank
subject to the Lien of the Collateral Agent for the benefit of the Secured
Parties, and otherwise comply with assumptions of the legal opinions of Rutan &
Tucker, LLP dated the Closing Date and delivered in connection with this
Agreement; provided that compliance shall be the responsibility of the Borrower
and the Servicer and not the Collateral Agent and Account Bank. All income and
gain realized from any such investment, as well as any interest earned on
deposits in any Controlled Account shall be distributed in accordance with the
provisions of Article II hereof. The Borrower shall deposit in the Collection
Account or the Unfunded Exposure Account, as the case may be (with respect to
investments made hereunder of funds held therein), an amount equal to the amount
of any actual loss incurred, in respect of any such investment, immediately upon
realization of such loss. None of the Account Bank, the Collateral Agent, the
Administrative Agent or any Lender shall be liable for the amount of any loss
incurred, in respect of any investment, or lack of investment, of funds held in
any Controlled Account, other than with respect to fraud or their own gross
negligence or willful misconduct. The parties hereto acknowledge that the
Collateral Agent or any of its Affiliates may receive compensation with respect
to the Permitted Investments.

(e) Until the Collection Date, neither the Borrower nor the Servicer shall have
any rights of direction or withdrawal, with respect to amounts held in any
Controlled Account, except to the extent explicitly set forth in Section 2.04.

 

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SECTION 2.21 Additional Lenders.

The Borrower may, with the written consent of the Administrative Agent, add
additional Persons as Lenders. Each additional Lender shall become a party
hereto by executing and delivering to the Administrative Agent and the Borrower
a Joinder Supplement and a Assignment and Acceptance.

ARTICLE III.

CONDITIONS PRECEDENT

SECTION 3.01 Conditions Precedent to Effectiveness.

(a) This Agreement shall be effective upon satisfaction of the conditions
precedent that:

(i) all reasonable up-front expenses and fees (including legal fees, any fees
required under any Lender Fee Letter and the U.S. Bank Fee Letter) that are
invoiced at or prior to the Closing Date shall have been paid in full and all
other acts and conditions (including, without limitation, the obtaining of any
necessary consents and regulatory approvals and the making of any required
filings, recordings or registrations) required to be done and performed and to
have happened prior to the execution, delivery and performance of this Agreement
and all related Transaction Documents and to constitute the same legal, valid
and binding obligations, enforceable in accordance with their respective terms,
shall have been done and performed and shall have happened in due and strict
compliance with all Applicable Law;

(ii) in the reasonable judgment of the Administrative Agent, there has not been
any change after the date hereof in Applicable Law which adversely affects any
Lender’s or the Administrative Agent’s ability to enter into the transactions
contemplated by the Transaction Documents or any Material Adverse Effect or
material disruption in the financial, banking or commercial loan or capital
markets generally;

(iii) any and all information submitted to each Lender and the Administrative
Agent by the Borrower, the Transferor or the Servicer or any of their Affiliates
is true, accurate, complete in all material respects and not misleading in any
material respect;

(iv) the Administrative Agent shall have received, all documentation and other
information requested by the Administrative Agent in its sole discretion and/or
required by regulatory authorities with respect to the Borrower, the Transferor
and the Servicer under applicable “know your customer” and anti-money laundering
rules and regulations, including, without limitation, the USA PATRIOT Act, all
in form and substance reasonably satisfactory to the Administrative Agent;

(v) the Administrative Agent shall have received on or before the date of such
effectiveness the items listed in Schedule I hereto, each in form and substance
satisfactory to the Administrative Agent;

 

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(vi) no material adverse change on the business, assets, financial conditions or
performance of the Servicer and its subsidiaries, including the Borrower, on a
consolidated basis, or any material portion of the initial proposed Eligible
Loan Assets has occurred;

(vii) the results of Administrative Agent’s financial, legal, tax and accounting
due diligence relating to the Transferor, the Borrower, the Servicer, the
Eligible Loan Assets and the transactions contemplated hereunder are
satisfactory to Administrative Agent; and

(viii) each applicable Lender that has requested a Variable Funding Note shall
have received a duly executed Variable Funding Note, in a principal amount equal
to the Commitment of such Lender.

(b) By its execution and delivery of this Agreement, each of the Borrower and
the Servicer hereby certifies that each of the conditions precedent to the
effectiveness of this Agreement set forth in this Section 3.01 have been
satisfied; provided that with respect to conditions precedent that expressly
require the consent or approval of the Administrative Agent or another party
(other than the Borrower or the Servicer), the foregoing certification is only
to the knowledge of the Borrower and the Servicer, as applicable, with respect
to such consents or approvals.

SECTION 3.02 Conditions Precedent to All Advances. Each Advance (including the
Initial Advance, except as explicitly set forth below) to the Borrower from the
Lenders shall be subject to the further conditions precedent that:

(a) On the Advance Date of such Advance, the following statements shall be true
and correct, and the Borrower by accepting any amount of such Advance shall be
deemed to have certified that:

(i) the Servicer (on behalf of the Borrower) shall have delivered to the
Administrative Agent and each Lender (with a copy to the Collateral Agent), with
respect to LIBOR Advances no later than 1:00 p.m. on the date that is three
Business Days prior to the related Advance Date and with respect to Base Rate
Advances no later than 11:00 a.m. on the related Advance Date: (A) a Notice of
Borrowing, (B) a Borrowing Base Certificate, (C) a Loan Asset Schedule and
(D) except with respect to an Advance under Section 2.02(f), a Loan Assignment
in the form of Exhibit A to the Purchase and Sale Agreement (including Schedule
I thereto) and containing such additional information as may be reasonably
requested by the Administrative Agent; in addition, the Notice of Borrowing for
the Initial Advance shall not be delivered prior to the first Business Day after
the Closing Date;

(ii) except with respect to an Advance under Section 2.02(f), the Borrower shall
have delivered to the Collateral Custodian (with a copy to the Administrative
Agent), no later than 1:00 p.m. one Business Day prior to the related Advance
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

 

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assignment agreement); provided that, notwithstanding the foregoing, the
Borrower shall cause the Loan Asset Checklist and the Required Loan Documents to
be in the possession of the Collateral Custodian within five Business Days of
any related Advance Date as to any Loan Assets;

(iii) the representations and warranties contained in Sections 4.01, 4.02 and
4.03 are true and correct in all respects, and (except with respect to an
Advance required by Section 2.02(f)) there exists no breach of any covenant
contained in Sections 5.01, 5.02, 5.03 and 5.04 before and after giving effect
to the Advance to take place on such Advance Date and to the application of
proceeds therefrom, on and as of such day as though made on and as of such date
(other than any representation and warranty that is made as of a specific date);

(iv) on and as of such Advance Date, after giving effect to such Advance and the
addition to the Collateral Portfolio of the Eligible Loan Assets being acquired
by the Borrower using the proceeds of such Advance (except with respect to an
Advance required by Section 2.02(f)), the Advances Outstanding does not exceed
the Borrowing Base;

(v) no Event of Default has occurred, or would result from such Advance, and no
Unmatured Event of Default or Borrowing Base Deficiency exists or would result
from such Advance;

(vi) no event has occurred and is continuing, or would result from such Advance,
which constitutes a Servicer Termination Event or any event which, if it
continues uncured, will, with notice or lapse of time, constitute a Servicer
Termination Event;

(vii) since the Closing Date, no material adverse change has occurred in the
ability of the Servicer, Transferor or the Borrower to perform its obligations
under any Transaction Document;

(viii) no Liens exist in respect of Taxes which are prior to the lien of the
Collateral Agent on the Eligible Loan Assets to be Pledged on such Advance Date;
and

(ix) all terms and conditions of the Purchase and Sale Agreement required to be
satisfied in connection with the assignment of each Eligible Loan Asset being
Pledged hereunder on such Advance Date (and the Portfolio Assets related
thereto), including, without limitation, the perfection of the Borrower’s
interests therein, shall have been satisfied in full, and all filings
(including, without limitation, UCC filings) required to be made by any Person
and all actions required to be taken or performed by any Person in any
jurisdiction to give the Collateral Agent, for the benefit of the Secured
Parties, a first priority perfected security interest (subject only to Permitted
Liens) in such Eligible Loan Assets and the Portfolio Assets related thereto and
the proceeds thereof shall have been made, taken or performed.

 

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(b) The Administrative Agent shall have approved as of the applicable Cut-Off
Date in its sole and absolute discretion each of the Eligible Loan Assets
identified in the applicable Loan Asset Schedule for inclusion in the Collateral
Portfolio.

(c) No Applicable Law shall prohibit, 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 such Advances by any Lender or the
proposed Pledge of Eligible Loan Assets in accordance with the provisions
hereof.

(d) Except with respect to an Advance required by Section 2.02(f), the proposed
Advance Date shall take place during the Reinvestment Period and the Facility
Maturity Date has not yet occurred.

(e) The Borrower shall have paid all fees then required to be paid, including
all fees required hereunder and under the applicable Lender Fee Letters and the
U.S. Bank Fee Letter and shall have reimbursed the Lenders, the Administrative
Agent, each Lender, the Collateral Custodian, the Account Bank and the
Collateral Agent for all fees, costs and expenses of closing the transactions
contemplated hereunder and under the other Transaction Documents, including the
reasonable attorney fees and any other legal and document preparation costs
incurred by the Lenders, the Administrative Agent and each Lender.

The failure of the Borrower to satisfy any of the foregoing conditions precedent
in respect of any Advance shall give rise to a right of the Administrative Agent
and the applicable Lender, which right may be exercised at any time on the
demand of the applicable Lender, to rescind the related Advance and direct the
Borrower to pay to the applicable Lender an amount equal to the Advances made
during any such time that any of the foregoing conditions precedent were not
satisfied.

SECTION 3.03 Advances Do Not Constitute a Waiver. No Advance made hereunder
shall constitute a waiver of any condition to any Lender’s obligation to make
such an advance unless such waiver is in writing and executed by such Lender.

SECTION 3.04 Conditions to Pledges of Loan Assets. Each Pledge of an additional
Eligible Loan Asset pursuant to Section 2.06, a Substitute Eligible Loan Asset
pursuant to Section 2.07(a) or (c) or any other Pledge of a Loan Asset hereunder
shall be subject to the further conditions precedent that (as certified to the
Collateral Agent by the Borrower):

(a) the Servicer (on behalf of the Borrower) shall have delivered to the
Administrative Agent and each Lender (with a copy to the Collateral Agent) no
later than 5:00 p.m. on the date that is one Business Day prior to the related
Cut-Off Date: (A) a Borrowing Base Certificate, (B) a Loan Asset Schedule and
(C) a Loan Assignment in the form of Exhibit A to the Purchase and Sale
Agreement (including Schedule I thereto) and containing such additional
information as may be reasonably requested by the Administrative Agent;

(b) the Borrower shall have 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 Cut-Off 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);

 

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provided that, notwithstanding the foregoing, the Borrower shall cause the Loan
Asset Checklist and the Required Loan Documents to be in the possession of the
Collateral Custodian within five Business Days of any related Cut-Off Date as to
any Loan Assets;

(c) no Liens exist in respect of Taxes which are prior to the lien of the
Collateral Agent on the Eligible Loan Assets to be Pledged on such Cut-Off Date;

(d) all terms and conditions of the Purchase and Sale Agreement required to be
satisfied in connection with the assignment of each Eligible Loan Asset being
Pledged hereunder on such Cut-Off Date (and the Portfolio Assets related
thereto), including, without limitation, the perfection of the Borrower’s
interests therein, shall have been satisfied in full, and all filings
(including, without limitation, UCC filings) required to be made by any Person
and all actions required to be taken or performed by any Person in any
jurisdiction to give the Collateral Agent, for the benefit of the Secured
Parties, a first priority perfected security interest (subject only to Permitted
Liens) in such Eligible Loan Assets and the Portfolio Assets related thereto and
the proceeds thereof shall have been made, taken or performed;

(e) the Administrative Agent shall have approved in its sole and absolute
discretion each of the Eligible Loan Assets identified in the applicable Loan
Asset Schedule for inclusion in the Collateral Portfolio on the applicable
Cut-Off Date;

(f) no Event of Default has occurred, or would result from such Pledge, and no
Unmatured Event of Default exists, or would result from such Pledge (other than,
with respect to any Pledge of an Eligible Loan Asset necessary to cure a
Borrowing Base Deficiency in accordance with Section 2.06, an Unmatured Event of
Default arising solely pursuant to such Borrowing Base Deficiency); and

(g) the representations and warranties contained in Sections 4.01, 4.02 and 4.03
are true and correct in all respects, and there exists no breach of any covenant
contained in Sections 5.01, 5.02, 5.03 and 5.04 before and after giving effect
to the Pledge to take place on such Cut-Off Date, on and as of such day as
though made on and as of such date (other than any representation and warranty
that is made as of a specific date).

ARTICLE IV.

REPRESENTATIONS AND WARRANTIES

SECTION 4.01 Representations and Warranties of the Borrower. The Borrower hereby
represents and warrants, as of the Closing Date, as of each applicable Cut-Off
Date, as of each applicable Advance Date, as of each Reporting Date and as of
each other date provided under this Agreement or the other Transaction Documents
on which such representations and warranties are required to be (or deemed to
be) made (unless a specific date is specified below):

(a) Organization, Good Standing and Due Qualification. The Borrower is a limited
liability company duly organized, validly existing and in good standing under
the laws of Delaware and has the power and all licenses necessary to own its
assets and to transact the business in which it is engaged and is duly qualified
and in good standing under the laws of each jurisdiction where the transaction
of such business or its ownership of the Loan Assets and the Collateral
Portfolio requires such qualification.

 

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(b) Power and Authority; Due Authorization; Execution and Delivery. The Borrower
has the necessary power, authority and legal right to make, deliver and perform
this Agreement and each of the Transaction Documents to which it is a party and
all of the transactions contemplated hereby and thereby, and has taken all
necessary action to authorize the execution, delivery and performance of this
Agreement and each of the Transaction Documents to which it is a party, and to
grant to the Collateral Agent, for the benefit of the Secured Parties, a first
priority perfected security interest in the Collateral Portfolio on the terms
and conditions of this Agreement, subject only to Permitted Liens.

(c) Binding Obligation. This Agreement and each of the Transaction Documents to
which the Borrower is a party constitutes the legal, valid and binding
obligation of the Borrower, enforceable against it in accordance with their
respective terms, except as the enforceability hereof and thereof may be limited
by Bankruptcy Laws and by general principles of equity (whether such
enforceability is considered in a proceeding in equity or at law).

(d) All Consents Required. No consent of any other party and no consent,
license, approval or authorization of, or registration or declaration with, any
Governmental Authority, bureau or agency is required in connection with the
execution, delivery or performance by the Borrower of this Agreement or any
Transaction Document to which it is a party or the validity or enforceability of
this Agreement or any such Transaction Document or the Loan Assets or the
transfer of an ownership interest or security interest in such Loan Assets,
other than such as have been met or obtained and are in full force and effect.

(e) No Violation. The execution, delivery and performance of this Agreement and
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 pursuant
hereto or thereto in connection with the Pledge of the Collateral Portfolio will
not (i) create any Lien on the Collateral Portfolio other than Permitted Liens
or (ii) violate any Applicable Law or the certificate of formation or limited
liability company agreement of the Borrower or (iii) violate any contract or
other agreement to which the Borrower is a party or by which the Borrower or any
property or assets of the Borrower may be bound.

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

(g) Origination of Loan Assets. The Loan Assets to be Pledged pursuant to this
Agreement were originated pursuant to and in accordance with the Investment
Policies.

 

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(h) Bulk Sales. The grant of the security interest in the Collateral Portfolio
by the Borrower to the Collateral Agent, for the benefit of the Secured Parties,
pursuant to this Agreement, is in the ordinary course of business for the
Borrower and is not subject to the bulk transfer or any similar statutory
provisions in effect in any applicable jurisdiction.

(i) Pledge of Collateral Portfolio. Except as otherwise expressly permitted by
the terms of this Agreement, no item of Collateral Portfolio has been sold,
transferred, assigned or pledged by the Borrower to any Person, other than as
contemplated by Article II and the Pledge of such Collateral Portfolio to the
Collateral Agent, for the benefit of the Secured Parties, pursuant to the terms
of this Agreement.

(j) Indebtedness. The Borrower has no Indebtedness or other indebtedness,
secured or unsecured, direct or contingent (including guaranteeing any
obligation), other than (i) Indebtedness incurred under the terms of the
Transaction Documents and (ii) Indebtedness incurred pursuant to certain
ordinary business expenses arising pursuant to the transactions contemplated by
this Agreement and the other Transaction Documents.

(k) Sole Purpose. The Borrower has been formed solely for the purpose of
engaging in transactions of the types contemplated by this Agreement, and has
not engaged in any business activity other than the negotiation, execution and
to the extent applicable, performance of this Agreement and the transactions
contemplated by the Transaction Documents.

(l) No Injunctions. No injunction, writ, restraining order or other order of any
nature adversely affects the Borrower’s performance of its obligations under
this Agreement or any Transaction Document to which the Borrower is a party.

(m) Taxes. The Borrower has filed or caused to be filed (on a consolidated basis
or otherwise) on a timely basis all tax returns (including, without limitation,
all foreign, federal, state, local and other tax returns) required to be filed
by it (subject to any extensions to file properly obtained by the same) and is
not liable for Taxes payable by any other Person. The Borrower has paid or made
adequate provisions for the payment of all Taxes, assessments and other
governmental charges made against it or any of its property except for those
Taxes being contested in good faith by appropriate proceedings and in respect of
which it has established proper reserves in accordance with GAAP on its books.
No Tax lien or similar adverse claim has been filed, and no claim is being
asserted, with respect to any such Tax, assessment or other governmental charge.
Any Taxes, fees and other governmental charges due and payable by the Borrower,
as applicable, in connection with the execution and delivery of this Agreement
and the other Transaction Documents and the transactions contemplated hereby or
thereby have been paid or shall have been paid if and when due.

(n) Location. The Borrower’s location (within the meaning of Article 9 of the
UCC) is Delaware. The chief executive office of the Borrower (and the location
of the Borrower’s records regarding the Collateral Portfolio (other than those
delivered to the Collateral Custodian)) is located at the address set forth in
Section 11.02 of this Agreement (or at such other address as shall be designated
by such party in a written notice to the other parties hereto).

 

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(o) Tradenames. Except as permitted hereunder, the Borrower’s legal name is as
set forth in this Agreement. Except as permitted hereunder, the Borrower has not
changed its name since its formation; does not have tradenames, fictitious
names, assumed names or “doing business as” names; the Borrower’s only
jurisdiction of formation is Delaware, and, except as permitted hereunder, the
Borrower has not changed its jurisdiction of formation.

(p) Solvency. The Borrower is not the subject of any Bankruptcy Proceedings or
Bankruptcy Event. The Borrower is Solvent, and the transactions under this
Agreement and any other Transaction Document to which the Borrower is a party do
not and will not render the Borrower not Solvent. The Borrower is paying its
debts as they become due (subject to any applicable grace period); and the
Borrower, after giving effect to the transactions contemplated hereby, will have
adequate capital to conduct its business.

(q) No Subsidiaries. The Borrower has no Subsidiaries.

(r) Value Given. The Borrower has given fair consideration and reasonably
equivalent value to the Transferor in exchange for the purchase of the Loan
Assets (or any number of them) from the Transferor pursuant to the Purchase and
Sale Agreement. No such transfer has been made for or on account of an
antecedent debt owed by the Borrower to the Transferor and no such transfer is
or may be voidable or subject to avoidance under any section of the Bankruptcy
Code.

(s) Reports Accurate. All Servicer’s Certificates, Servicing Reports, Notices of
Borrowing, Borrowing Base Certificates and other written or electronic
information, exhibits, financial statements, documents, books, records or
reports furnished by the Borrower (or the Servicer on its behalf) to the
Administrative Agent, the Collateral Agent, the Lenders or the Collateral
Custodian in connection with this Agreement are, as of their date, accurate,
true and correct and no such document or certificate omits to state a material
fact or any fact necessary to make the statements contained therein not
misleading; provided that, solely with respect to written or electronic
information furnished by the Servicer which was provided to the Servicer from an
Obligor with respect to a Loan Asset, such information need only be accurate,
true and correct to the knowledge of the Borrower; 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.

(t) 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 proceeds from the sale of the Collateral 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 Borrower does not own or intend to carry or purchase, and no
proceeds from the Advances will be used to carry or purchase, any “margin stock”
within the meaning of Regulation U or to extend “purpose credit” within the
meaning of Regulation U.

(u) No Adverse Agreements. There are no agreements in effect adversely affecting
the rights of the Borrower to make, or cause to be made, the grant of the
security interest in the Collateral Portfolio contemplated by Section 2.13.

 

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(v) Event of Default/Unmatured Event of Default. No event has occurred which
constitutes an Event of Default, and no event has occurred and is continuing
which constitutes an Unmatured Event of Default (other than any Event of Default
or Unmatured Event of Default which has previously been disclosed to the
Administrative Agent as such).

(w) Servicing Standard. Each of the Loan Assets was underwritten or acquired and
is being serviced in conformance with the standard underwriting, credit,
collection, operating and reporting procedures and systems of the Servicer or
the Transferor.

(x) ERISA. 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 Borrower or any ERISA Affiliate of the Borrower, or to which
the Borrower or any ERISA Affiliate of the Borrower 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 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 Borrower 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.

(y) Allocation of Charges. There is not any agreement or understanding between
the Servicer and the Borrower (other than as expressly set forth herein or as
consented to by the Administrative Agent), providing for the allocation or
sharing of obligations to make payments or otherwise in respect of any taxes,
fees, assessments or other governmental charges; provided that it is understood
and acknowledged that the Borrower will be consolidated with the Servicer for
tax purposes.

(z) Broker-Dealer. The Borrower is not a broker-dealer or subject to the
Securities Investor Protection Act of 1970, as amended.

(aa) Instructions to Obligors. The Collection Account is the only account to
which Obligors have been instructed by the Borrower, or the Servicer on the
Borrower’s behalf, to send Principal Collections and Interest Collections on the
Collateral Portfolio. The Borrower has not granted any Person other than the
Collateral Agent, on behalf of the Secured Parties, an interest in the
Collection Account.

(bb) Purchase and Sale Agreement. The Purchase and Sale Agreement and the Loan
Assignment contemplated therein are the only agreements pursuant to which the
Borrower acquires the Collateral Portfolio.

 

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

(dd) Compliance with Law. The Borrower has complied in all respects with all
Applicable Law to which it may be subject, and no item of the Collateral
Portfolio contravenes any Applicable Law (including, without limitation, all
applicable predatory and abusive lending laws, laws, rules and regulations
relating to licensing, truth in lending, fair credit billing, fair credit
reporting, equal credit opportunity, fair debt collection practices and
privacy).

(ee) Collections. The Borrower acknowledges that all Available Collections
received by it or its Affiliates with respect to the Collateral Portfolio
Pledged hereunder are held and shall be held in trust for the benefit of the
Collateral Agent, on behalf of the Secured Parties until deposited into the
Collection Account within two Business Days after receipt as required herein.

(ff) Set-Off, etc. No Loan Asset has been compromised, adjusted, extended,
satisfied, subordinated, rescinded, set-off or modified by the Borrower, the
Transferor or the Obligor thereof, and no Loan Asset in the Collateral 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 Collateral Portfolio or otherwise, by the Borrower,
the Transferor or the Obligor with respect thereto, except, in each case, for
amendments, extensions and modifications, if any, to such Collateral Portfolio
otherwise permitted pursuant to Section 6.04(a) of this Agreement and in
accordance with the Servicing Standard.

(gg) Full Payment. As of the applicable Cut-Off Date thereof, the Borrower has
no knowledge of any fact which should lead it to expect that any Loan Asset will
not be paid in full.

(hh) Environmental. With respect to each item of Underlying Collateral as of the
applicable Cut-Off Date for the Loan Asset related to such Underlying
Collateral, to the actual knowledge of a Responsible Officer of the Borrower:
(a) the related Obligor’s operations comply in all 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 connection with any release of any Hazardous
Materials into the environment. As of the applicable Cut-Off Date for the Loan
Asset related to such Underlying Collateral, none of the Borrower, the
Transferor nor the Servicer has 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 any such Person have knowledge or reason
to believe that any such notice will be received or is being threatened.

(ii) USA PATRIOT Act. Neither the Borrower nor any Affiliate of the Borrower 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

 

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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.

(jj) Confirmation from Transferor. The Borrower has received in writing from the
Transferor confirmation that the Transferor will not cause the Borrower to file
a voluntary bankruptcy petition under the Bankruptcy Code.

(kk) Accuracy of Representations and Warranties. Each representation or warranty
by the Borrower contained herein or in any certificate or other document
furnished by the Borrower pursuant hereto or in connection herewith is true and
correct in all respects.

(ll) Reaffirmation of Representations and Warranties. On each day that any
Advance is made hereunder, the Borrower shall be deemed to have certified that
all representations and warranties described in Section 4.01 and Section 4.02
are correct on and as of such day as though made on and as of such day, except
for any such representations or warranties which are made as of a specific date.

(mm) Security Interest.

(i) This Agreement creates a valid and continuing security interest (as defined
in the applicable UCC) in the Collateral Portfolio in favor of the Collateral
Agent, on behalf of the Secured Parties, 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 Borrower;

(ii) the Collateral Portfolio is comprised of “instruments”, “security
entitlements”, “general intangibles” (including “payment intangibles”),
“tangible chattel paper”, “accounts”, “certificated securities”, “uncertificated
securities”, “securities accounts”, “deposit accounts”, “supporting obligations”
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
Borrower has complied with its obligations under this Section 4.01(mm);

(iii) with respect to Collateral Portfolio that constitute “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;

 

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b. the Borrower has taken all steps necessary to cause the securities
intermediary to identify in its records the Borrower, subject to the lien of the
Collateral Agent, for the benefit of the Secured Parties, as the Person having a
security entitlement against the securities intermediary in each of the
Controlled Accounts; and

c. the Controlled Accounts are not in the name of any Person other than the
Borrower, 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 Borrower, 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.

(iv) all Controlled Accounts constitute “securities accounts” or “deposit
accounts” as defined in the applicable UCC;

(v) with respect to any Controlled Account which constitutes a “deposit account”
as defined in the applicable UCC, the Borrower, the Account Bank and the
Collateral Agent, on behalf of the Secured Parties, have entered into an account
control agreement which permits the Collateral Agent on behalf of the Secured
Parties to direct disposition of the funds in such deposit account;

(vi) the Borrower owns and has good and marketable title to (or with respect to
assets securing any Loan Assets, a valid security interest in) the Collateral
Portfolio free and clear of any Lien (other than Permitted Liens) of any Person;

(vii) the Borrower has received all consents and approvals required by the terms
of any Loan Asset to the granting of a security interest in the Loan Assets
hereunder to the Collateral Agent, on behalf of the Secured Parties;

(viii) the Borrower 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 the Collateral
Portfolio and that portion of the Loan Assets in which a security interest may
be perfected by filing granted to the Collateral Agent, on behalf of the Secured
Parties, under this Agreement; provided that filings in respect of real property
shall not be required;

(ix) other than as expressly permitted by the terms of this Agreement and the
security interest granted to the Collateral Agent, on behalf of the Secured
Parties, pursuant to this Agreement, the Borrower has not pledged, assigned,
sold, granted a

 

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security interest in or otherwise conveyed any of the Collateral Portfolio. The
Borrower has not authorized the filing of and is not aware of any financing
statements against the Borrower that include a description of collateral
covering the Collateral Portfolio other than any financing statement
(A) relating to the security interests granted to the Borrower under the
Purchase and Sale 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
Borrower is not aware of the filing of any judgment or Tax lien filings against
the Borrower;

(x) 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;

(xi) other than in the case of Noteless Loan Assets, the Borrower has received,
or subject to the delivery requirements contained 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;

(xii) 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;

(xiii) with respect to any Collateral 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
specially Indorsed in blank by an effective Indorsement or has been registered
in the name of the Collateral Agent, for the benefit of the Secured Parties,
upon original issue or registration of transfer by the Borrower of such
certificated security; and

(xiv) with respect to any Collateral Portfolio that constitutes an
“uncertificated security”, that the Borrower 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.

SECTION 4.02 Representations and Warranties of the Borrower Relating to the
Agreement and the Collateral Portfolio. The Borrower hereby represents and
warrants, as of the Closing Date, as of each applicable Cut-Off Date, as of each
applicable Advance Date, as of each Reporting Date and any date which Loan
Assets are Pledged hereunder and as of each other date provided under this
Agreement or the other Transaction Documents on which such representations and
warranties are required to be (or deemed to be) made:

(a) Valid Transfer and Security Interest. This Agreement constitutes a grant of
a security interest in all of the Collateral Portfolio to the Collateral Agent,
for the benefit of the Secured Parties, which upon the delivery of the Required
Loan Documents to the Collateral

 

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Custodian, the crediting of Loan Assets to the Controlled Accounts and the
filing of the financing statements, shall be a valid and first priority
perfected security interest in the Loan Assets forming a part of the Collateral
Portfolio and in that portion of the Loan Assets in which a security interest
may be perfected by filing subject only to Permitted Liens. Neither the Borrower
nor any Person claiming through or under Borrower shall have any claim to or
interest in the Controlled Accounts and, if this Agreement constitutes the grant
of a security interest in such property, except for the interest of the Borrower
in such property as a debtor for purposes of the UCC.

(b) Eligibility of Collateral Portfolio. (i) The Loan Asset Schedule and the
information contained in each Notice of Borrowing, is an accurate and complete
listing of all the Loan Assets contained in the Collateral Portfolio as of the
related Cut-Off Date and the information contained therein with respect to the
identity of such item of Collateral Portfolio and the amounts owing thereunder
is true and correct as of the related Cut-Off Date, (ii) each Loan Asset
designated on any Borrowing Base Certificate as an Eligible Loan Asset and each
Loan Asset included as an Eligible Loan Asset in any calculation of Borrowing
Base or Borrowing Base Deficiency is an Eligible Loan Asset and (iii) with
respect to each item of Collateral 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
Borrower in connection with the transfer of a security interest in each item of
Collateral Portfolio to the Collateral Agent, for the benefit of the Secured
Parties, have been duly obtained, effected or given and are in full force and
effect. For the avoidance of doubt, any inaccurate representation that a Loan
Asset is an Eligible Loan Asset hereunder or under the Purchase and Sale
Agreement shall not constitute an Event of Default if the Borrower complies with
Section 2.07(c) hereunder and the Transferor complies with Section 6.1 of the
Purchase and Sale Agreement

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

SECTION 4.03 Representations and Warranties of the Servicer. The Servicer hereby
represents and warrants, as of the Closing Date, as of each applicable Cut-Off
Date, as of each applicable Advance Date, as of each Reporting Date and as of
each other date provided under this Agreement or the other Transaction Documents
on which such representations and warranties are required to be (or deemed to
be) made (unless a specific date is specified below):

(a) Organization and Good Standing. The Servicer has been duly organized and is
validly existing as a corporation in good standing under the laws of the State
of Delaware (except as such jurisdiction is changed as permitted hereunder),
with all requisite corporate power and authority necessary to own or lease its
properties and to conduct its business as such business is presently conducted
and to enter into and perform its obligations pursuant to this Agreement.

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

 

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(c) Power and Authority; Due Authorization; Execution and Delivery. The Servicer
(i) has all necessary power, authority and legal right to (a) execute and
deliver this Agreement and the other Transaction Documents to which it is a
party, (b) carry out the terms of the 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 and the other Transaction
Documents to which it is a party. This Agreement and each other Transaction
Document to which the Servicer is a party have been duly executed and delivered
by the Servicer.

(d) Binding Obligation. This Agreement and each other Transaction Document to
which the Servicer is a party constitutes a legal, valid and binding obligation
of the Servicer enforceable against the Servicer in accordance with its
respective terms, except as such enforceability may be limited by Bankruptcy
Laws and general principles of equity (whether considered in a suit at law or in
equity).

(e) No Violation. The consummation of the transactions contemplated by this
Agreement 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 Servicer’s
articles of incorporation or by-laws or any contractual obligation of the
Servicer, (ii) result in the creation or imposition of any Lien upon any of the
Servicer’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 Servicer, threatened against the Servicer, before
any Governmental Authority (i) asserting the invalidity of this Agreement or any
other Transaction Document to which the Servicer is a party, (ii) seeking to
prevent the consummation of any of the transactions contemplated by this
Agreement or any other Transaction Document to which the Servicer is a party or
(iii) seeking any determination or ruling that could reasonably be expected to
have a Material Adverse Effect.

(g) All Consents Required. All approvals, authorizations, consents, orders,
licenses or other actions of any Person or of any Governmental Authority (if
any) required for the due execution, delivery and performance by the Servicer of
this Agreement and any other Transaction Document to which the Servicer is a
party have been obtained.

(h) Reports Accurate. No Borrowing Base Certificate, information, exhibit,
financial statement, document, book, record or report furnished by the Servicer
to the Administrative Agent, the Collateral Agent, the Lenders or the Collateral
Custodian in connection with this Agreement is inaccurate in any respect as of
the date it is dated, and no such document contains any material misstatement of
fact or omits to state a material fact or any fact necessary to make the
statements contained therein not misleading; provided that, solely with respect
to written or electronic information furnished by the Servicer which was
provided to the

 

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Servicer from an Obligor with respect to a Loan Asset, such information need
only be accurate, true and correct to the knowledge of the Servicer; 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.

(i) Servicing Standard. The Servicer has complied in all respects with the
Servicing Standard with regard to the servicing of the Loan Assets.

(j) Collections. The Servicer acknowledges that all Available Collections
received by it or its Affiliates with respect to the Collateral Portfolio
transferred or Pledged hereunder are held and shall be held in trust for the
benefit of the Secured Parties until deposited into the Collection Account
within two Business Days from receipt as required herein.

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

(l) Solvency. The Servicer is not the subject of any Bankruptcy Proceedings or
Bankruptcy Event. The transactions under this Agreement and any other
Transaction Document to which the Servicer is a party do not and will not render
the Servicer not Solvent.

(m) Taxes. The Servicer 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 Servicer 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 Servicer), and no
Tax lien has been filed and no claim is being asserted, with respect to any such
Tax, assessment or other charge.

(n) Exchange Act Compliance; Regulations T, U and X. None of the transactions
contemplated herein or the other Transaction Documents (including, without
limitation, the use of the Proceeds from the sale of the Collateral 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.

(o) Security Interest. The Servicer will take all steps necessary to ensure that
the Borrower has granted a security interest (as defined in the UCC) to the
Collateral Agent, for the benefit of the Secured Parties, in the Collateral
Portfolio, which is enforceable in accordance with Applicable Law upon execution
and delivery of this Agreement. Upon the filing of UCC-1 financing statements
naming the Collateral Agent as secured party and the Borrower as debtor, the
Collateral Agent, for the benefit of the Secured Parties, shall have a valid and
first priority perfected security interest in the Loan Assets and that portion
of the Collateral Portfolio in which a security interest may be perfected by
filing (except for any Permitted Liens). All filings (including, without
limitation, such UCC filings) as are necessary for the perfection of the Secured
Parties’ security interest in the Loan Assets and that portion of the Collateral
Portfolio in which a security interest may be perfected by filing have been (or
prior to the applicable Advance will be) made.

 

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(p) ERISA. 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 Servicer or any ERISA Affiliate of the Servicer or to which
the Servicer or any ERISA Affiliate of the Servicer contributes or has an
obligation to contribute, or has any liability (each, a “Servicer Pension Plan”)
does not exceed the value of the assets of the Servicer Pension Plan allocable
to such vested benefits (based on the value of such assets as of the last annual
valuation date) determined in accordance with the assumptions used for funding
such Servicer 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
Servicer Pension Plan other than a Multiemployer Plan), withdrawals or
reportable events have occurred with respect to any Servicer Pension Plan that,
in the aggregate, could subject the Servicer to any material tax, penalty or
other liability. No notice of intent to terminate a Servicer Pension Plan has
been filed, nor has any Servicer 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
Servicer 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 Servicer Pension Plan.

(q) USA PATRIOT Act. Neither the Servicer nor any Affiliate of the Servicer is
(i) a country, territory, organization, person or entity named on an 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.

(r) Environmental. With respect to each item of Underlying Collateral, to the
actual knowledge of a Responsible Officer of the Servicer: (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 connection with any release of any Hazardous
Materials into the environment. The Servicer 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 Servicer, have
knowledge or reason to believe that any such notice will be received or is being
threatened.

 

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(s) No Injunctions. No injunction, writ, restraining order or other order of any
nature adversely affects the Servicer’s performance of its obligations under
this Agreement or any Transaction Document to which the Servicer is a party.

(t) Instructions to Obligors. The Collection Account is the only account to
which Obligors have been instructed by the Servicer on the Borrower’s behalf to
send Principal Collections and Interest Collections on the Collateral Portfolio.

(u) Allocation of Charges. There is not any agreement or understanding between
the Servicer and the Borrower (other than as expressly set forth herein or as
consented to by the Administrative Agent), providing for the allocation or
sharing of obligations to make payments or otherwise in respect of any taxes,
fees, assessments or other governmental charges; provided that it is understood
and acknowledged that the Borrower will be consolidated with the Servicer for
tax purposes.

(v) Servicer Termination Event. No event has occurred which constitutes a
Servicer Termination Event (other than any Servicer Termination Event which has
previously been disclosed to the Administrative Agent as such).

(w) Broker-Dealer. The Servicer is not a broker-dealer or subject to the
Securities Investor Protection Act of 1970, as amended.

(x) Compliance with Applicable Law. The Servicer has complied in all respects
with all Applicable Law to which it may be subject, and no item in the
Collateral Portfolio contravenes in any respect any Applicable Law.

SECTION 4.04 Representations and Warranties of each Lender. Each Lender hereby
individually represents and warrants, as to itself, that it is (a) either a
“qualified institutional buyer” under Rule 144A of the Securities Act or an
institutional “accredited investor” as defined in Rule 501(a)(1)-(3) or
(7) under the Securities Act and (b) a “qualified purchaser” under the 1940 Act.
Such representation shall be without prejudice to the characterization of the
obligations of the Borrower hereunder in respect of the Advances as commercial
loans and not as securities.

ARTICLE V.

GENERAL COVENANTS

SECTION 5.01 Affirmative Covenants of the Borrower.

From the Closing Date until the Collection Date:

(a) Organizational Procedures and Scope of Business. The Borrower will observe
all organizational procedures required by its certificate of formation, limited
liability company agreement and the laws of its jurisdiction of formation.
Without limiting the foregoing, the Borrower will limit the scope of its
business to: (i) the acquisition of Eligible Loan Assets and the ownership and
management of the Portfolio Assets and the related assets in the Collateral
Portfolio; (ii) the sale, transfer or other disposition of Loan Assets as and
when

 

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permitted under the Transaction Documents; (iii) entering into and performing
under the Transaction Documents; (iv) consenting or withholding consent as to
proposed amendments, waivers and other modifications of the Loan Agreements to
the extent not in conflict with the terms of this Agreement or any other
Transaction Document; (v) exercising any rights (including but not limited to
voting rights and rights arising in connection with a Bankruptcy Event with
respect to an Obligor or the consensual or non-judicial restructuring of the
debt or equity of an Obligor) or remedies in connection with the Loan Assets and
participating in the committees (official or otherwise) or other groups formed
by creditors of an Obligor to the extent not in conflict with the terms of this
Agreement or any other Transaction Document; and (vi) engaging in any activity
and to exercise any powers permitted to limited liability companies under the
laws of the State of Delaware that are related to the foregoing and necessary,
convenient or advisable to accomplish the foregoing.

(b) Special Purpose Entity Requirements. The Borrower will at all times:
(i) maintain at least one Independent Director; (ii) maintain its own separate
books and records and bank accounts; (iii) hold itself out to the public and all
other Persons as a legal entity separate from the Transferor and any other
Person (although, in connection with certain advertising and marketing, the
Borrower may be identified as a Subsidiary of Fifth Street); (iv) have a board
of directors separate from that of the Transferor and any other Person; (v) file
its own tax returns, if any, as may be required under Applicable Law, to the
extent it is (1) not part of a consolidated group filing a consolidated return
or returns or (2) not treated as a division for tax purposes of another
taxpayer, and pay any Taxes so required to be paid under Applicable Law in
accordance with the terms of this Agreement; (vi) except as contemplated by the
Transaction Documents, not commingle its assets with assets of any other Person;
(vii) conduct its business in its own name and strictly comply with all
organizational formalities to maintain its separate existence (although, in
connection with certain advertising and marketing, the Borrower may be
identified as a Subsidiary of Fifth Street); (viii) maintain separate financial
statements, except to the extent that the Borrower’s financial and operating
results are consolidated with those of Fifth Street in consolidated financial
statements; (ix) pay its own liabilities only out of its own funds; (x) maintain
an arm’s-length relationship with its Affiliates and the Transferor; (xi) pay
the salaries of its own employees, if any; (xii) not hold out its credit or
assets as being available to satisfy the obligations of others; (xiii) allocate
fairly and reasonably any overhead for shared office space; (xiv) use separate
stationery, invoices and checks (although, in connection with certain
advertising and marketing, the Borrower may be identified as a Subsidiary of
Fifth Street); (xv) except as expressly permitted by this Agreement, not pledge
its assets as security for the obligations of any other Person; (xvi) correct
any known misunderstanding regarding its separate identity; (xvii) maintain
adequate capital in light of its contemplated business purpose, transactions and
liabilities and pay its operating expenses and liabilities from its own assets;
(xviii) cause its board of directors to meet at least annually or act pursuant
to written consent and keep minutes of such meetings and actions and observe in
all respects all other Delaware limited liability company formalities; (xix) not
acquire the obligations or any securities of its Affiliates; and (xx) cause the
directors, officers, agents and other representatives of the Borrower to act at
all times with respect to the Borrower consistently and in furtherance of the
foregoing and in the best interests of the Borrower. Where necessary, the
Borrower will obtain proper authorization from its members for limited liability
company action.

 

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(c) Preservation of Company Existence. The Borrower will maintain its limited
liability company existence in good standing under the laws of its jurisdiction
of formation and will promptly obtain and thereafter maintain qualifications to
do business as a foreign limited liability company in any other state in which
it does business and in which it is required to so qualify under Applicable Law.

(d) Compliance with Legal Opinions. The Borrower shall take all other actions
necessary to maintain the accuracy of the factual assumptions set forth in the
legal opinions of Rutan & Tucker, LLP, as special counsel to the Borrower,
issued in connection with the Purchase and Sale Agreement and relating to the
issues of substantive consolidation and true sale of the Loan Assets.

(e) Deposit of Collections. The Borrower shall promptly (but in no event later
than two Business Days after receipt) deposit or cause to be deposited into the
Collection Account any and all Available Collections received by the Borrower,
the Servicer or any of their Affiliates.

(f) Disclosure of Purchase Price. The Borrower shall disclose to the
Administrative Agent and the Lenders the purchase price for each Loan Asset
proposed to be transferred to the Borrower pursuant to the terms of the Purchase
and Sale Agreement.

(g) Obligor Defaults and Bankruptcy Events. The Borrower shall give, or shall
cause the Servicer to give, notice to the Administrative Agent and the Lenders
within two Business Days of the Borrower’s, the Transferor’s or the Servicer’s
actual knowledge of the occurrence of any default by an Obligor under any Loan
Asset or any Bankruptcy Event with respect to any Obligor under any Loan Asset.

(h) Required Loan Documents. The Borrower shall deliver to the Collateral
Custodian a hard copy of the Required Loan Documents and the Loan Asset
Checklist pertaining to each Loan Asset within five Business Days of the Cut-Off
Date pertaining to such Loan Asset.

(i) Taxes. The Borrower 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 4.01(m)).

(j) Notice of Event of Default. The Borrower shall notify the Administrative
Agent and each Lender of the occurrence of any Event of Default under this
Agreement promptly upon obtaining actual knowledge of such event. In addition,
no later than two Business Days following the Borrower’s knowledge or notice of
the occurrence of any Event of Default or Unmatured Event of Default, the
Borrower will provide to the Administrative Agent and each Lender a written
statement of a Responsible Officer of the Borrower setting forth the details of
such event and the action that the Borrower proposes to take with respect
thereto.

(k) Notice of Material Events. The Borrower shall promptly notify the
Administrative Agent and each Lender of any event or other circumstance that is
reasonably likely to have a Material Adverse Effect.

 

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(l) Notice of Income Tax Liability. The Borrower shall furnish to the
Administrative Agent and each Lender telephonic or facsimile notice 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 Fifth Street or any “affiliated group” (within the meaning of
Section 1504(a)(l) of the Code) of which Fifth Street 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 Borrower itself 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.

(m) Notice of Auditors’ Management Letters. The Borrower shall promptly notify
the Administrative Agent and each Lender after the receipt of any auditors’
management letters received by the Borrower or by its accountants.

(n) Notice of Breaches of Representations and Warranties under this Agreement.
The Borrower shall promptly notify the Administrative Agent and each Lender if
any representation or warranty set forth in Section 4.01 or Section 4.02 was
incorrect at the time it was given or deemed to have been given and at the same
time deliver to the Collateral Agent, the Administrative Agent and the Lenders a
written notice setting forth in reasonable detail the nature of such facts and
circumstances. In particular, but without limiting the foregoing, the Borrower
shall notify the Administrative Agent and each Lender in the manner set forth in
the preceding sentence before any Cut-Off Date of any facts or circumstances
within the knowledge of the Borrower 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.

(o) Notice of Breaches of Representations and Warranties under the Purchase and
Sale Agreement. The Borrower confirms and agrees that the Borrower will, upon
receipt of notice or discovery thereof, promptly send to the Administrative
Agent, each Lender and the Collateral Agent a notice of (i) any breach of any
representation, warranty, agreement or covenant under the Purchase and Sale
Agreement or (ii) any event or occurrence that, upon notice, or upon the passage
of time or both, would constitute such a breach.

(p) Notice of Proceedings. The Borrower shall notify the Administrative Agent
and each Lender, as soon as possible and in any event within three Business
Days, after the Borrower receives notice or obtains knowledge thereof, of any
settlement of, material judgment (including a material judgment with respect to
the liability phase of a bifurcated trial) in or commencement of 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
Collateral Portfolio, the Transaction Documents, the Collateral Agent’s, for the
benefit of the Secured Parties, interest in the Collateral Portfolio, or the
Borrower, the Servicer or the Transferor or any of their Affiliates. For
purposes of this Section 5.01(p), (i) any settlement, judgment, labor
controversy, litigation, action, suit or proceeding affecting the Collateral
Portfolio, the Transaction Documents, the Collateral Agent’s, for the benefit of
the Secured Parties, interest in the Collateral Portfolio, or the Borrower 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 Servicer or the Transferor or any of their Affiliates (other than the
Borrower) in excess of $1,000,000 shall be deemed to be material.

 

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(q) Notice of ERISA Reportable Events. The Borrower shall promptly notify the
Administrative Agent and each Lender 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
Borrower (or any ERISA Affiliate thereof), and provide them with a copy of such
notice.

(r) Notice of Accounting Changes. As soon as possible and in any event within
three Business Days after the effective date thereof, the Borrower will provide
to the Administrative Agent and each Lender notice of any change in the
accounting policies of the Borrower.

(s) Additional Documents. The Borrower shall provide the Administrative Agent
and each Lender with copies of such documents as the Administrative Agent or any
Lender may reasonably request evidencing the truthfulness of the representations
set forth in this Agreement.

(t) Protection of Security Interest. With respect to the Collateral Portfolio
acquired by the Borrower, the Borrower will (i) acquire such Collateral
Portfolio pursuant to and in accordance with the terms of the Purchase and Sale
Agreement, (ii) (at the expense of the Servicer, on behalf of the Borrower) take
all action necessary to perfect, protect and more fully evidence the Borrower’s
ownership of such Collateral Portfolio free and clear of any Lien other than the
Lien created hereunder and Permitted Liens, including, without limitation,
(a) with respect to the Loan Assets and that portion of the Collateral Portfolio
in which a security interest may be perfected by filing, filing and maintaining
(at the expense of the Servicer, on behalf of the Borrower), effective financing
statements against the Transferor in all necessary or appropriate filing
offices, (including any amendments thereto or assignments thereof) and filing
continuation statements, amendments or assignments with respect thereto in such
filing offices, (including any amendments thereto or assignments thereof) and
(b) executing or causing to be executed such other instruments or notices as may
be necessary or appropriate, (iii) (at the expense of the Servicer, on behalf of
the Borrower) take all action necessary to cause a valid, subsisting and
enforceable first priority perfected security interest, subject only to
Permitted Liens, to exist in favor of the Collateral Agent (for the benefit of
the Secured Parties) in the Borrower’s interests in all of the Collateral
Portfolio being Pledged hereunder including the filing of a UCC financing
statement in the applicable jurisdiction adequately describing the Collateral
Portfolio (which may include an “all asset” filing), and naming the Borrower as
debtor and the Collateral Agent as the secured party, and filing continuation
statements, amendments or assignments with respect thereto in such filing
offices, (including any amendments thereto or assignments thereof), (iv) permit
the Administrative Agent or any Lender or their respective agents or
representatives to visit the offices of the Borrower during normal office hours
and upon reasonable advance notice examine and make copies of all documents,
books, records and other information concerning the Collateral Portfolio and
discuss matters related thereto with any of the officers or employees of the
Borrower having knowledge of such matters, and (v) take all additional action
that the Administrative Agent, any Lender or the Collateral Agent may reasonably
request to perfect, protect and more fully evidence the respective first
priority

 

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perfected security interests of the parties to this Agreement in the Collateral
Portfolio, or to enable the Administrative Agent or the Collateral Agent to
exercise or enforce any of their respective rights hereunder.

(u) Liens. The Borrower will promptly notify the Administrative Agent and the
Lenders of the existence of any Lien on the Collateral Portfolio (other than
Permitted Liens) and the Borrower shall defend the right, title and interest of
the Collateral Agent, for the benefit of the Secured Parties, in, to and under
the Collateral Portfolio against all claims of third parties.

(v) Other Documents. At any time from time to time upon prior written request of
the Administrative Agent or any Lender, at the sole expense of the Borrower, the
Borrower will promptly and duly execute and deliver such further instruments and
documents and take such further actions as the Administrative Agent or any
Lender may reasonably request for the purposes of obtaining or preserving the
full benefits of this Agreement including the first priority security interest
(subject only to Permitted Liens) granted hereunder and of the rights and powers
herein granted (including, among other things, authorizing the filing of such
UCC financing statements as the Administrative Agent may request).

(w) Compliance with Law. The Borrower shall at all times comply in all respects
with all Applicable Law applicable to Borrower or any of its assets (including,
without limitation, Environmental Laws, and all federal securities laws), and
Borrower shall do or cause to be done all things necessary to preserve and
maintain in full force and effect its legal existence, and all licenses material
to its business.

(x) Proper Records. The Borrower shall at all times keep proper books of records
and accounts in which full, true and correct entries shall be made of its
transactions in accordance with GAAP and set aside on its books from its earning
for each fiscal year all such proper reserves in accordance with GAAP.

(y) Satisfaction of Obligations. The Borrower shall pay, discharge or otherwise
satisfy at or before maturity or before they become delinquent, as the case may
be, all its obligations of whatever nature, except where the amount or validity
thereof is currently being contested in good faith by appropriate proceedings
and reserves with respect thereto have been provided on the books of the
Borrower.

(z) Performance of Covenants. The Borrower shall observe, perform and satisfy
all the material terms, provisions, covenants and conditions required to be
observed, performed or satisfied by it, and shall pay when due all costs, fees
and expenses required to be paid by it, under the Transaction Documents. The
Borrower shall pay and discharge all Taxes, levies, liens and other charges on
it or its assets and on the Collateral Portfolio that, in each case, in any
manner would create any lien or charge upon the Collateral Portfolio, except for
any such Taxes as are being appropriately contested in good faith by appropriate
proceedings diligently conducted and with respect to which adequate reserves
have been provided in accordance with GAAP.

(aa) Tax Treatment. The Borrower, the Transferor and the Lenders shall treat the
Advances advanced hereunder as indebtedness of the Borrower (or, so long as the
Borrower

 

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is treated as a disregarded entity for U.S. federal income tax purposes, as
indebtedness of the entity of which it is considered to be a part) for U.S.
federal income tax purposes and to file any and all tax forms in a manner
consistent therewith.

(bb) Maintenance of Records. The Borrower will maintain records with respect to
the Collateral Portfolio and the conduct and operation of its business with no
less a degree of prudence than if the Collateral Portfolio were held by the
Borrower for its own account and will furnish the Administrative Agent and each
Lender, upon the reasonable request by the Administrative Agent and each Lender,
information with respect to the Collateral Portfolio and the conduct and
operation of its business.

(cc) Obligor Notification Forms. The Borrower shall furnish the Collateral Agent
and the Administrative Agent with an appropriate power of attorney to send (at
the Administrative Agent’s discretion on the Collateral Agent’s behalf, after
the occurrence of an Event of Default) Obligor notification forms to give notice
to the Obligors of the Collateral Agent’s interest in the Collateral Portfolio
and the obligation to make payments as directed by the Administrative Agent on
the Collateral Agent’s behalf.

(dd) Officer’s Certificate. Within two Business Days of (w) any request by the
Administrative Agent, (x) any extension of the Reinvestment Period, (y) any
material amendment of any Transaction Document or (z) any filing of any UCC
financing statement or continuation statement with respect to the Borrower or
the Collateral Portfolio (other than in connection with the execution of this
Agreement as of the Closing Date), the Borrower shall deliver an Officer’s
Certificate, in form and substance acceptable to the Lenders and the
Administrative Agent, providing (i) a certification, based upon a review and
summary of UCC search results, that there is no other interest in the Collateral
Portfolio perfected by filing of a UCC financing statement other than in favor
of the Collateral Agent and (ii) a certification, based upon a review and
summary of tax and judgment lien searches satisfactory to the Administrative
Agent, that there is no other interest in the Collateral Portfolio based on any
tax or judgment lien.

(ee) Continuation Statements. The Borrower 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 Schedule I hereto or any other
financing statement filed pursuant to this Agreement or in connection with any
Advance hereunder, unless the Collection Date shall have occurred:

(i) authorize and deliver and 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 Collateral Agent, the
Administrative Agent and the Lenders an opinion of the counsel for the Borrower,
in form and substance reasonably satisfactory to the Administrative Agent,
confirming and updating the opinion delivered pursuant to Schedule I 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 other Liens of record except as provided herein or otherwise
permitted hereunder, which opinion may contain usual and customary assumptions,
limitations and exceptions.

 

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(ff) Disregarded Entity. The Borrower will be disregarded as an entity separate
from its owner pursuant to Treasury Regulation Section 301.7701-3(b), and
neither the Borrower 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 5.02 Negative Covenants of the Borrower.

From the Closing Date until the Collection Date:

(a) Special Purpose Entity Requirements. Except as otherwise permitted by this
Agreement, the Borrower shall not (i) guarantee any obligation of any Person,
including any Affiliate; (ii) engage, directly or indirectly, in any business,
other than the actions required or permitted to be performed under the
Transaction Documents; (iii) incur, create or assume any Indebtedness, other
than Indebtedness incurred under the Transaction Documents; (iv) make or permit
to remain outstanding any loan or advance to, or own or acquire any stock or
securities of, any Person, except that the Borrower may invest in those Loan
Assets and other investments permitted under the Transaction Documents and may
make any advance required or expressly permitted to be made pursuant to any
provisions of the Transaction Documents and permit the same to remain
outstanding in accordance with such provisions; (v) become insolvent or fail to
pay its debts and liabilities from its assets when due; (vi) create, form or
otherwise acquire any Subsidiaries or (vii) release, sell, transfer, convey or
assign any Loan Asset unless in accordance with the Transaction Documents.

(b) Requirements for Material Actions. The Borrower shall not fail to provide
(and at all times the Borrower’s organizational documents shall reflect) that
the unanimous consent of all directors (including the consent of the Independent
Director(s)) is required for the Borrower to (i) dissolve or liquidate, in whole
or part, or institute proceedings to be adjudicated bankrupt or insolvent,
(ii) institute or consent to the institution of bankruptcy or insolvency
proceedings against it, (iii) file a petition seeking or consent to
reorganization or relief under any applicable federal or state law relating to
bankruptcy or insolvency, (iv) seek or consent to the appointment of a receiver,
liquidator, assignee, trustee, sequestrator, custodian or any similar official
for the Borrower, (v) make any assignment for the benefit of the Borrower’s
creditors, (vi) admit in writing its inability to pay its debts generally as
they become due, or (vii) take any action in furtherance of any of the
foregoing.

(c) Protection of Title. The Borrower shall not take any action which would
directly or indirectly impair or adversely affect the Borrower’s title to the
Collateral Portfolio.

(d) Transfer Limitations. The Borrower shall not transfer, assign, convey,
grant, bargain, sell, set over, deliver or otherwise dispose of, or pledge or
hypothecate, directly or indirectly, any interest in the Collateral Portfolio to
any person other than the Collateral Agent for the benefit of the Secured
Parties, or engage in financing transactions or similar transactions with
respect to the Collateral Portfolio with any person other than the
Administrative Agent and the Lenders, in each case, except as otherwise
expressly permitted by the terms of this Agreement.

 

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(e) Liens. The Borrower shall not create, incur or permit to exist any lien,
encumbrance or security interest in or on any of the Collateral Portfolio
subject to the security interest granted by the Borrower pursuant to this
Agreement, other than Permitted Liens.

(f) Organizational Documents. The Borrower shall not amend, modify or terminate
any of the organizational or operational documents of the Borrower without the
prior written consent of the Administrative Agent.

(g) Merger, Acquisitions, Sales, etc. The Borrower shall not change its
organizational structure, enter into any transaction of merger or consolidation
or amalgamation, or asset sale (other than pursuant to Section 2.07), or
liquidate, wind up or dissolve itself (or suffer any liquidation, winding up or
dissolution) without the prior written consent of the Administrative Agent.

(h) Use of Proceeds. The Borrower shall not use the proceeds of any Advance
other than (x) to finance the purchase by the Borrower from the Transferor on a
“true sale” basis, of Collateral Portfolio pursuant to the terms of the Purchase
and Sale Agreement or (y) to fund the Unfunded Exposure Account in order to
establish reserves for unfunded commitments of Revolving Loan Assets and Delayed
Draw Loan Assets included in the Collateral Portfolio or (z) to distribute such
proceeds to the Transferor (so long as such distribution is permitted pursuant
to Section 5.02(m) of this Agreement).

(i) Limited Assets. The Borrower shall not hold or own any assets that are not
part of the Collateral Portfolio or powers and rights incidental to the
Transaction Documents other than any Warranty Loan Asset pursuant to
Section 2.07(c) .

(j) Tax Treatment. The Borrower shall not elect to be treated as a corporation
for U.S. federal income tax purposes and shall take all reasonable steps
necessary to avoid being treated as a corporation for U. S. federal income tax
purposes.

(k) Extension or Amendment of Collateral Portfolio. The Borrower will not,
except as otherwise permitted in Section 6.04(a) of this Agreement and in
accordance with the Servicing Standard, extend, amend or otherwise modify the
terms of any Loan Asset (including the Underlying Collateral).

(l) Purchase and Sale Agreement. The Borrower will not amend, modify, waive or
terminate any provision of the Purchase and Sale Agreement without the prior
written consent of the Administrative Agent.

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

(n) ERISA Matters. The Borrower 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,

 

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(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 Borrower 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
Borrower, 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 reporting requirements have been waived by regulations.

(o) Instructions to Obligors. The Borrower will not make any change, or permit
the Servicer to make any change, in its instructions to Obligors regarding
payments to be made with respect to the Collateral Portfolio to the Collection
Account, unless the Administrative Agent has consented to such change.

(p) Taxable Mortgage Pool Matters. The sum of the Outstanding Balances of all
Loan Assets owned by the Borrower and that are principally secured by an
interest in real property (within the meaning of Treasury Regulation
Section 301.7701(i)-1(d)(3)) shall not at any time exceed 35% of the aggregate
Outstanding Balance of all Loan Assets.

(q) Change of Jurisdiction, Location, Names or Location of Loan Asset Files. The
Borrower shall not change the jurisdiction of its formation, make any change to
its corporate name or use any tradenames, fictitious names, assumed names,
“doing business as” names or other names unless, prior to the effective date of
any such change in the jurisdiction of its formation, name change or use, the
Borrower receives prior written consent from the Administrative Agent of such
change and delivers to the Administrative Agent such financing statements as the
Administrative Agent may request to reflect such name change or use, together
with such Opinions of Counsel and other documents and instruments as the
Administrative Agent may request in connection therewith. The Borrower will not
change the location of its chief executive office unless prior to the effective
date of any such change of location, the Borrower notifies the Administrative
Agent of such change of location in writing. The Borrower will not move, or
consent to the Collateral Custodian or the Servicer moving, the Loan Asset Files
from the location thereof on the Closing Date, unless the Administrative Agent
shall consent to such move in writing and the Servicer shall provide the
Administrative Agent with such Opinions of Counsel and other documents and
instruments as the Administrative Agent may request in connection therewith.

(r) Allocation of Charges. There will not be any agreement or understanding
between the Servicer and the Borrower (other than as expressly set forth herein
or as consented to by the Administrative Agent), providing for the allocation or
sharing of obligations to make payments or otherwise in respect of any Taxes,
fees, assessments or other governmental charges; provided that it is understood
and acknowledged that the Borrower will be consolidated with the Servicer for
tax purposes.

SECTION 5.03 Affirmative Covenants of the Servicer.

From the Closing Date until the Collection Date:

(a) Compliance with Law. The Servicer will comply in all respects with all
Applicable Law, including those with respect to servicing the Collateral
Portfolio or any part thereof.

 

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(b) Preservation of Company Existence. The Servicer will preserve and maintain
its corporate existence, rights, franchises and privileges in the jurisdiction
of its formation, 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) Obligations and Compliance with Collateral Portfolio. The Servicer will duly
fulfill and comply with all obligations on the part of the Borrower to be
fulfilled or complied with under or in connection with the administration of
each item of Collateral Portfolio and will do nothing to impair the rights of
the Collateral Agent, for the benefit of the Secured Parties, or of the Secured
Parties in, to and under the Collateral Portfolio. It is understood and agreed
that the Servicer does not hereby assume any obligations of the Borrower in
respect of any Advances or assume any responsibility for the performance by the
Borrower of any of its obligations hereunder or under any other agreement
executed in connection herewith that would be inconsistent with the limited
recourse undertaking of the Servicer, in its capacity as seller, under
Section 2.1(e) of the Purchase and Sale Agreement.

(d) Keeping of Records and Books of Account.

(i) The Servicer will maintain and implement administrative and operating
procedures (including, without limitation, an ability to recreate records
evidencing Collateral 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
Collateral Portfolio and the identification of the Collateral Portfolio.

(ii) The Servicer shall permit the Administrative Agent, each Lender or their
respective agents or representatives, to visit the offices of the Servicer
during normal office hours and upon reasonable advance notice and examine and
make copies of all documents, books, records and other information concerning
the Collateral Portfolio and the Servicer’s servicing thereof and discuss
matters related thereto with any of the officers or employees of the Servicer
having knowledge of such matters.

(iii) The Servicer will on or prior to the date hereof, mark its master data
processing records and other books and records relating to the Collateral
Portfolio with a legend, acceptable to the Administrative Agent describing
(i) the sale of the Collateral Portfolio from the Transferor to the Borrower and
(ii) the Pledge from the Borrower to the Collateral Agent, for the benefit of
the Secured Parties.

(e) Preservation of Security Interest. The Servicer (at its own expense, on
behalf of the Borrower) will file such financing and continuation statements and
any other documents that may be required by any law or regulation of any
Governmental Authority to preserve and protect fully the first priority
perfected security interest of the Collateral Agent, for the benefit of the
Secured Parties, in, to and under the Loan Assets and that portion of the
Collateral Portfolio in which a security interest may be perfected by filing.

 

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

(g) Taxes. The Servicer will file its tax returns and pay any and all Taxes
imposed on it or its property as required under the Transaction Documents
(except as contemplated by Section 4.03(m)).

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

(i) Proceedings Related to the Borrower, the Transferor and the Servicer and the
Transaction Documents. The Servicer shall notify the Administrative Agent and
each Lender as soon as possible and in any event within three Business Days
after any executive officer of the Servicer receives notice or obtains knowledge
thereof of any settlement of, judgment (including a judgment with respect to the
liability phase of a bifurcated trial) in or commencement of any labor
controversy, litigation, action, suit or proceeding before any court or
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, that could reasonably be expected to have a Material
Adverse Effect on the Borrower, the Transferor or the Servicer (or any of their
Affiliates) or the Transaction Documents. For purposes of this Section 5.03(i),
(i) any settlement, judgment, labor controversy, litigation, action, suit or
proceeding affecting the Transaction Documents or the Borrower in excess of
$500,000 shall be deemed to be expected to have such a Material Adverse Effect
and (ii) any settlement, judgment, labor controversy, litigation, action, suit
or proceeding affecting the Servicer or the Transferor or any of their
Affiliates (other than the Borrower) in excess of $10,000,000 shall be deemed to
be expected to have such a Material Adverse Effect.

(j) Deposit of Collections. The Servicer shall promptly (but in no event later
than two Business Days after receipt) deposit or cause to be deposited into the
Collection Account any and all Available Collections received by the Borrower,
the Servicer or any of their Affiliates.

 

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(k) Loan Asset Register.

(i) The Servicer shall maintain, or cause to be maintained, with respect to each
Noteless Loan Asset a register (which may be in physical or electronic form and
readily identifiable as the loan asset register) (each, a “Loan Asset Register”)
in which it will record, or cause to be recorded, (v) the amount of such
Noteless Loan Asset, (w) the amount of any principal or interest due and payable
or to become due and payable from the Obligor thereunder, (x) the amount of any
sum in respect of such Noteless Loan Asset received from the Obligor, (y) the
date of origination of such Noteless Loan Asset and (z) the maturity date of
such Noteless Loan Asset.

(ii) At any time a Noteless Loan Asset is included as part of the Collateral
Portfolio pursuant to this Agreement, the Servicer shall deliver to the
Administrative Agent, the Collateral Agent and the Collateral Custodian a copy
of the related Loan Asset Register, together with a certificate of a Responsible
Officer of the Servicer (in the form of Exhibit P) certifying to the accuracy of
such Loan Asset Register as of the applicable Cut-Off Date.

(l) Special Purpose Entity Requirements. The Servicer shall take such actions as
are necessary to cause the Borrower to be in compliance with the special purpose
entity requirements set forth in Sections 5.01(a) and (b) and 5.02(a) and (b);
provided that for the avoidance of doubt, the Servicer shall not be required to
expend any of its own funds to cause the Borrower to be in compliance with
subsection 5.02(a)(v) or subsection 5.01(b)(xvii) (it being understood that this
proviso shall in no way affect the obligation of Servicer to manage the
activities and liabilities of the Borrower such that the Borrower maintains
compliance with either of the foregoing subsections).

(m) Accounting Changes. As soon as possible and in any event within three
Business Days after the effective date thereof, the Servicer will provide to the
Administrative Agent and the Lenders notice of any change in the accounting
policies of the Servicer.

(n) Proceedings Related to the Collateral Portfolio. The Servicer shall notify
the Administrative Agent and each Lender as soon as possible and in any event
within three Business Days after any Responsible Officer of the Servicer
receives notice or has actual knowledge of any settlement of, judgment
(including a judgment with respect to the liability phase of a bifurcated trial)
in or commencement of any labor controversy, litigation, action, suit or
proceeding before any court or governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, that could reasonably be
expected to have a Material Adverse Effect on the interests of the Collateral
Agent or the Secured Parties in, to and under the Collateral Portfolio. For
purposes of this Section 5.03(n), any settlement, judgment, labor controversy,
litigation, action, suit or proceeding affecting the Collateral Portfolio or the
Collateral Agent’s or the Secured Parties’ interest in the Collateral Portfolio
in excess of $1,000,000 or more shall be deemed to be expected to have such a
Material Adverse Effect.

(o) Compliance with Legal Opinions. The Servicer shall take all other actions
necessary to maintain the accuracy of the factual assumptions set forth in the
legal opinions of Rutan & Tucker, LLP, as special counsel to the Servicer,
issued in connection with the Transaction Documents and relating to the issues
of substantive consolidation and true sale of the Loan Assets.

 

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(p) Instructions to Agents and Obligors. The Servicer shall direct, or shall
cause the Transferor to direct, any agent or administrative agent for any Loan
Asset to remit all payments and collections with respect to such Loan Asset,
and, if applicable, to direct the Obligor with respect to such Loan Asset to
remit all such payments and collections with respect to such Loan Asset directly
to the Collection Account. The Borrower and the Servicer shall take commercially
reasonable steps to ensure, and shall cause the Transferor to take commercially
reasonable steps to ensure, that only funds constituting payments and
collections relating to Loan Assets shall be deposited into the Collection
Account.

(q) Capacity as Servicer. The Servicer will use commercially reasonable efforts
to ensure that, at all times when it is dealing with or in connection with the
Loan Assets in its capacity as Servicer, it holds itself out as Servicer, and
not in any other capacity.

(r) Notice of Breaches of Representations and Warranties under the Purchase and
Sale Agreement. The Servicer confirms and agrees that the Servicer will, upon
receipt of notice or discovery thereof, promptly send to the Administrative
Agent, each Lender and the Collateral Agent a notice of (i) any breach of any
representation, warranty, agreement or covenant under the Purchase and Sale
Agreement or (ii) any event or occurrence that, upon notice, or upon the passage
of time or both, would constitute such a breach, in each case, promptly upon
learning thereof.

(s) Audits. Prior to the Closing Date and periodically thereafter at the
discretion of the Administrative Agent and each Lender, the Servicer shall allow
the Administrative Agent and each Lender (during normal office hours and upon
advance notice) to review the Servicer’s collection and administration of the
Collateral Portfolio in order to assess compliance by the Servicer with the
Servicing Standard, as well as with the Transaction Documents and to conduct an
audit of the Collateral Portfolio and Required Loan Documents in conjunction
with such a review. Such review shall be reasonable in scope and shall be
completed in a reasonable period of time; provided that, at the Servicer’s
expense, (i) prior to the occurrence of an Event of Default, the Administrative
Agent shall be entitled to two (2) such audits per annum and, (ii) after the
occurrence of an Event of Default, the Administrative Agent shall be entitled to
such number of audits per annum and at such times as it shall require in its
discretion.

(t) Notice of Breaches of Representations and Warranties under this Agreement.
The Servicer shall promptly notify the Administrative Agent and the Lenders if
any representation or warranty set forth in Section 4.03 was incorrect at the
time it was given or deemed to have been given and at the same time deliver to
the Collateral Agent, the Administrative Agent and the Lenders a written notice
setting forth in reasonable detail the nature of such facts and circumstances.
In particular, but without limiting the foregoing, the Servicer shall notify the
Administrative Agent and the Lenders in the manner set forth in the preceding
sentence before any Cut-Off Date of any facts or circumstances within the
knowledge of the Servicer 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.

(u) Insurance Policies. The Servicer has caused, and will cause, to be performed
any and all acts reasonably required to be performed to preserve the rights and

 

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remedies of the Collateral Agent and the Secured Parties in any Insurance
Policies applicable to Loan Assets (to the extent the Servicer or an Affiliate
of the Servicer is the agent or servicer under the applicable Loan Agreement)
including, without limitation, in each case, any necessary notifications of
insurers, assignments of policies or interests therein, and establishments of
co-insured, joint loss payee and mortgagee rights in favor of the Collateral
Agent and the Secured Parties; provided that, unless the Borrower is the sole
lender under such Loan Agreement, the Servicer shall only take such actions that
are customarily taken by or on behalf of a lender in a syndicated loan facility
to preserve the rights of such lender.

(v) Disregarded Entity. The Servicer shall cause the Borrower 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 Borrower 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 5.04 Negative Covenants of the Servicer.

From the Closing Date until the Collection Date:

(a) Mergers, Acquisition, Sales, etc. The Servicer 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, unless the Servicer is the surviving
entity and unless:

(i) the Servicer has delivered to the Administrative Agent and each Lender an
Officer’s Certificate and an Opinion of Counsel each stating that any such
consolidation, merger, conveyance or transfer and any supplemental agreement
executed in connection therewith comply with this Section 5.04 and that all
conditions precedent herein provided for relating to such transaction have been
complied with and, in the case of the Opinion of Counsel, that such supplemental
agreement is legal, valid and binding with respect to the Servicer and such
other matters as the Administrative Agent may reasonably request;

(ii) the Servicer shall have delivered notice of such consolidation, merger,
conveyance or transfer to the Administrative Agent and each Lender;

(iii) after giving effect thereto, no Event of Default or Servicer Termination
Event or event that with notice or lapse of time would constitute either an
Event of Default or a Servicer Termination Event shall have occurred; and

(iv) the Administrative Agent shall have consented in writing to such
consolidation, merger, conveyance or transfer.

Notwithstanding the foregoing or anything to the contrary contained in this
Agreement, from time to time, without the consent or approval of the
Administrative Agent or any Secured Party or the satisfaction of any of the
conditions set forth in clauses (i), (iii) or (iv) above, (x) the Servicer may
consolidate or merge with any Fifth Street Merger Party, (y) any Fifth Street
Merger Party may convey or transfer its properties and assets substantially as
an entirety to the Servicer (any such transaction, a “Fifth Street Affiliate
Merger Transaction”)

 

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and/or (z) the Servicer may acquire any other Person or its the properties and
assets substantially as an entirety so long as the Servicer is the surviving
entity; provided that, in each case, the Servicer is the surviving entity in any
such transaction or transactions; provided, further, that the Servicer shall,
upon the request of the Administrative Agent, deliver an Opinion of Counsel that
this Agreement and any supplemental agreement executed in connection therewith
is legal, valid and binding with respect to the Servicer after the consummation
of such Fifth Street Affiliate Merger Transaction or such acquisition.

(b) Change of Name or Location of Loan Asset Files. The Servicer shall not
(x) change its name, change the offices where it keeps records concerning the
Collateral Portfolio from the address set forth in Section 11.02 of this
Agreement, or change the jurisdiction of its formation, or (y) move, or consent
to the Collateral Custodian moving, the Required Loan Documents and Loan Asset
Files from the location thereof on the initial Advance Date, unless the
Administrative Agent shall consent of such move in writing and the Servicer
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 Collateral Agent, for the benefit of the Secured Parties, in the
Collateral Portfolio.

(c) Change in Payment Instructions to Obligors. The Servicer will not make any
change in its instructions to Obligors regarding payments to be made with
respect to the Collateral Portfolio to the Collection Account, unless the
Administrative Agent has consented to such change.

(d) Extension or Amendment of Loan Assets. The Servicer will not, except as
otherwise permitted in Section 6.04(a), extend, amend or otherwise modify the
terms of any Loan Asset (including the Underlying Collateral).

(e) Taxable Mortgage Pool Matters. The Servicer will manage the portfolio and
advise the Borrower with respect to purchases from the Transferor so as to not
at any time allow the sum of the Outstanding Balances of all Loan Assets owned
by the Borrower and that are principally secured by an interest in real property
(within the meaning of Treasury Regulation Section 301.7701(i)-1(d)(3)) to
exceed 35% of the aggregate Outstanding Balance of all Loan Assets.

(f) Allocation of Charges. There will not be any agreement or understanding
between the Servicer and the Borrower (other than as expressly set forth herein
or as consented to by the Administrative Agent), providing for the allocation or
sharing of obligations to make payments or otherwise in respect of any Taxes,
fees, assessments or other governmental charges; provided that it is understood
and acknowledged that the Borrower will be consolidated with the Servicer for
tax purposes.

 

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ARTICLE VI.

ADMINISTRATION AND SERVICING OF CONTRACTS

SECTION 6.01 Appointment and Designation of the Servicer.

(a) Initial Servicer. The Borrower, each Lender and the Administrative Agent
hereby appoint Fifth Street, pursuant to the terms and conditions of this
Agreement, as Servicer, with the authority to service, administer and exercise
rights and remedies, on behalf of the Borrower, in respect of the Collateral
Portfolio. Until the Administrative Agent gives Fifth Street a Servicer
Termination Notice pursuant to the terms of this Agreement, Fifth Street hereby
accepts such appointment and agrees to perform the duties and responsibilities
of the Servicer pursuant to the terms hereof. The Servicer and the Borrower
hereby acknowledge that the Administrative Agent and the Secured Parties are
third party beneficiaries of the obligations undertaken by the Servicer
hereunder.

(b) Servicer Termination Notice. The Borrower, the Servicer, each Lender, and
the Administrative Agent hereby agree that, upon the occurrence of a Servicer
Termination Event, the Administrative Agent, by written notice to the Servicer
(with a copy to the Collateral Agent) (a “Servicer Termination Notice”), may
terminate all of the rights, obligations, power and authority of the Servicer
under this Agreement. On and after the receipt by the Servicer of a Servicer
Termination Notice pursuant to this Section 6.01(b), the Servicer shall continue
to perform all servicing functions under this Agreement until the date specified
in the Servicer Termination Notice or otherwise specified by the Administrative
Agent in writing or, if no such date is specified in such Servicer Termination
Notice or otherwise specified by the Administrative Agent, until a date mutually
agreed upon by the Servicer and the Administrative Agent and shall be entitled
to receive, to the extent of funds available therefor pursuant to Section 2.04,
the Servicing Fees therefor accrued until such date. After such date, the
Servicer agrees that it will terminate its activities as Servicer hereunder in a
manner that the Administrative Agent believes will facilitate the transition of
the performance of such activities to a successor Servicer, and the successor
Servicer shall assume each and all of the Servicer’s obligations to service and
administer the Collateral Portfolio, on the terms and subject to the conditions
herein set forth, and the Servicer shall use its best efforts to assist the
successor Servicer in assuming such obligations.

(c) Appointment of Replacement Servicer. At any time following the delivery of a
Servicer Termination Notice, the Administrative Agent may, at its discretion,
(i) appoint SMBC (or an Affiliate thereof) as Servicer under this Agreement and,
in such case, all authority, power, rights and obligations of the Servicer shall
pass to and be vested in SMBC (or an Affiliate thereof) or (ii) appoint a new
Servicer which shall be an Eligible Replacement (as defined below) as the
replacement Servicer (the “Replacement Servicer”), which appointment shall take
effect upon the Replacement Servicer accepting such appointment by a written
assumption in a form satisfactory to the Administrative Agent in its sole
discretion. In the event that SMBC (or an Affiliate thereof) or a Replacement
Servicer has not accepted its appointment at the time when the Servicer ceases
to act as Servicer, the Administrative Agent shall petition a court of competent
jurisdiction to appoint any established financial institution, having a net
worth of not less than United States $50,000,000 and whose regular business
includes the servicing of assets similar to the Collateral Portfolio (each, an
“Eligible Replacement”), as the Replacement Servicer hereunder.

 

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(d) Liabilities and Obligations of Replacement Servicer. Upon its appointment,
SMBC (or an Affiliate thereof) or the Replacement Servicer, as applicable, shall
be the successor in all respects to the Servicer with respect to servicing
functions under this Agreement and shall be subject to all the responsibilities,
duties and liabilities relating thereto placed on the Servicer by the terms and
provisions hereof, and all references in this Agreement to the Servicer shall be
deemed to refer to SMBC (or an Affiliate thereof) or the Replacement Servicer,
as applicable; provided that SMBC (or an Affiliate thereof) or Replacement
Servicer, as applicable, shall have (i) no liability with respect to any action
performed by the terminated Servicer prior to the date that SMBC (or an
Affiliate thereof) or Replacement Servicer, as applicable, becomes the successor
to the Servicer or any claim of a third party based on any alleged action or
inaction of the terminated Servicer, (ii) no obligation to perform any advancing
obligations, if any, of the Servicer unless it elects to in its sole discretion,
(iii) no obligation to pay any Taxes required to be paid by the Servicer
(provided that SMBC (or an Affiliate thereof) or Replacement Servicer, as
applicable, shall pay any income Taxes for which it is liable), (iv) no
obligation to pay any of the fees and expenses of any other party to the
transactions contemplated hereby, and (v) no liability or obligation with
respect to any Servicer indemnification obligations of any prior Servicer,
including the original Servicer. The indemnification obligations of SMBC (or an
Affiliate thereof) or the Replacement Servicer, as applicable, upon becoming a
Replacement Servicer, are expressly limited to those arising on account of its
failure to act in good faith and with reasonable care under the circumstances.
In addition, SMBC (or an Affiliate thereof) or Replacement Servicer, as
applicable, shall have no liability relating to the representations and
warranties of the Servicer contained in Section 4.03.

(e) Authority and Power. All authority and power granted to the Servicer under
this Agreement shall automatically cease and terminate upon termination of this
Agreement and shall pass to and be vested in the Borrower and, without
limitation, the Borrower is hereby authorized and empowered to execute and
deliver, on behalf of the Servicer, as attorney-in-fact or otherwise, all
documents and other instruments, and to do and accomplish all other acts or
things necessary or appropriate to effect the purposes of such transfer of
servicing rights. The Servicer agrees to cooperate with the Borrower in
effecting the termination of the responsibilities and rights of the Servicer to
conduct servicing of the Collateral Portfolio.

(f) Subcontracts. The Servicer may, with the prior written consent of the
Administrative Agent, subcontract with any other Person for servicing,
administering or collecting the Collateral Portfolio; provided that (i) the
Servicer shall select any such Person with reasonable care and shall be solely
responsible for the fees and expenses payable to any such Person, (ii) the
Servicer shall not be relieved of, and shall remain liable for, the performance
of the duties and obligations of the Servicer pursuant to the terms hereof
without regard to any subcontracting arrangement and (iii) any such subcontract
shall be terminable upon the occurrence of a Servicer Termination Event. The
Administrative Agent hereby acknowledges that the Servicer has engaged Fifth
Street Management LLC in accordance with terms of the Management Agreement, a
copy of which has been previously delivered to the Administrative Agent.

 

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(g) Waiver. The Borrower acknowledges that the Administrative Agent or any of
its Affiliates may act as the Collateral Agent and/or the Servicer, and the
Borrower waives any and all claims against the Administrative Agent, each Lender
or any of their respective Affiliates, the Collateral Agent and the Servicer
(other than claims relating to such party’s gross negligence or willful
misconduct) relating in any way to the custodial or collateral administration
functions having been performed by the Administrative Agent or any of its
Affiliates in accordance with the terms and provisions (including the standard
of care) set forth in the Transaction Documents.

SECTION 6.02 Duties of the Servicer.

(a) Duties. The Servicer shall take or cause to be taken all such actions as may
be necessary or advisable to service, administer and collect on the Collateral
Portfolio from time to time, all in accordance with Applicable Law and the
Servicing Standard. Prior to the occurrence of a Servicer Termination Event, but
subject to the terms of this Agreement (including, without limitation,
Section 6.04), the Servicer has the sole and exclusive authority to make any and
all decisions with respect to the Collateral Portfolio and take or refrain from
taking any and all actions with respect to the Collateral Portfolio. Without
limiting the foregoing, the duties of the Servicer shall include the following:

(i) supervising the Collateral Portfolio, including communicating with Obligors,
executing amendments, providing consents and waivers, enforcing and collecting
on the Collateral Portfolio and otherwise managing the Collateral Portfolio on
behalf of the Borrower;

(ii) maintaining all necessary servicing records with respect to the Collateral
Portfolio and providing such reports to the Administrative Agent and each Lender
in respect of the servicing of the Collateral Portfolio (including information
relating to its performance under this Agreement) as may be required hereunder
or as the Administrative Agent or any Lender may reasonably request;

(iii) maintaining and implementing administrative and operating procedures
(including, without limitation, an ability to recreate servicing records
evidencing the Collateral Portfolio in the event of the destruction of the
originals thereof) and keeping and maintaining all documents, books, records and
other information reasonably necessary or advisable for the collection of the
Collateral Portfolio;

(iv) promptly delivering to the Administrative Agent and each Lender, from time
to time, such information and servicing records (including information relating
to its performance under this Agreement) as the Administrative Agent and each
Lender may from time to time reasonably request;

(v) identifying each Loan Asset clearly and unambiguously in its servicing
records to reflect that such Loan Asset is owned by the Borrower and that the
Borrower is Pledging a security interest therein to the Secured Parties pursuant
to this Agreement;

 

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(vi) notifying the Administrative Agent and each Lender of any material action,
suit, proceeding, dispute, offset, deduction, defense or counterclaim (1) that
is or is threatened to be asserted by an Obligor with respect to any Loan Asset
(or portion thereof) of which it has knowledge or has received notice; or
(2) that could reasonably be expected to have a Material Adverse Effect;

(vii) using its best efforts to maintain the perfected security interest of the
Collateral Agent, for the benefit of the Secured Parties, in the Collateral
Portfolio;

(viii) maintaining the Loan Asset File with respect to Loan Assets included as
part of the Collateral Portfolio; provided that, so long as the Servicer is in
possession of any Required Loan Documents, the Servicer will hold such Required
Loan Documents in a fireproof safe or fireproof file cabinet;

(ix) directing the Collateral Agent to make payments pursuant to the terms of
the Servicing Report in accordance with Section 2.04;

(x) directing the sale or substitution of Collateral Portfolio in accordance
with Section 2.07;

(xi) providing advice to the Borrower with respect to the purchase and sale of
and payment for the Loan Assets;

(xii) instructing the Obligors and the administrative agents on the Loan Assets
to make payments directly into the Collection Account established and maintained
with the Collateral Agent;

(xiii) delivering the Loan Asset Files and the Loan Asset Schedule to the
Collateral Custodian; and

(xiv) complying with such other duties and responsibilities as may be required
of the Servicer by this Agreement.

It is acknowledged and agreed that in circumstances in which a Person other than
the Borrower, the Transferor (so long as the Transferor is also the Servicer) or
the Servicer acts as lead agent with respect to any Loan Asset, the Servicer
shall perform its servicing duties hereunder only to the extent a lender under
the related loan syndication Loan Agreements has the right to do so.
Notwithstanding anything to the contrary contained herein, it is acknowledged
and agreed that the performance by the Servicer of its duties hereunder shall be
limited insofar as such performance would conflict with or result in a breach of
any of the express terms of the related Loan Agreements; provided that the
Servicer shall (a) provide prompt written notice to the Administrative Agent
upon becoming aware of such conflict or breach, (b) have determined that there
is no other commercially reasonable performance that it could render consistent
with the express terms of the Loan Agreements which would result in all or a
portion of the servicing duties being performed in accordance with this
Agreement, and (c) undertake all commercially reasonable efforts to mitigate the
effects of such non-performance including performing as much of the servicing
duties as possible and performing such other commercially reasonable and/or
similar duties consistent with the terms of the Loan Agreements.

 

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(b) Notwithstanding anything to the contrary contained herein, the exercise by
the Administrative Agent, the Collateral Agent, each Lender and the Secured
Parties of their rights hereunder shall not release the Servicer, the Transferor
or the Borrower from any of their duties or responsibilities with respect to the
Collateral Portfolio. The Secured Parties, the Administrative Agent, each Lender
and the Collateral Agent shall not have any obligation or liability with respect
to any Collateral Portfolio, nor shall any of them be obligated to perform any
of the obligations of the Servicer hereunder.

(c) Any payment by an Obligor in respect of any Indebtedness owed by it to the
Transferor or the Borrower shall, except as otherwise specified by such Obligor
or otherwise required by contract or law and unless otherwise instructed by the
Administrative Agent, be applied as a collection of a payment by such Obligor
(starting with the oldest such outstanding payment due) to the extent of any
amounts then due and payable thereunder before being applied to any other
receivable or other obligation of such Obligor.

SECTION 6.03 Authorization of the Servicer.

(a) Each of the Borrower, the Administrative Agent and each Lender hereby
authorizes the Servicer (including any successor thereto) to take any and all
reasonable steps in its name and on its behalf necessary or desirable in the
determination of the Servicer and not inconsistent with the sale of the
Collateral Portfolio by the Transferor to the Borrower under the Purchase and
Sale Agreement and, thereafter, the Pledge by the Borrower to the Collateral
Agent on behalf of the Secured Parties hereunder, to collect all amounts due
under any and all Collateral Portfolio, including, without limitation, endorsing
any of their names on checks and other instruments representing Interest
Collections and Principal Collections, executing and delivering any and all
instruments of satisfaction or cancellation, or of partial or full release or
discharge, and all other comparable instruments, with respect to the Collateral
Portfolio and, after the delinquency of any Collateral Portfolio and to the
extent permitted under and in compliance with Applicable Law, to commence
proceedings with respect to enforcing payment thereof, to the same extent as the
Transferor could have done if it had continued to own such Collateral Portfolio.
The Transferor, the Borrower and the Collateral Agent on behalf of the Secured
Parties shall furnish the Servicer (and any successors thereto) with any powers
of attorney and other documents necessary or appropriate to enable the Servicer
to carry out its servicing and administrative duties hereunder, and shall
cooperate with the Servicer to the fullest extent in order to ensure the
collectability of the Collateral Portfolio. In no event shall the Servicer be
entitled to make the Secured Parties, the Administrative Agent, the Collateral
Agent or any Lender a party to any litigation without such party’s express prior
written consent, or to make the Borrower a party to any litigation (other than
any routine foreclosure or similar collection procedure) without the
Administrative Agent’s and each Lender’s consent.

(b) After the declaration of the Facility Maturity Date, at the direction of the
Administrative Agent, the Servicer shall take such action as the Administrative
Agent may deem necessary or advisable to enforce collection of the Collateral
Portfolio; provided that the Administrative Agent may, at any time that an Event
of Default has occurred, notify any Obligor with respect to any Collateral
Portfolio of the assignment of such Collateral Portfolio to the Collateral Agent
on behalf of the Secured Parties and direct that payments of all amounts due or
to become due be made directly to the Administrative Agent or any servicer,
collection agent or

 

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account designated by the Administrative Agent and, upon such notification and
at the expense of the Borrower, the Administrative Agent may enforce collection
of any such Collateral Portfolio, and adjust, settle or compromise the amount or
payment thereof.

SECTION 6.04 Collection of Payments; Accounts.

(a) Collection Efforts, Modification of Collateral Portfolio. The Servicer will
use its commercially reasonable efforts and judgment to collect or cause to be
collected, all payments called for under the terms and provisions of the Loan
Assets included in the Collateral Portfolio as and when the same become due, all
in accordance with the Servicing Standard. The Servicer may not waive, modify or
otherwise vary any provision of an item of Collateral Portfolio in a manner that
would impair the collectability of the Collateral Portfolio or in any manner
contrary to the Servicing Standard. In addition, neither the Borrower nor the
Servicer shall, without the prior written consent of the Administrative Agent,
agree to waive, modify or otherwise vary any provision of a Loan Asset in the
Collateral Portfolio if such waiver, modification or variation would increase
the Borrower’s commitment or outstanding loans thereunder or extend the maturity
of any outstanding or committed loans of the Borrower thereunder beyond the
Stated Maturity Date.

(b) Acceleration. If consistent with the Servicing Standard, the Servicer shall
accelerate or vote to accelerate, as applicable, the maturity of all or any
Scheduled Payments and other amounts due under any Loan Asset promptly after
such Loan Asset becomes defaulted.

(c) Taxes and other Amounts. The Servicer will use its best efforts to collect
all payments with respect to amounts due for Taxes, assessments and insurance
premiums relating to each Loan Asset to the extent required to be paid to the
Borrower for such application under the applicable Loan Agreement and remit such
amounts to the appropriate Governmental Authority or insurer as required by the
Loan Agreements.

(d) Payments to Collection Account. On or before the applicable Cut-Off Date,
the Servicer shall have instructed all Obligors to make all payments in respect
of the Collateral Portfolio directly to the Collection Account; provided that
the Servicer is not required to so instruct any Obligor which is solely a
guarantor or other surety (or an Obligor that is not designated as the “lead
borrower” or another such similar term) unless and until the Servicer calls on
the related guaranty or secondary obligation.

(e) Controlled Accounts. Each of the parties hereto hereby agrees that (i) each
Controlled Account is intended to be a “securities account” or “deposit account”
within the meaning of the UCC and (ii) except as otherwise expressly provided
herein and in the Control Agreement prior to the delivery of a Notice of
Exclusive Control (as defined in the Control Agreement), the Borrower, the
Servicer and the Collateral Agent (acting at the direction of the Administrative
Agent) shall be entitled to exercise the rights that comprise each Financial
Asset held in each Controlled Account which is a securities account and have the
right to direct the disposition of funds in any Controlled Account which is a
deposit account; provided that after the delivery of a Notice of Exclusive
Control (as defined in the Control Agreement), such rights shall be exclusively
held by the Collateral Agent (acting at the direction of the Administrative
Agent). Each of the parties hereto hereby agrees to cause the securities
intermediary that holds

 

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any money or other property for the Borrower in a Controlled Account that is a
securities account to agree with the parties hereto that (A) the cash and other
property (subject to Section 6.04(f) below with respect to any property other
than investment property, as defined in Section 9-102(a)(49) of the UCC) is to
be treated as a Financial Asset under Article 8 of the UCC and (B) regardless of
any provision in any other agreement, for purposes of the UCC, with respect to
the Controlled Accounts, New York shall be deemed to be the Account Bank’s
jurisdiction (within the meaning of Section 9-304 of the UCC) and the securities
intermediary’s jurisdiction (within the meaning of Section 8-110 of the UCC).
All securities or other property underlying any Financial Assets credited to the
Controlled Accounts in the form of securities or instruments shall be registered
in the name of the Account Bank or if in the name of the Borrower or the
Collateral Agent, Indorsed to the Account Bank, Indorsed in blank, or credited
to another securities account maintained in the name of the Account Bank, and in
no case will any Financial Asset credited to the Controlled Accounts be
registered in the name of the Borrower, payable to the order of the Borrower or
specially Indorsed to the Borrower, except to the extent the foregoing have been
specially Indorsed to the Account Bank or Indorsed in blank.

(f) Loan Agreements. Notwithstanding any term hereof (or any term of the UCC
that might otherwise be construed to be applicable to a “securities
intermediary” as defined in the UCC) to the contrary, none of the Collateral
Agent, the Collateral Custodian nor any securities intermediary shall be under
any duty or obligation in connection with the acquisition by the Borrower, or
the grant by the Borrower to the Collateral Agent, of any Loan Asset in the
nature of a loan or a participation in a loan to examine or evaluate the
sufficiency of the documents or instruments delivered to it by or on behalf of
the Borrower under the related Loan Agreements, or otherwise to examine the Loan
Agreements, in order to determine or compel compliance with any applicable
requirements of or restrictions on transfer (including without limitation any
necessary consents). The Collateral Custodian shall hold any Instrument
delivered to it evidencing any Loan Asset granted to the Collateral Agent
hereunder as custodial agent for the Collateral Agent in accordance with the
terms of this Agreement.

(g) Adjustments. If (i) the Servicer makes a deposit into the Collection Account
in respect of an Interest Collection or a Principal Collection of a Loan Asset
and such Interest Collection or Principal Collection was received by the
Servicer in the form of a check that is not honored for any reason or (ii) the
Servicer makes a mistake with respect to the amount of any Interest Collection
or Principal Collection and deposits an amount that is less than or more than
the actual amount of such Interest Collection or Principal Collection, the
Servicer shall appropriately adjust the amount subsequently deposited into the
Collection Account to reflect such dishonored check or mistake. Any Scheduled
Payment in respect of which a dishonored check is received shall be deemed not
to have been paid.

SECTION 6.05 Realization Upon Loan Assets. The Servicer will use reasonable
efforts consistent with the Servicing Standard to foreclose upon or repossess,
as applicable, or otherwise comparably convert the ownership of any Underlying
Collateral relating to a Defaulted Loan Asset as to which no satisfactory
arrangements can be made for collection of delinquent payments. The Servicer
will comply with the Servicing Standard and Applicable Law in realizing upon
such Underlying Collateral, and employ practices and procedures including
reasonable efforts consistent with the Servicing Standard to enforce all
obligations of Obligors foreclosing upon, repossessing and causing the sale of
such Underlying Collateral at public or

 

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private sale in circumstances other than those described in the preceding
sentence. Without limiting the generality of the foregoing, unless the
Administrative Agent has specifically given instruction to the contrary, the
Servicer may cause the sale of any such Underlying Collateral to the Servicer or
its Affiliates for a purchase price equal to the then fair value thereof, any
such sale to be evidenced by a certificate of a Responsible Officer of the
Servicer delivered to the Administrative Agent setting forth the Loan Asset, the
Underlying Collateral, the sale price of the Underlying Collateral and
certifying that such sale price is the fair value of such Underlying Collateral.
In any case in which any such Underlying Collateral has suffered damage, the
Servicer will not expend funds in connection with any repair or toward the
foreclosure or repossession of such Underlying Collateral unless it reasonably
determines that such repair and/or foreclosure or repossession will increase the
Recoveries by an amount greater than the amount of such expenses. The Servicer
will remit to the Collection Account the Recoveries received in connection with
the sale or disposition of Underlying Collateral relating to a Defaulted Loan
Asset.

SECTION 6.06 Servicing Compensation. As compensation for its activities
hereunder and reimbursement for its expenses, the Servicer shall be entitled to
be paid the Servicing Fees as provided in Section 2.04.

SECTION 6.07 Payment of Certain Expenses by Servicer. The Servicer will be
required to pay all expenses incurred by it in connection with its activities
under this Agreement, including fees and disbursements of its independent
accountants, Taxes imposed on the Servicer, expenses incurred by the Servicer in
connection with payments and reports pursuant to this Agreement, and all other
fees and expenses not expressly stated under this Agreement for the account of
the Borrower. The Servicer will be required to pay all reasonable fees and
expenses owing to any bank or trust company in connection with the maintenance
of the Controlled Accounts. The Servicer shall be required to pay such expenses
for its own account and shall not be entitled to any payment therefor other than
the Servicing Fees.

SECTION 6.08 Reports to the Administrative Agent; Account Statements; Servicing
Information.

(a) Notice of Borrowing. Not later than 1:00 p.m. on the third Business Day
before the Advance Date for a LIBOR Advance and not later than 11:00 a.m. on the
Advance Date for a Base Rate Advance and on each reduction of Advances
Outstanding pursuant to Section 2.18, the Borrower (and the Servicer on its
behalf) will provide a Notice of Borrowing or a Notice of Reduction, as
applicable, and a Borrowing Base Certificate, each updated as of such date, to
the Administrative Agent and each Lender (with a copy to the Collateral Agent).

(b) Asset Report and Servicing Report. (i) On the 5th Business Day of each
calendar month, the Servicer will provide to the Borrower, each Lender, the
Administrative Agent and the Collateral Agent a monthly statement including the
following information, as of the last Business Day of the preceding calendar
month, (A) the current list of Obligors and the Outstanding Balance of each Loan
Asset with respect to each such Obligor, (B) the current rating(s) of the Loan
Assets by Moody’s or S&P, or both, if applicable, (C) a list of all Defaulted
Loan Assets, (D) an accounting of collections with respect to the Loan Assets,
(E) the aggregate Outstanding Balance of all Loan Assets as of such day, (F) the
Advances Outstanding as of such

 

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day and (G) the difference between the aggregate Outstanding Balance and the
Advances Outstanding as of such day and (ii) on each Reporting Date and each
Advance Date, the Servicer will provide to the Borrower, each Lender, the
Administrative Agent and the Collateral Agent, a monthly statement including
(A) a Borrowing Base Certificate calculated as of the most recent Payment Date
Cut-Off, (B) a summary prepared with respect to each Obligor and with respect to
each Loan Asset for such Obligor prepared as of the most recent Payment Date
Cut-Off that will be required to set forth (x) covenant compliance for each such
Loan Asset, (y) whether or not each such Loan Asset shall have become subject to
an amendment, restatement, supplement, waiver or other modification and whether
such amendment, restatement, supplement, waiver or other modification is a
Material Modification and (z) the Fair Market Value and (if applicable) the
purchase price of each such Loan Asset, (C) all scheduled and unscheduled
repayments with respect to any Loan Assets during the related calendar month and
(D) amounts to be remitted pursuant to Section 2.04 to the applicable parties
(which shall include any applicable wiring instructions of the parties receiving
payment) (such monthly statement, a “Servicing Report”), with respect to related
calendar month signed by a Responsible Officer of the Servicer and the Borrower
and substantially in the form of Exhibit J.

(c) Servicer’s Certificate. Together with each Servicing Report, the Servicer
shall submit to the Administrative Agent, each Lender and the Collateral Agent a
certificate substantially in the form of Exhibit K (a “Servicer’s Certificate”),
signed by a Responsible Officer of the Servicer, which shall include a
certification by such Responsible Officer that no Event of Default or Unmatured
Event of Default has occurred.

(d) Financial Statements. The Servicer will submit to the Administrative Agent,
each Lender and the Collateral Agent, (i) within 60 days after the end of each
of its first three fiscal quarters (excluding the fiscal quarter ending on the
date specified in clause (ii)), commencing December 31, 2011, consolidated
unaudited financial statements and quarterly investor letters of the Servicer
for the most recent fiscal quarter, and (ii) within 90 days after the end of
each fiscal year, commencing with the fiscal year ended September 30, 2011,
consolidated audited financial statements of the Servicer, audited by a firm of
nationally recognized independent public accountants, as of the end of such
fiscal year.

(e) Tax Returns. The Servicer shall deliver to the Administrative Agent, each
Lender, and the Collateral Agent copies of all federal, state and local tax
returns and reports filed by the Borrower, the Transferor and the Servicer, or
in which the Borrower, the Transferor or Servicer was included on a consolidated
or combined basis (excluding sales, use and similar Taxes) within 15 days after
the earlier of (i) the date such federal, state or local tax returns were filed
or (ii) the date such federal, state or local tax returns are required to be
filed under Applicable Law.

(f) Obligor Financial Statements; Valuation Reports; Other Reports. The Servicer
will deliver to the Administrative Agent, the Lenders and the Collateral Agent,
with respect to each Obligor, (i) to the extent received by the Borrower and/or
the Servicer pursuant to the Loan Agreement, the complete financial reporting
package with respect to such Obligor and with respect to each Loan Asset for
such Obligor provided to the Borrower and/or the Servicer either monthly or
quarterly, as the case may be, by such Obligor, which delivery shall be made
within 10 days after Servicer’s or Borrower’s receipt thereof, and (ii) asset
and portfolio level

 

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monitoring reports prepared by the Servicer with respect to the Loan Assets,
which delivery shall be made within 60 days of the end of each calendar month.
The Servicer will promptly deliver to the Administrative Agent and any Lender,
upon reasonable request and to the extent received by the Borrower and/or the
Servicer, all other documents and information required to be delivered by the
Obligors to the Borrower with respect to any Loan Asset included in the
Collateral Portfolio.

(g) Amendments to Loan Assets. The Servicer will deliver to the Administrative
Agent, the Lenders and the Collateral Custodian a copy of any amendment,
restatement, supplement, waiver or other modification to the Loan Agreement of
any Loan Asset (along with any internal documents prepared by the Servicer and
provided to its investment committee in connection with such amendment,
restatement, supplement, waiver or other modification) within 10 Business Days
of the effectiveness of such amendment, restatement, supplement, waiver or other
modification.

(h) Website Access to Information. Notwithstanding anything to the contrary
contained herein, information required to be delivered or submitted to any
Secured Party pursuant to Section 5.03(h) and this Article VI shall be deemed to
have been delivered on the date on which such information is posted on a Deal
Interactive (or other replacement) website to which the Administrative Agent and
Lenders have access or upon receipt of such information through e-mail or
another delivery method acceptable to the Administrative Agent.

SECTION 6.09 Annual Statement as to Compliance. The Servicer will provide to the
Administrative Agent, each Lender and the Collateral Agent within 90 days
following the end of each fiscal year of the Servicer, commencing with the
fiscal year ending on September 30, 2011, a fiscal report signed by a
Responsible Officer of the Servicer certifying that (a) a review of the
activities of the Servicer, and the Servicer’s performance pursuant to this
Agreement, for the fiscal period ending on the last day of such fiscal year has
been made under such Person’s supervision and (b) the Servicer has performed or
has caused to be performed in all material respects all of its obligations under
this Agreement throughout such year and no Servicer Termination Event has
occurred.

SECTION 6.10 Annual Independent Public Accountant’s Servicing Reports. The
Servicer will cause a firm of nationally recognized independent public
accountants (who may also render other services to the Servicer) to furnish to
the Administrative Agent, each Lender and the Collateral Agent within 90 days
following the end of each fiscal year of the Servicer, commencing with the
fiscal year ending on September 30, 2011,2012, a report covering such fiscal
year to the effect that such accountants have applied certain agreed-upon
procedures (a copy of which procedures are attached hereto as Schedule III, it
being understood that the Servicer and the Administrative Agent will provide an
updated Schedule III reflecting any further amendments to such Schedule III
prior to the issuance of the first such agreed-upon procedures report, a copy of
which shall replace the then existing Schedule III) to certain documents and
records relating to the Collateral Portfolio under any Transaction Document,
compared the information contained in the Servicing Reports and the Servicer’s
Certificates delivered during the period covered by such report with such
documents and records and that no matters came to the attention of such
accountants that caused them to believe that such servicing was not conducted in
compliance with this Article VI, except for such exceptions as such accountants
shall believe to be immaterial and such other exceptions as shall be set forth
in such statement.

 

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SECTION 6.11 The Servicer Not to Resign. The Servicer shall not resign from the
obligations and duties hereby imposed on it except upon the Servicer’s
determination that (i) the performance of its duties hereunder is or becomes
impermissible under Applicable Law and (ii) there is no reasonable action that
the Servicer could take to make the performance of its duties hereunder
permissible under Applicable Law. Any such determination permitting the
resignation of the Servicer shall be evidenced as to clause (i) above by an
Opinion of Counsel to such effect delivered to the Administrative Agent and each
Lender. No such resignation shall become effective until a Replacement Servicer
shall have assumed the responsibilities and obligations of the Servicer in
accordance with Section 6.02.

ARTICLE VII.

EVENTS OF DEFAULT

SECTION 7.01 Events of Default. If any of the following events (each, an “Event
of Default”) shall occur:

(a) (i) the Borrower shall enter into one or more agreements for borrowed money
other than this Agreement or without the consent of the Administrative Agent or
(ii) the Servicer or the Transferor defaults in making any payment required to
be made under one or more agreements for borrowed money to which it is a party
in an aggregate principal amount in excess of $10,000,000 and any such failure
continues unremedied for two Business Days and such default is not cured within
the applicable cure period, if any, provided for under such agreement; or

(b) (1) the rendering of one or more final judgments, decrees or orders by a
court or arbitrator of competent jurisdiction for the payment of money in excess
individually or in the aggregate of $10,000,000 against the Transferor, or any
amount against the Borrower, and the Transferor or the Borrower, as applicable,
shall not have either (i) discharged or provided for the discharge of any such
judgment, decree or order in accordance with its terms or (ii) perfected a
timely appeal of such judgment, decree or order and caused the execution of same
to be stayed during the pendency of the appeal or (2) the Transferor or the
Borrower shall have made payments of amounts in excess of $10,000,000 (in the
case of the Transferor) or any amount (in the case of the Borrower), in the
settlement of any litigation, claim or dispute (excluding payments made from
Insurance Proceeds); or

(c) failure on the part of the Borrower, the Transferor or the Servicer to make
any payment or deposit (including, without limitation, with respect to
bifurcation and remittance of Interest Collections and Principal Collections or
any other payment or deposit required to be made by the terms of the Transaction
Documents, including, without limitation, to any Secured Party, Affected Party
or Indemnified Party) required by the terms of any Transaction Document (other
than Section 2.06) within two Business Days of the day such payment or deposit
is required to be made; or

 

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(d) failure to pay, on the Facility Maturity Date, the outstanding principal of
all Advances Outstanding and all Yield and all Fees accrued and unpaid thereon
together with all other Obligations, including, but not limited to, any
Make-Whole Premium; or

(e) failure to remedy any Borrowing Base Deficiency within three Business Days
in accordance with Section 2.06; provided that, during the period of time that
such event remains unremedied, any payments required to be made by the Servicer
on a Payment Date shall be made under Section 2.04(c); or

(f) without limiting the generality of Section 7.01(c) above, failure of the
Borrower to pay Yield within two Business Days of any Payment Date or within two
Business Days of when otherwise due; or

(g) any failure on the part of the Borrower or the Transferor duly to observe or
perform in any material respect any other covenants or agreements of the
Borrower or the Transferor set forth in this Agreement or the other Transaction
Documents to which the Borrower or the Transferor is a party and the same
continues 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 Borrower
or the Transferor by the Administrative Agent, any Lender or Collateral Agent
and (ii) the date on which the Borrower or the Transferor acquires knowledge
thereof; or

(h) the occurrence of a Bankruptcy Event relating to the Transferor or the
Borrower; or

(i) the occurrence of a Servicer Termination Event (provided that Fifth Street
or an Affiliate is the Servicer) past any applicable notice or cure period
provided in the definition thereof; or

(j) the Borrower shall fail to qualify as a bankruptcy-remote entity based upon
customary criteria such that reputable counsel could no longer render a
substantive nonconsolidation opinion with respect to the Borrower and the
Transferor; or

(k) (1) any Transaction Document, or any lien or security interest granted
thereunder, shall (except in accordance with its terms), in whole or in part,
terminate, cease to be effective or cease to be the legally valid, binding and
enforceable obligation of the Borrower, the Transferor, or the Servicer,

(2) the Borrower, the Transferor or the Servicer or any other party shall,
directly or indirectly, contest in any manner the effectiveness, validity,
binding nature or enforceability of any Transaction Document or any lien or
security interest thereunder, or

(3) any security interest securing any obligation under any Transaction Document
shall, in whole or in part, cease to be a first priority perfected security
interest except as otherwise expressly permitted to be released in accordance
with the applicable Transaction Document; or

 

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(l) the Borrower shall become required to register as an “investment company”
within the meaning of the 1940 Act or the arrangements contemplated by the
Transaction Documents shall require registration as an “investment company”
within the meaning of the 1940 Act; or

(m) the Internal Revenue Service shall file notice of a lien pursuant to
Section 6323 of the Code with regard to any assets of the Borrower or the
Transferor and such lien shall not have been released within five Business Days,
or the Pension Benefit Guaranty Corporation shall file notice of a lien pursuant
to Section 4068 of ERISA with regard to any of the assets of the Borrower or the
Transferor and such lien shall not have been released within five Business Days;
or

(n) any Change of Control shall occur; or

(o) any representation, warranty or certification made by the Borrower or the
Transferor in any Transaction Document or in any document delivered pursuant to
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
Borrower or the Transferor by the Administrative Agent or the Collateral Agent
(which shall be given at the direction of the Administrative Agent) and (ii) the
date on which a Responsible Officer of the Borrower or the Transferor acquires
knowledge thereof; or

(p) the Borrower ceases to have a valid, perfected ownership interest in all of
the Collateral Portfolio; or

(q) the Borrower makes any assignment of its respective rights or obligations
under this Agreement or any other Transaction Document without first obtaining
the specific written consent of each of the Lenders and the Administrative
Agent, which consent may be withheld by any Lender or the Administrative Agent
in the exercise of its sole and absolute discretion; or

(r) the Borrower, the Servicer or the Transferor fails to observe or perform any
covenant, agreement or obligation with respect to the management and
distribution of funds received with respect to the Collateral Portfolio, and
such failure is not cured within three Business Days; or

(s) (i) failure of the Borrower to maintain at least one Independent Director,
(ii) the removal of any Independent Director of the Borrower without “cause” (as
such term is defined in the organizational document of the Borrower) or without
giving prior written notice to the Administrative Agent and the Lenders, each as
required in the organizational documents of the Borrower or (iii) an Independent
Director of the Borrower which is not provided by CSC or a nationally recognized
service reasonably acceptable to the Administrative Agent shall be appointed
without the consent of the Administrative Agent;

then the Administrative Agent or all of the Lenders, may, by notice to the
Borrower, declare the Facility Maturity Date to have occurred; provided that, in
the case of any event described in Section 7.01(h) above, the Facility Maturity
Date shall be deemed to have occurred

 

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automatically upon the occurrence of such event. Upon any such declaration or
automatic occurrence, (i) the Borrower shall cease purchasing Loan Assets from
the Transferor under the Purchase and Sale Agreement, (ii) the Administrative
Agent or all of the Lenders may declare the Advances to be immediately due and
payable in full (without presentment, demand, protest or notice of any kind all
of which are hereby waived by the Borrower) and any other Obligations to be
immediately due and payable, and (iii) all proceeds and distributions in respect
of the Portfolio Assets shall be distributed by the Collateral Agent (at the
direction of the Administrative Agent) as described in Section 2.04(c) (provided
that the Borrower shall in any event remain liable to pay such Advances
Outstanding and all such amounts and Obligations immediately in accordance with
Section 2.04(e) hereof). In addition, upon any such declaration or upon any such
automatic occurrence, the Collateral Agent, on behalf of the Secured Parties and
at the direction of the Administrative Agent, shall have, in addition to all
other rights and remedies under this Agreement or otherwise, all other rights
and remedies provided under the UCC of the applicable jurisdiction and other
Applicable Law, which rights shall be cumulative. Without limiting any
obligation of the Servicer hereunder, the Borrower confirms and agrees that the
Collateral Agent, on behalf of the Secured Parties and at the direction of the
Administrative Agent, (or any designee thereof, including, without limitation,
the Servicer), following an Event of Default, shall, at its option, have the
sole right to enforce the Borrower’s rights and remedies under each Assigned
Document, but without any obligation on the part of the Administrative Agent,
the Lenders or any of their respective Affiliates to perform any of the
obligations of the Borrower under any such Assigned Document. If any Event of
Default shall have occurred, the LIBOR Yield Rate and Base Rate Yield Rate shall
be increased pursuant to the increase set forth in the definition of “Applicable
Spread”, effective as of the date of the occurrence of such Event of Default,
and shall apply after the occurrence of such Event of Default.

SECTION 7.02 Additional Remedies of the Administrative Agent.

(a) If, (i) upon the Administrative Agent’s or the Lenders’ declaration that the
Advances Outstanding hereunder are immediately due and payable pursuant to
Section 7.01 upon the occurrence of an Event of Default, or (ii) on the Facility
Maturity Date, the aggregate outstanding principal amount of the Advances
Outstanding, all accrued and unpaid Fees and Yield and any other Obligations are
not immediately paid in full, then the Collateral Agent (acting as directed by
the Administrative Agent) or the Administrative Agent, in addition to all other
rights specified hereunder, shall have the right, in its own name and as agent
for the Lenders, to immediately sell (at the Servicer’s expense) in a
commercially reasonable manner, in a recognized market (if one exists) at such
price or prices as the Administrative Agent may reasonably deem satisfactory,
any or all of the Collateral Portfolio and apply the proceeds thereof to the
Obligations.

(b) The parties recognize that it may not be possible to sell all of the
Collateral Portfolio on a particular Business Day, or in a transaction with the
same purchaser, or in the same manner because the market for the assets
constituting the Collateral Portfolio may not be liquid. Accordingly, the
Administrative Agent may elect, in its sole discretion, the time and manner of
liquidating any of the Collateral Portfolio, and nothing contained herein shall
obligate the Administrative Agent to liquidate any of the Collateral Portfolio
on the date the Administrative Agent or all of the Lenders declares the Advances
Outstanding hereunder to be immediately due and payable pursuant to Section 7.01
or to liquidate all of the Collateral Portfolio in the same manner or on the
same Business Day.

 

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(c) If the Collateral Agent (acting as directed by the Administrative Agent) or
the Administrative Agent proposes to sell the Collateral Portfolio or any part
thereof in one or more parcels at a public or private sale, at the request of
the Collateral Agent or the Administrative Agent, as applicable, the Borrower
and the Servicer shall make available to (i) the Administrative Agent, on a
timely basis, all information (including any information that the Borrower and
the Servicer is required by law or contract to be kept confidential to the
extent such information can be provided without violation of such laws or
contracts) relating to the Collateral Portfolio subject to sale, including,
without limitation, copies of any disclosure documents, contracts, financial
statements of the applicable Obligors, covenant certificates and any other
materials requested by the Administrative Agent, and (ii) each prospective
bidder, on a timely basis, all reasonable information relating to the Collateral
Portfolio subject to sale, including, without limitation, copies of any
disclosure documents, contracts, financial statements of the applicable
Obligors, covenant certificates and any other materials reasonably requested by
each such bidder.

(d) Each of the Borrower and the Servicer agrees, to the full extent that it may
lawfully so agree, that neither it nor anyone claiming through or under it will
set up, claim or seek to take advantage of any appraisement, valuation, stay,
extension or redemption law now or hereafter in force in any locality where any
Collateral Portfolio may be situated in order to prevent, hinder or delay the
enforcement or foreclosure of this Agreement, or the absolute sale of any of the
Collateral Portfolio or any part thereof, or the final and absolute putting into
possession thereof, immediately after such sale, of the purchasers thereof, and
each of the Borrower and the Servicer, for itself and all who may at any time
claim through or under it, hereby waives, to the full extent that it may be
lawful so to do, the benefit of all such laws, and any and all right to have any
of the properties or assets constituting the Collateral Portfolio marshaled upon
any such sale, and agrees that the Collateral Agent, or the Administrative Agent
on its behalf, or any court having jurisdiction to foreclose the security
interests granted in this Agreement may sell the Collateral Portfolio as an
entirety or in such parcels as the Collateral Agent (acting at the direction of
the Administrative Agent) or such court may determine.

(e) Any amounts received from any sale or liquidation of the Collateral
Portfolio pursuant to this Section 7.02 in excess of the Obligations will be
applied by the Collateral Agent (as directed by the Administrative Agent) in
accordance with the provisions of Section 2.04(c), or as a court of competent
jurisdiction may otherwise direct.

(f) The Administrative Agent and the Lenders shall have, in addition to all the
rights and remedies provided herein and provided by applicable federal, state,
foreign, and local laws (including, without limitation, the rights and remedies
of a secured party under the UCC of any applicable state, to the extent that the
UCC is applicable, and the right to offset any mutual debt and claim), all
rights and remedies available to the Lenders at law, in equity or under any
other agreement between any Lender and the Borrower.

(g) Except as otherwise expressly provided in this Agreement, no remedy provided
for by this Agreement shall be exclusive of any other remedy, each and every
remedy

 

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shall be cumulative and in addition to any other remedy, and no delay or
omission to exercise any right or remedy shall impair any such right or remedy
or shall be deemed to be a waiver of any Event of Default.

(h) Each of the Borrower and the Servicer hereby irrevocably appoints each of
the Collateral Agent and the Administrative Agent its true and lawful attorney
(with full power of substitution) in its name, place and stead and at its
expense, in connection with the enforcement of the rights and remedies provided
for in this Agreement, including without limitation the following powers: (a) to
give any necessary receipts or acquittance for amounts collected or received
hereunder, (b) to make all necessary transfers of the Collateral Portfolio in
connection with any such sale or other disposition made pursuant hereto, (c) to
execute and deliver for value all necessary or appropriate bills of sale,
assignments and other instruments in connection with any such sale or other
disposition, the Borrower and the Servicer hereby ratifying and confirming all
that such attorney (or any substitute) shall lawfully do hereunder and pursuant
hereto, and (d) to sign any agreements, orders or other documents in connection
with or pursuant to any Transaction Document. Nevertheless, if so requested by
the Collateral Agent or the Administrative Agent, the Borrower shall ratify and
confirm any such sale or other disposition by executing and delivering to the
Collateral Agent or the Administrative Agent all proper bills of sale,
assignments, releases and other instruments as may be designated in any such
request.

ARTICLE VIII.

INDEMNIFICATION

SECTION 8.01 Indemnities by the Borrower.

(a) Without limiting any other rights which the Affected Parties, the Secured
Parties, the Administrative Agent, the Lenders, the Collateral Agent or any of
their respective Affiliates may have hereunder or under Applicable Law, the
Borrower hereby agrees to indemnify the Affected Parties, the Secured Parties,
Administrative Agent, the Lenders, the Collateral Agent and each of their
respective Affiliates, assigns, officers, directors, employees and agents (each,
an “Indemnified Party” for purposes of this Article VIII) from and against any
and all damages, losses, claims, liabilities and related costs and expenses,
including reasonable attorneys’ fees and disbursements (all of the foregoing
being collectively referred to as “Indemnified Amounts”), awarded against or
actually incurred by such Indemnified Party arising out of or as a result of
this Agreement or in respect of any of the Collateral Portfolio, excluding,
however, Indemnified Amounts to the extent resulting solely from (a) gross
negligence, bad faith or willful misconduct on the part of an Indemnified Party
or (b) Loan Assets which are uncollectible due to the Obligor’s financial
inability to pay. Without limiting the foregoing, the Borrower 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):

(i) any Loan Asset treated as or represented by the Borrower to be an Eligible
Loan Asset which is not at the applicable time an Eligible Loan Asset, or the
purchase by any party or origination of any Loan Asset which violates Applicable
Law;

 

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(ii) reliance on any representation or warranty made or deemed made by the
Borrower, the Servicer (if Fifth Street or one of its Affiliates is the
Servicer) or any of their 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;

(iii) the failure by the Borrower or the Servicer (if Fifth Street or one of its
Affiliates is the Servicer) to comply with any term, provision or covenant
contained in this Agreement or any agreement executed in connection with this
Agreement, or with any Applicable Law with respect to any item of Collateral
Portfolio, or the nonconformity of any item of Collateral Portfolio with any
such Applicable Law;

(iv) the failure to vest and maintain vested in the Collateral Agent, for the
benefit of the Secured Parties, a first priority perfected security interest in
the Collateral Portfolio, free and clear of any Lien other than Permitted Liens,
whether existing at the time of the related Advance or at any time thereafter;

(v) on each Business Day prior to the Collection Date, the occurrence of a
Borrowing Base Deficiency and the same continues unremedied for three Business
Days;

(vi) 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 Loan
Assets included in the Collateral Portfolio or the other Portfolio Assets
related thereto, whether at the time of any Advance or at any subsequent time;

(vii) any dispute, claim, offset or defense (other than the discharge in
bankruptcy of an Obligor) to the payment of any Loan Asset included in the
Collateral Portfolio (including, without limitation, a defense based on such
Loan Asset (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), or any other claim resulting from the sale of the
merchandise or services related to such Collateral Portfolio or the furnishing
or failure to furnish such merchandise or services;

(viii) any failure of the Borrower or the Servicer (if Fifth Street or one of
its Affiliates is the Servicer) 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 Borrower or any Affiliate thereof to
perform its respective duties under any Collateral Portfolio;

(ix) 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 Borrower or the Transferor to qualify to do business or
file any notice or business activity report or any similar report;

(x) any action taken by the Borrower or the Servicer in the enforcement or
collection of the Collateral Portfolio which results in any claim, suit or

 

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action of any kind pertaining to the Collateral Portfolio or which reduces or
impairs the rights of the Administrative Agent or Lender with respect to any
Loan Asset or the value of any such Loan Asset;

(xi) 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 Collateral Portfolio;

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

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

(xiv) any repayment by the Administrative Agent, the Lenders or a Secured Party
of any amount previously distributed in payment of Advances or payment of Yield
or Fees or any other amount due hereunder, in each case which amount the
Administrative Agent, the Lenders or a Secured Party believes in good faith is
required to be repaid;

(xv) the commingling by the Borrower or the Servicer of payments and collections
required to be remitted to the Collection Account or the Unfunded Exposure
Account with other funds;

(xvi) any investigation, litigation or proceeding related to this Agreement (or
the Transaction Documents), or the use of proceeds of Advances or the Collateral
Portfolio, or the administration of the Loan Assets by the Borrower or the
Servicer (unless such administration is carried out by SMBC or any of its
Affiliates in the capacity of the Servicer, if applicable);

(xvii) any failure by the Borrower to give reasonably equivalent value to
Transferor in consideration for the transfer by the Transferor to the Borrower
of any item of Collateral 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;

(xviii) the use of the proceeds of any Advance in a manner other than as
provided in this Agreement and the Transaction Documents; and/or

(xix) any failure of the Borrower, the Servicer or any of their respective
agents or representatives to remit to the Collection Account within one Business
Day of receipt, payments and collections with respect to the Collateral
Portfolio remitted to the Borrower, the Servicer or any such agent or
representative (other than such a failure on the part of SMBC or any of its
Affiliates in the capacity of Servicer, if applicable).

 

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(b) Any amounts subject to the indemnification provisions of this Section 8.01
shall be paid by the Borrower to the Administrative Agent on behalf of the
applicable Indemnified Party within five Business Days following receipt by the
Borrower of the Administrative Agent’s written demand therefor on behalf of the
applicable Indemnified Party (and the Administrative Agent shall pay such
amounts to the applicable Indemnified Party promptly after the receipt by the
Administrative Agent of such amounts). The Administrative Agent, on behalf of
any Indemnified Party making a request for indemnification under this
Section 8.01, shall submit to the Borrower a certificate setting forth in
reasonable detail the basis for and the computations of the Indemnified Amounts
with respect to which such indemnification is requested, which certificate shall
be conclusive absent demonstrable error.

(c) If for any reason the indemnification provided above in this Section 8.01 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 Borrower or the Servicer, as the case may be, 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
Borrower or the Servicer, 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) If the Borrower has made any payments in respect of Indemnified Amounts to
the Administrative Agent on behalf of an Indemnified Party pursuant to this
Section 8.01 and such Indemnified Party thereafter collects any of such amounts
from others, such Indemnified Party will promptly repay such amounts collected
to the Borrower, without interest.

(e) The obligations of the Borrower under this Section 8.01 shall survive the
resignation or removal of the Administrative Agent, the Lenders, the Servicer or
the Collateral Agent and the termination of this Agreement.

SECTION 8.02 Indemnities by Servicer.

(a) Without limiting any other rights which any Indemnified Party may have
hereunder or under Applicable Law, the Servicer hereby agrees to indemnify each
Indemnified Party from and against any and all Indemnified Amounts, awarded
against or incurred by any Indemnified Party as a consequence of any of the
following, excluding, however, Indemnified Amounts to the extent resulting from
gross negligence, bad faith or willful misconduct on the part of any Indemnified
Party claiming indemnification hereunder:

(i) the inclusion, in any computations made by it in connection with any
Borrowing Base Certificate or other report prepared by it hereunder, of any Loan
Assets which were not Eligible Loan Assets as of the date of any such
computation;

(ii) reliance on any representation or warranty made or deemed made by the
Servicer or any of its officers under or in connection with this Agreement or
any other Transaction Document, any Servicing Report, Servicer’s Certificate or
any other information or report delivered by or on behalf of the Servicer
pursuant hereto, which shall have been false, incorrect or misleading in any
respect when made or deemed made or delivered;

 

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(iii) the failure by the Servicer to comply with (A) any term, provision or
covenant contained in this Agreement or any other Transaction Document, or any
other agreement executed in connection with this Agreement, or (B) any
Applicable Law applicable to it with respect to any Portfolio Assets;

(iv) any litigation, proceedings or investigation against the Servicer;

(v) any action or inaction by the Servicer that causes the Collateral Agent, for
the benefit of the Secured Parties, not to have a first priority perfected
security interest in the Collateral Portfolio, free and clear of any Lien other
than Permitted Liens, whether existing at the time of the related Advance or any
time thereafter;

(vi) the commingling by the Servicer of payments and collections required to be
remitted to the Collection Account or the Unfunded Exposure Account with other
funds;

(vii) any failure of the Servicer or any of its agents or representatives
(including, without limitation, agents, representatives and employees of such
Servicer acting pursuant to authority granted under Section 6.01 hereof) to
remit to Collection Account, payments and collections with respect to Loan
Assets remitted to the Servicer or any such agent or representative within two
Business Days of receipt;

(viii) the failure by the Servicer to perform any of its duties or obligations
in accordance with the provisions of this Agreement or any other Transaction
Document or errors or omissions related to such duties;

(ix) 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, or failure or delay in complying with instructions from the
Administrative Agent with respect thereto; and/or

(x) any of the events or facts giving rise to a breach of any of the Servicer’s
representations, warranties, agreements and/or covenants set forth in Article
IV, Article V or Article VI or this Agreement.

(b) Any Indemnified Amounts shall be paid by the Servicer to the Administrative
Agent, for the benefit of the applicable Indemnified Party, within two Business
Days following receipt by the Servicer of the Administrative Agent’s written
demand therefor (and the Administrative Agent shall pay such amounts to the
applicable Indemnified Party promptly after the receipt by the Administrative
Agent of such amounts).

(c) If the Servicer has made any indemnity payments to the Administrative Agent,
on behalf of an Indemnified Party pursuant to this Section 8.02 and such
Indemnified Party thereafter collects any of such amounts from others, such
Indemnified Party will promptly repay such amounts collected to the Servicer,
without interest.

 

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(d) The Servicer shall have no liability for making indemnification hereunder to
the extent any such indemnification constitutes recourse for uncollectible or
uncollected Loan Assets.

(e) The obligations of the Servicer under this Section 8.02 shall survive the
resignation or removal of the Administrative Agent, the Lenders, the Collateral
Agent, the Account Bank or the Collateral Custodian and the termination of this
Agreement.

(f) Any indemnification pursuant to this Section 8.02 shall not be payable from
the Collateral Portfolio.

Each applicable Indemnified Party shall deliver to the Indemnifying Party under
Section 8.01 and Section 8.02, within a reasonable time after such Indemnified
Party’s receipt thereof, copies of all notices and documents (including court
papers) received by such Indemnified Party relating to the claim giving rise to
the Indemnified Amounts.

SECTION 8.03 Legal Proceedings. In the event an Indemnified Party becomes
involved in any action, claim, or legal, governmental or administrative
proceeding (an “Action”) for which it seeks indemnification hereunder, the
Indemnified Party shall promptly notify the other party or parties against whom
it seeks indemnification (the “Indemnifying Party”) in writing of the nature and
particulars of the Action; provided that its failure to do so shall not relieve
the Indemnifying Party of its obligations hereunder except to the extent such
failure has a material adverse effect on the Indemnifying Party. Upon written
notice to the Indemnified Party acknowledging in writing that the
indemnification provided hereunder applies to the Indemnified Party in
connection with the Action (subject to the exclusion in the first sentence of
Section 8.01, the first sentence of Section 8.02 or Section 8.02(d), as
applicable), the Indemnifying Party may assume the defense of the Action at its
expense with counsel reasonably acceptable to the Indemnified Party. The
Indemnified Party shall have the right to retain separate counsel in connection
with the Action, and the Indemnifying Party shall not be liable for the
reasonable legal fees and expenses of the Indemnified Party after the
Indemnifying Party has done so; provided that if the Indemnified Party
determines in good faith that there may be a conflict between the positions of
the Indemnified Party and the Indemnifying Party in connection with the Action,
or that the Indemnifying Party is not conducting the defense of the Action in a
manner reasonably protective of the interests of the Indemnified Party, the
reasonable legal fees and expenses of the Indemnified Party shall be paid by the
Indemnifying Party; provided, further, that the Indemnifying Party shall not, in
connection with any one Action or separate but substantially similar or related
Actions in the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the fees or expenses of more than one separate firm
of attorneys (and any required local counsel) for such Indemnified Party, which
firm (and local counsel, if any) shall be designated in writing to the
Indemnifying Party by the Indemnified Party. If the Indemnifying Party elects to
assume the defense of the Action, it shall have full control over the conduct of
such defense; provided that the Indemnifying Party and its counsel shall, as
reasonably requested by the Indemnified Party or its counsel, consult with and
keep them informed with respect to the conduct of such defense. The Indemnifying
Party shall not settle an Action without the prior written approval of the
Indemnified Party unless such settlement provides for the full and unconditional
release of the Indemnified Party from all liability in connection with the
Action. The Indemnified Party shall reasonably cooperate with the Indemnifying
Party in connection with the defense of the Action.

 

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SECTION 8.04 After-Tax Basis. Indemnification under Section 8.01 and 8.02 shall
be in an amount necessary to make the Indemnified Party whole after taking into
account (i) 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 and (ii) all reductions in federal, state, local and foreign
Taxes (including estimated Taxes) realized by the Indemnified Party as a result
of the event(s) giving rise to such indemnity payment for all affected taxable
years and periods.

ARTICLE IX.

THE ADMINISTRATIVE AGENT

SECTION 9.01 The Administrative Agent.

(a) Appointment. Each Lender and each Secured Party hereby appoints and
authorizes the Administrative Agent as its agent hereunder and hereby further
authorizes the Administrative Agent to appoint additional agents to act on its
behalf and for the benefit of each Lender and each Secured Party. Each Lender
and each Secured Party further authorizes the Administrative Agent to take such
action as agent on its behalf and to exercise such powers under this Agreement
and the other Transaction Documents as are delegated to the Administrative Agent
by the terms hereof and thereof, together with such powers as are reasonably
incidental thereto. Notwithstanding any provision to the contrary contained
elsewhere in this Agreement or in any other Transaction Document, the
Administrative Agent shall not have any duties or responsibilities, except those
expressly set forth in this Agreement, nor shall the Administrative Agent have
or be deemed to have any fiduciary relationship with any Lender, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this Agreement or any other Transaction Document or otherwise exist
against the Administrative Agent. Without limiting the generality of the
foregoing sentence, the use of the term “agent” in this Agreement with reference
to the Administrative Agent is not intended to connote any fiduciary or other
implied (or express) obligations arising under agency doctrine of any Applicable
Law. Instead, such term is used merely as a matter of market custom, and is
intended to create or reflect only an administrative relationship between
independent contracting parties.

(b) Delegation of Duties. The Administrative Agent may execute any of its duties
under this Agreement or any other Transaction Document by or through agents,
employees or attorneys in fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Administrative Agent shall
not be responsible for the negligence or misconduct of any agent or attorney in
fact that it selects with reasonable care

(c) Administrative Agent’s Reliance, Etc. Neither the Administrative Agent nor
any of its directors, officers, agents or employees shall be liable for any
action taken or omitted to be taken by it or them as Administrative Agent under
or in connection with this

 

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Agreement or any of the other Transaction Documents, except for its or their own
gross negligence or willful misconduct. Each Lender and each Secured Party
hereby waives any and all claims against the Administrative Agent or any of its
Affiliates for any action taken or omitted to be taken by the Administrative
Agent or any of its Affiliates under or in connection with this Agreement or any
of the other Transaction Documents, except for its or their own gross negligence
or willful misconduct. Without limiting the foregoing, the Administrative Agent:
(i) may consult with legal counsel (including counsel for the Borrower or the
Transferor), independent public accountants and other experts selected by it and
shall not be liable for any action taken or omitted to be taken in good faith by
it in accordance with the advice of such counsel, accountants or experts;
(ii) makes no warranty or representation and shall not be responsible for any
statements, warranties or representations made in or in connection with this
Agreement; (iii) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of this
Agreement or any of the other Transaction Documents on the part of the Borrower,
the Transferor, or the Servicer or to inspect the property (including the books
and records) of the Borrower, the Transferor, or the Servicer; (iv) shall not be
responsible for the due execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Agreement, any of the other
Transaction Documents or any other instrument or document furnished pursuant
hereto or thereto; and (v) shall incur no liability under or in respect of this
Agreement or any of the other Transaction Documents by acting upon any notice
(including notice by telephone), consent, certificate or other instrument or
writing (which may be by facsimile) believed by it to be genuine and signed or
sent by the proper party or parties.

(d) Actions by Administrative Agent. The Administrative Agent shall be fully
justified in failing or refusing to take any action under this Agreement or any
other Transaction Document unless it shall first receive such advice or
concurrence of the Lenders as it deems appropriate and, if it so requests, it
shall first be indemnified to its satisfaction by the Lenders against any and
all liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. The Administrative Agent shall in all cases
be fully protected in acting, or in refraining from acting, under this Agreement
or any other Transaction Document in accordance with a request or consent of the
Lenders; provided that, notwithstanding anything to the contrary herein, the
Administrative Agent shall not be required to take any action hereunder if the
taking of such action, in the reasonable determination of the Administrative
Agent, shall be in violation of any Applicable Law or contrary to any provision
of this Agreement or shall expose the Administrative Agent to liability
hereunder or otherwise. In the event the Administrative Agent requests the
consent of a Lender pursuant to the foregoing provisions and the Administrative
Agent does not receive a consent (either positive or negative) from such Person
within ten Business Days of such Person’s receipt of such request, then such
Lender shall be deemed to have declined to consent to the relevant action.

(e) Notice of Event of Default, Unmatured Event of Default or Servicer
Termination Event. The Administrative Agent shall not be deemed to have
knowledge or notice of the occurrence of an Event of Default, Unmatured Event of
Default or Servicer Termination Event, unless the Administrative Agent has
received written notice from a Lender, the Borrower or the Servicer referring to
this Agreement, describing such Event of Default, Unmatured Event of Default or
Servicer Termination Event and stating that such notice is a “Notice of Event of
Default,” “Notice of Unmatured Event of Default” or “Notice of Servicer
Termination Event,” as

 

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applicable. The Administrative Agent shall (subject to Section 9.01(c)) take
such action with respect to such Event of Default, Unmatured Event of Default or
Servicer Termination Event as may be requested by the Lenders acting jointly or
as the Administrative Agent shall deem advisable or in the best interest of the
Lenders.

(f) Credit Decision with Respect to the Administrative Agent. Each Lender and
each Secured Party acknowledges that none of the Administrative Agent or any of
its Affiliates has made any representation or warranty to it, and that no act by
the Administrative Agent hereinafter taken, including any consent to and
acceptance of any assignment or review of the affairs of the Borrower, the
Servicer, the Transferor or any of their respective Affiliates or review or
approval of any of the Collateral Portfolio, shall be deemed to constitute any
representation or warranty by any of the Administrative Agent or its Affiliates
to any Lender as to any matter, including whether the Administrative Agent has
disclosed material information in its possession. Each Lender and each Secured
Party acknowledges that it has, independently and without reliance upon the
Administrative Agent, or any of the Administrative Agent’s Affiliates, and based
upon such documents and information as it has deemed appropriate, made its own
evaluation and decision to enter into this Agreement and the other Transaction
Documents to which it is a party. Each Lender and each Secured Party also
acknowledges that it will, independently and without reliance upon the
Administrative Agent, or any of the Administrative Agent’s Affiliates, and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own decisions in taking or not taking action under this
Agreement and the other Transaction Documents to which it is a party. Each
Lender and each Secured Party hereby agrees that the Administrative Agent shall
not have any duty or responsibility to provide any Lender with any credit or
other information concerning the business, prospects, operations, property,
financial and other condition or creditworthiness of the Borrower, the Servicer,
the Transferor or their respective Affiliates which may come into the possession
of the Administrative Agent or any of its Affiliates.

(g) Indemnification of the Administrative Agent. Each Lender agrees to indemnify
the Administrative Agent (to the extent not reimbursed by the Borrower or the
Servicer), ratably in accordance with such Lender’s Pro Rata Share, from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by, or asserted against the
Administrative Agent in any way relating to or arising out of this Agreement or
any of the other Transaction Documents, or any action taken or omitted by the
Administrative Agent hereunder or thereunder; provided that the Lenders shall
not be liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from the Administrative Agent’s gross negligence or willful misconduct;
provided, further, that no action taken in accordance with the directions of the
Lenders shall be deemed to constitute gross negligence or willful misconduct for
purposes of this Article IX. Without limitation of the foregoing, each Lender
agrees to reimburse the Administrative Agent, ratably in accordance with such
Lender’s respective Pro Rata Share, promptly upon demand for any reasonable
out-of-pocket expenses (including counsel fees) incurred by the Administrative
Agent in connection with the administration, modification, amendment or
enforcement (whether through negotiations, legal proceedings or otherwise) of,
or legal advice in respect of rights or responsibilities under, this Agreement
and the other Transaction Documents, to the extent that such expenses are
incurred in the interests of or otherwise in respect of the Lenders hereunder
and/or thereunder and to the extent that the Administrative Agent is not
reimbursed for such expenses by the Borrower or the Servicer.

 

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(h) Successor Administrative Agent. The Administrative Agent may resign at any
time, effective upon the appointment and acceptance of a successor
Administrative Agent as provided below, by giving at least five days’ written
notice thereof to each Lender and the Borrower and may be removed at any time
with cause by the Lenders and the Borrower acting jointly. Upon any such
resignation or removal, the Lenders acting jointly shall appoint a successor
Administrative Agent which shall be an Eligible Successor Agent (as defined
below). Each Lender agrees that it shall not unreasonably withhold or delay its
approval of the appointment of a successor Administrative Agent. If no such
successor Administrative Agent shall have been so appointed, and shall have
accepted such appointment, within 30 days after the retiring Administrative
Agent’s giving of notice of resignation or the removal of the retiring
Administrative Agent, then the retiring Administrative Agent may, on behalf of
the Secured Parties, appoint a successor Administrative Agent which successor
Administrative Agent shall be either (i) a commercial bank organized under the
laws of the United States or of any state thereof and have a combined capital
and surplus of at least $50,000,000 or (ii) an Affiliate of such a bank (each,
an “Eligible Successor Agent”). Upon the acceptance of any appointment as
Administrative Agent hereunder by a successor Administrative Agent, such
successor Administrative Agent shall thereupon succeed to and become vested with
all the rights, powers, privileges and duties of the retiring Administrative
Agent, and the retiring Administrative Agent shall be discharged from its duties
and obligations under this Agreement. After any retiring Administrative Agent’s
resignation or removal hereunder as Administrative Agent, the provisions of this
Article IX shall continue to inure to its benefit as to any actions taken or
omitted to be taken by it while it was Administrative Agent under this
Agreement.

(i) Payments by the Administrative Agent. Unless specifically allocated to a
specific Lender pursuant to the terms of this Agreement, all amounts received by
the Administrative Agent on behalf of the Lenders shall be paid by the
Administrative Agent to the each Lender in accordance with such Lender’s
respective Pro Rata Shares in the applicable Advances Outstanding, or if there
are no Advances Outstanding in accordance with each Lender’s most recent
Commitments, on the Business Day received by the Administrative Agent, unless
such amounts are received after 12:00 noon on such Business Day, in which case
the Administrative Agent shall use its reasonable efforts to pay such amounts to
each Lender on such Business Day, but, in any event, shall pay such amounts to
such Lender not later than the following Business Day.

ARTICLE X.

COLLATERAL AGENT

SECTION 10.01 Designation of Collateral Agent.

(a) Initial Collateral Agent. Each of the Lenders and the Administrative Agent
hereby designate and appoint SMBC as the Collateral Agent to act as its agent
for the purposes of perfection of a security interest in the Collateral
Portfolio and hereby authorizes the Collateral Agent to take such actions on its
behalf and on behalf of each of the Secured Parties

 

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and to exercise such powers and perform such duties as are expressly granted to
the Collateral Agent by this Agreement. The Collateral Agent hereby accepts such
agency appointment to act as Collateral Agent pursuant to the terms of this
Agreement, until its resignation or removal as Collateral Agent pursuant to the
terms hereof.

(b) Successor Collateral Agent. Upon the Collateral Agent’s receipt of a
Collateral Agent Termination Notice from the Administrative Agent of the
designation of a successor Collateral Agent pursuant to the provisions of
Section 10.05, the Collateral Agent agrees that it will terminate its activities
as Collateral Agent hereunder.

(c) Secured Party. The Administrative Agent and the Lenders hereby appoint U.S.
Bank, in its capacity as Collateral Agent hereunder, as their agent for the
purposes of perfection of a security interest in the Collateral Portfolio. U.S.
Bank, in its capacity as Collateral Agent hereunder, hereby accepts such
appointment and agrees to perform the duties set forth in Section 10.02(b).

SECTION 10.02 Duties of Collateral Agent.

(a) Appointment. The Lenders and the Administrative Agent each hereby appoints
U.S. BankSMBC to act as Collateral Agent, for the benefit of the Secured
Parties. The Collateral Agent hereby accepts such appointment and agrees to
perform the duties and obligations with respect thereto set forth herein.

(b) Duties. On or before the initial Advance Date, and until its removal
pursuant to Section 10.05, the Collateral Agent shall perform, on behalf of the
Secured Parties, the following duties and obligations:

(i) The Collateral Agent shall calculate amounts to be remitted pursuant to
Section 2.04 to the applicable parties and notify the Servicer and the
Administrative Agent in the event of any discrepancy between the Collateral
Agent’s calculations and the Servicing Report (such dispute to be resolved in
accordance with Section 2.05);

(ii) The Collateral Agent shall make payments pursuant to the terms of the
Servicing Report or as otherwise directed in accordance with Sections 2.04 or
2.05 (the “Payment Duties”).

(iii) The Collateral Agent shall promptly provide to the Servicer a copy of all
written notices and communications identified as being sent to it in connection
with the Loan Assets and the other Collateral Portfolio held hereunder which it
receives from the related Obligor, participating bank and/or agent bank. In no
instance shall the Collateral Agent be under any duty or obligation to take any
action on behalf of the Servicer in respect of the exercise of any voting or
consent rights, or similar actions, unless it receives specific written
instructions from the Servicer, prior to the occurrence of an Event of Default
or the Administrative Agent, after the occurrence of Event of Default, in which
event the Collateral Agent shall vote, consent or take such other action in
accordance with such instructions.

 

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(c) (i) The Administrative Agent, each Lender and each Secured Party further
authorizes the Collateral Agent to take such action as agent on its behalf and
to exercise such powers under this Agreement and the other Transaction Documents
as are expressly delegated to the Collateral Agent by the terms hereof and
thereof, together with such powers as are reasonably incidental thereto. In
furtherance, and without limiting the generality of the foregoing, each Secured
Party hereby appoints the Collateral Agent (acting at the direction of the
Administrative Agent) as its agent to execute and deliver all further
instruments and documents, and take all further action that the Administrative
Agent deems necessary or desirable in order to perfect, protect or more fully
evidence the security interests granted by the Borrower hereunder, or to enable
any of them to exercise or enforce any of their respective rights hereunder,
including, without limitation, the execution by the Collateral Agent as secured
party/assignee of such financing or continuation statements, or amendments
thereto or assignments thereof, relative to all or any of the Loan Assets now
existing or hereafter arising, and such other instruments or notices, as may be
necessary or appropriate for the purposes stated hereinabove. Nothing in this
Section 10.02(c) shall be deemed to relieve the Borrower or the Servicer of
their respective obligations to protect the interest of the Collateral Agent
(for the benefit of the Secured Parties) in the Collateral Portfolio, including
to file financing and continuation statements in respect of the Collateral
Portfolio in accordance with Section 5.01(t).

(ii) The Administrative Agent may direct the Collateral Agent to take any such
incidental action hereunder. With respect to other actions which are incidental
to the actions specifically delegated to the Collateral Agent hereunder, the
Collateral Agent shall not be required to take any such incidental action
hereunder, but shall be required to act or to refrain from acting (and shall be
fully protected in acting or refraining from acting) upon the direction of the
Administrative Agent; provided that the Collateral Agent shall not be required
to take any action hereunder at the request of the Administrative Agent, any
Secured Party or otherwise if the taking of such action, in the reasonable
determination of the Collateral Agent, (x) shall be in violation of any
Applicable Law or contrary to any provisions of this Agreement or (y) shall
expose the Collateral Agent to liability hereunder or otherwise (unless it has
received indemnity which it reasonably deems to be satisfactory with respect
thereto). In the event the Collateral Agent requests the consent of the
Administrative Agent to any incidental action hereunder and the Collateral Agent
does not receive a consent (either positive or negative) from the Administrative
Agent within 10 Business Days of its receipt of such request, then the
Administrative Agent shall be deemed to have declined to consent to the relevant
action.

(iii) Except as expressly provided herein, the Collateral Agent shall not be
under any duty or obligation to take any affirmative action to exercise or
enforce any power, right or remedy available to it under this Agreement
(x) unless and until (and to the extent) expressly so directed by the
Administrative Agent or (y) prior to the Facility Maturity Date (and upon such
occurrence, the Collateral Agent shall act in accordance with the written
instructions of the Administrative Agent pursuant to clause (x)). The Collateral
Agent shall not be liable for any action taken, suffered or omitted by it in
accordance with the request or direction of any Secured Party, to the extent
that this Agreement provides such Secured Party the right to so direct the
Collateral Agent, or the

 

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Administrative Agent. The Collateral Agent shall not be deemed to have notice or
knowledge of any matter hereunder, including an Event of Default, unless a
Responsible Officer of the Collateral Agent has knowledge of such matter or
written notice thereof is received by the Collateral Agent.

(d) If, in performing its duties under this Agreement, the Collateral Agent is
required to decide between alternative courses of action, the Collateral Agent
may request written instructions from the Administrative Agent as to the course
of action desired by it. If the Collateral Agent does not receive such
instructions within two Business Days after it has requested them, the
Collateral Agent may, but shall be under no duty to, take or refrain from taking
any such courses of action. The Collateral Agent shall act in accordance with
instructions received after such two Business Day period except to the extent it
has already, in good faith, taken or committed itself to take, action
inconsistent with such instructions. The Collateral Agent shall be entitled to
rely on the advice of legal counsel and independent accountants in performing
its duties hereunder and shall be deemed to have acted in good faith if it acts
in accordance with such advice.

(e) Concurrently herewith, the Administrative Agent directs the Collateral Agent
and the Collateral Agent is authorized to enter into the Control Agreement. For
the avoidance of doubt, all of the Collateral Agent’s rights, protections and
immunities provided herein shall apply to the Collateral Agent for any actions
taken or omitted to be taken under the Control Agreement in such capacity.

SECTION 10.03 Merger or Consolidation.

Any Person (i) into which the Collateral Agent may be merged or consolidated,
(ii) that may result from any merger or consolidation to which the Collateral
Agent shall be a party, or (iii) that may succeed to the properties and assets
of the Collateral Agent substantially as a whole, which Person in any of the
foregoing cases executes an agreement of assumption to perform every obligation
of the Collateral Agent hereunder, shall be the successor to the Collateral
Agent under this Agreement without further act of any of the parties to this
Agreement.

SECTION 10.04 Collateral Agent Compensation.

As compensation for its Collateral Agent activities hereunder, the Collateral
Agent shall be entitled to the Collateral Agent Fees and Collateral Agent
Expenses from the Borrower, payable to the extent of funds available therefor
pursuant to the provisions of Section 2.04. The Collateral Agent’s entitlement
to receive the Collateral Agent Fees shall cease on the earlier to occur of:
(i) its removal as Collateral Agent pursuant to Section 10.05 or (ii) the
termination of this Agreement.

SECTION 10.05 Collateral Agent Removal.

The Collateral Agent may be removed, with or without cause, by the
Administrative Agent by notice given in writing to the Collateral Agent (the
“Collateral Agent Termination Notice”); provided that, notwithstanding its
receipt of a Collateral Agent Termination Notice, the Collateral Agent shall
continue to act in such capacity until a successor

 

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Collateral Agent has been appointed and has agreed to act as Collateral Agent
hereunder; provided that the Collateral Agent shall continue to receive
compensation of its fees and expenses in accordance with Section 10.04 above
while so serving as the Collateral Agent prior to a successor Collateral Agent
being appointed.

SECTION 10.06 Limitation on Liability.

(a) The Collateral Agent may conclusively rely on and shall be fully protected
in acting upon any certificate, instrument, opinion, notice, letter, telegram or
other document delivered to it and that in good faith it reasonably believes to
be genuine and that has been signed by the proper party or parties. The
Collateral Agent may rely conclusively on and shall be fully protected in acting
upon (a) the written instructions of any designated officer of the
Administrative Agent or (b) the verbal instructions of the Administrative Agent.

(b) The Collateral Agent may consult counsel satisfactory to it and the advice
or opinion of such counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in accordance with the advice or opinion of such counsel.

(c) The Collateral Agent shall not be liable for any error of judgment, or for
any act done or step taken or omitted by it, in good faith, or for any mistakes
of fact or law, or for anything that it may do or refrain from doing in
connection herewith except in the case of its willful misconduct or grossly
negligent performance or omission of its duties.

(d) The Collateral Agent makes no warranty or representation and shall have no
responsibility (except as expressly set forth in this Agreement) as to the
content, enforceability, completeness, validity, sufficiency, value,
genuineness, ownership or transferability of the Collateral Portfolio, and will
not be required to and will not make any representations as to the validity or
value (except as expressly set forth in this Agreement) of any of the Collateral
Portfolio. The Collateral Agent shall not be obligated to take any legal action
hereunder that might in its judgment involve any expense or liability unless it
has been furnished with an indemnity reasonably satisfactory to it.

(e) The Collateral Agent shall have no duties or responsibilities except such
duties and responsibilities as are specifically set forth in this Agreement and
no covenants or obligations shall be implied in this Agreement against the
Collateral Agent. Notwithstanding any provision to the contrary elsewhere in the
Transaction Documents, the Collateral Agent shall not have any fiduciary
relationship with any party hereto or any Secured Party in its capacity as such,
and no implied covenants, functions, obligations or responsibilities shall be
read into this Agreement, the other Transaction Documents or otherwise exist
against the Collateral Agent. Without limiting the generality of the foregoing,
it is hereby expressly agreed and stipulated by the other parties hereto that
the Collateral Agent shall not be required to exercise any discretion hereunder
and shall have no investment or management responsibility.

(f) The Collateral Agent shall not be required to expend or risk its own funds
in the performance of its duties hereunder.

 

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(g) It is expressly agreed and acknowledged that the Collateral Agent is not
guaranteeing performance of or assuming any liability for the obligations of the
other parties hereto or any parties to the Collateral Portfolio.

(h) Subject in all cases to the last sentence of Section 2.05, in case any
reasonable question arises as to its duties hereunder, the Collateral Agent may,
prior to the occurrence of an Event of Default or the Facility Maturity Date,
request instructions from the Servicer and may, after the occurrence of an Event
of Default or the Facility Maturity Date, request instructions from the
Administrative Agent, and shall be entitled at all times to refrain from taking
any action unless it has received instructions from the Servicer or the
Administrative Agent, as applicable. The Collateral Agent shall in all events
have no liability, risk or cost for any action taken pursuant to and in
compliance with the instruction of the Administrative Agent. In no event shall
the Collateral Agent be liable for special, indirect or consequential loss or
damage of any kind whatsoever (including but not limited to lost profits), even
if the Collateral Agent has been advised of the likelihood of such loss or
damage and regardless of the form of action.

(i) The Collateral Agent shall not be liable for the acts or omissions of the
Collateral Custodian under this Agreement and shall not be required to monitor
the performance of the Collateral Custodian. Notwithstanding anything herein to
the contrary, the Collateral Agent shall have no duty to perform any of the
duties of the Collateral Custodian under this Agreement.

SECTION 10.07 Collateral Agent Resignation.

The Collateral Agent may resign at any time by giving not less than 90 days
written notice thereof to the Administrative Agent and with the consent of the
Administrative Agent, which consent shall not be unreasonably withheld. Upon
receiving such notice of resignation, the Administrative Agent shall promptly
appoint a successor collateral agent or collateral agents by written instrument,
in duplicate, executed by the Administrative Agent, one copy of which shall be
delivered to the Collateral Agent so resigning and one copy to the successor
collateral agent or collateral agents, together with a copy to the Borrower,
Servicer and Collateral Custodian. If no successor collateral agent shall have
been appointed and an instrument of acceptance by a successor Collateral Agent
shall not have been delivered to the Collateral Agent within 45 days after the
giving of such notice of resignation, the resigning Collateral Agent may
petition any court of competent jurisdiction for the appointment of a successor
Collateral Agent. Notwithstanding anything herein to the contrary, the
Collateral Agent may not resign prior to a successor Collateral Agent being
appointed.

ARTICLE XI.

MISCELLANEOUS

SECTION 11.01 Amendments and Waivers.

(a) (i) No amendment or modification of any provision of this Agreement shall be
effective without the written agreement of the Borrower, the Servicer, the
Required

 

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Lenders, the Administrative Agent and, solely if such amendment or modification
would adversely affect the rights and obligations of the Collateral Agent, the
written agreement of the Collateral Agent and (ii) no termination or waiver of
any provision of this Agreement or consent to any departure therefrom by the
Borrower or the Servicer shall be effective without the written concurrence of
the Administrative Agent and the Required Lenders. Any waiver or consent shall
be effective only in the specific instance and for the specific purpose for
which given.

(b) Notwithstanding the provisions of Section 11.01(a), the written consent of
all of the Lenders shall be required for any amendment, modification or waiver
(i) reducing any Advances Outstanding, or the Yield thereon, (ii) postponing any
date for any payment of any Advance or the Yield thereon, (iii) modifying the
provisions of this Section 11.01, (iv) modifying the provisions of Section 2.21
or (v) extending the Stated Maturity Date or clause (i) of the definition of
“Reinvestment Period”.

SECTION 11.02 Notices, Etc. All notices and other communications hereunder
shall, unless otherwise stated herein, be in writing (which shall include
facsimile communication and communication by e-mail) and faxed, e-mailed or
delivered, to each party hereto, as follows:

To the Borrower:

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 Servicer or the Transferor:

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

To the Administrative Agent and the Collateral Agent:

Sumitomo Mitsui Banking Corporation

277 Park Avenue

New York, NY 10172

Attention: Claire Kowalski

Facsimile: (212) 224-4397

 

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To the Lender:

Sumitomo Mitsui Banking Corporation

277 Park Avenue

New York, NY 10172

Attention: Claire Kowalski

Facsimile: (212) 224-4397

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 (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 11.03 No Waiver; Remedies. No failure on the part of the Administrative
Agent, the Collateral Agent or any Lender to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right hereunder preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.

SECTION 11.04 Binding Effect; Assignability; Multiple Lenders.

(a) This Agreement shall be binding upon and inure to the benefit of the
Borrower, the Servicer, the Administrative Agent, each Lender, the Collateral
Agent and their respective successors and permitted assigns. Each Lender and
their respective successors and assigns may assign, syndicate, or grant a
security interest or sell a participation interest in, (i) this Agreement and
such Lender’s rights and obligations hereunder and interest herein in whole or
in part (including by way of the sale of participation interests therein) and/or
(ii) any Advance (or portion thereof) or any Variable Funding Note (or any
portion thereof) to any Person other than the Borrower or an Affiliate thereof;
provided that, (x) so long as no Event of Default has occurred, unless the
Borrower shall otherwise consent, a Lender may only assign, syndicate, grant a
security interest or sell a participation in, its rights and obligations
hereunder to an Affiliate and (y) after an Event of Default has occurred, a
Lender may assign its rights and obligations hereunder to any Person who is not
a Fifth Street Competitor. Any such assignee shall execute and deliver to the
Servicer, the Borrower and the Administrative Agent a fully-executed assignment
and acceptance substantially in the form of Exhibit M hereto (a “Assignment and
Acceptance”) and a fully-executed Joinder Supplement. The parties to any such
assignment, grant or sale of a participation interest shall execute and the
Lender record in its books and records, such agreement or document as may be
satisfactory to such parties. To the fullest extent effective under Applicable
Law (including Section 9-408 of the UCC), none of the Borrower, the Transferor
or the Servicer may assign, or permit any Lien (other than Permitted Liens) to
exist upon, any of its rights or obligations hereunder or under any Transaction
Document or any interest herein or in any Transaction Document without the prior
written consent of each Lender and the Administrative Agent.

(b) Notwithstanding any other provision of this Section 11.04, any Lender may at
any time pledge or grant a security interest in all or any portion of its rights
(including, without limitation, rights to payment of principal and interest)
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obligations of such Lender to a Federal Reserve Bank, without notice to or
consent of the Borrower or the Administrative Agent; provided that no such
pledge or grant of a security interest shall release such Lender from any of its
obligations hereunder, or substitute any such pledgee or grantee for such Lender
as a party hereto.

(c) Each Affected Party and each Indemnified Party shall be an express third
party beneficiary of this Agreement.

SECTION 11.05 Term of This Agreement. This Agreement, including, without
limitation, the Borrower’s representations and covenants set forth in Articles
IV and V and the Servicer’s representations, covenants and duties set forth in
Articles IV, V and VI, 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 Borrower or
the Servicer pursuant to Articles III and IV and the indemnification and payment
provisions of Article VIII, IX and Article XI and the provisions of
Section 2.10, Section 2.11, Section 11.07, Section 11.08 and Section 11.09 shall
be continuing and shall survive any termination of this Agreement.

SECTION 11.06 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 11.07 Costs, Expenses and Taxes.

(a) In addition to the rights of indemnification granted to the Collateral
Agent, the Administrative Agent, the Lenders and their respective Affiliates
under Section 8.01 and Section 8.02 hereof, each of the Borrower, the Servicer
and the Transferor agrees to pay on demand all reasonable out-of-pocket costs
and expenses of the Administrative Agent, the Lenders and the Collateral Agent
incurred in connection with the preparation, execution, delivery, administration
(including periodic auditing), syndication (pursuant to any agreement or other
arrangement with any additional lender), renewal, amendment or modification of,
any waiver or consent issued in connection with, this Agreement, the Transaction
Documents 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 for the Administrative Agent, the Lenders and the Collateral
Agent with respect thereto and with respect to advising the Administrative
Agent, the Lenders and the Collateral Agent as to their respective 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 counsel fees and expenses), incurred by the Administrative
Agent, the Lenders and the Collateral Agent in connection with the enforcement
or potential enforcement of this Agreement or any Transaction Document by such
Person and the other documents to be delivered hereunder or in connection
herewith.

 

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(b) The Borrower, the Servicer and the Transferor 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, the other Transaction
Documents or any other document providing liquidity support, credit enhancement
or other similar support to the Lenders in connection with this Agreement or the
funding or maintenance of Advances hereunder.

(c) The Servicer and the Transferor shall pay on demand all other out-of-pocket
costs, expenses and Taxes (excluding Taxes imposed on or measured by net income)
incurred by the Administrative Agent, the Lenders and the Collateral Agent,
including, without limitation, all costs and expenses incurred by the
Administrative Agent and the Lenders in connection with periodic audits of the
Borrower’s, the Transferor’s or the Servicer’s books and records.

(d) Any demand or request for payment of any amounts payable pursuant to this
Section.11.07 will be made first to the Borrower; provided that the Servicer and
Transferor agree, jointly and severally, to pay such amounts if the Borrower
does not pay such amounts within five Business Days of such demand or request.

SECTION 11.08 No Proceedings. Each of the parties hereto (other than the
Administrative Agent with the consent of the Lender) agree that it will not
institute against, or join any other Person in instituting against, the Borrower
any proceedings of the type referred to in the definition of Bankruptcy Event 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 provisions of this Section 11.08 are a material inducement for the
Administrative Agent, the Collateral Agent and the Lenders to enter into this
Agreement and the transactions contemplated hereby and are an essential term
hereof. The Collateral Agent (acting as directed by the Administrative Agent)
with the consent of the Lenders 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 11.09 Recourse Against Certain Parties.

(a) No recourse under or with respect to any obligation, covenant or agreement
(including, without limitation, the payment of any fees or any other
obligations) of the Administrative Agent, the Lenders or any Secured Party as
contained in this Agreement or any other agreement, instrument or document
entered into by the Administrative Agent, the Lenders or any Secured Party
pursuant hereto or in connection herewith shall be had against any administrator
of the Administrative Agent, the Lenders or any Secured Party or any
incorporator, affiliate, stockholder, officer, employee or director of the
Administrative Agent, the Lenders or any Secured Party or of any such
administrator, as such, by the enforcement of any assessment or by any legal or
equitable proceeding, by virtue of any statute or otherwise; it being expressly
agreed and understood that the agreements of each party hereto contained in this
Agreement and all of the other agreements, instruments and documents entered
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Agent, the Lenders or any Secured Party pursuant hereto or in connection
herewith are, in each case, solely the corporate obligations of such party (and
nothing in this Section 11.09 shall be construed to diminish in any way such
corporate obligations of such party), and that no personal liability whatsoever
shall attach to or be incurred by any administrator of the Administrative Agent,
the Lenders or any Secured Party or any incorporator, stockholder, affiliate,
officer, employee or director of the Lenders or the Administrative Agent or of
any such administrator, as such, or any of them, under or by reason of any of
the obligations, covenants or agreements of the Administrative Agent, the
Lenders or any Secured Party contained in this Agreement or in any other such
instruments, documents or agreements, or are implied therefrom, and that any and
all personal liability of every such administrator of the Administrative Agent,
the Lenders or any Secured Party and each incorporator, stockholder, affiliate,
officer, employee or director of the Administrative Agent, the Lenders or any
Secured Party or of any such administrator, or any of them, for breaches by the
Administrative Agent, the Lenders or any Secured Party of any such obligations,
covenants or agreements, which liability may arise either at common law or in
equity, by statute or constitution, or otherwise, is hereby expressly waived as
a condition of and in consideration for the execution of this Agreement.

(b) Notwithstanding any contrary provision set forth herein, no claim may be
made by the Borrower, the Transferor or the Servicer or any other Person against
the Administrative Agent, the Lenders or any Secured Party or their respective
Affiliates, directors, officers, employees, attorneys or agents for any special,
indirect, consequential or punitive damages in respect to any 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 Borrower, the Transferor and the
Servicer each 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.

(c) No obligation or liability to any Obligor under any of the Loan Assets is
intended to be assumed by the Administrative Agent, the Lenders or any Secured
Party under or as a result of this Agreement and the transactions contemplated
hereby.

(d) The provisions of this Section 11.09 shall survive the termination of this
Agreement.

SECTION 11.10 Execution in Counterparts; Severability; Integration. This
Agreement may be executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which when so executed shall be deemed
to be an original and all of which when taken together shall constitute one and
the same agreement. Delivery of an executed counterpart of a signature page to
this Agreement by e-mail in portable document format (.pdf) or facsimile shall
be effective as delivery of a manually executed counterpart of this Agreement.
In the event that any provision in or obligation under this Agreement shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby. This Agreement and any agreements or letters
(including fee letters) executed in connection herewith contains the final and
complete integration of all prior expressions by the parties hereto with respect
to the subject matter hereof and shall constitute the entire agreement among the
parties hereto with respect to the subject matter hereof, superseding all prior
oral or written understandings other than any fee letter delivered by the
Servicer to the Administrative Agent and the Lenders.

 

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SECTION 11.11 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 the Transaction
Documents, 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 Borrower and the Servicer agrees that service of process may be
effected by mailing a copy thereof by registered or certified mail, postage
prepaid, to the Borrower or the Servicer, as applicable, at its address
specified in Section 11.02 or at such other address as the Administrative Agent
shall have been notified in accordance herewith. Nothing in this Section 11.11
shall affect the right of the Lenders or the Administrative Agent to serve legal
process in any other manner permitted by law.

SECTION 11.12 Characterization of Conveyances Pursuant to the Purchase and Sale
Agreement.

(a) It is the express intent of the parties hereto that the conveyance of the
Eligible Loan Assets by the Transferor to the Borrower as contemplated by the
Purchase and Sale Agreement be, and be treated for all purposes (other than
accounting purposes and subject to the tax characterization of the Borrower and
the Advances described in Section 5.01(aa) and Section 5.02(j) hereof) as, a
sale by the Transferor of such Eligible Loan Assets. It is, further, not the
intention of the parties that such conveyance be deemed a pledge of the Eligible
Loan Assets by the Transferor to the Borrower to secure a debt or other
obligation of the Transferor. However, in the event that, notwithstanding the
intent of the parties, the Eligible Loan Assets are held to continue to be
property of the Transferor, then the parties hereto agree that: (i) the Purchase
and Sale Agreement shall also be deemed to be a security agreement under
Applicable Law; (ii) as set forth in the Purchase and Sale Agreement, the
transfer of the Eligible Loan Assets provided for in the Purchase and Sale
Agreement shall be deemed to be a grant by the Transferor to the Borrower of a
first priority security interest (subject only to Permitted Liens) in all of the
Transferor’s right, title and interest in and to the Eligible Loan Assets and
all amounts payable to the holders of the Eligible Loan Assets 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; (iii) the possession by the Borrower (or the
Collateral Custodian on its behalf) of Loan Assets 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
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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 Borrower for the purpose of perfecting such security interest
under Applicable Law. The parties further agree that any assignment of the
interest of the Borrower pursuant to any provision hereof shall also be deemed
to be an assignment of any security interest created pursuant to the terms of
the Purchase and Sale Agreement. The Borrower shall, to the extent consistent
with this Agreement and the other Transaction Documents, take such actions as
may be necessary to ensure that, if the Purchase and Sale Agreement was deemed
to create a security interest in the Eligible Loan Assets, such security
interest would be deemed to be a first priority perfected security interest
(subject only to Permitted Liens) under Applicable Law and will be maintained as
such throughout the term of this Agreement.

(b) It is the intention of each of the parties hereto that the Eligible Loan
Assets conveyed by the Transferor to the Borrower pursuant to the Purchase and
Sale Agreement shall constitute assets owned by the Borrower and shall not be
part of the Transferor’s estate in the event of the filing of a bankruptcy
petition by or against the Transferor under any bankruptcy or similar law.

(c) The Borrower agrees to treat, and shall cause the Transferor to treat, for
all purposes (other than accounting purposes and subject to the tax
characterization of the Borrower and the Advances described in Section 5.01(aa)
and Section 5.02(j) hereof), the transactions effected by the Purchase and Sale
Agreement as sales of assets to the Borrower. The Borrower and the Servicer each
hereby agree to cause the Transferor to reflect in the Transferor’s financial
records and to include a note in the publicly filed annual and quarterly
financial statements of Fifth Street 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 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.

SECTION 11.13 Confidentiality.

(a) Each of the Administrative Agent, the Lenders, the Servicer, the Collateral
Agent, the Borrower and the Transferor shall maintain and shall cause each of
its employees and officers to maintain the confidentiality of the Agreement and
all information with respect to the other parties, including all information
regarding the business of the Borrower and the Servicer hereto and their
respective businesses obtained by it or them in connection with the structuring,
negotiating and execution of the transactions contemplated herein, except that
each such party and its officers and employees may (i) disclose such information
to its external accountants, investigators, auditors, attorneys or other agents,
including any valuation firm engaged by such party in connection with any due
diligence or comparable activities with respect to the transactions and Loan
Assets contemplated herein and the agents of such Persons (“Excepted Persons”);
provided that each Excepted Person shall, as a condition to any such disclosure,
agree for the benefit of the Administrative Agent, the Lenders, the Servicer,
the Collateral Agent, the

 

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Borrower and the Transferor that such information shall be used solely in
connection with such Excepted Person’s evaluation of, or relationship with, the
Borrower and its affiliates, (ii) disclose the existence of the Agreement, but
not the financial terms thereof, (iii) disclose such information as is required
by Applicable Law and (iv) disclose the Agreement and such information in any
suit, action, proceeding or investigation (whether in law or in equity or
pursuant to arbitration) involving any of the Transaction Documents for the
purpose of defending itself, reducing its liability, or protecting or exercising
any of its claims, rights, remedies, or interests under or in connection with
any of the Transaction Documents. Notwithstanding the foregoing provisions of
this Section 11.13(a), the Servicer may, subject to Applicable Law and the terms
of any Loan Agreements, make available copies of the documents in the Servicing
Files and such other documents it holds in its capacity as Servicer pursuant to
the terms of this Agreement, to any of its creditors. It is understood that the
financial terms that may not be disclosed except in compliance with this
Section 11.13(a) include, without limitation, all fees and other pricing terms,
and all Events of Default, Servicer Termination Events, and priority of payment
provisions.

(b) Anything herein to the contrary notwithstanding, the Borrower and the
Servicer each hereby consents to the disclosure of any nonpublic information
with respect to it (i) to the Administrative Agent, the Lenders, the Account
Bank, the Collateral Agent or the Collateral Custodian by each other, (ii) by
the Administrative Agent, the Lenders, the Account Bank, the Collateral Agent
and the Collateral Custodian to any prospective or actual assignee or
participant of any of them provided such Person agrees to hold such information
confidential, or (iii) by the Administrative Agent, the Lenders, the Account
Bank, the Collateral Agent and the Collateral Custodian to any commercial paper
dealer or provider of a surety, guaranty or credit or liquidity enhancement to
any Lender, as applicable, and to any officers, directors, employees, outside
accountants and attorneys of any of the foregoing, provided each such Person is
informed of the confidential nature of such information. In addition, the
Lenders, the Administrative Agent, the Collateral Agent, the Account Bank and
the Collateral Custodian may disclose any such nonpublic information as required
pursuant to any law, rule, regulation, direction, request or order of any
judicial, administrative or regulatory authority or proceedings (whether or not
having the force or effect of law).

(c) Notwithstanding anything herein to the contrary, the foregoing shall not be
construed to prohibit (i) disclosure of any and all information that is or
becomes publicly known; (ii) disclosure of any and all information (a) if
required to do so by any applicable statute, law, rule or regulation, (b) to any
government agency or regulatory body having or claiming authority to regulate or
oversee any aspects of the Lenders’, the Administrative Agent’s, the Collateral
Agent’s, the Account Bank’s or the Collateral Custodian’s business or that of
their affiliates, (c) pursuant to any subpoena, civil investigative demand or
similar demand or request of any court, regulatory authority, arbitrator or
arbitration to which the Administrative Agent, any Lender, the Collateral Agent,
the Collateral Custodian or the Account Bank or an officer, director, employer,
shareholder or affiliate of any of the foregoing is a party, (d) in any
preliminary or final offering circular, registration statement or contract or
other document approved in advance by the Borrower, the Servicer or the
Transferor or (e) to any affiliate, independent or internal auditor, agent,
employee or attorney of the Collateral Agent or the Collateral Custodian having
a need to know the same, provided that the disclosing party advises such
recipient of the confidential nature of the information being disclosed; or
(iii) any other disclosure authorized by the Borrower, Servicer or the
Transferor.

 

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SECTION 11.14 Non-Confidentiality of Tax Treatment.

All parties hereto agree that each of them and each of their employees,
representatives, and other agents may disclose to any and all Persons, without
limitation of any kind, the tax treatment and tax structure of the transaction
and all materials of any kind (including, without limitation, opinions or other
tax analyses) that are provided to any of them relating to such tax treatment
and tax structure. “Tax treatment” and “tax structure” shall have the same
meaning as such terms have for purposes of Treasury Regulation Section 1.6011-4;
provided that with respect to any document or similar item that in either case
contains information concerning the tax treatment or tax structure of the
transaction as well as other information, the provisions of this Section 11.14
shall only apply to such portions of the document or similar item that relate to
the tax treatment or tax structure of the transactions contemplated hereby.

SECTION 11.15 Waiver of Set Off.

Each of the parties hereto hereby waives any right of setoff it may have or to
which it may be entitled under this Agreement from time to time against the
Administrative Agent, the Lenders or their respective assets.

SECTION 11.16 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.

SECTION 11.17 Ratable Payments.

If any Lender, whether by setoff or otherwise, shall obtain any payment (whether
voluntary, involuntary, through the exercise of any right of setoff, or
otherwise) on account of Advances owing to it (other than pursuant to Breakage
Fees, Section 2.10 or Section 2.11) in excess of its ratable share of payments
on account of the Advances obtained by all the Lenders, such Lender shall
forthwith purchase from the other Lenders such participations in the Advances
Outstanding owing to them as shall be necessary to cause such purchasing Lender
to share the excess payment ratably with each of them; provided that, if all or
any portion of such excess payment is thereafter recovered from such purchasing
Lender, such purchase from each Lender shall be rescinded and such Lender shall
repay to the purchasing Lender the purchase price to the extent of such recovery
together with an amount equal to such Lender’s ratable share (according to the
proportion of (i) the amount of such Lender’s required repayment to (ii) the
total amount so recovered from the purchasing Lender) of any interest or other
amount paid or payable by the purchasing Lender in respect of the total amount
so recovered.

 

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SECTION 11.18 Failure of Borrower or Servicer to Perform Certain Obligations.

If the Borrower or the Servicer, as applicable, fails to perform any of its
agreements or obligations under Section 5.01(t), Section 5.02(q) or
Section 5.03(e), the Administrative Agent may (but shall not be required to)
itself perform, or cause performance of, such agreement or obligation, and the
expenses of the Administrative Agent incurred in connection therewith shall be
payable by the Borrower or the Servicer (on behalf of the Borrower), as
applicable, upon the Administrative Agent’s demand therefor.

SECTION 11.19 Power of Attorney. The Borrower irrevocably authorizes the
Administrative Agent and appoints the Administrative Agent as its
attorney-in-fact to act on behalf of the Borrower (i) to file financing
statements necessary or desirable in the Administrative Agent’s sole discretion
to perfect and to maintain the perfection and priority of the interest of the
Secured Parties in the Collateral Portfolio and (ii) to file a carbon,
photographic or other reproduction of this Agreement or any financing statement
with respect to the Collateral Portfolio as a financing statement in such
offices as the Administrative Agent in its sole discretion deems necessary or
desirable to perfect and to maintain the perfection and priority of the
interests of the Secured Parties in the Collateral Portfolio. This appointment
is coupled with an interest and is irrevocable.

SECTION 11.20 Delivery of Termination Statements, Releases, etc. Upon payment in
full of all of the Obligations (other than unmatured contingent indemnification
obligations) and the termination of this Agreement, the Administrative Agent and
the Collateral Agent shall deliver to the Borrower termination statements,
reconveyances, releases and other documents necessary or appropriate to evidence
the termination of the Pledge and other Liens securing the Obligations, all at
the expense of the Borrower.

[Signature pages to follow.]

 

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

 

THE BORROWER:     FIFTH STREET FUNDING II, LLC     By:  

 

      Name:       Title:

[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]

 

Fifth Street Funding II, LLC

Loan and Servicing Agreement

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THE SERVICER:     FIFTH STREET FINANCE CORP.     By:  

 

      Name:       Title:

[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]

 

Fifth Street Funding II, LLC

Loan and Servicing Agreement

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THE TRANSFEROR:     FIFTH STREET FINANCE CORP.     By:  

 

      Name:       Title:

[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]

 

Fifth Street Funding II, LLC

Loan and Servicing Agreement

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THE ADMINISTRATIVE AGENT:     SUMITOMO MITSUI BANKING CORPORATION     By:  

 

      Name:       Title:

[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]

 

Fifth Street Funding II, LLC

Loan and Servicing Agreement

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LENDER:     SUMITOMO MITSUI BANKING CORPORATION     By:  

 

      Name:       Title:

[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]

 

Fifth Street Funding II, LLC

Loan and Servicing Agreement

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THE COLLATERAL AGENT:     SUMITOMO MITSUI BANKING CORPORATION     By:  

 

      Name:       Title:

 

Fifth Street Funding II, LLC

Loan and Servicing Agreement