Document:

Exhibit 10.1

 

Execution Version

 

 

 

 

$300,000,000

 

SECOND AMENDED AND
RESTATED

 

CREDIT AGREEMENT

 

Dated as of June 6,
2008

 

Among

 

GLADSTONE BUSINESS LOAN,
LLC

 

as the Borrower

 

GLADSTONE MANAGEMENT
CORPORATION

 

as the Servicer

 

THE FINANCIAL
INSTITUTIONS FROM TIME TO TIME PARTY HERETO

 

as Committed Lenders

 

THE COMMERCIAL PAPER
LENDERS FROM TIME TO TIME PARTY HERETO

 

as CP Lenders

 

THE FINANCIAL
INSTITUTIONS FROM TIME TO TIME PARTY HERETO

 

as Managing Agents

 

and

 

DEUTSCHE BANK AG, NEW
YORK BRANCH

 

as the Administrative
Agent

 

 

 

 

TABLE OF CONTENTS

 

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE I DEFINITIONS

  	
  1

  
	
  Section 1.1

  	
  Certain Defined Terms

  	
  1

  
	
  Section 1.2

  	
  Other Terms

  	
  35

  
	
  Section 1.3

  	
  Computation of Time Periods

  	
  35

  
	
  Section 1.4

  	
  Interpretation

  	
  35

  
	
   

  	
   

  	
   

  
	
  ARTICLE II ADVANCES

  	
  36

  
	
  Section 2.1

  	
  Advances

  	
  36

  
	
  Section 2.2

  	
  Procedures for Advances

  	
  37

  
	
  Section 2.3

  	
  Optional Changes in Facility Amount; Prepayments

  	
  39

  
	
  Section 2.4

  	
  Principal Repayments

  	
  40

  
	
  Section 2.5

  	
  The Notes

  	
  40

  
	
  Section 2.6

  	
  Interest Payments

  	
  40

  
	
  Section 2.7

  	
  Fees

  	
  42

  
	
  Section 2.8

  	
  Settlement Procedures

  	
  42

  
	
  Section 2.9

  	
  Collections and Allocations

  	
  45

  
	
  Section 2.10

  	
  Payments, Computations, Etc.

  	
  46

  
	
  Section 2.11

  	
  Breakage Costs

  	
  46

  
	
  Section 2.12

  	
  Increased Costs; Capital Adequacy; Illegality

  	
  47

  
	
  Section 2.13

  	
  Taxes

  	
  48

  
	
  Section 2.14

  	
  Revolver Loan Funding

  	
  49

  
	
  Section 2.15

  	
  Pending Account

  	
  51

  
	
  Section 2.16

  	
  Discretionary Sales of Loans

  	
  51

  
	
   

  	
   

  	
   

  
	
  ARTICLE III CONDITIONS OF EFFECTIVENESS AND ADVANCES

  	
  53

  
	
  Section 3.1

  	
  Conditions to Effectiveness and Advances

  	
  53

  
	
  Section 3.2

  	
  Additional Conditions Precedent to All Advances

  	
  54

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV REPRESENTATIONS AND WARRANTIES

  	
  55

  
	
  Section 4.1

  	
  Representations and Warranties of the Borrower

  	
  55

  
	
   

  	
   

  	
   

  
	
  ARTICLE V GENERAL COVENANTS OF THE BORROWER

  	
  58

  
	
  Section 5.1

  	
  Covenants of the Borrower

  	
  58

  
	
  Section 5.2

  	
  Hedging Agreement

  	
  63

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI SECURITY INTEREST

  	
  63

  
	
  Section 6.1

  	
  Security Interest

  	
  63

  
	
  Section 6.2

  	
  Remedies

  	
  64

  
	
  Section 6.3

  	
  Release of Liens

  	
  64

  
	
  Section 6.4

  	
  Assignment of the Purchase Agreement

  	
  66

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII ADMINISTRATION AND SERVICING OF LOANS

  	
  66

  
	
  Section 7.1

  	
  Appointment of the Servicer

  	
  66

  

 

i

 

	
  Section 7.2

  	
  Duties and Responsibilities of the Servicer

  	
  66

  
	
  Section 7.3

  	
  Authorization of the Servicer

  	
  68

  
	
  Section 7.4

  	
  Collection of Payments

  	
  69

  
	
  Section 7.5

  	
  Servicer Advances

  	
  70

  
	
  Section 7.6

  	
  Realization Upon Defaulted Loans or Charged-Off
  Loans

  	
  70

  
	
  Section 7.7

  	
  Optional Repurchase of Transferred Loans

  	
  70

  
	
  Section 7.8

  	
  Representations and Warranties of the Servicer

  	
  71

  
	
  Section 7.9

  	
  Covenants of the Servicer

  	
  72

  
	
  Section 7.10

  	
  Payment of Certain Expenses by Servicer

  	
  74

  
	
  Section 7.11

  	
  Reports

  	
  74

  
	
  Section 7.12

  	
  Annual Statement as to Compliance

  	
  75

  
	
  Section 7.13

  	
  Limitation on Liability of the Servicer and Others

  	
  75

  
	
  Section 7.14

  	
  The Servicer Not to Resign

  	
  76

  
	
  Section 7.15

  	
  Access to Certain Documentation and Information
  Regarding the Loans

  	
  76

  
	
  Section 7.16

  	
  Merger or Consolidation of the Servicer

  	
  76

  
	
  Section 7.17

  	
  Identification of Records

  	
  77

  
	
  Section 7.18

  	
  Servicer Termination Events

  	
  77

  
	
  Section 7.19

  	
  Appointment of Successor Servicer

  	
  79

  
	
  Section 7.20

  	
  Market Servicing Fee

  	
  80

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII EARLY TERMINATION EVENTS

  	
  80

  
	
  Section 8.1

  	
  Early Termination Events

  	
  80

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX INDEMNIFICATION

  	
  83

  
	
  Section 9.1

  	
  Indemnities by the Borrower

  	
  83

  
	
  Section 9.2

  	
  Indemnities by the Servicer

  	
  85

  
	
   

  	
   

  	
   

  
	
  ARTICLE X THE ADMINISTRATIVE AGENT AND THE MANAGING
  AGENTS

  	
  86

  
	
  Section 10.1

  	
  Authorization and Action

  	
  86

  
	
  Section 10.2

  	
  Delegation of Duties

  	
  87

  
	
  Section 10.3

  	
  Exculpatory Provisions

  	
  87

  
	
  Section 10.4

  	
  Reliance

  	
  88

  
	
  Section 10.5

  	
  Non-Reliance on Administrative Agent, Managing
  Agents and Other Lenders

  	
  89

  
	
  Section 10.6

  	
  Reimbursement and Indemnification

  	
  89

  
	
  Section 10.7

  	
  Administrative Agent and Managing Agents in their
  Individual Capacities

  	
  89

  
	
  Section 10.8

  	
  Successor Administrative Agent or Managing Agent

  	
  90

  
	
   

  	
   

  	
   

  
	
  ARTICLE XI ASSIGNMENTS; PARTICIPATIONS

  	
  90

  
	
  Section 11.1

  	
  Assignments and Participations

  	
  90

  
	
  Section 11.2

  	
  Additional Lender Groups

  	
  93

  
	
   

  	
   

  	
   

  
	
  ARTICLE XII MISCELLANEOUS

  	
  94

  
	
  Section 12.1

  	
  Amendments and Waivers

  	
  94

  
	
  Section 12.2

  	
  Notices, Etc.

  	
  95

  

 

ii

 

	
  Section 12.3

  	
  No Waiver, Rights and Remedies

  	
  95

  
	
  Section 12.4

  	
  Binding Effect

  	
  95

  
	
  Section 12.5

  	
  Term of this Agreement

  	
  95

  
	
  Section 12.6

  	
  GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF
  OBJECTION TO VENUE

  	
  95

  
	
  Section 12.7

  	
  WAIVER OF JURY TRIAL

  	
  96

  
	
  Section 12.8

  	
  Costs, Expenses and Taxes

  	
  96

  
	
  Section 12.9

  	
  No Proceedings

  	
  97

  
	
  Section 12.10

  	
  Recourse Against Certain Parties

  	
  97

  
	
  Section 12.11

  	
  Protection of Security Interest; Appointment of
  Administrative Agent as Attorney-in-Fact

  	
  98

  
	
  Section 12.12

  	
  Confidentiality

  	
  99

  
	
  Section 12.13

  	
  Execution in Counterparts; Severability; Integration

  	
  100

  
	
   

  	
   

  	
   

  
	
  EXHIBITS

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBIT A

  	
  Form of Borrower
  Notice

  	
   

  
	
  EXHIBIT B

  	
  Form of Note

  	
   

  
	
  EXHIBIT C

  	
  Form of Assignment
  and Acceptance

  	
   

  
	
  EXHIBIT D

  	
  Form of Joinder
  Agreement

  	
   

  
	
  EXHIBIT E

  	
  Form of Monthly
  Report

  	
   

  
	
  EXHIBIT F

  	
  Form of Servicer’s
  Certificate

  	
   

  
	
  EXHIBIT G

  	
  [Reserved]

  	
   

  
	
  EXHIBIT H

  	
  Form of Primary
  Document Trust Receipt

  	
   

  
	
  EXHIBIT I

  	
  [Reserved]

  	
   

  
	
  EXHIBIT J

  	
  [Reserved]

  	
   

  
	
  EXHIBIT K

  	
  [Reserved]

  	
   

  
	
  EXHIBIT L

  	
  Form of Lock-Box
  Agreement

  	
   

  
	
  EXHIBIT M

  	
  Credit Report and
  Transaction Summary

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBIT N

  	
  Moody’s Industry
  Classifications

  	
   

  
	
   

  	
   

  	
   

  
	
  SCHEDULES

  	
   

  
	
   

  	
   

  	
   

  
	
  SCHEDULE I

  	
  Schedule of Documents

  	
   

  
	
  SCHEDULE II

  	
  List of Lock-Box Banks,
  Lock-Box Accounts, Collection Account and Securities Accounts

  	
   

  
	
  SCHEDULE III

  	
  Loan List

  	
   

  
	
  SCHEDULE IV

  	
  Form of Loans

  	
   

  
	
  SCHEDULE V

  	
  Advance Rate Matrices

  	
   

  
	
  SCHEDULE VI

  	
  Diversity Score Table

  	
   

  

 

iii

 

THIS SECOND AMENDED AND RESTATED CREDIT AGREEMENT is
made as of June 6, 2008, among:

 

(1)           GLADSTONE
BUSINESS LOAN, LLC, a Delaware limited liability company,  as borrower (the “Borrower”);

 

(2)           GLADSTONE
MANAGEMENT CORPORATION, a Delaware corporation, as servicer (the “Servicer”);

 

(3)           Each
financial institution from time to time party hereto as a “Committed Lender”
(whether on the signature pages hereto or in a Joinder Agreement) and
their respective successors and assigns (collectively, the “Committed Lenders”);

 

(4)           Each
commercial paper issuer from time to time party hereto as a “CP Lender”
(whether on the signature pages hereto or in a Joinder Agreement) and
their respective successors and assigns (collectively, the “CP Lenders”);

 

(5)           Each
financial institution from time to time party hereto as a “Managing Agent”
(whether on the signature pages hereto or in a Joinder Agreement) and
their respective successors and assigns (collectively, the “Managing Agents”); and

 

(6)           DEUTSCHE
BANK AG, NEW YORK BRANCH, as “Administrative Agent” and its respective
successors and assigns (the “Administrative
Agent”).

 

IT IS AGREED as follows:

 

ARTICLE I

 

DEFINITIONS

 

Section 1.1                                   Certain
Defined Terms.

 

(a)           Certain
capitalized terms used throughout this Agreement are defined above or in this Section 1.1.

 

(b)           As
used in this Agreement and its exhibits, 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).

 

“Additional Amount” is defined in Section 2.13.

 

“Adjusted Collateral Balance” means, on any day,
the amount by which (a) the sum of (i) the aggregate Outstanding Loan Balance
of the Eligible Loans (excluding Defaulted Loans and Current Pay Loans), (ii)
the amount of cash and cash equivalents held in the custodial accounts less
accrued but unpaid interest and fees and any senior expenses; (iii) the
aggregate Revolver Loan Unfunded Commitment Amount and (iv) an amount equal to
70% of the Outstanding Loan Balance of each Current Pay Loan exceeds (b) the
Excess Concentration Amount on such date; provided, that for
purposes of any calculations hereunder, the Outstanding Loan Balance of any 

 

 

Eligible Loan shall be
reduced by 2.0% during the 60-day period following the date such Loan becomes a
Transferred Loan.

 

“Adjusted Eurodollar Rate” means, for any
Settlement Period, or, with respect to the Lender Group for which BB&T acts
as Managing Agent only, each portion thereof, resetting on each BB&T
Interest Reset Date, (i) with respect to the Lender Group for which BB&T
acts as Managing Agent, an interest rate per annum equal to the quotient,
expressed as a percentage and rounded upwards (if necessary), to the nearest
1/100 of 1%, (i) the numerator of which is equal to the BB&T LIBO Rate for
such portion of such Settlement Period and (ii) the denominator of which is
equal to 100% minus the Eurodollar Reserve Percentage for such
Settlement Period, in each case, as determined by BB&T and reported to the
Borrower, the Servicer and the Agent and (ii) for each other Lender Group, an
interest rate per annum equal to the quotient, expressed as a percentage and
rounded upwards (if necessary), to the nearest 1/100 of 1%, (i) the numerator
of which is equal to the LIBO Rate for such Settlement Period and (ii) the
denominator of which is equal to 100% minus the Eurodollar Reserve
Percentage for such Settlement Period.

 

“Administrative Agent” is defined in the
preamble hereto.

 

“Advance” is
defined in Section 2.1(a).

 

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

 

“Adverse Claim” 
means, a lien, security interest, pledge, charge, encumbrance or other
right or claim of any Person.

 

“Affected Committed Lender” is defined in Section
11.1(c).

 

“Affected Party”
is defined in Section 2.12(a).

 

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

 

“Agent’s Account” means account number
10-554121-0008 at Deutsche Bank AG, New York Branch.

 

“Agreement” or “Credit Agreement” means
this Second Amended and Restated Credit Agreement, dated as of June 6, 2008, as
hereafter amended, modified, supplemented or restated from time to time.

 

“Alternative Rate” means an interest rate per
annum equal to the Adjusted Eurodollar Rate; provided, however,
that the Alternative Rate shall be the Base Rate if a Eurodollar Disruption
Event occurs; and, provided, further, that the Alternative Rate
for the first two (2) 

 

2

 

Business Days following
any Advance made by a Committed Lender shall be the Base Rate unless such
Committed Lender has received at least two (2) Business Days’ prior notice
of such Advance.

 

“Amortization Period” means the period
beginning on the Termination Date and ending on the Maturity Date.

 

“Applicable Law” means, for any Person, all
existing and future applicable laws, rules, regulations (including proposed,
temporary and final income tax regulations), statutes, treaties, codes,
ordinances, permits, certificates, orders and licenses of and interpretations
by any Governmental Authority (including, without limitation, usury laws, the
Federal Truth in Lending Act, and Regulation Z, Regulation W and Regulation B
of the Federal Reserve Board), and applicable judgments, decrees, injunctions,
writs, orders, or line action of any court, arbitrator or other administrative,
judicial, or quasi-judicial tribunal or agency of competent jurisdiction.

 

“Assigned Rating” means, with respect to any
Transferred Loan as of any date of determination, the lowest of (a) the
monitored publicly available rating or Shadow Rating expressly assigned to such
Loan by Moody’s or S&P that addresses the full amount of the principal and
interest payable on such Loan, (b) the rating assigned by the Servicer’s
internal risk rating model, or (c) the RiskCalc Rating; provided, however,
that (i) in the case of the rating determined in subsection (a), (b) or (c),
such Assigned Rating shall in no event be lower than the rating determined in
(a), (ii) any such rating, if assigned by S&P, shall be lowered by one
rating level, (iii) any such rating, if assigned by the Servicer’s internal
rating model, shall, if the weighted average rating assigned by the Servicer to
any set of Transferred Loans is found to be higher than the weighted average
Shadow Rating of the same set of Loans, be adjusted downward by the amount of
such deviation, (iv) each such rating shall be compared quarterly with the
applicable RiskCalc Rating, and to the extent that the RiskCalc Rating is found
to be lower, then such rating will be adjusted downward and to the extent that
the RiskCalc Rating is found to be higher, then such rating will be adjusted
upward, in each case, by the amount of such deviation, and (v) each such rating
shall be converted to the equivalent Moody’s rating for reporting purposes; provided,
however, that for the period of 60 days after the Effective Date, the
Assigned Rating shall be the lower of (x) the RiskCalc Rating or (y) the
internal rating.

 

“Assignment and Acceptance” is defined in Section
11.1(b).

 

“Availability” means, on any day, the lesser of
(i) the amount by which the sum of (1) the Borrowing Base plus (2) the amount
of cash in the Pending Account exceeds the sum of (A) Advances Outstanding and
(B) 50% of the Revolver Loan Unfunded Commitment Amount on such day and (ii)
the amount by which the Facility Amount exceeds the sum of (A) Advances
Outstanding and (B) 50% of the Revolver Loan Unfunded Commitment Amount on such
day; provided, however, during the Amortization Period, the
Availability shall be zero.

 

“Available Collections” is defined in Section 2.8(a).

 

“Backup Servicer” means the Bank of New York,
in its capacity as Backup Servicer under the Backup Servicing Agreement,
together with its successors and assigns.

 

3

 

“Backup Servicer Expenses” means the
out-of-pocket expenses to be paid to the Backup Servicer under the Backup
Servicing Agreement.

 

“Backup Servicer Fee” means the fee to be paid
to the Backup Servicer as set forth in the Backup Servicing Agreement.

 

“Backup Servicing Agreement” means the Backup
Servicing Agreement, dated as of the Closing Date among the Borrower, the
Servicer, the Administrative Agent and the Backup Servicer, as the same may
from time to time be amended, supplemented, waived or modified.

 

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

 

“Base Rate” means, on any date, a fluctuating
rate of interest per annum equal to the higher of (a) the Prime Rate or (b) the
Federal Funds Rate plus 1.0%.

 

“BB&T” means Branch Banking and Trust
Company, in its capacity as a Committed Lender.

 

“BB&T Interest Reset Date” means the first
day of each calendar month, or, if the first day of such calendar month is not
a Business Day, the immediately preceding Business Day.

 

“BB&T LIBO Rate” means, for any Settlement
Period or portion thereof and any Advance, an interest rate per annum equal to
the rate per annum determined on the basis of the rate for deposits in United
States dollars of amounts equal or comparable to the principal amount of such
Advance offered for a term of one calendar month, which rate appears on Reuters
Screen LIBOR01 (or such other page as may replace such screen of that service
or such other service or services as may be nominated by the British Banker’s
Association for the purpose of displaying London InterBank Offered Rates for
United States dollar deposits) determined as of 11:00 a.m. London, England time
on each BB&T Interest Reset Date.

 

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

 

“Borrower” means Gladstone Business Loan, LLC,
a Delaware limited liability company, or any permitted successor thereto.

 

“Borrowing Base” means, on any date of
determination, the lesser of (a) (i) the Adjusted Collateral Balance minus
(ii) the Required Equity Investment or (b) (i) the Adjusted Collateral Balance times
(ii) the Maximum Advance Rate.

 

“Borrowing Base Test” means as of any date, a
determination that the Borrowing Base shall be equal to or greater than the
Drawn Amount.

 

“Borrower Notice” means a written notice, in
the form of Exhibit A, to be used for each borrowing, repayment of each
Advance or termination or reduction of the Facility Amount or Prepayments of
Advances.

 

4

 

“Breakage Costs”
is defined in Section 2.11.

 

“Business Day” means any day of the year other
than a Saturday or a Sunday on which (a) (i) banks are not required or
authorized to be closed in New York, New York, and Virginia or (ii) which is
not a day on which the Bond Market Association recommends a closed day for the
U.S. Bond Market, and (b) if the term “Business Day” is used in connection with
the Adjusted Eurodollar Rate or the BB&T Interest Reset Date, means the
foregoing only if such day is also a day of year on which dealings in United
States dollar deposits are carried on in the London interbank market.

 

“Change-in-Control” means, with respect to any
entity, the date on which (i) any Person or “group” acquires any “beneficial
ownership” (as such terms are defined under Rule 13d-3 of, and Regulation 13D
under, the Securities Exchange Act of 1934, as amended), either directly or
indirectly, of membership interests or other equity interests or any interest
convertible into any such interest in such entity having more than fifty
percent (50%) of the voting power for the election of managers of such entity,
if any, under ordinary circumstances, or (ii) (except in connection with any
Discretionary Sale) an entity sells, transfers, conveys, assigns or otherwise
disposes of all or substantially all of the assets of such entity.

 

“Charged-Off Loan” means any Loan (i) that is
120 days past due with respect to any interest or principal payment, (ii) for
which an Insolvency Event has occurred with respect to the related Obligor or
(iii) that is or should be written off as uncollectible by the Servicer in
accordance with the Credit and Collection Policy.

 

“Charged-Off Ratio” means, with respect to any
Settlement Period, the percentage equivalent of a fraction, calculated as of
the Determination Date for such Settlement Period, (i) the numerator of which
is equal to the aggregate Outstanding Loan Balance of all Loans that became
Charged-Off Loans during such Settlement Period and (ii) the denominator of
which is equal to the sum of (A) the Adjusted Collateral Balance as of the
first day of such Settlement Period and (B) the Adjusted Collateral Balance as
of the last day of such Settlement Period divided by 2.

 

“Closing Date” means May 19, 2003.

 

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

 

“Collateral” means all right, title and
interest, whether now owned or hereafter acquired or arising, and wherever
located, of the Borrower in, to and under any and all of the following:

 

(i)            the
Transferred Loans, and all monies due or to become due in payment of such Loans
on and after the related Purchase Date;

 

(ii)           any
Related Property securing the Transferred Loans including all proceeds from any
sale or other disposition of such Related Property;

 

(iii)          the
Loan Documents relating to the Transferred Loans;

 

(iv)          all
Supplemental Interests related to any Transferred Loans;

 

5

 

(v)           the
Collection Account, all funds held in such account, and all certificates and
instruments, if any, from time to time representing or evidencing the
Collection Account or such funds;

 

(vi)          all
Collections and all other payments made or to be made in the future with
respect to the Transferred Loans, including such payments under any guarantee
or similar credit enhancement with respect to such Loans;

 

(vii)         all
Hedge Collateral;

 

(viii)        all
income and Proceeds of the foregoing;

 

“Collateral Custodian” means BNY Midwest Trust
Company, in its capacity as Collateral Custodian under the Custody Agreement,
together with its successors and assigns.

 

“Collateral Custodian Expenses” means the
out-of-pocket expenses to be paid to the Collateral Custodian under the Custody
Agreement.

 

“Collateral Custodian Fee” means the fee to be
paid to the Collateral Custodian as set forth in the Custody Agreement.

 

“Collateral Quality Tests”  means, with respect to the Transferred Loans,
on any Determination Date, a set of tests that are satisfied so long as each of
the following are satisfied:

 

(i)                                     the
Weighted Average Spread is equal to or greater than 5.0% as of such date;

 

(ii)                                  the
Weighted Average Life is equal to or less than 66 months as of such date;

 

(iii)                               the Weighted Average
Rating Factor is equal to or less than 4000 as of such date;

 

(iv)                              the
Weighted Average Recovery Rate is equal to or greater than 25% as of such date;
and

 

(v)                                 the
weighted average Diversity Score is equal to or is greater than 10 as of such
date.

 

“Collection Account” is defined in Section
7.4(e).

 

“Collection Date” means the date following the
Termination Date on which all Advances Outstanding have been reduced to zero,
the Lenders have received all accrued Interest, fees, and all other amounts
owing to them under this Agreement and the Hedging Agreement, the Hedge
Counterparties have received all amounts due and owing hereunder and under the
Hedge Transactions, and each of the Backup Servicer, the Collateral Custodian,
the Administrative Agent and the Managing Agents have each received all amounts
due to them in connection with the Transaction Documents.

 

“Collections” means (a) All cash collections or
other cash proceeds of a Transferred Loan received by or on behalf of the
Borrower by the Servicer or Originator from or on behalf of any 

 

6

 

Obligor in payment of any
amounts owed in respect of such Transferred Loan, including, without
limitation, Interest Collections, Principal Collections, Deemed Collections,
Insurance Proceeds, and all Recoveries; provided, however, that Collections
shall not include fees (including up-front, continuing or success fees)
received in respect of the Transferred Loans, (b) all amounts received by
the Buyer in connection with the repurchase of an Ineligible Loan pursuant to Section 6.1
of the Purchase Agreement, (c) all amounts received by the Administrative
Agent in connection with the purchase of a Transferred Loan pursuant to Section 7.7, (d) all payments received
pursuant to any Hedging Agreement or Hedge Transaction, and (e) interest
earnings in the Collection Account.

 

“Commercial Paper Notes” means, on any day, any
short-term promissory notes issued by or on behalf of any CP Lender with
respect to financing any Advance hereunder that are allocated, in whole or in
part, by such CP Lender to fund or maintain the Advances Outstanding.

 

“Commitment” means (a) For each Committed
Lender other than BB&T, the commitment of such Committed Lender to fund any
Advance to the Borrower in an amount not to exceed $125,000,000, and in the
case of BB&T, the commitment of BB&T to fund any Advance to the
Borrower in an amount not to exceed $50,000,000, in each case as such amount
may be modified in accordance with the terms hereof; and (b) with respect to
any Person who becomes a Committed Lender pursuant to an Assignment and
Acceptance or a Joinder Agreement, the commitment of such Person to fund any
Advance to the Borrower in an amount not to exceed the amount set forth in such
Assignment and Acceptance or Joinder Agreement, as such amount may be modified
in accordance with the terms hereof.

 

“Commitment Termination Date”  May 21, 2009, or such later date to which the
Commitment Termination Date may be extended (if extended) in the sole
discretion of the Lenders in accordance with the terms of Section 2.1(b).

 

“Committed Lenders” is defined in the preamble
hereto.

 

“Contractual Obligation” means, with respect to
any Person, means any provision of any securities issued by such Person or any
indenture, mortgage, deed of trust, contract, undertaking, agreement,
instrument or other document to which such Person is a party or by which it or
any of its property is bound or is subject.

 

“Covenant-Lite Loan” means a Loan lacking
traditional financial covenants requiring minimum interest or other debt
service coverage or specifying maximum levels of leverage or other similar
“maintenance” tests.

 

“CP Lenders” is defined in the preamble hereto.

 

“CP Rate” means, for any Settlement Period for
any Advances made by a CP Lender, whether funded with proceeds of Commercial
Paper Notes or a Swingline Loan, the per annum rate equivalent to the weighted
average of the per annum rates paid or payable by such CP Lender from time to
time as interest on or otherwise (by means of interest rate hedges or otherwise
taking into consideration any incremental carrying costs associated with
short-term promissory notes issued by or on behalf of such CP Lender) in
respect of the Commercial Paper Notes issued by or on behalf of such CP Lender
that are allocated, in whole or in part, by such 

 

7

 

CP Lender to fund or maintain
the Advances during such period (or if no such promissory notes are then
allocated to fund or maintain the Advances, then other such promissory notes
issued by or on behalf of such CP Lender then outstanding), as determined by
such CP Lender and reported to the Borrower and the Servicer, which rates shall
reflect and give effect to the commissions of placement agents and dealers in
respect of such promissory notes, to the extent such commissions are allocated,
in whole or in part, to such promissory notes by such CP Lender, provided,
however, that if any component of such rate is a discount rate, in calculating
the CP Rate, such CP Lender shall for such component use the rate resulting
from converting such discount rate to an interest bearing equivalent rate per
annum.

 

“Credit and Collection Policy” means those
credit, collection, customer relation and service policies (i) determined by
the Borrower, the Originator and the initial Servicer as of the date hereof
relating to the Transferred Loans and related Loan Documents, as on file with
the Administrative Agent and as the same may be amended or modified from time
to time in accordance with Sections 5.1(r) and 7.9(g); and (ii)
with respect to any Successor Servicer, the collection procedures and policies
of such person (as approved by the Administrative Agent) at the time such
Person becomes Successor Servicer.

 

“Current Pay Loan” means any Transferred Loan (a) in
respect of which the Servicer or Originator shall have taken any of the
following actions: charging a default rate of interest, restricting Obligor’s
right to make subordinated payments (other than payments in respect of owner’s
debts and seller financings other than those in the original loan agreement),
acceleration of the Transferred Loan, foreclosure on collateral for the Loan,
increasing the Servicer’s representation on the Obligor’s Board of Directors or
similar governing body, or increasing the frequency of its inspection rights to
permit inspection on demand, (b) that is not more than thirty (30) days
past due with respect to any interest or principal payments and (c) in
respect of which the Servicer shall have certified (which certification may be
in the form of an e-mail or other written electronic communication) to the
Administrative Agent that the Servicer does not believe, in its reasonable
judgment, that a failure to pay interest or ultimate principal will occur.  A Transferred Loan shall cease to be a
Current Pay Loan if it (i) becomes a Defaulted Loan through failure to
satisfy the requirements set forth in this definition or (ii) becomes an
Eligible Loan, which shall occur upon receipt of a certification from the
Servicer (which certification may be in the form of an e-mail or other written
electronic communication) to the Administrative Agent that, as of the date of
the certification (x) the applicable circumstances enumerated in clause
(a) above which caused the Loan to be a Current Pay Loan shall no
longer exist and (y) such Loan is an Eligible Loan.

 

“Custody Agreement” means the Custodial
Agreement, dated as of the Closing Date among the Borrower, the Servicer, the
Originator, the Administrative Agent and the Collateral Custodian, as the same
may from time to time be amended, supplemented, waived or modified.

 

“DB” means Deutsche Bank AG, New York Branch,
in its individual capacity, and its successors or assigns.

 

“Deemed Collections” means, on any day, the
aggregate of all amounts Borrower shall have been deemed to have received as a
Collection of a Transferred Loan. 
Borrower shall be deemed to have received a Collection in an amount
equal to the unpaid balance (including any 

 

8

 

accrued interest thereon)
of a Transferred Loan if at any time the Outstanding Loan Balance of any such
Loan is either (i) reduced as a result of any discount or any adjustment
or otherwise by Borrower (other than receipt of cash Collections) or (ii) reduced
or canceled as a result of a setoff in respect of any claim by any Person
(whether such claim arises out of the same or a related transaction or an
unrelated transaction).

 

“Default Rate” is defined in each Fee Letter.

 

“Default Ratio” means, with respect to any
Settlement Period, the percentage equivalent of a fraction, calculated as of
the Determination Date for such Settlement Period, (a) the numerator of which
is equal to the aggregate Outstanding Loan Balance of all Transferred Loans
(excluding Charged-Off Loans) included as part of the Collateral that became
Defaulted Loans during such Settlement Period and (b) the denominator of which
is equal to (i) the sum of (x) the Adjusted Collateral Balance as of the first
day of such Settlement Period and (y) the Adjusted Collateral Balance as of the
last day of such Settlement Period divided by (ii) two.

 

“Defaulted Loan” means any Transferred Loan (a)
as to which, (x) a default as to the payment of principal and/or interest has
occurred for more than fifteen (15) days and is continuing with respect to such
Loan (without regard to any grace period applicable thereto, or waiver thereof)
or (y) a default not set forth in clause (x) has occurred and the holders of
such Loan have accelerated all or a portion of the principal amount thereof as
a result of such default, (b) as to which a default as to the payment of
principal and/or interest has occurred and is continuing on another debt
obligation of the same Obligor which is senior or pari passu in right of
payment to such Loan, (c) as to which the Obligor or others have instituted
proceedings to have the Obligor adjudicated bankrupt or insolvent or placed
into receivership and such proceedings have not been stayed or dismissed or
such issuer has filed for protection under Chapter 11 of the United States
Bankruptcy Code (unless (x) in the case of clauses (a), (b) and (c) the Loan is
a Current Pay Loan, in which case it shall not be deemed a Defaulted Loan or
(y) in the case of clauses (b) or (c), the Loan is a DIP Loan, in which case it
shall not be deemed a Defaulted Loan), (d) that the Servicer has in its reasonable
commercial judgment otherwise declared to be a Defaulted Loan or (e) that has
an Assigned Rating of “Ca” or “CC” or below by Moody’s or S&P,
respectively.

 

“Derivatives” 
Any exchange-traded or over-the-counter (i) forward, future, option,
swap, cap, collar, floor, foreign exchange contract, any combination thereof,
whether for physical delivery or cash settlement, relating to any interest
rate, interest rate index, currency, currency exchange rate, currency exchange
rate index, debt instrument, debt price, debt index, depository instrument,
depository price, depository index, equity instrument, equity price, equity
index, commodity, commodity price or commodity index, (ii) any similar
transaction, contract, instrument, undertaking or security, or (iii) any
transaction, contract, instrument, undertaking or security containing any of
the foregoing.

 

“Determination Date” means the last day of each
Settlement Period.

 

“DIP Loan” means a
Transferred Loan, the Obligor of which is a debtor-in-possession as described
in Section 1107 of the Bankruptcy Code or a debtor as defined in Section
101(13) of the Bankruptcy Code (a “Debtor”) organized under the laws of the
United States or any state 

 

9

 

therein, the terms
of which have been approved by an order of a court of competent jurisdiction,
which order provides that (i) such DIP Loan is secured by liens on otherwise
unencumbered property of the Debtor’s bankruptcy estate pursuant to 364(c)(2)
of the Bankruptcy Code, (ii) such DIP Loan is secured by liens of equal or
senior priority on property of the Debtor’s estate that is otherwise subject to
a lien pursuant to Section 364(d) of the Bankruptcy Code, (iii) such DIP Loan
is secured by junior liens on property of the Debtor’s bankruptcy estate
already subject to a lien encumbered assets (so long as such DIP Loan is a
fully secured claim within the meaning of Section 506 of the Bankruptcy Code),
or (iv) if the DIP Loan or any portion thereof is unsecured, the repayment of such
DIP Loan retains priority over all other administrative expenses pursuant to
Section 364(c)(1) of the Bankruptcy Code; provided that, in the case of the
origination or acquisition of any DIP Loan, none of the Borrower or the
Servicer have actual knowledge that the order set forth above is subject to any
pending contested matter or proceeding (as such terms are defined in the
Federal Rules of Bankruptcy Procedure) or the subject of an appeal or stay
pending appeal.

 

“Discretionary Sale” is defined in Section
2.16.

 

“Discretionary Sale Notice” is defined in Section
2.16.

 

“Discretionary Sale Settlement Date” means the
Business Day specified by the Borrower to the Administrative Agent in a
Discretionary Sale Notice as the proposed settlement date of a Discretionary
Sale.

 

“Discretionary Sale Trade Date” means the
Business Day specified by the Borrower to the Administrative Agent in a
Discretionary Sale Notice as the proposed trade date of a Discretionary Sale.

 

“Diversity Score”
means the single number that indicates collateral concentration for Loans in
terms of both Obligor and industry concentration, which is calculated as
described in Schedule VI attached hereto.

 

“Drawn Amount”
means, at any time, the sum of (i) Advances Outstanding and (ii) the Revolver
Loan Unfunded Commitment Amount at such time.

 

“Early Termination
Event” is defined in Section 8.1.

 

“Effective Date” means June 6, 2008.

 

“Eligible Assignee” means a Person (a) whose
short-term rating is at least A-1 from S&P and P-1 from Moody’s, or whose
obligations under this Agreement are guaranteed by a Person whose short-term
rating is at least A-1 from S&P and P-1 from Moody’s and (b) who is
approved by the Administrative Agent (such approval not to be unreasonably
withheld) and, if such Person will become a Liquidity Bank for a CP Lender, by
such CP Lender.

 

“Eligible Loan” means, on any date of
determination, each Loan which satisfies each of the following requirements:

 

10

 

(i)            the
Loan is evidenced by a promissory note that has been duly authorized and that,
together with the related Loan Documents, is in full force and effect and
constitutes the legal, valid and binding obligation of the Obligor of such Loan
to pay the stated amount of the Loan and interest thereon, and the related Loan
Documents are enforceable against such Obligor in accordance with their
respective terms;

 

(ii)           the
Loan was originated in accordance with the terms of the Credit and Collection
Policy and arose in the ordinary course of the Originator’s business from the
lending of money to the Obligor thereof;

 

(iii)          the
Loan is not a Defaulted Loan;

 

(iv)          the
Obligor of such Loan has executed all appropriate documentation required by the
Originator;

 

(v)           the
Loan, together with the Loan Documents related thereto, is a “general
intangible”, an “instrument”, an “account”, or “chattel paper” within the
meaning of the UCC of all jurisdictions that govern the perfection of the
security interest granted therein;

 

(vi)          all
material consents, licenses, approvals or authorizations of, or registrations
or declarations with, any Governmental Authority required to be obtained,
effected or given in connection with the making of such Loan have been duly
obtained, effected or given and are in full force and effect;

 

(vii)         the
Loan is denominated and payable only in United States dollars in the United
States;

 

(viii)        the Loan bears interest, which is due and
payable no less frequently than quarterly, except for (i) Loans which bear
interest which is due and payable no less frequently than semi-annually,
provided that the aggregate Outstanding Loan Balances of such Loans do not
exceed 10% of the Adjusted Collateral Balance and (ii) PIK Loans;

 

(ix)           the
Loan, together with the Loan Documents related thereto, does not contravene in
any material respect any Applicable Laws (including, without limitation, laws, rules and
regulations relating to usury, truth in lending, fair credit billing, fair
credit reporting, equal credit opportunity, fair debt collection practices and
privacy) and with respect to which no party to the Loan Documents related
thereto is in material violation of any such Applicable Laws;

 

(x)            the
Loan, together with the related Loan Documents, is fully assignable;

 

(xi)           the
Loan was documented and closed in accordance with the Credit and Collection
Policy, including the relevant opinions and assignments, and there is only one
current original promissory note;

 

(xii)          the
Loan and all Related Property are free of any Liens except for Permitted Liens;

 

11

 

(xiii)         the
Loan has an original term to maturity of no more than 120 months;

 

(xiv)        no
right of rescission, set off, counterclaim, defense or other material dispute
has been asserted with respect to such Loan;

 

(xv)         any
Related Property with respect to such Loan is insured in accordance with the
Credit and Collection Policy;

 

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

 

(xvii)       if
such Loan is a PIK Loan, such Loan shall pay a minimum of five percent (5.0%)
per annum current interest, on at least a quarterly basis;

 

(xviii)      the
Loan is not a loan or extension of credit made by the Originator or one of its
subsidiaries to an Obligor for the purpose of making any principal, interest or
other payment on such Loan necessary in order to keep such Loan from becoming
delinquent;

 

(xix)         the
Loan has not been amended or subject to a deferral or waiver the effect of
which is to (A) reduce the amount (other than by reason of the repayment
thereof) or extend the time for payment of principal or (B) reduce the
rate or extend the time of payment of interest (or any component thereof), in
each case without the consent of the Required Committed Lenders, which consent
shall not be unreasonably withheld or delayed;

 

(xx)          if
such Loan is a Qualifying Syndicated Loan, (a) the Borrower has purchased
an interest in such Loan from a financial institution which such financial
institution (A) has a short-term debt rating equal to at least A-1 from
S&P and P-1 from Moody’s, (B) has been approved in writing by the
Required Committed Lenders prior to the related Funding Date or (C) has an
investment grade rating of BBB+/Baa1 or greater and (b) such Loan closed
not more than thirty (30) days previously;

 

(xxi)         if such Loan is a Revolver Loan, it shall be
secured by a first priority, perfected security interest on certain assets of
the Obligor which shall include, without limitation, accounts receivable and
inventory;

 

(xxii)        if such Loan is a Revolver Loan, the
revolving credit commitment of the Borrower to the applicable Obligor
thereunder shall have a term to maturity of three years or less;

 

(xxiii)  if such Loan is a Fixed Rate Loan which is
not subject to a Hedging Transaction, the interest rate charged on such Loan
shall be equal to or greater than 9.0%;

 

(xxiv)  such Loan is not a Structured Finance
Obligation;

 

(xxv)  such Loan is not an equity security, does
not by its terms permit the payment obligation of the Obligor thereunder to be
converted into or exchanged for equity capital of such Obligor;

 

12

 

(xxvi)  such Loan is not an obligation whose
repayment is subject to or derived from (a) the value of other loans,
securities and/or financial instruments or (b) the value of bonds insuring
against loss arising from natural catastrophes;

 

(xxvii)  such Loan will not be accompanied by
additional consideration which would cause the Borrower to be deemed to own
5.0% or more of the voting securities of any publicly registered issuer or any
securities that are immediately convertible into or immediately exercisable or
exchangeable for 5.0% or more of the voting securities of any publicly
registered issuer, as determined by the Servicer;

 

(xxviii)  the financing of such Loan by the
Lenders does not contravene Regulation U of the Federal Reserve Board, nor
require the Lenders to undertake reporting thereunder which it would not
otherwise have cause to make;

 

(xxix)  if such security or loan is a Real Estate
Loan,  there is full recourse to the
Obligor for principal and interest payments;

 

(xxx)  such Loan does not contain a confidentiality provision
that restricts the ability of the Administrative Agent, on behalf of the
Secured Parties, to exercise its rights under the Transaction Documents,
including, without limitation, its rights to review the Loan, the related Loan
File or the Originator’s credit approval file in respect of such Loan; provided,
however, that a provision which requires the Administrative Agent or
other prospective recipient of confidential information to maintain the
confidentiality of such information shall not be deemed to restrict the
exercise of such rights;

 

(xxxi)  the Obligor of which is not an Affiliate of
the Borrower or the Servicer or any other person whose investments are
primarily managed by the Servicer or any Affiliate of the Servicer, unless such
Loan is approved by the Administrative Agent;

 

(xxxii)  such Loan is not a Covenant-Lite Loan; and

 

(xxxiii)  the proceeds of such Loan are not used to finance construction
projects or activities in the form of a traditional construction loan where the
only collateral for the loan is the project under construction and draws are
made on the loan specifically to fund construction in progress.

 

“Eligible Obligor”
means, on any day, any Obligor that satisfies each of the following
requirements:

 

(i)            such
Obligor’s principal office and any Related Property are located in the United
States or any territory of the United States;

 

(ii)           no
other Loan of such Obligor is a Defaulted Loan;

 

(iii)          such
Obligor is not the subject of any Insolvency Event;

 

(iv)          such
Obligor is not a Governmental Authority; and

 

13

 

(v)           such
Obligor is in material compliance with all material terms and conditions of its
Loan Documents.

 

“ERISA” means the
U.S. Employee Retirement Income Security Act of 1974, as amended from time to
time, and the regulations promulgated and rulings issued thereunder.

 

“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, with respect to any Advance as to which Interest accrues or is to accrue
at a rate based upon the Adjusted Eurodollar Rate, any of the following:  (a) a determination by a Lender that it
would be contrary to law or to the directive of any central bank or other
governmental authority (whether or not having the force of law) to obtain
United States dollars in the London interbank market to make, fund or maintain
any Advance; (b) the inability of any Lender to obtain timely information
for purposes of determining the Adjusted Eurodollar Rate; (c) a
determination by a Lender that the rate at which deposits of United States
dollars are being offered to such Lender in the London interbank market does
not accurately reflect the cost to such Lender of making, funding or
maintaining any Advance; or (d) the inability of a Lender to obtain United
States dollars in the London interbank market to make, fund or maintain any
Advance.

 

“Eurodollar Reserve
Percentage” means, on any day, the then applicable percentage
(expressed as a decimal) prescribed by the Federal Reserve Board (or any
successor) for determining reserve requirements applicable to “Eurocurrency
Liabilities” pursuant to Regulation D or any other then applicable regulation
of the Federal Reserve Board (or any successor) that prescribes reserve
requirements applicable to “Eurocurrency Liabilities” as presently defined in
Regulation D.

 

“Excess Concentration Amount” means, on any
date of determination, the sum of, without duplication,

 

(a)  the aggregate
amount by which the Outstanding Loan Balances of all Fixed Rate Loans which are
not subject to a Hedge Transaction exceeds 10% of the Adjusted Collateral
Balance;

 

(b)  the aggregate
amount by which the Outstanding Loan Balances of all Fixed Rate Loans (whether
subject to a Hedge Transaction or not) exceeds 20% of the Adjusted Collateral
Balance;

 

(c) 
the aggregate amount by which the Outstanding Loan Balances of all Eligible
Loans that have original terms to maturity greater than 84 months exceeds 15%
of the Adjusted Collateral Balance;

 

14

 

(d)  the aggregate
amount by which the Outstanding Loan Balances of Eligible Loans which are not
First Lien Loans, exceeds 70% of the Adjusted Collateral Balance, of which not
more than 25% may be Mezzanine Loans;

 

(e)  the aggregate
amount by which the Outstanding Loan Balances of all Eligible Loans which are
participation interests exceeds 10% of the Adjusted Collateral Balance;

 

(f)  the aggregate
amount by which the Outstanding Loan Balances of all Eligible Loans which are
DIP Loans exceeds 15% of the Adjusted Collateral Balance;

 

(g)  the aggregate
amount by which the Outstanding Loan Balances of all Eligible Loans which have
an Assigned Rating of CCC+/Caa1 or below exceeds 22% of the Adjusted Collateral
Balance;

 

(h)  the aggregate amount
by which the Outstanding Loan Balances of all Eligible Loans included as part
of the Collateral which are Revolver Loans exceeds 20% of the Adjusted
Collateral Balance;

 

(i)  the aggregate
amount by which the Outstanding Loan Balances of all Eligible Loans which are
PIK Loans exceeds 15% of the Adjusted Collateral Balance;

 

(j)  the aggregate
amount of the Outstanding Loan Balances of all Eligible Loans which are PIK
Loans which do not pay a minimum of 5.0% per annum current interest;

 

(k) the aggregate
amount by which the Outstanding Loan Balances of all Eligible Loans that are
Current Pay Loans exceeds 10% of the Adjusted Collateral Balance; and

 

(l)  the aggregate amount by which the Outstanding Loan Balances of all
Eligible Loans that are Real Estate Loans exceeds 5% of the Adjusted Collateral
Balance.

 

“Facility Amount”
means, at any time, $300,000,000; provided,
however, that on or after the Termination
Date, the Facility Amount shall be equal to the amount of Advances outstanding.

 

“Fair Market Value”
means, with respect to each Eligible Loan, (1) to the extent that such
Eligible Loan does not have a long term credit rating from S&P or Moody’s,
the least of (a) to the extent priced by Standard & Poor’s
Securities Evaluations, Inc., the product of (x) the remaining
principal amount of the Eligible Loan and (y) the pricing as determined by
Standard & Poor’s Securities Evaluations, Inc. in its most recent
quarterly pricing, (b) the remaining principal amount of such Eligible
Loan and (c) if such Eligible Loan has been reduced in value below the
remaining principal amount thereof (other than as a result of the allocation of
a portion of the remaining principal amount to warrants), the value of such
Eligible Loan as required by, and in accordance with, the 1940 Act, as amended,
and any orders of the SEC issued to the Originator, to be determined by the
Board of Directors of the Originator and reviewed by its auditors and (2) otherwise,
the least of (a) (x) the remaining principal amount of such Eligible
Loan times (y) the price quoted to the Borrower on such Eligible Loan from
a financial institution rated at least A-1/P-1 that makes a market in such
Eligible Loan or from a pricing service otherwise acceptable to the Managing
Agents, (b) the remaining principal amount of such

 

15

 

Eligible Loan and (c) if
such Eligible Loan has been reduced in value below the remaining principal
amount thereof (other than as a result of the allocation of a portion of the
remaining principal amount to warrants), the value of such Eligible Loan as
required by, and in accordance with, the 1940 Act, as amended, and any orders
of the SEC issued to the Originator, to be determined by the Board of Directors
of the Originator and reviewed by its auditors.

 

“FASB” is defined in Section 2.12(a).

 

“Federal Funds Rate”
means, for any period, a fluctuating interest rate per annum for each day
during such period equal to (a) the weighted average of the rates on
overnight federal funds transactions with members of the Federal Reserve System
arranged by federal funds brokers, as published for such day (or, if such day
is not a Business Day, for the preceding Business Day) by the Federal Reserve
Bank of New York; or (b) if such rate is not so published for any day
which is a Business Day, the average of the quotations at approximately 10:30 a.m.
(New York City time) for such day on such transactions received by DB from
three federal funds brokers of recognized standing selected by it.

 

“Federal Reserve Board”
means the Board of Governors of the Federal Reserve System.

 

“Fee Letter” means
any letter agreement in respect of fees among the Borrower, the Originator and
the Administrative Agent or any Managing Agent, as it may be amended or
modified and in effect from time to time.

 

“First Lien Loan”
means a loan that is secured by the pledge of collateral and which has the most
senior pre-petition priority in any bankruptcy, reorganization, arrangement,
insolvency, or liquidation proceedings; provided, that (i) any portion of
such a Loan which has leverage (as measured by debt/EBITDA) above (x) 5.5x
for loans to companies in the following industries (A) media (broadcasting
and publishing), (B) cable and (C) telecommunications and (y) 4.25x
for loans to companies in all other industries and is structured primarily
using a cash flow analysis (in the mutual reasonable judgment of the
Administrative Agent and the Borrower) will be deemed to be a Second Lien Loan
and (ii) Loans that are structured primarily using an asset based approach
(in the mutual reasonable judgment of the Administrative Agent and the
Borrower) will be deemed to be Second Lien Loans if the LTV percentage
(debt/asset value) is greater than [85]%.

 

“Fixed Rate Loan”
means a Transferred Loan that bears interest at a fixed rate.

 

“Floating Rate Loan”
means a Transferred Loan that bears interest at a floating rate.

 

“Funding Date”
means any day on which an Advance is made in accordance with and subject to the
terms and conditions of this Agreement.

 

“Funding Request”
means a Borrower Notice requesting an Advance and including the items required
by Section 2.2.

 

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

 

16

 

“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 entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government
and any court or arbitrator having jurisdiction over such Person.

 

“Group Advance Limit” means, for each Lender
Group, the sum of the Commitments of the Committed Lenders in such Lender
Group.

 

“Guarantor Event of Default” means the
occurrence of any “Event of Default” under and as defined in the Performance
Guaranty.

 

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

 

“Hedge Collateral”
is defined in Section 5.2(b).

 

“Hedge Counterparty”
means DB or any entity that (a) on the date of entering into any Hedge
Transaction (i) is an interest rate swap dealer that is either a Lender or
an Affiliate of a Lender, or has been approved in writing by the Administrative
Agent (which approval shall not be unreasonably withheld), and (ii) has a
short-term unsecured debt rating of not less than A-1 by S&P and not less
than P-1 by Moody’s, and (b) in a Hedging Agreement (i) consents to
the assignment of the Borrower’s rights under the Hedging Agreement to the
Administrative Agent pursuant to Section 5.2(b) and
(ii) agrees that in the event that S&P or Moody’s reduces its
short-term unsecured debt rating below A-1 or P-1, respectively, it shall
transfer its rights and obligations under each Hedging Transaction to another
entity that meets the requirements of clause (a) and (b) hereof or
make other arrangements acceptable to the Administrative Agent and the Rating
Agencies.

 

“Hedge Notional Amount”
means the aggregate notional amount in effect on any day under all Hedge
Transactions entered into pursuant to Section 5.2
which have not matured, been terminated or cancelled.

 

“Hedge Transaction”
means each interest rate cap transaction between the Borrower and a Hedge
Counterparty that is entered into pursuant to Section 5.2
and is governed by a Hedging Agreement.

 

“Hedging Agreement”
means each agreement between the Borrower and a Hedge Counterparty that governs
one or more Hedge Transactions entered into pursuant to Section 5.2,
which agreement shall consist of a “Master Agreement” in a form published by
the International Swaps and Derivatives Association, Inc., together with a
“Schedule” thereto substantially in a form as the Administrative Agent shall
approve in writing, and each “Confirmation” thereunder confirming the specific
terms of each such Hedge Transaction.

 

“Increased Costs”
means any amounts required to be paid by the Borrower to an Affected Party
pursuant to Section 2.12.

 

17

 

“Indebtedness”
means, with respect to the Borrower or the initial Servicer 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, (b) all obligations of such Person under 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 Adverse Claims
on any property owned by such Person even though such Person has not assumed or
otherwise become liable for the payment thereof, and (e) all indebtedness,
obligations or liabilities of that Person in respect of Derivatives, and (f) 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, clauses (a) through (e) above.

 

“Indemnified Amounts”
is defined in Section 9.1.

 

“Indemnified Party”
is defined in Section 9.1.

 

“Industry” means
the industry of an Obligor as determined by reference to the Moody’s Industry
Classifications.

 

“Ineligible Loan” is defined in the Purchase
Agreement.

 

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

 

“Insolvency Laws”
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.

 

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

 

“Insurance Policy”
means, with respect to any Loan included in the Collateral, an insurance policy
covering physical damage to or loss to any assets or Related Property of the
Obligor securing such Loan.

 

18

 

“Insurance Proceeds”
means any amounts payable or any payments made, to the Borrower or to the
Servicer on its behalf under any Insurance Policy.

 

“Interest” means,
for each Settlement Period and each Advance outstanding during such Settlement
Period, the product of:

 

	
   

  	
  IR x P x

  	
  AD

  
	
   

  	
   

  	
  360

  

 

where

 

IR                              =                                   the
Interest Rate applicable to such Advance, resetting as and when specified
herein;

 

P                                   =                                   the
principal amount of such Advance on the first day of such Settlement Period, or
if such Advance was first made during such Settlement Period, the principal
amount of such Advance on the day such Advance is made; and

 

AD                       =                                   the
actual number of days in such Settlement Period, or if such Advance was first
made during such Settlement Period, the actual number of days beginning on the
day such Advance was first made through the end of such Settlement Period;

 

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

 

“Interest Collections”
means any and all Collections which do not constitute Principal Collections.

 

“Interest Coverage Ratio” means with respect to
any Settlement Period, the percentage equivalent of a fraction, calculated as
of the Determination Date for such Settlement Period, (a) the numerator of
which is equal to the aggregate Interest Collections for such Settlement Period
and (b) the denominator of which is equal to the aggregate amount payable
pursuant to Section 2.8(i), (iii), (iv) and (vi) hereunder.

 

“Interest Rate”
means for any Settlement Period:

 

(a)           to
the extent the Lender is a CP Lender that is funding the applicable Advance or
portion thereof through the issuance of Commercial Paper Notes or a Swingline
Loan, a rate equal to the CP Rate for such Settlement Period on such portion;
provided, however, that (i) if such Advance is funded by such CP Lender
during such Settlement Period through a Swingline Loan and during such
Settlement Period no other short-term promissory notes issued by or on behalf
of such CP Lender are outstanding (including notes issued to fund or maintain
amounts allocated to unrelated transactions) or (ii) a Liquidity Bank
under a Liquidity Agreement to which such CP Lender is a party, purchases or
takes assignment of any portion of Advances

 

19

 

owing to such CP Lender,
then the portion of the Advance funded by such CP Lender with proceeds from a
Swingline Loan or a funding by a Liquidity Bank shall earn a rate equal to the
Alternative Rate; or

 

(b)           to the extent the relevant Lender is
not a CP Lender and such Lender is not funding the applicable Advance or
portion thereof through the issuance of Commercial Paper Notes, a rate equal to
the Alternative Rate on such portion; provided, however, that if the relevant
Lender is BB&T and at least one CP Lender shall be earning a CP Rate on its
portion of Advances during such Settlement Period, then BB&T shall earn a
rate equal to the greater of (i) (A) if only one CP Lender is earning
a CP Rate on its portion of Advances, such CP Rate and (B) if more than
one CP Lender is earning a CP Rate on its portion of Advances, the average of
the CP Rates earned by such CP Lenders on their respective Advances outstanding
during such Settlement Period and (ii) the Alternative Rate on such
portion; or

 

(c)           notwithstanding anything in clause (a) or
(b) to the contrary, following the occurrence and during the continuation
of an Early Termination Event, a rate equal to the Default Rate.

 

“Investment”
means, with respect to any Person, any direct or indirect loan, advance or
investment by such Person in any other Person, whether by means of share
purchase, capital contribution, loan or otherwise, excluding the acquisition of
assets pursuant to the Purchase Agreement and excluding commission, travel and
similar advances to officers, employees and directors made in the ordinary
course of business.

 

“Joinder Agreement”
means a joinder agreement substantially in the form set forth in Exhibit D
hereto pursuant to which a new Lender Group becomes party to this Agreement.

 

“Key Man Event”
means any two of (i) David Gladstone, (ii) Terry Brubaker and (iii) George
Stelljes shall cease to be employed by the Originator in the capacity as
executive officers thereof.

 

“Lender Group”
means any group consisting of (i) a CP Lender, its related Committed
Lenders and their related Managing Agent or (ii) a Committed Lender and
its related Managing Agent.

 

“Lenders” means,
collectively, the CP Lenders, the Committed Lenders and any other Person that
agrees, pursuant to the pertinent Joinder Agreement or Assignment and
Acceptance, as applicable, to fund Advances pursuant to this Agreement.

 

“LIBO Rate” means,
for any Settlement Period and any Advance, an interest rate per annum equal to:

 

(i)            the
posted rate for 30-day deposits in United States dollars appearing on Reuters
Screen LIBOR01 as of 11:00 a.m. (London time) on the Business Day that is
the second Business Day immediately preceding the applicable Funding Date (with
respect to the initial Settlement Period for such Advance) and as of the second
Business Day immediately preceding the first day of the applicable

 

20

 

Settlement Period (with respect to all subsequent
Settlement Periods for such Advance); or

 

(ii)           if
no rate appears on Reuters Screen LIBOR01 at such time and day, then the LIBO
Rate shall be determined by DB at its principal office in New York, New York as
its rate (each such determination, absent manifest error, to be conclusive and
binding on all parties hereto and their assignees (other than the BB&T
Lender Group)) at which 30-day deposits in United States dollars are being,
have been, or would be offered or quoted by DB to major banks in the applicable
interbank market for Eurodollar deposits at or about 11:00 a.m. (New York
City time) on such day.

 

“Lien” means, with
respect to any Collateral, (a) any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such Collateral, or (b) the
interest of a vendor or lessor under any conditional sale agreement, financing
loan or other title retention agreement relating to such Collateral.

 

“Liquidation Expenses”
means, with respect to any Defaulted Loan or Charged-Off Loan, the aggregate
amount of out-of-pocket expenses reasonably incurred by the Borrower or on
behalf of the Borrower by the Servicer (including amounts paid to any
subservicer) in connection with the repossession, refurbishing and disposition
of any related assets securing such Loan including the attempted collection of
any amount owing pursuant to such Loan.

 

“Liquidity Agreement”
means a liquidity agreement entered into by a CP Lender with a group of
financial institutions in connection with this Agreement.

 

“Liquidity Bank”
means each financial institution that is a party to a Liquidity Agreement.

 

“Liquidity Commitment Fee”
is defined in each Fee Letter.

 

“Loan” means any
senior or subordinate loan arising from the extension of credit to an Obligor
by the Originator in the ordinary course of the Originator’s business.

 

“Loan Documents”
means, with respect to any Loan, the related promissory note and any related
loan agreement, security agreement, mortgage, assignment of Loans, all
guarantees, and UCC financing statements and continuation statements (including
amendments or modifications thereof) executed by the Obligor thereof or by
another Person on the Obligor’s behalf in respect of such Loan and related
promissory note, including, without limitation, general or limited guaranties.

 

“Loan File” means,
with respect to any Loan, each of the Loan Documents related thereto.

 

“Loan List” means
the Loan List provided by the Borrower to the Administrative Agent and the
Collateral Custodian, as set forth in Schedule III
hereto (which shall include the specific documents that should be included in
each Loan File), as the same may be changed from time to time in accordance
with the provisions hereof.

 

21

 

“Lock-Box” means a
post office box to which Collections are remitted for retrieval by a Lock-Box
Bank and deposited by such Lock-Box Bank into a Lock-Box Account.

 

“Lock-Box Account”
means an account, subject to a Lock-Box Agreement, maintained in the name of
the Borrower for the purpose of receiving Collections at a Lock-Box Bank.

 

“Lock-Box Agreement”
means a letter agreement, substantially in the form of Exhibit L,
among the Borrower, the Administrative Agent and a Lock-Box Bank.

 

“Lock-Box Bank”
means any of the banks or other financial institutions holding one or more
Lock-Box Accounts.

 

“Managing Agent” means, as to any Lender, the
financial institution identified as such on the signature pages hereof or
in the applicable Assignment and Acceptance or Joinder Agreement.

 

“Mandatory Prepayment” is defined in Section 2.4(a).

 

“Market Servicing Fee”
is defined in Section 7.20.

 

“Market Servicing Fee
Differential” means, on any date of determination, an amount equal
to the positive difference between the Market Servicing Fee and Servicing Fee.

 

“Material Adverse Change”
means, with respect to any Person, any material adverse change in the business,
condition (financial or otherwise), operations, performance, properties or
prospects of such Person.

 

“Material Adverse Effect”
means, with respect to any event or circumstance, an event or circumstance
which would have or would be reasonably expected to have a material adverse
effect on (a) the business, condition (financial or otherwise),
operations, performance or properties of the Servicer or the Borrower, (b) the
validity, enforceability or collectibility of this Agreement or any other
Transaction Document or any Liquidity Agreement or the validity, enforceability
or collectibility of the Loans, (c) the rights and remedies of the
Administrative Agent or any Secured Party under this Agreement or any
Transaction Document or any Liquidity Agreement or (d) the ability of the
Borrower or the Servicer to perform its obligations under this Agreement or any
other Transaction Document, or (e) the status, existence, perfection,
priority, or enforceability of the Administrative Agent’s or Secured Parties’
interest in the Collateral.

 

“Maturity Date” means the date that is one year
after the Termination Date.  The Advances
Outstanding will be due and payable in full on the Maturity Date.

 

“Maximum Advance Rate” means the lesser of (i) (x) 60%
or, (y) at any time the Periodic Rating Requirement is not satisfied 33%
and (ii) a dynamic number that shall be determined on each Determination
Date by application of the Advance Rate Matrices set forth in Schedule V
based on:

 

(a)           in
the case of the Weighted Average Recovery Rate, (i) the actual level
thereof (if such level is equal to any of the Weighted Average Recovery Rate
levels specified in the

 

22

 

Advance Rate Matrices) or
(ii) otherwise, the Weighted Average Recovery Rate indicated in the
Advance Rate Matrices that is arithmetically closest to the actual Weighted
Average Recovery Rate level;

 

(b)           in
the case of the Diversity Score, (i) the actual level thereof (if such
level is equal to any of the Diversity Score levels specified in the Advance
Rate Matrices) or (ii) otherwise, the Diversity Score indicated in the
Advance Rate Matrices that is arithmetically closest to the actual Diversity
Score level; and

 

(c)           in
the case of each of the Weighted Average Rating Factor, (i) the actual
level thereof (if such level is equal to any of the Weighted Average Rating
Factor levels specified in the Advance Rate Matrices) or (ii) otherwise,
the Weighted Average Rating Factor indicated in the Advance Rate Matrices that
is arithmetically closest to the actual Weighted Average Rating Factor level.

 

“Maximum Lawful Rate” is defined in Section 2.6(d).

 

“Mezzanine Loan” means any assignment of, or
participation interest or other interest in, a Loan that is of a rank lower
than a Second Lien Loan.

 

“Monthly Report”
is defined in Section 7.11(a).

 

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

 

“Moody’s Industry Classifications” means the
classifications as set forth in Exhibit N. The classification under which
an Eligible Loan is categorized shall be determined on the date of origination
in the reasonable discretion of the Borrower.

 

“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 immediately
preceding five years contributed to by the Borrower or any ERISA Affiliate on
behalf of its employees.

 

“1940 Act” is defined in Section 4.1(x).

 

“Non-Renewing Committed Lender” is defined in Section 2.1(b).

 

“Notes” is defined
in Section 2.5(a).

 

“Obligations”
means all loans, advances, debts, liabilities and obligations, for monetary
amounts owing by the Borrower to the Lenders, the Administrative Agent, the
Managing Agents or any of their assigns, as the case may be, whether due or to
become due, matured or unmatured, liquidated or unliquidated, contingent or
non-contingent, and all covenants and duties regarding such amounts, of any
kind or nature, present or future, arising under or in respect of any of this
Agreement, any other Transaction Document or any Fee Letter delivered in
connection with the transactions contemplated by this Agreement, or any Hedging
Agreement, as amended or supplemented from time to time, whether or not
evidenced by any separate note, agreement or other instrument.  This term includes, without limitation, all
principal, interest (including interest that accrues after the commencement
against the Borrower of any action under the Bankruptcy

 

23

 

Code), Breakage Costs, Hedge Breakage Costs, fees, including, without
limitation, any and all arrangement fees, loan fees, facility fees, and any and
all other fees, expenses, costs or other sums (including attorney costs)
chargeable to the Borrower under any of the Transaction Documents or under any
Hedging Agreement.

 

“Obligor” means,
with respect to any Loan, the Person or Persons obligated to make payments
pursuant to such Loan, including any guarantor thereof.  For purposes of calculating the Excess
Concentration Amount and the Required Equity Investment, all Loans included in
the Collateral or to become part of the Collateral the Obligor of which is an
Affiliate of another Obligor shall be aggregated with all Loans of such other
Obligor.

 

“Officer’s Certificate”
means a certificate signed by any officer of the Borrower or the Servicer, as
the case may be, and delivered to the Administrative Agent.

 

“Opinion of Counsel”
means a written opinion of counsel, who may be counsel for the Borrower or the
Servicer, as the case may be, and who shall be reasonably acceptable to the
Administrative Agent.

 

“Originator” means
Gladstone Capital Corporation, a Maryland corporation.

 

“Outstanding Loan Balance”
means, on any date of determination with respect to any Transferred Loan (a) with
respect to any type of Transferred Loan not enumerated below, the least of (i) the
outstanding principal balance of such Loan, (ii) the Fair Market Value of
such Transferred Loan and (iii) the purchase price of such Loan, (b) with
respect to Current Pay Loans, the lesser of (i) 70% of the outstanding
principal balance of such Current Pay Loan or (ii) the Fair Market Value
of such Current Pay Loan and (c) with respect to Revolver Loans the sum of
(i) the lesser of (x) the outstanding principal balance of such
Revolver Loan and (y) the Fair Market Value of such Revolver Loan plus
(ii) the Revolver Loan Unfunded Commitment Amount.

 

“Participant” is defined in Section 11.1(g).

 

“Payment Date”
means the ninth (9th) day of each calendar month or, if such day is not a
Business Day, the next succeeding Business Day; provided that for
purposes of distributions required pursuant to Section 2.8(a)(vii) only,
“Payment Date” shall mean any Business Day.

 

“Peak CP Funding Period” means all of the
following:  (i) the 15th day of any
calendar month (or if such day is not a Business Day, the next succeeding
Business Day), (ii) the last 3 Business Days of any calendar month not
referenced in clause (iii) or (iv) below, (iii) the last 5
Business Days of March, June or September and (iv) the last 10
Business Days of November and December.

 

“Pending Account”
is defined in Section 2.15.

 

“Performance Guarantor” is defined in the
Performance Guaranty.

 

24

 

“Performance Guaranty” means the Amended and
Restated Performance Guaranty dated as of July 19, 2004, by the Originator
in favor of the Borrower and the Administrative Agent, as amended, modified,
supplemented or restated from time to time.

 

“Periodic Rating Requirement” means the requirement that (i) each Transferred Loan have a
RiskCalc Rating which shall be refreshed at least quarterly, and (ii) from
and after the date which is 60 days following the Effective Date, Transferred
Loans representing at least 30% of the Adjusted Collateral Balance plus an
additional three Transferred Loans selected by the Administrative Agent in its
sole discretion have a Shadow Rating which ratings shall be refreshed at least
annually; provided, however, that the test in clause (ii), at any time after
the initial date on which it is satisfied, shall not be deemed to not be
satisfied unless the failure to maintain such Shadow Ratings shall have
continued for 45 days and provided, further, that in the event a delay of the
receipt of Shadow Ratings is reasonably determined to have been caused by Moody’s,
the time period to complete the test in clause (ii) shall be extended by
such period (not to exceed 15 days unless further extended in writing by the
Administrative Agent and the Borrower) as is necessary for Moody’s to complete
and deliver such Shadow Ratings.

 

“Permitted Investments”
means any one or more of the following types of investments:

 

(a)           marketable
obligations of the United States, the full and timely payment of which are
backed by the full faith and credit of the United States and that have a
maturity of not more than 270 days from the date of acquisition;

 

(b)           marketable
obligations, the full and timely payment of which are directly and fully
guaranteed by the full faith and credit of the United States and that have a
maturity of not more than 270 days from the date of acquisition;

 

(c)           bankers’
acceptances and certificates of deposit and other interest-bearing obligations
(in each case having a maturity of not more than 270 days from the date of
acquisition) denominated in dollars and issued by any bank with capital,
surplus and undivided profits aggregating at least $100,000,000, the short-term
obligations of which are rated A-1 by S&P and P-1 by Moody’s;

 

(d)           repurchase
obligations with a term of not more than ten days for underlying securities of
the types described in clauses (a), (b) and (c) above entered into
with any bank of the type described in clause (c) above;

 

(e)           commercial
paper rated at least A-1 by S&P and P-1 by Moody’s; and

 

(f)            demand
deposits, time deposits or certificates of deposit (having original maturities
of no more than 365 days) of depository institutions or trust companies
incorporated under the laws of the United States or any state thereof (or
domestic branches of any foreign bank) and subject to supervision and examination
by federal or state banking or depository institution authorities; provided, however
that at the time such investment, or the commitment to make such investment, is
entered into, the short-term debt rating of such depository institution or
trust company shall be at least A-1 by S&P and P-1 by Moody’s.

 

25

 

“Permitted Liens”
means Liens created pursuant to the Transaction Documents in favor of the
Administrative Agent, as agent for the Secured Parties.

 

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

 

“PIK Loan” means a
Loan to an Obligor, which provides for a portion of the interest that accrues
thereon to be added to the principal amount of such Loan for some period of the
time prior to such Loan requiring the cash payment of interest on a monthly or
quarterly basis.

 

“Post-Termination Revolver Loan Fundings” means an advance by the Committed Lenders,
made on or following the Revolver Loan Funding Date, which may  be used for the sole purpose of funding
advances requested by Obligors under the Revolver Loans.

 

“Prime Rate” means
the rate publicly announced by DB 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 DB in connection with extensions
of credit to debtors.

 

“Principal Collections”
means any and all amounts received in respect of any principal due and payable
under any Transferred Loan from or on behalf of Obligors that are deposited
into the Collection Account, or received by the Borrower or on behalf of the
Borrower by the Servicer or Originator in respect of the Transferred Loans,
including, without limitation, proceeds of sales and any hedge termination
payments, in the form of cash, checks, wire transfers, electronic transfers or
any other form of cash payment.

 

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

 

“Program Fee”
means, for each Settlement Period and each Advance Outstanding during such
Settlement Period, the product of:

 

PFR x P x AD/360

 

where

 

PFR                    =                                   the
Program Fee Rate;

 

P                                   =                                   the
principal amount of such Advance on the first day of such Settlement Period, or
if such Advance was first made during such Settlement Period, the principal
amount of such Advance on the day such Advance is made; and

 

26

 

AD                       =                                   the
actual days comprising such Settlement Period, or if such Advance was first
made during such Settlement Period, the actual number of days beginning on the
day such Advance was first made through the end of such Settlement Period.

 

“Program Fee Rate”
is defined in each Fee Letter.

 

“Pro-Rata Share”
means, with respect to any Committed Lender on any day, the percentage
equivalent of a fraction the numerator of which is such Committed Lender’s
Commitment and the denominator of which is the Group Advance Limit of the
related Lender Group.

 

“Purchase Agreement”
means the Amended and Restated Purchase and Sale Agreement dated as of the Effective
Date, between the Originator and the Borrower, as amended, modified,
supplemented or restated from time to time.

 

“Purchase Date” is
defined in the Purchase Agreement.

 

“Purchasing Committed Lender” is defined in Section
11.1(b).

 

“Qualified Institution”
is defined in Section 7.4(e).

 

“Qualifying Syndicated Loan” means any Loan
designated by the Borrower as such in the Loan List.

 

“Rating Agency”
means any rating agency that has been requested to issue a rating with respect
to the Commercial Paper Notes issued by a CP Lender.

 

“Rating Factor” means, for each Loan, the
number set forth in the table below opposite the Assigned Rating of such Loan:

 

	
  Assigned Rating

  	
   

  	
  Rating Factor

  	
   

  	
  Assigned Rating

  	
   

  	
  Rating Factor

  
	
  Aaa

  	
   

  	
  1

  	
   

  	
  Ba1

  	
   

  	
  940

  
	
  Aa1

  	
   

  	
  10

  	
   

  	
  Ba2

  	
   

  	
  1,350

  
	
  Aa2

  	
   

  	
  20

  	
   

  	
  Ba3

  	
   

  	
  1,766

  
	
  Aa3

  	
   

  	
  40

  	
   

  	
  B1

  	
   

  	
  2,220

  
	
  A1

  	
   

  	
  70

  	
   

  	
  B2

  	
   

  	
  2,720

  
	
  A2

  	
   

  	
  120

  	
   

  	
  B3

  	
   

  	
  3,490

  
	
  A3

  	
   

  	
  180

  	
   

  	
  Caa1

  	
   

  	
  4,770

  
	
  Baal

  	
   

  	
  260

  	
   

  	
  Caa2

  	
   

  	
  6,500

  
	
  Baa2

  	
   

  	
  360

  	
   

  	
  Caa3

  	
   

  	
  8,070

  
	
  Baa3

  	
   

  	
  610

  	
   

  	
  Ca or lower

  	
   

  	
  10,000

  

 

“Real Estate Loan” means a Transferred Loan
that is (a)(i) secured primarily by a mortgage, deed of trust or similar lien
on commercial real estate (other than hotels, restaurants and casinos) or
residential real estate and (ii) primary repayment of the payment obligations

 

27

 

thereof is derived from rental or other real estate related income or
(b) a loan or debt obligation which falls within the Moody’s Industry
Classification “Buildings and Real Estate”.

 

“Records” means,
with respect to any Transferred Loans, all documents, books, records and other
information (including without limitation, computer programs, tapes, disks,
punch cards, data processing software and related property and rights)
maintained with respect to any item of Collateral and the related Obligors,
other than the Loan Documents.

 

“Recoveries”
means, with respect to any Defaulted Loan or Charged-Off Loan, proceeds of the
sale of any Related Property, proceeds of any related Insurance Policy, and any
other recoveries with respect to such Loan and Related Property, and amounts
representing late fees and penalties, net of Liquidation Expenses and amounts,
if any, received that are required to be refunded to the Obligor on such Loan.

 

“Reference Bank”
means any bank that furnishes information for purposes of determining the
Adjusted Eurodollar Rate.

 

“Register”
is defined in Section 11.1(e).

 

“Regulatory
Change” is defined in Section 2.12(a).

 

“Related Property”
means, with respect to a Loan, any property or other assets of the Obligor
thereunder pledged as collateral to the Originator to secure the repayment of
such Loan.

 

“Recovery Amount” means, with respect to any
Transferred Loan as of any date of determination, the product of (a) the
Outstanding Loan Balance of such Loan on such date and (b) the Recovery Rate
applicable to such Loan.

 

“Recovery Rate” means, with respect to any
Transferred Loan, as of any date of determination, the recovery rate determined
in accordance with the following:

 

First,
if the Loan has been specifically assigned a recovery rate by Moody’s or
S&P (for example, in connection with the assignment by Moody’s or S&P
of an estimated rating), such recovery rate; or

 

Second,
if no recovery rate has been specifically assigned with respect to such Loan
pursuant to clause (i) above, the rate determined pursuant to the table
below:

 

	
  Type
  of Loan

  	
   

  	
  Recovery Rate

  	
   

  
	
  First
  Lien Loans

  	
   

  	
  45

  	
  %

  
	
  Second
  Lien Loans

  	
   

  	
  25

  	
  %

  
	
  Mezzanine
  Loans

  	
   

  	
  15

  	
  %

  
	
  Bonds

  	
   

  	
  1

  	
  0%

  

 

28

 

“Reporting Date”
means the date that is two (2) Business Days prior to each Payment Date.

 

“Repurchase Price”
means for any Transferred Loan purchased by the Servicer pursuant to Section 7.7,
an amount equal to the outstanding principal balance of such Loan as of the
date of purchase, plus all accrued and unpaid interest on such Loan.

 

“Required Committed Lenders” means, at a
particular time, Committed Lenders (including, for this purpose, Non-Renewing
Committed Lenders) whose Lender Groups’ Advances outstanding are in excess of
66 2/3 % of the Advances Outstanding at such time.

 

“Required Equity Investment”
means the minimum amount of equity investment in the Borrower which shall be
maintained by the Originator, in the form of Eligible Loans and/or cash having
an outstanding principal balance at all times prior to the Termination Date of
an amount equal to the greater of (i) $100,000,000 or (ii) the sum of
the Outstanding Loan Balances of the Eligible Loans made to the five Obligors
having the largest Outstanding Loan Balances.

 

“Required Ratings” means with respect to (i)
any Committed Lender other than BB&T, the short term ratings from S&P
and Moody’s equal to or greater than the ratings required in order to maintain
the rating of the commercial paper issued by the related CP Lender and (ii)
with regard to BB&T, the then-current ratings of BB&T.

 

“Required Reports” means collectively, the
Monthly Report, the Servicer’s Certificate and the annual and quarterly
financial statements of the Originator required to be delivered to the
Borrower, the Managing Agents, the Administrative Agent and the Backup Servicer
pursuant to Section 7.11 hereof.

 

“Responsible Officer” means, as to the
Borrower, David Gladstone, Terry Brubaker, George Stelljes, Harry Brill,
Gresford Gray or Gary Gerson, and as to any other Person, any officer of such
Person with direct responsibility for the administration of this Agreement and
also, with respect to a particular matter, any other officer to whom such
matter is referred because of such officer’s knowledge of and familiarity with
the particular subject.  The Borrower may
designate other Responsible Officers from time to time by notice to the
Administrative Agent.

 

“Revolver Loan” means
each Loan with respect to which the Borrower has a revolving credit commitment
to advance amounts to the applicable Obligor during a specified term.

 

“Revolver Loan Funding” is defined in Section 2.14.

 

“Revolver Loan Funding Account” is defined in Section 2.14.

 

“Revolver Loan Funding Account Shortfall” means,
on any date, the amount, if any, by which the Revolver Loan Unfunded Commitment
Amount at such time exceeds the aggregate amount on deposit in the Revolver
Loan Funding Accounts.

 

29

 

“Revolver Loan Funding Account Surplus” means,
on any date, the amount, if any, by which the amount on deposit in the Revolver
Loan Funding Accounts exceeds the Revolver Loan Unfunded Commitment Amount at
such time.

 

“Revolver Loan Funding Date” means the Termination Date, if Revolver Loans are outstanding on such
date.

 

“Revolver Loan Unfunded Commitment Amount” is
defined in Section 2.14.

 

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

 

“RFC” means Relationship Funding Company, LLC
and its successors and assigns.

 

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

 

“RiskCalc Rating”
means, for any Transferred Loan, a rating based off a set of financial ratios
and other data approved by the Administrative Agent which is calculated by the
RiskCalc system operated by Moody’s.  The
Administrative Agent shall have the right, upon its request, to review and
approve the inputs used to calculate the RiskCalc Rating for any such
Transferred Loan, which approval shall not be unreasonably withheld or delayed.

 

“Rolling Three-Month
Charged-Off Ratio” means, for any day, beginning after the end of
the third Settlement Period following the Closing Date, the rolling three
period average Charged-Off Ratio for the three immediately preceding Settlement
Periods.

 

“Rolling Three-Month Default
Ratio” means, for any day, beginning after the end of the third
Settlement Period following the Closing Date, the rolling three period average
Default Ratio for the three immediately preceding Settlement Periods.

 

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

 

“Scheduled Payment”
means, on any Determination Date, with respect to any Loan, each monthly
payment (whether principal, interest or principal and interest) scheduled to be
made by the Obligor thereof after such Determination Date under the terms of
such Loan.

 

“Second Lien Loan” means a Transferred Loan
that is secured by the pledge of collateral and which is only subordinate to a
First Lien Loan.

 

“Secured Party”
means (i) Each Lender, (ii) each Managing Agent, (iii) each
Liquidity Bank, (iv) each Hedge Counterparty that is either a Lender or an
Affiliate of a Lender if that Affiliate executes a counterpart of this
Agreement agreeing to be bound by the terms of this Agreement applicable to a
Secured Party  and (v) each Swingline
Party.

 

30

 

“Senior Syndicated Loan” means any First Lien
Loan which is a Qualifying Syndicated Loan.

 

“Servicer” means Gladstone Management
Corporation, a Delaware corporation, and its permitted successors and assigns.

 

“Servicer Advance” means an advance of
Scheduled Payments made by the Servicer pursuant to Section 7.5.

 

“Servicer Termination Event” is defined in Section
7.18.

 

“Servicer’s Certificate” is defined in Section
7.11(b).

 

“Servicing Duties” means those duties of the
Servicer which are enumerated in Section 7.2.

 

“Servicing Fee” means, for each Payment Date,
an amount equal to the sum of the products, for each day during the related
Settlement Period, of (i) the Outstanding Loan Balance of each Loan as of the
preceding Determination Date, (ii) the applicable Servicing Fee Rate, and (iii)
a fraction, the numerator of which is 1 and the denominator of which is 360.

 

“Servicing Fee Limit Amount” means, for each
Payment Date, an amount equal to 50% of the Servicing Fee for the related
Settlement Period.

 

“Servicing Fee Rate” means, with respect to
each Senior Syndicated Loan, a rate equal to 0.5% per annum, and with respect
to all other Loans, a rate equal to 1.5% per annum.

 

“Servicing Records” means all documents, books,
records and other information (including, without limitation, computer
programs, tapes, disks, data processing software and related property rights)
prepared and maintained by the Servicer with respect to the Transferred Loans
and the related Obligors.

 

“Settlement Period” means each period from and
including a Payment Date to but excluding the following Payment Date.

 

“Shadow Rating” means, with respect to any
Transferred Loan required to have a shadow rating pursuant to the Periodic
Rating Requirement, the lowest corporate credit estimate received in respect of
such Loan from Moody’s or S&P.

 

“Solvent” means, as to any Person at any time,
having a state of affairs such that all of the following conditions are
met:  (a) the fair value of the property
owned by such Person is greater than the amount of such Person’s liabilities
(including disputed, contingent and unliquidated liabilities) as such value is
established and liabilities evaluated for purposes of Section 101(32) of the
Bankruptcy Code; (b) the present fair salable value of the property owned by
such Person in an orderly liquidation of such Person is not less than the
amount that will be required to pay the probable liability of such Person on
its debts as they become absolute and matured; (c) such Person is able to
realize upon its property and pay its debts and other liabilities (including
disputed, contingent and unliquidated liabilities) as they mature in the normal
course of business; 

 

31

 

(d) such Person does not intend to, and does not
believe that it will, incur debts or liabilities beyond such Person’s ability
to pay as such debts and liabilities mature; and (e) such Person is not
engaged in business or a transaction, and is not about to engage in a business
or a transaction, for which such Person’s property would constitute
unreasonably small capital.

 

“Spread” means, with respect to Floating Rate
Loans, the cash interest spread of such Floating Rate Loan over the LIBO Rate.

 

“Structured Finance Obligation” means any Loan
or security the payment or repayment of which is based primarily upon the
collection of payments from a specified pool of financial  assets, either fixed or revolving, that by
their terms convert into cash within a finite time period, together with any rights
or other assets designed to assure the servicing or timely distribution of
proceeds to security holders, including, in any event, any project finance
security, any asset backed security and any future flow security.

 

“Successor Servicer” is defined in Section
7.19(a).

 

“Supplemental Interests” means, with respect to
any Transferred Loan, any warrants, equity or other equity interests or
interests convertible into or exchangeable for any such interests received by
the Originator from the Obligor in connection with such Transferred Loan.

 

“Swap Breakage and Indemnity Amounts” means any
early termination payments, taxes, indemnification payments and any other
amounts owed to a Hedge Counterparty under a Hedging Agreement that do not
constitute monthly payments.

 

“Swingline Agent” has the meaning assigned to
that term in the Swingline Credit Agreement.

 

“Swingline Collateral Agent” means the “Collateral
Agent” as defined in the Swingline Credit Agreement.

 

“Swingline Credit Agreement” means that certain
Swingline Credit Agreement (Gladstone), dated as of October 25, 2007, among
RFC, Key Equipment Finance Inc., as agent, and Key Equipment Finance Inc., as
lender, as amended, restated, supplemented, amended and restated or otherwise
modified from time to time.

 

“Swingline Lender” means each of the lenders
party to the Swingline Credit Agreement from time to time.

 

“Swingline Lien” has the meaning assigned to
that term in the Swingline Credit Agreement.

 

“Swingline Loan” means a “Loan” (as defined in
the Swingline Credit Agreement).

 

“Swingline Loan Documents” means the “Loan
Documents” as defined in the Swingline Credit Agreement.

 

32

 

“Swingline Parties” means the Swingline Agent,
the Swingline Collateral Agent and each of the Swingline Lenders.

 

“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 Government Authority.

 

“Termination Date”
means the earliest to occur of (a) the date declared by the Administrative
Agent or occurring automatically in respect of the occurrence of an Early
Termination Event pursuant to Section 8.1,
(b) a date selected by the Borrower upon at least 30 days’ prior written
notice to the Administrative Agent and each Managing Agent, (c) the
Commitment Termination Date and (d) the date designated by the
Administrative Agent following the occurrence of a Key Man Event.

 

“Termination
Notice” is defined in Section 7.18.

 

“Transaction Documents”
means this Agreement, the Purchase Agreement, all Hedging Agreements, the
Custody Agreement, the Backup Servicing Agreement, the Performance Guaranty and
any additional document, letter, fee letter, certificate, opinion, agreement or
writing the execution of which is necessary or incidental to carrying out the
terms of the foregoing documents; excluding, however, the Liquidity Agreements
and the Swingline Loan Documents.

 

“Transferred Loans”
means each Loan that is acquired or in which an interest is acquired by the
Borrower under the Purchase Agreement and all Loans received by the Borrower in
respect of the Required Equity Investment. 
Any Transferred Loan that is (i) repurchased or reacquired by the
Originator pursuant to the terms of Section 6.1 of the Purchase Agreement,
(ii) purchased by the Servicer pursuant to the terms of Section 7.7
or (iii) otherwise released from the lien of this Agreement pursuant to Section 6.3
shall not be treated as a Transferred Loan for purposes of this Agreement (provided,
that the purchase or repurchase of any Defaulted Loan or Charged-Off Loan shall
not alter such Transferred Loan’s status as a Defaulted Loan or Charged-Off
Loan for purposes of calculating ratios for periods occurring prior to the
purchase or repurchase of such Transferred Loan).

 

“Transition Costs”
means the reasonable costs and expenses incurred by the Backup Servicer in
transitioning to Servicer; provided, however, that the Administrative Agent’s consent
shall be required if such Transition Costs exceed $50,000.00 in the aggregate.

 

“UCC” means the
Uniform Commercial Code as from time to time in effect in the specified
jurisdiction or, if no jurisdiction is specified, the State of New York.

 

“United States”
means the United States of America.

 

“Unmatured Termination Event”
means an event that, with the giving of notice or lapse of time, or both, would
become an Early Termination Event.

 

“Unreimbursed Servicer
Advances” means, at any time, the amount of all previous Servicer
Advances (or portions thereof) as to which the Servicer has not been reimbursed
as of 

 

33

 

such time pursuant to Section 2.8
and that the Servicer has determined in its sole discretion will not be recoverable
from Collections with respect to the related Transferred Loan.

 

“Weighted Average Fixed Coupon” means, as of
any date of determination, the number, expressed as a percentage, obtained by
summing the products obtained by multiplying the cash interest coupon of each
Fixed Rate Loan (excluding Defaulted Loans) as of such date by the Outstanding
Loan Balance of such Loans as of such date, dividing such sum by the aggregate
Outstanding Loan Balance of all such Fixed Rate Loans and rounding up to the
nearest 0.01%. For the purpose of calculating the Weighted Average Fixed
Coupon, all Fixed Rate Loans that are not currently paying cash interest shall
have an interest rate of 0%.

 

“Weighted Average Floating Spread” means, as of
any date of determination, the number, expressed as a percentage, obtained by
summing the products obtained by multiplying, in the case of each Floating Rate
Loan (excluding Defaulted Loans) on an annualized basis, the Spread of such
Loans (including commitment, letter of credit and all other fees), by the
Outstanding Loan Balance of such Loans as of such date and dividing such sum by
the aggregate Outstanding Loan Balance of all such Floating Rate Loans and
rounding the result up to the nearest 0.01%; provided that the Spread of any Revolver
Loan which is not fully funded shall be the sum of:

 

(a)   the product of (1) the
Spread payable on the funded portion of such Revolver Loan and (2) the
percentage equivalent of a fraction the numerator of which is equal to the
funded portion of such Revolver Loan and the denominator of which is equal to
the commitment amount of such Revolver Loan; plus

 

(b)   the product of (1) the
scheduled amounts (other than interest) of commitment fee and/or facility fee
payable on the unfunded portion of such Revolver Loan less any withholding tax,
if any, on commitment fees and (2) the percentage equivalent of a fraction
the numerator of which is equal to the Revolver Loan Unfunded Commitment Amount
of such Revolver Loan and the denominator of which is equal to the aggregate
commitment amount of such Revolver Loan.

 

“Weighted Average Life” means, at any date of
determination, with respect to any Transferred Loan, the number determined by: (a) multiplying
the number of months from and including the month in which such date of
determination falls to but excluding the month when each Scheduled Payment is
to be received under such Loan by the amount of each such Scheduled Payment, (b) summing
said products, (c) dividing the sum total by the total amount of all
Scheduled Payments to be received under the Loan, and (d) dividing the
total by 12.

 

“Weighted Average Rating Factor” means the
number determined by summing the products obtained by multiplying the
Outstanding Loan Balance of each Transferred Loan by its Rating Factor,
dividing such sum by the aggregate Outstanding Loan Balance of all such
Transferred Loans and then rounding the result down to the nearest whole
number.

 

“Weighted Average Recovery Rate” means, as of
any date of determination, the fraction (expressed as a percentage) obtained by
(A) summing the products obtained by multiplying the Outstanding Loan
Balance of each Transferred Loan by the Recovery Rate with respect to such 

 

34

 

Loan, (B) dividing such sum by the aggregate
Outstanding Loan Balance of all Transferred Loans as of such date, and (C) rounding
down to the nearest tenth of a percent; provided that for purposes of
subsection (A) of this definition, after the initial calculation of
Weighted Average Recovery Rate, the Recovery Rate of any particular Transferred
Loan will be deemed not to have changed from its prior value unless the
Servicer has become aware of a material change affecting such value.

 

“Weighted Average Spread” means, as of any date
of determination, an amount (rounded up to the next 0.01%) equal to the
weighted average of (a) for Floating Rate Loans, the Weighted Average
Floating Spread of the Floating Rate Loans and (b) for Fixed Rate Loans,
the excess of the Weighted Average Fixed Coupon of the Fixed Rate Loans over
the then-current weighted average strike rate under the Hedge Transactions, or,
if there are no Hedge Transactions outstanding, over the then current swap rate
for a swap with the same maturity.

 

“Williams Mullen Opinion” means the “non-consolidation”
opinion letter of Williams Mullen delivered on the Effective Date, as such
opinion letter may be modified, supplemented or replaced in any subsequent
opinion letter covering such subject matter delivered to the Administrative
Agent.

 

Section 1.2                                   Other
Terms.

 

All accounting terms 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 not specifically defined herein, are used herein as defined in such Article 9.

 

Section 1.3                                   Computation
of Time Periods.

 

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

 

Section 1.4                                   Interpretation.

 

In each Transaction Document, unless a contrary
intention appears:

 

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

 

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

 

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

 

(iv)                  reference to any agreement
(including any Transaction Document), document or instrument means such
agreement, document or instrument as amended, supplemented or modified and in
effect from time to time in accordance with the terms thereof and, if
applicable, the terms of the other Transaction Documents and reference to any
promissory 

 

35

 

note includes any promissory note that is an extension or renewal
thereof or a substitute or replacement therefor; and

 

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

 

ARTICLE II

 

ADVANCES

 

Section 2.1            Advances.

 

(a)           On
the terms and conditions hereinafter set forth, the Borrower may, by delivery
of a Funding Request to the Administrative Agent, each Managing Agent and RFC,
from time to time on any Business Day during the Revolving Period, at its
option, request that the Lenders make advances (each, an “Advance”) to
it in an amount which, at any time, shall not exceed the Availability in effect
on the related Funding Date.  Such
Funding Request shall be delivered not later than 12:00 noon (New York City
time) on the date which is two (2) Business Days prior to the requested
Funding Date.  Upon receipt of such Funding Request,
each Managing Agent shall, if its related Lender Group contains a CP Lender
member, request such CP Lender to make the Advance, and such CP Lender may from
time to time during the Revolving Period, in its sole discretion, agree or
decline to make the Advance.  If any CP
Lender declines to make all or any part of a proposed Advance, it shall so
notify its related Committed Lenders.  If
(i) a Lender Group’s CP Lender shall have notified its related Committed
Lenders that it declines to make all or part of such Advance or (ii) a
Lender Group shall not have a CP Lender member, the applicable portion of the
Advance will be made by the Committed Lenders in such Lender Group in accordance
with their Pro-Rata Shares. 
Notwithstanding anything contained in this Section 2.1 or
elsewhere in this Agreement to the contrary, no Committed Lender shall be
obligated to make any Advance in an amount that would result in the aggregate
Advances then funded by such Committed Lender exceeding its Commitment then in
effect (minus the unrecovered principal amount of such Committed Lender’s
advances made, downgrade draws funded or purchase prices paid pursuant to any
applicable Liquidity Agreement to which it is a party).  The obligation of each Committed Lender to
remit its Pro-Rata Share of any such Investment shall be several from that of
each other Committed Lender, and the failure of any Committed Lender to so make
such amount available to the Borrower shall not relieve any other Committed
Lender of its obligation hereunder.  Each
Advance to be made hereunder shall be made ratably among the Lender Groups in
accordance with their Group Advance Limits.

 

(b)           The
Borrower may, within 60 days, but no later than 45 days, prior to the then
current Commitment Termination Date, by written notice to the Administrative
Agent, make written requests for the Lenders to extend the Commitment
Termination Date for an additional revolving period of 364 days.  The Administrative Agent will give prompt
notice to each Managing Agent of its receipt of such request, and each Managing
Agent shall give prompt 

 

36

 

notice
to each of the Lenders in its related Lender Group of its receipt of such
request for extension of the Commitment Termination Date.  Each Lender shall make a determination, in
its sole discretion and after a full credit review, not less than fifteen (15)
days prior to the then applicable Commitment Termination Date as to whether or
not it will agree to extend the Commitment Termination Date; provided, however,
that the failure of any Lender to make a timely response to the Borrower’s
request for extension of the Commitment Termination Date shall be deemed to
constitute a refusal by such Lender to extend the Commitment Termination
Date.  In the event that at least one
Committed Lender agrees to extend the Commitment Termination Date, the
Borrower, the Servicer, the Administrative Agent and the extending Committed Lenders
and, if such extension is approved by its related CP Lender, if any, in its
sole discretion, such CP Lender shall enter into such documents as such
extending Committed Lenders and CP Lenders, if any, may deem necessary or
appropriate to reflect such extension, and all reasonable costs and expenses
incurred by such CP Lenders, such Committed Lenders and the Administrative
Agent (including reasonable attorneys’ fees) shall be paid by the
Borrower.  In the event that any
Committed Lender declines the request to extend the Commitment Termination Date
(each such Committed Lender being referred to herein as a “Non-Renewing
Committed Lender”), and the Commitment of such Non-Renewing Committed
Lender is not assigned to another Person in accordance with the terms of Article XI
prior to the then current Commitment Termination Date, (i) the Facility
Amount shall be reduced by an amount equal to each such Non-Renewing Committed
Lender’s Commitment on the then current Commitment Termination Date, and (ii) the
Group Advance Limits of the applicable Lender Groups shall be reduced by an
amount equal to the applicable Non-Renewing Committed Lender’s Commitment on
the then current Commitment Termination Date.

 

Section 2.2                                   Procedures
for Advances.

 

(a)           In the case of the making of any
Advance, the repayment of any Advance, or any termination, increase or
reduction of the Facility Amount and prepayments of Advances, the Borrower
shall give the Administrative Agent a Borrower Notice.  Each Borrower Notice shall specify the amount
(subject to Section 2.1 hereof) of
Advances to be borrowed or repaid and the Funding Date or repayment date
(which, in all cases, shall be a Business Day).

 

(b)           Subject to the conditions described
in Section 2.1, the Borrower may
request an Advance from the Lenders by delivering to the Administrative Agent
at certain times the information and documents set forth in this Section 2.2.

 

(c)           No later than 10:00 a.m. (New
York City time) five (5) Business Days prior to the proposed Funding Date
(or such shorter period of time or later date as may be agreed to by the
Required Committed Lenders), the Borrower shall notify (i) the Collateral
Custodian by delivery to the Collateral Custodian of written notice of such
proposed Funding Date, and (ii) the Administrative Agent by delivery to
the Administrative Agent of a credit report and transaction summary for each
Loan that is the subject of the proposed Advance setting forth the credit
underwriting by the Originator of such Loan, including without limitation a description
of the Obligor and the proposed loan transaction in the form of Exhibit M hereto; provided that the requirements of this Section 2.2(c) shall
apply only with respect to the first Advance to be made with respect to a
Revolver Loan.  By 5:00 p.m.
(New York City time) on the next Business Day, the Administrative Agent shall
use its best efforts to confirm to the Borrower the receipt of such 

 

37

 

items
and whether it has reviewed such items and found them to be complete and in
proper form.  If the Administrative Agent
makes a determination that the items are incomplete or not in proper form, it
will communicate such determination to the Borrower.  Failure by the Administrative Agent to
respond to the Borrower by 5:00 on the day the related Funding Request is
delivered by the Borrower shall constitute an implied determination that the
items are incomplete or not in proper form. 
The Borrower will take such steps requested by the Administrative Agent
to correct the problem(s).  In the event
of a delay in the actual Funding Date due to the need to correct any such
problems, the Funding Date shall be no earlier than three (3) Business
Days after the day on which the Administrative Agent confirms to the Borrower
that the problems have been corrected. 
For avoidance of doubt RFC shall not be obligated to make an Advance at
any time (as described in Section 2.1(a) above).  Without limiting the foregoing, (i) RFC
may, but does not intend to, during any Peak CP Funding Period, make any
Advance funded with the proceeds of commercial paper and (ii) the Borrower
understands that the Swingline Credit Agreement is an uncommitted line and the
Swingline Lender may decline to lend under the Swingline Credit Agreement to
fund any Advance during the following periods: (A) the last three Business
Days of any calendar month not referenced in clause (B) below and (B) the
last five Business Days of November and December.

 

(d)           No
later than 11:00 a.m. (New York City time) two (2) Business Days
prior to the proposed Funding Date (or, other than in the case of clause (i) below,
such shorter period of time or later date as may be agreed to by the Required
Committed Lenders), the Administrative Agent, each Managing Agent and the
Collateral Custodian, as applicable, shall receive or shall have previously
received the following:

 

(i)            a
Funding Request in the form of Exhibit A;

 

(ii)           a
wire disbursement and authorization form shall be delivered to the
Administrative Agent; and

 

(iii)          a
certification substantially in the form of Exhibit H
concerning the Collateral Custodian’s receipt of certain documentation relating
to the Eligible Loan(s) related to such Advance shall be delivered to the
Administrative Agent, which may be delivered either as a separate document or
incorporated in the Servicer Report.

 

(e)           Each
Funding Request shall specify the aggregate amount of the requested Advance,
which shall be in an amount equal to at least $1,000,000.  Each Funding Request shall be accompanied by (i) a
Borrower Notice, depicting the outstanding amount of Advances under this
Agreement and representing that all conditions precedent for a funding have
been met, including a representation by the Borrower that the requested Advance
shall not, on the Funding Date thereof, exceed the Availability on such day, (ii) a
calculation of the Borrowing Base as of the applicable Funding Date (which
calculation may, for avoidance of doubt, take into account (i) Loans which
will become Transferred Loans on or prior to such Funding Date and (ii) any
portion of such Advance which is to be deposited in the Pending Account at
funding), (iii) an updated Loan List including each Loan that is subject
to the requested Advance, (iv) the proposed Funding Date, and (v) wire
transfer instructions for the Advance.  A
Funding Request shall be irrevocable when delivered; provided  however,
that if the Borrowing Base calculation delivered pursuant to clause (ii) above
includes a Loan which does not become a Transferred 

 

38

 

Loan
on or before the applicable Funding Date as anticipated, and the Borrower
cannot otherwise make the representations required pursuant to clause (i) above,
the Borrower shall revise the Funding Request accordingly, and shall pay any
loss, cost or expense incurred by any Lender in connection with the broken
funding evidenced by such revised Funding Request.

 

(f)            On
the Funding Date following the satisfaction of the applicable conditions set
forth in this Section 2.2 and Article III, each CP Lender may, or the
Committed Lenders, as applicable, shall, make available to the Administrative
Agent at its address listed beneath its signature on its signature page to
this Agreement (or on the signature page to the Joinder Agreement pursuant
to which it became a party hereto), for deposit to the account of the Borrower
or its designee in same day funds, at the account specified in the Funding
Request, an amount equal to such Lender’s ratable share of the Advance then
being made.  Each wire transfer of an
Advance to the Borrower shall be initiated by the applicable Lender no later
than 3:00 p.m. (New York city time) on the applicable Funding Date.

 

Section 2.3                                   Optional
Changes in Facility Amount; Prepayments.

 

(a)           The Borrower shall be entitled at its
option, on any Payment Date prior to the occurrence of an Early Termination
Event, to reduce the Facility Amount in whole or in part; provided that the
Borrower shall give prior written notice of such reduction to the
Administrative Agent, each Managing Agent and RFC as provided in paragraph (b) of
this Section 2.3 and that any partial reduction of the Facility Amount
shall be in an amount equal to $3,000,000 with integral multiples of $500,000
above such amount.  Unless otherwise
agreed by the Committed Lenders, the Commitment of each Committed Lender shall
be reduced ratably in proportion to such reduction in the Facility Amount.  Any request for a reduction or termination
pursuant to this Section 2.3 shall be irrevocable.

 

(b)           From time to time during the
Revolving Period the Borrower may prepay any portion or all of the Advances
Outstanding, other than with respect to Mandatory Prepayments, by delivering to
the Administrative Agent, each Managing Agent and RFC a Borrower Notice at least
(i) in the case of any partial prepayment (other than a partial prepayment
during the month of  December), at least
two (2) Business Days prior to the date of such repayment, (ii) in
the case of any partial prepayment during the month of December, at least five (5) Business
Days prior to the Payment Date occurring in November, and (iii) in the
case of any prepayment in full, at least thirty (30) Business Days prior to the
date of such prepayment (or, in each case, such later time as the applicable
Lender, in its sole discretion, may agree), specifying the date and amount of
the prepayment and certifying that, following such prepayment, the Borrower
will be in compliance with the terms of this Agreement; provided, that no such
reduction shall be given effect unless the Borrower has complied with the terms
of any Hedging Agreement requiring that one or more Hedge Transactions be
terminated in whole or in part as the result of any such prepayment of the
Advances Outstanding, and the Borrower has paid all Hedge Breakage Costs owing
to the relevant Hedge Counterparty for any such termination.  If any Borrower Notice relating to any
prepayment is given, the amount specified in such Borrower Notice shall be due
and payable on the date specified therein, together with accrued Interest to
the payment date on the amount prepaid and any Breakage Costs (including Hedge
Breakage Costs) related thereto.  Any
partial prepayment by the Borrower of Advances hereunder, other than with respect
to Mandatory Prepayments, shall be in a minimum amount of $500,000 with
integral multiples of $100,000 

 

39

 

above
such amount.  Any amount so prepaid may,
subject to the terms and conditions hereof, be reborrowed during the Revolving
Period.  A Borrower Notice relating to
any such prepayment shall be irrevocable when delivered.

 

Section 2.4                                   Principal
Repayments.

 

(a)           The Advances Outstanding shall be due
and payable in accordance with Section 2.8 on the Maturity
Date.  In addition, Advances Outstanding
shall be repaid as and when necessary to cause the Borrowing Base Test to be
met, in accordance with Section 2.8 (each such payment, a “Mandatory
Prepayment”), and any amount so repaid may, subject to the terms and
conditions hereof, be reborrowed hereunder during the Revolving Period.

 

(b)           All
repayments of any Advance or any portion thereof shall be made together with
payment of (i) all Interest accrued and unpaid on the amount repaid to
(but excluding) the date of such repayment, (ii) any and all Breakage
Costs, and (iii) all Hedge Breakage Costs and any other amounts payable by
the Borrower under or with respect to any Hedging Agreement.

 

Section 2.5            The Notes.

 

(a)           The Advances made by the Lenders
hereunder shall be evidenced by a duly executed promissory note of the Borrower
payable to each Managing Agent, on behalf of the applicable Lenders in the
related Lender Group, in substantially the form of Exhibit B
hereto (collectively, the “Notes”).  The Notes shall be dated the Effective Date,
or, if later, the date on which a Lender becomes party to this Agreement and
shall be in a maximum principal amount equal to the applicable Lender Group’s
Group Advance Limit, and shall otherwise be duly completed.

 

(b)           Each Managing Agent is hereby
authorized to enter on a schedule attached to its Notes the following notations
(which may be computer generated) with respect to each Advance made by each
Lender in the applicable Lender Group:  (i) the
date and principal amount thereof and (ii) each payment and repayment of
principal thereof, and any such recordation shall constitute prima facie evidence
of the accuracy of the information so recorded. 
The failure of a Managing Agent to make any such notation on the
schedule attached to the applicable 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 2.6                                   Interest
Payments.

 

(a)           Interest shall accrue on each Advance
during each Settlement Period at the applicable Interest Rate.  The Borrower shall pay Interest on the unpaid
principal amount of each Advance for the period commencing on and including the
Funding Date of such Advance until but excluding the date that such Advance
shall be paid in full.  Interest shall
accrue during each Settlement Period and be payable on the Advances Outstanding
on each Payment Date, unless earlier paid pursuant to (i) a prepayment in
accordance with Section 2.3(b) or
(ii) a repayment in accordance with Section 2.4(b).

 

(b)           Each Managing Agent other than
BB&T shall determine (in accordance with information provided by the
relevant CP Lender and/or Committed Lenders in the related Lender 

 

40

 

Group,
as applicable) its estimate of the Interest (including unpaid Interest, if any
due and payable on a prior Payment Date) to be paid to the Lenders in the
applicable Lender Group on each Payment Date for the related Settlement Period
and shall advise the Administrative Agent and the Servicer, on behalf of the
Borrower, thereof three (3) Business Days prior to each Payment Date.  Upon receipt of such information, the
Servicer shall promptly notify BB&T whether any CP Lender shall be earning
a CP Rate in respect of its portion of Advances and (i) if a CP Lender is
earning a CP Rate in respect of its portion of Advances, what the CP Rate
imputed to the portions of Advances made by the Committed Lender member of the
Lender Group for which BB&T acts as Managing Agent shall be (calculated in
accordance with clause (b) of the definition of Interest Rate) and (ii) if
no CP Lender is earning a CP Rate in respect of its portion of Advances, what
the Alternative Rate is for such Settlement Period.  In the event that any Managing Agent’s, CP
Lender’s or Committed Lender’s, as applicable, estimate of the Interest payable
for a related Settlement Period is different from the actual amount of Interest
for such Settlement Period, the Managing Agent shall increase or decrease its
estimate of Interest for the next succeeding Settlement Period by the amount of
such difference, plus Interest thereon, if applicable.  Failure to set aside any amount so accrued
shall not relieve the Borrower or the Servicer on behalf of the Borrower of its
obligation to remit or cause the Servicer to remit Collections to the
Administrative Agent with respect to such accrued amount as and to the extent
provided in Section 2.8.

 

(c)           If any Managing Agent, on behalf of
the applicable Lenders, shall notify the Administrative Agent that a Eurodollar
Disruption Event as described in clause (a) of the definition of “Eurodollar
Disruption Event” has occurred, the Administrative Agent shall in turn so
notify the Borrower, whereupon all Advances in respect of which Interest
accrues at the LIBO Rate shall immediately be converted into Advances in
respect of which Interest accrues at the Base Rate.

 

(d)           Anything in this Agreement or the
other Transaction Documents to the contrary notwithstanding, if at any time the
rate of interest payable by any Person under this Agreement and the Transaction
Documents exceeds the highest rate of interest permissible under Applicable Law
(the “Maximum Lawful Rate”),
then, so long as the Maximum Lawful Rate would be exceeded, the rate of
interest under this Agreement and the Transaction Documents shall be equal to
the Maximum Lawful Rate.  If at any time
thereafter the rate of interest payable under this Agreement and the
Transaction Documents is less than the Maximum Lawful Rate, such Person shall
continue to pay interest under this Agreement and the Transaction Documents at
the Maximum Lawful Rate until such time as the total interest received from
such Person is equal to the total interest that would have been received had
Applicable Law not limited the interest rate payable under this Agreement and
the Transaction Documents.  In no event
shall the total interest received by a Lender under this Agreement and the
Transaction Documents exceed the amount that such Lender could lawfully have
received, had the interest due under this Agreement and the Transaction
Documents been calculated since the Effective Date at the Maximum Lawful Rate.

 

41

 

Section 2.7                                   Fees.

 

(a)           The Borrower shall pay to the
Administrative Agent from the Collection Account on each Payment Date, monthly
in arrears in accordance with Section 2.8,
the Program Fee and Liquidity Commitment Fee.

 

(b)           The Borrower shall pay to the
Servicer from the Collection Account on each Payment Date, monthly in arrears
in accordance with Section 2.8, the
Servicing Fee.

 

(c)           The Backup Servicer shall be entitled
to receive from the Collection Account on each Payment Date, monthly in arrears
in accordance with Section 2.8, the
Backup Servicing Fee.

 

(d)           The Collateral Custodian shall be
entitled to receive from the Collection Account on each Payment Date, monthly
in arrears in accordance with Section 2.8,
the Collateral Custodian Fee.

 

Section 2.8                                   Settlement
Procedures.

 

On each Payment Date, the
Servicer on behalf of the Borrower shall pay for receipt by the applicable
Lender no later than 11:00 a.m. (New York City time) to the following
Persons, from (i) the Collection Account, to the extent of available
funds, (ii) Servicer Advances, and (iii) amounts received in respect
of any Hedge Agreement during such Settlement Period (the sum of such amounts
described in clauses (i), (ii) and (iii), minus any amounts required to be
deposited to the Revolver Loan Funding Accounts in accordance with Section 2.14
below being the “Available Collections”) the following amounts in the following
order of priority:

 

(a)           During
the Revolving Period, and in each case unless otherwise specified below,
applying Interest Collections first, and then Principal Collections:

 

(i)            FIRST,
to each Hedge Counterparty, any amounts owing that Hedge Counterparty under its
respective Hedging Agreement in respect of any Hedge Transaction(s), for the
payment thereof, but excluding, to the extent the Hedge Counterparty is not the
same Person as the Administrative Agent, any Swap Breakage and Indemnity
Amounts;

 

(ii)           SECOND,
to the Servicer, in an amount equal to any Unreimbursed Servicer Advances, for
the payment thereof;

 

(iii)          THIRD,
to the extent not paid by the Servicer, to the Backup Servicer and any Successor
Servicer, as applicable, in amount equal to any accrued and unpaid Backup
Servicing Fee and, if any, accrued and unpaid Transition Costs, Backup Servicer
Expenses and Market Servicing Fee Differential, each for the payment thereof;

 

(iv)          FOURTH,
to the extent not paid by the Servicer, to the Collateral Custodian in an
amount equal to any accrued and unpaid Collateral Custodian Fee and Collateral
Custodian Expenses, if any, for the payment thereof;

 

42

 

(v)           FIFTH,
to the Servicer, in an amount equal to (A) if the Servicer is Gladstone
Management Corporation or any of its Affiliates, its accrued and unpaid
Servicing Fees to the end of the preceding Settlement Period, up to the
Servicing Fee Limit Amount for such Settlement Period, for the payment thereof
and (B) otherwise, its accrued and unpaid Servicing Fees to the end of the
preceding Settlement Period for the payment thereof;

 

(vi)          SIXTH,
to the Administrative Agent for payment to each Managing Agent, on behalf of
the related Lenders, in an amount equal to any accrued and unpaid Interest,
Program Fee and Liquidity Commitment Fee for such Payment Date;

 

(vii)         SEVENTH,
first, to the extent of available Principal Collections, and second, to the
extent of available Interest Collections, to the Administrative Agent for
payment to each Managing Agent, on behalf of the related Lenders, an amount
equal to the excess, if any, of Advances Outstanding over the lesser of (i) the
Borrowing Base or (ii) the Facility Amount, together with the amount of
Breakage Costs incurred by the applicable Lenders in connection with any such
payment (as such Breakage Costs are notified to the Borrower by the applicable
Lender(s)), pro rata; provided, however,
that to the extent that (i) the Termination Date has not occurred and (ii) Advances
Outstanding exceed the Facility Amount due to one or more Lenders becoming
Non-Renewing Committed Lenders, to each Managing Agent on behalf of such
Non-Renewing Committed Lenders only, pro rata in accordance
with their Advances Outstanding;

 

(viii)        EIGHTH, to
each Hedge Counterparty, any Swap Breakage and Indemnity Amounts owing that
Hedge Counterparty;

 

(ix)           NINTH, to
the Administrative Agent for payment to each Managing Agent, on behalf of the
related Lenders, in the amount of unpaid Breakage Costs (other than Breakage
Costs covered in clause (vii) above) with respect to any prepayments made
on such Payment Date, Increased Costs and/or Taxes (if any);

 

(x)            TENTH,
to the Administrative Agent, all other amounts or Obligations then due under
this Agreement to the Administrative Agent, the Lenders, the Affected Parties
or Indemnified Parties, each for the payment thereof;

 

(xi)           ELEVENTH, all remaining
Interest Collections shall be distributed to the Borrower;

 

(xii)          TWELFTH, to the Servicer, in an
amount equal to its accrued and unpaid Servicing Fees to the end of the
preceding Settlement Period not otherwise paid pursuant to priority FIFTH
above; and

 

(xiii)         THIRTEENTH,
all remaining amounts to the Borrower.

 

(b)           Following
the end of the Revolving Period, to the extent of available Interest
Collections:

 

43

 

(i)            FIRST,
to each Hedge Counterparty, any amounts owing that Hedge Counterparty under its
respective Hedging Agreement in respect of any Hedge Transaction(s), for the
payment thereof, but excluding, to the extent the Hedge Counterparty is not the
same Person as the Administrative Agent, any Swap Breakage and Indemnity
Amounts;

 

(ii)           SECOND,
to the Servicer, in an amount equal to any Unreimbursed Servicer Advances, for
the payment thereof;

 

(iii)          THIRD,
to the extent not paid by the Servicer, to the Backup Servicer and any
Successor Servicer, as applicable, in amount equal to any accrued and unpaid
Backup Servicing Fee and, if any, accrued and unpaid Transition Costs, Backup
Servicer Expenses and Market Servicing Fee Differential, each for the payment
thereof;

 

(iv)          FOURTH,
to the extent not paid by the Servicer, to the Collateral Custodian in an
amount equal to any accrued and unpaid Collateral Custodian Fee and Collateral
Custodian Expenses, if any, for the payment thereof;

 

(v)           FIFTH,
to the Servicer, in an amount equal to (A) if the Servicer is Gladstone
Management Corporation or any of its Affiliates, its accrued and unpaid
Servicing Fees to the end of the preceding Settlement Period, up to the
Servicing Fee Limit Amount for such Settlement Period, for the payment thereof
and (B) otherwise, its accrued and unpaid Servicing Fees to the end of the
preceding Settlement Period for the payment thereof;

 

(vi)          SIXTH,
to the Administrative Agent for payment to each Managing Agent, on behalf of
the related Lenders, in an amount equal to any accrued and unpaid Interest,
Program Fee and Liquidity Commitment Fee for such Payment Date;

 

(vii)         SEVENTH, to
the Administrative Agent for payment to each Managing Agent, on behalf of the
related Lenders, an amount equal to the excess, if any, of Advances Outstanding
over the lesser of (i) the Borrowing Base or (ii) the Facility
Amount, together with the amount of Breakage Costs incurred by the applicable
Lenders in connection with any such payment (as such Breakage Costs are
notified to the Borrower by the applicable Lender(s)), pro rata;
provided, however, that to the extent that (i) the
Termination Date has not occurred and (ii) Advances Outstanding exceed the
Facility Amount due to one or more Lenders becoming Non-Renewing Committed
Lenders, to each Managing Agent on behalf of such Non-Renewing Committed
Lenders only, pro rata in accordance with their
Advances Outstanding;

 

(viii)        EIGHTH, all
remaining amounts shall be distributed to the Borrower, provided, however, that
if an Early Termination Event has occurred and is continuing, all remaining
amounts shall be applied as Principal Collections in accordance with clause (c) below.

 

(c)           Following
the end of the Revolving Period, to the extent of available Principal
Collections:

 

44

 

(i)            FIRST,
to the parties listed above, any amount remaining unpaid pursuant to clauses
FIRST through SEVENTH under clause (b) above, in accordance with the
priority set forth thereunder;

 

(ii)           SECOND,
following the occurrence of the Termination Date, to the Administrative Agent
for ratable payment to each Managing Agent, on behalf of the related Lenders,
in an amount to reduce Advances Outstanding to zero and to pay any other
Obligations in full;

 

(iii)          THIRD, to
each Hedge Counterparty, any Swap Breakage and Indemnity Amounts owing that
Hedge Counterparty;

 

(iv)          FOURTH, to
the Administrative Agent for payment to each Managing Agent, on behalf of the
related Lenders, in the amount of unpaid Breakage Costs (other than Breakage
Costs covered in clause (b) above) with respect to any prepayments made on
such Payment Date, Increased Costs and/or Taxes (if any);

 

(v)           FIFTH,
to the Administrative Agent, all other amounts or Obligations then due under
this Agreement to the Administrative Agent, the Lenders, the Affected Parties
or Indemnified Parties, each for the payment thereof;

 

(vi)          SIXTH, to the Servicer, in an
amount equal to (A) if the Servicer is Gladstone Management Corporation or
any of its Affiliates, its accrued and unpaid Servicing Fees to the end of the
preceding Settlement Period not otherwise paid pursuant to clause (b) above;
and

 

(vii)         SEVENTH,
all remaining amounts to the Borrower.

 

Section 2.9            Collections
and Allocations.

 

(a)           The
Borrower or the Servicer on behalf of the Borrower shall promptly (but in no
event later than two (2) Business Days after the receipt thereof) identify
any Collections received by it as being on account of Interest Collections or
Principal Collections and deposit all such Interest Collections or Principal
Collections received directly by it into the Collection Account.  The Servicer on behalf of the Borrower shall
make such deposits or payments on the date indicated by wire transfer, in
immediately available funds.

 

(b)           Until the
occurrence of an Early Termination Event, to the extent there are uninvested
amounts deposited in the Collection Account, all amounts shall be invested in
Permitted Investments selected by the Servicer on behalf of the Borrower that
mature no later than the Business Day immediately preceding the next Payment
Date; from and after the occurrence of an Early Termination Event, to the
extent there are uninvested amounts deposited in the Collection Account, all
amounts may be invested in Permitted Investments selected by the Administrative
Agent that mature no later than the next Business Day.  Any earnings (and losses) thereon shall be
for the account of the Servicer on behalf of the Borrower.

 

45

 

Section 2.10                            Payments,
Computations, Etc.

 

(a)           Unless otherwise
expressly provided herein, all amounts to be paid or deposited by the Borrower
or the Servicer on behalf of the Borrower hereunder shall be paid or deposited
in accordance with the terms hereof no later than 10:00 a.m. (New York
City time) on the day when due in lawful money of the United States in
immediately available funds to the Agent’s Account.  The Borrower shall, to the extent permitted
by law, pay to the Secured Parties interest on all amounts not paid or
deposited when due hereunder at 2.0% per annum above the Base Rate, payable on
demand; provided, however,
that such interest rate shall not at any time exceed the Maximum Lawful
Rate.  All computations of interest and
all computations of the Interest Rate 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.

 

(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
Interest, other interest or any fee payable hereunder, as the case may be.

 

(c)           All payments hereunder
shall be made without set-off or counterclaim and in such amounts as may be
necessary in order that all such payments shall not be less than the amounts
otherwise specified to be paid under this Agreement (after withholding for or
on account of any Taxes).

 

Section 2.11                            Breakage
Costs.

 

The Borrower shall pay to the Administrative Agent for
the account of the applicable Managing Agent, on behalf of the related Lenders,
upon the request of any Managing Agent, any Lender or the Administrative Agent
on each Payment Date on which a prepayment is made, such amount or amounts as
shall, without duplication, compensate the Lenders for any loss, cost or
expense (the “Breakage Costs”) incurred by the Lenders (as reasonably
determined by the applicable Lender) as a result of any prepayment of an
Advance (and interest thereon) arising under this Agreement, the Liquidity
Agreements and the Swingline Credit Agreement. 
The determination by any Managing Agent, on behalf of the related
Lenders, of the amount of any such loss or expense shall be set forth in a
written notice to the Borrower delivered by the applicable Lender prior to the
date of such prepayment in the case where notice of such prepayment is
delivered to such Lender in accordance with Section 2.3(b) or
within two (2) Business Days following such prepayment in the case where
no such notice is delivered (in which case, Breakage Costs shall include
interest thereon from the date of such prepayment) and shall be conclusive
absent manifest error.  No Breakage Costs
shall be payable to any CP Lender to the extent that notice of such prepayment
shall have been delivered to such CP Lender in accordance with the provisions
of Section 2.3(b) or 7.7(c) and each of the
following apply: (i) such prepayment is made on a Payment Date and (ii) such
prepayment does not exceed the sum of (A) 15% of the Advances Outstanding
of such CP Lender as of the Payment Date immediately preceding the date of such
prepayment and (B) $5,000,000.

 

46

 

Section 2.12                            Increased
Costs; Capital Adequacy; Illegality.

 

(a)           If after the date
hereof, any Managing Agent, Lender, Liquidity Bank, Swingline Party or any
Affiliate thereof (each of which, an “Affected
Party”) shall be charged any fee, expense or increased
cost on account of the adoption of any applicable law, rule or regulation
(including any applicable law, rule or regulation regarding capital
adequacy), any accounting principles or any change in any of the foregoing, or
any change in the interpretation or administration thereof by any governmental
authority, the Financial Accounting Standards Board (“FASB”), any
central bank or any comparable agency charged with the interpretation or
administration thereof, or compliance with any request or directive (whether or
not having the force of law) of any such authority or agency (a “Regulatory
Change”):  (i) that subjects any
Affected Party to any charge or withholding on or with respect to any
Transaction Document or an Affected Party’s obligations under a Transaction
Document, or on or with respect to the Advances, or changes the basis of
taxation of payments to any Affected Party of any amounts payable under any
Transaction Document (except for changes in the rate of tax on the overall net
income of an Affected Party or taxes excluded by Section 2.13) or (ii) that
imposes, modifies or deems applicable any reserve, assessment, insurance
charge, special deposit or similar requirement against assets of, deposits with
or for the account of an Affected Party, or credit extended by an Affected
Party pursuant to a Transaction Document or (iii) that imposes any other
condition the result of which is to increase the cost to an Affected Party of
performing its obligations under a Transaction Document, or to reduce the rate
of return on an Affected Party’s capital as a consequence of its obligations
under a Transaction Document, or to reduce the amount of any sum received or
receivable by an Affected Party under a Transaction Document or to require any
payment calculated by reference to the amount of interests or loans held or
interest received by it, then, upon demand by the applicable Managing Agent,
Borrower shall pay to the Administrative Agent, for payment to the applicable
Managing Agent for the benefit of the relevant Affected Party, such amounts
charged to such Affected Party or such amounts to otherwise compensate such
Affected Party for such increased cost or such reduction.

 

(b)           If as a result of any
event or circumstance similar to those described in clause
(a) of this Section 2.12,
an Affected Party is required to compensate a bank or other financial
institution, including a Swingline Party, providing liquidity support, credit
enhancement, a Swingline Loan or other similar support or financing to such
Affected Party in connection with this Agreement or the funding or maintenance
of Advances hereunder, then within ten days after demand by such Affected
Party, the Borrower shall pay to such Affected Party such additional amount or amounts
as may be necessary to reimburse such Affected Party for any such amounts paid
by it.

 

(c)           In determining any
amount provided for in this section, the Affected Party may use any reasonable
averaging and attribution methods.  Any
Affected Party making a claim under this section shall submit to the Borrower a
certificate as to such additional or increased cost or reduction, which
certificate shall calculate in reasonable detail any such charges and shall be
conclusive absent demonstrable error.

 

47

 

Section 2.13                            Taxes.

 

(a)           All payments made by
the Borrower in respect of any Advance and all payments made by the Borrower
under this Agreement will be made free and clear of and without deduction or
withholding for or on account of any Taxes, unless such withholding or
deduction is required by law.  In such
event, the Borrower shall pay to the appropriate taxing authority any such
Taxes required to be deducted or withheld and the amount payable to each Lender
or the Administrative Agent (as the case may be) will be increased (such
increase, the “Additional
Amount”) such that every net payment made under this
Agreement after deduction or withholding for or on account of any Taxes
(including, without limitation, any Taxes on such increase) is not less than
the amount that would have been paid had no such deduction or withholding been
deducted or withheld.  The foregoing
obligation to pay Additional Amounts, however, will not apply with respect to,
and the term “Additional Amount” shall be deemed not to include net income or
franchise taxes imposed on a Lender, any Managing Agent or the Administrative
Agent, respectively, with respect to payments required to be made by the
Borrower or Servicer on behalf of the Borrower under this Agreement, by a
taxing jurisdiction in which such Lender, such Managing Agent or the
Administrative Agent is organized, conducts business or is paying taxes as of
the Effective Date (as the case may be). 
If a Lender, any Managing Agent or the Administrative Agent pays any
Taxes in respect of which the Borrower is obligated to pay Additional Amounts
under this Section 2.13(a), the
Borrower shall promptly reimburse such Lender or Administrative Agent in full.

 

(b)           The Borrower will
indemnify each Lender, each Managing Agent and the Administrative Agent for the
full amount of Taxes in respect of which the Borrower is required to pay
Additional Amounts (including, without limitation, any Taxes imposed by any
jurisdiction on such Additional Amounts) paid by such Lender, Managing Agent or
the Administrative Agent (as the case may be) and any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto; provided, however,
that such Lender, Managing Agent or the Administrative Agent, as appropriate,
making a demand for indemnity payment, shall provide the Borrower, at its
address set forth under its name on the signature pages hereof, with a
certificate from the relevant taxing authority or from a Responsible Officer of
such Lender, Managing Agent or the Administrative Agent stating or otherwise
evidencing that such Lender, Managing Agent or the Administrative Agent has
made payment of such Taxes and will provide a copy of or extract from
documentation, if available, furnished by such taxing authority evidencing
assertion or payment of such Taxes.  This
indemnification shall be made within ten days from the date such Lender,
Managing Agent or the Administrative Agent (as the case may be) makes written
demand therefor.

 

(c)           Within 30 days after
the date of any payment by the Borrower of any Taxes, the Borrower will furnish
to the Administrative Agent, the Managing Agent or the Lender, as applicable,
at its address set forth under its name on the signature pages hereof, appropriate
evidence of payment thereof.

 

(d)           If a Lender is not
created or organized under the laws of the United States or a political
subdivision thereof, such Lender shall, to the extent that it may then do so
under Applicable Laws, deliver to the Borrower with a copy to the
Administrative Agent (i) within 15 days after the date hereof, or, if
later, the date on which such Lender becomes a Lender hereof 

 

48

 

two (or such other
number as may from time to time be prescribed by Applicable Laws) duly
completed copies of IRS Form W-8EC1 or Form W-8BEN for 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 Laws), as
appropriate, to permit the Borrower to make payments hereunder for the account
of such Lender, as the case may be, without deduction or withholding of United
States federal income or similar Taxes and (ii) upon the obsolescence of
or after the occurrence of any event requiring a change in, any form or
certificate previously delivered pursuant to this Section 2.13(d),
two copies (or such other number as may from time to time be prescribed by
Applicable Laws) of such additional, amended or successor forms, certificates
or statements as may be required under Applicable Laws to permit the Borrower
to make payments hereunder for the account of such Lender, without deduction or
withholding of United States federal income or similar Taxes.

 

(e)           For any period with
respect to which a Lender has failed to provide the Borrower with the
appropriate form, certificate or statement described in clause (d) of
this section (other than if such failure is due to a change in law occurring
after the date of this Agreement), such Lender, as the case may be, shall not
be entitled to indemnification under clauses (a) or (b) of
this section with respect to any Taxes.

 

(f)            Within 30 days of the
written request of the Borrower therefor, the Administrative Agent, the
Managing Agent or the Lender, as appropriate, shall execute and deliver to the
Borrower such certificates, forms or other documents that can be furnished
consistent with the facts and that are reasonably necessary to assist the
Borrower in applying for refunds of Taxes remitted hereunder; provided, however,
that the Administrative Agent, the Managing Agent and the Lender shall not be
required to deliver such certificates forms or other documents if in their
respective sole discretion it is determined that the delivery of such
certificate, form or other document would have a material adverse effect on the
Administrative Agent, the Managing Agent or the Lender and provided  further,
however, that the Borrower shall reimburse
the Administrative Agent, the Managing Agent or the Lender for any reasonable
expenses incurred in the delivery of such certificate, form or other document.

 

(g)           If, in connection with
an agreement or other document providing liquidity support, credit enhancement,
a Swingline Loan or other similar support or financing to the Lenders in
connection with this Agreement or the funding or maintenance of Advances
hereunder, the Lenders are required to compensate a bank or other financial
institution in respect of Taxes under circumstances similar to those described
in this section then within ten days after demand by the Lenders, the Borrower
shall pay to the Lenders such additional amount or amounts as may be necessary
to reimburse the Lenders for any amounts paid by them.

 

Section 2.14                            Revolver
Loan Funding.

 

(a)           Upon the occurrence of
a Revolver Loan Funding Date (i) each CP Lender member of a Lender Group,
if any, shall make an assignment to its related Committed Lenders of its
Advances Outstanding in respect of Revolver Loans at such time (which assignment
shall become effective upon receipt by such CP Lender of payment in full in
respect of its Advances Outstanding and accrued Interest, fees, and all other
amounts owing to it under this Agreement) and (ii) each Committed Lender
shall make an advance (each, a “Revolver Loan Funding”) in an 

 

49

 

amount equal to such
Committed Lender’s ratable share of the aggregate outstanding unfunded
commitments under the Revolver Loans (collectively, the “Revolver Loan Unfunded
Commitment Amount”).  Upon receipt of
the proceeds of such Revolver Loan Funding, the Administrative Agent shall
deposit such funds into segregated accounts (each, a “Revolver Loan Funding
Account”), in its name, referencing the name of such Committed Lender, and
maintained at a Qualified Institution. 
Each Committed Lender hereby grants to the Administrative Agent full
power and authority, on its behalf, to withdraw funds from the applicable
Revolver Loan Funding Account at the time of, and in connection with, the
funding of any Post-Termination Revolver Loan Fundings to be made by the
Borrower, and to deposit to the related Revolver Loan Funding Account any funds
received in respect of each relevant Committed Lender’s ratable share of
principal payments under Section 2.8 hereof, all in accordance with
the terms of and for the purposes set forth in this Agreement.  The deposit of monies in such Revolver Loan
Funding Account by any Committed Lender shall not constitute an Advance (and
such Committed Lender shall not be entitled to interest on such monies except
as provided in clause (d) below) unless and until (and then only to the
extent that) such monies are used to make Post-Termination Revolver Loan
Fundings pursuant to the first sentence of clause (b) below).  On each Payment Date from and after the
Revolver Loan Funding Date, the Borrower shall pay the Administrative Agent,
for the benefit of the Committed Lenders, a fee (the “Revolver Loan Funding
Fee”) equal to 1.00%, multiplied by the weighted average amount on deposit
in the Revolver Loan Funding Accounts during the applicable Settlement Period,
calculated on the basis of a year of 360 days for the actual number of days
elapsed.

 

(b)           From and after the
establishment of a Revolver Loan Funding Account with respect to any Committed
Lender, and until the earlier of (i) the reduction to zero of all
outstanding commitments in respect of Revolver Loans and (ii) three years
following the Revolver Loan Funding Date, all Post-Termination Revolver Loan
Fundings to be made by such Committed Lender hereunder shall be made by
withdrawing funds from the applicable Revolver Loan Funding Account.  On each Business Day during such time, the
Administrative Agent shall, (i) if a Revolver Loan Funding Account
Shortfall exists, deposit the lesser of (A) the amount allocable to the
repayment of principal to the Committed Lenders and (B) the Revolver Loan
Funding Account Shortfall and (ii) if a Revolver Loan Funding Account
Surplus exists, pay to the applicable Managing Agent, on behalf of each
Committed Lender, such Committed Lender’s 
ratable share of the Revolver Loan Funding Account Surplus.  Until the earlier of (i) the reduction
to zero of all outstanding commitments in respect of Revolver Loans and (ii) three
years following the Revolver Loan Funding Date, all remaining funds then held
in such Revolver Loan Funding Account (after giving effect to any
Post-Termination Revolver Loan Fundings to be made on such date) shall be paid
by the Administrative Agent to the applicable Managing Agent, on behalf of such
Committed Lender, and thereafter all payments made in respect of the Loans
(whether or not originally funded from such Committed Lender’s Revolver Loan
Funding Account) shall be paid directly to the applicable Managing Agent, on
behalf of such Committed Lender, in accordance with the terms of Section 2.8.

 

(c)           The Administrative
Agent may, its sole discretion, advance funds withdrawn from the Revolver Loan
Funding Accounts to (i) the Borrower or (ii) the applicable Obligor
directly, on behalf of the Borrower, and in either case, such funds shall be
used solely for the purpose of funding advances requested by an Obligor under a
Revolver Loan.

 

50

 

(d)           Proceeds in a Revolver
Loan Funding Account shall be invested, at the written direction of the
applicable Committed Lender (or the applicable Managing Agent on its behalf) to
the applicable Revolver Loan Funding Account bank, only in investments which
constitute Permitted Investments.  The
investment earnings with respect to a Revolver Loan Funding Account shall
accrue as the Committed Lender and Revolver Loan Funding Account bank shall
agree.  The Administrative Agent shall
direct the Revolver Loan Funding Account bank to pay all such investment
earnings from the relevant account directly to the applicable Managing Agent,
for the account of the applicable Committed Lender.

 

(e)           Notwithstanding anything herein to the contrary, none of the
Administrative Agent, the other Managing Agents, the other Purchasers nor the
Revolver Loan Funding Account bank shall have any liability for any loss
arising from any investment or reinvestment made by it with respect to a
Revolver Loan Funding Account in accordance with, and pursuant to, the provisions
hereof.

 

Section 2.15                            Pending
Account.

 

(a)           The Borrower or the
Servicer on its behalf shall cause to be established and maintained in the name
of the Borrower and assigned to the Administrative Agent as agent for the
Secured Parties, with an office or branch of a depository institution or trust
company organized under the laws of the United States or any one of the States
thereof or the District of Columbia (or any domestic branch of a foreign bank)
a segregated corporate trust account (the “Pending Account”) for the
purpose of receiving (i) proceeds of Advances and (ii) Principal
Collections transferred from the Collection Account, and funding purchases of
Eligible Loans therefrom.

 

(b)           The Borrower may,
during the Revolving Period, transfer Principal Collections from the Collection
Account to the Pending Account, so long as (i) the conditions to Advances
described in Section 3.2 are met, mutatis mutandis,
other than the requirement a Borrower Notice containing certification thereto
has been delivered, (ii) in the reasonable determination of the Servicer
and the Borrower, such Collections shall not be necessary to make payments
pursuant to clauses FIRST through TWELFTH above on the next Payment Date
pursuant to Section 2.8(a) above and (iii) the Maximum
Advance Rate is 50% or less.

 

(c)           Funds deposited in the
Pending Account shall be used to purchase Eligible Loans within 3 Business Days
of deposit.  Any funds not used within
such 3 Business Day period shall, unless otherwise approved by the Administrative
Agent in its sole discretion, be used to make a prepayment of the Advances
Outstanding pursuant to Section 2.3(b).  Notice of such prepayment shall be given on
the Business Day immediately succeeding the expiration of such 3 Business Day
period, and such prepayment shall take place on the earliest possible Business
Day following such notice.

 

Section 2.16                            Discretionary
Sales of Loans.

 

On any
Discretionary Sale Settlement 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, and the release of the Lien by the
Administrative Agent over, one or more 

 

51

 

Transferred Loans, in
whole but not in part (a “Discretionary Sale”), subject to the following
terms and conditions and subject to the other restrictions contained herein:

 

(a)           any Discretionary Sale
shall be made by the Borrower in a transaction (A) arranged by the
Servicer (or, if a Successor Servicer shall have been appointed pursuant to Section 7.19,
arranged by the Borrower with the approval of the Administrative Agent) in
accordance with the customary management practices of prudent institutions
which manage financial assets similar to the Transferred Loans for their own
account or for the account of others, (B) reflecting arm’s-length market
terms, (C) in which the Borrower makes no representations, warranties or
covenants and provides no indemnification for the benefit of any other party to
the Discretionary Sale (other than any representations, warranties or covenants
relating to the Borrower’s ownership of or clean title to the Transferred Loans
that are the subject of the Discretionary Sale that are standard and customary
in connection with such a sale or for which the Originator has agreed to fully
indemnify the Borrower) and (D) of which the Administrative Agent and the
Required Committed Lenders shall have received 3 Business Days’ (or such
shorter period as the Required Committed Lenders shall consent to) written
notice (such notice, a “Discretionary Sale Notice”) which notice shall
provide a description of the terms of the Discretionary Sale;

 

(b)           after giving effect to
the Discretionary Sale on the related Discretionary Sale Trade Date and the
payment of funds from the sale into the Collection Account required under Section 2.16(d),
(A) all representations and warranties of the Borrower contained in Section 4.1
shall be true and correct as of the Discretionary Sale Trade Date, (B) neither
a Early Termination Event nor Unmatured Termination Event shall have occurred
and be continuing, (C) the Borrowing Base Test shall have been satisfied,
and, if such Discretionary Sale Trade Date takes place during the Amortization
Period, following the application of the funds described in clause (d) below,
the ratio of the Borrowing Base to the Drawn Amount shall have been improved, (D) the
Collateral Quality Tests shall have been satisfied, and, if such Discretionary
Sale Trade Date takes place during the Amortization Period, the Collateral
Quality Tests shall have been improved and (E) the Required Equity
Investment shall be maintained;

 

(c)           on the Discretionary
Sale Trade Date, the Borrower and the Servicer shall be deemed to have
represented and warranted that the requirements of Section 2.16(b) shall
have been satisfied as of the related Discretionary Sale Trade Date after
giving effect to the contemplated Discretionary Sale; and

 

(d)           on the related
Discretionary Sale Settlement Date, the Administrative Agent shall have
received into the Collection Account, in immediately available funds, an amount
(i) other than as described in clause (ii) below, equal to the sum of
(A) the portion of the Advances Outstanding to be prepaid so that the
requirements of Section 2.16(b) shall have been satisfied as
of such Discretionary Sale Settlement Date plus (B) an amount equal
to all unpaid Interest attributable to that portion of the Advances Outstanding
to be paid in connection with the Discretionary Sale plus (C) any
Breakage Costs owed in connection with the payment and (ii) in the case of
a sale of (x) Defaulted Loans or Charged-Off Loans in accordance with Section 7.7,
or (y) any Transferred Loans following the end of the Revolving Period,
equal to the proceeds of such Discretionary Sale.

 

52

 

In connection with
any Discretionary Sale, following receipt by the Administrative Agent of the
amounts referred to in Section 2.16(d) above (receipt of which
shall be confirmed to the Administrative Agent), there shall be released to the
Borrower (for further sale to a purchaser) without recourse, representation or
warranty of any kind all of the right, title and interest of the Administrative
Agent and the Secured Parties in, to and under the portion of the Collateral
subject to such Discretionary Sale and such portion of the Collateral so
released shall be released from any Lien and the Loan Documents (subject to the
requirements set forth above in this Section 2.16).

 

In connection with
any Discretionary Sale, on the related Discretionary Sale Settlement Date, the
Administrative Agent on behalf of the Secured Parties shall (i) execute
such instruments of release with respect to the portion of the Collateral to be
released to the Borrower, in recordable form if necessary, in favor of the
Borrower as the Servicer on behalf of the Borrower may reasonably request, (ii) deliver
any portion of the Collateral to be released to the Borrower in its possession
to the Borrower and (iii) otherwise take such actions, as are determined
by the Borrower or Servicer to be reasonably necessary and appropriate to
release the Lien on the portion of the Collateral to be released to the
Borrower and release and deliver to the Borrower such portion of the Collateral
to be released to the Borrower.

 

ARTICLE III

 

CONDITIONS OF
EFFECTIVENESS AND ADVANCES

 

Section 3.1                                   Conditions
to Effectiveness and Advances.

 

No Lender shall be obligated to make any Advance
hereunder from and after the Effective Date, nor shall any Lender, the
Administrative Agent or the Managing Agents be obligated to take, fulfill or
perform any other action hereunder, until the following conditions have been
satisfied, in the sole discretion of, or waived in writing by, the Managing
Agents:

 

(a)           This Agreement and all
other Transaction Documents and each Liquidity Agreement or counterparts hereof
or thereof shall have been duly executed by, and delivered to, the parties
hereto and thereto and the Administrative Agent shall have received such other
documents, instruments, agreements and legal opinions as any Managing Agent
shall reasonably request in connection with the transactions contemplated by
this Agreement, on or prior to the Effective Date, each in form and substance
satisfactory to the Administrative Agent.

 

(b)           Each Managing Agent
shall be satisfied with the results of the due diligence review performed by it
and each Lender shall have received all necessary internal approvals.

 

(c)           The Borrower shall have
paid all fees required to be paid by it on the Effective Date, including all
fees required hereunder and under the Fee Letters to be paid as of such date,
and shall have reimbursed each Lender and the Administrative Agent for all
fees, costs and expenses related to the transactions contemplated hereunder and
under the other Transaction Documents and each Liquidity Agreement, including
the legal and other document preparation costs incurred by any Lender and/or
the Administrative Agent.

 

53

 

(d)           Each CP Lender whose
commercial paper is being rated by one or more Rating Agency shall have
received, to the extent required under the terms of such CP Lender’s program
documents, the written confirmation of each such Rating Agency that the execution
and delivery of this Agreement will not result in a withdrawal or downgrading
of the then-current rating of such commercial paper by such Rating Agency.

 

(e)           The Required Equity
Investment shall be maintained.

 

The Administrative Agent shall promptly notify each
Lender of the satisfaction or waiver of the conditions set forth above.

 

Section 3.2                                   Additional
Conditions Precedent to All Advances.

 

Each Advance shall be subject to the further
conditions precedent that:

 

(a)           On the related Funding
Date, the Borrower or the Servicer, as the case may be, shall have certified in
the related Borrower Notice that:

 

(i)            The
representations and warranties set forth in Sections
4.1 and 7.8 are true and correct
on and as of such date, before and after giving effect to such borrowing and to
the application of the proceeds therefrom, as though made on and as of such
date; and

 

(ii)           No event
has occurred, or would result from such Advance or from the application of the
proceeds therefrom, that constitutes an Early Termination Event or an Unmatured
Termination Event.

 

(b)           The Termination Date
shall not have occurred;

 

(c)           Before and after giving
effect to such borrowing and to the application of proceeds therefrom the
Collateral Quality Test shall be satisfied, as calculated on such date;

 

(d)           Before and after giving
effect to such borrowing and to the application of proceeds therefrom the
Borrowing Base Test shall be satisfied, as calculated on such date;

 

(e)           No claim has been
asserted or proceeding commenced challenging enforceability or validity of any
of the Loan Documents, excluding any instruments, certificates or other
documents relating to Loans that were the subject of prior Advances;

 

(f)            There shall have been
no Material Adverse Change with respect to the Borrower or the Servicer since
the preceding Advance; and

 

(g)           The Servicer and
Borrower shall have taken such other action, including delivery of approvals,
consents, opinions, documents, and instruments to the Managing Agents as each
may reasonably request.

 

54

 

ARTICLE IV

 

REPRESENTATIONS AND
WARRANTIES

 

Section 4.1                                   Representations
and Warranties of the Borrower.

 

The Borrower represents and warrants as follows:

 

(a)           Organization
and Good Standing.  The
Borrower is a Delaware limited liability company duly organized, validly
existing, and in good standing under the laws of the jurisdiction of its
formation, and has full power, authority and legal right to own or lease its
properties and conduct its business as such business is presently conducted.

 

(b)           Due
Qualification.  The Borrower
is qualified to do business as a limited liability company, is in good
standing, and has obtained all licenses and approvals as required under the
laws of all jurisdictions in which the ownership or lease of its property and
or the conduct of its business (other than the performance of its obligations
hereunder) requires such qualification, standing, license or approval, except
to the extent that the failure to so qualify, maintain such standing or be so
licensed or approved would not have an adverse effect on the interests of the
Lenders.  The Borrower is qualified to do
business as a limited liability company, is in good standing, and has obtained all
licenses and approvals as required under the laws of all states in which the
performance of its obligations pursuant to this Agreement requires such
qualification, standing, license or approval and where the failure to qualify
or obtain such license or approval would have material adverse effect on its
ability to perform hereunder.

 

(c)           Due
Authorization.  The execution
and delivery of this Agreement and each Transaction Document to which the
Borrower is a party and the consummation of the transactions provided for
herein and therein have been duly authorized by the Borrower by all necessary
action on the part of the Borrower.

 

(d)           No
Conflict.  The execution and
delivery of this Agreement and each Transaction Document to which the Borrower
is a party, the performance by the Borrower of the transactions contemplated
hereby and thereby and the fulfillment of the terms hereof and thereof will not
conflict with or result in any breach of any of the terms and provisions of,
and will not constitute (with or without notice or lapse of time or both) a
default under, the Borrower’s limited liability company agreement or any
material Contractual Obligation of the Borrower.

 

(e)           No
Violation.  The execution and
delivery of this Agreement and each Transaction Document to which the Borrower
is a party, the performance of the transactions contemplated hereby and thereby
and the fulfillment of the terms hereof and thereof will not conflict with or
violate, in any material respect, any Applicable Law.

 

(f)            No
Proceedings.  There are no
proceedings or investigations pending or, to the best knowledge of the
Borrower, threatened against the Borrower, before any Governmental Authority (i) asserting
the invalidity of this Agreement or any 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 Transaction Document to
which the Borrower is a party 

 

55

 

or (iii) seeking
any determination or ruling that could reasonably be expected to have a
Material Adverse Effect.

 

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

 

(h)           Reports
Accurate.  All Monthly Reports
(if prepared by the Borrower, or to the extent that information contained
therein is supplied by the Borrower), information, exhibit, financial
statement, document, book, record or report furnished or to be furnished by the
Borrower to the Administrative Agent or a Lender in connection with this
Agreement are true, complete and accurate in all material respects.

 

(i)            Solvency.  The transactions contemplated under this
Agreement and each Transaction Document to which the Borrower is a party do not
and will not render the Borrower not Solvent.

 

(j)            Selection Procedures.  No procedures believed by the Borrower to be
materially adverse to the interests of the Secured Parties were utilized by the
Borrower in identifying and/or selecting the Loans that are part of the
Collateral.

 

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

 

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

 

(m)          No
Liens.  The Collateral is
owned by the Borrower free and clear of any Liens except for Permitted Liens as
provided herein, and the Administrative Agent, as agent for the Secured
Parties, has a valid and perfected first priority security interest in the
Collateral then existing or thereafter arising, free and clear of any Liens
except for Permitted Liens.  No effective
financing statement or other instrument similar in effect covering any
Collateral is on file in any recording office except such as may be filed in
favor of the Administrative Agent relating to this Agreement or reflecting the
transfer of the Collateral from the Originator to the Borrower.

 

(n)           Security
Interest.  The Borrower has
granted a security interest (as defined in the UCC) to the Administrative
Agent, as agent for the Secured Parties, in the Collateral, which is
enforceable in accordance with Applicable Law. 
All filings (including, without limitation, such 

 

56

 

UCC filings) as
are necessary in any jurisdiction to perfect the interest of the Administrative
Agent as agent for the Secured Parties, in the Collateral have been made.

 

(o)           Location
of Offices.  The Borrower’s
jurisdiction of organization, principal place of business and chief executive
office and the office where the Borrower keeps all the Records is located at
the address of the Borrower referred to in Section 12.2
hereof (or at such other locations as to which the notice and other
requirements specified in Section 5.1(m) shall
have been satisfied).

 

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

 

(q)           Purchase
Agreement.  The Purchase
Agreement is the only agreement pursuant to which the Borrower acquires Collateral
(other than the Hedge Collateral).

 

(r)            Value
Given.  The Borrower gave
reasonably equivalent value to the Originator in consideration for the transfer
to the Borrower of the Transferred Loans under the Purchase Agreement, no such
transfer was made for or on account of an antecedent debt owed by the
Originator to the Borrower, and no such transfer is voidable or subject to
avoidance under any Insolvency Law.

 

(s)           Accounting.  The Borrower accounts for the transfers to it
from the Originator of interests in the Loans under the Purchase Agreement as
sales of such Loans in its books, records and financial statements, in each
case consistent with GAAP.

 

(t)            Separate
Entity.  The Borrower is
operated as an entity with assets and liabilities distinct from those of the
Originator and any Affiliates thereof (other than the Borrower), and the
Borrower hereby acknowledges that the Administrative Agent and the Lenders are
entering into the transactions contemplated by this Agreement in reliance upon
the Borrower’s identity as a separate legal entity from the Originator and from
each such other Affiliate of the Originator.

 

(u)           Investments.  Except for Supplemental Interests or
Supplemental Interests that convert into an equity interest in any Person, the
Borrower does not own or hold directly or indirectly, any capital stock or
equity security of, or any equity interest in, any Person.

 

(v)           Business.  Since its formation, the Borrower has
conducted no business other than the purchase and receipt of Loans and Related
Property from the Originator under the Purchase Agreement, the borrowing of
funds under this Agreement and such other activities as are incidental to the
foregoing.

 

(w)          ERISA.  The Borrower is in compliance with ERISA and
has not incurred and does not expect to incur any liabilities (except for
premium payments arising in the ordinary course of business) payable to the
Pension Benefit Guaranty Corporation under ERISA.

 

57

 

(x)            Investment
Company Act.

 

(i)            The
Borrower represents and warrants that the Borrower is exempt and will remain
exempt from registration as an “investment company” within the meaning of the
Investment Company Act of 1940, as amended (the “1940 Act”).

 

(ii)           The
business and other activities of the Borrower, including but not limited to,
the making of the Advances by the Lenders, the application of the proceeds and
repayment thereof by the Borrower and the consummation of the transactions
contemplated by the Transaction Documents to which the Borrower is a party do
not now and will not at any time result in any violations, with respect to the
Borrower, of the provisions of the 1940 Act or any rules, regulations or orders
issued by the SEC thereunder.

 

(y)           Government
Regulations.  The Borrower is
not engaged in the business of extending credit for the purpose of “purchasing”
or “carrying” any “margin security,” as such terms are defined in Regulation U
of the Federal Reserve Board as now and from time to time hereafter in effect
(such securities being referred to herein as “Margin Stock”).  The Borrower owns no Margin Stock, and no
portion of the proceeds of any Advance hereunder will be used, directly or
indirectly, for the purpose of purchasing or carrying any Margin Stock, for the
purpose of reducing or retiring any Indebtedness that was originally incurred
to purchase or carry any Margin Stock or for any other purpose that might cause
any portion of such proceeds to be considered a “purpose credit” within the
meaning of Regulation T, U or X of the Federal Reserve Board.  The Borrower will not take or permit to be
taken any action that might cause any Related Document to violate any
regulation of the Federal Reserve Board.

 

(z)            Eligibility
of Loans.  As of the Effective
Date, (i) the Loan List and the information contained in the Borrower
Notice delivered pursuant to Sections 2.1
and 2.2 is an accurate and complete listing
in all material respects of all the Loans that are part of the Collateral as of
the Effective Date, and the information contained therein with respect to the
identity of such Loans and the amounts owing thereunder is true and correct in
all material respects as of such date and (ii) each such Loan is an
Eligible Loan.  On each Funding Date, the
Borrower shall be deemed to represent and warrant that any additional Loan
referenced on the related Borrower Notice delivered pursuant to Sections 2.1 and 2.2
is an Eligible Loan.

 

ARTICLE V

 

GENERAL COVENANTS OF THE
BORROWER

 

Section 5.1                                   Covenants
of the Borrower.

 

The Borrower hereby covenants that:

 

(a)           Compliance
with Laws.  The Borrower will
comply in all material respects with all Applicable Laws, including those with
respect to the Loans in the Collateral and any Related Property.

 

(b)           Preservation
of Corporate Existence.  The
Borrower will preserve and maintain its existence, rights, franchises and
privileges in the jurisdiction of its formation, and qualify and remain
qualified in good standing in each jurisdiction where the failure to maintain
such 

 

58

 

existence, rights,
franchises, privileges and qualification has had, or could reasonably be
expected to have, a Material Adverse Effect.

 

(c)           Security
Interests.  Except as
contemplated in this Agreement, the Borrower will not sell, pledge, assign or
transfer to any other Person, or grant, create, incur, assume or suffer to
exist any Lien on any Loan or Related Property that is part of the Collateral,
whether now existing or hereafter transferred hereunder, or any interest
therein.  The Borrower will promptly
notify the Administrative Agent of the existence of any Lien on any Loan or
Related Property that is part of the Collateral and the Borrower shall defend
the right, title and interest of the Administrative Agent as agent for the Secured
Parties in, to and under any Loan and the Related Property that is part of the
Collateral, against all claims of third parties; provided,
however, that nothing in this Section 5.1(c) shall
prevent or be deemed to prohibit the Borrower from suffering to exist Permitted
Liens upon any Loan or any Related Property that is part of the Collateral.

 

(d)           Delivery
of Collections.  The Borrower
agrees to cause the delivery to the Servicer promptly (but in no event later
than two (2) Business Days after receipt) all Collections (including any
Deemed Collections) received by Borrower in respect of the Loans that are part
of the Collateral.

 

(e)           Activities
of Borrower.  The Borrower
shall not engage in any business or activity of any kind, or enter into any
transaction or indenture, mortgage, instrument, agreement, contract, Loan or
other undertaking, which is not incidental to the transactions contemplated and
authorized by this Agreement or the Purchase Agreement.

 

(f)            Indebtedness.  The Borrower shall not create, incur, assume
or suffer to exist any Indebtedness or other liability whatsoever, except (i) obligations
incurred under this Agreement, under any Hedging Agreement required by Section 5.2(a), or the Purchase Agreement,
or (ii) liabilities incident to the maintenance of its existence in good
standing.

 

(g)           Guarantees.  The Borrower shall not become or remain
liable, directly or indirectly, in connection with any Indebtedness or other
liability of any other Person, whether by guarantee, endorsement (other than
endorsements of negotiable instruments for deposit or collection in the
ordinary course of business), agreement to purchase or repurchase, agreement to
supply or advance funds, or otherwise.

 

(h)           Investments.  The Borrower shall not make or suffer to exist
any loans or advances to, or extend any credit to, or make any investments (by
way of transfer of property, contributions to capital, purchase of stock or
securities or evidences of indebtedness, acquisition of the business or assets,
or otherwise) in, any Person except for purchases of Loans and Supplemental
Interests pursuant to the Purchase Agreement, or for investments in Permitted
Investments in accordance with the terms of this Agreement.

 

(i)            Merger;
Sales.  The Borrower shall not
enter into any transaction of merger or consolidation, or liquidate or dissolve
itself (or suffer any liquidation or dissolution), or acquire or be acquired by
any Person, or convey, sell, loan or otherwise dispose of all or substantially
all of its property or business, except as provided for in this Agreement.

 

59

 

(j)            Distributions.  The Borrower may not declare or pay or make,
directly or indirectly, any distribution (whether in cash or other property)
with respect to any Person’s equity interest in the Borrower (collectively, a “Distribution”); provided, however,
if no Early Termination Event has occurred or will occur as a result thereof,
the Borrower may make Distributions.

 

(k)           Agreements.  The Borrower shall not amend or modify (i) the
provisions of its limited liability company agreement or (ii) the Purchase
Agreement without the consent of the Administrative Agent and prior written
notice to each Managing Agent, or issue any power of attorney except to the
Administrative Agent or the Servicer.

 

(l)            Separate
Existence.  The Borrower
shall:

 

(i)            Maintain
its own deposit account or accounts, separate from those of any Affiliate, with
commercial banking institutions.  The
funds of the Borrower will not be diverted to any other Person or for other
than corporate uses of the Borrower.

 

(ii)           Ensure
that, to the extent that it shares the same persons as officers or other
employees as any of its Affiliates, the salaries of and the expenses related to
providing benefits to such officers or employees shall be fairly allocated
among such entities, and each such entity shall bear its fair share of the
salary and benefit costs associated with all such common officers and
employees.

 

(iii)          Ensure
that, to the extent that it jointly contracts with any of its Affiliates to do
business with vendors or service providers or to share overhead expenses, the
costs incurred in so doing shall be allocated fairly among such entities, and
each such entity shall bear its fair share of such costs.  To the extent that the Borrower contracts or
does business with vendors or service providers when the goods and services
provided are partially for the benefit of any other Person, the costs incurred
in so doing shall be fairly allocated to or among such entities for whose
benefit the goods and services are provided, and each such entity shall bear
its fair share of such costs.  All
material transactions between Borrower and any of its Affiliates shall be only
on an arm’s length basis.

 

(iv)          Maintain a
principal executive and administrative office through which its business is
conducted separate from those of its Affiliates.  To the extent that Borrower and any of its
Affiliates have offices in the same location, there shall be a fair and
appropriate allocation of overhead costs among them, and each such entity shall
bear its fair share of such expenses.

 

(v)           Conduct
its affairs strictly in accordance with its limited liability company agreement
and observe all necessary, appropriate and customary legal formalities,
including, but not limited to, holding all regular and special director’s
meetings appropriate to authorize all action, keeping separate and accurate
records of such meetings, passing all resolutions or consents necessary to
authorize actions taken or to be taken, and maintaining accurate and separate
books, records and accounts, including, but not limited to, payroll and
transaction accounts.

 

60

 

(vi)          Take or
refrain from taking, as applicable, each of the activities specified or assumed
in the Williams Mullen Opinion, upon which the conclusions expressed therein
are based.

 

(vii)         Maintain
the effectiveness of, and continue to perform under the Purchase Agreement and
the Performance Guaranty, such that it does not amend, restate, supplement,
cancel, terminate or otherwise modify the Purchase Agreement or the Performance
Guaranty, or give any consent, waiver, directive or approval thereunder or
waive any default, action, omission or breach under the Purchase Agreement or
the Performance Guaranty or otherwise grant any indulgence thereunder, without
(in each case) the prior written consent of the Administrative Agent and each
Managing Agent.

 

(m)          Change
of Name or Jurisdiction of Borrower; Records.  The Borrower (x) shall not change its
name or jurisdiction of organization, without 30 days’ prior written notice to
the Administrative Agent and (y) shall not move, or consent to the
Servicer or Collateral Custodian moving, the Loan Documents without 30 days’
prior written notice to the Administrative Agent and (z) will promptly
take all actions required of each relevant jurisdiction in order to continue
the first priority perfected security interest of the Administrative Agent as
agent for the Secured Parties (except for Permitted Liens) in all Collateral,
and such other actions as the Administrative Agent may reasonably request,
including but not limited to delivery of an Opinion of Counsel.

 

(n)           ERISA
Matters.  The Borrower will
not (a) engage or permit any ERISA Affiliate to engage in any prohibited
transaction for which an exemption is not available or has not previously been
obtained from the United States Department of Labor; (b) permit to exist
any accumulated funding deficiency, as defined in Section 302(a) of
ERISA and Section 412(a) of the Code, or funding deficiency with
respect to any Benefit Plan other than a Multiemployer Plan; (c) fail to
make any payments to a Multiemployer Plan that the Borrower or any ERISA
Affiliate may be required to make under the agreement relating to such
Multiemployer Plan or any law pertaining thereto; (d) terminate any
Benefit Plan so as to result in any liability; or (e) permit to exist any
occurrence of any reportable event described in Title IV of ERISA.

 

(o)           Originator
Collateral.  With respect to
each item of Collateral acquired by the Borrower, the Borrower will (i) acquire
such Collateral pursuant to and in accordance with the terms of the Purchase
Agreement, (ii) take all action necessary to perfect, protect and more
fully evidence the Borrower’s ownership of such Collateral, including, without
limitation, (A) filing and maintaining, effective financing statements (Form UCC-1)
naming the Originator as seller/debtor and the Borrower as purchaser/creditor
in all necessary or appropriate filing offices, and filing continuation
statements, amendments or assignments with respect thereto in such filing
offices and (B) executing or causing to be executed such other instruments
or notices as may be necessary or appropriate, including, without limitation,
Assignments of Mortgage, and (iii) take all additional action that the
Administrative Agent may reasonably request to perfect, protect and more fully
evidence the respective interests of the parties to this Agreement in the
Collateral.

 

(p)           Transactions
with Affiliates.  The Borrower
will not enter into, or be a party to, any transaction with any of its
Affiliates, except (i) the transactions permitted or contemplated by this
Agreement, the Purchase Agreement and any Hedging Agreements and (ii) other

 

61

 

transactions
(including, without limitation, transactions related to the use of office space
or computer equipment or software by the Borrower to or from an Affiliate) (A) in
the ordinary course of business, (B) pursuant to the reasonable
requirements of the Borrower’s business, (C) upon fair and reasonable
terms that are no less favorable to the Borrower than could be obtained in a
comparable arm’s-length transaction with a Person not an Affiliate of the
Borrower, and (D) not inconsistent with the factual assumptions set forth
in the Williams Mullen Opinion, as such assumptions may be modified in any
subsequent opinion letters delivered to the Administrative Agent pursuant to Section 3.2 or otherwise.  It is understood that any compensation
arrangement for any officer or employee shall be permitted under clause (ii)(A) through (C) above if such arrangement has
been expressly approved by the managers of the Borrower in accordance with the
Borrower’s limited liability company agreement.

 

(q)           Change
in the Transaction Documents. 
The Borrower will not amend, modify, waive or terminate any terms or
conditions of any of the Transaction Documents to which it is a party, without
the prior written consent of Administrative Agent.

 

(r)            Credit
and Collection Policy.  The
Borrower will (a) comply in all material respects with the Credit and
Collection Policy in regard to each Loan and the Related Property included in
the Collateral, and (b) furnish to the Administrative Agent and each
Managing Agent, at least 20 days prior to its proposed effective date, prompt
notice of any material changes in the Credit and Collection Policy.  The Borrower will not agree or otherwise
permit to occur any material change in the Credit and Collection Policy, which
change would impair the collectibility of any Loan or otherwise adversely
affect the interests or remedies of the Administrative Agent or the Secured
Parties under this Agreement or any other Transaction Document, without the
prior written consent of the Administrative Agent (in its sole discretion).

 

(s)           Extension
or Amendment of Loans.  The
Borrower will not, except as otherwise permitted in Section 7.4(a) extend,
amend or otherwise modify, or permit the Servicer on its behalf to extend,
amend or otherwise modify, the terms of any Loan.

 

(t)            Reporting.  The Borrower will furnish to the
Administrative Agent and each Managing Agent:

 

(i)            as soon
as possible and in any event within two (2) Business Days after the
occurrence of each Early Termination Event and each Unmatured Termination
Event, a written statement, signed by a Responsible Officer, setting forth the
details of such event and the action that the Borrower proposes to take with
respect thereto;

 

(ii)           promptly
upon request, such other information, documents, records or reports respecting
the Transferred Loans or the condition or operations, financial or otherwise,
of the Borrower or Originator as the Administrative Agent may from time to time
reasonably request in order to protect the interests of the Administrative
Agent or the Secured Parties under or as contemplated by this Agreement; and

 

(iii)          promptly,
but in no event later than two (2) Business Days after its receipt
thereof, copies of any and all notices, certificates, documents, or reports
delivered to it by the Originator under the Purchase Agreement.

 

62

 

Section 5.2            Hedging
Agreement.

 

(a)           If
at any time the aggregate Outstanding Loan Balances of Fixed Rate Loans exceeds
10% of the Adjusted Collateral Balance, the Borrower shall, with respect only
to such Outstanding Loan Balance of Fixed Rate Loans aggregating in excess of
10% of the Adjusted Collateral Balance, enter into and maintain a Hedge
Transaction with a Hedge Counterparty which Hedge Transaction shall: (i) be
in the form of interest rate caps having a notional amount equal to the
Outstanding Loan Balance of such Fixed Rate Loans and an amortization schedule
that provides for payments through a date which is within three (3) months
of the maturity of the applicable Fixed Rate Loans and (ii) shall provide
for payments to the Borrower to the extent that the LIBO Rate shall exceed a
rate agreed upon between the Managing Agents and the Borrower; provided,
however, that the strike rate shall be less than the fixed coupon of such Fixed
Rate Loans.

 

(b)           As
additional security hereunder, the Borrower hereby assigns to the
Administrative Agent, as agent for the Secured Parties, all right, title and
interest of the Borrower in any and all Hedging Agreements, any and all Hedge
Transactions, and any and all present and future amounts payable by a Hedge
Counterparty to the Borrower under or in connection with its respective Hedging
Agreement and Hedge Transaction(s) (collectively, the “Hedge Collateral”), and
grants a security interest to the Administrative Agent, as agent for the
Secured Parties, in the Hedge Collateral. 
The Borrower acknowledges that, as a result of that assignment, the
Borrower may not, without the prior written consent of the Administrative
Agent, exercise any rights under any Hedging Agreement or Hedge Transaction,
except for the Borrower’s right under any Hedging Agreement to enter into Hedge
Transactions in order to meet the Borrower’s obligations under Section 5.2(a) hereof.  Nothing herein shall have the effect of
releasing the Borrower from any of its obligations under any Hedging Agreement
or any Hedge Transaction, nor be construed as requiring the consent of the
Administrative Agent or any Secured Party for the performance by the Borrower
of any such obligations.

 

ARTICLE
VI

 

SECURITY
INTEREST

 

Section 6.1                                   Security
Interest.

 

As collateral security for the prompt, complete and
indefeasible payment and performance in full when due, whether by lapse of
time, acceleration or otherwise, of the Obligations, the Borrower hereby
assigns, pledges and grants to the Administrative Agent, as agent for the
Secured Parties, a lien on and security interest in all of the Borrower’s
right, title and interest in, to and under (but none of its obligations under)
the Collateral, whether now existing or owned or hereafter arising or acquired
by the Borrower, and wherever located. 
The assignment under this Section 6.1
does not constitute and is not intended to result in a creation or an
assumption by the Administrative Agent, the Managing Agents or any of the
Secured Parties of any obligation of the Borrower or any other Person in
connection with any or all of the Collateral or under any agreement or
instrument relating thereto.  Anything
herein to the contrary notwithstanding, (a) the Borrower shall remain
liable under the Transferred Loans to the extent set forth therein to perform
all of its duties and obligations thereunder to the same extent as if 

 

63

 

this Agreement had not
been executed, (b) the exercise by the Administrative Agent, as agent for
the Secured Parties, of any of its rights in the Collateral shall not release
the Borrower from any of its duties or obligations under the Collateral, and (c) none
of the Administrative Agent, the Managing Agents or any Secured Party shall
have any obligations or liability under the Collateral by reason of this
Agreement, nor shall the Administrative Agent, the Managing Agents or any
Secured Party be obligated to perform any of the obligations or duties of the
Borrower thereunder or to take any action to collect or enforce any claim for
payment assigned hereunder.

 

Section 6.2                                   Remedies.

 

The Administrative Agent (for itself and on behalf of
the other Secured Parties) shall have all of the rights and remedies of a
secured party under the UCC and other Applicable Law.  Upon the occurrence and during the
continuance of an Early Termination Event, the Administrative Agent or its
designees may (i) deliver a notice of exclusive control to the Collateral
Custodian; (ii) instruct the Collateral Custodian to deliver any or all of
the Collateral to the Administrative Agent or its designees and otherwise give
all instructions and entitlement orders to the Collateral Custodian regarding
the Collateral; (iii) require that the Borrower or the Collateral
Custodian immediately take action to liquidate the Collateral to pay amounts
due and payable in respect of the Obligations; (iv) sell or otherwise
dispose of the Collateral in a commercially reasonable manner, all without
judicial process or proceedings; (v) take control of the Proceeds of any
such Collateral; (vi) exercise any consensual or voting rights in respect
of the Collateral; (vii) release, make extensions, discharges, exchanges
or substitutions for, or surrender all or any part of the Collateral; (viii) enforce
the Borrower’s rights and remedies under the Custody Agreement with respect to
the Collateral; (ix) institute and prosecute legal and equitable
proceedings to enforce collection of, or realize upon, any of the Collateral; (x) remove
from the Borrower’s, the Servicer’s, the Collateral Custodian’s and their
respective agents’ place of business all books, records and documents relating
to the Collateral; and/or (xi) endorse the name of the Borrower upon any items
of payment relating to the Collateral or upon any proof of claim in bankruptcy
against an account debtor.  For purposes
of taking the actions described in subsections (i) through (xi)
of this Section 6.2 the Borrower hereby irrevocably appoints the
Administrative Agent as its attorney-in-fact (which appointment being coupled
with an interest is irrevocable while any of the Obligations remain unpaid),
with power of substitution, in the name of the Administrative Agent or in the
name of the Borrower or otherwise, for the use and benefit of the
Administrative Agent, but at the cost and expense of the Borrower and without
notice to the Borrower; provided that the Administrative Agent hereby agrees to
exercise such power only so long as an Early Termination Event shall be
continuing.  The Administrative Agent and
the other Secured Parties agree that the sale of the Collateral shall be
conducted in good faith and in accordance with commercially reasonable
practices.

 

Section 6.3                                   Release
of Liens.

 

(a)           If (i) the
Borrowing Base Test is met, and (ii) no Early Termination Event or
Unmatured Termination Event has occurred and is continuing, at the same time as
any Loan that is part of the Collateral expires by its terms and all amounts in
respect thereof have been paid by the related Obligor and deposited in the
Collection Account, the Administrative Agent as agent for the Secured Parties
will, to the extent requested by the Borrower or the Servicer on behalf of 

 

64

 

the Borrower, release its interest in such Loan and any Supplemental
Interests related thereto.  In connection
with any such release on or after the occurrence of the above, the
Administrative Agent, as agent for the Secured Parties, will execute and
deliver to the Borrower or the Servicer on behalf of the Borrower any
termination statements and any other releases and instruments as the Borrower
or the Servicer on behalf of the Borrower may reasonably request in order to
effect the release of such Loan and Supplemental Interest; provided, that,
the Administrative Agent as agent for the Secured Parties will make no
representation or warranty, express or implied, with respect to any such Loan
or Supplemental Interest in connection with such sale or transfer and
assignment.

 

(b)           Upon
any request for a release of certain Loans in connection with a proposed
Discretionary Sale, if, upon application of the proceeds of such transaction in
accordance with Section 2.8, the requirements of Section 2.16 shall
have been met, the Administrative Agent as agent for the Secured Parties will,
to the extent requested by the Borrower or the Servicer on behalf of the
Borrower, release its interest in such Loan and any Supplemental Interests
related thereto.  In connection with any
such release on or after the occurrence of the above, the Administrative Agent,
as agent for the Secured Parties, will execute and deliver to the Borrower or
the Servicer on behalf of the Borrower any termination statements and any other
releases and instruments as the Borrower or the Servicer on behalf of the Borrower
may reasonably request in order to effect the release of such Loan and
Supplemental Interest; provided, that, the Administrative Agent as agent for
the Secured Parties will make no representation or warranty, express or
implied, with respect to any such Loan or Supplemental Interest in connection
with such sale or transfer and assignment.

 

(c)           Upon
receipt by the Administrative Agent of the proceeds of a repurchase of an
Ineligible Loan (as such term is defined in the Purchase Agreement) by the
Originator pursuant to the terms of Section 6.1 of the Purchase Agreement,
the Administrative Agent, as agent for the Secured Parties, shall be deemed to
have automatically released its interest in such Ineligible Loan and any
Supplemental Interests related thereto without any further action on its
part.  In connection with any such
release on or after the occurrence of such repurchase, the Administrative
Agent, as agent for the Secured Parties, will execute and deliver to the Borrower
or the Servicer on behalf of the Borrower any releases and instruments as the
Borrower or the Servicer on behalf of the Borrower may reasonably request in
order to effect the release of such Ineligible Loan and Supplemental Interest.

 

(d)           Upon
receipt by the Administrative Agent of the proceeds of a purchase of a
Transferred Loan by the Servicer pursuant to the terms of Section 7.7,
the Administrative Agent, as agent for the Secured Parties, shall be deemed to
have automatically released its interest in such Transferred Loan and any Supplemental
Interests related thereto without any further action on its part.  In connection with any such release on or
after the occurrence of such purchase, the Administrative Agent, as agent for
the Secured Parties, will execute and deliver to the Borrower or the Servicer
on behalf of the Borrower any releases and instruments as the Borrower or the
Servicer on behalf of the Borrower may reasonably request in order to effect
the release of such Transferred Loan and Supplemental Interest.

 

65

 

Section 6.4                                   Assignment
of the Purchase Agreement.

 

The Borrower hereby represents, warrants and confirms
to the Administrative Agent that the Borrower has assigned to the
Administrative Agent, for the ratable benefit of the Secured Parties hereunder,
all of the Borrower’s right and title to and interest in the Purchase
Agreement.  The Borrower confirms that
following an Early Termination Event the Administrative Agent shall have the sole
right to enforce the Borrower’s rights and remedies under the Purchase
Agreement for the benefit of the Secured Parties, but without any obligation on
the part of the Administrative Agent, the Secured Parties or any of their
respective Affiliates to perform any of the obligations of the Borrower under
the Purchase Agreement.  The Borrower
further confirms and agrees that such assignment to the Administrative Agent
shall terminate upon the Collection Date; provided,
however, that the rights of the
Administrative Agent and the Secured Parties pursuant to such assignment with
respect to rights and remedies in connection with any indemnities and any
breach of any representation, warranty or covenants made by the Originator
pursuant to the Purchase Agreement, which rights and remedies survive the Termination
of the Purchase Agreement, shall be continuing and shall survive any
termination of such assignment.

 

ARTICLE
VII

 

ADMINISTRATION
AND SERVICING OF LOANS

 

Section 7.1                                   Appointment
of the Servicer.

 

The Borrower hereby appoints the Servicer to service
the Transferred Loans and enforce its respective rights and interests in and
under each Transferred Loan in accordance with the terms and conditions of this
Article VII and to serve in such capacity until the termination of
its responsibilities pursuant to Section 7.18.  The Servicer hereby agrees to perform the
duties and obligations with respect thereto set forth herein.  The Servicer and the Borrower hereby
acknowledge that the Administrative Agent and the Secured Parties are third
party beneficiaries of the obligations undertaken by the Servicer hereunder.

 

Section 7.2                                   Duties
and Responsibilities of the Servicer.

 

(a)           The Servicer shall conduct the
servicing, administration and collection of the Transferred Loans and shall
take, or cause to be taken, all such actions as may be necessary or advisable
to service, administer and collect Transferred Loans from time to time on
behalf of the Borrower and as the Borrower’s agent.

 

(b)          The duties of the Servicer, as the
Borrower’s agent, shall include, without limitation:

 

(i)            preparing and
submitting of claims to, and post-billing liaison with, Obligors on Transferred
Loans;

 

(ii)           maintaining all
necessary Servicing Records with respect to the Transferred Loans and providing
such reports to the Borrower, the Managing Agents and the Administrative Agent
in respect of the servicing of the Transferred Loans (including information
relating to its performance under this Agreement) as may be required 

 

66

 

hereunder or as
the Borrower, any Managing Agent or the Administrative Agent may reasonably
request;

 

(iii)          maintaining and
implementing administrative and operating procedures (including, without
limitation, an ability to recreate Servicing Records evidencing the Transferred
Loans 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 Transferred Loans (including,
without limitation, records adequate to permit the identification of each new
Transferred Loan and all Collections of and adjustments to each existing
Transferred Loan); provided, however, that any Successor Servicer shall only
be required to recreate the Servicing Records of each prior Servicer to the
extent such records have been delivered to it in a format reasonably acceptable
to such Successor Servicer;

 

(iv)          promptly delivering
to the Borrower, any Managing Agent or the Administrative Agent, from time to
time, such information and Servicing Records (including information relating to
its performance under this Agreement) as the Borrower, such Managing Agent or
the Administrative Agent from time to time reasonably request;

 

(v)           identifying each
Transferred Loan clearly and unambiguously in its Servicing Records to reflect
that such Transferred Loan is owned by the Borrower and pledged to the
Administrative Agent;

 

(vi)          complying in all
material respects with the Credit and Collection Policy in regard to each
Transferred Loan;

 

(vii)         complying in all
material respects with all Applicable Laws with respect to it, its business and
properties and all Transferred Loans and Collections with respect thereto;

 

(viii)        preserving and
maintaining its existence, rights, licenses, franchises and privileges as a
corporation in the jurisdiction of its organization, and qualifying and
remaining qualified in good standing as a foreign corporation and qualifying to
and remaining authorized and licensed to perform obligations as Servicer (including
enforcement of collection of Transferred Loans on behalf of the Borrower,
Lenders, each Hedge Counterparty and the Collateral Custodian) in each
jurisdiction where the failure to preserve and maintain such existence, rights,
franchises, privileges and qualification would materially adversely affect (A) the
rights or interests of the Borrower, Lenders, each Hedge Counterparty and the
Collateral Custodian in the Transferred Loans, (B) the collectibility of
any Transferred Loan, or (C) the ability of the Servicer to perform its
obligations hereunder; and

 

(ix)           notifying the
Borrower, each Managing Agent and the Administrative Agent of any material
action, suit, proceeding, dispute, offset deduction, defense or counterclaim
that is or is threatened to be (1) asserted by an Obligor with respect to
any Transferred Loan; or (2) reasonably expected to have a Material
Adverse Effect; and

 

67

 

(c)           The Borrower and Servicer hereby
acknowledge that the Secured Parties, the Administrative Agent and the
Collateral Custodian shall not have any obligation or liability with respect to
any Transferred Loans, nor shall any of them be obligated to perform any of the
obligations of the Servicer hereunder.

 

Section 7.3                                   Authorization
of the Servicer.

 

(a)           Each
of the Borrower, each Managing Agent, on behalf of itself and the related
Lenders, the Administrative Agent and each Hedge Counterparty hereby authorizes
the Servicer (including any successor thereto) to take any and all reasonable
steps in its name and on its behalf necessary or desirable and not inconsistent
with the pledge of the Transferred Loans to the Lender, each Hedge
Counterparty, and the Collateral Custodian, in the determination of the
Servicer, to collect all amounts due under any and all Transferred Loans,
including, without limitation, endorsing any of their names on checks and other
instruments representing Collections, executing and delivering any and all
instruments of satisfaction or cancellation, or of partial or full release or
discharge, and all other comparable instruments, with respect to the
Transferred Loans and, after the delinquency of any Transferred Loan and to the
extent permitted under and in compliance with Applicable Law, to commence proceedings
with respect to enforcing payment thereof, to the same extent as the Originator
could have done if it had continued to own such Loan; provided, however, that
the Servicer may not execute any document in the name of, or which imposes any
direct obligation on, any Lender.  The
Borrower shall furnish the Servicer (and any successors thereto) with any
powers of attorney and other documents necessary or appropriate to enable the
Servicer to carry out its servicing and administrative duties hereunder, and shall
cooperate with the Servicer to the fullest extent in order to ensure the
collectibility of the Transferred Loans. 
In no event shall the Servicer be entitled to make the Borrower, any
Lender, any Managing Agent, any Hedge Counterparty, the Collateral Custodian or
the Administrative Agent a party to any litigation without such party’s express
prior written consent, or to make the Borrower a party to any litigation (other
than any routine foreclosure or similar collection procedure) without the
Administrative Agent’s consent.

 

(b)           After an Early Termination Event has
occurred and is continuing, at the Administrative Agent’s direction, the
Servicer shall take such action as the Administrative Agent may deem necessary
or advisable to enforce collection of the Transferred Loans; provided, however,
that the Administrative Agent may, at any time that an Early Termination Event
has occurred and is continuing, notify any Obligor with respect to any
Transferred Loans of the assignment of such Transferred Loans to the
Administrative Agent and direct that payments of all amounts due or to become
due to the Borrower thereunder be made directly to the Administrative Agent or
any servicer, collection agent or lock-box or other account designated by the
Administrative Agent and, upon such notification and at the expense of the
Borrower, the Administrative Agent may enforce collection of any such
Transferred Loans and adjust, settle or compromise the amount or payment
thereof.  The Administrative Agent shall
give written notice to any Successor Servicer of the Administrative Agent’s
actions or directions pursuant to this Section 7.3(b),
and no Successor Servicer shall take any actions pursuant to this Section 7.3(b) that are outside of its
Credit and Collection Policy.

 

68

 

Section 7.4                                   Collection
of Payments.

 

(a)           Collection
Efforts, Modification of Loans. 
The Servicer will make reasonable efforts to collect all payments called
for under the terms and provisions of the Transferred Loans as and when the
same become due, and will follow those collection procedures which it follows
with respect to all comparable Loans that it services for itself or
others.  The Servicer may not waive,
modify or otherwise vary any provision of a Transferred Loan, except as may be
in accordance with the provisions of the Credit and Collection Policy,
including the waiver of any late payment charge or any other fees that may be
collected in the ordinary course of servicing any Loan included in the Collateral.

 

(b)           Acceleration.  The Servicer shall accelerate the maturity of
all or any Scheduled Payments under any Transferred Loan under which a default
under the terms thereof has occurred and is continuing (after the lapse of any
applicable grace period) promptly after such Loan becomes a Defaulted Loan or
such earlier or later time as is consistent with the Credit and Collection
Policy.

 

(c)           Taxes and
other Amounts.  To the extent
provided for in any Transferred Loan, the Servicer will use its best efforts to
collect all payments with respect to amounts due for taxes, assessments and
insurance premiums relating to such Transferred Loans or the Related Property
and remit such amounts to the appropriate Governmental Authority or insurer on
or prior to the date such payments are due.

 

(d)           Payments to
Lock-Box Account: On or before the Closing Date, the Servicer shall
have instructed all Obligors to make all payments in respect of Loans included
in the Collateral to a Lock-Box or directly to a Lock-Box Account or the
Collection Account.

 

(e)           Establishment
of the Collection Account. 
The Borrower or the Servicer on its behalf shall cause to be
established, on or before the Closing Date, and maintained in the name of the
Borrower and assigned to the Administrative Agent as agent for the Secured
Parties, with an office or branch of a depository institution or trust company
organized under the laws of the United States or any one of the States thereof
or the District of Columbia (or any domestic branch of a foreign bank) a
segregated corporate trust account (the “Collection Account”) for the
purpose of receiving Collections from the Collateral; provided,
however, that at all times such depository
institution or trust company shall be a depository institution organized under
the laws of the United States or any one of the States thereof or the District
of Columbia (or any domestic branch of a foreign bank), (i) (A) that
has either (1) a long-term unsecured debt rating of A- or better by
S&P and A-3 or better by Moody’s or (2) a short-term unsecured debt
rating or certificate of deposit rating of A-1 or better by S&P or P-1 or
better by Moody’s, (B) the parent corporation of which has either (1) a
long-term unsecured debt rating of A- or better by S&P and A-3 or better by
Moody’s or (2) a short-term unsecured debt rating or certificate of
deposit rating of A-1 or better by S&P and P-1 or better by Moody’s or (C) is
otherwise acceptable to the Administrative Agent and (ii) whose deposits
are insured by the Federal Deposit Insurance Corporation (any such depository
institution or trust company, a “Qualified
Institution”).

 

(f)            Adjustments.  If (i) the Servicer makes a deposit into
the Collection Account in respect of a Collection of a Loan in the Collateral
and such Collection was received by the 

 

69

 

Servicer in the form of a check that is not honored
for any reason or (ii) the Servicer makes a mistake with respect to the
amount of any Collection and deposits an amount that is less than or more than
the actual amount of such Collection, the Servicer shall appropriately adjust
the amount subsequently deposited into the Collection Account to reflect such
dishonored check or mistake.  Any Scheduled
Payment in respect of which a dishonored check is received shall be deemed not
to have been paid.

 

Section 7.5                                   Servicer
Advances.

 

For each Settlement Period, if the Servicer determines
that any Scheduled Payment (or portion thereof) that was due and payable
pursuant to a Loan included in the Collateral during such Settlement Period was
not received prior to the end of such Settlement Period, the Servicer may, but
shall not be obligated to, make an advance in an amount up to the amount of
such delinquent Scheduled Payment (or portion thereof) to the extent that the
Servicer reasonably expects to be reimbursed for such advance; in addition, if
on any day there are not sufficient funds on deposit in the Collection Account
to pay accrued Interest on any Advance the Settlement Period of which ends on
such day, the Servicer may make an advance in the amount necessary to pay such
Interest (in either case, any such advance, a “Servicer Advance”).  Notwithstanding the preceding sentence, any
Successor Servicer will not be obligated to make any Servicer Advances.  The Servicer will deposit any Servicer
Advances into the Collection Account on or prior to 11:00 a.m. (New York
City time) on the related Payment Date, in immediately available funds.

 

Section 7.6                                   Realization
Upon Defaulted Loans or Charged-Off Loans.

 

The Servicer will use reasonable efforts to repossess
or otherwise comparably convert the ownership of any Related Property with
respect to a Defaulted Loan or Charged-Off Loan and will act as sales and
processing agent for Related Property that it repossesses.  The Servicer will follow the practices and
procedures set forth in the Credit and Collection Policy in order to realize
upon such Related Property.  Without limiting
the foregoing, the Servicer may sell any such Related Property with respect any
Defaulted Loan or Charged-Off Loan to the Servicer or its Affiliates for a
purchase price equal to the then fair market value thereof; any such sale to be
evidenced by a certificate of a Responsible Officer of the Servicer delivered
to the Administrative Agent identifying the Defaulted Loan or Charged-Off Loan
and the Related Property, setting forth the sale price of the Related Property
and certifying that such sale price is the fair market value of such Related
Property.  In any case in which any such
Related Property has suffered damage, the Servicer will not expend funds in
connection with any repair or toward the repossession of such Related Property
unless it reasonably determines that such repair and/or repossession will
increase the Recoveries by an amount greater than the amount of such
expenses.  The Servicer will remit to the
Collection Account the Recoveries received in connection with the sale or
disposition of Related Property with respect to a Defaulted Loan or Charged-Off
Loan.

 

Section 7.7                                   Optional
Repurchase of Transferred Loans.

 

(a)           The
Servicer may, at any time, notify the Borrower and the Administrative Agent
that it (or its assignee) is requesting to purchase any Transferred Loan with
respect to which the 

 

70

 

Borrower or any Affiliate of the Borrower has received notice of the
related Obligor’s intention to prepay such Transferred Loan in full within a
period of not more than sixty (60) days from the date of such notification.

 

(b)           Either
of the Originator or the Servicer (or its assignee) may, at its sole option,
with respect to any Transferred Loan that it determines, in the exercise of its
reasonable discretion, will likely become a Defaulted Loan or a Charged-Off
Loan, or that has become a Defaulted Loan or a Charged-Off Loan, notify the
Borrower and the Administrative Agent that it is requesting to purchase each
such Transferred Loan.

 

(c)           The
Servicer (or its assignee) may request purchase of a Transferred Loan pursuant
to paragraph (a) or (b) above, and the Originator may
request purchase of a Transferred Loan pursuant to paragraph (b) above,
by providing five (5) Business Days’ prior written notice to Borrower and
the Administrative Agent.  The Borrower
may agree to such purchase with the consent of the Administrative Agent (which
consent shall not be unreasonably withheld). 
With respect to any such purchase of a Transferred Loan, the party
providing the required written notice shall, on the date of purchase, remit to
the Borrower in immediately available funds an amount equal to the Repurchase
Price therefor.  Upon each purchase of a
Transferred Loan pursuant to this Section 7.7, the Borrower shall
automatically and without further action be deemed to transfer, assign and set-over
to the purchaser thereof all the right, title and interest of the Borrower in,
to and under such Transferred Loan and all monies due or to become due with
respect thereto, all proceeds thereof and all rights to security for any such
Transferred Loan, and all proceeds and products of the foregoing, free and
clear of any Lien created pursuant to this Agreement, all of the Borrower’s
right, title and interest in such Transferred Loan, including any related
Supplemental Interests.  Each Lender
shall receive five (5) Business Days’ notice of any repurchase that
results in a prepayment of all or a portion of any Advance.

 

(d)           The
Borrower shall, at the sole expense of the party purchasing any Transferred
Loan, execute such documents and instruments of transfer as may be prepared by
such party and take such other actions as shall reasonably be requested by such
party to effect the transfer of the related Transferred Loan pursuant to this Section 7.7.

 

Section 7.8                                   Representations
and Warranties of the Servicer.

 

The initial Servicer, and any Successor Servicer
(mutatis mutandis), hereby represents and warrants as follows:

 

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

 

(b)           Due
Qualification.  The Servicer
is qualified to do business as a corporation, is in good standing, and has
obtained all licenses and approvals as required under the laws of all
jurisdictions in which the ownership or lease of its property and or the
conduct of its business (other than the performance of its obligations
hereunder) requires such qualification, standing, license or approval, except
to the extent that the failure to so qualify, maintain such standing or 

 

71

 

be so licensed or approved would not have an adverse
effect on the interests of the Borrower or of the Lenders.  The Servicer is qualified to do business as a
corporation, is in good standing, and has obtained all licenses and approvals
as required under the laws of all states in which the performance of its
obligations pursuant to this Agreement requires such qualification, standing,
license or approval and where the failure to qualify or obtain such license or
approval would have material adverse effect on its ability to perform
hereunder.

 

(c)           Power and
Authority.  The Servicer has
the corporate power and authority to execute and deliver this Agreement and to
carry out its terms.  The Servicer has
duly authorized the execution, delivery and performance of this Agreement by
all requisite corporate action.

 

(d)           No Violation.  The consummation of the transactions
contemplated by, and the fulfillment of the terms of, this Agreement by the
Servicer (with or without notice or lapse of time) will not (i) conflict
with, result in any breach of any of the terms or provisions of, or constitute
a default under, the articles of incorporation or by-laws of the Servicer, or
any Contractual Obligation to which the Servicer is a party or by which it or
any of its property is bound, (ii) result in the creation or imposition of
any Adverse Claim upon any of its properties pursuant to the terms of any such
Contractual Obligation (other than this Agreement), or (iii) violate any
Applicable Law.

 

(e)           No Consent.  No consent, approval, authorization, order,
registration, filing, qualification, license or permit of or with any
Governmental Authority having jurisdiction over the Servicer or any of its
properties is required to be obtained by or with respect to the Servicer in
order for the Servicer to enter into this Agreement or perform its obligations
hereunder.

 

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

 

(g)           No
Proceeding.  There are no
proceedings or investigations pending or threatened against the Servicer,
before any Governmental Authority (i) asserting the invalidity of this
Agreement, (ii) seeking to prevent the consummation of any of the
transactions contemplated by this Agreement or (iii) seeking any
determination or ruling that might (in the reasonable judgment of the Servicer)
have a Material Adverse Effect.

 

(h)           Reports
Accurate.  All Servicer
Certificates, Monthly Reports, information, exhibits, financial statements,
documents, books, Servicer Records or other reports furnished or to be
furnished by the Servicer to the Administrative Agent or a Lender in connection
with this Agreement are and will be accurate, true and correct in all material
respects.

 

Section 7.9                                   Covenants
of the Servicer.

 

The Servicer hereby covenants that:

 

(a)           Compliance
with Law.  The Servicer will
comply in all material respects with all Applicable Laws, including those with
respect to the Transferred Loans and Related Property and Loan Documents or any
part thereof.

 

72

 

(b)           Preservation
of Corporate 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 foreign corporation in each jurisdiction where
the failure to maintain such existence, rights, franchises, privileges and
qualification has had, or could reasonably be expected to have, a Material
Adverse Effect.

 

(c)           Obligations
with Respect to Loans.  The
Servicer will duly fulfill and comply with all material obligations on the part
of the Borrower to be fulfilled or complied with under or in connection with
each Loan and will do nothing to impair the rights of the Borrower or the
Administrative Agent as agent for the Secured Parties or of the Secured Parties
in, to and under the Collateral.

 

(d)           Preservation
of Security Interest.  The
Servicer on behalf of the Borrower will execute and file (or cause the
execution and filing of) 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 interest of the
Administrative Agent as agent for the Secured Parties in, to and under the
Collateral.

 

(e)           [Reserved].

 

(f)            Change of
Name or Jurisdiction; Records. 
The Servicer (i) shall not change its name or jurisdiction of
incorporation, without 30 days’ prior written notice to the Borrower and the
Administrative Agent, and (ii) shall not move, or consent to the Collateral
Custodian moving, the Loan Documents relating to the Transferred Loans without
30 days’ prior written notice to the Borrower and the Administrative Agent and,
in either case, will promptly take all actions required of each relevant
jurisdiction in order to continue the first priority perfected security
interest of the Administrative Agent as agent for the Secured Parties on all
collateral, and such other actions as the Administrative Agent may reasonably
request, including but not limited to delivery of an Opinion of Counsel.

 

(g)           Credit and
Collection Policy.  The
Servicer will (i) comply in all material respects with the Credit and
Collection Policy in regard to each Transferred Loan and (ii) furnish to
each Managing Agent and the Administrative Agent, at least 20 days prior to its
proposed effective date, prompt notice of any material change in the Credit and
Collection Policy.  The Servicer will not
agree or otherwise permit to occur any material change in the Credit and
Collection Policy, which change would impair the collectibility of any
Transferred Loan or otherwise adversely affect the interests or remedies of the
Administrative Agent or the Secured Parties under this Agreement or any other
Transaction Document, without the prior written consent of the Administrative
Agent (in its sole discretion).

 

(h)           Early
Termination Events.  The
Servicer will furnish to each Managing Agent and the Administrative Agent, as
soon as possible and in any event within three (3) Business Days after the
occurrence of each Early Termination Event or Unmatured Termination Event, a
written statement setting forth the details of such event and the action that
the Servicer proposes to take with respect thereto.

 

73

 

(i)            Extension or Amendment of Loans.  The Servicer will not, except as otherwise
permitted in  Section 7.4(a),
extend, amend or otherwise modify the terms of any Transferred Loan.

 

(j)            Other.  The Servicer will furnish to the Borrower,
any Managing Agent and the Administrative Agent such other information,
documents records or reports respecting the Transferred Loans or the condition
or operations, financial or otherwise of the Servicer as the Borrower, such
Managing Agent or the Administrative Agent may from time to time reasonably
request in order to protect the respective interests of the Borrower, such
Managing Agent, the Administrative Agent or the Secured Parties under or as
contemplated by this Agreement.

 

Section 7.10                            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 legal counsel and independent accountants,
Taxes imposed on the Servicer, expenses incurred 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.  In consideration for the payment by the Borrower
of the Servicing Fee, 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 Collection Account and the Backup Servicer Fee pursuant to
the Backup Servicing Agreement and the Collateral Custodian Fee pursuant to the
Custody Agreement.  The Servicer shall be
required to pay such expenses for its own account and shall not be entitled to
any payment therefor other than the Servicing Fee.

 

Section 7.11                            Reports.

 

(a)           Monthly Report. 
With respect to each Determination Date and the related Settlement
Period, the Servicer will provide to the Borrower, the Backup Servicer, each
Managing Agent and the Administrative Agent, on the related Reporting Date, a
monthly statement (a “Monthly Report”)
signed by a Responsible Officer of the Servicer and substantially in the form
of Exhibit E.  Except as otherwise set forth in the Backup
Servicing Agreement, the Backup Servicer shall have no obligation to review any
information in the Monthly Report.

 

(b)           Servicer Certificate.  Together with each Monthly Report, the
Servicer shall submit to the Borrower, the Backup Servicer, each Managing Agent
and the Administrative Agent a certificate (a “Servicer’s Certificate”),
signed by a Responsible Officer of the Servicer and substantially in the form
of Exhibit F, which may be incorporated in
the Servicer Report.  Except as
otherwise set forth in the Backup Servicing Agreement, the Backup Servicer
shall have no obligation to review any information in the Servicer Certificate.

 

(c)           Annual Reporting. 
The Servicer shall deliver, within 90 days after the close of each of
its respective fiscal years, audited, unqualified financial statements (which
shall include balance sheets, statements of income and retained earnings and a
statement of cash flow) for such fiscal year certified in a manner acceptable
to the Administrative Agent by independent public accountants acceptable to the
Administrative Agent.

 

74

 

(d)           Quarterly Reporting. 
The Servicer shall deliver, within 45 days after the close of the first
three (3) quarterly periods of each of its respective fiscal years,
balance sheets as at the close of each such period and statements of income and
retained earnings and a statement of cash flow for the period from the
beginning of such fiscal year to the end of such quarter, all certified by its
respective chief financial officer.

 

(e)           Financial Statements of the Originator.  The Borrower will submit to the Backup
Servicer, each Managing Agent and the Administrative Agent, promptly upon
receipt thereof, the quarterly and annual financial statements received from
the Originator pursuant to Section 5.1(l) of the Purchase
Agreement.  Except as otherwise set forth
in the Backup Servicing Agreement, the Backup Servicer shall have no duty to
review any of the financial information set forth in such financial statements.

 

Section 7.12                            Annual
Statement as to Compliance.

 

The Servicer will provide to the Borrower, each
Managing Agent, the Administrative Agent, and the Backup Servicer, within 90
days following the end of each fiscal year of the Servicer, commencing with the
fiscal year ending on September 30, 2003, an annual 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 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 and is continuing (or if a Servicer Termination Event has so occurred
and is continuing, specifying each such event, the nature and status thereof
and the steps necessary to remedy such event, and, if a Servicer Termination
Event occurred during such year and no notice thereof has been given to the
Administrative Agent, specifying such Servicer Termination Event and the steps
taken to remedy such event).

 

Section 7.13                            Limitation
on Liability of the Servicer and Others.

 

Except as provided herein, neither the Servicer
(including any Successor Servicer) nor any of the directors or officers or
employees or agents of the Servicer shall be under any liability to the
Borrower, the Administrative Agent, the Lenders or any other Person for any
action taken         or for refraining
from the taking of any action expressly provided for in this Agreement; provided, however,
that this provision shall not protect the Servicer or any such Person against
any liability that would otherwise be imposed by reason of its willful
misfeasance, bad faith or gross negligence in the performance of duties or by
reason of its willful misconduct hereunder.

 

The Servicer shall not be under any obligation to
appear in, prosecute or defend any legal action that is not incidental to its
duties to service the Transferred Loans in accordance with this Agreement that
in its reasonable opinion may involve it in any expense or liability.  The Servicer may, in its sole discretion,
undertake any legal action relating to the servicing, collection or
administration of Transferred Loans and the Related Property that it may
reasonably deem necessary or appropriate for the benefit of the Borrower and
the Secured Parties with respect to this Agreement and the rights and duties of
the parties hereto and the respective interests of the Borrower and the Secured
Parties hereunder.

 

75

 

Section 7.14                            The
Servicer Not to Resign.

 

The Servicer shall not resign from the obligations and
duties hereby imposed on it except upon its determination that (i) the
performance of its duties hereunder is or becomes impermissible under Applicable
Law and (ii) there is no reasonable action that it 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 Borrower and the Administrative Agent. 
No such resignation shall become effective until a successor shall have
assumed the responsibilities and obligations of the Servicer in according with
the terms of this Agreement.

 

Section 7.15                            Access
to Certain Documentation and Information Regarding the Loans.

 

The Borrower or the Servicer, as applicable, shall
provide to the Administrative Agent and each Managing Agent access to the Loan
Documents and all other documentation regarding the Loans included as part of
the Collateral and the Related Property, such access being afforded without
charge but only (i) upon reasonable prior notice, (ii) during normal
business hours and (iii) subject to the Servicer’s normal security and
confidentiality procedures.  From and
after (x) the Effective Date and periodically thereafter at the discretion
of the Administrative Agent (but in no event limited to fewer than twice per
calendar year), the Administrative Agent, on behalf of and with the input of
each Managing Agent, may review the Borrower’s and the Servicer’s collection
and administration of the Loans in order to assess compliance by the Servicer
with the Servicer’s written policies and procedures, as well as with this
Agreement and may conduct an audit of the Transferred Loans, Loan Documents and
Records in conjunction with such a review, which audit shall be reasonable in
scope and shall be completed in a reasonable period of time and (y) the
occurrence, and during the continuation of an Early Termination Event, the
Administrative Agent and each Managing Agent may review the Borrower’s and the
Servicer’s collection and administration of the Transferred Loans in order to
assess compliance by the Servicer with the Servicer’s written policies and
procedures, as well as with this Agreement, which review shall not be limited
in scope or frequency, nor restricted in period.  The Administrative Agent may also conduct an
audit (as such term is used in clause (x) of this Section 7.15)
of the Transferred Loans, Loan Documents and Records in conjunction with such a
review.  The Borrower shall bear the cost
of such reviews and audits.

 

Section 7.16                            Merger
or Consolidation of the Servicer.

 

The Servicer shall not consolidate with or merge into
any other Person or convey or transfer its properties and assets substantially
as an entirety to any Person and unless:

 

(i)            the Person formed
by such consolidation or into which the Servicer is merged or the Person that
acquires by conveyance or transfer the properties and assets of the Servicer
substantially as an entirety shall be, if the Servicer is not the surviving
entity, organized and existing under the laws of the United States or any State
or the District of Columbia and shall expressly assume, by an agreement
supplemental hereto, executed and delivered to the Borrower and the
Administrative Agent in form satisfactory to the Borrower and the
Administrative Agent, the performance of every covenant and 

 

76

 

obligation of the
Servicer hereunder (to the extent that any right, covenant or obligation of the
Servicer, as applicable hereunder, is inapplicable to the successor entity,
such successor entity shall be subject to such covenant or obligation, or
benefit from such right, as would apply, to the extent practicable, to such
successor entity);

 

(ii)           the Servicer shall
have delivered to the Borrower and the Administrative Agent an Officer’s
Certificate that such consolidation, merger, conveyance or transfer and such
supplemental agreement comply with this Section 7.16
and that all conditions precedent herein provided for relating to such
transaction have been complied with and an Opinion of Counsel that such
supplemental agreement is legal, valid and binding with respect to the
successor entity and that the entity surviving such consolidation, conveyance
or transfer is organized and existing under the laws of the United States or
any State or the District of Columbia. 
The Borrower and the Administrative Agent shall receive prompt written
notice of such merger or consolidation of the Servicer; and

 

(iii)          after giving effect
thereto, no Early Termination Event, Unmatured Termination Event or Servicer
Termination Event shall have occurred.

 

Section 7.17                            Identification
of Records.

 

The Servicer shall clearly and unambiguously identify
each Loan that is part of the Collateral and the Related Property in its
computer or other records to reflect that the interest in such Loans and
Related Property have been transferred to and are owned by the Borrower and
that the Administrative Agent has the interest therein granted by Borrower
pursuant to this Agreement.

 

Section 7.18                            Servicer
Termination Events.

 

(a)           If
any one of the following events (a “Servicer
Termination Event”) shall occur and be continuing on any
day:

 

(i)            any failure by the
Servicer to make any payment, transfer or deposit as required by this Agreement
and such failure shall continue for two (2) Business Days;

 

(ii)           any failure by the
Servicer to give instructions or notice to the Borrower, any Managing Agent
and/or the Administrative Agent as required by this Agreement or to deliver any
Required Reports hereunder on or before the date occurring two Business Days
after the date such instructions, notice or report is required to be made or
given, as the case may be, under the terms of this Agreement;

 

(iii)          any failure on the
part of the Servicer duly to observe or perform in any material respect any
other covenants or agreements of the Servicer set forth in this Agreement or
any other Transaction Document to which it is a party as Servicer that
continues unremedied for a period of fifteen (15) days after the first to occur
of (i) the date on which written notice of such failure requiring the same
to be remedied shall have been given to the Servicer by the Administrative
Agent, any Managing Agent or the Borrower and (ii) the date on which the
Servicer becomes or reasonably should have become aware thereof;

 

77

 

(iv)          any representation,
warranty or certification made by the Servicer in this Agreement or in any
certificate delivered pursuant to this Agreement shall prove to have been false
or incorrect in any material respect when made and such failure, if susceptible
to a cure, shall continue unremedied for a period of fifteen (15) days after
the first to occur of (i) the date on which written notice of such failure
requiring the same to be remedied shall have been given to the Servicer by the
Administrative Agent, any Managing Agent or the Borrower and (ii) the date
on which the Servicer becomes or reasonably should have become aware thereof;

 

(v)           the
Servicer shall fail to service the Transferred Loans in accordance with the
Credit and Collection Policy;

 

(vi)          an
Insolvency Event shall occur with respect to the Servicer;

 

(vii)         the
Servicer agrees to materially alter the Credit and Collection Policy without
the prior written consent of the Administrative Agent;

 

(viii)        any
financial or asset information reasonably requested by the Administrative Agent
or any Managing Agent as provided herein is not provided as requested within
five (5) Business Days (or such longer period as the Administrative Agent
or such Managing Agent may consent to) of the receipt by the Servicer of such
request;

 

(ix)           the
rendering against the Servicer of a final judgment, decree or order for the
payment of money in excess of U.S. $5,000,000 (individually or in the
aggregate) and the continuance of such judgment, decree or order unsatisfied
and in effect for any period of 30 consecutive days without a stay of
execution;

 

(x)            the
failure of the Performance Guarantor to make any payment due with respect to
aggregate recourse debt or other obligations with an aggregate principal amount
exceeding U.S. $1,000,000 or the occurrence of any event or condition that
would permit acceleration of such recourse debt or other obligations if such
event or condition has not been waived;

 

(xi)           any
Guarantor Event of Default shall occur;

 

(xii)          any
Material Adverse Change occurs in the financial condition of the Servicer or a
material adverse change occurs with regard to the collectibility of the
Transferred Loans, taken as a whole;

 

(xiii)         any
Change-in-Control of the Servicer is made without the prior written consent of
the Borrower and the Administrative Agent;

 

(xiv)        the
Performance Guarantor shall fail to maintain a minimum Tangible Net Worth equal
to the sum of (i) of $250,000,000 plus (ii) 75% of any equity issued
by the Servicer after the Effective Date; or

 

78

 

(xv)         the
Performance Guarantor shall fail to satisfy the RIC/BDC Requirements;

 

then, notwithstanding anything herein to the contrary,
so long as any such Servicer Termination Events shall not have been remedied at
the expiration of any applicable cure period, the Administrative Agent may, or
at the direction of the Required Committed Lenders shall, by written notice to
the Servicer and the Backup Servicer (a “Termination Notice”), subject
to the provisions of Section 7.19,
either (i) terminate all of the rights and obligations of the Servicer as
Servicer under this Agreement or (ii) terminate all of the rights and
obligations of the Servicer as Servicer under this Agreement and simultaneously
reappoint the Servicer for a period not to exceed one month (subject to renewal
at the sole discretion of the Administrative Agent, acting at the direction of
the Required Committed Lenders), at the expiration of which appointment the
Servicer’s rights and obligations hereunder shall automatically terminate
without further action on the part of any party hereto.  The Borrower shall pay all reasonable set-up
and conversion costs associated with the transfer of servicing rights to the
Successor Servicer.

 

Section 7.19                            Appointment
of Successor Servicer.

 

(a)           On
and after the receipt by the Servicer of a Termination Notice pursuant to Section 7.18, the Servicer shall continue to
perform all servicing functions under this Agreement until the date specified
in the Termination Notice or otherwise specified by the Administrative Agent,
to the Servicer and the Backup Servicer in writing.  The Administrative Agent may at the time
described in the immediately preceding sentence in its sole discretion, appoint
the Backup Servicer as the Servicer hereunder, and the Backup Servicer shall
within seven (7) days assume all obligations of the Servicer hereunder,
and all authority and power of the Servicer under this Agreement shall pass to
and be vested in the Backup Servicer; provided,
however, that any Successor Servicer
(including, without limitation, the Backup Servicer) shall not (i) be
responsible or liable for any past actions or omissions of the outgoing
Servicer or (ii) be obligated to make Servicer Advances.  The Administrative Agent may appoint (i) the
Backup Servicer as successor servicer, or (ii) if the Administrative Agent
does not so appoint the Backup Servicer, there is no Backup Servicer or the
Backup Servicer is unwilling or unable to assume such obligations on such date,
the Administrative Agent shall as promptly as possible appoint an alternate
successor servicer to act as Servicer (in each such case, the “Successor Servicer”), and such
Successor Servicer shall accept its appointment by a written assumption in a
form acceptable to the Administrative Agent.

 

(b)           Upon
its appointment as Successor Servicer, the Backup Servicer (subject to Section 7.19(a)) or the alternate successor
servicer, as applicable, shall be the successor in all respects to the Servicer
with respect to servicing functions under this Agreement, shall assume all
Servicing Duties hereunder and shall be subject to all the responsibilities,
duties and liabilities relating thereto placed on the Servicer by the terms and
provisions hereof, and all references in this Agreement to the Servicer shall
be deemed to refer to the Backup Servicer or the Successor Servicer, as
applicable.  Any Successor Servicer shall
be entitled, with the prior consent of the Administrative Agent, to appoint
agents to provide some or all of its duties hereunder, provided that no such
appointment shall relieve such Successor Servicer of the duties and obligations
of the Successor Servicer pursuant to the terms hereof and that any such
subcontract may be terminated upon the occurrence of a Servicer Termination
Event.

 

79

 

(c)                                  All
authority and power granted to the Servicer under this Agreement shall
automatically cease and terminate upon termination of the Servicer under this
Agreement and shall pass to and be vested in the Successor Servicer, and,
without limitation, the Successor Servicer 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 Successor Servicer in effecting the
termination of the responsibilities and rights of the Servicer to conduct
servicing on the Collateral.

 

(d)                                 Upon
the Backup Servicer receiving notice that it is required to serve as the
Servicer hereunder pursuant to the foregoing provisions of this Section 7.19, the Backup Servicer will
promptly begin the transition to its role as Servicer.

 

(e)                                  The
Backup Servicer shall be entitled to receive its Transition Costs incurred in
transitioning to Servicer.

 

Section 7.20                            Market
Servicing Fee.

 

Notwithstanding anything to the contrary herein, in
the event that a Successor Servicer is appointed Servicer, the Servicing Fee
shall equal the market rate for comparable servicing duties to be fixed upon
the date of such appointment by such Successor Servicer with the consent of the
Administrative Agent (the “Market
Servicing Fee”).

 

ARTICLE VIII

 

EARLY TERMINATION EVENTS

 

Section 8.1                                   Early
Termination Events.

 

If any of the following events (each, an “Early Termination Event”) shall
occur and be continuing:

 

(a)                                  the
Borrower shall fail to (i) make payment of any amount required to be made
under the terms of this Agreement and such failure shall continue for more than
two (2) Business Days; or (ii) repay all Advances Outstanding on or
prior to the Maturity Date; or

 

(b)                                 the
Borrowing Base Test shall not be met, and such failure shall continue for more
than two (2) Business Days; or

 

(c)                                  (i) the
Borrower shall fail to perform or observe in any material respect any other
covenant or other agreement of the Borrower set forth in this Agreement and any
other Transaction Document to which it is a party, or (ii) the Originator
shall fail to perform or observe in any material respect any term, covenant or
agreement of such Originator set forth in any other Transaction Document to
which it is a party, in each case when such failure continues unremedied for
more than fifteen (15) days after the first to occur of (i) the date on
which written notice of such failure requiring the same to be remedied shall
have been given to such Person by 

 

80

 

the Administrative Agent, any Managing Agent or the Collateral
Custodian and (ii) the date on which such Person becomes or should have
become aware thereof; or

 

(d)                                 any
representation or warranty made or deemed made hereunder shall prove to be
incorrect in any material respect as of the time when the same shall have been
made; or

 

(e)                                  an
Insolvency Event shall occur with respect to the Borrower or the Originator; or

 

(f)                                    a
Servicer Termination Event occurs; or

 

(g)                                 any
Change-in-Control of the Borrower or Originator occurs; or

 

(h)                                 the
Borrower or the Servicer defaults in making any payment required to be made
under any material agreement for borrowed money to which either is a party and
such default is not cured within the relevant cure period; or

 

(i)                                     the
Administrative Agent, as agent for the Secured Parties, shall fail for any
reason to have a valid and perfected first priority security interest in any of
the Collateral; or

 

(j)                                     (i) a
final judgment for the payment of money in excess of (A) $10,000,000 shall
have been rendered against the Originator or (B) $100,000 against the
Borrower by a court of competent jurisdiction and, if such judgment relates to
the Originator, such judgment, decree or order shall continue unsatisfied and
in effect for any period of 30 consecutive days without a stay of execution, or
(ii) the Originator or the Borrower, as the case may be, shall have made
payments of amounts in excess of $10,000,000 or $50,000, respectively, in
settlement of any litigation; or

 

(k)                                  the
Borrower or the Servicer agrees or consents to, or otherwise permits to occur,
any amendment, modification, change, supplement or recession of or to the
Credit and Collection Policy in whole or in part that could have a material
adverse effect upon the Transferred Loans or interest of any Lender, without
the prior written consent of the Administrative Agent; or

 

(l)                                     any
Material Adverse Change occurs with respect to the Borrower or the Servicer; or

 

(m)                               the
Rolling Three-Month Default Ratio shall exceed 7.5%; or

 

(n)                                 the
Rolling Three-Month Charged-Off Ratio shall exceed 5.0%; or

 

(o)                                 the
Borrower shall become an “investment company” subject to registration under the
1940 Act; or

 

(p)                                 the
business and other activities of the Borrower or the Originator, including but
not limited to, the acceptance of the Advances by the Borrower made by the
Lenders, the application and use of the proceeds thereof by the Borrower and
the consummation and conduct of the transactions contemplated by the
Transaction Documents to which the Borrower or the Originator is a party result
in a violation by the Originator, the Borrower, or any other person or entity
of the 1940 Act or the rules and regulations promulgated thereunder; or

 

81

 

(q)                                 on
the Determination Dates falling in August, November, February and May, the
Interest Coverage Ratio does not equal or exceed 150.0% and such failure
continues on the next succeeding Determination Date; or

 

(r)                                    the
Required Equity Investment shall not be maintained, and such failure shall
continue unremedied for a period of five Business Days;

 

then, and in any such event, the Administrative Agent
shall, at the request, or may with the consent, of the Required Committed
Lenders, by notice to the Borrower declare the Termination Date to have
occurred, without demand, protest or future notice of any kind, all of which
are hereby expressly waived by the Borrower, and all Advances Outstanding and
all other amounts owing by the Borrower under this Agreement shall be
accelerated and become immediately due and payable, provided,
that in the event that the Early Termination Event described in subsection (e) herein
has occurred, the Termination Date shall automatically occur, without demand,
protest or any notice of any kind, all of which are hereby expressly waived by
the Borrower.  Upon its receipt of
written notice thereof, the Administrative Agent shall promptly notify each
Lender of the occurrence of any Early Termination Event.

 

Section 8.2                                   Remedies.

 

(a)                                  Upon
any such declaration or automatic occurrence of the Termination Date as
specified under Section 8.1, no further Advances will be made, and
the Administrative Agent and the other Secured Parties shall have, in addition
to all other rights and remedies under this Agreement or otherwise, all rights
and remedies provided under the UCC of each applicable jurisdiction and other
Applicable Laws, including the right to sell the Collateral, which rights and
remedies shall be cumulative.  The
Administrative Agent and the other Secured Parties agree that the sale of the
Collateral shall be conducted in good faith and in accordance with commercially
reasonable practices.

 

(b)                                 At
any time on and after the Termination Date, the Borrower and the Servicer
hereby agree that they will, at the expense of Borrower or, if such Termination
Date occurred as a result of a Servicer Termination Event, at the expense of
the initial Servicer or any Affiliate of the initial Servicer if appointed as
Successor Servicer hereunder, and upon request of the Administrative Agent,
forthwith, (i) assemble all or any part of the Collateral as directed by
the Administrative Agent, and make the same available to the Administrative
Agent, at a place to be designated by the Administrative Agent, and (ii) without
notice except as specified below, sell the Collateral or any part thereof in
one or more parcels at a public sale in accordance with commercially reasonable
practices.  If there is no recognizable
public market for sale of any portion of Collateral, then a private sale of that
Collateral may be conducted only on an arm’s length basis and in accordance
with commercially reasonable practices. 
The Borrower agrees that, to the extent notice of sale shall be required
by law, at least ten days’ notice to the Borrower of the time and place of any
public sale or the time after which any private sale is to be made shall
constitute reasonable notification.  The
Administrative Agent shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. 
The Administrative Agent, may adjourn any public or private sale from
time to time by announcement at the time and place fixed therefor, and such
sale may, without further notice, be made at the time and place to which it was
so adjourned.  All cash Proceeds received
by the Administrative Agent in respect of any 

 

82

 

sale of, collection from,
or other realization upon, all or any part of the Collateral (after payment of
any amounts incurred by the Administrative Agent or any of the Secured Parties
in connection with such sale) shall be deposited into the Collection Account
and to be applied against all or any part of the Obligations pursuant to Section 2.8.

 

(c)                                  If
the Administrative Agent proposes to sell the Collateral or any part thereof in
one or more parcels at a public or private sale, the Borrower shall have the
right of first refusal to repurchase the Collateral, in whole but not in part,
prior to such sale at a price not less than the Obligations as of the date of
such proposed repurchase.  The
aforementioned rights and remedies shall be without limitation, and shall be in
addition to all other rights and remedies of the Administrative Agent and the
Secured Parties otherwise available under any provision of this Agreement by
operation of law, at equity or otherwise, each of which are expressly
preserved.

 

ARTICLE IX

 

INDEMNIFICATION

 

Section 9.1                                   Indemnities
by the Borrower.

 

(a)                                  Without
limiting any other rights that any such Person may have hereunder or under
Applicable Law, the Borrower hereby agrees to indemnify the Administrative
Agent, the Managing Agents, the Backup Servicer, any Successor Servicer, the
Collateral Custodian, any Secured Party or its assignee and each of their
respective Affiliates and officers, directors, employees, members and agents
thereof (collectively, the “Indemnified
Parties”), forthwith on demand, from and against any and
all damages, losses, claims, liabilities and related costs and expenses,
including reasonable attorneys’ fees and disbursements (all of the foregoing
being collectively referred to as “Indemnified
Amounts”) awarded against or incurred by, any such
Indemnified Party or other non-monetary damages of any such Indemnified Party
any of them arising out of or as a result of this Agreement, excluding, however,
Indemnified Amounts to the extent resulting from gross negligence or willful
misconduct on the part of any Indemnified Party.  Without limiting the foregoing, the Borrower
shall indemnify the Indemnified Parties for Indemnified Amounts relating to or resulting
from:

 

(i)                                     any
Loan treated as or represented by the Borrower to be an Eligible Loan that is
not at the applicable time an Eligible Loan;

 

(ii)                                  reliance
on any representation or warranty made or deemed made by the Borrower, the
Servicer (or one of its Affiliates) or any of their respective officers under
or in connection with this Agreement, which shall have been false or incorrect
in any material respect when made or deemed made or delivered;

 

(iii)                               the failure by the
Borrower or the Servicer (or one of its Affiliates) 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
Loan comprising a portion of the Collateral, or the nonconformity of any Loan,
the Related Property with any such Applicable Law or any failure by the 

 

83

 

Originator,
the Borrower or any Affiliate thereof to perform its respective duties under
the Loans included as a part of the Collateral;

 

(iv)                              the
failure to vest and maintain vested in the Administrative Agent a first
priority perfected security interest in the Collateral;

 

(v)                                 the
failure to file, or any delay in filing, financing statements or other similar
instruments or documents under the UCC of any applicable jurisdiction or other
Applicable Laws with respect to any Collateral whether at the time of any
Advance or at any subsequent time and as required by the Transaction Documents;

 

(vi)                              any
dispute, claim, offset or defense (other than the discharge in bankruptcy of
the Obligor) of the Obligor to the payment of any Loan included as part of the
Collateral that is, or is purported to be, an Eligible Loan (including, without
limitation, a defense based on the Loan not being a legal, valid and binding
obligation of such Obligor enforceable against it in accordance with its
terms);

 

(vii)                           any failure of the Borrower
or the Servicer (if the Originator or one of its Affiliates) to perform its
duties or obligations in accordance with the provisions of this Agreement or
any failure by the Originator, the Borrower or any Affiliate thereof to perform
its respective duties under the Transferred Loans;

 

(viii)                        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 merchandise or
services that are the subject of any Loan included as part of the Collateral or
the Related Property included as part of the Collateral;

 

(ix)                                the
failure by Borrower to pay when due any Taxes for which the Borrower is liable,
including without limitation, sales, excise or personal property taxes payable
in connection with the Collateral;

 

(x)                                   any
repayment by the Administrative Agent, any Managing Agent or a Secured Party of
any amount previously distributed in reduction of Advances Outstanding or
payment of Interest or any other amount due hereunder or under any Hedging
Agreement, in each case which amount the Administrative Agent, such Managing
Agent or a Secured Party believes in good faith is required to be repaid;

 

(xi)                                any
investigation, litigation or proceeding related to this Agreement or the use of
proceeds of Advances or in respect of any Loan included as part of the Collateral
or the Related Property included as part of the Collateral;

 

(xii)                             any failure by the
Borrower to give reasonably equivalent value to the Originator in consideration
for the transfer by the Originator to the Borrower of any Transferred Loan or
the Related Property or any attempt by any Person to void or otherwise avoid
any such transfer under any statutory provision or common law or equitable
action, including, without limitation, any provision of the Bankruptcy Code, or

 

84

 

(xiii)                          the failure of the Borrower,
the Originator or any of their respective agents or representatives to remit to
the Servicer or the Administrative Agent, Collections on the Collateral
remitted to the Borrower or any such agent or representative in accordance with
the terms hereof or the commingling by the Borrower or any Affiliate of any
collections.

 

(b)                                 Any
amounts subject to the indemnification provisions of this Section 9.1 shall be paid by the Borrower to
the applicable Indemnified Party within two (2) Business Days following
the Administrative Agent’s demand therefor.

 

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

 

(d)                                 The
obligations of the Borrower under this Section 9.1
shall survive the removal of the Administrative Agent or any Managing Agent and
the termination of this Agreement.

 

(e)                                  The
parties hereto agree that the provisions of Section 9.1
shall not be interpreted to provide recourse to the Borrower against loss by
reason of the bankruptcy or insolvency (or other credit condition) of, or
default by, an Obligor on, any Transferred Loan.

 

Section 9.2                                   Indemnities
by the Servicer.

 

(a)                                  Without
limiting any other rights that any such Person may have hereunder or under
Applicable Law, the Servicer hereby agrees to indemnify each Indemnified Party,
forthwith on demand, from and against any and all Indemnified Amounts
(calculated without duplication of Indemnified Amounts paid by the Borrower
pursuant to Section 9.1 above) awarded against or incurred by any
such Indemnified Party by reason of any acts, omissions or alleged acts or
omissions of the Servicer, including, but not limited to (i) any
representation or warranty made by the Servicer under or in connection with any
Transaction Documents to which it is a party, any Monthly 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, (ii) the failure by the
Servicer to comply with any Applicable Law, (iii) the failure of the
Servicer to comply with its duties or obligations in accordance with the
Agreement, or (iv) any litigation, proceedings or investigation against the
Servicer, excluding, however, (a) Indemnified Amounts to the extent
resulting from gross negligence or willful misconduct on the part of such
Indemnified Party, and (b) under any Federal, state or local income or
franchise taxes or any other Tax imposed on or measured by income (or any
interest or penalties with respect thereto or arising from a failure to comply
therewith) required to be paid by such Indemnified Party in connection herewith
to any taxing authority.  The provisions
of this indemnity shall run directly to and be enforceable by an injured party
subject to the limitations hereof.  If
the Servicer has made any indemnity payment pursuant to this Section 9.2 and such payment fully
indemnified the recipient thereof and the recipient 

 

85

 

thereafter collects any payments from others in respect of such
Indemnified Amounts, the recipient shall repay to the Servicer an amount equal
to the amount it has collected from others in respect of such indemnified
amounts.

 

(b)                                 If
for any reason the indemnification provided above in this Section 9.2 is unavailable to the
Indemnified Party or is insufficient to hold an Indemnified Party harmless,
then Servicer shall contribute to the amount paid or payable to such
Indemnified Party as a result of such loss, claim, damage or liability in such
proportion as is appropriate to reflect not only the relative benefits received
by such Indemnified Party on the one hand and Servicer on the other hand but
also the relative fault of such Indemnified Party as well as any other relevant
equitable considerations.

 

(c)                                  The
obligations of the Servicer under this Section 9.2
shall survive the resignation or removal of the Administrative Agent or any
Managing Agents and the termination of this Agreement.

 

(d)                                 The
parties hereto agree that the provisions of this Section 9.2
shall not be interpreted to provide recourse to the Servicer against loss by
reason of the bankruptcy or insolvency (or other credit condition) of, or
default by, related Obligor on, any Transferred Loan.

 

(e)                                  Any
indemnification pursuant to this Section 9.2
shall not be payable from the Collateral.

 

ARTICLE X

 

THE ADMINISTRATIVE AGENT AND THE MANAGING AGENTS

 

Section 10.1                            Authorization
and Action.

 

(a)                                  Each
Secured Party hereby designates and appoints DB as Administrative Agent
hereunder, and authorizes DB to take such actions as agent on its behalf and to
exercise such powers as are delegated to the Administrative Agent by the terms
of this Agreement together with such powers as are reasonably incidental
thereto; provided, however, that the Administrative Agent may not
execute any document in the name of, or which imposes any direct obligation on,
any Lender.  The Administrative Agent
shall not have any duties or responsibilities, except those expressly set forth
herein, or any fiduciary relationship with any Secured Party, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities on
the part of the Administrative Agent shall be read into this Agreement or
otherwise exist for the Administrative Agent. 
In performing its functions and duties hereunder, the Administrative
Agent shall act solely as agent for the Secured Parties and does not assume nor
shall be deemed to have assumed any obligation or relationship of trust or
agency with or for the Borrower or any of its successors or assigns.  The Administrative Agent shall not be
required to take any action that exposes the Administrative Agent to personal
liability or that is contrary to this Agreement or Applicable Law.  The appointment and authority of the
Administrative Agent hereunder shall terminate at the indefeasible payment in
full of the Obligations.

 

(b)                                 Each
Lender hereby designates and appoints the Managing Agent for such Lender’s
Lender Group as its Managing Agent hereunder, and authorizes such Managing
Agent 

 

86

 

to take such actions as agent on its behalf and to exercise such powers
as are delegated to the Managing Agents by the terms of this Agreement together
with such powers as are reasonably incidental thereto; provided, however,
that the applicable Managing Agent may not execute any document in the name of,
or which imposes any direct obligation on, RFC. 
No Managing Agent shall have any duties or responsibilities, except
those expressly set forth herein, or any fiduciary relationship with any
Lender, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities on the part of the applicable Managing Agent shall
be read into this Agreement or otherwise exist for the applicable Managing
Agent.  In performing its functions and
duties hereunder, each Managing Agent shall act solely as agent for the Lenders
in the related Lender Group and does not assume nor shall be deemed to have
assumed any obligation or relationship of trust or agency with or for the
Borrower or any of its successors or assigns. 
No Managing Agent shall be required to take any action that exposes it
to personal liability or that is contrary to this Agreement or Applicable
Law.  The appointment and authority of
each Managing Agent hereunder shall terminate at the indefeasible payment in
full of the Obligations.

 

Section 10.2                            Delegation
of Duties.

 

(a)                                  The
Administrative Agent may execute any of its duties under this Agreement by or
through agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties.  The Administrative Agent shall not be responsible
for the negligence or misconduct of any agents or attorneys-in-fact selected by
it with reasonable care.

 

(b)                                 Each
Managing Agent may execute any of its duties under this Agreement by or through
agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties.  No Managing Agent shall be responsible for
the negligence or misconduct of any agents or attorneys-in-fact selected by it
with reasonable care.

 

Section 10.3                            Exculpatory
Provisions.

 

(a)                                  Neither
the Administrative Agent nor any of its directors, officers, agents or
employees shall be (i) liable for any action lawfully taken or omitted to
be taken by it or them under or in connection with this Agreement (except for
its, their or such Person’s own gross negligence or willful misconduct or, in
the case of the Administrative Agent, the breach of its obligations expressly
set forth in this Agreement), or (ii) responsible in any manner to any of
the Secured Parties for any recitals, statements, representations or warranties
made by the Borrower contained in this Agreement or in any certificate, report,
statement or other document referred to or provided for in, or received under
or in connection with, this Agreement for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other
document furnished in connection herewith, or for any failure of the Borrower
to perform its obligations hereunder, or for the satisfaction of any condition
specified in Article III.  The Administrative Agent shall not be under
any obligation to any Secured Party to ascertain or to inquire as to the
observance or performance of any of the agreements or covenants contained in,
or conditions of, this Agreement, or to inspect the properties, books or
records of the Borrower.  The
Administrative Agent shall not be deemed to have knowledge of any Early
Termination Event unless the Administrative Agent has received notice of such
Early Termination Event, in a document or other written communication titled
“Notice of Early Termination Event” from the Borrower or a Secured Party.

 

87

 

(b)                                 Neither
any Managing Agent nor any of its respective directors, officers, agents or
employees shall be (i) liable for any action lawfully taken or omitted to
be taken by it or them under or in connection with this Agreement (except for
its, their or such Person’s own gross negligence or willful misconduct or, in
the case of a Managing Agent, the breach of its obligations expressly set forth
in this Agreement), or (ii) responsible in any manner to the
Administrative Agent or any of the Secured Parties for any recitals,
statements, representations or warranties made by the Borrower contained in
this Agreement or in any certificate, report, statement or other document
referred to or provided for in, or received under or in connection with, this
Agreement or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other document furnished
in connection herewith, or for any failure of the Borrower to perform its
obligations hereunder, or for the satisfaction of any condition specified in Article III. 
No Managing Agent shall be under any obligation to the Administrative
Agent or any Secured Party to ascertain or to inquire as to the observance or
performance of any of the agreements or covenants contained in, or conditions
of, this Agreement, or to inspect the properties, books or records of the
Borrower.  No Managing Agent shall be
deemed to have knowledge of any Early Termination Event unless such Managing
Agent has received notice of such Early Termination Event, in a document or
other written communication titled “Notice of Early Termination Event” from the
Borrower, the Administrative Agent or a Secured Party.

 

Section 10.4                            Reliance.

 

(a)                                  The
Administrative Agent shall in all cases be entitled to rely, and shall be fully
protected in relying, upon any document or conversation believed by it to be
genuine and correct and to have been signed, sent or made by the proper Person
or Persons and upon advice and statements of legal counsel (including, without
limitation, counsel to the Borrower), independent accountants and other experts
selected by the Administrative Agent. 
The Administrative Agent shall in all cases be fully justified in
failing or refusing to take any action under this Agreement or any other
document furnished in connection herewith unless it shall first receive such
advice or concurrence of the Required Committed Lenders or all of the Secured
Parties, as applicable, as it deems appropriate or it shall first be
indemnified to its satisfaction by the Lenders, provided,
that, unless and until the Administrative
Agent shall have received such advice, the Administrative Agent may take or refrain
from taking any action, as the Administrative Agent shall deem advisable and in
the best interests of the Secured Parties, The Administrative Agent shall in
all cases be fully protected in acting, or in refraining from acting, in
accordance with a request of the Required Committed Lenders or all of the
Secured Parties, as applicable, and such request and any action taken or
failure to act pursuant thereto shall be binding upon all the Secured Parties.

 

(b)                                 Each
Managing Agent shall in all cases be entitled to rely, and shall be fully
protected in relying, upon any document or conversation believed by it to be
genuine and correct and to have been signed, sent or made by the proper Person
or Persons and upon advice and statements of legal counsel (including, without
limitation, counsel to the Borrower), independent accountants and other experts
selected by such Managing Agent.  Each
Managing Agent shall in all cases be fully justified in failing or refusing to
take any action under this Agreement or any other document furnished in
connection herewith unless it shall first receive such advice or concurrence of
the Committed Lenders in its related Lender Group as it deems appropriate or it

 

88

 

shall first be indemnified to its satisfaction by the Committed Lenders
in its related Lender Group, provided that unless and until such Managing Agent
shall have received such advice, the Managing Agent may take or refrain from
taking any action, as the Managing Agent shall deem advisable and in the best
interests of the Lenders in its Lender Group. 
Each Managing Agent shall in all cases be fully protected in acting, or
in refraining from acting, in accordance with a request of the Committed
Lenders in such Managing Agent’s Lender Group and such request and any action
taken or failure to act pursuant thereto shall be binding upon all the Lenders
in such Managing Agent’s Lender Group.

 

Section 10.5                            Non-Reliance
on Administrative Agent, Managing Agents and Other Lenders.

 

Each Secured Party expressly acknowledges that neither
the Administrative Agent, any other Secured Party nor any of their respective
officers, directors, employees, agents, attorneys-in-fact or affiliates has
made any representations or warranties to it and that no act by the
Administrative Agent or any other Secured Party hereafter taken, including,
without limitation, any review of the affairs of the Borrower, shall be deemed
to constitute any representation or warranty by the Administrative Agent or any
other Secured Party.  Each Secured Party
represents and warrants to the Administrative Agent and to each other Secured
Party that it has and will, independently and without reliance upon the
Administrative Agent or any other Secured Party and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, operations, property, prospects, financial and
other conditions and creditworthiness of the Borrower and made its own decision
to enter into this Agreement.

 

Section 10.6                            Reimbursement
and Indemnification.

 

The Committed Lenders agree to reimburse and indemnify
the Administrative Agent, and the Committed Lenders in each Lender Group agree
to reimburse the Managing Agent for such Lender Group, and their respective
officers, directors, employees, representatives and agents ratably according to
their Commitments, as applicable, to the extent not paid or reimbursed by the
Borrower (i) for any amounts for which the Administrative Agent, acting in
its capacity as Administrative Agent, or any Managing Agent, acting in its
capacity as a Managing Agent, is entitled to reimbursement by the Borrower
hereunder and (ii) for any other expenses incurred by the Administrative
Agent, in its capacity as Administrative Agent, or any Managing Agent, acting
in its capacity as a Managing Agent, and acting on behalf of the related
Lenders, in connection with the administration and enforcement of this
Agreement and the other Transaction Documents.

 

Section 10.7         Administrative Agent and Managing
Agents in their Individual Capacities.

 

The Administrative Agent, each Managing Agent and each
of their respective Affiliates may make loans to, accept deposits from and
generally engage in any kind of business with the Borrower or any Affiliate of
the Borrower as though the Administrative Agent or such Managing Agent, as the
case may be, were not the Administrative Agent or a Managing Agent, as the case
may be, hereunder.  With respect to the
acquisition of Advances pursuant to this Agreement, the 

 

89

 

Administrative Agent,
each Managing Agent and each of their respective Affiliates shall have the same
rights and powers under this Agreement as any Lender and may exercise the same
as though it were not the Administrative Agent or a Managing Agent, as the case
may be, and the terms “Committed Lender” “Lender” “Committed Lenders” and
“Lenders” shall include the Administrative Agent or a Managing Agent, as the
case may be, in its individual capacity.

 

Section 10.8                            Successor
Administrative Agent or Managing Agent.

 

(a)                                  The
Administrative Agent may, upon 5 days’ notice to the Borrower and the Secured
Parties, and the Administrative Agent will, upon the direction of all of the
Lenders resign as Administrative Agent. 
If the Administrative Agent shall resign, then the Required Committed
Lenders during such 5-day period shall appoint from among the Secured Parties a
successor agent.  If for any reason no
successor Administrative Agent is appointed by the Required Committed Lenders
during such 5-day period, then effective upon the expiration of such 5-day
period, the Secured Parties shall perform all of the duties of the
Administrative Agent hereunder and the Borrower shall make all payments in
respect of the Obligations or under any Fee Letter delivered by the Borrower to
the Administrative Agent and the Secured Parties directly to the applicable
Managing Agents, on behalf of the Lenders in the applicable Lender Group and
for all purposes shall deal directly with the Secured Parties.  After any retiring Administrative Agent’s
resignation hereunder as Administrative Agent, the provisions of Article IX
and Article X shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was Administrative Agent under this
Agreement.

 

(b)                                 Any
Managing Agent may, upon 5 days’ notice to the Borrower, the Administrative
Agent and the related Lenders, and any Managing Agent will, upon the direction
of all of the related Committed Lenders resign as a Managing Agent.  If a Managing Agent shall resign, then the
related Committed Lenders during such 5-day period shall appoint from among the
related Committed Lenders a successor Managing Agent.  If for any reason no successor Managing Agent
is appointed by such Committed Lenders during such 5-day period, then effective
upon the expiration of such 5-day period, such Committed Lenders shall perform
all of the duties of the related Managing Agent hereunder.  After any retiring Managing Agent’s resignation
hereunder as a Managing Agent, the provisions of Article IX and Article X
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was a Managing Agent under this Agreement.

 

ARTICLE XI

 

ASSIGNMENTS; PARTICIPATIONS

 

Section 11.1                            Assignments
and Participations.

 

(a)                                  Borrower
and each Committed Lender hereby agree and consent to the complete or partial
assignment by each CP Lender of all or any portion of its rights under,
interest in, title to and obligations under this Agreement (i) to its
Liquidity Banks pursuant to a Liquidity Agreement, (ii) (A) to any
other issuer of commercial paper notes sponsored or administered by the
Managing Agent of such CP Lender’s Lender Group (or, in the case of the Lender
Group for which KeyBank National Association acts as Managing Agent, to any
other issuer of commercial 

 

90

 

paper notes sponsored or administered by such Managing Agent or for
which Liberty Hampshire Company, LLC provides services) or (B) to any
Lender or any Affiliate of a Lender hereunder, or (iii) to any other
Person; provided that, prior to the occurrence of an Early Termination Event,
such CP Lender may not make any such assignment pursuant to this clause (iii),
except in the event that the circumstances described in Section 11.1(c) occur,
without the consent of the Borrower (which consent shall not be unreasonably
withheld or delayed).  Upon such
assignment, such CP Lender shall be released from its obligations so assigned.  Further, Borrower and each Committed Lender
hereby agree that any assignee of any CP Lender of this Agreement or all or any
of the outstanding Advances of such CP Lender shall have all of the rights and
benefits under this Agreement as if the term “CP Lender” explicitly referred to
such party, and no such assignment shall in any way impair the rights and
benefits of such CP Lender hereunder. 
Neither Borrower nor the Servicer shall have the right to assign its
rights or obligations under this Agreement.

 

(b)                                 Any
Committed Lender may at any time and from time to time assign to one or more
Persons (“Purchasing Committed Lenders”) all or any part of its rights
and obligations under this Agreement pursuant to an assignment agreement,
substantially in the form set forth in Exhibit C hereto (the “Assignment
and Acceptance”) executed by such Purchasing Committed Lender and such
selling Committed Lender.  The consent of
the CP Lender or CP Lenders, if any, in such Committed Lender’s Lender Group
shall be required prior to the effectiveness of any such assignment.  In addition, so long as no Early Termination
Event or Unmatured Termination Event has occurred and is continuing at such
time, the consent of the Borrower (such consent not to be unreasonably withheld
or delayed) shall be required prior to the effectiveness of any such
assignment.  Each assignee of a Committed
Lender must be an Eligible Assignee and must agree to deliver to the
Administrative Agent, promptly following any request therefor by the Managing
Agent for its Lender Group or the affected CP Lender or CP Lenders, if any, an
enforceability opinion in form and substance satisfactory to such Managing
Agent and such CP Lender or CP Lenders, if any. 
Upon delivery of the executed Assignment and Acceptance to the
Administrative Agent, such selling Committed Lender shall be released from its
obligations hereunder to the extent of such assignment.  Thereafter the Purchasing Committed Lender
shall for all purposes be a Committed Lender party to this Agreement and shall
have all the rights and obligations of a Committed Lender under this Agreement
to the same extent as if it were an original party hereto and no further
consent or action by Borrower, the Lenders or the Administrative Agent shall be
required.

 

(c)                                  Each
of the Committed Lenders agrees that in the event that it shall cease to have
the Required Ratings (an “Affected Committed Lender”), such Affected
Committed Lender shall be obliged, at the request of the CP Lenders, if any, in
such Committed Lender’s Lender Group or the applicable Managing Agent, to
assign all of its rights and obligations hereunder to (x) another
Committed Lender or (y) another funding entity nominated by such Managing
Agent and acceptable to such affected CP Lenders, and willing to participate in
this Agreement through the Termination Date in the place of such Affected
Committed Lender; provided that the Affected Committed Lender receives
payment in full, pursuant to an Assignment Agreement, of an amount equal to
such Committed Lender’s Pro Rata Share of the outstanding Advances and Interest
owing to the Committed Lenders and all accrued but unpaid fees and other costs
and expenses payable in respect of its Pro Rata Share of the outstanding
Advances of the Committed Lenders.

 

91

 

(d)                                 By
executing and delivering an Assignment and Acceptance, the Purchasing Committed
Lender thereunder and the selling Committed Lender thereunder confirm to and
agree with each other and the other parties hereto as follows: (i) other
than as provided in such Assignment and Acceptance, such selling Committed
Lender makes no representation or warranty and assumes no responsibility with
respect to any statements, warranties or representations made in or in
connection with this Agreement or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or any
other instrument or document furnished pursuant hereto; (ii) such selling
Committed Lender makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the related CP
Lender, if any, or the performance or observance by such CP Lender of any of
its obligations under this Agreement or any other instrument or document furnished
pursuant hereto; (iii) such Purchasing Committed Lender confirms that it
has received a copy of this Agreement, together with copies of such financial
statements and other documents and information as it has deemed appropriate to
make its own credit analysis and decision to enter into such Assignment and
Acceptance; (iv) such Purchasing Committed Lender will, independently and
without reliance upon the Administrative Agent or any Managing Agent, the
selling Committed Lender or any other Committed Lender and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under this
Agreement; (v) such Purchasing Committed Lender and such selling Committed
Lender confirm that such Purchasing Committed Lender is an Eligible Assignee; (vi) such
Purchasing Committed Lender appoints and authorizes each of the Administrative
Agent and the applicable Managing Agent to take such action as agent on its
behalf and to exercise such powers under this Agreement as are delegated to
such agent by the terms hereof, together with such powers as are reasonably
incidental thereto; and (vii) such Purchasing Committed Lender agrees that
it will perform in accordance with their terms all of the obligations which by
the terms of this Agreement are required to be performed by it as a Committed
Lender.

 

(e)                                  The
Administrative Agent shall maintain at its address referred to herein a copy of
each Assignment and Acceptance delivered to and accepted by it and a register
for the recordation of the names and addresses of the Committed Lenders and the
Commitment of, and principal amount of, each Advance owned by each Committed
Lender from time to time (the “Register”).  The entries in the Register shall be
conclusive and binding for all purposes, absent manifest error, and the
Lenders, the Borrower and the Managing Agents may treat each Person whose name
is recorded in the Register as a Committed Lender hereunder for all purposes of
this Agreement.  The Register shall be
available for inspection by the Lenders, any Managing Agent or the Borrower at
any reasonable time and from time to time upon reasonable prior notice.

 

(f)                                    Subject
to the provisions of this Section 11.1,
upon their receipt of an Assignment and Acceptance executed by an selling
Committed Lender and an Purchasing Committed Lender, the Administrative Agent
shall, if such Assignment and Acceptance has been completed and is in
substantially the form of Exhibit C
hereto, accept such Assignment and Acceptance, and the Administrative Agent
shall then (i) record the information contained therein in the Register
and (ii) give prompt notice thereof to each Managing Agent.

 

(g)                                 Any
Committed Lender may, in the ordinary course of its business at any time sell
to one or more Persons (each a “Participant”) participating interests in
its Pro-Rata Share of the Advances of the Committed Lenders or any other
interest of such Committed Lender 

 

92

 

hereunder.  Notwithstanding any
such sale by a Committed Lender of a participating interest to a Participant,
such Committed Lender’s rights and obligations under this Agreement shall
remain unchanged, such Committed Lender shall remain solely responsible for the
performance of its obligations hereunder, and the Borrower, the CP Lenders, the
Managing Agents and the Administrative Agent shall continue to deal solely and
directly with such Committed Lender in connection with such Committed Lender’s
rights and obligations under this Agreement. 
Each Committed Lender agrees that any agreement between such Committed
Lender and any such Participant in respect of such participating interest shall
not restrict such Committed Lender’s right to agree to any amendment, supplement,
waiver or modification to this Agreement, except for (i) any amendment,
supplement, waiver or modification set forth in Section 12.1 of
this Agreement and (ii) any restrictions set forth under the Swingline
Credit Agreement restricting RFC, or its assigns under the Swingline Credit
Agreement, from consenting to any amendment, supplement, waiver or modification
to this Agreement which requires the prior approval of the Swingline Agent.

 

(h)                                 Each
Committed Lender may, in connection with any assignment or participation or
proposed assignment or participation pursuant to this Section 11.1,
disclose to the assignee or participant or proposed assignee or participant any
information relating to the Borrower or Servicer furnished to such Committed
Lender by or on behalf of the Borrower or the Servicer.

 

(i)                                     Nothing
herein shall prohibit any Committed Lender from pledging or assigning as
collateral any of its rights under this Agreement to any Federal Reserve Bank
in accordance with Applicable Law and any such pledge or collateral assignment
may be made without compliance with Section 11.1(a) or
Section 11.1(b).

 

(j)                                     In
the event any Committed Lender causes increased costs, expenses or taxes to be
incurred by the Administrative Agent, Managing Agents or the related CP Lender,
if any, in connection with the assignment or participation of such Committed
Lender’s rights and obligations under this Agreement to an Eligible Assignee
then such Committed Lender agrees that it will make reasonable efforts to
assign such increased costs, expenses or taxes to such Eligible Assignee in
accordance with the provisions of this Agreement.

 

Section 11.2                            Additional
Lender Groups.

 

Upon the Borrower’s request, with the consent of the Administrative
Agent, an additional Lender Group may be added to this Agreement at any time by
the execution and delivery of a Joinder Agreement by the members of such
proposed additional Lender Group, the Borrower, the Servicer and the
Administrative Agent, which execution and delivery shall not be unreasonably
refused by such parties.  Upon the
effective date of such Joinder Agreement, (i) each Person specified
therein as a “CP Lender”, if any, shall become a party hereto as a CP Lender,
entitled to the rights and subject to the obligations of a CP Lender hereunder,
(ii) each Person specified therein as a “Committed Lender” shall become a
party hereto as a Committed Lender, entitled to the rights and subject to the
obligations of a Committed Lender hereunder, (iii) each Person specified
therein as a “Managing Agent” shall become a party hereto as a Managing Agent,
entitled to the rights and subject to the obligations of a Managing Agent
hereunder and (iv) the Facility Amount shall be increased by an amount
equal to the aggregate Commitments of the Committed Lenders party to such
Joinder Agreement.  On or prior to the 

 

93

 

effective date of such Joinder Agreement, the
Borrower, the Servicer and the new Managing Agent shall enter into a fee letter
for purposes of setting forth the fees payable to the members of such Lender
Group in connection with this Agreement, which fee letter shall be considered a
“Fee Letter” for all purposes of this Agreement.  The Administrative Agent shall give each
Lender prompt notice of the addition of any Lender Group.

 

ARTICLE XII

 

MISCELLANEOUS

 

Section 12.1                            Amendments
and Waivers.

 

Except as provided in this Section 12.1,
no amendment, waiver or other modification of any provision of this Agreement
shall be effective without the written agreement of the Borrower, the
Administrative Agent, the Managing Agents and the Required Committed Lenders; provided, however,
that (i) without the consent of the Committed Lenders in any Lender Group
(other than the Lender Group to which such Committed Lenders are being added),
the Administrative Agent and the applicable Managing Agent may, with the
consent of Borrower, amend this Agreement solely to add additional Persons as
Committed Lenders hereunder, (ii) any amendment of this Agreement that is
solely for the purpose of increasing the Commitment of a specific Committed
Lender may be effected with the written consent of the Borrower, the
Administrative Agent and the affected Committed Lender, (iii) any
amendment waiver or other modification, the effect of which is to create a
commitment by any CP Lender to fund Advances hereunder, shall not be effective
without the consent of such CP Lender, and (iv) the consent of each
affected Lender shall be required to: (A) extend the Commitment
Termination Date or the date of any payment or deposit of Collections by the
Borrower or the Servicer, (B) reduce the amount (other than by reason of
the repayment thereof) or extend the time of payment of Advances Outstanding or
reduce the rate or extend the time of payment of Interest (or any component
thereof) or increase the Group Advance Limit of the related Lender Group, (C) reduce
any fee payable to the Administrative Agent or any Managing Agent for the
benefit of the Lenders, (D) amend, modify or waive any provision of the
definition of Required Committed Lenders or Sections 2.11, 11.1(a),
12.1, 12.9, or 12.10, (E) consent to or permit the
assignment or transfer by the Borrower of any of its rights and obligations
under this Agreement, (F) amend or waive any Servicer Termination Event or
Early Termination Event, (G) change the definition of “Borrowing Base,”
“Charged-Off Ratio,” “Default Ratio,” “Eligible Loan” or “Settlement Date,” or (H) amend
or modify any defined term (or any defined term used directly or indirectly in
such defined term) used in clauses (A) through (G) above in a manner
that would circumvent the intention of the restrictions set forth in such
clauses.  Any waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.

 

No amendment, waiver or other modification (i) affecting
the rights or obligations of any Hedge Counterparty or (ii) having a
material affect on the rights or obligations of the Collateral Custodian or the
Backup Servicer (including any duties of the Servicer that the Backup Servicer
would have to assume as Successor Servicer) shall be effective against such
Person without the written agreement of such Person.  The Borrower or the Servicer on its behalf
will deliver a copy of all waivers and amendments to the Collateral Custodian
and the Backup Servicer.

 

94

 

Section 12.2                            Notices,
Etc.

 

All notices and other communications provided for
hereunder shall, unless otherwise stated herein, be in writing (including telex
communication and communication by facsimile copy) and mailed, telexed,
transmitted or hand delivered, as to each party hereto, at its address set
forth under its name on the signature pages hereof or specified in such
party’s Assignment and Acceptance or Joinder Agreement or at such other address
as shall be designated by such party in a written notice to the other parties
hereto.  All such notices and
communications shall be effective, upon receipt, or in the case of (a) notice
by mail, five days after being deposited in the United States mail, first class
postage prepaid, (b) notice by telex, when telexed against receipt of
answer back, or (c) notice by facsimile copy, when verbal communication of
receipt is obtained, except that notices and communications pursuant to this Article XII
shall not be effective until received with respect to any notice sent by mail
or telex.

 

Section 12.3                            No
Waiver, Rights and Remedies.

 

No failure on the part of the Administrative Agent or
any Secured Party or any assignee of any Secured Party to exercise, and no
delay in exercising, any right or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any right or remedy
hereunder preclude any other or further exercise thereof or the exercise of any
other right.  The rights and remedies
herein provided are cumulative and not exclusive of any rights and remedies
provided by law.

 

Section 12.4                            Binding
Effect.

 

This Agreement shall be binding upon and inure to the
benefit of the Borrower, the Administrative Agent, the Secured Parties and
their respective successors and permitted assigns and, in addition, the
provisions of Section 2.8 shall inure
to the benefit of each Hedge Counterparty, whether or not that Hedge
Counterparty is a Secured Party, and the provisions relating to the Backup
Servicer, including Sections 2.8, 7.18, 9.1 and 9.2
shall inure to the benefit of the Backup Servicer.

 

Section 12.5                            Term
of this Agreement.

 

This Agreement, including, without limitation, the
Borrower’s obligation to observe its covenants set forth in Article V, and the Servicer’s obligation to
observe its covenants set forth in Article VII,
shall remain in full force and effect until the Collection Date; provided, however,
that the rights and remedies with respect to any breach of any representation
and warranty made or deemed made by the Borrower pursuant to Articles III and IV
and the indemnification and payment provisions of Article IX
and Article X and the provisions of Section 12.9 and Section 12.10
shall be continuing and shall survive any termination of this Agreement.

 

Section 12.6                            GOVERNING
LAW; CONSENT TO JURISDICTION; WAIVER OF OBJECTION TO VENUE.

 

THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.  EACH OF THE SECURED PARTIES, THE BORROWER AND
THE ADMINISTRATIVE AGENT HEREBY

 

95

 

AGREES TO THE
NON-EXCLUSIVE JURISDICTION OF ANY FEDERAL COURT LOCATED WITHIN THE STATE OF NEW
YORK.  EACH OF THE PARTIES HERETO AND
EACH SECURED PARTY HEREBY WAIVES ANY OBJECTION BASED ON FORUM NON CONVENIENS,
AND ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED HEREUNDER IN ANY OF THE
AFOREMENTIONED COURTS AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE
RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT.

 

Section 12.7                            WAIVER
OF JURY TRIAL.

 

TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE
SECURED PARTIES, THE BORROWER AND THE ADMINISTRATIVE AGENT WAIVES ANY RIGHT TO
HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT,
TORT, OR OTHERWISE BETWEEN THE PARTIES HERETO ARISING OUT OF, CONNECTED WITH,
RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP BETWEEN ANY OF THEM IN CONNECTION
WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.  INSTEAD, ANY SUCH DISPUTE RESOLVED IN COURT
WILL BE RESOLVED IN A BENCH TRIAL WITHOUT A JURY.

 

Section 12.8                            Costs,
Expenses and Taxes.

 

(a)           In
addition to the rights of indemnification granted to the Administrative Agent,
the Managing Agents, the other Secured Parties and its or their Affiliates and
officers, directors, employees and agents thereof under Article IX
hereof, the Borrower agrees to pay on demand all reasonable costs and expenses
of the Administrative Agent, the Managing Agents and the other Secured Parties
incurred in connection with the preparation, execution, delivery,
administration (including periodic auditing), amendment or modification of, or
any waiver or consent issued in connection with, this Agreement and the other
documents to be delivered hereunder or in connection herewith, including,
without limitation, the reasonable fees and out-of-pocket expenses of counsel
for the Administrative Agent, the Managing Agents and the other Secured Parties
with respect thereto and with respect to advising the Administrative Agent, the
Managing Agents and the other Secured Parties as to their respective rights and
remedies under this Agreement and the other documents to be delivered hereunder
or in connection herewith, and all costs and expenses, if any (including
reasonable counsel fees and expenses), incurred by the Administrative Agent,
the Managing Agents or the other Secured Parties in connection with the
enforcement of this Agreement and the other documents to be delivered hereunder
or in connection herewith (including any Hedge Agreement).

 

(b)           The
Borrower shall pay on demand any and all stamp, sales, excise and other taxes
and fees payable or determined to be payable in connection with the execution,
delivery, filing and recording of this Agreement, the other documents to be
delivered hereunder or any agreement or other document providing liquidity
support, credit enhancement or other similar Support to the Lender in
connection with this Agreement or the funding or maintenance of Advances
hereunder.

 

96

 

(c)           The
Borrower shall pay on demand all other costs, expenses and taxes (excluding
income taxes) (“Other Costs”),
including, without limitation, all reasonable costs and expenses incurred by
the Administrative Agent or any Managing Agent in connection with periodic
audits of the Borrower’s or the Servicer’s books and records, which are
incurred as a result of the execution of this Agreement.

 

Section 12.9                            No
Proceedings.

 

Each party hereto (other than each CP Lender, as to
itself) hereby covenants and agrees that on behalf of itself and each of its
affiliates, that prior to the date which is one year and one day after the
payment in full of all indebtedness for borrowed money of a CP Lender, such
party will not institute against, or join any other Person in instituting
against, such CP Lender any bankruptcy, reorganization, arrangement, insolvency
or liquidation proceedings or other similar proceeding under the laws of any
jurisdiction.  The provisions of this Section 12.9
shall survive the termination of this Agreement.

 

Each of the parties hereto (other than the
Administrative Agent and the Secured Parties) hereby agrees that it will not
institute against, or join any other Person in instituting against the Borrower
any Insolvency Proceeding so long as there shall not have elapsed one year and
one day since the Collection Date.

 

Section 12.10                     Recourse
Against Certain Parties.

 

(a)           No
recourse under or with respect to any obligation, covenant or agreement
(including, without limitation, the payment of any fees or any other
obligations) of the Administrative Agent, any Secured Party as contained in
this Agreement or any other agreement, instrument or document entered into by
it pursuant hereto or in connection herewith shall be had against any Person or
any manager or administrator of such Person or any incorporator, affiliate,
stockholder, officer, employee or director of such Person or of the Borrower or
of any such manager or administrator, as such, by the enforcement of any
assessment or by any legal or equitable proceeding, by virtue of any statute or
otherwise.

 

(b)           Notwithstanding
anything to the contrary contained in this Agreement, the obligations of a CP
Lender under this Agreement are solely the company obligations of such CP
Lender and shall be payable by such CP Lender and shall constitute a claim (as
defined in Section 101 of Title 11 of the United States Bankruptcy Code)
against such CP Lender solely to the extent of funds received by such CP Lender
in respect of this Agreement.  In
addition, each party hereto agrees that a CP Lender shall have no obligation to
pay any party hereto any amounts constituting fees, a reimbursement for
expenses or indemnities (collectively, “Expense Claims”), and such
Expense Claims shall not constitute a claim against such CP Lender (as defined
in Section 101 of Title 11 of the United States Bankruptcy Code), unless
or until such CP Lender has received amounts sufficient to pay such Expense
Claims pursuant to this Agreement and such amounts are not required to pay the
commercial paper and any other debt securities of such CP Lender.

 

(c)           The
provisions of this Section 12.10 shall
survive the termination of this Agreement.

 

97

 

Section 12.11                     Protection
of Security Interest; Appointment of Administrative Agent as Attorney-in-Fact.

 

(a)           The
Borrower shall, or shall cause the Servicer to, cause this Agreement, all
amendments hereto and/or all financing statements and continuation statements
and any other necessary documents covering the right, title and interest of the
Administrative Agent as agent for the Secured Parties and of the Secured
Parties to the Collateral to be promptly recorded, registered and filed, and at
all time to be kept recorded, registered and filed, all in such manner and in
such places as may be required by law fully to preserve and protect the right,
title and interest of the Administrative Agent as agent for the Secured Parties
hereunder to all property comprising the Collateral.  The Borrower shall deliver or, shall cause
the Servicer to deliver, to the Administrative Agent file-stamped copies of, or
filing receipts for, any document recorded, registered or filed as provided
above, as soon as available following such recording, registration or
filing.  The Borrower and the Servicer
shall cooperate fully in connection with the obligations set forth above and
will execute any and all documents reasonably required to fulfill the intent of
this Section 12.11.

 

(b)           The
Borrower agrees that from time to time, at its expense, it will promptly
execute and deliver all instruments and documents, and take all actions, that
may reasonably be necessary or desirable, or that the Administrative Agent may
reasonably request, to perfect, protect or more fully evidence the security
interest granted to the Administrative Agent, as agent for the Secured Parties,
in the Collateral, or to enable the Administrative Agent or the Secured Parties
to exercise and enforce their rights and remedies hereunder.

 

(c)           If
the Borrower or the Servicer fails to perform any of its obligations hereunder
after five Business Days’ notice from the Administrative Agent, the
Administrative Agent or any Lender may (but shall not be required to) perform,
or cause performance of, such obligation; and the Administrative Agent’s or
such Lender’s reasonable costs and expenses incurred in connection therewith
shall be payable by the Borrower (if the Servicer that fails to so perform is
the Borrower or an Affiliate thereof) as provided in Article IX,
as applicable.  The Borrower irrevocably
authorizes the Administrative Agent and appoints the Administrative Agent as
its attorney-in-fact to act on behalf of the Borrower, (i) to execute on
behalf of the Borrower as debtor and to file financing statements necessary or
desirable in the Administrative Agent’s sole discretion to perfect and to
maintain the perfection and priority of the interest of the Secured Parties in
the Collateral and (ii) to file a carbon, photographic or other
reproduction of this Agreement or any financing statement with respect to the
Collateral as a financing statement in such offices as the Administrative Agent
in its sole discretion deems necessary or desirable to perfect and to maintain
the perfection and priority of the interests of the Lenders in the Collateral.  This appointment is coupled with an interest
and is irrevocable.

 

(d)           Without
limiting the generality of the foregoing, Borrower will, not earlier than six (6) months
and not later than three (3) months prior to the fifth anniversary of the
date of filing of the financing statement referred to in Section 3.1
or any other financing statement filed pursuant to this Agreement or in
connection with any Advance hereunder, unless the Collection Date shall have
occurred:

 

98

 

(i)            execute
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 Administrative Agent an opinion of the counsel
for Borrower, in form and substance reasonably satisfactory to the
Administrative Agent, confirming and updating the opinion delivered pursuant to
Section 3.1 with respect to perfection
and otherwise to the effect that the Collateral hereunder continues to be
subject to a perfected security interest in favor of the Administrative Agent,
as agent for the Secured Parties, subject to no other Liens of record except as
provided herein or otherwise permitted hereunder, which opinion may contain
usual and customary assumptions, limitations and exceptions.

 

Section 12.12                     Confidentiality.

 

(a)           Each
of the Administrative Agent, the Managing Agents, the other Secured Parties and
the Borrower shall maintain and shall cause each of its employees and officers
to maintain the confidentiality of the Agreement and the other confidential
proprietary information with respect to the other parties hereto and their
respective businesses obtained by it or them in connection with the
structuring, negotiating and execution of the transactions contemplated herein,
except that each such party and its officers and employees may (i) disclose
such information to its external accountants and attorneys and as required by
an Applicable Law, as required to be publicly filed with SEC, or as required by
an order of any judicial or administrative proceeding, (ii) disclose the
existence of this Agreement, but not the financial terms thereof and (iii) disclose
the Agreement and such information in any suit, action, proceeding or
investigation (whether in law or in equity or pursuant to arbitration)
involving and of the Loan Documents or any Hedging Agreement for the purpose of
defending itself, reducing itself, reducing its liability, or protecting or
exercising any of its claims, rights, remedies, or interests under or in
connection with any of the Loan Documents or any Hedging Agreement.

 

(b)           Anything herein to the contrary notwithstanding, the
Borrower hereby consents to the disclosure of any nonpublic information with
respect to it for use in connection with the transactions contemplated herein
and in the Transaction Documents (i) to the Administrative Agent or the
Secured Parties by each other, (ii) by the Administrative Agent or the
Secured Parties to any prospective or actual Eligible Assignee or participant
of any of them or (iii) by the Administrative Agent or the Secured Parties
to any Rating Agency, commercial paper dealer,
or provider of a surety, guaranty or credit or liquidity enhancement to a
Secured Party and to any officers, directors, members, employees, outside accountants
and attorneys of any of the foregoing, provided each such Person is informed of
the confidential nature of such information and, other than any Rating Agency,
agrees to be bound hereby.  In addition,
the Secured Parties and the Administrative Agent may disclose any such
nonpublic information pursuant to any law, rule, regulation, direction, request
or order of any judicial, administrative or regulatory authority or proceedings.  In addition, the Borrower hereby consents to
disclosure by a CP Lender to its commercial paper investors of the existence of
this facility and the identity of the Borrower hereunder.

 

(c)           The
Borrower and the Servicer each agrees that it shall not (and shall not permit
any of its Affiliates to) issue any news release or make any public
announcement pertaining to

 

99

 

the transactions contemplated by this Agreement and the Transaction
Documents without the prior written consent of the Administrative Agent (which
consent shall not be unreasonably withheld) unless such news release or public
announcement is required by law, in which case the Borrower or the Servicer
shall consult with the Administrative Agent and each Managing Agent prior to
the issuance of such news release or public announcement.  The Borrower and the Servicer each may,
however, disclose the general terms of the transactions contemplated by this
Agreement and the Transaction Documents to trade creditors, suppliers and other
similarly-situated Persons so long as such disclosure is not in the form of a
news release or public announcement.

 

Section 12.13                     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.  In case any provision in or obligation under
this Agreement shall be invalid, illegal or unenforceable in any jurisdiction,
the validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction,
shall not in any way be affected or impaired thereby.  This Agreement 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.

 

[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]

 

100

 

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.

 

	
  BORROWER:

  	
  GLADSTONE BUSINESS
  LOAN, LLC

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
    Title:
  President

  
	
   

  	
   

  
	
   

  	
  Gladstone Business Loan, LLC 

  
	
   

  	
  1521 Westbranch Drive, Suite 200 

  
	
   

  	
  McLean, Virginia 22102 

  
	
   

  	
  Attention: President 

  
	
   

  	
  Facsimile No.: (703) 287-5801 

  
	
   

  	
  Phone No.: (703) 287-5800

  
	
   

  	
   

  
	
   

  	
   

  
	
  SERVICER:

  	
  GLADSTONE MANAGEMENT

  CORPORATION

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
    Title:
  Chairman

  
	
   

  	
   

  
	
   

  	
  Gladstone Management Corporation 

  
	
   

  	
  1521 Westbranch Drive, Suite 200 

  
	
   

  	
  McLean, Virginia 22102 

  
	
   

  	
  Attention: Chairman 

  
	
   

  	
  Facsimile No.: (703) 287-5801 

  
	
   

  	
  Phone No.: (703) 287-5800

  

 

[SIGNATURES CONTINUED ON FOLLOWING PAGE]

 

S-1

 

	
  COMMITTED LENDER and
  MANAGING AGENT for the Tahoe Lender Group:

  	
   

  	
  DEUTSCHE BANK AG, NEW
  YORK BRANCH

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  	
   

  
	
   

  	
   

  	
   

  	
    Title

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Commitment: $125,000,000

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  60 Wall Street 

  18th Floor 

  New York, New York 10005 

  Attention: Tina Gu 

  Phone: (212) 250-0357 

  Facsimile: (212) 797-5150

  
	
   

  	
   

  	
   

  
	
  CP LENDER:

  	
   

  	
  TAHOE FUNDING CORP, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  	
   

  
	
   

  	
   

  	
   

  	
    Title

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  TAHOE FUNDING CORP, LLC. 

  c/o Global Securitization Services, LLC 

  68 South Service Road, Suite 120 

  Melville, NY 11747 

  Attention: Andrew Stidd 

  Phone: (212) 930-7203 

  Facsimile: (212) 302-8767 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  with copies to: 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  DEUTSCHE BANK AG, NEW YORK BRANCH 

  60 Wall Street 

  18th Floor 

  New York, New York 10005 

  Attention: Tina Gu 

  Phone:(212) 250-0357 

  Facsimile: (212) 797-5150

  

 

[SIGNATURES
CONTINUED ON FOLLOWING PAGE]

 

S-2

 

	
  ADMINISTRATIVE AGENT

  	
   

  	
  DEUTSCHE BANK AG, NEW
  YORK BRANCH

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  	
   

  
	
   

  	
   

  	
   

  	
    Title

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  60 Wall Street 

  18th Floor 

  New York, New York 10005 

  Attention: Tina Gu 

  Phone: (212) 250-0357 

  Facsimile: (212) 797-5150

  

 

[SIGNATURES
CONTINUED ON FOLLOWING PAGE]

 

S-3

 

	
  COMMITTED LENDER and
  MANAGING AGENT for the RFC Lender Group:

  	
   

  	
  KEYBANK NATIONAL
  ASSOCIATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  	
   

  
	
   

  	
   

  	
   

  	
    Title

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Commitment: $125,000,000 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  127 Public Square 

  MC OH-01-27-0411 

  Cleveland, Ohio 44113 

  Attention: Tony Bulic 

  Phone:      (216) 689-3842 

  Facsimile: (216) 689-5287 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  with a copy to: 

  
	
   

  	
   

  	
  KEY EQUIPMENT FINANCE 

  
	
   

  	
   

  	
  Lease Advisory Services 

  
	
   

  	
   

  	
  19100 Von Karman Ave., Suite 250 

  
	
   

  	
   

  	
  Irvine, California 92612 

  
	
   

  	
   

  	
  Attention: Rian Emmett 

  
	
   

  	
   

  	
  Phone:      (949) 757-8942 

  
	
   

  	
   

  	
  Facsimile: (949) 757-1312

  
	
   

  	
   

  	
   

  
	
  CP LENDER:

  	
   

  	
  RELATIONSHIP FUNDING
  COMPANY, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  	
   

  
	
   

  	
   

  	
   

  	
    Title

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  227 West Monroe 

  Suite 4900 

  Chicago, IL 60606 

  Attention: Operations Department 

  Phone: (312) 977-4560 

  Facsimile: (312) 977-1967

  

 

[SIGNATURES CONTINUED ON
FOLLOWING PAGE]

 

S-4

 

	
  COMMITTED LENDER and
  MANAGING AGENT:

  	
   

  	
  BRANCH BANKING AND
  TRUST COMPANY

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  	
   

  
	
   

  	
   

  	
   

  	
    Title

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Commitment: $50,000,000 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  200 West Second Street 16th Floor 

  Winston-Salem North Carolina 27101 

  Attention: Beth Cook 

  Phone: (336) 733-2726 

  Facsimile: (336) 733-2740

  

 

S-5

 

[Exhibits and
Schedules under separate cover]

 

S-1Exhibit 10.2

 

BEHRINGER HARVARD MULTIFAMILY REIT I, INC.

 

FORM OF AMENDED AND RESTATED PROPERTY

MANAGEMENT AGREEMENT

 

THIS AMENDED AND RESTATED PROPERTY
MANAGEMENT AGREEMENT (this “Agreement”) is made as of (although not necessarily
on) the     day of                ,
2008, between BEHRINGER HARVARD MULTIFAMILY REIT I, INC. (the “Company”), a Maryland corporation,
BEHRINGER HARVARD MULTIFAMILY OP I LP (the “OP”),
a Delaware limited partnership (the Company and the OP collectively “Owner”)
and BEHRINGER HARVARD MULTIFAMILY MANAGEMENT SERVICES, LLC, a Texas limited
liability company (“Manager”).

 

WHEREAS, on March 17, 2008, HPT
MANAGEMENT SERVICES LP, a Texas limited partnership (“Former
Manager”) and with the consent of the Company and OP, assigned
any and all rights, duties and obligations to the Manager.

 

ARTICLE I

 

Engagement
of Manager and Rental Responsibility

 

1.1                                 Engagements.  Subject to the restrictions of
this Section 1.1, Owner hereby engages Manager to manage the apartment
communities in which Owner now owns a direct or indirect equity interest or
hereafter acquires a direct or indirect equity interest (whether one or more,
are referred to herein collectively as the “Project”),
and Manager accepts such engagement and agrees to perform the services set
forth herein.   Such engagement shall not
commence with respect to any particular Project until Owner, in its sole
discretion, has the ability to appoint or hire the Manager.  Further, Owner may elect to exclude any
Project from the terms of this Agreement upon written notice to Manager
delivered by Owner within ten (10) days following the later of (i) Owner’s
acquisition of a direct or indirect equity interest in such Project or (ii) the
date on which Owner, in its sole discretion, has the ability to appoint or hire
the Manager with respect to such Project. 
Owner has the right to include any previously excluded Project ten (10) days
following delivery of written notice from Owner to Manager.  Notwithstanding the foregoing, Manager shall
be entitled to an Oversight Fee (as defined herein) pursuant to Section 3.1
with respect to any Project excluded from the terms of this Agreement, but only
after Owner, in its sole discretion, has the ability to appoint or hire the
Manager for such Project.

 

1.2                                 Status of Manager; Limitation on Authority. 
Manager shall act under this Agreement as an independent contractor and
not as Owner’s agent or employee. 
Manager shall not have the right, power or authority to enter into
agreements or incur liability on behalf of Owner except as expressly set forth
herein.  Any personnel hired by Manager
to maintain, operate and/or lease each Project shall be the employees or
independent contractors of Manager and not of Owner.  Manager shall use due care in the selection
and supervision of such employees or independent contractors, who shall be duly
qualified and licensed, as necessary. 
Any action taken by Manager which is not expressly permitted by this
Agreement shall not bind Owner.

 

1.3                                 Leasing of Premises. 
Manager shall perform promotional, leasing and management activities
required to lease apartment units in the Project in accordance with the
parameters established by or otherwise approved in writing by Owner (the “Approved Leasing Parameters”).  Throughout the term of this Agreement,
Manager shall use its diligent efforts to lease apartment units in the
Project.  

 

 

Subject to reimbursement by Owner, Manager
shall advertise the Project, or portions thereof, prepare and secure
advertising signs, space plans, circular matter, marketing brochures and other
forms of advertising.  Manager is
authorized to advertise the Project in conjunction with general advertising
campaigns and to allocate the cost of such campaigns on a pro rata
basis among the projects being advertised (to the extent authorized by the
Annual Business Plan (hereinafter defined)). 
All inquiries for any leases or renewals or agreements for the rental of
the Project or portions thereof shall be referred to Manager and all negotiations
connected therewith shall be conducted solely by or under the direction of
Manager in accordance with the parameters established by or otherwise approved
in writing by Owner.  Manager is hereby
authorized to execute, deliver and renew leases on behalf of Owner including,
but not limited to tenant and commercial leases (such as laundry room leases)
in accordance with the Approved Leasing Parameters.  Manager is authorized to utilize the services
of apartment locator services and pay compensation of duly qualified and
licensed leasing personnel responsible for the leasing of each Project; the
fees for such services shall be operating expenses of the Project and, to the
extent paid by Manager, reimbursable to Manager by Owner to the extent set
forth in the applicable Annual Business Plan.

 

1.4                                 Manager’s Standard of Care.  In
performing Manager’s duties under this Agreement, Manager shall exercise the
same degree of care, prudence, and skill as other professional property
managers of similar properties in the area. 
In no event shall Manager be liable to Owner for any loss or damage,
unless caused by the misconduct and/or negligence of the Manager, its agents,
servants, or employees.

 

1.5                                 Compliance With Laws; Environmental Matters.

 

(a)                             Owner assumes all responsibility as to the compliance of the Project
with all laws applicable to the Project. 
Owner agrees to defend and indemnify and hold harmless Manager and its
members, officers, directors, employees, managers, successors and assigns
(collectively, the “Manager Indemnified Parties”) from and against any and all
Losses (as defined in Section 2.8(e)(i) hereof) arising out of any
violation, breach or failure of the Project to comply with any or all state or
federal laws applicable to the Project, except for any violations caused by the
misconduct and/or negligence of the Manager, its agents, servants, or
employees.

 

(b)                            Owner hereby warrants and represents to Manager that to the best of
Owner’s knowledge, no Project, upon acquisition of an interest therein by
Owner, nor any part thereof, will be used to treat, deposit, store, dispose of
or place any hazardous substance that may subject Manager to liability or
claims under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (42 U.S.C.A. Section 9607) or any constitutional
provision, statute, ordinance, law, or regulation of any governmental body or
of any order or ruling of any public authority or official thereof, having or
claiming to have jurisdiction thereover. 
Furthermore, Owner agrees to indemnify, protect, defend, save and hold
harmless Manager and all of the other Manager Indemnified Parties from any and
all Losses involving, concerning or in any way related to any past, current or
future allegations regarding treatment, depositing, storage, disposal or placement
by any duly qualified and licensed person or entity other than Manager of
hazardous substances on any Project.

 

1.6                                 Treatment Under Texas Margin Tax.  For
purposes of the Texas margin tax, Manager’s performance of the services
specified in this Agreement will cause Manager to conduct part of the active
trade or business of Owner, and Manager’s compensation includes both the
payment of fees due pursuant to Section 3.1 and the reimbursement of
specified costs incurred in Manager’s conduct of the active trade or business
of the Owner.  Therefore, Owner and
Manager intend Manager to be, and shall treat Manager as, a “management company”
within the meaning of Section 171.0001(11) of the Texas Tax Code.  Owner and Manager will apply Sections
171.1011(m-1) and 171.1013(f)-(g) of the Texas Tax Code to Owner’s
reimbursements paid to Manager pursuant to this Agreement of specified costs
and allocable 

 

2

 

wages and compensation.  Owner and Manager further recognize and
intend that as a result of the relationship created by this Agreement,
reimbursements paid to Manager pursuant to this Agreement include (i) “flow-though
funds” that Manager is mandated by law or fiduciary duty to distribute, within
the meaning of Section 171.1011(f) of the Texas Tax Code, and (ii) “flow-through
funds” that Manager is mandated by contract to distribute, within the meaning
of Section 171.1011(g).  The terms
of this Agreement shall be interpreted in a manner consistent with the
characterization of the Manager as a “management company” as defined in Section
171.0001(11), and with the characterization of the reimbursements as “flow-though
funds” within the meaning of Section 171.1011(f)-(g) of the Texas Tax
Code.  “Texas Tax Code” means the  Texas Tax Code as amended by Texas H.B. 3, 79th
Leg., 3rd C.S. (2006), and reference to any provision of the Texas
Tax Code Act shall mean such provision as in effect from time to time, as the
same may be amended, and any successor provision thereto, as interpreted by any
applicable administrative rules as in effect from time to time.

 

ARTICLE II

Services to be Performed by Manager

 

2.1                                 Expense of Owner.  All
acts performed by Manager in the performance of its obligations under this
Agreement shall be performed on behalf of Owner, and all obligations or
expenses incurred thereby, if included in the Annual Business Plan or otherwise
approved in writing by Owner, shall be for the account of, on behalf of, and at
the expense of Owner, except as otherwise specifically provided in this Article II.  Owner shall not be obligated to reimburse
Manager for any expense allocable to (i) time spent on projects other than
the Project, or (ii) any personnel other than personnel located at the
Project site and personnel spending a portion of their working hours (to be
charged on a pro rata basis) at the Project
site or in specifically performing Manager’s obligations hereunder, whether on
or off the Project site.  Manager may use
employees normally assigned to other work centers or part-time employees to
properly staff the Project, whose wages and related expenses shall be
reimbursed on a pro rata basis for the time
actually spent at or for the Project to the extent set forth in the applicable
Annual Business Plan.  Owner shall
reimburse to Manager the costs and expenses incurred by Manager on Owner’s
behalf including the wages and salaries and other employee-related expenses and
benefits of all on-site and affiliate employees of Manager who are engaged in
the operation, management, maintenance and leasing or access of a Project,
including taxes, insurance and benefits and legal, travel and other
out-of-pocket expenses directly related to the management of a Project,
provided that such items are reflected in the Annual Business Plan.  Owner acknowledges that the following
miscellaneous expenses, when incurred with respect to the performance of
Manager’s obligations under this Agreement, shall be reimbursable to Manager by
Owner (which list of expenses is not intended to be all-inclusive) to the
extent set forth in the applicable Annual Business Plan:  courier services, postage, photocopies,
signage, check printing, marketing expenses, bank charges, telephone and
answering service (which may be allocated on a pro rata
basis among the Project and other projects managed by Manager).  All reimbursable payments made by Manager
hereunder shall be reimbursed by Owner from funds deposited in an account
established pursuant to Section 4.2 of this Agreement.  Manager shall not be obligated to make any
advance to or for the account of Owner or to pay any sums, except out of funds
held in an account maintained under Section 4.2, nor shall Manager be
obligated to incur any liability or obligation for the account of Owner without
assurance that the necessary funds for the discharge thereof will be provided
by Owner.  All debts and liabilities to
third persons incurred by Manager in the course of its operation and management
of the Project shall be the debts and liabilities of the Owner only, and
Manager shall not be liable for any such debt or liabilities, except to the
extent Manager has exceeded its authority hereunder.  Manager may sub-contract any or all of its
responsibilities hereunder, but Owner shall look to Manager for the performance
of such responsibilities in accordance with this Agreement and Manager shall be
solely responsible for paying the fees and expenses of any duly qualified and licensed 

 

3

 

person or entity  to which it sub-contracts its
responsibilities hereunder, except as otherwise agreed in writing between Owner
and Manager.

 

2.2                                 Covenants Concerning Payment of Operating
Expenses.  Owner covenants to pay all sums for operating
expenses in excess of gross receipts required to operate the Project in
accordance with the Annual Business Plan upon written notice and demand from
Manager within ten (10) days after receipt of such written notice.  Owner further recognizes that the Project may
be operated in conjunction with other properties, and costs may be allocated or
shared between such other properties on a more efficient or less expensive
basis.  In such regard, Owner consents to
the allocation of costs and/or the sharing of any expenses in an effort to save
costs or operate the Project in a more efficient manner so long as such
allocation is done on an equitable basis and so long as the computations of
such allocations are provided to Owner for its approval pursuant to Section 2.12
hereof.

 

2.3                                 Employment of Personnel. 
Manager shall use its diligent efforts to investigate, hire, pay,
supervise and discharge duly qualified and licensed personnel necessary to be employed by it to
properly maintain, operate and lease the Project, including without limitation,
a property manager or business manager at the Project.  Owner has no right of supervision or
direction of agents or employees of the Manager whatsoever.  All Owner directives shall be communicated to
Manager’s senior level management employees. 
Manager and all personnel of Manager who handle or who are responsible
for handling Owner’s monies shall be duly qualified and licensed, bonded under
a fidelity bond or a crime/employee dishonesty insurance policy or equivalent
in favor of Owner.  Manager shall furnish
such fidelity bond/insurance policy at Manager’s sole expense and shall provide
Owner Two Million Dollars ($2,000,000.00) per occurrence coverage with no more
than a Ten Thousand Dollar ($10,000.00) deductible.  Manager shall execute and file when due all
forms, reports, and returns required by law relating to the employment of its
personnel.

 

2.4                                 Utility and Service Contracts. 
Manager shall make, at Owner’s expense and in Owner’s name or in Manager’s
name, as an authorized representative for Owner, contracts for water, electricity,
gas, fuel, oil, telephone, vermin extermination, trash removal, cable
television, security protection and other services deemed by Manager to be
necessary or advisable for the operation of the Project.  Manager shall also place orders in the name of
Owner for such equipment, tools, appliances, materials, and supplies as are
reasonable and necessary to properly maintain the Project.  Manager may make such contracts and place
such orders in Owner’s name or in its own name, as Owner’s authorized representative.  In addition, Owner agrees to specifically
assume in writing all obligations under all such contracts so entered into by
Manager, on behalf of Owner, upon the termination of this Agreement, and Owner
shall indemnify, protect, save, defend and hold harmless Manager and the other
Manager Indemnified Parties harmless from and against any and all Losses
resulting from, arising out of or in any way related to such contracts and that
relate to or concern matters occurring after termination of this Agreement, but
excluding matters arising out of the misconduct and/or negligence of the
Manager, its agents, servants, or employees. 
Owner agrees to pay or reimburse Manager for all expenses and
liabilities incurred in accordance with this Section 2.4.

 

2.5                                 Maintenance and Repair of a Project. 
Manager shall use its diligent efforts to maintain, at Owner’s expense,
the buildings, appurtenances and grounds of the Project in good condition and
repair and in accordance with standards established by Owner in writing from
time to time, including interior and exterior cleaning, painting and
decorating, plumbing, carpentry and such other normal maintenance and repair
work as may be reasonably desirable taking into consideration the amount
allocated therefore in the Annual Business Plan.  With respect to any expenditure not
contemplated by the Annual Business Plan, Manager shall not incur any
individual item for repair or replacement in excess of Five Thousand Dollars
($5,000.00) unless authorized in writing by Owner, excepting, however, that
emergency repairs immediately necessary for the preservation and safety of the
Project or to avoid the suspension of any 

 

4

 

service to the Project or danger of injury to
persons or damage to property may be made by Manager upon written notice to
Owner, but without the approval of Owner. 
Manager shall not be obligated by this Section to perform any major
capital improvements.

 

2.6                                 Supervision of Capital Improvements or Major
Repairs.  When requested by the Owner or set forth in
an Annual Business Plan, Manager, at Owner’s expense and in Owner’s name, shall
supervise the installation and construction of all capital improvements or
major repairs to the Project where such work constitutes other than normal
maintenance and repair, for additional compensation as set forth in a separate
agreement between Owner and Manager.  In
such events, Manager may negotiate contracts with all contractors, subcontractors,
materialmen, suppliers, architects, and engineers approved by Owner, on behalf
of, and in the name of, Owner, and may compromise and settle any dispute or
claim arising therefrom on behalf of and in the name of Owner; provided only
that the Manager shall act in good faith and in the best interest of the Owner
at all times.  Manager will furnish all
personnel necessary for proper supervision of the work and may assign personnel
located at the Project to such supervisory work (and such assignment shall not
reduce or abate any other fees or compensation owed to Manager under this
Agreement).

 

2.7                                 Controlling Agreements. 
Manager has received copies of (and will be provided with copies of
future) articles of incorporation, agreements of limited partnership, joint
venture agreements, operating agreements, loan agreements, deeds of trust or
mortgages, each as may be amended from time to time, of Owner, as applicable
(the “Controlling Agreements”) and is and will be familiar with the terms
thereof.  Manager shall use reasonable
care to avoid any act or omission that, in the performance of its duties
hereunder, shall in any way conflict with the terms of Controlling Agreements.

 

2.8                                 Insurance and Indemnification.

 

(a)                               Insurance to be Carried.

 

(i)                                      Manager shall obtain and keep in full force
and effect insurance on the Project against such hazards as Owner and Manager
shall deem appropriate, but in any event insurance sufficient to comply with
the leases and other agreements with respect to the Project and the Controlling
Agreements shall be maintained.   All
liability policies shall provide sufficient insurance satisfactory to both
Owner and Manager and shall contain waivers of subrogation for the benefit of
Manager.

 

(ii)                                   Manager shall obtain and keep in full force
and effect, in accordance with the laws of the state in which such Project is
located, workers’ compensation and employer’s liability insurance applicable to
and covering all employees of Manager at the Project and all persons engaged in
the performance of any work required hereunder, and Manager shall furnish Owner
certificates of insurance evidencing that such insurance is in effect.  If any work under this Agreement is
subcontracted as permitted herein, Manager shall include in each subcontract a
provision that the subcontractor shall also furnish Owner with such a
certificate.

 

(b)                              Insurance Expenses. 
Premiums and other expenses of such insurance, as well as any applicable
payments in respect of deductibles, shall be borne by Owner.

 

(c)                               Cooperation with Insurers. 
Manager shall cooperate with and provide reasonable access to the
Project to representatives of insurance companies and insurance brokers or
agents with respect to insurance that is in effect or for which application has
been made.  Manager shall use its best
efforts to comply with all requirements of insurers.

 

5

 

(d)                                 Accidents and Claims. 
Manager shall promptly investigate and shall report in detail to Owner
all accidents and claims for damage relating to the ownership, operation or
maintenance of the Project, and any damage or destruction to the Project and
the estimated costs of repair thereof, and shall prepare for approval by Owner
all reports required by an insurance company in connection with any such
accident, claim, damage, or destruction. 
Such reports shall be given to Owner promptly, and shall be noted in the
monthly reports delivered to Owner pursuant to Section  2.14
below.  Manager is authorized to settle
any claim against an insurance company arising out of any policy and, in
connection with such claim, to execute proofs of loss and adjustments of loss
and to collect and receipt for loss proceeds.

 

(e)                                  Indemnification.

 

(i)                                   On Termination.  In
the event this Agreement is terminated for any reason prior to the expiration
of its original term or any renewal term, Owner shall indemnify, protect,
defend, save and hold harmless Manager and all of the other Manager Indemnified
Parties from and against any and all claims, causes of action, demands, suits,
proceedings, loss, judgments, damage, awards, liens, fines, costs, attorney’s
fees and expenses, of every kind and nature whatsoever (collectively, “Losses”),
that may be imposed on or incurred by reason of the willful misconduct, gross
negligence and/or unlawful acts (such unlawfulness having been adjudicated by a
court of proper jurisdiction) of Owner, its agents, servants, or employees.

 

(ii)                                Property Damage and Injury to Person. 
Owner agrees to indemnify, defend, protect, save and hold harmless
Manager and all of the other Manager Indemnified Parties from any and all
Losses in connection with or in any way related to each Project and from
liability for damage to each Project and injuries to or death of any person
whomsoever, and damage to property; provided, however, that such
indemnification and exculpation shall not extend to any such Losses arising out
of the misconduct and/or negligence of Manager, its agents, servants, or
employees; provided, further, that such indemnification and exculpation shall
be limited to the extent that Manager recovers insurance proceeds with respect
to such matter.  Manager shall not be
liable for any error of judgment or for any mistake of fact or law, or for any
thing that it may do or refrain from doing, except in cases of misconduct
and/or negligence.  Manager agrees to
indemnify, defend, protect, save and hold harmless Owner and its stockholders,
officers, directors, employees, managers, successors and assigns from any and
all claims or liability for any injury or damage to any person or property
whatsoever for which Manager is responsible occurring in, on, or about the
Project when such injury or damage shall be caused by the willful misconduct,
gross negligence and/or unlawful acts (such unlawfulness having been
adjudicated by a court of proper jurisdiction) of Manager, its agents,
servants, or employees, except to the extent that Owner recovers insurance
proceeds with respect to such matter.

 

(iii)                             Limitations.  Notwithstanding anything to
the contrary in this Agreement, any indemnification and exculpation by the
Owner under this Agreement is subject to any limitations imposed under the
Company’s Articles of Incorporation or any amendments thereto.

 

2.9                                 Collection of Monies. 
Manager shall use its diligent efforts to collect all rents and other
charges due from tenants, users of garage spaces (if any), storage spaces,
commercial lessees (if any) and concessionaires (if any) in respect of the
Project and otherwise due Owner with respect to the 

 

6

 

Project in the ordinary course of business,
provided that Manager does not guarantee the creditworthiness of any tenants,
users, lessees, concessionaires or collectibility of accounts receivable from
any of the foregoing.  Owner authorizes
Manager to request, demand, collect, receive and provide a receipt for all such
rent and other charges and to institute legal proceedings in the name of Owner,
and at Owner’s expense, for the collection thereof, and for the dispossession
of tenants and other persons from the Project or to cancel or terminate any
lease, license or concession agreement for breach or default thereunder, and
such expense may include the engaging of legal counsel approved by Owner in
writing for any such matter.  All monies
collected by Manager shall be deposited in the separate bank account referred
to in Section 4.2 herein.

 

2.10                           Manager Disbursements.

 

(a)                                  Manager shall, from the funds collected and
deposited, cause to be disbursed regularly and punctually (1) Manager’s
compensation, together with all sales or other taxes (other than income) which
Manager is obligated, presently or in the future, to collect and pay to any
applicable governmental authority, (2) the amounts reimbursable to Manager
under this Agreement, (3) the amount of all real estate taxes and other
impositions levied by appropriate authorities which, if not escrowed with any
mortgagee, shall be paid upon specific written direction of Owner before
interest begins to accrue thereon, (4) debt service related to any
mortgages of the Project; and (5) amounts otherwise due and payable as
operating expenses of the Project authorized to be incurred under the terms of
this Agreement.  After (i) making
disbursements as herein specified and (ii) establishing a cash reserve to
pay taxes, insurance, and/or other costs and expenses incidental to the
operation of the Project, including nonrecurring emergency repairs and capital
expenditures which shall become due and payable within the succeeding calendar
month and for which the cash to make such payments may not be generated by
operations during such period, any balance remaining at the end of each
calendar month during the term of this Agreement shall be disbursed or
transferred as generally or specifically directed from time to time by Owner.

 

(b)                                 All costs, expenses, debts and liabilities
owed to third persons that are incurred by Manager pursuant to the terms of
this Agreement and in the course of managing, leasing and operating the Project
shall be the responsibility of Owner and not Manager.  Owner agrees to provide sufficient working
capital funds to Manager so that all amounts due and owing may be promptly paid
by Manager.  Manager is not obligated to
advance any funds.  As of the first day
of each month of this Agreement, Manager will project the cash requirements for
such month and (if it shall reasonably determine that collections will be
insufficient to meet such cash requirements) request the necessary additional
funds from the Owner, which funds will be deposited with the Manager in the
segregated bank account referred to in Section 4.2 on or before ten (10) days
following the receipt of such request. 
If at any month end, the bank balance exceeds the projected cash
requirements, such excess shall be returned to the Owner within five days.  If at any time there is not sufficient cash
in the account with which to promptly pay the bills due and owing, the Manager
will request that the necessary additional funds be deposited in an amount
sufficient to create an operating reserve pursuant to Section 4.4.  Owner will deposit the additional funds
requested by the Manager within five (5) days following the receipt of
such request.

 

2.11                           Use and Maintenance of Premises. 
Manager agrees that it will not knowingly permit the use of the Project
for any purpose which might void any policy of insurance held by Owner or which
might render any loss thereunder uncollectible, or which would be in violation
of any government restriction or any covenant or restriction of any lease of
the Project.  Manager shall use its good
faith efforts to secure substantial compliance by the tenants with the terms
and conditions of their respective leases.

 

7

 

2.12                           Annual Business Plan.

 

(a)                                  On or before October 1 of each calendar
year during the term of this Agreement, Manager shall prepare and submit to
Owner for Owner’s approval, an Annual Business Plan (herein so called) for the
Project for the promotion, leasing, operations, repair and maintenance of the
Project for each calendar year during which this Agreement is in effect.  The Annual Business Plan shall include a
detailed budget of projected income and expenses for the Project for such
calendar year (the “Operating Budget”) and a detailed budget of projected
capital improvements for the Project for such calendar year (the “Capital
Budget”).  Within 30 days
following the purchase of a Project by Owner, after the approval of the Annual
Business Plan for such calendar year, Manager shall prepare and submit to Owner
a comparable business plan for such Project and Manager and Owner must follow
the procedure set forth in (b) below with respect to approving any such
additional business plan.

 

(b)                                 Manager shall meet with Owner to discuss the
proposed Annual Business Plan and Owner shall notify Manager with respect to
the approval or disapproval of the proposed Annual Business Plan within 20 days
following the receipt of the Annual Business Plan.  Any notice which disapproves a proposed
Annual Business Plan must contain specific objections in reasonable
detail.  If Owner fails to provide
approval of a proposed Annual Business Plan within such 20 day period, the
proposed Annual Business Plan shall be deemed to be disapproved and the Annual
Business Plan in effect for the previous calendar year shall remain in effect
until Owner approves a new Annual Business Plan for such Project.  Owner acknowledges that the Operating Budget
is intended only to be a reasonable estimate of the Project’s income and
expenses for the ensuing calendar year. 
Manager shall not be deemed to have made any guarantee, warranty or
representation whatsoever in connection with the Operating Budget.

 

(c)                                  Manager may revise the Operating Budget from
time to time, as necessary, to reflect any unpredicted significant changes,
variables or events or to include significant additional, unanticipated items
of revenue and expense.  Any such
revision shall be subject to the prior written approval of Owner.

 

(d)                                 Manager agrees to use diligence and to employ
all reasonable efforts to ensure that the actual costs of maintaining and
operating the Project shall not exceed the Operating Budget which is a part of
the approved Annual Business Plan either in total or in any one accounting
category.  Any expense causing or likely
to cause a variance of greater than ten percent (10%) or $2,000, whichever is
greater, in any one accounting category on a cumulative year-to-date basis
shall be promptly explained to Owner by Manager in the next monthly report
submitted by Manager to Owner under Section 2.14(a) below.  During the calendar year Manager shall inform
Owner of any major increases or decreases in costs, expenses, and income that
were not reflected in the Annual Business Plan.

 

2.13                           Records.  Manager shall maintain all
office records and books of account and shall record therein, and keep copies
of, each invoice received from services, work and supplies ordered in
connection with the maintenance and operation of the Project.  Such records shall be maintained on a double
entry basis.  Owner and persons
designated by Owner shall at all reasonable times have access to and the right
to audit and make independent examinations of such records, books and accounts
and all vouchers, files and all other material pertaining to the Project and
this Agreement, all of which Manager agrees to keep safe, available and
separate from any records not pertaining to the Project, at a place recommended
by Manager and approved by Owner.

 

8

 

2.14                           Financial Reports.

 

(a)                                  Monthly Reports.  On
or before the 10th day after the end of each month during the term
of this Agreement, Manager shall prepare and submit to Owner the following
reports and statements:

 

(i)            rental collection record;

 

(ii)           monthly operating and cash flow statement;

 

(iii)          copy of cash disbursements ledger entries for such period, if
requested;

 

(iv)          copy of cash receipts ledger entries for such period, if requested;

 

(v)           the original copies of all contracts entered into by Manager on behalf
of Owner during such period, if requested; and

 

(vi)          copy of ledger entries for such period relating to security deposits
maintained by Manager, if requested.

 

In addition to the above, Manager shall
deliver to Owner such other reports and statements as are reasonably requested
by Owner.

 

(b)                                 Annual Report. 
Within 60 days after the end of each calendar year of the Project,
Manager shall deliver to Owner a statement showing the results of operations
for the calendar year or portion thereof during which the provisions of this
Agreement were in effect.  Manager shall
cooperate with and submit to Owner at such times as may be required (monthly or
annually, as applicable) such other information, reports or statements requested
by Owner regarding the Project or as may be necessary to comply with any
reporting requirements of Owner or prepare any balance sheets, operating
statements or disclosure statements which may be required to be prepared or
filed by Owner.

 

(c)                                  Returns Required by Law. 
Manager shall execute and file punctually when due all forms, reports
and returns required by law relating to the employment of personnel.

 

2.15                           Compliance with Legal Requirements. 
Manager shall execute and file when due all forms, reports, and returns
required by law relating to the employment of its personnel.  Manager shall promptly, and in no event later
than 72 hours from the time of receipt, notify Owner in writing of all notices
of violation or other notices relating the Project from any governmental
authority, board of fire underwriters or insurance company, and shall make such
recommendations regarding compliance with such notice as shall be
appropriate.  Manager shall be
responsible for notifying Owner in the event it receives notice that any
improvement on the Project or any equipment therein does not comply with the
requirements of any statute, ordinance, law or regulation of any governmental
body or of any public authority or official thereof having or claiming to have
jurisdiction thereover.  Manager shall
promptly forward to Owner any complaints, warnings, notices or summonses
received by it relating to such matters. 
Owner represents that to the best of its knowledge each of the Project
and any equipment thereon will upon acquisition by Owner comply with all such
requirements.  Owner authorizes Manager
to disclose the ownership of each Project by Owner to any such officials.  Owner agrees to indemnify, protect, defend,
save and hold harmless Manager and the other Manager Indemnified Parties from
and against any and all Losses that may be imposed on them or any or all of
them by reason of the failure of Owner to correct any present or future
violation or alleged violation of any and all present or future laws,
ordinances, statutes, or regulations of any public authority or official
thereof, having or claiming to have jurisdiction thereover, of which it has
actual notice.

 

9

 

Owner
acknowledges that Manager does not hold itself out to be an expert or
consultant with respect to, or represent that, the Project currently complies
with applicable ordinances, regulations, rules, statutes, or laws of
governmental entities having jurisdiction over the Project or the requirements
of the board of fire underwriters or other similar bodies (collectively, “Governmental Requirements”).  Manager shall take such action as may be
reasonably necessary to comply with any Governmental Requirements applicable to
Manager, including the collection and payment of all sales and other taxes
(other than income taxes) which may be assessed or charged by any governmental
entities in the state in which the Project is located in connection with
Manager’s Compensation (set forth in Article III below).  If Manager discovers the Project does not
comply with any Governmental Requirements, Manager shall take such action as
may be reasonably necessary to bring the Project into compliance with such
Governmental Requirements, subject to the limitation contained in Section 2.5
of this Agreement regarding the making of alterations and repairs.  Manager, however, shall not take any such
action as long as Owner is contesting or has affirmed its intention to contest
and promptly institute proceedings contesting any such order or requirement.  If, however, failure to comply promptly with
any such order or requirement would or might expose Manager to civil or
criminal liability, Manager shall have the right, but not the obligation, to
cause the same to be complied with and Owner agrees to indemnify and hold
harmless Manager and the other Manager Indemnified Parties from and against any
and all Losses that may be imposed on them or any or all for taking such
actions and to promptly reimburse Manager for expenses incurred thereby.  The Manager also shall not be liable for any effort
or judgment or for any mistake of fact of law, or for anything which it may do
or refrain from doing hereinafter, except in cases of misconduct and/or
negligence of Manager, its agents, servants, or employees.

 

2.16                           Dealings with Advisor. 
Unless Owner specifically informs Manager to the contrary, Behringer
Harvard Multifamily Advisors I LP, or its successor as advisor to the Company,
may perform any of the obligations or exercise any of the rights of Owner under
this Agreement.

 

2.17                           Branding.  Manager shall maintain and administer for Owner the standards
of branding established by Behringer Harvard Holdings, LLC with respect to all
billboards, signage and uniforms.

 

2.18                           Risk Management.  Manager shall provide to Owner risk
management services, including, but not limited to, the following: assisting
and providing ways to mitigate, minimize, control, and transfer risk through
the prudent use of risk management, insurance programs and recommendations of
safety and loss control techniques; selecting and managing insurance brokers
and service products; preparing underwriting data for use in marketing
insurance programs; negotiating and placing insurance and related services;
serving as liaison for insurance brokers and monitoring insurance premium invoices
for accuracy; managing and settling loss control and insurance claims;
consulting and coordinating  insurance requirements for financing
properties; reviewing and monitoring sub-contractor certificates of insurance;
and consulting regarding insurance verbiage requirements for leases and
contracts.

 

2.19                           Real Estate Tax Management.  Manager shall provide to Owner tax
management services with respect to the Properties, including, but not limited
to, the following: coordinating payment of real estate taxes; contesting real
estate taxes, as Manager deems appropriate; accounting for all bills to be
processed at any given installment, and following up on missing bills; data
entry of tax amounts and equalized values when available; providing copies of
documents as requested (including following up on cancelled checks, monitoring
payment by third parties, communicating with interested parties and forwarding
tax bills to purchasers and other parties as necessary).

 

2.20                           Technology Use and Support.  Manager shall utilize the software
and technology platforms that it believes are appropriate in connection with
fulfilling its duties under this Agreement.  

 

10

 

In
addition, Manager shall provide technical support and maintenance with respect
to any technology used in the maintenance, operation, management and leasing of
properties.

 

ARTICLE III

Manager’s Compensation, Term

 

3.1                                 Management Fee. Commencing on the date hereof, Owner shall
pay Manager a monthly management fee (“Management
Fee”) equal to three and three-quarters percent (3-3/4%) of
Gross Revenue (as defined below) for each Project for such month payable
monthly in arrears. The term “Gross
Revenues” shall mean all amounts actually collected as rents or
other charges for use and occupancy of apartment units and from users of garage
spaces (if any), leases of other non-dwelling facilities in each Project and
concessionaires (if any) in respect of each Project, including furniture
rental, parking fees, forfeited security deposits, application fees, late
charges, income from coin operated machines, proceeds from rental interruption
insurance, and other miscellaneous income collected at each Project; but shall
exclude all other receipts not related to the use of real or personal property
relating to the Project, including but not limited to, income derived from
interest on investments or otherwise, proceeds of claims on account of
insurance policies (other than rental interruption[s] insurance), abatement of
taxes, awards arising out of eminent domain proceedings and discounts and
dividends on insurance policies.  Certain
of these Projects may be owned by Joint Ventures.  We define a “Joint
Venture” as an investment in a legal organization formed to
provide for the sharing of the risks and rewards in an enterprise co-owned and
operated for mutual benefit by two or more business partners and established to
acquire or hold Properties.   When the
Manager is not paid by the Joint Venture directly in respect of its services,
the applicable Management Fee or Oversight Fee (as defined below) to be paid by
the Owner will be calculated by multiplying the Management Fee by the Economic
Interest Percentage owned directly or indirectly by the Owner in such Project.
The term “Economic Interest Percentage”  shall
mean the percentage of capital contributed directly or indirectly to the Joint
Venture as compared with the total capital contributed to the Joint Venture by
all of the owners of the Joint Venture as such percentage shall be calculated
in good faith by the Owner. For purposes of defining Economic Interest
Percentage, any in-kind contribution shall be considered in the calculation and
valued at the fair market value of the contribution on the date of contribution
as determined by the Owner. In the event that Owner contracts directly with a
third-party property manager not affiliated with the Manager in respect of a
Project for which the Owner, in its sole discretion, has the ability to appoint
or hire the Manager, Owner shall pay Manager an oversight fee (“Oversight Fee”) equal to one-half of
one percent (0.50%) of Gross Revenues of such Project.

 

In
no event will Owner pay both a Management Fee and an Oversight Fee to Manager
with respect to any Project. If Manager subcontracts its responsibilities
hereunder to another person or entity, Manager shall be solely responsible for
the payment to such third party. The Management Fee includes the reimbursement
of the specified cost incurred by the Manger of engaging another person or
entity to perform Manager’s responsibilities hereunder; provided, however, that
Manager shall be responsible for payment of all such amounts to such third
parties. Nothing herein shall prevent Manager from entering fee-splitting
arrangements with third parties with respect to the Management Fee.

 

3.2                                 Term  This Agreement commenced as of November 22,
2006, and shall thereafter continue for a period of seven years from said
commencement date, unless otherwise terminated as provided herein.  If no party gives written notice to the other
at least thirty (30) days prior to the expiration date hereof that this
Agreement is to terminate, then this Agreement shall automatically continue
thereafter for consecutive five-year periods until terminated by any party by
written notice given at least 30 days in advance of such termination.  Provided, however, that in the event the
Company terminates its advisory management agreement with Behringer Harvard
Multifamily Advisors I LP, Manager, upon at least thirty (30) days prior written
notice, shall have the right to terminate this Agreement.  In addition, and notwithstanding the
foregoing, Owner may terminate this Agreement (i) at any time upon
delivery of written notice to Manager not less than thirty (30) days prior to
the effective 

 

11

 

date of termination, in the event of (and only in the event of) a
showing by Owner of willful misconduct, gross negligence or deliberate
malfeasance of the Manager, its agents, servants or employees in the
performance of Manager’s duties hereunder and (ii) immediately upon the
occurrence of any of the following:

 

(a)                                A decree or order is rendered by a court having jurisdiction (i) adjudging
Manager as bankrupt or insolvent, or (ii) approving as properly filed a
petition seeking reorganization, readjustment, arrangement, composition or
similar relief for Manager under the federal bankruptcy laws or any similar
applicable law or practice, or (iii) appointing a receiver or liquidator
or trustee or assignee in bankruptcy or insolvency of Manager or a substantial
part of the property of Manager, or for the winding up or liquidating of its
affairs; or

 

(b)                               Manager (i) institutes proceedings to be adjudicated a voluntary
bankrupt or an insolvent, (ii) consents to the filing of a bankruptcy
proceeding against it, (iii) files a petition or answer or consent seeking
reorganization, readjustment, arrangement, composition or relief under any
similar applicable law or practice, (iv) consents to the filing of any
such petition, or to the appointment of a receiver or liquidator or trustee or
assignee in bankruptcy or insolvency for it or for a substantial part of its
property, (v) makes an assignment for the benefit of creditors, (vi) is
unable to or admits in writing its inability to pay its debts generally as they
become due unless such inability shall be the fault of the other party, or (iv) takes
corporate or other action in furtherance of any of the aforesaid purposes; or

 

(c)                                With respect to any particular Project, the sale of such Project.

If
Owner shall materially breach its obligations hereunder, and such breach
remains uncured for a period of 10 days after written notification of such
breach, then Manager may terminate this Agreement by giving written notice to Owner
and Owner agrees to pay Manager the fees due to Manager pursuant to Section 3.1  for the unexpired portion of the term.

 

3.3                                 Manager’s Obligations Upon Termination.  Upon
the termination of this Agreement, Manager shall have the following duties:

 

(a)                                Manager shall deliver to Owner or its designee, all books and records
with respect to the Project.

 

(b)                               Manager shall transfer and assign to Owner, or its designee, all
service contracts and personal property relating to or used in the operation
and maintenance of the Project, except personal property paid for and owned by
Manager.  Manager shall also, for a
period of sixty (60) days immediately following the date of such termination,
make itself available to consult with and advise Owner, or its designee,
regarding the operation, maintenance and leasing of the Project.

 

(c)                                  Manager shall render to Owner an accounting
of all funds of Owner in its possession and shall deliver to Owner a statement
of all fees and reimbursements claimed to be due to Manager and shall cause
funds of Owner held by Manager relating to the Project to be paid to Owner or
its designee.

 

(d)                               Within sixty (60) days immediately following the date of such
termination, Manager shall deliver to Owner the report required by Section 2.14(a) for
any period not covered by such a report at the time of termination, and within
sixty (60) days immediately following the date of such termination, Manager
shall deliver to Owner, as required by Section 2.14(b), the statement of
operations for the fiscal year or portion thereof ending on the date of
termination.

 

12

 

3.4                                 Owner’s Obligations Upon Termination.  Upon
any termination of this Agreement by Owner other than under subparagraph (i) of
the introductory paragraph to this Section 3.2, Manager shall be entitled
to receive all compensation and reimbursements, if any, due to Manager through
the date of termination.  Such amounts
will be due Manager no later than 30 days from the date of such termination.  All provisions of this Agreement that require
Owner to have insured, or to protect, defend, save, hold and indemnify or to
reimburse Manager shall survive any expiration or termination of this
Agreement, but only to the extent the applicable claim or cause of action is
based on an event occurring prior to the date of termination.

 

The
parties understand and agree that Manager may withhold funds for sixty (60)
days after the end of the month in which this Agreement is terminated to pay
bills previously incurred but not yet invoiced and to close accounts. Should
the funds withheld be insufficient to meet the obligation of Manager to pay
bills previously incurred, Owner will, upon demand, advance sufficient funds to
Manager to ensure fulfillment of Manager’s obligation to do so, within ten (10) days
of receipt of notice and an itemization of such unpaid bills.

 

ARTICLE IV

Procedures for Handling Receipts and Operating Capital

 

4.1                                 Security Deposits. 
Tenant security deposits shall be held by Manager in accordance with the
laws of the jurisdiction in which the Project is located.  Owner agrees to indemnify and hold harmless
Manager and the other Manager Indemnified Parties from and against any and all
Losses with respect to any use by Owner of the tenant security deposits that is
inconsistent with the terms of the lease and applicable laws.

 

4.2                                 Separation of Owner’s Monies. 
Manager shall establish and maintain, in a bank of Manager’s choice
whose deposits are insured by the Federal Deposit Insurance Corporation, and in
a manner to indicate the custodial nature thereof, a separate bank account for
the deposit of all monies of Owner. 
Manager shall also establish such other special bank accounts as may be
reasonably required by Owner.  All monies
deposited from time to time in these accounts shall be deemed trust funds and
shall be and remain the property of Owner and shall be withdrawn and dispersed
by Manager for the account of Owner only as expressly permitted by this
Agreement for the purposes of performing the obligations of Manager
hereunder.  No monies collected by
Manager on Owner’s behalf shall be commingled with the funds of Manager.

 

4.3                                 Depository Accounts. 
Owner and Manager agree that Manager shall have no liability for loss of
funds of Owner contained in the bank accounts for the Project maintained by
Manager pursuant to this Agreement due to insolvency of the bank or financial
institution in which its accounts are kept, whether or not the amounts in such
accounts exceed the maximum amount of federal or other deposit insurance
applicable with respect to the financial institution in question.

 

4.4                                 Working Capital.  In
addition to the funds derived from the operation of the Project, Owner shall
furnish and maintain in the operating accounts of the Project such other funds
as may be necessary to discharge financial commitments required to efficiently
operate the Project and to meet all payrolls and satisfy, before delinquency,
and to discharge all accounts payable.  Manager
shall have no responsibility or obligation with respect to the furnishing of
any such funds.  Nevertheless, Manager
shall have the right, but not the obligation, to advance funds or contribute
property on behalf of Owner to satisfy obligations of Owner in connection with
this Agreement and the Project.  Manager
shall keep 

 

13

 

appropriate records to document all
reimbursable expenses paid by Manager, which records shall be made available
for inspection by Owner or its agents on request.  Owner agrees to reimburse Manager upon demand
for money paid or property contributed in connection with the Project and this
Agreement.

 

4.5                                 Authorized Signatures.  Any persons from time to time designated by
Manager shall be authorized signatories on all bank accounts established by
Manager pursuant to this Agreement and shall have authority to make
disbursements from such accounts.  Funds
may be withdrawn from all bank accounts established by Manager, in accordance
with this Article IV, only upon the signature of an individual who has
been granted that authority by Manager and funds may not be withdrawn from such
accounts by Owner unless Manager is in default hereunder.

 

ARTICLE V

Miscellaneous

 

5.1                                 Assignment.  Manager may delegate partially or in full its
duties and rights under this Agreement but only with the prior written consent
of Owner.  Owner acknowledges and agrees that any or all of the duties of
Manager as contained herein may be delegated by Manager and performed by a
person or entity (“Submanager”) with whom Manager contracts for the purpose of
performing such duties.  Owner specifically grants Manager the authority
to enter into such a contract with a Submanager; provided that, unless Owner
otherwise agrees in writing with such Submanager, Owner shall have no liability
or responsibility to any such Submanager for the payment of the Submanager’s
fee or for reimbursement to the Submanager of its expenses or to indemnify the
Submanager in any manner for any matter; and provided further that Manager shall
require such Submanager to agree, in the written agreement setting forth the
duties and obligations of such Submanager, to indemnify Owner for all Losses
incurred by Owner as a result of the willful misconduct or gross negligence of
the Submanager, except that such indemnity shall not be required to the extent
that Owner recovers issuance proceeds with respect to such matter.  Any
contract entered into between Manager and a Submanager pursuant to this Section 5.1
shall be consistent with the provisions of this Agreement, except to the extent
Owner otherwise specifically agrees in writing.  This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns.

 

5.2                                 Non-Solicitation.  During the period commencing on the date on
which this Agreement is entered into and ending one year following the
termination of this Agreement, the Company and OP shall not, without the
Manager’s prior written consent, directly or indirectly, (i) solicit or encourage
any person to leave the employment or other service of the Manager or any of
its affiliates, or (ii) hire, on behalf of the Company or OP or any other
person or entity, any person who has left the employment of the Manager or any
of its affiliates within the one-year period following the termination of that
person’s employment with the Manager or any of its affiliates.  During the period commencing on the date
hereof through and ending one year following the termination of this Agreement,
the Company and OP will not, whether for its or their own account or for the
account of any other person, firm, corporation or other business organization,
intentionally interfere with the relationship of the Manager or any of its
affiliates with, or endeavor to entice away from the Manager or any of its
affiliates, any person who during the term of this Agreement is, or during the
preceding one-year period was, a tenant, co-investor, co-developer, joint
venturer or other customer of the Manager or any of its affiliates.

 

5.3                                 Notices.  All notices required or
permitted by this Agreement shall be in writing and shall be sent by registered
or certified mail, addressed in the case of Owner to 15601 Dallas Parkway, Suite 600,
Addison, Texas 75001, and in the case of Manager to 15601 Dallas Parkway, Suite 600,
Addison, Texas 75001, or to such other address as shall, from time to time,
have been designated by written notice by either party given to the other party
as herein provided.

 

14

 

5.4                                 Entire Agreement.  This
Agreement shall constitute the entire agreement between the parties hereto and
no modification thereof shall be effective unless in writing executed by the
parties hereto.

 

5.5                                 No Partnership. 
Nothing contained in this Agreement shall constitute or be construed to
be or create a partnership or joint venture between the Owner, its successors
or assigns, on the one part, and Manager, its successors and assigns, on the
other part.

 

5.6                                 No Third Party Beneficiary. 
Neither this Agreement nor any part hereof nor any service relationship
shall inure to the benefit of any third party, to any trustee in bankruptcy, to
any assignee for the benefit of creditors, to any receiver by reason of
insolvency, to any other fiduciary or officer representing a bankrupt or
insolvent estate of either party, or to the creditors or claimants of such an
estate.  Without limiting the generality
of the foregoing sentence, it is specifically understood and agreed that
insolvency or bankruptcy of either party hereto shall, at the option of the
other party, void all rights of such insolvent or bankrupt party hereunder (or
so many of such rights  as the other
party shall elect to void).

 

5.7                                 Severability.  If
any one or more of the provisions of this Agreement, or the applicability of
any such provision to a specific situation shall be held invalid or
unenforceable, such provision should be modified to the minimum extent
necessary to make it or its application valid and enforceable, and the validity
and enforceability of all other provisions of this Agreement and all other
applications of such provisions shall not be affected thereby.

 

5.8                                 Captions, Plural Terms. 
Unless the context clearly requires otherwise, the singular number
herein shall include the plural, the plural number shall include the singular
and any gender shall include all genders. 
Titles and captions herein shall not affect the construction of this
Agreement.

 

5.9                                 Attorneys’ Fees. 
Should either party employ an attorney to enforce any of the provisions
of this Agreement, or to recover damages for breach of this Agreement, the
non-prevailing party in any action agrees to pay to the prevailing party all
reasonable costs, damages and expenses, including reasonable attorneys’ fees,
expended or incurred by the prevailing party in connection therewith.

 

5.10                           Signs.  Manager shall have the right
to place signs on the Project in accordance with applicable Governmental
Requirements stating that Manager is the manager and leasing agent for the Project.

 

5.11                           Survival of Indemnities.  The
indemnification obligations of the parties to this Agreement shall survive the
termination of this Agreement to the extent of any claim or cause of action
based on an event occurring prior to the date of termination.

 

5.12                           Ownership of Proprietary Property.  The
Manager retains ownership of and reserves all Intellectual Property Rights (as
defined below) in the Proprietary Property (as defined below).  To the extent that Owner has or obtains any
claim to any right, title or interest in the Proprietary Property, including
without limitation in any suggestions, enhancements or contributions that Owner
may provide regarding the Proprietary Property, Owner hereby assigns and
transfers exclusively to the Manager all right, title and interest, including
without limitation all Intellectual Property Rights, free and clear of any
liens, encumbrances or licenses in favor of Owner or any other party, in and to
the Proprietary Property.  In addition,
at the Manager’s expense, Owner will perform any acts that may be deemed
desirable by the Manager to evidence more fully the transfer of ownership of
right, title and interest in the Proprietary Property to the Manager, including
but not limited to the execution of any instruments or documents now 

 

15

 

or
hereafter requested by the Manager to perfect, defend or confirm the assignment
described herein, in a form determined by the Manager.

 

“Intellectual
Property Rights” means all rights, titles and interests, whether foreign or
domestic, in and to any and all trade secrets, confidential information rights,
patents, invention rights, copyrights, service marks, trademarks, know-how, or
similar intellectual property rights and all applications and rights to apply
for such rights, as well as any and all moral rights, rights of privacy,
publicity and similar rights and license rights of any type under the laws or
regulations of any governmental, regulatory, or judicial authority, foreign or
domestic and all renewals and extensions thereof.

 

“Proprietary
Property” means all modeling algorithms, tools, computer programs, know-how,
methodologies, processes, technologies, ideas, concepts, skills, routines,
subroutines, operating instructions and other materials and aides used by
Manager in performing its duties set forth in this Agreement that relate to
management advice, services and techniques regarding current and potential
Projects, and all modifications, enhancements and derivative works of the foregoing.

 

5.13                 Governing Law, Venue.  This
Agreement shall be construed under and in accordance with the laws of the State
of Texas and is fully performable in Dallas County, Texas.

 

5.14                 Counterparts.  This
Agreement may be executed in two or more counterparts, each of which shall be
deemed to be an original.

 

5.15                 Savings Clause.  If any provision of this Agreement is
held unenforceable, then such provision will be modified to reflect
the parties’ intention. By way of example and without limitation, if any
provision requiring the reimbursement of  certain of the Manager’s
expenses should be deemed unenforceable, the parties shall take such action to
reach an agreement for Owner to pay such reimbursable expenses.  All
remaining provisions of this Agreement shall remain in full force and
effect.

 

[REST
OF PAGE INTENTIONALLY LEFT BLANK]

 

16

 

IN WITNESS WHEREOF, the parties hereto
have caused this instrument to be duly executed by their duly authorized
representatives.

 

	
  “OWNER”

  	
   

  	
  “MANAGER”

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  BEHRINGER HARVARD MULTIFAMILY

  REIT I, INC.

  	
   

  	
  BEHRINGER HARVARD MULTIFAMILY

  MANAGEMENT SERVICES, LLC

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Gerald
  J. Reihsen, III

  	
   

  	
   

  	
   

  	
  Gerald
  J. Reihsen, III

  
	
   

  	
   

  	
  Executive
  Vice President – Corporate

  	
   

  	
   

  	
   

  	
  Executive
  Vice President – Corporate

  
	
   

  	
   

  	
  Development
  and Legal

  	
   

  	
   

  	
   

  	
  Development
  and Legal

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  BEHRINGER HARVARD MULTIFAMILY 

  OP I LP

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
  BHMF, Inc.,
  its General Partner

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Gerald
  J. Reihsen, III

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Executive
  Vice President –

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Corporate
  Development and Legal

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

17

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00143-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00143-of-00352.parquet"}]]