Document:

Exhibit 10.1

 

LIMITED CONSENT AND FIFTH AMENDMENT 

TO FIFTH AMENDED AND RESTATED CREDIT AGREEMENT

 

This LIMITED CONSENT AND
FIFTH AMENDMENT TO FIFTH AMENDED AND RESTATED CREDIT AGREEMENT (this “Fifth
Amendment”), dated as of July 15, 2009, is entered into by and among: (A) MTR
GAMING GROUP, INC., a Delaware corporation (“MTRI”), MOUNTAINEER PARK,
INC., a West Virginia corporation (“MPI”), PRESQUE ISLE DOWNS, INC., a
Pennsylvania corporation (“PIDI”), and SCIOTO DOWNS, INC., an Ohio
corporation (“SDI” and together with MTRI, MPI, and PIDI, each, a “Borrower”
and collectively, the “Borrowers”); (B) Lenders constituting the
Requisite Lenders; and (C) WELLS FARGO BANK, NATIONAL ASSOCIATION, as
administrative agent and collateral agent for the Lenders under the Credit
Agreement, the Swingline Lender and the L/C Issuer (in such capacity, the “Agent
Bank”).  Capitalized terms used
herein and not otherwise defined herein shall have the meanings given to them
in the Credit Agreement defined below.

 

RECITALS

 

A.            Borrowers, the Agent Bank
and the Lenders have previously entered into that certain Fifth Amended and
Restated Credit Agreement, dated as of September 22, 2006, as amended by
that certain First Amendment to Fifth Amended and Restated Credit Agreement
dated as of June 19, 2007, as further amended by that certain Limited
Waiver and Second Amendment to Fifth Amended and Restated Credit Agreement
dated as of March 31, 2008, as further amended by that certain Third
Amendment to Fifth Amended and Restated Credit Agreement dated as of May 9,
2008 and as further amended by that certain Fourth Amendment to Fifth Amended
and Restated Credit Agreement dated as of December 19, 2008 (collectively,
the “Existing Credit Agreement” and as the same may be further amended,
restated, supplemented or otherwise modified and in effect from time to time,
including, but not limited to, by this Fifth Amendment, the “Credit
Agreement”), by and among Borrowers, the Lenders, and Wells Fargo Bank,
National Association, as Agent Bank, L/C Issuer and Swingline Lender.

 

B.            Borrowers have requested a
limited consent and certain amendments to the Existing Credit Agreement as set
forth below.

 

C.            The Agent Bank and the
Requisite Lenders are willing to grant such requests on the terms and subject
to the conditions set forth in this Fifth Amendment.

 

AGREEMENT

 

NOW, THEREFORE, in
consideration of the foregoing, the mutual covenants and agreements set forth
below and other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties hereby agree, except as otherwise
set forth herein, as of the Fifth Amendment Effective Date (as defined in Section 4
below) as follows:

 

1

 

SECTION 1.         Limited
Consent.

 

(a)           The Borrowers have informed the Agent Bank and the
Lenders that prior to the date hereof, legislation providing for the operation of Gaming
Devices at racetracks has been passed by the Ohio legislature, and in
connection therewith, the Borrowers plan to pay $13,000,000 in fees to the
State of Ohio on or about September 15, 2009 (the “Ohio Licensing
Payment”).  On the terms and subject
to the conditions set forth herein (including the satisfaction of the
conditions precedent set forth in Section 4 below), the Agent Bank
and the Requisite Lenders hereby consent to the Ohio Licensing Payment.

 

(b)           This limited consent is a one-time consent and shall
apply only to the matters expressly set forth in this Section 1.  Without limiting the generality of the
foregoing, the limited consent herein shall not apply to any current or future
circumstances not specified above whether or not similar to the foregoing.

 

(c)           The
Agent Bank and the Lenders reserve all of their rights and remedies with
respect to all other obligations of the Borrowers under the Credit Agreement
and all other Loan Documents.

 

SECTION 2.         Amendments.  On the terms and subject to the conditions of
this Fifth Amendment (including the satisfaction of the conditions precedent
set forth in Section 4 below), the Existing Credit Agreement is
hereby amended as follows:

 

(a)           Deletion of Certain Definitions.  As of the Fifth Amendment Effective Date, the
definitions of “Adjusted Fixed Charge Coverage Ratio,” “Commitment Percentage,”
“Total Leverage Ratio,” “Total Net Funded Debt” and “Total Senior Secured
Funded Debt” in Section 1.01 of the Existing Credit Agreement are
hereby deleted.

 

(b)           Definition of “Acceptable
Senior Refinancing”.  As of the Fifth Amendment Effective Date, the
definition of “Acceptable Senior Refinancing” in Section 1.01 of
the Existing Credit Agreement is hereby amended and restated in its entirety as
follows:

 

“Acceptable Senior
Refinancing” shall mean a full refinancing of the Senior
Unsecured Notes from the proceeds of debt issued (i) pursuant to the terms
of the Senior Secured Notes and the Senior Secured Indenture or (ii) pursuant
to other documentation acceptable to the Requisite Lenders in their sole
discretion (including, without limitation, the amount, maturity, amortization,
interest rate, covenants, defaults and remedies) and the Requisite Lenders have
confirmed such acceptability in writing.

 

(c)           Definition of
“Aggregate Commitment”.

 

(i)             As of the Fifth
Amendment Effective Date, the definition of “Aggregate Commitment” in Section 1.01
of the Existing Credit Agreement is hereby amended and restated in its entirety
as follows:

 

“Aggregate Commitment” shall mean reference to the aggregate
amount committed by Lenders for advance to or on behalf of the Borrowers as
Borrowings under the Credit Facility in the principal amount of Twenty Million
Dollars ($20,000,000.00) as of the Fifth Amendment Effective Date, as may be
reduced from time to time by: (i) the Scheduled Reductions, (ii) Voluntary
Permanent Reductions, and/or (iii) Mandatory Commitment 

 

2

 

Reductions.

 

(ii)            The Borrowers acknowledge
and agree that the Aggregate Commitment Reduction Schedule is not affected by
the reduction in the Aggregate Commitment resulting from the amendment set
forth above.

 

(d)           Definition of “Applicable
Margin”.

 

(i)             As of the Fifth Amendment
Effective Date, the definition of “Applicable Margin” in Section 1.01
of the Existing Credit Agreement is hereby amended and restated in its entirety
as follows:

 

“Applicable Margin” shall mean (i) for any Base Rate Loan,
5.00% and (ii) for any LIBOR Loan, 6.00%.

 

(ii)            For the
avoidance of doubt, all accrued but unpaid interest outstanding prior to the
Fifth Amendment Effective Date shall be priced according to the Applicable
Margin as in effect prior to the Fifth Amendment Effective Date, and all
interest  accruing  from
and after the Fifth Amendment Effective Date shall be priced as set forth using
the Applicable Margin as modified above.

 

(e)           Definition of “Change of
Control”.  As of the Fifth Amendment Effective Date,
clauses (a) and (d) of the definition of “Change of Control” in Section 1.01
of the Existing Credit Agreement are hereby amended and restated in their
entirety as follows:

 

“(a)         Any “person” or “group” (as such terms are defined in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934,
as amended) or their Affiliates (other than Jeffrey P. Jacobs or his
Affiliates), own or control, more than forty percent (40%) of the common voting
stock of MTRI; or”

 

“(d)         A “Change of
Control” as defined in the Senior Subordinated Indenture, a “Change of Control”
as defined in the Senior Unsecured Indenture, a “Change of Control” as defined
in the Second Lien Documents or a “change of control” or “change in control” as
defined in any document governing any other Indebtedness in excess of the
Threshold Amount of any Borrower or Restricted Subsidiary which gives the
holders of such Indebtedness the right to accelerate or otherwise require
payment or redemption of such Indebtedness prior to the maturity date thereof.”

 

(f)            Definition of “Default Rate”.  As of the Fifth Amendment Effective Date, the
definition of “Default Rate” in Section 1.01 of the Existing Credit
Agreement is hereby amended by deleting “two percent (2%)” and substituting
“four percent (4.00%)” in lieu thereof.

 

(g)           Definition of “Fifth Amendment”.  As of the Fifth Amendment
Effective Date, the definition
of “Fifth Amendment” is
hereby added to Section 1.01 of the Existing Credit Agreement as
follows:

 

“Fifth Amendment” shall mean the Fifth Amendment to Fifth
Amended and 

 

3

 

Restated
Credit Agreement dated as of July 15 , 2009.

 

(h)           Definition of “Fifth Amendment
Effective Date”.  As of the Fifth Amendment
Effective Date, the definition
of “Fifth Amendment Effective Date” is hereby added to Section 1.01 of the Existing Credit Agreement as
follows:

 

“Fifth Amendment Effective Date” shall have the meaning given in
the Fifth Amendment.

 

(i)            Definition of “Hoit Property”.  As of the Fifth Amendment
Effective Date, the definition
of “Hoit Property” is
hereby added to Section 1.01 of the Existing Credit Agreement as
follows:

 

“Hoit Property”
shall mean the approximately 1.1 acre parcel of land in Hancock County, West
Virginia that MPI purchased from Jack C. Hoit, Jr. and Miranda L. Hoit
pursuant to the deed dated November 21, 2007 and recorded in the land
records of Hancock County, West Virginia on December 19, 2007 in Deed Book
286, Page 189.

 

(j)            Definition of “Hoit Property
Compliance”.  As of the Fifth Amendment
Effective Date, the definition
of “Hoit Property Compliance” is hereby added to Section 1.01 of the Existing Credit Agreement as
follows:

 

“Hoit Property
Compliance” shall mean the satisfaction of conditions necessary to allow
MPI to make the New Acquisition Certificates with respect to the Hoit Property.

 

(k)           Definition of “Indebtedness”.  As of the Fifth Amendment Effective Date, the
definition of “Indebtedness” in Section 1.01 of the Existing Credit
Agreement is hereby amended by deleting “Total Funded Debt” and substituting
“Total Secured Debt” in lieu thereof.

 

(l)            Definition of “Interest
Coverage Ratio”.  As of the Fifth Amendment
Effective Date, the definition
of “Interest Coverage Ratio” is hereby added to Section 1.01 of the Existing Credit Agreement as
follows:

 

“Interest Coverage Ratio” means, as of the last day of any
Fiscal Quarter, the ratio of (a)  EBITDA for the four Fiscal Quarter
period ending on that date to (b) Interest Expense for such period.

 

(m)          Definition of “LIBO Rate”.  As of the Fifth Amendment Effective Date, the
definition of “LIBO Rate” in Section 1.01 of the Existing Credit
Agreement is hereby amended and restated in its entirety as follows:

 

“LIBO Rate”
means, relative to any LIBOR Loan Interest Period for any LIBOR Loan included
in any Borrowing, the greater of (i) 2.50% (reserve adjusted as
hereinbelow provided) and (ii) the per annum rate (reserve adjusted as
hereinbelow provided) of interest quoted by the British Bankers Association as
reported on Reuters LIBOR Page 1, or if such rate is not so reported by
Reuters, as reported by any other service selected by Agent Bank, 

 

4

 

rounded upwards, if
necessary, to the nearest one-sixteenth of one percent (0.0625%) at which
Dollar deposits in immediately available funds are offered to leading banks in
the London interbank market at approximately 11:00 a.m. London, England
time two (2) Banking Business Days prior to the beginning of such Interest
Period, for delivery on the first day of such Interest Period for a period
approximately equal to such Interest Period and in an amount equal or
comparable to the LIBOR Loan to which such Interest Period relates.  The foregoing rate of interest (including the
2.50% floor) shall be reserve adjusted by dividing the applicable LIBO Rate by
a one (1.00) minus the LIBOR Reserve Percentage, with such quotient to be
rounded upward to the nearest whole multiple of one-hundredth of one percent
(0.01%).  All references in this Credit
Agreement or other Loan Documents to a LIBO Rate include the aforesaid reserve
adjustment.

 

(n)           Definition of “LIBOR Reserve
Percentage”.  As of the Fifth Amendment Effective Date, the
definition of “LIBOR Reserve Percentage” in Section 1.01 of the
Existing Credit Agreement is hereby amended and restated in its entirety as
follows:

 

“LIBOR Reserve Percentage” means, relative to any LIBOR Loan or
the One Month LIBOR Rate in the calculation of the Base Rate, the reserve
percentage (expressed as a decimal) equal to the actual aggregate reserve
requirements (including all basic, emergency, supplemental, marginal and other
reserves and taking into account any transactional adjustments or other
scheduled changes in reserve requirements) announced within Agent Bank as the
reserve percentage applicable to Agent Bank as specified under regulations
issued from time to time by the Federal Reserve Board.  The LIBOR Reserve Percentage shall be based
on Regulation D of the Federal Reserve Board or other regulations from time to
time in effect concerning reserves for “Eurocurrency Liabilities” from related
institutions as though Agent Bank were in a net borrowing position.

 

(o)           Definition of
“Loan Documents”.  As
of the Fifth Amendment Effective Date, the definition of “Loan Documents” in Section 1.01
of the Existing Credit Agreement is hereby amended by deleting “the
Environmental Certificate” and substituting “the Environmental Certificate, the
Second Lien Intercreditor Agreement” in lieu thereof.

 

(p)           Definition of “Non-Core Assets”. As of the
Fifth Amendment Effective Date, the definition of “Non-Core Assets” in Section 1.01
of the Existing Credit Agreement is hereby amended and restated in its entirety
as follows:

 

“Non-Core Assets” shall
mean all assets of the Borrower Consolidation other than (i) the MPI Hotel/Casino Facilities and all
operations and business conducted at or in connection with the MPI Hotel/Casino Facilities and all
assets located at the MPI Hotel/Casino Facilities or used in the operations
or business of or useful to the MPI Hotel/Casino Facilities together with
all real property adjacent or related thereto which could be used for expansion
of or parking facilities for such Facilities, (ii) the SDI Facility and all operations and business
conducted at or in connection with the SDI Facility and all assets located at the SDI Facility or used in the operations or
business of or useful to the SDI Facility together with all real
property adjacent or related thereto which could be used for expansion of or
parking facilities for such Facilities, (iii) the PIDI Facility and all operations and
business conducted at or in connection with the PIDI Facility and all assets located at
PIDI Facility or used in the operations or business 

 

5

 

of or useful to the PIDI Facility together with all real
property adjacent or related thereto which could be used for expansion of or
parking facilities for such Facilities, (v) the Unrestricted Subsidiaries
and (vi) the common stock, preferred stock, participations, shares,
partnership interests, limited liability company interests or other equity
interests of any Borrower and any Restricted Subsidiary (regardless of how
designated and whether or not voting or non-voting) and warrants, options and
other rights to acquire any of the foregoing. 
For the avoidance of doubt, and notwithstanding anything in the
definition of Non-Core Assets to the contrary, the Non-Core Assets shall include
the real property listed on Schedule 6.12 attached hereto and made a part
hereof.

 

(q)           Definition of “Permitted
Second Lien Indebtedness”.  As of the Fifth Amendment
Effective Date, the definition
of “Permitted Second Lien Indebtedness” is hereby added to Section 1.01 of the Existing Credit Agreement as
follows:

 

“Permitted Second Lien Indebtedness” shall have the meaning
given in the Fifth Amendment.

 

(r)            Definition of “Restricted
Subsidiary”.  As of the Fifth Amendment Effective Date, the
definition of “Restricted Subsidiary” in Section 1.01 of the
Existing Credit Agreement is hereby amended by (i) deleting “Senior
Unsecured Notes” and substituting “Senior Unsecured Notes or the Permitted
Second Lien Indebtedness” in lieu thereof and (ii) deleting “Restricted
Subsidiary Permitted Encumbrances” and substituting “Restricted Subsidiary
Permitted Encumbrances or, so long as the Second Lien Intercreditor Agreement
is in full force and effect, Liens in favor of the holders of Permitted Second
Lien Indebtedness in respect of such obligations” in lieu thereof.

 

(s)           Definition of “Second Lien
Documents”.  As of the Fifth Amendment
Effective Date, the definition
of “Second Lien Documents” is hereby added to Section 1.01 of the Existing Credit Agreement as
follows:

 

“Second Lien Documents” means the
Senior Secured Notes, the Senior Secured Indenture and all other documents
executed in connection therewith.

 

(t)            Definition of “Second Lien
Intercreditor Agreement”.  As of the Fifth Amendment
Effective Date, the definition
of “Second Lien Intercreditor Agreement” is hereby added to Section 1.01 of the Existing Credit Agreement as
follows:

 

“Second Lien Intercreditor Agreement” shall have the meaning
given in the Fifth Amendment.

 

(u)           Definition of “Secured
Leverage Ratio”.  As of the Fifth Amendment
Effective Date, the definition
of “Secured Leverage Ratio” is hereby added to Section 1.01 of the Existing Credit Agreement as
follows:

 

“Secured Leverage Ratio” shall mean, at any time, the ratio of (a) Total
Secured Debt at such time, to (b) EBITDA for the four Fiscal Quarter
period ended as of the end of the most recent Fiscal Quarter for which
financial statements are available.

 

6

 

(v)           Definition of “Senior Secured
Leverage Ratio”.  As of the Fifth Amendment Effective Date, the
definition of “Senior Secured Leverage Ratio” in Section 1.01 of
the Existing Credit Agreement is hereby amended and restated in its entirety as
follows:

 

“Senior Secured
Leverage Ratio” shall mean, at any time, the ratio of (a) Total Secured
Debt at such time minus the outstanding principal amount of Permitted
Second Lien Indebtedness at such time and minus the outstanding
principal amount of secured Subordinated Obligations at such time, to (b) EBITDA
for the four Fiscal Quarter period ended as of the end of the most recent
Fiscal Quarter for which financial statements are available.

 

(w)          Definition of “Senior Secured
Indenture”.  As of the Fifth Amendment
Effective Date, the definition
of “Senior Secured Indenture” is hereby added to Section 1.01 of the Existing Credit Agreement as
follows:

 

“Senior Secured
Indenture” shall mean that certain Indenture, dated as of the Fifth
Amendment Effective Date, by and among MTRI, as issuer, the guarantors party
thereto, and Wilmington Trust Company, as trustee and as collateral agent,
pursuant to which MTRI issued the Senior Secured Notes.

 

(x)            Definition of “Senior Secured
Notes”.  As of the Fifth Amendment
Effective Date, the definition
of “Senior Secured Notes” is hereby added to Section 1.01 of the Existing Credit Agreement as
follows:

 

“Senior Secured
Notes” shall mean the senior secured notes due 2014 in an aggregate
principal amount of $250,000,000 issued pursuant to the Senior Secured
Indenture.

 

(y)           Definition of “Threshold Amount”.  As of the Fifth Amendment
Effective Date, the definition
of “Threshold Amount” is hereby added to Section 1.01 of the Existing Credit Agreement as
follows:

 

“Threshold
Amount” shall mean $2,500,000.

 

(z)            Definition of “Total Secured
Debt”.  As of the Fifth Amendment
Effective Date, the definition
of “Total Secured Debt” is
hereby added to Section 1.01 of the Existing Credit Agreement as
follows:

 

“Total Secured Debt” shall mean all Indebtedness (including
Contingent Liabilities and Capitalized Lease Liabilities) of the Borrower
Consolidation that is secured by all or any portion of the Collateral
(including, without limitation, the Indebtedness under the Loan Documents and
Permitted Second Lien Indebtedness) less the amount of Excess Cash On Hand as
of any given date of determination.

 

(aa)         Section 1.06/LIBOR
Loans.

 

(i)             As of the Fifth Amendment
Effective Date, Section 1.06 of the Existing Credit Agreement is
hereby deleted.

 

7

 

(ii)            As of the Fifth Amendment
Effective Date, the parties hereto understand and agree that LIBOR Loans shall
once again be available to the Borrowers on the terms and subject to the
conditions in the Credit Agreement.

 

(bb)         Section 2.08(b)/Swingline Facility.  As of the Fifth Amendment Effective Date, Section 2.08(b) of
the Existing Credit Agreement is hereby amended by deleting “Ten Million
Dollars ($10,000,000.00)” and substituting “Zero Dollars ($0)” in lieu thereof.

 

(cc)         Section 2.09(c)(i)/L/C
Fees.

 

(i)             As of the Fifth Amendment Effective Date,
Section 2.09(c)(i) of the Existing Credit Agreement is hereby
amended by deleting “5.00%” and substituting “6.00%” in lieu thereof.

 

(ii)            For the avoidance of doubt,
all accrued but unpaid L/C Fees outstanding prior to the Fifth Amendment
Effective Date shall be priced according to the Applicable Margin as in effect
prior to the Fifth Amendment Effective Date, and all L/C Fees  accruing  from and after
the Fifth Amendment Effective Date shall be priced as set forth in Section 2.09(c)(i) of
the Credit Agreement as modified above.

 

(dd)         Section 2.10(b)/”Default Rate”.  As of the Fifth Amendment Effective Date, Section 2.10(b) of
the Existing Credit Agreement is hereby amended by deleting “two
percent (2.0%)” and substituting “four percent (4.00%)” in lieu thereof.

 

(ee)         Section 2.14(a)/Letters
of Credit.  As of the
Fifth Amendment Effective Date, Section 2.14(a) of the
Existing Credit Agreement is hereby amended by deleting “Sixty Million Dollars
($60,000,000.00)” and substituting “Five Million Dollars ($5,000,000.00)” in
lieu thereof.

 

(ff)           Section 2.15/Mandatory
Prepayments.  As of the
Fifth Amendment Effective Date, Section 2.15 of the Existing Credit
Agreement is hereby amended by adding a new Section 2.15(f), Section 2.15(g) and
Section 2.15(h) as follows:

 

“f.            If, at any time
from and after the Fifth Amendment Effective Date, any entity included in the
Borrower Consolidation issues or incurs any Indebtedness (excluding
Indebtedness expressly permitted under Section 6.05), the Borrowers
shall immediately, prepay the outstanding Obligations in the manner set forth
in Section 2.15(d), in an aggregate principal amount equal to one
hundred percent (100%) of the principal amount of such Indebtedness.

 

g.             If, at any time
from and after the Fifth Amendment Effective Date, any entity included in the
Borrower Consolidation issues or sells any stock or other equity securities,
the Borrowers shall immediately, prepay the outstanding Obligations in the
manner set forth in Section 2.15(d), in an aggregate principal amount
equal to one hundred percent (100%) of the cash proceeds of such issuance and
sale.

 

h.             Notwithstanding
any provision in the Credit Agreement to the contrary, including but not
limited to Sections 2.15(a) and (d), the Borrowers shall have no
obligation to prepay the outstanding Obligations in connection with the sale of
Non-Core Assets 

 

8

 

sold
pursuant to Section 6.12(c) and the sale of Non-Core Assets shall not
give rise to a reduction in the Aggregate Commitment.”

 

(gg)         Section 3.31/Conditions
Precedent.  As of the
Fifth Amendment Effective Date, Section 3.31 of the Existing Credit
Agreement is hereby amended by deleting the “and” at the end of clause (c) thereof,
replacing the period at the end of clause (d) thereof with “: and” and
adding a new clause (e) at the end of Section 3.31 as follows:

 

“e.           The Senior Unsecured Notes shall have been fully
refinanced and repaid with the proceeds of Acceptable Senior Refinancing and
the Borrowers shall have provided the Agent Bank with evidence thereof in form
and substance satisfactory to the Agent Bank.”

 

(hh)         Section 4.31/Second
Lien Documents.  As
of the Fifth Amendment Effective Date, Article VI of the Existing
Credit Agreement is hereby amended by adding a new Section 4.31 as
follows:

 

“Section 4.31         Second Lien
Documents.  The copy of
the Second Lien Documents and all modifications and amendments thereto (if any)
which have been delivered to Agent Bank are a true, correct and complete copy
of the respective original thereof, as in effect on the Fifth Amendment
Effective Date, and no amendments or modifications have been made to any such
Second Lien Documents, except as otherwise reasonably approved in writing by
Requisite Lenders.  The Second Lien
Documents have not been terminated and are in full force and effect.  No Default or Event of Default under and as
defined in the Second Lien Documents and the Borrower Consolidation has
occurred and is continuing.  This Credit
Agreement, the Loan Documents, the Bank Facilities and all Obligations
(including Swingline Loans and all other loans and advances hereunder from and
after such Swingline Loans, loans and advances are made and including Letters
of Credit from and after the date such Letters of Credit are issued) are
permitted under the terms of the Second Lien Documents.”

 

(ii)           Section 5.08(e)/Compliance
Certificate.  As of the
Fifth Amendment Effective Date, Section 5.08(e) of the
Existing Credit Agreement is hereby amended by deleting “; provided, however,
that in the event that the Borrowers do not deliver a Compliance Certificate
when due, then until (but only until) such Compliance Certificate is delivered
as provided herein, the Total Leverage Ratio shall be deemed, for the purpose
of determining the Applicable Margin, to be the highest permitted Maximum Total
Leverage Ratio and the Applicable Margin determined with respect thereto”
therefrom.

 

(jj)           Section 5.24/Second
Lien Documents.  As
of the Fifth Amendment Effective Date, (i) Section 5.24(a) of
the Existing Credit Agreement is hereby amended by deleting “and Senior
Subordinated Notes” and substituting “, Senior Subordinated Notes and the
Second Lien Documents” in lieu thereof, (ii) Section 5.24(b) of
the Existing Credit Agreement is hereby amended by deleting “or Senior
Subordinated Notes” and substituting “, Senior Subordinated Notes or the
Second Lien Documents” in lieu thereof, and (iii) Section 5.24
of the Existing Credit Agreement is further amended by adding a new clause (c) as
follows:

 

“(c)         Unless approved in writing by the
Requisite Lenders, the Borrower 

 

9

 

Consolidation shall not
amend, restate, supplement or otherwise modify any term or provision of any
Second Lien Document to the extent such amendment, restatement, supplement,
modification, or the terms of any new Second Lien Document would:

 

(i)            increase the principal amount of the Senior Secured
Indenture in excess of the amount permitted under this Agreement;

 

(ii)           increase the “Applicable Margin” or similar component
of the interest rate or yield provisions applicable to the Permitted Second
Lien Indebtedness;

 

(iii)          change any default or event
of default or condition to a default or an event of default with respect
thereto (other than to eliminate any such event of default or increase any
grace period related thereto) or add any event of default change (to an earlier date) any date
upon which payment of principal, interest or premium (if any) is due thereon;

 

(iv)          add or make any modification that has the effect
of adding any financial maintenance covenant or debt incurrence covenant
therein;

 

(v)           change the prepayment provisions thereof in any way
that would have the effect of adding any new mandatory prepayment, or
increasing the amount of any existing mandatory prepayment, or requiring that
any existing mandatory prepayment be made on an earlier date;

 

(vi)          increase materially the obligations of any member of
the Borrower Consolidation, or confer any additional material rights upon, the holders of
Permitted Second Lien Indebtedness (or the trustee, agent or other authorized
representative for such holders) (in each case, including without limitation, by
amending or adding covenants) which would be adverse to any member of the
Borrower Consolidation or the Agent Bank or any Lender;

 

(vii)         contravene the provisions of this Agreement or the
Second Lien Intercreditor Agreement;

 

(viii)        grant or permit additional Liens on any asset or
property to secure any Permitted Second Lien Indebtedness unless such
additional Liens secure the Obligations and are expressly subject to the Second
Lien Intercreditor Agreement; or

 

(ix)           amend the levels for the financial covenants or
incurrence tests set forth in the Senior Secured Indenture; provided
that if the levels of the financial covenants in this Agreement are amended,
the corresponding financial covenants or incurrence tests in the Senior Secured
Indenture may be adjusted to levels that are at least 15% less restrictive than
the levels in this Agreement.”

 

(kk)         Section 5.25/Permitted Second Lien
Indebtedness.  As of the
Fifth Amendment Effective Date, the first sentence of Section 5.25
of the Existing Credit Agreement is hereby amended by (A) deleting “or any
Subordinated Obligations” and substituting “or any Subordinated Obligations or
any Permitted Second Lien Indebtedness” in lieu thereof and 

 

10

 

(B) amending and restating clause (ii) thereof  to read as follows: “(ii) regularly
scheduled payments of interest in respect of such Permitted Second Lien
Indebtedness required pursuant to the Permitted Second Lien Indebtedness,”.

 

(ll)           Section 5.33/Deferral of Green Shingle
Environmental Compliance.  As of the Fifth Amendment
Effective Date,  Section 5.33 of the Existing Credit Agreement
shall be amended and restated in its entirety as follows:

 

“Section 5.33.       Green Shingle Environmental Compliance.  Each of the Lenders
agrees that the occurrence of Green Shingle Environmental Compliance can be
deferred until March 31, 2010.”

 

(mm)       Section 5.34/Encumbrance of Hoit
Property.  As of the Fifth
Amendment Effective Date, Article V of the Existing Credit Agreement is
further amended by adding a new Section 5.34 as follows:

 

“Section 5.34        Encumbrance of Hoit Property.  The
Hoit Property Compliance shall be completed by Borrowers in all material
respects on or before March 31, 2010, and Agent Bank and each of the
Lenders:

 

a.             Agree that the New Acquisition
Certifications with respect to the Hoit Property may be deferred until such
time as the Hoit Property Compliance has been completed; and

 

b.             Agree that the requirement that MPI encumber the Hoit
Property as Collateral shall be deferred until such time as the Hoit Property
Compliance has occurred and Borrowers have delivered the New Acquisition
Certifications with respect to the Hoit Property.”

 

(nn)         Section 6.01/Secured Leverage Ratio.  As of the Fifth Amendment Effective Date, Section 6.01
of the Existing Credit Agreement is hereby amended and restated in its entirety
as follows:

 

“Section 6.01        Secured Leverage Ratio.  Commencing as of the Fifth Amendment
Effective Date, the Borrowers shall not at any time permit the Secured Leverage
Ratio to be greater than the ratio set opposite the applicable period below:

 

	
  Period

  	
   

  	
  Maximum Secured

  Leverage Ratio

  
	
   

  	
   

  	
   

  
	
  Fifth Amendment Effective Date to and including September 30,
  2009

  	
   

  	
  4.00:1.00

  
	
   

  	
   

  	
   

  
	
  October 1, 2009 and thereafter

  	
   

  	
  3.75:1.00”

  

 

(oo)         Section 6.02/Senior Secured Leverage Ratio.  As of the Fifth 

 

11

 

Amendment Effective Date, Section 6.02 of the Existing
Credit Agreement is hereby amended and restated in its entirety as follows:

 

“Section 6.02         Senior Secured Leverage
Ratio.  Commencing as of the Fifth
Amendment Effective Date, the Borrowers shall not at any time permit the Senior
Secured Leverage Ratio to be greater than 0.50:1.00.

 

(pp)         Section 6.03/Interest Coverage Ratio.  As of the Fifth Amendment Effective Date, Section 6.03
of the Existing Credit Agreement is hereby amended and restated in its entirety
as follows:

 

“Section 6.03         Interest
Coverage Ratio.  Commencing
as of the Fifth Amendment Effective Date, the Borrowers shall not permit the
Interest Coverage Ratio as of the last day of any Fiscal Quarter to be less
than 1.50:1.00.”

 

(qq)         Section 6.05(c)/Permitted
Second Lien Indebtedness.  As
of the Fifth Amendment Effective Date, Section 6.05(c) of the
Existing Credit Agreement is hereby amended and restated in its entirety as
follows:

 

“c.           So long as the
Second Lien Intercreditor Agreement is in full force and effect, Indebtedness
owing by the Borrower Consolidation in respect of the Permitted Second Lien
Indebtedness up to an aggregate principal amount not exceeding Two Hundred
Fifty Million Dollars ($250,000,000) less any repayments of principal or
redemptions thereof;”

 

(rr)           Section 6.05(j)/Subordinated
Obligations.  As of the
Fifth Amendment Effective Date, Section 6.05(j) of the
Existing Credit Agreement is hereby amended by deleting “Section 6.01
(Total Leverage Ratio)” and substituting “Section 6.01 and Section 6.02”
in lieu thereof.

 

(ss)         Section 6.10/Total
Liens.  As of the Fifth Amendment
Effective Date, Section 6.10 of the Existing Credit Agreement is
hereby amended by (i) deleting the period at the end of Section 6.10(d) and
substituting a semi-colon in lieu thereof and (ii) adding a new Section 6.10(e) as
follows:

 

“e.           So long as the
Second Lien Intercreditor Agreement is in full force and effect, Liens securing
Indebtedness permitted by Section 6.05(c).”

 

(tt)           Section 6.12/Sale of Assets,
Consolidation, Merger or Liquidation.

 

(i)            As of the
Fifth Amendment Effective Date, Section 6.12(c) of the Existing
Credit Agreement is hereby amended and restated in its entirety as follows:

 

“(c)         So long as
no Default or Event of Default shall have occurred and remains continuing, the
Borrower Consolidation may sell or otherwise dispose of Non-Core Assets without
further consent or authorization of the Lenders and, in connection with the
sale or disposition of a Non-Core Asset, the Agent Bank shall release such
Non-Core Asset as Collateral.  All fees
and expenses associated with the release of any Non-Core Assets as Collateral
shall be paid by the Borrower Consolidation.”

 

12

 

(ii)           As of the
Fifth Amendment Effective Date, Section 6.12 of the Existing Credit
Agreement is further amended by adding there to a new clause (e) as
follows:

 

“(e)         The Lenders
hereby consent to the liquidation (or merger or consolidation with another
entity of the Borrower Consolidation) of SGLVI, MTR-Harness, JRI, JTAL and
Speakeasy Gaming of Reno, Inc. (“SGRI”).”

 

(uu)         Section 7.01(j)/Cross-Default.  As of the Fifth Amendment Effective Date, Section 7.01(j) of
the Existing Credit Agreement is hereby amended by deleting “or Senior
Subordinated Notes” and substituting “or Senior Subordinated Notes or Permitted
Second Lien Indebtedness” in lieu thereof.

 

(vv)         Section 8.02/Casualty/Condemnation.  As of the Fifth Amendment Effective Date, Section 8.02
of the Existing Credit Agreement is hereby amended and restated in its entirety
as follows:

 

“Section 8.02         Distribution of
Capital Proceeds Upon Occurrence of Fire, Casualty, Other Perils or
Condemnation.  All Capital
Proceeds received from insurance policies under Section 5.09 and any other
insurance policies, including flood and earthquake, covering any of the
Collateral or from condemnation or similar actions in regard to said
Collateral, shall be paid directly to Agent Bank.  Upon receipt of any such Capital Proceeds,
the Borrowers shall immediately, prepay the outstanding Obligations in the
manner set forth in Section 2.15(d), in an aggregate principal
amount equal to one hundred percent (100%) of the principal amount of such
Capital Proceeds.”

 

(ww)       Section 9.10(d)/Consents. 
As of the Fifth Amendment Effective Date, Section 9.10(d) of
the Existing Credit Agreement is hereby amended by adding the following
sentence at the end thereof:

 

“The Agent Bank is authorized to execute and deliver the Second Lien
Intercreditor Agreement on behalf of the Lenders, and so long as the Second
Lien Intercreditor Agreement shall be effective, certain rights of the Lenders
hereunder and under the Loan Documents shall be subject thereto.  By its execution of the Fifth Amendment or by
separate authorization in writing each Lender has agreed to sell its Loans and
certain other Obligations owing to it in accordance with the terms and subject
to the conditions of Section 5.6 of the Second Lien Intercreditor
Agreement.”

 

(xx)          Replacement
Exhibit/Compliance Certificate.  As of the Fifth Amendment
Effective Date, the Exhibit D of the Existing Credit Agreement is
hereby amended and restated in its entirety with Exhibit D attached
hereto.

 

(yy)         New
Schedule/Non-Core Assets.  As of the Fifth Amendment Effective Date, the Existing
Credit Agreement is amended and restated by adding thereto a new Schedule 6.12
(Non-Core Assets) attached hereto.

 

SECTION 3.         Confirmation of Senior Debt; Cash Collateral;
Amendment Fee.

 

(a)           Confirmation of Senior Debt. 
Borrowers confirm and represent to 

 

13

 

the Agent Bank and
the Lenders that (i) the definition of “Credit Agreement” in the Senior
Subordinated Indenture refers to the Credit Agreement and that all present and
future Obligations under the Credit Agreement are and will be permitted to be
incurred pursuant to Section 4.11 (b) of the Senior Subordinated
Indenture and (ii) all present and future Obligations under the Credit
Agreement constitute “Senior Debt” and “Designated Senior Debt” under and as
defined in the Senior Subordinated Indenture.

 

(b)           Cash Collateral. 
The parties hereto acknowledge and agree that (i) if any Letters of
Credit are drawn and there is at such time cash collateral pledged to the Agent
Bank or the L/C Issuer, the Agent Bank and the Lenders are authorized to use
and apply such cash collateral to reimburse the L/C Issuer for such drawing,
and (ii) upon the request of the Borrowers at any time after the Senior
Unsecured Notes have been fully refinanced and repaid, provided that at such
time no Default or Event of Default shall have occurred and then be existing,
such cash collateral shall be released to the Borrowers to the extent not
applied to reimburse the L/C Issuer for any drawings under Letters of Credit.

 

(c)           Amendment Fee. 
In addition to all other amounts payable by the Borrowers to the Agent
Bank and/or the Lenders, on the Fifth Amendment Effective Date, Borrowers shall
pay to the Agent Bank, for the account of each Lender that has executed and
delivered a signature page to this Amendment as of the Fifth Amendment
Effective Date (each, a “Consenting Lender”), a non-refundable amendment
fee in an amount equal to 0.25% of such Consenting Lender’s Syndication
Interest of the Aggregate Commitment as of the Fifth Amendment Effective Date
after giving effect to this Fifth Amendment (collectively, the “Amendment
Fees”).  The Amendment Fees are fully
earned, due and payable as of the Fifth Amendment Effective Date.

 

SECTION 4.         Conditions Precedent to the Effectiveness of
this Fifth Amendment.  The consent contained in Section 1
above and the amendments contained in Section 2 above are
conditioned upon satisfaction of the following conditions on or before August 31,
2009 (the first date on which all of the following conditions have been
satisfied being referred to herein as the “Fifth Amendment Effective Date”):

 

(a)           Due execution
and delivery by Borrowers and Lenders constituting the Requisite Lenders of
this Fifth Amendment;

 

(b)           The Borrowers
shall have incurred Two Hundred Fifty Million ($250,000,000) of second lien
Indebtedness on terms and conditions reflected in the section entitled
“Description of Notes” in the preliminary offering circular, dated July 15,
2009, previously provided to the Lenders, without material modification thereto
(other than the addition of any pricing information) that would be materially
adverse to the Lenders as determined by the Agent Bank in its reasonable
discretion (it being understood in any event that the principal financial
covenants or incurrence tests for such proposed second lien Indebtedness must
be at least 15% less restrictive than the corresponding tests in the Credit
Agreement unless the Requisite Lenders otherwise agree) and such acceptability
shall have been confirmed in writing by the Agent Bank (“Permitted Second
Lien Indebtedness”);

 

14

 

(c)           The
holders of Permitted Second Lien Indebtedness (or the trustee, agent or other
authorized representative for such holders) and the Borrowers shall have
executed and delivered a collateral agency and intercreditor agreement with the
Agent Bank in the form of that provided to and approved by the
Requisite Lenders on or prior to the date hereof with only changes thereto
determined by the Agent Bank in its reasonable discretion not to be material (the “Second Lien Intercreditor Agreement”)
and if less than all of the Lenders have executed this Fifth Amendment, the
Lenders which have not executed this Fifth Amendment shall have agreed to sell
the Obligations owing to it in accordance with the terms and subject to the
conditions of Section 5.6 of the Second Lien Intercreditor Agreement.;

 

(d)           The Borrowers shall have voluntarily prepaid
all Funded Outstandings, Swingline Outstandings and all other Aggregate
Outstandings (other than the undrawn face amount of Letters of Credit) so as to
cause the Aggregate Outstandings (other than the undrawn face amount of Letters
of Credit) to be reduced to zero as of the Fifth Amendment Effective Date and
no extensions of credit are made under the Credit Agreement on the Fifth
Amendment Effective Date (it being understood and agreed that the limitations
in Section 2.07 of the Credit Agreement regarding Principal Prepayments
shall not be applicable to the prepayment contemplated by this clause); and if,
in addition to complying with the voluntary prepayment in this clause (d) and
the satisfaction of all of the other conditions in this Section 4,
there are sufficient proceeds from the incurrence of the Permitted Second Lien
Indebtedness, the Borrowers may prepay the indebtedness outstanding under the
National City Loan Documents on the Fifth Amendment Effective Date;

 

(e)           The Borrowers shall have cash collateralized
105% of the aggregate L/C Exposure of all outstanding Letters of Credit  unless the Senior Unsecured Notes have
been fully refinanced and repaid with the proceeds of the Permitted Second Lien
Indebtedness and the Borrowers have provided the Agent Bank with evidence
thereof in form and substance satisfactory to the Agent Bank;

 

(f)            The Agent Bank, on behalf of the Lenders,
shall have received a legal opinion satisfactory to it opining that the Credit
Agreement and the Second Lien Intercreditor Agreement are enforceable in
accordance with their terms against the Borrowers and that all present
and future Obligations under the Credit Agreement constitute “Senior Debt” and
“Designated Senior Debt” under and as defined in the Senior Subordinated
Indenture;

 

(g)           The Agent Bank shall have received, on behalf
of the Lenders: (i) an amendment to each mortgage, deed of trust and real
property security document in form and substance satisfactory to the Agent Bank
and (ii) such endorsements as the Agent Bank may require in connection
with each existing title policy (or in lieu of such endorsements, an agreement
from the title company to issue such endorsements promptly after the Fifth
Amendment Effective Date);

 

(h)           A certificate, duly executed and delivered by
the Secretary of each Borrower, certifying (i) a true and correct copy of
the resolutions for each of the Borrowers authorizing each respective Borrowers
to enter into all documents and agreements to be executed by it pursuant to
this Fifth Amendment and further authorizing and empowering the officer or
officers who will execute such documents and agreements with the authority and
power to 

 

15

 

execute
such documents and agreements on behalf of each respective corporation and (ii) the
incumbency, signatures and authority of the officers of such Borrower
authorized to execute, deliver and perform this Fifth Amendment and all other
documents, instruments or agreements related hereto executed or to be executed
by such Borrower;

 

(i)            Agent Bank shall have received, on behalf of
the Consenting Lenders, the Amendment Fees, and Agent Bank shall have received,
on behalf of itself, such fees agreed to be paid by the Borrowers to the Agent
Bank in connection with this Fifth Amendment;

 

(j)            Reimbursement to Agent Bank by Borrowers for
all fees and out-of-pocket expenses incurred by Agent Bank in connection with
this Fifth Amendment and invoiced as of the Fifth Amendment Effective Date, but
not limited to, attorneys’ fees of Orrick, Herrington & Sutcliffe LLP
and all other like expenses remaining unpaid as of the Fifth Amendment
Effective Date; and

 

(k)           Such other documents, instruments or conditions
as may be reasonably required by Agent Bank.

 

SECTION 5.         Representations
and Warranties.  In order to induce the Agent Bank and the
Lenders to enter into this Fifth Amendment and to amend the Existing Credit
Agreement in the manner provided in this Fifth Amendment, Borrowers represent
and warrant to the Agent Bank and each Bank as follows:

 

(a)           Power and Authority. 
Borrowers have all requisite corporate power and authority to enter into
this Fifth Amendment and the Second Lien Intercreditor Agreement and to carry
out the transactions contemplated by, and perform their obligations under, the
Credit Agreement.

 

(b)           Authorization of Agreements.  The
execution and delivery of this Fifth Amendment and the Second Lien
Intercreditor Agreement by Borrowers and the performance of the Credit
Agreement and the Second Lien Intercreditor Agreement by Borrowers has been
duly authorized by all necessary action, and this Fifth Amendment and the
Second Lien Intercreditor Agreement have been duly executed and delivered by
Borrowers.

 

(c)           Enforceability.  Each
of this Fifth Amendment, the Second Lien Intercreditor Agreement and the Credit
Agreement constitutes the legal, valid and binding obligation of each Borrower
enforceable against such Borrower in accordance with its terms, except as may
be limited by bankruptcy, insolvency, other similar laws affecting the
enforcement of creditors’ rights in general or general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).

 

(d)           No Conflict.  The execution and delivery by
Borrowers of this Fifth Amendment and the Second Lien Intercreditor Agreement
and the performance by Borrowers of each of this Fifth Amendment, the Second
Lien Intercreditor Agreement and the Credit Agreement do not and will not (i) violate
any law, rule, regulation, order, writ, injunction or decree of any court or
Governmental Authority to which Borrowers are subject, (ii) violate any
provision of, or result in the breach or the acceleration of, or entitle any
other Person to accelerate any indenture, evidence of indebtedness, loan or
financing agreement, or other 

 

16

 

agreement
or instrument to which any Borrower is bound or (iii) result in the creation
or imposition of any lien, charge, or encumbrance of any nature whatsoever upon
any of their respective property or assets.

 

(e)           Governmental Consents.  No
authorization or approval or other action by, and no notice to or filing with,
any Governmental Authority is required for the due execution, delivery and
performance by Borrowers of this Fifth Amendment and the Second Lien
Intercreditor Agreement.

 

(f)            Representations and Warranties in the Credit
Agreement.  Borrowers confirm that, as of the Fifth
Amendment Effective Date, the representations and warranties contained in the
Credit Agreement are (after giving effect to this Fifth Amendment) true and
correct in all material respects (except to the extent any such representation
and warranty is expressly stated to have been made as of a specific date, in
which case it shall be true and correct as of such specific date) and that no
Default has occurred and is continuing.

 

SECTION 6.         Releases. 
In further consideration of this Fifth Amendment, each Borrower hereby (i) represents
that it has no defenses to or setoffs against any Obligations owing to the Banks nor claims against the Banks for any matter whatsoever, related to or unrelated to
the Obligations, (ii) waives, releases and forever discharges each of the Banks and their respective agents, officers and directors,
from any and all known and unknown claims, actions, causes of action, demands,
setoffs, damages, causes, suits, accounts, controversies and reckonings, in law
or in equity, filed or otherwise, which they or any of them have or may have
against the Banks, or any of them, by reason
of any matter, facts, cause, act or thing of any conceivable kind or character,
whatsoever, occurring on or prior to the date of execution hereof, which in any
way, directly or indirectly relates to, concerns, arises out of or is founded
upon this Fifth Amendment and/or the documentation, obligations and
transactions evidenced by the Credit Agreement or any of the Loan Documents.

 

SECTION 7.         Miscellaneous.

 

(a)           Reference to and Effect Upon the Existing
Credit Agreement and other Loan Documents.

 

(i)             Except as specifically amended by this Fifth
Amendment and the documents executed and delivered in connection herewith, the
Existing Credit Agreement and each other Loan Document shall remain in full
force and effect and each is hereby ratified and confirmed by the
Borrower.  Without limiting the
foregoing, the Liens granted pursuant to the Security Documents shall continue
in full force and effect.

 

(ii)            Each reference in the Existing Credit
Agreement to “this Credit Agreement”, “hereunder”, “hereof”, “herein” or any
other word or words of similar import shall mean and be a reference to the
Credit Agreement as amended hereby, and each reference in any other Loan
Document to the Existing Credit Agreement or any word or words of similar
import shall be and mean a reference to the Credit Agreement as amended hereby.

 

(iii)           The execution and delivery of this Fifth
Amendment and performance of the Credit Agreement shall not, except as
expressly provided herein, constitute a 

 

17

 

waiver
of any provision of, or operate as a waiver of any right, power or remedy of
the Agent Bank or the Lenders under the Existing Credit Agreement or any of the
other Loan Documents.

 

(iv)          If there is any conflict between the terms
and provisions of this Fifth Amendment and the terms and provisions of the
Existing Credit Agreement or any other Loan Document, the terms and provisions
of this Fifth Amendment shall govern.

 

(b)           Expenses.  Borrowers acknowledge that all
costs and expenses of the Agent Bank incurred in connection with this Fifth
Amendment and the related Loan Documents will be paid in accordance with Section 10.20
of the Credit Agreement.

 

(c)           Headings.  Section and subsection
headings in this Fifth Amendment are included for convenience of reference only
and shall not constitute a part of this Fifth Amendment for any other purpose
or be given any substantive effect.

 

(d)           Counterparts.  This
Fifth Amendment may be executed in one or more counterparts, each of which
shall be deemed an original but all of which together shall constitute one and
the same instrument.  Transmission by
telecopier or electronic mail of an executed counterpart of this Fifth
Amendment shall be deemed to constitute due and sufficient delivery of such
counterpart.

 

(e)           Governing Law.  This
Fifth Amendment shall be governed by and construed according to the laws of the
State of Nevada without reference to conflicts of law rules.  The scope of the foregoing governing law
provision is intended to be all-encompassing of any and all disputes that may
be brought in any court or any mediation or arbitration proceeding and that
relate to the subject matter of this Fifth Amendment, including contract
claims, tort claims, breach of duty claims and all other common law and
statutory claims.

 

[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]

 

18

 

IN WITNESS WHEREOF, the
parties hereto have duly executed this Fifth Amendment as of the date first
above written.

 

	
   

  	
  BORROWERS:

  
	
   

  	
   

  
	
   

  	
  MTR
  GAMING GROUP, INC.,

  
	
   

  	
  a
  Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  John W. Bittner, Jr.

  
	
   

  	
  Name:

  	
  John
  W. Bittner Jr.

  
	
   

  	
  Title:

  	
  Executive
  Vice President Finance & Accounting

  
	
   

  	
   

  
	
   

  	
  MOUNTAINEER
  PARK, INC.,

  
	
   

  	
  a
  West Virginia corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  John W. Bittner, Jr.

  
	
   

  	
  Name:

  	
  John
  W. Bittner Jr.

  
	
   

  	
  Title:

  	
  Chief
  Accounting Officer & Treasurer

  
	
   

  	
   

  
	
   

  	
  PRESQUE
  ISLE DOWNS, INC.,

  
	
   

  	
  a
  Pennsylvania corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  John W. Bittner, Jr.

  
	
   

  	
  Name:

  	
  John
  W. Bittner Jr.

  
	
   

  	
  Title:

  	
  Chief
  Financial Officer & Treasurer

  
	
   

  	
   

  
	
   

  	
  SCIOTO
  DOWNS, INC.,

  
	
   

  	
  an
  Ohio Corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  John W. Bittner, Jr.

  
	
   

  	
  Name:

  	
  John
  W. Bittner Jr.

  
	
   

  	
  Title:

  	
  Chief Financial
  Officer & Chief Accounting Officer

  

 

 

	
   

  	
  BANKS

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  WELLS
  FARGO BANK, NATIONAL ASSOCIATION, as Agent Bank, Lender, Swingline Lender and
  L/C Issuer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Ryan Edde

  
	
   

  	
  Name:

  	
  Ryan
  Edde

  
	
   

  	
  Title:

  	
  Vice President

  
					

 

 

	
   

  	
  NATIONAL
  CITY BANK, successor by merger to NATIONAL CITY BANK OF PENNSYLVANIA,

  Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Emil Kwaczala

  
	
   

  	
  Name:

  	
  Emil
  Kwaczala

  
	
   

  	
  Title:

  	
  Vice President

  

 

 

	
   

  	
  CIT
  LENDING SERVICES CORPORATION, 

  Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Anthony Holland

  
	
   

  	
  Name:

  	
  Anthony
  Holland

  
	
   

  	
  Title:

  	
  Vice President

  

 

 

	
   

  	
  PNC
  BANK, 

  Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Jack Laquatra

  
	
   

  	
  Name:

  	
  Jack
  Laquatra

  
	
   

  	
  Title:

  	
  Vice President

  

 

 

	
   

  	
  FIFTH
  THIRD BANK, 

  Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Steven Moynihan

  
	
   

  	
  Name:

  	
  Steven
  Moynihan

  
	
   

  	
  Title:

  	
  Senior Vice
  President

  

 

 

	
   

  	
  COMMERZBANK
  AG,

  NEW YORK AND GRAND CAYMAN BRANCHES 

  Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Kelly Goudge

  
	
   

  	
  Name:

  	
  Kelly
  Goudge

  
	
   

  	
  Title:

  	
  AT

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Karla Wirth

  
	
   

  	
  Name:

  	
  Karla
  Wirth

  
	
   

  	
  Title:

  	
  AVP

  

 

 

EXHIBIT D

COMPLIANCE CERTIFICATE

 

(see attached)Exhibit
10.1

 

EXECUTION COPY

 

	
   

  

 

U.S. $200,000,000

 

 

NOTE PURCHASE AGREEMENT

 

 

Dated as of July 21, 2009

 

 

Among

 

 

ARES CAPITAL CP FUNDING II LLC,

as the Borrower

 

 

and

 

 

ARES CAPITAL CP FUNDING LLC,

as the Guarantor

 

 

and

 

 

ARES CAPITAL CORPORATION,

as the Servicer and the Transferor

 

 

and

 

 

WACHOVIA BANK, NATIONAL ASSOCIATION,

as the Note Purchaser and the Agent

 

 

and

 

 

WELLS FARGO BANK, NATIONAL ASSOCIATION,

as the Collateral Custodian

 

 

and

 

 

U.S. BANK NATIONAL ASSOCIATION,

as the Trustee and the Bank

	
   

  

 

 

TABLE OF
CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  I.

  	
  DEFINITIONS

  	
  1

  
	
   

  	
   

  	
   

  
	
  Section 1.01

  	
  Certain
  Defined Terms

  	
  1

  
	
   

  	
   

  	
   

  
	
  Section 1.02

  	
  Other
  Terms

  	
  36

  
	
   

  	
   

  	
   

  
	
  Section 1.03

  	
  Computation
  of Time Periods

  	
  36

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  II.

  	
  THE
  FACILITY

  	
  36

  
	
   

  	
   

  	
   

  
	
  Section 2.01

  	
  Variable
  Funding Note and Advances

  	
  36

  
	
   

  	
   

  	
   

  
	
  Section 2.02

  	
  Procedure
  for Advances

  	
  37

  
	
   

  	
   

  	
   

  
	
  Section 2.03

  	
  [Reserved]

  	
  38

  
	
   

  	
   

  	
   

  
	
  Section 2.04

  	
  Remittance
  Procedures

  	
  38

  
	
   

  	
   

  	
   

  
	
  Section 2.05

  	
  Instructions
  to the Trustee and the Bank

  	
  41

  
	
   

  	
   

  	
   

  
	
  Section 2.06

  	
  Borrowing
  Base Deficiency Payments

  	
  41

  
	
   

  	
   

  	
   

  
	
  Section 2.07

  	
  Substitution
  and Sale of Loan Assets; Affiliate Transactions

  	
  42

  
	
   

  	
   

  	
   

  
	
  Section 2.08

  	
  Payments
  and Computations, Etc

  	
  47

  
	
   

  	
   

  	
   

  
	
  Section 2.09

  	
  Fees

  	
  48

  
	
   

  	
   

  	
   

  
	
  Section 2.10

  	
  Increased
  Costs; Capital Adequacy

  	
  48

  
	
   

  	
   

  	
   

  
	
  Section 2.11

  	
  Taxes

  	
  49

  
	
   

  	
   

  	
   

  
	
  Section 2.12

  	
  Collateral
  Assignment of Agreements

  	
  51

  
	
   

  	
   

  	
   

  
	
  Section 2.13

  	
  Grant
  of a Security Interest

  	
  51

  
	
   

  	
   

  	
   

  
	
  Section 2.14

  	
  Evidence
  of Debt

  	
  51

  
	
   

  	
   

  	
   

  
	
  Section 2.15

  	
  Survival
  of Representations and Warranties

  	
  52

  
	
   

  	
   

  	
   

  
	
  Section 2.16

  	
  Release
  of Loan Assets

  	
  52

  
	
   

  	
   

  	
   

  
	
  Section 2.17

  	
  Treatment
  of Amounts Paid by the Borrower

  	
  52

  
	
   

  	
   

  	
   

  
	
  Section 2.18

  	
  Prepayment;
  Termination

  	
  52

  
	
   

  	
   

  	
   

  
	
  Section 2.19

  	
  Extension
  of Stated Maturity Date

  	
  54

  
	
   

  	
   

  	
   

  
	
  Section 2.20

  	
  Collections
  and Allocations

  	
  54

  
	
   

  	
   

  	
   

  
	
  Section 2.21

  	
  Reinvestment
  of Principal Collections

  	
  55

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  III.

  	
  CONDITIONS
  PRECEDENT

  	
  56

  
	
   

  	
   

  	
   

  
	
  Section 3.01

  	
  Conditions
  Precedent to Effectiveness

  	
  56

  
	
   

  	
   

  	
   

  
	
  Section 3.02

  	
  Conditions
  Precedent to All Advances

  	
  57

  
	
   

  	
   

  	
   

  
	
  Section 3.03

  	
  Advances
  Do Not Constitute a Waiver

  	
  59

  
				

 

i

 

TABLE OF
CONTENTS

(continued)

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  Section 3.04

  	
  Conditions
  to Pledges of Loan Assets

  	
  59

  
	
   

  	
   

  	
   

  
	
  Section 3.05

  	
  Conditions
  Precedent to Initial Advance

  	
  60

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  IV.

  	
  REPRESENTATIONS
  AND WARRANTIES

  	
  60

  
	
   

  	
   

  	
   

  
	
  Section 4.01

  	
  Representations
  and Warranties of the Borrower

  	
  60

  
	
   

  	
   

  	
   

  
	
  Section 4.02

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

  	
  68

  
	
   

  	
   

  	
   

  
	
  Section 4.03

  	
  Representations
  and Warranties of the Servicer

  	
  69

  
	
   

  	
   

  	
   

  
	
  Section 4.04

  	
  Representations
  and Warranties of the Trustee

  	
  73

  
	
   

  	
   

  	
   

  
	
  Section 4.05

  	
  Representations
  and Warranties of the Guarantor

  	
  73

  
	
   

  	
   

  	
   

  
	
  Section 4.06

  	
  Representations
  and Warranties of the Note Purchaser

  	
  75

  
	
   

  	
   

  	
   

  
	
  Section 4.07

  	
  Representations
  and Warranties of the Collateral Custodian

  	
  75

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  V.

  	
  GENERAL
  COVENANTS

  	
  76

  
	
   

  	
   

  	
   

  
	
  Section 5.01

  	
  Affirmative
  Covenants of the Borrower

  	
  76

  
	
   

  	
   

  	
   

  
	
  Section 5.02

  	
  Negative
  Covenants of the Borrower

  	
  82

  
	
   

  	
   

  	
   

  
	
  Section 5.03

  	
  Affirmative
  Covenants of the Servicer

  	
  85

  
	
   

  	
   

  	
   

  
	
  Section 5.04

  	
  Negative
  Covenants of the Servicer

  	
  89

  
	
   

  	
   

  	
   

  
	
  Section 5.05

  	
  Affirmative
  Covenants of the Trustee

  	
  90

  
	
   

  	
   

  	
   

  
	
  Section 5.06

  	
  Negative
  Covenants of the Trustee

  	
  91

  
	
   

  	
   

  	
   

  
	
  Section 5.07

  	
  Affirmative
  Covenants of the Collateral Custodian

  	
  91

  
	
   

  	
   

  	
   

  
	
  Section 5.08

  	
  Negative
  Covenants of the Collateral Custodian

  	
  91

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  VI.

  	
  ADMINISTRATION
  AND SERVICING OF CONTRACTS

  	
  91

  
	
   

  	
   

  	
   

  
	
  Section 6.01

  	
  Appointment
  and Designation of the Servicer

  	
  91

  
	
   

  	
   

  	
   

  
	
  Section 6.02

  	
  Duties
  of the Servicer

  	
  93

  
	
   

  	
   

  	
   

  
	
  Section 6.03

  	
  Authorization
  of the Servicer

  	
  95

  
	
   

  	
   

  	
   

  
	
  Section 6.04

  	
  Collection
  of Payments; Accounts

  	
  96

  
	
   

  	
   

  	
   

  
	
  Section 6.05

  	
  Realization
  Upon Loan Assets

  	
  98

  
	
   

  	
   

  	
   

  
	
  Section 6.06

  	
  Servicing
  Compensation

  	
  98

  
	
   

  	
   

  	
   

  
	
  Section 6.07

  	
  Payment
  of Certain Expenses by Servicer

  	
  98

  
	
   

  	
   

  	
   

  
	
  Section 6.08

  	
  Reports
  to the Agent; Account Statements; Servicing Information

  	
  99

  
	
   

  	
   

  	
   

  
	
  Section 6.09

  	
  Annual
  Statement as to Compliance

  	
  100

  
				

 

ii

 

TABLE OF
CONTENTS

(continued)

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  Section 6.10

  	
  Annual
  Independent Public Accountant’s Servicing Reports

  	
  100

  
	
   

  	
   

  	
   

  
	
  Section 6.11

  	
  The
  Servicer Not to Resign

  	
  101

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  VII.

  	
  EVENTS
  OF DEFAULT

  	
  101

  
	
   

  	
   

  	
   

  
	
  Section 7.01

  	
  Events
  of Default

  	
  101

  
	
   

  	
   

  	
   

  
	
  Section 7.02

  	
  Additional
  Remedies of the Agent

  	
  104

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  VIII.

  	
  INDEMNIFICATION

  	
  107

  
	
   

  	
   

  	
   

  
	
  Section 8.01

  	
  Indemnities
  by the Borrower

  	
  107

  
	
   

  	
   

  	
   

  
	
  Section 8.02

  	
  Indemnities
  by Servicer

  	
  110

  
	
   

  	
   

  	
   

  
	
  Section 8.03

  	
  Legal
  Proceedings

  	
  112

  
	
   

  	
   

  	
   

  
	
  Section 8.04

  	
  After-Tax
  Basis

  	
  113

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  IX.

  	
  THE
  AGENT

  	
  113

  
	
   

  	
   

  	
   

  
	
  Section 9.01

  	
  The
  Agent

  	
  113

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  X.

  	
  TRUSTEE

  	
  116

  
	
   

  	
   

  	
   

  
	
  Section 10.01

  	
  Designation
  of Trustee

  	
  116

  
	
   

  	
   

  	
   

  
	
  Section 10.02

  	
  Duties
  of Trustee

  	
  116

  
	
   

  	
   

  	
   

  
	
  Section 10.03

  	
  Merger
  or Consolidation

  	
  118

  
	
   

  	
   

  	
   

  
	
  Section 10.04

  	
  Trustee
  Compensation

  	
  118

  
	
   

  	
   

  	
   

  
	
  Section 10.05

  	
  Trustee
  Removal

  	
  118

  
	
   

  	
   

  	
   

  
	
  Section 10.06

  	
  Limitation
  on Liability

  	
  118

  
	
   

  	
   

  	
   

  
	
  Section 10.07

  	
  Trustee
  Resignation

  	
  120

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  XI.

  	
  MISCELLANEOUS

  	
  120

  
	
   

  	
   

  	
   

  
	
  Section 11.01

  	
  Amendments
  and Waivers

  	
  120

  
	
   

  	
   

  	
   

  
	
  Section 11.02

  	
  Notices,
  Etc

  	
  120

  
	
   

  	
   

  	
   

  
	
  Section 11.03

  	
  No
  Waiver; Remedies

  	
  121

  
	
   

  	
   

  	
   

  
	
  Section 11.04

  	
  Binding
  Effect; Assignability; Multiple Note Purchasers

  	
  121

  
	
   

  	
   

  	
   

  
	
  Section 11.05

  	
  Term
  of This Agreement

  	
  121

  
	
   

  	
   

  	
   

  
	
  Section 11.06

  	
  GOVERNING
  LAW; JURY WAIVER

  	
  122

  
	
   

  	
   

  	
   

  
	
  Section 11.07

  	
  Costs,
  Expenses and Taxes

  	
  122

  
	
   

  	
   

  	
   

  
	
  Section 11.08

  	
  No
  Proceedings

  	
  123

  
	
   

  	
   

  	
   

  
	
  Section 11.09

  	
  Recourse
  Against Certain Parties

  	
  123

  
				

 

iii

 

TABLE OF
CONTENTS

(continued)

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  Section 11.10

  	
  Execution
  in Counterparts; Severability; Integration

  	
  124

  
	
   

  	
   

  	
   

  
	
  Section 11.11

  	
  Consent
  to Jurisdiction; Service of Process

  	
  124

  
	
   

  	
   

  	
   

  
	
  Section 11.12

  	
  Characterization
  of Conveyances Pursuant to the Purchase and Sale Agreements

  	
  125

  
	
   

  	
   

  	
   

  
	
  Section 11.13

  	
  Confidentiality

  	
  126

  
	
   

  	
   

  	
   

  
	
  Section 11.14

  	
  Non-Confidentiality
  of Tax Treatment

  	
  127

  
	
   

  	
   

  	
   

  
	
  Section 11.15

  	
  Waiver
  of Set Off

  	
  128

  
	
   

  	
   

  	
   

  
	
  Section 11.16

  	
  Headings
  and Exhibits

  	
  128

  
	
   

  	
   

  	
   

  
	
  Section 11.17

  	
  Breaches
  of Representations, Warranties and Covenants

  	
  128

  
	
   

  	
   

  	
   

  
	
  Section 11.18

  	
  Assignments
  of Loan Assets

  	
  128

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  XII.

  	
  GUARANTY

  	
  129

  
	
   

  	
   

  	
   

  
	
  Section 12.01

  	
  The
  Guaranty

  	
  129

  
	
   

  	
   

  	
   

  
	
  Section 12.02

  	
  Bankruptcy

  	
  129

  
	
   

  	
   

  	
   

  
	
  Section 12.03

  	
  Nature
  of Liability

  	
  130

  
	
   

  	
   

  	
   

  
	
  Section 12.04

  	
  Independent
  Obligation

  	
  130

  
	
   

  	
   

  	
   

  
	
  Section 12.05

  	
  Authorization

  	
  130

  
	
   

  	
   

  	
   

  
	
  Section 12.06

  	
  Reliance

  	
  131

  
	
   

  	
   

  	
   

  
	
  Section 12.07

  	
  Waiver

  	
  131

  
	
   

  	
   

  	
   

  
	
  Section 12.08

  	
  Limitation
  on Enforcement

  	
  132

  
	
   

  	
   

  	
   

  
	
  Section 12.09

  	
  Security
  for Guaranty

  	
  132

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  XIII.

  	
  COLLATERAL
  CUSTODIAN

  	
  132

  
	
   

  	
   

  	
   

  
	
  Section 13.01

  	
  Designation
  of Collateral Custodian

  	
  132

  
	
   

  	
   

  	
   

  
	
  Section 13.02

  	
  Duties
  of Collateral Custodian

  	
  133

  
	
   

  	
   

  	
   

  
	
  Section 13.03

  	
  Merger
  or Consolidation

  	
  135

  
	
   

  	
   

  	
   

  
	
  Section 13.04

  	
  Collateral
  Custodian Compensation

  	
  135

  
	
   

  	
   

  	
   

  
	
  Section 13.05

  	
  Collateral
  Custodian Removal

  	
  136

  
	
   

  	
   

  	
   

  
	
  Section 13.06

  	
  Limitation
  on Liability

  	
  136

  
	
   

  	
   

  	
   

  
	
  Section 13.07

  	
  Collateral
  Custodian Resignation

  	
  137

  
	
   

  	
   

  	
   

  
	
  Section 13.08

  	
  Release
  of Documents

  	
  137

  
	
   

  	
   

  	
   

  
	
  Section 13.09

  	
  Return
  of Required Loan Documents

  	
  138

  
				

 

iv

 

TABLE OF
CONTENTS

(continued)

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  Section 13.10

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

  	
  138

  
	
   

  	
   

  	
   

  
	
  Section 13.11

  	
  Bailment

  	
  139

  

 

v

 

LIST OF SCHEDULES AND EXHIBITS

 

	
  SCHEDULES

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  SCHEDULE I

  	
  Conditions Precedent
  Documents

  
	
  SCHEDULE II

  	
  Prior Names, Tradenames,
  Fictitious Names and “Doing Business As” Names

  
	
  SCHEDULE III

  	
  Eligibility Criteria

  
	
  SCHEDULE IV

  	
  Agreed-Upon Procedures For
  Independent Public Accountants

  
	
  SCHEDULE V

  	
  Loan Asset Schedule

  
	
   

  	
   

  
	
   

  	
   

  
	
  EXHIBITS

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  EXHIBIT A

  	
  Form of Approval
  Notice

  
	
  EXHIBIT B

  	
  Form of Assignment of
  Mortgage

  
	
  EXHIBIT C

  	
  Form of Borrowing
  Base Certificate

  
	
  EXHIBIT D

  	
  Form of Disbursement
  Request

  
	
  EXHIBIT E

  	
  Form of Joinder
  Supplement

  
	
  EXHIBIT
  F

  	
  Form of
  Notice of Borrowing

  
	
  EXHIBIT
  G

  	
  Form of
  Notice of Reduction (Reduction of Advances Outstanding)

  
	
  EXHIBIT
  H

  	
  Form of
  Notice of Reduction (Reduction of Maximum Facility Amount)

  
	
  EXHIBIT
  I

  	
  Form of
  Variable Funding Note

  
	
  EXHIBIT
  J

  	
  Form of
  Notice and Request for Consent

  
	
  EXHIBIT
  K

  	
  Form of
  Certificate of Closing Attorneys

  
	
  EXHIBIT
  L

  	
  Form of
  Servicing Report

  
	
  EXHIBIT
  M

  	
  Form of
  Servicer’s Certificate (Servicing Report)

  
	
  EXHIBIT
  N

  	
  Form of
  Release of Required Loan Documents

  
	
  EXHIBIT
  O

  	
  Form of
  Transferee Letter

  
	
  EXHIBIT
  P

  	
  Form of
  Power of Attorney for Servicer

  
	
  EXHIBIT
  Q

  	
  Form of
  Power of Attorney for Borrower

  
	
  EXHIBIT
  R

  	
  Form of
  Servicer’s Certificate (Loan Asset Register)

  
	
  EXHIBIT
  S

  	
  Form of
  No Conflicts Opinion

  

 

i

 

This NOTE PURCHASE AGREEMENT is made as of July 21,
2009, among:

 

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

 

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

 

(3)                                  ARES CAPITAL
CORPORATION, a Maryland corporation, as the Servicer (as defined herein) and
the Transferor (as defined herein);

 

(4)                                  WACHOVIA BANK,
NATIONAL ASSOCIATION, as the Note Purchaser (as defined herein);

 

(5)                                  WACHOVIA BANK,
NATIONAL ASSOCIATION, as agent for the Note Purchaser (“Agent”);

 

(6)                                  U.S. BANK
NATIONAL ASSOCIATION (“U.S. Bank”), as the Trustee (together with its
successors and assigns in such capacity, the “Trustee”) and the Bank (as
defined herein); and

 

(7)                                  WELLS FARGO
BANK, NATIONAL ASSOCIATION (“Wells Fargo”), as the Collateral Custodian
(together with its successors and assigns in such capacity, the “Collateral
Custodian”).

 

PRELIMINARY STATEMENT

 

The Note Purchaser has
agreed, on the terms and conditions set forth herein, to provide a secured
revolving credit facility which shall provide for Advances under the Variable
Funding Note from time to time in an aggregate principal amount not to exceed
the Borrowing Base. The proceeds of the Advances will be used to finance the
Borrower’s purchase, on a “true sale” basis, of Eligible Loan Assets from the
Equityholder and the Equityholder’s purchase, on a “true sale” basis, of
Eligible Loan Assets from the Transferor, approved by the Agent, pursuant to
the Second Tier Purchase and Sale Agreement between the Borrower and the
Equityholder and the First Tier Purchase and Sale Agreement between the
Equityholder and the Transferor, respectively. Accordingly, the parties agree
as follows:

 

ARTICLE I.

DEFINITIONS

 

SECTION 1.01                    Certain Defined
Terms.

 

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

 

(b)                                 As used in this
Agreement and the exhibits and schedules thereto (each of which is hereby
incorporated herein and made a part hereof), the following terms shall have the

 

 

following
meanings (such meanings to be equally applicable to both the singular and
plural forms of the terms defined):

 

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

 

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

 

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

 

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

 

“Adjusted Borrowing Value”
means for any Loan Asset, for any date of determination, an amount equal to the
lowest of: (i) the Outstanding Balance of such Loan Asset at such time, (ii) the
Advance Date Assigned Value of such Loan Asset multiplied by the principal balance
of such Loan Asset (exclusive of Accreted Interest), and (iii) the
Assigned Value of such Loan Asset at such time multiplied by the principal
balance of such Loan Asset (exclusive of Accreted Interest); provided that the parties hereby agree
that the Adjusted Borrowing Value of any Loan Asset that is no longer an
Eligible Loan Asset shall be zero.

 

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

 

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

 

“Advance Date Assigned Value”
means, with respect to any Loan Asset, the value (expressed as a percentage of
the principal balance of such Loan Asset (exclusive of Accreted Interest))
equal to the lower of (i) the amount paid by the Equityholder to acquire
such Loan Asset from the Transferor and by the Borrower to acquire such Loan
Asset from the Equityholder (in each case, expressed exclusive of accrued
interest) or (ii) the value determined by the Agent, in its sole
reasonable discretion.

 

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

 

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

 

“Affiliate” when used with
respect to a Person, means any other Person controlling, controlled by or under
common control with such Person. For the purposes of this 

 

2

 

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

 

“Agent” means Wachovia, in
its capacity as agent for the Note Purchaser, together with its successors and
assigns, including any successor appointed pursuant to Article IX.

 

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

 

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

 

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

 

“Applicable Percentage” means
65%.

 

“Applicable Spread” means
4.00% or such other percentage as adjusted in accordance with Section 2.08(d).

 

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

 

3

 

Equityholder
to the Borrower pursuant to the terms of the Second Tier Purchase and Sale
Agreement and the Assignments by which the Transferor effects such conveyance.

 

“Approved Valuation Firm”
shall mean each of (i) Houlihan Lokey Howard & Zukin, (ii) Lincoln
International LLC (f/k/a Lincoln Partners LLC), (iii) Duff &
Phelps Corp. and (iv) Valuation Research Corporation, and any other
nationally recognized valuation firm approved by the Agent in its sole
reasonable discretion.

 

“Ares” means Ares
Capital Corporation.

 

“Ares LIBOR Rate”  means, with respect to any Loan Asset, the
definition of “LIBOR Rate” or any comparable definition in the Loan Agreement
for each such Loan Asset, and in any case that “LIBOR Rate” or such comparable definition
is not defined in such Loan Agreement, the rate per annum appearing on Reuters
Screen LIBOR01 Page (or on any successor or substitute page of such
service, or any successor to or substitute for such service, providing rate
quotations comparable to those currently provided on such page of such
service, as determined by the Agent from time to time for purposes of providing
quotations of interest rates applicable to dollar deposits in the London
interbank market) at approximately 11:00 a.m., London time for such day,
provided, if such day is not a Business Day, the immediately preceding Business
Day, as the rate for Dollar deposits with a one-month, a two-month or a
three-month maturity, as applicable, as and when determined in accordance with
the applicable Loan Agreement.

 

“Ares Prime Rate”
means, with respect to any Loan Asset, the definition of “Prime Rate” or any
comparable definition in the Loan Agreement for each such Loan Asset, and in
any case that “Prime Rate” or such comparable definition is not defined in such
Loan Agreement, the rate designated by certain reference lenders in the
applicable Loan Agreement from time to time as its prime rate in the United
States, such rate to change as and when the designated rate changes; provided that the Ares Prime Rate is not
intended to be lowest rate of interest charged by Ares in connection with
extensions of credit to debtors.

 

“Asset Coverage Ratio”
means the ratio, determined on a consolidated basis, without duplication, in
accordance with GAAP, of (a) the fair market value of the total assets of
Ares and its Subsidiaries as required by, and in accordance with, the 1940 Act
and any orders of the Securities and Exchange Commission issued to Ares, to be
determined by the Board of Directors of Ares and reviewed by its auditors, less
all liabilities (other than Indebtedness, including Indebtedness hereunder) of
Ares and its Subsidiaries, to (b) the aggregate amount of Indebtedness of
Ares and its Subsidiaries.

 

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

 

“Assigned Value” means,
with respect to each Loan Asset, as of any date of determination and expressed
as a percentage of the principal balance of such Loan Asset (exclusive of
Accreted Interest), the Advance Date Assigned Value of such Loan Asset, subject
to the following terms:

 

4

 

(a)                              If a Value
Adjustment Event of the type described in clauses (ii), (iv) or
(vi) of the definition thereof with respect to such Loan Asset
occurs, the Assigned Value of such Loan Asset will be zero.

 

(b)                                 If a Value
Adjustment Event of the type described in clauses (i), (iii) or
(v) of the definition thereof with respect to such Loan Asset
occurs, “Assigned Value” may be amended by the Agent, in its sole reasonable
discretion; provided that (a) the
Assigned Value of any Priced Loan Asset shall not be less than the price quoted
therefor (if any) by such pricing service as selected by the Agent and (b) the
Assigned Value shall not be based upon the practices set forth in FASB
Statement No. 157 or any pronouncement, statement, rule or amendment
with respect to GAAP-mandated mark-to-market requirements, but rather shall be
based on the amortized cost adjusted for any credit impairment of such Loan
Asset.  In the event the Borrower
disagrees with the Agent’s determination of the Assigned Value of a Loan Asset,
the Borrower may (at its expense) retain any Approved Valuation Firm to value
such Loan Asset and if the value determined by such firm is greater than the
Agent’s determination of the Assigned Value, such firm’s valuation shall become
the Assigned Value of such Loan Asset; provided
that the Assigned Value of such Loan Asset shall be the value assigned by the
Agent until such firm has determined its value. 
The value determined by such firm shall be based on the amortized cost
adjusted for any credit impairment of such Loan Asset.  The Assigned Value of any Loan Asset may be
increased at the sole reasonable discretion of the Agent upon improvement in
the Net Leverage Ratio or the Interest Coverage Ratio of such Loan Asset, as
the case may be, as part of a Value Adjustment Event; provided that such Assigned Value may not
increase above the Advance Date Assigned Value. The Agent shall promptly notify
the Servicer of any change effected by the Agent of the Assigned Value of any
Loan Asset.

 

“Assignment of Mortgage”
means 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
Loan Assets secured by mortgaged properties located in the same jurisdiction,
if permitted by Applicable Law, substantially in the form of Exhibit B.

 

“Assignments” means
the First Tier Loan Assignment and the Second Tier Loan Assignment.

 

“Attached Equity”
means, with respect to any Loan Asset, any stock, partnership or membership
interest, beneficial interest or other equity security, warrant, option, or any
right, including, without limitation, any registration right, with respect to
the foregoing received by the Transferor in connection with the origination or
acquisition of such Loan Asset.

 

“Available Collections”
means, with respect to any Loan Asset, all Principal Collections, all Interest
Collections, all proceeds of any sale or disposition with respect to such Loan
Asset, cash proceeds or other funds received by the Borrower or the Servicer
with respect to any Underlying Collateral (including from any guarantors), all
other amounts on deposit in the Collection Account from time to time, and all
proceeds of Permitted Investments with respect to the Controlled Accounts; provided that, for the avoidance of doubt,
“Available Collections” shall 

 

5

 

not
include amounts on deposit in the Unfunded Exposure Account which do not
represent proceeds of Permitted Investments.

 

“Average Life” means,
for any Loan Asset, as of any date of determination, the number determined by
multiplying the amount of each Scheduled Payment of principal to be paid after
such date of determination by the number of years (rounded to the nearest
hundredth) from such date of determination until such Scheduled Payment of
principal is due.

 

“Bank” means U.S. Bank, in
its capacity as the “Bank” pursuant to each of the Collection Account Agreement
and the Unfunded Exposure Account Agreement.

 

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

 

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

 

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

 

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

 

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

 

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

 

“Base Rate” means, on any
date, a fluctuating per annum
interest rate equal to the higher of (a) the Prime Rate or (b) the
Federal Funds Rate plus 0.5%.

 

6

 

“Benefit Plan” means
any “employee pension benefit plan” as defined in Section 3(2) 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” has the meaning
assigned to that term in the preamble hereto.

 

“Borrower Guaranty”
means the guaranty executed by the Borrower in favor of the “Administrative
Agent” (as such term is defined in the Term-Out Sale and Servicing Agreement)
on behalf of the “Secured Parties” (as such term is defined in the Term-Out
Sale and Servicing Agreement) pursuant to Article XIV of the Term-Out Sale
and Servicing Agreement.

 

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

 

(a)                                  the sum of (i) the
product of (A) the Applicable Percentage and (B) the aggregate
Adjusted Borrowing Values of all Eligible Loan Assets as of such date, plus (ii) the amount on deposit in the
Principal Collection Account as of such date minus (iii) the
Unfunded Exposure Equity Shortfall; or

 

(b)                                 (i) the
aggregate Adjusted Borrowing Value of all Eligible Loan Assets as of such date minus
(ii) the Large Obligor Exposure Amount, plus
(iii) the amount on deposit in the Principal Collection Account as of such
date minus (iv) the Unfunded Exposure Equity Shortfall; or

 

(c)                                  the Maximum
Facility Amount minus the Unfunded Exposure Amount;

 

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

 

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

 

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

 

“Breakage Fee” means, for
Advances which are repaid (in whole or in part) on any date other than a
Payment Date, the breakage costs, if any, related to such repayment, it hereby
being understood that the amount of any loss, costs or expense payable by the
Borrower to the Note Purchaser as Breakage Fee shall be determined in the Note
Purchaser’s reasonable discretion based upon the assumption that the Note
Purchaser funded its loan commitment in the London Interbank Eurodollar market
and using any reasonable attribution or averaging methods which the Note
Purchaser deems appropriate and practical.

 

“Business Day” means a day
of the year other than (i) Saturday or a Sunday or (ii) any other day
on which commercial banks in New York, New York or the city in which the
offices of the Trustee are authorized or required by applicable law, regulation
or executive order to close; provided,
that, if any determination of a Business Day shall relate to an Advance 

 

7

 

bearing
interest at LIBOR, the term “Business Day” shall also exclude any day on which
banks are not open for dealings in dollar deposits in the London interbank
market.  For avoidance of doubt, if the
offices of the Trustee are authorized by applicable law, regulation or
executive order to close but remain open, such day shall not be a “Business Day”.

 

“Capital Lease Obligations”
means, with respect to any entity, the obligations of such entity to pay rent
or other amounts under any lease of (or other arrangement conveying the right
to use) real or personal property, or a combination thereof, which obligations
are required to be classified and accounted for as capital leases on a balance
sheet of such entity under GAAP, and the amount of such obligations shall be the
capitalized amount thereof determined in accordance with GAAP.

 

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

 

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

 

(b)                                 the creation or
imposition of any Lien on any limited liability company membership interest in
the Borrower (other than pursuant to the Pledge Agreement);

 

(c)                                  the failure by
the Transferor to own 100% of the limited liability company membership
interests in the Equityholder;

 

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

 

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

 

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

 

“Closing Date” means July 21,
2009

 

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

 

“Collateral Custodian”
means Wells Fargo, not in its individual capacity, but solely as collateral
custodian pursuant to the terms of this Agreement.

 

“Collateral Custodian Fee
Letter” means the Collateral Custodian Fee Letter, dated as of the date
hereof, by and among the Collateral Custodian, the Borrower, the Agent and
Servicer as such letter may be amended, modified, supplemented, restated or
replaced from time to time.

 

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

 

8

 

“Collateral Custodian
Termination Notice” has the meaning assigned to that term in Section 13.05.

 

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

 

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

 

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

 

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

 

(iv)                              all income and
Proceeds of the foregoing.

 

“Collection Account” means
a trust account (account number 133257-202 at the Bank) in the name of the
Borrower for the benefit of and under the sole dominion and control of the
Trustee for the benefit of the Secured Parties; provided, that the funds deposited therein (including any
interest and earnings thereon) from time to time shall constitute the property
and assets of the Borrower, and the Borrower shall be solely liable for any
taxes payable with respect to the Collection Account.

 

“Collection Account Agreement”
means that certain Collection Account Agreement, dated the date of this
Agreement, among the Borrower, the Servicer, the Bank, the Agent and the
Trustee, which agreement relates to the Collection Account, as such agreement
may from time to time be amended, supplemented or otherwise modified in
accordance with the terms thereof.

 

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

 

“Commitment Percentage” has
the meaning assigned to that term in Section 11.04(b).

 

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

 

9

 

“Credit Policy” means
the written credit policies and procedures manual of the Transferor provided to
the 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 this
Agreement.

 

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

 

“Default Funding Rate”
means a floating interest rate per annum equal to 5.0% plus LIBOR; provided
that (i) if the Note Purchaser shall have notified the Agent that a
Eurodollar Disruption Event has occurred, the Default Funding Rate shall be
equal to the Base Rate plus 5.0% until the Note Purchaser shall have
notified the Agent that such Eurodollar Disruption Event has ceased, at which
time the Default Funding Rate shall again be equal to LIBOR for such date plus
5.0% .

 

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

 

“Determination Date” means
the last day of each calendar month.

 

“Disbursement Request”
means a disbursement request from the Borrower to the Agent and the Trustee in
the form attached hereto as Exhibit D in connection with a
disbursement request from the Unfunded Exposure Account in accordance with Section 2.04(c) or
a disbursement request from the Principal Collection Account in accordance with
Section 2.21, as applicable.

 

“EBITDA” means, with
respect to any period and any Loan Asset, the meaning of “EBITDA”, “Adjusted
EBITDA” or any comparable definition in the Loan Agreement for each such Loan
Asset, and in any case that “EBITDA”, “Adjusted EBITDA” or such comparable
definition is not defined in such Loan Agreement, an amount, for the principal
obligor on such Loan Asset and any of its parents or Subsidiaries that are
obligated pursuant to the Loan Agreement for such Loan Asset (determined on a
consolidated basis without duplication in accordance with GAAP) equal to
earnings from continuing operations for such period plus interest expense, income taxes and unallocated depreciation and
amortization for such period (to the extent deducted in determining earnings
from continuing operations for such period), and any other item the Borrower
and the Agent mutually deem to be appropriate.

 

“Eligible Bid” means
a bid made in good faith (and acceptable as a valid bid in the Agent’s
reasonable discretion) by a bidder for all or any portion of the Collateral
Portfolio in connection with a sale of the Collateral Portfolio in whole or in
part pursuant to Section 7.02(i).

 

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

 

10

 

“Eligible
Repurchase Obligations” means 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.

 

“Environmental Laws”
means any and all foreign, federal, state and local laws, statutes, ordinances,
rules, regulations, permits, licenses, approvals, interpretations (with the
force of law) and orders of courts or Governmental Authorities, relating to the
protection of human health or the environment, including, but not limited to,
requirements pertaining to the manufacture, processing, distribution, use,
treatment, storage, disposal, transportation, handling, reporting, licensing,
permitting, investigation or remediation of Hazardous Materials.  Environmental Laws include, without
limitation, the Comprehensive Environmental Response, Compensation, and
Liability Act (42 U.S.C. § 9601 et seq.), the Hazardous Material
Transportation Act (49 U.S.C. § 331 et seq.), the Resource Conservation
and Recovery Act (42 U.S.C. § 6901 et seq.), the Federal Water Pollution
Control Act (33 U.S.C. § 1251 et seq.), the Clean Air Act (42 U.S.C. §
7401 et seq.), the Toxic Substances Control Act (15 U.S.C. § 2601 et
seq.), the Safe Drinking Water Act (42 U.S.C. § 300, et seq.), the
Environmental Protection Agency’s regulations relating to underground storage
tanks (40 C.F.R. Parts 280 and 281), and the Occupational Safety and Health Act
(29 U.S.C. § 651 et seq.), and the rules and regulations
thereunder, each as amended or supplemented from time to time.

 

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

 

“Equityholder” means Ares
Capital CP Funding Holdings II LLC, a Delaware limited liability company, which
owns 100% of the equity interests in the Borrower.

 

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

 

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

 

“Eurodollar Disruption Event”
means the occurrence of any of the following: (a) the Note Purchaser shall
have notified the Agent of a determination by the Note Purchaser 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 

 

11

 

States
dollars in the London interbank market to fund any Advance, (b) the Note
Purchaser shall have notified the Agent of the inability, for any reason, of
the Note Purchaser or any of its assignees or participants to determine LIBOR, (c) the
Note Purchaser shall have notified the Agent of a determination by the Note
Purchaser or any of its assignees or participants that the rate at which
deposits of United States dollars are being offered to the Note Purchaser or
any of its assignees or participants in the London interbank market does not
accurately reflect the cost to the Note Purchaser or such assignee or such
participant of making, funding or maintaining any Advance or (d) the Note
Purchaser shall have notified the Agent of the inability of the Note Purchaser
or any of its assignees or participants to obtain United States dollars in the
London interbank market to make, fund or maintain any Advance.

 

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

 

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

 

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

 

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

 

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

 

“Exposure Amount”
means, as of any date of determination, with respect to any Delayed Draw Loan
Asset or Revolving Loan Asset, the excess, if any, of (i) the maximum
commitment of the Borrower under the terms of the applicable Loan Agreement to
make advances (and, for the avoidance of doubt, the Borrower’s commitment in
respect of a Loan Asset as to which the commitment to make additional advances
has been terminated shall be zero) over (ii) the outstanding
principal balance of such Loan Asset on such date of determination.

 

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

 

“Facility Maturity Date”
means the earliest to occur of (i) the Stated Maturity Date, (ii) the
date of the declaration, or automatic occurrence, of the Facility Maturity Date

 

12

 

pursuant
to Section 7.01, (iii) the Collection Date and (iv) the
occurrence of the termination of this Agreement pursuant to Section 2.18
hereof.

 

“FDIC” means the
Federal Deposit Insurance Corporation, and any successor thereto.

 

“Federal Funds Rate”
means, 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 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 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.

 

“Fee Letter” has the
meaning assigned to that term in Section 2.09.

 

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

 

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

 

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

 

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

 

“First Tier Purchase and
Sale Agreement” means that certain First Tier Purchase and Sale Agreement,
dated as of the date hereof, between the Transferor, as the seller, and the
Equityholder, as the purchaser, as amended, modified, waived, supplemented,
restated or replaced from time to time.

 

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

 

“Fixed Rate Loan Asset”
means a Loan Asset other than a Floating Rate Loan Asset.

 

“Floating Rate Loan Asset”
means a Loan Asset 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.

 

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

 

13

 

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

 

“Guaranteed Obligations”
has the meaning assigned to that term in Section 12.01(a).

 

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

 

“Guaranty” means the
guaranty of the Guarantor set forth in Article XII.

 

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

 

“Highest Required
Investment Category” means (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.

 

“Indebtedness” means:

 

(i)                                     with respect to
any Obligor under any Loan Asset, for the purposes of the definition of the
Interest Coverage Ratio and the Net Leverage Ratio, the meaning of “Indebtedness”
or any comparable definition in the Loan Agreement for each such Loan Asset,
and in any case that “Indebtedness” or such comparable definition is not defined
in such Loan Agreement, without duplication, (a) all obligations of such
entity for borrowed money or with respect to deposits or advances of any kind, (b) all
obligations of such entity evidenced by bonds, debentures, notes or similar
instruments, (c) all obligations of such entity under conditional sale or
other title retention agreements relating to property acquired by such entity, (d) all
obligations of such entity in respect of the deferred purchase price of
property or services (excluding current accounts payable incurred in the
ordinary course of business), (e) all indebtedness of others secured by
(or for which the holder of such indebtedness has an existing right, contingent
or otherwise, to be secured by) any Lien on property owned or acquired by such
entity, whether or not the indebtedness secured thereby has been assumed, (f) all
guarantees by such entity of indebtedness of others, (g) all Capital Lease
Obligations of such entity, (h) all obligations, contingent or otherwise,
of such entity as an account party in respect of letters of credit and 

 

14

 

letters
of guaranty and (i) all obligations, contingent or otherwise, of such
entity in respect of bankers’ acceptances; and

 

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

 

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

 

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

 

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

 

“Independent Director”
means a natural person who, (A) for the five-year period prior to his or
her appointment as Independent Director, has not been, and during the
continuation of his or her service as Independent Director is not: (i) an
employee, director, stockholder, member, manager, partner or officer of the
Borrower, the Equityholder or any of their respective Affiliates (other than
his or her service as an Independent Director of the Borrower or other
Affiliates that are structured to be “bankruptcy remote”); (ii) a customer
or supplier of the Borrower, the Equityholder or any of their Affiliates (other
than his or her service as an Independent Director of the Borrower); or (iii) any
member of the immediate family of a person described in (i) or (ii), and (B) has,
(i) prior experience as an Independent Director for a corporation or
limited liability company whose charter documents required the unanimous
consent of all Independent Directors thereof before such corporation or limited
liability company could consent to the institution of bankruptcy or insolvency
proceedings against it or could file a petition seeking relief under any
applicable federal or state law relating to bankruptcy and (ii) at least
three years of employment experience with one or more entities that provide, in
the ordinary course of their respective businesses, advisory, management or
placement services to issuers of securitization or structured finance
instruments, agreements or securities.

 

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

 

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

 

“Initial Extension” has the
meaning assigned to that term in Section 2.19.

 

15

 

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

 

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

 

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

 

“Insurance Proceeds”
means any amounts received on or with respect to a Loan Asset under any
Insurance Policy or with respect to any condemnation proceeding or award in
lieu of condemnation 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 Loan Agreement.

 

“Interest” means, with
respect to any period and any Loan Asset, for the Obligor on such Loan Asset
and any of its parents or Subsidiaries that are obligated under the Loan
Agreement for such Loan Asset (determined on a consolidated basis without
duplication in accordance with GAAP), the meaning of “Interest” or any
comparable definition in the Loan Agreement for each such Loan Asset and in any
case that “Interest” or such comparable definition is not defined in such Loan
Agreement, all interest in respect of Indebtedness (including the interest
component of any payments in respect of Capital Lease Obligations) accrued or
capitalized during such period (whether or not actually paid during such
period).

 

“Interest Collection
Account” means a sub-account (account number 133257-200 at the Bank) of the
Collection Account into which Interest Collections shall be segregated.

 

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

 

“Interest Coverage Ratio”
means, with respect to any Loan Asset for any Relevant Test Period, the meaning
of “Interest Coverage Ratio” or any comparable definition in the Loan Agreement
for each such Loan Asset, and in any case that “Interest Coverage Ratio” or
such comparable definition is not defined in such Loan Agreement, the ratio of (a) EBITDA
to (b) Interest.

 

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

 

“JPMorgan” has the
meaning specified in the definition of “JPMorgan Loan Documents”.

 

“JPMorgan Loan Documents”
means that certain Senior Secured Revolving Credit Agreement dated as of December 28,
2005 between Ares, the lenders party thereto and 

 

16

 

JPMorgan
Chase Bank, N.A. (“JPMorgan”) and that certain Guarantee and Security
Agreement, dated as of December 28, 2005, between Ares and JPMorgan, each
as amended, modified, waived, supplemented or restated from time to time.

 

“Large Obligor Exposure
Amount” means, as of any date of determination, an amount equal to the sum
of the Adjusted Borrowing Values of all Eligible Loan Assets attributable to
the three (3) Obligors having the largest Obligor concentration; such
Obligor concentrations to be determined by summing, for each Obligor, the
Adjusted Borrowing Values for all Eligible Loan Assets of such Obligor on such
date of determination.

 

“LIBOR” means, for any day
during the Remittance Period, with respect to any Advance (or portion thereof) (a) the
rate per annum appearing on Reuters Screen LIBOR01 Page (or any successor
or substitute page) as the London interbank offered rate for deposits in
dollars at approximately 11:00 a.m., London time, for such day, provided,
if such day is not a Business Day, the immediately preceding Business Day, for
a one-month maturity; and (b) if no rate specified in clause (a) of
this definition so appears on Reuters Screen LIBOR01 Page (or any
successor or substitute page), the interest rate per annum at which dollar
deposits of $5,000,000 and for a one-month maturity are offered by the
principal London office of Wachovia in immediately available funds in the
London interbank market at approximately 11:00 a.m., London time, for such
day.

 

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

 

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

 

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

 

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

 

“Loan Asset” means any loan
originated or acquired by the Transferor in the ordinary course of its
business, which loan includes, without limitation, (i) the Required Loan
Documents and Loan Asset File, and (ii) all right, title and interest of
the Transferor in and to the loan and any Underlying Collateral, but excluding,
in each case, the Retained Interest, any Attached Equity and Excluded Amounts
and which loan was acquired by the Borrower from the 

 

17

 

Equityholder
under the Second Tier Purchase and Sale Agreement and by the Equityholder from
the Transferor under the First Tier Purchase and Sale Agreement and owned by
the Borrower on the initial Advance Date (as set forth on the Loan Asset
Schedule delivered on the initial Advance Date) or acquired by the Borrower
after the initial Advance Date pursuant to the delivery of the Loan Assignments
and listed on Schedule I to such Loan Assignments.

 

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

 

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

 

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

 

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

 

“Loan Assignments”
means, collectively, the First Tier Loan Assignment (as such term is defined in
the First Tier Purchase and Sale Agreement) and the Second Tier Loan Assignment
(as such term is defined in the Second Tier Purchase and Sale Agreement).

 

“Make-Whole Premium” means (i) to
the extent the Make-Whole Premium is required to be paid pursuant to this
Agreement on or prior to the date which is one year following the Closing Date,
3.00% of the Maximum Facility Amount or the amount by which the Maximum
Facility Amount is reduced, as applicable, (ii) to the extent the Make-Whole
Premium is required to be paid pursuant to this Agreement on or prior to the
date which is two years following the Closing Date but after the first
anniversary of the Closing Date, 2.00% of the Maximum Facility Amount or the
amount by which the Maximum Facility Amount is reduced, as applicable, and (iii) to
the extent the Make-Whole Premium is required to be paid pursuant to this
Agreement on or prior to the date which is three years following the Closing
Date but after the second anniversary of the Closing Date, 1.00% of the Maximum
Facility Amount or the amount by which the Maximum Facility Amount is reduced,
as applicable; provided that, in
the foregoing clauses (i) through (iii), the Make-Whole
Premium shall be calculated without giving effect to the proviso in the
definition of “Maximum Facility Amount”.

 

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

 

18

 

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

 

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

 

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

 

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

 

(b)                                 delays or
extends the required or scheduled amortization in any way that increases the
Average Life of such Loan Asset; provided
that the Average Life of such Loan Asset may be increased by not more than 20%
from its Average Life on the related Cut-Off Date if the Net Leverage Ratio of
such Loan Asset is not more than 85% of the maximum established in the Net Leverage
Ratio covenant of such Loan Asset;

 

(c)                                  waives one or
more interest payments, permits any interest due in cash to be deferred or
capitalized and added to the principal amount of such Loan Asset (other than
any deferral or capitalization already allowed by the terms of the Loan
Agreement of any PIK Loan Asset), or reduces the spread or coupon with respect
to such Loan Asset; provided that
such spread or coupon may be reduced a maximum of one time and by not more than
20% from the spread or coupon on the related Cut-Off Date; provided  further
that the Interest Coverage Ratio of such Loan Asset is greater than
2.0:1 at the time of such reduction;

 

(d)                                 contractually
or structurally subordinates such Loan Asset by operation of a priority of
payments, turnover provisions, the transfer of assets in order to limit
recourse to the related Obligor or the granting of Liens (other than “permitted
liens” as defined in the applicable Loan Agreement for such Loan Asset or such
comparable definition if “permitted liens” is not defined therein, so long as
such definition is reasonable and customary) on any of the Underlying
Collateral securing such Loan Asset;

 

(e)                                  substitutes,
alters or releases the Underlying Collateral securing such Loan Asset and each
such substitution, alteration or release, as determined in the sole reasonable
discretion of the Agent, materially and adversely affects the value of such
Loan Asset;

 

19

 

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

 

(g)                                 amends, waives,
forbears, supplements or otherwise modifies (i) the meaning of “Net
Leverage Ratio”, “Interest Coverage Ratio” or “Permitted Liens” or any
respective comparable definitions in the Loan Agreement for such Loan Asset or (ii) any
term or provision of such Loan Agreement referenced in or utilized in the
calculation of the “Net Leverage Ratio”, “Interest Coverage Ratio” or “Permitted
Liens” or any respective comparable definitions for such Loan Asset, in either
case in a manner that, in the sole reasonable judgment of the Agent, is
materially adverse to the Secured Parties.

 

“Maximum Facility Amount”
means initially $200,000,000, as such amount may be reduced from time to time
pursuant to Section 2.18(b); provided
that at all times when an Event of Default has occurred, the Maximum Facility
Amount shall mean the aggregate Advances Outstanding at such time.

 

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

 

“Mortgage” means the
mortgage, deed of trust or other instrument creating a Lien on an interest in
real property securing a Loan Asset, including the assignment of leases and
rents related thereto.

 

“Multiemployer Plan”
means 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.

 

“Net Leverage Ratio” means,
with respect to any Loan Asset for any Relevant Test Period, the meaning of “Net
Leverage Ratio” or any comparable definition in the Loan Agreement for each
such Loan Asset, and in any case that “Net Leverage Ratio” or such comparable
definition is not defined in such Loan Agreement, the ratio of (a) Indebtedness
minus Unrestricted Cash to (b) EBITDA.

 

“Non-Usage Fee” has the
meaning ascribed thereto in the Fee Letter.

 

“Note Purchaser” means,
collectively, Wachovia and/or any other Person to whom the Note Purchaser
assigns any part of its rights and obligations under this Agreement and the
other Transaction Documents in accordance with the terms of Section 11.04.

 

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

 

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

 

20

 

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

 

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

 

“Obligations” means (i) all
present and future indebtedness and other liabilities and obligations
(howsoever created, arising or evidenced, whether direct or indirect, absolute
or contingent, or due or to become due) of the Borrower to the Note Purchaser,
the Agent, the Bank, the Trustee or the Collateral Custodian arising under this
Agreement and/or any other Transaction Document and shall include, without
limitation, all liability for principal of and interest on the Advances,
indemnifications and other amounts due or to become due by the Borrower to the
Note Purchaser, the Agent or the Trustee under this Agreement and/or any other
Transaction Document, including, without limitation, any Make-Whole Premium and
costs and expenses payable by the Borrower to the Note Purchaser, the Agent,
the Bank, the Trustee or the Collateral Custodian, including reasonable
attorneys’ fees, costs and expenses, including without limitation, interest,
fees and other obligations that accrue after the commencement of an insolvency
proceeding (in each case whether or not allowed as a claim in such insolvency
proceeding) and (ii) the “Aggregate Unpaids,” as such term is defined in
the Term-Out Sale and Servicing Agreement.

 

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

 

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

 

“Opinion of Counsel” means
a written opinion of counsel, which opinion and counsel are acceptable to the
Agent in its sole discretion; provided
that Latham & Watkins LLP, Richards Layton & Finger, P.A. and
Venable LLP shall be considered acceptable counsel for purposes of this
definition.

 

“Optional Sale” has
the meaning assigned to that term in Section 2.07(c).

 

“Optional Sale Date”
means any Business Day, provided 45 days’ prior written notice is given in
accordance with Section 2.07(c).

 

“Other Parties” has
the meaning assigned to that term in Section 12.07(c).

 

“Outstanding Balance”
means, with respect to any Loan Asset as of any date of determination, the
outstanding principal balance of any advances or loans made to the related
Obligor pursuant to the related Loan Agreement as of such date of determination
(exclusive of any interest and Accreted Interest).

 

“Payment Date” means the 15th day of each of February, May, August and November or,
if such day is not a Business Day, the next succeeding Business Day, commencing

 

21

 

on
the 15th day of November; provided, that the final Payment Date shall occur on the
Collection Date.

 

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

 

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

 

“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 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) 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,
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);

 

22

 

(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 Agent, as applicable, purchase or sell to
itself or an Affiliate, as principal or agent, the Permitted Investments
described above.

 

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

 

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

 

“Permitted Securitization”
means any private or public term or conduit securitization transaction (a) undertaken
by the Transferor, the Borrower or an Affiliate of the Transferor, that is
secured, directly or indirectly, by any Loan Asset currently or formerly
included in the Collateral Portfolio 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 Transferor 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 Transferor 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” means an
individual, partnership, corporation (including a statutory or business trust),
limited liability company, joint stock company, trust, unincorporated
association, 

 

23

 

sole
proprietorship, joint venture, government (or any agency or political
subdivision thereof) or other entity.

 

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

 

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

 

“Pledge Agreement” means
that certain Pledge Agreement, dated as of the Closing Date, between the
Equityholder, as pledgor, and the Trustee, as pledgee, as such Pledge Agreement
may from time to time be amended, restated, supplemented or otherwise modified
from time to time in accordance with the terms thereof.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(h)           the Purchase and Sale
Agreements (including, without limitation, rights of recovery of the Borrower
against the Equityholder and the Transferor) and the assignment to the Trustee,
for the benefit of the Secured Parties, of all UCC financing statements filed
by the 

 

24

 

Borrower
against the Equityholder and filed by the Equityholder against the Transferor
under or in connection with the Purchase and Sale Agreements;

 

(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.

 

“Priced Loan Asset”
means any Loan Asset that has an observable quote from LoanX Mark-It Partners
or Loan Pricing Corporation, or from another pricing service selected by the
Agent in its sole discretion.

 

“Prime Rate” means
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 Collection
Account” means a sub-account (account number 133257-201 at the Bank) of the
Collection Account into which Principal Collections shall be segregated.

 

“Principal Collections”
means any deposits by the Borrower in accordance with Section 2.06(a)(i) or
Section 2.07(e)(i) or, with respect to any Loan Asset, all
amounts received which are not Interest Collections, including, without
limitation, all Recoveries, all Insurance Proceeds, all scheduled payments of
principal and principal prepayments and all guaranty payments and proceeds of
any liquidations, sales, dispositions or securitizations, in each case,
attributable to the principal of such Loan Asset; provided that, for the avoidance of doubt, “Principal
Collections” shall not include amounts on deposit in the Unfunded Exposure
Account.

 

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

 

“Purchase and Sale
Agreements” means the First Tier Purchase and Sale Agreement and the Second
Tier Purchase and Sale Agreement.

 

“Rating Agency” means
each of S&P, Moody’s and Fitch.

 

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

 

“Recoveries” means,
as of the time any Underlying Collateral with respect to any Loan Asset subject
to clauses (ii) or (iv) of the definition of “Value
Adjustment Event”, as 

 

25

 

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

 

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

 

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

 

“Relevant Test Period”
means, with respect to any Loan Asset, the relevant test period for the
calculation of Net Leverage Ratio or Interest Coverage Ratio, as applicable,
for such Loan Asset in the Loan Agreements or, if no such period is provided
for therein, for Obligors delivering monthly financing statements, each period
of the last 12 consecutive reported calendar months, and for Obligors
delivering quarterly financing statements, each period of the last four
consecutive reported fiscal quarters of the principal Obligor on such Loan
Asset; provided that with respect
to any Loan Asset for which the relevant test period is not provided for in the
Loan Agreement, if an Obligor is a newly-formed entity as to which 12
consecutive calendar months have not yet elapsed, “Relevant Test Period” shall
initially include the period from the date of formation of such Obligor to the
end of the twelfth calendar month or fourth fiscal quarter (as the case may be)
from the date of formation, and shall subsequently include each period of the
last 12 consecutive reported calendar months or four consecutive reported
fiscal quarters (as the case may be) of such Obligor.

 

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

 

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

 

“Reporting Date”
means the date that is 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 September, 2009.

 

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

 

(a)           (i) other than in the
case of a Noteless Loan Asset, the original or, if accompanied by an original “lost
note” affidavit and indemnity, a copy of, the underlying promissory note,
endorsed by the Borrower or the prior holder of record 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 either in blank or to the
Trustee, subject to Section 

 

26

 

11.18), 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 Asset (x) a copy of each transfer document or instrument
relating to such Noteless Loan Asset evidencing the assignment of such Noteless
Loan Asset to the Transferor and from the Transferor to the Borrower (or, in
the case of Third Party Acquired Loan Assets purchased by the Transferor from
third parties, from such third party directly to the Borrower as provided in Section 11.18)
and from the Borrower either to the Trustee or in blank, and (y) a copy of
the Loan Asset Register with respect to such Noteless Loan Asset, as described
in Section 5.03(l)(ii);

 

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

 

(c)            if any Loan Asset is secured
by a Mortgage, in each case as set forth in the Loan Asset Checklist:

 

(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; provided
that, solely for purposes of the Review Criteria, the Collateral Custodian
shall have no duty to ascertain whether any certification set forth in this
subsection (c)(ii) has been received, other than a certification which has
been clearly delineated as being provided by the Servicer 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)           other than with respect to
any Agented Note, to the extent the Borrower is the sole lender under the Loan
Agreement, 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
Asset originated by the Transferor and with respect to which the Transferor
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 Transferor as secured party
and each with evidence of filing thereon, or (ii) copies 

 

27

 

of
any such financing statements certified by the Servicer to be true and complete
copies thereof in instances where the original financing statements have been
sent to the appropriate public filing office for filing, in each case as set
forth in the Loan Asset Checklist.

 

“Required Note Purchasers”
has the meaning assigned to that term in Section 11.01(a).

 

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

 

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

 

“Restricted Junior
Payment” means (i) any dividend or other distribution, direct or
indirect, on account of any class of membership interests of the Borrower now
or hereafter outstanding, except a dividend paid solely in interests of that
class of membership interests or in any junior class of membership interests of
the Borrower; (ii) any redemption, retirement, sinking fund or similar
payment, purchase or other acquisition for value, direct or indirect, of any
class of membership interests of the Borrower now or hereafter outstanding, (iii) any
payment made to redeem, purchase, repurchase or retire, or to obtain the surrender
of, any outstanding warrants, options or other rights to acquire membership
interests of the Borrower now or hereafter outstanding, and (iv) any
payment of management fees by the Borrower (except for reasonable management
fees to the Transferor 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 Loan Assets or of cash or
other proceeds relating thereto which have been substituted by the Borrower in
accordance with this Agreement shall not constitute Restricted Junior Payments.

 

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

 

“Review Criteria” has
the meaning assigned to that term in Section 13.02(b)(i).

 

28

 

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

 

“S&P” means Standard &
Poor’s Ratings Group, a division of The McGraw-Hill Companies, Inc. (or
its successors in interest).

 

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

 

“Second Extension” has the
meaning assigned to that term in Section 2.19.

 

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

 

“Second Tier Purchase and
Sale Agreement” means that certain Second Tier Purchase and Sale Agreement,
dated as of the date hereof, between the Equityholder, as the seller, and the
Borrower, as the purchaser, as amended, modified, waived, supplemented,
restated or replaced from time to time.

 

“Secured Party” means
each of the Agent, the Note Purchaser (together with its successors and
assigns), the Trustee and Wells Fargo Securities, LLC (f/k/a Wachovia Capital
Markets, LLC) (as “Administrative Agent” in the Term-Out Sale and Servicing
Agreement) on behalf of the “Secured Parties” (as such term is defined in the
Term-Out Sale and Servicing Agreement), to the extent any payments are owed
thereto in connection with the Borrower Guaranty.

 

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

 

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

 

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

 

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

 

(b)           any failure on the part of
the Servicer duly to (i) observe or perform in any material respect any
other covenants or agreements of the Servicer set forth in this Agreement or
the other Transaction Documents to which the Servicer is a party (including,
without limitation, any material delegation of the Servicer’s duties that is
not permitted by Section 6.01 of this 

 

29

 

Agreement)
or (ii) comply in any material respect with the Credit Policy and the
Servicing Standard regarding the servicing of the Collateral Portfolio and in
each case the same continues unremedied for a period of 30 days (if such
failure can be remedied) after the earlier to occur of (x) the date on
which written notice of such failure requiring the same to be remedied shall
have been given to the Servicer by the Agent or the Trustee and (y) the
date on which a Responsible Officer of the Servicer acquires knowledge thereof;

 

(c)           the failure of the Servicer
to make any payment when due (after giving effect to any related grace period)
under one or more agreements for borrowed money to which it is a party in an
aggregate amount in excess of United States $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)           a Bankruptcy Event shall
occur with respect to the Servicer;

 

(e)           the Servicer consents to or
otherwise permits to occur, without the prior written consent of the Agent, any
material amendment, modification, change, supplement or rescission (any of the
foregoing an “amendment” for purposes of this clause (e)) of or to the
Credit Policy and the Servicer fails to receive the written consent of the
Agent within 10 Business Days after notice of such amendment has been delivered
to the Agent (which notice shall be delivered by the Servicer within seven
Business Days after the effectiveness of such amendment); provided that no such written consent
shall be required in the case of an amendment which was mandated by any
Applicable Law or Governmental Authority;

 

(f)            Ares or an Affiliate thereof
shall cease to be the Servicer;

 

(g)           at any time, Ares fails to
maintain the Asset Coverage Ratio at greater than or equal to 2:1;

 

(h)           Ares permits Shareholders’
Equity at the last day of any of its fiscal quarter to be less than the greater
of (i) 40% of the total assets of the Servicer and its Subsidiaries as at
the last day of such fiscal quarter (determined on a consolidated basis,
without duplication, in accordance with GAAP) and (ii) $300,000,000 plus
25% of the net proceeds of the sale of equity interests by the Servicer and its
Subsidiaries after the Closing Date;

 

(i)            any change in the management
of the Servicer (whether by resignation, termination, disability, death or lack
of day-to-day management) relating to any three of Michael Arougheti, R. Kipp
deVeer, Mitchell Goldstein, Eric Beckman and Michael Smith (or other
individuals acceptable to the Agent), or any failure by any three 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 Agent
has not been appointed within 30 days of such event; provided 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 Agent deems each of John Kissick, Anthony
Ressler, Bennett Rosenthal, David Sachs, Gregory Margolies, David Kaplan and
Seth Brufsky to 

 

30

 

be
an acceptable, experienced appointee for purposes of replacing any of the
individuals described in the preceding sentence;

 

(j)            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;

 

(k)           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 Agent or
any of the Secured Parties and continues to be unremedied for a period of 30
days after the earlier to occur of (i) the date on which written notice of
such incorrectness requiring the same to be remedied shall have been given to
the Servicer by the Agent or the Trustee and (ii) the date on which a
Responsible Officer of the Servicer acquires knowledge thereof;

 

(l)            any financial or other
information reasonably requested by the Agent, the Note Purchaser or the
Trustee is not provided as requested within a reasonable amount of time
following such request;

 

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

 

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

 

(o)           the occurrence of the
Facility Maturity Date;

 

(p)           an Affiliate of the Servicer
fails to be the Equityholder;  or

 

(q)           any other event which has
caused, or which may cause, a Material Adverse Effect on the assets,
liabilities, financial condition, business or operations of the Servicer or the
ability of the Servicer to meet its obligations under the Transaction Documents
to which it is a party.

 

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

 

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

 

“Servicing Fees” means the
fee payable to the Servicer on each Payment Date in arrears in respect of each
Remittance Period, which fee shall be equal to the product of (i) 0.50%, (ii) the
arithmetic mean of the aggregate outstanding principal balance of the
Collateral Portfolio 

 

31

 

on
the first day and on the last day of the related Remittance Period and (iii) the
actual number of days in such Remittance Period divided by 360.

 

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

 

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

 

“Servicing Standard”
means, with respect to any Loan Assets included in the Collateral Portfolio, to
service and administer such Loan Assets on behalf of the Secured Parties in
accordance with Applicable Law, the terms of this Agreement, the Loan
Agreements, all customary and usual servicing practices for loans like the Loan
Assets and, to the extent consistent with the foregoing, (i) if the
Servicer is the originator or an Affiliate thereof, the higher of: (A) in
a manner which the Servicer believes to be consistent with the practices and
procedures followed by institutional servicers of national standing relating to
assets of the nature and character of the Loan Assets, and (B) the same
care, skill, prudence and diligence with which the Servicer services and
administers loans for its own account or for the account of others, and (ii) if
the Servicer is not the originator or an Affiliate thereof, the same care,
skill, prudence and diligence with which the Servicer services and administers
loans for its own account or for the account of others.

 

“Shareholders’ Equity”
means, at any date, the amount determined on a consolidated basis, without
duplication, in accordance with GAAP, of shareholders equity for the Servicer
and its Subsidiaries at such date.

 

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

 

“Stated Maturity Date”
means July 21, 2012 or such later date as is agreed to in writing by the
Borrower, the Servicer, the Agent and the Note Purchaser pursuant to Section 2.19.

 

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

 

“Substitute Eligible Loan
Asset” means each Eligible Loan Asset Pledged by the Borrower to the Agent,
on behalf of the Note Purchaser, pursuant to Section 2.07(a) or
Section 2.07(e)(ii).

 

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

 

32

 

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

 

“Term-Out Sale and
Servicing Agreement” means that certain Sale and Servicing Agreement, dated
as of November 3, 2004, by and among Ares, as the originator and as the
servicer, the Guarantor, as the borrower, the Borrower, as the guarantor, each
of the conduit purchasers and institutional purchasers from time to time party
thereto, each of the purchaser agents from time to time party thereto, Wells
Fargo Securities, LLC (f/k/a 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, as amended, supplemented, modified or restated from time to
time.

 

“Third Party Acquired
Loan Asset” means any Loan Asset purchased by the Transferor from third
parties not Affiliated with the Transferor and then sold from the Transferor to
the Equityholder pursuant to the First Tier Purchase and Sale Agreement and
from the Equityholder to the Borrower pursuant to the Second Tier Purchase and
Sale Agreement.

 

“Transaction Documents”
means this Agreement, the Variable Funding Note, the Purchase and Sale
Agreements, the Collection Account Agreement, the Unfunded Exposure Account
Agreement, the Trustee Fee Letter, the Collateral Custodian Fee Letter, the Fee
Letter, the Pledge Agreement and each document, instrument or agreement related
to any of the foregoing.

 

“Transferee Letter”
has the meaning assigned to that term in Section 11.04(a).

 

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

 

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

 

“Trustee Expenses”
means the expenses set forth in the Trustee Fee Letter and any other accrued
and unpaid fees, expenses (including reasonable attorneys’ fees, costs and
expenses) and indemnity amounts payable by the Borrower or the Servicer to the
Trustee under the Transaction Documents.

 

“Trustee Fee Letter”
means the Trustee Fee Letter, dated as of the date hereof, between the Trustee,
the Borrower, the Servicer and the Agent, as such letter may be amended,
modified, supplemented, restated or replaced from time to time.

 

“Trustee Fees” means
the fees set forth in the Trustee Fee Letter, as such fee letter may be
amended, restated, supplemented and/or otherwise modified from time to time.

 

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

 

“U.S. Bank” has the meaning
assigned to that term in the preamble hereto.

 

33

 

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

 

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

 

“Unfunded Exposure
Account” means a special trust account (account number 133257-700 at the
Bank) in the name of the Borrower and under the sole dominion and control of
the Trustee for the benefit of the Secured Parties; provided, that the funds deposited therein (including any
interest and earnings thereon) from time to time shall constitute the property
and assets of the Borrower and the Borrower shall be solely liable for any
taxes payable with respect to the Unfunded Exposure Account.

 

“Unfunded Exposure Account Agreement”
means that certain Unfunded Exposure Account Agreement, dated the date of this
Agreement, among the Borrower, the Servicer, the Bank, the Agent, and the
Trustee, which agreement relates to the Unfunded Exposure Account, as such
agreement may from time to time be amended, supplemented or otherwise modified
in accordance with the terms thereof.

 

“Unfunded Exposure Amount”
means, at any time, the amount, if any, by which (i) the aggregate
Exposure Amount exceeds (ii) the aggregate amount on deposit in the
Unfunded Exposure Account.

 

“Unfunded Exposure Equity
Amount” means, on any date of determination, an amount equal to (a) the
Exposure Amount multiplied by (b) the difference of (i) 100% minus
(ii) the Applicable Percentage.

 

“Unfunded Exposure Equity
Shortfall” means, on any date of determination, an amount equal to the
excess, if any, of the Unfunded Exposure Equity Amount over the amount on
deposit in the Unfunded Exposure Account.

 

“United States” means the
United States of America.

 

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

 

“Unrestricted Cash” the
meaning of “Unrestricted Cash” or any comparable definition in the Loan
Agreements for each Loan Asset, and in any case that “Unrestricted Cash” or
such comparable definition is not defined in such Loan Agreement, all cash
available for use for general corporate purposes and not held in any reserve
account or legally or contractually restricted for any particular purposes or
subject to any lien (other than blanket liens permitted under or granted in
accordance with such Loan Agreement).

 

“Value Adjustment Event”
means, with respect to any Loan Asset, the occurrence of any one or more of the
following events after the related Cut-Off Date:

 

34

 

(i)            (x) The Interest
Coverage Ratio for any Relevant Test Period with respect to such Loan Asset is
less than 90% of the Interest Coverage Ratio with respect to such Loan Asset as
calculated on the applicable Cut-Off Date, or (y) the Net Leverage Ratio
for any Relevant Test Period of the related Obligor with respect to such Loan
Asset is more than 0.50x higher than such Net Leverage Ratio as calculated on
the applicable Cut-Off Date;

 

(ii)           an Obligor payment default
under any Loan Asset (after giving effect to any applicable grace or cure
periods, but in any case not to exceed five Business Days, in accordance with
the Loan Agreement);

 

(iii)          any other Obligor default
under any Loan Asset (after giving effect to any applicable grace or cure
periods in accordance with the Loan Agreement);

 

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

 

(v)           the occurrence of a Material
Modification (in accordance with clauses (b)-(c) or clauses
(e)-(g) of the definition thereof) with respect to such Loan
Asset; or

 

(vi)          the occurrence of a Material
Modification (in accordance with clauses (a) or (d) of
the definition thereof) with respect to such Loan Asset.

 

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

 

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

 

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

 

“Warranty Loan Asset”
means any Loan Asset that fails to satisfy any criteria of the definition of
Eligible Loan Asset as of the Cut-Off Date for such Loan Asset or a Loan Asset
with respect to which a Warranty Event has occurred; provided that, any Loan Asset approved by the Agent
in accordance with Section 11 of Schedule III on the applicable
Cut-Off Date shall not be a Warranty Loan Asset due to the failure of such Loan
Asset to satisfy the requirements of Section 11 of Schedule III on
any date thereafter.

 

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

 

“Yield” means with respect
to any Remittance Period, the sum for each day in such Remittance Period
determined in accordance with the following formula:

 

YR x L

D

 

35

 

	
  where:

  	
   

  	
  YR

  	
   

  	
  =

  	
   

  	
  the
  Yield Rate applicable on such day;

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  L

  	
   

  	
  =

  	
   

  	
  the
  Advances Outstanding on such day; and

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  D

  	
   

  	
  =

  	
   

  	
  360
  or, to the extent the Yield Rate is the Base Rate, 365 or 366 days, as
  applicable;

  

 

 

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

 

“Yield Rate” means, as of
any date of determination, an interest rate per annum equal to LIBOR
for such date plus the Applicable Spread; provided that (i) if the Note Purchaser shall have
notified the Agent that a Eurodollar Disruption Event has occurred, the Yield
Rate shall be equal to the Base Rate plus the Applicable Spread until
the Note Purchaser shall have notified the Agent that such Eurodollar
Disruption Event has ceased, at which time the Yield Rate shall again be equal
to LIBOR for such date plus the Applicable Spread and (ii) if any
Event of Default has occurred, the Yield Rate shall be increased to the Default
Funding Rate, effective as of the date of the occurrence of such Event of
Default, and shall remain at the Default Funding Rate following the occurrence
of such Event of Default.

 

SECTION 1.02                       Other Terms. All
accounting terms used but not specifically defined herein shall be construed in
accordance with GAAP. All terms used in Article 9 of the UCC in the State
of New York, and used but not specifically defined herein, are used herein as
defined in such Article 9.

 

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

 

ARTICLE II.

THE FACILITY

 

SECTION 2.01                       Variable
Funding Note and Advances.

 

(a)           Variable
Funding Note. The Borrower has heretofore delivered or shall, on
the date hereof (and on the terms and subject to the conditions hereinafter set
forth), deliver, to the Note Purchaser, at the address set forth on the
signature pages of this Agreement, a duly executed variable funding note
(the “Variable Funding Note”), in substantially the form of Exhibit I,
in an aggregate face amount equal to $200,000,000, and otherwise duly
completed. Interest shall accrue on the Variable Funding Note, and the Variable
Funding Note shall be payable, as described herein.

 

36

 

(b)            Advances. On the terms
and conditions hereinafter set forth, the Note Purchaser shall make Advances
under the Variable Funding Note to the Borrower secured by Eligible Loan Assets
from time to time during the period from the Closing Date until the Facility
Maturity Date. Under no circumstances shall the Note Purchaser make any Advance
if after giving effect to such Advance and the addition to the Collateral
Portfolio of the Eligible Loan Assets being acquired by the Borrower using the
proceeds of such Advance, (i) an Event of Default has occurred or would
result therefrom or an Unmatured Event of Default exists or would result
therefrom or (ii) the aggregate Advances Outstanding would exceed the
Borrowing Base.

 

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

 

SECTION 2.02                       Procedure for Advances.

 

(a)            Until the occurrence of the
Facility Maturity Date, the Note Purchaser will make Advances on any Business
Day at the request of the Borrower, subject to and in accordance with the terms
and conditions of Sections 2.01 and 2.02 and subject to the
provisions of Article III hereof.

 

(b)            Each Advance shall be made
on at least one Business Day’s irrevocable written notice from the Borrower to
the Agent, with a copy to the Trustee and the Collateral Custodian, in the form
of a Notice of Borrowing; provided
that such Notice of Borrowing shall be deemed to have been received by the
Agent on a Business Day if delivered no later than 5:00 p.m. (New York
City time) on such Business Day and if not delivered by such time, shall be
deemed to have been received on the following Business Day. The Borrower or Servicer
shall post all Loan Agreements and other loan documents and information with
respect to each proposed Eligible Loan Asset, if any, to an IntraLinks (or
other replacement) website to which the Agent has access. Each Notice of
Borrowing shall include a duly completed Borrowing Base Certificate (updated to
the date such Advance is requested and giving pro
forma effect to the Advance requested and the use of the proceeds
thereof), and shall specify:

 

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

 

(ii)           the proposed date of such
Advance;

 

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

 

37

 

(iv)          the amount of cash that will
be funded into the Unfunded Exposure Account in connection with the Advance, if
applicable.

 

On the date of each Advance,
the Note Purchaser shall, upon satisfaction of the applicable conditions set
forth in Article III, make available to the Borrower on the
applicable Advance Date in same day funds, the amount of such Advance, by
payment into the account which the Borrower has designated in writing; provided that, with respect to an Advance
funded pursuant to Section 2.02(f), the Note Purchaser shall remit
the Advance equal to the Exposure Amount Shortfall in same day funds to the
Unfunded Exposure Account.

 

(c)            The Advances shall bear
interest at the Yield Rate.

 

(d)            Subject to Section 2.18
and the other terms, conditions, provisions and limitations set forth herein,
the Borrower may borrow, repay or prepay and reborrow Advances without any
penalty, on and after the Closing Date and prior to the Facility Maturity Date.

 

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

 

(f)             Notwithstanding anything to
the contrary herein (including, without limitation, the occurrence of an Event
of Default or the existence of an Unmatured Event of Default or a Borrowing
Base Deficiency), if, upon the occurrence of an Event of Default, the amount on
deposit in the Unfunded Exposure Account is less than the aggregate Exposure
Amount, the Borrower shall request an Advance in the amount of such shortfall
(the “Exposure Amount Shortfall”). 
Following receipt of a Notice of Borrowing (which shall specify the
account details of the Unfunded Exposure Account where the funds will be made
available), the Note Purchaser shall fund such Exposure Amount Shortfall in
accordance with Section 2.02(b), notwithstanding anything to the
contrary herein (including, without limitation, the Borrower’s failure to
satisfy any of the conditions precedent set forth in Section 3.02).

 

SECTION 2.03                       [Reserved]

 

SECTION 2.04                       Remittance
Procedures. The Servicer, as agent for the Agent and the Note
Purchaser, shall instruct the Trustee and, if the Servicer fails to do so, the
Agent may instruct the Trustee, to apply funds on deposit in the Controlled
Accounts as described in this Section 2.04.

 

(a)            Payment Date Transfers
Absent an Event of Default. So long as no Event of
Default has occurred and, in any case, prior to the declaration, or automatic
occurrence, of the Facility Maturity Date, the Servicer shall, and if the
Servicer fails to do so the Agent may, on each Payment Date, direct the Trustee
to transfer collected funds held by the Bank in the Collection Account, in
accordance with the Servicing Report, to the following Persons in the following
amounts and priority:

 

38

 

(i)            FIRST, pari
passu to (a) the Trustee, in payment in full of all
accrued Trustee Fees and all Trustee Expenses; provided
that amounts payable to the Trustee for Trustee Expenses pursuant to this
clause (a) shall not exceed $25,000 for any Payment Date, and (b) the
Collateral Custodian, in payment in full of all accrued Collateral Custodian
Fees and SECOND to the Servicer, in payment in full of all accrued Servicing
Fees;

 

(ii)           to the Agent, for the
benefit of the Note Purchaser, all Yield and the Non-Usage Fee that is accrued
and unpaid as of the last day of the related Remittance Period;

 

(iii)          to the Agent, for the
benefit of the Note Purchaser, the Agent or the Collateral Custodian as
applicable, all accrued and unpaid fees, expenses (including reasonable
attorneys’ fees, costs and expenses) and indemnity amounts payable by the
Borrower to the Agent, the Note Purchaser or the Collateral Custodian under the
Transaction Documents;

 

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

 

(v)           to pay the Advances
Outstanding, together with any applicable Make-Whole Premium, in connection
with any complete refinancing or termination of this Agreement in accordance
with Section 2.18(b);

 

(vi)          to pay any other amounts due
(other than with respect to the repayment of Advances) under this Agreement and
the other Transaction Documents (including any indemnity amounts due from the
Borrower hereunder and thereunder);

 

(vii)         to Wells Fargo Securities,
LLC (f/k/a Wachovia Capital Markets, LLC) (as “Administrative Agent” under the
Term-Out Sale and Servicing Agreement), for the benefit of the “Secured Parties”
(as such term is defined in the Term-Out Sale and Servicing Agreement) on
account of any due and payable “Aggregate Unpaids” (as such term is defined in
the Term-Out Sale and Servicing Agreement), to the extent a claim has been made
therefor under the Borrower Guaranty;

 

(viii)        to the Servicer, in respect
of all reasonable expenses (except allocated overhead) incurred in connection
with the performance of its duties hereunder; and

 

(ix)           to the Borrower, any
remaining amounts.

 

(b)            Payment Date Transfers Upon
the Occurrence of an Event of Default. If an Event of Default has
occurred or, in any case, after the declaration, or automatic occurrence, of
the Facility Maturity Date, the Servicer shall, and if the Servicer fails to do
so the Agent may, on each Payment Date, direct the Trustee to transfer
collected funds held by the Bank in the Collection Account, in accordance with
the Servicing Report, to the following Persons in the following amounts and
priority:

 

39

 

(i)            FIRST, pari
passu to (a) the Trustee, in payment in full of all
accrued Trustee Fees and all Trustee Expenses; provided
that amounts payable to the Trustee for Trustee Expenses pursuant to this
clause (a) shall not exceed $40,000 for any Payment Date, and (b) the
Collateral Custodian, in payment in full of all accrued Collateral Custodian
Fees and SECOND to the Servicer, in payment in full of all accrued Servicing
Fees;

 

(ii)           to the Agent, for the
benefit of the Note Purchaser, all accrued and unpaid Yield and the Non-Usage
Fee as of the last day of the related Remittance Period;

 

(iii)          to the Unfunded Exposure
Account in an amount necessary to cause the amount on deposit in the Unfunded
Exposure Account to equal the Exposure Amount;

 

(iv)          to the Agent, for the
benefit of the Note Purchaser, the Agent or the Collateral Custodian, as
applicable, all accrued and unpaid fees, expenses (including reasonable
attorneys’ fees, costs and expenses) and indemnity amounts payable by the
Borrower to the Agent, the Note Purchaser or the Collateral Custodian under the
Transaction Documents;

 

(v)           to pay the Advances, until
paid in full;

 

(vi)          to pay any other amounts due
under this Agreement and the other Transaction Documents (including any
indemnity amounts due from the Borrower hereunder and thereunder);

 

(vii)         to Wells Fargo Securities,
LLC (f/k/a Wachovia Capital Markets, LLC) (as “Administrative Agent” under the
Term-Out Sale and Servicing Agreement), for the benefit of the “Secured Parties”
(as such term is defined in the Term-Out Sale and Servicing Agreement) on
account of any due and payable “Aggregate Unpaids” (as such term is defined in
the Term-Out Sale and Servicing Agreement), to the extent a claim has been made
therefor under the Borrower Guaranty;

 

(viii)        to the Servicer, in respect
of all reasonable expenses (except allocated overhead) incurred in connection
with the performance of its duties hereunder; and

 

(ix)           to the Borrower, any
remaining amounts.

 

(c)            Unfunded Exposure Account. Funds on
deposit in the Unfunded Exposure Account as of any date of determination may be
withdrawn to fund draw requests of the relevant Obligors under any Revolving
Loan Asset or Delayed Draw Loan Asset; provided
that, until an Event of Default has occurred, the amount withdrawn to fund such
draw request shall not create any Borrowing Base Deficiency. Any such draw
request made by an Obligor, along with wiring instructions for the applicable
Obligor, shall be forwarded by the Borrower or the Servicer to the Trustee
(with a copy to the Agent) in the form of a Disbursement Request, and the
Trustee shall instruct the Bank to fund such draw request in accordance with
the Loan Agreement pertaining to such Revolving Loan Asset or Delayed Draw Loan
Asset. Until an Event of Default has 

 

40

 

occurred,
any amounts on deposit in the Unfunded Exposure Account which exceed the
Unfunded Exposure Equity Amount as of any date of determination shall be
deposited into the Principal Collection Account as Principal Collections. On
and after the occurrence of an Event of Default, any amounts on deposit in the
Unfunded Exposure Account which exceed the Exposure Amount as of any date of
determination shall be deposited into the Principal Collection Account as
Principal Collections.

 

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

 

SECTION 2.05                       Instructions to
the Trustee and the Bank. All instructions and directions given to
the Trustee or the Bank by the Servicer, the Borrower or the Agent pursuant to Section 2.04
shall be in writing (including instructions and directions transmitted to the
Trustee or the Bank by telecopy or e-mail), and such written instructions and
directions shall be delivered with a written certification that such
instructions and directions are in compliance with the provisions of Section 2.04.
The Servicer and the Borrower shall promptly transmit to the Agent by telecopy
or e-mail a copy of all instructions and directions given to the Trustee or the
Bank by such party pursuant to Section 2.04. The Agent shall
promptly transmit to the Servicer and the Borrower by telecopy or e-mail a copy
of all instructions and directions given to the Trustee or the Bank by the
Agent, pursuant to Section 2.04. In the event the Trustee or the
Bank receives instructions from the Servicer or the Borrower which conflict
with any instructions received by the Agent, the Trustee or the Bank, as
applicable, shall rely on and follow the instructions given by the Agent; provided that the Trustee or Bank, as
applicable, shall promptly provide notification to the Servicer or the Borrower
of such conflicting instructions; provided,
further, that any such failure on
the part of the Trustee to deliver such notice shall not render such action by
the Trustee invalid.

 

SECTION 2.06                       Borrowing Base
Deficiency Payments.

 

(a)           In addition to
any other obligation of the Borrower to cure any Borrowing Base Deficiency
pursuant to the terms of this Agreement, if, on any day prior to the Collection
Date, any Borrowing Base Deficiency exists, then the Borrower shall, within
five Business Days from the date of such Borrowing Base Deficiency, eliminate
such Borrowing Base Deficiency in its entirety by effecting one or more of the
following actions in order to eliminate such Borrowing Base Deficiency as of
such date of determination: (i) deposit cash in United States dollars into
the Principal Collection Account, (ii) repay Advances (together with any
Breakage Fees and all accrued and unpaid costs and expenses of the Agent and
Note Purchaser, in each case in respect of the amount so prepaid), and/or (iii) subject
to the approval of the Agent, in its sole discretion (and the Agent shall use
reasonable efforts to give such approval in a timely fashion), Pledge
additional Eligible Loan Assets.

 

(b)           No later than
2:00 p.m. on the Business Day prior to the proposed repayment of Advances
or Pledge of additional Eligible Loan Assets pursuant to Section 2.06(a),

 

41

 

the
Borrower (or the Servicer on its behalf) shall deliver (i) to the Agent
(with a copy to the Trustee and the Collateral Custodian), notice of such
repayment or Pledge and a duly completed Borrowing Base Certificate, updated to
the date such repayment or Pledge is being made and giving pro forma effect to
such repayment or Pledge, and (ii) to the Agent, if applicable, a
description of any Eligible Loan Asset and each Obligor of such Eligible Loan
Asset to be Pledged and added to the updated Loan Asset Schedule.  Any notice pertaining to any repayment or any
Pledge pursuant to this Section 2.06 shall be irrevocable.

 

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

 

(a)            Substitutions. The Borrower
may, with the consent of the Agent in its sole discretion, replace any Loan
Asset as a Loan Asset so long as (i) no event has occurred, or would
result from such substitution, which constitutes an Event of Default and no
event has occurred and is continuing, or would result from such substitution,
which constitutes an Unmatured Event of Default or a Borrowing Base Deficiency;
provided that the Borrower may
effect a substitution as necessary to facilitate a cure of a Borrowing Base
Deficiency (and any Unmatured Event of Default arising therefrom) so long as
immediately after giving effect to such substitution and any other sale or
transfer substantially contemporaneous therewith, such Borrowing Base
Deficiency shall be cured or closer to being cured and (ii) simultaneously
therewith, the Borrower Pledges (in accordance with all of the terms and
provisions contained herein) a Substitute Eligible Loan Asset.

 

(b)            Discretionary Sales. The Borrower
shall be permitted to sell Loan Assets to Persons other than the Transferor or
its Affiliates from time to time; provided
that (i) the proceeds of such sale shall be deposited into the Collection
Account to be disbursed in accordance with Section 2.04 hereof, (ii) no
event has occurred, or would result from such sale, which constitutes an Event
of Default and no event has occurred and is continuing, or would result from
such sale, which constitutes an Unmatured Event of Default or a Borrowing Base
Deficiency; provided that the
Borrower may sell Loan Assets as necessary to facilitate a cure of a Borrowing
Base Deficiency (and any Unmatured Event of Default arising therefrom) so long
as the Agent shall approve of such sale and, immediately after giving effect to
such sale and any other substitution or transfer substantially contemporaneous
therewith, the Borrowing Base Deficiency shall be cured or closer to being
cured and (iii) the prior written consent of the Agent shall be required
if such Loan Asset is sold for an amount which is less than the Adjusted
Borrowing Value.

 

(c)            Optional Sales. 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 by the
Borrower of all or a portion of the Loan Assets, 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 Agent (with a copy to the Trustee and the Collateral Custodian) at
least 45 days’ prior written notice of its intent to effect an Optional Sale in
connection with a Permitted Securitization or a Permitted Refinancing, and the
Agent shall have delivered to the Borrower its prior written consent (in its
sole discretion) to such Optional Sale, unless such 45 days’ notice requirement
is 

 

42

 

waived or reduced by the
Agent; provided that no such
consent will be required for any Optional Sale of any Loan Asset at a price
equal to or greater than the Adjusted Borrowing Value of such Loan Asset as of
the date of the Optional Sale to the extent that the aggregate Outstanding
Balance of all Loan Assets sold pursuant to this proviso (taking into account
the proposed sale) during the 12-month period immediately preceding and
including the proposed date of such sale does not exceed 15% of the highest
aggregate Outstanding Balance of any month during such 12-month period;

 

(ii)           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 Agent (with a copy to the Trustee
and the Collateral Custodian) a certificate and evidence to the reasonable
satisfaction of the 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 Loan Assets to repay
all or a portion of the Obligations;

 

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

 

(iv)          on the related Optional Sale
Date, the Borrower shall have deposited into the Collection Account, in
immediately available funds, the proceeds of such Optional Sale, which shall at
least equal the aggregate Adjusted Borrowing Value of the Loan Assets being
sold.

 

(d)            Lien Release Dividend.  Notwithstanding any provision contained in
this Agreement to the contrary, provided no Event of Default has occurred and
no Unmatured Event of Default exists, on a Lien Release Dividend Date, the Borrower
may dividend to the Equityholder and the Equityholder may dividend to the
Transferor a portion of those Loan Assets that were sold by the Transferor to
the Equityholder and by the Equityholder to the Borrower, or portions thereof
(each, a “Lien Release Dividend”), subject to the following terms and
conditions, as certified by the Borrower and the Transferor to the Agent (with
a copy to the Trustee and the Collateral Custodian):

 

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

 

43

 

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

 

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

 

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

 

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

 

(vi)          A portion of a Loan Asset
may be transferred pursuant to a Lien Release Dividend provided that (A) such transfer does
not have an adverse effect on the portion of such Loan Asset remaining as a
part of the Collateral Portfolio, any other aspect of the Collateral Portfolio,
the Note Purchaser, the Agent or any other Secured Party and (B) a new
promissory note (other than with respect to a Noteless Loan Asset) for the
portion of the Loan Asset remaining as a part of the Collateral Portfolio has
been executed, and the original thereof has been endorsed to the Trustee and
delivered to the Collateral Custodian;

 

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

 

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

 

44

 

 

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

 

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

 

(e)            Repurchase or Substitution
of Warranty Loan Assets.  If
on any day a Loan Asset is (or becomes) a Warranty Loan Asset, no later than 10
Business Days following the earlier of knowledge by the Borrower of such Loan
Asset becoming a Warranty Loan Asset or receipt by the Borrower from the 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 2.04) in
immediately available funds in an amount equal to the Advance Date Assigned
Value multiplied by the principal balance of such Loan Asset (exclusive of
Accreted Interest), any expenses or fees with respect to such Loan Asset and
costs and damages incurred by the Agent or by any Note Purchaser in connection
with any violation by such Loan Asset of any predatory or abusive lending law
which is an Applicable Law (a notification regarding the amount of such
expenses or fees to be provided by the Agent to the Borrower); provided that the Agent shall have the
right to determine whether the amount so deposited is sufficient to satisfy the
foregoing requirements; or

 

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

 

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

 

45

 

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

 

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

 

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

 

(iii)          no selection procedures
adverse to the interests of the Agent or the Note Purchaser were utilized by
the Borrower in the selection of the Loan Assets to be sold, repurchased or
substituted;

 

(iv)          the Borrower shall give one
Business Day’s notice of such sale (other than in the case of an Optional
Sale), substitution or repurchase;

 

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

 

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

 

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

 

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

 

(ix)           other than in the case of Section 2.07(e) and
solely in the event that Ares or an Affiliate is no longer the Servicer and the
Facility Maturity Date has not yet occurred (or, in the case of the declaration
of the Facility Maturity Date that arises solely pursuant to Section 7.01(d) due
solely to the occurrence of an event described in clauses (g) or (h) of
the definition of “Servicer Termination Event” or clause (o) of the
definition of “Servicer Termination Event” (to the extent arising solely due to
the occurrence of an event described in clauses (g) or (h) of
the definition thereof), until on or after the earlier of (x) the date
that is twelve months after the occurrence of such Facility Maturity Date or (y) the
occurrence of a Facility Maturity Date for any other reason other than an event
described in clauses (g) or (h) of the definition of “Servicer
Termination Event” or clause (o) of the definition of “Servicer
Termination Event” (to the extent arising solely due to 

 

46

 

the occurrence of an event
described in clauses (g) or (h) of the definition
thereof), the Borrower shall have consented to such sale or substitution.

 

(g)            Affiliate Transactions.
Notwithstanding anything to the contrary set forth herein or in any other Transaction
Document, neither the Equityholder nor the Transferor shall reacquire from the
Borrower and the Borrower shall not transfer to the Equityholder, the
Transferor or to Affiliates of the Transferor or the Equityholder, and none of
the Transferor, the Equityholder nor any Affiliates thereof will have a right
or ability to purchase, the Loan Assets without the prior written consent of
the Agent, except in the case of repurchases of Loan Assets by the Equityholder
pursuant to Section 6.1 of the Second Tier Purchase and Sale
Agreement and by the Transferor pursuant to Section 6.1 of the
First Tier Purchase and Sale Agreement. 
For the avoidance of doubt, nothing in this clause (g) shall
prohibit the Borrower or the Equityholder, respectively, from transferring or
distributing its Loan Assets to the holders of its equity or Affiliates, as
applicable, in accordance with Section 2.07(a), 2.07(c), 2.07(d) or
2.07(e) herein.

 

(h)            Limitations on Sales,
Substitutions and Repurchases.

 

(i)            The Outstanding Balance of
all Loan Assets subject to clauses (ii), (iv) or (vi) of
the definition of “Value Adjustment Event” which were included in all Lien
Release Dividends or substituted by the Borrower pursuant to Section 2.07(a),
in each case during the 12-month period immediately preceding the proposed Lien
Release Dividend Date or date of substitution, as applicable, does not exceed
10% of the highest aggregate Outstanding Balance of any month during such
12-month period (or such lesser number of months as shall have elapsed as of
such date).

 

(ii)           The Outstanding Balance of
all Loan Assets (other than Warranty Loan Assets) sold pursuant to Section 2.07(b),
sold without the consent of the Agent in accordance with Section 2.07(c) (in
each case, other than Loan Assets subject to clauses (ii), (iv) or
(vi) of the definition of “Value Adjustment Event”), substituted
pursuant to Section 2.07(a)  or released pursuant to Section 2.07(d) during
the 12-month period immediately preceding the proposed date of sale,
substitution or Lien Release Dividend (or such lesser number of months as shall
have elapsed as of such date) does not exceed 20% of the highest aggregate
Outstanding Balance of any month during such 12-month period (or such lesser
number of months as shall have elapsed as of such date).

 

(iii)          Rule 3a-7.  Notwithstanding anything in this Section 2.07,
the Borrower shall not, and the Servicer shall not on the Borrower’s behalf,
purchase, sell or substitute any Loan Asset with the primary purpose of
recognizing gain or decreasing losses on such Loan Asset or in any manner that
would cause the Borrower not to be in compliance with the requirements of Rule 3a-7
under the 1940 Act.

 

SECTION 2.08                       Payments and
Computations, Etc.

 

(a)            All amounts to be paid or
deposited by the Borrower or the Servicer hereunder shall be paid or deposited
in accordance with the terms hereof no later than 5:00 p.m. (New York City
time) on the day when due in lawful money of the United States in immediately
available funds to the Collection Account or such other account as is
designated by the Agent. 

 

47

 

Any
Obligation hereunder shall not be reduced by any distribution of any portion of
Available Collections if at any time such distribution is rescinded or required
to be returned by the Note Purchaser to the Borrower or any other Person for
any reason. All computations of interest and all computations of Yield and
other fees hereunder shall be made on the basis of a year of 360 days for the
actual number of days (including the first but excluding the last day) elapsed,
other than calculations with respect to the Base Rate, which shall be based on
a year consisting of 365 or 366 days, as applicable.

 

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

 

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

 

(d)           The Agent may,
in its reasonable sole discretion, based on then prevailing market conditions,
adjust the definition of Applicable Spread at any time after the date which is
one year following the Closing Date provided
that: (i) any adjustment to the Applicable Spread shall remain effective
for 364 days from the date of such adjustment; (ii) the Agent shall
provide the Borrower at least 30 days’ prior written notice of any adjustment; (iii) no
single adjustment shall be greater than 0.50%; and (iv) the Applicable
Spread can not be adjusted to a percentage which is greater than 5.0%.

 

SECTION 2.09                       Fees. The Borrower
shall pay the Note Purchaser (either directly or through the Agent) certain
fees (the “Fees”)
in the amounts and on the dates set forth in a fee letter (the “Fee Letter”),
dated the Closing Date, among the Borrower, Ares, the Agent, and the Note
Purchaser.

 

SECTION 2.10                       Increased
Costs; Capital Adequacy.

 

(a)           If, due to
either (i) the introduction of or any change following the date hereof
(including, without limitation, any change by way of imposition or increase of
reserve requirements) in or in the interpretation, administration or
application following the date hereof of any Applicable Law (including, without
limitation, any law or regulation resulting in any 

 

48

 

interest
payments paid to the Note Purchaser under this Agreement being subject to any
tax, except for taxes on the overall net income of the Note Purchaser), in each
case whether foreign or domestic or (ii) the compliance with any guideline
or request following the date hereof from any central bank or other
Governmental Authority (whether or not having the force of law), there shall be
any increase in the cost to the Agent, the Note Purchaser, or any Affiliate,
successor or assign thereof (each of which shall be an “Affected Party”)
of agreeing to make or making, funding or maintaining any Advance (or any
reduction of the amount of any payment (whether of principal, interest, fee,
compensation or otherwise) to any Affected Party hereunder), as the case may
be, the Borrower shall, from time to time, after written demand by the Agent
(which demand shall be accompanied by a statement setting forth in reasonable
detail the basis for such demand), on behalf of such Affected Party, pay to the
Agent, on behalf of such Affected Party, additional amounts sufficient to
compensate such Affected Party for such increased costs or reduced payments
within 10 days after such demand; provided,
that the amounts payable under this Section 2.10 shall be without
duplication of amounts payable under Section 2.11 and shall not
include any Excluded Taxes.

 

(b)           If either (i) the
introduction of or any change following the date hereof in or in the
interpretation, administration or application following the date hereof of any
law, guideline, rule or regulation, directive or request or (ii) the
compliance by any Affected Party with any law, guideline, rule, regulation,
directive or request following the date hereof, from any central bank, any
Governmental Authority or agency, including, without limitation, compliance by
an Affected Party with any request or directive regarding capital adequacy, has
or would have the effect of reducing the rate of return on the capital of any
Affected Party, as a consequence of its obligations hereunder or any related
document or arising in connection herewith or therewith to a level below that
which any such Affected Party could have achieved but for such introduction,
change or compliance (taking into consideration the policies of such Affected Party
with respect to capital adequacy), by an amount deemed by such Affected Party
to be material, then, from time to time, after demand by such Affected Party
(which demand shall be accompanied by a statement setting forth in reasonable
detail the basis for such demand), the Borrower shall pay the Agent on behalf
of such Affected Party such additional amounts as will compensate such Affected
Party for such reduction.

 

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

 

SECTION 2.11                       Taxes.

 

(a)           All payments
made by an Obligor in respect of a Loan Asset 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 

 

49

 

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 (i) taxes imposed on or measured by 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) or (ii) in the case of any Indemnified
Party that is an assignee and is not created or organized under the laws of the
United States or a political subdivision thereof, any United States withholding
tax imposed on any assignee Indemnified Party in excess of the United States
withholding tax that would have been imposed absent the assignment to such
assignee Indemnified Party (all such excluded Taxes in clauses (i) and (ii) of
this Section 2.11(a), “Excluded Taxes”).

 

(b)           The Borrower
will indemnify, from funds available to it pursuant to Section 2.04(a)(ix) or
2.04(b)(ix) (and to the extent the funds available for
indemnification provided by the Borrower is insufficient the Servicer, on
behalf of the Borrower, will indemnify) each Indemnified Party for the full
amount of 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 Agent and the Note Purchaser at the applicable address set forth
on this Agreement, appropriate evidence of payment thereof.

 

(d)           If any assignee
of the Note Purchaser is not created or organized under the laws of the United
States or a political subdivision thereof, such Note Purchaser shall deliver to
the Borrower, with a copy to the Agent, (i) within 15 days after becoming
an assignee hereunder, 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 and (ii) upon the obsolescence of or after
the occurrence of any event requiring a change in, any form or certificate
previously delivered pursuant to this Section 2.11(d), copies (in
such numbers as may from time to time be prescribed by Applicable Law or
regulations) of such additional, amended or successor forms, certificates or
statements as may be required under Applicable Law.

 

(e)           If, in
connection with an agreement or other document providing liquidity support,
credit enhancement or other similar support to the Note Purchaser in connection
with this Agreement or the funding or maintenance of Advances hereunder, the
Note Purchaser is required to compensate a bank or other financial institution
in respect of Taxes under circumstances similar to those described in this Section 2.11,
then, within 10 days after demand by each applicable Note Purchaser, the
Servicer shall pay (or to the extent the Servicer does not make such payment
the Borrower shall pay) to the Note Purchaser such additional amount or amounts
as may be necessary to reimburse the Note Purchaser for any amounts paid by
them.

 

50

 

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 2.11
shall survive the termination of this Agreement.

 

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

 

SECTION 2.13                       Grant of a
Security Interest. To secure the prompt, complete and indefeasible
payment in full when due, whether by lapse of time, acceleration or otherwise,
of the Obligations and the performance by the Borrower of all of the covenants
and obligations to be performed by it pursuant to this Agreement and each other
Transaction Document, whether now or hereafter existing, due or to become due,
direct or indirect, or absolute or contingent, the Borrower hereby (a) collaterally
assigns and pledges to the Trustee, on behalf of the Secured Parties, and (b) grants
a security interest to the Trustee, on behalf of the Secured Parties, in all of
the Borrower’s right, title and interest in, to and under (but none of the
obligations under) all of the Collateral Portfolio, whether now existing or
hereafter arising or acquired by the Borrower, and wherever the same may be
located. For the avoidance of doubt, the Collateral Portfolio shall not include
any Excluded Amounts, and the Borrower does not hereby assign, pledge or grant
a security interest in any such amounts. Anything herein to the contrary
notwithstanding, (a) the Borrower shall remain liable under the Collateral
Portfolio to the extent set forth therein to perform all of its duties and
obligations thereunder to the same extent as if this Agreement had not been
executed, (b) the exercise by the Trustee, for the benefit of the Secured
Parties, of any of its rights in the Collateral Portfolio shall not release the
Borrower from any of its duties or obligations under the Collateral Portfolio,
and (c) none of the Agent, the Trustee or the Note Purchaser (nor its
successors and assigns) shall have any obligations or liability under the
Collateral Portfolio by reason of this Agreement, nor shall the Agent, the
Trustee, or the Note Purchaser (nor its successors and assigns) 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 2.14                       Evidence of
Debt. The Agent shall maintain, solely for this purpose as the agent of the
Borrower, at its address referred to in Section 11.02 a copy of
each assignment and acceptance agreement and participation agreement delivered
to and accepted by 

 

51

 

it
and a register for the recordation of the names and addresses and interests of
the Note Purchasers (the “Register”). The entries in the
Register shall be conclusive and binding for all purposes, absent manifest
error, and the Borrower, the Agent and each Note Purchaser shall treat each
person whose name is recorded in the Register as a Note Purchaser under this
Agreement for all purposes of this Agreement. The Register shall be available
for inspection by the Borrower or any Note Purchaser at any reasonable time and
from time to time upon reasonable prior notice.

 

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

 

SECTION 2.16                       Release of Loan
Assets.

 

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

 

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

 

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

 

SECTION 2.18                       Prepayment; Termination.

 

(a)           Except as
expressly permitted or required herein, including, without limitation, any
repayment necessary to cure a Borrowing Base Deficiency, Advances may only be
prepaid in whole or in part at the option of the Borrower at any time by
delivering a Notice of Reduction at least one Business Day prior to such
reduction (which notice shall include a Borrowing Base Certificate) and upon
payment in full of any Breakage Fees and other accrued and unpaid costs and
expenses of Agent and Note Purchaser related to such prepayment; 

 

52

 

provided that no such reduction
shall be given effect unless (i) sufficient funds have been remitted to
pay all such amounts in full, as determined by the Agent, in its sole
discretion and (ii) no event would result from such prepayment which would
constitute an Event of Default or an Unmatured Event of Default. Any notice
relating to any repayment pursuant to this Section 2.18(a) shall
be irrevocable.

 

(b)           Notwithstanding
any other provision hereof, the Borrower shall not terminate this Agreement or
any other Transaction Document or reduce the Maximum Facility Amount prior to
the date which is five Business Days prior to the Stated Maturity Date without
the Agent’s prior written consent, which consent may be withheld in the Agent’s
sole discretion; provided, that (i) upon
three Business Days’ prior written notice to the Agent, and only so long as no
Event of Default has occurred and no Unmatured Event of Default exists, the
Borrower may terminate this Agreement upon payment in full of all outstanding
Advances, all accrued and unpaid Yield, any Breakage Fees, all accrued and
unpaid costs and expenses of Agent and Note Purchaser, payment of the
Make-Whole Premium and payment of all other Obligations (without giving effect
to clause (ii) of the definition thereof) and (ii) with the prior
written consent of the Agent, the Borrower may reduce the Maximum Facility
Amount upon payment in full of the Make-Whole Premium and delivery of a Notice
of Reduction at least one Business Day prior to such reduction; provided, further that no Event of Default
or Unmatured Event of Default would result from such reduction in the Maximum
Facility Amount. Any termination of this Agreement shall be subject to Section 11.05.

 

(c)           Notwithstanding
anything to the contrary in Section 2.18(b), no Make-Whole Premium
shall be payable by the Borrower in the event that either (i)(x) the
Obligations (without giving effect to clause (ii) of the definition
thereof) are refinanced by the proceeds of any other financing of the
Transferor or any of its Affiliates by any of the Agent or any of their
respective Affiliates or (y) the Agent or any of their respective
Affiliates enters into another credit facility or other financing with the
Transferor or any of its Affiliates substantially concurrently with the
termination of this Agreement (provided that in either case of clause (x) or
clause (y) above, the aggregate commitments of such financing shall equal
or exceed the Advances Outstanding on such date, and the Agent or their
respective Affiliates hold at least 51% of the aggregate commitments of such
replacement or other financing), (ii) as of any date of determination, the
Agent has not approved greater than 33% of the Eligible Loan Assets submitted
by the Borrower for approval prior to such date, such percentage to be
calculated based on the number of Eligible Loan Assets reviewed; provided, that only Eligible Loan Assets
with respect to which the Borrower has provided the Agent with all of the
information reasonably requested by the Agent to make such approval
determination for such Eligible Loan Asset; provided,
further, that at least 15 Eligible
Loan Assets that meet the criteria of the foregoing proviso must have been
reviewed for this clause (ii) to apply. For the avoidance of doubt, any
reference to “Eligible Loan Asset” in this Section 2.18(c) shall
include Loan Assets which are not “Eligible Loan Assets” solely due to the
failure to satisfy clause 11 of Schedule III to this Agreement or (iii) this
Agreement is terminated within five Business Days prior to the Stated Maturity
Date.

 

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

 

53

 

SECTION 2.19       Extension of Stated Maturity
Date.  The Borrower may, within 60
days but not less than 45 days prior to the Stated Maturity Date, make a
request to extend the date set forth in the definition of “Stated Maturity Date”
for an additional period of one year. The Stated Maturity Date may be extended
by one year by mutual agreement among the Agent, the Note Purchaser, the
Borrower and the Servicer (such extension, the “Initial Extension”).
Following such Initial Extension, the Borrower may, within 60 days but not less
than 45 days prior to the Stated Maturity Date (as revised by the Initial
Extension), make a request to extend the date set forth in the definition of “Stated
Maturity Date” (as revised by the Initial Extension) for an additional period
of one year. The Stated Maturity Date (as revised by the Initial Extension) may
be extended by one year upon the mutual agreement among the Agent, the Note
Purchaser, the Borrower and the Servicer (such extension, the “Second
Extension”). The effectiveness of either the Initial Extension or the
Second Extension shall be conditioned upon the payment of the Additional
Structuring Fee (as defined in the Fee Letter) to the Agent for the Agent’s own
account, in immediately available funds. The Borrower confirms that the Note
Purchaser and the Agent, in their sole and absolute discretion, without regard
to the value or performance of the Loan Assets or any other factor, may elect
not to extend the Stated Maturity Date.

 

SECTION 2.20                       Collections and Allocations.

 

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

 

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

 

(c)           With the prior written
consent of the Agent (a copy of which will be provided by the Servicer to the
Trustee), 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 Agent a report setting forth the
calculation of such Excluded Amounts in form and substance satisfactory to the
Agent in its sole discretion.

 

(d)           Prior to notice of exclusive
control, the Servicer shall, pursuant to written instruction (which may be in
the form of standing instructions), direct the Trustee to invest, or cause the
investment of, funds on deposit in the Controlled Accounts in Permitted
Investments, from the date of this Agreement until the Collection Date. Absent
any such written instruction, such funds shall not be invested. A Permitted
Investment acquired with funds deposited in any Controlled Account shall mature
not later than the Business Day immediately preceding any

 

54

 

Payment Date, and shall not
be sold or disposed of prior to its maturity unless the Servicer determines
there is a substantial risk of material deterioration of such Permitted
Investment, in its commercially reasonable discretion. All such Permitted
Investments shall be registered in the name of the Bank or its nominee for the
benefit of the Agent or Trustee, and otherwise comply with assumptions of the
legal opinions of Latham & Watkins LLP dated the Closing Date and
delivered in connection with this Agreement. All income and gain realized from
any such investment, as well as any interest earned on deposits in any
Controlled Account shall be distributed in accordance with the provisions of Article II
hereof. In the event the Borrower or Servicer direct the funds to be invested
in investments which are not Permitted Investments, the Borrower shall deposit
in the Collection Account or the Unfunded Exposure Account, as the case may be
(with respect to investments made hereunder of funds held therein), an amount
equal to the amount of any actual loss incurred, in respect of any such
investment, immediately upon realization of such loss. None of the Bank, the
Trustee, the Agent or the Note Purchaser shall be liable for the amount of any
loss incurred, in respect of any investment, or lack of investment, of funds
held in any Controlled Account.

 

(e)           Until the Collection Date,
the Borrower shall have no rights of direction or withdrawal, with respect to
amounts held in any Controlled Account, except to the extent explicitly set
forth in Section 2.04 or Section 2.21.

 

SECTION 2.21                       Reinvestment of
Principal Collections.

 

On the terms and conditions
hereinafter set forth as certified in writing to the Trustee and Agent, prior
to the Facility Maturity Date, the Servicer may, to the extent of any Principal
Collections on deposit in the Principal Collection Account:

 

(a)           withdraw such funds for the
purpose of reinvesting in additional Eligible Loan Assets to be Pledged
hereunder; provided that the
following conditions are satisfied:

 

(i)            all conditions precedent set
forth in Section 3.04 have been satisfied;

 

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

 

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

 

(iv)          the Servicer provides same
day written notice to the Agent and the Trustee by facsimile or email (to be
received no later than 1:00 p.m. on such day) of the request to withdraw
Principal Collections and the amount of such request;

 

(v)           the notice required in clause
(iv) above shall be accompanied by a Disbursement Request and a
Borrowing Base Certificate, each executed by the Borrower and a Responsible
Officer of the Servicer; and

 

55

 

(vi)          the Trustee provides to the
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 as of the opening of
business on such day in the Principal Collection Account; or

 

(b)           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 2.18.

 

Upon the satisfaction of the
applicable conditions set forth in this Section 2.21 (as certified
by the Borrower to the Trustee and the Agent), the Trustee will release funds
from the Principal Collection Account 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 Collection Account on such day.

 

ARTICLE
III.

CONDITIONS PRECEDENT

 

SECTION 3.01                       Conditions Precedent to
Effectiveness.

 

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

 

(i)            all reasonable up-front
expenses and fees (including legal fees and any fees required under the Fee
Letter) that are invoiced at or prior to the Closing Date shall have been paid
in full;

 

(ii)           in the reasonable judgment
of the Agent, there not having been any change in Applicable Law which
adversely affects the Note Purchaser’s or the Agent’s entering into the
transactions contemplated by the Transaction Documents or any Material Adverse
Effect or material disruption after May 7, 2009 in the financial, banking
or commercial loan or capital markets generally;

 

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

 

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

 

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

 

56

 

(vi)          the Agent and Note Purchaser
have received approval from their internal credit committee and all other
necessary approvals, as required by the Agent, in its sole discretion; and

 

(vii)         no material adverse effect
on the business, assets, financial conditions or performance of the Servicer
and its subsidiaries, including the Borrower, on a consolidated basis, has
occurred.

 

(b)           By its execution and
delivery of this Agreement, each of the Borrower and Servicer hereby certifies
that, and the Agent hereby acknowledges that, each of the conditions precedent
to the effectiveness of this Agreement set forth in this Section 3.01
have been satisfied.

 

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

 

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

 

(i)            the Servicer (on behalf of
the Borrower) shall have delivered to the Agent (with a copy to the Collateral
Custodian and copies of the Notice of Borrowing and Borrowing Base Certificate
to the Trustee only) no later than 5:00 p.m. on the date that is one
Business Day prior to the related Advance Date: (A) a Notice of Borrowing,
(B) a Borrowing Base Certificate, (C) a Loan Asset Schedule and (D) except
with respect to an Advance under Section 2.02(f), Loan Assignments
in the form of Exhibit A to the Purchase and Sale Agreements (including
Schedule I thereto) and containing such additional information as may be
reasonably requested by the Agent;

 

(ii)           except with respect to an
Advance under Section 2.02(f), the Borrower shall have delivered to
the Collateral Custodian (with a copy to the Agent), no later than 2:00 p.m.
one Business Day prior to the related Advance Date, a faxed or e-mailed copy of
the duly executed original promissory notes of the Loan Assets (and, in the
case of any Noteless Loan Asset, a fully executed assignment agreement) and if
any Loan Assets are closed in escrow, a certificate (in the form of Exhibit K)
from the closing attorneys of such Loan Assets certifying the possession of the
Required Loan Documents; provided that,
notwithstanding the foregoing, the Borrower shall cause the Loan Asset
Checklist and the Required Loan Documents to be in the possession of the
Collateral Custodian within five Business Days of any related Advance Date as
to any Loan Assets;

 

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

 

57

 

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

 

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

 

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

 

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

 

(viii)        no liens exist in respect of
taxes which are prior to the lien of the Trustee on the Eligible Loan Assets to
be Pledged on such Advance Date; and

 

(ix)           all terms and conditions of
each Purchase and Sale Agreement required to be satisfied in connection with
the assignment of each Eligible Loan Asset being Pledged hereunder on such
Advance Date (and the Portfolio Assets related thereto), including, without
limitation, the perfection of the Borrower’s interests therein, shall have been
satisfied in full, and all filings (including, without limitation, UCC filings)
required to be made by any Person and all actions required to be taken or
performed by any Person in any jurisdiction to give the Trustee, for the
benefit of the Secured Parties, a first priority perfected security interest
(subject only to Permitted Liens) in such Eligible Loan Assets and the
Portfolio Assets related thereto and the proceeds thereof shall have been made,
taken or performed, and with respect to each Eligible Loan Asset so assigned
pursuant to each Purchase and Sale Agreement, the Transferor and the Equityholder
shall not have been subject to any Change of Control since the Closing Date,
other than a Change of Control previously approved by the Agent in writing.

 

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

 

(c)           No Applicable Law shall
prohibit, and no order, judgment or decree of any federal, state or local court
or governmental body, agency or instrumentality shall prohibit or enjoin, the
making of such Advances by the Note Purchaser or the proposed Pledge of
Eligible Loan Assets in accordance with the provisions hereof.

 

(d)           Except with respect to an
Advance required by Section 2.02(f),  the Facility Maturity Date has not yet
occurred.

 

58

 

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 Agent and the Note Purchaser, which right may
be exercised at any time on the demand of the Note Purchaser, to rescind the
related Advance and direct the Borrower to pay to the Agent for the benefit of
the Note Purchaser an amount equal to the Advances made during any such time
that any of the foregoing conditions precedent were not satisfied.

 

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

 

SECTION 3.04                       Conditions to
Pledges of Loan Assets. Each Pledge of an additional Eligible Loan
Asset pursuant to Section 2.06, a Substitute Eligible Loan Asset
pursuant to Section 2.07(a) or (e), an additional
Eligible Loan Asset pursuant to Section 2.21 or any other Pledge of
a Loan Asset hereunder shall be subject to the further conditions precedent
that (as certified to the Trustee by the Borrower):

 

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

 

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

 

(c)           no liens exist in respect of
taxes which are prior to the lien of the Trustee on the Eligible Loan Assets to
be Pledged on such Cut-Off Date;

 

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

 

59

 

proceeds thereof shall have
been made, taken or performed, and with respect to each Eligible Loan Asset so
assigned pursuant to each Purchase and Sale Agreement;

 

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

 

(f)            no Event of Default has
occurred, or would result from such Pledge, and no Unmatured Event of Default
exists, or would result from such Pledge (other than, with respect to any
Pledge of an Eligible Loan Asset necessary to cure a Borrowing Base Deficiency
in accordance with Section 2.06 or 2.07, an Unmatured Event
of Default arising solely pursuant to such Borrowing Base Deficiency); and

 

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

 

SECTION 3.05       Conditions Precedent to
Initial Advance. The Initial Advance to the Borrower from the Note
Purchaser shall, in addition to the conditions precedent set forth herein with
regard to all Advances, be subject to the further conditions precedent that on
the Advance Date, the Agent shall receive an Opinion of Counsel with respect to
“no conflicts” with respect to each of the Borrower, the Guarantor, the
Equityholder and Ares (substantially in the form of Exhibit S).

 

ARTICLE IV.

REPRESENTATIONS AND WARRANTIES

 

SECTION 4.01                       Representations
and Warranties of the Borrower.  The Borrower hereby represents and warrants,
as of the Closing Date, as of each applicable Cut-Off Date, as of each
applicable Advance Date 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, Good Standing
and Due Qualification.  The
Borrower is a limited liability company duly organized, validly existing and in
good standing under the laws of Delaware (subject to Section 5.02(r))
and has the power and all licenses necessary to own its assets and to transact
the business in which it is engaged and is duly qualified and in good standing
under the laws of each jurisdiction where the transaction of such business or
its ownership of the Loan Assets and the Collateral Portfolio requires such
qualification.

 

(b)           Power and Authority; Due
Authorization; Execution and Delivery.  The Borrower has the power, authority and
legal right to make, deliver and perform this Agreement and each of the
Transaction Documents to which it is a party and all of the transactions 

 

60

 

contemplated hereby and
thereby, and has taken all necessary action to authorize the execution,
delivery and performance of this Agreement and each of the Transaction
Documents to which it is a party, and to grant to the Trustee, for the benefit
of the Secured Parties, a first priority perfected security interest in the
Collateral Portfolio on the terms and conditions of this Agreement, subject
only to Permitted Liens.

 

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

 

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

 

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

 

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

 

(g)           Selection Procedures.  In selecting the Loan Assets to be Pledged
pursuant to this Agreement, no selection procedures were employed which are
intended to be adverse to the interests of the Note Purchaser.

 

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

 

(i)            Pledge of Collateral
Portfolio.  Except as
otherwise expressly permitted by the terms of this Agreement, no item of
Collateral Portfolio has been sold, transferred, assigned 

 

61

 

or pledged by the Borrower
to any Person, other than as contemplated by Article II and the
Pledge of such Collateral Portfolio to the Trustee, for the benefit of the
Secured Parties, pursuant to the terms of this Agreement.

 

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

 

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

 

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

 

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

 

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

 

(o)           Tradenames.  Except as permitted hereunder, the Borrower’s
legal name is as set forth in this Agreement. Except as permitted hereunder,
the Borrower has not changed its name since its formation; does not have
tradenames, fictitious names, assumed names or “doing business as” names other
than as disclosed on Schedule II hereto (as such schedule may be updated from
time to by the Agent upon receipt of a notice delivered to the Agent pursuant
to

 

62

 

Section 5.02(r)); the Borrower’s
only jurisdiction of formation is Delaware, and, except as permitted hereunder,
the Borrower has not changed its jurisdiction of formation.

 

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

 

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

 

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

 

(s)           Reports Accurate.  All Servicer’s Certificates, Servicing
Reports, Notices of Borrowing, Borrowing Base Certificates and other written or
electronic information, exhibits, financial statements, documents, books,
records or reports furnished by the Servicer to the Agent, the Trustee, the
Note Purchaser or the Collateral Custodian in connection with this Agreement
are, as of their date, accurate, true and correct; provided that, solely with respect to written or electronic
information furnished by the Servicer which was provided to the Servicer from
an Obligor with respect to a Loan Asset, such information need only be
accurate, true and correct to the knowledge of the Servicer; provided, further, that the foregoing
proviso shall not apply to any information presented in a Servicer’s
Certificate, Servicing Report, Notice of Borrowing or Borrowing Base Certificate.

 

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

 

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

 

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

 

63

 

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

 

(x)            ERISA.  The present value of all benefits vested
under all “employee pension benefit plans,” as such term is defined in Section 3
of ERISA, maintained by the Borrower or any ERISA Affiliate of the Borrower, or
in which employees of the Borrower or any ERISA Affiliate 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, failure to meet the minimum
funding standard set forth in Section 302(a) of ERISA and Section 412(a) of
the Code with respect to any Benefit Plan other than a Multiemployer Plan,
withdrawals or reportable events have occurred with respect to any Pension
Plans that, in the aggregate, could subject the Borrower to any material tax,
penalty or other liability.  No notice of
intent to terminate a Pension Plan has been filed, nor has any Pension Plan
been terminated under Section 4041(f) of ERISA, nor has the Pension
Benefit Guaranty Corporation instituted proceedings to terminate, or appoint a
trustee to administer a Pension Plan and no event has occurred or condition
exists that might constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Pension
Plan.

 

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

 

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

 

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

 

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

 

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

 

(dd)         Compliance with Law.  The Borrower has complied in all material
respects with all Applicable Law to which it may be subject, and no item of the
Collateral Portfolio contravenes any Applicable Law (including, without
limitation, all applicable predatory 

 

64

 

and abusive lending laws,
laws, rules and regulations relating to licensing, truth in lending, fair
credit billing, fair credit reporting, equal credit opportunity, fair debt
collection practices and privacy).

 

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

 

(ff)           Set-Off, etc.  No Loan Asset has been compromised, adjusted,
extended, satisfied, subordinated, rescinded, set-off or modified by the
Borrower, the Transferor, the Equityholder or the Obligor thereof, and no
Collateral Portfolio is subject to compromise, adjustment, extension,
satisfaction, subordination, rescission, set-off, counterclaim, defense,
abatement, suspension, deferment, deduction, reduction, termination or
modification, whether arising out of transactions concerning the Collateral
Portfolio or otherwise, by the Borrower, the Transferor, the Equityholder or
the Obligor with respect thereto, except, in each case, for amendments,
extensions and modifications, if any, to such Collateral Portfolio otherwise
permitted pursuant to Section 6.04(a) of this Agreement and in
accordance with the Credit Policy and the Servicing Standard.

 

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

 

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

 

(ii)           USA PATRIOT Act.  Neither the Borrower nor any Affiliate of the
Borrower is (i) a country, territory, organization, person or entity named
on an Office of Foreign Asset Control (OFAC) list; (ii) a Person that
resides or has a place of business in a country or territory named on such
lists or which is designated as a “Non-Cooperative Jurisdiction” by the
Financial Action Task Force on Money Laundering, or whose subscription funds
are transferred from or through such a jurisdiction; (iii) a “Foreign
Shell Bank” within the meaning of the USA PATRIOT Act, i.e., a foreign bank that does not have a
physical presence in any country and that

 

65

 

is not affiliated with a
bank that has a physical presence and an acceptable level of regulation and
supervision; or (iv) a person or entity that resides in or is organized
under the laws of a jurisdiction designated by the United States Secretary of
the Treasury under Sections 311 or 312 of the USA PATRIOT Act as warranting
special measures due to money laundering concerns.

 

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

 

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

 

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

 

(mm)       Security Interest.

 

(i)            This Agreement creates a
valid and continuing security interest (as defined in the applicable UCC) in
the Collateral Portfolio in favor of the 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 Portfolio is
comprised of “instruments”, “security entitlements”, “general intangibles”, “tangible
chattel paper”, “accounts”, “certificated securities”, “uncertificated
securities”, “securities accounts”, “deposit accounts”, “supporting obligations”
or “insurance” (each as defined in the applicable UCC), real property and/or
such other category of collateral under the applicable UCC as to which the
Borrower has complied with its obligations under this Section 4.01(mm);

 

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

 

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

 

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

 

66

 

c.             the Controlled 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 securities intermediary of any Controlled
Account which is a “securities account” under the UCC has agreed to comply with
the entitlement orders and instructions of the Borrower, the Servicer and the
Trustee (acting at the direction of the Agent) in accordance with the
Transaction Documents, including causing cash to be invested in Permitted
Investments; provided that, upon
the delivery of a notice of exclusive control under the Collection Account
Agreement or Unfunded Exposure Account Agreement by the Trustee (acting at the
direction of the Agent), the securities intermediary has agreed to only follow
the entitlement orders and instructions of the Trustee, on behalf of the
Secured Parties, including with respect to the investment of cash in Permitted
Investments.

 

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

 

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

 

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

 

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

 

(viii)        the Borrower has caused the
filing of all appropriate financing statements in the proper filing office in
the appropriate jurisdictions under Applicable Law in order to perfect the
security interest in the Collateral Portfolio and that portion of the Loan
Assets in which a security interest may be perfected by filing granted to the
Trustee, on behalf of the Secured Parties, under this Agreement; provided that filings in respect of real
property shall not be required;

 

(ix)           other than as expressly
permitted by the terms of this Agreement and the security interest granted to
the 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 Portfolio.  The Borrower has not authorized the filing of
and is not aware of any financing statements against the Borrower that include
a description of collateral covering the Collateral  Portfolio other than any financing statement (A) relating
to the security interests granted to the Borrower under the Second Tier
Purchase and Sale Agreement, or (B) relating to the closing of a Permitted
Securitization contemplated by Section 2.07(c), or (C) that
has been terminated and/or fully and validly assigned to the Trustee on or
prior to the date hereof. 

 

67

 

The Borrower is not aware of the filing of
any judgment or tax lien filings against the Borrower;

 

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

 

(xi)           other than in the case of
Noteless Loan Assets, the Borrower has received, or subject to the delivery
requirements contained herein will receive, a written acknowledgment from the
Collateral Custodian that the Collateral Custodian, as the bailee of the Trustee,
is holding the underlying promissory notes that constitute or evidence the Loan
Assets solely on behalf of and for the Trustee, for the benefit of the Secured
Parties; provided that the
acknowledgement of the Collateral Custodian set forth in Section 13.11
may serve as such acknowledgement;

 

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

 

(xiii)         with respect to any
Collateral Portfolio that constitutes a “certificated security,” such
certificated security has been delivered to the Collateral Custodian, on behalf
of the Secured Parties and, if in registered form, has been specially Indorsed
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

 

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

 

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

 

(a)           Valid Transfer and Security
Interest. This Agreement constitutes a grant of a security
interest in all of the Collateral Portfolio to the Trustee, for the benefit of
the Secured Parties, which upon the delivery of the Required Loan Documents to
the Collateral Custodian, the crediting of Loan Assets to the Controlled
Accounts and the filing of the financing statements, shall be a valid and first
priority perfected security interest in the Loan Assets forming a part of the
Collateral Portfolio and in that portion of the Loan Assets in which a

 

68

 

security interest may be
perfected by filing subject only to Permitted Liens.  Neither the Borrower nor any Person claiming
through or under Borrower shall have any claim to or interest in the Controlled
Accounts and, if this Agreement constitutes the grant of a security interest in
such property, except for the interest of the Borrower in such property as a
debtor for purposes of the UCC.

 

(b)           Eligibility of Collateral
Portfolio. As of the Closing Date, each Cut-Off Date and each
Advance Date, (i) the Loan Asset Schedule and the information contained in
each Notice of Borrowing, is an accurate and complete listing of all the Loan
Assets contained in the Collateral Portfolio as of the related Cut-Off Date and
the information contained therein with respect to the identity of such item of
Collateral Portfolio and the amounts owing thereunder is true and correct as of
the related Cut-Off Date, (ii) each Loan Asset designated on any Borrowing
Base Certificate as an Eligible Loan Asset and each Loan Asset included as an
Eligible Loan Asset in any calculation of Borrowing Base or Borrowing Base
Deficiency is an Eligible Loan Asset and (iii) with respect to each item
of Collateral Portfolio, all consents, licenses, approvals or authorizations of
or registrations or declarations of any Governmental Authority or any Person
required to be obtained, effected or given by the Borrower in connection with
the transfer of a security interest in each item of Collateral Portfolio to the
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
Asset was originated without any fraud or material misrepresentation by the
Transferor or, to the best of the Borrower’s knowledge, on the part of the
Obligor.

 

SECTION 4.03       Representations and
Warranties of the Servicer.  The Servicer hereby represents and warrants,
as of the Closing Date, as of each applicable Cut-Off Date, as of each
applicable Advance Date 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 (except as such
jurisdiction is changed as permitted hereunder), 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 

 

69

 

Transaction Document to
which the Servicer is a party have been duly executed and delivered by the
Servicer.

 

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

 

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

 

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

 

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

 

(h)           Reports Accurate.  No Borrowing Base Certificate, information,
exhibit, financial statement, document, book, record or report furnished by the
Servicer to the Agent, the Trustee, the Note Purchaser or the Collateral
Custodian in connection with this Agreement is inaccurate in any material
respect as of the date it is dated, and no such document contains any material
misstatement of fact or omits to state a material fact or any fact necessary to
make the statements contained therein not misleading; provided that, solely with respect to
written or electronic information furnished by the Servicer which was provided
to the Servicer from an Obligor with respect to a Loan Asset, such information
need only be accurate, true and correct to the knowledge of the Servicer; provided, further, that the foregoing
proviso shall not apply to any information presented in a Servicer’s
Certificate, Servicing Report, Notice of Borrowing or Borrowing Base
Certificate.

 

(i)            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 Loan Assets and (ii) the
Servicing Standard with regard to the servicing of the Loan Assets.

 

70

 

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

 

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

 

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

 

(m)          Taxes.  The Servicer has filed or caused to be filed
all tax returns that are required to be filed by it.  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.

 

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

 

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

 

(p)           ERISA.  The present value of all benefits vested
under all Pension Plans does not exceed the value of the assets of the Pension
Plan allocable to such vested benefits (based on the value of such assets as of
the last annual valuation date).  No
prohibited transactions, failure to meet the minimum funding standard set forth
in Section 302(a) of ERISA and Section 412(a) of the Code
with respect to any Benefit Plan other than a Multiemployer Plan, withdrawals
or reportable events have occurred with respect to any Pension Plans that, in
the aggregate, could subject the 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 

 

71

 

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

 

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

 

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

 

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

 

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

 

72

 

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

 

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

 

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

 

SECTION 4.04                                                                    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.

 

(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 Bankruptcy Laws and general principles of equity (whether considered
in a suit at law or in equity).

 

SECTION 4.05                                                                    Representations
and Warranties of the Guarantor.  The Guarantor hereby represents and warrants,
as of the Closing Date, as of each applicable Cut-Off Date, as of each
applicable Advance Date and as of each other date provided under this Agreement
or the 

 

73

 

other
Transaction Documents on which such representations and warranties are required
to be (or deemed to be) made:

 

(a)                                  Organization
and Good Standing.  The
Guarantor has been duly organized, and is validly existing as a limited
liability company in good standing, under the laws of the State of Delaware
(except as such jurisdiction is changed in accordance with the Term-Out Sale
and Servicing Agreement), 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 provide the Guaranty.

 

(b)                                 Due
Qualification.  The
Guarantor is duly qualified to do business as a limited liability company 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.

 

(c)                                  Power and
Authority; Due Authorization; Execution and Delivery.  The Guarantor (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 Guaranty on the terms and conditions herein provided.  This Agreement and each other Transaction
Document to which the Guarantor is a party have been duly executed and
delivered by the Guarantor.

 

(d)                                 Binding
Obligation.  This
Agreement and each other Transaction Document to which the Guarantor is a party
constitutes a legal, valid and binding obligation of the Guarantor enforceable
against the Guarantor in accordance with its respective terms, except as such
enforceability may be limited by bankruptcy, insolvency, moratorium,
reorganization and other similar laws of general application affecting
creditors’ rights generally and by general principles of equity (whether such
enforceability is considered in a proceeding in equity or at law).

 

(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
Guarantor’s certificate of formation, limited liability company agreement or
any contract or other agreement to which or the Guarantor is a party or by
which the Guarantor or any property or assets of the Guarantor may be bound, (ii) result
in the creation or imposition of any Lien (other than Permitted Liens) upon any
of the Guarantor’s properties pursuant to the terms of any such contract or
other agreement to which or the Guarantor is a party or by which the Guarantor
or any property or assets of the Guarantor may be bound, 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 Guarantor, threatened
against the Guarantor, before any 

 

74

 

Governmental Authority (i) asserting
the invalidity of this Agreement or any other Transaction Document to which the
Guarantor 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 Guarantor 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 Guarantor of this Agreement and any
other Transaction Document to which the Guarantor 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 Guarantor.

 

(i)                                     Investment
Company Act.  The
Guarantor is not required to register as an investment company under the provisions
of the 1940 Act.

 

(j)                                     Solvency.  The Guarantor is not the subject of any
Bankruptcy Proceedings or Bankruptcy Event.

 

SECTION 4.06                                                                    Representations
and Warranties of the Note Purchaser.  The Note Purchaser hereby represents and
warrants that it is (a) either a Qualified Institutional Buyer under Rule 144A
of the Securities Act or an institutional “Accredited Investor” as defined in Rule (1)-501(a)(1)-(3) or
(7) under the Securities Act and (b) a “qualified purchaser” under
the 1940 Act.

 

SECTION 4.07                                                                    Representations
and Warranties of the Collateral Custodian.  The Collateral Custodian in its individual
capacity and as Collateral Custodian 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 Collateral Custodian 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 Collateral Custodian, 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 Collateral Custodian is a party or by which it or any
of its property is bound.

 

75

 

(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 Collateral Custodian, required in
connection with the execution and delivery of this Agreement, the performance
by the Collateral Custodian of the transactions contemplated hereby and the
fulfillment by the Collateral Custodian of the terms hereof have been obtained.

 

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

 

ARTICLE V.

GENERAL COVENANTS

 

SECTION 5.01                                                                    Affirmative
Covenants of the Borrower.

 

From the Closing Date until
the Collection Date:

 

(a)                                  Organizational
Procedures and Scope of Business.  The Borrower will observe all organizational
procedures required by its certificate of formation, limited liability company
agreement and the laws of its jurisdiction of formation. Without limiting the
foregoing, the Borrower will limit the scope of its business to: (i) the
acquisition of Eligible Loan Assets and the ownership and management of the
Portfolio Assets and the related assets in the Collateral Portfolio; (ii) the
sale, transfer or other disposition of Loan Assets as and when permitted under
the Transaction Documents; (iii) entering into and performing under the
Transaction Documents and the Term-Out Sale and Servicing Agreement; (iv) consenting
or withholding consent as to proposed amendments, waivers and other modifications
of the Loan Agreements to the extent not in conflict with the terms of this
Agreement or any other Transaction Document; (v) exercising any rights
(including but not limited to voting rights and rights arising in connection
with a Bankruptcy Event with respect to an Obligor or the consensual or
non-judicial restructuring of the debt or equity of an Obligor) or remedies in
connection with the Loan Assets and participating in the committees (official
or otherwise) or other groups formed by creditors of an Obligor to the extent
not in conflict with the terms of this Agreement or any other Transaction
Document; and (vi) to engage in any activity and to exercise any powers
permitted to limited liability companies under the laws of the State of
Delaware that are related to the foregoing and necessary, convenient or
advisable to accomplish the foregoing.

 

(b)                                 Special Purpose
Entity Requirements.  The
Borrower will at all times:  (i) maintain
at least one Independent Director; (ii) maintain its own separate books
and records and bank accounts; (iii) hold itself out to the public and all
other Persons as a legal entity separate from the Equityholder and any other
Person (although, in connection with certain 

 

76

 

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

 

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

 

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

 

(e)                                  Deposit of
Collections.  The
Borrower shall promptly (but in no event later than two Business Days after
receipt) deposit or cause to be deposited into the Collection 

 

77

 

Account any and all
Available Collections received by the Borrower, the Servicer or any of their
Affiliates.

 

(f)                                    Disclosure of
Purchase Price.  The
Borrower shall disclose to the Agent and the Note Purchaser the purchase price
for each Loan Asset proposed to be transferred to the Equityholder and then to
the Borrower pursuant to the terms of the Purchase and Sale Agreements.

 

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

 

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

 

(i)                                     Taxes.  The Borrower will file or cause to be filed
its tax returns and pay any and all Taxes imposed on it or its property as
required by the Transaction Documents (except as contemplated in Section 4.01(m)).

 

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

 

(k)                                  Notice of Material
Events.  The Borrower shall, promptly
upon becoming aware thereof, notify the Agent of any event or other
circumstance that is reasonably likely to have a Material Adverse Effect.

 

(l)                                     Notice of
Income Tax Liability.  The
Borrower shall furnish to the Agent telephonic or facsimile notice within 10
Business Days (confirmed in writing within five Business Days thereafter) of
the receipt of revenue agent reports or other written proposals, determinations
or assessments of the Internal Revenue Service or any other taxing authority
which propose, determine or otherwise set forth positive adjustments (i) to
the Tax liability of Ares or any “affiliated group” (within the meaning of Section 1504(a)(l) of
the Code) of which Ares is a member in an amount equal to or greater than
$10,000,000 in the aggregate, or (ii) to the Tax liability of the Borrower
itself in an amount equal to or greater than $1,000,000 in the aggregate.  Any such notice shall specify the nature of
the items giving rise to such adjustments and the amounts thereof.

 

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

 

78

 

(n)                                 Notice of
Breaches of Representations and Warranties under this Agreement.  The Borrower shall promptly notify the Agent
if any representation or warranty set forth in Section 4.01 or Section 4.02
was incorrect at the time it was given or deemed to have been given and at the
same time deliver to the Trustee, the Agent and the Note Purchaser a written
notice setting forth in reasonable detail the nature of such facts and
circumstances.  In particular, but
without limiting the foregoing, the Borrower shall notify the Agent in the
manner set forth in the preceding sentence before any Cut-Off Date of any facts
or circumstances within the knowledge of the Borrower which would render any of
the said representations and warranties untrue at the date when such
representations and warranties were made or deemed to have been made.

 

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

 

(p)                                 Notice of
Proceedings.  The
Borrower shall notify the Agent, as soon as possible and in any event within
three Business Days, after the Borrower receives notice or obtains knowledge
thereof, of any settlement of, material judgment (including a material judgment
with respect to the liability phase of a bifurcated trial) in or commencement
of any material labor controversy, material litigation, material action,
material suit or material proceeding before any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, affecting the Collateral Portfolio, the Transaction Documents, the
Trustee’s, for the benefit of the Secured Parties, interest in the Collateral
Portfolio, or the Borrower, the Servicer, the Equityholder or the Transferor or
any of their Affiliates. For purposes of this Section 5.01(p), (i) any
settlement, judgment, labor controversy, litigation, action, suit or proceeding
affecting the Collateral Portfolio, the Transaction Documents, the Trustee’s,
for the benefit of the Secured Parties, interest in the Collateral Portfolio,
or the Borrower or the Equityholder in excess of $1,000,000 shall be deemed to
be material and (ii) any settlement, judgment, labor controversy,
litigation, action, suit or proceeding affecting the Servicer or the Transferor
or any of their Affiliates (other than the Borrower or the Equityholder) in
excess of $5,000,000 shall be deemed to be material.

 

(q)                                 Notice of ERISA
Reportable Events.  The
Borrower shall promptly notify the Agent after receiving notice of any “reportable
event” (as defined in Title IV of ERISA, other than an event for which the
reporting requirements have been waived by regulations) with respect to the
Borrower (or any Affiliate thereof), a copy of such notice.

 

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

 

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

 

79

 

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

 

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

 

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

 

(w)          Compliance with Law.  The Borrower shall at all times comply in all
material respects with all Applicable Law applicable to Borrower or any of its
assets (including, without limitation, Environmental Laws, and all federal
securities laws), and Borrower shall do 

 

80

 

or cause to be done all
things necessary to preserve and maintain in full force and effect its legal
existence, and all licenses material to its business.

 

(x)            Proper Records.  The Borrower shall at all times keep proper
books of records and accounts in which full, true and correct entries shall be
made of its transactions in accordance with GAAP.

 

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

 

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

 

(aa)         Tax Treatment.  The Borrower, the Transferor, the
Equityholder and the Note Purchaser shall treat the Advances advanced hereunder
as indebtedness of the Borrower (or, so long as the Borrower is treated as a
disregarded entity for U.S. federal income tax purposes, as indebtedness of the
entity of which it is considered to be a part) for U.S. federal income tax
purposes and to file any and all tax forms in a manner consistent therewith.

 

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

 

(cc)         Obligor Notification Forms.  The Borrower shall furnish the Trustee and
the Agent with an appropriate power of attorney to send (at the Agent’s
discretion on the Trustee’s behalf, after the occurrence or declaration of the
Facility Maturity Date but subject to the proviso in Section 7.02(a))
Obligor notification forms to give notice to the Obligors of the Trustee’s
interest in the Collateral Portfolio and the obligation to make payments as
directed by the Agent on the Trustee’s behalf.

 

(dd)         Officer’s Certificate.  On each anniversary of the date of this
Agreement, the Borrower shall deliver an Officer’s Certificate, in form and
substance acceptable to the Agent, providing (i) a certification, based
upon a review and summary of UCC search results, that there is no other
interest in the Collateral Portfolio perfected by filing of a UCC financing
statement other than in favor of the Trustee and (ii) a certification,
based upon a review and 

 

81

 

summary of tax and judgment
lien searches satisfactory to the Agent, that there is no other interest in the
Collateral Portfolio based on any tax or judgment lien.

 

(ee)         Continuation Statements. The Borrower
shall, not earlier than six months and not later than three months prior to the
fifth anniversary of the date of filing of the financing statement referred to
in Schedule I hereto or any other financing statement filed pursuant to
this Agreement or in connection with any Advance hereunder, unless the
Collection Date shall have occurred:

 

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

 

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

 

SECTION 5.02                     Negative
Covenants of the Borrower.

 

From the Closing Date until
the Collection Date:

 

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

 

(b)           Requirements for Material
Actions.  The Borrower shall not fail to
provide that the unanimous consent of all members (including the consent of the
Independent Director(s)) is required for the Borrower to (i) dissolve or
liquidate, in whole or part, or institute proceedings to be adjudicated
bankrupt or insolvent, (ii) institute or consent to the institution of
bankruptcy or insolvency proceedings against it, (iii) file a petition
seeking or consent to reorganization or relief under any applicable federal or
state law relating to bankruptcy or 

 

82

 

insolvency, (iv) seek
or consent to the appointment of a receiver, liquidator, assignee, trustee,
sequestrator, custodian or any similar official for the Borrower, (v) make
any assignment for the benefit of the Borrower’s creditors, (vi) admit in
writing its inability to pay its debts generally as they become due, or (vii) take
any action in furtherance of any of the foregoing.

 

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

 

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

 

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

 

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

 

(g)           [Reserved].

 

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

 

(i)            Use of Proceeds.  The Borrower shall not use the proceeds of
any Advance other than to finance the purchase by the Borrower from the
Equityholder on a “true sale” basis, of Collateral Portfolio pursuant to the
terms of the Second Tier Purchase and Sale Agreement.

 

(j)            Limited Assets.  The Borrower shall not hold or own any assets
that are not part of the Collateral Portfolio other than with respect to any
assets released from the Lien of the Trustee hereunder following (i) a
substitution effected in accordance with Section 2.07(a) (so
long as the Borrower has Pledged a Substitute Eligible Loan Asset in connection
therewith), (ii) an Optional Sale in connection with a Permitted
Refinancing effected in accordance with Section 2.07(c), (iii) a
Lien Release Dividend effected in accordance with Section 2.07(d) or
(iv) a repurchase or substitution of a Warranty Loan Asset effected in
accordance with Section 2.07(e).

 

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

 

(l)            Extension or Amendment of
Collateral Portfolio.  The
Borrower will not, except as otherwise permitted in Section 6.04(a) of
this Agreement and in accordance with the 

 

83

 

Credit Policy and the
Servicing Standard, extend, amend or otherwise modify the terms of any Loan
Asset (including the Underlying Collateral).

 

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

 

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

 

(o)           ERISA Matters.  The Borrower will not (a) engage, and
will exercise its best efforts not to permit any ERISA Affiliate to engage, in
any prohibited transaction (within the meaning of ERISA Section 406(a) or
(b) or Code Section 4975) for which an exemption is not available or
has not previously been obtained from the United States Department of Labor, (b) fail
to meet the minimum funding standard set forth in Section 302(a) of
ERISA and Section 412(a) of the Code with respect to any Benefit Plan
other than a Multiemployer Plan, (c) fail to make any payments to a
Multiemployer Plan that the 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,
directly or indirectly in any liability to the Borrower, or (e) permit to
exist any occurrence of any reportable event described in Title IV of ERISA
with respect to any Pension Plan, other than an event for which reporting
requirements have been waived by regulations.

 

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

 

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

 

(r)            Change of Jurisdiction,
Location, Names or Location of Loan Asset Files. The Borrower shall not
change the jurisdiction of its formation, make any change to its corporate name
or use any tradenames, fictitious names, assumed names, “doing business as”
names or other names (other than those listed on Schedule II hereto, as such
schedule may be revised from time to time to reflect name changes and name
usage permitted under the terms of this Section 5.02(r) after
compliance with all terms and conditions of this Section 5.02(r) related
thereto) unless, prior to the effective date of any such change in the
jurisdiction of its formation, name change or use, the Borrower receives prior
written consent from the Agent of such change and delivers to the Agent such
financing statements as the Agent may request to reflect such name change or
use, together with such Opinions of Counsel and other documents and instruments
as the Agent may request in connection therewith.  The Borrower will not change the location of
its chief executive office unless prior to the effective date of any such
change of location, the 

 

84

 

Borrower notifies the Agent
of such change of location in writing. The Borrower will not move, or consent
to the Collateral Custodian or the Servicer moving, the Loan Asset Files from
the location thereof on the Closing Date, unless 30 days prior to the effective
date of any such move, the Borrower notifies the Agent of such move in writing.

 

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

 

SECTION 5.03                     Affirmative
Covenants of the Servicer.

 

From the Closing Date until
the Collection Date:

 

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

 

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

 

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

 

(d)           Keeping of Records and Books
of Account.

 

(i)             The Servicer will maintain
and implement administrative and operating procedures (including, without
limitation, an ability to recreate records evidencing Collateral Portfolio in
the event of the destruction of the originals thereof), and keep and maintain
all documents, books, records and other information reasonably necessary or
advisable for the collection of all Collateral Portfolio and the identification
of the Collateral Portfolio.

 

(ii)            The Servicer shall permit
the Agent or its respective agents or representatives, to visit the offices of
the Servicer during normal office hours and upon 

 

85

 

reasonable advance notice
and examine and make copies of all documents, books, records and other
information concerning the Collateral Portfolio and the Servicer’s servicing
thereof and discuss matters related thereto with any of the officers or
employees of the Servicer having knowledge of such matters.

 

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

 

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

 

(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 Portfolio, and (ii) furnish to the 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 Agent; provided that, no consent shall be
required from the Agent in connection with any change mandated by Applicable
Law or a Governmental Authority as evidenced by an Opinion of Counsel to that
effect delivered to the Agent.

 

(g)           Events of Default.  The Servicer will provide the Agent (with a
copy to the Trustee) with immediate written notice of the occurrence of each
Event of Default and each Unmatured Event of Default of which the Servicer has
knowledge or has received notice.  In
addition, no later than two Business Days following the Servicer’s knowledge or
notice of the occurrence of any Event of Default or Unmatured Event of Default,
the Servicer will provide to the Trustee and the 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 (except as contemplated by Section 4.03(m)).

 

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

 

86

 

(j)            Proceedings Related to the
Borrower, the Transferor 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 Transferor or the Servicer (or
any of their Affiliates) or the Transaction Documents. For purposes of this Section 5.03(j),
(i) any settlement, judgment, labor controversy, litigation, action, suit
or proceeding affecting the Transaction Documents or the Borrower in excess of
$1,000,000 shall be deemed to be expected to have such a Material Adverse
Effect and (ii) any settlement, judgment, labor controversy, litigation,
action, suit or proceeding affecting the Servicer or the Transferor or any of
their Affiliates (other than the Borrower) in excess of $5,000,000 shall be
deemed to be expected to have such a Material Adverse Effect.

 

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

 

(l)            Loan Asset Register.

 

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

 

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

 

(m)          Special Purpose Entity
Requirements.  The
Servicer shall take such actions as are necessary to cause the Borrower to be
in compliance with the special purpose entity requirements set forth in Sections
5.01(a) and (b) and 5.02(a) and (b).

 

(n)           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 Agent notice of any change in the accounting policies of the Servicer.

 

87

 

(o)           Proceedings Related to the
Collateral Portfolio.  As soon as
possible and in any event within three Business Days after any Responsible
Officer of the Servicer receives notice or has actual knowledge of any
settlement of, judgment (including a judgment with respect to the liability
phase of a bifurcated trial) in or commencement of any labor controversy,
litigation, action, suit or proceeding before any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, that could reasonably be expected to have a Material Adverse Effect on
the interests of the Trustee or the Secured Parties in, to and under the
Collateral Portfolio. For purposes of this Section 5.03(o), any
settlement, judgment, labor controversy, litigation, action, suit or proceeding
affecting the Collateral Portfolio or the Trustee’s or the Secured Parties’
interest in the Collateral Portfolio in excess of $2,500,000 or more shall be
deemed to be expected to have such a Material Adverse Effect.

 

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

 

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

 

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

 

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

 

(t)            Audits. Prior to the
Closing Date and periodically thereafter at the discretion of the Agent, the
Servicer shall allow the Agent (during normal office hours and upon reasonable
advance notice) to review the Servicer’s collection and administration of the
Collateral Portfolio in order to assess compliance by the Servicer with the
Credit Policy and the Servicing Standard, as well as with the Transaction
Documents and to conduct an audit of the Collateral Portfolio and Required Loan
Documents in conjunction with such a review. 
Such review shall be reasonable in scope and shall be completed in a
reasonable period of time.

 

88

 

(u)           Notice of Breaches of
Representations and Warranties under this Agreement.  The Servicer shall promptly, upon receipt of
notice or discovery thereof, notify the Agent if any representation or warranty
set forth in Section 4.03 was incorrect at the time it was given or
deemed to have been given and at the same time deliver to the Trustee, the
Agent and the Note Purchaser a written notice setting forth in reasonable
detail the nature of such facts and circumstances.  In particular, but without limiting the
foregoing, the Servicer shall notify the Agent in the manner set forth in the
preceding sentence before any Cut-Off Date of any facts or circumstances within
the knowledge of the Servicer which would render any of the said
representations and warranties untrue at the date when such representations and
warranties were made or deemed to have been made.

 

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

 

SECTION 5.04                     Negative
Covenants of the Servicer.

 

From the Closing Date until
the Collection Date:

 

(a)           Mergers, Acquisition, Sales,
etc.  The Servicer will not
consolidate with or merge into any other Person or convey or transfer its
properties and assets substantially as an entirety to any Person, unless the
Servicer is the surviving entity and unless:

 

(i)             the Servicer has delivered
to the 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 5.04
and that all conditions precedent herein provided for relating to such
transaction have been complied with and, in the case of the Opinion of Counsel,
that such supplemental agreement is legal, valid and binding with respect to
the Servicer and such other matters as the Agent may reasonably request;

 

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

 

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

 

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

 

89

 

(b)          Change of Name or Location
of Loan  Asset 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
Portfolio from the address set forth under its name on the signature pages hereto,
or change the jurisdiction of its formation, or (y) move, or consent to
the Collateral Custodian moving, the Required Loan Documents and Loan Asset
Files from the location thereof on the initial Advance Date, unless the
Servicer has given at least 30 days’ written notice to the Agent and has taken
all actions required under the UCC of each relevant jurisdiction in order to
continue the first priority perfected security interest of the Trustee, for the
benefit of the Secured Parties, in the Collateral Portfolio.

 

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

 

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

 

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

 

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

 

SECTION 5.05                       Affirmative
Covenants of the Trustee.

 

From the Closing Date 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.

 

90

 

SECTION 5.06                       Negative
Covenants of the Trustee.

 

From the Closing Date until
the Collection Date, the Trustee will not make any changes to the Trustee Fees
without the prior written approval of the Agent.

 

SECTION 5.07                       Affirmative
Covenants of the Collateral Custodian.

 

From the Closing Date until
the Collection Date:

 

(a)           Compliance with Law.  The Collateral Custodian will comply in all
material respects with all Applicable Law.

 

(b)           Preservation of Existence.  The Collateral Custodian 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 Article XIII
of this Agreement, the Required Loan Documents shall remain at all times in the
possession of the Collateral Custodian at the address set forth under its name
on the signature pages hereto unless notice of a different address is
given in accordance with the terms hereof or unless the 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 the terms of this Agreement.

 

SECTION 5.08                       Negative
Covenants of the Collateral Custodian.

 

From the Closing Date until
the Collection Date:

 

(a)           Required Loan Documents.  The Collateral Custodian 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 Collateral
Custodian pursuant to this Agreement and will not dispose of any Collateral
Portfolio except as contemplated by this Agreement.

 

(b)           No Changes in Collateral
Custodian Fees.  The
Collateral Custodian will not make any changes to the Collateral Custodian Fees
without the prior written approval of the Agent.

 

ARTICLE VI.

ADMINISTRATION AND SERVICING OF CONTRACTS

 

SECTION 6.01                       Appointment and
Designation of the Servicer.

 

(a)           Initial Servicer.  The Borrower, the Note Purchaser and the
Agent hereby appoint Ares, pursuant to the terms and conditions of this
Agreement, as Servicer, with the authority to service, administer and exercise
rights and remedies, on behalf of the Borrower, in respect of the Collateral
Portfolio. Until the Agent gives Ares a Servicer Termination Notice, Ares
hereby accepts such appointment and agrees to perform the duties and
responsibilities of 

 

91

 

the Servicer pursuant to the
terms hereof. The Servicer and the Borrower hereby acknowledge that the Agent
and the Secured Parties are third party beneficiaries of the obligations
undertaken by the Servicer hereunder.

 

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

 

(c)           Appointment of Replacement
Servicer.  At any time
following the delivery of a Servicer Termination Notice, the Agent may, at its
discretion, (i) appoint Wachovia as Servicer under this Agreement and, in
such case, all authority, power, rights and obligations of the Servicer shall
pass to and be vested in Wachovia or (ii) appoint a new Servicer (the “Replacement
Servicer”), which appointment shall take effect upon the
Replacement Servicer accepting such appointment by a written assumption in a
form satisfactory to the Agent in its sole discretion. In the event that
Wachovia or a Replacement Servicer has not accepted its appointment at the time
when the Servicer ceases to act as Servicer, the 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 Portfolio, as the Replacement
Servicer hereunder.

 

(d)           Liabilities and Obligations
of Replacement Servicer. Upon its appointment, Wachovia or the
Replacement Servicer, as applicable, shall be the successor in all respects to
the Servicer with respect to servicing functions under this Agreement and shall
be subject to all the responsibilities, duties and liabilities relating thereto
placed on the Servicer by the terms and provisions hereof, and all references
in this Agreement to the Servicer shall be deemed to refer to Wachovia or the
Replacement Servicer, as applicable; provided,
that Wachovia or Replacement Servicer, as applicable, shall have (i) no
liability with respect to any action performed by the terminated Servicer prior
to the date that Wachovia or Replacement 
Servicer, as applicable, becomes the successor to the Servicer or any
claim of a third party based on any alleged action or inaction of the
terminated Servicer, (ii) no obligation to perform any advancing
obligations, if any, of the Servicer unless it elects to in its sole
discretion, (iii) no obligation to pay any taxes required to be paid by
the Servicer (provided that
Wachovia or Replacement Servicer, as applicable, shall pay any income taxes for
which it is liable), (iv) no 

 

92

 

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 Wachovia or the Replacement Servicer, as applicable, upon
becoming a Replacement Servicer, are expressly limited to those arising on
account of its failure to act in good faith and with reasonable care under the
circumstances.  In addition, Wachovia or Replacement
Servicer, as applicable, shall have no liability relating to the
representations and warranties of the Servicer contained in Section 4.03.

 

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

 

(f)            Subcontracts. The Servicer
may, with the prior written consent of the Agent, subcontract with any other
Person for servicing, administering or collecting the Collateral Portfolio; provided, that (i) the Servicer shall
select any such Person with reasonable care and shall be solely responsible for
the fees and expenses payable to any such Person, (ii) the Servicer shall
not be relieved of, and shall remain liable for, the performance of the duties
and obligations of the Servicer pursuant to the terms hereof without regard to
any subcontracting arrangement and (iii) any such subcontract shall be
terminable upon the occurrence of a Servicer Termination Event.

 

(g)           Servicing Programs.  In the event that the Servicer uses any
software program in servicing the Collateral Portfolio 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 Agent or the Servicer to use such program
and to allow the Servicer to assign such licenses to Wachovia or to any other
Replacement Servicer appointed as provided in this Agreement.

 

(h)           Waiver.  The Borrower acknowledges that the Agent or
any of its Affiliates may act as the Trustee and/or the Servicer, and the
Borrower waives any and all claims against the Note Purchaser, the Trustee and
the Servicer relating in any way to the custodial or collateral administration
functions having been performed by the Agent or any of its Affiliates in
accordance with the terms and provisions (including the standard of care) set
forth in the Transaction Documents.

 

SECTION 6.02                       Duties of the
Servicer.

 

(a)           Duties.  The Servicer shall take or cause to be taken
all such actions as may be necessary or advisable to collect on the Collateral
Portfolio 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:

 

93

 

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

 

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

 

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

 

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

 

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

 

(vi)          notifying the 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 Asset (or portion thereof) of which it has knowledge
or has received notice; or (2) that could reasonably be expected to have a
Material Adverse Effect;

 

(vii)         providing the prompt written
notice to the 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 Portfolio;

 

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

 

(x)            directing the Trustee to
make payments pursuant to the terms of the Servicing Report in accordance with Section 2.04;

 

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

 

94

 

(xii)          providing administrative
assistance to the Borrower with respect to the purchase and sale of and payment
for the Loan Assets;

 

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

 

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

 

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

 

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

 

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

 

(c)           Except as otherwise set
forth in Section 11.17, any payment by an Obligor in respect of any
indebtedness owed by it to the Transferor or the Borrower shall, except as
otherwise specified by such Obligor or otherwise required by contract or law
and unless otherwise instructed by the Agent, be applied as a collection of a
payment by such Obligor (starting with the oldest such outstanding payment due)
to the extent of any amounts then due and payable thereunder before being
applied to any other receivable or other obligation of such Obligor.

 

SECTION 6.03                       Authorization
of the Servicer.

 

(a)           Each of the Borrower, the
Agent and the Note Purchaser hereby authorizes the Servicer (including any
successor thereto) to take any and all reasonable steps in its name and 

 

95

 

on its behalf necessary or
desirable in the determination of the Servicer and not inconsistent with the
sale of the Collateral Portfolio by the Transferor to the Equityholder and the
Equityholder to the Borrower under the Purchase and Sale Agreements and,
thereafter, the Pledge by the Borrower to the Trustee on behalf of the Secured
Parties hereunder, to collect all amounts due under any and all Collateral
Portfolio, including, without limitation, endorsing any of their names on
checks and other instruments representing Interest Collections and Principal
Collections, executing and delivering any and all instruments of satisfaction
or cancellation, or of partial or full release or discharge, and all other
comparable instruments, with respect to the Collateral Portfolio and, after the
delinquency of any Collateral Portfolio and to the extent permitted under and
in compliance with Applicable Law, to commence proceedings with respect to
enforcing payment thereof, to the same extent as the Transferor could have done
if it had continued to own such Collateral Portfolio.  The Transferor, the Borrower and the Trustee
on behalf of the Secured Parties shall furnish the Servicer (and any successors
thereto) with any powers of attorney and other documents necessary or
appropriate to enable the Servicer to carry out its servicing and
administrative duties hereunder, and shall cooperate with the Servicer to the
fullest extent in order to ensure the collectability of the Collateral
Portfolio.  In no event shall the
Servicer be entitled to make the Secured Parties, the Agent, the Trustee or the
Note Purchaser 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 Agent’s
consent.

 

(b)           After the declaration
of  the Facility Maturity Date but
subject to the proviso in Section 7.02(a), at the direction of the
Agent, the Servicer shall take such action as the Agent may deem necessary or
advisable to enforce collection of the Collateral Portfolio; provided, that the Agent may, at any time
that an Event of Default has occurred, notify any Obligor with respect to any
Collateral Portfolio of the assignment of such Collateral Portfolio to the
Trustee on behalf of the Secured Parties and direct that payments of all
amounts due or to become due be made directly to the Agent or any servicer,
collection agent or account designated by the Agent and, upon such notification
and at the expense of the Borrower, the Agent may enforce collection of any
such Collateral Portfolio, and adjust, settle or compromise the amount or
payment thereof.

 

SECTION 6.04                       Collection of
Payments; Accounts.

 

(a)           Collection Efforts,
Modification of Collateral Portfolio.  The Servicer will use its best efforts to
collect or cause to be collected, all payments called for under the terms and
provisions of the Loan Assets included in the Collateral Portfolio as and when
the same become due 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 Portfolio in a
manner that would impair the collectability of the Collateral Portfolio or in
any manner contrary to the Credit Policy or the Servicing Standard.

 

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

 

96

 

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

 

(d)           Payments to Collection
Account.  On or before the applicable
Cut-Off Date, the Servicer shall have instructed all Obligors to make all
payments in respect of the Collateral Portfolio directly to the Collection
Account; provided that the
Servicer is not required to so instruct any Obligor which is solely a guarantor
unless and until the Servicer calls on the related guaranty.

 

(e)           Controlled Accounts. Each of the
parties hereto hereby agrees that (i) each Controlled Account is intended
to be a “securities account” or “deposit account” within the meaning of the UCC
and (ii) except as otherwise expressly provided herein and in the
Collection Account Agreement or Unfunded Exposure Account Agreement, as
applicable, prior to the delivery of a notice of exclusive control, the
Borrower, the Servicer and the Trustee (acting at the direction of the Agent)
shall be entitled to exercise the rights that comprise each Financial Asset
held in each Controlled Account which is a securities account and have the
right to direct the disposition of funds in any Controlled Account which is a
deposit account; provided that
after the delivery of a notice of exclusive control, such rights shall be
exclusively held by the Trustee (acting at the direction of the Agent).  Each of the parties hereto hereby agrees to
cause the securities intermediary that holds any money or other property for
the Borrower in a Controlled Account that is a securities account to agree with
the parties hereto that (A) the cash and other property (subject to Section 6.04(f) below
with respect to any property other than investment property, as defined in Section 9-102(a)(49)
of the UCC) is to be treated as a Financial Asset under Article 8 of the
UCC and (B) regardless of any provision in any other agreement, for
purposes of the UCC, with respect to the Controlled Accounts, New York shall be
deemed to be the Bank’s jurisdiction (within the meaning of Section 9-304
of the UCC) and the securities intermediary’s jurisdiction (within the meaning
of Section 8-110 of the UCC). All securities or other property underlying
any Financial Assets credited to the Controlled Accounts in the form of
securities or instruments shall be registered in the name of the Bank or if in
the name of the Borrower or the Trustee, Indorsed to the Bank, Indorsed in
blank, or credited to another securities account maintained in the name of the Bank,
and in no case will any Financial Asset credited to the Controlled Accounts be
registered in the name of the Borrower, payable to the order of the Borrower or
specially Indorsed to the Borrower, except to the extent the foregoing have
been specially Indorsed to the Bank or Indorsed in blank.

 

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

 

97

 

necessary consents).  The Collateral Custodian shall hold any
Instrument delivered to it evidencing any Loan Asset granted to the Trustee
hereunder as custodial agent for the Trustee in accordance with the terms of
this Agreement.

 

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

 

SECTION 6.05                       Realization
Upon Loan Assets.  The
Servicer will use reasonable efforts consistent with the Servicing Standard to
foreclose upon or repossess, as applicable, or otherwise comparably convert the
ownership of any Underlying Collateral relating to a defaulted Loan Asset as to
which no satisfactory arrangements can be made for collection of delinquent
payments.  The Servicer will comply with
the Servicing Standard and Applicable Law in realizing upon such Underlying
Collateral, and employ practices and procedures including reasonable efforts
consistent with the Servicing Standard to enforce all obligations of Obligors
foreclosing upon, repossessing and causing the sale of such Underlying
Collateral at public or private sale in circumstances other than those
described in the preceding sentence. 
Without limiting the generality of the foregoing, unless the Agent has
specifically given instruction to the contrary, the Servicer may cause the sale
of any such Underlying Collateral to the Servicer or its Affiliates for a
purchase price equal to the then fair market value thereof, any such sale to be
evidenced by a certificate of a Responsible Officer of the Servicer delivered
to the Agent setting forth the Loan Asset, the Underlying Collateral, the sale
price of the Underlying Collateral and certifying that such sale price is the
fair market value of such Underlying Collateral.  In any case in which any such Underlying
Collateral has suffered damage, the Servicer will not expend funds in
connection with any repair or toward the foreclosure or repossession of such
Underlying Collateral unless it reasonably determines that such repair and/or
foreclosure or repossession will increase the Recoveries by an amount greater
than the amount of such expenses.  The
Servicer will remit to the Collection Account the Recoveries received in
connection with the sale or disposition of Underlying Collateral relating to a
defaulted Loan Asset.

 

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

 

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

 

98

 

Accounts.  The Servicer may be reimbursed for any
reasonable expenses incurred hereunder subject to the availability of funds
pursuant to Section 2.04; provided,
that, to the extent funds are not available for such reimbursement, the
Servicer shall be required to pay such expenses for its own account and shall
not be entitled to any payment therefor other than the Servicing Fees.

 

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

 

(a)           Notice of Borrowing. On each
Advance Date and on each reduction of Advances Outstanding pursuant to Section 2.18,
the Borrower (and the Servicer on its behalf) will provide a Notice of
Borrowing or a Notice of Reduction, as applicable, and a Borrowing Base
Certificate, each updated as of such date, to the Agent (with a copy to the
Trustee).

 

(b)           Servicing Report.  On each Reporting Date, the Servicer will
provide to the Borrower, the Agent and the Trustee, a monthly statement
including (i) a Borrowing Base calculated as of the most recent
Determination Date and (ii) a summary prepared with respect to each
Obligor and with respect to each Loan Asset for such Obligor prepared as of the
most recent Determination Date that will be required to set forth only (x) calculations
of the Net Leverage Ratio and the Interest Coverage Ratio for each such Loan
Asset for the most recently ended Relevant Test Period for each such Loan Asset
and (y) whether or not each such Loan Asset shall have become subject to a
Material Modification (such monthly statement, a “Servicing Report”), with
respect to related calendar month signed by a Responsible Officer of the
Servicer and the Borrower and substantially in the form of Exhibit L.

 

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

 

(d)           Financial Statements.  The Servicer will submit to the Agent and the
Trustee, (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 September 30, 2009, consolidated 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,
2009, consolidated audited financial statements of the Servicer, audited by a
firm of nationally recognized independent public accountants, as of the end of
such fiscal year.

 

(e)           Tax Returns.  Upon demand by the Agent, the Servicer shall
deliver, copies of all federal, state and local tax returns and reports filed
by the Borrower, the Equityholder and the Servicer, or in which the Borrower,
the  Equityholder or Servicer was
included on a consolidated or combined basis (excluding sales, use and like
Taxes).

 

(f)            Obligor Financial
Statements; Valuation Reports; Other Reports.  The Servicer will deliver to the Agent and
the Trustee, with respect to each Obligor, (i) to the extent received by
the Borrower and/or the Servicer pursuant to the Loan Agreement, the complete
financial reporting package with respect to such Obligor and with respect to
each Loan Asset for such Obligor (including any covenant compliance
certificates with respect to such Obligor and 

 

99

 

with respect to each Loan
Asset for such Obligor) provided to the Borrower and/or the Servicer either
monthly or quarterly, as the case may be, by such Obligor, which delivery shall
be made within 45 days (or such longer period as specified in the Loan
Agreement) after the end of each such month or such Obligor’s fiscal quarters,
as applicable (excluding the last month or fiscal quarter, as applicable, of
each such Obligor’s fiscal year), and within 90 days (or such longer period as
specified in the Loan Agreement) after the end of each such Obligor’s fiscal
year, and (ii) a quarterly update to the “tear sheet” prepared by the
Servicer with respect to such Obligor and with respect to each Loan Asset for
such Obligor, which delivery shall be made within 45 days (or such longer period
as specified in the Loan Agreement) after the end of each such Obligor’s fiscal
quarters (excluding the last fiscal quarter of each such Obligor’s fiscal year)
and within 90 days (or such longer period as specified in the Loan Agreement)
after the end of each such Obligor’s fiscal year.  The Servicer will promptly deliver to the
Agent, upon reasonable request and to the extent received by the Borrower
and/or the Servicer, all other documents and information required to be
delivered by the Obligors to the Borrower with respect to any Loan Asset
included in the Collateral Portfolio.

 

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

 

(h)           Website Access to
Information. 
Notwithstanding anything to the contrary contained herein, information
required to be delivered or submitted to any Secured Party pursuant to Section 5.03(i) and
this Article VI shall be deemed to have been delivered on the date
on which such information is posted on an IntraLinks (or other replacement)
website to which the Agent has access.

 

SECTION 6.09                       Annual Statement
as to Compliance.  The
Servicer will provide to the Agent and the Trustee within 90 days following the
end of each fiscal year of the Servicer, commencing with the fiscal year ending
on December 31, 2009, a fiscal report signed by a Responsible Officer of
the Servicer certifying that (a) a review of the activities of the
Servicer, and the Servicer’s performance pursuant to this Agreement, for the
fiscal period ending on the last day of such fiscal year has been made under
such Person’s supervision and (b) the Servicer has performed or has caused
to be performed in all material respects all of its obligations under this
Agreement throughout such year and no Servicer Termination Event has occurred.

 

SECTION 6.10                       Annual
Independent Public Accountant’s Servicing Reports.  The Servicer will cause a firm of nationally
recognized independent public accountants (who may also render other services
to the Servicer) to furnish to the Agent and the Trustee within 90 days
following the end of each fiscal year of the Servicer, commencing with the
fiscal year ending on December 31, 2009, 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 IV,
it being understood that the Servicer and the Agent will provide an updated Schedule
IV reflecting any further amendments to such Schedule IV prior to
the issuance of the first such agreed-upon procedures report, a copy of which
shall replace the then existing 

 

100

 

Schedule IV) to certain
documents and records relating to the Collateral Portfolio under any
Transaction Document, compared the information contained in the Servicing
Reports and the Servicer’s Certificates delivered during the period covered by
such report with such documents and records and that no matters came to the
attention of such accountants that caused them to believe that such servicing
was not conducted in compliance with this Article VI, except for
such exceptions as such accountants shall believe to be immaterial and such
other exceptions as shall be set forth in such statement.

 

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

 

ARTICLE VII.

EVENTS OF DEFAULT

 

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

 

(a)           the Borrower, the
Equityholder or the Transferor defaults in making any payment required to be
made under one or more agreements for borrowed money (including, but not
limited to, the Term-Out Sale and Servicing Agreement) to which it is a party
in an aggregate principal amount in excess of (x) $1,000,000 for the
Borrower or the Equityholder or (y) $5,000,000 for the Transferor and any
such failure continues unremedied for two Business Days and such default is not
cured within the applicable cure period, if any, provided for under such
agreement; or

 

(b)           any failure on the part of
the Borrower, the Equityholder or the Transferor duly to observe or perform in
any material respect any other covenants or agreements of the Borrower, the
Equityholder or the Transferor set forth in this Agreement or the other
Transaction Documents to which the Borrower, the Equityholder or the Transferor
is a party and the same continues unremedied for a period of 30 days (if such
failure can be remedied) after the earlier to occur of (i) the date on
which written notice of such failure requiring the same to be remedied shall
have been given to the Borrower, the Equityholder or the Transferor by the
Agent or Trustee and (ii) the date on which the Borrower, the Equityholder
or the Transferor acquires knowledge thereof; or

 

(c)           the occurrence of a
Bankruptcy Event relating to the Transferor, the Equityholder or the Borrower;
or

 

101

 

(d)           the occurrence of a Servicer
Termination Event (subject to the applicable cure periods set forth in the
definition of “Servicer Termination Event”);
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 $10,000,000, against the Transferor, or $1,000,000, against
the Borrower or the Equityholder, and the Transferor, the Equityholder or the
Borrower, as applicable, shall not have either (i) discharged or provided
for the discharge of any such judgment, decree or order in accordance with its
terms or (ii) perfected a timely appeal of such judgment, decree or order
and caused the execution of same to be stayed during the pendency of the appeal
or (2) the Transferor, the Equityholder or the Borrower shall have made
payments of amounts in excess of $10,000,000 (in the case of the Transferor) or
$1,000,000 (in the case of the Borrower or the Equityholder), in the settlement
of any litigation, claim or dispute (excluding payments made from insurance
proceeds); or

 

(f)            either the Borrower or the
Equityholder shall cease to be an Affiliate of the Transferor 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 Equityholder, the Transferor, or the Servicer,

 

(2)           the Borrower, the
Transferor, the Equityholder, 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)           the Advances Outstanding on
any day exceeds the Borrowing Base and has not been remedied in accordance with
Section 2.06; provided
that, during the period of time that such event remains unremedied, any
payments required to be made by the Servicer on a Payment Date shall be made
under Section 2.04(b); or

 

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

 

102

 

payment or deposit is
required to be made and the same continues unremedied for two Business Days; or

 

(j)            the Borrower or the
Equityholder 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

 

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

 

(l)            any Change of Control shall
occur; or

 

(m)          any representation, warranty
or certification made by the Borrower, the Equityholder, the Transferor or the
Guarantor 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 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, the Equityholder, the
Transferor or the Guarantor by the Agent or Trustee and (ii) the date on
which a Responsible Officer of the Borrower, the Equityholder, the Transferor
or the Guarantor acquires knowledge thereof; or

 

(n)           failure to pay, on the
Facility Maturity Date, the outstanding principal of all outstanding Advances,
if any, and all Yield and all Fees accrued and unpaid thereon together with all
other Obligations (without giving effect to clause (ii) of the definition
thereof in the case of a Facility Maturity Date pursuant to clause (iv) of
the definition thereof prior to the occurrence of any Event of Default),
including, but not limited to, any Make-Whole Premium; or

 

(o)           an event has occurred which
constitutes an Event of Default under and pursuant to the terms of the Pledge
Agreement;  or

 

(p)           the “Termination Date” (as
such term is defined in the Term-Out Sale and Servicing Agreement) shall occur
or be declared, in each case, pursuant to Section 10.2(a) of the
Term-Out Sale and Servicing Agreement; or

 

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

 

(r)            the Transferor fails to
transfer to Equityholder or the Equityholder fails to transfer to the Borrower
the applicable Loan Assets and the related Portfolio Assets on an Advance Date
(provided that the Note Purchaser
shall have funded the related Advance) unless the related Advance is repaid in
full with accrued and unpaid Yield thereon within five Business Days; or

 

103

 

(s)           either of the Borrower or
the Equityholder makes any assignment or attempted assignment of their
respective rights or obligations under this Agreement or any other Transaction
Document without first obtaining the specific written consent of the Agent,
which consent may be withheld by the Agent in the exercise of its sole and
absolute discretion;

 

then the Agent, with the
consent of the Note Purchaser, may, by notice to the Borrower, declare the
Facility Maturity Date to have occurred; provided,
that, in the case of any event described in Section 7.01(c) above,
the Facility Maturity Date shall be deemed to have occurred automatically upon
the occurrence of such event. Upon any such declaration or automatic
occurrence, (i) the Borrower shall cease purchasing Loan Assets from the
Equityholder under the Second Tier Purchase and Sale Agreement and the
Equityholder shall cease purchasing Loan Assets from the Transferor under the
First Tier Purchase and Sale Agreement, (ii) at the option of the Note
Purchaser in its sole discretion, the Note Purchaser may declare the Variable
Funding Note to be immediately due and payable in full (without presentment,
demand, protest or notice of any kind all of which are hereby waived by the
Borrower) and any other Obligations to be immediately due and payable, and (iii) all
proceeds and distributions in respect of the Portfolio Assets shall be
distributed as described in Section 2.04(b) (provided that the Borrower shall in any
event remain liable to pay such Advances and all such amounts and Obligations
immediately in accordance with Section 2.04(d) hereof). In
addition, upon any such declaration or upon any such automatic occurrence, the
Trustee, on behalf of the Secured Parties and at the direction of the Agent,
shall have, in addition to all other rights and remedies under this Agreement
or otherwise, all other rights and remedies provided under the UCC of the
applicable jurisdiction and other Applicable Law, which rights shall be
cumulative. Without limiting any obligation of the Servicer hereunder, the
Borrower confirms and agrees that the Trustee, on behalf of the Secured Parties
and at the direction of the Agent, (or any designee thereof, including, without
limitation, the Servicer), following an Event of Default, shall, at its option,
have the sole right to enforce the Borrower’s rights and remedies under each
Assigned Document, but without any obligation on the part of the Agent, the
Note Purchaser or any of their respective Affiliates to perform any of the
obligations of the Borrower under any such Assigned Document. If any Event of
Default shall have occurred, the Yield Rate shall be increased to the Default
Funding Rate, effective as of the date of the occurrence of such Event of
Default, and shall apply after the occurrence of such Event of Default.

 

SECTION 7.02                       Additional
Remedies of the Agent.

 

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

 

104

 

notwithstanding anything to
the contrary herein or in any other Transaction Document, in the case of the
declaration of the Facility Maturity Date that arises solely pursuant to Section 7.01(d) due
solely to the occurrence of an event described in clauses (g) or (h) of
the definition of “Servicer Termination Event” or clause (o) of the
definition of “Servicer Termination Event” (to the extent arising solely due to
the occurrence of an event described in clauses (g) or (h) of
the definition thereof), the Trustee and the Agent (as applicable) may not
order the assembly or liquidation of the Collateral Portfolio, or take any
action or exercise any power of attorney furnished hereunder in connection with
such assembly or liquidation, until on or after the earlier of (x) the
date that is twelve (12) months after the occurrence of such Facility Maturity
Date or (y) the occurrence of a Facility Maturity Date for any other
reason other than an event described in clauses (g) or (h) of
the definition of “Servicer Termination Event” or clause (o) of the
definition of “Servicer Termination Event” (to the extent arising solely due to
the occurrence of an event described in clauses (g) or (h) of
the definition thereof).

 

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

 

(c)           If the Trustee (acting as
directed by the Agent) or the Agent proposes to sell the Collateral Portfolio
or any part thereof in one or more parcels at a public or private sale, at the
request of the Trustee or the Agent, as applicable, the Borrower and the
Servicer shall make available to (i) the Agent, on a timely basis, all
information (including any information that the Borrower and the Servicer is
required by law or contract to be kept confidential) relating to the Collateral
Portfolio subject to sale, including, without limitation, copies of any
disclosure documents, contracts, financial statements of the applicable
Obligors, covenant certificates and any other materials requested by the Agent,
and (ii) each prospective bidder, on a timely basis, all reasonable
information relating to the Collateral Portfolio subject to sale, including,
without limitation, copies of any disclosure documents, contracts, financial
statements of the applicable Obligors, covenant certificates and any other
materials reasonably requested by each such bidder; provided that with respect to this clause (ii),
neither the Borrower nor the Servicer shall be required to disclose to each
such bidder any information which it is required by law or contract to be kept
confidential.

 

(d)           Each of the Borrower and the
Servicer agrees, to the full extent that it may lawfully so agree, that neither
it nor anyone claiming through or under it will set up, claim or seek to take
advantage of any appraisement, valuation, stay, extension or redemption law now
or hereafter in force in any locality where any Collateral Portfolio may be
situated in order to prevent, hinder or delay the enforcement or foreclosure of
this Agreement, or the absolute sale of any of the Collateral Portfolio or any
part thereof, or the final and absolute putting into possession thereof,
immediately after such sale, of the purchasers thereof, and each of the
Borrower and the Servicer, for itself and all who may at any time claim through
or under it, hereby waives, to the full extent that it may be lawful so to do,
the benefit of all such laws, and 

 

105

 

any and all right to have
any of the properties or assets constituting the Collateral Portfolio marshaled
upon any such sale, and agrees that the Trustee, or the Agent on its behalf, or
any court having jurisdiction to foreclose the security interests granted in
this Agreement may sell the Collateral Portfolio as an entirety or in such
parcels as the Trustee or such court may determine.

 

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

 

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

 

(g)           Except as otherwise
expressly provided in this Agreement, no remedy provided for by this Agreement
shall be exclusive of any other remedy, each and every remedy shall be
cumulative and in addition to any other remedy, and no delay or omission to
exercise any right or remedy shall impair any such right or remedy or shall be
deemed to be a waiver of any Event of Default.

 

(h)           Each of the Borrower and the
Servicer hereby irrevocably appoints each of the Trustee and the 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
remedies after the occurrence of an Event of Default, and as provided for in
this Agreement, including without limitation the following powers:  (a) to give any necessary receipts or
acquittance for amounts collected or received hereunder, (b) to make all
necessary transfers of the Collateral Portfolio in connection with any such
sale or other disposition made pursuant hereto, (c) to execute and deliver
for value all necessary or appropriate bills of sale, assignments and other
instruments in connection with any such sale or other disposition, the Borrower
and the Servicer hereby ratifying and confirming all that such attorney (or any
substitute) shall lawfully do hereunder and pursuant hereto, and (d) to
sign any agreements, orders or other documents in connection with or pursuant
to any Transaction Document. Nevertheless, if so requested by the Trustee or
the Agent, the Borrower shall ratify and confirm any such sale or other
disposition by executing and delivering to the Trustee or the Agent or all
proper bills of sale, assignments, releases and other instruments as may be
designated in any such request; provided
that, for the avoidance of doubt, no right under any power of attorney
furnished under this Section 7.02(h) may be exercised until
after the occurrence of an Event of Default.

 

(i)            (1)           If the Trustee (acting as
directed by the Agent) or the Agent elects to sell the Collateral Portfolio in
whole, but not in part, at a public or private sale, the Borrower may exercise
its right of first refusal to repurchase the Collateral Portfolio, in whole but
not in part, prior to such sale at a purchase price that is not less than the
amount of the Obligations as of the date of such proposed sale.  The Borrower’s right of first refusal shall
terminate not later than 4:00 p.m. on the second Business Day following
the Business Day on which the Borrower 

 

106

 

receives notice of the
Trustee’s or the Agent’s election to sell such Collateral Portfolio, such
notice to attach copies of all Eligible Bids received by the Trustee or the
Agent in respect of such Collateral Portfolio.

 

(2)           If the Trustee (acting as
directed by the Agent) or the Agent elects to sell less than all of the
Collateral Portfolio in one or more parcels at a public or private sale, the
Borrower may exercise its right of first refusal to repurchase such portion of
the Collateral Portfolio prior to such sale at a purchase price of not less than
the highest Eligible Bid received in respect of such portion of the Collateral
Portfolio as of the date of such proposed sale, as notified by the Trustee or
the Agent to the Borrower.  The Borrower’s
right of first refusal shall terminate not later than 4:00 p.m. on the
Business Day on which the Borrower receives notice of the Trustee’s or the
Agent’s election to sell such portion of the Collateral Portfolio, if such
notice is delivered by 12:00 p.m. on such Business Day; provided that if such notice is delivered
after 12:00 p.m. on the Business Day on which the Borrower receives such
notice, or if the highest Eligible Bid received in respect of such portion of
the Collateral Portfolio is greater than $25,000,000, the Borrower’s right of
first refusal shall terminate not later than 12:00 p.m. on the following
Business Day.

 

(3)           If the Borrower elects not
to exercise its right of first refusal as provided in clauses (1) or
(2) above, the Trustee (acting as directed by the Agent) or the
Agent shall sell such Collateral Portfolio or portion thereof for a purchase
price equal to the highest of the Eligible Bids then received.  For the avoidance of doubt, any determination
of the highest Eligible Bid shall only consider bids for the same parcels of
the Collateral Portfolio.

 

(4)           It is understood that the
Borrower may submit its bid for the Collateral Portfolio or any portion thereof
as a combined bid with the bids of other members of a group of bidders, and
shall have the right to find bidders to bid on the Collateral Portfolio or any
portion thereof.

 

(5)           It is understood that the
Borrower’s right of first refusal shall apply to each proposed sale of the same
parcel of the Collateral Portfolio.

 

ARTICLE VIII.

INDEMNIFICATION

 

SECTION 8.01                     Indemnities by
the Borrower.

 

(a)           Without limiting any other
rights which the Agent, the Note Purchaser, the Trustee, the Bank, the
Collateral Custodian or any of their respective Affiliates may have hereunder
or under Applicable Law, the Borrower hereby agrees to indemnify the Agent, the
Note Purchaser, the Trustee, the Bank, the Collateral Custodian and each of
their respective Affiliates, assigns, officers, directors, employees and agents
(each, an “Indemnified
Party” for purposes of this Article VIII) from
and against any and all damages, losses, claims, liabilities and related costs
and expenses, including reasonable attorneys’ fees and disbursements (all of
the 

 

107

 

foregoing being collectively
referred to as “Indemnified Amounts”), awarded against
or actually incurred by such Indemnified Party arising out of or as a result of
this Agreement or in respect of any of the Collateral Portfolio, excluding,
however, Indemnified Amounts to the extent resulting solely from (a) gross
negligence, bad faith or willful misconduct on the part of an Indemnified Party
or (b) Loan Assets which are uncollectible due to the Obligor’s financial
inability to pay. Without limiting the foregoing, the Borrower shall indemnify
each Indemnified Party for Indemnified Amounts relating to or resulting from
any of the following (to the extent not resulting from the conditions set forth
in (a) or (b) above):

 

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

 

(ii)           reliance on any
representation or warranty made or deemed made by the Borrower, the Guarantor,
the Servicer (if Ares or one of its Affiliates is the Servicer) or any of their
respective officers under or in connection with this Agreement or any
Transaction Document, which shall have been false or incorrect in any material
respect when made or deemed made or delivered;

 

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

 

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

 

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

 

(vi)          the failure to file, or any
delay in filing, financing statements, continuation statements or other similar
instruments or documents under the UCC of any applicable jurisdiction or other
Applicable Law with respect to any Loan Assets included in the Collateral
Portfolio or the other Portfolio Assets related thereto, whether at the time of
any Advance or at any subsequent time;

 

(vii)         any dispute, claim, offset
or defense (other than the discharge in bankruptcy of an Obligor) to the
payment of any Loan Asset included in the Collateral Portfolio (including,
without limitation, a defense based on such Loan Asset (or the Loan Agreement
evidencing such Loan Asset) not being a legal, valid and binding obligation of
such Obligor enforceable against it in accordance with its terms), or any other
claim resulting from the sale of the merchandise or services related to such
Collateral Portfolio or the furnishing or failure to furnish such merchandise
or services;

 

108

 

(viii)        any failure of the Borrower,
the Guarantor, or the Servicer (if Ares or one of its Affiliates is the
Servicer) to perform its duties or obligations in accordance with the
provisions of the Transaction Documents to which it is a party or any failure
by Ares, the Borrower, the Guarantor, or any Affiliate thereof to perform its
respective duties under any Collateral Portfolio;

 

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

 

(x)            any action taken by the
Borrower or the Servicer in the enforcement or collection of the Collateral
Portfolio;

 

(xi)           any products liability claim
or personal injury or property damage suit or other similar or related claim or
action of whatever sort arising out of or in connection with the Underlying
Collateral or services that are the subject of any Collateral Portfolio;

 

(xii)          any claim, suit or action of
any kind arising out of or in connection with Environmental Laws including any
vicarious liability;

 

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

 

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

 

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

 

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

 

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

 

109

 

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

 

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

 

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

 

(c)           If for any reason the
indemnification provided above in this Section 8.01 is unavailable
to the Indemnified Party or is insufficient to hold an Indemnified Party
harmless in respect of any losses, claims, damages or liabilities, then the
Borrower or the Servicer, as the case may be, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such losses, claims,
damages or liabilities in such proportion as is appropriate to reflect not only
the relative benefits received by such Indemnified Party on the one hand and
the Borrower or the Servicer, as the case may be, on the other hand but also
the relative fault of such Indemnified Party as well as any other relevant
equitable considerations.

 

(d)           If the Borrower has made any
payments in respect of Indemnified Amounts to the Agent on behalf of an
Indemnified Party pursuant to this Section 8.01 and such
Indemnified Party thereafter collects any of such amounts from others, such
Indemnified Party will promptly repay such amounts collected to the Borrower,
without interest.

 

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

 

SECTION 8.02                       Indemnities by
Servicer.

 

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

 

110

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(c)           If the Servicer has made any
indemnity payments to the Agent, on behalf of an Indemnified Party pursuant to
this Section 8.02 and such Indemnified Party thereafter 

 

111

 

collects any of such amounts
from others, such Indemnified Party will promptly repay such amounts collected
to the Servicer, without interest.

 

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

 

(e)           The obligations of the
Servicer under this Section 8.02 shall survive the resignation or
removal of the Agent, the Note Purchaser, the Trustee or the Collateral
Custodian and the termination of this Agreement.

 

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

 

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

 

SECTION 8.03                       Legal
Proceedings.  In the
event an Indemnified Party becomes involved in any action, claim, or legal,
governmental or administrative proceeding (an “Action”) for which it
seeks indemnification hereunder, the Indemnified Party shall promptly notify
the other party or parties against whom it seeks indemnification (the “Indemnifying
Party”) in writing of the nature and particulars of the
Action; provided that its failure
to do so shall not relieve the Indemnifying Party of its obligations hereunder
except to the extent such failure has a material adverse effect on the
Indemnifying Party. Upon written notice to the Indemnified Party acknowledging
in writing that the indemnification provided hereunder applies to the
Indemnified Party in connection with the Action (subject to the exclusion in
the first sentence of Section 8.01, the first sentence of Section 8.02
or Section 8.02(d), as applicable), the Indemnifying Party may
assume the defense of the Action at its expense with counsel reasonably acceptable
to the Indemnified Party. The Indemnified Party shall have the right to retain
separate counsel in connection with the Action, and the Indemnifying Party
shall not be liable for the legal fees and expenses of the Indemnified Party
after the Indemnifying Party has done so; provided
that if the Indemnified Party determines in good faith that there may be a
conflict between the positions of the Indemnified Party and the Indemnifying
Party in connection with the Action, or that the Indemnifying Party is not
conducting the defense of the Action in a manner reasonably protective of the
interests of the Indemnified Party, the reasonable legal fees and expenses of
the Indemnified Party shall be paid by the Indemnifying Party; provided, further,
that the Indemnifying Party shall not, in connection with any one Action or
separate but substantially similar or related Actions in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
fees or expenses of more than one separate firm of attorneys (and any required
local counsel) for such Indemnified Party, which firm (and local counsel, if
any) shall be designated in writing to the Indemnifying Party by the
Indemnified Party. If the Indemnifying Party elects to assume the defense of
the Action, it shall have full control over the conduct of such defense; provided that the Indemnifying Party and
its counsel shall, as reasonably requested by the Indemnified Party or its
counsel, consult with and keep them informed with respect to the conduct of
such defense. The Indemnifying Party shall not settle an 

 

112

 

Action without the prior
written approval of the Indemnified Party unless such settlement provides for
the full and unconditional release of the Indemnified Party from all liability
in connection with the Action. The Indemnified Party shall reasonably cooperate
with the Indemnifying Party in connection with the defense of the Action.

 

SECTION 8.04                       After-Tax Basis.  Indemnification under Section 8.01
and 8.02 shall be in an amount necessary to make the Indemnified Party
whole after taking into account 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 IX.

THE AGENT

 

SECTION 9.01                       The Agent.

 

(a)           Each Secured Party hereby
appoints and authorizes the Agent as its agent hereunder and hereby further
authorizes the Agent to appoint additional agents to act on its behalf and for
the benefit of each Secured Party.  Each
Secured Party further authorizes the 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 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 Agent hereunder, the
Agent shall not be required to take any such incidental action hereunder, but
shall be required to act or to refrain from acting (and shall be fully
protected in acting or refraining from acting) upon the direction of the Note
Purchaser; provided that the
Agent shall not be required to take any action hereunder if the taking of such
action, in the reasonable determination of the Agent, shall be in violation of
any Applicable Law or contrary to any provision of this Agreement or shall
expose the Agent to liability hereunder or otherwise.  In the event the Agent requests the consent
of the Note Purchaser pursuant to the foregoing provisions and the 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 Note
Purchaser shall be deemed to have declined to consent to the relevant action.

 

(b)           The Borrower irrevocably
authorizes the Agent and appoints the Agent as its attorney-in-fact to act on
behalf of the Borrower (i) to file financing statements necessary or
desirable in the Agent’s sole discretion to perfect and to maintain the
perfection and priority of the interest of the Secured Parties in the
Collateral Portfolio and (ii) to file a carbon, photographic or other
reproduction of this Agreement or any financing statement with respect to the
Collateral Portfolio as a financing statement in such offices as the Agent in
its sole discretion deems necessary or desirable to perfect and to maintain the
perfection and priority of the interests of the Secured Parties in the
Collateral Portfolio.  This appointment
is coupled with an interest and is irrevocable.

 

(c)           If the Borrower or the
Servicer, as applicable, fails to perform any of its agreements or obligations
under Section 5.01(t), Section 5.02(r) or Section 5.03(e),
the Agent 

 

113

 

may (but shall not be
required to) itself perform, or cause performance of, such agreement or obligation,
and the expenses of the Agent incurred in connection therewith shall be payable
by the Borrower or the Servicer (on behalf of the Borrower), as applicable,
upon the Agent’s demand therefor.

 

(d)           Notwithstanding any
provision to the contrary elsewhere in this Agreement, the Agent shall not have
any duties or responsibilities, except those expressly set forth herein, or any
fiduciary relationship with the Note Purchaser, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities shall be read
into this Agreement or otherwise exist against the Agent.

 

(e)           Neither the 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 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 Agent:  (i) may
consult with legal counsel (including counsel for the Borrower or the
Transferor), independent public accountants and other experts selected by it
and shall not be liable for any action taken or omitted to be taken in good
faith by it in accordance with the advice of such counsel, accountants or
experts; (ii) makes no warranty or representation and shall not be
responsible for any statements, warranties or representations made in or in
connection with this Agreement; (iii) shall not have any duty to ascertain
or to inquire as to the performance or observance of any of the terms,
covenants or conditions of this Agreement or any of the other Transaction
Documents on the part of the Borrower, the Transferor, or the Servicer or to
inspect the property (including the books and records) of the Borrower, the
Transferor, or the Servicer; (iv) shall not be responsible for the due
execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement, any of the other Transaction Documents or any other
instrument or document furnished pursuant hereto or thereto; and (v) shall
incur no liability under or in respect of this Agreement or any of the other
Transaction Documents by acting upon any notice (including notice by
telephone), consent, certificate or other instrument or writing (which may be
by facsimile) believed by it to be genuine and signed or sent by the proper
party or parties.

 

(f)            Each Secured Party
acknowledges that it has, independently and without reliance upon the Agent, or
any of the 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 Secured Party also acknowledges that it
will, independently and without reliance upon the Agent, or any of the 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.

 

(g)           The Note Purchaser agrees to
indemnify the Agent (to the extent not reimbursed by the Borrower or the
Servicer) 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 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 Agent hereunder or thereunder; provided
that 

 

114

 

the Note Purchaser shall not
be liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the Agent’s gross negligence or willful misconduct. Without
limitation of the foregoing, the Note Purchaser agrees to reimburse the Agent
promptly upon demand for any out-of-pocket expenses (including counsel fees)
incurred by the 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 Note
Purchaser hereunder and/or thereunder and to the extent that the Agent is not
reimbursed for such expenses by the Borrower or the Servicer.

 

(h)           The Agent may resign at any
time, effective upon the appointment and acceptance of a successor Agent as
provided below, by giving at least five days’ written notice thereof to the
Note Purchaser and the Borrower and may be removed at any time with cause by
the Note Purchaser.  Upon any such
resignation or removal, the Note Purchaser shall appoint a successor
Agent.  The Note Purchaser agrees that it
shall not unreasonably withhold or delay its approval of the appointment of a
successor Agent; provided that
any successor Agent which is not an Affiliate of Wachovia shall be subject to
the prior consent of the Borrower.  If no
such successor Agent shall have been so appointed, and shall have accepted such
appointment, within 30 days after the retiring Agent’s giving of notice of
resignation or the removal of the retiring Agent, then the retiring Agent may,
on behalf of the Secured Parties, appoint a successor Agent which successor
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
Agent hereunder by a successor Agent, such successor Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Agent, and the retiring Agent shall be discharged from its
duties and obligations under this Agreement. 
After any retiring Agent’s resignation or removal hereunder as Agent,
the provisions of this Article IX shall continue to inure to its
benefit as to any actions taken or omitted to be taken by it while it was Agent
under this Agreement.

 

(i)            Unless specifically
allocated to a specific Note Purchaser pursuant to the terms of this Agreement,
all amounts received by the Agent on behalf of the Note Purchaser shall be paid
by the Agent to each Note Purchaser in accordance with such Note Purchaser’s
respective Commitment Percentage, on the Business Day received by the Agent,
unless such amounts are received after 12:00 noon on such Business Day, in
which case the Agent shall use its reasonable efforts to pay such amounts to
the Note Purchaser on such Business Day, but, in any event, shall pay such amounts
to such Note Purchaser not later than the following Business Day.

 

115

 

ARTICLE X.

TRUSTEE

 

SECTION 10.01                     Designation of
Trustee.

 

(a)           Initial Trustee.  The role of Trustee shall be conducted by the
Person designated as Trustee hereunder from time to time in accordance with
this Section 10.01.  Until
the 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 Agent of the designation of a successor Trustee
pursuant to the provisions of Section 10.05, the Trustee agrees
that it will terminate its activities as Trustee hereunder.

 

(c)           Secured Party.  The Agent and the Note Purchaser 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 Collateral Portfolio.  U.S. Bank, in its capacity as Trustee
hereunder, hereby accepts such appointment and agrees to perform the duties set
forth in Section 10.02(b).

 

SECTION 10.02                  Duties of
Trustee.

 

(a)           Appointment.  The Borrower and the 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 Advance Date, and
until its removal pursuant to Section 10.05, the Trustee shall
perform, on behalf of the Secured Parties, the following duties and
obligations:

 

(i)            The Trustee shall make
payments pursuant to the terms of the Servicing Report in accordance with Section 2.04
(the “Payment Duties”).

 

(ii)           The Trustee shall provide to
the Servicer a copy of all written notices and communications identified as
being sent to it in connection with the Loan Assets and the other Collateral
Portfolio held hereunder which it receives from the related Obligor,
participating bank and/or agent bank.  In
no instance shall the 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 an Event of Default
or the Agent, after the occurrence of Event of Default, in which event the
Trustee shall vote, consent or take such other action in accordance with such
instructions.

 

(c)           (i)            The 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
(acting at the direction of the Agent) as its agent to execute and deliver all
further instruments and documents, and take all further action that the 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 

 

116

 

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 Loan Assets now existing or hereafter arising, and such other
instruments or notices, as may be necessary or appropriate for the purposes
stated hereinabove.  Nothing in this Section 10.02(c) shall
be deemed to relieve the Borrower or the Servicer of their respective
obligations to protect the interest of the Trustee (for the benefit of the
Secured Parties) in the Collateral Portfolio, including to file financing and
continuation statements in respect of the Collateral Portfolio in accordance
with Section 5.01(t).

 

(ii)           The 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 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 Agent; provided that the Trustee shall not be
required to take any action hereunder at the request of the 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 Agent and the Trustee does not receive a consent
(either positive or negative) from the Agent within 10 Business Days of its
receipt of such request, then the 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 (x) unless and until (and to the extent)
expressly so directed by the Agent or (y) prior to the Facility Maturity
Date (and upon such occurrence, the Trustee shall act in accordance with the
written instructions of the Agent pursuant to clause (x)).  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 Agent.  The Trustee shall not be deemed to have
notice or knowledge of any matter hereunder, including an Event of Default,
unless a Responsible Officer of the Trustee has knowledge of such matter or
written notice thereof is received by the Trustee.

 

(d)           If, in performing its duties
under this Agreement, the Trustee is required to decide between alternative
courses of action, the Trustee may request written instructions from the Agent
as to the course of action desired by it. 
If the Trustee does not receive such instructions within two Business
Days after it has requested them, the Trustee may, but shall be under no duty
to, take or refrain from taking any such courses of action.  The Trustee shall act in accordance with
instructions received after such two Business Day period except to the extent
it has already, in good faith, taken or committed itself to take, action
inconsistent with such instructions.  The
Trustee shall be entitled to rely on the advice of legal counsel and independent
accountants in performing its duties hereunder and shall be deemed to have
acted in good faith if it acts in accordance with such advice.

 

117

 

(e)           Concurrently herewith, the
Agent directs the Trustee and the Trustee is authorized to enter into the
Pledge Agreement, Collection Account Agreement and Unfunded Exposure Account
Agreement.  For the avoidance of doubt,
all of the Trustee’s rights, protections and immunities provided herein shall
apply to the Trustee for any actions taken or omitted to be taken under the
Pledge Agreement, Collection Account Agreement and Unfunded Exposure Account
Agreement in such capacity.

 

SECTION 10.03                     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 10.04                     Trustee
Compensation.

 

As compensation for its
Trustee activities hereunder, the Trustee shall be entitled to the Trustee Fees
and Trustee Expenses from the Servicer, on behalf of the Borrower.  To the extent that the Trustee Fees and
Trustee Expenses are not paid by the Servicer, on behalf of the Borrower, the
Trustee shall be entitled to receive the unpaid balance of the Trustee Fees and
Trustee Expenses to the extent of funds available therefor pursuant to the
provision of Section 2.04(a) or (b), as
applicable.  The Trustee’s entitlement to
receive the Trustee Fees shall cease on the earlier to occur of:  (i) its removal as Trustee pursuant to Section 10.05
or (ii) the termination of this Agreement.

 

SECTION 10.05                     Trustee Removal.

 

The Trustee may be removed,
with or without cause, by the Agent by notice given in writing to the Trustee
(the “Trustee Termination Notice”); provided,
notwithstanding its receipt of a Trustee Termination Notice, the Trustee shall
continue to act in such capacity until a successor Trustee has been appointed
and has agreed to act as Trustee hereunder; provided that the Trustee shall
continue to receive compensation of its fees and expenses in accordance with Section 10.04
above while so serving as the Trustee prior to a successor Trustee being
appointed.

 

SECTION 10.06                     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
Agent or (b) the verbal instructions of the 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 

 

118

 

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.

 

(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 Portfolio, and will not be required to and
will not make any representations as to the validity or value (except as
expressly set forth in this Agreement) of any of the Collateral Portfolio.  The 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 Portfolio.

 

(h)           Subject in all cases to the
last sentence of Section 2.05, in case any reasonable question
arises as to its duties hereunder, the Trustee may, prior to the occurrence of
an Event of Default or the Facility Maturity Date, request instructions from
the Servicer and may, after the occurrence of an Event of Default or the
Facility Maturity Date, request instructions from the Agent, and shall be
entitled at all times to refrain from taking any action unless it has received
instructions from the Servicer or the 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 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.

 

(i)            The Trustee shall not be
liable for the acts or omissions of the Collateral Custodian under this
Agreement and shall not be required to monitor the performance of the
Collateral Custodian.  Notwithstanding
anything herein to the contrary, unless appointed as successor Collateral
Custodian hereunder, the Trustee shall have no duty to perform any of the
duties of the Collateral Custodian under this Agreement.

 

119

 

SECTION 10.07                     Trustee
Resignation.

 

The Trustee may resign at
any time by giving not less than 90 days written notice thereof to the Agent
and with the consent of the Agent, which consent shall not be unreasonably
withheld.  Upon receiving such notice of
resignation, the Agent shall promptly appoint a successor trustee or trustees
by written instrument, in duplicate, executed by the Agent, one copy of which
shall be delivered to the Trustee so resigning and one copy to the successor
trustee or trustees, together with a copy to the Borrower, Servicer and
Collateral Custodian.  If no successor
trustee shall have been appointed and an instrument of acceptance by a
successor Trustee shall not have been delivered to the Trustee within 45 days
after the giving of such notice of resignation, the resigning Trustee may
petition any court of competent jurisdiction for the appointment of a successor
Trustee. Notwithstanding anything herein to the contrary, the Trustee may not
resign prior to a successor Trustee being appointed.

 

ARTICLE XI.

MISCELLANEOUS

 

SECTION 11.01                     Amendments and
Waivers.

 

(a)           Except as provided in Section 11.01(b),
no amendment or modification of any provision of this Agreement shall be
effective without the written agreement of the Borrower, the Servicer, the
Trustee, the Bank, the Agent, the Collateral Custodian and Note Purchasers
having in excess of 50% of the Commitment Percentage (the “Required Note
Purchasers”), and no termination or waiver of any provision of this
Agreement or consent to any departure therefrom by the Borrower or the Servicer
shall be effective without the written concurrence of the Agent and Required
Note Purchasers. Any waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.  For the avoidance of doubt, in the event that
an Event of Default has occurred but has been waived unconditionally and in its
entirety in accordance with the terms hereof, such Event of Default shall be
deemed to have not “occurred” and references to “after the occurrence of an
Event of Default” shall be inapplicable for all purposes in this Agreement or
any of the Transaction Documents, except to the extent otherwise provided for
in the relevant waiver; provided
that any waiver which by its terms becomes effective upon certain conditions
precedent being met will not be considered a conditional waiver solely due to
the existence of such conditions precedent if all such conditions precedent to
effectiveness have been satisfied.

 

(b)           Notwithstanding the
provisions of Section 11.01(a), the written consent of Note
Purchasers having 100% of the Commitment Percentage shall be required for any
amendment, modification or waiver (i) reducing any outstanding Advances,
or the Yield thereon, (ii) postponing any date for any payment of any
Advance, or the Yield thereon, (iii) modifying the provisions of this Section 11.01,
(iv) increasing the Maximum Facility Amount or (v) extending the
Stated Maturity Date.

 

SECTION 11.02                     Notices, Etc. All notices
and other communications hereunder shall, unless otherwise stated herein, be in
writing (which shall include facsimile communication and communication by
e-mail) and faxed, e-mailed or delivered, to each party hereto, at its address
set forth under its name on the signature pages hereto or at such other
address as shall be designated by such party in a written notice to the other
parties hereto. Notices and 

 

120

 

communications by facsimile
and e-mail shall be effective when sent (and shall be followed by hard copy
sent by regular mail), and notices and communications sent by other means shall
be effective when received.

 

SECTION 11.03                     No Waiver;
Remedies. No failure on the part of the Agent, the Trustee
or the Note Purchaser to exercise, and no delay in exercising, any right
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any right hereunder preclude any other or further exercise thereof
or the exercise of any other right. The remedies herein provided are cumulative
and not exclusive of any remedies provided by law.

 

SECTION 11.04                     Binding Effect;
Assignability; Multiple Note Purchasers.

 

(a)           This Agreement shall be
binding upon and inure to the benefit of the Borrower, the Servicer, the Agent,
the Note Purchaser, the Trustee, the Bank, the Collateral Custodian and their
respective successors and permitted assigns. The Note Purchaser and its
successors and assigns may assign (i) this Agreement and the Note
Purchaser’s rights and obligations hereunder and interest herein in whole or in
part (including by way of the sale of participation interests therein) and/or (ii) any
Advance (or portion thereof) or any Variable Funding Note (or any portion
thereof) to any Person; provided
that the Note Purchaser and any successor and assign shall only assign its
rights and obligations hereunder to an Affiliate of Wachovia and that such
assignee executes and delivers to the Servicer, the Borrower and the Agent a
fully-executed Transferee Letter substantially in the form of Exhibit O
hereto (a “Transferee Letter”) and a fully-executed Joinder Supplement.
None of the Borrower, the Equityholder, the Transferor or the Servicer may
assign any of its rights and obligations hereunder or under any Transaction
Document or any interest herein or in any Transaction Document without the
prior written consent of the Note Purchaser and the Agent.

 

(b)           Whenever the term “Note Purchaser”
is used herein, it shall mean Wachovia and/or each of its assignees; provided that each such party shall have a
pro rata
share of the rights and obligations of the Note Purchaser hereunder in such
percentage amount (the “Commitment Percentage”) as shall be
obtained by dividing such party’s commitment to fund Advances hereunder by the
total commitment of all parties to fund Advances hereunder. Unless otherwise
specified herein, any right at any time of the Note Purchaser to enforce any
remedy, or instruct the Agent to take (or refrain from taking) any action
hereunder, shall be exercised by the Agent only upon direction by the Required
Note Purchasers at such time.

 

(c)           Notwithstanding any other
provision of this Section 11.04, the Note Purchaser may at any time
pledge or grant a security interest in all or any portion of its rights
(including, without limitation, rights to payment of principal and interest)
under this Agreement to secure obligations of the Note Purchaser to a Federal
Reserve Bank, without notice to or consent of the Borrower or the Agent; provided that no such pledge or grant of a
security interest shall release the Note Purchaser from any of its obligations
hereunder, or substitute any such pledgee or grantee for the Note Purchaser as
a party hereto.

 

SECTION 11.05                     Term of This
Agreement. This Agreement, including, without limitation, the
Borrower’s obligation to observe its covenants set forth in Articles V
and VI and the Servicer’s obligation to observe its covenants set forth
in Articles V and VI, shall remain in 

 

121

 

full force and effect until
the Collection Date; provided
that the rights and remedies with respect to any breach of any representation
and warranty made or deemed made by the Borrower or the Servicer pursuant to Articles
III and IV and the indemnification and payment provisions of Article VIII
and Article XI and the provisions of Section 11.07, Section 11.08
and Section 11.09 shall be continuing and shall survive any
termination of this Agreement. Notwithstanding anything herein to the contrary,
the Collection Date will be deemed to have occurred upon payment in full of all
Obligations (without giving effect to clause (ii) of the definition
thereof) pursuant to clause (i) of the first proviso of Section 2.18(b) or
pursuant to Section 2.18(c)(i).

 

SECTION 11.06                     GOVERNING LAW; JURY WAIVER. THIS
AGREEMENT SHALL, IN ACCORDANCE WITH SECTION 5-1401 OF THE GENERAL
OBLIGATIONS LAW OF THE STATE OF NEW YORK, BE GOVERNED BY THE LAWS OF THE STATE
OF NEW YORK. EACH OF THE PARTIES HERETO WAIVES, TO THE FULLEST EXTENT PERMITTED
BY LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION ARISING DIRECTLY OR INDIRECTLY OUT OF, UNDER OR IN CONNECTION WITH
THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREUNDER.

 

SECTION 11.07                     Costs, Expenses
and Taxes.

 

(a)           In addition to the rights of
indemnification granted to the Trustee, the Bank, the Agent, the Note
Purchaser, the Collateral Custodian and its Affiliates under Section 8.01
and Section 8.02 hereof, each of the Borrower, the Servicer and the
Transferor agrees to pay on demand all reasonable out-of-pocket costs and expenses
of the Agent, the Note Purchaser, the Trustee, the Bank and the Collateral
Custodian 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, the Transaction Documents and the other documents to be delivered
hereunder or in connection herewith, including, without limitation, the
reasonable fees and out-of-pocket expenses of counsel for the Agent, the Note
Purchaser, the Trustee, the Bank and the Collateral Custodian with respect
thereto and with respect to advising the Agent, the Note Purchaser, the
Trustee, the Bank and the Collateral Custodian as to their respective rights
and remedies under this Agreement and the other documents to be delivered
hereunder or in connection herewith, and all out-of-pocket costs and expenses,
if any (including reasonable counsel fees and expenses), incurred by the Agent,
the Note Purchaser, the Trustee, the Bank or the Collateral Custodian in
connection with the enforcement of this Agreement or any Transaction Document
by such Person and the other documents to be delivered hereunder or in
connection herewith.

 

(b)           The Borrower, the
Servicer  and the Transferor shall pay on
demand any and all stamp, sales, excise and other taxes and fees payable or
determined to be payable to any Governmental Authority in connection with the
execution, delivery, filing and recording of this Agreement, the other
documents to be delivered hereunder or any other Transaction Document or the
funding or maintenance of Advances hereunder.

 

(c)           The Servicer and the
Transferor shall pay on demand all other reasonable out-of-pocket costs,
expenses and Taxes (excluding income taxes) incurred by the Agent, the Note
Purchaser, the Trustee, the Collateral Custodian and the Bank, including,
without 

 

122

 

limitation, all costs and
expenses incurred by the Agent and the Note Purchaser in connection with
periodic audits of the Borrower’s, the Transferor’s or the Servicer’s books and
records.

 

(d)           For the avoidance of doubt,
except with respect to the costs and expenses to be paid to the Trustee and the
Collateral Custodian, costs and expenses to be paid pursuant to this Section 11.07
shall exclude all allocable overhead costs and expenses.

 

SECTION 11.08                     No Proceedings. Each of the
Servicer and the Transferor agree that it will not institute against, or join
any other Person in instituting against, the Borrower any proceedings of the
type referred to in the definition of Bankruptcy Event so long as there shall
not have elapsed one year and one day (or such longer preference period as
shall then be in effect) since the Collection Date.

 

SECTION 11.09                     Recourse
Against Certain Parties.

 

(a)           No recourse under or with
respect to any obligation, covenant or agreement (including, without
limitation, the payment of any fees or any other obligations) of the Agent or
any Secured Party as contained in this Agreement or any other agreement,
instrument or document entered into by the Agent or any Secured Party pursuant
hereto or in connection herewith shall be had against any administrator of the
Agent or any Secured Party or any incorporator, affiliate, stockholder, officer,
employee or director of the Agent or any Secured Party or of any such
administrator, as such, by the enforcement of any assessment or by any legal or
equitable proceeding, by virtue of any statute or otherwise; it being expressly
agreed and understood that the agreements of each party hereto contained in
this Agreement and all of the other agreements, instruments and documents
entered into by the Agent or any Secured Party pursuant hereto or in connection
herewith are, in each case, solely the corporate obligations of such party (and
nothing in this Section 11.09 shall be construed to diminish in any
way such corporate obligations of such party), and that no personal liability
whatsoever shall attach to or be incurred by any administrator of the Agent or
any Secured Party or any incorporator, stockholder, affiliate, officer,
employee or director of the Note Purchaser or the Agent or of any such
administrator, as such, or any of them, under or by reason of any of the
obligations, covenants or agreements of the Agent or any Secured Party
contained in this Agreement or in any other such instruments, documents or
agreements, or are implied therefrom, and that any and all personal liability
of every such administrator of the Agent or any Secured Party and each
incorporator, stockholder, affiliate, officer, employee or director of the
Agent or any Secured Party or of any such administrator, or any of them, for
breaches by the Agent or any Secured Party of any such obligations, covenants
or agreements, which liability may arise either at common law or in equity, by
statute or constitution, or otherwise, is hereby expressly waived as a
condition of and in consideration for the execution of this Agreement.

 

(b)           Notwithstanding any contrary
provision set forth herein, no claim may be made by the Borrower, the
Transferor, the Equityholder or the Servicer or any other Person against the
Agent or any Secured Party or their respective Affiliates, directors, officers,
employees, attorneys or agents for any special, indirect, consequential or
punitive damages in respect to any claim for breach of contract or any other
theory of liability arising out of or related to the transactions contemplated
by this Agreement, or any act, omission or event occurring in connection therewith;
and the Borrower, the Transferor, the Equityholder and the Servicer each 

 

123

 

hereby waives, releases, and
agrees not to sue upon any claim for any such damages, whether or not accrued
and whether or not known or suspected.

 

(c)           No obligation or liability
to any Obligor under any of the Loan Assets is intended to be assumed by the
Agent or any Secured Party under or as a result of this Agreement and the
transactions contemplated hereby.

 

(d)           The provisions of this Section 11.09
shall survive the termination of this Agreement.

 

SECTION 11.10                     Execution in
Counterparts; Severability; Integration. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which when taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Agreement by e-mail in portable document format (.pdf) or facsimile shall be
effective as delivery of a manually executed counterpart of this Agreement. In
the event that any provision in or obligation under this Agreement shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby. This Agreement, the Term-Out Sale and Servicing
Agreement and any agreements or letters (including fee letters) executed in
connection herewith contains the final and complete integration of all prior
expressions by the parties hereto with respect to the subject matter hereof and
shall constitute the entire agreement among the parties hereto with respect to
the subject matter hereof, superseding all prior oral or written understandings
other than any fee letter delivered by the Servicer to the Agent and the Note
Purchaser.

 

SECTION 11.11                     Consent to
Jurisdiction; Service of Process.

 

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

 

(b)           Each of the Borrower and the
Servicer agrees that service of process may be effected by mailing a copy
thereof by registered or certified mail, postage prepaid, to the Borrower or
the Servicer, as applicable, at its address specified in Section 11.02
or at such other address as the Agent shall have been notified in accordance
herewith. Nothing in this Section 11.11 shall affect the right of
the Note Purchaser or the Agent to serve legal process in any other manner
permitted by law.

 

124

 

SECTION 11.12                     Characterization
of Conveyances Pursuant to the Purchase and Sale Agreements.

 

(a)           It is the express intent of
the parties hereto that the conveyance of the Eligible Loan Assets by the
Transferor to the Equityholder and the Equityholder to the Borrower as
contemplated by the Purchase and Sale Agreements be, and be treated for all
purposes (other than accounting purposes and subject to the tax
characterization of the Borrower and the Advances described in Section 5.01(aa)
and Section 5.02(k) hereof) as, a sale by the Transferor and
the Equityholder, as applicable, of such Eligible Loan Assets. It is, further,
not the intention of the parties that such conveyance be deemed a pledge of the
Eligible Loan Assets by the Transferor to the Equityholder and the Equityholder
to the Borrower to secure a debt or other obligation of the Transferor or
Equityholder, as applicable. However, in the event that, notwithstanding the
intent of the parties, the Eligible Loan Assets are held to continue to be
property of the Transferor (in the case of the First Tier Purchase and Sale
Agreement) or the Equityholder (in the case of the Second Tier Purchase and
Sale Agreement), as applicable, then the parties hereto agree that: (i) each
of the Purchase and Sale Agreements shall also be deemed to be a security
agreement under Applicable Law; (ii) the transfer of the Eligible Loan
Assets provided for in the First Tier Purchase and Sale Agreement shall be
deemed to be a grant by the Transferor to the Equityholder of a first priority
security interest (subject only to Permitted Liens) in all of the Transferor’s
right, title and interest in and to the Eligible Loan Assets and all amounts
payable to the holders of the Eligible Loan Assets in accordance with the terms
thereof and all proceeds of the conversion, voluntary or involuntary, of the
foregoing into cash, instruments, securities or other property, including,
without limitation, all amounts from time to time held or invested in the
Controlled Accounts, whether in the form of cash, instruments, securities or
other property; (iii) the transfer of the Eligible Loan Assets provided
for in the Second Tier Purchase and Sale Agreement shall be deemed to be a
grant by the Equityholder to the Borrower of a first priority security interest
(subject only to Permitted Liens) in all of such Equityholder’s right, title
and interest in and to the Eligible Loan Assets and all amounts payable to the
holders of the Eligible Loan Assets in accordance with the terms thereof and
all proceeds of the conversion, voluntary or involuntary, of the foregoing into
cash, instruments, securities or other property, including, without limitation,
all amounts from time to time held or invested in the Controlled Accounts,
whether in the form of cash, instruments, securities or other property; (iv) the
possession by the Borrower (or the Collateral Custodian on its behalf) of Loan
Assets and such other items of property as constitute instruments, money,
negotiable documents or chattel paper shall be, subject to clause (v),
for purposes of perfecting the security interest pursuant to the UCC; and (v) acknowledgements
from Persons holding such property shall be deemed acknowledgements from
custodians, bailees or agents (as applicable) of the Borrower for the purpose
of perfecting such security interest under Applicable Law. The parties further
agree that any assignment of the interest of the Borrower pursuant to any
provision hereof shall also be deemed to be an assignment of any security
interest created pursuant to the terms of the Purchase and Sale Agreements. The
Borrower shall, to the extent consistent with this Agreement and the other Transaction
Documents, take such actions as may be necessary to ensure that, if either of
the Purchase and Sale Agreements were deemed to create a security interest in
the Eligible Loan Assets, such security interest would be deemed to be a
perfected security interest of first priority (subject only to Permitted Liens)
under Applicable Law and will be maintained as such throughout the term of this
Agreement.

 

125

 

(b)           It is the
intention of each of the parties hereto that the Eligible Loan Assets conveyed
by the Transferor to the Equityholder pursuant to the First Tier Purchase and
Sale Agreement and by the Equityholder to the Borrower pursuant to the Second
Tier Purchase and Sale Agreement shall constitute assets owned by the Borrower
and shall not be part of the Transferor’s estate or the Equityholder’s estate,
as applicable, in the event of the filing of a bankruptcy petition by or
against the Transferor or Equityholder, as applicable, under any bankruptcy or
similar law.

 

(c)           The Borrower
agrees to treat, and shall cause the Equityholder and the Transferor to treat,
for all purposes (other than accounting purposes and subject to the tax
characterization of the Borrower and the Advances described in Section 5.01(aa)
and Section 5.02(k) hereof), the transactions effected by the
First Tier Purchase and Sale Agreements as sales of assets to the Equityholder
and transactions effected by the Second Tier Purchase and Sale Agreements as
sales of assets to the Borrower. The Borrower and the Servicer each hereby
agree to cause each of the Transferor and the Equityholder, as applicable, to
reflect in the Transferor’s or Equityholder’s financial records, as applicable,
and to include a note in the publicly filed annual and quarterly financial
statements of Ares indicating that: (i) assets related to transactions
(including transactions pursuant to the Transaction Documents) that do not meet
SFAS 140 requirements for accounting sale treatment are reflected in the
consolidated balance sheet of Ares, as finance receivables pledged and
non-recourse, secured borrowings and (ii) those assets are owned by a
special purpose entity that is consolidated in the financial statements of Ares,
and the creditors of that special purpose entity have received ownership and/or
security interests in such assets and such assets are not intended to be
available to the creditors of sellers (or any affiliate of the sellers, other
than the Guarantor) of such assets to that special purpose entity.

 

SECTION 11.13                     Confidentiality.

 

(a)           Each of the
Agent, the Note Purchaser, the Servicer, the Trustee, the Borrower, the Bank,
the Equityholder, the Transferor and the Collateral Custodian 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, and all information in
connection with or related to the Loan Agreements (including but not limited to
any information provided pursuant to Section 6.08), obtained by it
or them in connection with the structuring, negotiating and execution of the
transactions contemplated herein, except that each such party and its officers
and employees may (i) disclose such information to its external
accountants, investigators, auditors, attorneys or other agents, including any
Approved Valuation Firm engaged by such party in connection with any due
diligence or comparable activities with respect to the transactions and Loan
Assets contemplated herein and the agents of such Persons (“Excepted Persons”);
provided that each Excepted
Person shall, as a condition to any such disclosure, agree for the benefit of
the Agent, the Note Purchaser, the Servicer, the Trustee, the Borrower, the
Bank, the Equityholder,  the Transferor
and the Collateral Custodian 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 

 

126

 

pursuant
to arbitration) involving any of the Transaction Documents for the purpose of
defending itself, reducing its liability, or protecting or exercising any of
its claims, rights, remedies, or interests under or in connection with any of
the Transaction Documents. 
Notwithstanding the foregoing provisions of this Section 11.13(a),
the Servicer may, subject to Applicable Law and the terms of any Loan
Agreements, make available copies of the documents in the Servicing Files and
such other documents it holds in its capacity as Servicer pursuant to the terms
of this Agreement, to any of its creditors. 
It is understood that the financial terms that may not be disclosed
except in compliance with this Section 11.13(a) include,
without limitation, all fees and other pricing terms, and all Events of
Default, Servicer Termination Events, and priority of payment provisions.

 

(b)           Anything herein
to the contrary notwithstanding, the Borrower, the Equityholder and the
Servicer each hereby consents to the disclosure of any nonpublic information
with respect to it (i) to the Agent, the Note Purchaser,  the Trustee or the Collateral Custodian by
each other, (ii) by the Agent, the Note Purchaser,  the Trustee and the Collateral Custodian to
any prospective or actual assignee or participant of any of them provided such
Person agrees to hold such information confidential, or (iii) by the
Agent, the Note Purchaser, the Trustee and the Collateral Custodian to any
provider of a surety, guaranty or credit or liquidity enhancement to the Note
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 Note Purchaser, the Agent,
the Trustee and the Collateral Custodian may disclose any such nonpublic
information as required pursuant to any law, rule, regulation, direction,
request or order of any judicial, administrative or regulatory authority or
proceedings (whether or not having the force or effect of law).

 

(c)           Notwithstanding
anything herein to the contrary, the foregoing shall not be construed to
prohibit (i) disclosure of any and all information that is or becomes
publicly known; (ii) disclosure of any and all information (a) if
required to do so by any applicable statute, law, rule or regulation, (b) to
any government agency or regulatory body having or claiming authority to
regulate or oversee any respects of the Note Purchaser’s, the Agent’s,  the Trustee’s or the Collateral Custodian’s
business or that of their affiliates, (c) pursuant to any subpoena, civil
investigative demand or similar demand or request of any court, regulatory
authority, arbitrator or arbitration to which the Agent, the Note Purchaser or
the Trustee 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, the Equityholder or the Transferor or (e) to
any affiliate, independent or internal auditor, agent, employee or attorney of
the Trustee or the Collateral Custodian having a need to know the same, provided that the disclosing party advises
such recipient of the confidential nature of the information being disclosed;
or (iii) any other disclosure authorized by the Borrower, Servicer, the
Equityholder or the Transferor.

 

SECTION 11.14                     Non-Confidentiality
of Tax Treatment.

 

All parties hereto agree
that each of them and each of their employees, representatives, and other agents
may disclose to any and all Persons, without limitation of any kind, the tax
treatment and tax structure of the transaction and all materials of any kind
(including, without limitation, opinions or other tax analyses) that are
provided to any of them 

 

127

 

relating
to such tax treatment and tax structure. 
“Tax treatment” and “tax structure” shall have the same meaning as such
terms have for purposes of Treasury Regulation Section 1.6011-4; provided that with respect to any
document or similar item that in either case contains information concerning
the tax treatment or tax structure of the transaction as well as other
information, the provisions of this Section 11.14
shall only apply to such portions of the document or similar item that relate
to the tax treatment or tax structure of the transactions contemplated hereby.

 

SECTION 11.15                     Waiver of Set Off.

 

Each of the parties hereto
hereby waives any right of setoff it may have or to which it may be entitled
under this Agreement from time to time against the Note Purchaser or its
assets.

 

SECTION 11.16                     Headings and
Exhibits.

 

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

 

SECTION 11.17                     Breaches of
Representations, Warranties and Covenants.

 

For the avoidance of doubt,
no breach or default of any representation, warranty or covenant contained in Sections
4.01, 4.02, 4.03 or 4.05 or 5.01, 5.02, 5.03,
5.04 that does not constitute an Unmatured Event of Default or Event of
Default shall be deemed to be a breach or default hereunder; provided that the foregoing shall not
affect the definition of “Eligible Loan Asset”, the definition of “Warranty
Event”, Sections 2.07(d), 2.07(f), 2.15, 2.21, 3.02(a),
3.04(g), 5.01(n), 8.01, 8.02, 11.05 and the
schedules and exhibits hereto.

 

SECTION 11.18                     Assignments of
Loan Assets.

 

(a)           Notwithstanding
anything to the contrary herein, solely for administrative convenience and
solely in the case of Third Party Acquired Loan Assets, (i) for purposes
of clause (a)(i) of the definition of “Required Loan Documents”, the chain
of endorsements required therein by the third party to the Transferor, the
Transferor to the Equityholder and the Equityholder to the Borrower may be
satisfied by a direct endorsement from the applicable third party to the
Borrower or (ii) delivery of the transfer documents or instruments
required by clause (a)(ii) of the definition of “Required Loan Documents”
may be satisfied by delivery of transfer documents or instruments evidencing
the assignment of such Loan Asset by the applicable third party directly to the
Borrower (and by the Borrower either to the Trustee or in blank).

 

(b)           Nothing in this
Section 11.18 shall limit any requirement that all Loan Assets
treated as or represented to be Eligible Loan Assets hereunder or in any
Transaction Document be purchased by Borrower from the Equityholder pursuant to
the Second Tier Purchase and Sale Agreement and by the Equityholder from the
Transferor pursuant to the First Tier Purchase and Sale Agreement (as evidenced
by the Assignments applicable to each Purchase and Sale Agreement) or any
representations or warranties with respect to Loan Assets 

 

128

 

so
purchased or the liabilities or recourse of the Transferor or Equityholder, as
applicable, pertaining to such sales.

 

ARTICLE XII.

GUARANTY

 

SECTION 12.01                     The Guaranty.

 

(a)           In order to
induce Agent, the Note Purchaser and the Trustee to enter into this Agreement
and in recognition of the direct benefits to be received by the Guarantor from
the Borrower Guaranty, the Guarantor hereby agrees with the Agent and Trustee,
on behalf of the Secured Parties as follows: 
the Guarantor hereby unconditionally and irrevocably guarantees as
primary obligor and not merely as surety the full and prompt payment when due,
whether upon maturity, by acceleration or otherwise, of any and all Obligations
(the “Guaranteed Obligations”). 
If any or all of the indebtedness becomes due and payable hereunder, the
Guarantor unconditionally promises to deposit (or cause to be deposited) into
the Collection Account sufficient funds to pay such Guaranteed Obligations
together with any and all reasonable expenses which may be incurred by the
Agent, Trustee or any other Secured Party in collecting any of the Guaranteed
Obligations.  The Guaranty set forth in
this Article XII is a guaranty of timely payment and not of
collection.  The word “indebtedness” is
used in this Article XII in its most comprehensive sense and
includes any and all advances, debts, obligations and liabilities of the
Borrower, including specifically all Guaranteed Obligations, arising in
connection with this Agreement or any other Transaction Document, in each case,
heretofore, now, or hereafter made, incurred or created, whether voluntarily or
involuntarily, absolute or contingent, liquidated or unliquidated, determined
or undetermined, whether or not such indebtedness is from time to time reduced,
or extinguished and thereafter increased or incurred, whether the Borrower may
be liable individually or jointly with others, whether or not recovery upon
such indebtedness may be or hereafter become barred by any statute of
limitations, and whether or not such indebtedness may be or hereafter become
otherwise unenforceable.

 

(b)           Notwithstanding
any provision to the contrary contained herein or in any other of the
Transaction Documents, to the extent the obligations of the Guarantor shall be
adjudicated to be invalid or unenforceable for any reason (including, without
limitation, because of any applicable state or federal law relating to
fraudulent conveyances or transfers) then the obligations of the Guarantor
hereunder shall be limited to the maximum amount that is permissible under
Applicable Law (including, without limitation, the Bankruptcy Code).

 

SECTION 12.02                     Bankruptcy.

 

Additionally, the Guarantor
unconditionally and irrevocably guarantees the payment of any and all
Guaranteed Obligations of the Borrower to any of the Secured Parties whether or
not due or payable by the Borrower upon the occurrence of any Bankruptcy Event
relating to the Borrower, and unconditionally promises to pay such Guaranteed
Obligations to the Trustee for the account of the Secured Parties, or order, on
demand, in lawful money of the United States. 
The Guarantor further agrees that to the extent that the Borrower shall
make a payment or a transfer of an interest in any property to the Agent, any
other Secured Party or the 

 

129

 

Trustee,
which payment or transfer or any part thereof is subsequently invalidated,
declared to be fraudulent or preferential, or otherwise is avoided, and/or
required to be repaid to the Borrower, the estate of the Borrower, a trustee,
receiver or any other party under any bankruptcy law, state or federal law,
common law or equitable cause, then to the extent of such avoidance or
repayment, the obligation or part thereof intended to be satisfied shall be
revived and continued in full force and effect as if said payment had not been
made.

 

SECTION 12.03                     Nature of
Liability.

 

The liability of the
Guarantor hereunder is exclusive and independent of any security for or other
guaranty of the Guaranteed Obligations of the Borrower whether executed by the
Guarantor, any other guarantor or by any other party, and the Guarantor’s
liability hereunder shall not be affected or impaired by (a) any direction
as to application of payment by the Borrower or by any other party, or (b) any
other continuing or other guaranty, undertaking or maximum liability of a
guarantor or of any other party as to the Guaranteed Obligations of the
Borrower, or (c) any payment on or in reduction of any such other guaranty
or undertaking, or (d) any dissolution, termination or increase, decrease
or change in personnel by the Servicer or the Transferor, or (e) any
payment made to the Agent, any other Secured Party or the Trustee on the
Guaranteed Obligations that the Agent, such Secured Party or the Trustee repays
to the Borrower pursuant to court order in any bankruptcy, reorganization,
arrangement, moratorium or other debtor relief proceeding, and the Guarantor
waives any right to the deferral or modification of its obligations hereunder
by reason of any such proceeding. All parties hereto agree that,
notwithstanding anything in the Term-Out Sale and Servicing Agreement to the
contrary, the liability of the Borrower (in the capacity of the “Guarantor”
under the Term-Out Sale and Servicing Agreement) shall not be affected or
impaired by any of the foregoing clauses (a) through (e), as though such
clauses related to the “Guaranteed Obligations” thereunder.

 

SECTION 12.04                     Independent
Obligation.

 

The obligations of the
Guarantor hereunder is independent of the obligations of the Borrower, and a
separate action or actions may be brought and prosecuted against the Guarantor
whether or not action is brought against the Borrower and whether or not
Borrower is joined in any such action or actions.

 

SECTION 12.05                     Authorization.

 

The Guarantor expressly
authorizes the Agent, the Note Purchaser, and the Trustee without notice or
demand (except as shall be required by applicable statute and cannot be
waived), and without affecting or impairing its liability hereunder, from time
to time to (a) renew, compromise, extend, increase, accelerate or
otherwise change the time for payment of, or otherwise change the terms of the
Guaranteed Obligations or any part thereof in accordance with this Agreement
including any increase or decrease of the rate of interest thereon, (b) take
and hold security from the Guarantor or any other party for the payment of the
Guaranty or the Guaranteed Obligations and exchange, enforce, waive and release
any such security, (c) apply such security and direct the order or manner
of sale thereof as the Agent in its sole reasonable discretion may determine
and (d) release or substitute any one or more endorsers, the Guarantor,
the Borrower or other obligors.

 

130

 

SECTION 12.06                     Reliance.

 

It is not necessary for the
Agent or any other Secured Party to inquire into the capacity or powers of the
Borrower, the Servicer or the officers, directors, members, partners or agents
acting or purporting to act on its behalf, and any Guaranteed Obligations made
or created in reliance upon the professed exercise of such powers shall be
guaranteed hereunder.

 

SECTION 12.07                     Waiver.

 

(a)           The Guarantor
hereby waives any right (except as shall be required by applicable statute and
cannot be waived) to require the Agent or any other Secured Party to (i) proceed
against the Borrower, any other guarantor or any other party, (ii) proceed
against or exhaust any security held from the Borrower, any other guarantor or
any other party, or (iii) pursue any other remedy in the Agent’s or any
Secured Party’s power whatsoever.  The
Guarantor hereby waives any defense based on or arising out of any defense of
the Borrower, any other guarantor or any other party other than payment in full
of the Guaranteed Obligations (other than contingent indemnity obligations),
including without limitation any defense based on or arising out of the
disability of the Borrower, the Servicer, the Transferor, any other guarantor
or any other party, or the unenforceability of the Guaranteed Obligations or
any part thereof from any cause, or the cessation from any cause of the
liability of the Borrower other than payment in full of the Guaranteed
Obligations.  The Agent may, as set forth
in Article VII, foreclose on any security held by the Trustee or
exercise any other right or remedy the Agent or any other Secured Party may
have against the Borrower or any other party, or any security, without
affecting or impairing in any way the liability of the Guarantor hereunder
except to the extent the Guaranteed Obligations have been paid in full.  The Guarantor hereby waives any defense
arising out of any such election by the Agent or any other Secured Party, even
though such election operates to impair or extinguish any right of
reimbursement or subrogation or other right or remedy of the Guarantor against
the Borrower or any other party or any security.

 

(b)           The Guarantor
hereby waives all presentments, demands for performance, protests and notices,
including without limitation notices of nonperformance, notice of protest,
notices of dishonor, notices of acceptance of the Guaranty, and notices of the
existence, creation or incurring of new or additional Guaranteed Obligations.
The Guarantor assumes all responsibility for being and keeping itself informed
of the Borrower’s, Servicer’s and Transferor’s financial condition and assets,
and of all other circumstances bearing upon the risk of nonpayment of the
Guaranteed Obligations and the nature, scope and extent of the risks which such
Guarantor assumes and incurs hereunder, and agrees that neither the Agent nor
any other Secured Party shall have any duty to advise the Guarantor of
information known to it regarding such circumstances or risks.

 

(c)           The Guarantor
hereby agrees it will not exercise any rights of subrogation which it may at
any time otherwise have as a result of the Guaranty (whether contractual, under
Section 509 of the U.S. Bankruptcy Code, or otherwise) to the claims of
the Secured Parties against the Borrower or any other guarantor of the
Guaranteed Obligations of the Borrower owing to the Secured Parties
(collectively, the “Other Parties”) and all contractual,
statutory or common law rights of reimbursement, contribution or indemnity from
any Other Party which it may at any time otherwise have as a result of the
Guaranty until such time as the Guaranteed 

 

131

 

Obligations
shall have been paid in full.  The
Guarantor hereby further agrees not to exercise any right to enforce any other
remedy that the Agent, the other Secured Parties or the Trustee now have or may
hereafter have against any Other Party, any endorser or any other guarantor of
all or any part of the Guaranteed Obligations of the Borrower and any benefit
of, and any right to participate in, any security or collateral given to or for
the benefit of the Secured Parties to secure payment of the Guaranteed
Obligations of the Borrower until such time as the Guaranteed Obligations shall
have been paid in full (other than contingent indemnity obligations).

 

SECTION 12.08                     Limitation on
Enforcement.

 

The
Secured Parties agree that the Guaranty may be enforced only by the action of
the Trustee, on behalf of the Secured Parties and at the direction of the
Agent, and that no Note Purchaser shall have any right individually to seek to
enforce or to enforce the Guaranty, it being understood and agreed that such
rights and remedies may be exercised by the Trustee for the benefit of the
Secured Parties under the terms of this Agreement.

 

SECTION 12.09                     Security for
Guaranty.

 

All parties hereto agree
that the assets of the Guarantor shall secure the Guaranteed Obligations.  In furtherance of such agreement, the parties
hereto agree that the definition of “Aggregate Unpaids”, as such term is used
in the Term-Out Sale and Servicing Agreement, shall include the Obligations for
all purposes under the Term-Out Sale and Servicing Agreement (other than with
respect to (i) Sections 2.9(a)(7), 2.9(b)(2) and 2.10(a)(7) thereunder
and (ii) determining whether the “Collection Date” has occurred for
purposes of Section 13.6 in the Term-Out Sale and Servicing Agreement in
the event that (x) the “Facility Amount”, 
as such term is used in the Term-Out Sale and Servicing Agreement, is
terminated in full pursuant to Section 2.4(b) thereunder or (y) in
the absence of any “Termination Event” (as such term is defined in the Term-Out
Sale and Servicing Agreement), all other “Aggregate Unpaids” (as such term is
defined in the Term-Out Sale and Servicing Agreement) are paid in full pursuant
to and in accordance with Section 2.9 thereunder). For the avoidance of
doubt, the parties hereto further agree that any failure of the Guarantor to
pay any amounts owed hereunder on account of the Guaranteed Obligations shall
constitute a “Termination Event” under Section 10.1(a) of the
Term-Out Sale and Servicing Agreement.

 

ARTICLE XIII.

COLLATERAL CUSTODIAN

 

SECTION 13.01                     Designation of
Collateral Custodian.

 

(a)           Initial
Collateral Custodian.  The role of
Collateral Custodian with respect to the Required Loan Documents shall be conducted
by the Person designated as Collateral Custodian hereunder from time to time in
accordance with this Section 13.01. 
Until the Agent shall give to Wells Fargo a Collateral Custodian
Termination Notice, Wells Fargo is hereby appointed as, and hereby accepts such
appointment and agrees to perform the duties and obligations of, Collateral
Custodian pursuant to the terms hereof.

 

132

 

(b)            Successor Collateral
Custodian.  Upon the
Collateral Custodian’s receipt of a Collateral Custodian Termination Notice
from the Agent of the designation of a successor Collateral Custodian pursuant
to the provisions of Section 13.05, the Collateral Custodian agrees
that it will terminate its activities as Collateral Custodian hereunder.

 

SECTION 13.02                     Duties of
Collateral Custodian.

 

(a)            Appointment.  The Borrower and the Agent each hereby
appoints Wells Fargo to act as Collateral Custodian, for the benefit of the
Secured Parties.  The Collateral
Custodian hereby accepts such appointment and agrees to perform the duties and
obligations with respect thereto set forth herein.

 

(b)            Duties.  From the Closing Date until its removal
pursuant to Section 13.05, the Collateral Custodian shall perform,
on behalf of the Secured Parties, the following duties and obligations:

 

(i)            The Collateral Custodian
shall take and retain custody of the Required Loan Documents delivered by the
Borrower pursuant to Section 3.02(a) and Section 3.04(b) 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 related
Loan Asset Schedule and a hard copy of the Loan Asset Checklist, the Collateral
Custodian shall review the Required Loan Documents to confirm that (A) such
Required Loan Documents have been properly executed and have no mutilated
pages, (B) UCC and other filings (required by the Required Loan Documents)
have been made, (C) if listed on the Loan Asset Checklist, an Insurance
Policy exists with respect to any real or personal property constituting the
Underlying Collateral, and (D) the related original balance (based on a
comparison to the note or assignment agreement, as applicable), Loan Asset
number and Obligor name, as applicable, with respect to such Loan Asset is
referenced on the related Loan Asset Schedule (such items (A) through (D) collectively,
the “Review Criteria”).  In order
to facilitate the foregoing review by the Collateral Custodian, in connection
with each delivery of Required Loan Documents hereunder to the Collateral
Custodian, the Servicer shall provide to the Collateral Custodian a hard copy
(which may be preceded by an electronic copy, as applicable) of the related
Loan Asset Checklist which contains the Loan Asset information with respect to
the Required Loan Documents being delivered, identification number and the name
of the Obligor with respect to such Loan Asset. 
Notwithstanding anything herein to the contrary, the Collateral
Custodian’s obligation to review the Required Loan Documents shall be limited
to reviewing such Required Loan Documents based on the information provided on
the Loan Asset Checklist. If, at the conclusion of such review, the Collateral
Custodian shall determine that (i) the original balance of the Loan Asset
with respect to which it has received Required Loan Documents is less than as
set forth on the Loan Asset Schedule, the Collateral Custodian shall notify the
Agent and the Servicer of such discrepancy within one Business Day, or (ii) any
Review Criteria is not satisfied, the Collateral Custodian shall within one
Business Day notify the Servicer of such determination and provide the Servicer
with a list of the non-complying Loan Assets and the applicable Review Criteria
that they fail to satisfy. The Servicer shall have five Business Days after
notice or knowledge thereof to 

 

133

 

correct any non-compliance
with any Review Criteria.  In addition,
if requested in writing (in the form of Exhibit N) by the Servicer
and approved by the Agent within 10 Business Days of the Collateral Custodian’s
delivery of such report, the Collateral Custodian shall return any Loan Asset
which fails to satisfy a Review Criteria to the Borrower.  Other than the foregoing, the Collateral
Custodian shall not have any responsibility for reviewing any Required Loan
Documents. Notwithstanding anything to the contrary contained herein, the
Collateral Custodian shall have no duty or obligation with respect to any Loan
Asset checklist delivered to it in electronic form.

 

(ii)           In taking and retaining
custody of the Required Loan Documents, the Collateral Custodian shall be
deemed to be acting as the agent of the Secured Parties; provided that the Collateral Custodian
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 Collateral Custodian’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 the address of the Collateral Custodian on the signature pages attached
hereto, or at such other office as shall be specified to the Agent and the
Servicer by the Collateral Custodian in a written notice delivered at least 30
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. The
Collateral Custodian shall segregate the Required Loan Documents on its
inventory system and will not commingle the physical Required Loan Documents
with any other files of the Collateral Custodian other than those, if any,
relating to Ares and its Affiliates and subsidiaries; provided, however,
the Collateral Custodian shall segregate any commingled files upon written
request of the Agent and the Borrower.

 

(iv)          On the 12th calendar day of every month (or if such day is
not a Business Day, the next succeeding Business Day), the Collateral Custodian
shall provide a written report to the Agent and the Servicer (in a form
mutually agreeable to the Agent and the Collateral Custodian) identifying each
Loan Asset for which it holds Required Loan Documents and the applicable Review
Criteria that any Loan Asset fails to satisfy.

 

(v)           In performing its duties,
the Collateral Custodian shall use the same degree of care and attention as it
employs with respect to similar collateral that it holds as collateral
custodian for others.

 

(c)            (i)            The Collateral Custodian
agrees to cooperate with the Agent and the Trustee and deliver any Required
Loan Documents to the Trustee or Agent (pursuant to a written request in the
form of Exhibit N), as applicable, as requested in order to take
any action that the Trustee or the 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 any rights arising with respect to
Article VII. In the event the Collateral Custodian receives
instructions from the Trustee, the Servicer or the Borrower which 

 

134

 

conflict with any
instructions received by the Agent, the Collateral Custodian shall rely on and
follow the instructions given by the Agent.

 

(ii)           The Agent may direct the
Collateral Custodian to take any such incidental action hereunder.  With respect to other actions which are
incidental to the actions specifically delegated to the Collateral Custodian
hereunder, the Collateral Custodian shall not be required to take any such
incidental action hereunder, but shall be required to act or to refrain from
acting (and shall be fully protected in acting or refraining from acting) upon
the direction of the Agent; provided
that the Collateral Custodian shall not be required to take any action
hereunder at the request of the Agent, any Secured Parties or otherwise if the
taking of such action, in the reasonable determination of the Collateral
Custodian, (x) shall be in violation of any Applicable Law or contrary to
any provisions of this Agreement or (y) shall expose the Collateral
Custodian to liability hereunder or otherwise (unless it has received indemnity
which it reasonably deems to be satisfactory with respect thereto).  In the event the Collateral Custodian
requests the consent of the Agent and the Collateral Custodian does not receive
a consent (either positive or negative) from the Agent within 10 Business Days
of its receipt of such request, then the Agent shall be deemed to have declined
to consent to the relevant action.

 

(iii)          The Collateral Custodian
shall not be liable for any action taken, suffered or omitted by it in
accordance with the request or direction of any Secured Party, to the extent
that this Agreement provides such Secured Party the right to so direct the
Collateral Custodian, or the Agent.  The Collateral
Custodian shall not be deemed to have notice or knowledge of any matter
hereunder, including an Event of Default, unless a Responsible Officer of the
Collateral Custodian has knowledge of such matter or written notice thereof is
received by the Collateral Custodian.

 

SECTION 13.03                     Merger or
Consolidation.

 

Any Person (i) into
which the Collateral Custodian may be merged or consolidated, (ii) that
may result from any merger or consolidation to which the Collateral Custodian
shall be a party, or (iii) that may succeed to the properties and assets
of the Collateral Custodian substantially as a whole, which Person in any of
the foregoing cases executes an agreement of assumption to perform every
obligation of the Collateral Custodian hereunder, shall be the successor to the
Collateral Custodian under this Agreement without further act of any of the
parties to this Agreement.

 

SECTION 13.04                     Collateral Custodian
Compensation.

 

As compensation for its
Collateral Custodian activities hereunder, the Collateral Custodian shall be
entitled to the Collateral Custodian Fees from the Borrower as set forth in the
Collateral Custodian Fee Letter.  The
Collateral Custodian shall be entitled to receive the Collateral Custodian Fees
to the extent of funds available therefor pursuant to the provision of Section 2.04(a) or
(b), as applicable.  The
Collateral Custodian’s entitlement to receive the Collateral Custodian Fees
shall cease on the earlier to occur of:  (i) its
removal as Collateral 

 

135

 

Custodian
pursuant to Section 13.05, (ii) its resignation as Collateral
Custodian pursuant to Section 13.07 of this Agreement or (iii) the
termination of this Agreement.

 

SECTION 13.05                     Collateral
Custodian Removal.

 

The Collateral Custodian may
be removed, with or without cause, by the Agent by notice given in writing to
the Collateral Custodian (the “Collateral Custodian Termination Notice”);
provided, notwithstanding its
receipt of a Collateral Custodian Termination Notice, the Collateral Custodian
shall continue to act in such capacity until a successor Collateral Custodian
has been appointed and has agreed to act as Collateral Custodian hereunder.

 

SECTION 13.06                     Limitation on
Liability.

 

(a)           The Collateral
Custodian may conclusively rely on and shall be fully protected in acting upon
any certificate, instrument, opinion, notice, letter, telegram or other
document delivered to it and that in good faith it reasonably believes to be
genuine and that has been signed by the proper party or parties.  The Collateral Custodian may rely
conclusively on and shall be fully protected in acting upon (a) the
written instructions of any designated officer of the Agent or (b) the
verbal instructions of the Agent.

 

(b)           The Collateral
Custodian may consult counsel satisfactory to it and the advice or opinion of
such counsel shall be full and complete authorization and protection in respect
of any action taken, suffered or omitted by it hereunder in good faith and in
accordance with the advice or opinion of such counsel.

 

(c)           The Collateral
Custodian 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
duties in taking and retaining custody of the Required Loan Documents.

 

(d)           The Collateral
Custodian makes no warranty or representation and shall have no responsibility
(except as expressly set forth in this Agreement) as to the content,
enforceability, completeness, validity, sufficiency, value, genuineness,
ownership or transferability of the Collateral Portfolio, and will not be
required to and will not make any representations as to the validity or value
(except as expressly set forth in this Agreement) of any of the Collateral
Portfolio.  The Collateral Custodian
shall not be obligated to take any legal action hereunder that might in its
judgment involve any expense or liability unless it has been furnished with an
indemnity reasonably satisfactory to it.

 

(e)           The Collateral
Custodian shall have no duties or responsibilities except such duties and
responsibilities as are specifically set forth in this Agreement and no
covenants or obligations shall be implied in this Agreement against the
Collateral Custodian.

 

(f)            The Collateral
Custodian shall not be required to expend or risk its own funds in the
performance of its duties hereunder.

 

136

 

(g)           It is expressly
agreed and acknowledged that the Collateral Custodian is not guaranteeing
performance of or assuming any liability for the obligations of the other
parties hereto or any parties to the Collateral Portfolio.

 

(h)           Subject in all cases
to the last sentence of Section 13.02(c)(i), in case any reasonable
question arises as to its duties hereunder, the Collateral Custodian may, prior
to the occurrence of an Event of Default or the Facility Maturity Date, request
instructions from the Servicer and may, after the occurrence of an Event of
Default or the Facility Maturity Date, request instructions from the Agent, and
shall be entitled at all times to refrain from taking any action unless it has
received instructions from the Servicer or the Agent, as applicable.  The Collateral Custodian shall in all events
have no liability, risk or cost for any action taken pursuant to and in
compliance with the instruction of the Agent. 
In no event shall the Collateral Custodian be liable for special,
indirect or consequential loss or damage of any kind whatsoever (including but
not limited to lost profits), even if the Collateral Custodian has been advised
of the likelihood of such loss or damage and regardless of the form of action.

 

SECTION 13.07                     Collateral
Custodian Resignation.

 

Collateral Custodian may
resign and be discharged from its duties or obligations hereunder, not earlier
than 90 days after delivery to the Agent of written notice of such resignation
specifying a date when such resignation shall take effect.  Upon the effective date of such resignation,
or if the Agent gives Collateral Custodian written notice of an earlier
termination hereof, Collateral Custodian shall (i) be reimbursed for any
costs and expenses Collateral Custodian shall incur in connection with the
termination of its duties under this Agreement and (ii) deliver all of the
Required Loan Documents in the possession of Collateral Custodian to the Agent
or to such Person as the Agent may designate to Collateral Custodian in writing
upon the receipt of a request in the form of Exhibit N; provided that the Borrower shall consent
to any successor Collateral Custodian appointed by the Agent (such consent not
to be unreasonably withheld). Notwithstanding anything herein to the contrary,
the Collateral Custodian may not resign prior to a successor Collateral
Custodian being appointed.

 

SECTION 13.08                     Release
of Documents.

 

(a)           Release for
Servicing.  From time to time and as
appropriate for the enforcement or servicing of any of the Collateral
Portfolio, the Collateral Custodian is hereby authorized (unless and until such
authorization is revoked by the Agent), upon written receipt from the Servicer
of a request for release of documents and receipt in the form annexed hereto as
Exhibit N, to release to the Servicer within two 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 Trustee, on
behalf of the Secured Parties in accordance with the terms of this
Agreement.  The Servicer shall return to
the Collateral Custodian the Required Loan Documents or other such documents (i) promptly
upon the request of the Agent, or (ii) when the Servicer’s need therefor
in connection with such foreclosure or servicing no longer exists, unless the
Loan Asset shall be liquidated, in which case, the Servicer shall deliver an
additional request for release of documents to the Collateral Custodian and
receipt certifying such liquidation from the Servicer to the Trustee, all in
the form annexed hereto as Exhibit N.

 

137

 

(b)           Limitation on
Release.  The foregoing provision
with respect to the release to the Servicer of the Required Loan Documents and
documents by the Collateral Custodian upon request by the Servicer shall be
operative only to the extent that the Agent has consented to such release.  Promptly after delivery to the Collateral
Custodian of any request for release of documents, the Servicer shall provide
notice of the same to the Agent.  Any
additional Required Loan Documents or documents requested to be released by the
Servicer may be released only upon written authorization of the 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
Collateral Custodian of the Servicer’s request for release of documents and
receipt in the form annexed hereto as Exhibit N (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 Collateral Custodian
shall promptly release the related Required Loan Documents to the Servicer.

 

SECTION 13.09                     Return
of Required Loan Documents.

 

The Borrower may, with the
prior written consent of the Agent (such consent not to be unreasonably
withheld), require that the Collateral Custodian return each Required Loan
Document (a) delivered to the Collateral Custodian in error or (b) released
from the Lien of the Trustee hereunder pursuant to Section 2.16, in
each case by submitting to the Collateral Custodian and the Agent a written
request in the form of Exhibit N hereto (signed by both the
Borrower and the Agent) specifying the Collateral Portfolio 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 Collateral Custodian shall
upon its receipt of each such request for return executed by the Borrower and
the Agent promptly, but in any event within five Business Days, return the
Required Loan Documents so requested to the Borrower.

 

SECTION 13.10                     Access
to Certain Documentation and Information Regarding the Collateral Portfolio;
Audits of Servicer.

 

The Collateral Custodian
shall provide to the Agent access to the Required Loan Documents and all other
documentation regarding the Collateral Portfolio including in such cases where
the 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 Collateral Custodian’s normal
security and confidentiality procedures. 
Prior to the Closing Date and periodically thereafter at the discretion
of the Agent, the Agent may review the Servicer’s collection and administration
of the Collateral Portfolio 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 Portfolio, and Required Loan
Documents in conjunction with such a review. 
Such review shall be (subject to Section 5.03(d)(ii))
reasonable in scope and shall be completed in a reasonable period of time.  Without limiting the foregoing provisions of
this Section 13.10, from time to time on request of the Agent, the
Collateral Custodian shall permit 

 

138

 

certified
public accountants or other auditors acceptable to the Agent to conduct, at the
expense of the Servicer (on behalf of the Borrower), a review of the Required
Loan Documents and all other documentation regarding the Collateral Portfolio.

 

SECTION 13.11                     Bailment.

 

The Collateral Custodian
agrees that, with respect to any Required Loan Documents at any time or times
in its possession or held in its name, the Collateral Custodian shall be the
agent and bailee of the Trustee, for the benefit of the Secured Parties, for
purposes of perfecting (to the extent not otherwise perfected) the Trustee’s
security interest in the Collateral Portfolio and for the purpose of ensuring
that such security interest is entitled to first priority status under the UCC.

 

[Signature pages to follow.]

 

139

 

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 II LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Richard S. Davis

  
	
   

  	
   

  	
  Name: Richard S. Davis

  
	
   

  	
   

  	
  Title:   Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Ares Capital CP Funding II
  LLC

  
	
   

  	
  2000 Avenue of the Stars,
  12th Floor

  
	
   

  	
  Los Angeles, California
  90067

  
	
   

  	
  Attention: General Counsel
  and Chief Financial Officer

  
	
   

  	
  Facsimile No.: (310)
  201-4197

  
	
   

  	
  Confirmation No.: (310)
  201-4205

  
	
   

  	
   

  
	
   

  	
  and

  
	
   

  	
   

  
	
   

  	
  Ares Capital CP Funding II
  LLC

  
	
   

  	
  280 Park Avenue, 22nd
  Floor East

  
	
   

  	
  New York, New York 10017

  
	
   

  	
  Attention: General Counsel
  and Chief Financial Officer

  
	
   

  	
  Facsimile No.: (212)
  750-1777

  
	
   

  	
  Confirmation No.: (212) 750-7300

  

 

[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]

 

Ares Capital CP Funding II LLC

Note Purchase Agreement

 

 

	
  THE GUARANTOR:

  	
  ARES CAPITAL CP FUNDING LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Richard S. Davis

  
	
   

  	
   

  	
  Name: Richard S. Davis

  
	
   

  	
   

  	
  Title:   Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Ares Capital CP Funding
  LLC

  
	
   

  	
  2000 Avenue of the Stars,
  12th Floor

  
	
   

  	
  Los Angeles, California
  90067

  
	
   

  	
  Attention: General Counsel
  and Chief Financial Officer

  
	
   

  	
  Facsimile No.: (310)
  201-4197

  
	
   

  	
  Confirmation No.: (310)
  201-4205

  
	
   

  	
   

  
	
   

  	
  and

  
	
   

  	
   

  
	
   

  	
  Ares Capital CP Funding
  LLC

  
	
   

  	
  280 Park Avenue, 22nd
  Floor East

  
	
   

  	
  New York, New York 10017

  
	
   

  	
  Attention: General Counsel
  and Chief Financial Officer

  
	
   

  	
  Facsimile No.: (212)
  750-1777

  
	
   

  	
  Confirmation No.: (212)
  750-7300

  

 

[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]

 

Ares Capital CP Funding II LLC

Note Purchase Agreement

 

 

	
  THE SERVICER:

  	
  ARES CAPITAL CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Richard S. Davis

  
	
   

  	
   

  	
  Name: Richard S. Davis

  
	
   

  	
   

  	
  Title:   Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Ares Capital Corporation

  
	
   

  	
  c/o Ares Management LLC

  
	
   

  	
  2000 Avenue of the Stars,
  12th Floor

  
	
   

  	
  Los Angeles, California
  90067

  
	
   

  	
  Attention: General Counsel
  and Chief Financial Officer

  
	
   

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

  
	
   

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

  
	
   

  	
   

  
	
   

  	
  and

  
	
   

  	
   

  
	
   

  	
  Ares Capital Corporation

  
	
   

  	
  280 Park Avenue, 22nd
  Floor East

  
	
   

  	
  New York, New York 10017

  
	
   

  	
  Attention: Michael J.
  Arougheti and Raymond Wright

  
	
   

  	
  Facsimile No.: (212)
  750-1777

  
	
   

  	
  Confirmation No.: (212)
  750-7300

  

 

[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]

 

Ares Capital CP Funding II LLC

Note Purchase Agreement

 

 

	
  THE TRANSFEROR:

  	
  ARES CAPITAL CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Richard S. Davis

  
	
   

  	
   

  	
  Name: Richard S. Davis

  
	
   

  	
   

  	
  Title:   Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Ares Capital Corporation

  
	
   

  	
  c/o Ares Management LLC

  
	
   

  	
  2000 Avenue of the Stars,
  12th Floor

  
	
   

  	
  Los Angeles, California
  90067

  
	
   

  	
  Attention: General Counsel
  and Chief Financial Officer

  
	
   

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

  
	
   

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

  
	
   

  	
   

  
	
   

  	
  and

  
	
   

  	
   

  
	
   

  	
  Ares Capital Corporation

  
	
   

  	
  280 Park Avenue, 22nd
  Floor East

  
	
   

  	
  New York, New York 10017

  
	
   

  	
  Attention: Michael J.
  Arougheti and Raymond Wright

  
	
   

  	
  Facsimile No.: (212)
  750-1777

  
	
   

  	
  Confirmation No.: (212)
  750-7300

  

 

[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]

 

Ares Capital CP Funding II LLC

Note Purchase Agreement

 

 

	
  THE AGENT:

  	
  WACHOVIA BANK, NATIONAL ASSOCIATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Kevin Sunday

  
	
   

  	
   

  	
  Name: Kevin Sunday

  
	
   

  	
   

  	
  Title:   Director

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Wachovia Bank, National
  Association

  
	
   

  	
  One Wachovia Center, Mail
  Code:  NC0600

  
	
   

  	
  Charlotte, North Carolina
  28288

  
	
   

  	
  Attention: Kevin Sunday 

  
	
   

  	
  Facsimile No.: (704)
  715-0067 

  
	
   

  	
  Confirmation No: (704)
  374-6230

  

 

 

	
  THE NOTE PURCHASER:

  	
  WACHOVIA BANK, NATIONAL ASSOCIATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Kevin Sunday

  
	
   

  	
   

  	
  Name: Kevin Sunday

  
	
   

  	
   

  	
  Title:   Director

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Wachovia Bank, National
  Association

  
	
   

  	
  One Wachovia Center, Mail
  Code:  NC0600

  
	
   

  	
  Charlotte, North Carolina
  28288

  
	
   

  	
  Attention: Kevin Sunday 

  
	
   

  	
  Facsimile No.: (704)
  715-0067 

  
	
   

  	
  Confirmation No: (704)
  374-6230

  

 

[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]

 

Ares Capital CP Funding II LLC

Note Purchase Agreement

 

 

	
  THE TRUSTEE:

  	
  U.S. BANK NATIONAL ASSOCIATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ John T. Edwards 

  
	
   

  	
   

  	
  Name: John T. Edwards

  
	
   

  	
   

  	
  Title:   Assistant Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  U.S. Bank National
  Association

  
	
   

  	
  One Federal Street, Third
  Floor

  
	
   

  	
  Boston, Massachusetts
  02110

  
	
   

  	
  Attention: Corporate Trust
  / CDO Unit — Ares 

  
	
   

  	
  Capital CP Funding II

  
	
   

  	
  Facsimile No: (866)
  738-6062

  

 

 [SIGNATURES CONTINUE ON THE FOLLOWING PAGE]

 

Ares Capital CP Funding II LLC

Note Purchase Agreement

 

 

	
  THE BANK:

  	
  U.S. BANK NATIONAL ASSOCIATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ John T. Edwards 

  
	
   

  	
   

  	
  Name: John T. Edwards

  
	
   

  	
   

  	
  Title:   Assistant Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  U.S. Bank National
  Association

  
	
   

  	
  One Federal Street, Third
  Floor

  
	
   

  	
  Boston, Massachusetts
  02110

  
	
   

  	
  Attention: Corporate Trust
  / CDO Unit — Ares 

  
	
   

  	
  Capital CP Funding II

  
	
   

  	
  Facsimile No: (866)
  738-6062

  

 

[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]

 

Ares Capital CP Funding II LLC

Note Purchase Agreement

 

 

	
  THE COLLATERAL CUSTODIAN:

  	
  WELLS FARGO BANK, NATIONAL ASSOCIATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Benjamin E. Jordan

  
	
   

  	
   

  	
  Name: Benjamin E. Jordan

  
	
   

  	
   

  	
  Title:   Assistant Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Wells Fargo Bank, National
  Association

  
	
   

  	
  ABS Custody Vault

  
	
   

  	
  1055 10th Avenue SE

  
	
   

  	
  MAC N9401-011

  
	
   

  	
  Minneapolis, MN 55414

  
	
   

  	
  Attention:  Corporate Trust Services — Asset-Backed
  Securities Vault

  
	
   

  	
  Phone:  (612) 667-8058

  
	
   

  	
  Fax:  (612) 667-1080

  
	
   

  	
   

  
	
   

  	
  With a copy to:

  
	
   

  	
   

  
	
   

  	
  Wells Fargo Bank, National
  Association

  
	
   

  	
  Sixth Street and Marquette
  Avenue

  
	
   

  	
  MAC N9311-161

  
	
   

  	
  Minneapolis, MN 55479

  
	
   

  	
  Attention:  Corporate Trust Services — Asset-Backed
  Administration

  
	
   

  	
  Phone:  (612) 667-8058

  
	
   

  	
  Fax:  (612) 667-3464

  

 

Ares Capital CP Funding II LLC

Note
Purchase Agreement

 

 

Agreed and Acknowledged by (solely for purposes of Article XII):

 

	
   

  	
  WELLS FARGO SECURITIES, LLC (f/k/a 

  
	
   

  	
  Wachovia Capital Markets,
  LLC), as the

  
	
   

  	
  Administrative Agent under
  the Term-Out Sale

  
	
   

  	
  and Servicing Agreement

  
	
   

  	
   

  

 

	
   

  	
  By:

  	
    /s/ Mary Katherine DuBose

  
	
   

  	
   

  	
  Name: Mary Katherine
  DuBose

  
	
   

  	
   

  	
  Title:   Managing Director

  

 

Ares Capital CP Funding II LLC

Note
Purchase Agreement

 

 

SCHEDULE III

 

ELIGIBILITY CRITERIA

 

The
representations and warranties set forth in this Schedule III are made by the
Borrower and the Servicer under the Note Purchase Agreement, the Transferor
under the First Tier Purchase and Sale Agreement and the Equityholder under the
Second Tier Purchase and Sale Agreement, with respect to all Loan Assets which
are designated as being Eligible Loan Assets on any Borrowing Base Certificate
or are otherwise represented to the Agent or the Note Purchaser as being Eligible
Loan Assets, or are included as Eligible Loan Assets in any calculation set
forth in the Agreement to which this Schedule III is attached.

 

1.             Each such Loan
Asset is a perfected first lien, senior secured, commercial loan evidenced by a
note or a credit document and an assignment document in the form specified in
the applicable credit agreement or, if no such specification, on the LSTA
assignment form. Each such Loan Asset and the Portfolio Assets related thereto
is subject to a valid, subsisting and enforceable first priority perfected
security interest (subject only to Permitted Liens) in favor of the Trustee, on
behalf of the Secured Parties, and the Borrower has good and marketable title
to such Loan Asset and the Portfolio Assets related thereto, free and clear of
all Liens other than any Permitted Liens.

 

2.             The Obligor with
respect to each such Loan Asset is organized under the laws of the United
States or any state thereof.

 

3.             Each such Loan
Asset is denominated in United States dollars.

 

4.             No such Loan Asset
is Margin Stock.

 

5.             The acquisition of
such Loan Asset does not cause the Borrower or the assets constituting the
Collateral Portfolio to be required to be registered as an investment company
under the 1940 Act, as amended.

 

6.             As of the related
Cut-Off Date, no such Loan Asset is a financing by a debtor-in-possession in
any Bankruptcy Proceeding.

 

7.             No such Loan Asset
is principally secured by real estate.

 

8.             Each such Loan
Asset constitutes a legal, valid, binding and enforceable obligation of the
Obligor thereunder and each guarantor thereof, enforceable against each such
Person in accordance with its terms, subject to usual and customary bankruptcy,
insolvency and equity limitations.

 

9.             Each such Loan
Asset is in the form of, and is treated as, indebtedness for federal income tax
purposes.

 

10.           As of the related
Cut-Off Date and at any time prior to the related Cut-Off Date, except as
permitted under clause 43 set forth below, (i) such Loan Asset is and has
been current on all interest and principal payments under the terms of the
related Loan Agreement and 

 

III-1

 

(ii) there
has been no (a) “event of default” (as defined in the related Loan
Agreement) or (b) any other default, breach, violation or event permitting
acceleration under the terms of any such Loan Asset (of which the Transferor
has actual knowledge) that, in each of the foregoing cases, has not been cured
or waived, unless otherwise approved by the Agent in writing.

 

11.           As of the related
Cut-Off Date, the acquisition of each such Loan Asset by the Borrower, and the
Pledge of each such Loan Asset, has been approved by the Agent.

 

12.           As of the related
Cut-Off Date, the Assigned Value of each such Loan Asset with respect to the
related Obligor and its Affiliates after giving effect to any acquisitions will
not be less than $3,000,000 or greater than $30,000,000, unless the Agent has
provided prior approval.

 

13.           The Obligor with
respect to each such Loan Asset is not an Affiliate of the Servicer or the
Transferor with respect to such Loan Asset.

 

14.           The acquisition of
any such Loan Asset by the Borrower or the Pledge thereof would not, in the
Agent’s commercially reasonable judgment, (i) violate any Applicable Law
or (ii) cause the Agent or the Note Purchaser to fail to comply with any
request or directive (whether or not having the force of law) from any banking
or other Governmental Authority having jurisdiction over the Agent or the Note
Purchaser.

 

15.           No such Loan Asset
contravenes any Applicable Law and no part thereof is in violation of any
Applicable Law.

 

16.           Pursuant to the Loan
Agreement with respect to such Loan Asset, either (i) such Loan Asset is
freely assignable to the Borrower and able to be Pledged to the Trustee, on
behalf of the Secured Parties, without the consent of the Obligor or (ii) (a) 
all consents necessary for assignment of such Loan Asset to the Borrower and
Pledge to the Trustee for the benefit of the Secured Parties have been obtained
and (b) the Loan Agreement provides that any consents necessary for future
assignments shall not be unreasonably withheld by the applicable Obligor and/or
agent, and the rights to enforce rights and remedies in respect of the same
under the applicable Loan Agreement inure to the benefit of the holder of such
Loan Asset (subject to the rights of any applicable agent or other lenders).

 

17.           The funding
obligations for each such Loan Asset and the Loan Agreement under which such
Loan Asset was created have been fully satisfied and all sums available
thereunder have been fully advanced, or if such Loan Asset is a Revolving Loan
Asset or Delayed Draw Loan Asset, either (i) the Borrower shall have or
have caused to be, at the time of the sale of such Loan Asset to the Borrower,
deposited into the Unfunded Exposure Account an amount in United States dollars
equal to the Unfunded Exposure Equity Amount or (ii) the Borrowing Base
shall have been reduced by the Unfunded Exposure Equity Amount with respect to
such Loan Asset.

 

18.           No such Loan Asset
is the subject of any assertions in respect of, any litigation, right of
rescission, set-off, counterclaim or defense, including the defense of usury,
by the related Obligor, nor will the operation of any of the terms of the Loan
Agreements, or the exercise of any right thereunder, render the Loan Agreements
unenforceable in whole or in part, 

 

III-2

 

or
subject to any litigation, right of rescission, set-off, counterclaim or
defense, including the defense of usury, and no such litigation, right of
rescission, set-off, counterclaim or defense has been asserted with respect
thereto, and the Loan Agreements with respect to the Loan Asset provide for an
affirmative waiver by the related Obligor of all litigation, rights of  rescission, set-off and counterclaim against
the Transferor and its assignees.

 

19.           With respect to each
such Loan Asset acquired by the Equityholder from the Transferor under First
Tier Purchase and Sale Agreement and the Borrower from the Equityholder under
the Second Tier Purchase and Sale Agreement, by the Cut-Off Date on which such
Loan Asset is Pledged under the Note Purchase Agreement and on each day
thereafter, the Transferor and the Equityholder will each have caused its
respective master computer records relating to such Loan Asset to be clearly
and unambiguously marked to show that such Loan Asset has been sold to the
Equityholder and the Borrower, respectively.

 

20.           No such Loan Asset
has been repaid, prepaid, satisfied, subordinated or rescinded, in each case,
in full.

 

21.           No such Loan Asset
has been sold, transferred, assigned or pledged by the Borrower to any Person
other than the Trustee for the benefit of the Secured Parties.

 

22.           Such Loan Asset is
not subject to withholding tax unless the Obligor thereon is required under the
terms of the related Loan Agreement 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. The transfer, assignment and conveyance of such Loan Asset
(and the other Portfolio Assets related thereto) from the Transferor to the
Equityholder pursuant to the First Tier Purchase and Sale Agreement and from
the Equityholder to the Borrower pursuant to the Second Tier Purchase and Sale
Agreement, are not subject to and will not result in any fee or governmental
charge (other than income taxes) payable by the Borrower or any other Person to
any federal, state or local government.

 

23.           The Obligor with
respect to such Loan Asset (and any guarantor of such Obligor’s obligations
thereunder), had full legal capacity to execute and deliver the Loan Agreement
which creates such Loan Asset and any other documents related thereto.

 

24.           The Obligor of each
such Loan Asset is not a Government Authority.

 

25.           Each such Loan Asset
(i) was originated or acquired by the Transferor in the ordinary course of
the Transferor’s business and the Transferor has all necessary licenses and
permits to originate or acquire such Loan Asset in the State where the Obligor
was located, and (ii) was sold by the Transferor to the Equityholder under
the First Tier Purchase and Sale Agreement and sold by the Equityholder to the
Borrower under the Second Tier Purchase and Sale Agreement, and the Borrower and
the Equityholder, as applicable, have all necessary licenses and permits to
purchase and own such Loan Assets and enter into Loan Agreements pursuant to
which such Loan Asset was created, in the State where the Obligor is located.

 

26.           There are no proceedings
pending or, to the Borrower’s knowledge, threatened (i) asserting
insolvency of the Obligor of such Loan Asset, or (ii) wherein the Obligor 

 

III-3

 

of
such Loan Asset, any other obligated party or any governmental agency has
alleged that such Loan Asset or the Loan Agreement which creates such Loan
Asset is illegal or unenforceable.

 

27.           Each such Loan Asset
requires the related Obligor to pay all maintenance, repair, insurance and
taxes, together with all other ancillary costs and expenses, with respect to
the related Underlying Collateral.

 

28.           The Underlying
Collateral related to each such Loan Asset has not, and will not, be used by
the related Obligor in any manner or for any purpose which would result in any
material risk of liability being imposed upon the Transferor, the Equityholder,
the Borrower or the Note Purchaser under any federal, state, local or foreign
laws, common laws, statutes, codes, ordinances, rules, regulations, permits,
judgments, agreements or order related to addressing the environment, health or
safety.

 

29.           Each such Loan Asset
has an original term to maturity of not greater than seven years.

 

30.           Each such Loan Asset
does not contain confidentiality restrictions that would prohibit the Note
Purchaser or the Agent from accessing all necessary information with regards to
such Loan Asset.

 

31.           As of the related
Cut-Off Date, each such Loan Asset has a current cash coupon of at least 4.00%
and such coupon is payable at least quarterly.

 

32.           The aggregate
Outstanding Balance for Loan Assets that are Fixed Rate Loan Assets shall not
exceed 15% of the aggregate Outstanding Balance for all Loan Assets Pledged to
the Trustee, on behalf of the Secured Parties.

 

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

 

34.           All of the original
or certified Required Loan Documents, acceptable to the Agent and the
Transferor, with respect to such Loan Asset have been, or will be, delivered to
the Trustee within two Business Days of the applicable Cut-Off Date, 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 Agent.

 

35.           As of the related
Cut-Off Date, each such Loan Asset is not subject to clause (a) or (d) of
the definition of “Material Modification”.

 

36.           Each such Loan Asset
is not an extension of credit by the Transferor to the Obligor for the purpose
of (i) making any past due principal, interest or other payments due on
such Loan Asset, (ii) preventing such Loan Asset or any other loan to the
related Obligor from becoming past due or (iii) preventing such Loan Asset
from becoming defaulted.

 

III-4

 

37.           Each such Loan Asset
is an “Eligible Asset” as defined in Rule 3a-7 under the 1940 Act.

 

38.           Each such Loan Asset
which was issued after July 18, 1984 is in registered form for purposes of
the Code.

 

39.           The Obligor with
respect to such Loan Asset, on the applicable date of determination,  (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 Asset primarily for personal,
family or household purposes; and (iv) as of the related Cut-Off Date, is
not the subject of a Bankruptcy Event, and is not in financial distress and has
not experienced a material adverse change in its condition, financial or
otherwise, in each case, as determined by the Servicer in its reasonable
discretion unless approved in writing by the Agent.

 

40.           All information
provided by the Borrower or the Servicer to the Agent in writing with respect
to such Loan Asset is true and correct in all material respects as of the date
such information is provided.

 

41.           Each such Loan Asset
is not an Equity Security and does not provide for the conversion into an
Equity Security at any time on or after the date it is included as part of the
Collateral Portfolio.

 

42.           No selection
procedure adverse to the interests of the Secured Parties was utilized by the
Borrower in the selection of such Loan Asset for inclusion in the Collateral
Portfolio.

 

43.           Each such Loan Asset
is not a Loan Asset with respect to which interest required by the Loan
Agreement to be paid in cash has previously been deferred or capitalized as
principal and not subsequently paid in full; unless the Obligor has commenced
paying in cash current interest required to be paid in cash.

 

44.           Each such Loan Asset
is not a participation interest in all or a portion of a loan.

 

45.           For any Cut-Off Date prior to the
date on which Agent and JPMorgan shall enter into an intercreditor agreement in
which JPMorgan shall affirm it has no Lien with respect to any of the
Collateral Portfolio sold pursuant to the Purchase and Sale Agreements and
Pledged under this Agreement, the Agent shall receive, on such Cut-Off Date
with respect to each Loan Asset, a release or confirmation of release
(acceptable to the Agent in its sole discretion), executed by JPMorgan, of any
Lien of JPMorgan with respect to such Loan Asset that has been sold pursuant to
the Purchase and Sale Agreements and Pledged under this Agreement.

 

III-5

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00161-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00161-of-00352.parquet"}]]