Exhibit 10.3




 





 


COMMERCIAL LOAN SALE AGREEMENT



by and between



ARES CAPITAL CORPORATION,

as the Originator



and



ARCC CLO 2006 LLC,

as the Trust Depositor



Dated as of July 7, 2006




 





 


ARCC Commercial Loan
Trust 2006 Notes, Series 2006

Class A-1A, Class A-1A VFN, Class A-1B, Class A-2A, Class A-2B,

Class B, Class C, Class D and Class E Notes















 


 


TABLE OF CONTENTS


	
  

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE I            DEFINITIONS

  	
   

  	
  2

  
	
   

  	
   

  	
   

  
	
  Section 1.01

  	
   

  	
  Definitions

  	
   

  	
  2

  
	
  Section 1.02

  	
   

  	
  Other Terms

  	
   

  	
  4

  
	
  Section 1.03

  	
   

  	
  Computation of Time Periods

  	
   

  	
  4

  
	
  Section 1.04

  	
   

  	
  Interpretation

  	
   

  	
  4

  
	
  Section 1.05

  	
   

  	
  References

  	
   

  	
  5

  
	
  Section 1.06

  	
   

  	
  Calculations

  	
   

  	
  5

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II           TRANSFER
  OF LOAN ASSETS

  	
   

  	
  5

  
	
   

  	
   

  	
   

  
	
  Section 2.01

  	
   

  	
  Transfer of Loan Assets

  	
   

  	
  5

  
	
  Section 2.02

  	
   

  	
  Conditions to Transfer of Loan Assets to the Trust
  Depositor

  	
   

  	
  7

  
	
  Section 2.03

  	
   

  	
  Acceptance by the Trust Depositor

  	
   

  	
  8

  
	
  Section 2.04

  	
   

  	
  [Reserved]

  	
   

  	
  8

  
	
  Section 2.05

  	
   

  	
  Conveyance of Additional Loans

  	
   

  	
  8

  
	
  Section 2.06

  	
   

  	
  Release of Excluded Amounts

  	
   

  	
  9

  
	
  Section 2.07

  	
   

  	
  Delivery of Documents in the Loan File; Recording of
  Assignments of Mortgage

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III          REPRESENTATIONS
  AND WARRANTIES

  	
   

  	
  10

  
	
   

  	
   

  	
   

  
	
  Section 3.01

  	
   

  	
  Representations and Warranties Regarding the
  Originator

  	
   

  	
  10

  
	
  Section 3.02

  	
   

  	
  Representations and Warranties Regarding Each Loan
  and as to Certain Loans in the Aggregate

  	
   

  	
  17

  
	
  Section 3.03

  	
   

  	
  [Reserved]

  	
   

  	
  18

  
	
  Section 3.04

  	
   

  	
  Representations and Warranties Regarding the
  Required Loan Documents

  	
   

  	
  18

  
	
  Section 3.05

  	
   

  	
  [Reserved]

  	
   

  	
  18

  
	
  Section 3.06

  	
   

  	
  Representations and Warranties Regarding the Trust
  Depositor

  	
   

  	
  18

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV          PERFECTION
  OF TRANSFER AND PROTECTION OF SECURITY INTERESTS

  	
   

  	
  20

  
	
   

  	
   

  	
   

  
	
  Section 4.01

  	
   

  	
  Custody of Loans

  	
   

  	
  20

  
	
  Section 4.02

  	
   

  	
  Filing

  	
   

  	
  20

  
	
  Section 4.03

  	
   

  	
  Changes in Name, Corporate Structure or Location

  	
   

  	
  20

  
	
  Section 4.04

  	
   

  	
  Sale Treatment

  	
   

  	
  20

  
	
  Section 4.05

  	
   

  	
  Separateness from Trust Depositor

  	
   

  	
  21

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V           COVENANTS
  OF THE ORIGINATOR

  	
   

  	
  21

  
	
   

  	
   

  	
   

  
	
  Section 5.01

  	
   

  	
  Corporate Existence

  	
   

  	
  21

  
	
  Section 5.02

  	
   

  	
  Loans Not to Be Evidenced by Promissory Notes

  	
   

  	
  21

  
	
  Section 5.03

  	
   

  	
  Security Interests

  	
   

  	
  21

  
	
  Section 5.04

  	
   

  	
  Compliance with Law

  	
   

  	
  22

  



 









 



 


	
  Section 5.05

  	
   

  	
  Liability of Originator

  	
   

  	
  22

  
	
  Section 5.06

  	
   

  	
  Limitation on Liability of Originator and Others

  	
   

  	
  22

  
	
  Section 5.07

  	
   

  	
  Merger or Consolidation of Originator;
  Change-in-Control

  	
   

  	
  22

  
	
  Section 5.08

  	
   

  	
  Delivery of Collections

  	
   

  	
  23

  
	
  Section 5.09

  	
   

  	
  Payments from Principal and Interest Account

  	
   

  	
  23

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI          REMEDIES
  UPON MISREPRESENTATION

  	
   

  	
  23

  
	
   

  	
   

  	
   

  
	
  Section 6.01

  	
   

  	
  Repurchases of, or Substitution for, Loans for
  Breach of Representations and Warranties

  	
   

  	
  23

  
	
  Section 6.02

  	
   

  	
  Reassignment of Repurchased or Substituted Loans

  	
   

  	
  26

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII        INDEMNIFICATION
  BY THE ORIGINATOR

  	
   

  	
  26

  
	
   

  	
   

  	
   

  
	
  Section 7.01

  	
   

  	
  Indemnification

  	
   

  	
  26

  
	
  Section 7.02

  	
   

  	
  Liabilities to Obligors

  	
   

  	
  27

  
	
  Section 7.03

  	
   

  	
  Operation of Indemnities

  	
   

  	
  27

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VIII       MISCELLANEOUS

  	
   

  	
  27

  
	
   

  	
   

  	
   

  
	
  Section 8.01

  	
   

  	
  Amendment

  	
   

  	
  27

  
	
  Section 8.02

  	
   

  	
  Governing Law

  	
   

  	
  29

  
	
  Section 8.03

  	
   

  	
  Notices

  	
   

  	
  29

  
	
  Section 8.04

  	
   

  	
  Severability of Provisions

  	
   

  	
  30

  
	
  Section 8.05

  	
   

  	
  Third Party Beneficiaries

  	
   

  	
  30

  
	
  Section 8.06

  	
   

  	
  Counterparts

  	
   

  	
  30

  
	
  Section 8.07

  	
   

  	
  Headings

  	
   

  	
  30

  
	
  Section 8.08

  	
   

  	
  No Bankruptcy Petition; Disclaimer

  	
   

  	
  31

  
	
  Section 8.09

  	
   

  	
  Jurisdiction

  	
   

  	
  31

  
	
  Section 8.10

  	
   

  	
  Prohibited Transactions with Respect to the Issuer

  	
   

  	
  31

  
	
  Section 8.11

  	
   

  	
  No Partnership

  	
   

  	
  31

  
	
  Section 8.12

  	
   

  	
  Successors and Assigns

  	
   

  	
  31

  
	
  Section 8.13

  	
   

  	
  Duration of Agreement

  	
   

  	
  32

  
	
  Section 8.14

  	
   

  	
  Limited Recourse

  	
   

  	
  32

  



 
















 


COMMERCIAL
LOAN SALE AGREEMENT


THIS COMMERCIAL LOAN SALE AGREEMENT,
dated as of July 7, 2006 (as amended, modified, restated, waived, or
supplemented from time to time, the “Agreement”), is between ARES
CAPITAL CORPORATION, a Maryland corporation (together with its successors and
assigns, “Ares Capital”, and in its capacity as originator, together
with its successors and assigns, the “Originator”), and ARCC CLO 2006
LLC, a Delaware limited liability company (together with its successors and
assigns, the ‘“Trust Depositor”).


WHEREAS, in the
regular course of its business, the Originator originates and/or otherwise
acquires Loans;


WHEREAS, the Trust
Depositor desires to acquire the Initial Loans from the Originator and may
acquire from time to time thereafter certain Substitute Loans;


WHEREAS, during the
Ramp-Up Period and the Replenishment Period, ARCC Commercial Loan Trust 2006, a
Delaware statutory trust (the “Issuer”) intends to acquire Additional
Loans from the Trust Depositor from time to time using the proceeds of Draws
under the Class A-2 Notes, amounts on deposit in the Class A-2 Funding Account
and Principal Collections with respect to the Loan Assets; and the Trust
Depositor wishes to convey any such Additional Loans to the Issuer;


WHEREAS, it is a condition
to the Trust Depositor’s acquisition of the Initial Loans, any Additional Loans
and any Substitute Loans from the Originator that the Originator make certain
representations and warranties regarding the Loan Assets for the benefit of the
Trust Depositor as well as the Issuer;


WHEREAS, the Trust
Depositor is willing to purchase and accept assignment of the Loan Assets from
the Originator pursuant to the terms hereof; and


WHEREAS, on the
Closing Date, the Trust Depositor will grant a subparticipation (or a
participation in a subparticipation) interest in the Initial Loan Assets to the
Issuer, pursuant to a Sale and Servicing Agreement, dated as of the date hereof
(as amended, modified, restated, replaced, waived, substituted, supplemented or
extended from time to time, the “Sale and Servicing Agreement”), among
Ares Capital, as the originator and the servicer, the Trust Depositor, as the
trust depositor, the Issuer, as the issuer, U.S. Bank National Association, as
the trustee and as the collateral administrator, Lyon Financial Services, Inc.
(d/b/a U.S. Bank Portfolio Services) as the backup servicer, and Wilmington
Trust Company as the owner trustee.


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















 


 


ARTICLE I



DEFINITIONS


Section 1.01         Definitions.


Capitalized terms used but not defined in this
Agreement shall have the meanings attributed to such terms in the Sale and
Servicing Agreement, unless the context otherwise requires.  In addition, as used herein, the following
defined terms, unless the context otherwise requires, shall have the following
meanings:


“Additional Loan Assets” means any assets to be
acquired by the Trust Depositor from the Originator during the Ramp-Up Period
and the Replenishment Period pursuant to Section 2.05(a), which assets
shall include the Originator’s right, title and interest in the following:


(i)                   the Additional Loans listed
in the related Subsequent List of Loans, all payments paid in respect thereof
and all monies due, to become due or paid in respect thereof accruing on and
after the applicable Cut-Off Date and all Liquidation Proceeds and recoveries
thereon, in each case as they arise after the applicable Cut-Off Date;


(ii)                  all security interests and
Liens and Related Property subject thereto from time to time purporting to
secure payment by Obligors under such Loans;


(iii)                 all guaranties, indemnities and
warranties, Asset Specific Swaps, and other agreements or arrangements of
whatever character from time to time supporting or securing payment of such
Loans;


(iv)                all collections and records (including
Computer Records) with respect to the foregoing;


(v)                 all documents relating to the
applicable Loan Files; and


(vi)                all income, payments, proceeds
and other benefits of any and all of the foregoing, including but not limited
to, all accounts, cash and currency, chattel paper, electronic chattel paper,
tangible chattel paper, copyrights, copyright licenses, equipment, fixtures,
general intangibles, instruments, commercial tort claims, deposit accounts,
inventory, investment property, letter of credit rights, software, supporting
obligations, accessions, and other property consisting of, arising out of, or
related to the foregoing, but excluding any Excluded Amount with respect
thereto.


“Elevation”
has the meaning provided in Section 8.15(b).


“Elevation Date”
has the meaning provided in Section 8.15(b).


“Initial Loan Assets” means any assets to be
acquired by the Trust Depositor from the Originator on the Closing Date
pursuant to Section 2.01, which assets shall include the Originator’s
right, title and interest in the following:



 2
 






 



 


(i)                   the Initial Loans, all
payments paid in respect thereof and all monies due, to become due or paid in
respect thereof accruing on and after the Closing Date;


(ii)                  all security interests and
Liens and Related Property subject thereto from time to time purporting to
secure payment by Obligors under such Loans;


(iii)                 all guaranties, indemnities and
warranties, Asset Specific Swaps, and other agreements or arrangements of
whatever character from time to time supporting or securing payment of such
Loans;


(iv)                the Transaction Accounts
together with all cash and investments in each of the foregoing;


(v)                 all collections and records
(including Computer Records) with respect to the foregoing;


(vi)                all documents relating to the
applicable Loan Files; and


(vii)               all income, payments, proceeds
and other benefits of any and all of the foregoing, including but not limited
to, all accounts, cash and currency, chattel paper, electronic chattel paper,
tangible chattel paper, copyrights, copyright licenses, equipment, fixtures,
general intangibles, instruments, commercial tort claims, deposit accounts,
inventory, investment property, letter of credit rights, software, supporting
obligations, accessions, and other property consisting of, arising out of, or
related to the foregoing, but excluding any Excluded Amount with respect
thereto.


“Investment”: 
With respect to any Person, any direct or indirect loan, advance or
investment by such Person in any other Person, whether by means of share
purchase, capital contribution, loan or otherwise, excluding the acquisition of
Loans pursuant to the Sale Agreement.


“Loan Assets” means, collectively and as
applicable, the Initial Loan Assets, the Substitute Loan Assets and the
Additional Loan Assets, as applicable.


“Participated
Portion” has the meaning provided in Section 8.15(a).


“Participation”
has the meaning provided in Section 8.15(b).


“Participation
Period” has the meaning provided in Section 8.15(b).


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



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“Substitute Loan Assets” means any assets to be
acquired by the Trust Depositor in connection with a substitution of one or
more Substitute Loans pursuant to Section 2.04, which assets shall
include the Originator’s right, title and interest in the following:


(i)                   the Substitute Loans listed
in the related Subsequent List of Loans, all payments paid in respect thereof
and all monies due, to become due or paid in respect thereof accruing on and
after the applicable Cut-Off Date and all Liquidation Proceeds and recoveries
thereon, in each case as they arise after the applicable Cut-Off Date;


(ii)                  all security interests and
Liens and Related Property subject thereto from time to time purporting to
secure payment by Obligors under such Loans;


(iii)                 all guaranties, indemnities and
warranties, Asset Specific Swaps, and other agreements or arrangements of
whatever character from time to time supporting or securing payment of such
Loans;


(iv)                all collections and records
(including Computer Records) with respect to the foregoing;


(v)                 all documents relating to the
applicable Loan Files; and


(vi)                all income, payments, proceeds
and other benefits of any and all of the foregoing, including but not limited
to, all accounts, cash and currency, chattel paper, electronic chattel paper,
tangible chattel paper, copyrights, copyright licenses, equipment, fixtures,
general intangibles, instruments, commercial tort claims, deposit accounts,
inventory, investment property, letter of credit rights, software, supporting
obligations, accessions, and other property consisting of, arising out of, or
related to the foregoing, but excluding any Excluded Amount with respect
thereto.


Section
1.02         Other Terms.


All accounting terms used but not specifically defined
herein shall be construed in accordance with generally accepted accounting
principles.  The symbol “$” shall mean
the lawful currency of the United States of America.  All terms used in Article 9 of the UCC in the
State of New York, and not specifically defined herein, are used herein as
defined in such Article 9.


Section
1.03         Computation of Time Periods.


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


Section
1.04         Interpretation.


In this Agreement,
unless a contrary intention appears:



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


(ii)           reference
to any Person includes such Person’s successors and assigns but, if applicable,
only if such successors and assigns are permitted by the Transaction Documents;


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


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


(v)           unless
otherwise stated, reference to any time means New York, New York time;


(vi)          references to “writing” include
printing, typing, lithography, electronic or other means of reproducing words
in a visible form;


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


(viii)        reference to any law or statute,
including any Applicable Law means such law, statute or Applicable Law as
amended, modified, codified, replaced or reenacted, in whole or in part, and in
effect from time to time, including rules and regulations promulgated
thereunder and reference to any Section or other provision of any Applicable
Law means that provision of such Applicable Law from time to time in effect and
constituting the substantive amendment, modification, codification, replacement
or reenactment of such Section or other provision.


Section
1.05         References.


All section references (including references to the Preamble),
unless otherwise indicated, shall be to Sections (and the Preamble) in
this Agreement.


Section
1.06         Calculations.


Except as otherwise provided herein, all interest rate
and basis point calculations hereunder will be made on the basis of a 360 day
year and the actual days elapsed in the relevant period and will be carried out
to at least three decimal places.



 5
 






 



 


ARTICLE
II



TRANSFER OF LOAN ASSETS


Section
2.01         Transfer of Loan Assets.


(a)           The Originator shall sell, assign and
convey Loan Assets to the Trust Depositor pursuant to the terms and provisions
hereof.


(b)           Subject to and upon the terms and
conditions set forth herein (including, without limitation, Section 8.15),
the Originator hereby sells, transfers, assigns, sets over and otherwise
conveys to the Trust Depositor without recourse, for a purchase price
consisting of $308,054,888.70 in cash, all the right, title and interest of the
Originator in and to the Initial Loan Assets and proceeds hereof.


To the extent the purchase price paid to the
Originator for any Loan Asset conveyed under this Agreement is less than the
fair market value of such Loan, the difference between such fair market value
and the purchase price shall be deemed to be a capital contribution made by the
Originator to the Trust Depositor on the Closing Date in the case of the
Initial Loans and on the applicable Cut-Off Date, in the case of any Additional
Loans or Substitute Loans.


(c)           The Originator and the Trust
Depositor each acknowledge with respect to itself that the representations and
warranties of the Originator in Sections 3.01 through 3.04 and in
Section 3.06 will run to and be for the benefit of the Issuer and the
Trustee, and the Issuer and the Trustee may enforce directly (without joinder
of the Trust Depositor when enforcing against the Originator), the repurchase
obligations of the Originator or the Trust Depositor, as applicable, with
respect to breaches of such representations and warranties as set forth in the
Sale and Servicing Agreement or in this Agreement.


(d)           The sale, transfer, assignment, set-over
and conveyance of the Loan Assets by the Originator to the Trust Depositor
pursuant to this Agreement does not constitute and is not intended to result in
a creation or an assumption by the Trust Depositor or the Issuer of any
obligation of the Originator as lead agent, collateral agent or paying agent
under any Agented Loan.


(e)           The Originator and the Trust
Depositor intend and agree that (i) the transfer of the Loan Assets by the
Originator to the Trust Depositor is intended to be a sale, conveyance and
transfer of ownership of the applicable Loan Assets, as the case may be, rather
than the mere granting of a security interest to secure a borrowing and (ii)
such Loan Assets, as applicable, shall not be part of the Originator’s estate
in the event of a filing of a bankruptcy petition or other action by or against
such Person under any Insolvency Law.  In
the event, however, that notwithstanding such intent and agreement, such
transfers are deemed to be a mere grant of a security interest to secure
indebtedness, the Originator shall be deemed to have granted (and as of the
Closing Date hereby grants to) the Trust Depositor a perfected first priority
security interest within the meaning of Article 9 of the UCC in all right,
title and interest of the Originator in such Loan Assets, and this Agreement shall
constitute a security agreement under Applicable Law, securing the repayment of
a loan deemed to have been in an amount equal to the aggregate purchase price
paid hereunder, in the order of priorities, and subject to the other terms and
conditions of, this Agreement, the Sale and Servicing Agreement, the Indenture
and the Trust Agreement, together with such other obligations or interests as
may arise hereunder and thereunder in favor of the parties hereto and thereto.



 6
 






 



 


(f)            If any such transfer of the Loan
Assets is deemed to be a mere grant of a security interest to secure a
borrowing, the Trust Depositor may, to secure the Trust Depositor’s own
borrowing under the Sale and Servicing Agreement (to the extent that the
transfer of the Loan Assets thereunder is deemed to be a mere grant of a
security interest to secure a borrowing), repledge and reassign (i) all or a
portion of the Loan Assets pledged to the Trust Depositor by the Originator and
with respect to which the Trust Depositor 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 Trust Depositor with or without a repledge and reassignment
by the Trust Depositor of its rights under any agreement with the Originator,
and without further notice to or acknowledgment from the Originator.  The Originator waives, to the extent
permitted by Applicable Law, all claims, causes of action and remedies, whether
legal or equitable (including any right of setoff), against the Trust Depositor
or any assignee of the Trust Depositor relating to such action by the Trust
Depositor in connection with the transactions contemplated by this Agreement
and the Transaction Documents.


Section
2.02         Conditions to Transfer of
Loan Assets to the Trust Depositor.


On or before the Closing Date, the Originator shall
deliver or cause to be delivered to the Trust Depositor, the Owner Trustee and
the Trustee each of the documents, certificates and other items as follows:


(i)            an
Officer’s Certificate of the Originator substantially in the form of Exhibit
C to the Sale and Servicing Agreement;


(ii)           copies
of resolutions of the board of directors of the Originator and the Servicer or
of the executive committee of the board of directors of the Originator and the
Servicer approving the execution, delivery and performance of this Agreement,
the Transaction Documents to which it is a party and the transactions
contemplated hereunder, certified in each case by a Responsible Officer of the
Originator and the Servicer;


(iii)          officially certified evidence dated
within 30 days prior to the Closing Date of due formation and good standing of
the Originator under the laws of the State of New York;


(iv)          the initial List of Loans, certified
by a Responsible Officer of the Originator, together with the delivery of any
instruments and Loan Files as required under Section 2.07;


(v)           a
letter from KPMG LLP or another nationally recognized accounting firm,
addressed to the Originator and the Trust Depositor (with a copy to Moody’s and
S&P), stating that such firm has reviewed a sample of the Initial Loans and
performed specific procedures for such sample with respect to certain loan
terms and that identifies those Initial Loans that do not conform;


(vi)          evidence of proper filing with
appropriate offices in the State of Delaware of a UCC financing statement
listing the Originator, as debtor, naming the Trustee as total assignee and
identifying the Loan Assets as collateral;



 7
 






 



 


(vii)         an Officer’s Certificate from the
Servicer’s listing the Servicing Officers;


(viii)        evidence of deposit in the Principal and
Interest Account of all Principal Collections received with respect to the
Initial Loans on and after the Closing Date, together with an Officer’s
Certificate from the Servicer to the effect that such amount is correct; and


(ix)           a fully executed copy of each of the
Transaction Documents.


Section
2.03         Acceptance by the Trust
Depositor.


Within three Business Days after the Closing Date, if
the conditions set forth in Section 2.02 have been satisfied, the
Originator shall deliver, on behalf of the Trust Depositor, to the Trustee the
Initial Loan Assets and such delivery to and acceptance by the Issuer shall be
deemed to be delivery to and acceptance by the Trust Depositor.


Section
2.04         [Reserved]


Section
2.05         Conveyance of Additional
Loans.


(a)           The Trust Depositor may, at any time
during the Ramp-Up Period and the Replenishment Period and subject to the
conditions set forth in this Section 2.05, purchase Additional Loan
Assets from the Originator.  The purchase
price paid by the Issuer for any Additional Loan shall be an amount equal to
(x) in the case of a Loan originated by the Originator, the Outstanding Loan
Balance thereof or (y) in the case of a Loan acquired by the Originator from a
third party, the purchase price paid for such Loan, as applicable, plus, in
each case, accrued and unpaid interest thereon.


(b)           Upon the acquisition of any
Additional Loan Assets pursuant to and in accordance with this Section 2.05,
the Trust Depositor will convey such Additional Loan Assets to the Issuer
pursuant to the Sale and Servicing Agreement and, upon the pledge by the Issuer
of such Loan Assets to the Trustee for the benefit of the Noteholders, such
Additional Loan Assets shall become part of the Collateral subject to the Lien
of the Indenture.


(c)           The Originator shall transfer to the
Trust Depositor and the Trust Depositor shall transfer to the Issuer the
Additional Loans and the Loan Assets related thereto only upon the satisfaction
of each of the following conditions on or prior to the related Cut-Off Date
(and the delivery of a related Loan Asset Certificate by the Trust Depositor
shall be deemed a representation and warranty by the Issuer, Trust Depositor
and the Originator that such conditions are satisfied as of the related Cut-Off
Date):


(i)            the
Trust Depositor shall have provided the Issuer and the Trustee with a timely
Loan Asset Certificate complying with the definition thereof contained herein,
which Loan Asset Certificate shall be delivered no later than 11:00 a.m. on the
related Cut-Off Date;


(ii)           with
respect to the acquisition of any Additional Loan, after giving effect to the
sale of the applicable Additional Loan Assets to the Issuer under the Sale and



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Servicing
Agreement and the inclusion of such Loan in the Collateral, the Portfolio
Acquisition and Disposition Requirements and, solely with respect to such
acquisitions effected during the Replenishment Period, the Portfolio Criteria
are satisfied; provided that if
any component of the Portfolio Criteria is not satisfied prior to giving effect
to the acquisition of any such Additional Loan effected during the
Replenishment Period, the Portfolio Criteria shall be deemed satisfied with
respect to such component if the component is maintained or improved by the
inclusion of such Additional Loans;


(iii)          the Originator shall have deposited or
caused to be deposited in the Principal and Interest Account all Collections
received with respect to the Additional Loans on and after the related Cut-Off
Date;


(iv)          as of each Cut-Off Date, the
Originator was Solvent and it will not be rendered insolvent by the transfer of
the applicable Additional Loan Assets to the Trust Depositor on such Cut-Off
Date nor is it aware of any pending insolvency;


(v)           no
selection procedures believed by the Originator to be adverse to the interests
of the Holders shall have been utilized in selecting the Additional Loans; and


(vi)          each of the representations and
warranties made by the Trust Depositor pursuant to Section 3.02
(including without limitation that each such Additional Loan is an Eligible
Loan and Section 3.04 applicable to the Additional Loans shall be true
and correct as of the related Cut-Off Date.


(d)           The Originator shall, at its own
expense, on or prior to the related Cut-Off Date, indicate in its Computer
Records that ownership of the applicable Additional Loans identified on the
applicable Subsequent List of Loans has been sold by the Originator to the
Trust Depositor, pursuant to this Agreement, and by the Trust Depositor to the
Issuer, pursuant to the Sale and Servicing Agreement.


(e)           The Originator shall deliver prior
written notice of the inclusion of an Additional Loan to Moody’s and S&P.


Section
2.06         Release of Excluded Amounts.


The parties acknowledge and agree that the Trust
Depositor has no interest in the Excluded Amounts.  Immediately upon the release to the Trust
Depositor by the Trustee of the Excluded Amounts, the Trust Depositor hereby
irrevocably agrees to release to the Originator such Excluded Amounts, which
release shall be automatic and require no further action by the Trust
Depositor; provided that the
Trust Depositor shall execute and deliver such instruments of release and
assignment, or otherwise confirming the foregoing release of any Excluded
Amounts, as may be reasonably requested by the Originator.


Section
2.07         Delivery of Documents in the
Loan File; Recording of Assignments of Mortgage.


(a)           Subject to the delivery requirements
set forth in Section 2.07(b), the Originator shall deliver, on behalf of
the Trust Depositor, possession of all the Loan Files to the Trustee on



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behalf of and for the account of the Noteholders.  The Originator shall also identify on the
List of Loans (including any deemed amendment thereof associated with any
Additional Loans or Substitute Loans), whether by attached schedule or marking
or other effective identifying designation, all Loans that are evidenced by
such instruments.


(b)           With respect to each Loan in the
Collateral, on or before the Closing Date in the case of the Initial Loans and
on or before the related Cut-Off Date in the case of any Additional Loans or
Substitute Loans, the Originator, on behalf of the Trust Depositor, will
deliver or cause to be delivered to the Trustee, to the extent not previously
delivered, each of the documents in the Loan File with respect to such Loan,
except that (i) to the extent required to be delivered pursuant to the Sale and
Servicing Agreement as part of the Required Loan Documents with respect to such
Loan, the original recorded Mortgage, in those instances where a copy thereof
certified by the Originator was delivered to the Trustee as a Required Loan
Document pursuant to clause (b)(iii)(x) of the definition thereof, will be
delivered or caused to be delivered within ten Business Days after receipt
thereof, and in any event within one year after the Closing Date in the case of
the Initial Loans and the related Cut-Off Date in the case of any Additional
Loans or Substitute Loans, and (ii) to the extent required to be delivered
pursuant to the Sale and Servicing Agreement as part of the Required Loan
Documents with respect to such Loan, any intervening Assignments of Mortgage,
in those instances where copies thereof certified by the Originator were
delivered to the Trustee as a Required Loan Document pursuant to clause
(b)(iii)(x) of the definition thereof, will be delivered or caused to be
delivered within ten Business Days after the receipt thereof, and in any event,
within one year after the Closing Date in the case of the Initial Loans and the
related Cut-Off Date in the case of any Additional Loans of Substitute
Loans.  Notwithstanding the foregoing in clauses
(i) and (ii) of this Section 2.07(b), in those instances
where the public recording office retains the original Mortgage or the
intervening Assignments of Mortgage after it has been recorded, the Originator
shall be deemed to have satisfied its obligations hereunder upon delivery to
the Trustee of a copy of such Mortgage or Assignments of Mortgage certified by
the public recording office to be a true copy of the recorded original thereof.


ARTICLE
III


REPRESENTATIONS
AND WARRANTIES


The Originator makes, and
upon transferring any Additional Loan or Substituted Loan is deemed to make, the
representations and warranties in Section 3.01 through Section 3.04,
on which the Trust Depositor will rely in conveying the Initial Loan Assets on
the Closing Date to the Issuer, and on which the Issuer and the Securityholders
will rely.  The Trust Depositor
acknowledges that such representations and warranties are being made by the
Originator for the benefit of the Issuer and the Securityholders.


Such representations and warranties are given as of
the execution and delivery of this Agreement and as of the Closing Date (or
Cut-Off Date, as applicable), but shall survive the sale, transfer and
assignment of the Loan Assets to the Issuer. 
The repurchase obligation or substitution obligation of the Originator
set forth in Section 6.01 constitutes the sole remedy available for a
breach of a representation or warranty of the Originator set forth in Section
3.01, through Section 3.04 and no Servicer Default or other default
may result therefrom.



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Section 3.01         Representations
and Warranties Regarding the Originator.


By its execution
of this Agreement the Originator represents and warrants that:


(a)           Organization and Good Standing.  The Originator is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Maryland and has the power to own its assets and to transact the business in
which it is currently engaged.  The
Originator is duly qualified to do business as a foreign corporation and is in
good standing in each jurisdiction in which the character of the business
transacted by it or properties owned or leased by it requires such
qualification and in which the failure so to qualify would have a Material
Adverse Effect with respect to the Originator.


(b)           Authorization; Valid Sale; Binding
Obligations.  The Originator has the
power and authority to make, execute, deliver and perform this Agreement and
the other Transaction Documents to which it is a party and all of the
transactions contemplated under this Agreement and the other Transaction
Documents to which it is a party, and to create the Trust Depositor and cause
it to make, execute, deliver and perform its obligations under this Agreement
and the other Transaction Documents to which it is a party and has taken all
necessary corporate action to authorize the execution, delivery and performance
of this Agreement and the other Transaction Documents to which it is a party
and to cause the Trust Depositor to be created. 
This Agreement shall effect a valid sale, transfer and assignment of or
grant of a security interest in the Loan Assets from the Originator to the
Trust Depositor, enforceable against the Originator and creditors of and
purchasers from the Originator.  This
Agreement and the other Transaction Documents to which the Originator is a
party constitute the legal, valid and binding obligation of the Originator
enforceable in accordance with their terms, except as enforcement of such terms
may be limited by applicable Insolvency Laws and general principles of equity,
whether considered in a suit at law or in equity.


(c)           No Consent Required.  The Originator is not required to obtain the
consent of any other party (other than those that it has already obtained) or
any consent, license, approval or authorization from, or registration or
declaration with, any Governmental Authority (other than those that it has
already obtained) in connection with the execution, delivery, performance,
validity or enforceability of this Agreement or the other Transaction Documents
to which it is a party.


(d)           No Violations.  The execution, delivery and performance of
this Agreement and the other Transaction Documents to which it is a party by
the Originator, and the consummation of the transactions contemplated hereby
and thereby, will not violate any Applicable Law applicable to the Originator,
or conflict with, result in a default under or constitute a breach of the
Originator’s organizational documents or the Contractual Obligations to which
the Originator is a party or by which the Originator or any of the Originator’s
properties may be bound, or result in the creation or imposition of any Lien of
any kind upon any of its properties pursuant to the terms of any such
Contractual Obligations, other than as contemplated by the Transaction
Documents.


(e)           Litigation.  No litigation or administrative proceeding of
or before any court, tribunal or governmental body is currently pending, or to
the knowledge of the Originator



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threatened, against the Originator or any of its
properties or with respect to this Agreement, the other Transaction Documents
to which it is a party or the Securities (1) that, if adversely determined,
would in the reasonable judgment of the Originator be expected to have a
Material Adverse Effect on the business, properties, assets or condition
(financial or otherwise) of the Originator or the transactions contemplated by
this Agreement or the other Transaction Documents to which the Originator is a
party or (2) seeking to adversely affect the federal income tax or other
federal, state or local tax attributes of the Certificate or Notes.


(f)            Solvency.  The Originator, at the time of and after
giving effect to each conveyance of Loan Assets hereunder, is Solvent on and as
of the date thereof.


(g)           Taxes.  The Originator has filed or caused to be
filed all tax returns which, to its knowledge, are required to be filed and has
paid all taxes shown to be due and payable on such returns or on any
assessments made against it or any of its property and all other taxes, fees other
charges imposed on it or any of its property by any Governmental Authority
(other any amount of tax due, the validity of which is currently being
contested in good faith by appropriate proceedings and with respect to which
reserves in accordance with generally accepted accounting principles have been
provided on the books of the Originator); no tax Lien has been filed and, to
the Originator’s knowledge, no claim is being asserted, with respect to any
such tax, fee or other charge.


(h)           Place of Business; No Changes.  The Originator’s location (within the meaning
of Article 9 of the UCC) is the State of New York.  The Originator has not changed its name, whether
by amendment of its Articles of Incorporation, by reorganization or otherwise,
and has not changed its location within the four months preceding the Closing
Date.


(i)            Not an Investment Company.  Neither the Originator nor the pool of Loan
Assets are registered or are required to be registered, as an “investment
company” within the meaning of the 1940 Act.


(j)            Sale Treatment.  Other than for accounting and tax purposes,
the Originator has treated the transfer of Loan Assets to the Trust Depositor
for all purposes as a sale and purchase on all of its relevant books and
records.


(k)           Security Interest.


(i)            This
Agreement creates a valid and continuing security interest (as defined in the
applicable UCC) in favor of the Trust Depositor in all right, title and
interest of Originator in the Loan Assets, 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 Originator;


(ii)           the
Loans, along with the related Loan Files, constitute either a “general
intangible,” an “instrument,” an “account,” “investment property,” or “chattel
paper,” within the meaning of the applicable UCC;


(iii)          the Originator owns and has, and upon
the sale and transfer thereof by the Originator to the Trust Depositor, the
Trust Depositor will have good and marketable title



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to such Loan Assets
free and clear of any Lien (other than Permitted Liens), claim or encumbrance
of any Person;


(iv)          the Originator has received all
consents and approvals required by the terms of the Loan Assets to the sale of
the Loan Assets hereunder to the Trust Depositor;


(v)           the Originator 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 such Loan Assets granted to the Trust Depositor under this
Agreement in the name of the Trustee, for the benefit of, and as agent for, the
Securityholders;


(vi)          other
than the security interest granted to the Trust Depositor pursuant to this
Agreement, the Originator has not pledged, assigned, sold, granted a security
interest in or otherwise conveyed any of such Loan Assets.  The Originator has not authorized the filing
of and is not aware of any financing statements naming the Originator as debtor
that include a description of collateral covering such Loan Assets other than
any financing statement (A) relating to the security interest granted to the
Trust Depositor under this Agreement, or (B) that has been terminated.  The Originator is not aware of the filing of
any judgment or tax Lien filings against the Originator;


(vii)         all
original executed copies of each Underlying Note (if any) that constitute or
evidence the Loan Assets have been delivered to the Trustee and, in the case of
Noteless Loans, the documents required pursuant to clause (ii)(a)(2) of the
definition of Required Loan Documents have been delivered to the Trustee;


(viii)        except
with respect to Noteless Loans, the Originator has received a written
acknowledgment from the Trustee that the Trustee or its bailee is holding any
Underlying Notes that constitute or evidence any Loan Assets solely on behalf
of and for the benefit of the Securityholders; and


(ix)           none
of the Underlying Notes that constitute or evidence any Loan Assets has any
marks or notations indicating that they have been pledged, assigned or
otherwise conveyed to any Person other than the Trust Depositor and the
Trustee.


(l)            Value Given.  The cash payment and the corresponding
increase in the Originator’s equity interest in the Trust Depositor received by
the Originator in respect of the purchase price the Loans sold hereunder
constitutes the fair market value of such Loan and the Originator has received
the reasonably equivalent value in consideration for the transfer to the Trust
Depositor of such Loan under this Agreement, such transfer was not made for or
on account of an antecedent debt owed by the Originator to the Trust Depositor,
and such transfer was not and is not voidable or subject to avoidance under any
Insolvency Law.


(m)          No Defaults.  The Originator is not in default with respect
to any order or decree of any court or any order, regulation or demand of any
federal, state, municipal or governmental agency, which default might have
consequences that would materially and adversely affect the condition (financial
or otherwise) or operations of the Originator or its respective properties or
might have consequences that would materially and adversely affect its
performance hereunder.



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(n)           Bulk Transfer Laws.  The transfer, assignment and conveyance of
the Loans by the Originator pursuant to this Agreement are not subject to the
bulk transfer laws or any similar statutory provisions in effect in any
applicable jurisdiction.


(o)           Origination and Collection
Practices.  The origination and
collection practices used by the Originator and any of its Affiliates with
respect to each Loan have been consistent with the Servicing Standard and
comply in all material respects with the Credit and Collection Policy.


(p)           Nonconsolidation.  Each of the Trust Depositor and the Originator
conducts its affairs such that the Trust Depositor or the Originator would not
be substantively consolidated in the estate of the other and their respective
separate existences would not be disregarded in the event of the Originator’s
bankruptcy.  Without limitation to any of
the foregoing, each of the Trust Depositor and the Originator has not and shall
not:


(i)            engage in any business or activity
other than the purchase and receipt of Collateral and related assets under the
Loan Sale Agreement, the sale and pledge of Collateral under the Transaction
Documents, and such other activities as are incidental thereto;


(ii)           acquire or own any material assets
other than (a) the Collateral and related assets and (b) incidental property as
may be necessary for the operation of either the Trust Depositor or the
Originator and the performance of its obligations under the Transaction
Documents;


(iii)          merge
into or consolidate with any Person or dissolve, terminate or liquidate in
whole or in part, transfer or otherwise dispose of all or substantially all of
its assets or change its legal structure, or jurisdiction of formation;


(iv)          fail
to preserve its existence as an entity duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization or
formation, amend, modify, terminate or fail to comply with the provisions of
its operating agreement, or fail to observe limited liability company
formalities;


(v)           own any Subsidiary or make any
Investment in any Person;


(vi)          except as permitted by this Agreement,
commingle its assets with the assets of any of its Affiliates, or of any other
Person;


(vii)         incur
any debt, secured or unsecured, direct or contingent (including guaranteeing
any obligation), other than indebtedness incurred under the Transaction
Documents; provided that such
debt is not evidenced by a note and is paid when due;


(viii)        become insolvent or fail to pay its
debts and liabilities from its assets as the same shall become due;


(ix)           fail to maintain its records, books
of account and bank accounts separate and apart from those of any other Person;



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(x)            enter into any contract or agreement
with any Person, except upon terms and conditions that are commercially
reasonable and intrinsically fair and substantially similar to those that would
be available on an arms-length basis with third parties other than such Person;


(xi)           seek its dissolution or winding up in
whole or in part;


(xii)          fail
to correct any known misunderstandings regarding the separate identity of Trust
Depositor and the Originator or any principal or Affiliate thereof or any other
Person;


(xiii)         guarantee, become obligated for, or
hold itself out to be responsible for the debt of another Person;


(xiv)        make
any loan or advances to any third party, including any principal or Affiliate,
or hold evidence of indebtedness issued by any other Person (other than the
Loans and cash);


(xv)         fail to file its own separate tax
return, or file a consolidated federal income tax return with any other Person,
except as may be required by the Code and regulations;


(xvi)        fail
either to hold itself out to the public as a legal entity separate and distinct
from any other Person or to conduct its business solely in its own name in
order not (a) to mislead others as to the identity with which such other party
is transacting business, or (b) to suggest that it is responsible for the debts
of any third party (including any of its principals or Affiliates);


(xvii)       fail
to maintain adequate capital for the normal obligations reasonably foreseeable
in a business of its size and character and in light of its contemplated
business operations;


(xviii)      file
or consent to the filing of any petition, either voluntary or involuntary, to
take advantage of any applicable insolvency, bankruptcy, liquidation or
reorganization statute, or make an assignment for the benefit of creditors;


(xix)         except
as may be required by the Code and regulations, share any common logo with or
hold itself out as or be considered as a department or division of (a) any of
its principals or Affiliates, (b) any Affiliate of a principal or (c) any other
Person;


(xx)          permit
any transfer (whether in any one or more transactions) of any direct or
indirect ownership interest in the Trust Depositor or the Originator to the
extent it has the ability to control the same, unless the Trust Depositor or
the Originator delivers to the Trustee an acceptable non-consolidation opinion;


(xxi)         fail to maintain separate financial
statements, showing its assets and liabilities separate and apart from those of
any other Person;


(xxii)        fail to pay its own liabilities and
expenses only out of its own funds;



 15
 






 



 


(xxiii)       fail to pay the salaries of its own
employees, if any, in light of its contemplated business operations;


(xxiv)       acquire the obligations or securities of
its Affiliates or stockholders;


(xxv)        guarantee any obligation of any person,
including an Affiliate;


(xxvi)       fail
to allocate fairly and reasonably any overhead expenses that are shared with an
Affiliate, including paying for office space and services performed by any
employee of an Affiliate;


(xxvii)      fail to use separate invoices and checks
bearing its own name;


(xxviii)     fail to have a separate telephone number,
stationery and other business forms from those, if any, of the Trust Depositor;


(xxix)       pledge
or permit the pledge of its assets or ownership interests in the Trust
Depositor for the benefit of any other Person, other than with respect to
payment of the indebtedness to the Secured Parties hereunder;


(xxx)        fail
at any time to have at least one independent manager (an “Independent
Manager”) who is not currently a director, officer, employee, trade
creditor shareholder, manager or member (or spouse, parent, sibling or child of
the foregoing) of (a) the Servicer, (b) the Trust Depositor, (c) any principal
of the Servicer, (d) any Affiliate of the Servicer, or (e) any Affiliate of any
principal of the Servicer; provided that
such Independent Manager may be an independent manager or an independent
director of another special purpose entity affiliated with the Servicer or fail
to ensure that all limited liability company action relating to the selection,
maintenance or replacement of the Independent Manager are duly authorized by
the unanimous vote of the board of managers (including the Independent
Managers);


(xxxi)       fail
to provide that the unanimous consent of all members (including the consent of
the Independent Manager) is required for the Trust Depositor to (a) dissolve or
liquidate, in whole or part, or institute proceedings to be adjudicated
bankrupt or insolvent, (b) institute or consent to the institution of
bankruptcy or insolvency proceedings against it, (c) file a petition seeking or
consent to reorganization or relief under any applicable federal or state law
relating to bankruptcy or insolvency, (d) seek or consent to the appointment of
a receiver, liquidator, assignee, trustee, sequestrator, custodian or any
similar official for the Trust Depositor, (e) make any assignment for the
benefit of the Trust Depositor’s creditors, (f) admit in writing its inability
to pay its debts generally as they become due, or (g) take any action in
furtherance of any of the foregoing; and


(xxxii)      take
or refrain from taking, as applicable, each of the activities specified in the
non-consolidation opinion of Latham & Watkins LLP, dated as of the date
hereof, upon which the conclusions expressed therein are based.



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(xxxiii)     The
Trust Depositor has received in writing from the Originator confirmation that
the Originator will not cause the Trust Depositor to file a voluntary petition
under the Bankruptcy Code or Insolvency Laws.


(q)           Lack of Intent to Hinder, Delay or
Defraud.  Neither the Originator nor
any of its Affiliates sold, or will sell, any interest in any Loan with any
intent to hinder, delay or defraud any of their respective creditors.


(r)            Accuracy of Information.  All written factual information heretofore
furnished by the Originator for purposes of or in connection with this
Agreement or the other Transaction Documents to which Originator is a party, or
any transaction contemplated hereby or thereby is, and all such written factual
information hereafter furnished by the Originator to any party to the
Transaction Documents will be, true and accurate in all material respects, on
the date such information is stated or certified.


The representations and warranties set forth in Section
3.01(k) may not be waived by any Person and shall survive the termination
of this Agreement.  The Originator and
Trust Depositor (i) shall not waive any breach of the representations and
warranties in Section 3.01(k), and (ii) shall provide S&P with
prompt written notice of any breach of the representations and warranties set
out in Section 3.01(k).


Section 3.02                               Representations
and Warranties Regarding Each Loan and as to Certain Loans in the Aggregate.


The Originator represents
and warrants (x) with respect to Section 3.02(a), Section 3.02(b)
and Section 3.02(d) as to each Loan as of the Closing Date, and as of
each Cut-Off Date with respect to each Additional Loan and each Substitute
Loan, as applicable, and (y) with respect to Section 3.02(c), as to the
Collateral in the aggregate as of the Closing Date, and as of each Cut-Off Date
with respect to Additional Loans and Substitute Loans (after giving effect to
the addition of such Additional Loans and Substitute Loans to the Collateral),
that:


(a)           List of Loans.  The information set forth in the List of
Loans attached to the Sale and Servicing Agreement as Exhibit G (as the
same may be amended or deemed amended in respect of a conveyance of Additional
Loans or Substitute Loans on a Cut-Off Date) is true, complete and correct as
of the Closing Date, in the case of the Initial Loans, or the applicable Cut-Off
Date in the case of Additional Loans or Substitute Loans.


(b)           Eligible Loan.  Such Loan satisfies the criteria for the
definition of Eligible Loan as of the date of its conveyance hereunder.


(c)           Loans Secured by Real Property.  To the Originator’s best knowledge after
reasonable inquiry, less than 40% of the Aggregate Outstanding Loan Balance of
the Collateral as of the Closing Date consists of Loans principally secured by
real property and the Originator will not effectuate the transfer of an
Additional Loan or Substitute Loan if the Originator knows after reasonable inquiry
that such transfer would cause more than 40% of the Aggregate Outstanding Loan
Balance of the Collateral as of any Cut-Off Date to consist of Loans
principally secured by real property; provided
that, for this purpose, a Loan will be considered



 17
 






 



 


principally secured by real property if the Originator
knows that the fair market value of the interest in real property securing the
Loan exceeds 50% of its Outstanding Loan Balance.


(d)           Participated Loans.  Any Participated Loan included in the
Collateral (other than a Qualified Participated Loan) shall be converted to a
full assignment within 60 days following the Closing Date.


Section
3.03         [Reserved]


Section
3.04         Representations and
Warranties Regarding the Required Loan Documents.


The Originator represents
and warrants on the Closing Date with respect to the Initial Loans (or as of
the related Cut-Off Date, with respect to Additional Loans and Substitute
Loans), that except as otherwise provided in Section 2.07, the Required
Loan Documents and each other item identified on each Loan Checklist with
respect to the Loan File for each Loan are in the possession of the Trustee.


Section
3.05         [Reserved].


Section
3.06         Representations and
Warranties Regarding the Trust Depositor.


By its execution of this Agreement the Trust Depositor
represents and warrants to the Originator that:


(a)           Organization and Good Standing.  The Trust Depositor is a limited liability
company duly organized, validly existing and in good standing under the laws of
Delaware and has the power to own its assets and to transact the business in
which it is currently engaged.  The Trust
Depositor is duly qualified to do business as a foreign entity and is in good
standing in each jurisdiction in which the character of the business transacted
by it or properties owned or leased by it requires such qualification and in
which the failure so to qualify would have a Material Adverse Effect on the
business, properties, assets or condition (financial or other) of the Trust
Depositor or the Issuer.


(b)           Authorization; Valid Sale; Binding
Obligations.  The Trust Depositor has
the power and authority to make, execute, deliver and perform this Agreement
and the other Transaction Documents to which it is a party and all of the
transactions contemplated under this Agreement and the other Transaction
Documents to which it is a party, and to create the Issuer and cause it to
make, execute, deliver and perform its obligations under this Agreement and the
other Transaction Documents to which the Issuer is a party, and the Trust
Depositor has taken all necessary limited liability company action to authorize
the execution, delivery and performance of this Agreement and the other
Transaction Documents to which it is a party and to cause the Issuer to be
created.  This Agreement shall effect a
valid sale, transfer and assignment of or grant a security interest in the Loan
Assets from the Trust Depositor to the Issuer. 
This Agreement and the other Transaction Documents to which the Trust Depositor
is a party constitute the legal, valid and binding obligation of the Trust
Depositor enforceable in accordance with their respective terms, except as
enforcement of such terms may be limited by applicable Insolvency Laws and
general principles of equity, whether considered in a suit at law or in equity.



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(c)           No Consent Required.  The Trust Depositor is not required to obtain
the consent of any other party (other than those that it has already obtained)
or any consent, license, approval or authorization from, or registration or
declaration with, any Governmental Authority (other than those that it has
already obtained) in connection with the execution, delivery, performance,
validity or enforceability of this Agreement or the other Transaction Documents
to which it is a party.


(d)           No Violations.  The execution, delivery and performance of
this Agreement and the other Transaction Documents to which it is a party by
the Trust Depositor, and the consummation of the transactions contemplated
hereby and thereby, will not violate any Applicable Law applicable to the Trust
Depositor, or conflict with, result in a default under or constitute a breach
of the Trust Depositor’s organizational documents or any Contractual
Obligations to which the Trust Depositor is a party or by which the Trust
Depositor or any of the Trust Depositor’s properties may be bound, or result in
the creation or imposition of any Lien of any kind upon any of its properties
pursuant to the terms of any such Contractual Obligations, other than as
contemplated by the Transaction Documents.


(e)           Litigation.  No litigation or administrative proceeding of
or before any court, tribunal or governmental body is currently pending, or to
the knowledge of the Trust Depositor threatened, against the Trust Depositor or
any of its properties or with respect to this Agreement, the other Transaction
Documents to which it is a party or the Securities (i) that, if adversely
determined, would in the reasonable judgment of the Trust Depositor be expected
to have a Material Adverse Effect on the business, properties, assets or
condition (financial or otherwise) of the Trust Depositor or the Issuer or the
transactions contemplated by this Agreement or the other Transaction Documents
to which the Trust Depositor is a party or (ii) seeking to adversely affect the
federal income tax or other federal, state or local tax attributes of the
Securities.


(f)            Solvency.  The Trust Depositor, at the time of, and
after giving effect to each conveyance of Loan Assets under the Sale and
Servicing Agreement, is as of the date hereof and as of such other dates,
Solvent.


(g)           Taxes.  The Trust Depositor has filed or caused to be
filed all tax returns which, to its knowledge, are required to be filed and has
put all taxes shown to be due and payable on such returns or on any assessments
made against it or any of its property and all other taxes, fees or other
charges imposed on it or any of its property by any Governmental Authority
(other than any amount of tax due, the validity of which is currently being
contested in good faith by appropriate proceedings and with respect to which
reserves in accordance with generally accepted accounting principles have been
provided on the books of the Trust Depositor); no tax Lien has been filed and,
to the Trust Depositor’s knowledge, no claim is being asserted, with respect to
any such tax, fee or other charge.


(h)           Place of Business; No Changes.  The Trust Depositor’s location (within the
meaning of Article 9 of the UCC) is the State of Delaware.  The Trust Depositor has not changed its name,
whether by amendment of its certificate of formation, by reorganization or
otherwise, and has not changed its location, within the four months preceding
the Closing Date.



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(i)            Not an Investment Company.  The Trust Depositor is not and, after giving
effect to the transactions contemplated by the Transaction Documents, will not
be required to be registered as an “investment company” within the meaning of
the 1940 Act.


(j)            Sale Treatment.  Other than for accounting and tax purposes,
the Trust Depositor has treated the transfer of Loan Assets to the Issuer for
all purposes as a sale and purchase on all of its relevant books and records
and other applicable documents.


ARTICLE
IV



PERFECTION OF TRANSFER AND

PROTECTION OF SECURITY INTERESTS


Section
4.01         Custody of Loans.


The contents of each Loan File shall be held in the
custody of the Trustee under the terms of the Sale and Servicing Agreement for
the benefit of, and as agent for, the Securityholders.


Section
4.02         Filing.


On or prior to the
Closing Date, the Originator shall cause the UCC financing statement(s)
referred to in Section 2.02(vi) to be filed.  Notwithstanding the obligations of the
Originator set forth in the preceding sentence, the Originator hereby
authorizes the Servicer to prepare and file, at the expense of the Servicer,
UCC financing statements (including but not limited to renewal, continuation or
in lieu statements) and amendments or supplements thereto or other instruments
as the Servicer may from time to time deem necessary or appropriate in order to
perfect and maintain the security interest granted hereunder in accordance with
the UCC.


Section
4.03         Changes in Name, Corporate
Structure or Location.


(a)           During the term of this Agreement,
the Originator shall not change its name, form of organization, existence,
state of formation or location without first giving at least 30 days’ prior
written notice to the Trust Depositor and Servicer.


(b)           If any change in the Originator’s
name, form of organization, existence, state of formation, location or other
action would make any financing or continuation statement or notice of
ownership interest or Lien relating to any Loan Asset seriously misleading
within the meaning of applicable provisions of the UCC or any title statute,
the Originator, or the Servicer on its behalf, no later than five Business Days
after the effective date of such change, shall file such amendments as may be
required to preserve and protect the Trust Depositor’s and the Issuer’s
interests in the Loan Assets and the proceeds thereof.  Promptly after taking any of the foregoing
actions, the Originator, or the Servicer on its behalf, shall deliver to the
Owner Trustee and the Trustee an Opinion of Counsel reasonably acceptable to
the Owner Trustee and the Trustee stating that, in the opinion of such counsel,
all financing statements or amendments necessary to preserve and protect the
Trustee’s security interest in the Loan Assets have been filed, and reciting
the details of such filing.



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Section
4.04         Sale Treatment.


Other than for accounting
and tax purposes, the Originator shall treat the transfer of Loan Assets made
hereunder for all purposes as a sale and purchase on all of its relevant books
and records.


Section
4.05         Separateness from Trust
Depositor.


The Originator agrees to
take or refrain from taking or engaging in with respect to the Trust Depositor,
each of the actions or activities specified in the “substantive consolidation”
opinion of Latham & Watkins, LLP (including any certificates of the
Originator attached thereto) delivered on the Closing Date, upon which the
conclusions therein are based.


ARTICLE
V



COVENANTS OF THE ORIGINATOR


Section
5.01         Corporate Existence.


During the term of this
Agreement, the Originator will keep in full force and effect its existence,
rights and franchises as a corporation under the laws of the jurisdiction of
its formation and will obtain and preserve its qualification to do business in
each jurisdiction in which such qualification is or shall be necessary to
protect the validity and enforceability of this Agreement, the other
Transaction Documents and each other instrument or agreement necessary or
appropriate to the proper administration of this Agreement and the transactions
contemplated hereby.  In addition, all
transactions and dealings between the Originator and the Trust Depositor will
be conducted on an arm’s-length basis.


Section
5.02         Loans Not to Be Evidenced by
Promissory Notes.


The Originator will take
no action to cause any Loan not originally evidenced by an Underlying Note to
be evidenced by an instrument (as defined in the UCC), except in connection
with the enforcement or collection of such Loan.


Section
5.03         Security Interests.


(a)           The Originator will not sell, pledge,
assign or transfer to any Person other than the Trust Depositor, or grant,
create, incur, assume or suffer to exist any Lien on any Loan in the Collateral
or its interest in any Related Property, other than the Lien granted to the
Trust Depositor, whether now existing or hereafter transferred to the Trust
Depositor, or any interest therein.  The
Originator will immediately notify the Trust Depositor of the existence of any
Lien on any Loan in the Collateral or its interest in any Related Property; and
the Originator shall defend the right, title and interest of the Trust
Depositor in, to and under the Loans in the Collateral and the Trust Depositor’s
interest in any Related Property, against all claims of third parties; provided that nothing in this Section
5.03(a) shall prevent or be deemed to prohibit the Originator from
suffering to exist Permitted Liens upon any of the Loans in the Collateral or
its interest in any Related Property.



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(b)           The Originator will not sell, pledge,
assign or transfer to Person other than the Trust Depositor, or grant, create,
incur, assume or suffer to exist any Lien on any warrants and equity
instruments issued in the name of the Originator or its Affiliates in
connection with or related to any Loan in the Collateral, other than the Lien
granted to the Trust Depositor, whether now existing or hereafter transferred
to the Trust Depositor.  The Originator
will immediately notify the Trust Depositor of the existence of any Lien on any
warrants and equity instruments issued in the name of the Originator or its
Affiliates in connection with or related to any Loan in the Collateral; provided that nothing in this Section
5.03(b) shall prevent or be deemed to prohibit the Originator from
suffering to exist Permitted Liens on any warrants and equity instruments
issued in the name of the Originator or its Affiliates in connection with or
related to any Loan in the Collateral.


Section
5.04         Compliance with Law.


The Originator hereby
agrees to comply in all material respects with all Applicable Law applicable to
the Originator except where the failure to do so would not have a Material
Adverse Effect on the Securityholders.


Section
5.05         Liability of Originator.


The Originator shall be liable in accordance herewith
only to the extent of the obligations specifically undertaken by the Originator
under this Agreement.


Section
5.06         Limitation on Liability of
Originator and Others.


The Originator and any
director, officer, employee or agent of the Originator may rely in good faith
on any document of any kind, prima facie properly executed and submitted by any
Person respecting any matters arising hereunder.  The Originator and any director, officer,
employee or agent of the Originator shall be reimbursed by the Trust Depositor
for any liability or expense incurred by reason of the Trust Depositor’s
willful misfeasance, bad faith or negligence (except errors in judgment) in the
performance of its respective duties hereunder, or by reason of reckless
disregard of its obligations and duties hereunder.  The Originator shall not be under any
obligation to appear in, prosecute or defend any legal action that shall not be
incidental to its obligations under this Agreement, and that in its opinion may
involve it in any expense or liability.


Section
5.07         Merger or Consolidation of
Originator; Change-in-Control.


(a)           The Originator will keep in full
force and effect its existence, rights and franchise as a Maryland corporation,
and the Originator will obtain and preserve its qualification to do business as
a foreign corporation in each jurisdiction in which such qualification is or
shall be necessary to protect the validity and enforceability of this Agreement
and of any of the Loans and to perform its duties under this Agreement.


(b)           Any Person into which the Originator
may be merged or consolidated, or any entity resulting from such merger,
conversion or consolidation to which the Originator is a party, or any Person
succeeding by acquisition or transfer to substantially all of the assets and
the business of the Originator shall be the successor to the Originator
hereunder, without execution



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or filing of any paper or any further act on the part
of any of the parties hereto, notwithstanding anything herein to the contrary; provided no such merger, conversion or
consolidation of the Originator or transfer of substantially all of its assets
and its business shall be permitted hereunder unless the Rating Agency
Condition is satisfied with respect thereto.


(c)           Upon the occurrence of a
change-in-control (including any merger or consolidation of the Originator or
transfer of substantially all of its assets and its business, the Originator
shall (i) provide the Trust Depositor, the Trustee and the Rating Agencies with
notice of such change-in-control within 30 days after completion of the same,
and (ii) satisfy the Rating Agency Condition after completion of the same.


Section
5.08         Delivery of Collections.


The Originator agrees to
deliver to the Servicer promptly (but in no event later than two Business Days
after receipt) all Collections received by the Originator in respect of a Loan,
for application in accordance with Section 7.05 of the Sale and Servicing
Agreement.


Section
5.09         Payments from Principal and
Interest Account.


The Originator agrees not
to make, or consent to, any change in the direction of, or instructions with
respect to, any payments to be made by an Obligor in any manner that would
diminish, impair, delay or otherwise materially adversely effect the timing or
receipt of such payments into the Principal and Interest Account without the
prior written consent of the Trustee and with the consent of the Majority
Noteholders.


ARTICLE
VI



REMEDIES UPON MISREPRESENTATION


Section 6.01                               Repurchases
of, or Substitution for, Loans for Breach of Representations and Warranties.


(a)           In the event that the Trust Depositor
determines that a Loan is an Ineligible Loan then the Originator must either
repurchase such Ineligible Loan or substitute for such Ineligible Loan a
Substitute Loan.  The repurchase price
for such Ineligible Loan shall be the Transfer Deposit Amount.  In the event that the Originator substitutes
a Substitute Loan for such Ineligible Loan at any time after the Effective
Date, after giving effect to such substitution, the Portfolio Criteria must be
satisfied for the applicable Substitute Loan to become part of the Collateral
(or, if any component of the Portfolio Criteria was not satisfied prior to
giving effect to such substitution, compliance with such component shall be
maintained or improved after giving effect to such substitution).  In addition, the substitution of any
Substitute Loan into the Collateral will be subject to the following
requirements:


(i)            each Substitute Loan must have an
Outstanding Loan Balance, or if more than one Substitute Loan will be added in
replacement of a Loan to be reassigned by the Trust Depositor to the Originator
the sum of the Outstanding Loan Balances of such Substitute Loans must be,
equal to or greater than that of the Loan being substituted; and



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(ii)           all actions or additional actions (if
any) necessary to perfect the security interest and assignment of such Loan
being substituted and Related Property to the Originator, and of such
Substitute Loan and Related Property to the Trust Depositor, shall have been
taken as of or prior to the date of substitution of such Loan.


(b)           A substitution may be accomplished by
either (a) a contemporaneous substitution of a Substitute Loan meeting the
criteria specified above for the Loan being replaced or (b) a deposit by the
Servicer into the Principal and Interest Account of the Transfer Deposit Amount
with respect to the Loan being replaced and then, within 90 days, the sale by
the Originator to the Trust Depositor of one or more Substitute Loans in
exchange for the funds so deposited.  In
the event that the full Transfer Deposit Amount is not used to purchase
Substitute Loans within the 90 day period, then the remaining amount of such
funds previously deposited as described above will be distributed from the
Principal and Interest Account and distributed, in accordance with the Priority
of Payments, on the next Distribution Date, provided
that, with respect to any such amounts constituting Principal Collections, no
such distribution shall be made during the Replenishment Period unless the
conditions for payment of a Special Redemption Amount by the Issuer are not
satisfied with respect to such amount. 
The price paid (or, in the case of a contemporaneous conveyance of a
Substitute Loan pursuant to this Agreement, deemed paid) by the Trust Depositor
for any Substitute Loan shall be an amount equal to (i) in the case of a Loan
originated by the Originator, the Outstanding Loan Balance thereof and (ii) in
the case of a Loan acquired by the Originator from a third party, the purchase
price paid for such Loan, plus, in each case, accrued and unpaid interest
thereon, which price may equal, exceed or be less than the fair market value of
such Substitute Loan as of the related Cut-Off Date.


(c)           In the case of any substitution to be
effected after the Replenishment Period, the Originator must provide written notice
to each Rating Agency.


(d)           Prior to any substitution or
repurchase effected pursuant to this Section 6.01, the Servicer shall
deliver a written notice to the Trustee setting forth (1) the Originator’s
intent to effect such a substitution or repurchase, (2) the specific Loan or
Loans to be substituted or repurchased and (3) the reasons for such
substitution or repurchase.


(e)           With respect to any Substitute Loans
to be conveyed to the Trust Depositor by the Originator pursuant to this
Agreement, the Originator shall sell, transfer, assign, set over and otherwise
convey to the Trust Depositor, without recourse other than as expressly
provided herein and therein (and the Trust Depositor shall be required to
purchase through cash payment or by exchange of one or more related Loans
released by the Issuer to the Trust Depositor on the related Cut-Off Date), all
the right, title and interest of the Originator in and to the Substitute Loan
Assets.  To the extent the purchase price
paid to the Originator for any Substitute Loan is less than the fair market
value, as determined by the Servicer, of such Substitute Loan, the difference
between such fair market value and the purchase price shall be deemed to be a
capital contribution made by the Originator to the Trust Depositor on the
relevant Cut-Off Date.


(f)            Subject to the conditions set forth
in Section 6.01(g), the Originator shall sell, transfer, assign, set
over and otherwise convey to the Trust Depositor, without recourse



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other than as expressly provided herein, (i) all the
right, title and interest of the Originator in and to the Substitute Loans
purchased pursuant to this Section 6.01, and (ii) all other rights and
property interests consisting of Substitute Loan Assets related to such
Substitute Loans (the property in clauses (i) and (ii) above,
upon such transfer, becoming part of the Collateral).


(g)           The Originator shall transfer to the
Trust Depositor and the Trust Depositor shall transfer to the Issuer the
Substitute Loans and the other property and rights related thereto described in
Sections 6.01(e) and (f) only upon the satisfaction of each of
the following conditions on or prior to the related Cut-Off Date (and the
delivery of a related Loan Asset Certificate by the Trust Depositor and by the
Originator shall be deemed a representation and warranty by the Trust Depositor
and by the Originator that such conditions have been or will be, as of the
related Cut-Off Date, satisfied):


(i)            the Trust Depositor and the
Originator shall have provided the Owner Trustee and the Trustee with a timely
Loan Asset Certificate complying with the definition thereof contained herein
(a copy of which shall be provided to S&P promptly after it is delivered to
the Owner Trustee), which Loan Asset Certificate shall be delivered no later
than 11:00 a.m. (New York City time) on the date which is ten Business Days
prior to the related Cut-Off Date;


(ii)           the conveyance of the Substitute
Loans satisfies the Substitute Loan Qualification Conditions and the Portfolio
Acquisition and Disposition Requirements;


(iii)          with respect to any substitution
effected after the Effective Date, after giving effect to the inclusion of the
applicable Substitute Loans in the Collateral, the Portfolio Criteria are
satisfied; provided that if any
component of the Portfolio Criteria is not satisfied prior to giving effect to
such inclusion of a Substitute Loan, the Portfolio Criteria shall be deemed
satisfied with respect to such component if the component is maintained or
improved by the inclusion of such Substitute Loan;


(iv)          the Originator shall have delivered to
the Trust Depositor, and the Trust Depositor shall have delivered to the
Issuer, a duly updated Subsequent List of Loans listing the Substitute Loans; provided that each such Subsequent List of
Loans shall separately identify (by attached schedule, or marking or other
effective identifying designation) the related Loan or Loans being removed from
the Issuer and replaced by the Substitution Loans, such replaced Loans being
deleted from the List of Loans by virtue of the delivery of such Subsequent
List of Loans;


(v)           the Trust Depositor shall have
deposited or caused to be deposited in the Principal and Interest Account all
Collections received with respect to the Substitute Loan on and after the related
Cut-Off Date;


(vi)          each of the representations and
warranties made by the Trust Depositor pursuant to Section 3.02
(including without limitation that each such Substitute Loan is an Eligible
Loan and that less than 40% of the Aggregate Outstanding Loan Balance of the
Collateral after such substitution shall consist of Loans principally secured
by real property) and



 25
 






 



 


Section 3.04
applicable to the Substitute Loan shall be true and correct as of the related
Cut-Off Date;


(vii)         the Originator shall bear all
incidental transaction costs incurred in connection with a substitution
effected pursuant to this Agreement and shall, at its own expense, on or prior
to the related Cut-Off Date and indicate in its Computer Records that ownership
of each Substitute Loan identified on the Subsequent List of Loans has been
sold by the Originator to the Trust Depositor and by the Trust Depositor to the
Issuer pursuant to the Loan Sale Agreement and this Agreement, respectively;
and


(viii)        the Originator shall provide written
notice to each Rating Agency.


(h)           The Servicer, the Trust Depositor and
the Trustee shall execute and deliver such instruments, consents or other
documents and perform all acts reasonably requested by the Servicer in order to
effect the transfer and release of any of the Trust Depositor’s interests in
the Loans that are being substituted.


Section
6.02         Reassignment of Repurchased
or Substituted Loans.


Upon receipt by the
Trustee (i) for deposit in the Principal Collection Account of any amounts
described in Section 6.01, (or upon the Cut-Off Date related to a
Substitute Loan in case of a contemporaneous substitution described in Section
6.01) or (ii) of a Substitute Loan or Substitute Loans as contemplated by
such Section 6.01, and upon receipt of an Officer’s Certificate of the
Servicer in the form attached as Exhibit F to the Sale and Servicing
Agreement, the Trustee shall assign to the Trust Depositor and the Trust
Depositor shall assign to the Originator all of the Issuer’s (or Trust
Depositor’s, as applicable) right, title and interest in the repurchased or
substituted Loan and related Loan Assets without recourse, representation or
warranty.  Such reassigned Loan shall no
longer thereafter be included in any calculations of Outstanding Loan Balances
or otherwise be deemed a part of the Issuer.


ARTICLE
VII



INDEMNIFICATION BY THE ORIGINATOR


Section
7.01         Indemnification.


The Originator agrees to
indemnify, defend and hold the Trust Depositor, its officers, directors,
employees and agents (any one of which is an “Indemnified Party”)
harmless from and against any and all claims, losses, penalties, fines,
forfeitures, reasonable legal fees and related costs, judgments (provided that any indemnification for
damages is limited to actual damages, not consequential, special or punitive
damages), reasonable legal fees and related costs and any other reasonable
costs, fees and expenses that such Person may sustain as a result of the
Originator’s gross negligence, willful misconduct or fraud in the performance
of its duties hereunder, except to the extent such damages arise from the gross
negligence, willful misconduct or fraud on the part of the Person claiming
indemnification.  Any Person seeking
indemnification hereunder shall promptly notify the Originator if such Person
receives a complaint, claim, compulsory process or other notice of any loss,
claim, damage or liability giving rise to a claim of indemnification hereunder
but failure to provide such notice shall not relieve the Originator of



 26
 






 



 


its indemnification obligations hereunder unless the
Originator is deprived of material, substantive or procedural rights or
defenses as a result thereof.  The
Originator shall assume (with the consent of the Indemnified Party, such
consent not to be unreasonably withheld) the defense and any settlement of any
such claim and promptly pay, discharge and satisfy any judgment or decree which
may be entered against the Indemnified Party in respect of such claim.  If the consent of the Indemnified Party
required in the immediately preceding sentence is unreasonably withheld, the
Originator is relieved of its indemnification obligations hereunder with
respect to such Person.  The parties
agree that the provisions of this Section 7.01 shall not be interpreted
to provide recourse to the Originator against loss by reason of the bankruptcy,
insolvency or lack of creditworthiness of an Obligor with respect to a
Loan.  The Originator shall have no
liability for making indemnification hereunder to the extent any such
indemnification constitutes recourse for uncollectible or uncollected Loans.


Section
7.02         Liabilities to Obligors.


Except with respect to
the funding commitment assumed by the Issuer with respect to any Delayed Draw
Term Loan or Revolving Loan, no obligation or liability to any Obligor under
any of the Loans is intended to be assumed by the Trustees, the Issuer or the
Securityholders under or as a result of this Agreement and the transactions
contemplated hereby.


Section
7.03         Operation of Indemnities.


If the Originator has made
any indemnity payments to the Trust Depositor or the Securityholders pursuant
to this Article VII and the Trust Depositor or the Securityholders
thereafter collect any such amounts from others, the Trust Depositor or the
Securityholders, as applicable, will repay such amounts collected to the
Originator, except that any payments received by the Trust Depositor or the
Securityholders from an insurance provider as a result of the events under
which the Originator’s indemnity payments arose shall be repaid prior to any
repayment of the Originator’s indemnity payment.


ARTICLE
VIII



MISCELLANEOUS


Section
8.01         Amendment.


(a)           This Agreement may be amended from
time to time by the parties hereto by written agreement, with the prior written
consent of the Trustee but without notice to or consent of the Securityholders,
to cure any ambiguity, to correct or supplement any provisions herein, to
comply with any changes in the Code, or to make any other provisions with
respect to matters or questions arising under this Agreement which shall not be
inconsistent with the provisions of this Agreement; provided that such action shall not, as evidenced by an
Opinion of Counsel delivered to the Trustee, materially adversely affect the
interests of any Securityholder, which Opinion of Counsel may rely upon an
officer’s certificate with respect to the effect of any such amendment on the
economic interests of any Securityholder; and provided
further that no such amendment
shall reduce in any manner the amount of, or delay the timing of, any amounts
received on Loans which are required to be distributed on any Note or
Certificate without the consent of the Holder



 27
 






 



 


of such Note or Certificate, or change the rights or
obligations of any other party hereto without the consent of such party.


(b)           Except as provided in Section
8.01(a), this Agreement may be amended from time to time by the parties
hereto by written agreement, with the prior written consent of the Trustee and
with the consent of the Majority Noteholders adversely affected thereby, for
the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Agreement or of modifying in any
manner the rights of the Holders of the Notes or Certificates; provided that (i) no such amendment shall
reduce in any manner the amount of, or delay the timing of, any amounts which
are required to be distributed on any Note or Certificate without the consent
of the Holder of such Note or Certificate or reduce the percentage of Holders
of any Note or Certificate which are required to consent to any such amendment
without the consent of the Holders of 100% of the Notes affected thereby and
(ii) no amendment affecting only one Class shall require the approval of the
Holders of any other Class.


(c)           Fifteen days prior to the execution
of any such amendment or consent (other than any amendment to the List of
Loans), the Originator shall cause the Trustee to furnish written notification
of the substance of such amendment or consent, together with a copy thereof, to
each applicable Rating Agency.  In
addition, prior to the execution of any such amendment or consent, the
Originator shall cause the Trustee to obtain written confirmation from each of
Moody’s and S&P that entry into such amendment or consent satisfies the
Moody’s Rating Condition and the S&P Rating Condition, respectively.


(d)           Promptly after the execution of any
such amendment or consent, the Originator shall cause written notification of
the substance of such amendment or consent to be furnished to the Noteholders
by the Trustee and to the Certificateholders by the Owner Trustee.  It shall not be necessary for the consent of
any Securityholders required pursuant to Section 8.01(b) to approve the
particular form of any proposed amendment or consent, but it shall be
sufficient if such consent shall approve the substance thereof.  The manner of obtaining such consents and of
evidencing the authorization by the Securityholders of the execution thereof
shall be subject to such reasonable requirements as the Trustee may prescribe
for the Noteholders and as the Owner Trustee may prescribe for the
Certificateholders.


(e)           Notwithstanding the above, any
amendment to this Agreement that would have the effect of amending or modifying
the Portfolio Criteria shall be subject to the following requirements and
restrictions: (a) only clauses (b) through (i) of the definition
of Portfolio Criteria may be amended, (b) such amendment shall satisfy the
Rating Agency Condition, (c) such amendment shall not, as evidenced by an
officer’s certificate of the Servicer delivered to the Trustee, materially
adversely affect the interests of any Securityholder and (d) the Issuer shall
deliver to the Noteholders the proposed amendment and the Majority Noteholders
shall not have objected to such amendment within ten Business Days from the
receipt thereof; provided that
any amendment that would have the effect of modifying the calculation of clauses
(b) through (i) of the definition of Portfolio Criteria in order to
correspond to written changes in the guidelines, methodology or standards
established by the Rating Agencies shall only be subject to satisfaction of the
Rating Agency Condition.



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(f)            Prior to the execution of any
amendment to this Agreement, other than any amendment to the List of Loans, the
Owner Trustee and the Trustee shall be entitled to receive and rely upon an
Opinion of Counsel stating that the execution of such amendment is authorized
or permitted by this Agreement.  Each
Trustee may, but shall not be obligated to, consent to any such amendment that
affects such Trustee’s own rights, duties or immunities under this Agreement or
otherwise.


(g)           It shall not be necessary for the
Noteholders to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent shall approve the substance thereof.


Section
8.02         Governing Law.


(a)           THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS,
AND REMEDIES OF THE PARTIES UNDER THE AGREEMENT SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.


(b)           EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT
OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT. 
EACH PARTY HERETO (I) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (II) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO
HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE
MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 8.02(b).


Section
8.03         Notices.


All notices, demands,
certificates, requests and communications hereunder (“notices”) shall be in
writing and shall be effective (a) upon receipt when sent through the U.S.
mails, registered or certified mail, return receipt requested, postage prepaid,
with such receipt to be effective the date of delivery indicated on the return
receipt, (b) one Business Day after delivery to an overnight courier, (c) on
the date personally delivered to a Responsible Officer of the party to which
sent, or (d) on the date transmitted by legible telecopier or electronic mail
transmission with a confirmation of receipt, in all cases addressed to the
recipient as follows:


(a)           if to the Originator:


Ares Capital
Corporation

280 Park Avenue, 22nd Floor, Building East

New York, New York 10017

Attention: Michael J. Arougheti

Facsimile No.: (212) 750-1777



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with a copy to:


Ares Capital
Management LLC

1999 Avenue of the Stars, Suite 1900

Los Angeles, California 90067

Attention: Daniel F. Nguyen

Facsimile No.: (312) 201-4189


(b)           if to the Trust Depositor:


ARCC CLO 2006 LLC

280 Park Avenue, 22nd Floor, Building East

New York, New York 10017

Attention: Michael J. Arougheti

Facsimile No.: (212) 750-1777


with a copy to:


Ares Capital
Management LLC

1999 Avenue of the Stars, Suite 1900

Los Angeles, California 90067

Attention: Daniel F. Nguyen

Facsimile No.: (312) 201-4189


Each party hereto may, by notice given in accordance
herewith to each of the other parties hereto, designate any further or
different address to which subsequent notices shall be sent.


Section
8.04         Severability of Provisions.


If one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever prohibited or held invalid or unenforceable, then such
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Agreement and
shall in no way affect the validity or enforceability of the other provisions
of this Agreement, the Notes or Certificates or the rights of the
Securityholders, and any such prohibition, invalidity or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such covenant,
agreement, provision or term in any other jurisdiction.


Section
8.05         Third Party Beneficiaries.


Except as otherwise
specifically provided herein, the parties hereto hereby manifest their intent
that no third party (other than the Issuer, the Trustee and the Owner Trustee)
shall be deemed a third party beneficiary of this Agreement, and specifically
that the Obligors are not third party beneficiaries of this Agreement.



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Section
8.06         Counterparts.


This Agreement may be
executed by facsimile signature and in several counterparts, each of which
shall be an original and all of which shall together constitute but one and the
same instrument.


Section
8.07         Headings.


The headings of the various Articles and Sections
herein are for convenience of reference only and shall not define or limit any
of the terms or provisions hereof.


Section
8.08         No Bankruptcy Petition;
Disclaimer.


(a)           Each of the Originator and the Trust
Depositor covenants and agrees that, prior to the date that is one year and one
day (or, if longer, the preference period then in effect and one day) after the
payment in full of all amounts owing in respect of all outstanding Classes of
Notes rated by any Rating Agency, it will not institute against the Trust
Depositor (in the case of the Originator), or the Issuer, or join any other
Person in instituting against the Trust Depositor or the Issuer, any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings
or other similar proceedings under the laws of the United States or any state
of the United States.  This Section
8.08 will survive the termination of this Agreement.


(b)           The provisions of this Section 8.08
shall be for the third party benefit of those entitled to rely thereon,
including the Securityholders, and shall survive the termination of this
Agreement.


Section
8.09         Jurisdiction.


Any legal action or
proceeding with respect to this Agreement may be brought in the courts of the
United States for the Southern District of New York, and by execution and
delivery of this Agreement, each party hereto consents, for itself and in
respect of its property, to the non-exclusive jurisdiction of those
courts.  Each such party irrevocably
waives any objection, including any objection to the laying of venue or based
on the grounds of forum non conveniens, which it may now or hereafter have to
the bringing of any action or proceeding in such jurisdiction in respect of
this Agreement or any document related hereto.


Section
8.10 Prohibited Transactions with Respect to the Issuer.


The Originator
shall not:


(a)           Provide credit to any Noteholder or
Certificateholder for the purpose of enabling such Noteholder or Certificateholder
to purchase Notes or Certificates, respectively;


(b)           Purchase any Notes or Certificates in
an agency or trustee capacity; or


(c)           Except in its capacity as Servicer as
provided in the Sale and Servicing Agreement, lend any money to the Issuer.



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Section
8.11         No Partnership.


Nothing herein contained shall be deemed or construed
to create a co-partnership or joint venture between the parties hereto.


Section
8.12         Successors and Assigns.


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


Section
8.13         Duration of Agreement.


This Agreement shall continue in existence and effect
until the termination of the Sale and Servicing Agreement.


Section
8.14         Limited Recourse.


The obligations of the
Trust Depositor and the Originator under this Agreement and the other
Transaction Documents are solely the corporate obligations of the Trust
Depositor and the Originator, respectively. 
No recourse shall be had for the payment of any amount owing by the
Trust Depositor or the Originator or otherwise under this Agreement, any other
Transaction Document or for the payment by the Trust Depositor or the
Originator of any fee in respect hereof or thereof or any other obligation or
claim of or against the Trust Depositor or the Originator arising out of or
based upon this Agreement or any other Transaction Document, against any
Affiliate, shareholder, partner, manager, member, director, officer, employee,
representative or agent of the Trust Depositor or the Originator or of any
Affiliate of such Person.  The provisions
of this Section 8.14 shall survive the termination of this Agreement.


Section 8.15.        Temporary
Participation and Elevation.


(a)           The parties hereto acknowledge that,
as of the date hereof, the Originator holds a participation interest in and to
that portion of the Initial Loan Assets (the “Participated Portion”)
that are the subject matter of that certain Master Participation Agreement
dated as of the date hereof between Ares Capital CP Funding LLC (“Ares CP”)
and the Originator.  The parties hereto
hereby expressly agree that, notwithstanding any provision contained in this
Agreement or the other Transaction Documents to the contrary, but subject to
the terms, conditions and restrictions, if any, contained in the credit
documentation in respect of each of the Initial Loans, during the period from
the date hereof to the Elevation Date with respect to each Initial Loan (the “Participation
Period”), (i) the Trust Depositor shall be deemed to have purchased from
the Originator, and the Originator shall be deemed to have sold and granted to
the Trust Depositor, pursuant to this Agreement, in consideration of the
purchase price set forth in Section 2.01(b), an undivided 100% participation interest
(or, in the case of the Participated Portion, an undivided 100%
subparticipation interest) in and to the Initial Loan Assets (the “Participation”)
but otherwise on the same terms and conditions set forth herein, and the terms
hereof shall be construed accordingly, mutatis mutandis.  For the avoidance of doubt, during the
Participation Period with respect to an Initial Loan, such Initial Loan shall
be deemed to be a Participated Loan for purposes of this Agreement.  The parties hereto shall cooperate to deliver
such notices, obtain such consents, and/or fulfill such other requirements as
may be necessary in connection



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with a participation (or, as applicable,
subparticipation) of each Initial Loan pursuant to the terms of the credit
documentation in respect of such Initial Loan.


(b)           From and after the date hereof, the
parties hereto shall use commercially reasonable efforts to cause the Issuer or
its designee to become the record lender in respect of, and holder of legal
title to, each of the Initial Loans, in accordance with the terms of the credit
documentation in respect of such Initial Loan (an “Elevation,” and the
date of an Elevation, an “Elevation Date”).  On the Elevation Date with respect to each
Initial Loan, without any further action by any entity, the Participation shall
terminate and shall be of no further force or effect with respect to such
Initial Loan (except that each party shall remain liable for any liabilities
and obligations under this Section 8.15 that arose before such Elevation Date),
and the Originator shall be deemed to have granted and conveyed the
corresponding Initial Loan Assets by assignment to the Trust Depositor or its
designee (as applicable).  Without
limiting the generality of the foregoing, (i) the Originator agrees to use
commercially reasonable efforts to cause Ares CP to enter into such assignment
documentation with the Trust Depositor or its designee as may be required by
the credit documentation in respect of any Initial Loan included in the
Participated Portion in order to cause the Elevation with respect to such
Initial Loan to occur, and (ii) the parties hereto agree to use commercially
reasonable efforts to cause the Elevation with respect to each Initial Loan to
occur within 60 days following the Closing Date.


(c)           The Originator shall not be held to
the standard of care of a fiduciary or agent and shall not be a fiduciary or
agent for the Trust Depositor but shall exercise only the same care in the
administration of the Participation as if it had retained such interest
beneficially for its own account. 
Without limiting the generality of the foregoing, (i) the Originator
shall not be liable for any error in judgment or for any action taken or
omitted to be taken by it hereunder except for its gross negligence or willful
misconduct and (ii) the Originator may rely on legal counsel, independent
public accountants and other experts selected or accepted by the Originator and
shall not be liable for any action taken or omitted to be taken in good faith
by the Originator in accordance with the advice of such counsel, accountants or
experts.  For the avoidance of doubt, (i)
this Section 8.15(c) shall apply only to responsibilities of, and actions taken
by, the Originator exclusively as a result of its status as grantor of the
Participation pursuant to this Section 8.15, and (ii) nothing contained in this
Section 8.15 shall relieve the Originator of its obligation to comply with the
terms and provisions of this Agreement or from any liability for any breach of
its representations, warranties, covenants or agreements contained herein.


[Remainder
of Page Intentionally Left Blank.]



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


 


	
   

  	
  ARES CAPITAL CORPORATION,

  as the originator

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael
  Arougheti

  	
   

  
	
   

  	
  Name:

  	
  Michael
  Arougheti

  	
   

  
	
   

  	
  Title: 

  	
  President

  	
   

  
	
   

  	
   

  
	
   

  	
  ARES
  CLO 2006 LLC, as the Trust Depositor

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  ARES CAPITAL
  CORPORATION, its sole

  member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael
  Arougheti

  	
   

  
	
   

  	
  Name: 

  	
  Michael
  Arougheti

  	
   

  
	
   

  	
  Title: 

  	
  President

  	
   

  
					



 



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