Exhibit
10.2


 


EXECUTION
VERSION


 


 


FIRST TIER PURCHASE AND
SALE AGREEMENT


 


 


among


 


 


ARES CAPITAL CP FUNDING
HOLDINGS II LLC,


 


 


as the Purchaser


 


 


and


 


 


ARES CAPITAL CORPORATION,


 


 


as the Seller


 


 


Dated as of July 21,
2009


 

















 


TABLE OF CONTENTS


 


	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE I.

  	
  DEFINITIONS

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 1.1.

  	
  General

  	
   

  	
  1

  
	
  Section 1.2.

  	
  Specific Terms

  	
   

  	
  2

  
	
  Section 1.3.

  	
  Other Terms

  	
   

  	
  5

  
	
  Section 1.4.

  	
  Computation of
  Time Periods

  	
   

  	
  5

  
	
  Section 1.5.

  	
  Certain References

  	
   

  	
  5

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  II.

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

  	
   

  	
  5

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.1.

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

  	
   

  	
  5

  
	
  Section 2.2.

  	
  Purchase Price

  	
   

  	
  8

  
	
  Section 2.3.

  	
  Payment of
  Purchase Price

  	
   

  	
  8

  
	
  Section 2.4.

  	
  Nature of the
  Sales

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III.

  	
  CONDITIONS OF SALE AND
  PURCHASE

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.1.

  	
  Conditions
  Precedent to Effectiveness

  	
   

  	
  10

  
	
  Section 3.2.

  	
  Conditions
  Precedent to All Purchases

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV.

  	
  REPRESENTATIONS AND
  WARRANTIES

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.1.

  	
  Representations
  and Warranties of the Seller

  	
   

  	
  13

  
	
  Section 4.2.

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

  	
   

  	
  21

  
	
  Section 4.3.

  	
  Representations
  and Warranties of the Purchaser

  	
   

  	
  22

  
	
   

  	
   

  	
   

  	
   

  
	
  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

  



 


i

















 


TABLE OF CONTENTS


(continued)


 


	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  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

  
	
  Section 7.3.

  	
  Notice to
  Trustee, Agent and Note Purchaser

  	
   

  	
  35

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  VIII.

  	
  SELLER
  TERMINATION EVENTS

  	
   

  	
  35

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 8.1.

  	
  Seller Termination Events

  	
   

  	
  35

  
	
  Section 8.2.

  	
  Remedies

  	
   

  	
  37

  
	
  Section 8.3.

  	
  Survival of Certain Provisions

  	
   

  	
  38

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  IX.

  	
  INDEMNIFICATION

  	
   

  	
  39

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 9.1.

  	
  Indemnification by the Seller

  	
   

  	
  39

  
	
  Section 9.2.

  	
  Assignment of
  Indemnities

  	
   

  	
  42

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE X.

  	
  MISCELLANEOUS

  	
   

  	
  42

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 10.1.

  	
  Liability of the
  Seller

  	
   

  	
  42

  
	
  Section 10.2.

  	
  Limitation on
  Liability

  	
   

  	
  42

  
	
  Section 10.3.

  	
  Amendments;
  Limited Agency

  	
   

  	
  42

  
	
  Section 10.4.

  	
  Waivers;
  Cumulative Remedies

  	
   

  	
  42

  
	
  Section 10.5.

  	
  Notices

  	
   

  	
  43

  
	
  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

  	
   

  	
  44

  
	
  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

  



 


ii

















 


TABLE OF CONTENTS


(continued)


 


	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 10.18.

  	
  Breaches of
  Representations, Warranties and Covenants

  	
   

  	
  46

  
	
  Section 10.19.

  	
  Confidentiality

  	
   

  	
  46

  
	
  Section 10.20.

  	
  Assignments of
  Loan Assets

  	
   

  	
  46

  



 


SCHEDULES AND EXHIBITS


 


	
  Schedule I

  	
  -

  	
  Sale Portfolio List

  
	
   

  	
   

  	
   

  
	
  Exhibit A

  	
  -

  	
  Form of First Tier Loan Assignment

  
	
  Exhibit B

  	
  -

  	
  Form of Officer’s Purchase Date Certificate

  
	
  Exhibit C

  	
  -

  	
  Form of Power of Attorney for Seller

  



 


iii

















 


FIRST
TIER PURCHASE AND SALE AGREEMENT


 


THIS FIRST TIER PURCHASE AND SALE AGREEMENT, dated as
of July 21, 2009, among ARES CAPITAL CORPORATION, a Maryland corporation,
as the seller (the “Seller”) and ARES CAPITAL CP FUNDING HOLDINGS 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 (in each case, as hereinafter defined)
related thereto on the terms set forth herein;


 


WHEREAS, it is contemplated that the Loan Assets and
Portfolio Assets Purchased hereunder may be transferred by the Purchaser to the
Borrower pursuant to the terms and conditions of the Second Tier Purchase and
Sale Agreement and Pledged by the Borrower pursuant to the Note Purchase
Agreement (as defined herein) and the related Transaction Documents, to the
Trustee, 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 Note
Purchase Agreement (as hereinafter defined). 
References herein to Persons include their successors and assigns permitted
hereunder or under the Note Purchase 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.  Capitalized
terms used herein but not defined herein shall have the respective meanings
assigned to such terms in the Note Purchase Agreement, provided
that, if, 


 

















 


within such definition in the Note Purchase 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 First Tier Purchase and
Sale Agreement, as the same may be amended, restated, waived, supplemented
and/or otherwise modified from time to time hereafter.


 


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


 


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


 


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


 


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


 


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


 


“JPM Lien” means the lien on the membership
interests of the Purchaser created pursuant to the terms of that certain Senior
Secured Revolving Credit Agreement dated as of December 28, 2005 between
the Seller, the Lenders party thereto and JPMorgan Chase Bank, N.A., as
amended, modified, waived, supplemented or restated from time to time.


 


“Loan Asset” means any Eligible Loan Asset
listed on Schedule I hereto, as the same may be amended, supplemented,
restated or replaced from time to time.


 


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


 


“Note Purchase Agreement” means that certain
Note Purchase Agreement, dated as of the Closing Date, by and among Ares
Capital CP Funding II LLC, as the Borrower, the Seller, as the Servicer and the
Transferor, Ares Capital CP Funding LLC, as the Guarantor, Wachovia Bank,
National Association, as the Note Purchaser and as the Agent, U.S. Bank
National Association, as the Trustee and as the Bank and Wells Fargo Bank,
National Association, as the Collateral Custodian, as such may be amended,
restated, supplemented or otherwise modified from time to time pursuant to the
terms thereof.


 


“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;


 


2

















 


(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 Purchaser (except for reasonable management fees to the
Transferor or its Affiliates in reimbursement of actual management services
performed).


 


“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, an
amount equal to the Purchase Price less all Principal 


 


3

















 


Collections received in
respect of such Loan Asset from the Purchase Date to the date of repurchase
hereunder.


 


“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 First Tier 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 Note Purchase Agreement.


 


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


 


“Seller Purchase Event”
means the occurrence of a breach of the Seller’s representations and warranties
under Section 4.2.


 


“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).


 


4

















 


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”.


 


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, 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.


 


(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 First Tier 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
First Tier 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 


 


5

















 


Purchaser on such Purchase Date, and the Seller shall
not take any action inconsistent with such ownership and shall not claim any
ownership interest in such Sale Portfolio.


 


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


 


(f)            Neither the Purchaser nor any
assignee of the Purchaser (including the Borrower and the Secured Parties)
shall have any obligation or liability to any Obligor or client of the Seller
(including any obligation to perform any obligation of the Seller, including
with respect to any other related agreements) in respect of the Sale Portfolio
(other than with respect to funding obligations to Obligors pursuant to the
terms of the applicable Loan Agreement for Revolving Loan Assets and Delayed
Draw Loan Assets, as applicable). No such obligation or liability is intended
to be assumed by the Purchaser or any assignee of the Purchaser (including the
Borrower and 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 Borrower and 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 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 Note Purchase 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.


 


(h)           In accordance with the Note Purchase
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 Trustee necessary for the Servicer, the Collateral
Custodian and the Trustee, as applicable, to conduct the management,
administration and collection of the Sale Portfolio Purchased hereunder in
accordance with the terms of the Note Purchase Agreement.


 


6
















 


(j)            In connection with each Purchase of
Sale Portfolio hereunder, the Seller hereby grants to each of the Purchaser and
its assigns, the Agent, the Note Purchaser, the Trustee, the Collateral
Custodian and the Servicer an irrevocable, non—exclusive license to use,
without royalty or payment of any kind, all software used by the Seller to
account for the Sale Portfolio, to the extent necessary to administer the Sale
Portfolio, whether such software is owned by the Seller or is owned by others
and used by the Seller under license agreements with respect thereto; provided that, should the consent of any licensor of such
software be required for the grant of the license described herein to be
effective or for the Purchaser to assign such licenses to the Servicer or any
successor, the Seller hereby agrees that upon the request of the Purchaser or
its assignees, the Agent, the Note Purchaser, the Collateral Custodian or the
Trustee, the Seller shall use its best efforts to obtain the consent of such
third—party licensor.  The license
granted hereby shall be irrevocable until the Collection Date and shall
terminate on the date this Agreement terminates in accordance with its
terms.  The Seller (i) shall take
such action reasonably requested by the Purchaser or the Agent, from time to
time hereafter, that may be necessary or appropriate to ensure that the
Purchaser and its assigns under the Second Tier Purchase and Sale Agreement and
the Note Purchase Agreement have an enforceable ownership or security interest,
as applicable, in the Sale Portfolio Purchased by the Purchaser as contemplated
by this Agreement, and (ii) shall use its commercially reasonable efforts
to ensure that each of the Purchaser (and its assignees), the Agent, the Note
Purchaser, the Trustee, the Collateral Custodian and the Servicer (or any
successor) has an enforceable right (whether by license or sublicense or
otherwise) to use all of the computer software used to account for the Sale
Portfolio and/or to recreate the related Loan Asset Files.


 


(k)           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.


 


(l)            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 First Tier 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.


 


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


 


(n)           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 of the Seller in Article V
hereof, will run to and be for the benefit of the Purchaser, the Borrower and
the Trustee (on behalf of the Secured 


 


7

















 


Parties), and the Purchaser, the Borrower or the
Trustee (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 and covenants as set forth in the Second Tier
Purchase and Sale Agreement or in this Agreement.


 


Section 2.2.            Purchase Price.


 


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


 


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 Second Tier Purchase
and Sale 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
First Tier 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.


 


8

















 


Section 2.4.            Nature of the Sales.


 


(a)           It is the express intent of the
parties hereto that the Sale of the Sale Portfolio by the Seller to the
Purchaser hereunder be, and be treated for all purposes (other than tax and
accounting purposes) as an absolute sale by the Seller (free and clear of any
Lien, security interest, charge or encumbrance other than Permitted Liens) of
such Sale Portfolio. It is, further, not the intention of the parties that such
Sale be deemed a pledge of the Sale Portfolio by the Seller to the Purchaser to
secure a debt or other obligation of the Seller.  However, in the event that, notwithstanding
the intent of the parties, the Sale Portfolio is held to continue to be
property of the Seller, then the parties hereto agree that:  (i) this Agreement shall also be deemed
to be a “security agreement” within the meaning of Article 9 of the UCC; (ii) the
transfer of the Sale Portfolio provided for in this Agreement shall be deemed
to be a grant by the Seller to the Purchaser of a first priority security
interest (subject only to Permitted Liens) in all of the Seller’s right, title
and interest in and to the Sale Portfolio and all amounts payable to the
holders of the Sale Portfolio in accordance with the terms thereof and all proceeds
of the conversion, voluntary or involuntary, of the foregoing into cash,
instruments, securities or other property, including, without limitation, all
amounts from time to time held or invested in the Controlled Accounts, whether
in the form of cash, instruments, securities or other property; (iii) the
possession by the Purchaser (or the Collateral Custodian on behalf of the
Trustee, 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)           If any such Sale of the Sale
Portfolio is deemed to be a pledge to secure a debt or other obligation of the
Seller, the Purchaser may, to secure the Purchaser’s own borrowing under the
Second Tier Purchase and Sale Agreement (to the extent that the transfer of the
Sale Portfolio thereunder is deemed to be a pledge to secure a debt or other
obligation of the Purchaser), repledge and reassign (i) all or a portion
of the Sale Portfolio pledged to the Purchaser by the Seller and with respect
to which the Purchaser has not released its security interest at the time of
such pledge and assignment, and (ii) all proceeds thereof.  Such repledge and reassignment may be made by
the Purchaser with or without a repledge and reassignment by 


 


9

















 


the Purchaser of its rights under any agreement with
the Seller, and without further notice to or acknowledgment from the Seller.


 


(d)           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 Ares Capital Corporation indicating that: (i) assets
related to transactions (including transactions pursuant to the Transaction
Documents) that do not meet SFAS 140 requirements for accounting sale treatment
are reflected in the consolidated balance sheet of Ares Capital Corporation 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 Ares Capital Corporation, 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 other than the Guarantor) of such
assets to that special purpose entity.


 


ARTICLE III.



CONDITIONS OF SALE AND PURCHASE


 


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


 


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


 


(ii)           a
certificate of the Secretary or Assistant Secretary of the Seller, dated the
Closing Date, certifying (A) the names and true signatures of the
incumbent officers of the Seller authorized to sign on behalf of the Seller
this Agreement, the First Tier 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 articles of incorporation of the Seller is a
complete and correct copy and that such articles of incorporation have not been
amended, modified or supplemented and are 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 First Tier 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 formation or incorporation, as
applicable;


 


10

















 


(iv)          filed,
original copies of proper financing statements (the “Facility Financing
Statements”) describing the Sale Portfolio, and naming the Seller as the “Debtor/Seller”
and the Purchaser as “Secured Party/Buyer”, 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;


 


(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 and the Agent, and
the Purchaser and the 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 and the 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 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 


 


11

















 


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


 


(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 First Tier 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 (subject to Section 10.20)
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 Agent evidencing the approval of the 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 First Tier Loan
Assignment on the applicable Purchase Date.


 


12

















 


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, the Borrower relies in
acquiring the Sale Portfolio under the Second Tier Purchase and Sale Agreement
and each of the Secured Parties relies upon in entering into the Note Purchase
Agreement. As of each Purchase Date, the Seller represents and warrants to the
Purchaser for the benefit of the Purchaser and each of its successors and
assigns 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 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 First Tier
Loan Assignment and the other Transaction Documents to which it is a party and (b) carry
out the terms of this Agreement, each First Tier 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 First Tier 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 First
Tier 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
First Tier Loan Assignment and the Transaction Documents to which the Seller is
party have been and, in the case of each First Tier Loan Assignment delivered
after the Closing Date, will be, duly executed and delivered by the Seller, and
this Agreement, together with the applicable First Tier 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 First Tier 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).


 


13

















 


(e)           No Violation.  The execution, delivery and performance of
this Agreement, each First Tier 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 articles 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 First Tier 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
First Tier Loan Assignment or any other Transaction Document to which the Seller
is a party or (iii) seeking any determination or ruling that could
reasonably be expected to have a Material Adverse Effect.


 


(g)           No Consents.  The Seller is not required to obtain the
consent or approval of any other party or any consent, license, approval or
authorization, or registration or declaration with, any governmental authority,
bureau or agency in connection with the execution, delivery, performance,
validity or enforceability of this Agreement or any First Tier 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 formation; does not have tradenames,
fictitious names, assumed names or “doing business as” names. 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 on the signature pages hereto.  The Seller’s only jurisdiction of formation
is Maryland, and, except as permitted hereunder, the Seller has not changed its
jurisdiction of formation.


 


(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.


 


14

















 


(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 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.  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 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)           First Tier Loan Assignments.  Each First Tier 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 (subject to Section 10.20)  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 Trustee as
“Secured Party” or “Assignee”, in each case, for the benefit of the Secured
Parties pursuant to the Note Purchase Agreement.


 


15
















 


(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 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 all Pension Plans 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 Benefit Plan other than a Multiemployer Plan, withdrawals
or reportable events have occurred with respect to any Pension Plans 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.


 


16

















 


(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 (other than the Guarantor), and the Seller hereby acknowledges that the
Agent, the Note Purchaser, the Borrower, the Trustee and the other Secured
Parties are entering into the transactions contemplated by the Note Purchase
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 (other
than the Guarantor).  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
Agent, the Note Purchaser, the Borrower and the Trustee may from time to time
reasonably 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 (other than the Guarantor) and not just a division of the
Seller or any such other Affiliate (other than the Guarantor) (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 operating agreement.


 


(y)           Sale Agreement.  This Agreement and the First Tier 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 the Sale Portfolio (subject to
Section 10.20) 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 


 


17

















 


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
Note Purchase Agreement and (ii) the security interest granted to the
Purchaser, 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, (B) relating to the closing of a Permitted
Securitization contemplated by Section 2.07(c) of the Note Purchase
Agreement or (C) that has been terminated and/or fully and validly assigned
to the Trustee on or prior to the date hereof. 
The Seller is not aware of the filing of any judgment or tax lien
filings against the Seller;


 


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


 


(viii)        other
than in the case of Noteless Loan Assets, the Seller has received, or subject
to the delivery requirements herein will receive, a written acknowledgment from
the Collateral Custodian that the Collateral Custodian, as the bailee of the
Trustee, is holding the underlying promissory notes that constitute or evidence
the Loan Assets solely on behalf of and for the Trustee, for the benefit of the
Secured Parties; provided that the acknowledgement
of the Collateral Custodian set forth in Section 13.11 of the Note
Purchase 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 Trustee, 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 Trustee, for the benefit of the Secured Parties, or in blank by
an effective Indorsement or has been registered in the name of the Trustee, for
the benefit of the Secured Parties, upon original issue or registration or transfer
by the Borrower 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 Trustee, on behalf of the Secured Parties, as the registered owner
of such uncertificated security.


 


18

















 


(aa)         Credit Policy.  The Seller has complied in all material
respects with the Credit Policy with respect to all of the Sale Portfolio.


 


(bb)         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.


 


(cc)         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 Note Purchase Agreement.


 


(dd)         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, 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 Note Purchase
Agreement and in accordance with the Credit Policy and the Servicing Standard.


 


(ee)         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.


 


(ff)           Ownership of the Purchaser.  The Seller owns, directly or indirectly, 100%
of the membership interests of the Purchaser, free and clear of any Lien (other
than the JPM 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.


 


(gg)         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.


 


(hh)         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 


 


19

















 


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.


 


(ii)           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.


 


(jj)           Seller Termination Event.  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 as previously disclosed to the Agent as
such).


 


(kk)         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 Latham & Watkins LLP, dated as of the date
hereof are true and correct in all material respects.


 


(ll)           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
Agent in writing pursuant hereto or in connection herewith is, as of its date,
true and correct in all material respects.


 


(mm)       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 Agent, the Note Purchaser and the Trustee 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) any subsequent
transfer of the Sale Portfolio by the Purchaser (including a transfer under the
Second Tier Purchase and Sale Agreement and grant of a first priority perfected
security interest in, to and under the Sale Portfolio pursuant to the Note
Purchase Agreement by the Borrower). 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 Agent immediately upon obtaining knowledge of such breach.


 


20

















 


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, the Borrower relies in acquiring the Sale
Portfolio under the Second Tier Purchase and Sale Agreement and each of the
Secured Parties relies upon in entering into the Note Purchase Agreement. As of
each Purchase Date, the Seller represents and warrants to the Purchaser for the
benefit of the Purchaser and each of its successors and assigns that:


 


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


 


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


 


(c)           No Fraud.  Each Eligible Loan Asset was originated
without any fraud or material 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) any subsequent transfer
of the Sale Portfolio by the Purchaser (including a transfer under the Second
Tier Purchase and Sale Agreement and grant of a first priority perfected
security interest in, to and under the Sale Portfolio pursuant to the Note Purchase
Agreement by the Borrower) and (z) the termination of this Agreement, the
Second Tier Purchase and Sale Agreement and the Note Purchase 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 Agent immediately upon obtaining knowledge of such breach.


 


21

















 


Section 4.3.            Representations and Warranties of
the Purchaser.  The Purchaser makes
the following representations and warranties, on which the Seller relies in
selling Sale Portfolio to the Purchaser hereunder.  Such representations are made as of the
execution and delivery of this Agreement, but shall survive until the
Collection Date, the Sale of Sale Portfolio hereunder, the sale of the Sale
Portfolio to the Borrower under the Second Tier Purchase and Sale Agreement,
and the grant of a security interest in such Sale Portfolio by the Borrower to
the Trustee, on behalf of the Secured Parties, under the Note Purchase
Agreement.


 


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


 


(b)           Due Qualification.  The Purchaser is duly qualified to do
business as a limited liability company in good standing, 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 has all necessary
power, authority and legal right to execute and deliver this Agreement and to
carry out the terms hereof and to acquire the Sale Portfolio; and the
execution, delivery and performance of this Agreement and all of the documents
required pursuant hereto have been duly authorized by the Purchaser by all
necessary limited liability company action.


 


(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 First Tier 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 constitutes a legal, valid and
binding obligation of the Purchaser, enforceable against the Purchaser in accordance
with its terms, subject, as to enforceability, to applicable Bankruptcy Laws
and general principles of equity.


 


(f)            No Violation.  The consummation of the transactions
contemplated by this Agreement, each First Tier 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.


 


22

















 


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


 


(h)           No Proceedings.  No litigation or administrative proceeding of
or before any court, tribunal or governmental body is presently pending or, to
the knowledge of the Purchaser, threatened against the Purchaser or any
properties of the Purchaser or with respect to this Agreement, any First Tier
Loan Assignment or any other Transaction Document to which the Purchaser is a
party, which, if adversely determined, could have a material adverse effect on
the ability of the Purchaser to perform its obligations under this Agreement,
any First Tier Loan Assignment or any Transaction Document to which the
Purchaser is a party or any of the other applicable documents forming part of
the Sale Portfolio.


 


(i)            Sale Agreement.  This Agreement and the First Tier 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 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 material 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 Trustee, 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, the
ownership interest of the Borrower under the Second Tier Purchase and Sale
Agreement, and the security interest of the Trustee for the benefit of the
Secured Parties under the Note Purchase 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 Trustee, the Collateral 


 


23

















 


Custodian, the Servicer, the Note Purchaser and the
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 Trustee or the 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
Trustee, the Agent or the Secured Parties to exercise and enforce their rights
and remedies hereunder or under any Transaction Document.


 


(b)           On or prior to each Purchase Date
hereunder, the Seller shall take all steps necessary under all Applicable Law
in order to Sell to the Purchaser the Sale Portfolio being acquired by the
Purchaser on such Purchase Date to the Purchaser so that, upon the Sale of such
Sale Portfolio from the Seller to the Purchaser pursuant to the terms hereof on
such Purchase Date, the Purchaser will have acquired good and marketable title
to (subject to Section 10.20) 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 Borrower to grant to the Trustee, 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
Trustee’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 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 or
declaration of the Facility Maturity Date, the Purchaser, the Trustee or the
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 Trustee or the Agent.


 


24

















 


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


 


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


 


(ii)           deliver
or cause to be delivered to the Purchaser, the Trustee and the Agent an opinion
of the counsel for Seller, in form and substance reasonably satisfactory to the
Purchaser, the Trustee and the 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 specified therein, provided herein or otherwise permitted
hereunder, which opinion may contain usual and customary assumptions, limitations
and exceptions.


 


(f)            The Seller shall not (x) change
its name, 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 on the signature pages hereto,
or change the jurisdiction of its formation, or (y) move, or consent to
the Collateral Custodian moving, the Required Loan Documents and Loan Asset
Files from the location required under the Transaction Documents, unless the
Seller has given at least 30 days’ written notice to the Purchaser and the
Agent 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, together with such Opinions of
Counsel and other documents and instruments as the Agent may request in
connection therewith.


 


(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, the sale of Sale Portfolio to the
Borrower under the Second Tier Purchase and Sale Agreement and the grant of a
security interest in such Sale Portfolio by the Borrower to the Trustee for the
benefit of the Secured Parties under the Note Purchase 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, transferred to the Borrower under the Second Tier
Purchase and Sale Agreement and Pledged by the Borrower to the Trustee, on
behalf of the Secured Parties, under the Note Purchase Agreement.  Indication of the Trustee’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 Trustee pursuant to Section 2.16 of
the Note Purchase Agreement.


 


25
















 


(i)            If the Seller fails to perform any
of its obligations hereunder, the Purchaser, the Trustee or the Agent may (but
shall not be required to) perform, or cause performance of, such obligation;
and the Purchaser’s, the Trustee’s or the 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 Trustee or the Agent at
any time and from time to time at the Purchaser’s, the Trustee’s or the Agent’s
sole discretion and appoints the Purchaser, the Trustee and the 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
Trustee’s or the Agent’s sole discretion to perfect and to maintain the
perfection and priority of the interest of the Purchaser or the Trustee 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
Trustee or the 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 Trustee 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 formation, and qualify and remain qualified in good standing as a
corporation in each jurisdiction where the failure to preserve and maintain
such existence, rights, franchises, privileges and qualification could
reasonably be expected to have a Material Adverse Effect.


 


(c)           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 Borrower,
the Agent, the Trustee, the Note Purchaser and the other Secured Parties are
entering into the transactions contemplated by this Agreement, the Note
Purchase 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 (other than the Guarantor).


 


26

















 


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 Borrower, the Agent, the Trustee, the
Note Purchaser and the other Secured Parties may from time to time reasonably
request to maintain the Purchaser’s identity as a legal entity that is separate
from the Seller and each other Affiliate of the Seller (other than the
Guarantor) 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 the Guarantor)(other than for tax purposes)
and not just a division of the Seller or any such other Affiliate.  Without limiting the generality of the
foregoing and in addition to the other covenants set forth herein, the Seller
agrees that:


 


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


 


(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 (other than the
Guarantor);


 


(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
for the Purchaser in the performance of such duties.


 


(f)            Credit Policy.  The Seller will (i) comply in all
material respects with the Credit Policy in regard to the Sale Portfolio and (ii) furnish
to the Purchaser, the Trustee, the Agent and the Note Purchaser, prior to its
effective date, prompt written notice of any changes in the Credit Policy.


 


27

















 


(g)           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)).


 


(h)           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.


 


(i)            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.


 


(j)            Notices.  The Seller will furnish to the Purchaser, the
Trustee, the Agent and the Note Purchaser:


 


(i)            Income
Tax Liability.  Telephonic or
facsimile notice within 10 Business Days (confirmed in writing within five
Business Days thereafter) of the receipt of revenue agent reports or other
written proposals, determinations or assessments of the Internal Revenue
Service or any other taxing authority which propose, determine or otherwise set
forth positive adjustments (i) to the Tax liability of 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 Borrower in an
amount equal to or greater than $1,000,000 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, any auditors’ management letters that are received by the
Seller or by its accountants;


 


(iii)          Representations
and Covenants.  The Seller shall
promptly, upon receipt of notice or discovery thereof, notify the Purchaser,
the Trustee, the Agent and the Note Purchaser (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
Trustee, the Agent and the Note Purchaser 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
Trustee, the Agent and the Note Purchaser in the manner set forth in the
preceding sentence before any Purchase Date of any facts or circumstances
within the knowledge of the Seller 


 


28

















 


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 Affiliate thereof), a copy of such notice;


 


(v)           Proceedings.
As soon as possible and in any event within three Business Days, after the
Seller receives notice or obtains knowledge thereof, 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 Trustee’s, for the benefit of the
Secured Parties, interest in the Sale Portfolio, or the Borrower, the Seller,
the Purchaser or any of their Affiliates. For purposes of this Section 5.2(j),
(i) any settlement, judgment, labor controversy, litigation, action, suit
or proceeding affecting the Sale Portfolio, the Transaction Documents, the
Trustee’s, for the benefit of the Secured Parties, interest in the Sale
Portfolio, or the Borrower or the Purchaser in excess of $1,000,000 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 Borrower or the Purchaser) in excess of
$5,000,000 shall be deemed to be material;


 


(vi)          Material
Events.  Promptly upon becoming aware
thereof, of any event or other circumstance that is reasonably likely to have a
Material Adverse Effect;


 


(vii)         Events
of Default.  The Seller will provide
the Purchaser, the Agent, the Trustee and the Note Purchaser with immediate
written notice of the occurrence of each Event of Default and each Unmatured
Event of Default of which the Seller has knowledge or has received notice.  In addition, no later than two Business Days
following the Seller’s knowledge or notice of the occurrence of any Event of
Default or Unmatured Event of Default, the Seller will provide to the
Purchaser, the Trustee, the Agent and the Note Purchaser 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; and


 


(viii)        Seller
Termination Event and Seller Purchase Event. The Seller will provide the
Purchaser, the Agent, the Trustee and the Note Purchaser 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.


 


(k)           Other.  The Seller will furnish to the Purchaser, the
Trustee, the Agent and the Note Purchaser 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 Trustee, the Agent and the Note Purchaser may from time to time 


 


29

















 


reasonably request in order to protect the interests
of the Purchaser, the Agent, the Trustee, the Note Purchaser or the Secured
Parties under or as contemplated by this Agreement and the other Transaction
Documents.


 


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


 


(m)          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 and the Agent, providing (i) a certification, based upon
a review and summary of UCC search results reasonably satisfactory to the
Purchaser and the 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 Trustee 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 Agent, that there
is no other interest in the Sale Portfolio based on any tax or judgment lien.


 


(n)           Opinion.  The Seller will comply in all material
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.


 


(o)           Copies of Other Information.  The Seller will deliver to the Purchaser, the
Trustee, the Agent and the Note Purchaser:


 


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


 


(ii)           promptly,
from time to time, such other information, documents, records or reports
respecting the Sale Portfolio or the conditions or operations, financial or
otherwise, of the Seller (including, without limitation, reports and notices
relating to the Seller’s actions under and compliance with ERISA and the 1940
Act) as the Purchaser, the Agent or the Note Purchaser 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.


 


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.


 


30

















 


(b)           Security Interests.  Except as otherwise permitted herein and in
the Note Purchase 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 Trustee, the Note Purchaser and the 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 Trustee, 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 be a party to any merger
or consolidation, or purchase or otherwise acquire any of the assets or any
stock of any class of, or any partnership or joint venture interest in, any
other Person, or sell, transfer, convey or lease substantially all of its
assets, 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 Agent and the delivery
of an acceptable (in the Agent’s reasonable discretion) non-consolidation
opinion (other than with respect to the JPM Lien).


 


(e)           Restricted Payments.  The Seller shall permit the Purchaser to make
Purchaser Restricted Junior Payments, provided that
after the occurrence of an Event of Default, the Purchaser may not make any
Purchaser Restricted Junior Payment with respect to proceeds received by the
Purchaser from the Seller with respect to claims hereunder, including, but not
limited to indemnification claims pursuant to Article IX or
repurchases pursuant to Section 6.1.


 


(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 Benefit 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 Benefit Plan so as to result,
directly or indirectly in any liability to the Seller, or (e) permit to
exist any occurrence of any reportable event described in Title IV of 


 


31

















 


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 Note Purchase
Agreement, extend, amend or otherwise modify, or permit the Servicer to extend,
amend or otherwise modify, the terms of any Sale Portfolio.


 


(i)            Credit Policy.  The Seller will not agree to or otherwise
permit to occur any change in the Credit Policy that could have a Material
Adverse Effect without the prior written consent of the Agent; provided that no consent shall be required from the Agent in
connection with any change mandated by Applicable Law or a Governmental
Authority as evidenced by an Opinion of Counsel to that effect delivered to the
Agent.


 


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


 


(k)           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 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 10 Business Days of the discovery by or
notice (from any Person) to the Seller of the Seller Purchase Event, (i) purchase
each Loan Asset hereunder which is affected by or related to such Seller
Purchase Event from the Purchaser, and the Seller shall pay to the Purchaser
(by means of a deposit to the Collection Account, provided
that the excess if any of the Repurchase Price of such Loan Asset over the
amount equal to the Advance Date Assigned Value of such Loan Asset multiplied
by the principal balance of such Loan Asset (exclusive of Accreted Interest) as
of the date of repurchase shall be paid to the Purchaser as otherwise directed
by the Purchaser) the Repurchase Price of such Loan Asset as of the date of the
purchase thereof from the Purchaser or (ii) 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 (and shall request the
Trustee to), at the sole expense of the Seller, 
take such steps as may be reasonably requested by the Seller in order to
Sell to the Seller all of the Purchaser’s and the Trustee’s right, title and
interest in and to such Loan Asset, without recourse, representation or 


 


32

















 


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 Trustee. 
Such Sale shall be a sale outright, and not for security.


 


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 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 Agent (with a copy to the
Trustee 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; provided that
the Seller may effect a Substitution as necessary to facilitate a cure of a
Borrowing Base Deficiency (and any Unmatured Event of Default arising
therefrom) so long as the Agent shall approve of such sale and immediately
after giving effect to such Substitution and any other sale or transfer
substantially contemporaneous therewith, such Borrowing Base Deficiency shall
be cured or closer to being cured;


 


(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
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 principal balance thereof (exclusive of Accreted
Interest);


 


(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 Agent, the
Note Purchaser 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 subject to clauses (ii), (iv) or (vi) of
the definition of “Value Adjustment Event” which were dividended from the
Purchaser to the Seller in accordance with Section 2.07(d) of the
Note Purchase 


 


33

















 


Agreement or substituted pursuant to this Section 6.2,
in each case during the 12-month period immediately preceding the proposed date
of such 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);


 


(viii)        the
Outstanding Balance of all Loan Assets (other than Warranty Loan Assets), sold
pursuant to Section 2.07(b) of the Note Purchase Agreement, sold
without the consent of the Agent in accordance with Section 2.07(c) of
the Note Purchase Agreement (in each case, other than Loan Assets subject to
clauses (ii), (iv) or (vi) of the definition of “Value Adjustment
Event”), substituted pursuant to this Section 6.2 or dividended
from the Purchaser to the Seller in accordance with Section 2.07(d) of
the Note Purchase Agreement during the 12-month period 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);


 


(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; and


 


(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.


 


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 Trustee, the Agent, the Note Purchaser 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 Trustee, the Agent, the
Note Purchaser and/or their respective designees or assignees determine are
reasonably necessary or appropriate to collect all amounts due under any and
all Sale Portfolio and to enforce or protect the Purchaser’s, the Trustee’s,
the Agent’s and the Note Purchaser’s rights under this Agreement, including
endorsing the name of the Seller on checks and other instruments representing
Interest Collections and Principal Collections and enforcing such Sale
Portfolio.


 


(b)           Except as set forth in Sections
6.1 and 6.2 with respect to the repurchase or Substitution of certain
Loan Assets, the Purchaser shall have no obligation to account for, replace,
substitute or return any Sale Portfolio to the Seller.  The Purchaser shall have no 


 


34

















 


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 Second Tier Purchase and Sale
Agreement or the Note Purchase 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 Ares Capital
Corporation has been designated pursuant to Section 6.01 of the Note
Purchase Agreement, the Seller shall, at the Purchaser’s, the Trustee’s, the
Collateral Custodian’s,  the Agent’s or
the Note Purchaser’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 Trustee, the Collateral Custodian, the Agent or
the Note Purchaser at a place selected by the Purchaser, the Trustee, the
Collateral Custodian, the Agent, the Note Purchaser or their designee.


 


Section 7.3.            Notice to Trustee, Agent and Note
Purchaser.


 


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 Trustee, the Agent and the Note
Purchaser.


 


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 and such failure shall continue
unremedied for a period of five Business Days from the earlier of (1) the
date any Responsible Officer of the Seller obtains knowledge of such failure
and (2) the date the Seller receives notice of such failure from the
Purchaser, the Servicer, the Trustee or the Agent or (B) any other amount
required to be paid by the Seller hereunder within two Business Days of the
date when due; or


 


35
















 


(ii)           the
Seller shall fail to observe or perform in any material respect any covenant or
agreement applicable to it contained herein (other than as specified in paragraph
(i) of this Section 8.1); provided
that no such failure shall constitute a Seller Termination Event under this paragraph
(ii) unless 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 Agent, the Servicer, the Trustee 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, 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 Agent, the Trustee or the
Purchaser and (ii) the date on which a Responsible Officer of the Seller
acquires knowledge thereof; provided that a
Seller Termination Event shall not be deemed to have occurred under this paragraph
(iii) based upon a Seller Purchase Event if the Seller shall have
complied with the provisions of Section 6.1 in respect thereof; or


 


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


 


(v)           the
occurrence of (A) an Event of Default set forth in Section 7.01 of
the Note Purchase Agreement or (B) the Facility Maturity Date; or


 


36

















 


(vi)          the
Seller has been terminated as Servicer following a Servicer Termination Event
with respect to the Seller under the Note Purchase 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 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 Agent proof of release of such Lien;


 


then, (A) in the
case of any Seller Termination Event described in paragraph (iv), (v)(A),
(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 Agent may terminate its
obligation to Purchase Sale Portfolio from the Seller by written notice to the
Seller (any termination pursuant to clause (A), (B) or (C) of
this Article VIII is herein called an “Early Termination”); provided, that, in the event of any
involuntary petition or proceeding as described in paragraphs (iv)(A) and
(iv)(B) above, the Purchaser shall not Purchase Sale Portfolio from
the Seller unless such involuntary petition or proceeding is dismissed, bonded
or discharged within 60 days of the filing of such petition or the commencement
of such proceeding.


 


Section 8.2.            Remedies.


 


(a)           If a Seller Termination Event has
occurred, the Purchaser (and its assignees) shall have, in addition to all
other rights and remedies under this Agreement or otherwise all of the rights
and remedies provided to a secured creditor under the UCC of each applicable
jurisdiction and other Applicable Law in respect thereto, which rights shall be
cumulative.


 


37

















 


(b)           The Seller agrees that, upon the
occurrence of a Seller Termination Event under Section 8.1(a)(iv) or
Section 8.1(a)(v)(A) the Purchaser, the Trustee or the Agent
shall have the right to:


 


(i)            require
the Seller to, and the Seller hereby agrees that it will at the Seller’s
expense and upon request of the Purchaser, the Trustee or the Agent forthwith,
assemble all or any part of the Sale Portfolio as directed by the Purchaser,
the Trustee or the Agent and make the same available at a place to be
designated by the Purchaser, the Trustee or the Agent; and


 


(ii)           without
notice except as specified below, sell the Sale Portfolio or any part thereof
in one or more parcels at a public or private sale, at any of the Trustee’s,
the Purchaser’s or the Agent’s offices or elsewhere, for cash, or credit or for
future delivery, and upon such other terms as the Purchaser, the Trustee or the
Agent may deem commercially reasonable. The Seller agrees that, to the extent
notice of sale shall be required by law, at least ten days’ notice to the
Seller of the time and place of any public sale or the time after which any
private sale is to be made shall constitute reasonable notification.  The Purchaser, the Trustee or the Agent shall
not be obligated to make any sale of Sale Portfolio regardless of notice of
sale having been given.  The Purchaser,
the Trustee or the Agent may adjourn any public or private sale from time to
time by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned.


 


Section 8.3.            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. For the avoidance of doubt, in the event that a
Seller Termination Event has occurred but has been waived unconditionally and
in its entirety in accordance with the terms hereof, such Seller Termination
Event shall be deemed to have not “occurred” and references to “after the
occurrence of a Seller Termination Event” shall be inapplicable for all
purposes in this Agreement or any of the Transaction Documents, except to the
extent otherwise provided for in the relevant waiver; provided
that any waiver which by its terms becomes effective upon certain conditions
precedent being met will not be considered a conditional waiver solely due to
the existence of such conditions precedent if all such conditions precedent to
effectiveness have been satisfied.


 


38

















 


ARTICLE IX.



INDEMNIFICATION.


 


Section 9.1.            Indemnification by the Seller.


 


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


 


39

















 


(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
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;


 


(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;


 


40

















 


(xv)         any
action taken by the Seller in the enforcement or collection of any Sale
Portfolio;


 


(xvi)        any
claim, suit or action of any kind arising out of or in connection with
Environmental Laws 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; or


 


(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.


 


(A)          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.


 


(B)           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.


 


(C)           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.


 


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


 


41

















 


Section 9.2.            Assignment of Indemnities.


 


The Seller acknowledges that, pursuant to the Second
Tier Purchase and Sale Agreement, the Purchaser shall assign its rights of
indemnity hereunder to the Borrower, and pursuant to the Note Purchase
Agreement, the Borrower shall assign its rights of indemnity granted hereunder
to the Trustee, on behalf of the Secured Parties.  Upon such assignment, (a) the Trustee,
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 Section 9.2 shall inure to the Trustee, on behalf
of the Secured Parties.  The Seller
agrees that, upon such assignment, the Trustee, on behalf of the Secured
Parties, may enforce directly, without joinder of the Purchaser or the
Borrower, 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 Note Purchaser,
the Trustee, the Agent or any other Secured Party, no claim may be made by the
Seller or any other Person against the Note Purchaser, the Trustee, the 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 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 Agent and the Trustee. The Purchaser shall provide not
less than ten Business Days’ prior written notice of any such amendment to the
Agent, the Trustee and the Note Purchaser.


 


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 or remedy under this Agreement shall operate as a waiver thereof, nor
shall any single or partial exercise of any such power, right or remedy
preclude any other or future exercise thereof or the exercise of any other
power, right or remedy. The powers, rights and remedies herein provided are
cumulative and not exhaustive of any powers, rights 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.


 


42
















 


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 under its name on the signature pages hereto or
at such other address as shall be designated by such party in a written notice
to the other parties hereto.  Notices and
communications by facsimile and e-mail shall be effective when sent (and shall
be followed by hard copy sent by regular mail), and notices and communications
sent by other means shall be effective when received.


 


Section 10.6.          Merger and Integration.  Except as specifically stated otherwise
herein, this Agreement, the Note Purchase 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 Note Purchase 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 


 


43

















 


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 Section 9.1 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, or any waiver or consent issued in
connection with, this Agreement and the other documents to be delivered
hereunder or in connection herewith, including, without limitation, the
reasonable fees and out—of—pocket expenses of counsel with respect thereto and
with respect to advising the Purchaser or its assignees as to its rights and
remedies under this Agreement and the other documents to be delivered hereunder
or in connection herewith, and all 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 income
taxes) 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 or the
Borrower 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 the membership
interests of the Borrower and the proceeds of such 


 


44

















 


membership interests, (ii) the Purchaser shall,
immediately upon Purchase hereunder, transfer the Sale Portfolio to the
Borrower pursuant to the Second Tier Purchase and Sale Agreement, and (iii) Available
Collections generated by the Sale Portfolio will be applied to payment of the
Borrower’s obligations under the Note Purchase 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.


 


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, the Second
Tier Purchase and Sale Agreement or the Note Purchase Agreement.  Simultaneously with the execution and
delivery of this Agreement, the Purchaser will transfer the Sale Portfolio to
the Borrower pursuant to the Second Tier Purchase and Sale Agreement, and the
Borrower, pursuant to the Note Purchase Agreement, will assign all of its
right, title and interest in this Agreement to the Trustee, 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 Trustee, for the benefit of
the Secured Parties, under the Note Purchase Agreement and the Trustee, in such
capacity, shall be a third party beneficiary hereof.  The Trustee, for the benefit of the Secured
Parties, under the Note Purchase Agreement upon such assignment 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 or the
Borrower.


 


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 Agent, the Note Purchaser, the Trustee, 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 its representatives and
assigns may conduct at any reasonable time, with reasonable notice, and from
time to time, and the 


 


45

















 


Seller will fully cooperate with, a reasonable number
of field examinations and audits of the inventory, the Loan Assets and business
affairs of the Seller each calendar year. 
Each such inspection shall be at the sole expense of the Seller.  The Purchaser and its representatives and
successors and assigns acknowledge that in exercising the rights and privileges
conferred in this Section 10.16, it or its representatives or
assigns may, from time to time, obtain knowledge of information, practices,
books, correspondence and records of a confidential nature and in which the
Seller has a proprietary interest.  The
Purchaser and its representatives and successors and assigns agree that (i) they
shall retain in strict confidence and shall use their best efforts to ensure
that their 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
they will not, and will use their best efforts to ensure that their
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 Borrower or any
assets or properties of the Borrower, whether arising hereunder or otherwise
existing, the Borrowing Base at such time must exceed the Obligations owed by
the Borrower to the Secured Parties under the Note Purchase 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 Borrower owing to the Note
Purchaser, the Trustee, the Collateral Custodian, the Agent or any other
Secured Party under the Note Purchase Agreement.


 


Section 10.18.        Breaches of Representations,
Warranties and Covenants. For the avoidance of doubt, no breach or default
of any representation, warranty or covenant contained in Sections 4.1, 4.2,
4.3,  5.1, 5.2, or 5.3 that does not constitute an “Unmatured
Event of Default” under the Note Purchase Agreement,  “Event of Default” under the Note Purchase
Agreement or Seller Termination Event under this Agreement shall be deemed to
be a breach or default hereunder; provided that the
foregoing shall not affect the definition of “Seller Purchase Event”, Sections
2.1(n), 2.3(c), 3.2(a), 4.1(ll), 4.1(mm), 5.2(j)(iii),
6.2(b), 8.3,  9.1
and the schedules and exhibits hereto.


 


Section 10.19.        Confidentiality. Each of the
parties hereto hereby agrees with the confidentiality provisions set forth in
Sections 11.13 and 11.14 of the Note Purchase Agreement.


 


Section 10.20.        Assignments of Loan Assets.


 


(a)           Notwithstanding anything to the
contrary herein, solely for administrative convenience and solely in the case
of Third Party Acquired Loan Assets, (i) for purposes of clause (a)(i) of
the definition of “Required Loan Documents” in the Note Purchase Agreement, the
chain of endorsements required therein by the third party to the Seller, the
Seller to the Purchaser and the Purchaser to the Borrower may be satisfied by a
direct endorsement from the applicable third party to the Borrower or (ii) delivery
of the transfer documents or instruments required by clause (a)(ii) of the
definition of “Required Loan Documents” may be satisfied by 


 


46

















 


delivery of transfer documents or instruments
evidencing the assignment of such Loan Asset by the applicable third party
directly to the Borrower (and by the Borrower either to the Trustee or in
blank).


 


(b)           Nothing in this Section 10.20
shall limit any requirement that all Loan Assets treated as or represented to
be Eligible Loan Assets hereunder or in any Transaction Document be purchased
by Borrower from the Purchaser pursuant to the Second Tier Purchase and Sale
Agreement and by the Purchaser from the Seller pursuant to this Agreement (as
evidenced by the Assignments applicable to each Purchase and Sale Agreement) or
any representations or warranties with respect to Loan Assets so purchased or
the liabilities or recourse of the Seller or Purchaser, as applicable,
pertaining to such sales.


 


[Signature
pages to follow.]


 


47

















 


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.


 


	
   

  	
  ARES CAPITAL CP FUNDING HOLDINGS II LLC, as the Purchaser

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Richard S. Davis

  
	
   

  	
   

  	
  Name:  Richard
  S. Davis

  
	
   

  	
   

  	
  Title:    Chief
  Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Ares Capital CP Funding
  Holdings II LLC

  
	
   

  	
  2000 Avenue of the
  Stars, 12th Floor

  
	
   

  	
  Los Angeles, California
  90067

  
	
   

  	
  Attention: General
  Counsel and Chief Financial Officer

  
	
   

  	
  Facsimile No.: (310)
  201-4197

  
	
   

  	
  Confirmation No.: (310)
  201-4205

  
	
   

  	
   

  	
   

  
	
   

  	
  and

  
	
   

  	
   

  	
   

  
	
   

  	
  Ares Capital CP Funding
  Holdings II LLC

  
	
   

  	
  280 Park Avenue, 22nd Floor East

  
	
   

  	
  New York, New York
  10017

  
	
   

  	
  Attention: General
  Counsel and Chief Financial Officer

  
	
   

  	
  Facsimile No.: (212)
  750-1777

  
	
   

  	
  Confirmation No.: (212)
  750-7300

  



 


 


Ares Capital CP Funding
II LLC


First Tier Purchase and
Sale Agreement


 

















 


	
   

  	
  ARES CAPITAL CORPORATION, as the Seller

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Richard S. Davis

  
	
   

  	
   

  	
  Name:  Richard
  S. Davis

  
	
   

  	
   

  	
  Title:    Chief
  Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Ares Capital
  Corporation

  
	
   

  	
  c/o Ares Management LLC

  
	
   

  	
  2000 Avenue of the
  Stars, 12th Floor

  
	
   

  	
  Los Angeles, California
  90067

  
	
   

  	
  Attention:

  	
  General Counsel and
  Chief Financial Officer

  
	
   

  	
  Facsimile No.: (310)
  201-4197; (310) 201-4189

  
	
   

  	
  Confirmation No.: (310)
  201-4205; (310) 201-4204

  
	
   

  	
   

  	
   

  
	
   

  	
  and

  
	
   

  	
   

  	
   

  
	
   

  	
  Ares Capital
  Corporation

  
	
   

  	
  280 Park Avenue, 22nd Floor East

  
	
   

  	
  New York, New York
  100017

  
	
   

  	
  Attention:

  	
  Michael J. Arougheti
  and Raymond Wright

  
	
   

  	
  Facsimile No: (212)
  750-1777

  
	
   

  	
  Confirmation No.: (212)
  750-7300

  
				



 


 


Ares Capital CP Funding
II LLC


First Tier Purchase and
Sale Agreement