Document:

Exhibit 10.2

 

 

U.S. $150,000,000

 

SALE AND SERVICING AGREEMENT

 

by and among

 

ARES CAPITAL CORPORATION,

as the Originator and as the Servicer

 

ARES CAPITAL CP FUNDING LLC,

as the Borrower

 

EACH OF THE CONDUIT PURCHASERS AND
INSTITUTIONAL PURCHASERS 

FROM TIME TO TIME PARTY HERETO,
as the Purchasers

 

EACH OF THE PURCHASER AGENTS FROM TIME TO
TIME PARTY HERETO,

as the Purchaser Agents

 

WACHOVIA CAPITAL MARKETS, LLC, 

as the Administrative Agent 

 

U.S. BANK NATIONAL ASSOCIATION,

as the Trustee

 

and

 

LYON FINANCIAL SERVICES, INC. (D/B/A U.S.
BANK PORTFOLIO SERVICES),

as the Backup Servicer 

 

Dated as of November 3, 2004

 

 

 

TABLE OF CONTENTS

 

	
  ARTICLE I

  	
  DEFINITION

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 1.1.

  	
  Certain Defined Terms

  	
   

  
	
  Section 1.2.

  	
  Other Terms

  	
   

  
	
  Section 1.3.

  	
  Computation of Time Periods

  	
   

  
	
  Section 1.4.

  	
  Interpretation

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  II

  	
  THE
  VARIABLE FUNDING CERTIFICATES

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 2.1.

  	
  The Variable Funding Certificates

  	
   

  
	
  Section 2.2.

  	
  Procedures for Pre-Funded Advances by the Conduit Purchasers and the
  Institutional Purchasers

  	
   

  
	
  Section 2.3.

  	
  Procedures for Funded Advances by Conduit
  Purchasers and Institutional Purchasers

  	
   

  
	
  Section 2.4.

  	
  Reduction of the Facility Amount; Optional
  and Mandatory Repayments of Advances

  	
   

  
	
  Section 2.5.

  	
  Determination of Interest

  	
   

  
	
  Section 2.6.

  	
  [Reserved]

  	
   

  
	
  Section 2.7.

  	
  Notations on Variable Funding Certificates

  	
   

  
	
  Section 2.8.

  	
  Principal Repayments

  	
   

  
	
  Section 2.9.

  	
  Settlement Procedures During the Revolving
  Period

  	
   

  
	
  Section 2.10.

  	
  Settlement Procedures During the
  Amortization Period

  	
   

  
	
  Section 2.11.

  	
  Collections and Allocations

  	
   

  
	
  Section 2.12.

  	
  Payments, Computations, Etc

  	
   

  
	
  Section 2.13.

  	
  [Reserved]

  	
   

  
	
  Section 2.14.

  	
  Fees

  	
   

  
	
  Section 2.15.

  	
  Increased Costs; Capital Adequacy;
  Illegality

  	
   

  
	
  Section 2.16.

  	
  Taxes

  	
   

  
	
  Section 2.17.

  	
  Assignment of the Sale Agreement

  	
   

  
	
  Section 2.18.

  	
  Substitution and Repurchase of Loans

  	
   

  
	
  Section 2.19.

  	
  Optional Sales

  	
   

  
	
  Section 2.20.

  	
  RIC/BDC Sales

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  III

  	
  CONDITIONS
  TO CLOSING; ADVANCES

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 3.1.

  	
  Conditions to Closing and Initial Advance

  	
   

  

 

i

 

	
  Section 3.2.

  	
  Conditions Precedent to All Advances

  	
   

  
	
  Section 3.3.

  	
  Custodianship; Transfer of Loans and
  Permitted Investments

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  IV

  	
  REPRESENTATIONS
  AND WARRANTIES

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 4.1.

  	
  Representations and Warranties of the
  Borrower

  	
   

  
	
  Section 4.2.

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

  	
   

  
	
  Section 4.3.

  	
  Representations and Warranties of the
  Servicer

  	
   

  
	
  Section 4.4.

  	
  Representations and Warranties of the
  Backup Servicer

  	
   

  
	
  Section 4.5.

  	
  Representations and Warranties of the
  Trustee

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  V

  	
  GENERAL
  COVENANTS

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 5.1.

  	
  Affirmative Covenants of the Borrower

  	
   

  
	
  Section 5.2.

  	
  Negative Covenants of the Borrower

  	
   

  
	
  Section 5.3.

  	
  Covenants of the Borrower Relating to the
  Hedging of Fixed Rate Loans

  	
   

  
	
  Section 5.4.

  	
  Affirmative Covenants of the Servicer

  	
   

  
	
  Section 5.5.

  	
  Negative Covenants of the Servicer

  	
   

  
	
  Section 5.6.

  	
  Affirmative Covenants of the Backup
  Servicer

  	
   

  
	
  Section 5.7.

  	
  Negative Covenants of the Backup Servicer

  	
   

  
	
  Section 5.8.

  	
  Affirmative Covenants of the Trustee

  	
   

  
	
  Section 5.9.

  	
  Negative Covenants of the Trustee

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  VI

  	
  ADMINISTRATION
  AND SERVICING OF CONTRACTS

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 6.1.

  	
  Designation of the Servicer

  	
   

  
	
  Section 6.2.

  	
  Duties of the Servicer

  	
   

  
	
  Section 6.3.

  	
  Authorization of the Servicer

  	
   

  
	
  Section 6.4.

  	
  Collection of Payments; Accounts

  	
   

  
	
  Section 6.5.

  	
  Servicer Advances

  	
   

  
	
  Section 6.6.

  	
  Realization Upon Charged-Off Loans

  	
   

  
	
  Section 6.7.

  	
  [Reserved]

  	
   

  
	
  Section 6.8.

  	
  Servicing Compensation

  	
   

  
	
  Section 6.9.

  	
  Payment of Certain Expenses by Servicer

  	
   

  
	
  Section 6.10.

  	
  Reports

  	
   

  

 

ii

 

	
  Section 6.11.

  	
  Annual Statement as to Compliance

  	
   

  
	
  Section 6.12.

  	
  Annual Independent Public Accountant’s
  Servicing Reports

  	
   

  
	
  Section 6.13.

  	
  Limitation on Liability of the Servicer and
  Others

  	
   

  
	
  Section 6.14.

  	
  The Servicer Not to Resign

  	
   

  
	
  Section 6.15.

  	
  Servicer Defaults

  	
   

  
	
  Section 6.16.

  	
  Appointment of Successor Servicer

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  VII

  	
  THE
  BACKUP SERVICER

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 7.1.

  	
  Designation of the Backup Servicer

  	
   

  
	
  Section 7.2.

  	
  Duties of the Backup Servicer

  	
   

  
	
  Section 7.3.

  	
  Merger or Consolidation

  	
   

  
	
  Section
  7.4.

  	
  Backup
  Servicing Compensation

  	
   

  
	
  Section 7.5.

  	
  Backup Servicer Removal

  	
   

  
	
  Section 7.6.

  	
  Limitation on Liability

  	
   

  
	
  Section 7.7.

  	
  The Backup Servicer Not to Resign

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  	
  THE TRUSTEE

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 8.1.

  	
  Designation of Trustee

  	
   

  
	
  Section 8.2.

  	
  Duties of Trustee

  	
   

  
	
  Section 8.3.

  	
  Merger or Consolidation

  	
   

  
	
  Section 8.4.

  	
  Trustee Compensation

  	
   

  
	
  Section 8.5.

  	
  Trustee Removal

  	
   

  
	
  Section 8.6.

  	
  Limitation on Liability

  	
   

  
	
  Section 8.7.

  	
  The Trustee Not to Resign

  	
   

  
	
  Section 8.8.

  	
  Release of Documents

  	
   

  
	
  Section 8.9.

  	
  Return of Required Loan Documents

  	
   

  
	
  Section 8.10.

  	
  Access to Certain Documentation and
  Information Regarding the Collateral; Audits of Servicer

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX

  	
  SECURITY INTEREST

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  9.1.

  	
  Grant
  of Security Interest

  	
   

  
	
  Section 9.2.

  	
  Release of Lien on Collateral

  	
   

  
	
  Section 9.3.

  	
  Further Assurances

  	
   

  

 

iii

 

	
  Section 9.4.

  	
  Remedies

  	
   

  
	
  Section 9.5.

  	
  Waiver of Certain Laws

  	
   

  
	
  Section 9.6.

  	
  Power of Attorney

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE X

  	
  TERMINATION EVENTS

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 10.1.

  	
  Termination Events

  	
   

  
	
  Section 10.2.

  	
  Remedies

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE XI

  	
  INDEMNIFICATION

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 11.1.

  	
  Indemnities by the Borrower

  	
   

  
	
  Section 11.2.

  	
  Indemnities by the Servicer

  	
   

  
	
  Section 11.3.

  	
  After-Tax Basis

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE XII

  	
  THE ADMINISTRATIVE AGENT AND PURCHASER
  AGENTS

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 12.1.

  	
  The Administrative Agent

  	
   

  
	
  Section 12.2.

  	
  Additional Agent

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE XIII

  	
  MISCELLANEOUS

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 13.1.

  	
  Amendments and Waivers

  	
   

  
	
  Section 13.2.

  	
  Notices, Etc

  	
   

  
	
  Section 13.3.

  	
  Ratable Payments

  	
   

  
	
  Section 13.4.

  	
  No Waiver; Remedies

  	
   

  
	
  Section 13.5.

  	
  Binding Effect; Benefit of Agreement

  	
   

  
	
  Section 13.6.

  	
  Term of this Agreement

  	
   

  
	
  Section 13.7.

  	
  Governing Law; Consent to Jurisdiction;
  Waiver of Objection to Venue

  	
   

  
	
  Section 13.8.

  	
  Waiver of Jury Trial

  	
   

  
	
  Section 13.9.

  	
  Costs, Expenses and Taxes

  	
   

  
	
  Section 13.10.

  	
  No Proceedings

  	
   

  
	
  Section 13.11.

  	
  Recourse Against Certain Parties

  	
   

  
	
  Section 13.12.

  	
  Protection of Right, Title and Interest in
  the Collateral; Further Action Evidencing Advances

  	
   

  
	
  Section 13.13.

  	
  Confidentiality

  	
   

  
	
  Section 13.14.

  	
  Execution in Counterparts; Severability;
  Integration

  	
   

  
	
  Section 13.15.

  	
  Waiver of Setoff

  	
   

  

 

iv

 

	
  Section 13.16.

  	
  Assignments by the Purchasers

  	
   

  
	
  Section 13.17.

  	
  Heading and Exhibits

  	
   

  
	
  Section 13.18.

  	
  Loans Subject to Retained Interest
  Provisions

  	
   

  
	
  Section 13.19.

  	
  Non-Confidentiality of Tax Treatment

  	
   

  

 

v

 

	
  EXHIBITS

  
	
   

  	
   

  	
   

  
	
  EXHIBIT A-1

  	
  Form of
  Borrowing Notice (Funding Request)

  	
   

  
	
  EXHIBIT
  A-1-PF

  	
  Form of
  Borrowing Notice (P-F Funding Request)

  	
   

  
	
  EXHIBIT A-2

  	
  Form of
  Borrowing Notice (Reduction of Advances Outstanding/Facility Amount)

  	
   

  
	
  EXHIBIT A-3

  	
  Form of
  Borrowing Notice (Investment of Amounts on Deposit in the Principal
  Collections Account and/or Pre-Funded Advances from the Pre-Funded Advances
  Account)

  	
   

  
	
  EXHIBIT A-4

  	
  Form of
  Borrowing Base Certificate

  	
   

  
	
  EXHIBIT A-5

  	
  Form of
  Pre-Funded Advance Certificate

  	
   

  
	
  EXHIBIT B

  	
  Form of
  Variable Funding Certificate (Conduit Purchaser or Institutional Purchaser)

  	
   

  
	
  EXHIBIT C

  	
  Form of
  Servicing Report

  	
   

  
	
  EXHIBIT D

  	
  Form of
  Hedging Agreement (including Schedule and Confirmation)

  	
   

  
	
  EXHIBIT E-1

  	
  Form of
  Officer’s Certificate as to Solvency (Ares Capital CP Funding LLC)

  	
   

  
	
  EXHIBIT E-2

  	
  Form of
  Officer’s Certificate as to Solvency (Ares Capital Corporation)

  	
   

  
	
  EXHIBIT F-1

  	
  Form of
  Officer’s Closing Certificate (Ares Capital CP Funding LLC)

  	
   

  
	
  EXHIBIT F-2

  	
  Form of
  Officer’s Closing Certificate (Ares Capital Corporation)

  	
   

  
	
  EXHIBIT G-1

  	
  Form of
  Power of Attorney (Ares Capital CP Funding LLC)

  	
   

  
	
  EXHIBIT G-2

  	
  Form of
  Power of Attorney (Ares Capital Corporation)

  	
   

  
	
  EXHIBIT H

  	
  Form of
  Release of Required Loan Documents

  	
   

  
	
  EXHIBIT I

  	
  Form of
  Assignment of Mortgage

  	
   

  
	
  EXHIBIT J

  	
  Form of
  Servicer’s Certificate

  	
   

  
	
  EXHIBIT K

  	
  Form of
  Transferee Letter

  	
   

  
	
  EXHIBIT L

  	
  Form of
  Certificate of Closing Attorneys

  	
   

  
	
  EXHIBIT M

  	
  Form of
  Joinder Supplement

  	
   

  
	
  EXHIBIT N

  	
  Form of
  Confidentiality Provision

  	
   

  
	
   

  	
   

  
	
  SCHEDULES

  
	
   

  
	
  SCHEDULE I

  	
  Condition
  Precedent Documents

  	
   

  
	
  SCHEDULE II

  	
  Concentration
  Account Bank and Concentration Account

  	
   

  
	
  SCHEDULE III

  	
  Location of
  Required Loan Documents

  	
   

  
	
  SCHEDULE IV

  	
  Loan List

  	
   

  
	
  SCHEDULE V

  	
  ACC Loan
  List

  	
   

  
	
  SCHEDULE VI

  	
  [Reserved]

  	
   

  
	
  SCHEDULE VII

  	
  Agreed-Upon
  Procedures For Independent Public Accountants

  	
   

  
	
  SCHEDULE
  VIII

  	
  [Reserved]

  	
   

  
	
  SCHEDULE IX

  	
  Moody’s
  Industry Classification Group

  	
   

  
	
   

  	
   

  	
   

  
	
  ANNEXES

  
	
   

  	
   

  	
   

  
	
  ANNEX A

  	
  Addresses
  for Notices

  	
   

  
	
  ANNEX B

  	
  Commitments

  	
   

  

 

 

THIS
SALE AND SERVICING AGREEMENT (as amended, modified,
waived, supplemented, restated or replaced from time to time, this “Agreement”)
is made as of November 3, 2004, by and among:

 

(1)           ARES CAPITAL CORPORATION, a Maryland
corporation (“Ares Capital Corporation”), as the originator (together
with its successors and assigns in such capacity, the “Originator”), and
as the servicer (together with its successors and assigns in such capacity, the
“Servicer”);

 

(2)           ARES CAPITAL CP FUNDING LLC, a Delaware
limited liability company, as the borrower (together with its successors and
assigns in such capacity, the “Borrower”);

 

(3)           EACH OF THE CONDUIT PURCHASERS FROM TIME TO TIME PARTY
HERETO, as a Conduit
Purchaser;

 

(4)           EACH OF THE INSTITUTIONAL PURCHASERS FROM TIME TO TIME
PARTY HERETO, as an Institutional Purchaser;

 

(5)           EACH OF THE PURCHASER AGENTS FROM TIME TO TIME PARTY
HERETO, as a Purchaser Agent;

 

(6)           WACHOVIA CAPITAL MARKETS, LLC, a Delaware
limited liability company (together with its successors and assigns, “WCM”),
as the administrative agent (together with its successors and assigns in such
capacity, the “Administrative Agent”);

 

(7)           LYON FINANCIAL SERVICES, INC., a Minnesota
corporation, doing business as U.S. Bank Portfolio Services (“Lyon”),
not in its individual capacity but as the backup servicer (together with its
successors and assigns in such capacity, the “Backup Servicer”); and

 

(8)           U.S. BANK NATIONAL ASSOCIATION, a national
banking association (“U.S. Bank”), not in its individual capacity but as
the trustee (together with its successors and assigns in such capacity, the “Trustee”).

 

R_E_C_I_T_A_L_S

 

WHEREAS,
the Borrower has acquired, and may from time to time continue to acquire,
certain Loans from the Originator pursuant to the Sale Agreement;

 

WHEREAS,
the Borrower is prepared to transfer and assign, and
grant security interests in, certain Loans and certain related security with respect
thereto and the proceeds thereof and certain other assets to the Purchasers
from time to time;

 

WHEREAS,
the Purchasers may, in accordance with the terms of this Agreement, purchase
Variable Funding Certificates representing an undivided ownership interest in
such Loans, related security and proceeds;

 

 

WHEREAS,
it is the intention of the parties hereto that (i) in connection with each
Advance hereunder, the Borrower hereby transfers and assigns to the Trustee, on
behalf of the Purchasers, and hereby grants to the Trustee a security interest
in, for the benefit of the Secured Parties, all of the Borrower’s right, title
and interest in and to the Loans and certain related security with respect
thereto and the proceeds thereof and the other Collateral, and (ii) this
Agreement shall constitute a security agreement under Applicable Law in respect
of the transfer and grant described in the second Recital above and all other
security interests granted hereunder; and

 

WHEREAS,
all other conditions precedent to the execution of
this Agreement have been complied with.

 

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

 

ARTICLE I

DEFINITION

 

Section 1.1.                                Certain Defined Terms.

 

(a)           Certain capitalized terms used
throughout this Agreement are defined in this Section 1.1.  As used in this Agreement and its schedules,
exhibits and other attachments, unless the context requires a different
meaning, the following terms shall have the following meanings:

 

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

 

“ACC Loan”:  Any Loan included on the ACC Loan List.

 

“ACC Loan
List”:  The list of Loans on Schedule
V attached hereto that are owned by the Originator on the date hereof and
that are not required to be titled in the name of the Borrower at the time such
Loans are first included in the Collateral, to the extent such Loans are first
included in the Collateral prior to the Required Transfer Date.

 

“Account”:  Any of the Collection Account, the Principal
Collections Account, the Interest Collections Account, the Pre-Funded Advances
Account and any sub-accounts thereof deemed appropriate or necessary by the
Administrative Agent or the Trustee for convenience in administering such
accounts.

 

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

 

“Accrual
Period”:  With respect to (a) each
Advance (or portion thereof) funded at an Interest Rate equal to the CP Rate,
(i) with respect to the first Payment Date, the period from and

 

2

 

including the Closing Date to
and including the last day (whether or not a Business Day) of the calendar
month preceding the first Payment Date and (ii) with respect to any subsequent
Payment Date, the period from and including the first day (whether or not a
Business Day) of the calendar month in which the preceding Payment Date
occurred, to and including the last day (whether or not a Business Day) of the
calendar month immediately preceding the month in which the Payment Date
occurs; and (b) each Advance (or portion thereof) funded at an Interest Rate
other than the CP Rate, (i) with respect to the first Payment Date, the period
from and including the Closing Date to but excluding such first Payment Date
and (ii) with respect to any subsequent Payment Date, the period from and
including the previous Payment Date to but excluding such subsequent Payment
Date.

 

“Additional
Amount”:  Defined in Section 2.16.

 

“Additional
Loans”:  All Loans other than
Existing Loans that become part of the Collateral after the initial Funding
Date pursuant to the delivery of a Loan Assignment (as defined in the Sale
Agreement) and listed on a schedule to such Loan Assignment.

 

“Adjusted
Eurodollar Rate”:  For any Accrual
Period, a per annum interest rate
equal to a fraction, expressed as a percentage and rounded upwards (if
necessary) to the nearest 1/100 of 1%, (i) the numerator of which is equal to
the LIBOR Rate for such Accrual Period and (ii) the denominator of which is
equal to 100% minus the Eurodollar Reserve Percentage for such Accrual
Period.

 

“Administrative
Agent”:  WCM, in its capacity as
administrative agent for the Purchaser Agents, together with its successors and
assigns, including any successor appointed pursuant to Article XII.

 

“Advance”:  Any Funded Advance or Pre-Funded Advance.

 

“Advance
Rate”:  With respect to any type of
Loan on any Measurement Date, the corresponding percentage for such type of
Loan (such type to be determined as of the Funding Date of each Loan) set forth
below:  

 

	
  Type of Loan

  	
   

  	
  Advance Rate

  	
   

  
	
  Senior Secured ABL

  	
   

  	
  85

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Senior Secured Loan

  	
   

  	
  80

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Stretch Senior Secured Loan

  	
   

  	
  75

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  LOT Loan

  	
   

  	
  70

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Second Lien Loan

  	
   

  	
  68

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Senior Subordinated Loan

  	
   

  	
  63

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Junior Subordinated Loan

  	
   

  	
  50

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  DIP Loan

  	
   

  	
  70

  	
  %

  

 

3

 

For the
avoidance of doubt, with respect to any Agented Notes, the applicable Advance
Rate will be determined by reference to the type of the applicable underlying
Loan.

 

“Advances
Outstanding”:  On any day, the
aggregate principal amount of all Advances outstanding on such day, after
giving effect to all repayments of Advances and the making of new Advances on
such day.

 

“Affected
Party”:  The Administrative Agent,
each Purchaser Agent, each Purchaser, each Liquidity Bank, all assignees and
participants of each Purchaser and each Liquidity Bank, any sub-agent of the
Administrative Agent and any successor to a Purchaser Agent.

 

“Affiliate”:  With respect to a Person, means any other
Person that, directly or indirectly, controls, is controlled by or is under
common control with such Person, or is a director or officer of such Person; provided, however,
that for purposes of determining whether any Loan is an Eligible Loan or any
Obligor is an Eligible Obligor, the term Affiliate shall not include any
Affiliate relationship which may exist solely as a result of direct or indirect
ownership of, or control by, a common Financial Sponsor.  For purposes of this definition, “control,”
when used with respect to any specified Person means the possession, directly
or indirectly, of the power to vote 20% or more of the voting securities of
such Person or to direct or cause the direction of the management or policies
of such Person, whether through the ownership of voting securities, by contract
or otherwise.

 

“Agented
Note”:  Any Loan (a) originated as a
part of a syndicated loan transaction that has been closed (without regard to
any contemporaneous or subsequent syndication of such Loan) prior to such Loan
becoming part of the Collateral and (b) with respect to which, upon an
assignment of the note under the Sale Agreement to the Borrower, the Borrower,
as assignee of the note, will have all of the rights but none of the
obligations of the Originator with respect to such note and the Related
Property.

 

“Aggregate
Outstanding Loan Balance” or “AOLB”: 
On any date of determination, the sum of the Outstanding Loan Balances
of all Eligible Loans included as part of the Collateral on such date, minus
the Outstanding Loan Balances of any Charged-Off Loans.

 

“Aggregate
Unpaids”:  At any time, an amount
equal to the sum of all unpaid Advances Outstanding, Interest, Breakage Costs,
Hedge Breakage Costs and all other amounts owed by the Borrower to the
Purchasers, the Purchaser Agents, the Administrative Agent, the Backup
Servicer, each Hedge Counterparty and the Trustee hereunder (including, without
limitation, all Indemnified Amounts, other amounts payable under Article XI
and amounts required to be paid under Section 2.9, Section 2.10, Section
2.14, Section 2.15 and Section 2.16 to any Indemnified Party)
or under any Hedging Agreement (including, without limitation, payments in
respect of the termination of any such Hedging Agreement) or by the Borrower or
any other Person under

 

4

 

any fee letter delivered in
connection with the transactions contemplated by this Agreement (including,
without limitation, each Purchaser Fee Letter, the Backup Servicer Fee Letter
and the Trustee Fee Letter), in each case whether due or accrued.

 

“Agreement”:  Defined in the Preamble.

 

“Alternative
Rate”:  A per annum interest rate equal to (i) the Adjusted
Eurodollar Rate; or (ii) if a Eurodollar Disruption Event occurs, the Base
Rate.

 

“Amortization
Period”:  The period beginning on the
date on which the Termination Date is declared or occurs automatically pursuant
to Section 10.2(a), and ending on the Collection Date.

 

“Applicable
Law”:  For any Person or property of
such Person, all existing and future laws, rules, regulations (including
proposed, temporary and final income tax regulations), statutes, treaties,
codes ordinances, permits, certificates, orders and licenses of and
interpretations by any Governmental Authority which are applicable to such
Person or property (including, without limitation, predatory lending laws,
usury laws, the Federal Truth in Lending Act, and Regulation Z and Regulation B
of the Board of Governors of the Federal Reserve System), and applicable
judgments, decrees, injunctions, writs, awards or orders of any court,
arbitrator or other administrative, judicial, or quasi-judicial tribunal or
agency of competent jurisdiction.

 

“Appraisal”:  With respect to any Mortgaged Property as to
which an appraisal is required or permitted to be performed pursuant to the
terms of this Agreement, an appraisal performed in conformance with the
guidelines established by the Appraisal Institute.

 

“Appraisal
Institute”:  The international
membership association of real estate appraisers.

 

“Ares LIBOR
Rate”:  The posted rate for
one-month, two-month or three-month, as applicable, deposits in Dollars
appearing on Telerate Page 3750, as and when determined in accordance with the
applicable Underlying Instruments.

 

“Ares Prime
Rate”:  The rate designated by
certain reference lenders in the Underlying Instruments from time to time as
its prime rate in the United States, such rate to change as and when the
designated rate changes; provided, however,
the Ares Prime Rate is not intended to be lowest rate of interest charged by
the Originator in connection with extensions of credit to debtors.

 

“Assignment
of Mortgage”:  An assignment of the
Mortgage, notice of transfer or equivalent instrument in recordable form
sufficient under the laws of the jurisdiction wherein the related Mortgaged
Property is located to effect the assignment of the Mortgage to the Trustee,
which assignment, notice of transfer or equivalent instrument may be in the
form of one or more blanket assignments covering the Loans secured by Mortgaged
Properties located in the same jurisdiction, if permitted by Applicable Law.

 

“Attached
Equity”: With respect to any Loan, any stock, partnership or membership interest,
beneficial interest or other equity security, warrant, option, or any right,
including,

 

5

 

without limitation, any
registration right, with respect to the foregoing received by the Originator in
connection with the origination or acquisition of such Loan.

 

“Availability”:  At any time, an amount equal to the excess,
if any, of (i) the lesser of (a) the Facility Amount and (b) the Maximum
Availability over (ii) the Advances Outstanding on such day; provided that, during the Amortization
Period, the Availability shall be equal to zero.

 

“Available
Funds”:  With respect to any Payment
Date, all immediately available amounts on deposit in the Collection Account
(including, without limitation, any Collections and Servicer Advances).

 

“Average
Pool Delinquency Ratio”:  As of any
Determination Date, the percentage equivalent of a fraction, the numerator of
which is the sum of the Pool Delinquency Ratios for such Determination Date and
each of the two preceding Determination Dates (or such lesser number of
preceding Determination Dates as shall have elapsed as of such Determination
Date), and the denominator of which is three (or such lesser number of
Determination Dates included in the calculations described herein).

 

“Backup
Servicer”:  Defined in the Preamble.

 

“Backup
Servicer Fee Letter”:  The Backup
Servicer Fee Letter, dated as of the date hereof, by and among the Servicer,
the Administrative Agent, the Trustee, and the Backup Servicer, as such letter
may be amended, modified, supplemented, restated or replaced from time to time.

 

“Backup
Servicer Termination Notice”: 
Defined in Section 7.5.

 

“Backup
Servicing Fee”:  The fee set forth as
such in the Backup Servicer Fee Letter.

 

“Bankruptcy
Code”:  The United States Bankruptcy
Reform Act of 1978 (11 U.S.C. § 101, et seq.),
as amended from time to time.

 

“Base Rate”:  On any date, a fluctuating per annum interest rate equal to the
higher of (a) the Prime Rate or (b) the Federal Funds Rate plus 1.5%.

 

“Benefit
Plan”:  Any “employee benefit plan”
as defined in Section 3(3) of ERISA in respect of which the Borrower or any
ERISA Affiliate of the Borrower is, or at any time during the preceding six
years was, an “employer” as defined in Section 3(5) of ERISA.

 

“Borrower”:  Defined in Preamble.

 

“Borrowing
Base”:  As of any Measurement Date,
an amount equal to (i) the Aggregate Outstanding Loan Balance, after giving
effect to all Loans added to and removed from the Collateral on such date, minus
(ii) the Excess Concentration Amount, minus (iii) the Outstanding Loan
Balances of all Delinquent Loans.

 

6

 

“Borrowing
Base Certificate”:  Each certificate,
in the form of Exhibit A-4, required to be delivered by the Borrower with
each Borrowing Notice related to a Funded Advance and on each Measurement Date.

 

“Borrowing
Notice”:  Each notice required to be
delivered by the Borrower (i) in respect of (a) the Initial Advance and each
incremental Funded Advance, in the form of Exhibit A-1, (b) each
Pre-Funded Advance, in the form of Exhibit A-1-PF, (c) any reduction of
the Facility Amount or repayment of Advances Outstanding, in the form of Exhibit
A-2, or (d) any reinvestment of Principal Collections under Section
2.9(b), in the form of Exhibit A-3.

 

“Breakage
Costs”:  With respect to any
Purchaser, any amount or amounts as shall compensate such Purchaser for any
loss, cost or expense incurred by such Purchaser (as determined by the
applicable Purchaser Agent on behalf of such Purchaser, in such Purchaser Agent’s
sole discretion) as a result of a prepayment by the Borrower of Advances
Outstanding or Interest.  All Breakage
Costs shall be due and payable hereunder upon demand, in accordance with the
terms hereof.  The determination by the
applicable Purchaser Agent of the amount of any such loss, cost or expense
shall be set forth in a written notice to the Borrower and shall be conclusive
absent manifest error.

 

“Business
Day”:  Any day (other than a Saturday
or a Sunday) on which commercial banks are not required or authorized to be
closed in New York, New York, Charlotte, North Carolina, Boston, Massachusetts,
Minneapolis, Minnesota or Florence, South Carolina.

 

“Certificated
Security”:  The meaning specified in
Section 8-102(a)(4) of the UCC.

 

“Change of
Control”:  Any of the following:

 

(a)           The Management Agreement shall fail
to be in full force and effect;

 

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

 

(c)           the failure by the Originator to own
100% of the limited liability company membership interests in the Borrower; or

 

(d)           the dissolution, termination or
liquidation in whole or in part, transfer or other disposition of all or
substantially all of the assets of, Ares Capital Corporation.

 

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

 

7

 

“Charged-Off
Loan”:  A Loan as to which any of the
following first occurs:  (i) the Servicer
has determined in accordance with the Servicing Standard that such Loan is not
collectible, (ii) the Loan has been a Delinquent Loan for a period of 60 days
or more (without giving effect to any Servicer Advance thereon or any grace
period permitted in the related Underlying Instruments), (iii) except in the
case of any DIP Loan, the related Obligor is subject to an Insolvency Event or
(iv) the related Obligor is not Solvent or such Loan is on non-accrual status,
as reasonably determined by the Servicer in accordance with the Credit Policy
and the Servicing Standard.

 

“Charged-Off
Portfolio Loan”:  A Portfolio Loan as
to which any of the following first occurs: 
(i) the Servicer has determined in accordance with the Servicing
Standard (or such similar policies and procedures utilized by the Servicer in
servicing such Portfolio Loan) that such Portfolio Loan is not collectible,
(ii) the Portfolio Loan has been a Delinquent Portfolio Loan for a period of 60
days or more (without giving effect to any servicer advance or loan by the
Originator or any of its Affiliates thereon or any grace period permitted in
the related Underlying Instruments), (iii) the related Obligor is subject to an
Insolvency Event or (iv) the related Obligor is not Solvent or such Portfolio
Loan is on non-accrual status, as reasonably determined by the Servicer in
accordance with the Credit Policy and the Servicing Standard (or such similar
policies and procedures utilized by the Servicer in servicing such Portfolio
Loan).

 

“Clearing
Agency”:  An organization registered
as a “clearing agency” pursuant to Section 17A of the Exchange Act.

 

“Clearing
Corporation”:  The meaning specified in
Section 8-102(a)(5) of the UCC.

 

“Closing
Counsel”:  Legal counsel responsible
for closing the origination or acquisition of any Loan on behalf of the
Originator which is sold to the Borrower under the Sale Agreement and financed
by the Borrower under this Agreement.

 

“Closing
Date”:  November 3, 2004.

 

“Code”:  The Internal Revenue Code of 1986, as amended
from time to time.

 

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

 

(i)  the Existing Loans and Additional Loans, and
all monies due or to become due in payment under such Existing Loans and
Additional Loans on and after the related Cut-Off Date, including, but not
limited to, all Collections, but excluding any related Attached Equity;

 

(ii)  all Related Security with respect to the
Loans referred to in clause (i);

 

8

 

(iii)  the Accounts and all Permitted Investments
purchased with funds on deposit in the Accounts (including all Permitted
Investments purchased in connection with Pre-Funded Advances); and

 

(iv)  all income and Proceeds of the foregoing.

 

“Collection
Account”:  Defined in Section
6.4(h).

 

“Collection
Date”:  The date following the
Termination Date on which the Aggregate Unpaids have been reduced to zero and
indefeasibly paid in full.

 

“Collection
Period”:  With respect to the first
Payment Date, the period from and including the Closing Date to and including
the Determination Date preceding the first Payment Date; and thereafter, the
period from but excluding the Determination Date preceding the previous Payment
Date to and including the Determination Date preceding the current Payment
Date.

 

“Collections”:  (a) All cash collections and other cash
proceeds of any Loan, including, without limitation or duplication, any
Interest Collections, Principal Collections, amendment fees, late fees, waiver
fees or other amounts received in respect thereof (but excluding any Excluded
Amounts), (b) interest earnings on Permitted Investments or otherwise in any
Account, (c) any cash proceeds or other funds received by the Borrower or the
Servicer with respect to any Related Security (including from any guarantors)
and (d) all payments received pursuant to any Hedging Agreement or Hedge
Transaction.

 

“Commercial
Paper Notes”:  Any short-term
promissory notes of any Conduit Purchaser issued by such Conduit Purchaser in
the commercial paper market.

 

“Commitment”:  With respect to each Conduit Purchaser and
each Institutional Purchaser, the commitment of such Purchaser to make Advances
in accordance herewith in an amount not to exceed (a) prior to the Termination
Date, the dollar amount set forth opposite such Purchaser’s name on Annex B
hereto or the amount set forth as such Purchasers “Commitment” on Schedule I to
the Joinder Supplement relating to such Purchaser, as applicable, and (b) on or
after the Termination Date, with respect to each Conduit Purchaser and each
Institutional Purchaser, the Pro Rata Share of such Conduit Purchaser or
Institutional Purchaser, as applicable, of the aggregate Advances Outstanding.

 

“Commitment
Fee”:  With respect to any Purchaser,
the “commitment fee” set forth in the applicable Purchaser Fee Letter.

 

“Concentration
Account”:  The account maintained at
the Concentration Account Bank, subject to the Intercreditor Agreement, for the
purpose of receiving Collections, the details of which are set forth on Schedule
II, as such schedule may be amended from time to time.

 

“Concentration
Account Bank”:  U.S. Bank National
Association, a national banking association.

 

9

 

“Concentration
Limits”:  As of any Measurement Date,
for purposes of determining the Borrowing Base, the Eligible Loans included in
the Aggregate Outstanding Loan Balance must conform to the concentration
limitations set forth below (except as specifically noted, percentages refer to
the percentage of the Aggregate Outstanding Loan Balance):

 

(a)         the sum of the
Outstanding Loan Balances of Eligible Loans that have been owned by the
Borrower for a period of greater than 12 months from the Closing Date and 12
months after each Term Securitization shall not exceed $20,000,000; provided that, for any Eligible Loan a
portion of which has been conveyed into a Term Securitization, the initial date
of the Borrower’s ownership of such Eligible Loan will be reset to the closing
date of such Term Securitization for the purposes of determining compliance
with this limitation;

 

(b)        the sum of the
Outstanding Loan Balances of Eligible Loans that are Loans to a single Obligor
(including any Affiliates thereof) shall not exceed (x) $20,000,000, at any
time when the Facility Amount is less than $250,000,000, or (y) $25,000,000, at
any time when the Facility Amount is greater than or equal to $250,000,000;

 

(c)         the sum of the
Outstanding Loan Balances of all Eligible Loans divided by the number of
Eligible Obligors (including Affiliates thereof) shall not exceed the greater
of 4% or $8,000,000;

 

(d)        the sum of the
Outstanding Loan Balances of Eligible Loans that are loans to Eligible Obligors
in the same Moody’s Industry Classification Group shall not exceed the greater
of 15% or $20,000,000;

 

(e)         the sum of the
Outstanding Loan Balances of Eligible Loans that are DIP Loans shall not exceed
the greater of 5% or $7,500,000;

 

(f)         the sum of the Outstanding
Loan Balances of Eligible Loans that are Revolving Loans shall not exceed the
greater of 20% or $20,000,000;

 

(g)        the sum of the
Outstanding Loan Balances of Eligible Loans that have a Risk Rating of (i) 1,
shall not exceed 0%, and (ii) 2, shall not exceed the greater of 10% or
$7,500,000; and

 

(h)        the sum of the
Outstanding Loan Balances of Eligible Loans that are PIK Loans with a current
annual cash coupon of less than (i) the Ares LIBOR Rate + 5.0%, if such Loan is
a Floating Rate Loan with an interest rate based on Ares LIBOR Rate, (ii) the
Ares Prime Rate + 3.0%, if such Loan is a Floating Rate Loan with an interest
rate based on the Ares Prime Rate, and (iii) 7.0% if such Loan is a Fixed Rate
Loan, shall not exceed 0%.

 

“Conduit
Purchaser”:  VFCC and each other
commercial paper conduit as may from time to time become a Purchaser hereunder
by executing and delivering a Joinder Supplement to the Administrative Agent
and the Borrower as contemplated by Section 2.1(e).

 

“Contractual
Obligation”:  With respect to any
Person, any provision of any securities issued by such Person or any indenture,
mortgage, deed of trust, contract,

 

10

 

undertaking,
agreement, instrument or other document to which such Person is a party or by
which it or any of its property is bound or to which either is subject.

 

“CP Rate”:  With respect to any Conduit Purchaser for any
day during any Accrual Period, the per annum
rate equal to (a) the rate (expressed as a percentage and an interest yield
equivalent and calculated on the basis of a 360-day year) or, if more
than one rate, the weighted average thereof, paid or payable by such Conduit
Purchaser from time to time as interest on or otherwise in respect of the
Commercial Paper Notes issued by such Conduit Purchaser that are allocated, in
whole or in part, by such Purchaser’s Purchaser Agent to fund the purchase or
maintenance of the outstanding Advances made by such Purchaser (and which may
also, in the case of a pool-funded Conduit Purchaser, be allocated in
part to the funding of other assets of such Conduit Purchaser and which
Commercial Paper Notes need not mature on the last day of any Accrual Period)
during such Accrual Period as determined by such Conduit Purchaser’s Purchaser
Agent, which rates shall reflect and give effect to (i) certain documentation
and transaction costs (including, without limitation, dealer and placement
agent commissions, and incremental carrying costs incurred with respect to
Commercial Paper Notes maturing on dates other than those on which
corresponding funds are received by such Conduit Purchaser) associated with the
issuance of such Conduit Purchaser’s Commercial Paper Notes, and (ii) other
borrowings by such Conduit Purchaser, including borrowings to fund small or odd
dollar amounts that are not easily accommodated in the commercial paper market,
to the extent such amounts are allocated, in whole or in part, by such Conduit
Purchaser’s Purchaser Agent to fund such Conduit Purchaser’s purchase or
maintenance of the outstanding Advances made by such Purchaser during such
Accrual Period; provided that, if
any component of such rate is a discount rate, in calculating the applicable “CP
Rate” for such day, such Conduit Purchaser’s Purchaser Agent shall for such
component use the rate resulting from converting such discount rate to an
interest bearing equivalent per annum
rate or (b) such other rate as may be set forth as such in such Conduit
Purchaser’s Purchaser Fee Letter.

 

“Credit
Policy”:  The written credit policies
and procedures manual of the Originator provided to the Administrative Agent on
the Closing Date, as such credit policies and procedures manual may be as
amended or supplemented from time to time in accordance with Section 5.4(f).

 

“Cut-Off
Date”:  With respect to each Loan,
the Funding Date of the Advance made in respect thereof.

 

“Defaulted
Loan Sale”:  Defined in Section
2.18(c)(i).

 

“Defaulted
Loan Sale Date”:  The Business Day
identified by the Borrower to the Administrative Agent and the Trustee in a
Defaulted Loan Sale Notice as the proposed date of a Defaulted Loan Sale.

 

“Defaulted
Loan Sale Notice”:  Defined in Section
2.18(c)(i)(1).

 

“Delayed
Draw Term Loan”:  A Loan that is
fully committed on the initial funding date of such Loan and is required to be
fully funded in one or more installments on draw dates to

 

11

 

occur within one year of the
initial funding of such Loan but which, once all such installments have been
made, has the characteristics of a Term Loan.

 

“Delinquent
Loan”:  A Loan (other than a
Charged-Off Loan) as to which any of the following occurs:  (a) all or any portion of any one or more
payments of principal or interest thereunder remains unpaid for at least 60 days
from the original due date for such payment (without giving effect to any
Servicer Advance thereon or any grace period permitted in the Underlying
Instruments); (b) a Material Modification of the type described in clause (b),
(c) or (f) of the definition thereof has occurred with respect to such Loan;
(c) the related Obligor is not paying any of the accrued and unpaid interest on
a current basis for at least 60 days from the original date for such payment
(without giving effect to any Servicer Advance thereon or any grace period
permitted in the Underlying Instruments); or (d) consistent with the Servicing
Standard, such Loan would be classified as delinquent by the Servicer.

 

“Delinquent
Portfolio Loan”:  A Portfolio Loan
(other than a Charged-Off Portfolio Loan) as to which any of the following
first occurs:  (a) all or any portion of
any one or more payments of principal or interest thereunder remains unpaid for
at least 60 days from the original due date for such payment (without giving
effect to any servicer advance thereon or any grace period permitted in the
Underlying Instruments); (b) a Material Modification of the type described in
clause (b), (c) or (f) of the definition thereof has occurred with respect to
such Portfolio Loan; (c) the related Obligor is not paying any of the accrued
and unpaid interest on a current basis for at least 60 days from the original
date for such payment (without giving effect to any servicer advance thereon or
any grace period permitted in the Underlying Instruments); or (d) consistent
with the Servicing Standard (or such similar policies and procedures utilized
by the Servicer in servicing such Portfolio Loan), such Portfolio Loan would be
classified as delinquent by the Servicer.

 

“Determination
Date”:  The last day of each calendar
month.

 

“DIP Loan”:  Any Loan or Portfolio Loan to an Obligor that
is a Chapter 11 debtor under the Bankruptcy Code which is permitted by the
Credit Policy and also which satisfies the following criteria:  (a) the DIP Loan is duly authorized by a
final order of the applicable bankruptcy court or federal district court under
the provisions of subsection (b), (c) or (d) of 11 U.S.C. § 364; (b) the
Obligor’s bankruptcy case is still pending as a case under the provisions of
Chapter 11 of Title 11 of the Bankruptcy Code and has not been dismissed or
converted to a case under the provisions of Chapter 7 of Title 11 of the
Bankruptcy Code; (c) the Obligor’s obligations under such Loan or Portfolio
Loan have not been (i) disallowed, in whole or in part, or (ii) subordinated,
in whole or in part, to the claims or interests of any other Person under the
provisions of 11 U.S.C. § 510; (d) the DIP Loan is secured and the Liens
granted by the applicable bankruptcy court or federal district court in relation
to the Loan or Portfolio Loan have not been subordinated, in whole or in part,
to the Liens of any other lender under the provisions of 11 U.S.C. § 364(d) or
otherwise; (e) the Obligor is not in default on its obligations under the Loan
or Portfolio Loan; (f) neither the Obligor nor any party in interest has filed
a Chapter 11 plan with the applicable federal bankruptcy or district court
that, upon confirmation, would (i) disallow or subordinate the Loan or
Portfolio Loan, in whole or in part, (ii) subordinate, in whole or in part, any
Lien granted in connection with such Loan or Portfolio Loan, (iii) fail to
provide for the repayment, in full and in cash, of the Loan or Portfolio Loan 

 

12

 

upon the effective date of such
plan or (iv) otherwise impair, in any manner, the claim evidenced by the Loan
or Portfolio Loan; and (g) the DIP Loan is documented in a form that is
commercially reasonable and consistent with the Credit Policy.  For the purposes of this definition, an order
is a “final order” if the applicable period for filing a motion to reconsider
or notice of appeal in respect of a permanent order authorizing the Obligor to
obtain credit has lapsed and no such motion or notice has been filed with the applicable
bankruptcy court or federal district court or the clerk thereof.

 

“Dollars”:  Means, and the conventional “$”
signifies, the lawful currency of the United States.

 

“Eligible
Loan”:  On any Measurement Date, each
Loan:

 

(A)          for which the Administrative Agent,
the Trustee and the Backup Servicer have received, no later than 12:00 p.m. on
the day prior to the related Funding Date, the following:

 

(1)           a faxed copy of the
duly executed original promissory note for the Loan (other than in the case of
a Noteless Loan) and if any Loan is closed in escrow, a certificate in the form
of Exhibit L from the closing attorneys of such Loans certifying as to
their possession of the Required Loan Documents; provided that, notwithstanding the foregoing, as to any Additional
Loans, the Required Loan Documents shall be in the possession of the Trustee
within five Business Days of any related Funding Date; and

 

(2)           a Certificate of
Assignment in the form of Exhibit A to the Sale Agreement, including
Schedule I thereto, and

 

(B)           that satisfies each of the following
eligibility requirements:

 

(a)           such Loan is
underwritten as (i) a cash flow loan where the source of repayment is ongoing
cash flow of the Obligor, (ii) an asset-based loan where the source of
repayment is liquidation of collateral (including real estate), or (iii) some
combination thereof;

 

(b)           such Loan is
evidenced by a promissory note (other than in the case of a Noteless Loan), a
credit agreement containing an express promise to pay, a security agreement or
instrument and related loan documents that have been duly authorized and
executed, are in full force and effect and constitute the legal, valid, binding
and absolute and unconditional payment obligation of the related Obligor,
enforceable against such Obligor in accordance with their terms (subject, as to
enforcement only, to applicable bankruptcy, insolvency, moratorium or other
similar laws affecting the rights of creditors generally and to general
principles of equity, whether considered in a suit at law or in equity), and
there are no conditions precedent to the enforceability or validity of the Loan
that have not been satisfied or validly waived;

 

(c)           such Loan does not
contravene any Applicable Law (including, without limitation, laws, rules and
regulations, if applicable, relating to usury, truth in lending, fair credit
billing, fair credit reporting, equal credit opportunity, fair debt collection
practices, licensing and privacy) and no part thereof is in violation of any
Applicable Law;

 

13

 

(d)           such Loan is
denominated and payable only in Dollars in the United States to Obligors
residing in the United States (as determined by the domicile of the related
underlying collateral);

 

(e)           such Loan (i) was originated
and underwritten, or purchased and re-underwritten, by the Originator
including, without limitation, the completion of a due diligence and, if
applicable, a collateral assessment and (ii) is fully documented in a manner
consistent with the Credit Policy and such Loan is being serviced by the
Servicer in accordance with the Servicing Standard;

 

(f)            such Loan (i) if a
Senior Secured ABL, Senior Secured Loan, Stretch Senior Secured Loan, LOT Loan,
Second Lien Loan or DIP Loan has an original term to maturity that does not
exceed 96 months and (ii) if a Senior Subordinated Loan or Junior Subordinated
Loan, has an original term to maturity that does not exceed 120 months;

 

(g)           all of the original
or certified Required Loan Documents, acceptable to the Administrative Agent
and the Originator, with respect to such Loan have been, or will be, delivered
to the Trustee on or prior to the related Funding Date, except as otherwise
provided in Section 3.2(c), and all Servicing Files are being or shall
be maintained at the principal place of business of the Servicer in Los
Angeles, California in accordance with documented safety procedures approved by
the Administrative Agent;

 

(h)           as of the related
Funding Date, such Loan is not more than ten days delinquent in payment and,
since its origination by the Originator or, in the case of any Loan not
originated by the Originator, acquisition by the Originator, such Loan has
never been more than 30 days delinquent in payment of either principal or
interest;

 

(i)            such Loan is not a
Materially Modified Loan and such Loan is not a loan (including, without
limitation, a new loan that replaced a prior loan by the Originator or any of
its Affiliates to the Obligor that was a Delinquent Loan or a Charged-Off Loan)
or extension of credit by the Originator to the Obligor for the purpose of (i)
making any past due principal, interest or other payments due on such Loan,
(ii) preventing such Loan or any other loan to the related Obligor from
becoming past due or (iii) causing a Delinquent Loan or a Charged-Off Loan to
cease to be so classified;

 

(j)            if such Loan is an
ACC Loan, such Loan does not contain any restrictions on further assignment or
transferability other than provisions requiring Obligor, lending agent and/or
co-borrower consent and execution of an assignment agreement;

 

(k)           such Loan is
eligible under its Underlying Instruments (giving effect to the provisions of
Sections 9-406 and 9-408 of the UCC) to be sold to the Borrower and to have a
security interest therein granted to the Trustee, for the benefit of the
Secured Parties, and, if such Loan is not an ACC Loan, such Loan does not
contain any restrictions on further assignments or transferability to the
related special purpose entity issuer in connection with any Permitted
Securitization other than the execution of an assignment agreement;

 

(l)            such Loan either
(i) contains the confidentiality provision set forth on Exhibit N or
(ii) does not contain a confidentiality provision that restricts or purports to
restrict

 

14

 

the ability of the Trustee or
any Secured Party to exercise their rights under this Agreement, including,
without limitation, their rights to review the related Loan File;

 

(m)          such Loan provides
for periodic payments of a portion of accrued and unpaid interest in cash on a
current basis, no less frequently than quarterly;

 

(n)           all material
consents, licenses, approvals or authorizations of, or registrations or
declarations with, any Governmental Authority or any other Person required by
the Originator or the Borrower to be obtained, effected or given in connection
with the Originator’s or the Borrower’s making, acquisition, transfer or
performance of such Loan have been duly obtained, effected or given and are in
full force and effect;

 

(o)           such Loan does not
permit interest to be capitalized in its entirety or contain payment
obligations relating to “put rights” by the related Obligor;

 

(p)           such Loan is an “Eligible
Asset” as defined in Rule 3a-7 under the 1940 Act;

 

(q)           such Loan is
Registered;

 

(r)            such Loan, together
with the Related Security, has been sold to the Borrower pursuant to (and in
accordance with) the Sale Agreement, and the Borrower has good and marketable
title, to such Loan and Related Security, free and clear of all Liens (other
than Permitted Liens);

 

(s)           the Loan (together
with the Collections and Related Security related thereto), has been the
subject of a grant of a valid and first priority perfected security interest by
the Borrower in favor of the Trustee, on behalf of the Secured Parties;

 

(t)            the Obligor with
respect to such Loan is an Eligible Obligor;

 

(u)           all information
provided by the Borrower or the Servicer to the Administrative Agent or the
Trustee in writing with respect to the Loan is true and correct in all material
respects as of the date such information is provided;

 

(v)           such Loan (A) is not
an Equity Security and (B) does not provide for the conversion or exchange into
an Equity Security at any time on or after the date it is included as part of
the Collateral;

 

(w)          such Loan does not
require the Borrower to make future advances to the Obligor under the related
Underlying Instruments (exclusive of advances under Revolving Loans or Delayed
Draw Term Loans which are part of the Retained Interest or advances made to
protect or preserve rights against the Obligor, to preserve or enhance the
value of any Related Property securing such Loan or to indemnify an agent or
representative for lenders pursuant to any such Underlying Instrument);

 

15

 

(x)            such Loan is not a
Loan with respect to which interest required by the Underlying Instrument to be
paid in cash has previously been deferred or capitalized as principal and not
subsequently paid in full;

 

(y)           no selection
procedure adverse to the interests of the Administrative Agent, the Purchaser
Agents or the Secured Parties was utilized by the Borrower or the Originator in
the selection of such Loan for inclusion in the Collateral;

 

(z)            the acquisition of
such Loan will not cause the Borrower or the pool of Collateral to be required
to register as an investment company under the 1940 Act and if the issuer of
such Loan is excepted from the definition of an “investment company” solely by
reason of Section 3(c)(1) of the 1940 Act, then either (A) such security does
not constitute a “voting security” for purposes of the 1940 Act or (B) the
aggregate amount of such security held by the Borrower is less than 10% of the
entire issue of such security;

 

(aa)         such Loan does not
constitute Margin Stock;

 

(bb)         such Loan is not
subject to withholding tax unless the Obligor thereon is required under the
terms of the related Underlying Instrument to make “gross-up” payments that
cover the full amount of such withholding tax on an after-tax basis in the
event of a Change of Tax Law;

 

(cc)         the proceeds of such
Loan will not be used to finance activities of the type engaged in by
businesses classified under NAICS Codes 2361 (Residential Building
Construction), 2362 (Nonresidential Building Construction), 2371 (Utility
System Construction), or 2372 (Land Subdivision);

 

(dd)         [Reserved];

 

(ee)         [Reserved];

 

(ff)           such Loan is not a
Participation;

 

(gg)         if such Loan is an
Agented Note:

 

(i)                  the related Underlying Instruments
shall include a note purchase or similar agreement containing (x) provisions
relating to the appointment and duties of a payment agent and a collateral
agent (which, in the case of a Loan originated by the Originator, shall be the
Originator or a wholly-owned Subsidiary of the Originator) and in such capacity
such agent has the right to receive and collect payments and to enforce the
Obligor’s obligations on behalf of all holders of the Obligor’s underlying
indebtedness at the direction of the requisite majority of the underlying
lenders and (y) if such Agented Note was issued in a transaction involving more
than one class of notes, intercreditor provisions;

 

(ii) if the entity serving as the
collateral agent of the security for all notes of the Obligor issued under the
applicable Underlying Instruments has or will change from the time of the
origination of the notes, all appropriate assignments of

 

16

 

the collateral
agent’s rights in and to the collateral on behalf of the noteholders have been
executed and filed or recorded as appropriate prior to such Agented Note
becoming a part of the Collateral;

 

(iii)                all required
notifications, if any, have been given to the collateral agent, the payment
agent and any other parties required by the Underlying Instruments of, and all
required consents, if any, have been obtained with respect to, the Originator’s
assignment of such Agented Note and the Originator’s right, title and interest
in the Related Property to the Borrower and the Trustee’s security interest
therein on behalf of the secured parties;

 

(iv)               the right to
control the actions of and replace the collateral agent and/or the paying agent
of the notes is to be exercised by at least a majority in interest of all
holders of such Agented Notes; and

 

(v)                                all notes of the Obligor of the
same priority are cross-defaulted and the Related Property securing such notes
is held by the collateral agent for the benefit of all holders of the notes and
all holders of such notes (A) have an undivided pari passu interest in the Related Property securing such
notes, (B) are secured by, and share in the proceeds of the sale or other
disposition of, such Related Property on a pro
rata basis and (C) may transfer or assign their right, title and
interest in the Related Property;

 

(hh)              if such Loan is
a Material Mortgage Loan:

 

(i)                  the Loan is secured by the related Mortgage, which
has been properly recorded (or, if not properly recorded, has been submitted in
proper form for recording) and establishes and creates a valid, enforceable and
subsisting first priority security interest on the related Mortgaged Property
subject only to the following permitted encumbrances: (a) the Lien of current
real property taxes and assessments; (b) covenants, conditions and
restrictions, rights of way, easements and other matters of public record as of
the date of recording of such Mortgage, such exceptions appearing of record
being acceptable to mortgage lending institutions generally in the area wherein
the Mortgaged Property is located or specifically reflected in the Appraisal
obtained by the Originator in connection with the origination of the related
Loan; and (c) other matters to which like properties are commonly subject which
do not materially and adversely interfere with the value of or current
principal use of the related Mortgaged Property or the benefits of the security
intended to be provided by such Mortgage;

 

(ii) the Lien of the related
Mortgage is insured by a Title Policy or its equivalent, issued by a nationally
recognized title insurance company licensed to do business in the state in
which the Mortgaged Property is located, insuring the Originator of such Loan,
its successors and assigns, as to the first priority Lien of the related
Mortgage in the original principal amount of such Loan after all advances of
principal, subject only to customary Liens permitted under the Mortgage (or, if
a Title Policy has not yet been issued in respect of such Loan, a policy
meeting the

 

17

 

foregoing
description is evidenced by a commitment for title insurance “marked-up” at the
closing of such loan); (ii) each Title Policy (or, if it has yet to be issued,
the coverage to be provided thereby) is in full force and effect, all premiums
thereon have been paid and no material claims have been made thereunder and no
claims have been paid thereunder; (iii) the Originator, the Borrower and the
Servicer have not, by act or omission, done anything that would materially
impair the coverage under such Title Policy; (iv) the Title Policy is freely
transferable or assignable by the Originator, and the Borrower; and (iv)
immediately following the transfer and assignment of the related Loan to the
Secured Parties, such Title Policy (or, if it has yet to be issued, the
coverage to be provided thereby) will inure to the benefit of the Secured
Parties without the consent of or notice to the insurer;

 

(iii)                any related
Mortgage contains customary and enforceable provisions, which render the rights
and remedies of the holder thereof adequate for the realization against the
Mortgaged Property of the benefits of the security, including, (x) in the case
of a Mortgage designated as a deed of trust, by trustee’s sale, and (y)
otherwise by judicial foreclosure, and there is no homestead or other exemption
available to the Obligor which would materially interfere with the right to
sell the Mortgaged Property related to such Loan at a trustee’s sale or the
right to foreclose the Mortgage;

 

(iv)               all escrow
deposits relating to such Loan that are, as of the applicable Cut-Off Date,
required to be deposited with the mortgagee or its agent have been so
deposited;

 

(v)                there is no
delinquent tax or assessment Lien on any Mortgaged Property which is the
primary Collateral for the related Material Mortgage Loan, and each such
Mortgaged Property is free of material damage and is in good repair;

 

(vi)               there are no
material defaults in complying with the terms of any applicable related Mortgage,
and all taxes, governmental assessments, insurance premiums, water, sewer and
municipal charges, leasehold payments or ground rents which previously became
due and owing have been paid, or an escrow of funds has been established in an
amount sufficient to pay for every such item which remains unpaid and which has
been assessed but is not yet due and payable;

 

(vii)              the related
Loan File contains a valid Appraisal, an Environmental Site Assessment, and, in
the case of any Loan either (x) having an Outstanding Loan Balance of
$5,000,000 or greater or (y) with respect to which the related Mortgaged
Property is at least 25 years old, an engineering report;

 

(viii)             the terms of
such Loan require that improvements on the related Mortgaged Property be
insured by a generally acceptable carrier against loss under a hazard insurance
policy with extended coverage and conforming to the requirements of the
Agreement, and all such insurance policies are in full force and effect;

 

18

 

(ix)                no proceeding
for the condemnation of all or any material portion of the related Mortgaged
Property has commenced or been threatened;

 

(x)                 the related Mortgaged Property was subject to one or
more Environmental Site Assessments (or an update of a previously conducted
Environmental Assessment), which were performed on behalf of the Originator, or
as to which the related report was delivered to the Originator in connection
with its origination or acquisition of such Loan, and the Originator, the
Borrower and the Servicer have no knowledge of any material and adverse
environmental conditions or circumstance affecting such Mortgaged Property;

 

(xi)                none of the
Originator, the Borrower or the Servicer have taken any action with respect to
such Loan or the related Mortgaged Property that could subject the Secured
Parties, or their respective successors and assigns in respect of such Loan, to
any liability under CERCLA or any other applicable federal, state or local
Environmental Law, and none of the Originator, the Borrower or the Servicer
have received any actual notice of a material violation of CERCLA or any
applicable federal, state or local Environmental Law with respect to the
related Mortgaged Property;

 

(xii)               the interest
of the related Obligor in the related Mortgaged Property consists of an
Interest in Real Property constituting part of such Mortgaged Property;

 

(xiii)              based on
surveys and/or the related Title Policy obtained in connection with the
origination of such Loan, as of the date of such origination, no improvement
that was included for the purpose of determining the Appraised Value of the
related Mortgaged Property at the time of origination of such Loan lay outside
the boundaries and building restriction lines of such property to any material
extent (unless affirmatively covered by the Title Policy), and no improvements
on adjoining properties encroached upon such Mortgaged Property to any material
extent; and (ii) based upon opinions of counsel and/or other due diligence customarily
performed by the Originator, the improvements located on or forming part of
such Mortgaged Property comply in all material respects with applicable zoning
laws and ordinances (except to the extent that they may constitute legal
non-conforming uses);

 

(xiv)              as of the date
of origination of such Loan, the related Obligor or operator of the related
Mortgaged Property was in possession of all material licenses, permits and
authorizations required by Applicable Law for the ownership and operation of
the related Mortgaged Property as it was then operated;

 

(xv)               the related
Mortgage provides that Insurance Proceeds and condemnation proceeds will be
applied for one of the following purposes: either to restore or repair such
Mortgaged Property, or to repay the principal of such Loan, or otherwise at the
option of the holder of the related Mortgage;

 

19

 

(xvi)              such Loan
contains provisions for the acceleration of the payment of the unpaid principal
balance of such Loan if, without obtaining consent of the holder of the
promissory note complying with the requirements of such Loan, the related
Mortgaged Property, or any controlling interest therein, is directly or
indirectly transferred or sold, unless otherwise approved in writing by the
Administrative Agent in its sole discretion;

 

(xvii)             the Assignment
of Leases and Rents, if any, establishes and creates a valid, subsisting and,
subject only to Permitted Liens, enforceable lien and security interest in the
related Obligor’s interest in the material leases pursuant to which any person
is entitled to occupy, use or possess all or any portion of the Mortgaged
Property;

 

(xviii)            if such
Mortgage is a deed of trust, a trustee, duly qualified under Applicable Law to
serve as such, has been properly designated and currently so serves, and no
fees or expenses are payable to such trustee by the Originator, the Borrower,
the Servicer, the Purchasers or any transferee thereof, except in connection
with a sale after default by the related Obligor or in connection with any full
or partial release of the related Mortgaged Property or related security for
the related Loan; and

 

(xix)              if such
Mortgaged Property is in an area identified in the Federal Register by the
Federal Emergency Management Agency as having special flood hazards, a flood
insurance policy is in effect with respect to such Mortgaged Property with a
generally acceptable carrier in an amount representing coverage described in
the Agreement.

 

(ii)              such Loan is not
subject to any right of rescission, set-off, counterclaim or defense, including
the defense of usury, by the related Obligor (including any account debtor or
Person obligated to make payments on such Loan to such Obligor), nor will the
operation of any of the terms of the Underlying Instruments, or the exercise of
any right thereunder, render the Underlying Instruments unenforceable in whole
or in part, or subject to any right of rescission, set-off, counterclaim or
defense, including the defense of usury, and no such right of rescission,
set-off, counterclaim or defense has been asserted with respect thereto, and
the Underlying Instruments with respect to the Loan provide for an affirmative
waiver by the related Obligor of all rights of rescission, set-off and counterclaim
against the Originator and its assignees; and

 

(jj)              the Borrower has
caused, and will cause, to be performed any and all acts reasonably required to
be performed to preserve the rights and remedies of the Trustee and the Secured
Parties in any Insurance Policies applicable to the Loan including, without
limitation, in each case, any necessary notifications of insurers, assignments
of policies or interests therein, and establishments of co-insured, joint loss
payee and mortgagee rights in favor of the Trustee and the Secured Parties.

 

provided, however, that, notwithstanding
anything herein to the contrary, prior to the related Required Transfer Date,
no ACC Loan included in the Collateral shall fail to be an Eligible Loan

 

20

 

hereunder
solely because all consents, assignments and other agreements and documents
necessary to cause such ACC Loan to be titled in the name of the Borrower have
not been obtained by the Originator.

 

“Eligible
Obligor”:  On Measurement Date, any
Obligor that:

 

(i)                  is a business organization (and not a natural person)
duly organized and validly existing under the laws of its jurisdiction of
organization;

 

(ii) is a legal operating entity
or holding company;

 

(iii)                has not entered
into the Loan primarily for personal, family or household purposes;

 

(iv)               is not a
Governmental Authority;

 

(v)                is not an
Affiliate of the Borrower, the Originator or the Servicer (so long as the
Servicer is an Affiliate of or the Borrower);

 

(vi)               such Obligor’s
principal office is located in the United States;

 

(vii)              is not in the
nuclear waste, biotechnology, natural resource exploration or internet industry
(other than Obligors in the business of wholesale purchasing and reselling of
natural gas or electricity, the Loans to which have been appropriately hedged)
unless approved in writing by the Administrative Agent in its sole discretion;
and

 

(viii)             except with
respect to a DIP Loan that has been approved in writing by the Administrative
Agent, is not (and has not been for at least four years) the subject of an
Insolvency Event, and, as of the date on which such Loan becomes part of the
Collateral, such Obligor is not in financial distress and has not experienced a
material adverse change in its condition, financial or otherwise, as determined
by the Servicer, unless approved in writing by the Administrative Agent (which
approval shall not be unreasonably withheld).

 

“Eligible
Repurchase Obligations”:  Repurchase
obligations with respect to any security that is a direct obligation of, or
fully guaranteed by, the United States or any agency or instrumentality thereof
the obligations of which are backed by the full faith and credit of the United
States, in either case entered into with a depository institution or trust
company (acting as principal) described in clause (iii)(b) of the
definition of Permitted Investments.

 

“Entitlement
Holder”:  The meaning specified in
Section 8-102(a)(7) of the UCC.

 

“Environmental
Laws”:  Any and all foreign, federal,
state and local laws, statutes, ordinances, rules, regulations, permits,
licenses, approvals, interpretations and orders of courts or Governmental
Authorities, relating to the protection of human health or the environment,
including, but not limited to, requirements pertaining to the manufacture,
processing, distribution, use, treatment, storage, disposal, transportation,
handling, reporting, licensing,

 

21

 

permitting, investigation or
remediation of Hazardous Materials. 
Environmental Laws include, without limitation, the Comprehensive
Environmental Response, Compensation, and Liability Act (42 U.S.C. § 9601 et
seq.), the Hazardous Material Transportation Act (49 U.S.C. § 331 et seq.),
the Resource Conservation and Recovery Act (42 U.S.C. § 6901 et seq.),
the Federal Water Pollution Control Act (33 U.S.C. § 1251 et seq.), the
Clean Air Act (42 U.S.C. § 7401 et seq.), the Toxic Substances Control
Act (15 U.S.C. § 2601 et seq.), the Safe Drinking Water Act (42 U.S.C. §
300, et seq.), the Environmental Protection Agency’s regulations
relating to underground storage tanks (40 C.F.R. Parts 280 and 281), and the
Occupational Safety and Health Act (29 U.S.C. § 651 et seq.), and the
rules and regulations thereunder, each as amended or supplemented from time to
time.

 

“Environmental
Site Assessment”:  With respect to
any Mortgaged Property, a “Phase I assessment” or “Phase II assessment”
conducted in accordance with ASTM Standard E 1527-97 or any successor thereto
published by the American Society for Testing and Materials Standard.

 

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

 

“ERISA”:  The United States Employee Retirement Income
Security Act of 1974, as amended from time to time, and the regulations
promulgated and rulings issued thereunder.

 

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

 

“Eurocurrency
Liabilities”:  Defined in Regulation
D of the Board of Governors of the Federal Reserve System, as in effect from
time to time.

 

“Eurodollar
Disruption Event”:  The occurrence of
any of the following:  (a) any Liquidity
Bank or any Institutional Purchaser shall have notified the Administrative
Agent of a determination by such Liquidity Bank or any of its assignees or
participants that it would be contrary to law or to the directive of any
central bank or other Governmental Authority (whether or not having the force
of law) to obtain United States dollars in the London interbank market to fund
any Advance, (b) any Liquidity Bank or any Institutional Purchaser shall have notified
the Administrative Agent of the inability, for any reason, of such Liquidity
Bank or any of its assignees or participants or such Institutional Purchaser,
as applicable, to determine the Adjusted Eurodollar Rate, (c) any Liquidity
Bank or any Institutional Purchaser shall have notified the Administrative
Agent of a determination by such Liquidity Bank or any of its assignees or

 

22

 

participants or such
Institutional Purchaser, as applicable, that the rate at which deposits of
United States dollars are being offered to such Liquidity Bank or any of its
assignees or participants or such Institutional Purchaser in the London
interbank market does not accurately reflect the cost to such Liquidity Bank,
such assignee or such participant or such Institutional Purchaser of making,
funding or maintaining any Advance or (d) any Liquidity Bank or any
Institutional Purchaser shall have notified the Administrative Agent of the
inability of such Liquidity Bank or any of its assignees or participants or
such Institutional Purchaser, as applicable, to obtain United States dollars in
the London interbank market to make, fund or maintain any Advance.

 

“Eurodollar
Reserve Percentage”:  For any period,
the percentage, if any, applicable during such period (or, if more than one
such percentage shall be so applicable, the daily average of such percentages
for those days in such period during which any such percentage shall be so
applicable) under regulations issued from time to time by the Board of
Governors of the Federal Reserve System (or any successor thereto) for
determining the maximum reserve requirement (including, without limitation, any
basic, emergency, supplemental, marginal or other reserve requirements) with
respect to liabilities or assets consisting of or including Eurocurrency
Liabilities having a term of one month.

 

“Excepted
Persons”:  Defined in Section
13.13(a).

 

“Excess
Concentration Amount”:  With respect
to all Eligible Loans included in the Collateral, the amount by which the sum
of the Outstanding Loan Balances of such Eligible Loans exceeds any applicable
Concentration Limits, to be calculated without duplication.

 

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

 

“Excluded
Amounts”:  (a) Any amount received in
the Concentration Account with respect to any Loan included as part of the
Collateral, which amount is attributable to the payment of any tax, fee or
other charge imposed by any Governmental Authority on such Loan or on any
Related Property and (b) any amount received in the Collection Account or other
Account representing (i) any amount representing a reimbursement of insurance
premiums, (ii) any escrows relating to taxes, insurance and other amounts in
connection with Loans which are held in an escrow account for the benefit of
the Obligor and the secured party pursuant to escrow arrangements under the
Underlying Instruments, (iii) any amount received in the Collection Account
with respect to any Loan retransferred or substituted for upon the occurrence
of a Warranty Event or that is otherwise replaced by a Substitute Loan, or that
is otherwise sold by the Borrower pursuant to Section 2.18, Section
2.19 or Section 2.20, to the extent such amount is attributable to a
time after the effective date of such replacement or sale and (iv) any amounts
paid in respect of Attached Equity.

 

“Existing
Loans”:  Each Loan purchased by the
Borrower under the Sale Agreement and owned by the Borrower on the initial
Funding Date, if any, as set forth on the Loan List delivered pursuant to Section
3.2(a)(i) on the initial Funding Date.

 

“Facility
Amount”:  The lesser of (a)
$150,000,000, as such amount may vary from time to time upon the written
agreement of the parties hereto, and (b) the aggregate Commitments

 

23

 

then in effect; provided that, on or after the Termination
Date, the Facility Amount shall be equal to the Advances Outstanding.

 

“Facility
Termination Date”:  November 2, 2007
or such later date as the Administrative Agent and each Purchaser Agent shall
notify the Borrower of in writing in accordance with Section 2.1(d).

 

“Fair
Market Value”:  With respect to each
Eligible Loan included in the Collateral, if such Eligible Loan has been
reduced in value on such date of determination below the original principal
amount (other than as a result of the allocation of a portion of the original
principal amount to any warrants received in connection with such Eligible
Loan) the fair market value of such Eligible Loan as required by, and in
accordance with, the 1940 Act and any orders of the Securities and Exchange
Commission issued to the Originator, to be determined by the Board of Directors
of the Originator and reviewed by its auditors.

 

“FDIC”:
The Federal Deposit Insurance Corporation, and any successor thereto.

 

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

 

“Finance
Charges”:  With respect to any Loan,
any interest or finance charges payable by an Obligor pursuant to or with
respect to such Loan.

 

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

 

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

 

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

 

“Fixed Rate
Loan”:  A Loan other than a Floating
Rate Loan.

 

“Floating
Rate Loan”:  A Loan under which the
interest rate payable by the Obligor thereof is based on the Ares Prime Rate or
Ares LIBOR Rate, plus some specified interest percentage in addition
thereto, and which provides that such interest rate will reset immediately upon
any change in the related Ares Prime Rate or Ares LIBOR Rate.

 

“Funded
Advance”:  Defined in Section
2.1(b).

 

24

 

“Funding
Date”:  With respect to any Advance,
the Business Day following the Business Day of receipt by the Administrative
Agent, the Trustee and each Purchaser Agent of a Borrowing Notice and other
required deliveries in accordance with Section 2.3, in the case of any
Funded Advance, and Section 2.2, in the case of any Pre-Funded Advance.

 

“Funding
Request”:  A Borrowing Notice in the
form of Exhibit A-1 requesting an Advance and including the items
required by Section 2.3.

 

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

 

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

 

“H.15”:  Federal Reserve Statistical Release H.15.

 

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

 

“Hedge
Amount”:  On any day that the
Outstanding Loan Balance of all Fixed Rate Loans exceeds $20,000,000 or the
Portfolio Yield is less than the Minimum Portfolio Yield, an amount equal to
the product of (i) the Weighted Average Advance Rate relating to Fixed Rate
Loans as of such date times (ii) the Outstanding Loan Balance of all
Fixed Rate Loans included in the Collateral as of such date.  For the avoidance of doubt, the Hedge Amount
for any Floating Rate Loan is $0.

 

“Hedge
Breakage Costs”:  For any Hedge
Transaction, any amount payable by the Borrower for the early termination of
that Hedge Transaction or any portion thereof.

 

“Hedge
Collateral”:  Defined in Section
5.3(b).

 

“Hedge
Counterparty”:  Means (1) Wachovia
and (2) any other entity, to the extent that such other entity (a) on the date
of entering into a Hedging Agreement (i) is an interest rate swap dealer that
has been approved in writing by the Administrative Agent, and (ii) has a
long-term unsecured debt rating of not less than “A” by S&P, not less than “A2”
by Moody’s and not less than “A-” by Fitch (if such entity is rated by Fitch)
(the “Long-term Rating Requirement”) and a short-term unsecured debt
rating of not less than “A-1” by S&P, not less than “P-1” by Moody’s and
not less than “F-1” by Fitch (if such entity is rated by Fitch) (the “Short-term
Rating Requirement”), and (b) in a Hedging Agreement (i) consents to the
assignment of the Borrower’s

 

25

 

rights under the Hedging
Agreement to the Trustee on behalf of the Secured Parties pursuant to Section
5.3(b) and (ii) agrees that in the event that Moody’s, S&P or Fitch
reduces its long-term unsecured debt rating below the Long-term Rating
Requirement, or reduces its short-term unsecured debt rating below the Short-term
Rating Requirement, it shall either collateralize its obligations in a manner
satisfactory to the Administrative Agent or transfer its rights and obligations
under each Hedge Transaction to another entity that meets the requirements of clause
(a) and (b) hereof which has entered into a Hedging Agreement with
the Borrower on or prior to the date of such transfer.

 

“Hedge
Notional Amount”:  For any Advance,
the aggregate notional amount in effect on any day under all Hedge Transactions
entered into pursuant to Section 5.3(a) for that Advance.

 

“Hedge
Transaction”:  Each interest rate
swap transaction, Interest Rate Cap Transaction, Interest Rate Floor
Transaction or other derivative transaction approved in writing by the
Administrative Agent, between the Borrower and a Hedge Counterparty that is
entered into pursuant to Section 5.3(a) and is governed by a Hedging
Agreement.

 

“Hedging
Agreement”:  Each agreement between
the Borrower and a Hedge Counterparty that governs one or more Hedge
Transactions entered into by the Borrower and such Hedge Counterparty pursuant
to Section 5.3(a), which agreement shall consist of a “Master Agreement”
in a form published by the International Swaps and Derivatives Association,
Inc., together with a “Schedule” thereto substantially in the form of Exhibit
D hereto or such other form as the Administrative Agent shall approve in
writing, and each “Confirmation” thereunder confirming the specific terms of
each such Hedge Transaction; provided that,
the “Schedule” to any Hedging Agreement with respect to any Hedge Counterparty
other than Wachovia shall be subject to the written approval of the
Administrative Agent.  

 

“Highest
Required Investment Category”: 
(i)  With respect to ratings assigned by Moody’s, “Aa2” or “P-1”
for one month instruments, “Aa2” and “P-1” for three month instruments, “Aa3”
and “P-1” for six month instruments and “Aa2” and “P-1” for instruments with a
term in excess of six months, (ii) with respect to rating assigned by
S&P, “A-1” for short-term instruments and “A” for long-term instruments,
and (iii) with respect to rating assigned by Fitch (if such investment is rated
by Fitch), “F-1+” for short-term instruments and “AAA” for long-term
instruments.

 

“Increased
Costs”:  Any amounts required to be
paid by the Borrower to an Affected Party pursuant to Section 2.15.

 

“Indebtedness”:  With respect to any Person at any date, (a)
all indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services (other than current liabilities incurred in the
ordinary course of business and payable in accordance with customary trade
practices) or that is evidenced by a note, bond, debenture or similar
instrument or other evidence of indebtedness customary for indebtedness of that
type, (b) all obligations of such Person under leases that have been or should
be, in accordance with GAAP, recorded as capital leases, (c) all obligations of
such Person in respect of acceptances issued or created for the account of such
Person, (d) all liabilities secured by any Lien on any property owned by such
Person even though such Person has not assumed or otherwise become liable for
the payment

 

26

 

thereof, (e) all indebtedness,
obligations or liabilities of that Person in respect of derivatives, and (f)
all obligations under direct or indirect guaranties in respect of obligations
(contingent or otherwise) to purchase or otherwise acquire, or to otherwise
assure a creditor against loss in respect of, indebtedness or obligations of
others of the kind referred to in clauses (a) through (e) above.

 

“Indemnified
Amounts”:  Defined in Section 11.1.

 

“Indemnified
Parties”:  Defined in Section 11.1.

 

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

 

“Initial
Advance”:  The first Advance
hereunder.

 

“Insolvency
Event”:  With respect to a specified
Person, (a) the filing of a decree or order for relief by a court having
jurisdiction over such Person or any substantial part of its property in an
involuntary case under any applicable Insolvency Law now or hereafter in
effect, or appointing a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official for such Person or for any substantial part of
its property, or ordering the winding-up or liquidation of such Person’s
affairs, and such decree or order shall remain unstayed and in effect for a
period of 60 consecutive days, (b) the commencement by such Person of a
voluntary case under any applicable Insolvency Law now or hereafter in effect,
or the consent by such Person to the entry of an order for relief in an
involuntary case under any such law, (c) the consent by such Person to the
appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official for such Person or for any
substantial part of its property, or the making by such Person of any general
assignment for the benefit of creditors, or (d) the failure by such Person
generally to pay its debts as such debts become due, or the taking of action by
such Person in furtherance of any of the foregoing.

 

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

 

“Insolvency
Proceeding”:  Any case, action or
proceeding before any court or other Governmental Authority relating to any
Insolvency Event.

 

“Institutional
Purchaser”:  Each financial
institution other than a Conduit Purchaser which may from time to time become a
Purchaser hereunder by executing and delivering a Joinder Supplement to the
Administrative Agent and the Borrower as contemplated by Section 2.1(e).

 

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

 

“Insurance
Policy”:  With respect to any Loan or
Portfolio Loan, as applicable, an insurance policy covering liability and
physical damage to, or loss of, the Related Property.

 

27

 

“Insurance
Proceeds”:  Any amounts received on
or with respect to a Loan under any Insurance Policy or with respect to any
condemnation proceeding or award in lieu of condemnation which is neither
required to be used to restore, improve or repair the related real estate nor
required to be paid to the Obligor under the Underlying Instruments.

 

“Intercreditor
Agreement”:  The Concentration
Account and Intercreditor Agreement, dated as of November 3, 2004 among the
Servicer, the Trustee, the Concentration Account Bank, the Administrative Agent
and each securitization agent that from time to time executes a joinder
thereto, as amended, modified, waived, supplemented or restated from time to
time.

 

“Interest”:  For each Accrual Period and each Advance
outstanding, the sum of the products (for each day during such Accrual Period)
of:

 

	
  IR x P x 

  	
  1

  	
   

  
	
   

  	
  D

  	
   

  

 

where:

 

	
  IR

  	
  =

  	
  the Interest
  Rate applicable on such day;

  
	
  P

  	
  =

  	
  the
  principal amount of such Advance on such day; and

  
	
  D

  	
  =

  	
  360 or, to
  the extent the Interest Rate is the Base Rate, 365 or 366 days, as
  applicable.

  

 

provided, however, that (i) no provision of
this Agreement shall require the payment or permit the collection of Interest
in excess of the maximum permitted by Applicable Law and (ii) Interest shall
not be considered paid by any distribution if at any time such distribution is
rescinded or must otherwise be returned for any reason.

 

“Interest
Collections”:  Any and all amounts of
collections received with respect to the Collateral other than Principal
Collections that are deposited into the Collection Account, or received by or
on behalf of the Borrower by the Servicer or the Originator in respect of a
Loan, including, without limitation, Insurance Proceeds, whether in the form of
cash, checks, wire transfers, electronic transfers or any other form of cash
payment.

 

“Interest
Collections Account”:  Defined in Section
6.4(h).

 

“Interest
Rate”:  For any Accrual Period and
for each Advance outstanding for each day during such Accrual Period:

 

(i)                  to the extent the applicable Conduit Purchaser funded
such Advance through the issuance of commercial paper, a rate equal to the
applicable CP Rate; or

 

(ii) to the extent the applicable
Conduit Purchaser or Institutional Purchaser did not fund such Advance through
the issuance of commercial paper, a rate equal to the Alternative Rate;

 

28

 

provided, however, the Interest Rate shall be
the Base Rate for any Accrual Period for any Advance as to which a Conduit
Purchaser has funded the making or maintenance thereof by a sale of an interest
therein to any Liquidity Bank under the applicable Liquidity Agreement on any
day other than the first day of such Accrual Period and without giving such
Liquidity Bank(s) at least two Business Days’ prior notice of such assignment.

 

“Interest
Rate Cap Transaction” means any Hedge Transaction with respect to which the
related Hedge Counterparty is required to make periodic payments to the
Borrower in an amount equal to the excess, if any, of the applicable floating
rate of interest over a fixed strike rate multiplied by a specified notional
amount, provided that the fixed
strike rate of any such transaction shall be no greater than the then current
coupon rate of the applicable Fixed Rate Loan minus 5.5%.

 

“Interest
Rate Floor Transaction” means any Hedge Transaction acceptable to the
Administrative Agent with respect to which the Borrower is required to make
periodic payments to the related Hedge Counterparty in an amount equal to the
excess, if any, of a fixed strike rate over the applicable floating rate of
interest multiplied by a specified notional amount.

 

“Interests
in Real Property”:  A fee simple
interest, a financeable estate for years or a leasehold interest in each case
in real property.

 

“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.

 

“ISDA
Definitions”:  The 2000 ISDA
Definitions as published by the International Swaps and Derivatives
Association, Inc.

 

“Joinder
Supplement”:  An agreement among the
Borrower, a Purchaser, a Purchaser Agent and the Administrative Agent in the
form of Exhibit M to this Agreement (appropriately completed) delivered
in connection with a Person becoming a Purchaser hereunder after the Closing
Date, as contemplated by Section 2.01(e).

 

“Junior
Subordinated Loan”:  Any Term Loan
that (i) may or may not be secured by a Lien on the Obligor’s assets
constituting Related Property for the Loan, (ii) has a Loan-to-Value not
greater than (a) 80% where the Loan is not a Material Mortgage Loan or the
Related Property is not primarily real estate, and (b) 90% where the Loan is a
Material Mortgage Loan or the Related Property is primarily real estate, and
(iii) that contains terms which, upon the occurrence of an event of default
under the Underlying Instruments or in the case of any liquidation or
foreclosure on the Related Property, provide that the Borrower’s portion of
such Loan would be paid only after the other lenders party to such Loan
(including any lender party making any Senior Secured ABL, Senior Secured Loan,
Stretch Senior Secured Loan, Second Lien Loan or Senior Subordinated Loan whose
right to payment is contractually senior to the Borrower) is paid in full.

 

“Large
Obligor Coverage Amount”:  As of any
Measurement Date, an amount equal to the sum of the Outstanding Loan Balances
of Eligible Loans to the three Obligors with the

 

29

 

highest aggregate Outstanding
Loan Balances included in the Borrowing Base on such date (net of amounts in
excess of the Concentration Limits).

 

“LIBOR Rate”:  For any day during any Accrual Period and any
Advance or portion thereof, a per annum
interest rate equal to:

 

(1)           the posted rate for
one-month deposits in United States Dollars appearing on Telerate page 3750, or
any successor page thereto, as of 11:00 a.m. (London time) on the Business Day
which is the second Business Day preceding the applicable Funding Date (with
respect to the initial Accrual Period for such Advance) and as of the second
Business Day preceding the first day of the applicable Accrual Period (with
respect to all subsequent Accrual Periods for such Advance); or

 

(2)           if no such rate
appears on Telerate page 3750, or any successor page thereto, at such time and
day, then the LIBOR Rate shall be determined by Wachovia at its principal
office in Charlotte, North Carolina as its rate (each such determination,
absent manifest error, to be conclusive and binding on all parties hereto and
their assignees) at which one-month deposits in United States Dollars are
being, have been, or would be offered or quoted by Wachovia to major banks in
the applicable interbank market for Eurodollar deposits at or about 11:00 a.m.
on such day.

 

“Lien”:  Any mortgage, lien, pledge, charge, right,
claim, security interest or encumbrance of any kind of or on any Person’s
assets or properties in favor of any other Person (including any UCC financing
statement or any similar instrument filed against such Person’s assets or
properties).

 

“Liquidation
Expenses”:  With respect to any Loan
or Portfolio Loan, the aggregate amount of all out-of-pocket expenses
reasonably incurred by the Servicer (including amounts paid to any subservicer)
in accordance with the Servicer’s customary procedures in connection with the
repossession, refurbishing and disposition of any related assets securing such
Loan or Portfolio Loan, as applicable, upon or after the expiration or earlier
termination of such Loan or Portfolio Loan, as applicable, and other
out-of-pocket costs related to the liquidation of any such assets, including
the attempted collection of any amount owing under such Loan or Portfolio Loan,
as applicable, if it is a Charged-Off Loan, or a Charged-Off Portfolio Loan, as
applicable, as documented by the Servicer and the Originator upon the request
of the Administrative Agent, in writing providing a breakdown of the
Liquidation Expenses for such Loan or Portfolio Loan, as applicable, along with
any supporting documentation therefor.

 

“Liquidity
Agreement”:  Means any agreement
entered into in connection with this Agreement pursuant to which a Liquidity
Bank agrees to make purchases from or advances to, or purchase assets from, any
Conduit Purchaser in order to provide liquidity support for such Conduit
Purchaser’s Advances hereunder, which in the case of the agreement entered into
by Wachovia for the benefit of VFCC shall have an initial term of 364 days.

 

“Liquidity
Bank”:  The Person or Persons who provide
liquidity support to any Conduit Purchaser pursuant to a Liquidity Agreement in
connection with the issuance by such Conduit Purchaser of Commercial Paper
Notes.

 

30

 

“Loan”:  Any DIP Loan, Junior Subordinated Loan, LOT
Loan, Second Lien Loan, Senior Secured ABL, Senior Secured Loan, Senior
Subordinated Loan or Stretch Senior Secured Loan originated or acquired by the
Originator in the ordinary course of its business, which loan includes, without
limitation, (i) the Required Loan Documents and Loan File, and (ii) all right,
title and interest of the Originator in and to the loan and any Related
Property, but excluding, in each case, the Retained Interest, any Attached
Equity and Excluded Amounts.

 

“Loan Checklist”:  The list delivered by or on behalf of the
Borrower to the Trustee that identifies each of the items contained in the
related Loan File which constitute Required Loan Documents.

 

“Loan File”:  With respect to any Loan and the Related
Security, copies of each of the Required Loan Documents and duly executed
originals (to the extent required by the Credit Policy and the Servicing
Standard) and copies of any other Records relating to such Loan and Related
Security.

 

“Loan List”:  The Loan List provided by the Borrower to the
Administrative Agent and the Trustee, in the form of Schedule IV hereto,
as such list may be amended, supplemented or modified from time to time in
accordance with this Agreement.

 

“Loan
Rating”:  The “Loan Rating”
determined for each Loan by the Originator in accordance with the Credit Policy
using the scale set forth on Schedule X.

 

“Loan
Register”:  Defined in Section
5.4(n).

 

“Loan-to-Liquidation
Value Ratio” or “LLV”: With respect to any Loan as of any date of
determination, the percentage equivalent of a fraction, (i) the numerator of
which is equal to the maximum availability (as provided in the applicable
Underlying Instruments) of such Loan and (ii) the denominator of which is equal
to the liquidation value of the Related Property securing such Loan that is
subject to a valid and first priority perfected security interest in favor of
the Originator (as determined by the Servicer in accordance with the Credit
Policy and the Servicing Standard).

 

“Loan-to-Value
Ratio” or “LTV”:  With respect
to any Loan, as of any date of determination, the percentage equivalent of a
fraction, (i) the numerator of which is equal to the commitment amount as
provided in the applicable Underlying Instruments (or in the case of Revolving
Loans the maximum availability thereof) of such Loans plus the commitment
amount of any other senior or pari
passu Indebtedness of the related
Obligor (including, in the case of Revolving Loans, the maximum availability
thereof) and (ii) the denominator of which is equal to the enterprise value of
the Related Property securing such Loan (as determined by the Originator in
accordance with the Credit Policy and the Servicing Standard unless the
Administrative Agent in its sole discretion disagrees with such determination,
in which case the decision of the Administrative Agent as to the enterprise
value of the Related Property shall be conclusive and binding on the parties
hereto absent manifest error).

 

“LOT Loan”:  Any Term Loan that (i) is secured by a valid
and first priority perfected security interest on all of the Obligor’s assets
constituting Related Property for the Loan, (ii) (a) has a “first dollar” at
risk at less than or equal to 50% of the Loan-to-Value Ratio and a “last

 

31

 

dollar” at risk less than or
equal to 65% of the Loan-to-Value Ratio where the Loan is not a Material
Mortgage Loan or the Related Property is not primarily real estate, or (b) has
a “last dollar” at risk less than or equal to 80% of the Loan-to-Value Ratio
where the Loan is a Material Mortgage Loan or the Related Property is primarily
real estate, and (iii) contains terms which, upon the occurrence of an event of
default under the Underlying Instruments or in the case of any liquidation or foreclosure
on the Related Property, the Borrower’s portion of such Loan would be paid only
after the other lender party to such Loan (whose right to payment is
contractually senior to the Borrower) is paid in full.

 

“MAI”:  Member of the Appraisal Institute.

 

“Management
Agreement”:  The Investment Advisory
and Management Agreement, dated as of September 30, 2004, between Ares Capital
Corporation and Ares Capital Management LLC.

 

“Margin
Stock”:  “Margin Stock” as defined
under Regulation U.

 

“Material
Adverse Effect”:  With respect to any
event or circumstance, means a material adverse effect on (a) the business,
condition (financial or otherwise), operations, performance or properties of
the Originator, the Servicer or the Borrower, (b) the validity, enforceability
or collectibility of this Agreement or any other Transaction Document or the
validity, enforceability or collectibility of the Loans generally or any
material portion of the Loans, (c) the rights and remedies of the Trustee, the
Administrative Agent, the Purchasers, the Purchaser Agents and the Secured
Parties with respect to matters arising under this Agreement or any other
Transaction Document, (d) the ability of each of the Borrower, the Servicer, to
perform their respective obligations under this Agreement or any other
Transaction Document, or (e) the status, existence, perfection, priority or
enforceability of the Administrative Agent’s, each Purchaser Agent’s, or the
other Secured Parties’ lien on the Collateral.

 

“Material
Modification”:  Any amendment or
waiver of, or modification or supplement to, an Underlying Instrument governing
a Loan executed or effected on or after (i) the date on which the Originator
originated or acquired such Loan, in the case of a Loan purchased by the
Borrower from the Originator, or (ii) the date on which the Borrower acquired
such Loan, in the case of a Loan purchased by the Borrower from any Person
other than the Originator, that:

 

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

 

(b)        delays or extends the
required or scheduled amortization in any way that increases the Weighted
Average Life; provided,  however, that the Weighted Average Life of
such Loan may be increased by not more than 20% from its Weighted Average Life
on the related Cut-Off Date if the total leverage ratio (as defined in the
related Underlying Instruments) is not more than 85% of the maximum established
in the total leverage ratio covenant (as defined in the related Underlying
Instruments);

 

(c)         waives one or more
interest payments, or reduces the Weighted Average Spread with respect to such
Loan; provided, however, that the
Weighted Average Spread may be reduced a maximum of one time and by not more
than 20% from the Weighted Average Spread

 

32

 

of such Loan on the related
Cut-Off Date, provided that, the
interest coverage ratio (as defined in the related Underlying Instruments) is
greater than 2.0:1 at the time of such reduction;

 

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

 

(e)                          substitutes,
alters or releases the Related Property securing such Loan, unless in the
Servicer’s determination (to be made in accordance with the Credit Policy and
the Servicing Standard), the value of any new or remaining Related Property
obtained as security for such Loan equals or exceeds the Outstanding Loan
Balance; or

 

(f)                            provides
additional funds to the Obligor of such Loan with the intent of keeping that
Loan current.

 

“Materially
Modified Loan”:  Any Loan subject to
a Material Modification, unless otherwise deemed not to constitute a Materially
Modified Loan by the Administrative Agent in its sole discretion.

 

“Material
Mortgage Loan”:  Any Loan for which
the underlying Related Property consisting of real property owned by the
Obligor (i) represents 25% or more (measured by the book value of the three
most valuable parcels of real property as of the date of such Loan) of (a) the
original commitment for such Loan or (b) the fair value of the underlying
Obligor and the Related Property as a whole and (ii) is material to the
operations of the related business; provided,
however, that parcels of real property which the Obligor is in the
process of disposing shall not be considered in determining whether a Loan is a
Material Mortgage Loan.

 

“Maximum
Availability”:  At any time, an
amount equal to (i) the lesser of (a) the product of the Borrowing Base and the
Weighted Average Advance Rate and (b) the Borrowing Base minus the Large
Obligor Coverage Amount, plus (ii) the amount on deposit in the
Principal Collections Account received in reduction of the Outstanding Loan
Balance of any Loan, plus (iii) the amount on deposit in the Pre-Funded
Advances Account in respect of Pre-Funded Advances, after giving effect to all
repayments of Pre-Funded Advances on such day and the making of new Pre-Funded
Advances on such day; provided, however,
that, during the Amortization Period, the Maximum Availability shall be equal
to the Advances Outstanding.

 

“Measurement
Date”:  Each of the following:  (i) the Closing Date; (ii) each Determination
Date; (iii) the date of any Borrowing Notice; (iv) any date on which a
substitution or repurchase of a Loan occurs; (v) any Optional Sale Date; (vi)
the date as of which any Loan becomes a Charged-Off Loan; (vii) the date as of
which any Servicing Report, as provided for in Section 6.10(b), is
calculated; (viii) the date of any release of Principal Collections requested
pursuant to Section 2.10(b); (ix) each Cut-Off Date; (x) any RIC/BDC
Sale Date; and (xi) any Defaulted Loan Sale Date.

 

“Minimum
Pool Yield”:  A rolling three-month
average Pool Yield equal to: 3.0%.

 

“Moody’s”:  Moody’s Investors Service, Inc., and any
successor thereto.

 

33

 

“Moody’s
Industry Classification Group”:  Any
of Moody’s industry classification groups set forth in Schedule IX, and
any additional such industry classification groups that may be subsequently
established by Moody’s and provided by the Servicer or Moody’s to the
Administrative Agent.  The Servicer shall
determine the industry classification group unless the Administrative Agent in
its discretion disagrees with such determination, in which case the decision of
the Administrative Agent as to such industry classification group shall be
conclusive and binding on the parties hereto absent manifest error, unless and
until Moody’s determines the relevant industry classification group in which
case the Moody’s determination shall be conclusive.

 

“Moody’s
Rating”:  With respect to any Loan,
as of any date of determination, if such Loan is rated by Moody’s, such Moody’s
rating.

 

“Mortgage”:  The mortgage, deed of trust or other
instrument creating a first or second Lien on an Interest in Real Property
securing a Loan subject to this Agreement, including the Assignment of Leases and
Rents related thereto.

 

“Mortgaged
Property”:  The underlying Interests
in Real Property which are subject to the Lien of a Mortgage that secures a
Loan, consisting of Interests in Real Property in a parcel or parcels of land,
at least one of which parcels is improved by a commercial building or facility,
together with Interests in Real Property in such commercial building or
facility and any personal property, fixtures, leases and other property or
rights pertaining to such land, commercial building or facility which are
subject to the related Mortgage.

 

“Multiemployer
Plan”:  A “multiemployer plan” as
defined in Section 4001(a)(3) of ERISA that is or was at any time during the
current year or the preceding five years contributed to by the Borrower or any
ERISA Affiliate on behalf of its employees.

 

“NAICS
Codes”:  The North American Industry
Classification System codes by four digits.

 

“Nonrecoverable
Advance”:  Any Servicer Advance
which, if made by the Servicer in respect of a Loan, in the reasonable good
faith judgment of the Servicer would not be ultimately recoverable by the
Servicer from the net proceeds and collections received solely with respect to
such Loan, and/or the Related Property, including any escrowed amounts.

 

“Noteless
Loan”  means a Loan with respect to
which the Underlying Instruments (i) do not require the Obligor to execute and
deliver a promissory note to evidence the indebtedness created under such Loan
or (ii) require any holder of the indebtedness created under such Loan to affirmatively
request a promissory note from the related Obligor.

 

“Obligor”:  With respect to any Loan or Portfolio Loan,
any Person or Persons obligated to make payments pursuant to or with respect to
such Loan or Portfolio Loan, as applicable, including any guarantor
thereof.  For purposes of calculating any
Concentration Limit, all Loans included as part of the Collateral or to be
transferred to the Collateral the Obligor of which is an Affiliate of another
Obligor shall be aggregated with all Loans of such Affiliate Obligor; for
example, if Corporation A is an Affiliate of Corporation B, and the sum
of the Outstanding Loan Balances of all of Corporation A’s Loans included as
part of the Collateral constitutes 10% of the

 

34

 

Aggregate Outstanding Loan
Balance and the sum of the Outstanding Loan Balances all of Corporation B’s
Loans included as part of the Collateral constitutes 10% of the Aggregate
Outstanding Loan Balance, the combined Obligor concentration for Corporation A
and Corporation B would be 20%.

 

“Officer’s
Certificate”:  A certificate signed
by a Responsible Officer of the Borrower or the Servicer, as the case may be,
and delivered to the Trustee.

 

“Opinion of
Counsel”:  A written opinion of
counsel, which opinion and counsel are acceptable to the Administrative Agent
in its sole discretion.

 

“Optional
Sale”:  Defined in Section 2.19(a).

 

“Optional
Sale Date”:  Any Business Day,
provided 45 days’ prior written notice is given in accordance with Section
2.19(a).

 

“Originator”:  Defined in the Preamble of this
Agreement.

 

“Other
Costs”:  Defined in Section
13.9(c).

 

“Outstanding
Loan Balance”:  As of any Measurement
Date, with respect to any Loan, the lesser of (a) the Fair Market Value of such
Loan as of the end of the most recent date of determination and (b) the
principal balance of the Loan outstanding (exclusive of any interest and
Accreted Interest) as of the date it is transferred to the Borrower, after
application of principal payments received on or before such date, minus
the sum of (x) the principal portion of the Scheduled Payments on such Loan
received during each Collection Period ending prior to the most recent Payment
Date, and (y) all other Principal Collections on such Loan, to the extent
deposited by the Servicer in the Collection Account.  The Outstanding Loan Balance of (i) any
Prepaid Loan which has been prepaid in full or (ii) any Equity Security shall
equal $0.  For the avoidance of doubt,
any principal amount previously covered by a Servicer Advance will be excluded
from the principal amounts outstanding for purposes of this definition.

 

“P-F
Funding Request”:  A Borrowing Notice
in the form of Exhibit A-1-PF requesting a Pre-Funded Advance and
including the items required by Section 2.2.

 

“Participation”:  A participation interest in all or a portion
of a loan.

 

“Payment
Date”:  The 15th day of each April,
July, October and January or, if such day is not a Business Day, the next
succeeding Business Day, commencing in January, 2005.

 

“Payment
Duties”:  Defined in Section
8.2(b).

 

“Pension
Plans”:  Defined in Section 4.3(p).

 

“Permitted
Investments”:  Means negotiable
instruments or securities or other investments that (i) except in the case of
demand or time deposits, investments in money market funds and Eligible
Repurchase Obligations, are represented by instruments in bearer or registered
form or ownership of which is represented by book entries by a Clearing Agency
or by a Federal

 

35

 

Reserve Bank in favor of
depository institutions eligible to have an account with such Federal Reserve
Bank who hold such investments on behalf of their customers, (ii) subject to Section
2.2(d), as of any date of determination, mature by their terms on or prior
to the Business Day preceding the next Payment Date, and (iii) evidence:

 

(a)                          direct
obligations of, and obligations fully guaranteed as to full and timely payment
by, the United States (or by any agency thereof to the extent such obligations
are backed by the full faith and credit of the United States);

 

(b)                         demand
deposits, time deposits or certificates of deposit of depository institutions
or trust companies incorporated under the laws of the United States or any
state thereof and subject to supervision and examination by federal or state
banking or depository institution authorities; provided,
however, that at the time of the Borrower’s investment or
contractual commitment to invest therein, the commercial paper, if any, and
short-term unsecured debt obligations (other than such obligation whose rating
is based on the credit of a Person other than such institution or trust
company) of such depository institution or trust company shall have a credit
rating from Fitch and each Rating Agency in the Highest Required Investment
Category granted by Fitch and such Rating Agency;

 

(c)                          commercial
paper, or other short term obligations, having, at the time of the Borrower’s
investment or contractual commitment to invest therein, a rating in the Highest
Required Investment Category granted by each Rating Agency and Fitch;

 

(d)                         demand
deposits, time deposits or certificates of deposit that are fully insured by
the FDIC and either have a rating on their certificates of deposit or
short-term deposits from Moody’s and S&P of “P-1” and “A-1”, respectively,
and if rated by Fitch, from Fitch of “F-1+”;

 

(e)                          notes
that are payable on demand or bankers’ acceptances issued by any depository
institution or trust company referred to in clause (b) above;

 

(f)                            investments
in taxable money market funds or other regulated investment companies having,
at the time of the Borrower’s investment or contractual commitment to invest
therein, a rating of the Highest Required Investment Category from each Rating
Agency and Fitch (if rated by Fitch);

 

(g)                         time
deposits (having maturities of not more than 90 days) by an entity the
commercial paper of which has, at the time of the Borrower’s investment or
contractual commitment to invest therein, a rating of the Highest Required
Investment Category granted by each Rating Agency and Fitch; or

 

(h)                         Eligible
Repurchase Obligations with a rating acceptable to the Rating Agencies and
Fitch, which in the case of S&P, shall be “A-1” and in the case of Fitch
shall be “F-1+”.

 

The Trustee
may pursuant to the direction of the Servicer or the Administrative Agent, as
applicable, purchase or sell to itself or an Affiliate, as principal or agent,
the Permitted Investments described above.

 

36

 

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

 

“Permitted
Refinancing”:  Any refinancing
transaction undertaken by the Originator, the Borrower or an Affiliate of the
Originator that is secured, directly or indirectly, by any Loan currently or
formerly included in the Collateral or any portion thereof or any interest
therein released from the Lien of this Agreement.

 

“Permitted
Securitization”:  Any private or
public term or conduit securitization transaction (a) undertaken by the
Originator, the Borrower or an Affiliate of the Originator, that is secured,
directly or indirectly, by any Loan currently or formerly included in the
Collateral or any portion thereof or any interest therein released from the
Lien of this Agreement, including, without limitation, any collateralized loan
obligation or collateralized debt obligation offering or other asset securitization
and (b) in the case of a term securitization in which the Originator or an
Affiliate thereof or underwriter or placement agent has agreed to purchase or
place 100% of the equity and non-investment grade tranches of notes issued in
such term securitization transaction. 
For the avoidance of doubt, notwithstanding any agreement by the
Originator or an Affiliate to purchase or place 100% of the equity in such term
securitization transaction, any such party agreeing to so purchase or place may
designate other Persons as purchasers of such equity provided such party or
parties remain primarily liable therefor if such designees fail to purchase or
place in connection with the closing date of such term securitization and/or,
after the closing of such term securitization, may transfer equity it purchases
at the closing thereof.

 

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

 

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

 

“Pool
Charged-Off Ratio”:  As of any
Determination Date, the percentage equivalent of a fraction, (i) the numerator
of which is equal to the sum of the Outstanding Loan Balances of all Loans that
became Charged-Off Loans (net of Recoveries on any Charged-Off Loans during the
related calendar month) during the calendar month related to such Determination
Date and each of the 11 preceding Determination Dates (or such lesser number as
shall have elapsed as of such

 

37

 

Determination Date), and (ii)
the denominator of which is equal to the weighted average of the Aggregate
Outstanding Loan Balances measured as of the first day of the calendar month
related to such Determination Date and each of the 11 preceding Determination
Dates (or such lesser number of Determinate Dates included in the calculations
described herein) plus the amount described in clause (i).

 

“Pool
Delinquency Ratio”:  As of any
Determination Date, the percentage equivalent of a fraction, (i) the numerator
of which is equal to the sum of the Outstanding Loan Balances of all Loans that
are Delinquent Loans as of such Determination Date, and (ii) the denominator of
which is equal to the sum of the Outstanding Loan Balances of all Loans as of
the first day of the calendar month related to such Determination Date.

 

“Pool Yield”:  As of any Determination Date immediately
preceding a Payment Date, the annualized percentage equivalent of a fraction,
(a) the numerator of which is equal to all Interest Collections that are
deposited into the Collection Account during the related Collection Period minus
the sum of the amounts payable for the related Collection Period in respect of
(i) the Interest, (ii) the Servicing Fee, (iii) the Program Fee, (iv) the net
payments due or payable to the Hedge Counterparties in respect of all Hedging
Agreements, (v) the Backup Servicing Fee and (vi) the Trustee Fee, and (b) the
denominator of which is equal to the weighted average of the Aggregate
Outstanding Loan Balances measured as of the first day of each calendar month
during the Collection Period related to such Determination Date.

 

“Portfolio
Aggregate Outstanding Loan Balance”: 
With respect to all Portfolio Loans, on any day, the sum of the
Portfolio Outstanding Loan Balances of such Portfolio Loans on such date minus
the Portfolio Outstanding Loan Balances of any Charged-Off Portfolio Loans.

 

“Portfolio
Charged-Off Ratio”:  As of any
Determination Date, the percentage equivalent of a fraction, (i) the numerator
of which is equal to the sum of the Portfolio Outstanding Loan Balance of all
Portfolio Loans that became Charged-Off Portfolio Loans (net of Recoveries on
Charged-Off Portfolio Loans during the related calendar month) during the
calendar month related to such Determination Date and each of the 11 preceding
Determination Dates (or such lesser number as shall have elapsed as of such
Determination Date), and (ii) the denominator of which is equal to the weighted
average of the Portfolio Aggregate Outstanding Loan Balance measured as of the
first day of calendar month related to such Determination Date and each of the
11 preceding Determination Dates (or such lesser number of Determination Dates
included in the calculation described herein) plus the amount described
in clause (i).

 

“Portfolio
Loan”:  Any loan serviced by the
Servicer, but excluding any loan which the Servicer services for an
unaffiliated third party.

 

“Portfolio
Outstanding Loan Balance”:  As of any
Measurement Date, with respect to any Portfolio Loan, the principal balance of
such Portfolio Loan outstanding (exclusive of any interest and Accreted
Interest) as of the date it is originated or acquired by the Originator, after
application of principal payments received on or before such date, minus
the sum of (x) the principal portion of the Scheduled Payments on such
Portfolio Loan received during each Collection Period ending prior to the most
recent Payment Date, and (y) all other Principal Collections on such Portfolio
Loan, to the extent applied by the Originator as payments of

 

38

 

principal.  The Portfolio Outstanding Loan Balance of (i)
any Prepaid Loan which has been prepaid in full or (ii) any Equity Security
shall equal $0.  For the avoidance of
doubt, any principal amount previously covered by a servicer advance will be
excluded from the principal amounts outstanding for purposes of this
definition.

 

“Pre-Funded
Advance”:  Defined in Section
2.1(c).

 

“Pre-Funded
Advance Certificate”:  Each
certificate, in the form of Exhibit A-5, required to be delivered by the
Borrower with each Borrowing Notice related to a Pre-Funded Advance and on each
Measurement Date related to a Pre-Funded Advance.

 

“Pre-Funded
Advances Account”:  Defined in Section
6.4(h).

 

“Pre-Funded
Availability”:  At any time, an
amount equal to the lesser of (i) the Availability and (ii) the Pre-Funded
Limit minus the aggregate principal amount of all Pre-Funded Advances
outstanding on such day, after giving effect to all repayments of Pre-Funded
Advances on such day and the making of new Pre-Funded Advances on such day.

 

“Pre-Funded
Limit”:  $35,000,000, as such amount
may vary from time to time upon the written agreement of the parties hereto; provided that, on or after the Termination
Date, the Pre-Funded Limit shall be equal to zero.

 

“Prepaid
Loan”:  Any Loan or Portfolio Loan
(other than a Charged-Off Loan or Charged-Off Portfolio Loan) that has been
terminated or has been prepaid in full or in part prior to its scheduled
expiration date.

 

“Prepayment
Amount”:  Defined in Section
6.4(b).

 

“Prepayments”:  Any and all partial or full prepayments on or
with respect to a Loan (including, with respect to any Loan and any Collection
Period, any Scheduled Payment, Finance Charge or portion thereof that is due in
a subsequent Collection Period that the Servicer has received, and pursuant to
the terms of Section 6.4(b) expressly permitted the related Obligor to
make, in advance of its scheduled due date, and that will satisfy such
Scheduled Payment on such due date).

 

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

 

“Principal
Collections”:  Any and all amounts of
Collections received in respect of any principal due and payable under the
Loans, from or on behalf of Obligors that are deposited into the Collection
Account (including, without limitation, the principal portion of any Scheduled
Payment or of any repurchase amount paid by the Originator to repurchase a Loan
pursuant to Section 6.1 of the Sale Agreement), or received by or on
behalf of the Borrower by the Servicer or the Originator in respect of a Loan
and all Recoveries, whether in the form of cash, checks, wire transfers,
electronic transfers or any other form of cash payment.

 

39

 

“Principal
Collections Account”:  Defined in Section
6.4(h).

 

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

 

“Program
Fee”:  With respect to any Purchaser,
the “program fee” set forth in the applicable Purchaser Fee Letter.

 

“Pro Rata
Share”:  With respect to a Purchaser,
the percentage obtained by dividing the Commitment of such Purchaser (as
determined under clause (a) of the definition of Commitment), by the
aggregate Commitments of all the Purchasers (as determined under clause (a)
of the definition of Commitment).

 

“Purchaser”:  Any Conduit Purchaser or Institutional
Purchaser.

 

“Purchaser
Agent”:  With respect to (i) VFCC,
the VFCC Agent, (ii) each Conduit Purchaser which may from time to time become
party hereto, the Person designated as the “Purchaser Agent” with respect to
such Purchaser in the applicable Joinder Supplement (iii) each Institutional
Purchaser which may from time to time become a party hereto, each shall be
deemed to be its own Purchaser Agent.

 

“Purchaser
Agent’s Account”:  With respect to
(i) VFCC, a special account (number 2000002391825) at Wachovia and (ii) each
Purchaser which may become a party hereto after the Closing Date, a special
account having the account number and located at the financial institution specified
in the applicable Joinder Supplement delivered in accordance with Section
2.1(e).

 

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

 

“Qualified
Institutional Buyer”: The meaning given in Rule 144A.

 

“Qualified
Institution”:  A depository
institution or trust company acceptable to the Administrative Agent and a
depository institution organized under the laws of the United States of America
or any one of the States thereof or the District of Columbia (or any domestic
branch of a foreign bank), (i)(a) that has either (1) a long-term unsecured
debt rating of “A” or better by S&P, “A2” or better by Moody’s and “A” or
better by Fitch, if rated by Fitch, or (2) a short-term unsecured debt rating
or certificate of deposit rating of “A-1” or better by S&P, “P-1” or better
by Moody’s or “A-1” or better by Fitch, if rated by Fitch, (b) the parent
corporation of which has either (1) a long-term unsecured debt rating of “A” or
better by S&P, “A2” or better by Moody’s and “A” or better by Fitch, if
rated by Fitch, or (2) a short-term unsecured debt rating or certificate of
deposit rating of “A-1” or better by S&P, “P-1” or better by Moody’s and “A-1”
or better by Fitch, if rated by Fitch, or (c) is otherwise acceptable to the
Administrative Agent and (ii) the deposits of which are insured by the Federal
Deposit Insurance Corporation.

 

40

 

“Rating
Agency”:  Each of S&P, Moody’s,
Fitch and any other rating agency that has been requested to issue a rating
with respect to the commercial paper notes issued by any Conduit Purchaser.

 

“Records”:  All documents relating to the Loans,
including books, records and other information executed in connection with the
origination or acquisition of the Collateral or maintained with respect to the
Collateral and the related Obligors that the Borrower, the Originator or the
Servicer have generated, in which the Borrower, the Originator or the Servicer
have acquired an interest pursuant to the Sale Agreement or in which the
Borrower, the Originator or the Servicer have otherwise obtained an interest.

 

“Recoveries”:  As of the time any Related Property with
respect to any Charged-Off Loan or Charged-Off Portfolio Loan, as applicable,
is sold, discarded or abandoned (after a determination by the Servicer that
such Related Property has little or no remaining value) or otherwise determined
to be fully liquidated by the Servicer in accordance with the Credit Policy and
the Servicing Standard (or such similar policies and procedures utilized by the
Servicer in servicing the Portfolio Loans), the proceeds from the sale of the
Related Property, the proceeds of any related Insurance Policy, any other
recoveries with respect to such Charged-Off Loan or Charged-Off Portfolio Loan,
as applicable, the Related Property, and amounts representing late fees and
penalties, net of Liquidation Expenses and amounts, if any, received that are
required under such Charged-Off Loan or Charged-Off Portfolio Loan, as
applicable, to be refunded to the related Obligor.

 

“Registered”:
With respect to any debt obligation, a debt obligation that was issued after
July 18, 1984 and that is in registered form for purposes of the Code.

 

“Regulation
U”:  Regulation U of the Board of
Governors of the Federal Reserve System, 12 C.F.R. §221, or any successor
regulation.

 

“Related
Property”:  With respect to a Loan or
Portfolio Loan, any property or other assets designated and pledged or
mortgaged as collateral to secure repayment of such Loan or Portfolio Loan, as
applicable, including, without limitation, Mortgaged Property and/or a pledge
of the stock, membership or other ownership interests in the related Obligor
and all Proceeds from any sale or other disposition of such property or other
assets.

 

“Related Security”:  As used in (1) the Sale Agreement, all of the
Originator’s right, title and interest in and to the items set forth in clauses
(a) through (d) and (i) hereof, and (2) this Agreement, all of the Borrower’s
right, title and interest in and to:

 

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

 

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

 

(c)                                  all
Insurance Policies with respect to any Loan;

 

41

 

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

 

(e)                                  the
Accounts and the Concentration Account, to the extent amounts on deposit
therein or credited thereto relate to the Collateral, together with all cash
and investments in each of the foregoing other than amounts earned on
investments therein (excluding any Excluded Amounts that may be on deposit
therein);

 

(f)                                    any
Hedging Agreement and all payments from time to time due thereunder;

 

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

 

(h)                                 the
Sale Agreement and the assignment to the Trustee of all UCC financing
statements filed by the Borrower against the Originator under or in connection
with the Sale Agreement;

 

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

 

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

 

“Replaced
Loan”:  Defined in Section
2.18(a)(i).

 

“Reporting
Date”:  The date that is two Business
Days prior to the 15th of each calendar month (unless in such month
a Payment Date occurs, in which case two Business Days prior to such Payment
Date), commencing December 13, 2004.

 

“Required
Advance Reduction Amount”:  As of any Measurement Date, an amount
equal to the positive difference, if any, of (a) Advances Outstanding on such
day over (b) the lesser of the Facility Amount and the Maximum
Availability on such day.

 

“Required
Loan Documents”:  For each Loan,
originals (except as otherwise indicated) of the following documents or
instruments:

 

(a)                          (i)
other than in the case of a Noteless Loan, the original or, if accompanied by a
“lost note” affidavit and indemnity, a copy of, the underlying promissory note,
endorsed by the Borrower or the prior holder of record either in blank or to
the Trustee (and evidencing an unbroken chain of endorsements from each prior
holder thereof evidenced in the chain of endorsements to the Trustee), with any
endorsement to the Trustee to be in the following form: “U.S. Bank National
Association, as Trustee for the Secured Parties”, and (ii) in the case of a
Noteless Loan, (x) a copy of each transfer document or instrument relating to
such Noteless Loan evidencing the assignment of such Noteless Loan to the
Originator, from the Originator to

 

42

 

the Borrower
and from the Borrower either to the Trustee or in blank, and (y) a copy of the
Loan Register with respect to such Noteless Loan;

 

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

 

(c)                          if any
Loan is secured by a Mortgage:

 

(i)                                                     either
(i) the original Mortgage, the original Assignment of Leases and Rents, if any,
and the originals of all intervening assignments, if any, of the Mortgage and
Assignments of Leases and Rents with evidence of recording thereon, (ii) copies
thereof certified by the Servicer, by Closing Counsel or by a title company or
escrow company to be true and complete copies thereof where the originals have
been transmitted for recording until such time as the originals are returned by
the public recording office or (iii) copies certified by the public recording
offices where such documents were recorded to be true and complete copies
thereof in those instances where the public recording offices retain the
original or where the original recorded documents are lost; and

 

(ii)  an Assignment of Mortgage and of
any other material recorded security documents (including any Assignment of
Leases and Rents) in recordable form, executed by the Borrower or the prior
holder of record, in blank or to the Trustee (and evidencing an unbroken chain
of assignments from the prior holder of record to the Trustee), with any
assignment to the Trustee to be in the following form: “U.S. Bank National
Association, as Trustee for the Secured Parties”;

 

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

 

“Required
Purchasers”:  The Conduit Purchasers
and/or Institutional Purchasers representing an aggregate of more than 66.67%
of the aggregate Commitments of the Conduit Purchasers and the Institutional
Purchasers then in effect; provided, however,
that for the purposes of determining the Required Purchasers, in the event that
an Institutional Purchaser or a Conduit Purchaser (or its related Liquidity
Bank on its behalf) fails to provide funding for an Advance hereunder for which
all conditions precedent have been satisfied, such Institutional Purchaser or
Conduit Purchaser, as applicable, shall not constitute a Required Purchaser

 

43

 

hereunder (and the Commitment
of such Institutional Purchaser or Conduit Purchaser, as applicable, shall be
disregarded for purposes of determining whether the consent of the Required
Purchasers has been obtained).

 

“Required
Reports”:  Collectively, the
Servicing Report, the Servicer’s Certificate required pursuant to Section
6.10(c), the financial statements of the Servicer required pursuant to Section
6.10(d), the annual statements as to compliance required pursuant to Section
6.11, and the annual independent public accountant’s report required
pursuant to Section 6.12.

 

“Required
Transfer Date”:  With respect to any
ACC Loan included in the Collateral, the earliest of (a) February 3, 2005, (b)
the date on which such ACC Loan is to be included in a Permitted Securitization
and (c) the occurrence of any Termination Event or Unmatured Termination Event.

 

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

 

“Restricted
Junior Payment”:  (i) Any dividend or
other distribution, direct or indirect, on account of any class of membership
interests of the Borrower now or hereafter outstanding, except a dividend paid
solely in interests of that class of membership interests or in any junior
class of membership interests of the Borrower; (ii) any redemption, retirement,
sinking fund or similar payment, purchase or other acquisition for value,
direct or indirect, of any class of membership interests of the Borrower now or
hereafter outstanding, (iii) any payment made to redeem, purchase, repurchase
or retire, or to obtain the surrender of, any outstanding warrants, options or
other rights to acquire membership interests of the Borrower now or hereafter outstanding,
and (iv) any payment of management fees by the Borrower (except for reasonable
management fees to the Originator or its Affiliates in reimbursement of actual
management services performed).  For the
avoidance of doubt, (x) payments and reimbursements due to the Servicer in
accordance with this Agreement or any other Transaction Document do not
constitute Restricted Junior Payments, and (y) distributions by the Borrower to
holders of its membership interests of Loans or of cash or other proceeds relating
thereto which have been repurchased or substituted by the Borrower in
accordance with this Agreement shall not constitute Restricted Junior Payments.

 

“Retained
Interest”:  (a) With respect to any
Delayed Draw Term Loan, any Revolving Loan or any Loan with an unfunded
commitment on the part of the Originator that does not provide by its terms
that funding thereunder is in the Originator’s sole and absolute discretion and
the right to receive payment (but not the obligation of the Originator to provide
additional fundings) with respect to such Loan is transferred by the Originator
to the Borrower and/or by the Borrower to the Purchasers, all of the
obligations, if any, of the Originator to provide additional funding with
respect to such Loan, and (b) with respect to any Agented Note that is
transferred by the Originator to the Borrower and by the Borrower to the
Purchasers, (i) all of the obligations, if any, of the agent(s) under the
documentation

 

44

 

evidencing such Agented Note
and (ii) the applicable portion of the interests, rights and obligations under
the documentation evidencing such Agented Note that relate to such portion(s)
of the indebtedness that is owned by another lender or is being retained by the
Originator pursuant to clause (a) of this definition.

 

“Retransfer
Price”:  Defined in Section
2.18(b).

 

“Review
Criteria”:  Defined in Section
8.2(b).

 

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

 

“Revolving
Period”:  The period commencing on
the Closing Date and ending on the day preceding the Termination Date.

 

“RIC/BDC
Requirements”:  The requirements
(including, without limitation, requirements pertaining to asset
diversification) Ares Capital Corporation must satisfy to maintain its status
as a “business development company,” within the meaning of the Small Business
Incentive Act of 1980, and its election to be treated as a “registered
investment company” under the Code.

 

“RIC/BDC
Sale”:  Defined in Section 2.20(a).

 

“RIC/BDC
Sale Date”:  The Business Day
identified by the Borrower to the Administrative Agent and the Trustee in a
RIC/BDC Sale Notice as the proposed date of a RIC/BDC Sale.

 

“RIC/BDC
Sale Notice”:  Defined in Section
2.20(a)(i).

 

“Risk
Rating”: With respect to any Loan, the “Risk Rating” of such Loan as
determined in accordance with the Credit Policy.

 

“Rule 144A”:  Rule 144A under the Securities Act.

 

“S&P”:  Standard & Poor’s Ratings Services, a
division of The McGraw-Hill Companies, Inc., and any successor thereto.

 

“S&P
Rating”:  With respect to any Loan,
as of any date of determination, if such Loan is rated by S&P, such S&P
rating.

 

“Sale
Agreement”:  The Purchase and Sale
Agreement, dated as of the date hereof, between the Originator and the
Borrower, as amended, modified, waived, supplemented, restated or replaced from
time to time.

 

“Scheduled
Payment”:  Each scheduled payment of
principal and/or interest required to be made by an Obligor on the related Loan
or Portfolio Loan, as adjusted pursuant to the terms of the related Required
Loan Documents.

 

45

 

“Second
Lien Loan”:  Any Loan that (i) is
secured by a valid and perfected second priority security interest on all of
the Obligor’s assets constituting Related Property for the Loan (whether or not
there is also a security interest of a higher or lower priority in additional
collateral), (ii) with respect to priority of payment obligations is pari passu with the indebtedness of the
holder with the first priority security interest except after an event of
default thereunder, (iii) pursuant to an intercreditor agreement between the
Borrower and the holder of such first priority security interest, the amount of
the indebtedness covered by such first priority security interest is limited
(in terms of aggregate dollar amount or percent of outstanding principal or
both), and (iv) has a Loan-to-Value Ratio of not greater than 70%.

 

“Secured
Party”:  (i) Each Purchaser, (ii) the
Administrative Agent and each Purchaser Agent, and (iii) each Hedge
Counterparty that at the time of entering into a Hedging Agreement is either a
Purchaser or an Affiliate of the VFCC Agent if that Affiliate is a Hedge
Counterparty that executes a counterpart of this Agreement agreeing to be bound
by the terms of this Agreement applicable to a Secured Party.

 

“Securities
Account”:  The meaning specified in
Section 8-501 of the UCC.

 

“Securities
Account Control Agreement”:  The
Securities Account Control Agreement, dated as of the date hereof, among Ares
Capital Corporation, as the debtor, the Servicer, U.S. Bank, as the Trustee and
as the Securities Intermediary, as the same may be amended, modified, waived,
supplemented or restated from time to time.

 

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

 

“Securities
and Exchange Commission”:  The U.S.
Securities and Exchange Commission.

 

“Securities
Intermediary”:  (i) A Clearing
Corporation; or (ii) a Person, including a bank or broker, that in the ordinary
course of its business maintains Securities Accounts for others and is acting
in that capacity.

 

“Security”:  The meaning specified in Section 9-102(a)(15)
of the UCC.

 

“Security
Certificate”:  The meaning specified
in Section 8-102(a)(16) of the UCC.

 

“Security
Entitlement”:  The meaning specified
in Section 8-102(a)(17) of the UCC.

 

“Senior
Secured ABL”:  Any Revolving Loan
that (i) is secured by a valid and first priority perfected security interest
on all of the Obligor’s assets constituting Related Property for the Loan, (ii)
provides the related Obligor with the option to receive additional borrowings
thereunder based on the value of its eligible accounts receivable, inventory or
equipment, (iii) has a Loan-to-Liquidation Value Ratio of less than or equal to
(a) 85% where the Related Property is accounts receivable, (b) 50% where the
Related Property is inventory, and (c) 80% where the Related Property is
equipment, and (iv) provides that the payment obligation of the Obligor on such
Loan is either senior to, or pari passu with, all other loans or financings to
such Obligor.

 

46

 

“Senior
Secured Loan”:  Any Loan that is a
Term Loan or Revolving Loan that (i) is secured by a valid and first priority
Lien on all of the Obligor’s assets, (ii) has a Loan-to-Value Ratio not greater
than (a) 60% where the Related Property is not primarily real property and (b)
75% where the Related Property is primarily real property, and (iii) provides
that the payment obligation of the Obligor on such Loan is either senior to, or
pari passu with, all other
Indebtedness of such Obligor.  

 

“Senior
Subordinated Loan”:  Any Term Loan
that (i) has a Loan-to-Value not greater than (a) 75% where the Loan is not a
Material Mortgage Loan or the Related Property is not primarily real estate,
and (b) 85% where the Loan is a Material Mortgage Loan or the Related Property
is primarily real estate, and (ii) contains terms which, upon the occurrence of
an event of default under the Loan Documents or in the case of any liquidation
or foreclosure on the Related Property, provide that the Borrower’s portion of
such Loan would be paid only after the other lender party to such Loan
(including any lender party making any Senior Secured ABL, Senior Secured Loan,
Stretch Senior Secured Loan or Second Lien Loan whose right to payment is
contractually senior to the Borrower) is paid in full.

 

“Servicer”:
Ares Capital Corporation and each successor appointed as Successor Servicer
pursuant to Section 6.16(a).

 

“Servicer
Advance”:  An advance of Scheduled
Payments made by the Servicer with respect to a Loan pursuant to Section 6.5.

 

“Servicer
Default”:  Defined in Section 6.15.

 

“Servicer
Termination Notice”:  Defined in Section
6.15.

 

“Servicer’s
Certificate”:  Defined in Section
6.10(c).

 

“Servicing
Fee”:  The fee payable to the
Servicer on each Payment Date in arrears in respect of each Collection Period,
which fee shall be equal to the product of (i) 1.0%, (ii) Aggregate Outstanding
Loan Balance as of the first day of the related Collection Period and (iii) the
actual number of days in such Collection Period divided by 360.

 

“Servicing
File”:  For each Loan, the following
documents or instruments:

 

(a)                                  copies
of each of the Required Loan Documents;

 

(b)                                 with
respect to any Material Mortgage Loan:

 

(i)                                     the
original or a copy of the lender’s title insurance policy or a written
commitment to issue such title insurance policy issued on or about the date of
the origination of such Loan, together with all endorsements or riders (or
copies thereof) that were issued with or subsequent to the issuance of such
policy or commitment, or, with respect to each Loan not covered by a lender’s
title insurance policy to the extent customary in the applicable jurisdiction,
an attorney’s opinion of title given by an attorney licensed to practice law in
the jurisdiction where the related Mortgaged Property is located, or, if such
policy or

 

47

 

commitment has
not been issued and if the related Loan was funded through a title insurance
company or other comparable closing agent pursuant to escrow instructions or
lender’s closing instructions precluding the title insurance company or such
agent from funding until the title insurance company is prepared to issue the
required title insurance coverage, a copy of such escrow instructions or lender’s
closing instructions;

 

(ii)                                  the
originals or copies of any environmental indemnity agreement;

 

(iii)                               each
Appraisal of the related Mortgaged Property;

 

(iv)                              any
Environmental Site Assessment in the possession of the Servicer relating to the
related Mortgaged Property;

 

(c)                                  any
other portion of the Loan File which is not part of the Required Loan
Documents.

 

“Servicing
Report”:  Defined in Section
6.10(b).

 

“Servicing
Standard”:  Shall mean, with respect
to any Loans included in the Collateral, to service and administer such Loans
on behalf of the Secured Parties in accordance with Applicable Law, the terms
of this Agreement, the Underlying Instruments, all customary and usual
servicing practices for loans like the Loans and, to the extent consistent with
the foregoing, (a) the same care, skill, prudence and diligence with which the
Servicer services and administers loans for its own account or for the account
of others; (b) with a view to maximize the value of the Loans; and (c) without
regard to:  (i) any relationship that the
Servicer or any Affiliate of the Servicer may have with any Obligor or any
Affiliate of any Obligor, (ii) the Servicer’s obligations to incur servicing
and administrative expenses with respect to a Loan, (iii) the Servicer’s right
to receive compensation for its services hereunder or with respect to any
particular transaction, (iv) the ownership by the Servicer or any Affiliate
thereof of any Loans, (v) the ownership, servicing or management for others by
the Servicer of any other loans or property by the Servicer or (vi) any
relationship that the Servicer or any Affiliate of the Servicer may have with
any holder of other loans of the Obligor with respect to such Loans.

 

“Solvent”:  As to any Person at any time, having a state
of affairs such that all of the following conditions are met:  (a) the fair value of the property of such
Person is greater than the amount of such Person’s liabilities (including
disputed, contingent and unliquidated liabilities) as such value is established
and liabilities evaluated for purposes of Section 101(32) of the Bankruptcy
Code; (b) the present fair saleable value of the property of such Person in an
orderly liquidation of such Person is not less than the amount that will be
required to pay the probable liability of such Person on its debts and other
liabilities as they become absolute and matured; (c) such Person is able to
realize upon its property and pay its debts and other liabilities (including
disputed, contingent and unliquidated liabilities) as they mature in the normal
course of business; (d) such Person does not intend to, and does not believe
that it will, incur debts or liabilities beyond such Person’s ability to pay as
such debts and liabilities mature; and (e) such Person is not engaged in a
business or a transaction, and does not propose to engage in a business or a
transaction, for which such Person’s property assets would constitute
unreasonably small capital.

 

48

 

“Stretch
Senior Secured Loan”:  Any Term Loan
that (a) is secured by a valid and first priority Lien on all of the Obligor’s
assets constituting Related Property for the Loan, (b) has a Loan-to-Value not
greater than (i) 65% where the Loan is not a Material Mortgage Loan or the
Related Property is not primarily real estate, and (ii) 80% where the Loan is a
Material Mortgage Loan or the Related Property is primarily real estate, and
(c) provides that the payment obligation of the Obligor on such Loan is either
senior to, or pari passu with,
all other Indebtedness of such Obligor.

 

“Subsidiary”:  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.

 

“Substitute
Loan”:  Defined in Section 2.18(a).

 

“Successor
Servicer”:  Defined in Section
6.16(a).

 

“Tape”:  Defined in Section 7.2(b)(ii).

 

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

 

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

 

“Term
Securitization”:  A Permitted
Securitization which is a term securitization transaction.

 

“Termination
Date”:  The earliest of (a) the date
of the termination in whole of the Facility Amount pursuant to Section
2.4(a), (b) the Business Day designated by the Borrower to the
Administrative Agent and each Purchaser Agent as the Termination Date at any
time following two Business Days’ prior written notice thereof to the
Administrative Agent and each Purchaser Agent, (c) November 2, 2005 or such
later date as is agreed to in writing by the Borrower, the Servicer, the
Administrative Agent and the Purchaser Agents, (d) the date any Liquidity
Agreement shall cease to be in full force and effect, (d) the date of the
declaration of the Termination Date or the date of the automatic occurrence of
the Termination Date pursuant to Section 10.2(a), and (e) the second
Business Day prior to the Facility Termination Date.

 

“Termination
Event”:  Defined in Section 10.1.

 

“Title
Policy”:  An ALTA lender’s title
insurance policy.

 

“Transaction”:  Described in Section 3.2.

 

49

 

“Transaction
Documents”:  This Agreement, the Sale
Agreement, each Hedging Agreement, the Intercreditor Agreement, the Securities
Account Control Agreement, each Variable Funding Certificate, each Purchaser
Fee Letter, any Joinder Supplement, any Transferee Letter, the Backup Servicer
Fee Letter, the Trustee Fee Letter, and any additional document the execution
of which is necessary or incidental to carrying out the terms of the foregoing
documents.

 

“Transferee
Letter”:  Defined in Section 13.16.

 

“Transition
Expenses”:  The reasonable costs
(including reasonable attorneys’ fees) of the Backup Servicer incurred in
connection with transferring the servicing obligations under this Agreement and
amending this Agreement to reflect such transfer, in an amount not to exceed
$100,000.

 

“Trustee”:  U.S. Bank, not in its individual capacity,
but solely as Trustee, its successor in interest pursuant to Section 8.3
or such Person as shall have been appointed Trustee pursuant to Section 8.5.

 

“Trustee
Fee”:  The fee set forth as such in
the Trustee Fee Letter.

 

“Trustee
Fee Letter”:  The Trustee Fee Letter,
dated as of the date hereof, by and among the Servicer, the Administrative
Agent and the Trustee, as such letter may be amended, modified, supplemented,
restated or replaced from time to time.

 

“Trustee
Termination Notice”:  Defined in Section
8.5.

 

“UCC”:  The Uniform Commercial Code as from time to
time in effect in the applicable jurisdiction or jurisdictions.

 

“Uncertificated
Security”:  The meaning specified in
Section 8-102(a)(l8) of the UCC.

 

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

 

“United
States”:  The United States of
America.

 

“Unmatured
Termination Event”:  Any event (other
than events described in Section 10.1(c) and 10.1(d) (in the case
of Section 10.1(d), due to the occurrence of an event described in Section
6.15(d)) that, with the giving of notice or the lapse of time, or both,
would become a Termination Event.

 

“Variable
Funding Certificate” or “VFC”: 
Defined in Section 2.1(a).

 

“VFCC”:  Variable Funding Capital Corporation, a
Delaware corporation, as a Purchaser, together with its successors and assigns
in such capacity.

 

50

 

“VFCC Agent”:  WCM or any other entity that has been
appointed as the administrator for VFCC.

 

“Wachovia”:  Wachovia Bank, National Association, a
national banking association, in its individual capacity, and its successors
and assigns.

 

“Warranty
Loan”:  Any Loan that fails to satisfy
any criteria of the definition of Eligible Loan as of the applicable Cut-Off
Date for such Loan or any Loan with respect to which a Warranty Event has
occurred.

 

“Warranty
Event”:  As to any Loan, the
discovery that as of the related Cut-Off Date for such Loan there existed a
breach of any representation or warranty relating to such Loan (other than any
representation or warranty that the Loan satisfies the criteria of the
definition of Eligible Loan) and the failure of Borrower to cure such breach, or
cause the same to be cured, within 30 days after the earlier occur of the
Borrower’s receipt of notice thereof from the Administrative Agent or the
Borrower becoming aware thereof.

 

“Weighted
Average Advance Rate”:  For any
Funded Advances outstanding on any day, the weighted average of the Advance
Rates applicable to the Eligible Loans backing such Funded Advances on such
day, weighted according to the proportion of the Aggregate Outstanding Loan
Balance that each type of Loan forming a part of the Collateral represents.

 

“Weighted
Average Life”:  As of any Measurement
Date, the number determined as follows: 
(i) for each Loan included in the Borrowing Base as of such date, by
multiplying the amount of each Scheduled Payment of principal (treating each
Revolving Loan and each Delayed Draw Term Loan as if the same were fully
funded) to be paid after such Measurement Date by the number of years (rounded
to the nearest hundredth) from such Measurement Date until such Scheduled
Payment of principal is due; (ii) summing all of the products calculated
pursuant to clause (i); and (iii) dividing the sum calculated pursuant
to clause  (ii) by the sum of all Scheduled Payments of principal
due on all the Loans included in the Borrowing Base as of such date.

 

Section 1.2.                                Other
Terms.

 

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

 

Section 1.3.                                Computation of Time Periods.

 

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

 

Section 1.4.                                Interpretation.

 

In each
Transaction Document, unless a contrary intention appears:

 

51

 

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

 

(b)                         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;

 

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

 

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

 

(e)                          reference
to any time means Charlotte, North Carolina time;

 

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

 

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

 

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

 

ARTICLE II

THE VARIABLE FUNDING CERTIFICATES

 

Section 2.1.                                The
Variable Funding Certificates.

 

(a)                          On the
terms and conditions hereinafter set forth, the Borrower shall deliver (i) on
the Closing Date, to each Purchaser Agent at the applicable address set forth
on Annex A to this Agreement, and (ii) on the effective date of any
Joinder Supplement, to each additional Purchaser Agent, at the address set
forth in the applicable Joinder Supplement, a duly executed variable funding
certificate in substantially the form of Exhibit B (each, a “Variable
Funding Certificate” or “VFC”), dated as of the date of this
Agreement, each in a face amount equal to the applicable Purchaser’s Commitment
as of the Closing Date or the effective date of any Joinder Supplement, as
applicable, and otherwise duly completed. 
Each Variable Funding Certificate shall evidence an undivided ownership
interest in the Collateral purchased by a Purchaser in an amount equal, at any
time, to the percentage equivalent of a fraction, (i) the numerator of which is
the outstanding Advances by such Purchaser under the applicable VFC on such day
and (ii) the denominator of which is the Advances Outstanding on such day.  Interest shall accrue, and each VFC shall be
payable, as described herein.  Each
Purchaser hereby represents and warrants that such Purchaser is a Qualified
Institutional Buyer.

 

52

 

(b)                         During
the Revolving Period, the Borrower may, at its option, request the Conduit
Purchasers and the Institutional Purchasers to make advances of funds (each, a “Funded
Advance”) under the VFCs pursuant to a Funding Request, in an aggregate
amount up to the Availability as of the proposed Funding Date of the Funded
Advance.  Following the receipt of a
Funding Request, subject to the terms and conditions hereinafter set forth,
during the Revolving Period, the Conduit Purchasers and the Institutional
Purchasers shall fund such Funded Advance. 
Notwithstanding anything to the contrary herein, no Purchaser shall be
obligated to provide the Borrower with aggregate funds in connection with a
Funded Advance that would exceed the least of (i) such Purchaser’s unused
Commitment then in effect, (ii) the aggregate unused Commitments then in effect
and (iii) the Availability on the proposed Funding Date of such Funded Advance.

 

(c)                          During
the Revolving Period, the Borrower may, at its option, request the Conduit
Purchasers and the Institutional Purchasers to make advances of funds on a
pre-funded basis (each, a “Pre-Funded Advance”) under the VFCs pursuant
to a P-F Funding Request, in an aggregate amount up to the Pre-Funded
Availability as of the proposed Funding Date of the Pre-Funded Advance.  Following the receipt of a P-F Funding
Request, subject to the terms and conditions hereinafter set forth, during the
Revolving Period, the Conduit Purchasers and the Institutional Purchasers shall
fund such Pre-Funded Advance. 
Notwithstanding anything to the contrary contained herein, no Purchaser
shall be obligated to provide the Borrower with aggregate funds in connection
with a Pre-Funded Advance that would exceed the least of (i) such Purchaser’s
unused Commitment then in effect, (ii) the aggregate unused Commitments then in
effect and (iii) the Availability on the proposed Funding Date of such Pre-Funded
Advance.

 

(d)                         The
Borrower may, within 60 days but not less than 45 days prior to (x) the
expiration of any Liquidity Agreement or (y) the date set forth in clause (c)
of the definition of Termination Date and/or the Facility Termination Date, by
written notice to each Purchaser Agent, make a request (i) for each applicable
Liquidity Bank to extend the term of its related Liquidity Agreement for an
additional period of 364 days and (ii) for each Purchaser Agent to extend the
date set forth in clause (c) of the definition of Termination Date and/or the
Facility Termination Date for an additional period of 364 days.  Each Purchaser Agent will give prompt notice
to the applicable Purchaser and each applicable Liquidity Bank of its receipt
of such request, and each Purchaser and each Liquidity Bank shall make a
determination, in their sole discretion, not less than 15 days prior to the
expiration of the date set forth in clause (c) of the definition of Termination
Date, the Facility Termination Date or the expiration of any Liquidity
Agreement (as applicable) as to whether or not it will agree to the applicable
extension requested.  The failure of a
Purchaser Agent or a Liquidity Bank to provide timely notice of its decision to
the Borrower shall be deemed to constitute a refusal by such Purchaser or such
Liquidity Bank (as applicable) to extend the date set forth in clause (c) of
the definition of Termination Date, the Facility Termination Date or the term
of the Liquidity Agreement, respectively. 
In the event that the term of any Liquidity Agreement or the date set
forth in clause (c) of the definition of Termination Date is not extended for a
period of up to 364 days, the Termination Date shall be extended with the
consent of the Administrative Agent (such consent not to be unreasonably
withheld) for a period of 45 days and notice of such termination shall be
provided by the Administrative Agent to the Backup Servicer, the Trustee, the
Originator, the Borrower and the Servicer. 
Only one such 45 day extension of the Termination

 

53

 

Date shall be permitted under
this Section 2.1(d).  The Borrower
confirms that each Liquidity Bank and each Purchaser, in their sole and
absolute discretion, without regard to the value or performance of the Loans or
any other factor, may elect not to extend any Liquidity Agreement, the date set
forth in clause (c) of the definition of Termination Date or the Facility
Termination Date (as applicable).

 

(e)                          The
Borrower may, with the written consent of the Administrative Agent, add
additional Persons as Purchasers or cause an existing Purchaser to increase its
Commitment in connection with a corresponding increase in the Facility Amount; provided, however, that (i) if the
addition of any Purchaser or the increase of any Purchaser’s Commitment
hereunder would cause the aggregate Commitments of the Conduit Purchasers and
the Institutional Purchasers to exceed $300,000,000, such addition or increase
may only be effected with the prior written consent of the Administrative Agent
and each Purchaser Agent, and (ii) the Commitment of any Purchaser may only be
increased with the prior written consent of such Purchaser and the
Administrative Agent.  Each additional
Purchaser and Purchaser Agent shall become a party hereto by executing and
delivering to the Administrative Agent and the Borrower a Joinder Supplement.

 

Section 2.2.                                Procedures for Pre-Funded Advances by the
Conduit Purchasers and the Institutional Purchasers.

 

(a)                          Subject
to the limitations set forth in Section 2.1(c), the Borrower may request
a Pre-Funded Advance from the Conduit Purchasers and the Institutional
Purchasers by delivering to Purchaser Agents at certain times the information
and documents set forth in this Section 2.2.

 

(b)                         No later
than 2:00 p.m. on the Business Day
prior to the proposed Funding Date, the Borrower (or the Servicer on its
behalf) shall deliver:

 

(i)                                                     to
the Administrative Agent and the Trustee, written notice of such proposed
Funding Date (including a duly completed Pre-Funded Advance Certificate updated
to the date such Pre-Funded Advance is requested and giving pro forma effect to
the Pre-Funded Advance requested and the use of the proceeds thereof); and

 

(ii)  to the Administrative Agent and
the Trustee, a duly completed P-F Funding Request, which shall (a) specify the
desired amount of such Pre-Funded Advance, which amount must be at least equal
to $500,000, (b) specify the proposed Funding Date of such Pre-Funded Advance
and (c) include a representation that all conditions precedent for a Pre-Funded
Advance described in Article III hereof have been satisfied.

 

Each P-F
Funding Request shall be irrevocable.  If
any P-F Funding Request is received by the Administrative Agent after 2:00 p.m.
on the Business Day prior to the Business Day for which such Pre-Funded Advance
is requested or on a day that is not a Business Day, such P-F Funding Request
shall be deemed to be received by the Administrative Agent at 9:00 a.m. on the
next following Business Day.

 

54

 

(c)                          On the
proposed Funding Date, subject to the limitations set forth in Section
2.1(c) and upon satisfaction of the applicable conditions set forth in Article
III, each Conduit Purchaser and each Institutional Purchaser shall make
available to the Trustee in same day funds, for deposit into the Pre-Funded
Advances Account on such Funding Date, an amount equal to the Purchaser’s Pro
Rata Share of the least of (i) the amount requested by the Borrower for such
Pre-Funded Advance, (ii) the aggregate unused Commitments then in effect, (iii)
the Pre-Funded Availability and (iv) the Availability on such Funding Date.

 

(d)                         On the
proposed Funding Date, all amounts deposited into the Pre-Funded Advances
Account pursuant to Section 2.2(c) shall be invested in Permitted
Investments selected by the Servicer in written instructions delivered to the
Trustee and the Administrative Agent which mature not later than the earlier of
(i) the Business Day preceding the next Payment Date and (ii) the day that is
one week after the related Funding Date (or, if such day is not a Business Day,
the next preceding Business Day).

 

(e)                          On each
Funding Date related to a Pre-Funded Advance, the obligation of each Conduit
Purchaser and each Institutional Purchaser to remit its Pro-Rata Share of any
such Pre-Funded Advance shall be several from that of each other Purchaser and
the failure of any Conduit Purchaser or Institutional Purchaser to so make such
amount available to the Borrower shall not relieve any other Purchaser of its
obligation hereunder.

 

Section 2.3.                                Procedures for Funded Advances by Conduit Purchasers and Institutional
Purchasers.

 

(a)                          Subject
to the limitations set forth in Section 2.1(b), the Borrower may request
a Funded Advance from the Conduit Purchasers and the Institutional Purchasers
by delivering to the Purchaser Agents at certain times the information and
documents set forth in this Section 2.3.

 

(b)                         No later
than 2:00 p.m. on the Business Day prior to the proposed Funding Date, the
Borrower (or the Servicer on its behalf) shall deliver:

 

(i)                                                     to
the Administrative Agent and the Trustee, written notice of such proposed
Funding Date (including a duly completed Borrowing Base Certificate updated to
the date such Funded Advance is requested and giving pro forma effect to the
Funded Advance requested and the use of the proceeds thereof);

 

(ii)  to the Administrative Agent, a
description of the Obligor and the Loan to be funded by the proposed Funded
Advance;

 

(iii)                                               to
the Administrative Agent, a wire disbursement and authorization form, to the
extent not previously delivered;

 

(iv)                                              to
the Administrative Agent and the Trustee, a duly completed Funding Request
which shall (a) specify the desired amount of such Funded Advance, which amount
must be at least equal to $500,000, to be allocated to each Conduit Purchaser
and each Institutional Purchaser in accordance with its Pro Rata

 

55

 

Share, (b)
specify the proposed Funding Date of such Funded Advance, (c) specify the Loans
to be financed on such Funding Date (including the appropriate file number,
Outstanding Loan Balance for each Loan and identifying each Loan by type and
proposed Advance Rate applicable to each such Loan and any other information
reasonably requested by the Trustee to permit it to properly account for such
Loan) and (d) include a representation that all conditions precedent for a
Funded Advance described in Article III hereof have been satisfied.

 

Each Funding Request
shall be irrevocable.  If any Funding
Request is received by the Administrative Agent and each Purchaser Agent after
2:00 p.m. on the Business Day prior to the Business Day for which such Funded
Advance is requested or on a day that is not a Business Day, such Funding
Request shall be deemed to be received by the Administrative Agent and each
Purchaser Agent at 9:00 a.m. on the next Business Day.

 

(c)                          On the
proposed Funding Date, subject to the limitations set forth in Section
2.1(b) and upon satisfaction of the applicable conditions set forth in Article
III, each Conduit Purchaser and each Institutional Purchaser shall make
available to the Borrower in same day funds, at such bank or other location
reasonably designated by Borrower in the Funding Request given pursuant to this
Section 2.3, an amount equal to such Purchaser’s Pro Rata Share of the
least of (i) the amount requested by the Borrower for such Funded Advance, (ii)
the aggregate unused Commitments then in effect and (iii) an amount equal to
the Availability on such Funding Date.

 

(d)                         On each
Funding Date related to a Funded Advance, the obligation of each Conduit
Purchaser and each Institutional Purchaser to remit its Pro Rata Share of any
such Funded Advance shall be several from that of each other Purchaser and the
failure of any Conduit Purchaser or Institutional Purchaser to so make such
amount available to the Borrower shall not relieve any other Purchaser of its
obligation hereunder.

 

Section 2.4.                                Reduction
of the Facility Amount; Optional and Mandatory Repayments of
Advances.

 

(a)                          The
Borrower shall be entitled at its option, at any time prior to the occurrence
of a Termination Event, to terminate in whole or reduce in part the portion of
the Facility Amount that exceeds the sum of the Advances Outstanding, accrued
Interest, Breakage Costs and Hedge Breakage Costs; provided that (i) the Borrower shall give 20 Business Days’
prior written notice of such termination or reduction in the form of Exhibit
A-3 to the Administrative Agent and each Hedge Counterparty and (ii) any
partial reduction of the Facility Amount shall be in an amount equal to
$5,000,000 and in integral multiples of $500,000 in excess thereof.  Any request for a reduction or termination
pursuant to this Section 2.4(a) shall be irrevocable.  The Commitment of each Conduit Purchaser and
each Institutional Purchaser shall be reduced by an amount equal to its Pro
Rata Share (prior to giving effect to any reduction of Commitments hereunder)
of the aggregate amount of any reduction under this Section 2.4(a).

 

(b)                         The
Borrower shall be entitled at its option, at any time prior to the occurrence
of a Termination Event, to reduce the Advances Outstanding; provided that (i) in the case of any such
reduction relating to Funded Advances, the Borrower shall give one Business Day’s

 

56

 

prior written
notice of such reduction to the Administrative Agent, (ii) in the case of any
such reduction relating to Pre-Funded Advances, the Borrower shall give three
days’ prior written notice of such reduction to the Administrative Agent, in
each case in the form of Exhibit A-2, and (iii) any reduction of the
Advances Outstanding (other than with respect to repayments of Advances
Outstanding made by the Borrower to reduce Advances Outstanding such that the
Availability is greater than or equal to $0) shall be in a minimum amount of
$500,000 and in integral multiples of $100,000 in excess thereof.  In connection with any such reduction of
Advances Outstanding, the Borrower shall deliver to each Purchaser Agent (i)
instructions to reduce such Advances Outstanding and (ii) funds sufficient to
repay such Advances Outstanding, together with all accrued Interest, Breakage
Costs and Hedge Breakage Costs; provided
that, no such reduction shall be given effect unless (x) the Borrower has
complied with the terms of any Hedging Agreement requiring that one or more
Hedge Transactions be terminated in whole or in part as the result of any such
reduction of the Advances Outstanding, and has paid in full all Hedge Breakage
Costs owing to the relevant Hedge Counterparty for any such termination and (y)
sufficient funds have been remitted to pay all such amounts in the succeeding
sentence in full.  The Administrative
Agent shall apply amounts received from the Borrower pursuant to this Section
2.4(b) to the payment of any Hedge Breakage Costs, to the pro rata reduction of the Advances
Outstanding, to the payment of accrued Interest on the amount of the Advances
Outstanding to be repaid and to the payment of any Breakage Costs.  Any Advance so repaid may, subject to the
terms and conditions hereof, be reborrowed during the Revolving Period.  Any Borrowing Notice relating to any
repayment pursuant to this Section 2.4(b) shall be irrevocable.

 

(c)                          On any
day on which either (i) a Termination Event occurs, (ii) the Termination Date
occurs or (iii) the Advances Outstanding exceeds the Availability, the Trustee,
at the written direction of the Administrative Agent, shall liquidate all Permitted
Investments relating to Pre-Funded Advances on deposit in the Pre-Funded
Advances Account and release them to or upon the order of the Administrative
Agent.  The Administrative Agent shall
apply the proceeds of any such liquidation to the pro rata reduction of the Pre-Funded Advances outstanding on
such day.

 

Section
2.5.                                Determination of
Interest.

 

Each
applicable Purchaser Agent shall determine the CP Rate and the Interest, as
applicable, for its related Purchaser (including unpaid Interest related
thereto, if any, due and payable on a prior Payment Date) to be paid by the
Borrower with respect to each Advance on each Payment Date for the related
Accrual Period and shall advise the Servicer thereof on the third Business Day
prior to such Payment Date.

 

Section
2.6.                                [Reserved].

 

Section
2.7.                                Notations on
Variable Funding Certificates.

 

Each Purchaser
Agent is hereby authorized to enter on a schedule attached to the VFC with
respect to each Conduit Purchaser and each Institutional Purchaser a notation
(which may be computer generated) or to otherwise record in its internal books
and records or computer system with respect to each Advance under the VFC made
by the applicable Purchaser of (a) the

 

57

 

date and principal amount
thereof and (b) each payment and repayment of principal thereof.  Any such recordation shall, absent manifest
error, constitute prima facie evidence of the outstanding Advances under each
VFC.  The failure of any Purchaser Agent
to make any such notation on the schedule attached to the applicable VFC shall
not limit or otherwise affect the obligation of the Borrower to repay the
Advances in accordance with the terms set forth herein.

 

Section
2.8.                                Principal Repayments.

 

(a)                          Unless
sooner prepaid pursuant to Section 2.4(b) or Section 10.2, the
Advances Outstanding shall be repaid in full on the date that occurs 24 months
following the Termination Date.  In
addition, Advances Outstanding shall be repaid as and when necessary to cause
each of the Availability, with respect to the Funded Advances, and the
Pre-Funded Availability, with respect to the Pre-Funded Advances, to equal or
exceed $0, and any amount so repaid may, subject to the terms and conditions
hereof, be reborrowed hereunder during the Revolving Period.

 

(b)                         [Reserved].

 

(c)                          All
repayments of any Advance or any portion thereof shall be made together with
payment of (i) all Interest accrued and unpaid on the amount repaid to (but
excluding) the date of such repayment, (ii) all Breakage Costs, and (iii) all
Hedge Breakage Costs.

 

Section
2.9.                                Settlement
Procedures During the Revolving Period.

 

(a)                          On each
Payment Date during the Revolving Period, the Servicer shall direct the Trustee
to pay pursuant to the Servicing Report (and the Trustee shall make payment
from the Collection Account to the extent of Available Funds, in reliance on
the information set forth in such Servicing Report and without any independent
verification of such information) to the following Persons, the following
amounts in the following order of priority:

 

(1)                                  pro rata in accordance with the amounts
due under this clause, to each Hedge Counterparty, any amounts (other than any
Hedge Breakage Costs) owing to that Hedge Counterparty under its respective
Hedging Agreement in respect of any Hedge Transaction(s);

 

(2)                                  pro  rata
in accordance with the amounts due under this clause, to the extent not paid by
the Originator, to the Backup Servicer and the Trustee, (a) in an amount equal
to any accrued and unpaid Backup Servicing Fees, Trustee Fees and Transition
Expenses, and (b) incurred but unreimbursed reasonable third-party,
out-of-pocket expenses relating to their respective duties as Backup Servicer
or Trustee hereunder, in respect of which the Backup Servicer or the Trustee,
as applicable, has provided prior written notice to the Servicer and the
Administrative Agent, for the payment thereof; provided
that amounts payable pursuant to this clause (b) shall not exceed $15,000 for
any Payment Date;

 

(3)                                  to
the Servicer, in an amount equal to any unreimbursed Servicer Advances (but
solely to the extent of Collections in respect of the Loan for which such
Servicer Advance was made);

 

58

 

(4)                                  to
the Servicer, in an amount equal to any accrued and unpaid Servicing Fees to
the end of the related Collection Period;

 

(5)                                  pro rata in accordance with the amounts
due under this clause, to each Purchaser Agent, in an amount equal to any
accrued and unpaid Interest, Program Fee, Commitment Fee and Breakage Costs;

 

(6)                                  pro rata in accordance with the amounts
due under subclauses (a) and (b) of this clause (6), (a) to each Purchaser
Agent for the account of the applicable Purchaser, if the Required Advance
Reduction Amount is greater than zero, an amount necessary to reduce the
Required Advance Reduction Amount to zero, pro
rata in accordance with the amount of Advances Outstanding
hereunder, and (b) pro rata in
accordance with the amounts due under this subclause (b), to each Hedge Counterparty,
any Hedge Breakage Costs owing to that Hedge Counterparty under its respective
Hedging Agreement;

 

(7)                                  pro rata in accordance with the amounts
due under this clause, to the Administrative Agent, each Purchaser Agent, any
applicable Purchaser, the Backup Servicer, the Trustee, the Affected Parties,
the Indemnified Parties or the Secured Parties, all other amounts, including
Increased Costs, but other than the principal of Advances Outstanding, then due
under this Agreement; and

 

(8)                                  to
the Servicer, in an amount equal to the sum of (i) any unreimbursed Servicer
Advances, to the extent not paid pursuant to clause 2 above, and (ii) any
Nonrecoverable Advance; and

 

(9)                                  any
remaining amount shall be distributed to the Borrower.

 

(b)                         On the
terms and conditions hereinafter set forth, from time to time during the
Revolving Period, the Servicer may, to the extent of any Principal Collections
on deposit in the Principal Collections Account and the aggregate principal
amount of all Pre-Funded Advances on deposit in the Pre-Funded Advances
Account:

 

(i)                                                     withdraw
such funds for the purpose of reinvesting in additional Eligible Loans, provided that the following conditions are
satisfied:

 

(1)                                  all
conditions precedent set forth in Section 3.2(b) have been satisfied;

 

(2)                                  the
Servicer provides same day written notice to the Administrative Agent and the
Trustee by facsimile (to be received no later than 1:00 p.m. on such day) of
the request to withdraw Principal Collections and/or Pre-Funded Advances on
deposit in the Pre-Funded Advances Account and the amount of such request;

 

(3)                                  the
notice required in clause (2) above shall be accompanied by a Borrowing Notice
in the form of Exhibit A-2 or Exhibit A-3, as applicable, and a
Borrowing Base Certificate, each executed by the Borrower and a Responsible
Officer of the Servicer;

 

59

 

(4)                                  the
Trustee provides to the Administrative Agent by facsimile (to be received no
later than 1:30 p.m. on that same day) a statement reflecting the total amount
on deposit on such day in each of the Principal Collections Account and the
Pre-Funded Advances Account; and

 

(5)                                  upon
the satisfaction of the conditions set forth in clauses (1) through (4) of this
Section 2.9(b), the Trustee will release funds from the Principal
Collections Account and/or the Pre-Funded Advances Account, as applicable, to
the Servicer in an amount not to exceed the lesser of (A) the amount requested
by the Servicer and (B) the amount on deposit in the Principal Collections
Account on such day plus the aggregate principal amount of all
Pre-Funded Advances on deposit in the Pre-Funded Advances Account; or

 

(ii)  withdraw such funds for the
purpose of making payments in respect of the Advances Outstanding at such time
in accordance with and subject to the terms of Section 2.4(b).

 

Section
2.10.                         Settlement Procedures
During the Amortization Period.

 

(a)                          On each
Payment Date during the Amortization Period, the Servicer shall direct the
Trustee to pay pursuant to the Servicing Report (and the Trustee shall make
payment from the Collection Account to the extent of Available Funds, in
reliance on the information set forth in such Servicing Report and without any
independent verification of such information) to the following Persons, the
following amounts in the following order of priority:

 

(1)                                  pro rata in accordance with the amounts
due under this clause, to each Hedge Counterparty, any amounts (other than any
Hedge Breakage Costs) owing to that Hedge Counterparty under its respective
Hedging Agreement in respect of any Hedge Transaction(s);

 

(2)                                  pro rata in accordance with the amounts
due under this clause, to the extent not paid by the Originator, to the Backup
Servicer and the Trustee, (a) in an amount equal to any accrued and unpaid
Backup Servicing Fees, Trustee Fees and Transition Expenses, and (b) incurred
but unreimbursed reasonable third-party, out-of-pocket expenses relating to
their respective duties as Backup Servicer or Trustee hereunder, in respect of
which the Backup Servicer or the Trustee, as applicable, has provided prior
written notice to the Servicer and the Administrative Agent, for the payment
thereof; provided that amounts
payable pursuant to this clause (b) shall not exceed $15,000 for any Payment
Date;

 

(3)                                  to
the Servicer, in an amount equal to any unreimbursed Servicer Advances (but
solely to the extent of Collections in respect of the Loan for which such
Servicer Advance was made);

 

(4)                                  to
the Servicer, in an amount equal to any accrued and unpaid Servicing Fees to
the end of the related Collection Period;

 

60

 

(5)                                  pro rata in accordance with the amounts
due under this clause, to each Purchaser Agent, in an amount equal to any
accrued and unpaid Interest, Program Fee, Commitment Fee and Breakage Costs;

 

(6)                                  pro rata in accordance with the amounts
due under subclauses (a) and (b) of this clause (6), (a) to each Purchaser
Agent for the account of the applicable Purchaser, in an amount necessary to
reduce the Advances Outstanding and Aggregate Unpaids to zero and (b) pro rata in accordance with the amounts
due under this subclause (b), to each Hedge Counterparty, any Hedge Breakage
Costs owing to that Hedge Counterparty under its respective Hedging Agreement;

 

(7)                                  pro rata in accordance with the amounts
due under this clause, to the Administrative Agent, each Purchaser Agent, the
applicable Purchaser, the Backup Servicer, the Trustee, the Affected Parties,
the Indemnified Parties, or the Secured Parties, all other amounts, including
Increased Costs, but other than the principal of Advances Outstanding, then due
under this Agreement; and

 

(8)                                  to
the Servicer, in an amount equal to the sum of (i) any unreimbursed Servicer
Advances, to the extent not paid pursuant to clause (2) above, and (ii) any
Nonrecoverable Advance; and

 

(9)                                  any
remaining amounts shall be distributed to the Borrower.

 

Section
2.11.                         Collections and Allocations.

 

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

 

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

 

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

 

61

 

(d)                         Investment
of Funds.  Until the occurrence of a
Termination Event, to the extent there are uninvested available amounts
deposited in the Collection Account on or before 3:00 p.m., all such amounts
shall be invested in Permitted Investments selected by the Servicer in written
instructions delivered to the Trustee and the Administrative Agent (which may
be in the form of standing instructions) that, subject to Section 2.2(d),
mature no later than the Business Day immediately preceding the next Payment
Date; to the extent that there are uninvested available funds deposited after
3:00 p.m. but prior to 4:00 p.m., such funds shall be swept into an overnight
funds investment which shall be a Permitted Investment selected by the Servicer
in written instructions delivered to the Trustee and the Administrative Agent
(which may be in the form of standing instructions).  From and after the occurrence of a
Termination Event, to the extent there are uninvested amounts in the Collection
Account (net of losses and investment expenses), all amounts may be invested in
Permitted Investments selected by the Trustee, or the Administrative Agent on
its behalf, that mature no later than the Business Day immediately preceding
the next Payment Date.  All earnings (net
of losses and investment expenses) thereon shall be retained or deposited into
the Collection Account and shall be applied on each Payment Date pursuant to
the provisions of Section 2.9 and Section 2.10.  All investments shall be subject to
availability.  Absent receipt of
instructions as contemplated herein, the Trustee shall have no obligation to
invest any funds.

 

Section
2.12.                         Payments, Computations, Etc.

 

(a)                          Unless
otherwise expressly provided herein, all amounts to be paid or deposited by the
Borrower or the Servicer hereunder shall be paid or deposited in accordance
with the terms hereof no later than 11:00 a.m. on the day when due in lawful
money of the United States in immediately available funds and any amount not
received before such time shall be deemed received on the next Business Day.  The Borrower or the Servicer, as applicable,
shall, to the extent permitted by law, pay to the Secured Parties interest on
all amounts not paid or deposited when due hereunder at 2.0% per annum above the Base Rate, payable on
demand; provided, however, that such interest rate shall not
at any time exceed the maximum rate permitted by Applicable Law.  Such interest shall be for the account of,
the applicable Secured Party.  All
computations of interest and other fees hereunder shall be made on the basis of
a year consisting of 360 days (other than calculations with respect to the Base
Rate which shall be based on a year consisting of 365 or 366 days, as
applicable) for the actual number of days elapsed.

 

(b)                         Whenever
any payment hereunder shall be stated to be due on a day other than a Business
Day, such payment shall be made on the next succeeding Business Day, and such
extension of time shall in such case be included in the computation of the
payment of Interest or any fee payable hereunder, as the case may be.  For avoidance of doubt, to the extent that
Available Funds are insufficient on any Payment Date to satisfy the full amount
of any Increased Costs pursuant to Section 2.9(a)(7) or Section
2.10(a)(7), such unpaid amounts shall remain due and owing and shall accrue
interest as provided in this Section 2.12 until repaid in full.

 

(c)                          If any
Advance requested by the Borrower and approved by the applicable Purchaser
pursuant to Section 2.2 or Section 2.3 is not, for any reason
made or effectuated, as the case may be, on the date specified therefor, the
Borrower shall indemnify the applicable

 

62

 

Purchaser against any
reasonable loss, cost or expense incurred by the applicable Purchaser
including, without limitation, any loss (including loss of anticipated profits,
net of anticipated profits in the redeployment of such funds in the manner
determined by each Purchaser), cost or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by the
applicable Purchaser to fund or maintain such Advance.

 

Section
2.13.                         [Reserved].

 

Section
2.14.                         Fees.

 

(a)                          The
Servicer on behalf of the Borrower shall pay in accordance with Section
2.9(a)(5) and Section 2.10(a)(5), as applicable, to each applicable
Purchaser Agent, monthly in arrears, the applicable Program Fee and the
applicable Commitment Fee.

 

(b)                         The
Servicer shall be entitled to the Servicing Fee in accordance with Section
2.9(a)(4) and Section 2.10(a)(4), as applicable.

 

(c)                          The
Backup Servicer shall be entitled to receive the Backup Servicing Fee and
Transition Expenses, if applicable, in accordance with Section 2.9(a)(2)
and Section 2.10(a)(2), as applicable.

 

(d)                         The
Trustee shall be entitled to receive the Trustee Fee in accordance with Section
2.9(a)(2) and Section 2.10(a)(2), as applicable.

 

(e)                          The
Borrower shall pay to Dechert LLP as counsel to the Administrative Agent, on
the Closing Date, its reasonable estimated fees and out-of-pocket expenses and
shall pay all additional reasonable fees and out-of-pocket expenses of Dechert
LLP within 30 Business Days after receiving an invoice for such amounts and in
no event later than April 23, 2005.

 

Section
2.15.                         Increased Costs; Capital
Adequacy; Illegality.

 

(a)                          If
either (i) the introduction of or any change (including, without limitation,
any change by way of imposition or increase of reserve requirements) in or in
the interpretation of any Applicable Law or (ii) the compliance by an Affected
Party with any guideline or request from any central bank or other Governmental
Authority (whether or not having the force of law), shall (a) subject an
Affected Party to any Tax (except for Taxes on the overall net income of such
Affected Party), duty or other charge with respect to any ownership interest in
the Collateral, or any right or obligation to make Advances hereunder, or on
any payment made hereunder, (b) impose, modify or deem applicable any reserve
requirement (including, without limitation, any reserve requirement imposed by
the Board of Governors of the Federal Reserve System, but excluding any reserve
requirement, if any, included in the determination of Interest), special
deposit or similar requirement against assets of, deposits with or for the
amount of, or credit extended by, any Affected Party or (c) impose any other
condition affecting the ownership interest in the Collateral conveyed to the
Purchasers hereunder or any Affected Party’s rights hereunder or under any
other Transaction Document or any Liquidity Agreement, the result of which is
to increase the cost to any Affected Party or to reduce the amount of any sum
received or receivable by an Affected Party under this Agreement, under any
other Transaction Document or any Liquidity Agreement, then within ten days
after

 

63

 

demand by such Affected Party
(which demand shall be accompanied by a statement setting forth the basis for
such demand), the Borrower shall pay directly to such Affected Party such
additional amount or amounts as will compensate such Affected Party for such
additional or increased cost incurred or such reduction suffered.

 

(b)                         If either
(i) the introduction of or any change in or in the interpretation of any law,
guideline, rule, regulation, directive or request or (ii) compliance by any
Affected Party with any law, guideline, rule, regulation, directive or request
from any central bank or other governmental authority or agency (whether or not
having the force of law), including, without limitation, compliance by an Affected
Party with any request or directive regarding capital adequacy, has or would
have the effect of reducing the rate of return on the capital of any Affected
Party as a consequence of its obligations hereunder or arising in connection
herewith to a level below that which any such Affected Party could have
achieved but for such introduction, change or compliance (taking into
consideration the policies of such Affected Party with respect to capital
adequacy) by an amount deemed by such Affected Party to be material, then from
time to time, within ten days after demand by such Affected Party (which demand
shall be accompanied by a statement setting forth the basis for such demand),
the Borrower shall pay directly to such Affected Party such additional amount or
amounts as will compensate such Affected Party for such reduction.  For the avoidance of doubt, if the issuance
of Interpretation No. 46 (and/or any amendment or supplement thereto or to
Statement of Financial Accounting Standards No. 140) by the Financial
Accounting Standards Board or any other change in accounting standards or the
issuance of any other pronouncement, release or interpretation, causes or
requires the consolidation of all or a portion of the assets and liabilities of
the Originator or Borrower or any Purchaser with the assets and liabilities of
the Administrative Agent, any Purchaser Agent, any Purchaser or any Liquidity
Bank or shall otherwise impose any loss, cost, expense, reduction of return on
capital or other loss, such event shall constitute a circumstance on which such
Affected Party may base a claim for reimbursement under this Section 2.15.

 

(c)                          If as a
result of any event or circumstance similar to those described in clause (a) or
(b) of this Section 2.15, any Affected Party is required to compensate a
bank or other financial institution providing liquidity support, credit
enhancement or other similar support to such Affected Party in connection with
this Agreement or the funding or maintenance of Advances hereunder, then within
ten days after demand by such Affected Party, the Borrower shall pay to such
Affected Party such additional amount or amounts as may be necessary to
reimburse such Affected Party for any amounts payable or paid by it.

 

(d)                         In
determining any amount provided for in this Section 2.15, the Affected
Party may use any reasonable averaging and attribution methods.  Any Affected Party making a claim under this Section
2.15 shall submit to the Servicer a written description as to such
additional or increased cost or reduction and the calculation thereof, which
written description shall be conclusive absent manifest error.

 

(e)                          If the
(a) Purchaser shall notify its Purchaser Agent that a Eurodollar Disruption
Event as described in clause (a) of the definition of “Eurodollar
Disruption Event” has occurred, the applicable Purchaser Agent or the
Administrative Agent shall in turn so notify the Borrower, whereupon all
Advances Outstanding of the affected Purchaser in respect of which

 

64

 

Interest accrues at the
Adjusted Eurodollar Rate shall immediately be converted into Advances
Outstanding in respect of which Interest accrues at the Base Rate.

 

(f)                            Failure
or delay on the part of any Affected Party to demand compensation pursuant to
this Section 2.15 shall not constitute a waiver of such Affected Party’s
right to demand or receive such compensation.

 

Section
2.16.                         Taxes.

 

(a)                          All
payments made by an Obligor in respect of a Loan and all payments made by the
Borrower or made by the Servicer on behalf of the Borrower under this Agreement
will be made free and clear of and without deduction or withholding for or on
account of any Taxes.  If any Taxes are
required to be withheld from any amounts payable to any Indemnified Party, then
the amount payable to such Person will be increased (the amount of such
increase, the “Additional Amount”) such that every net payment made
under this Agreement after withholding for or on account of any Taxes
(including, without limitation, any Taxes on such increase) is not less than
the amount that would have been paid had no such deduction or withholding been
made.  The foregoing obligation to pay
Additional Amounts with respect to payments required to be made by the Borrower
or Servicer under this Agreement will not, however, apply with respect to net
income or franchise taxes imposed on any Indemnified Party by a taxing
jurisdiction in which any such Person is organized, conducts business or is
paying taxes (as the case may be).

 

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

 

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

 

(d)                         If a
Purchaser is not created or organized under the laws of the United States or a
political subdivision thereof, such Purchaser shall deliver to the Borrower,
with a copy to the Administrative Agent, (i) within 15 days after the date
hereof, two (or such other number as may from time to time be prescribed by
Applicable Law) duly completed copies of IRS Form W-8BEN or Form W-8ECI (or any
successor forms or other certificates or statements that may be required from
time to time by the relevant United States taxing authorities or Applicable
Law), as appropriate, to permit the Borrower to make payments hereunder for the
account of such Purchaser without deduction or withholding of United States
federal income or similar Taxes and (ii) upon the obsolescence of or after the
occurrence of any event requiring a change in, any form or certificate
previously delivered pursuant to this Section 2.16(d), copies (in such
numbers as may from time to time be prescribed by Applicable Law or
regulations) of such additional, amended or successor forms, certificates or
statements as may be required under

 

65

 

Applicable Law to permit the
Borrower or the Servicer to make payments hereunder for the account of such
Purchaser without deduction or withholding of United States federal income or
similar Taxes.

 

(e)                          If, in
connection with an agreement or other document providing liquidity support,
credit enhancement or other similar support to the Purchasers in connection
with this Agreement or the funding or maintenance of Advances hereunder, the
Purchasers are required to compensate a bank or other financial institution in
respect of Taxes under circumstances similar to those described in this Section
2.16, then, within ten days after demand by each applicable Purchaser, the
Servicer shall pay (or to the extent the Servicer does not make such payment
the Borrower shall pay) to each applicable Purchaser such additional amount or
amounts as may be necessary to reimburse each such Purchaser for any amounts
paid by them.

 

(f)                            Without
prejudice to the survival of any other agreement of the Borrower and the
Servicer hereunder, the agreements and obligations of the Borrower and the
Servicer contained in this Section 2.16 shall survive the termination of
this Agreement.

 

Section
2.17.                         Assignment of the Sale
Agreement.

 

The Borrower
hereby assigns to the Trustee, for the benefit of the Secured Parties
hereunder, all of the Borrower’s right, title and interest in and to (but none
of its obligations) under the Sale Agreement and any UCC financing statements
filed under or in connection therewith. 
In furtherance and not in limitation of the foregoing, the Borrower
hereby assigns to the Trustee, for the benefit of the Secured Parties, its
right to indemnification under Article IX of the Sale Agreement.  The Borrower confirms that the Trustee on
behalf of the Secured Parties shall have the sole right to enforce the Borrower’s
rights and remedies under the Sale Agreement and any UCC financing statements
filed under or in connection therewith for the benefit of the Secured Parties.

 

Section
2.18.                         Substitution and Repurchase
of Loans.

 

(a)                          Substitution
of Loans.  On any day prior to the occurrence
of a Termination Event (and after the Termination Date at the sole discretion
of the Administrative Agent), the Borrower may, subject to the conditions set
forth in this Section 2.18 and subject to the other restrictions
contained herein, replace any Loan with one or more Eligible Loans (each, a “Substitute
Loan”); provided that no such
replacement shall occur unless each of the following conditions is satisfied as
of the date of such replacement and substitution:

 

(i)                                                     the
Borrower has recommended to the Administrative Agent (with a copy to the
Trustee) in writing that the Loan to be replaced should be replaced because it
is a Warranty Loan (each a “Replaced Loan”);

 

(ii)  each Substitute Loan is an
Eligible Loan on the date of substitution;

 

(iii)                                               after
giving effect to any such substitution, the Availability is greater than or
equal to $0;

 

66

 

(iv)                                              solely
in the case of substitutions pursuant to Section 2.18(b), the sum of the
Outstanding Loan Balances of such Substitute Loans shall be equal to or greater
than the sum of the Outstanding Loan Balances of the Replaced Loans;

 

(v)                                                                                                 solely
in the case of substitutions pursuant to Section 2.18(b), such
Substitute Loans, at the time of substitution by the Borrower, shall not cause
the Weighted Average Life of the Loans included in the Borrowing Base to
increase by more than .25 years;

 

(vi)                                              all
representations and warranties of the Borrower contained in Section 4.1
and Section 4.2 shall be true and correct as of the date of substitution
of any such Substitute Loan;

 

(vii)                                           the
substitution of any Substitute Loan does not cause a Termination Event or
Unmatured Termination Event to occur;

 

(viii)                                        [Reserved];

 

(ix)                                                [Reserved];

 

(x)                                                   the
Borrower shall deliver to the Administrative Agent on the date of such
substitution a certificate of a Responsible Officer certifying that each of the
foregoing is true and correct as of such date;

 

(xi)                                                each
Loan that is replaced pursuant to the terms of this Section 2.18 shall
be substituted only with another Loan that meets the foregoing conditions; and

 

(xii)                                             No
selection procedure adverse to the interests of the Administrative Agent, the
Purchaser Agents or the Secured Parties was utilized by the Borrower in the
selection of the Loan to be replaced or the Substitute Loan,

 

In addition,
the Borrower shall in connection with such substitution deliver to the Trustee
the related Required Loan Documents.  On
the date any such substitution is completed, the Trustee, for the benefit of
the Secured Parties, shall, automatically and without further action, release
and transfer to the Borrower, free and clear of any Lien created pursuant to
this Agreement, all of the right, title and interest of the Trustee, for the
benefit of the Secured Parties, in, to and under such Replaced Loan, but
without any representation and warranty of any kind, express or implied.

 

(b)                         Repurchase
or Substitution of Warranty Loans. 
If on any day a Loan is (or becomes) a Warranty Loan, no later than 10
Business Days following the earlier of knowledge by the Borrower of such Loan
becoming a Warranty Loan or receipt by the Borrower from the Administrative
Agent or the Servicer of written notice thereof, the Borrower shall either:

 

(i)                                                     make
a deposit to the Collection Account (for allocation pursuant to Section 2.9
or Section 2.10, as applicable) in immediately available funds in an
amount equal to the sum of (a) the Outstanding Loan Balance of such Loan, (b)
any outstanding Servicer Advances thereon, (c) any accrued and unpaid interest
thereon,

 

67

 

(d) all Hedge
Breakage Costs arising as a result thereof and owed to the relevant Hedge
Counterparty for any termination of one or more Hedge Transactions, in whole or
in part, as required by the terms of any Hedging Agreement and (e) any costs
and damages incurred by the Administrative Agent or by any Purchaser in
connection with any violation by such Loan of any predatory or abusive lending
law which is an Applicable Law (collectively, the “Retransfer Price”);
or

 

(ii)  subject to the satisfaction of
the conditions in Section 2.18(a), substitute for such Warranty Loan a
Substitute Loan.  The Borrowing Base
shall be reduced by the Outstanding Loan Balance of each such Warranty Loan
and, if applicable, increased by the Outstanding Loan Balance of each
Substitute Loan.  Upon confirmation of
the deposit of such Retransfer Price into the Collection Account or the
delivery by the Borrower of a Substitute Loan for each Warranty Loan (the date
of such confirmation or delivery, the “Retransfer Date”), such Warranty
Loan shall be removed from the Collateral and, as applicable, the Substitute
Loan shall be included in the Collateral. 
On the Retransfer Date of each Warranty Loan, the Trustee, for the
benefit of the Secured Parties, shall automatically and without further action
be deemed to transfer, assign and set-over to the Borrower, without recourse,
representation or warranty, all the right, title and interest of the Trustee,
for the benefit of the Secured Parties in, to and under such Warranty Loan and
all future monies due or to become due with respect thereto, the Related
Property, all Proceeds of such Warranty Loan, and Recoveries relating thereto,
all rights to security for any such Warranty Loan, and all Proceeds and
products of the foregoing.  The Trustee,
for the benefit of the Secured Parties, shall at the sole expense of the
Servicer, execute such documents and instruments of transfer as may be prepared
by the Servicer on behalf of the Borrower and take other such actions as shall
reasonably be requested by the Borrower to effect the transfer of such Warranty
Loan pursuant to this Section 2.18

 

(c)                          Sale
of Delinquent Loans or Charged-Off Loans.

 

(i)                                                     In
the event a Loan becomes either a Delinquent Loan or a Charged-Off Loan, the
Servicer, on behalf of the Borrower, may, prior to the occurrence of an
Unmatured Termination Event (other than an Unmatured Termination Event relating
to item (l) or (m) of Section 10.1) or a Termination Event, seek to
liquidate such defaulted assets by selling any such Loan (any such sale a “Defaulted
Loan Sale”); provided that
such sale is in accordance with the Servicing Standard and on arms-length
terms, fair market terms.  All proceeds
of any such sale, net of reasonable selling expenses of the Servicer, shall be
deposited into the Collection Account in immediately available funds and shall
be available to repay Advances Outstanding on the next Payment Date in
accordance with Section 2.9 or Section 2.10, as applicable.  Each Defaulted Loan Sale shall be subject to
the following terms and conditions:

 

(1)                                  At
least one Business Day prior to such Defaulted Loan Sale Date, the Borrower
shall have recommended to the Administrative Agent in writing that the related
Loan should be sold and shall have given the Administrative Agent (with a copy
to the

 

68

 

Trustee)
written notice of its intent to effect a Defaulted Loan Sale (each such notice,
a “Defaulted Loan Sale Notice”), specifying the Defaulted Loan Sale
Date, including a list of all Delinquent Loans and/or Charged-Off Loans to be
sold and assigned pursuant to such Defaulted Loan Sale, and the purchase price
therefor, and attaching a completed Borrowing Base Certificate;

 

(2)                                  Any
Defaulted Loan Sale shall be made by the Borrower to an unaffiliated third
party purchaser in a transaction in which the Borrower makes no
representations, warranties or covenants and provides no indemnification for
the benefit of any other party to the Defaulted Loan Sale (other than any
representations, warranties or covenants relating to the Borrower’s ownership
of or title to the Loan that is the subject of the Defaulted Loan Sale that are
standard and customary in connection with such a sale or for which the
Originator has agreed to fully indemnify the Borrower);

 

(3)                                  After
giving effect to the Defaulted Loan Sale and the assignment to the Borrower of
the Collateral on any Defaulted Loan Sale Date, (a) the Availability shall be
equal to or greater than zero, (b) the representations and warranties contained
in Section 4.1 hereof shall continue to be correct in all material
respects, except to the extent relating to an earlier date, and (c) neither an
Unmatured Termination Event nor a Termination Event shall have resulted; and

 

(ii)  In connection with any Defaulted
Loan Sale, following receipt into the Collection Account of the amounts
referred to in paragraph (i) above and receipt by the Trustee of a
certificate of the Servicer that such amounts have been paid and all conditions
precedent herein to such Defaulted Loan Sale have been satisfied, there shall
be sold and assigned to the Borrower (for further sale to a third-party
unaffiliated with the Borrower, the Originator or the Servicer) without
recourse, representation or warranty all of the right, title and interest of
the Administrative Agent, the Trustee, the Purchaser Agents, the Purchasers and
the Secured Parties in, to and under the portion of the Collateral so
retransferred and such portion of the Collateral so retransferred shall be
released from the Lien of this Agreement (subject to the requirements of clause
(3) above).

 

(iii)                                               The
Originator hereby agrees to pay the reasonable legal fees and expenses of the
Administrative Agent, the Trustee, each Purchaser Agent and the Secured Parties
in connection with any Defaulted Loan Sale (including, but not limited to,
expenses incurred in connection with the release of the Lien of the
Administrative Agent, the Trustee, the Secured Parties and any other party
having an interest in the Collateral in connection with such Defaulted Loan
Sale).

 

(iv)                                              In
connection with any Defaulted Loan Sale, on the related Defaulted Loan Sale
Date, the Trustee shall, at the expense of the Borrower (i) execute such
instruments of release with respect to the portion of the Collateral to be
retransferred to the Borrower, in recordable form if necessary, in favor of the
Borrower as the Borrower may reasonably request, (ii) deliver any portion of
the Collateral to be retransferred to the Borrower in its possession to the
Borrower and (iii) otherwise take such actions as the Borrower or the
Administrative Agent may determine are

 

69

 

necessary and
appropriate to release the Lien of the Trustee and the Secured Parties on the
portion of the Collateral to be retransferred to the Borrower and release and
deliver to the Borrower such portion of the Collateral to be retransferred to
the Borrower.

 

(v)                                                                                                 Unless
and until a Charged-Off Loan is sold pursuant to this Section 2.18(c),
the Servicer shall pursue such other resolution strategies available hereunder
with respect to such Charged-Off Loan, including, without limitation, workout
and foreclosure, as the Servicer may deem appropriate and consistent with the
Credit Policy and the Servicing Standard, in each case with a view towards the
maximization of the recovery on such Loan to the Secured Parties (as a
collective whole) on a present value basis.

 

(vi)                                              The
Servicer shall act on behalf of the Secured Parties in negotiating and taking
any other action necessary or appropriate in connection with any Defaulted Loan
Sale, including the collection of all amounts payable in connection therewith.

 

(vii)                                           A
Delinquent Loan or Charged-Off Loan may be sold or purchased only on the terms
and subject to the conditions set forth in this Section 2.18.

 

(d)                         Notwithstanding
anything in this Section 2.18, Section 2.19 or Section 2.20,
the Borrower shall not, and the Servicer shall not on the Borrower’s behalf,
purchase, sell or substitute any Loan with the primary purpose of recognizing
gain or decreasing losses on such Loan or in any manner that would cause the
Borrower not to be in compliance with the requirements of Rule 3a-7 under the
Investment Company Act of 1940, as amended.

 

Section
2.19.                         Optional Sales.

 

(a)                          Prior to
the occurrence of an Unmatured Termination Event or a Termination Event, on any
Optional Sale Date, the Borrower shall have the right to prepay all or a
portion of the Advances Outstanding in connection with the sale and assignment
to the Borrower by the Trustee, on behalf of the Secured Parties, of all or a
portion of the Loans, as the case may be in connection with a Permitted
Securitization or a Permitted Refinancing (each, an “Optional Sale”),
subject to the following terms and conditions:

 

(i)                                                     The
Borrower shall have given the Administrative Agent (with a copy to the Trustee)
at least 45 Business Days’ prior written notice of its intent to effect an
Optional Sale in connection with a Permitted Securitization or a Permitted
Refinancing, unless such notice requirement is waived or reduced by the
Administrative Agent;

 

(ii)  Any Optional Sale shall be in
connection with a Permitted Securitization or a Permitted Refinancing;

 

(iii)                                               Unless
an Optional Sale is to be effected on a Payment Date (in which case the
relevant calculations with respect to such Optional Sale shall be reflected on
the applicable Servicing Report), the Servicer shall deliver to the

 

70

 

Administrative
Agent (with a copy to the Trustee) a certificate and evidence to the reasonable
satisfaction of the Administrative Agent (which evidence may consist solely of
a certificate from the Servicer) that the Borrower shall have sufficient funds
on the related Optional Sale Date to effect the contemplated Optional Sale in
accordance with this Agreement.  In
effecting an Optional Sale, the Borrower may use the Proceeds of sales of the
Loans to repay all or a portion of the Aggregate Unpaids;

 

(iv)                                              After
giving effect to the Optional Sale and the assignment to the Borrower of all or
a portion of the Loans, as the case may be, on any Optional Sale Date, (a) the
Availability shall be greater than or equal to $0, (b) the representations and
warranties contained in Section 4.1 hereof shall continue to be correct,
except to the extent relating to an earlier date and (c) neither an Unmatured
Termination Event nor a Termination Event shall have resulted from the Optional
Sale;

 

(v)                                                                                                 On
the related Optional Sale Date, the Administrative Agent, each Purchaser Agent
on behalf of the applicable Purchaser, the Hedge Counterparties, the Trustee
and the Backup Servicer, as applicable, shall have received, as applicable, in
immediately available funds, an amount equal to the sum of (a) the portion of
the Advances Outstanding to be repaid (that are attributable to the Collateral
to be sold by the Borrower in connection with such Optional Sale) plus
(b) an amount equal to all unpaid Interest to the extent reasonably determined
by the Administrative Agent and the Purchaser Agents to be attributable to that
portion of the Advances Outstanding to be repaid in connection with the
Optional Sale plus (c) an aggregate amount equal to the sum of all other
amounts due and owing to the Administrative Agent, the Trustee, the Backup
Servicer, the Purchaser Agents, each applicable Purchaser, the Affected
Parties, the Indemnified Parties and the Hedge Counterparties, as applicable,
under this Agreement and the other Transaction Documents, to the extent accrued
to such date and to accrue thereafter to the next Payment Date and attributed
to that portion of the Advances Outstanding to be repaid in connection with the
Optional Sale; provided that the
Trustee, the Administrative Agent and each Purchaser Agent shall have the right
solely in connection with a Permitted Securitization or Permitted Refinancing
to determine whether the amount paid (or proposed to be paid) by the Borrower
on the Optional Sale Date is sufficient to satisfy the requirements of clauses
(a) through (c) and is sufficient to reduce the Advances
Outstanding to the extent requested by the Borrower in connection with the
Optional Sale;

 

(vi)                                              On
or prior to each Optional Sale Date, the Borrower shall have delivered to the
Administrative Agent a list specifying all Loans to be sold and assigned
pursuant to such Optional Sale; and

 

(vii)                                           No
selection procedure adverse to the interests of the Administrative Agent, the
Purchaser Agents or the Secured Parties shall have been utilized by the
Borrower in the selection of the Loan to be sold and assigned pursuant to such
Optional Sale.

 

71

 

(b)                         In
connection with any Optional Sale, upon receipt by the Administrative Agent,
the Purchaser Agents, the Hedge Counterparties, the Trustee and the Backup
Servicer, as applicable, of the amounts referred to in clause (a)(v)
above, there shall be sold and assigned to the Borrower without recourse,
representation or warranty all of the right, title and interest of the Trustee,
for the benefit of the Secured Parties, in, to and under the portion of the
Collateral so retransferred and such portion of the Collateral so retransferred
shall be released from the Lien of this Agreement.

 

(c)                          The
Originator hereby agrees to pay the reasonable legal fees and expenses of the
Administrative Agent, each Purchaser Agent and the other Secured Parties in
connection with any Optional Sale (including, but not limited to, expenses
incurred in connection with the release of the Lien of the Trustee on behalf of
the Secured Parties and any other party having an interest in the Collateral in
connection with such Optional Sale).

 

(d)                         In
connection with any Optional Sale, on the related Optional Sale Date, the
Trustee, on behalf of the Secured Parties, shall, at the expense of the
Borrower (i) execute such instruments of release in favor of the Borrower with
respect to the portion of the Collateral to be retransferred to the Borrower,
as the Borrower may reasonably request (in recordable form if necessary and, in
each case, without recourse), (ii) deliver any portion of the Collateral to be
retransferred to the Borrower in its possession to the Borrower and (iii)
otherwise take such actions, and cause or permit the Trustee to take such
actions, as are necessary and appropriate to release the Lien of the Trustee
and the Secured Parties on the portion of the Collateral to be retransferred to
the Borrower and release and deliver to the Borrower such portion of the
Collateral to be retransferred to the Borrower.

 

Section
2.20.                         RIC/BDC Sales.

 

(a)                          Prior to
the occurrence of a Termination Event, on any RIC/BDC Sale Date, the Borrower
shall have the right to prepay all or a portion of the Advances Outstanding in
connection with the sale and assignment to the Borrower by the Trustee, for the
benefit of the Secured Parties, of one or more Loans (each, a “RIC/BDC Sale”),
subject to the following terms and conditions:

 

(i)                                                     At
least one Business Day prior to such RIC/BDC Sale Date, the Borrower shall have
recommended to the Administrative Agent in writing that the related Loan should
be sold and shall have given the Administrative Agent (with a copy to the
Trustee) written notice of its intent to effect a RIC/BDC Sale (each such
notice, a “RIC/BDC Sale Notice”), specifying the RIC/BDC Sale Date,
including a list of all Loans to be sold and assigned pursuant to such RIC/BDC
Sale and demonstrating that after such RIC/BDC Sale, the RIC/BDC Requirements
shall be satisfied;

 

(ii) Any RIC/BDC
Sale shall be made by the Borrower to an unaffiliated third party purchaser in
a transaction (x) in accordance with the Servicing Standard, (y) reflecting
arms-length market terms and (z) in which the Borrower makes no representations,
warranties or covenants and provides no indemnification for the benefit of any
other party to the RIC/BDC Sale (other than

 

72

 

any
representations, warranties or covenants relating to the Borrower’s ownership
of or title to the Loan that is the subject of the Defaulted Loan Sale that are
standard and customary in connection with such a sale or for which the
Originator has agreed to fully indemnify the Borrower);

 

(iii)                                               The
Servicer shall deliver to the Administrative Agent (with a copy to the Trustee)
a completed Borrowing Base Certificate and other evidence to the reasonable
satisfaction of the Administrative Agent that (x) the RIC/BDC Requirements are
not satisfied prior to the related RIC/BDC Sale and after such sale the RIC/BDC
Requirements shall be satisfied or the extent of compliance with the RIC/BDC
Requirements will be improved, (y) the Borrower shall have sufficient funds on
the related RIC/BDC Sale Date to effect the contemplated RIC/BDC Sale in
accordance with this Agreement (unless an RIC/BDC Sale is to be effected on a
Payment Date, in which case there must be sufficient Available Funds to effect
the contemplated RIC/BDC Sale in accordance with the terms of this Agreement),
and (z) the sum of the Outstanding Loan Balances of all Loans that have been
sold pursuant to RIC/BDC Sales during the 12 month period immediately preceding
the proposed date of sale (or such lesser number of months as shall have
elapsed as of such date) does not exceed 20% of the Facility Amount;

 

(iv)                                              After
giving effect to the RIC/BDC Sale and the assignment to the Borrower of the
related Collateral on any RIC/BDC Sale Date, (a) each of the Availability and
the Pre-Funded Availability shall be equal to or greater than zero, (b) the
representations and warranties contained in Section 4.1 hereof shall
continue to be correct in all material respects, except to the extent relating
to an earlier date, and (c) neither an Unmatured Termination Event nor a
Termination Event shall have resulted;

 

(v)                                                 On
the related RIC/BDC Sale Date, the Trustee on behalf of the Secured Parties
shall have received, into the Collection Account, in immediately available
funds, an amount equal to the sum of (a) the portion of the Advances
Outstanding to be prepaid that are attributable to the Collateral to be sold by
the Borrower pursuant to this Section 2.20  plus (b) an amount
equal to all unpaid Interest to the extent reasonably determined by the
Administrative Agent and the Purchaser Agents to be attributable to that
portion of the Advances Outstanding to be paid in connection with the RIC/BDC
Sale plus (c) an aggregate amount equal to the sum of all other amounts
due and owing to the Administrative Agent, the Trustee and the Backup Servicer,
the Purchaser Agents, the applicable Purchaser, any other Affected Parties and
the Hedge Counterparties, as applicable, under this Agreement and the other
Transaction Documents, to the extent accrued to such date and to accrue to the
next Payment Date (including, without limitation, Breakage Costs, Hedge
Breakage Costs and any other payments owing to the Hedge Counterparties in
respect of the termination of any Hedge Transaction) in each case, to the
extent attributable to the Collateral to be sold by the Borrower pursuant to
this Section 2.20; provided
that the Trustee, the Administrative Agent and each Purchaser Agent shall have
the right to determine whether the amount paid (or proposed to be paid) by the
Borrower on the RIC/BDC Sale Date is sufficient to satisfy such

 

73

 

requirements
and is sufficient to reduce the Advances Outstanding to the extent requested by
the Borrower in connection with the RIC/BDC Sale; provided, further,
that any proceeds of such RIC/BDC Sale in excess of the amount so deposited
into the Collection Account also shall be deposited into the Collection Account
and used to prepay Advances Outstanding on such RIC/BDC Sale Date; and

 

(vi)                                              Any
RIC/BDC Sale shall be made only to the extent such sale is necessary (as
certified by the Servicer in the related RIC/BDC Sale Notice) to satisfy the
RIC/BDC Requirements.

 

(b)                         In
connection with any RIC/BDC Sale, following receipt by the Purchaser Agents of
the amounts referred to in clause (v) above, there shall be sold and
assigned to the Borrower (for further sale to a third-party unaffiliated with
the Borrower, the Originator or the Servicer) without recourse, representation
or warranty all of the right, title and interest of the Administrative Agent,
the Trustee, the Purchaser Agents, the Purchasers and the Secured Parties in,
to and under the portion of the Collateral so retransferred and such portion of
the Collateral so retransferred shall be released from the Lien of this
Agreement (subject to the requirements of clauses (iii) and (iv)
above).

 

(c)                          The
Originator hereby agrees to pay the reasonable legal fees and expenses of the
Administrative Agent, the Trustee, each Purchaser Agent and the Secured Parties
in connection with any RIC/BDC Sale (including, but not limited to, expenses
incurred in connection with the release of the Lien of the Administrative
Agent, the Trustee, the Secured Parties and any other party having an interest
in the Collateral in connection with such RIC/BDC Sale).

 

(d)                         In
connection with any RIC/BDC Sale, on the related RIC/BDC Sale Date, the Trustee
shall, at the expense of the Borrower (i) execute such instruments of release
with respect to the portion of the Collateral to be retransferred to the
Borrower, in recordable form if necessary, in favor of the Borrower as the
Borrower may reasonably request, (ii) deliver any portion of the Collateral to
be retransferred to the Borrower in its possession to the Borrower and (iii)
otherwise take such actions, and cause or permit the Trustee to take such
actions, as are necessary and appropriate to release the Lien of the Trustee
and the Secured Parties on the portion of the Collateral to be retransferred to
the Borrower and release and deliver to the Borrower such portion of the
Collateral to be retransferred to the Borrower.

 

74

 

ARTICLE III

CONDITIONS TO CLOSING; ADVANCES

 

Section
3.1.                                Conditions to
Closing and Initial Advance.

 

No Purchaser
shall be obligated to make any Advance hereunder on the occasion of the Initial
Advance, nor shall any Purchaser, the Administrative Agent, the Purchaser
Agents, the Backup Servicer or the Trustee be obligated to take, fulfill or
perform any other action hereunder, until the following conditions have been
satisfied, in the sole discretion of, or waived in writing by, the
Administrative Agent and each Purchaser Agent:

 

(a)                          Each
Transaction Document shall have been duly executed by, and delivered to, the
parties thereto, and the Administrative Agent and each Purchaser Agent shall
have received such other documents, instruments, agreements and legal opinions
as the Administrative Agent and each Purchaser Agent shall reasonably request
in connection with the transactions contemplated by this Agreement, including,
without limitation, all those specified in the schedule of condition precedent
documents attached hereto as Schedule I, each in form and substance
satisfactory to the Administrative Agent and each Purchaser Agent;

 

(b)                         The
Administrative Agent and each Purchaser Agent shall have received
(i) satisfactory evidence that the Borrower, the Originator and the
Servicer have obtained all required consents and approvals of all Persons,
including all requisite Governmental Authorities, to the execution, delivery
and performance of this Agreement and the other Transaction Documents to which
each is a party and the consummation of the transactions contemplated hereby or
thereby or (ii) an Officer’s Certificate from each of the Borrower, the
Originator and the Servicer in form and substance satisfactory to the
Administrative Agent and each Purchaser Agent affirming that no such consents
or approvals are required; it being understood
that the acceptance of such evidence or Officer’s Certificate shall in no way
limit the recourse of the Administrative Agent, each Purchaser Agent or any
Secured Party against the Originator, the Servicer, or the Borrower for a
breach of the Originator’s, the Borrower’s, and the Servicer’s representation
or warranty that all such consents and approvals have, in fact, been obtained;

 

(c)                          The
Borrower, the Servicer and the Originator shall each be in compliance in all
material respects with all Applicable Law and shall have delivered to the
Administrative Agent and each Purchaser Agent as to this and other closing
matters a certification in the form of Exhibits F-1 and F-2,
as applicable;

 

(d)                         The
Borrower and the Servicer shall have delivered to the Administrative Agent, the
Trustee and each Purchaser Agent duly executed Powers of Attorney in the form
of Exhibits G-1 and G-2, as applicable;

 

(e)                          The
Borrower and the Servicer shall each have delivered to the Administrative Agent
and each Purchaser Agent a certificate as to Solvency in the form of Exhibits
E-1 and E-2, as applicable;

 

75

 

(f)                            On or
prior to the date of the Initial Advance, each applicable Purchaser Agent shall
have received a duly executed copy of its Variable Funding Certificate, in a
principal amount equal to the Commitment of the related Purchaser; and

 

(g)                         On or
prior to the date of the Initial Advance, the Administrative Agent shall have
approved the Credit Policy.

 

Section
3.2.                                Conditions Precedent
to All Advances.

 

Each Advance
under this Agreement, each reduction in Advances Outstanding pursuant to Section
2.4(b) and each investment of amounts on deposit in the Principal
Collections Account pursuant to Section 2.9(b) (each, a “Transaction”)
shall be subject to the further conditions precedent that:

 

(a)                          (i)                                     With
respect to any Advance, the Servicer shall have delivered to the Administrative
Agent and each Purchaser Agent (with a copy to the Trustee and the Backup
Servicer) no later than 2:00 p.m. on the date that is one Business Day prior to
the related Funding Date:

 

(1)                                  a
Borrowing Notice in the form of Exhibit A-1 or A-1-PF, as
applicable, a Borrowing Base Certificate or a Pre-Funded Advance Certificate,
as applicable, a Loan List and, if applicable, a Servicing Report; and

 

(2)                                  a
Certificate of Assignment in the form of Exhibit A to the Sale Agreement
including Schedule I thereto and containing such additional information as may
be reasonably requested by the Administrative Agent and each Purchaser Agent;

 

(ii)                 with respect to any
reduction in Advances Outstanding pursuant to Section 2.4(b), the
Servicer shall have delivered to the Administrative Agent and each Purchaser
Agent (with a copy to the Trustee and the Backup Servicer) at least one Business
Day prior to any reduction of Advances Outstanding a Borrowing Notice in the
form of Exhibit A-2 and a Borrowing Base Certificate; and

 

(iii)                                               with
respect to any investment of amounts on deposit in the Principal Collections
Account or the Pre-Funding Account permitted by Section 2.9(b), the
Servicer shall have delivered to the Administrative Agent and each Purchaser
Agent (with a copy to the Trustee and the Backup Servicer), no later than 2:00
p.m. on the Business Day prior to any such investment, with respect to any
Advance, a Borrowing Notice in the form of Exhibit A-3 and a Borrowing
Base Certificate or a Pre-Funded Advance Certificate, as applicable, executed
by the Servicer and the Borrower;

 

(b)                         On the
date of such Transaction the following shall be true and correct and the
Borrower and the Servicer shall have certified in the related Borrowing Notice
that all conditions precedent to the requested Advance have been satisfied and
shall be deemed to have certified that:

 

76

 

(i)     The representations and
warranties contained in Section 4.1, Section 4.2 and Section
4.3 are true and correct on and as of such day as though made on and as of
such day and shall be deemed to have been made on such day (other than any
representation and warranty that is made as of a specific date);

 

(ii)  No event has occurred, or would
result from such Transaction, that constitutes a Termination Event or Unmatured
Termination Event;

 

(iii)                                               On
and as of such day, after giving effect to such Transaction, each of the
Availability and the Pre-Funded Availability shall be greater than or equal to
$0;

 

(iv)                                              On
and as of such day, the Borrower and the Servicer each has performed all of the
covenants and agreements contained in this Agreement to be performed by such
Person on or prior to such day;

 

(v)                                                 No
Applicable Law shall prohibit or enjoin the making of such Advance by any
Purchaser, the proposed reduction of Advances Outstanding, the proposed
reinvestment of Principal Collections or any other transaction contemplated
herein;

 

(c)                          The
Borrower shall have delivered to the Trustee (with a copy to the Backup
Servicer and the Administrative Agent) in the case of a Funded Advance, no
later than 2:00 p.m. one Business Day prior to the related Funding Date, a
faxed copy of the duly executed original promissory notes of the Loans (other
than in the case of Noteless Loans) and if any Loans are closed in escrow, a
certificate (in the form of Exhibit L) from the closing attorneys of
such Loans certifying the possession of the Required Loan Documents, provided, however, that, notwithstanding
the foregoing, the Borrower shall cause the Required Loan Documents to be in
the possession of the Trustee within two Business Days of any related Funding
Date as to any Additional Loans;

 

(d)                         The
Amortization Period shall not have commenced;

 

(e)                          On the
date of such Transaction, the Administrative Agent and each Purchaser Agent
shall have received such other approvals, opinions or documents as the
Administrative Agent and each Purchaser Agent may reasonably require;

 

(f)                            The
Administrative Agent shall have received from the Borrower all hedging
confirmations required in connection with such Transaction;

 

(g)                         The
Borrower and Servicer shall have delivered to the Administrative Agent and each
Purchaser Agent all reports required to be delivered as of the date of such
Transaction including, without limitation, all deliveries required by Section
2.2 or Section 2.3, as applicable;

 

(h)                         The
Borrower shall have paid all fees required to be paid, including all fees
required hereunder and under the applicable Purchaser Fee Letters and shall
have reimbursed the Purchasers, the Administrative Agent and each Purchaser
Agent for all fees, costs and expenses of closing the transactions contemplated
hereunder and under the other Transaction

 

77

 

Documents,
including the reasonable attorney fees and any other legal and document
preparation costs incurred by the Purchasers, the Administrative Agent and each
Purchaser Agent; and

 

(i)                             The
Borrower shall have delivered to the Administrative Agent and each Purchaser
Agent (with a copy to the Trustee) an Officer’s Certificate (which may be part
of the Borrowing Notice) in form and substance reasonably satisfactory to the
Administrative Agent and each Purchaser Agent certifying that each of the
foregoing conditions precedent has been satisfied.

 

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

 

Section
3.3.                                Custodianship;
Transfer of Loans and Permitted Investments.

 

(a)                          The
Trustee shall hold all Certificated Securities (whether Loans or Permitted
Investments) and Instruments in physical form at the office of the Trustee in
Boston, Massachusetts or the office of the Trustee in Florence, South Carolina
at the addresses specified in Schedule III hereto.  Any successor Trustee shall be a state or
national bank or trust company which is not an Affiliate of the Borrower and
which is a Qualified Institution.

 

(b)                         Each time
that the Borrower (or the Servicer on behalf of the Borrower) shall direct or
cause the acquisition of any Permitted Investment, the Borrower shall (or the
Servicer on behalf of the Borrower), if such Permitted Investment has not
already been transferred in accordance with its Underlying Instruments
(including obtaining any necessary consents) to the Collection Account, cause
the transfer of such Permitted Investment in accordance with its Underlying
Instruments (including obtaining any necessary consents) to the Trustee to be
held in the Collection Account for the benefit of the Secured Parties in
accordance with the terms of this Agreement. 
The security interest of the Trustee in the funds or other property
utilized in connection with such acquisition shall, immediately and without
further action on the part of the Trustee, be released.  The security interest of the Trustee shall
nevertheless come into existence and continue in the Permitted Investment so
acquired, including all rights of the Borrower in and to any contracts related
to and proceeds of such Permitted Investment.

 

(c)                          The
Borrower (or the Servicer on behalf of the Borrower) shall cause all Permitted
Investments acquired by the Borrower to be transferred to the Trustee for
credit to the appropriate Account, in each case for the benefit of the Secured
Parties, and shall cause all Loans acquired by the Borrower to be delivered to
the Trustee, for the benefit of the Secured Parties, by one of the following
means (and shall take any and all other actions necessary to create in favor of
the Trustee, for the benefit of the Secured Parties, a valid, perfected, first
priority security interest in each Loan and Permitted Investment granted to the
Administrative

 

78

 

Agent under laws and
regulations (including without limitation Articles 8 and 9 of the UCC, as
applicable) in effect at the time of such grant):

 

(i)                                                     in
the case of an Instrument or a Certificated Security represented by a Security
Certificate in registered form by having it specially Indorsed to the Trustee
or in blank by an effective Indorsement or registered in the name of the
Trustee and by (A) delivering such Instrument or Security Certificate to the
Trustee in the State of Massachusetts or South Carolina and (B) causing the
Trustee to maintain (on behalf of the Secured Parties) continuous possession of
such Instrument or Security Certificate in the State of Massachusetts or South
Carolina;

 

(ii)                                                  in
the case of an Uncertificated Security, by (A) causing the Trustee, for the
benefit of the Secured Parties, to become the registered owner of such
Uncertificated Security and (B) causing such registration to remain effective;

 

(iii)                                               in
the case of any Security Entitlement, by causing the Trustee, for the benefit
of the Secured Parties, to become the Entitlement Holder of such Security
Entitlement; and

 

(iv)                                              in
the case of general intangibles (including any loan not evidenced by an
Instrument) by (A) notifying the related Obligor thereunder of the transfer and
(B) filing, maintaining and continuing the effectiveness of, a financing
statement naming the Borrower as debtor and the Trustee as secured party and
describing the Loan or Permitted Investment (as the case may be) as the
collateral at the filing office of the Secretary of State for the State of
Delaware.

 

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

 

Section
4.1.                                Representations and
Warranties of the Borrower.

 

The Borrower
represents and warrants as follows as of the Closing Date, each Funding Date,
and as of each other date provided under this Agreement or the other
Transaction Documents on which such representations and warranties are required
to be (or deemed to be) made:

 

(a)                          Organization
and Good Standing.  The Borrower has
been duly organized, and is validly existing as a limited liability company in
good standing, under the laws of the State of Delaware, with all requisite
limited liability company power and authority to own or lease its properties
and conduct its business as such business is presently conducted, and had at
all relevant times, and now has all necessary power, authority and legal right
to acquire, own and sell the Collateral.

 

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

 

79

 

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

 

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

 

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

 

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

 

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

 

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

 

(i)                             Solvency.  The Borrower is not the subject of any
Insolvency Proceedings or Insolvency Event. 
The transactions under this Agreement and any other Transaction Document
to which the Borrower is a party do not and will not render the Borrower not
Solvent and the Borrower shall deliver to the Administrative Agent and each
Purchaser Agent on the Closing Date a certification in the form of Exhibit
E-1.

 

80

 

(j)                             Selection
Procedures.  No procedures adverse to
the interests of the Purchasers were utilized by the Borrower in identifying
and/or selecting the Loans in the Collateral.

 

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

 

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

 

(m)                       Security
Interest.

 

(i)                                                     This
Agreement creates a valid and continuing security interest (as defined in the
applicable UCC) in the Collateral in favor of the Trustee, on behalf of the
Secured Parties, which security interest is prior to all other Liens (except
for Permitted Liens), and is enforceable as such against creditors of and
purchasers from the Borrower;

 

(ii)                                                  the
Collateral is comprised of “instruments”, “security entitlements”, “general
intangibles”, “tangible chattel paper”, “accounts”, “certificated securities”, “uncertificated
securities” or “securities accounts” (each as defined in the applicable UCC)
and/or such other category of collateral under the applicable UCC as to which
the Borrower has complied with its obligations under this Section 4.1(m));

 

(iii)                                               with
respect to Collateral that constitute “security entitlements”:

 

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

 

(2)                                  the
Borrower has taken all steps necessary to cause the securities intermediary to
identify in its records the Trustee, for the benefit of the Secured Parties, as
the Person having a security entitlement against the securities intermediary in
each of the Accounts; and

 

(3)                                  the
Accounts are not in the name of any Person other than the Borrower, subject to
the lien of the Trustee, for the benefit of the Secured Parties.  The Borrower has not authorized or allowed
the securities intermediary of any Account to comply with

 

81

 

the
entitlement order of any Person other than the Trustee, for the benefit of the
Secured Parties, provided that,
until the Trustee delivers a notice of exclusive control under the Securities
Account Control Agreement, the Borrower and the Servicer may cause cash in the
Accounts to be invested in Permitted Investments.

 

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

 

(v)                                                 the
Borrower owns and has good and marketable title to the Collateral free and
clear of any Lien (other than Permitted Liens) of any Person;

 

(vi)                                              the
Borrower has received all consents and approvals required by the terms of any
Loan to the granting of a security interest in the Loans hereunder to the
Trustee, on behalf of the Secured Parties;

 

(vii)                                           the
Borrower has caused the filing of all appropriate financing statements in the
proper filing office in the appropriate jurisdictions under Applicable Law in
order to perfect the security interest in the Collateral and that portion of
the Loans in which a security interest may be perfected by filing granted to
the Trustee, on behalf of the Secured Parties, under this Agreement;

 

(viii)                                        other
than the security interest granted to the Trustee, on behalf of the Secured
Parties, pursuant to this Agreement, the Borrower has not pledged, assigned,
sold, granted a security interest in or otherwise conveyed any of the
Collateral.  The Borrower has not
authorized the filing of and is not aware of any financing statements against
the Borrower that include a description of collateral covering the Collateral
other than any financing statement (A) relating to the security interest
granted to the Borrower under the Sale Agreement, or (B) relating to the
closing of a Permitted Securitization contemplated by Section 2.19, or
(C) that has been terminated and/or fully and validly assigned to the Trustee
on or prior to the date hereof or (D) relating to the Collateral related to a
Senior Subordinated Loan or a Junior Subordinated Loan.  The Borrower is not aware of the filing of
any judgment or tax lien filings against the Borrower;

 

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

 

(x)                                                   other
than in the case of Noteless Loans, the Borrower has received, or subject to
the delivery requirements contained herein will receive, a written
acknowledgment from the Trustee that the Trustee or its bailee is holding the
underlying promissory notes that constitute or evidence the Loans solely on
behalf of and for the benefit of the Secured Parties;

 

(xi)                                                none
of the underlying promissory notes, or Loan Registers, as applicable, that
constitute or evidence the Loans has any marks or notations

 

82

 

indicating
that they have been pledged, assigned or otherwise conveyed to any Person other
than the Trustee, on behalf of the Secured Parties;

 

(xii)                                             with
respect to Collateral that constitutes a “certificated security,” such
certificated security has been delivered to the Trustee, on behalf of the
Secured Parties and, if in registered form, has been specially Indorsed to the
Trustee, for the benefit of the Secured Parties, or in blank by an effective
Indorsement or has been registered in the name of the Trustee, for the benefit
of the Secured Parties, upon original issue or registration of transfer by the
Borrower of such certificated security; and

 

(xiii)                                          with
respect to Collateral that constitutes an “uncertificated security”, that the
Borrower of such uncertificated security has registered the Administrative
Agent as the registered owner of such uncertificated security.

 

(n)                         Reports
Accurate.  All Servicing Reports (if
prepared by the Borrower, or to the extent that information contained therein
is supplied by the Borrower), information, exhibits, financial statements,
documents, books, records or reports furnished by the Borrower to the
Administrative Agent, the Trustee, each Purchaser Agent or any Purchaser in
connection with this Agreement are, as of their date, true, complete and
correct.

 

(o)                         Location
of Offices.  The Borrower’s location
(within the meaning of Article 9 of the UCC) is Delaware.  The office where the Borrower keeps all the
Records is at the address of the Borrower referred to in Section 13.2
hereof (or at such other locations as to which the notice and other
requirements specified in Section 5.2(g) shall have been
satisfied).  The Borrower’s Federal
Employee Identification Number is correctly set forth on Exhibit F-1.  The Borrower has not changed its name
(whether by amendment of its certificate of formation, by reorganization or
otherwise) or its jurisdiction of organization and has not changed its location
within the four months preceding the Closing Date.

 

(p)                         Concentration
Account.  The name and address of the
Concentration Account Bank, together with the account number of the
Concentration Account of the Originator at such Concentration Account Bank is
specified in Schedule II.  The
Concentration Account is the only account to which Obligors send Collections on
the Collateral.  Except as contemplated
by the Intercreditor Agreement, the Borrower has not granted any Person other
than the Administrative Agent and the Trustee an interest in the Concentration
Account.

 

(q)                         Tradenames.  The Borrower has no trade names, fictitious
names, assumed names or “doing business as” names or other names under which it
has done or is doing business.

 

(r)                            Sale
Agreement.  The Sale Agreement is the
only agreement pursuant to which the Borrower purchases Collateral.

 

(s)                          Value
Given.  The Borrower shall have given
reasonably equivalent value to the Originator in consideration for the transfer
to the Borrower of the Collateral under the Sale Agreement, no such transfer
has been made for or on account of an antecedent debt owed by the

 

83

 

Originator to
the Borrower, and no such transfer is or may be voidable or subject to
avoidance under any section of the Bankruptcy Code.

 

(t)                            Accounting.  Other than for tax and consolidated
accounting purposes, the Borrower will not account for or treat (whether in
financial statements or otherwise) the transactions contemplated hereby in any
manner other than as a sale of the Collateral by the Borrower to the Secured
Parties. Other than for tax and consolidated accounting purposes, the Borrower
will not account for or treat (whether in financial statements or otherwise)
the transactions contemplated by the Sale Agreement in any manner other than as
a sale of the Collateral by the Originator to the Borrower.

 

(u)                         Special
Purpose Entity.  The Borrower has not
and shall not:

 

(i)                                                     engage
in any business or activity other than the purchase and receipt of Collateral
and related assets from the Originator under the 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
from the Originator under the Sale Agreement and (b) incidental property as may
be necessary for the operation of the Borrower 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, without
in each case first obtaining the consent of the Administrative Agent and each
Purchaser Agent;

 

(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, or without the prior written consent of the Administrative Agent and
each Purchaser Agent, 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 without the consent of the
Administrative Agent and each Purchaser Agent;

 

(vi)                                              except
as permitted by this Agreement and the Intercreditor 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 to the Secured Parties hereunder or in
conjunction with a repayment of all Advances owed to the Purchasers, except for
trade payables in the ordinary course of its business; provided that, such debt is not evidenced
by a note and is paid when due;

 

84

 

(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;

 

(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
Borrower 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, cash and Permitted Investments);

 

(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;

 

85

 

(xx)                                              permit
any transfer (whether in any one or more transactions) of any direct or
indirect ownership interest in the Borrower to the extent it has the ability to
control the same, unless the Borrower delivers to the Administrative Agent and
each Purchaser Agent an acceptable non-consolidation opinion and the
Administrative Agent consents to such transfer;

 

(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;

 

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

 

(xxix)                                      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 Borrower, (c) any principal of the
Servicer, (d) any Affiliate of the Servicer, or (e) any Affiliate of any principal
of the Servicer; provided, however,
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);

 

(xxx)                                         fail
to provide that the unanimous consent of all members (including the consent of
the Independent Manager) is required for the Borrower 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 Borrower, (e) make any assignment for the benefit of
the Borrower’s creditors, (f) admit in writing its

 

86

 

inability to
pay its debts generally as they become due, or (g) take any action in
furtherance of any of the foregoing; and

 

(xxxi)                                      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.

 

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

 

(v)                         Investment
Company Act.  The Borrower is exempt
from the provisions of the 1940 Act.

 

(w)                       ERISA.  The present value of all benefits vested
under all “employee pension benefit plans,” as such term is defined in Section
3 of ERISA, maintained by the Borrower, or in which employees of the Borrower
are entitled to participate, as from time to time in effect (the “Pension
Plans”), does not exceed the value of the assets of the Pension Plan
allocable to such vested benefits (based on the value of such assets as of the
last annual valuation date).  No
prohibited transactions, accumulated funding deficiencies, withdrawals or
reportable events have occurred with respect to any Pension Plans that, in the
aggregate, could subject the Borrower to any material tax, penalty or other
liability.  No notice of intent to
terminate a Pension Plan has been filed, nor has any Pension Plan been
terminated under Section 4041(f) of ERISA, nor has the Pension Benefit Guaranty
Corporation instituted proceedings to terminate, or appoint a trustee to
administer a Pension Plan and no event has occurred or condition exists that
might constitute grounds under Section 4042 of ERISA for the termination of, or
the appointment of a trustee to administer, any Pension Plan.

 

(x)                           PUHCA.  The Borrower is not a “holding company” or a “subsidiary
holding company” of a “holding company” within the meaning of the Public
Utility Holding Company Act of 1935, as amended, or any successor statute.

 

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

 

(z)                           [Reserved].

 

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

 

(bb)                  Set-Off, etc.  No Loan has been compromised, adjusted,
extended, satisfied, subordinated (other than Senior Subordinated Loans and
Junior Subordinated Loans, and solely to the extent described and provided for
in the definition thereof), rescinded, set-off or modified

 

87

 

by the
Borrower, the Originator or the Obligor thereof, and no Collateral is subject
to compromise, adjustment, extension, satisfaction, subordination, rescission,
set-off, counterclaim, defense, abatement, suspension, deferment, deduction,
reduction, termination or modification, whether arising out of transactions
concerning the Collateral or otherwise, by the Borrower, the Originator or the
Obligor with respect thereto, except for amendments, extensions and
modifications, if any, to such Collateral otherwise permitted under Section
6.4(a) of this Agreement and in accordance with the Credit Policy and the
Servicing Standard.

 

(cc)                    Full
Payment.  As of the Funding Date
thereof, the Borrower has no knowledge of any fact which should lead it to
expect that any Loan will not be paid in full.

 

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

 

(ee)                    [Reserved].

 

(ff)                        Reaffirmation
of Representations and Warranties by the Borrower.  On each day that any Advance is made
hereunder, the Borrower shall be deemed to have certified that all
representations and warranties described in Section 4.1 are correct on
and as of such day as though made on and as of such day, except for any such
representations or warranties which are made as of a specific date.

 

(gg)                  [Reserved].

 

(hh)                  Environmental.

 

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

 

(ii)                                                  As
of Cut-Off Date for the Loan related to such Related Property, none of the
Borrower, the Originator nor the Servicer has received any written or verbal
notice of, or inquiry from any Governmental Authority regarding, any violation,
alleged violation, non-compliance, liability or potential liability regarding
environmental matters or compliance with Environmental Laws with regard to any
of the Related Property, nor does any such Person have knowledge or reason to
believe that any such notice will be received or is being threatened.

 

(ii)                          USA
PATRIOT Act.  Neither the Borrower
nor any Affiliate of the Borrower is (i) a country, territory, organization,
person or entity named on an Office of Foreign Asset Control (OFAC) list; (ii)
a Person that resides or has a place of business in a country or territory

 

88

 

named on such
lists or which is designated as a “Non-Cooperative Jurisdiction” by the
Financial Action Task Force on Money Laundering, or whose subscription funds
are transferred from or through such a jurisdiction; (iii) a “Foreign Shell
Bank” within the meaning of the USA PATRIOT Act, i.e., a foreign bank that does
not have a physical presence in any country and that is not affiliated with a
bank that has a physical presence and an acceptable level of regulation and
supervision; or (iv) a person or entity that resides in or is organized under
the laws of a jurisdiction designated by the United States Secretary of the
Treasury under Sections 311 or 312 of the USA PATRIOT Act as warranting special
measures due to money laundering concerns.

 

(jj)                          “Concentration
Account”:  The Concentration Account
is the only account to which Obligors send Collections on the Collateral.  The Concentration Account is subject only to
the interests of the parties to the Intercreditor Agreement.

 

The
representations and warranties in Section 4.1(m) shall survive the
termination of this Agreement.

 

Section
4.2.                                Representations and
Warranties of the Borrower Relating to the Agreement and the Collateral.

 

The Borrower
hereby represents and warrants, as of the Closing Date and as of each Cut-Off
Date:

 

(a)                          Valid
Transfer and Security Interest.  This
Agreement constitutes a valid transfer to the Trustee, for the benefit of the
Secured Parties, of all right, title and interest of the Borrower in, to and
under all of the Collateral, free and clear of any Lien of any Person claiming
through or under the Borrower or its Affiliates, except for Permitted
Liens.  If the conveyances contemplated
by this Agreement are determined to be transfers for security, then this
Agreement constitutes a grant of a security interest in all of the Collateral
to the Trustee, for the benefit of the Secured Parties, which upon the delivery
of the Required Loan Documents to the Trustee, the crediting of Loans to the
Accounts and the filing of the financing statements described in Section
4.1(m) and, in the case of Additional Loans on the applicable Cut-Off Date,
shall be a valid and first priority perfected security interest in Agents the
Loans forming a part of the Collateral and in that portion of the Loans in
which a security interest may be perfected by filing subject only to Permitted
Liens.  Neither the Borrower nor any
Person claiming through or under Borrower shall have any claim to or interest
in the Collection Account or any other Account and, if this Agreement
constitutes the grant of a security interest in such property, except for the
interest of Borrower in such property as a debtor for purposes of the UCC.

 

(b)                         Eligibility
of Collateral.  As of the Closing
Date and each Cut-Off Date, (i) the Loan List and the information contained in
each Borrowing Notice delivered pursuant to Section 2.2 or Section
2.3, as applicable, is an accurate and complete listing of all Collateral
as of the related Cut-Off Date and the information contained therein with
respect to the identity of such Collateral and the amounts owing thereunder is
true and correct as of the related Cut-Off Date, (ii) each such Loan included
in the Borrowing Base is an Eligible Loan and (iii) with respect to each such
item of Collateral, all consents, licenses, approvals or authorizations of or

 

89

 

registrations
or declarations of any Governmental Authority or any Person required to be
obtained, effected or given by the Borrower in connection with the transfer of
an ownership interest or security interest in such Collateral to the Trustee,
for the benefit of the Secured Parties, have been duly obtained, effected or
given and are in full force and effect.

 

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

 

Section
4.3.                                Representations and
Warranties of the Servicer.

 

The Servicer
represents and warrants as follows as of the Closing Date, each Funding Date
and as of each other date provided under this Agreement or the other
Transaction Documents on which such representations and warranties are required
to be (or deemed to be) made:

 

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

 

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

 

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

 

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

 

(e)                          No
Violation.  The consummation of the
transactions contemplated by this Agreement and the other Transaction Documents
to which it is a party and the fulfillment of the terms hereof and thereof will
not (i) conflict with, result in any breach of any of the terms and provisions
of, or constitute (with or without notice or lapse of time or both) a default
under, the Servicer’s articles of incorporation or by-laws or any Contractual
Obligation of the Servicer, (ii) result in the creation or imposition of any
Lien upon any of the Servicer’s properties pursuant to

 

90

 

the terms of
any such Contractual Obligation, other than this Agreement, or (iii) violate
any Applicable Law.

 

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

 

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

 

(h)                         Reports
Accurate.  All Servicer Certificates,
Servicing Reports, Borrowing Notices, Borrowing Base Certificates and other
written or electronic information, exhibits, financial statements, documents,
books, records or reports furnished by the Servicer to the Administrative
Agent, the Trustee, each Purchaser Agent or any Purchaser in connection with
this Agreement are, as of their date, accurate, true and correct.

 

(i)                             Credit
Policy and Servicing Standard.  The
Servicer has complied in all material respects with (i) the Credit Policy with
regard to the origination and underwriting of the Loans and (ii) the Servicing
Standard with regard to the servicing of the Loans.

 

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

 

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

 

(l)                             Solvency.  The Servicer is not the subject of any
Insolvency Proceedings or Insolvency Event. 
The transactions under this Agreement and any other Transaction Document
to which the Servicer is a party do not and will not render the Servicer not
Solvent and the Servicer shall deliver to the Administrative Agent and each
Purchaser Agent on the Closing Date a certification in the form of Exhibit
E-2.

 

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

 

91

 

(n)                         Exchange
Act Compliance; Regulations T, U and X. 
None of the transactions contemplated herein or the other Transaction
Documents (including, without limitation, the use of the Proceeds from the sale
of the Collateral) will violate or result in a violation of Section 7 of the
Exchange Act, or any regulations issued pursuant thereto, including, without
limitation, Regulations T, U and X of the Board of Governors of the Federal Reserve
System, 12 C.F.R., Chapter II.

 

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

 

(p)                         ERISA.  The present value of all benefits vested
under all “employee pension benefit plans,” as such term is defined in Section
3 of ERISA, maintained by the Servicer, or in which employees of the Servicer
are entitled to participate, as from time to time in effect (the “Pension
Plans”), does not exceed the value of the assets of the Pension Plan
allocable to such vested benefits (based on the value of such assets as of the
last annual valuation date).  No
prohibited transactions, accumulated funding deficiencies, withdrawals or
reportable events have occurred with respect to any Pension Plans that, in the
aggregate, could subject the Servicer to any material tax, penalty or other
liability.  No notice of intent to
terminate a Pension Plan has been filed, nor has any Pension Plan been
terminated under Section 4041(f) of ERISA, nor has the Pension Benefit Guaranty
Corporation instituted proceedings to terminate, or appoint a trustee to
administer, a Pension Plan and no event has occurred or condition exists that
might constitute grounds under Section 4042 of ERISA for the termination of, or
the appointment of a trustee to administer, any Pension Plan.

 

(q)                         [Reserved].

 

(r)                            Concentration
Account.  The name and address of the
Concentration Account Bank, together with the account number of the
Concentration Account of the Originator at the Concentration Account Bank, have
been sent to the Trustee and the Administrative Agent.  Subject to the terms of the Intercreditor
Agreement, the Servicer has not granted and shall not grant any Person other
than the Trustee an interest in the Concentration Account, other than any such
interest that has been terminated or fully and validly assigned to the Trustee
on or prior to the date hereof.

 

(s)                          USA
PATRIOT Act.  Neither the Servicer
nor any Affiliate of the Servicer is (i) a country, territory, organization,
person or entity named on an OFAC list; (ii) a Person that resides or has a
place of business in a country or territory named on such lists or which is
designated as a “Non-Cooperative Jurisdiction” by the Financial Action Task
Force on Money

 

92

 

Laundering, or
whose subscription funds are transferred from or through such a jurisdiction;
(iii) a “Foreign Shell Bank” within the meaning of the USA PATRIOT Act, i.e., a
foreign bank that does not have a physical presence in any country and that is
not affiliated with a bank that has a physical presence and an acceptable level
of regulation and supervision; or (iv) a person or entity that resides in or is
organized under the laws of a jurisdiction designated by the United States
Secretary of the Treasury under Sections 311 or 312 of the USA PATRIOT Act as
warranting special measures due to money laundering concerns.

 

(t)                            Environmental.

 

(i)                                                     With
respect to each item of Related Property, to the actual knowledge of a
Responsible Officer of the Servicer: (a) the related Obligor’s operations
comply in all material respects with all applicable Environmental Laws; (b)
none of the related Obligor’s operations is the subject of a Federal or state
investigation evaluating whether any remedial action, involving expenditures,
is needed to respond to a release of any Hazardous Materials into the
environment; and (c) the related Obligor does not have any material contingent
liability in connection with any release of any Hazardous Materials into the
environment.

 

(ii)                                                  The
Servicer has not received any written or verbal notice of, or inquiry from any
Governmental Authority regarding, any violation, alleged violation,
non-compliance, liability or potential liability regarding environmental
matters or compliance with Environmental Laws with regard to any of the Related
Property, nor does the Servicer, have knowledge or reason to believe that any
such notice will be received or is being threatened.

 

(u)                         Compliance
with Law.  The Servicer has complied
in all material respects with all Applicable Law to which it may be subject,
and no Loan in the Collateral contravenes in any material respect any
Applicable Law (including, without limitation, laws, rules and regulations
relating to licensing, truth in lending, fair credit billing, fair credit
reporting, equal credit opportunity, fair debt collection practices and
privacy).

 

(v)                         PUHCA.  The Servicer is not a “holding company” or a “subsidiary
holding company” of a “holding company” within the meaning of the Public
Utility Holding Company Act of 1935, as amended, or any successor statute.

 

Section
4.4.                                Representations and
Warranties of the Backup Servicer.

 

The Backup
Servicer in its individual capacity and as Backup Servicer represents and
warrants as follows:

 

(a)                          Organization;
Power and Authority.  It is a duly
organized and validly existing national banking association in good standing
under the laws of the United States.  It
has full corporate power, authority and legal right to execute, deliver and
perform its obligations as Backup Servicer under this Agreement.

 

(b)                         Due
Authorization.  The execution and
delivery of this Agreement and the consummation of the transactions provided
for herein have been duly authorized by all

 

93

 

necessary
association action on its part, either in its individual capacity or as Backup
Servicer, as the case may be.

 

(c)                          No
Conflict.  The execution and delivery
of this Agreement, the performance of the transactions contemplated hereby and
the fulfillment of the terms hereof will not conflict with, result in any
breach of its articles of incorporation or bylaws or any of the material terms
and provisions of, or constitute (with or without notice or lapse of time or
both) a default under any indenture, contract, agreement, mortgage, deed of
trust, or other instrument to which the Backup Servicer is a party or by which
it or any of its property is bound.

 

(d)                         No
Violation.  The execution and
delivery of this Agreement, the performance of the transactions contemplated
hereby and the fulfillment of the terms hereof will not conflict with or
violate, in any material respect, any Applicable Law.

 

(e)                          All
Consents Required.  All approvals,
authorizations, consents, orders or other actions of any Person or Governmental
Authority applicable to the Backup Servicer, required in connection with the
execution and delivery of this Agreement, the performance by the Backup
Servicer of the transactions contemplated hereby and the fulfillment by the
Backup Servicer of the terms hereof have been obtained.

 

(f)                            Validity,
Etc.  This Agreement constitutes the
legal, valid and binding obligation of the Backup Servicer, enforceable against
the Backup Servicer in accordance with its terms, except as such enforceability
may be limited by applicable Insolvency Laws or general principles of equity
(whether considered in a suit at law or in equity).

 

Section
4.5.                                Representations and
Warranties of the Trustee.

 

The Trustee in
its individual capacity and as Trustee represents and warrants as follows:

 

(a)                          Organization;
Power and Authority.  It is a duly
organized and validly existing national banking association in good standing
under the laws of the United States.  It
has full corporate power, authority and legal right to execute, deliver and
perform its obligations as Trustee under this Agreement.

 

(b)                         Due
Authorization.  The execution and
delivery of this Agreement and the consummation of the transactions provided
for herein have been duly authorized by all necessary association action on its
part, either in its individual capacity or as Trustee, as the case may be.

 

(c)                          No
Conflict.  The execution and delivery
of this Agreement, the performance of the transactions contemplated hereby and
the fulfillment of the terms hereof will not conflict with, result in any
breach of its articles of incorporation or bylaws or any of the material terms
and provisions of, or constitute (with or without notice or lapse of time or
both) a default under any indenture, contract, agreement, mortgage, deed of
trust, or other instrument to which the Trustee is a party or by which it or
any of its property is bound.

 

94

 

(d)                         No
Violation.  The execution and
delivery of this Agreement, the performance of the Transactions contemplated
hereby and the fulfillment of the terms hereof will not conflict with or
violate, in any material respect, any Applicable Law.

 

(e)                          All
Consents Required.  All approvals,
authorizations, consents, orders or other actions of any Person or Governmental
Authority applicable to the Trustee, required in connection with the execution
and delivery of this Agreement, the performance by the Trustee of the
transactions contemplated hereby and the fulfillment by the Trustee of the
terms hereof have been obtained.

 

(f)                            Validity,
Etc.  The Agreement constitutes the
legal, valid and binding obligation of the Trustee, enforceable against the
Trustee in accordance with its terms, except as such enforceability may be
limited by applicable Insolvency Laws and general principles of equity (whether
considered in a suit at law or in equity).

 

ARTICLE V

GENERAL COVENANTS

 

Section
5.1.                                Affirmative
Covenants of the Borrower.

 

From the date
hereof until the Collection Date:

 

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

 

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

 

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

 

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

 

(e)                          Protection
of Interest in Collateral.  With
respect to the Collateral acquired by the Borrower, the Borrower will (i)
acquire such Collateral pursuant to and in accordance with the terms of the
Sale Agreement, (ii) (at the Servicer’s expense) take all action necessary to

 

95

 

perfect,
protect and more fully evidence the Borrower’s ownership of such Collateral
free and clear of any Lien other than the Lien created hereunder and Permitted
Liens, including, without limitation, (a) with respect to the Loans and that
portion of the Collateral in which a security interest may be perfected by
filing, filing and maintaining (at the Servicer’s expense), effective financing
statements against the Originator in all necessary or appropriate filing
offices, (including any amendments thereto or assignments thereof) and filing
continuation statements, amendments or assignments with respect thereto in such
filing offices, (including any amendments thereto or assignments thereof) and
(b) executing or causing to be executed such other instruments or notices as
may be necessary or appropriate, (iii) permit the Administrative Agent or its
agents or representatives to visit the offices of the Borrower during normal
office hours and upon reasonable notice examine and make copies of all
documents, books, records and other information concerning the Collateral and
discuss matters related thereto with any of the officers or employees of the Borrower
having knowledge of such matters, and (iv) take all additional action that the
Administrative Agent may reasonably request to perfect, protect and more fully
evidence the respective interests of the parties to this Agreement in the
Collateral.

 

(f)                            Deposit
of Collections.  The Borrower
promptly (but in no event later than two Business Days after receipt) deposit
all Collections received by the Borrower in respect of the Collateral into the
Collection Account.

 

(g)                         Special
Purpose Entity.  The Borrower shall
be in compliance with the Special Purpose Entity requirements set forth in Section
4.1(u).

 

(h)                         [Reserved].

 

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

 

(j)                             Taxes.  The Borrower will file its tax returns and
pay any and all Taxes imposed on it or its property as required by the
Transaction Documents.

 

(k)                          Use
of Proceeds.  The Borrower will use
the proceeds of the Advances only to acquire Collateral or to make
distributions to its members in accordance with the terms hereof.

 

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

 

96

 

(m)                       Adverse
Claims.  Subject to the terms of the
Intercreditor Agreement, the Borrower will not create, or participate in the
creation of, or permit to exist, any Liens in relation to the Concentration
Account other than as disclosed to the Administrative Agent, the Trustee and
each Purchaser Agent and existing as of the date of this Agreement.

 

(n)                         Protection
of Interest in Collateral.  With
respect to each item of Collateral granted to the Trustee, for the benefit of
the Secured Parties, the Borrower will (i) take all action necessary to
perfect, protect and more fully evidence the Trustee’s, for the benefit of the
Secured Parties, ownership of such Collateral, including, without limitation,
(a) with respect to the Loans and that portion of the Collateral in which a
Security Interest may be perfected by filing, by filing and maintaining (at the
Servicer’s expense), effective financing statements against the Borrower in all
necessary or appropriate filing offices, (including any amendments thereto or
assignments thereof) and filing continuation statements, amendments or
assignments with respect thereto in such filing offices, and (b) executing or
causing to be executed such other instruments or notices as may be necessary or
appropriate and (ii) take all additional action that the Administrative Agent
or the Trustee may reasonably request to perfect, protect and more fully
evidence the respective interests of the parties to this Agreement in such
Collateral.

 

(o)                         Notices.  The Borrower will furnish to the
Administrative Agent, the Trustee and each Purchaser Agent (with a copy to the
Backup Servicer):

 

(i)                                                     Income
Tax Liability.  Within ten Business
Days after the receipt of revenue agent reports or other written proposals,
determinations or assessments of the Internal Revenue Service or any other
taxing authority which propose, determine or otherwise set forth positive
adjustments to the Tax liability of any “affiliated group” (within the meaning
of Section 1504(a)(l) of the Code) which equal or exceed $1,000,000 in the
aggregate, telephonic or facsimile notice (confirmed in writing within five
Business Days) specifying the nature of the items giving rise to such
adjustments and the amounts thereof;

 

(ii)                                                  Auditors’
Management Letters.  Promptly after
the receipt thereof, any auditors’ management letters are received by the
Borrower or by its accountants;

 

(iii)                                               Representations
and Warranties.  Forthwith upon
receiving knowledge of the same, the Borrower shall notify the Administrative
Agent and each Purchaser Agent if any representation or warranty set forth in Section
4.1 or Section 4.2 was incorrect at the time it was given or deemed
to have been given and at the same time deliver to the Trustee, the
Administrative Agent and each Purchaser Agent a written notice setting forth in
reasonable detail the nature of such facts and circumstances.  In particular, but without limiting the
foregoing, the Borrower shall notify the Administrative Agent and each
Purchaser Agent in the manner set forth in the preceding sentence before any
Funding Date of any facts or circumstances within the knowledge of the Borrower
which would render any of the said representations and warranties untrue at the
date when such representations and warranties were made or deemed to have been
made;

 

97

 

(iv)                                              ERISA.  Promptly after receiving notice of any “reportable
event” (as defined in Title IV of ERISA) with respect to the Borrower (or any
Affiliate thereof), a copy of such notice;

 

(v)                                                 Proceedings.  As soon as possible and in any event within
three Business Days after the Borrower receives notice or obtains knowledge
thereof, notice of any settlement of, material judgment (including a material
judgment with respect to the liability phase of a bifurcated trial) in or
commencement of any material labor controversy, material litigation, material
action, material suit or material proceeding before any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, affecting the Collateral, the Transaction Documents, the Trustee’s,
for the benefit of the Secured Parties, interest in the Collateral, or the
Borrower, the Servicer or the Originator or any of their Affiliates; provided, however, that, notwithstanding
the foregoing, any settlement, judgment, labor controversy, litigation, action,
suit or proceeding affecting the Collateral, the Transaction Documents, the
Trustee’s, for the benefit of the Secured Parties, interest in the Collateral,
or the Borrower, the Servicer or the Originator or any of their Affiliates in
excess of $1,000,000 or more shall be deemed to be material for purposes of
this Section 5.1(o);

 

(vi)                                              Notice
of Material Events.  Promptly upon
becoming aware thereof, notice of any other event or circumstances that, in the
reasonable judgment of the Borrower, is reasonably likely to have a Material
Adverse Effect; and

 

(vii)                                           Accounting
Changes.  As soon as possible and in
any event within three Business Days after the effective date thereof, notice
of any change in the accounting policies of the Borrower or the Servicer.

 

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

 

Section
5.2.                                Negative Covenants
of the Borrower.

 

From the date
hereof until the Collection Date:

 

(a)                          Other
Business.  Borrower will not (i)
engage in any business other than the transactions contemplated by the
Transaction Documents, (ii) incur any Indebtedness, obligation, liability or
contingent obligation of any kind other than pursuant to this Agreement or
under any Hedging Agreement required by Section 5.3(a), or (iii) form
any Subsidiary or make any Investment in any other Person.

 

(b)                         Collateral
Not to be Evidenced by Instruments. 
The Borrower will take no action to cause any Loan that is not, as of
the Closing Date or the related Cut-Off Date, as the

 

98

 

case may be,
evidenced by an Instrument, to be so evidenced except in connection with the
enforcement or collection of such Loan.

 

(c)                          Security
Interests.  Except as otherwise
permitted herein and in respect of any Optional Sale in connection with a
Permitted Securitization or Permitted Refinancing, Defaulted Loan Sale, RIC/BDC
Sale or Replaced Loan, the Borrower will not sell, pledge, assign or transfer
to any other Person, or grant, create, incur, assume or suffer to exist any Lien
on any Collateral, whether now existing or hereafter transferred hereunder, or
any interest therein, and the Borrower will not sell, pledge, assign or suffer
to exist any Lien (except for Permitted Liens) on its interest in the
Collateral.  The Borrower will promptly
notify the Administrative Agent and each Purchaser Agent of the existence of
any Lien on any Collateral and the Borrower shall defend the right, title and
interest of the Trustee, for the benefit of Secured Parties, in, to and under
the Collateral against all claims of third parties; provided, however, that nothing in this Section 5.2(c)
shall prevent or be deemed to prohibit the Borrower from suffering to exist
Permitted Liens upon any of the Collateral.

 

(d)                         Mergers,
Acquisitions, Sales, etc.  The
Borrower will not be a party to any merger or consolidation, or purchase or
otherwise acquire any of the assets or any stock of any class of, or any
partnership or joint venture interest in, any other Person, or sell, transfer,
convey or lease any of its assets, or sell or assign with or without recourse
any Collateral or any interest therein (other than as permitted pursuant to
this Agreement or the Sale Agreement).

 

(e)                          Deposits
to Special Accounts.  Except as
otherwise contemplated by the Intercreditor Agreement, the Borrower will not
deposit or otherwise credit, or cause or permit to be so deposited or credited,
to the Concentration Account cash or cash proceeds other than Collections in
respect of the Collateral.

 

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

 

(g)                         Change
of Name or Location of Loan Files. 
The Borrower shall not (x) change its name, move the location of its
principal place of business and chief executive office, change the offices
where it keeps the records from the location referred to in Section 13.2,
or change the jurisdiction of its organization, or (y) move, or consent to the
Trustee or Servicer moving, the Required Loan Documents and the Loan Files from
the location thereof on the initial Funding Date, unless the Borrower has given
at least 30 days’ written notice to the Administrative Agent and the Trustee
and has taken all actions required under the UCC of each relevant jurisdiction
in order to continue the first priority perfected security interest of the
Trustee, for the benefit of the Secured Parties, in the Collateral.

 

(h)                         Accounting
of Purchases.  Other than for tax and
consolidated accounting purposes, the Borrower will not account for or treat
(whether in financial statements or otherwise) the transactions contemplated
hereby in any manner other than as a sale of the Collateral by the Borrower to
the Secured Parties. Other than for tax and consolidated accounting purposes,
the Borrower will not account for or treat (whether in financial statements

 

99

 

or otherwise)
the transactions contemplated by the Sale Agreement in any manner other than as
a sale of the Collateral by the Originator to the Borrower.

 

(i)                             ERISA
Matters.  The Borrower will not (a)
engage or permit any ERISA Affiliate to engage in any prohibited transaction
for which an exemption is not available or has not previously been obtained
from the United States Department of Labor, (b) permit to exist any accumulated
funding deficiency, as defined in Section 302(a) of ERISA and Section
412(a) of the Code, or funding deficiency with respect to any Benefit Plan
other than a Multiemployer Plan, (c) fail to make any payments to a
Multiemployer Plan that the Borrower or any ERISA Affiliate may be required to
make under the agreement relating to such Multiemployer Plan or any law
pertaining thereto, (d) terminate any Benefit Plan so as to result in any
liability, or (e) permit to exist any occurrence of any reportable event
described in Title IV of ERISA.

 

(j)                             Operating
Agreement; Sale Agreement.  The
Borrower will not amend, modify, waive or terminate any provision of its
operating agreement or the Sale Agreement without the prior written consent of
the Administrative Agent and each Purchaser Agent.

 

(k)                          Changes
in Payment Instructions to Obligors. 
The Borrower will not add or terminate any bank as a Concentration
Account Bank or any Concentration Account listed in Schedule II or make
any change, or permit the Servicer to make any change, in its instructions to
Obligors regarding payments to be made with respect to the Collateral to the
Concentration Account Bank, unless the Administrative Agent has consented to
such addition, termination or change (which consent shall not be unreasonably
withheld) and has received duly executed copies of the Intercreditor Agreement
(incorporating appropriate amendments), with each new Concentration Account
Bank being a party thereto.

 

(l)                             Extension
or Amendment of Collateral.  The
Borrower will not, except as otherwise permitted in Section 6.4(a),
extend, amend or otherwise modify the terms of any Loan (including the Related
Security).

 

(m)                       [Reserved].

 

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

 

Section
5.3.                                Covenants of the
Borrower Relating to the Hedging of Fixed Rate Loans.

 

(a)                          On or
prior to each Funding Date, the Borrower shall enter into one or more Hedge
Transactions for the related Advance to the extent necessary to comply with the
definition of “Hedge Amount”.  Each Hedge
Transaction shall:

 

(i)                                                     be
entered into with a Hedge Counterparty and governed by a Hedging Agreement;

 

100

 

(ii)                                                  have
a schedule of quarterly calculation periods the first of which commences on the
Funding Date of the applicable Advance and the last of which ends on the last
expected scheduled payment due to occur under or with respect to the Loans to
which that Advance relates;

 

(iii)                                               have
an amortizing notional amount such that the Hedge Notional Amount shall be at
least equal to the portion of the Hedge Amount represented by such Advance; and

 

(iv)                                              provide
for two series of quarterly payments to be netted against each other, one such
series being payments to be made by the Borrower to a Hedge Counterparty
(solely on a net basis) by reference to a fixed rate for that Advance, and the
other such series being payments to be made by such Hedge Counterparty to the
Borrower (solely on a net basis) at a floating rate equal to “USD-LIBOR-BBA”
(as defined in the ISDA Definitions), the net amount of which shall be paid
into the Collection Account (if payable by such Hedge Counterparty) or from the
Collection Account to the extent funds are available under Section 2.9
or Section 2.10 of this Agreement (if payable by the Borrower).

 

(b)                         As
additional security hereunder, the Borrower hereby assigns to the Trustee, for
the benefit of the Secured Parties, all right, title and interest of the
Borrower (but none of the obligations) in each Hedging Agreement, each Hedge
Transaction, and all present and future amounts payable by a Hedge Counterparty
to the Borrower under or in connection with the respective Hedging Agreement
and Hedge Transaction(s) with that Hedge Counterparty (“Hedge Collateral”),
and grants a security interest to the Trustee, for the benefit of the Secured
Parties, in the Hedge Collateral; provided,
however, that so long as the
Hedge Counterparty is the Administrative Agent or any Affiliate thereof, the
Trustee hereby grants to the Servicer a non-exclusive license (which shall be
deemed revoked upon the occurrence of a Termination Event) to exercise any
rights under any related Hedging Agreement or Hedge Transaction.  The Borrower acknowledges that as a result of
such assignment the Borrower may not, except as set forth in the proviso to the
immediately preceding sentence (and in accordance with Part 6(c)(iii) of each
Hedging Agreement), without the prior written consent of the Administrative
Agent, exercise any rights under any Hedging Agreement or Hedge Transaction,
except for the Borrower’s right under any Hedging Agreement to enter into Hedge
Transactions in order to meet the Borrower’s obligations under Section
5.3(a) hereof.  Nothing herein shall
have the effect of releasing the Borrower from any of its obligations under any
Hedging Agreement or any Hedge Transaction, nor be construed as requiring the
consent of the Administrative Agent, the Trustee or any Secured Party for the
performance by the Borrower of any such obligations.

 

(c)                          The
Borrower, or the Servicer on the Borrower’s behalf, shall not permit, at any
time, the notional amount of all Interest Rate Floor Transactions outstanding
to exceed the notional amount of all Interest Rate Cap Transactions
outstanding.

 

(d)                         The
Borrower shall, promptly upon execution thereof, provide to the Administrative
Agent and the Trustee a copy of any Hedging Agreement entered into in
connection with this Agreement.

 

101

 

(e)                          At any
time during the Amortization Period, the Administrative Agent, in its reasonable
discretion, may direct the Borrower to (i) amend or modify the terms of or (ii)
terminate, any Hedge Transaction then in effect; provided that the primary objective of any such amendment,
modification or termination shall be the maximization of the value of the
Collateral and any such amendment, modification or termination shall not have a
material adverse effect on the Borrower.

 

Section
5.4.                                Affirmative
Covenants of the Servicer.

 

From the date
hereof until the Collection Date:

 

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

 

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

 

(c)                          Obligations
and Compliance with Collateral.  The
Servicer will duly fulfill and comply with all obligations on the part of the
Borrower to be fulfilled or complied with under or in connection with each
Collateral and will do nothing to impair the rights of the Trustee, for the
benefit of the Secured Parties, or of the Secured Parties in, to and under the
Collateral.

 

(d)                         Keeping
of Records and Books of Account.

 

(i)                                                     The
Servicer will maintain and implement administrative and operating procedures
(including, without limitation, an ability to recreate records evidencing
Collateral in the event of the destruction of the originals thereof), and keep
and maintain all documents, books, records and other information reasonably
necessary or advisable for the collection of all Collateral and the
identification of the Collateral.

 

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

 

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

 

102

 

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

 

(f)                            Credit
Policy.  The Servicer will (i) comply
in all material respects with the Credit Policy and the Servicing Standard in
regard to the Collateral, and (ii) furnish to the Administrative Agent and each
Purchaser Agent, prior to its effective date, prompt written notice of any
changes in the Credit Policy.  The
Servicer will not agree to or otherwise permit to occur any change in the
Credit Policy that could have a Material Adverse Effect without the prior
written consent of the Administrative Agent and each Purchaser Agent; provided that, no consent shall be
required from the Administrative Agent or any Purchaser Agent in connection
with any change mandated by Applicable Law or a Governmental Authority as
evidenced by an Opinion of Counsel to that effect delivered to the
Administrative Agent and each Purchaser Agent.

 

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

 

(h)                         Taxes.  The Servicer will file its tax returns and
pay any and all Taxes imposed on it or its property as required under the
Transaction Documents.

 

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

 

(j)                             Proceedings
Related to the Borrower, the Originator and the Servicer and the Transaction
Documents.  As soon as possible and
in any event within three Business Days after any executive officer of the
Servicer receives notice or obtains knowledge thereof of any settlement of,
judgment (including a judgment with respect to the liability phase of a
bifurcated trial) in or commencement of any labor controversy, litigation,
action, suit or proceeding before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, that
could reasonably be expected to have a Material Adverse Effect on the Borrower,
the Originator or the Servicer (or any of their Affiliates) or the Transaction
Documents; provided, however,
that, notwithstanding the foregoing, any settlement, judgment,

 

103

 

labor
controversy, litigation, action, suit or proceeding affecting the Transaction
Documents, the Borrower, the Servicer or the Originator (or any of their
Affiliates) in excess of $2,500,000 or more shall be deemed to be expected to
have such a Material Adverse Effect for purposes of this Section 5.4(j).

 

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

 

(l)                             Concentration
Account.  The Servicer will maintain
exclusive ownership, dominion and control (subject to the terms of the
Intercreditor Agreement) of the Concentration Account and shall not grant the
right to take dominion and control of the Concentration Account to any Person,
except to the Administrative Agent and each Purchaser Agent as contemplated by
this Agreement and except as otherwise contemplated by the Intercreditor
Agreement.

 

(m)                       Change
of Control.  Upon the occurrence of a
Change of Control, the Servicer shall provide the Administrative Agent, each
Purchaser Agent and the Hedge Counterparties with notice of such Change of
Control within 30 days after completion of the same.

 

(n)                         Loan
Register.

 

(i)                                                     The
Servicer shall maintain with respect to each Noteless Loan a register (each, a “Loan
Register”) in which it will record (v) the amount of such Loan, (w) the
amount of any principal or interest due and payable or to become due and
payable from the Obligor thereunder, (x) the amount of any sum in respect of
such Loan received from the Obligor, (y) the date of origination of such Loan
and (z) the maturity date of such Loan.

 

(ii)                                                  At
any time a Noteless Loan is included as part of the Collateral pursuant to this
Agreement, the Servicer shall deliver to the Administrative Agent and the
Trustee (with a copy to the Backup Servicer) a copy of the related Loan
Register, together with a certificate of a Responsible Officer of the Servicer
certifying to the accuracy of such Loan Register as of the related Funding
Date.

 

(o)                         Special
Purpose Entity Requirements.  The
Servicer shall take such actions as are necessary to cause the Borrower to be
in compliance with the Special Purpose Entity requirements set forth in Section
4.1(u).

 

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

 

(q)                         Proceedings
Related to the Collateral.  As soon
as possible and in any event within three Business Days after any Responsible
Officer of the Servicer receives notice or has actual knowledge of any
settlement of, judgment (including a judgment with respect to the liability
phase of a bifurcated trial) in or commencement of any labor controversy, litigation,
action, suit or proceeding before any court or governmental department,
commission, board,

 

104

 

bureau, agency
or instrumentality, domestic or foreign, that could reasonably be expected to
have a Material Adverse Effect on the interests of the Trustee or the Secured
Parties in, to and under the Collateral; provided,
however, that, notwithstanding the foregoing, any settlement,
judgment, labor controversy, litigation, action, suit or proceeding affecting
the Collateral or the Trustee’s or the Secured Parties’ interest in the
Collateral in excess of $2,500,000 or more shall be deemed to be expected to
have such a Material Adverse Effect for purposes of this Section 5.4(q).

 

Section
5.5.                                Negative Covenants
of the Servicer.

 

From the date
hereof until the Collection Date.

 

(a)                          Deposits
to Special Accounts.  Except as
otherwise contemplated by the Intercreditor Agreement, the Servicer will not
deposit or otherwise credit, or cause or permit to be so deposited or credited,
to the Concentration Account cash or cash proceeds other than Collections in
respect of the Collateral.

 

(b)                         Mergers,
Acquisition, Sales, etc.  The
Servicer will not consolidate with or merge into any other Person or convey or
transfer its properties and assets substantially as an entirety to any Person,
unless the Servicer is the surviving entity and unless:

 

(i)                                                     the
Servicer has delivered to the Administrative Agent and each Purchaser Agent an
Officer’s Certificate and an Opinion of Counsel each stating that any such
consolidation, merger, conveyance or transfer and any supplemental agreement
executed in connection therewith comply with this Section 5.5 and that
all conditions precedent herein provided for relating to such transaction have
been complied with and, in the case of the Opinion of Counsel, that such
supplemental agreement is legal, valid and binding with respect to the Servicer
and such other matters as the Administrative Agent may reasonably request;

 

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

 

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

 

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

 

(c)                          Change
of Name or Location of Loan Files. 
The Servicer shall not (x) change its name, move the location of its
principal place of business and chief executive office, change the offices
where it keeps records concerning the Collateral from the location referred to
in Section 13.2, or change the jurisdiction of its formation, or (y)
move, or consent to the Trustee moving, the Required Loan Documents and Loan
Files from the location thereof on the initial Funding Date, unless the
Servicer has given at least 30 days’ written notice to the Administrative Agent
and has taken all actions required under the UCC of each relevant jurisdiction
in order to

 

105

 

continue the
first priority perfected security interest of the Trustee, for the benefit of
the Secured Parties, in the Collateral.

 

(d)                         Change
in Payment Instructions to Obligors. 
The Servicer will not add or terminate any bank as a Concentration
Account Bank or any Concentration Account listed in Schedule II or make
any change in its instructions to Obligors regarding payments to be made to the
Borrower or the Servicer or payments to be made to the Concentration Account
Bank, unless the Administrative Agent has consented to such addition,
termination or change (which consent shall not be unreasonably withheld) and
has received duly executed copies of each Intercreditor Agreement
(incorporating appropriate amendments), with each new Concentration Account
Bank being a party thereto.

 

(e)                          Extension
or Amendment of Loans.  The Servicer
will not, except as otherwise permitted in Section 6.4(a), extend, amend
or otherwise modify the terms of any Loan (including the Related Security).

 

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

 

(g)                         Title.  On any date on which (i) there are any ACC
Loans that have been transferred or sold to the Borrower under the Sale
Agreement prior to the Required Transfer Date but which have not been titled in
the name of the Borrower and (ii) the Availability would not be greater than or
equal to zero if such ACC Loans were excluded from the calculation of the
Borrowing Base on such date, the Servicer shall not have Indebtedness in excess
of $1,000,000.

 

Section
5.6.                                Affirmative
Covenants of the Backup Servicer.

 

From the date
hereof until the Collection Date:

 

(a)                          Compliance
with Law.  The Backup Servicer will
comply in all material respects with all Applicable Law.

 

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

 

Section
5.7.                                Negative Covenants
of the Backup Servicer.

 

From the date
hereof until the Collection Date:

 

106

 

(a)                          No
Changes in Backup Servicer Fee.  The
Backup Servicer will not make any changes to the Backup Servicer Fee set forth
in the Backup Servicer Fee Letter without the prior written approval of the
Administrative Agent and each Purchaser Agent.

 

Section
5.8.                                Affirmative
Covenants of the Trustee.

 

From the date
hereof until the Collection Date:

 

(a)                          Compliance
with Law.  The Trustee will comply in
all material respects with all Applicable Law.

 

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

 

(c)                          Location
of Required Loan Documents.  Subject
to Section 8.8, the Required Loan Documents shall remain at all times in
the possession of the Trustee at the address set forth on Annex A to this
Agreement unless notice of a different address is given in accordance with the
terms hereof or unless the Administrative Agent agrees to allow certain
Required Loan Documents to be released to the Servicer on a temporary basis in
accordance with the terms hereof, except as such Required Loan Documents may be
released pursuant to this Agreement.

 

Section
5.9.                                Negative Covenants
of the Trustee.

 

From the date
hereof until the Collection Date:

 

(a)                          Required
Loan Documents.  The Trustee will not
dispose of any documents constituting the Required Loan Documents in any manner
that is inconsistent with the performance of its obligations as the Trustee
pursuant to this Agreement and will not dispose of any Collateral except as
contemplated by this Agreement.

 

(b)                         No
Changes in Trustee Fee.  The Trustee
will not make any changes to the Trustee Fee set forth in the Trustee Fee
Letter without the prior written approval of the Administrative Agent and each
Purchaser Agent.

 

ARTICLE VI

ADMINISTRATION AND SERVICING OF CONTRACTS

 

Section
6.1.                                Designation of the
Servicer.

 

(a)                          Initial
Servicer.  The servicing,
administering and collection of the Collateral shall be conducted by the Person
designated as the Servicer hereunder from time to time in accordance with this Section
6.1.  Until the Administrative Agent
gives to the Originator a Servicer Termination Notice, the Originator is hereby
appointed as, and hereby accepts such

 

107

 

appointment
and agrees to perform the duties and responsibilities of, the Servicer pursuant
to the terms hereof.

 

(b)                         Successor
Servicer.  Upon the Servicer’s
receipt of a Servicer Termination Notice from the Administrative Agent pursuant
to Section 6.15, the Servicer agrees that it will terminate its
activities as Servicer hereunder in a manner that the Administrative Agent
believes will facilitate the transition of the performance of such activities
to a successor Servicer, and the successor Servicer shall assume each and all
of the Servicer’s obligations to service and administer the Collateral, on the
terms and subject to the conditions herein set forth, and the Servicer shall
use its best efforts to assist the successor Servicer in assuming such
obligations.

 

(c)                          Subcontracts.  The Servicer may, with the prior written
consent of the Administrative Agent, subcontract with any other Person for
servicing, administering or collecting the Collateral; provided, however,
that (i) the Servicer shall select any such Person with reasonable care and
shall be solely responsible for the fees and expenses payable to any such
Person, (ii) the Servicer shall not be relieved of, and shall remain liable
for, the performance of the duties and obligations of the Servicer pursuant to
the terms hereof without regard to any subcontracting arrangement and (iii) any
such subcontract shall be terminable upon the occurrence of a Servicer Default.

 

(d)                         Servicing
Programs.  In the event that the
Servicer uses any software program in servicing the Collateral that it licenses
from a third party, the Servicer shall use its best efforts to obtain, either
before the Closing Date or as soon as possible thereafter, whatever licenses or
approvals are necessary to allow the Administrative Agent or the Servicer to
use such program and to allow the Servicer to assign such licenses to the
Backup Servicer or to any other Successor Servicer appointed as provided in
this Agreement.

 

Section
6.2.                                Duties of the
Servicer.

 

(a)                          Appointment.  The Borrower hereby appoints the Servicer as
its agent, as from time to time designated pursuant to Section 6.1, to
service the Collateral and enforce its rights in, to and under such
Collateral.  The Servicer hereby accepts
such appointment and agrees to perform the duties and obligations with respect
thereto as set forth herein.  The
Servicer and the Borrower hereby acknowledge that the Administrative Agent,
each Purchaser Agent and the Secured Parties are third party beneficiaries of
the obligations undertaken by the Servicer hereunder.

 

(b)                         Duties.  The Servicer shall take or cause to be taken
all such actions as may be necessary or advisable to collect on the Collateral
from time to time, all in accordance with Applicable Law and the Servicing
Standard.  Without limiting the
foregoing, the duties of the Servicer shall include the following:

 

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

 

(ii)                                                  maintaining
all necessary servicing records with respect to the Collateral and providing
such reports to the Administrative Agent and each

 

108

 

Purchaser
Agent (with a copy to the Trustee and the Backup Servicer) in respect of the
servicing of the Collateral (including information relating to its performance
under this Agreement) as may be required hereunder or as the Administrative
Agent and each Purchaser Agent may reasonably request;

 

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

 

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

 

(v)                                                 identifying
each Loan clearly and unambiguously in its servicing records to reflect that
such Loan is owned by the Borrower and that the Borrower is selling an
undivided ownership interest therein to the Secured Parties pursuant to this
Agreement;

 

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

 

(vii)                                           providing
the prompt written notice to the Administrative Agent and each Purchaser Agent,
prior to the effective date thereof, of any proposed changes in the Credit
Policy;

 

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

 

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

 

(x)                                                   directing
the Trustee to make payments pursuant to the terms of the Servicing Report in
accordance with Section 2.9 and Section 2.10; and

 

(xi)                                                directing
the sale or substitution of Collateral in accordance with Section 2.18 ,
Section 2.19 and Section 2.20.

 

It is
acknowledged and agreed that in circumstances in which a Person other than the
Borrower, the Originator (so long as the Originator is also the Servicer) or
the Servicer acts as

 

109

 

lead agent
with respect to any Loan, the Servicer shall perform its servicing duties
hereunder only to the extent a lender under the related loan syndication
Underlying Instruments has the right to do so.

 

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

 

(d)                         Except as
otherwise set forth in Section 13.18, any payment by an Obligor in
respect of any indebtedness owed by it to the Originator or the Borrower shall,
except as otherwise specified by such Obligor or otherwise required by contract
or law and unless otherwise instructed by the Administrative Agent, be applied
as a collection of a payment by such Obligor (starting with the oldest such
outstanding payment due) to the extent of any amounts then due and payable
thereunder before being applied to any other receivable or other obligation of
such Obligor.

 

Section
6.3.                                Authorization of the
Servicer.

 

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

 

(b)                         After the
declaration of the Termination Date, at the direction the Administrative Agent,
the Servicer shall take such action as the Administrative Agent may deem necessary
or

 

110

 

advisable to
enforce collection of the Collateral; provided,
however, that the Administrative Agent may, at any time that a
Termination Event has occurred, notify any Obligor with respect to any
Collateral of the assignment of such Collateral to the Trustee on behalf of the
Secured Parties and direct that payments of all amounts due or to become due be
made directly to the Administrative Agent or any servicer, collection agent or
account designated by the Administrative Agent and, upon such notification and
at the expense of the Borrower, the Administrative Agent may enforce collection
of any such Collateral, and adjust, settle or compromise the amount or payment
thereof.

 

Section
6.4.                                Collection of
Payments; Accounts.

 

(a)                          Collection
Efforts, Modification of Collateral. 
The Servicer will use its best efforts to collect or cause to be
collected, all payments called for under the terms and provisions of the Loans
included in the Collateral as and when the same become due in accordance with
the Credit Policy and the Servicing Standard. 
The Servicer may not waive, modify or otherwise vary any provision of an
item of Collateral in a manner that would impair the collectibility of the
Collateral or in any manner contrary to the Credit Policy or the Servicing
Standard.

 

(b)                         [Reserved].

 

(c)                          Acceleration.  If required by the Credit Policy or if
consistent with the Servicing Standard, the Servicer shall accelerate the
maturity of all or any Scheduled Payments and other amounts due under any Loan
promptly after such Loan becomes a Charged-Off Loan.

 

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

 

(e)                          Payments
to Concentration Account.  On or
before the applicable Cut-Off Date, the Servicer shall have instructed all
Obligors to make all payments in respect of the Collateral directly to the
Concentration Account; provided, however,
that the Servicer is not required to so instruct any Obligor which is solely a
guarantor unless and until the Servicer calls on the related guaranty.

 

(f)                            Accounts.  Each of the parties hereto hereby agrees that
(i) each Account shall be deemed to be a Securities Account and (ii) except as
otherwise expressly provided herein, the Administrative Agent shall be
exclusively entitled to exercise the rights that comprise each Financial Asset
held in each Account.  Each of the
parties hereto hereby agrees to cause the Trustee or any other Securities
Intermediary that holds any money or other property for the Borrower in an
Account to agree with the parties hereto that (A) the cash and other property
(subject to Section 6.4(g) below with respect to any property other than
investment property, as defined in Section 9-102(a)(49) of the UCC) is to be
treated as a Financial Asset under Article 8 of the UCC and (B) the “securities
intermediary’s jurisdiction” (within the meaning of Section 8-110 of the UCC)
for that purpose shall be the State of New York.  In no event may any Financial Asset held in
any Account be registered in the name of, payable to the order of, or

 

111

 

specially
Indorsed to, the Borrower, unless such Financial Asset has also been Indorsed
in blank or to the Trustee or other Securities Intermediary that holds such
Financial Asset in such Account.

 

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

 

(h)                         Establishment
of the Collection Account.  The
Servicer shall cause to be established, on or before the Closing Date, with the
Trustee, and maintained in the name of the Borrower, subject to the lien of the
Trustee, for the benefit of the Secured Parties, a segregated corporate trust
account entitled “Collection Account for Ares Capital CP Funding LLC, subject
to the lien of U.S. Bank National Association, as Trustee for the benefit of
the Secured Parties” (the “Collection Account”), and the Servicer shall
further cause to be maintained three subaccounts linked to and constituting
part of the Collection Account for the purpose of segregating (i) all
Pre-Funded Advances (the “Pre-Funded Advances Account”) and (ii) within
two Business Days of the receipt of any Collections, Principal Collections (the
“Principal Collections Account”) and Interest Collections (the “Interest
Collections Account”), respectively, and over which the Trustee, for the
benefit of the Secured Parties, shall have control and from which neither the
Originator, the Servicer nor the Borrower shall have any right of withdrawal
except in accordance with Section 2.9(b).

 

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

 

Section
6.5.                                Servicer Advances.

 

(a)                          For each
Collection Period, if the Servicer determines that any Scheduled Payment (or
portion thereof) that was due and payable pursuant to a Loan during such
Collection Period was not received prior to the last day of such Collection
Period, the Servicer may (in its sole and absolute discretion) make an advance
in an amount up to the amount of such delinquent Scheduled Payment (or portion
thereof) to the extent the Servicer has

 

112

 

determined in
accordance with the Credit Policy and the Servicing Standard that such amount
will be ultimately recoverable.  The
Servicer will deposit any Servicer Advances into the Collection Account on or
prior to 9:00 a.m. on the Business Day prior to the related Payment Date, in
immediately available funds. 
Notwithstanding anything to the contrary contained herein, no Successor
Servicer shall have any responsibility to make Servicer Advances.

 

(b)                         Notwithstanding
anything to the contrary set forth herein, the Servicer shall not be required
to make any Nonrecoverable Advance; provided,
however, that the Servicer may make a Servicer Advance
notwithstanding that, at the time such Servicer Advance is made, the Servicer
may not have adequate information available in order to make a determination
whether or not such advance would, if made, be a Nonrecoverable Advance.  Nonrecoverable Advances (including any
Servicer Advances made pursuant to the proviso of the preceding sentence which
are ultimately determined to be Nonrecoverable Advances) shall be reimbursable
in accordance with Section 2.9(a)(8) and Section 2.10(a)(8).

 

Section
6.6.                                Realization Upon
Charged-Off Loans.

 

The Servicer
will use reasonable efforts consistent with the Servicing Standard to foreclose
upon or repossess, as applicable, or otherwise comparably convert the ownership
of any Related Property relating to a Charged-Off Loan as to which no
satisfactory arrangements can be made for collection of delinquent
payments.  The Servicer will comply with
the Servicing Standard and Applicable Law in realizing upon such Related
Property, and employ practices and procedures including reasonable efforts to
enforce all obligations of Obligors foreclosing upon, repossessing and causing
the sale of such Related Property at public or private sale in circumstances
other than those described in the preceding sentence.  Without limiting the generality of the
foregoing, unless the Administrative Agent has specifically given instruction
to the contrary, the Servicer may cause the sale of any such Related Property
to the Servicer or its Affiliates for a purchase price equal to the then fair
market value thereof, any such sale to be evidenced by a certificate of a
Responsible Officer of the Servicer delivered to the Administrative Agent
setting forth the Loan, the Related Property, the sale price of the Related
Property and certifying that such sale price is the fair market value of such
Related Property.  In any case in which
any such Related Property has suffered damage, the Servicer will not expend funds
in connection with any repair or toward the foreclosure or repossession of such
Related Property unless it reasonably determines that such repair and/or
foreclosure or repossession will increase the Recoveries by an amount greater
than the amount of such expenses.  The
Servicer will remit to the Collection Account the Recoveries received in
connection with the sale or disposition of Related Property relating to a
Charged-Off Loan.

 

Section
6.7.                                [Reserved].

 

Section
6.8.                                Servicing
Compensation.

 

As
compensation for its servicing activities hereunder and reimbursement for its
expenses, the Servicer shall be entitled to receive the Servicing Fee to the
extent of funds available therefor pursuant to the provisions of Section
2.9(a)(4) or Section 2.10(a)(4), as applicable.

 

113

 

Section
6.9.                                Payment of Certain
Expenses by Servicer.

 

The Servicer
will be required to pay all expenses incurred by it in connection with its
activities under this Agreement, including fees and disbursements of its
independent accountants, Taxes imposed on the Servicer, expenses incurred by
the Servicer in connection with payments and reports pursuant to this
Agreement, and all other fees and expenses not expressly stated under this
Agreement for the account of the Borrower, but excluding Servicer Advances and
Liquidation Expenses incurred as a result of activities contemplated by Section
6.6; provided, however, for
avoidance of doubt, to the extent Servicer Advances and Liquidation Expenses
relate to a Loan and a Retained Interest such Liquidation Expenses shall be
allocated pro rata.  The Servicer will be required to pay all
reasonable fees and expenses owing to any bank or trust company in connection
with the maintenance of the Accounts and the Concentration Account.  The Servicer shall be required to pay such
expenses for its own account and shall not be entitled to any payment therefor
other than the Servicing Fee.

 

Section
6.10.                         Reports.

 

(a)                          Borrowing
Notice.  On each Funding Date, on
each reduction of Advances Outstanding pursuant to Section 2.4(b) and on
each investment of amounts on deposit in the Principal Collections Account
pursuant to Section 2.9(b), the Borrower (and the Servicer on its
behalf) will provide a Borrowing Notice and a Borrowing Base Certificate or
Pre-Funded Advance Certificate, as applicable, each updated as of such date, to
the Administrative Agent and each Purchaser Agent (with a copy to the Trustee).

 

(b)                         Servicing
Report.  On each Reporting Date, the
Servicer will provide to the Borrower, the Administrative Agent, the Trustee,
each Purchaser Agent, the Backup Servicer and any Liquidity Bank, a monthly
statement including a Borrowing Base calculated as of the most recent
Determination Date (a “Servicing Report”), with respect to related
calendar month signed by a Responsible Officer of the Servicer and the Borrower
and substantially in the form of Exhibit C.

 

(c)                          Servicer’s
Certificate.  Together with each
Servicing Report, the Servicer shall submit to the Administrative Agent, the
Trustee, each Purchaser Agent, the Backup Servicer and any Liquidity Bank a
certificate substantially in the form of Exhibit J (a “Servicer’s
Certificate”), signed by a Responsible Officer of the Servicer, which shall
include a certification by such Responsible Officer that no Termination Event
or Unmatured Termination Event has occurred.

 

(d)                         Financial
Statements.  The Servicer will submit
to the Administrative Agent, each Purchaser Agent, each Purchaser, the Backup
Servicer and any Liquidity Bank, (i) within (45) days after the end of each of
its fiscal quarters (excluding the fiscal quarter ending on the date specified
in clause (ii)), commencing December 31, 2004, consolidated and consolidating
unaudited financial statements of the Servicer for the most recent fiscal quarter,
and (ii) within 90 days after the end of each fiscal year, commencing with the
fiscal year ended December 31, 2004, consolidated and consolidating audited
financial statements of the Servicer, audited by a firm of nationally
recognized independent public accountants, as of the end of such fiscal year.

 

114

 

(e)                          Tax
Returns.  Upon demand by the
Administrative Agent, each Purchaser Agent and any Liquidity Bank, the Servicer
shall deliver, copies of all federal, state and local tax returns and reports
filed by the Borrower and the Servicer, or in which the Borrower or Servicer
was included on a consolidated or combined basis (excluding sales, use and like
Taxes).

 

(f)                            Obligor
Financial Statements; Valuation Reports. 
The Servicer will deliver to the Administrative Agent copies of each
quarterly valuation report prepared with respect to each Obligor promptly upon
their becoming available.  Upon demand by
the Administrative Agent, the Servicer will provide financial statements and
such other information as the Administrative Agent may request with respect to
any Obligor.

 

Section
6.11.                         Annual Statement as to
Compliance.

 

The Servicer
will provide to the Administrative Agent, the Trustee, the Backup Servicer and
each Purchaser Agent, within 90 days following the end of each fiscal year of
the Servicer, commencing with the fiscal year ending on December 31, 2004, a
fiscal report signed by a Responsible Officer of the Servicer certifying that
(a) a review of the activities of the Servicer, and the Servicer’s performance
pursuant to this Agreement, for the fiscal period ending on the last day of
such fiscal year has been made under such Person’s supervision and (b) the
Servicer has performed or has caused to be performed in all material respects
all of its obligations under this Agreement throughout such year and no
Servicer Default has occurred.

 

Section
6.12.                         Annual Independent Public
Accountant’s Servicing Reports.

 

The Servicer
will cause a firm of nationally recognized independent public accountants (who
may also render other services to the Servicer) to furnish to the
Administrative Agent, each Purchaser Agent, the Trustee and the Backup
Servicer, within 90 days following the end of each fiscal year of the Servicer,
commencing with the fiscal year ending on December 31, 2005, a report covering
such fiscal year to the effect that such accountants have applied certain
agreed-upon procedures (a copy of which procedures are attached hereto as Schedule
VII, it being understood that the Servicer and the Administrative Agent
will provide an updated Schedule VII reflecting any further amendments
to such Schedule VII prior to the issuance of the first such agreed-upon
procedures report, a copy of which shall replace the then existing Schedule
VII) to certain documents and records relating to the Collateral under any
Transaction Document, compared the information contained in the Servicing
Reports and the Servicer’s Certificates delivered during the period covered by
such report with such documents and records and that no matters came to the
attention of such accountants that caused them to believe that such servicing
was not conducted in compliance with this Article VI, except for such
exceptions as such accountants shall believe to be immaterial and such other
exceptions as shall be set forth in such statement.

 

Section
6.13.                         Limitation on Liability of
the Servicer and Others

 

Except as
provided herein, the Servicer shall not be under any liability to the
Administrative Agent, the Trustee, each Purchaser Agent, the Secured Parties or
any other Person for any action taken or for refraining from the taking of any
action pursuant to this Agreement whether arising from express or implied
duties under this Agreement; provided,

 

115

 

however, notwithstanding anything to the
contrary contained herein nothing shall protect the Servicer against any
liability that would otherwise be imposed by reason of its willful misfeasance,
bad faith or negligence in the performance of duties or by reason of its
willful misconduct hereunder.

 

Section
6.14.                         The Servicer Not to Resign.

 

The Servicer
shall not resign from the obligations and duties hereby imposed on it except
upon the Servicer’s determination that (i) the performance of its duties
hereunder is or becomes impermissible under Applicable Law and (ii) there is no
reasonable action that the Servicer could take to make the performance of its
duties hereunder permissible under Applicable Law.  Any such determination permitting the
resignation of the Servicer shall be evidenced as to clause (i) above by an
Opinion of Counsel to such effect delivered to the Administrative Agent, each
Purchaser Agent and the Backup Servicer. 
No such resignation shall become effective until a Successor Servicer
shall have assumed the responsibilities and obligations of the Servicer in
accordance with Section 6.2.

 

Section
6.15.                         Servicer Defaults.

 

If any one of
the following events (a “Servicer Default”) shall occur:

 

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

 

(b)                         any
failure on the part of the Servicer duly to (i) observe or perform in any
material respect any other covenants or agreements of the Servicer set forth in
this Agreement or the other Transaction Documents to which the Servicer is a
party (including, without limitation, any material delegation of the Servicer’s
duties that is not permitted by Section 6.1) or (ii) comply in any
material respect with the Credit Policy and the Servicing Standard regarding
the servicing of the Collateral and in each case the same continues unremedied
for a period of 30 days (if such failure can be remedied) after the earlier to
occur of (i) the date on which written notice of such failure requiring the
same to be remedied shall have been given to the Servicer by the Administrative
Agent or any Purchaser Agent and (ii) the date on which a Responsible Officer
of the Servicer acquires knowledge thereof;

 

(c)                          the
failure of the Servicer to make any payment when due (after giving effect to
any related grace period) under one or more agreements for borrowed money to
which it is a party in an aggregate amount in excess of United States
$5,000,000, individually or in the aggregate, or the occurrence of any event or
condition that has resulted in the acceleration of such amount of recourse debt
whether or not waived;

 

(d)                         an
Insolvency Event shall occur with respect to the Servicer;

 

(e)                          [Reserved];

 

116

 

(f)                            the
Servicer consents to or otherwise permits to occur, without the prior written
consent of the Administrative Agent and each Purchaser Agent, any material
amendment, modification, change, supplement or rescission (any of the foregoing
an “amendment” for purposes of this Section 6.15(f)) of or to the Credit
Policy and the Servicer fails to receive the written consent of the
Administrative Agent within ten Business Days after notice of such amendment
has been delivered to the Administrative Agent (which notice shall be delivered
by the Servicer within seven Business Days after the effectiveness of such
amendment); provided, however, that no such written consent
shall be required in the case of an amendment which was mandated by any
Applicable Law or Governmental Authority;

 

(g)                         Ares
Capital Corporation or an Affiliate thereof shall cease to be the Servicer;

 

(h)                         as of any
Determination Date, the Portfolio Charged-Off Ratio is greater than 3.0%;

 

(i)                             [Reserved];

 

(j)                             Ares
Capital Corporation fails to maintain the aggregate of its GAAP stockholders’
equity and subscribed stockholders’ equity in an amount equal to at least 80%
of the initial committed equity, as increased by 80% of the proceeds of any
equity offerings of Ares Capital Corporation consummated after the Closing
Date;

 

(k)                          any
change in the management of the Servicer (whether by resignation, termination,
disability, death or lack of day to day management) relating to all of Michael
Arougheti, R. Kipp deVeer and Michael Smith (or other individuals acceptable to
the Administrative Agent), or any failure by all of the aforementioned Persons
to provide active and material participation in the Servicer’s daily activities
including, but not limited to, general management, underwriting, and the credit
approval process and credit monitoring activities, and a reputable, experienced
individual reasonably satisfactory to the Administrative Agent has not been
appointed within 30 days of such event; provided,
however, that time relating to an individual’s vacation within the
Servicer’s employee policy and customary industry standards shall not
constitute lack of day-to-day management or failure to provide active and
material participation in the Servicer’s daily activities.  The Administrative Agent deems each of John
Kissick, Anthony Ressler, Bennett Rosenthal, David Sachs and Seth Brufsky to be
an acceptable, experienced appointee for purposes of satisfying this provision;

 

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

 

(m)                       any
representation, warranty or certification made by the Servicer in any
Transaction Document or in any certificate delivered pursuant to any
Transaction Document shall prove to have been incorrect when made, which has a
Material Adverse Effect on the Administrative Agent, any Purchaser Agent or the
Secured Parties and which continues to be unremedied for a period of 30 days
after the earlier to occur of (i) the date on which written

 

117

 

notice of such incorrectness requiring the same to be remedied shall
have been given to the Servicer by the Administrative Agent or any Purchaser
Agent and (ii) the date on which a Responsible Officer of the Servicer acquires
knowledge thereof;

 

(n)                         [Reserved];

 

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

 

(p)                         the rendering against the Servicer
of one or more final judgments, decrees or orders for the payment of money in
excess of United States $7,500,000, individually or in the aggregate, and the
continuance of such judgment, decree or order unsatisfied and in effect for any
period of more than 60 consecutive days without a stay of execution; or

 

(q)                         any change in the control of
the Servicer that takes the form of either a merger or consolidation that does
not comply with the provisions of Section 5.5(b);

 

then,
notwithstanding anything herein to the contrary, the Administrative Agent, by
written notice to the Servicer (with a copy to the Trustee and Backup Servicer)
(a “Servicer Termination Notice”), may terminate all of the rights and
obligations of the Servicer as Servicer under this Agreement.

 

Section 6.16.                         Appointment of Successor
Servicer.

 

(a)                          On and after the receipt by
the Servicer of a Servicer Termination Notice pursuant to Section 6.15,
the Servicer shall continue to perform all servicing functions under this
Agreement until the date specified in the Servicer Termination Notice or
otherwise specified by the Administrative Agent in writing or, if no such date
is specified in such Servicer Termination Notice or otherwise specified by the
Administrative Agent, until a date mutually agreed upon by the Servicer and the
Administrative Agent and shall be entitled to receive, to the extent of funds
available therefor pursuant to Section 2.9 or Section 2.10,
as applicable, the Servicing Fee therefor until such date, together with the
sum of (i), an amount equal to all unreimbursed Nonrecoverable Advances made by
such Servicer which remain outstanding as of such date plus (ii) an amount
equal to any unreimbursed Servicer Advances (but solely to the extent of
Collections received from time to time in respect of the Loan for which such
Servicer Advance was made) which remain outstanding as of such date.  The Administrative Agent may at any time
following delivery of a Servicer Termination Notice in its sole discretion,
appoint the Backup Servicer as the Servicer hereunder, and the Backup Servicer
shall on such date assume all obligations of the Servicer hereunder, and all
authority and power of the Servicer under this Agreement shall pass to and be
vested in the Backup Servicer.  As
compensation therefor, the Backup Servicer shall be entitled to the Servicing
Fee, together with other servicing compensation in the form of assumption fees,
late payment charges or otherwise as provided herein; including, without
limitation, Transition Expenses.  In the
event that the Administrative Agent does not so appoint the Backup Servicer,
there is no Backup Servicer or the Backup Servicer is unable to assume such
obligations on such date, the Administrative Agent shall as promptly as
possible appoint a successor servicer (the “Successor Servicer”), and

 

118

 

such Successor Servicer shall accept its appointment by a written
assumption in a form acceptable to the Administrative Agent and each Purchaser
Agent.  In the event that a Successor
Servicer has not accepted its appointment at the time when the Servicer ceases
to act as Servicer, the Administrative Agent shall petition a court of
competent jurisdiction to appoint any established financial institution, having
a net worth of not less than United States $50,000,000 and whose regular
business includes the servicing of Collateral, as the Successor Servicer
hereunder.

 

(b)                         Upon its appointment, the
Backup Servicer (subject to Section 6.16(a)) or the Successor Servicer,
as applicable, shall be the successor in all respects to the Servicer with
respect to servicing functions under this Agreement and shall be subject to all
the responsibilities, duties and liabilities relating thereto placed on the
Servicer by the terms and provisions hereof, and all references in this
Agreement to the Servicer shall be deemed to refer to the Backup Servicer or
the Successor Servicer, as applicable; provided,
however, that the Backup Servicer or Successor Servicer, as
applicable, shall have (i) no liability with respect to any action performed by
the terminated Servicer prior to the date that the Backup Servicer or Successor
Servicer, as applicable, becomes the successor to the Servicer or any claim of
a third party based on any alleged action or inaction of the terminated
Servicer, (ii) no obligation to perform any advancing obligations, if any, of
the Servicer unless it elects to in its sole discretion, (iii) no obligation to
pay any taxes required to be paid by the Servicer (provided that the Backup
Servicer or Successor Servicer, as applicable, shall pay any income taxes for
which it is liable), (iv) no obligation to pay any of the fees and expenses of
any other party to the transactions contemplated hereby, and (v) no liability
or obligation with respect to any Servicer indemnification obligations of any
prior Servicer, including the original Servicer.  The indemnification obligations of the Backup
Servicer or the Successor Servicer, as applicable, upon becoming a Successor
Servicer, are expressly limited to those arising on account of its failure to
act in good faith and with reasonable care under the circumstances.  In addition, the Backup Servicer or Successor
Servicer, as applicable, shall have no liability relating to the representations
and warranties of the Servicer contained in Article IV.  Further, for so long as the Backup Servicer
shall be the Successor Servicer, the provisions of Section 2.15, Section 2.16(b)
and Section 2.16(e) of this Agreement shall not apply to it in its
capacity as Servicer.

 

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

 

(d)                         Upon the Backup Servicer
receiving notice that it is required to serve as the Servicer hereunder
pursuant to the foregoing provisions of this Section 6.16, the
Backup Servicer will promptly begin the transition to its role as
Servicer.  In the event the Backup
Servicer declines to continue to act as Servicer hereunder, the Backup Servicer
shall solicit, by public announcement, bids from banks, specialty finance
companies, asset managers, mortgage servicing institutions meeting the
qualifications set forth in Section 6.16(a).  Such public

 

119

 

announcement shall specify that the Successor Servicer shall be
entitled to the full amount of the Servicing Fee as servicing compensation,
together with the other servicing compensation in the form of assumption fees,
late payment charges or otherwise that accrued prior thereto.  Within 30 days after any such public
announcement, the Backup Servicer shall negotiate and effect the sale, transfer
and assignment of the servicing rights and responsibilities hereunder to a
qualified party acceptable to the Administrative Agent submitting a qualifying
bid.  The Backup Servicer shall deduct
from any sum received by the Backup Servicer from the successor to the Servicer
in respect of such sale, transfer and assignment, all costs and expenses of any
public announcement, and of any sale, transfer and assignment of the servicing
rights and responsibilities hereunder and the amount of any unreimbursed
Servicing Advances.  After such deductions,
the remainder of such sum shall be paid by the Backup Servicer to the Servicer
at the time of such sale, transfer and assignment to the Servicer’s
successor.  If no bid from a qualified
potential Successor Servicer is received or if no sale, transfer and assignment
of the servicing rights and responsibilities hereunder shall have been
concluded within 30 days after such public announcement, the Backup Servicer
may, in its discretion, appoint, or petition a court of competent jurisdiction
to appoint, any established servicing institution as the successor to the
Servicer hereunder in the assumption of all or any part of the
responsibilities, duties or liabilities of the Servicer hereunder. As
compensation, any Successor Servicer (including, without limitation, the
Administrative Agent) so appointed shall be entitled to receive the Servicing
Fee, together with any other servicing compensation in the form of assumption
fees, late payment charges or otherwise as provided herein that accrued prior
thereto, including, without limitation, Transition Expenses.  The Backup Servicer and such successor shall
take such action, consistent with this Agreement, as shall be necessary to
effectuate any such succession.  No
appointment of a successor to the Servicer hereunder shall be effective until
written notice of such proposed appointment shall have been provided by the
Backup Servicer to the Administrative Agent and each Purchaser Agent and the
Backup Servicer shall have consented thereto. 
The Backup Servicer shall not resign as servicer until a Successor
Servicer has been appointed and accepted such appointment.  Notwithstanding anything to the contrary
contained herein, in no event shall Lyon, in any capacity, be liable for any
Servicing Fee or for any differential in the amount of the Servicing Fee paid
hereunder and the amount necessary to induce any Successor Servicer under this
Agreement and the transactions set forth or provided for by this Agreement.

 

ARTICLE VII

THE BACKUP SERVICER

 

Section 7.1.                                Designation of the Backup Servicer.

 

(a)                          Initial Backup Servicer.  The backup servicing role with respect to the
Collateral shall be conducted by the Person designated as Backup Servicer
hereunder from time to time in accordance with this Section 7.1.  Until the Administrative Agent shall give to
Lyon a Backup Servicer Termination Notice, Lyon is hereby designated as, and
hereby agrees to perform the duties and obligations of, a Backup Servicer
pursuant to the terms hereof.

 

(b)                         Successor Backup Servicer.  Upon the Backup Servicer’s receipt of Backup
Servicer Termination Notice from the Administrative Agent of the designation of
a replacement

 

120

 

Backup Servicer pursuant to the provisions of Section 7.5,
the Backup Servicer agrees that it will terminate its activities as Backup
Servicer hereunder.

 

Section 7.2.                                Duties of the Backup Servicer.

 

(a)                          Appointment.  The Borrower and the Administrative Agent
each hereby appoints Lyon to act as Backup Servicer, for the benefit of the
Administrative Agent, the Trustee each Purchaser Agent and the benefit of the
Secured Parties, as from time to time designated pursuant to Section 7.1.  The Backup Servicer hereby accepts such
appointment and agrees to perform the duties and obligations with respect
thereto set forth herein.

 

(b)                         Duties.  On or before the initial Funding Date, and
until its removal pursuant to Section 7.5, the Backup Servicer
shall perform, on behalf of the Administrative Agent, the Trustee and the
Secured Parties, the following duties and obligations:

 

(i)                                     On or before the
initial Funding Date, the Backup Servicer shall accept from the Servicer
delivery of the information required to be set forth in the Servicing Reports
(if any) in hard copy and in EXCEL or a comparable format.

 

(ii)                                  Not later than 12:00
p.m. on each Reporting Date, the Servicer shall deliver to the Backup Servicer
the loan tape, which shall include but not be limited to the following
information:  (x) for each Loan, the name
and number of the related Obligor, the collection status, the loan status, the
date of each Scheduled Payment and the Outstanding Loan Balance, (y) the
Borrowing Base and (z) the Aggregate Outstanding Loan Balance (the “Tape”).  The Backup Servicer shall accept delivery of
the Tape.

 

(iii)                               Prior to the related
Payment Date, the Backup Servicer shall review the Servicing Report to ensure
that it is complete on its face and that the following items in such Servicing
Report have been accurately calculated, if applicable, and reported:  (A) the Borrowing Base, (B) the Backup
Servicing Fee, (C) the Loans that are current and not past due, (D) the Loans
that are 1 - 30 days past due, (E) the Loans that are 31 - 60 days past due,
(F) the Loans that are 61 - 90 days past due, (G) the Loans that are 90+ days
past due, (H) the Pool Charged-Off Ratio, (I) the Aggregate Outstanding Loan
Balance, (J) the Portfolio Charged-Off Ratio, (K) the Pool Delinquency Ratio
and (L) the Pool Yield.  The Backup
Servicer by a separate written report shall notify the Administrative Agent and
the Servicer of any disagreements with the Servicing Report based on such
review not later than the Business Day preceding such Payment Date to such
Persons.

 

(iv)                              If the Servicer disagrees
with the report provided under paragraph (iii) above by the Backup Servicer or
if the Servicer or any subservicer has not reconciled such discrepancy, the
Backup Servicer agrees to confer with the Servicer to resolve such disagreement
on or prior to the next succeeding Determination Date and shall settle such
discrepancy with the Servicer if possible, and notify the Administrative Agent
of the resolution thereof.  The Servicer
hereby agrees to

 

121

 

cooperate at its own expense with the Backup
Servicer in reconciling any discrepancies herein.  If within 20 days after the delivery of the
report provided under paragraph (iii) above by the Backup Servicer, such
discrepancy is not resolved, the Backup Servicer shall promptly notify the
Administrative Agent of the continued existence of such discrepancy.  Following receipt of such notice by the
Administrative Agent, the Servicer shall deliver to the Administrative Agent,
the Secured Parties and the Backup Servicer no later than the next Payment Date
a certificate describing the nature and amount of such discrepancies and the
actions the Servicer proposes to take with respect thereto.

 

(c)                          Reliance on Tape.  With respect to the duties described in Section 7.2(b),
the Backup Servicer, is entitled to rely conclusively, and shall be fully protected
in so relying, on the contents of each Tape, including, but not limited to, the
completeness and accuracy thereof, provided by the Servicer.

 

Section 7.3.                                Merger or Consolidation.

 

Any Person (i) into which the Backup Servicer may be merged or consolidated,
(ii) that may result from any merger or consolidation to which the Backup
Servicer shall be a party, or (iii) that may succeed to the properties and
assets of the Backup Servicer substantially as a whole, which Person in any of
the foregoing cases executes an agreement of assumption to perform every
obligation of the Backup Servicer hereunder, shall be the successor to the
Backup Servicer under this Agreement without further act on the part of any of
the parties to this Agreement provided such Person is organized under the laws
of the United States of America or any one of the States thereof or the
District of Columbia (or any domestic branch of a foreign bank), and (a) has
either (1) a long-term unsecured debt rating of “A” or better by S&P and “A2”
or better by Moody’s or (2) a short-term unsecured debt rating or certificate
of deposit rating of “A-1” or better by S&P or “P-1” or better by Moody’s,
(b) the parent corporation which has either (1) a long-term unsecured debt
rating of “A” or better by S&P and “A2” or better by Moody’s or (2) a
short-term unsecured debt rating or certificate of deposit rating of “A-1” or
better by S&P and “P-1” or better by Moody’s or (c) is otherwise acceptable
to the Administrative Agent.

 

Section 7.4.                                Backup Servicing Compensation.

 

As compensation for its back-up servicing activities hereunder, the
Backup Servicer shall be entitled to receive the Backup Servicing Fee from the
Servicer.  To the extent that such Backup
Servicing Fee is not paid by the Servicer, the Backup Servicer shall be
entitled to receive the unpaid balance of its Backup Servicing Fee to the
extent of funds available therefor pursuant to Section 2.9(a)(2)
and Section 2.10(a)(2), as applicable.  The Backup Servicer’s entitlement to receive
the Backup Servicing Fee shall cease (excluding any unpaid outstanding amounts
as of that date) on the earliest to occur of: 
(i) it becoming the Successor Servicer, (ii) its removal as Backup
Servicer pursuant to Section 7.5, or (iii) the termination of this
Agreement.  Upon becoming Successor
Servicer pursuant to Section 6.16, the Backup Servicer shall be
entitled to the Servicing Fee.

 

122

 

Section 7.5.                                Backup Servicer
Removal.

 

The Backup Servicer may be removed, with or without cause, by the
Administrative Agent by notice given in writing to the Backup Servicer (the “Backup
Servicer Termination Notice”), dated one day prior to the effective date of
such Backup Servicer Termination Notice, in the case of any removal for cause,
and at least 30 days prior to the effective date of the Backup Servicer
Termination Notice, in the case of any removal without cause.  In the event of any such removal, a
replacement Backup Servicer may be appointed by the Administrative Agent.

 

Section 7.6.                                Limitation on
Liability.

 

(a)                          The Backup Servicer
undertakes to perform only such duties and obligations as are specifically set
forth in this Agreement, it being expressly understood by all parties hereto
that there are no implied duties or obligations of the Backup Servicer
hereunder.  Without limiting the
generality of the foregoing, the Backup Servicer, except as expressly set forth
herein, shall have no obligation to supervise, verify, monitor or administer
the performance of the Servicer.  The
Backup Servicer may act through its agents, nominees, attorneys and custodians
in performing any of its duties and obligations under this Agreement, it being
understood by the parties hereto that the Backup Servicer will be responsible
for any misconduct or negligence on the part of such agents, attorneys or
custodians.  Neither the Backup Servicer
nor any of its officers, directors, employees or agents shall be liable,
directly or indirectly, for any damages or expenses arising out of the services
performed under this Agreement other than damages or expenses that result from
the gross negligence or willful misconduct of it or them or the failure to
perform materially in accordance with this Agreement.

 

(b)                         The Backup Servicer shall not
be liable for any obligation of the Servicer contained in this Agreement or for
any errors of the Servicer contained in any computer tape, certificate or other
data or document delivered to the Backup Servicer hereunder or on which the
Backup Servicer must rely in order to perform its obligations hereunder, and
the Secured Parties, the Administrative Agent and the Trustee each agree to
look only to the Servicer to perform such obligations.  The Backup Servicer shall have no responsibility
and shall not be in default hereunder or incur any liability for any failure,
error, malfunction or any delay in carrying out any of its duties under this
Agreement if such failure or delay results from the Backup Servicer acting in
accordance with information prepared or provided by a Person other than the
Backup Servicer or the failure of any such other Person to prepare or provide
such information.  The Backup Servicer
shall have no responsibility, shall not be in default and shall incur no liability
for (i) any act or failure to act of any third party, including the Servicer,
(ii) any inaccuracy or omission in a notice or communication received by the
Backup Servicer from any third party, (iii) the invalidity or unenforceability
of any Collateral under Applicable Law, (iv) the breach or inaccuracy of any
representation or warranty made with respect to any Collateral, or (v) the acts
or omissions of any successor Backup Servicer.

 

Section 7.7.                                The Backup Servicer
Not to Resign.

 

The Backup Servicer shall not resign (except with prior consent of the
Administrative Agent which consent shall not be unreasonably withheld) from the
obligations and duties hereby imposed on it except upon a determination by the
Backup Servicer that (i) the performance of its duties hereunder is or becomes
impermissible under Applicable Law and (ii) there is no reasonable action that
the Backup Servicer could take to make the performance of its duties

 

123

 

hereunder
permissible under Applicable Law.  Any
such determination permitting the resignation of the Backup Servicer shall be
evidenced as to clause (i) above by an Opinion of Counsel to such effect
delivered to the Administrative Agent and each Purchaser Agent.  No such resignation shall become effective
until a successor Backup Servicer shall have assumed the responsibilities and
obligations of the Backup Servicer hereunder.

 

ARTICLE VIII

THE TRUSTEE

 

Section 8.1.                                Designation of Trustee.

 

(a)                          Initial Trustee.  The role of Trustee with respect to the
Required Loan Documents shall be conducted by the Person designated as Trustee
hereunder from time to time in accordance with this Section 8.1.  Until the Administrative Agent shall give to
U.S. Bank a Trustee Termination Notice, U.S. Bank is hereby appointed as, and hereby
accepts such appointment and agrees to perform the duties and obligations of,
Trustee pursuant to the terms hereof.

 

(b)                         Successor Trustee.  Upon the Trustee’s receipt of a Trustee
Termination Notice from the Administrative Agent of the designation of a
successor Trustee pursuant to the provisions of Section 8.5, the
Trustee agrees that it will terminate its activities as Trustee hereunder.

 

(c)                          Secured Party.  The Administrative Agent, the Purchaser
Agents and the Purchasers hereby appoint U.S. Bank, in its capacity as Trustee
hereunder, as their agent for the purposes of perfection of a security interest
in the Loans.  U.S. Bank, in its capacity
as Trustee hereunder, hereby accepts such appointment and agrees to perform the
duties set forth in Section 8.2(b).

 

Section 8.2.                                Duties of Trustee.

 

(a)                          Appointment.  The Borrower and the Administrative Agent
each hereby appoints U.S. Bank to act as Trustee, for the benefit of the
Secured Parties.  The Trustee hereby
accepts such appointment and agrees to perform the duties and obligations with
respect thereto set forth herein.

 

(b)                         Duties.  On or before the initial Funding Date, and
until its removal pursuant to Section 8.5, the Trustee shall
perform, on behalf of the Secured Parties, the following duties and
obligations:

 

(i)                                     The Trustee shall
take and retain custody of the Required Loan Documents delivered by the
Borrower pursuant to Section 3.2 hereof in accordance with the
terms and conditions of this Agreement, all for the benefit of the Secured
Parties.  Within five Business Days of
its receipt of any Required Loan Documents, the Trustee shall review the
related Collateral and Required Loan Documents to confirm that (A) such
Required Loan Documents have been properly executed and have no missing or
mutilated pages, (B) UCC and other filings (required by the

 

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Required Loan Documents) have been made, (C)
if listed on the Loan Checklist, an Insurance Policy exists with respect to any
real or personal property constituting the Related Property, and (D) the
related Outstanding Loan Balance, Loan number and Obligor name with respect to
such Loan is referenced on the related Loan List and is not a duplicate Loan
(such items (A) through (D) collectively, the “Review Criteria”).  In order to facilitate the foregoing review
by the Trustee, in connection with each delivery of Required Loan Documents
hereunder to the Trustee, the Servicer shall provide to the Trustee an
electronic file (in EXCEL or a comparable format) that contains the related
Loan Checklist or that otherwise contains the Loan identification number and
the name of the Obligor with respect to each related Loan.  If, at the conclusion of such review, the
Trustee shall determine that (i) the Outstanding Loan Balances of the Loans
with respect to which it has received Required Loan Documents is less than as
set forth on the electronic file, the Trustee shall promptly notify the
Administrative Agent and the Servicer of such discrepancy, and (ii) any Review
Criteria is not satisfied, the Trustee shall within one Business Day notify the
Servicer of such determination and provide the Servicer with a list of the
non-complying Loans and the applicable Review Criteria that they fail to
satisfy.  The Servicer shall have five
Business Days to correct any non-compliance with any Review Criteria.  If after the conclusion of such time period
the Servicer has still not cured any non-compliance by a Loan with any Review
Criteria, the Trustee shall promptly notify the Borrower and the Administrative
Agent of such determination by providing a written report to such persons
identifying, with particularity, each Loan and each of the applicable Review
Criteria that such Loan fails to satisfy. 
In addition, if requested in writing by the Servicer and approved by the
Administrative Agent within ten Business Days of the Trustee’s delivery of such
report, the Trustee shall return any Loan which fails to satisfy a Review
Criteria to the Borrower.  Other than the
foregoing, the Trustee shall not have any responsibility for reviewing any
Required Loan Documents.

 

(ii)                                  In taking and
retaining custody of the Required Loan Documents, the Trustee shall be deemed
to be acting as the agent of the Secured Parties; provided, however, that the Trustee makes no representations
as to the existence, perfection or priority of any Lien on the Required Loan
Documents or the instruments therein; and provided,
further, that, the Trustee’s duties shall be limited to those
expressly contemplated herein.

 

(iii)                               All Required Loan
Documents shall be kept in fire resistant vaults, rooms or cabinets at the
locations specified on Schedule III attached hereto, or at such
other office as shall be specified to the Administrative Agent and the Servicer
by the Trustee in a written notice delivered at least 45 days prior to such
change.  All Required Loan Documents
shall be placed together with an appropriate identifying label and maintained
in such a manner so as to permit retrieval and access.  All Required Loan Documents shall be clearly
segregated from any other documents or instruments maintained by the Trustee.

 

125

 

(iv)                              The Trustee shall make
payments pursuant to the terms of the Servicing Report in accordance with Section 2.9
and Section 2.10 (the “Payment Duties”).

 

(v)                                 On each Reporting
Date, the Trustee shall provide a written report to the Administrative Agent
and the Servicer (in a form mutually agreeable to the Administrative Agent and
the Trustee) identifying each Loan for which it holds Required Loan Documents,
the non-complying Loans and the applicable Review Criteria that any
non-complying Loan fails to satisfy.

 

(vi)                              The Trustee shall provide
to the Servicer and the Backup Servicer a copy of all written notices and
communications identified as being sent to it in connection with the Existing
Loans and the Additional Loans and the other Collateral held hereunder which it
receives from the related Obligor, participating bank and/or agent bank.  In no instance shall the Trustee be under any
duty or obligation to take any action on behalf of the Servicer in respect of
the exercise of any voting or consent rights, or similar actions, unless it
receives specific written instructions from the Servicer, prior to the
occurrence of a Termination Event or the Administrative Agent, after the
occurrence of a Termination Event, in which event the Trustee shall vote,
consent or take such other action in accordance with such instructions.

 

(vii)                           In performing its duties, the
Trustee shall use the same degree of care and attention as it employs with
respect to similar collateral that it holds as trustee or collateral custodian
for others.

 

(c)                                  (i)                                     Each
of the Administrative Agent, each Purchaser Agent and each Secured Party further
authorizes the Trustee to take such action as agent on its behalf and to
exercise such powers under this Agreement and the other Transaction Documents
as are expressly delegated to the Trustee by the terms hereof and thereof,
together with such powers as are reasonably incidental thereto.  In furtherance, and without limiting the
generality of the foregoing, each Secured Party hereby appoints the Trustee as
its agent to execute and deliver all further instruments and documents, and
take all further action that the Trustee or the Administrative Agent deems
necessary or desirable in order to perfect, protect or more fully evidence the
security interests granted by the Borrower hereunder, or to enable any of them
to exercise or enforce any of their respective rights hereunder, including,
without limitation, the execution by the Trustee as secured party/assignee of
such financing or continuation statements, or amendments thereto or assignments
thereof, relative to all or any of the Loans now existing or hereafter arising,
and such other instruments or notices, as may be necessary or appropriate for
the purposes stated hereinabove.  Nothing
in this Section 8.2(c) shall be deemed to relieve the Borrower of
its obligation to protect the interest of the Trustee (for the benefit of the
Secured Parties) in the Collateral, including to file financing and
continuation statements in respect of the Collateral in accordance with Section 5.1(e)
and Section 5.1(n).

 

(ii)                                  The
Administrative Agent may direct the Trustee to take any such incidental action
hereunder.  With respect to other actions
which are incidental to the actions specifically delegated to the Trustee
hereunder, the Trustee shall not be required to take any such

 

126

 

incidental
action hereunder, but shall be required to act or to refrain from acting (and
shall be fully protected in acting or refraining from acting) upon the
direction of the Administrative Agent; provided,
however, that the Trustee shall
not be required to take any action hereunder at the request of the
Administrative Agent, any Secured Parties or otherwise if the taking of such
action, in the reasonable determination of the Trustee, (x) shall be in
violation of any Applicable Law or contrary to any provisions of this Agreement
or (y) shall expose the Trustee to liability hereunder or otherwise (unless it
has received indemnity which it reasonably deems to be satisfactory with
respect thereto).  In the event the
Trustee requests the consent of the Administrative Agent and the Trustee does
not receive a consent (either positive or negative) from the Administrative
Agent with 10 Business Days of its receipt of such request, then the
Administrative Agent shall be deemed to have declined to consent to the
relevant action.

 

(iii)                               Except
as expressly provided herein, the Trustee shall not be under any duty or
obligation to take any affirmative action to exercise or enforce any power,
right or remedy available to it under this Agreement or any of the Required
Loan Documents (i) unless and until (and to the extent) expressly so directed
by the Administrative Agent or (ii) prior to the occurrence of the Termination
Date pursuant to clause (d) of the definition of “Termination Date” (and upon
such occurrence, the Trustee shall act in accordance with the written
instructions of the Administrative Agent pursuant to clause (i)).  The Trustee shall not be liable for any
action taken, suffered or omitted by it in accordance with the request or
direction of any Secured Party, to the extent that this Agreement provides such
Secured Party the right to so direct the Trustee, or the Administrative
Agent.  The Trustee shall not be deemed
to have notice or knowledge of any matter hereunder, including a Termination
Event, unless a Responsible Officer of the Trustee has knowledge of such matter
or written notice thereof is received by the Trustee.

 

Section 8.3.                                Merger or Consolidation.

 

Any Person (i) into which the Trustee may be merged or consolidated,
(ii) that may result from any merger or consolidation to which the Trustee
shall be a party, or (iii) that may succeed to the properties and assets of the
Trustee substantially as a whole, which Person in any of the foregoing cases
executes an agreement of assumption to perform every obligation of the Trustee
hereunder, shall be the successor to the Trustee under this Agreement without
further act of any of the parties to this Agreement.

 

Section 8.4.                                Trustee Compensation.

 

As compensation for its Trustee activities hereunder, the Trustee shall
be entitled to a Trustee Fee from the Servicer. 
To the extent that such Trustee Fee is not paid by the Servicer, the
Trustee shall be entitled to receive the unpaid balance of its Trustee Fee to
the extent of funds available therefor pursuant to the provision of Section 2.9(a)(2)
or Section 2.10(a)(2), as applicable.  The Trustee’s entitlement to receive the
Trustee Fee shall cease on the earlier to occur of:  (i) its removal as Trustee pursuant to Section 8.5
or (ii) the termination of this Agreement.

 

127

 

Section 8.5.                                Trustee Removal.

 

The Trustee may be removed, with or without cause, by the
Administrative Agent by notice given in writing to the Trustee (the “Trustee
Termination Notice”); provided, however,
notwithstanding its receipt of a Trustee Termination Notice, the Trustee shall
continue to act in such capacity until a successor Trustee has been appointed,
has agreed to act as Trustee hereunder, and has received all Required Loan Documents
held by the previous Trustee.

 

Section 8.6.                                Limitation on
Liability.

 

(a)                          The Trustee may conclusively
rely on and shall be fully protected in acting upon any certificate,
instrument, opinion, notice, letter, telegram or other document delivered to it
and that in good faith it reasonably believes to be genuine and that has been
signed by the proper party or parties. 
The Trustee may rely conclusively on and shall be fully protected in
acting upon (a) the written instructions of any designated officer of the
Administrative Agent or (b) the verbal instructions of the Administrative
Agent.

 

(b)                         The Trustee may consult
counsel satisfactory to it and the advice or opinion of such counsel shall be
full and complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in accordance with the
advice or opinion of such counsel.

 

(c)                          The Trustee shall not be
liable for any error of judgment, or for any act done or step taken or omitted
by it, in good faith, or for any mistakes of fact or law, or for anything that
it may do or refrain from doing in connection herewith except in the case of
its willful misconduct or grossly negligent performance or omission of its
duties and in the case of the negligent performance of its Payment Duties and
in the case of its negligent performance of its duties in taking and retaining
custody of the Required Loan Documents.

 

(d)                         The Trustee makes no warranty
or representation and shall have no responsibility (except as expressly set
forth in this Agreement) as to the content, enforceability, completeness,
validity, sufficiency, value, genuineness, ownership or transferability of the
Collateral, and will not be required to and will not make any representations
as to the validity or value (except as expressly set forth in this Agreement)
of any of the Collateral.  The Trustee
shall not be obligated to take any legal action hereunder that might in its
judgment involve any expense or liability unless it has been furnished with an
indemnity reasonably satisfactory to it.

 

(e)                          The Trustee shall have no
duties or responsibilities except such duties and responsibilities as are
specifically set forth in this Agreement and no covenants or obligations shall
be implied in this Agreement against the Trustee.

 

(f)                            The Trustee shall not be
required to expend or risk its own funds in the performance of its duties
hereunder.

 

(g)                         It is expressly agreed and
acknowledged that the Trustee is not guaranteeing performance of or assuming
any liability for the obligations of the other parties hereto or any parties to
the Collateral.

 

(h)                         In case any reasonable
question arises as to its duties hereunder, the Trustee may, prior to the
occurrence of a Termination Event or the Termination Date, request

 

128

 

instructions from the Servicer and may, after the occurrence of a
Termination Event or the Termination Date, request instructions from the
Administrative Agent, and shall be entitled at all times to refrain from taking
any action unless it has received instructions from the Servicer or the
Administrative Agent, as applicable.  The
Trustee shall in all events have no liability, risk or cost for any action
taken pursuant to and in compliance with the instruction of the Administrative
Agent.  In no event shall the Trustee be
liable for special, indirect or consequential loss or damage of any kind
whatsoever (including but not limited to lost profits), even if the Trustee has
been advised of the likelihood of such loss or damage and regardless of the
form of action.

 

Section 8.7.                                The Trustee Not to
Resign.

 

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

 

Section 8.8.                                Release of Documents.

 

(a)                          Release for Servicing.  From time to time and as appropriate for the
enforcement or servicing of any of the Collateral, the Trustee is hereby
authorized (unless and until such authorization is revoked by the
Administrative Agent), upon written receipt from the Servicer of a request for
release of documents and receipt in the form annexed hereto as Exhibit H,
to release to the Servicer within 2 Business Days of receipt of such request,
the related Required Loan Documents or the documents set forth in such request
and receipt to the Servicer.  All
documents so released to the Servicer shall be held by the Servicer in trust
for the benefit of the Administrative Agent in accordance with the terms of
this Agreement.  The Servicer shall
return to the Trustee the Required Loan Documents or other such documents (i)
promptly upon the request of the Administrative Agent, or (ii) when the
Servicer’s need therefor in connection with such foreclosure or servicing no
longer exists, unless the Loan shall be liquidated, in which case, upon receipt
of an additional request for release of documents and receipt certifying such
liquidation from the Servicer to the Trustee in the form annexed hereto as Exhibit
H, the Servicer’s request and receipt submitted pursuant to the first
sentence of this subsection shall be released by the Trustee to the
Servicer.

 

(b)                         Limitation on Release.  The foregoing provision with respect to the release
to the Servicer of the Required Loan Documents and documents by the Trustee
upon request by the Servicer shall be operative only to the extent that at any
time the Trustee shall not have released to the Servicer active Required Loan
Documents (including those requested) pertaining to more than 10 Loans at the
time being serviced by the Servicer under this Agreement.  Promptly after delivery to the Trustee of any
request for release of documents, the Servicer shall provide notice of the same
to the Administrative Agent.  Any
additional Required Loan Documents or documents requested to be released by the
Servicer may be released only upon written

 

129

 

authorization of the Administrative Agent.  The limitations of this paragraph shall not
apply to the release of Required Loan Documents to the Servicer pursuant to the
immediately succeeding subsection.

 

(c)                          Release for Payment.  Upon receipt by the Trustee of the Servicer’s
request for release of documents and receipt in the form annexed hereto as Exhibit
H (which certification shall include a statement to the effect that all
amounts received in connection with such payment or repurchase have been
credited to the Collection Account as provided in this Agreement), the Trustee
shall promptly release the related Required Loan Documents to the Servicer.

 

Section 8.9.                                Return of Required
Loan Documents.

 

The Borrower may, with the prior written consent of the Administrative
Agent (such consent not to be unreasonably withheld), require that the Trustee
return each Required Loan Document (a) delivered to the Trustee in error, (b)
for which a Substitute Loan has been substituted in accordance with Section 2.18,
(c) as to which the lien on the Related Property has been so released pursuant
to Section 9.2, (d) that has been repurchased or sold by the
Borrower pursuant to Section 2.18, (e) that has been the subject of
an Optional Sale pursuant to Section 2.19, (f) that has been the
subject of a RIC/BDC Sale pursuant to Section 2.20, or (g) that is
required to be redelivered to the Borrower in connection with the termination
of this Agreement, in each case by submitting to the Trustee and the
Administrative Agent a written request in the form of Exhibit H hereto
(signed by both the Borrower and the Administrative Agent) specifying the
Collateral to be so returned and reciting that the conditions to such release
have been met (and specifying the Section or Sections of this Agreement
being relied upon for such release).  The
Trustee shall upon its receipt of each such request for return executed by the
Borrower and the Administrative Agent promptly, but in any event within five
Business Days, return the Required Loan Documents so requested to the Borrower.

 

Section 8.10.                         Access to Certain
Documentation and Information Regarding the Collateral; Audits of Servicer.

 

The Trustee shall provide to the Administrative Agent and each
Purchaser Agent access to the Required Loan Documents and all other
documentation regarding the Collateral including in such cases where the
Administrative Agent and each Purchaser Agent is required in connection with
the enforcement of the rights or interests of the Secured Parties, or by
applicable statutes or regulations, to review such documentation, such access
being afforded without charge but only (i) upon two Business Days prior written
request, (ii) during normal business hours and (iii) subject to the Servicer’s
and the Trustee’s normal security and confidentiality procedures.  Prior to the Closing Date and periodically
thereafter at the discretion of the Administrative Agent and each Purchaser
Agent, the Administrative Agent and each Purchaser Agent may review the
Servicer’s collection and administration of the Collateral in order to assess
compliance by the Servicer with the Credit Policy and the Servicing Standard,
as well as with this Agreement and may conduct an audit of the Collateral, and
Required Loan Documents in conjunction with such a review.  Such review shall be reasonable in scope and
shall be completed in a reasonable period of time.  Without limiting the foregoing provisions of
this Section 8.10, from time to time on request of the
Administrative Agent, the Trustee shall permit certified public accountants or

 

130

 

other auditors
acceptable to the Administrative Agent to conduct, at the Servicer’s expense, a
review of the Required Loan Documents and all other documentation regarding the
Collateral.

 

ARTICLE IX

SECURITY INTEREST

 

Section 9.1.                                Grant
of Security Interest.

 

The parties to this Agreement intend that the conveyance of the
Collateral by the Borrower to the applicable Purchasers be treated as sales for
all purposes other than financial accounting purposes.  If, despite such intention, a determination
is made that such transactions not be treated as sales, then the parties hereto
intend that this Agreement constitute a security agreement and the transactions
effected hereby constitute secured loans by the applicable Purchasers to the
Borrower under Applicable Law.  In
addition to, and not in limitation of, any ownership interest now or hereafter
acquired by any Purchasers, the Borrower hereby transfers, conveys, assigns and
grants as of the Closing Date to the Trustee, for the benefit of the Secured
Parties, a lien and continuing security interest in all of the Borrower’s
right, title and interest in, to and under (but none of the obligations under) all
Collateral (including any Hedging Agreements), whether now existing or
hereafter arising or acquired by the Borrower, and wherever the same may be
located, to secure the prompt, complete and indefeasible payment and
performance in full when due, whether by lapse of time, acceleration or
otherwise, of the Aggregate Unpaids of the Borrower arising in connection with
this Agreement and each other Transaction Document, whether now or hereafter
existing, due or to become due, direct or indirect, or absolute or contingent,
including, without limitation, all Aggregate Unpaids.  The assignment under this Section 9.1
does not constitute and is not intended to result in a creation or an
assumption by the Trustee, the Administrative Agent, the Purchaser Agents, any
Hedge Counterparty, the Liquidity Banks or any of the Secured Parties of any
obligation of the Borrower or any other Person in connection with any or all of
the Collateral or under any agreement or instrument relating thereto.  Anything herein to the contrary
notwithstanding, (a) the Borrower shall remain liable under the Collateral to
the extent set forth therein to perform all of its duties and obligations
thereunder to the same extent as if this Agreement had not been executed, (b)
the exercise by the Trustee, for the benefit of the Secured Parties, of any of
its rights in the Collateral shall not release the Borrower from any of its
duties or obligations under the Collateral, and (c) none of the Administrative
Agent, the Trustee, the Purchaser Agents, any Hedge Counterparty, the Liquidity
Banks or any Secured Party shall have any obligations or liability under the
Collateral by reason of this Agreement, nor shall the Administrative Agent, the
Trustee, the Purchaser Agents, any Hedge Counterparty, the Liquidity Banks or
any Secured Party be obligated to perform any of the obligations or duties of
the Borrower thereunder or to take any action to collect or enforce any claim
for payment assigned hereunder.

 

Section 9.2.                                Release of Lien on Collateral.

 

At the same time as (i) any Collateral expires by its terms and all
amounts in respect thereof have been paid in full by the related Obligor and
deposited in the Collection Account, (ii) any Loan becomes a Prepaid Loan and
all amounts in respect thereof have been paid in full by the related Obligor
and deposited in the Collection Account, (iii) such Loan is repurchased,

 

131

 

replaced or
sold in accordance with Section 2.18, (iv) such Loan has been the
subject of an Optional Sale pursuant to Section 2.19, (v) such Loan
has been the subject of a RIC/BDC Sale pursuant to Section 2.20, or
(vi) this Agreement terminates in accordance with Section 13.6, the
Trustee will, to the extent requested by the Servicer, release its interest in
such Collateral.  In connection with any
sale of such Related Property, the Trustee will, after the deposit by the
Servicer of the Proceeds of such sale into the Collection Account, at the sole
expense of the Servicer, execute and deliver to the Servicer any assignments,
bills of sale, termination statements and any other releases and instruments as
the Servicer may reasonably request in order to effect the release and transfer
of such Related Property; provided that
the Trustee will make no representation or warranty, express or implied, with
respect to any such Related Property in connection with such sale or transfer
and assignment.  Nothing in this Section 9.2
shall diminish the Servicer’s obligations pursuant to Section 6.6
with respect to the Proceeds of any such sale.

 

Section 9.3.                                Further Assurances.

 

The provisions of Section 13.12 shall apply to the security
interest granted under Section 9.1 as well as to the Advances
hereunder.

 

Section 9.4.                                Remedies.

 

Subject to the provisions of Section 10.2, upon the
occurrence of a Termination Event, the Trustee and the Secured Parties shall
have, with respect to the Collateral granted pursuant to Section 9.1,
and in addition to all other rights and remedies available to the Trustee and
the Secured Parties under this Agreement or other Applicable Law, all rights
and remedies of a secured party upon default under the UCC, subject to the
provisions of Section 10.2(c).

 

Section 9.5.                                Waiver of Certain
Laws.

 

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

 

Section 9.6.                                Power of Attorney.

 

Each of the Borrower and the Servicer hereby irrevocably appoints each
of the Trustee and the Administrative Agent its true and lawful attorney (with
full power of substitution) in its name, place and stead and at is expense, in
connection with the enforcement of the rights and

 

132

 

remedies
provided for in this Agreement, including without limitation the following
powers:  (a) to give any necessary
receipts or acquittance for amounts collected or received hereunder, (b) to
make all necessary transfers of the Collateral in connection with any such sale
or other disposition made pursuant hereto, (c) to execute and deliver for value
all necessary or appropriate bills of sale, assignments and other instruments
in connection with any such sale or other disposition, the Borrower and the
Servicer hereby ratifying and confirming all that such attorney (or any
substitute) shall lawfully do hereunder and pursuant hereto, and (d) to sign
any agreements, orders or other documents in connection with or pursuant to any
Transaction Document or Hedging Agreement. 
Nevertheless, if so requested by the Trustee, the Administrative Agent
or a Purchaser Agent, the Borrower shall ratify and confirm any such sale or
other disposition by executing and delivering to the Trustee, the
Administrative Agent or such purchaser all proper bills of sale, assignments,
releases and other instruments as may be designated in any such request.

 

ARTICLE X

TERMINATION EVENTS

 

Section 10.1.                         Termination Events.

 

The following events shall be Termination Events (“Termination
Events”) hereunder:

 

(a)                          the Borrower or the
Originator defaults in making any payment required to be made under one or more
agreements for borrowed money to which it is a party in an aggregate principal
amount in excess of $5,000,000 and such failure continues unremedied for two
Business Days and such default is not cured within the applicable cure period,
if any, provided for under such agreement; or

 

(b)                         any failure on the part of the
Borrower or the Originator duly to observe or perform in any material respect
any other covenants or agreements of the Borrower or the Originator set forth
in this Agreement or the other Transaction Documents to which the Borrower or
the Originator is a party and the same continues unremedied for a period of 30
days (if such failure can be remedied) after the earlier to occur of (i) the
date on which written notice of such failure requiring the same to be remedied
shall have been given to the Borrower or the Originator by the Administrative
Agent and (ii) the date on which the Borrower or the Originator acquires
knowledge thereof; or

 

(c)                          the occurrence of an
Insolvency Event relating to the Originator or the Borrower; or

 

(d)                         the occurrence of a Servicer
Default (subject to the applicable cure periods set forth in the definition of “Servicer
Default”); or

 

(e)                          (1)  the rendering of one or more final judgments,
decrees or orders by a court or arbitrator of competent jurisdiction for the
payment of money in excess individually or in the aggregate of $7,500,000,
against the Originator, or $1,000,000, against the Borrower, and the Originator
or the Borrower, as applicable, shall not have either (i) discharged or
provided for the discharge of any such judgment, decree or order in accordance
with its terms or (ii)

 

133

 

perfected a timely appeal of such judgment, decree or order and caused
the execution of same to be stayed during the pendency of the appeal or (2) the
Originator or the Borrower shall have made payments of amounts in excess of
$7,500,000 or $500,000, respectively, in the settlement of any litigation,
claim or dispute (excluding payments made from insurance proceeds); or

 

(f)                            the Borrower shall cease to
be an Affiliate of the Originator or shall fail to qualify as a
bankruptcy-remote entity based upon customary criteria such that reputable
counsel could no longer render a substantive nonconsolidation opinion with
respect thereto; or

 

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

 

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

 

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

 

(h)                         any portion of the Advances
Outstanding shall be funded by a Liquidity Bank solely due to a default by the
Borrower, the Servicer or the Originator under the Transaction Documents or the
creditworthiness of the Collateral; or

 

(i)                             either (1) the Advances
Outstanding on any day exceeds the lesser of the Facility Amount and the
Maximum Availability and the same continues unremedied for three Business Days
or (2) the Pre-Funded Advances on any day exceeds the Pre-Funded Availability
and the same continues unremedied for three Business Days; provided, however,
that, during the period of time that such event remains unremedied, no
additional Advances will be made under this Agreement and any payments required
to be made by the Servicer on a Payment Date shall be made under Section 2.10;
or

 

(j)                             the Borrower or its
Affiliates shall fail to consummate a Term Securitization involving the
Collateral within 12 months after the Closing Date and every 12 months
thereafter other than due to a failure of the Administrative Agent or its
Affiliates; or

 

(k)                          as of any Determination Date,
the Pool Yield does not equal or exceed the Minimum Pool Yield; or

 

(l)                             as of any Determination
Date, the Average Pool Delinquency Ratio exceeds 5.0%; or

 

(m)                       as of any Determination Date,
the Pool Charged-Off Ratio exceeds 2.5%; or

 

134

 

(n)                         on any date of determination,
the aggregate Hedge Notional Amount in effect for that day under all Hedge
Transactions is less than the Hedge Amount on that day, and the same continues
unremedied for a period of the later of 15 calendar days or the next succeeding
Reporting Date; or

 

(o)                         failure on the part of the
Borrower or the Originator to make any payment or deposit (including, without
limitation, with respect to bifurcation and remittance of Collections or any
other payment or deposit required to be made by the terms of the Transaction
Documents, including, without limitation, to any Secured Party, Affected Party
or Indemnified Party) required by the terms of any Transaction Document on the
day such payment or deposit is required to be made and the same continues
unremedied for two Business Days; or

 

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

 

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

 

(r)                            any Change of Control shall
occur; or

 

(s)                          any representation, warranty
or certification made by the Borrower or the Originator in any Transaction Document
or in any certificate delivered pursuant to any Transaction Document shall
prove to have been incorrect when made, which has a Material Adverse Effect on
the Secured Parties and which continues to be unremedied for a period of 30
days after the earlier to occur of (i) the date on which written notice of such
incorrectness requiring the same to be remedied shall have been given to the
Borrower or the Originator by the Administrative Agent and (ii) the date on
which a Responsible Officer of the Borrower or the Originator acquires
knowledge thereof.

 

Section 10.2.                         Remedies.

 

(a)                          Upon the occurrence of a
Termination Event, the Administrative Agent shall, at the request of, or may,
with the consent of the Required Purchasers, by notice to the Borrower, declare
the Termination Date to have occurred, the VFCs to be immediately due and
payable in full (without presentment, demand, protest or notice of any kind all
of which are hereby waived by the Borrower) and the Amortization Period to have
commenced; provided, however, in
the case of any event described in Section 10.1(c) or 10.1(d)
(in the case of Section 10.1(d) due to the occurrence of an event
described in Section 6.15(d)), the VFCs shall be immediately due
and payable in full (without presentment, demand, notice of any kind, all of
which are hereby expressly, waived by the Borrower) and the Termination Date
shall be deemed to have occurred automatically upon the occurrence of any such
event.

 

135

 

(b)                         Upon the occurrence of any
Termination Event described in Section 10.1, no Advances will
thereafter be made.  After the
declaration or occurrence of the Termination Date in accordance with Section 10.2(a),
the Amortization Period shall commence and the Trustee shall, on each Payment
Date thereafter, make payments in accordance with the provisions of Section 2.10
and the Trustee and the Secured Parties shall have, in addition to all of the
rights and remedies under this Agreement or otherwise, all other rights and remedies
provided under the UCC of each applicable jurisdiction and other Applicable
Law, which rights shall be cumulative.

 

(c)                          At any time on and after the
Termination Date, the Borrower and the Servicer hereby agree that they will, at
the Servicer’s expense and upon request of the Trustee, or the Administrative
Agent on its behalf, forthwith, (i) assemble all or any part of the
Collateral as directed by the Trustee, or the Administrative Agent on its
behalf, and make the same available to the Trustee, or the Administrative Agent
on its behalf, at a place to be designated by the Trustee, or the
Administrative Agent on its behalf, and (ii) without notice except as specified
below, sell the Collateral or any part thereof in one or more parcels at a
public or private sale, at any of the Administrative Agent’s offices or
elsewhere, for cash, on credit or for future delivery, and upon such other
terms as the Administrative Agent may deem commercially reasonable.  The Borrower agrees that, to the extent
notice of sale shall be required by law, at least ten days’ notice to the
Borrower of the time and place of any public sale or the time after which any
private sale is to be made shall constitute reasonable notification.  The Trustee shall not be obligated to make any
sale of Collateral regardless of notice of sale having been given.  The Trustee, if so requested by the
Administrative Agent, shall adjourn any public or private sale from time to
time by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned.  All cash Proceeds received by
the Trustee in respect of any sale of, collection from, or other realization
upon, all or any part of the Collateral (after payment of any amounts incurred
by the Trustee or any of the Secured Parties in connection with such sale)
shall be deposited into the Collection Account and to be applied against all or
any part of the Aggregate Unpaids pursuant to Section 2.10 or
otherwise in such order as the Trustee shall elect in its discretion.

 

(d)                         If the Trustee, or the
Administrative Agent on its behalf, proposes to sell the Collateral or any part
thereof in one or more parcels at a public or private sale, the Borrower shall
have the right of first refusal to repurchase the Collateral, in whole but not
in part, prior to such sale at a price not less than the Aggregate Unpaids as
of the date of such proposed repurchase.

 

ARTICLE XI

INDEMNIFICATION

 

Section 11.1.                         Indemnities by the Borrower.

 

(a)                          Without limiting any other
rights that any such Person may have hereunder or under Applicable Law, the
Borrower hereby agrees to indemnify the Administrative Agent, the Trustee, the
Purchaser Agents, the Backup Servicer, the Secured Parties, the Affected
Parties and each of their respective assigns and officers, directors, employees
and agents thereof

 

136

 

(collectively, the “Indemnified Parties”), forthwith on demand,
from and against any and all damages, losses, claims, liabilities and related
costs and expenses, including reasonable attorneys’ fees and disbursements (all
of the foregoing being collectively referred to as the “Indemnified Amounts”)
awarded against or incurred by such Indemnified Party arising out of or as a
result of this Agreement or the ownership of an interest in the Collateral or
in respect of any Loan included in the Collateral, excluding, however,
Indemnified Amounts to the extent resulting from gross negligence or willful
misconduct on the part of the Indemnified Party seeking indemnification; provided, however, that nothing contained
in this sentence shall limit the liability of the Borrower or limit the
recourse of the Secured Parties to the Borrower for amounts otherwise specifically
provided to be paid by the Borrower under the terms of this Agreement.  If the Borrower has made any indemnity
payment pursuant to this Section 11.1 and such payment fully
indemnified the recipient thereof and the recipient thereafter collects any
payments from others in respect of such Indemnified Amounts then, the recipient
shall repay to the Borrower an amount equal to the amount it has collected from
others in respect of such indemnified amounts. 
Without limiting the foregoing, the Borrower shall indemnify each
Indemnified Party for Indemnified Amounts relating to or resulting from:

 

(i)                                     any representation
or warranty made or deemed made by the Borrower, the Servicer (if the
Originator or one of its Affiliates is the Servicer) or any of their respective
officers under or in connection with this Agreement or any other Transaction
Document, which shall have been false or incorrect in any material respect when
made or deemed made or delivered;

 

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

 

(iii)                               the failure to vest and
maintain vested in the Trustee, for the benefit of the Secured Parties, an
undivided ownership interest in the Collateral, together with all Collections,
free and clear of any Lien (other than Permitted Liens) whether existing at the
time of any Advance o at any time thereafter;

 

(iv)                              the failure to maintain,
as of the close of business on each Business Day prior to the Termination Date,
(x) an amount of Advances Outstanding that is less than or equal to the lesser
of the Facility Amount and the Maximum Availability on such Business Day, or
(y) an aggregate principal amount of Pre-Funded Advances that is less than or
equal to the Pre-Funded Availability on such Business Day.

 

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

 

137

 

(vi)                              any dispute, claim,
offset or defense (other than the discharge in bankruptcy of the Obligor) of
the Obligor to the payment with respect to any Collateral (including, without
limitation, a defense based on the Collateral not being a legal, valid and
binding obligation of such Obligor enforceable against it in accordance with
its terms), or any other claim resulting from the sale of the merchandise or
services related to such Collateral or the furnishing or failure to furnish
such merchandise or services;

 

(vii)                           any failure of the Borrower
or the Servicer (if the Originator or one of its Affiliates is the Servicer) to
perform its duties or obligations in accordance with the provisions of this
Agreement or any of the other Transaction Documents to which it is a party or
any failure by the Originator, the Borrower or any Affiliate thereof to perform
its respective duties under any Collateral;

 

(viii)                        the failure of any
Concentration Account Bank to remit any amounts held in a Concentration Account
pursuant to the instructions of the Servicer or the Administrative Agent (to
the extent such Person is entitled to give such instructions in accordance with
the terms hereof and of the Intercreditor Agreement) whether by reason of the
exercise of set-off rights or otherwise;

 

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

 

(x)                                   any action taken by
the Borrower or the Originator (in its capacity as Servicer) in the enforcement
or collection of any Collateral;

 

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

 

(xii)                             any claim, suit or action
of any kind arising out of or in connection with Environmental Laws including
any vicarious liability;

 

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

 

(xiv)                         any repayment by the
Administrative Agent, the Purchaser Agents or a Secured Party of any amount
previously distributed in reduction of Advances Outstanding or payment of
Interest or any other amount due hereunder or under any Hedging Agreement, in
each case which amount the Administrative Agent, the Purchaser Agents or a
Secured Party believes in good faith is required to be repaid;

 

(xv)                            except with respect to
funds held in the Concentration Account, the commingling of Collections on the
Collateral at any time with other funds;

 

138

 

(xvi)                         any investigation, litigation
or proceeding related to this Agreement or the use of proceeds of Advances or
the security interest in the Collateral;

 

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

 

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

 

(xix)                           the failure of the Borrower,
the Originator or any of their respective agents or representatives to remit to
the Servicer or the Administrative Agent or the Purchaser Agents, Collections
on the Collateral remitted to the Borrower, the Originator, the Servicer or any
such agent or representative; as provided in this Agreement; or

 

(xx)                              the failure by the
Borrower to comply with any of the covenants relating to the Hedging Agreement
in accordance with the Transaction Documents.

 

(b)                         Any amounts subject to the
indemnification provisions of this Section 11.1 shall be paid by
the Borrower to the Indemnified Party within five Business Days following such
Person’s demand therefor.

 

(c)                          If for any reason the
indemnification provided above in this Section 11.1 is unavailable
to the Indemnified Party or is insufficient to hold an Indemnified Party
harmless in respect of any losses, claims, damages or liabilities, then the
Borrower or the Servicer, as the case may be, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such losses, claims,
damages or liabilities in such proportion as is appropriate to reflect not only
the relative benefits received by such Indemnified Party on the one hand and
the Borrower or the Servicer, as the case may be, on the other hand but also
the relative fault of such Indemnified Party as well as any other relevant
equitable considerations.

 

(d)                         The obligations of the
Borrower under this Section 11.1 shall survive the resignation or
removal of the Administrative Agent, the Purchaser Agents, the Servicer, the
Backup Servicer or the Trustee and the termination of this Agreement.

 

Section 11.2.                         Indemnities by the Servicer.

 

(a)                          Without limiting any other
rights that any such Person may have hereunder or under Applicable Law, the
Servicer hereby agrees to indemnify each Indemnified Party, forthwith on
demand, from and against any and all Indemnified Amounts awarded against or
incurred by any such Indemnified Party by reason of any acts, omissions or
alleged acts or omissions of the Servicer, including, but not limited to (i)
any representation or warranty made by the Servicer under or in connection with
any Transaction Document, any Servicing Report, Servicer’s Certificate or any
other information or report delivered by or on behalf of the Servicer pursuant
hereto, which shall have been false, incorrect or misleading in any material

 

139

 

respect when made or deemed made, (ii) the failure by the Servicer to
comply with any Applicable Law, (iii) the failure of the Servicer to comply
with its duties or obligations in accordance with the Agreement, (iv) the
failure by the Servicer to comply with any of the covenants relating to the
Hedging Agreement in accordance with the Transaction Documents, or (v) any
litigation, proceedings or investigation against the Servicer.  The provisions of this indemnity shall run
directly to and be enforceable by an injured party subject to the limitations
hereof.

 

(b)                         Any amounts subject to the
indemnification provisions of this Section 11.2 shall be paid by
the Servicer to the Indemnified Party within five Business Days following such
Person’s demand therefor.

 

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

 

(d)                         The obligations of the
Servicer under this Section 11.2 shall survive the resignation or
removal of the Administrative Agent, the Purchaser Agents, the Backup Servicer
or the Trustee and the termination of this Agreement.

 

(e)                          Any indemnification pursuant
to this Section 11.2 shall not be payable from the Collateral.

 

Section 11.3.                         After-Tax Basis.

 

Indemnification under Section 11.1 and Section 11.2
shall be in an amount necessary to make the Indemnified Party whole after
taking into account any tax consequences to the Indemnified Party of the
receipt of the indemnity provided hereunder, including the effect of such tax
or refund on the amount of tax measured by net income or profits that is or was
payable by the Indemnified Party.

 

ARTICLE XII

THE ADMINISTRATIVE AGENT AND PURCHASER AGENTS

 

Section 12.1.                         The Administrative Agent.

 

(a)                          Appointment.  Each Purchaser Agent and each Secured Party
hereby appoints and authorizes the Administrative Agent as its agent hereunder
and hereby further authorizes the Administrative Agent to appoint additional
agents to act on its behalf and for the benefit of each of the Purchaser Agents
and each Secured Party.  Each Purchaser
Agent and each Secured Party further authorizes the Administrative Agent to
take such action as agent on its behalf and to exercise such powers under this
Agreement and the other Transaction Documents as are delegated to the
Administrative Agent by the terms hereof and thereof, together with such powers
as are reasonably incidental thereto. 
With respect to other actions which are incidental to the actions
specifically delegated to the Administrative Agent hereunder, the
Administrative Agent shall not be required to take any such incidental action
hereunder, but shall be required to act or to refrain from acting (and shall be
fully protected in acting or refraining from acting)

 

140

 

upon the direction of the Purchaser Agents; provided, however, that the Administrative Agent shall not
be required to take any action hereunder if the taking of such action, in the
reasonable determination of the Administrative Agent, shall be in violation of
any Applicable Law or contrary to any provision of this Agreement or shall
expose the Administrative Agent to liability hereunder or otherwise.  In the event the Administrative Agent
requests the consent of a Purchaser Agent or a Purchaser pursuant to the
foregoing provisions and the Administrative Agent does not receive a consent
(either positive or negative) from such Person within ten Business Days of such
Person’s receipt of such request, then such Purchaser Agent or Purchaser shall
be deemed to have declined to consent to the relevant action.

 

(b)                         Standard of Care.  The Administrative Agent shall exercise such
rights and powers vested in it by this Agreement and the other Transaction
Documents, and use the same degree of care and skill in their exercise as a
prudent person would exercise or use under the circumstances in the conduct of
such person’s own affairs.

 

(c)                          Administrative Agent’s
Reliance, Etc.  Neither the
Administrative Agent nor any of its directors, officers, agents or employees
shall be liable for any action taken or omitted to be taken by it or them as
Administrative Agent under or in connection with this Agreement or any of the
other Transaction Documents, except for its or their own gross negligence or
willful misconduct. Without limiting the foregoing, the Administrative
Agent:  (i) may consult with legal
counsel (including counsel for the Borrower or the Originator), independent
public accountants and other experts selected by it and shall not be liable for
any action taken or omitted to be taken in good faith by it in accordance with
the advice of such counsel, accountants or experts; (ii) makes no warranty or
representation and shall not be responsible for any statements, warranties or
representations made in or in connection with this Agreement; (iii) shall not
have any duty to ascertain or to inquire as to the performance or observance of
any of the terms, covenants or conditions of this Agreement or any of the other
Transaction Documents on the part of the Borrower, the Originator, or the
Servicer or to inspect the property (including the books and records) of the
Borrower, the Originator, or the Servicer; (iv) shall not be responsible for
the due execution, legality, validity, enforceability, genuineness, sufficiency
or value of this Agreement, any of the other Transaction Documents or any other
instrument or document furnished pursuant hereto or thereto; and (v) shall
incur no liability under or in respect of this Agreement or any of the other
Transaction Documents by acting upon any notice (including notice by
telephone), consent, certificate or other instrument or writing (which may be
by facsimile) believed by it to be genuine and signed or sent by the proper
party or parties.

 

(d)                         Credit Decision with
Respect to the Administrative Agent. 
Each Purchaser Agent and Secured Party acknowledges that it has,
independently and without reliance upon the Administrative Agent, or any of the
Administrative Agent’s Affiliates, and based upon such documents and
information as it has deemed appropriate, made its own evaluation and decision
to enter into this Agreement and the other Transaction Documents to which it is
a party.  Each Purchaser Agent and
Secured Party also acknowledges that it will, independently and without
reliance upon the Administrative Agent, or any of the Administrative Agent’s
Affiliates, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own decisions in taking or not
taking action under this Agreement and the other Transaction Documents to which
it is a party.

 

141

 

(e)                          Indemnification of the
Administrative Agent.  Each Purchaser
Agent agrees to indemnify the Administrative Agent (to the extent not
reimbursed by the Borrower or the Servicer), ratably in accordance the Pro Rata
Share of its related Purchaser from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by, or asserted against the Administrative Agent in any way
relating to or arising out of this Agreement or any of the other Transaction
Documents, or any action taken or omitted by the Administrative Agent hereunder
or thereunder; provided that the
Purchaser Agents shall not be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from the Administrative Agent’s gross
negligence or willful misconduct. Without limitation of the foregoing, each
Purchaser Agent agrees to reimburse the Administrative Agent, ratably in accordance
with the Pro Rata Share of its related Purchaser promptly upon demand for any
out-of-pocket expenses (including counsel fees) incurred by the Administrative
Agent in connection with the administration, modification, amendment or
enforcement (whether through negotiations, legal proceedings or otherwise) of,
or legal advice in respect of rights or responsibilities under, this Agreement
and the other Transaction Documents, to the extent that such expenses are
incurred in the interests of or otherwise in respect of the Purchaser Agents,
or the Purchasers hereunder and/or thereunder and to the extent that the
Administrative Agent is not reimbursed for such expenses by the Borrower or the
Servicer.

 

(f)                            Successor Administrative
Agent.  The Administrative Agent may
resign at any time, effective upon the appointment and acceptance of a
successor Administrative Agent as provided below, by giving at least five days’
written notice thereof to each Purchaser Agent and the Borrower and may be
removed at any time with cause by the Purchaser Agents acting jointly.  Upon any such resignation or removal, the
Purchaser Agents acting jointly shall appoint a successor Administrative
Agent.  Each Purchaser Agent agrees that
it shall not unreasonably withhold or delay its approval of the appointment of
a successor Administrative Agent.  If no
such successor Administrative Agent shall have been so appointed, and shall
have accepted such appointment, within 30 days after the retiring Administrative
Agent’s giving of notice of resignation or the removal of the retiring
Administrative Agent, then the retiring Trustee may, on behalf of the Secured
Parties, appoint a successor Administrative Agent which successor
Administrative Agent shall be either (i) a commercial bank organized under the
laws of the United States or of any state thereof and have a combined capital
and surplus of at least $50,000,000 or (ii) an Affiliate of such a bank.  Upon the acceptance of any appointment as
Administrative Agent hereunder by a successor Administrative Agent, such
successor Administrative Agent shall thereupon succeed to and become vested
with all the rights, powers, privileges and duties of the retiring
Administrative Agent, and the retiring Administrative Agent shall be discharged
from its duties and obligations under this Agreement.  After any retiring Administrative Agent’s
resignation or removal hereunder as Administrative Agent, the provisions of
this Article XII shall continue to inure to its benefit as to any
actions taken or omitted to be taken by it while it was Administrative Agent
under this Agreement.

 

(g)                         Payments by the
Administrative Agent.  Unless
specifically allocated to a specific Purchaser Agent pursuant to the terms of
this Agreement, all amounts received by the Administrative Agent on behalf of
the Purchaser Agents shall be paid by the Administrative Agent to the Purchaser
Agents in accordance with their related Purchaser’s respective Pro Rata

 

142

 

Shares in the applicable Advances Outstanding, or if there are no
Advances Outstanding in accordance with their related Purchaser’s most recent
Commitments, on the Business Day received by the Administrative Agent, unless
such amounts are received after 12:00 noon on such Business Day, in which case
the Administrative Agent shall use its reasonable efforts to pay such amounts
to each Purchaser Agent on such Business Day, but, in any event, shall pay such
amounts to such Purchaser Agent not later than the following Business Day.

 

Section 12.2.                         Additional Agent.

 

(a)                          Authorization and Action.
Each Purchaser, respectively, hereby designates and appoints its applicable
Purchaser Agent to act as its agent hereunder and under each other Transaction
Document, and authorizes such Purchaser Agent to take such actions as agent on
its behalf and to exercise such powers as are delegated to such Purchaser Agent
by the terms of this Agreement and the other Transaction Documents, together
with such powers as are reasonably incidental thereto.  No Purchaser Agent shall have any duties or
responsibilities, except those expressly set forth herein or in any other
Transaction Document, or any fiduciary relationship with its related Purchaser,
and no implied covenants, functions, responsibilities, duties, obligations or
liabilities on the part of such Purchaser Agent shall be read into this
Agreement or any other Transaction Document or otherwise exist for such
Purchaser Agent.  In performing its
functions and duties hereunder and under the other Transaction Documents, each
Purchaser Agent shall act solely as agent for its related Purchaser and does
not assume nor shall be deemed to have assumed any obligation or relationship
of trust or agency with or for the Borrower or the Servicer or any of the
Borrower’s or the Servicer’s successors or assigns.  No Purchaser Agent shall be required to take
any action that exposes such Purchaser Agent to personal liability or that is
contrary to this Agreement, any other Transaction Document or Applicable
Law.  The appointment and authority of
each Purchaser Agent hereunder shall terminate upon the indefeasible payment in
full of all Aggregate Unpaids.

 

(b)                         Delegation of Duties.  Each Purchaser Agent may execute any of its
duties under this Agreement and each other Transaction Document by or through
agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties.  No Purchaser Agent shall be responsible for
the negligence or misconduct of any agents or attorneys-in-fact selected by it
with reasonable care.

 

(c)                          Exculpatory Provisions.  Neither any Purchaser Agent nor any of its
directors, officers, agents or employees shall be (i) liable for any action
lawfully taken or omitted to be taken by it or them under or in connection with
this Agreement or any other Transaction Document (except for its, their or such
Person’s own gross negligence or willful misconduct), or (ii) responsible in
any manner to its related Purchaser for any recitals, statements,
representations or warranties made by the Borrower or the Servicer contained in
Article IV, any other Transaction Document or any certificate,
report, statement or other document referred to or provided for in, or received
under or in connection with, this Agreement or any other Transaction Document,
or for the value, validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement, any other Transaction Document or any other
document furnished in connection herewith or therewith, or for any failure of
the Borrower or the Servicer to perform its obligations hereunder or
thereunder, or for the satisfaction of any condition specified in this
Agreement, or for the perfection, priority, condition, value or sufficiency of

 

143

 

any collateral pledged in connection herewith.  No Purchaser Agent shall be under any
obligation to its related Purchaser to ascertain or to inquire as to the
observance or performance of any of the agreements or covenants contained in,
or conditions of, this Agreement or any other Transaction Document, or to
inspect the properties, books or records of the Borrower or the Servicer.  No Purchaser Agent shall be deemed to have
knowledge of any Termination Event or Unmatured Termination Event unless such
Purchaser Agent has received notice from the Borrower or its related Purchaser.

 

(d)                         Reliance by Purchaser Agent.  Each Purchaser Agent shall in all cases be
entitled to rely, and shall be fully protected in relying, upon any document or
conversation believed by it to be genuine and correct and to have been signed,
sent or made by the proper Person or Persons and upon advice and statements of
legal counsel (including, without limitation, counsel to the Borrower),
independent accountants and other experts selected by such Purchaser
Agent.  Each Purchaser Agent shall in all
cases be fully justified in failing or refusing to take any action under this
Agreement or any other Transaction Document unless it shall first receive such
advice or concurrence of its related Purchaser as it deems appropriate and it
shall first be indemnified to its satisfaction by its related Purchaser; provided that, unless and until such
Purchaser Agent shall have received such advice, such Purchaser Agent may take
or refrain from taking any action, as the Purchaser Agent shall deem advisable
and in the best interests of its related Purchaser.  Each Purchaser Agent shall in all cases be
fully protected in acting, or in refraining from acting, in accordance with a
request of its related Purchaser, and such request and any action taken or
failure to act pursuant thereto shall be binding upon its related Purchaser.

 

(e)                          Non-Reliance on Purchaser
Agent.  Each Purchaser expressly
acknowledges that neither its related Agent, nor any of its officers,
directors, employees, agents, attorneys-in-fact or affiliates has made any
representations or warranties to it and that no act by such Purchaser Agent
hereafter taken, including, without limitation, any review of the affairs of
the Borrower or the Servicer, shall be deemed to constitute any representation
or warranty by such Purchaser Agent. 
Each Purchaser represents and warrants to its related Agent that it has
and will, independently and without reliance upon its related Purchaser Agent,
and based on such documents and information as it has deemed appropriate, made
its own appraisal of and investigation into the business, operations, property,
prospects, financial and other conditions and creditworthiness of the Borrower
and made its own decision to enter into this Agreement, the other Transaction
Documents and all other documents related hereto or thereto.

 

(f)                            Purchaser Agents are in
their Respective Individual Capacities. 
Each Purchaser Agent and its Affiliates may make loans to, accept deposits
from and generally engage in any kind of business with the Borrower or any
Affiliate of the Borrower as though such Purchaser Agent were not a Purchaser
Agent hereunder.  With respect to
Advances pursuant to this Agreement, each Purchaser Agent shall have the same
rights and powers under this Agreement in its individual capacity as any
Purchaser and may exercise the same as though it were not a Purchaser Agent,
and the terms “Purchaser,” and “Purchasers,” shall include the Purchaser Agent
in its individual capacity.

 

(g)                         Successor Purchaser Agent.  Each Purchaser Agent may, upon five days’
notice to the Borrower and its related Purchaser, and such Purchaser Agent
will, upon the direction of

 

144

 

its related Purchaser resign as the Purchaser Agent for such
Purchaser.  If any Purchaser Agent shall
resign, then its related Purchaser during such five day period shall appoint a
successor agent.  If for any reason no
successor agent is appointed by such Purchaser during such five day period,
then effective upon the termination of such five day period, and the Borrower
shall make all payments in respect of the Aggregate Unpaids due to such
Purchaser directly to such Purchaser, and for all purposes shall deal directly
with such Purchaser.  After any retiring
Purchaser Agent’s resignation hereunder as a Purchaser Agent, the provisions of
Articles XI and XII shall inure to its benefit with respect
to any actions taken or omitted to be taken by it while it was an Additional
Agent under this Agreement.

 

ARTICLE XIII

MISCELLANEOUS

 

Section 13.1.                         Amendments and Waivers.

 

Except as provided in this Section 13.1, no amendment,
waiver or other modification of any provision of this Agreement shall be
effective without the written agreement of the Borrower, the Administrative
Agent, the Trustee and each Purchaser and its related Purchaser Agent; provided that, (i) any amendment of the
Agreement that is solely for the purpose of adding a Purchaser may be effected
with the written consent of the Administrative Agent; and (ii) no such
amendment, waiver or modification adversely affecting the rights or obligations
of any Hedge Counterparty, the Backup Servicer or the Trustee shall be
effective without the written agreement of such Person.

 

Section 13.2.                         Notices, Etc.

 

All notices, reports and other communications provided for hereunder
shall, unless otherwise stated herein, be in writing (including communication
by facsimile copy) and mailed, e-mailed, faxed, transmitted or delivered, as to
each party hereto, at its address set forth on Annex A to this Agreement
or at such other address as shall be designated by such party in a written
notice to the other parties hereto (provided,
however, that, for avoidance of doubt, Lord Securities Corp. shall
not receive notices, reports and other communications provided pursuant to Article II,
and Section 6.10, Section 6.11 and Section 6.12
hereof).  All such notices and
communications shall be effective, upon receipt, or in the case of (a) notice by
mail, five days after being deposited in the United States mail, first class
postage prepaid, (b) notice by e-mail, when verbal or electronic communication
of receipt is obtained, or (c) notice by facsimile copy, when verbal
communication of receipt is obtained.

 

Section 13.3.                         Ratable
Payments.

 

If any Secured Party, whether by setoff or otherwise, has payment made
to it with respect to any portion of the Aggregate Unpaids owing to such
Secured Party (other than payments received pursuant to Section 11.1)
in a greater proportion than that received by any other Secured Party, such
Secured Party agrees, promptly upon demand, to purchase for cash without
recourse or warranty a portion of the Aggregate Unpaids held by the other
Secured Parties so that after such purchase each Secured Party will hold its
ratable proportion of the Aggregate Unpaids;

 

145

 

provided, however, that, if all or any portion
of such excess amount is thereafter recovered from such Secured Party, such
purchase shall be rescinded and the purchase price restored to the extent of
such recovery, but without interest.

 

Section 13.4.                         No Waiver; Remedies.

 

No failure on the part of the Administrative Agent, the Trustee, the
Purchaser Agents, the Backup Servicer or a Secured Party to exercise, and no
delay in exercising, any right or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any right or remedy
hereunder preclude any other or further exercise thereof or the exercise of any
other right.  The rights and remedies
herein provided are cumulative and not exclusive of any rights and remedies
provided by law.

 

Section 13.5.                         Binding Effect; Benefit of
Agreement.

 

This Agreement shall be binding upon and inure to the benefit of the
Borrower, the Servicer, the Administrative Agent, the Purchaser Agents, the
Backup Servicer, the Trustee, the Secured Parties and their respective
successors and permitted assigns.  Each
Hedge Counterparty, each Affected Party and each Indemnified Party shall be an
express third party beneficiary of this Agreement.

 

Section 13.6.                         Term of this Agreement.

 

This Agreement, including, without limitation, the Borrower’s
representations and covenants set forth in Articles IV and V, and
the Servicer’s representations, covenants and duties set forth in Articles
VI, VII and VIII, create and constitute the continuing
obligation of the parties hereto in accordance with its terms, and shall remain
in full force and effect until the Collection Date; provided, however, that the rights and remedies with respect
to any breach of any representation and warranty made or deemed made by the
Borrower pursuant to Articles III and IV the indemnification and
payment provisions of Article XI and the provisions of Section 13.9,
Section 13.10 and Section 13.11, shall be continuing
and shall survive any termination of this Agreement.

 

Section 13.7.                         Governing Law; Consent to
Jurisdiction; Waiver of Objection to Venue.

 

THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK.  EACH
OF THE PARTIES HERETO HEREBY AGREES TO THE NON-EXCLUSIVE JURISDICTION OF ANY
FEDERAL COURT LOCATED WITHIN THE STATE OF NEW YORK.  EACH OF THE PARTIES HERETO HEREBY WAIVES ANY
OBJECTION BASED ON FORUM NON CONVENIENS, AND ANY OBJECTION TO VENUE OF ANY
ACTION INSTITUTED HEREUNDER IN ANY OF THE AFOREMENTIONED COURTS AND CONSENTS TO
THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH
COURT.

 

146

 

Section 13.8.                         Waiver of Jury Trial.

 

TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE PARTIES HERETO
HEREBY WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE,
WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE BETWEEN THE PARTIES HERETO
ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
BETWEEN ANY OF THEM IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.  INSTEAD, ANY SUCH
DISPUTE RESOLVED IN COURT WILL BE RESOLVED IN A BENCH TRIAL WITHOUT A JURY.

 

Section 13.9.                         Costs, Expenses and Taxes.

 

(a)                          In addition to the rights of
indemnification granted under Article XI hereof, each of the Borrower, the
Servicer and the Originator agrees to pay on demand all reasonable costs and
expenses of the Administrative Agent, the Purchaser Agents, the Backup
Servicer, the Trustee and the Secured Parties incurred in connection with the
preparation, execution, delivery, administration (including periodic auditing),
renewal, amendment or modification of, or any waiver or consent issued in
connection with, this Agreement and the other documents to be delivered
hereunder or in connection herewith (including any Hedging Agreement),
including, without limitation, the reasonable fees and out-of-pocket expenses
of counsel for the Administrative Agent, the Purchaser Agents, the Backup
Servicer, the Trustee and the Secured Parties with respect thereto and with
respect to advising the Administrative Agent, the Purchaser Agents, the Backup Servicer,
the Trustee and the Secured Parties as to their respective rights and remedies
under this Agreement and the other documents to be delivered hereunder or in
connection herewith (including any Hedging Agreement), and all costs and
expenses, if any (including reasonable counsel fees and expenses), incurred by
the Administrative Agent, the Purchaser Agents, the Backup Servicer, the
Trustee or the Secured Parties in connection with the enforcement of this
Agreement by such Person and the other documents to be delivered hereunder or
in connection herewith (including any Hedging Agreement).

 

(b)                         The Borrower, the Servicer and
the Originator shall pay on demand any and all stamp, sales, excise and other
taxes and fees payable or determined to be payable to any Governmental
Authority in connection with the execution, delivery, filing and recording of
this Agreement, the other documents to be delivered hereunder or any agreement
or other document providing liquidity support, credit enhancement or other
similar support to the Purchasers in connection with this Agreement or the
funding or maintenance of Advances hereunder.

 

(c)                          The Borrower, the Servicer
and the Originator shall pay on demand all other reasonable costs, expenses and
Taxes (excluding income taxes) incurred by the Administrative Agent, the
Purchaser Agents, the Secured Parties (“Other Costs”), including,
without limitation, all costs and expenses incurred by the Administrative Agent
and the Purchaser Agents in connection with periodic audits of the Borrower’s,
the Originator’s or the Servicer’s books and records.

 

147

 

Section 13.10.                  No Proceedings.

 

(a)                          Each of the parties hereto
(other than VFCC and any other Conduit Purchaser) and each Hedge Counterparty
(by accepting the benefits of this Agreement) hereby agrees that it will not
institute against, or join any other Person in instituting against, any Conduit
Purchaser, the Administrative Agent, or any Liquidity Banks any Insolvency
Proceeding so long as any commercial paper issued by VFCC shall be outstanding
and there shall not have elapsed one year and one day (or such longer
preference period as shall then be in effect) since the last day on which any
such commercial paper shall have been outstanding.

 

(b)                         Each of the parties hereto
(other than the Administrative Agent without the consent of the Purchaser
Agents) hereby agrees that it will not institute against, or join any other
Person in instituting against, the Borrower any Insolvency Proceeding so long
as there shall not have elapsed one year and one day (or such longer preference
period as shall then be in effect) since the Collection Date.

 

Section 13.11.                  Recourse Against Certain Parties.

 

(a)                          No recourse under or with
respect to any obligation, covenant or agreement (including, without
limitation, the payment of any fees or any other obligations) of the
Administrative Agent, the Purchaser Agents, or any Secured Party as contained
in this Agreement or any other agreement, instrument or document entered into
by it pursuant hereto or in connection herewith shall be had against the
Administrative Agent, the Purchaser Agents, or any Secured Party, or any
incorporator, affiliate, stockholder, officer, employee or director of the
Administrative Agent, the Purchaser Agents, or any Secured Party, by the
enforcement of any assessment or by any legal or equitable proceeding, by
virtue of any statute or otherwise; it  being  expressly  agreed
and  understood that the agreements of the Administrative Agent,
the Purchaser Agents, or any Secured Party contained in this Agreement and all
of the other agreements, instruments and documents entered into by it pursuant
hereto or in connection herewith are, in each case, solely the corporate
obligations of the Administrative Agent, the Purchaser Agents, or any Secured
Party, and that no personal liability whatsoever shall attach to or be incurred
by the Administrative Agent, the Purchaser Agents, or any Secured Party or any
incorporator, stockholder, affiliate, officer, employee or director of the
Administrative Agent, the Purchaser Agents, or any Secured Party under or by
reason of any of the obligations, covenants or agreements of the Administrative
Agent, the Purchaser Agents, or any Secured Party contained in this Agreement
or in any other such instruments, documents or agreements, or that are implied
therefrom, and that any and all personal liability of the Administrative Agent,
the Purchaser Agents, or any Secured Party and each incorporator, stockholder,
affiliate, officer, employee or director of the Administrative Agent, the
Purchaser Agents, or any Secured Party, or any of them, for breaches by the
Administrative Agent, the Purchaser Agents, or any Secured Party of any such
obligations, covenants or agreements, which liability may arise either at
common law or at equity, by statute or constitution, or otherwise, is hereby
expressly waived as a condition of and in consideration for the execution of
this Agreement.

 

(b)                         Notwithstanding anything in
this Agreement to the contrary, no Purchaser shall have any obligation to pay
any amount required to be paid by it hereunder in excess of any amount
available to such Purchaser, as applicable, after paying or making provision
for the

 

148

 

payment of its Commercial Paper Notes. 
All payment obligations of any Purchaser hereunder are contingent on the
availability of funds in excess of the amounts necessary to pay its Commercial
Paper Notes; and each of the other parties hereto agrees that it will not have
a claim under Section 101(5) of the Bankruptcy Code if and to the
extent that any such payment obligation owed to it by such Purchaser, as
applicable, exceeds the amount available to such Purchaser, as applicable, to
pay such amount after paying or making provision for the payment of its
Commercial Paper Notes.

 

(c)                          Notwithstanding any contrary
provision set forth herein, no claim may be made by the Borrower, the
Originator or the Servicer or any other Person against the Trustee, the
Administrative Agent and the Secured Parties or their respective Affiliates,
directors, officers, employees, attorneys or agents for any special, indirect,
consequential or punitive damages in respect to any claim for breach of
contract or any other theory of liability arising out of or related to the
transactions contemplated by this Agreement, or any act, omission or event
occurring in connection therewith; and the Borrower, the Originator and the
Servicer each hereby waives, releases, and agrees not to sue upon any claim for
any such damages, whether or not accrued and whether or not known or suspected.

 

(d)                         No obligation or liability to
any Obligor under any of the Loans is intended to be assumed by the Trustee,
the Backup Servicer, the Administrative Agent, the Purchaser Agents and the
Secured Parties under or as a result of this Agreement and the transactions
contemplated hereby.

 

(e)                          The provisions of this Section 13.11
shall survive the termination of this Agreement.

 

Section 13.12.                  Protection of Right, Title and
Interest in the Collateral; Further Action Evidencing Advances.

 

(a)                          The Servicer shall cause this
Agreement, all amendments hereto and/or all financing statements and
continuation statements and any other necessary documents covering the right,
title and interest of the Trustee, for the benefit of the Secured Parties, and
of the Secured Parties to the Collateral to be promptly recorded, registered
and filed, and at all times to be kept recorded, registered and filed, all in
such manner and in such places as may be required by law fully to preserve and
protect the right, title and interest of the Trustee, for the benefit of the
Secured Parties, hereunder to all property comprising the Collateral.  The Servicer shall deliver to the Trustee and
the Administrative Agent file-stamped copies of, or filing receipts for, any
document recorded, registered or filed as provided above, as soon as available
following such recording, registration or filing.  The Borrower shall cooperate fully with the
Servicer in connection with the obligations set forth above and will execute
any and all documents reasonably required to fulfill the intent of this Section 13.12(a).

 

(b)                         The Borrower agrees that from
time to time, at its expense, it will promptly authorize, execute and deliver
all instruments and documents, and take all actions, that the Trustee or the
Administrative Agent may reasonably request in order to perfect, protect or
more fully evidence the Advances hereunder and the security interest granted in
the Collateral, or to

 

149

 

enable the Trustee or the Secured Parties to exercise and enforce their
rights and remedies hereunder or under any other Transaction Document.

 

(c)                          If the Borrower or the
Servicer fails to perform any of its obligations hereunder, the Trustee, or the
Administrative Agent on its behalf, or any Secured Party may (but shall not be
required to) perform, or cause performance of, such obligation; and the
Trustee, the Administrative Agent’s or such Secured Party’s costs and expenses
incurred in connection therewith shall be payable by the Borrower as provided
in Article XI.  The Borrower
irrevocably authorizes each of the Trustee and the Administrative Agent and
appoints the each of the Trustee and the Administrative Agent as its
attorney-in-fact to act on behalf of the Borrower (i) to file financing
statements necessary or desirable in either of the Trustee’s or Administrative
Agent’s sole discretion to perfect and to maintain the perfection and priority
of the interest of the Secured Parties in the Collateral and (ii) to file a
carbon, photographic or other reproduction of this Agreement or any financing
statement with respect to the Collateral as a financing statement in such
offices as either of the Trustee or the Administrative Agent in its sole
discretion deems necessary or desirable to perfect and to maintain the
perfection and priority of the interests of the Secured Parties in the
Collateral.  This appointment is coupled
with an interest and is irrevocable.

 

(d)                         Without limiting the
generality of the foregoing, the Borrower will, not earlier than six months and
not later than three months prior to the fifth anniversary of the date of
filing of the financing statement referred to in Section 3.1 or any
other financing statement filed pursuant to this Agreement or in connection
with any Advance hereunder, unless the Collection Date shall have occurred:

 

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

 

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

 

Section 13.13.                  Confidentiality

 

(a)                          Each of the Administrative
Agent, the Purchaser Agents, the Secured Parties, the Servicer, the Trustee,
the Backup Servicer, the Borrower, the Originator shall maintain and shall
cause each of its employees and officers to maintain the confidentiality of the
Agreement and all information with respect to the other parties, including all
information regarding the business of the Borrower and the Servicer hereto and
their respective businesses obtained by it or them in connection with the
structuring, negotiating and execution of the transactions contemplated herein,
except that each such party and its officers and employees may (i) disclose
such information to its external accountants, investigators, auditors,
attorneys,

 

150

 

investors, potential investors or other agents engaged by such party in
connection with any due diligence or comparable activities with respect to the
transactions and Loans contemplated herein and the agents of such Persons (“Excepted
Persons”); provided, however,
that each Excepted Person shall, as a condition to any such disclosure, agree
for the benefit of the Administrative Agent, the Purchaser Agents, the Secured
Parties, the Servicer, the Trustee, the Backup Servicer and the Borrower that
such information shall be used solely in connection with such Excepted Person’s
evaluation of, or relationship with, the Borrower and its affiliates, (ii)
disclose the existence of the Agreement, but not the financial terms thereof,
(iii) disclose such information as is required by Applicable Law and (iv)
disclose the Agreement and such information in any suit, action, proceeding or
investigation (whether in law or in equity or pursuant to arbitration)
involving any of the Transaction Documents or any Hedging Agreement for the
purpose of defending itself, reducing its liability, or protecting or
exercising any of its claims, rights, remedies, or interests under or in
connection with any of the Transaction Documents or any Hedging Agreement.  It is understood that the financial terms that
may not be disclosed except in compliance with this Section 13.13(a)
include, without limitation, all fees and other pricing terms, and all
Termination Events, Servicer Defaults, and priority of payment provisions.

 

(b)                         Anything herein to the
contrary notwithstanding, the Borrower and the Servicer each hereby consents to
the disclosure of any nonpublic information with respect to it (i) to the
Administrative Agent, the Purchaser Agents, the Trustee, the Backup Servicer or
the Secured Parties by each other, (ii) by the Administrative Agent, the
Purchaser Agents, the Trustee, the Backup Servicer and the Secured Parties to
any prospective or actual assignee or participant of any of them provided such
Person agrees to hold such information confidential, or (iii) by the
Administrative Agent, the Purchaser Agents, and the Secured Parties to any
commercial paper dealer or provider of a surety, guaranty or credit or
liquidity enhancement to any Purchaser, as applicable, and to any officers,
directors, employees, outside accountants and attorneys of any of the
foregoing, provided each such Person is informed of the confidential nature of
such information.  In addition, the
Secured Parties, the Administrative Agent and the Purchaser Agents, may
disclose any such nonpublic information as required pursuant to any law, rule,
regulation, direction, request or order of any judicial, administrative or
regulatory authority or proceedings (whether or not having the force or effect
of law).

 

(c)                          Notwithstanding anything
herein to the contrary, the foregoing shall not be construed to prohibit (i)
disclosure of any and all information that is or becomes publicly known; (ii)
disclosure of any and all information (a) if required to do so by any
applicable statute, law, rule or regulation, (b) to any government agency or regulatory
body having or claiming authority to regulate or oversee any respects of the
Administrative Agents’, the Purchaser Agents’, the Secured Parties’, the
Trustee’s or the Backup Servicer’s business or that of their affiliates, (c)
pursuant to any subpoena, civil investigative demand or similar demand or
request of any court, regulatory authority, arbitrator or arbitration to which
the Administrative Agent, the Purchaser Agents, the Secured Parties, the
Trustee or the Backup Servicer or an officer, director, employer, shareholder
or affiliate of any of the foregoing is a party, (d) in any preliminary or
final offering circular, registration statement or contract or other document
approved in advance by the Borrower, the Servicer or the Originator or (e) to
any affiliate, independent or internal auditor, agent, employee or attorney of
the Trustee or Backup Servicer having a need to know the same, provided that the Trustee or Backup
Servicer advises such

 

151

 

recipient of the confidential nature of the information being
disclosed; or (iii) any other disclosure authorized by the Borrower, Servicer
or the Originator.

 

Section 13.14.                  Execution in Counterparts;
Severability; Integration.

 

This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts (including by facsimile),
each of which when so executed shall be deemed to be an original and all of
which when taken together shall constitute one and the same agreement.  In case any provision in or obligation under
this Agreement shall be invalid, illegal or unenforceable in any jurisdiction,
the validity, legality and enforceability of the remaining provisions or obligations,
or of such provision or obligation in any other jurisdiction, shall not in any
way be affected or impaired thereby. 
This Agreement and any agreements or letters (including fee letters)
executed in connection herewith contains the final and complete integration of
all prior expressions by the parties hereto with respect to the subject matter
hereof and shall constitute the entire agreement among the parties hereto with
respect to the subject matter hereof, superseding all prior oral or written
understandings other than any fee letter delivered by the Originator to the
Administrative Agent, the Purchaser Agents, and the Secured Parties.

 

Section 13.15.                  Waiver of Setoff.

 

(a)                          Each of the parties hereto
hereby waives any right of setoff it may have or to which it may be entitled
under this Agreement from time to time against any Purchaser or its assets.

 

Section 13.16.                  Assignments by the Purchasers.

 

(a)                          With the prior written
consent of the Borrower (which consent shall not be unreasonably withheld),
each Purchaser may at any time assign, or grant a security interest or sell a
participation interest in, any Advance (or portion thereof) to any Person; provided that, (i) no such consent of the
Borrower shall be required following the occurrence of a Termination Event,
(ii) in the case of an assignment of the Variable Funding Certificate with
respect to such Purchaser, the assignee (other than any assignee that is a
Liquidity Bank) shall execute and deliver to the Servicer and the
Administrative Agent a fully-executed Joinder Supplement substantially in the
form of Exhibit M hereto and a Transferee Letter substantially in the
form of Exhibit K hereto, (iii) any Institutional Purchaser shall not
need prior consent to at any time assign, or grant a security interest or sell
a participation interest in, any Advance (or portion thereof) to an Affiliate
of its related Purchaser Agent and (iv) any Conduit Purchaser shall not need
prior consent to at any time assign, or grant a security interest or sell a
participation interest in, any Advance (or portion thereof) to a Liquidity Bank
or any commercial paper conduit sponsored by a Liquidity Bank or an Affiliate
of its related Purchaser Agent.  The
parties to any such assignment, grant or sale of a participation interest by a
Purchaser shall execute and deliver to the Administrative Agent, for its
acceptance and recording in its books and records, such agreement or document
as may be satisfactory to such parties and the Administrative Agent.  The Borrower shall not assign or delegate, or
grant any interest in, or permit any Lien to exist upon, any of the Borrower
rights, obligations or duties under this

 

152

 

Agreement without the prior written consent of the Administrative Agent
and each Hedge Counterparty.

 

Section 13.17.                  Heading and Exhibits.

 

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

 

Section 13.18.                  Loans Subject to Retained Interest
Provisions.

 

(a)                          With respect to any Loan
included in the Collateral subject to the Retained Interest provisions of this
Agreement, the Borrower will own only the principal portion of such Loans
outstanding as of the applicable Cut-Off Date. 
Principal Collections received by the Borrower or the Servicer on any
Revolving Loans will be allocated first to the portion of such Revolving Loan
owned by the Borrower, until the principal amount of such portion is reduced to
zero, and then to the portion not owned by the Borrower; provided, however, if a payment default
occurs with respect to any of the related Loans, then Principal Collections
received on the applicable Loan will be allocated between the portion owned by
the Borrower and the portion not owned by the Borrower, pro rata based upon the outstanding
principal amount of each such portion.

 

(b)                         With respect to any Loan included
in the Collateral subject to the Retained Interest provisions of this
Agreement, Interest Collections received by the Servicer on those Loans will be
allocated between the portion owned by the Borrower and the portion not owned
by the Borrower pro rata based
upon the outstanding principal amount of each such portion.

 

Section 13.19.                  Non-Confidentiality of Tax
Treatment.

 

All parties hereto agree that each of them and each of their employees,
representatives, and other agents may disclose to any and all persons, without
limitation of any kind, the tax treatment and tax structure of the transaction
and all materials of any kind (including, without limitation, opinions or other
tax analyses) that are provided to any of them relating to such tax treatment
and tax structure.  “Tax treatment” and “tax
structure” shall have the same meaning as such terms have for purposes of
Treasury Regulation Section 1.6011-4; provided,
however, that with respect to any document or similar item that in
either case contains information concerning the tax treatment or tax structure
of the transaction as well as other information, the provisions of this Section 13.19
shall only apply to such portions of the document or similar item that relate
to the tax treatment or tax structure of the transactions contemplated hereby.

 

[Remainder of Page Intentionally Left Blank.]

 

153

 

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

 

 

	
  THE BORROWER:

  	
  ARES CAPITAL CP FUNDING LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael
  J. Arougheti

  
	
   

  	
  Name:

  	
  Michael J.
  Arougheti

  
	
   

  	
  Title:

  	
  President

  
	
   

  	
   

  
	
  THE ORIGINATOR AND SERVICER:

  	
  ARES CAPITAL CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael
  J. Arougheti

  
	
   

  	
  Name:

  	
  Michael J.
  Arougheti

  
	
   

  	
  Title:

  	
  President

  
					

 

[Signatures Continued on the Following Page]

 

 

	
  CONDUIT PURCHASER:

  	
  VARIABLE FUNDING CAPITAL CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:        Wachovia Capital
  Markets, LLC,

  as attorney-in-fact

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Douglas
  R. Wilson, Sr.

  
	
   

  	
  Name:

  	
  Douglas R.
  Wilson, Sr.

  
	
   

  	
  Title:

  	
  Vice
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  THE ADMINISTRATIVE AGENT

  AND THE VFCC AGENT

  	
  WACHOVIA CAPITAL MARKETS, LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Paul
  Burkhart

  
	
   

  	
  Name:

  	
  Paul
  Burkhart

  
	
   

  	
  Title:

  	
  Vice
  President

  
					

 

[Signatures Continued on the Following Page]

 

 

	
  THE BACKUP SERVICER:

  	
  LYON FINANCIAL SERVICES, INC., d/b/a

  U.S. Bank Portfolio Services not in its individual capacity but solely as
  Backup Servicer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Joseph
  Andries

  
	
   

  	
  Name:

  	
  Joseph
  Andries

  
	
   

  	
  Title:

  	
  Senior Vice
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
  THE TRUSTEE:

  	
  U.S. BANK NATIONAL ASSOCIATION, not in its
  individual capacity but solely as Trustee

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Anne E.
  Chlebnik

  
	
   

  	
  Name:

  	
  Anne E.
  Chlebnik

  
	
   

  	
  Title:

  	
  Assistant
  Vice President

  
					

 

[Signatures Continued on the Following Page]

 

1

 

	
  Acknowledged
  and Agreed to

  	
   

  
	
  as of the
  date first written above.

  	
   

  
	
   

  	
   

  
	
  WACHOVIA BANK, NATIONAL ASSOCIATION,

  	
   

  
	
  as a Hedge
  Counterparty

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Bruce
  Young

  	
   

  
	
  Name:

  	
  Bruce Young

  	
   

  
	
  Title:

  	
  Senior Vice
  President

  	
   

  
					

 

2Exhibit 10.11

 

LHP HOLDING CORP.

2004 RESTRICTED STOCK PLAN

 

ARTICLE
I

PURPOSES

 

The purposes of
the Plan are to foster and promote the long-term financial success of the
Company and the Subsidiaries and materially increase shareholder value by (a)
motivating superior performance by Participants by means of performance-related
incentives, (b) encouraging and providing for the acquisition of an
ownership interest in the Company by Employees and (c) enabling the
Company and the Subsidiaries to attract and retain the services of an
outstanding management team upon whose judgment, interest and special effort
the successful conduct of its operations is largely dependent.

 

ARTICLE II

DEFINITIONS

 

Section 2.1  Certain Definitions.  Whenever used herein, the following terms
shall have the respective meanings set forth below:

(a)  “Adjustment
Event” means any dividend payable in capital stock of the Company, and any
stock split, share combination, extraordinary cash dividend, recapitalization,
reorganization, merger, consolidation, split-up, spin-off, combination,
exchange of shares or other similar event, in each case, affecting the Common
Stock.

 

(b)  “Affiliate”
shall have the same meaning given to such term in the Stockholders Agreement.

 

(c)  “Assumed
Tax Rate” shall have the meaning specified in Section 7.2(a).

 

(d)  “Award”
means an award of the right to purchase shares of Common Stock pursuant to the
Plan.

 

(e)  “Board”
means the Board of Directors of the Company.

 

(f)  “Call
Rights” means the First Call Right, the Second Call Right, and the
Post-Employment Call Right.

 

(g)  “Cause”
means, with respect to any Participant (as determined by the Board in its sole
discretion), (i) the willful failure by the Participant to substantially
perform his duties as an employee of the Company or any Subsidiary (other than
due to physical or mental illness), (ii) the Participant’s engaging
in willful or serious misconduct that has caused or could reasonably be
expected to result in material injury to the Company or any Affiliate thereof
including, but not

 

 

limited to, by way of damage to the reputation or
public standing of the Company or any Affiliate thereof, (iii) the
Participant’s conviction of, or entering a plea of guilt or nolo  contendere
to, a crime that constitutes a felony or involving moral turpitude, or (iv)
the Participant’s material violation or breach of any written Company policy or
rule or the material breach by the Participant of any of his obligations under
any written covenant or agreement with the Company or any Affiliate thereof; provided,
that with respect to any Participant who is party to an employment agreement
with the Company or any Subsidiary, “Cause” shall have the meaning specified in
such employment agreement.

 

(h)  “Change
of Control” means, with respect to the Company, the first to occur after
the effective date of the Plan of any of the following events:

 

(i)  the
acquisition by any person, entity or group (as defined in section 13(d) of the
Securities Exchange Act of 1934, as amended) (other than (A) the Company
and the Subsidiaries, (B) any employee benefit plan of the Company or
the Subsidiaries, or (C) the Investors (as defined in the Consulting
Agreement, dated as of May 27, 2004, by and among the Company and the other
parties thereto, as amended from time to time) or any Affiliate or partner
thereof) through one transaction or a series of transactions of 50% or more of
the combined voting power of the then outstanding voting securities of the
Company;

 

(ii)  the merger
or consolidation of the Company as a result of which persons who were
stockholders of the Company immediately prior to such merger or consolidation,
do not, immediately thereafter, own, directly or indirectly, more than 50% of
the combined voting power entitled to vote generally in the election of
directors of the merged or consolidated company;

 

(iii)  the
liquidation or dissolution of the Company (other than a dissolution occurring
upon a merger or consolidation thereof); and

 

(iv)  the sale,
transfer or other disposition of all or substantially all of the assets of the
Company through one transaction or a series of related transactions to one or
more persons or entities that are not, immediately prior to such sale, transfer
or other disposition, Affiliates of the Investors.

 

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

 

(j)  “Committee”
means the Compensation Committee of the Board (or such other committee of the
Board as the Board shall designate) or, if there shall not be any such
committee then serving, the Board.

 

(k)  “Common
Stock” means one share of common stock, par value $.01 per share, of the
Company.

 

2

 

(l)  “Company”
means LHP Holding Corp., a Delaware corporation, and any successor thereto.

 

(m)  “Disability”
means a physical or mental disability or infirmity that prevents, or is
reasonably expected to prevent (based on an independent physician’s medical
examination), the performance by a Participant of his duties hereunder for a
continuous period of 90 days or longer or for 180 days or more in any 12-month
period.  The reasoned and good faith
judgment of the Board as to Disability shall be final, binding and
conclusive.  Notwithstanding the
foregoing definition, with respect to any Participant who is party to an
employment agreement with the Company or any Subsidiary, “Disability” shall
have the meaning specified in such employment agreement.

 

(n)  “Employee”
means any officer or key employee of the Company or any Subsidiary.

 

(o)  “Fair
Market Value” means, as of any date, with respect to the Common Stock, the
fair market value on such date per share of Common Stock as determined by the
Board in its sole discretion. 
Notwithstanding the foregoing, following a Public Offering, Fair Market
Value with respect to the Common Stock that is listed for trading shall mean
the average of the high and low trading prices for a share of the Common Stock
on the primary national exchange (including NASDAQ) on which the Common Stock
is then traded on the trading day immediately preceding the date as of which
such Fair Market Value is determined. 
The determination of Fair Market Value will not give effect to any
restrictions on the shares of the Common Stock (including transferability
restrictions and Call Rights) or the fact that such shares would represent a
minority interest in the Company.

 

(p)  “First
Call Right” shall have the meaning specified in Section 6.6(a).

 

(q)  “Good
Reason” means any termination by a Participant of his employment with the
Company, by written notice to the Company specifying in reasonable detail the
circumstances claimed to provide the basis for such termination, within 30 days
following the occurrence, without the Participant’s consent, of any of the
following events and the failure of the Company to correct the circumstances
set forth in the Participant’s written notice within 30 days of receipt of such
notice: (i) the assignment to the Participant of duties that are
significantly different from, and that result in a substantial diminution of,
the duties that he has as an employee; provided,
that a corporate reorganization by the Company and/or its Affiliates pursuant
to which the Company ceases to exist or the Participant’s title is changed
shall not constitute Good Reason hereunder so long as there is no substantial
diminution and significant difference in the nature of Executive’s duties, and
(ii) a reduction in the rate of the Participant’s base salary (other
than a proportionate adjustment applicable generally to similarly situated
Company executives).  Notwithstanding the
foregoing definition, with respect to any Participant who is party to an
employment agreement with the

 

3

 

Company or any Subsidiary, “Good Reason” shall have
the meaning specified in such employment agreement.

 

(r)  “Option
Plan Value” shall have the meaning specified in Section 7.2(b)(ii).

 

(s)  “Participant”
means any Employee designated by the Board to receive an Award under the Plan.

 

(t)  “Payments”
shall have the meaning specified in Section 7.3.

 

(u)  “Plan”
means this LHP Holding Corp. 2004 Restricted Stock Plan, as amended from time
to time.

 

(v)  “Post-Employment
Call Right” shall have the meaning specified in Section 6.6(c).

 

(w)  “Public
Offering” shall have the same meaning given to such term in the
Stockholders Agreement.

 

(x)  “Purchase
Price” shall have the meaning specified in Section 6.1.

 

(y)  “Retirement”
means the termination of a Participant’s employment with the Company and any
Subsidiary on or after the date the Participant attains age 65 or such earlier
date as determined by the Board in its sole discretion; provided, that, with respect to
any Participant who is party to an employment agreement with the Company or any
Subsidiary, “Retirement” shall have the meaning specified in such employment
agreement.

 

(z)  “Second
Call Right” shall have the meaning specified in Section 6.6(b).

 

(aa)  “Stockholders
Agreement” means the Stockholders Agreement, dated as of May 27, 2004, by
and among the Company, the other parties thereto and each other person who
becomes a party thereto, as amended or superseded from time to time.

 

(bb)  “Stock
Plan Value” shall have the meaning specified in Section 7.2(b)(i).

 

(cc)  “Subscription
Agreement” means the subscription agreement, substantially in the form
attached hereto as Exhibit A or such other form as the Board shall approve, to
be entered into by the Company and the Participant in connection with the
purchase by a Participant of any shares of Common Stock pursuant to Article VI
hereof.

 

(dd)   “Subsidiary”
means any corporation in which the Company owns, directly or indirectly, stock
representing 50% or more of the combined voting

 

4

 

power of all classes of stock entitled to vote, and
any other business organization, regardless of form, in which the Company
possesses, directly or indirectly, 50% or more of the total combined equity
interests in such organization.

 

Section 2.2  Gender and Number.  Except when otherwise indicated by the
context, words in the masculine gender used in the Plan shall include the
feminine gender, the singular shall include the plural, and the plural shall
include the singular.

 

ARTICLE III

ELIGIBILITY

 

Participants in
the Plan shall be those Employees selected by the Board to participate in the
Plan.  The selection of an Employee as a
Participant shall neither entitle such Employee to, nor disqualify such
Employee from, participation in any other incentive plan of the Company.

ARTICLE IV

ADMINISTRATION

 

Section 4.1  Power to Grant and Establish Terms of
Awards.  The Board shall have the
discretionary authority, subject to the terms of the Plan, to determine the
Employees to whom Awards shall be granted and the terms and conditions of such
Awards including, but not limited to, the number of shares of Common Stock
subject to an Award, the time or times at which Awards shall be granted, and
the terms and conditions of the Subscription Agreements.

 

Section 4.2  Administration.  The Board shall be responsible for the
administration of the Plan.  The Board
shall have discretionary authority to prescribe, amend and rescind rules and
regulations relating to the Plan, to provide for conditions deemed necessary or
advisable to protect the interests of the Company and the Subsidiaries, to
interpret the Plan and to make all other determinations necessary or advisable
for the administration and interpretation of the Plan and to carry out its
provisions and purposes.  Any
determination, interpretation or other action made or taken (including any
failure to make any determination or interpretation, or take any other action)
by the Board pursuant to the provisions of the Plan shall be final, binding and
conclusive for all purposes and upon all persons, and shall be given deference
in any proceeding with respect thereto. 
The Board may consult with legal counsel, who may be counsel to the
Company, and shall not incur any liability for any action taken in good faith
in reliance upon the advice of counsel.

 

Section 4.3  Delegation by the Board.  All of the powers, duties and
responsibilities of the Board specified in the Plan may, to the full extent
permitted by applicable law, be exercised and performed by the Committee to the
extent authorized by the Board to exercise and perform such powers, duties and
responsibilities.

 

5

 

ARTICLE V

STOCK SUBJECT TO PLAN

 

Section 5.1  Number.  Subject to the provisions of Section 5.3, the
number of shares of Common Stock subject to Awards plus the number of shares of
Common Stock subject to Subscription Agreements may not exceed 195,676 shares
in the aggregate.  Notwithstanding the
foregoing, at any such time as the offer and sale of securities pursuant to
this Plan is subject to compliance with Section 260.140.45 of Title 10 of the
California Code of Regulations (as amended from time to time), the total number
of shares of Common Stock subject to the Plan (together with equity-based
awards under any other incentive plan of the Company) and the total number of
shares available for award under any stock bonus or similar plan of the Company
shall not exceed thirty percent (30%) (or such other higher percentage
limitation as may be approved by the shareholders of the Company pursuant to Section
260.140.45) of the then outstanding shares of the Company as calculated in
accordance with the conditions and exclusions of Section 260.140.45.

 

Section 5.2  Canceled, Terminated, or Forfeited Awards.  Any shares of Common Stock subject to an
Award that for any reason expires or is canceled, terminated, forfeited,
substituted for or otherwise settled without the issuance of such shares of
Common Stock shall again be available for award under the Plan.  Any shares of Common Stock subject to a
Subscription Agreement that for any reason are repurchased by the Company shall
again be available for award under the Plan.

 

Section 5.3  Adjustments in Capitalization.  If the Board determines in its sole
discretion that, as a result of any Adjustment Event, an adjustment is
necessary or appropriate to preserve, or to prevent enlargement of, the
benefits or potential benefits made available under the Plan, then the Board
shall, in such manner as the Board shall deem equitable, adjust any or all of (a)
the number and kind of shares that thereafter may be awarded under the Plan, (b)
the number and kind of shares subject to outstanding Awards, and (c) the
number and kind of shares subject to Subscription Agreements and the Purchase
Price (as defined below) for shares subject to Subscription Agreements.  In addition, the Board may make provisions
for a cash payment to any and all Participants in respect of their shares of
Common Stock subject to Subscription Agreements.  Further, in connection with any such
adjustment, the number of shares of Common Stock subject to any Award and the
number of shares of Common Stock subject to any Subscription Agreement shall be
rounded to the nearest whole number.

 

ARTICLE VI

AWARDS; TERMS OF COMMON STOCK

 

Section 6.1  Grant of Awards.  Awards may be granted to Participants at such
time or times as the Board shall determine. 
At the time of grant of an Award, the Board shall determine the number
of shares of Common Stock subject to such Award, the purchase price thereof
(which shall not be less than the Fair Market Value on the date of grant or
purchase) (the “Purchase Price”) and the duration of the Award.  Each purchase of Common Stock pursuant to an
Award shall be consummated pursuant to a

 

6

 

Subscription Agreement,
which shall include such terms and conditions not inconsistent with the Plan as
the Board shall determine including, but not limited to, customary
representations, warranties and covenants with respect to securities law
matters.  The Board may establish
different terms and conditions for different Participants receiving Awards and
for the same Participant for each Award such Participant may receive, whether
or not granted at different times.  The
grant of any Award to any Employee shall not entitle such Employee to the grant
of any other Awards.

 

Section 6.2  Stockholders Agreement.  Each Participant who purchases shares of
Common Stock shall be entitled to the benefits of and be bound by the
obligations set forth in the Stockholders Agreement and shall be deemed to be a
Management Stockholder (as defined in the Stockholders Agreement) thereunder,
and as a condition to receipt of any shares of Common Stock, the Participant
shall from time to time, as requested by the Company, execute and deliver a
joinder to the Stockholders Agreement evidencing the forgoing (and such
holder’s spouse will execute and deliver any spousal consent requested for
community property reasons or otherwise).

 

Section
6.3  Restrictions on Transferability.  Except as provided in Article VII, as
otherwise expressly provided in any Subscription Agreement or as permitted by
the Board, no Common Stock may be sold, transferred, pledged, assigned, or
otherwise alienated or hypothecated (other than by will or by the laws of
descent and distribution; provided, that such
recipient shall be bound by the terms of the Plan, any applicable Subscription
Agreement and the Stockholders Agreement) until the lapse of the Call Rights
for any reason.  Thereafter, shares of
Common Stock purchased hereunder may only be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated in compliance with applicable
securities laws, the Plan, the Subscription Agreement, the Stockholders
Agreement and any other agreement to which such Common Stock is subject, or by
will or the laws of descent and distribution (provided that such recipient shall be bound by
the provisions of the Plan and any applicable Subscription Agreement).

 

Section 6.4  Rights as Stockholder.  Except as otherwise expressly provided in any
Subscription Agreement or in the Stockholders Agreement, each Participant who
holds shares of Common Stock purchased hereunder may exercise any voting or
other rights as a stockholder of the Company with respect to such shares; provided,
that a certificate or certificates in respect of such shares have been issued
to such Participant, and such Participant has executed and delivered a
Subscription Agreement.

 

Section 6.5  Dividends and Distributions.  Except as otherwise expressly provided in any
Subscription Agreement or in the Stockholders Agreement, each Participant
shall, with respect to the shares of Common Stock purchased hereunder by the
Participant that remain outstanding as of the record date of any dividend or
distribution, be entitled to receive all dividends and distributions paid in
respect of such shares; provided that, if
any such dividends or distributions are paid in shares of Common Stock or other
property, such shares and such other property shall be subject to the same Call
Rights and other restrictions as apply to the Common Stock with respect to
which they were paid.

 

7

 

Section 6.6  Rights Upon and After Termination of
Employment.  Except as otherwise
expressly provided in any Subscription Agreement, each Subscription Agreement
shall provide that the Company shall have (subject to such
additional terms and conditions as set forth in the applicable Subscription
Agreement):

 

(a)  the right
(the “First Call Right”) to repurchase all or a portion of the shares
subject to the First Call Right upon the termination of a Participant’s
employment with the Company and any Subsidiary that employs the Participant for
any reason, at a purchase price equal to the lower of their aggregate Purchase
Price and their aggregate Fair Market Value. 
The number of shares of Common Stock that shall be subject to the First
Call Right as of any termination date shall be equal to the number of shares of
Common Stock purchased hereunder by the Participant that remain outstanding as
of the date of such termination, multiplied by a fraction, the numerator of
which shall equal four minus the number of full years from the purchase date
(or such other date as the Board shall determine) to the employment termination
date (but not less than zero), and the denominator of which shall equal four,
and

 

(b)  the right
(the “Second Call Right”) to repurchase all or any portion of the shares
of Common Stock subject to the Second Call Right upon the termination of a
Participant’s employment (i) (A) by the Company for Cause at any
time, or (B) by the Participant without Good Reason during the six year
period beginning from the purchase date (or such other date as the Board shall
determine) of such shares, in either case, at a purchase price equal to the
lower of their aggregate Purchase Price and their aggregate Fair Market Value,
and (ii) for any other reason during the six year period beginning from
the purchase date (or such other date as the Board shall determine) of such
shares, their aggregate Fair Market Value; provided that, if Holdings
does not purchase the Participant’s shares pursuant to the Second Call Right
and the Participant’s employment is terminated as a result of the Participant’s
death or Disability, the Participant (or the Participant’s estate) shall have
the right (following the expiration of Holdings’ right under this Section
6.6(b)) to require Holdings to buy all of the shares subject to the Second Call
Right.  The number of
shares of Common Stock that shall be subject to the Second Call Right as of any
termination date shall be equal to the number of shares of Common Stock
purchased hereunder by the Participant that remain outstanding and are no
longer subject to the First Call Right, in each case, as of the date of such
termination, and

 

(c)  the right
(the “Post-Employment Call Right”) to repurchase all or any or portion
of the shares subject to the Post-Employment Call Right upon
any breach of any post-termination non-competition, non-solicitation,
confidentiality, or other similar agreement or covenant with the Company, at a
purchase price equal to the lower of their aggregate Purchase Price and their
aggregate Fair Market Value.  The number
of shares of Common Stock that shall be subject to the Post-Employment Call
Right as of the date of any such breach shall be equal to the number of shares
of Common Stock purchased hereunder by the Participant that remain outstanding
as of the date of such breach.

 

8

 

ARTICLE VII

CHANGE OF CONTROL

 

Section 7.1  Lapse of Rights.  Notwithstanding anything else contained in
the Plan, except as otherwise expressly provided in any Subscription Agreement,
in the event of a Change of Control, the Call Rights applicable to any shares
of Common Stock purchased hereunder shall automatically expire.  For the avoidance of doubt, the restrictions
contained in this Plan (including, but not limited to, the Call Rights that
lapse pursuant to the immediately preceding sentence) and any applicable
Subscription Agreement shall not preclude such shares of Common Stock from
participating in any Change of Control.

 

Section
7.2  Exit Bonus.

 

(a)  In
General.  Except as otherwise
expressly provided in any Subscription Agreement, in the event of a Change of
Control, the Board will compare the Stock Plan Value with the Option Plan Value
for each Participant who is employed by the Company or any Subsidiary through
the date of such Change of Control.  To
the extent that the Option Plan Value exceeds the Stock Plan Value and provided
that such Participant is employed by the Company or any Subsidiary through the
date of the Change of Control, such Participant shall receive within 30 days
after the Change of Control a cash bonus equal to such excess, plus an
additional amount such that, after payment of all taxes incurred by a
Participant on the receipt of such cash bonus, the Participant retains the same
after-tax amount that he would have retained had such payment not been subject
to tax (calculated assuming that a Participant’s combined federal, state and
local marginal income tax rate is equal to the combined marginal tax rate which
would be applicable to such Participant based solely on the income derived by
such Participant for the last completed fiscal year of the Company and the
rates applicable to a person working and residing in the jurisdiction in which
such Participant works and resides (the “Assumed Tax Rate”)).

 

(b)  Certain
Definitions; Calculations.

 

(i)  “Stock
Plan Value” means the after-tax value a Participant receives in connection
with the Change of Control in respect of the shares of Common Stock purchased
hereunder by the Participant that remain outstanding immediately prior to the
date of such Change of Control, plus the after-tax value of any dividends and
distribution received by such Participant prior to the date of the Change of
Control.

 

(ii)  “Option
Plan Value” means the after-tax value the Participant would have received
had the Investors made their investments in the Company in Common Stock and
established a 10% option pool (fully diluted) at the time this Plan was
adopted.  For the avoidance of doubt,
Option Plan Value shall be calculated assuming that the Participant was not
entitled to receive any dividends or distributions in respect of the

 

9

 

shares of Common Stock underlying the Participant’s
hypothetical options, and that such options were cashed out in connection with
the Change of Control.

 

(iii)  Calculations;
Determinations.  All calculations and
determinations made by the Board pursuant to this Section 7.2 shall be in the
Board’s sole discretion, shall be final, binding and conclusive upon all
persons and for all purposes, and shall be made as of the date of the Change of
Control using the Assumed Tax Rate and using the aggregate Purchase Price of
the Participant’s shares of Common Stock as the aggregate exercise price for
the hypothetical options.

 

Section 7.3  Limitation on Benefits.  Notwithstanding anything to the contrary
contained in the Plan or any Subscription Agreement, to the extent that any of
the payments and benefits provided for under the Plan, any applicable
Subscription Agreement or any other agreement or arrangement between the
Company and a Participant (collectively, the “Payments”) would
constitute a “parachute payment” within the meaning of section 280G of the
Code, the amount of such Payments shall be reduced to the amount that would
result in no portion of the Payments being subject to the excise tax imposed
pursuant to section 4999 of the Code.  If
any Payments that would be reduced, pursuant to the immediately preceding
sentence but would not be so reduced if the stockholder approval requirements
of section 280G(b)(5) of the Code are satisfied, the Company shall use its
reasonable best efforts to cause such payments to be submitted for such
approval prior to the Change of Control giving rise to such payments.

 

ARTICLE VIII

EFFECTIVE DATE, AMENDMENT AND
TERMINATION

 

The Plan shall be
effective upon adoption by the Board or such later date, as the Board shall
specify, and shall expire on the tenth anniversary thereof (except as to
outstanding Awards and shares subject to Subscription Agreements), unless
sooner terminated pursuant to this Article VIII.  The Board at any time may terminate or
suspend the Plan, and from time to time may amend or modify the Plan.  No termination, suspension, amendment or
modification of the Plan shall (except in the case of an adjustment pursuant to
Section 5.3 hereof) in any manner adversely affect any Award theretofore
granted under the Plan or any shares subject to a Subscription Agreement,
without the consent of the Participant holding such Award.  Shareholder approval of any such termination,
suspension, amendment or modification shall be obtained to the extent mandated
by applicable law, or if otherwise deemed appropriate by the Board.

ARTICLE
IX 

MISCELLANEOUS

 

Section 9.1  Nontransferability of Awards.  No Award may be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated, other than by will or by the
laws of descent and distribution.

 

10

 

Section 9.2  Beneficiary Designation.  Each Participant under the Plan may from time
to time name any beneficiary or beneficiaries (who may be named contingently or
successively) to whom any benefit under the Plan is to be paid or by whom any
right under the Plan is to be exercised in case of his or her death.  Each designation will revoke all prior designations
by the same Participant, shall be in a form prescribed by the Board and will be
effective only when filed by the Participant in writing with the Board during
his lifetime.  In the absence of any such
designation, benefits remaining unpaid or Awards or shares subject to any
Subscription Agreement outstanding at the Participant’s death shall be paid to
or exercised by the Participant’s surviving spouse, if any, or otherwise to or
by his estate.

 

Section 9.3  Tax Withholding.  The Company and each Subsidiary shall have
the power to withhold, or require a Participant to remit to the Company or any
Subsidiary promptly upon notification of the amount due, an amount determined
by the Company or such Subsidiary, in its discretion, to be sufficient to satisfy
all Federal, state, local and foreign withholding tax requirements in respect
of any Award or shares subject to any Subscription Agreement and the Company
may (or may cause a Subsidiary to) defer payment of cash or issuance or
delivery of Common Stock until such requirements are satisfied.  The Board may permit or require a Participant
to satisfy his tax withholding obligation hereunder in such other manner,
subject to such conditions, as the Board shall determine.

 

Section 9.4  Requirements of Law.  The grant of Awards and the issuance of
shares of Common Stock shall be subject to all applicable laws, rules and
regulations, and to such approvals by any governmental agencies or national or
foreign securities exchanges as may be appropriate or required, as determined
by the Board.  Notwithstanding any other
provision of the Plan or any Subscription Agreement, no Awards shall be
granted, and no shares of Common Stock shall be issued in connection with any
Award, if such grant or issuance would result in a violation of applicable law,
including the federal securities laws and any applicable state or foreign
securities laws.

 

Section 9.5  No Guarantee of Employment or
Participation.  Nothing in the Plan
shall interfere with or limit in any way the right of the Company or any
Subsidiary to terminate any Participant’s employment at any time and for any
reason, nor confer upon any Participant any right to continue in the employ of
the Company or any Subsidiary.  No
Employee shall have a right to be selected as a Participant or, having been so
selected, to receive any Awards.

 

Section 9.6  No Limitation on Compensation.  Nothing in the Plan shall be construed to
limit the right of the Company or any Subsidiary to establish other plans or to
pay compensation to its employees in cash or property, in a manner that is not
expressly authorized under the Plan.

 

Section 9.7  No Right to Particular Assets.  Nothing contained in this Plan and no action
taken pursuant to this Plan shall create or be construed to create a trust of
any kind or any fiduciary relationship between the Company and the
Subsidiaries, on the one hand, and any Participant or executor, administrator
or other personal representative or

 

11

 

designated beneficiary of such Participant, on the
other hand, or any other persons.  Any
reserves that may be established by the Company or any Subsidiary in connection
with this Plan shall continue to be held as part of the general funds of the
Company, and no individual or entity other than the Company shall have any
interest in such funds until paid to a Participant.  To the extent that any Participant or his
executor, administrator or other personal representative, as the case may be,
acquires a right to receive any payment from the Company or a Subsidiary
pursuant to this Plan, such right shall be no greater than the right of an
unsecured general creditor of the Company or such Subsidiary.

 

Section 9.8  No Impact On Benefits.  Awards shall not be treated as compensation
for purposes of calculating an Employee’s rights under any employee benefit
plan, except to the extent provided in any such plan.

 

Section 9.9  Freedom of Action.  Subject to Article VII, nothing in the Plan
or any Subscription Agreement shall be construed as limiting or preventing the
Company or any Subsidiary from taking any action with respect to the operation
or conduct of its business that it deems appropriate or in its best interest.

 

Section 9.10  Governing Law.  The Plan, and all Subscription Agreements
hereunder, shall be construed in accordance with and governed by the laws of
the State of Delaware without regard to principles of conflicts of laws.

 

Section
9.11  Severability; Blue Pencil. 
In the event that any one or more of the provisions of this Plan or any
Subscription Agreement shall be or become invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein or therein shall not be affected thereby.  If, in the opinion of any court of competent
jurisdiction any covenant or covenants of the Plan or any Subscription
Agreement are not reasonable in any respect, such court shall have the right,
power and authority to excise or modify such provision or provisions of such covenants
as to the court shall appear not reasonable and to enforce the remainder of
these covenants as so amended.

 

Section 9.12  Indemnification.  Each person who is or shall have been a
member of the Board or the Committee shall be indemnified and held harmless by
the Company to the fullest extent permitted by law against and from any loss,
cost, liability or expense (including any related attorneys’ fees and advances
thereof) that may be imposed upon or reasonably incurred by him in connection
with, based upon or arising or resulting from any claim, action, suit or
proceeding to which he may be made a party or in which he may be involved by
reason of any action taken or failure to act under or in connection with the
Plan or any Subscription Agreement and against and from any and all amounts
paid by him in settlement thereof, with the Company’s approval, or paid by him
in satisfaction of any judgment in any such action, suit or proceeding against
him; provided that he shall give the
Company an opportunity, at its own expense, to handle and defend the same
before he undertakes to handle and defend it on his own behalf.  The foregoing right of indemnification shall
not be exclusive and shall be independent of any other rights of
indemnification to which such persons may be entitled under the Company’s
Articles of Incorporation or By-laws, by contract, as a matter of law or
otherwise.

 

12

 

Section 9.13  Notices.  Each Participant shall be responsible for
furnishing the Company with the current and proper address for the mailing of
notices and delivery of agreements and certificates.  Any notices required or permitted to be given
shall be deemed given if directed to the person to whom addressed at such
address and mailed by regular United States mail, first-class and
prepaid.  If any item mailed to such
address is returned as undeliverable to the addressee, mailing will be
suspended until the Participant furnishes the proper address.

 

Section 9.14  Incapacity.  Any benefit payable to or for the benefit of
a minor, an incompetent person or other person incapable of receiving such
benefit shall be deemed paid when paid to such person’s guardian or to the
party providing or reasonably appearing to provide for the care of such person,
and such payment shall fully discharge the Board, the Committee, the Company
and other parties with respect thereto.

 

Section 9.15  Rights Cumulative; Waiver.  The rights and remedies of Participants and
the Company under this Plan shall be cumulative and not exclusive of any rights
or remedies which either would otherwise have hereunder or at law or in equity
or by statute, and no failure or delay by either party in exercising any right
or remedy shall impair any such right or remedy or operate as a waiver of such
right or remedy, nor shall any single or partial exercise of any power or right
preclude such party’s other or further exercise or the exercise of any other
power or right.  The waiver by any party
hereto of a breach of any provision of the Plan shall not operate or be
construed as a waiver of any preceding or succeeding breach and no failure by
either party to exercise any right or privilege hereunder shall be deemed a
waiver of such party’s rights or privileges hereunder or shall be deemed a
waiver of such party’s rights to exercise the same at any subsequent time or
times hereunder.

 

Section 9.16  Headings and Captions.  The headings and captions herein are provided
for reference and convenience only, shall not be considered part of this Plan
and shall not be employed in the construction of this Plan

 

13

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