Exhibit 10.2

PURCHASE AND SALE AGREEMENT

by and between

SOLAR CAPITAL FUNDING II LLC,

as the Purchaser

and

SOLAR CAPITAL LTD.

as the Seller

Dated as of December 17, 2010

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TABLE OF CONTENTS

 

         Page  

ARTICLE I.

  DEFINITIONS      1   

        Section 1.1.

          General      1   

        Section 1.2.

          Specific Terms      2   

        Section 1.3.

          Other Terms      5   

        Section 1.4.

          Computation of Time Periods      5   

        Section 1.5.

          Certain References      5   

ARTICLE II.

  SALE AND PURCHASE OF THE ELIGIBLE LOAN ASSETS AND OTHER PORTFOLIO ASSETS     
5   

        Section 2.1.

          Sale and Purchase of the Eligible Loan Assets and the Other Portfolio
Assets      5   

        Section 2.2.

          Purchase Price      8   

        Section 2.3.

          Payment of Purchase Price      8   

        Section 2.4.

          Nature of the Sales      8   

ARTICLE III.

  CONDITIONS OF SALE AND PURCHASE      10   

        Section 3.1.

          Conditions Precedent to Effectiveness      10   

        Section 3.2.

          Conditions Precedent to All Purchases      11   

ARTICLE IV.

  REPRESENTATIONS AND WARRANTIES      12   

        Section 4.1.

          Representations and Warranties of the Seller      12   

        Section 4.2.

          Representations and Warranties of the Seller Relating to the Agreement
and the Sale Portfolio      20   

        Section 4.3.

          Representations and Warranties of the Purchaser      21   

ARTICLE V.

  COVENANTS OF THE SELLER      23   

        Section 5.1.

          Protection of Title of the Purchaser      23   

        Section 5.2.

          Affirmative Covenants of the Seller      26   

        Section 5.3.

          Negative Covenants of the Seller      30   

ARTICLE VI.

  REPURCHASES AND SUBSTITUTION BY THE SELLER      32   

        Section 6.1.

          Repurchase of Loan Assets      32   

        Section 6.2.

          Substitution of Loan Assets      33   

        Section 6.3.

          Repurchase Limitations      34   

ARTICLE VII.

  ADDITIONAL RIGHTS AND OBLIGATIONS IN RESPECT OF THE SALE PORTFOLIO      34   

        Section 7.1.

          Rights of the Purchaser      34   

        Section 7.2.

          Rights With Respect to Loan Asset Files      35   

 

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TABLE OF CONTENTS

(cont’d)

 

          Page  

        Section 7.3.

           Notice to Collateral Agent, Administrative Agent and each Lender
Agent      35   

ARTICLE VIII.

   SELLER TERMINATION EVENTS      35   

        Section 8.1.

           Seller Termination Events      35   

        Section 8.2.

           Survival of Certain Provisions      38   

ARTICLE IX.

   INDEMNIFICATION      38   

        Section 9.1.

           Indemnification by the Seller      38   

        Section 9.2.

           Assignment of Indemnities      41   

ARTICLE X.

   MISCELLANEOUS      41   

        Section 10.1.

           Liability of the Seller      41   

        Section 10.2.

           Limitation on Liability      41   

        Section 10.3.

           Amendments; Limited Agency      42   

        Section 10.4.

           Waivers; Cumulative Remedies      42   

        Section 10.5.

           Notices      42   

        Section 10.6.

           Merger and Integration      43   

        Section 10.7.

           Severability of Provisions      43   

        Section 10.8.

           GOVERNING LAW; JURY WAIVER      43   

        Section 10.9.

           Consent to Jurisdiction; Service of Process      43   

        Section 10.10.

           Costs, Expenses and Taxes      43   

        Section 10.11.

           Counterparts      44   

        Section 10.12.

           Bankruptcy Non-Petition and Limited Recourse; Claims      44   

        Section 10.13.

           Binding Effect; Assignability      45   

        Section 10.14.

           Waiver of Setoff      45   

        Section 10.15.

           Headings and Exhibits      45   

        Section 10.16.

           Rights of Inspection      45   

        Section 10.17.

           Subordination      46   

        Section 10.18.

           Confidentiality      46   

SCHEDULES AND EXHIBITS

 

Schedule I

   -    Sale Portfolio List

Exhibit A

   -    Form of Loan Assignment

Exhibit B

   -    Form of Officer’s Purchase Date Certificate

Exhibit C

   -    Form of Power of Attorney for Seller

 

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PURCHASE AND SALE AGREEMENT

THIS PURCHASE AND SALE AGREEMENT, dated as of December 17, 2010, by and between
SOLAR CAPITAL LTD., a Maryland corporation, as the seller (the “Seller”) and
SOLAR CAPITAL FUNDING II LLC, a Delaware limited liability company, as the
purchaser (the “Purchaser”).

W I T N E S S E T H:

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

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

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

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

ARTICLE I.

DEFINITIONS

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

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

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

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

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

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

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

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

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

“Loan and Servicing Agreement” means that certain Loan and Servicing Agreement,
dated as of the Closing Date, by and among the Purchaser, as the Borrower, the
Seller, as the Servicer and the Transferor, Wells Fargo Securities, LLC, as the
Administrative Agent, each of the Conduit Lenders and Institutional Lenders from
time to time party thereto, each of the Lender Agents from time to time party
thereto, Wells Fargo Delaware Trust Company, N.A., as the Collateral Agent and
Wells Fargo Bank, N.A., as the Account Bank and as the Collateral Custodian, as
such may be amended, restated, supplemented or otherwise modified from time to
time pursuant to the terms thereof.

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

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

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

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

 

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

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

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

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

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

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

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

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

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

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

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

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

“Purchaser” has the meaning specified in the Preamble.

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

 

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

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

“Repurchase Price” means, with respect to a Loan Asset to be repurchased
pursuant to Article VI hereof, (i) the greater of (a) an amount equal to the
Purchase Price less all Principal Collections received in respect of such Loan
Asset from the Purchase Date to the date of repurchase hereunder and (b) an
amount equal to the Advance Date Assigned Value multiplied by the Outstanding
Balance of such Loan Asset, plus (ii) any expenses or fees with respect to such
Loan Asset and costs and damages incurred by the Administrative Agent or by any
Lender in connection with any violation by such Loan Asset of any predatory or
abusive lending law which is an Applicable Law.

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

“Sale Portfolio” means all right, title, and interest (whether now owned or
hereafter acquired or arising, and wherever located) of the Seller in the
property identified below in clauses (i) through (iii) and all accounts, cash
and currency, chattel paper, tangible chattel paper, electronic chattel paper,
copyrights, copyright licenses, equipment, fixtures, contract rights, general
intangibles, 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, but excluding any related Attached Equity;

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

(iii) all income and Proceeds of the foregoing.

“Schedule I” means the schedule of all Sale Portfolio that is Sold by the Seller
to the Purchaser on a Purchase Date, as supplemented on any subsequent Purchase
Date by the “Schedule I” attached to the applicable Loan Assignment, and
incorporated herein by reference, as such schedule may be supplemented and
amended from time to time pursuant to the terms hereof, which schedule shall,
together with all supplements and amendments thereto, be included in and made
part of the Loan Asset Schedule attached to the Loan and Servicing Agreement.

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

 

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

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

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

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

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

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

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

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

ARTICLE II.

SALE AND PURCHASE OF THE ELIGIBLE LOAN ASSETS

AND OTHER PORTFOLIO ASSETS

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

(a) Subject to the terms and conditions of this Agreement (including the
conditions to Purchase set forth in Article III), on and after the Closing Date,
the Seller hereby agrees to (i) sell, transfer and otherwise convey
(collectively, “Sell” and any such sale, transfer and/or other conveyance, a
“Sale”), from time to time, to the Purchaser, without recourse (except to the
extent specifically provided herein), and the Purchaser hereby agrees to
purchase, all right, title and interest of the Seller (whether now owned or
hereafter acquired or arising, and wherever located) in and to certain Sale
Portfolio designated by the Seller and (ii) transfer, or cause the deposit into,
the Collection Account of all Available Collections received by the Seller on
account of any Sale Portfolio hereunder on and after the Purchase Date with
respect to such Sale Portfolio, in each case, within two Business Days of the
receipt thereof. The Seller hereby acknowledges that each Sale to the Purchaser
hereunder is absolute and irrevocable, without reservation or retention of any
interest whatsoever by the Seller.

 

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

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

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

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

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

(g) In connection with each Purchase of Sale Portfolio hereunder, the Seller
shall cause to be delivered to the Collateral Custodian (with a copy to the
Administrative Agent), no later than 2:00 p.m. one Business Day prior to the
related Purchase Date, a faxed or e-mailed copy of the duly executed original
promissory notes of the Loan Assets (and, in the case of any Noteless Loan
Asset, a fully executed assignment agreement) and if any Loan Assets are closed
in escrow, a certificate (in the form of Exhibit K to the Loan and Servicing
Agreement) from the closing attorneys of such Loan Assets certifying the
possession of the Required Loan Documents; provided that, notwithstanding the
foregoing, the Seller shall cause the Loan Asset Checklist and the Required Loan
Documents to be in the possession of the Collateral Custodian within five
Business Days after the related Purchase Date.

 

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

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

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

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

(l) The Seller shall, at all times, continue to fulfill its obligations under,
and in strict conformance with, the terms of all Loan Agreements related to any
Sale Portfolio purchased hereunder, including without limitation any obligations
pertaining to any Retained Interest.

(m) The Seller and the Purchaser each acknowledge with respect to itself that
the representations and warranties of the Seller in Sections 4.1 and 4.2 hereof
and of the Purchaser in Section 4.3 hereof, and the covenants and agreements of
the Seller herein, including without limitation, in Article V and Article VI
hereof, will run to and be for the benefit of the Purchaser and the Collateral
Agent (on behalf of the Secured Parties) and the Collateral Agent (on behalf of
the Secured Parties) may enforce directly (without joinder of the Purchaser when
enforcing against the Seller), the obligations of the Seller or the Purchaser,
as applicable, with respect to breaches of such representations, warranties,
covenants and all other obligations as set forth in this Agreement.

 

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Section 2.2. Purchase Price.

The purchase price for each item of Sale Portfolio Sold to the Purchaser
hereunder (the “Purchase Price”) shall be in a dollar amount equal to the fair
market value of such Loan Asset as determined from time to time by the Seller
and the Purchaser. Each of the Purchaser and the Seller hereby agree that the
fair market value of each Loan Asset Sold hereunder as of the related Purchase
Date shall not be less than the Advance Date Assigned Value thereof multiplied
by the Outstanding Balance of such Loan Asset on the related Purchase Date.

Section 2.3. Payment of Purchase Price.

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

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

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

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

Section 2.4. Nature of the Sales.

(a) It is the express intent of the parties hereto that the Sale of the Sale
Portfolio by the Seller to the Purchaser hereunder be, and be treated for all
purposes (other than tax and accounting purposes) as an absolute sale by the
Seller (free and clear of any Lien, security interest, charge or encumbrance
other than Permitted Liens) of such Sale Portfolio. It is,

 

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

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

(c) The Purchaser agrees to treat, and shall cause the Seller to treat, for all
purposes (other than tax and accounting purposes), the transactions effected by
this Agreement as sales of assets to the Purchaser. The Seller agrees to reflect
in the Seller’s financial records and to include a note in the publicly filed
annual and quarterly financial statements of Solar Capital indicating that:
(i) assets related to transactions (including transactions pursuant to the
Transaction Documents) that do not meet GAAP requirements for accounting sale
treatment are reflected in the consolidated balance sheet of Solar Capital 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 Solar Capital, and the creditors of that special purpose
entity have received ownership and/or security interests in such assets and such
assets are not intended to be available to the creditors of sellers (or any
affiliate of the sellers) of such assets to that special purpose entity.

 

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ARTICLE III.

CONDITIONS OF SALE AND PURCHASE

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

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

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

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

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

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

 

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

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

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

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

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

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

(a) The following statements shall be true:

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

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

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

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

 

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

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

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

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

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

ARTICLE IV.

REPRESENTATIONS AND WARRANTIES

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

(a) Organization and Good Standing. The Seller has been duly organized and is
validly existing as a corporation in good standing under the laws of the State
of Maryland (subject to Section 5.1(f)), with all requisite corporate power and
authority to own or lease its

 

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properties and to conduct its business as such business is presently conducted,
and had at all relevant times, and now has, all necessary power, authority and
legal right to acquire and own the Sale Portfolio and to Sell such Sale
Portfolio to the Purchaser hereunder.

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

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

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

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

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

 

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

(h) State of Organization, Etc. Except as permitted hereunder, the Seller’s
legal name is as set forth in this Agreement. Except as permitted hereunder, the
Seller has not changed its name since its incorporation; does not have
tradenames, fictitious names, assumed names or “doing business as” names. Except
as permitted hereunder, the chief executive office of the Seller (and the
location of the Seller’s records regarding the Sale Portfolio (other than those
delivered to the Collateral Custodian)) is at the address of the Seller set
forth in Section 10.5. The Seller’s only jurisdiction of incorporation is
Maryland, and, except as permitted hereunder, the Seller has not changed its
jurisdiction of incorporation.

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

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

(k) Selection Procedures. No procedures believed by the Seller to be adverse to
the interests of the Purchaser were utilized by the Seller in identifying and/or
selecting the Eligible Loan Assets included in the Sale Portfolio.

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

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

(n) Exchange Act Compliance; Regulations T, U and X. None of the transactions
contemplated herein or in the other Transaction Documents (including, without

 

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limitation, the use of the proceeds from the Sale of the Sale Portfolio) will
violate or result in a violation of Section 7 of the Exchange Act, or any
regulations issued pursuant thereto, including, without limitation, Regulations
T, U and X of the Board of Governors of the Federal Reserve System, 12 C.F.R.,
Chapter II. The Seller does not own or intend to carry or purchase, and no
proceeds from the Sale of the Sale Portfolio will be used to carry or purchase,
any Margin Stock or to extend “purpose credit” within the meaning of Regulation
U.

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

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

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

(r) ERISA Compliance. The present value of all benefits vested under each
“employee pension benefit plan”, as such term is defined in Section 3 of ERISA,
that is, or at any time during the preceding six years was, maintained by the
Seller or any ERISA Affiliate of the Seller, or open to participation by
employees of the Seller or of any ERISA Affiliate of the Seller, as from time to
time in effect (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). 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

 

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have occurred with respect to any Pension Plan that, in the aggregate, could
subject the Seller to any material Tax, penalty or other liability. No notice of
intent to terminate a Pension Plan has been filed, nor has any Pension Plan been
terminated under Section 4041(f) of ERISA, nor has the Pension Benefit Guaranty
Corporation instituted proceedings to terminate, or appoint a trustee to
administer, a Pension Plan and no event has occurred or condition exists that
might constitute grounds under Section 4042 of ERISA for the termination of, or
the appointment of a trustee to administer, any Pension Plan.

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

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

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

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

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

(x) Special Purpose Entity. The Purchaser is an entity with assets and
liabilities separate and distinct from those of the Seller and any Affiliates
thereof, and the Seller hereby acknowledges that the Administrative Agent, the
Lenders, the Lender Agents, the Collateral Agent, the Collateral Custodian and
the other Secured Parties are entering into the transactions contemplated by the
Loan and Servicing Agreement in reliance upon the Purchaser’s identity as a
legal entity that is separate from the Seller and from each other Affiliate of
the Seller. Therefore, from and after the date of execution and delivery of this
Agreement, the Seller shall take all reasonable steps, including, without
limitation, all steps that the Administrative Agent and the Collateral Agent may
from time to time request, to maintain the Purchaser’s identity as a separate
legal entity and to make it manifest to third parties that the Purchaser is an
entity with assets and liabilities distinct from those of the Seller and each
other Affiliate thereof and not just a division of the Seller or any such other
Affiliate (other than for tax purposes). Without limiting the generality of the
foregoing and in addition to the other covenants set forth herein, the Seller
shall take all reasonable steps to ensure that the Purchaser has not and will
not take, refrain from taking, or fail to take (as applicable) any action
described in Section 9(j) of its limited liability company operating agreement
and Sections 5.01(a), 5.01(b), 5.02(a) and 5.02(b) of the Loan and Servicing
Agreement.

 

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

(z) Security Interest.

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

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

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

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

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

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

 

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

(viii) other than in the case of Noteless Loan Assets, the Seller has received,
or subject to the delivery requirements herein will receive, a written
acknowledgment from the Collateral Custodian that the Collateral Custodian, as
the bailee of the Collateral Agent, is holding the underlying promissory notes
that constitute or evidence the Loan Assets solely on behalf of and for the
Collateral Agent, for the benefit of the Secured Parties; provided that the
acknowledgement of the Collateral Custodian set forth in Section 12.11 of the
Loan and Servicing Agreement may serve as such acknowledgement;

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

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

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

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

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

(cc) Set–Off, Etc. No Sale Portfolio has been compromised, adjusted, extended,
satisfied, subordinated, rescinded, set–off or modified by the Seller or the
Obligor thereof, and no Sale Portfolio is subject to compromise, adjustment,
extension, satisfaction,

 

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subordination, rescission, set–off, counterclaim, defense, abatement,
suspension, deferment, deduction, reduction, termination or modification,
whether arising out of transactions concerning the Sale Portfolio or otherwise,
by the Seller or the Obligor with respect thereto, except for amendments,
extensions or modifications to such Sale Portfolio otherwise permitted under
Section 6.04(a) of the Loan and Servicing Agreement and in accordance with the
Servicing Standard.

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

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

(ff) Confirmation from the Seller. The Seller has provided written confirmation
to the Purchaser that the Seller will not cause the Purchaser to file a
voluntary petition under the Bankruptcy Code.

(gg) Environmental. With respect to each item of Underlying Collateral as of the
Cut-Off Date for the Loan Asset related to such Underlying Collateral, to the
actual knowledge of a Responsible Officer of the Seller (a) the related
Obligor’s operations comply in all material respects with all applicable
Environmental Laws; (b) none of the related Obligor’s operations is the subject
of a Federal or state investigation evaluating whether any remedial action,
involving expenditures, is needed to respond to a release of any Hazardous
Materials into the environment; and (c) the related Obligor does not have any
material contingent liability in connection with any release of any Hazardous
Materials into the environment. As of the Cut-Off Date for the Loan Asset
related to such Underlying Collateral, the Seller has not received any written
or verbal notice of, or inquiry from any Governmental Authority regarding, any
violation, alleged violation, non-compliance, liability or potential liability
regarding environmental matters or compliance with Environmental Laws with
regard to any of the Underlying Collateral, nor does the Seller have knowledge
or reason to believe that any such notice will be received or is being
threatened.

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

 

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

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

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

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

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

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

(a) Binding Obligation, Valid Transfer and Security Interest. This Agreement,
together with the Loan Assignments, constitutes a valid transfer to the
Purchaser of all right, title and interest in, to and under all Sale Portfolio,
free and clear of any Lien of any Person claiming through or under the Seller or
its Affiliates, except for Permitted Liens. If the conveyances contemplated by
this Agreement are determined to be a transfer for security, then this Agreement
constitutes a grant of a security interest in all Sale Portfolio to the
Purchaser which upon the delivery of the Required Loan Documents and the filing
of the financing

 

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statements shall be a first priority perfected security interest in all Sale
Portfolio, subject only to Permitted Liens. Neither the Seller nor any Person
claiming through or under the Seller shall have any claim to or interest in the
Collection Account; provided if this Agreement constitutes only a grant of a
security interest in such property, then the Seller shall have the rights in
such property as a debtor for purposes of the UCC.

(b) Eligibility of Sale Portfolio. (i) Schedule I is an accurate and complete
listing of all the Sale Portfolio as of the related Cut–Off Date and the
information contained therein with respect to the identity of such Sale
Portfolio and the amounts owing thereunder is true and correct as of the related
Cut–Off Date, (ii) each item of the Sale Portfolio Purchased by the Purchaser
hereunder is an Eligible Loan Asset, and (iii) with respect to each item of the
Sale Portfolio all consents, licenses, approvals or authorizations of or
registrations or declarations of any Governmental Authority or any Person
required to be obtained, effected or given by the Seller in connection with the
transfer of an ownership interest or security interest in each item of Sale
Portfolio to the Purchaser have been duly obtained, effected or given and are in
full force and effect. For the avoidance of doubt, any inaccurate representation
that a Loan Asset is an Eligible Loan Asset hereunder or under the Loan and
Servicing Agreement shall not constitute an Event of Default under the Loan and
Servicing Agreement if the Seller complies with Section 2.07(c) of the Loan and
Servicing Agreement and the Transferor complies with Section 6.1 hereunder
(subject to the 30 day grace period set forth in such provisions); provided,
that any such Loan Asset will not be included in any calculation of the Loan to
Value Ratio or the Borrowing Base (as set forth in the Loan and Servicing
Agreement) during such 30 day period.

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

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

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

(a) Organization and Good Standing. The Purchaser has been duly organized and is
validly existing and in good standing as a limited liability company under the
laws of the State of Delaware or such other jurisdiction as permitted under the
terms of the Transaction

 

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Documents, with the power and authority to own or lease its properties and to
conduct its business as such properties are currently owned and such business is
currently conducted, and had at all relevant times, and has, all necessary
power, authority and legal right to acquire and own the Sale Portfolio.

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

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

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

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

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

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

 

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

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

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

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

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

ARTICLE V.

COVENANTS OF THE SELLER

Section 5.1. Protection of Title of the Purchaser.

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

 

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

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

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

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

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

 

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(ii) deliver or cause to be delivered to the Purchaser, the Collateral Agent,
the Administrative Agent and each Lender Agent an opinion of the counsel for
Seller, in form and substance reasonably satisfactory to the Purchaser, the
Collateral Agent and the Administrative Agent, confirming and updating the
opinion delivered pursuant to Section 3.1 with respect to perfection and
otherwise to the effect that the security interest hereunder continues to be an
enforceable and perfected security interest, subject to no other Liens of record
except as provided herein or otherwise permitted hereunder, which opinion may
contain usual and customary assumptions, limitations and exceptions.

(f) The Seller shall not (x) make any change to its corporate name or use any
tradenames, fictitious names, assumed names, “doing business as” names or other
names, move the location of its principal place of business and chief executive
office, change the offices where it keeps records concerning the Sale Portfolio
from the address set forth under its name in Section 10.5, or change the
jurisdiction of its incorporation, or (y) move, or consent to the Collateral
Custodian moving, the Required Loan Documents and Loan Asset Files from the
location required under the Transaction Documents, unless, in each case, the
Seller shall provide the Administrative Agent with such Opinions of Counsel and
other documents and instruments as the Administrative Agent may request in
connection therewith and has taken all actions required under the UCC of each
relevant jurisdiction in order to continue the first priority perfected security
interest of the Purchaser in the Sale Portfolio.

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

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

(i) If the Seller fails to perform any of its obligations hereunder, the
Purchaser, the Collateral Agent or the Administrative Agent may (but shall not
be required to) perform, or cause performance of, such obligation; and the
Purchaser’s, the Collateral Agent’s or the Administrative Agent’s costs and
expenses incurred in connection therewith shall be payable by the Seller as
provided in Section 9.1. The Seller irrevocably authorizes the Purchaser, the
Collateral Agent or the Administrative Agent at any time and from time to time
at the

 

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Purchaser’s, the Collateral Agent’s or the Administrative Agent’s sole
discretion and appoints the Purchaser, the Collateral Agent and the
Administrative Agent as its attorney–in–fact pursuant to a Power of Attorney
substantially in the form of Exhibit C to act on behalf of the Seller (i) to
file financing statements on behalf of the Seller, as debtor, necessary or
desirable in the Purchaser’s, the Collateral Agent’s or the Administrative
Agent’s sole discretion to perfect and to maintain the perfection and priority
of the interest of the Purchaser or the Collateral Agent in the Sale Portfolio
and (ii) to file a carbon, photographic or other reproduction of this Agreement
or any financing statement with respect to the Sale Portfolio as a financing
statement in such offices as the Purchaser, the Collateral Agent or the
Administrative Agent in their sole discretion deem necessary or desirable to
perfect and to maintain the perfection and priority of the interests of the
Purchaser or the Collateral Agent in the Sale Portfolio. This appointment is
coupled with an interest and is irrevocable.

Section 5.2. Affirmative Covenants of the Seller.

From the date hereof until the Collection Date:

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

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

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

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

(e) Separate Identity. The Seller acknowledges that the Administrative Agent,
the Collateral Agent, the Collateral Custodian, the Lenders, the Lender Agents
and the other Secured Parties are entering into the transactions contemplated by
this Agreement, the Loan and Servicing Agreement and the other Transaction
Documents in reliance upon the Purchaser’s identity as a legal entity that is
separate from the Seller and each other Affiliate of the Seller. Therefore, from
and after the date of execution and delivery of this Agreement, the Seller will
take all reasonable steps including, without limitation, all steps that the
Administrative Agent or the Collateral Agent may from time to time reasonably
request to maintain the Purchaser’s identity as a legal entity that is separate
from the Seller and each other

 

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Affiliate of the Seller and to make it manifest to third parties that the
Purchaser is an entity with assets and liabilities distinct from those of the
Seller and each other Affiliate thereof (other than for tax or accounting
purposes) and not just a division of the Seller or any such other Affiliate.
Without limiting the generality of the foregoing and in addition to the other
covenants set forth herein, the Seller agrees that:

(i) the Seller will take all other actions necessary on its part to ensure that
the Purchaser is at all times in compliance with the criteria and the
restrictions set forth in Section 9(j) of the limited liability company
operating agreement of the Purchaser and Sections 5.01(a), 5.01(b), 5.02(a) and
5.02(b) of the Loan and Servicing Agreement;

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

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

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

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

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

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

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

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

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

 

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

(i) Notices.

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

(ii) Auditors’ Management Letters. Promptly after the receipt thereof, the
Seller will (i) provide the Purchaser with any auditors’ management letters that
are received by the Seller or by its accountants and (ii) notify the
Administrative Agent of the receipt of any auditors’ management letters and,
upon request of the Administrative Agent, provide the Administrative Agent with
a copy of any auditors’ management letters.

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

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

 

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(v) Proceedings. As soon as possible and in any event within three Business
Days, after the Seller receives notice or obtains knowledge thereof, the Seller
will provide the Purchaser, the Collateral Agent and the Administrative Agent
with notice of any settlement of, material judgment (including a material
judgment with respect to the liability phase of a bifurcated trial) in or
commencement of any material labor controversy, material litigation, material
action, material suit or material proceeding before any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, affecting the Sale Portfolio, the Transaction Documents, the Collateral
Agent’s, for the benefit of the Secured Parties, interest in the Sale Portfolio,
or the Purchaser, the Servicer, the Seller or the Transferor or any of their
Affiliates. For purposes of this Section 5.2(i), (i) any settlement, judgment,
labor controversy, litigation, action, suit or proceeding affecting the Sale
Portfolio, the Transaction Documents, the Collateral Agent’s, for the benefit of
the Secured Parties, interest in the Sale Portfolio, or the Purchaser in excess
of $500,000 shall be deemed to be material and (ii) any settlement, judgment,
labor controversy, litigation, action, suit or proceeding affecting the Seller
or any of its Affiliates (other than the Purchaser) in excess of $10,000,000
shall be deemed to be material.

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

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

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

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

 

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

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

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

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

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

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

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

Section 5.3. Negative Covenants of the Seller.

From the date hereof until the Collection Date:

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

 

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

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

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

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

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

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

 

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Seller, or (e) permit to exist any occurrence of any reportable event described
in Title IV of ERISA with respect to any Pension Plan other than an event for
which the reporting requirements have been waived by regulations.

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

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

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

ARTICLE VI.

REPURCHASES AND SUBSTITUTION BY THE SELLER

Section 6.1. Repurchase of Loan Assets. In the event of the occurrence of a
Seller Purchase Event, the Seller will within 30 days of the discovery by or
notice (from any Person) to the Seller of the Seller Purchase Event,
(i) purchase each Loan Asset hereunder which is affected by or related to such
Seller Purchase Event from the Purchaser, and the Seller shall pay to the
Purchaser (by means of a deposit to the Collection Account) the Repurchase Price
of such Loan Asset as of the date of the purchase thereof from the Purchaser or
(ii) with the consent of the Administrative Agent and subject to the
satisfaction of the conditions in Section 6.2, substitute for such Loan Asset, a
Substitute Eligible Loan Asset. It is understood and agreed that the obligation
of the Seller to purchase the Loan Assets or substitute a Substitute Eligible
Loan Asset for the Loan Assets which are affected by or related to such Seller
Purchase Event is not intended to, and shall not, constitute a guaranty of the
collectability or payment of any Loan Asset which is not collected, not paid or
uncollectible on account of the insolvency, bankruptcy or financial inability to
pay of the related Obligor. Upon deposit in the Collection Account of the
Repurchase Price for any Loan Asset purchased by the Seller, the Purchaser
shall, automatically and without further action be deemed to transfer, assign
and set over to the Seller, without recourse, representation or warranty of any
kind, except as to the absence of Liens, charges or encumbrances created by or
arising solely as a result of actions of the Purchaser or the Collateral Agent,
all the right, title and interest of the Purchaser, in, to and under such Loan
Asset and all future monies due or to become due with respect thereto, the
Underlying Collateral, all Proceeds of such Loan Asset and Recoveries and
Insurance Proceeds relating thereto, all rights to security for such Loan Asset
and all Proceeds and products of the foregoing. The Purchaser shall (and shall
request the Collateral Agent to), at the sole expense of the Seller, execute
such documents and instruments of transfer as may be prepared by the Seller and
take such other actions as may be reasonably requested by the Seller in order to
effect the transfer of such Loan Asset pursuant to this Section 6.1. Such Sale
shall be a sale outright, and not for security.

 

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Section 6.2. Substitution of Loan Assets.

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

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

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

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

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

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

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

(vi) no selection procedures adverse to the interests of the Purchaser, the
Administrative Agent, the Lenders, the Lender Agents or the other Secured
Parties were utilized by the Seller in the selection of the Loan Asset to be
replaced by the Substitute Eligible Loan Asset;

(vii) the Outstanding Balance of all Loan Assets (other than Warranty Loan
Assets) sold pursuant to Section 2.07(b) of the Loan and Servicing Agreement or
substituted pursuant to this Section 6.2 during the 12-month period (or such
lesser number of months as shall have elapsed as of such date) immediately
preceding the proposed date of Substitution does not exceed 20% of the highest
aggregate Outstanding Balance of any month during such 12-month period (or such
lesser number of months as shall have elapsed as of such date);

 

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(viii) the Outstanding Balance of all Loan Assets subject to clause (ii) or
(iv) of the definition of “Value Adjustment Event” (other than Warranty Loan
Assets) substituted pursuant to this Section 6.2 or otherwise sold or
transferred to the Seller (or an Affiliate thereof) during the 12-month period
(or such lesser number of months as shall have elapsed as of such date)
immediately preceding the proposed date of sale or Substitution does not exceed
10% of the highest aggregate Outstanding Balance of any month during such
12-month period (or such lesser number of months as shall have elapsed as of
such date);

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

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

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

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

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

ARTICLE VII.

ADDITIONAL RIGHTS AND OBLIGATIONS IN

RESPECT OF THE SALE PORTFOLIO

Section 7.1. Rights of the Purchaser.

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

 

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

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

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

Section 7.2. Rights With Respect to Loan Asset Files.

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

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

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

ARTICLE VIII.

SELLER TERMINATION EVENTS

Section 8.1. Seller Termination Events.

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

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

 

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

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

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

 

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

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

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

(viii) any Lien in an amount equal to or greater than $10,000,000 has been
asserted against or imposed on, any real or personal property of the Seller
pursuant to the Comprehensive Environmental Response, Compensation, and
Liability Act, 42 U.S.C. § 9607(1), or any equivalent or comparable state law,
relating to or arising from the costs of, response to, or investigation,
remediation or monitoring of, any environmental contamination resulting from the
current or past operations of the Seller; or

(ix) a Federal tax notice of Lien, in an amount equal to or greater than
$10,000,000, shall have been filed against the Seller unless there shall have
been delivered to the Administrative Agent and each Lender Agent proof of
release of such Lien;

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

 

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Section 8.2. Survival of Certain Provisions.

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

ARTICLE IX.

INDEMNIFICATION.

Section 9.1. Indemnification by the Seller.

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

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

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

(iii) any Taxes (other than Taxes based upon the net or gross income of an
Indemnified Party and Taxes that would constitute Excluded Amounts) that may at
any time be asserted against any Indemnified Party with respect to the
transactions contemplated in this Agreement, including, without limitation, any
sales, gross receipts, general corporation, tangible or intangible personal
property, privilege, stamp or license Taxes and costs and expenses in defending
against the same, arising by reason of the acts to be performed by the Seller
under this Agreement and imposed against such Indemnified Party. Without
limiting the foregoing, in the event that the Purchaser, the

 

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Collateral Agent, the Collateral Custodian, the Account Bank, the Servicer, any
Lender, any Lender Agent or the Administrative Agent receives actual notice of
any Transfer Taxes arising out of the Sale of any Sale Portfolio from the Seller
to the Purchaser under this Agreement, on written demand by such party, or upon
the Seller otherwise being given notice thereof, the Seller shall pay, and
otherwise indemnify and hold the Purchaser, the Collateral Agent, the Collateral
Custodian, the Account Bank, the Servicer, each Lender, each Lender Agent and
the Administrative Agent harmless, on an after-tax basis, from and against any
and all such Transfer Taxes (it being understood that the Purchaser, the
Collateral Agent, the Collateral Custodian, the Account Bank, the Servicer, the
Lenders, the Lender Agents and the Administrative Agent shall have no
contractual obligation to pay such Transfer Taxes);

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

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

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

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

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

(ix) the failure by the Seller to comply with any term, provision or covenant
contained in this Agreement or any agreement executed in connection with this
Agreement, any Transaction Document or with any Applicable Law;

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

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

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

 

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(xiii) any dispute, claim, offset or defense (other than the discharge in
bankruptcy of the Obligor) of the Obligor to the payment with respect to any
Sale Portfolio (including, without limitation, a defense based on the Sale
Portfolio not being a legal, valid and binding obligation of such Obligor
enforceable against it in accordance with its terms);

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

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

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

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

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

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

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

(xxi) failure or delay in assisting a successor Servicer in assuming each and
all of the Servicer’s obligations to service and administer the Collateral
Portfolio in accordance with the Loan and Servicing Agreement, or failure or
delay in complying with instructions from the Administrative Agent with respect
thereto.

 

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

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

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

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

Section 9.2. Assignment of Indemnities.

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

ARTICLE X.

MISCELLANEOUS

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

Section 10.2. Limitation on Liability. Except with respect to any claim arising
solely out of the willful misconduct or gross negligence of the Lenders, the
Lender Agents, the Collateral Agent, the Collateral Custodian, the
Administrative Agent or any other Secured Party, no claim may be made by the
Seller or any other Person against the Lenders, the Lender Agents, the
Collateral Agent, the Collateral Custodian, the Administrative Agent or any
other Secured Party or their respective Affiliates, directors, officers,
employees, attorneys or agents for any special, indirect, consequential or
punitive damages in respect of any claim for breach of contract or any other
theory of liability arising out of or related to the transactions contemplated
by this

 

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Agreement, or any act, omission or event occurring in connection therewith; and
the Seller hereby waives, releases and agrees not to sue upon any claim for any
such damages, whether or not accrued and whether or not known or suspected to
exist in its favor.

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

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

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

Purchaser

Solar Capital Funding II LLC

500 Park Avenue, 5th Floor

New York, NY 10022

Attention: Nicholas Radesca

Facsimile: (212) 993-1698

Phone: (212) 993-1668

Seller

Solar Capital Ltd.

500 Park Avenue, 5th Floor

New York, NY 10022

Attention: Nicholas Radesca

Facsimile: (212) 993-1698

Phone: (212) 993-1668

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.

 

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

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

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

Section 10.9. Consent to Jurisdiction; Service of Process.

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

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

Section 10.10. Costs, Expenses and Taxes.

(a) In addition to the rights of indemnification granted to the Purchaser and
its Affiliates and officers, directors, employees and agents thereof under
Article IX hereof, the Seller agrees to pay on demand all reasonable
out-of-pocket costs and expenses of the Purchaser or its assignees incurred in
connection with the preparation, execution, delivery, enforcement,
administration (including periodic auditing), renewal, amendment or modification
of, any waiver

 

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

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

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

(d) For the avoidance of doubt, costs and expenses to be paid pursuant to this
Section 10.10 shall exclude all allocable overhead costs and expenses.

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

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

 

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Section 10.13. Binding Effect; Assignability.

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

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

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

Section 10.14. Waiver of Setoff.

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

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

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

Section 10.16. Rights of Inspection. The Purchaser and the Administrative Agent,
and each of their respective representatives and assigns may conduct at any
reasonable time, with reasonable notice, and from time to time, and the Seller
will fully cooperate with, a reasonable number of field examinations and audits
of the inventory, the Loan Assets and business affairs of the Seller each
calendar year, subject to any limitations in the Loan and Servicing Agreement.
Each such inspection shall be at the sole expense of the Seller. The Purchaser
and its representatives and successors and assigns acknowledge that in
exercising the rights and

 

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privileges conferred in this Section 10.16, it or its representatives or assigns
may, from time to time, obtain knowledge of information, practices, books,
correspondence and records of a confidential nature and in which the Seller has
a proprietary interest. The Purchaser and its representatives and successors and
assigns each agree that (i) it shall retain in strict confidence and shall use
its reasonable efforts to ensure that its representatives retain in strict
confidence and will not disclose without the prior written consent of the Seller
any or all of such information, practices, books, correspondence and records
furnished to them and (ii) that it will not, and will use its reasonable efforts
to ensure that its representatives and assigns will not, make any use whatsoever
(other than for the purposes contemplated by this Agreement) of any of such
information, practices, books, correspondence and records without the prior
written consent of the Seller, unless such information is generally available to
the public or is required by law to be disclosed.

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

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

[Signature pages to follow.]

 

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

 

SOLAR CAPITAL FUNDING II LLC, as the Purchaser By:  

 

  Name:   Title:

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SOLAR CAPITAL LTD., as the Seller By:  

 

  Name:   Title: