Document:

Exhibit 10.9

 

EXECUTION VERSION

 

$50,000,000

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

 

Dated as of April 14, 2009

 

Among

 

GLADSTONE BUSINESS INVESTMENT, 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

 

BRANCH BANKING AND TRUST COMPANY

 

as the Administrative Agent

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE I DEFINITIONS

  	
  1

  
	
  Section 1.1

  	
  Certain
  Defined Terms

  	
  1

  
	
  Section 1.2

  	
  Other
  Terms

  	
  34

  
	
  Section 1.3

  	
  Computation
  of Time Periods

  	
  34

  
	
  Section 1.4

  	
  Interpretation

  	
  34

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  II ADVANCES

  	
  35

  
	
  Section 2.1

  	
  Advances

  	
  35

  
	
  Section 2.2

  	
  Procedures
  for Advances

  	
  36

  
	
  Section 2.3

  	
  Optional
  Changes in Facility Amount; Prepayments

  	
  38

  
	
  Section 2.4

  	
  Principal
  Repayments

  	
  39

  
	
  Section 2.5

  	
  The
  Notes

  	
  40

  
	
  Section 2.6

  	
  Interest
  Payments

  	
  40

  
	
  Section 2.7

  	
  Fees

  	
  41

  
	
  Section 2.8

  	
  Settlement
  Procedures

  	
  41

  
	
  Section 2.9

  	
  Collections
  and Allocations

  	
  45

  
	
  Section 2.10

  	
  Payments,
  Computations, Etc.

  	
  45

  
	
  Section 2.11

  	
  Breakage
  Costs

  	
  46

  
	
  Section 2.12

  	
  Increased
  Costs; Capital Adequacy; Illegality

  	
  46

  
	
  Section 2.13

  	
  Taxes

  	
  47

  
	
  Section 2.14

  	
  Revolver
  Loan Funding

  	
  49

  
	
  Section 2.15

  	
  Pending
  Account

  	
  50

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  III CONDITIONS OF EFFECTIVENESS AND ADVANCES

  	
  51

  
	
  Section 3.1

  	
  Conditions
  to Effectiveness and Advances

  	
  51

  
	
  Section 3.2

  	
  Additional
  Conditions Precedent to All Advances

  	
  52

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  IV REPRESENTATIONS AND WARRANTIES

  	
  53

  
	
  Section 4.1

  	
  Representations
  and Warranties of the Borrower

  	
  53

  
	
  Section 4.2

  	
  Joint
  Representations and Warranties Regarding Ordinary Course of Business

  	
  57

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  V GENERAL COVENANTS OF THE BORROWER

  	
  57

  
	
  Section 5.1

  	
  Covenants
  of the Borrower

  	
  57

  
	
  Section 5.2

  	
  Hedging
  Agreement

  	
  62

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  VI SECURITY INTEREST

  	
  62

  
	
  Section 6.1

  	
  Security
  Interest

  	
  62

  
	
  Section 6.2

  	
  Remedies

  	
  63

  
	
  Section 6.3

  	
  Release
  of Liens

  	
  63

  
	
  Section 6.4

  	
  Assignment
  of the Purchase Agreement

  	
  65

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  VII ADMINISTRATION AND SERVICING OF LOANS

  	
  65

  
	
  Section 7.1

  	
  Appointment
  of the Servicer

  	
  65

  
				

 

i

 

	
  Section 7.2

  	
  Duties
  and Responsibilities of the Servicer

  	
  65

  
	
  Section 7.3

  	
  Authorization
  of the Servicer

  	
  67

  
	
  Section 7.4

  	
  Collection
  of Payments

  	
  68

  
	
  Section 7.5

  	
  Servicer
  Advances

  	
  69

  
	
  Section 7.6

  	
  Realization
  Upon Defaulted Loans or Charged-Off Loans

  	
  69

  
	
  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

  	
  80

  
	
  Section 7.20

  	
  Market
  Servicing Fee

  	
  81

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  VIII EARLY TERMINATION EVENTS

  	
  81

  
	
  Section 8.1

  	
  Early
  Termination Events

  	
  81

  
	
   

  	
   

  	
   

  
	
  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

  	
  88

  
	
  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

  	
  90

  
	
  Section 10.7

  	
  Administrative
  Agent and Managing Agents in their Individual Capacities

  	
  90

  
	
  Section 10.8

  	
  Successor
  Administrative Agent or Managing Agent

  	
  90

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  XI ASSIGNMENTS; PARTICIPATIONS

  	
  91

  
	
  Section 11.1

  	
  Assignments
  and Participations

  	
  91

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  XII MISCELLANEOUS

  	
  94

  
	
  Section 12.1

  	
  Amendments
  and Waivers

  	
  94

  
	
  Section 12.2

  	
  Notices,
  Etc.

  	
  95

  
	
  Section 12.3

  	
  No
  Waiver, Rights and Remedies

  	
  96

  

 

ii

 

	
  Section 12.4

  	
  Binding
  Effect

  	
  96

  
	
  Section 12.5

  	
  Term of
  this Agreement

  	
  96

  
	
  Section 12.6

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

  	
  97

  
	
  Section 12.7

  	
  WAIVER
  OF JURY TRIAL

  	
  98

  
	
  Section 12.8

  	
  Costs,
  Expenses and Taxes

  	
  98

  
	
  Section 12.9

  	
  No
  Proceedings

  	
  99

  
	
  Section 12.10

  	
  Recourse
  Against Certain Parties

  	
  99

  
	
  Section 12.11

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

  	
  100

  
	
  Section 12.12

  	
  Confidentiality

  	
  101

  
	
  Section 12.13

  	
  Execution
  in Counterparts; Severability; Integration

  	
  102

  
	
  Section 12.14

  	
  Amendment
  and Restatement

  	
  102

  

 

	
  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

  	
   

  	
  Form of
  Assignment of Mortgage

  
	
  EXHIBIT
  J

  	
   

  	
  Reserved

  
	
  EXHIBIT
  K

  	
   

  	
  Reserved

  
	
  EXHIBIT
  L

  	
   

  	
  Form of
  Deposit Account Control Agreement

  
	
  EXHIBIT
  M

  	
   

  	
  Credit
  Report and Transaction Summary

  
	
  EXHIBIT
  N

  	
   

  	
  Moody’s
  Industry Classifications

  
	
   

  	
   

  	
   

  
	
  SCHEDULES

  
	
   

  	
   

  	
   

  
	
  SCHEDULE
  I

  	
   

  	
  Loan
  List

  
	
  SCHEDULE
  II

  	
   

  	
  Diversity
  Score Calculation

  

 

iii

 

THIS SECOND AMENDED AND RESTATED CREDIT
AGREEMENT is made as of April 14, 2009, among:

 

(1)           GLADSTONE BUSINESS
INVESTMENT, 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)           BRANCH BANKING AND TRUST
COMPANY, 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 Eurodollar Rate” means for any Settlement Period, or,
with respect to a Lender Group for which a Non-Conduit Lender acts as Managing
Agent only, each portion thereof, resetting on each Non-Conduit Lender Interest
Reset Date, (a) with respect to a Lender Group for which a Non-Conduit
Lender 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
Non-Conduit Lender 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 such
Non-Conduit Lender and reported to the Borrower, the Servicer and the
Administrative Agent and (b) 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.

 

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

 

“Administrative Agent” is defined in the preamble hereto.

 

“Advance” is defined in Section 2.1.

 

“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” 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 0005101447423 at Branch
Banking and Trust Company.

 

“Aggregate Outstanding Loan Balance” means on any day, the sum
of the Outstanding Loan Balances of all Eligible Loans included as part of the
Collateral on such date.

 

“Aggregate Purchased Loan Balance” means on any day, (a) the
sum of (i) the Purchased Loan Balances of all Eligible Loans included as
part of the Collateral on such date and (ii) the amount of cash and cash equivalents
held in the Collection Account and the Pending Account less the sum of the
aggregate accrued but unpaid Servicing Fee, Revolving Loan Funding Fee,
Interest and Commitment Fee minus (b) the Excess Concentration
Amount as of such date.

 

2

 

“Agreement” or “Credit Agreement” means this Second
Amended and Restated Credit Agreement, dated as of April 14, 2009, 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) 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; and provided, further, that in no
event shall the Alternative Rate be less than 2.0% per annum.

 

“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, Regulation U 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.

 

“Approved Fund” means any Fund that is administered or managed
by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity
or an Affiliate of an entity that administers or manages a Lender.

 

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

 

“Assignment of Mortgage” means as to each Loan secured by an
interest in real property, one or more assignments, notices of transfer or
equivalent instruments, each in recordable form and sufficient under the laws
of the relevant jurisdiction to reflect the transfer of the related mortgage,
deed of trust, security deed or similar security instrument and all other
documents related to such Loan and to the Borrower and to grant a perfected
lien thereon by the Borrower in favor of the Administrative Agent on behalf of
the Secured Parties, each such Assignment of Mortgage to be substantially in
the form of Exhibit I hereto.

 

“Availability” On any day, the lesser of (i) the amount by
which the Borrowing Base exceeds the sum of (A) Advances Outstanding and (B) an
amount equal to 50% of the aggregate outstanding unfunded commitments under the
Revolver Loans on such day and (ii) the amount by which the Facility
Amount exceeds the sum of (A) Advances Outstanding and (B) the aggregate
outstanding unfunded commitments under the Revolver Loans on such day; provided,
however, that following the Termination Date, the Availability shall be
zero.

 

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

 

3

 

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

 

“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 amended by that certain
Amendment No. 1 to Backup Servicing Agreement dated as of even date
herewith, as the same may from time to time be further 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
individual capacity or in its capacity as a Committed Lender, as applicable,
and its successors or assigns.

 

“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 Investment, 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 Aggregate Purchased Loan Balance minus (ii) the
Required Equity Investment or (b) an amount equal to 50% of the Aggregate
Purchased Loan Balance.

 

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

 

“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.

 

“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, 

 

4

 

and
North Carolina 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 Non-Conduit Lender 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 50% of the
voting power for the election of managers of such entity, if any, under
ordinary circumstances, or (ii) (with regard to the Borrower, except in
connection with any Securitization) 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 Aggregate Outstanding Loan Balance as of the
first day of such Settlement Period and (B) the Aggregate Outstanding Loan
Balance as of the last day of such Settlement Period divided by 2.

 

“Closing Date” means October 19, 2006.

 

“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)        the Pending Account, the Operating Account and all
deposit or banking accounts of the Borrower with the Administrative Agent, and
all funds held in such accounts, and all certificates and instruments, if any,
from time to time representing or evidencing such accounts or such funds; and

 

(viii)        all income and Proceeds of the foregoing.

 

“Collateral Custodian” means The Bank of New York Mellon Trust
Company, N.A., 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 Test” means as of any date, (i) the
weighted average life of the Transferred Loans shall not be greater than 66
months, (ii) the weighted average excess spread in respect of Transferred
Loans shall not be less than 5% (for the purpose of this definition, the excess
spread on (A) Transferred Loans which accrue interest at a floating rate
shall be the amount by which the interest rate on such Transferred Loans
exceeds the LIBO Rate and (B) Transferred Loans which accrue interest at a
fixed rate shall be amount by which the interest rate on such Transferred Loans
exceeds the cap rate under the related Hedge Transactions), (iii) the
weighted average Risk Rating of the portfolio shall not be less than B-/B3/4 by
S&P, Moody’s or the Servicer’s risk rating model, respectively, (iv) the
Diversity Score for the Transferred Loans is equal to or greater than 9 as of
such date and (v) there shall be no fewer than twelve (12) Obligors on the
Transferred Loans included in the Collateral.

 

“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 

 

6

 

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 Obligor in payment of any
amounts owed in respect of such Transferred Loan, including, without
limitation, Interest Collections, Principal Collections, Deemed Collections,
all Proceeds received from any Supplemental Interests, Insurance Proceeds, and
all Recoveries, (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 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 BB&T and KEF, the commitment
of such Committed Lender to fund any Advance to the Borrower in an amount not
to exceed $25,000,000, 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 Fee” means an amount equal to .75% per annum on the
average daily Unused Commitment of each Lender.

 

“Commitment Termination Date” means April 14, 2010.

 

“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.

 

“CP Lenders” is defined in the preamble hereto.

 

“CP Rate” means for any Settlement Period for any Advances made
by a CP Lender, 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 such CP Lender 

 

7

 

maturing
on dates other than those certain dates on which such CP Lender is to receive
funds) in respect of the Commercial Paper Notes issued by such CP Lender during
such period, 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, on file with the Administrative
Agent and as the same may be amended or modified from time to time in
accordance with Section 5.1(r) and Section 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),
acceleration of the Transferred Loan, foreclosure on collateral for the Loan,
increasing its 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
Unrestricted 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 Unrestricted 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 amended by that certain
Amendment No. 1 to Custodial Agreement dated as of even date herewith, as
the same may from time to time be further amended, supplemented, waived or
modified.

 

“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.  

 

8

 

Borrower
shall be deemed to have received a Collection in an amount equal to the unpaid
balance (including any 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” means the rate equal to (a) during the
Revolving Period, the Base Rate plus 2% plus the applicable Program Fee Rate; (b) during
the Amortization Period, the Base Rate plus 4% plus the applicable Program Fee
Rate.

 

“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 Aggregate Outstanding Loan Balance as
of the first day of such Settlement Period and (y) the Aggregate
Outstanding Loan Balance as of the last day of such Settlement Period divided
by (ii) two.

 

“Defaulted Loan” means any Transferred Loan (i) that is
sixty (60) days past due with respect to any interest or principal payments or (ii) 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),
acceleration of the Transferred Loan, foreclosure on collateral for the Loan,
increasing its 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 and is not a Current Pay Loan.

 

“Deposit Account Control Agreement” means (i) a letter
agreement, substantially in the form of Exhibit L, among the
Borrower, the Administrative Agent and the bank maintaining the Collection
Account and the Pending Account with respect to control of the Collection
Account and the Pending Account, as amended by Amendment No. 1 to Deposit
Account Control Agreement of even date herewith, as the same may be further
amended, modified, supplemented or restated from time to time, and (ii) the
Deposit Account Control Agreement of even date herewith with respect to the
Operating Account among the Borrower, the bank maintaining the Operating
Account and the Administrative Agent, as the same may be amended, modified,
supplemented or restated from time to time.

 

“Derivatives” means 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, 

 

9

 

(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 Loan made to a debtor-in-possession as
described in Section 1107 of the Bankruptcy Code or a trustee (if
appointment of such trustee has been ordered pursuant to Section 1104 of
the Bankruptcy Code) (a “Debtor”) organized under the laws of the United States
or any state 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 the Debtor’s otherwise unencumbered assets 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 the
Debtor’s encumbered assets (so long as such DIP Loan is fully secured based
upon a current valuation or appraisal report), 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, neither Borrower nor 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).

 

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

 

“Early Termination Event” is defined in Section 8.1.

 

“Effective Date” means April 14, 2009.

 

“Eligible Assignee” means any Person that is (a) a Lender, (b) an
Affiliate of a Lender, (c) an Approved Fund, and (d) any other Person
(other than a natural person) 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;  provided  that notwithstanding
the foregoing, “Eligible Assignee” shall not include the Borrower or any of the
Borrower’s Affiliates or subsidiaries.

 

“Eligible Loan” means
on any date of determination, each Loan which is either:

 

(i)            an Unrestricted Eligible Loan; or

 

(ii)           a Current Pay Loan;

 

provided, however,
that any such Loan extended or acquired by the Originator from an
Obligor that was not an Obligor as of the Effective Date shall only be an
Eligible Loan if it is (i) secured by a first-priority lien or security
interest on the assets of the relevant Obligor and (ii) a Senior Debt
Loan.

 

10

 

“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, any territory of the United States
or Canada;

 

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

 

(iii)          such Obligor is (A) not the subject of any
Insolvency Event or (B) the Obligor with regard to a DIP Loan;

 

(iv)          such Obligor is not a Governmental Authority;

 

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

 

(vi)          such Obligor is not (A) an Affiliate of the
Borrower, the Servicer or the Originator or (B) an entity to which the
Borrower, the Servicer or the Originator would be deemed an Insider.

 

“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 maximum reserve requirements
applicable to “Eurocurrency 

 

11

 

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.  The LIBO Rate and
Non-Conduit LIBO Rate shall be adjusted automatically on and as of the
effective date of any change in the Eurodollar Reserve Percentage.

 

“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 Eligible Loans included as part of the Collateral, the Obligors of
which are residents of any one state, exceed 40% of the Aggregate Outstanding
Loan Balance;

 

(b)           the aggregate amount by which the Outstanding Loan
Balance of each Eligible Loan included as part of the Collateral exceeds the
Large Loan Limit applicable to such Eligible Loan;

 

(c)           the aggregate amount by which the Outstanding Loan
Balances of all Eligible Loans included as part of the Collateral which are PIK
Loans exceed 10% of the Aggregate Outstanding Loan Balance;

 

(d)           the aggregate amount by which the Outstanding Loan
Balances of all Eligible Loans that have remaining terms to maturity greater
than 84 months (measured as of the most recent Reporting Date) exceed 15% of
the Aggregate Outstanding Loan Balance;

 

(e)           the aggregate amount by which the Outstanding Loan
Balances of Qualifying Syndicated Loans included as part of the Collateral, for
which no Subsequent Delivery Trust Receipt (as defined in the Custody
Agreement) has been received exceed 10% of the Aggregate Outstanding Loan
Balance;

 

(f)            the aggregate Outstanding Loan Balances of all Loans
which have a Risk Rating of CCC+/Caa1/3 or below exceed 10% of the Aggregate
Outstanding Loan Balance;

 

(g)           the aggregate amount by which the Outstanding Loan
Balances of all Eligible Loans included as part of the Collateral which are
Revolver Loans exceed 15% of the Aggregate Outstanding Loan 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 having a term to maturity of more than one year (measured as of
the date such Loans became Transferred Loans) exceed 10% of the Aggregate
Outstanding Loan Balance;

 

(i)            the aggregate Outstanding Loan Balances of all Loans
which are not priced by Standard & Poor’s Securities Evaluations, Inc.
on a quarterly basis 

 

12

 

and
have not been so priced by Standard & Poor’s Securities Evaluations, Inc.
for a period in excess of 135 days from the date such Loans became Transferred
Loans (other than those Loans which have a long term credit rating from S&P
or Moody’s and have a quoted price by a financial institution rated at least
A-1/P-1 that makes a market in such Loan or from a pricing service otherwise
acceptable to the Managing Agents, which shall be expressly excluded from this
subsection (i));

 

(j)            the aggregate amount by which the Outstanding Loan
Balances of all Eligible Loans that are unsecured exceed 10% of the Aggregate
Outstanding Loan Balance;

 

(k)           the aggregate amount by which the Outstanding Loan
Balances of all Fixed Rate Loans exceed 35% of the Aggregate Outstanding Loan
Balance;

 

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

 

(m)          the aggregate amount by which the Outstanding Loan
Balances of all Eligible Loans that are Current Pay Loans exceed 10% of the
Aggregate Outstanding Loan Balance;

 

(n)           the aggregate amount by which the Outstanding Loan
Balances of all Eligible Loans included as part of the Collateral which are DIP
Loans exceed 10% of the Aggregate Outstanding Loan Balance;

 

(o)           the aggregate amount by which the Outstanding Loan
Balances of all Loans which are subordinated to any other indebtedness of the
applicable Obligor exceed 50% of the Aggregate Outstanding Loan Balance;

 

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

 

(q)           the aggregate amount by which the Outstanding Loan
Balances of all Eligible Loans included as part of the Collateral for which the
applicable Eligible Obligor is domiciled in Canada exceed 5% of the Aggregate
Outstanding Loan Balance; and

 

(r)            the aggregate amount by which the Outstanding Loan
Balances of all Eligible Loans included as part of the Collateral which are
Mezzanine Loans exceed 15% of the Aggregate Outstanding Loan Balance.

 

“Facility Amount” means, at any time and as reduced or increased
from time to time, pursuant to the terms of this Agreement the aggregate dollar
amount of Commitments of all the Lenders, as of the date of determination; provided,
however, that on or after the Termination Date, the Facility Amount
shall be equal to the amount of 

 

13

 

Advances
Outstanding.  As of the Effective Date,
the Facility Amount is $50,000,000.  The
Facility Amount may be increased up to a total of $125,000,000 in accordance
with the provisions of Section 2.3(c).

 

“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 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. (Winston-Salem, North
Carolina time) for such day on such transactions received by the Administrative
Agent 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, the Managing Agents, and the Administrative Agent
or any Managing Agent, as it may be amended or modified and in effect from time
to time.

 

“Fixed Rate Loans” is defined in Section 5.2.

 

14

 

“Fund” means any Person (other than a natural
person) that is (or will be) engaged in making, purchasing, holding or
otherwise investing in commercial loans and similar extensions of credit in the
ordinary course of its business.

 

“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.

 

“Galaxy Tools Loan”
means that certain Eligible Loan included in the Collateral as of the Effective
Date, the Obligor of which is Galaxy Tools Holding Corporation, having an Outstanding
Loan Balance as of the Effective Date of not more than $17,250,000.

 

“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 each of Deutsche Bank AG, New York Branch (with respect to any Hedge
Transactions in effect on the Effective Date only), BB&T, KeyBank or any
other 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 

 

15

 

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.

 

“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.

 

“Insider” is defined
in Section 101(31) of the Bankruptcy Code.

 

16

 

“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 sixty (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.

 

“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

  

 

17

 

	
  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 amounts received in respect of any interest, fees or other
similar charges on a Transferred Loan from or on behalf of any 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, in the form of cash, checks, wire transfers, electronic
transfers or any other form of cash payment (net of any payment owed by the
Borrower to, and including any receipts from, any Hedge Counterparties) and,
solely for purposes of calculating the Portfolio Rate, any and all amounts
accrued in respect of any fees and interest (but only to the extent such fees
or interest were not received during the applicable Settlement Period) owed by
any Obligor in respect of any Transferred Loan.

 

“Interest Coverage Ratio”
means with respect to any calendar quarter, the percentage equivalent of a
fraction, calculated as of the last Determination Date in such calendar
quarter, (a) the numerator of which is equal to the aggregate Interest
Collections for such calendar quarter and (b) the denominator of which is
equal to the sum of (x) the aggregate amount payable pursuant to Section 2.8(a)(i),
(iii), (iv) and (vi) hereunder and (y) an
amount equal to the sum of the products, for each day during the related
calendar quarter, of (i) the Advances Outstanding, (ii) the weighted
average of the Servicing Fee Rates used to compute the Servicing Fee for such
calendar quarter, and (iii) a fraction, the numerator of which is 1 and
the denominator of which is 360.

 

“Interest
Rate” means for any Settlement Period:

 

(a)           during the Revolving Period, 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, a rate equal to the CP Rate for such
Settlement Period on such portion plus the applicable Program Fee Rate;
provided, however, that if a Liquidity Bank under a Liquidity Agreement to
which such CP Lender is a party purchases or takes assignment of any portion of
Advances owing to such CP Lender, then the portion of the Advance funded by
such CP Lender with proceeds from a funding by a Liquidity Bank shall earn a
rate equal to the Alternative Rate plus the applicable Program Fee Rate;
or

 

(b)           during the Revolving Period, to the extent the relevant
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 plus the applicable Program Fee Rate; or

 

18

 

(c)           during the Amortization Period, a rate equal to the Base
Rate plus 2% plus the applicable Program Fee Rate; or

 

(d)           at any time following 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.

 

“KEF” means Key
Equipment Finance Inc. in its capacity as a Committed Lender, and its
successors or assigns.

 

“KeyBank” means
KeyBank National Association in its individual capacity, and its successors and
assigns.

 

“Key Man Event” means
any two of (a) David Gladstone, (b) Terry Brubaker and (c) George
Stelljes shall cease to be executive officers of Gladstone Management
Corporation.

 

“Large Loan Limit”
means (i) for any Eligible Loan other than the Galaxy Tools Loan,
$15,000,000 and (ii) for the Galaxy Tools Loan, $17,250,000.

 

“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 thirty (30) day deposits in United
States dollars appearing on Reuters Screen LIBOR01 Page (or such other
successor page as may replace Reuters Screen LIBOR01 Page 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
U.S. dollar deposits) determined 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 

 

19

 

immediately preceding the first day of the
applicable 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 the Administrative Agent
(each such determination, absent manifest error, to be conclusive and binding
on all parties hereto and their assignees) to be the arithmetic average
(rounded upward, if necessary, to the next higher 1/100th of 1%) of rates
quoted by not less than two (2) major lenders in New York City, selected
by the Administrative Agent, at approximately 11:00 A.M., New York City
time, two (2) Business Days prior to the first day of such Settlement
Period, for deposits in United States dollars offered by leading European banks
for a period comparable to such Settlement Period in an amount comparable to
the principal amount of such Advance.

 

“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.

 

“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
and, for each Loan secured by real property an Assignment of Mortgage.

 

“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 I hereto (which
shall include 

 

20

 

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.

 

“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 Deposit Account Control Agreement, maintained in
the name of the Borrower for the purpose of receiving Collections at 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, a material adverse effect on (a) the
business, condition (financial or otherwise), operations, performance,
properties or prospects 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 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 subordinate to a Second Lien Loan.

 

21

 

“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.

 

“Net Worth” means,
with respect to the Performance Guarantor, the total of stockholder’s equity
(determined in accordance with GAAP) plus Subordinated Debt, less the total
amount of any intangible assets, including without limitation, deferred charges
and goodwill.

 

“Non-Conduit Lender”
means a Committed Lender that does not have a CP Lender in its Lender Group.

 

“Non-Conduit Lender
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.

 

“Non-Conduit Lender 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 Non-Conduit
Lender Interest Reset Date;  provided
that if no such offered rates appear on such page, the “London InterBank
Offered Rate” for such Settlement Period will be the arithmetic average
(rounded upward, if necessary, to the next higher 1/100th of 1%) of rates
quoted by not less than two (2) major lenders in New York City, selected
by the Administrative Agent, at approximately 10:00 A.M., New York City
time, two (2) Business Days prior to the first day of such Settlement
Period, for deposits in Dollars offered by leading European banks for a period
comparable to such Settlement Period in an amount comparable to the principal
amount of such Advance.

 

“Non-Syndicated Loan”
means each Loan which is not a Qualifying Syndicated Loan.

 

“Notes” is defined in
Section 2.5(a).

 

22

 

“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 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, 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.

 

“Operating Account”
means the Borrower’s operating account number 138833 at The Bank of New York
Mellon Trust Company, N.A.

 

“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 Investment Corporation, a Delaware corporation.

 

“Outstanding Loan Balance”
means with respect to any Loan, the then outstanding principal balance thereof,
provided, however, that with respect to Current Pay Loans, the “Outstanding
Loan Balance” of such Loans shall be equal to 70% of the outstanding principal
balance thereof.

 

“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(b)(vii) only, “Payment
Date” shall mean any Business Day.

 

“Pending Account” is
defined in Section 2.15.

 

23

 

“Performance Guarantor”
is defined in the Performance Guaranty.

 

“Performance Guaranty”
means the Performance Guaranty with respect to the obligations of the Servicer,
dated as of the Closing Date, by the Originator in favor of the Borrower and
the Administrative Agent, as amended by that certain Amendment No. 1 to
Performance Guaranty dated as of even date herewith, as the same may be further
amended, modified, supplemented or restated from time to time.

 

“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 (10) 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.

 

“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.

 

24

 

“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.

 

“Portfolio Rate”
means on any day, with respect to any Settlement Period, the annualized
percentage equivalent of a fraction, the numerator of which is equal to all
Interest Collections for such Settlement Period, and the denominator of which
is equal to the Advances Outstanding on the last day of such Settlement Period.

 

“Portfolio Yield”
means on any day, the excess, if any, of (a) the Portfolio Rate on such
day over (b) the Interest Rate on such day.

 

“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 BB&T 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 BB&T 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, 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 Rate”
means for any Settlement Period and each Advance or portion thereof outstanding
during such 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, a rate equal to 4.0%; or

 

(b)           to the extent the relevant
Lender is not funding the applicable Advance or portion thereof through the
issuance of Commercial Paper Notes, a rate equal to 5.0%.

 

“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 

 

25

 

Commitment and the denominator of which is
the Group Advance Limit of the related CP Lender’s Lender Group.

 

“Purchase Agreement”
means the Purchase and Sale Agreement dated as of the Closing Date, between the
Originator and the Borrower, as amended by that certain Amendment No. 1 to
Purchase Agreement dated as of even date herewith, as the same may be further
amended, modified, supplemented or restated from time to time

 

“Purchase Date” is
defined in the Purchase Agreement.

 

“Purchased Loan Balance”
means as of any date of determination and any Transferred Loan, the lesser of (i) the
Outstanding Loan Balance of such Loan as of such date and (ii) the Fair
Market Value of such Loan.

 

“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.

 

“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, Insurance Proceeds, 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 Obligation”
means an obligation issued by Gladstone Management Corporation, any of its
Affiliates that are investment funds or any other Person that is an investment
fund, whose investments are primarily managed by Gladstone Management
Corporation or any of its Affiliates.

 

26

 

“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.

 

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

 

“Repurchase Price”
means for any Transferred Loan purchased 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 with Commitments in
excess of 66 2/3 % of the Facility Amount; provided that at any time at which
there are three or fewer Committed Lenders, Required Committed Lenders shall
mean all Committed Lenders.

 

“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) $75,000,000 or (ii) the
sum of the Outstanding Loan Balances of the five largest Eligible Loans
included as part of the Collateral.

 

“Required Ratings”
means with respect to (i) any Committed Lender other than a Non-Conduit Lender,
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 a Non-Conduit Lender, the
then-current ratings of such Non-Conduit Lender.

 

“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,
Mark Perrigo, David Dullum, Gary Gerson or Kevin Cheetham, 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.

 

27

 

“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 Funding Amount at such time exceeds the aggregate amount on
deposit in the Revolver Loan Funding Accounts.

 

“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
Funding Amount at such time.

 

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

 

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

 

“Revolver Loan Funding
Fee” means, for any Settlement Period, a fee equal to the product of (a) the
sum of (i) the LIBO Rate for such Settlement Period plus (ii) 3.0%
multiplied by (b) the weighted average amount on deposit in the Revolver
Loan Funding Accounts during such Settlement Period, calculated on the basis of
a year of 360 days for the actual number of days elapsed.

 

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

 

“Risk Rating” means,
with respect to any Loan at any time, if such Loan is at such time (i) rated
by both S&P and Moody’s, the lower of such ratings, (ii) rated by
either S&P or Moody’s, such rating or (iii) not rated by either
S&P or Moody’s, the rating determined by the Servicer’s risk rating model.

 

“RIC/BDC Requirements”
means the requirements 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.

 

“Rolling Three-Month
Charged-Off Ratio” means for any day, beginning after the end of the third
Settlement Period following the Effective 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 Effective 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) 

 

28

 

scheduled to be made by the Obligor thereof
after such Determination Date under the terms of such Loan.

 

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

 

“Secured Party” means
(i) each Lender, (ii) each Managing Agent, (iii) each Liquidity
Bank and (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.

 

“Securitization”
means a disposition of Transferred Loans in one or a series of structured
finance securitization transactions.

 

“Senior Debt Loan”
means a Loan which (a) has a risk rating equal to or greater than 5.5 (or
the equivalent of a rating greater than B/B2 by S&P and Moody’s respectively),
as determined by the Servicer’s risk rating model and (b) is not
subordinated to any other indebtedness of the applicable Obligor.

 

“Senior Syndicated Loan”
means any Senior Debt 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 10% of the
Servicing Fee for the related Settlement Period.

 

“Servicing Fee Rate”
means with respect all Loans, a rate equal to 2.0% per annum.

 

29

 

“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.

 

“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; (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.

 

“Subordinated Debt”
means any debt that is subordinated in right of payment to other debt of the
Performance Guarantor.

 

“Subordination Event”
is defined in Section 5.1(u).

 

“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.

 

“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 

 

30

 

least thirty (30) days’ prior written notice
to the Administrative Agent and each Managing Agent and (c) the Commitment
Termination Date.

 

“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 Deposit Account Control
Agreements for the Collection Account, the Pending Account and the Operating
Account, 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.

 

“Transferred Loans”
means each Loan, together with the related interests and property associated
therewith, 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 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 North Carolina.

 

“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
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.

 

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

 

(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 

 

31

 

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 Aggregate Outstanding Loan 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, (and if such Loan is secured by an
interest in real property, an Assignment of Mortgage executed in blank has been
delivered to the Collateral Custodian);

 

(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;

 

32

 

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

 

(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 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 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;

 

(xx)          if such Loan is a Qualifying
Syndicated Loan, (a) the Borrower has purchased an interest in such Loan
from a financial institution which (A) has a short-term debt rating equal
to at least A-1 from S&P and P-1 from Moody’s or (B) has been approved
in writing by the Required Committed Lenders prior to the related Funding Date
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 (A) is between $500,000 and $5,000,000 and (B) shall have
a term to maturity of two years or less;

 

(xxiii)       the Loan will not 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;

 

33

 

(xxiv)       the Loan is not an equity
security;

 

(xxv)        the Loan is not a Related
Obligation;

 

(xxvi)       such Loan does not contain a
confidentiality provision that restricts the ability of the Administrative
Agent to exercise its rights under the Transaction Documents, including,
without limitation, its rights to review the Loan and related Loan File;

 

(xxvii)      the proceeds of such Loan
are not used to finance construction projects or activities;

 

(xxviii)     the financing of such Loan
by the Lenders does not contravene in any material respect 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)       the Loan will not cause the
Borrower, the Servicer or the Originator to be deemed an Insider or an
Affiliate of the related Obligor; and

 

(xxx)        the Loan is not any type of
bond, whether high yield or otherwise, or any similar financial instrument.

 

“Unused Commitment”
means, as to any Lender at any time, the amount by which such Lender’s
Commitment at such time exceeds the aggregate Advances Outstanding in respect
of such Lender.

 

“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 North Carolina, 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:

 

34

 

(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 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.

 

On the terms and conditions
hereinafter set forth, the Borrower may, by delivery of a Funding Request to
the Administrative Agent, 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; provided, however, that the Borrower may not, without the
consent of each Committed Lender, request more than five (5) Advances per
calendar month.  Such Funding Request
shall be delivered not later than 10:00 a.m. (Winston-Salem, North
Carolina time) on the date which is one (1) Business Day prior to the
requested Funding Date.  Following
receipt by the Administrative Agent of a Funding Request, the Administrative
Agent shall forward such Funding Request to each Managing Agent not later than
11:00 a.m. (Winston-Salem, North Carolina time) that day.  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 

 

35

 

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.

 

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. (Winston-Salem, North
Carolina 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.
(Winston-Salem, North Carolina time) on the next Business Day, the
Administrative Agent shall use its best efforts to confirm to the Borrower the
receipt of such 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 p.m. (Winston-Salem, North Carolina time)
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 

 

36

 

Date shall be no earlier than two (2) Business Days after the day
on which the Administrative Agent confirms to the Borrower that the problems
have been corrected.

 

(d)           No later than 11:00 a.m. (Winston-Salem, North
Carolina time) one (1) Business Day 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 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.

 

(e)           Each Funding Request shall specify the aggregate
amount of the requested Advance, which shall be in an amount equal to at least
$500,000.  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 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 

 

37

 

initiated by the applicable Lender no later than 3:00 p.m.
(Winston-Salem, North Carolina time) on the applicable Funding Date.

 

Section 2.3            Optional Changes in Facility Amount; Prepayments.

 

(a)           The Borrower shall be entitled at its option, at any
time 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 and
each Managing Agent 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 and each Managing Agent a Borrower Notice at least two (2) Business
Day prior to the date of such repayment; 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 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.

 

(c)           Subject to the terms and conditions set forth
herein, the Borrower shall have the right, at any time from the Effective Date
until the Commitment Termination Date, to increase the Facility Amount by an
amount up to $75,000,000 (for a total maximum Facility Amount of
$125,000,000).  The following terms and
conditions shall apply to any such increase: 
(i) any such increase shall be obtained from existing Lenders or
from other Eligible Assignees, in each case in accordance with the terms set
forth below; (ii) the Commitment of any Lender may not be increased
without the prior written consent of such Lender; (iii) any increase in
the Facility Amount shall be in a minimum principal amount of $5,000,000; (iv) the
Borrower and Lenders shall execute an acknowledgement (or in the case of the
addition of a bank or other financial institution not then a party to this
Agreement, a Joinder Agreement) in form and content satisfactory to the
Administrative Agent to reflect the revised Commitments and Facility Amount
(the Lenders do hereby agree to execute such acknowledgement (or Joinder
Agreement) unless the acknowledgement purports to increase the Commitment of a
Lender without 

 

38

 

such Lender’s consent); (v) the Borrower shall execute such
promissory notes as are necessary to reflect the increase in or creation of the
Commitments; (vi) if any Advances are outstanding at the time of any such
increase, the Borrower shall make such payments and adjustments on the Advances
(including payment of any break-funding amount owing under Section 2.11
hereof) as necessary to give effect to the revised commitment percentages and
outstandings of the Lenders; (vii) the Borrower may solicit commitments
from Eligible Assignees that are not then a party to this Agreement so long as
such Eligible Assignees are reasonably acceptable to the Administrative Agent
and execute a Joinder Agreement in form and content satisfactory to the
Administrative Agent; (viii) the conditions set forth in Section 3.2
shall be satisfied in all material respects; (ix) after giving effect to
any such increase in the Facility Amount, no Unmatured Early Termination Event
or Early Termination Event shall have occurred; (x) the Borrower shall
have provided to the Administrative Agent, at least 30 days prior to such
proposed increase in the Facility Amount, written evidence demonstrating pro
forma compliance with Section 8.1(r) of this Agreement after giving
effect to such proposed increase, such evidence to be satisfactory in the sole
discretion of the Administrative Agent. 
The amount of any increase in the Facility Amount hereunder shall be
offered first to the existing Lenders, and in the event the additional
commitments which existing Lenders are willing to take shall exceed the amount
requested by the Borrower, such excess shall be allocated in proportion to the
commitments of such existing Lenders willing to take additional
commitments.  If the amount of the
additional commitments requested by the Borrower shall exceed the additional
commitments which the existing Lenders are willing to take, then the Borrower
may invite other Eligible Assignees reasonably acceptable to the Administrative
Agent to join this Agreement as Lenders hereunder for the portion of
commitments not taken by existing Lenders, provided that such Eligible
Assignees shall enter into such joinder agreements to give effect thereto as
the Administrative Agent and the Borrower may reasonably request.  Unless otherwise agreed by the Administrative
Agent and the Lenders, the terms of any increase in the Facility Amount shall
be the same as those in effect prior to any increase; provided, however,
that should the terms of the increase agreed to be other than those in effect
prior to the increase, then the Transaction Documents shall be amended to the
extent necessary to incorporate any such different terms.

 

Section 2.4            Principal Repayments.

 

(a)           The Advances Outstanding shall be due and payable in
full 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.

 

39

 

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 a 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 a Non-Conduit Lender
shall determine (in accordance with information provided by the relevant CP
Lender and/or Committed Lender in the related Lender 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.  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.

 

40

 

(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.

 

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 Commitment Fee and, from and after
the Revolver Loan Funding Date, the Revolver Loan Funding 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. (Winston-Salem, North Carolina 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 

 

41

 

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;

 

(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 and 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;

 

42

 

(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, 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

 

(xii)          TWELFTH, all remaining amounts to
the Borrower.

 

(b)           During the Amortization
Period, Interest Collections and Principal Collections shall be applied as
follows:

 

To the extent of available
Interest 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 an 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 

 

43

 

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, Commitment Fee and Revolver
Loan Funding 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;

 

(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 the priority set forth
below.

 

To the extent of available
Principal Collections:

 

(i)            FIRST, to the parties listed
above, any amount remaining unpaid pursuant to clauses FIRST through SEVENTH
under the priority of distributions of Interest Collections set forth above;

 

(ii)           SECOND, 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 the distribution of Interest Collections above; and

 

44

 

(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 (i) the
occurrence of an Early Termination Event or (ii) the appointment of a
Successor Servicer, 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 Borrower.

 

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. (Winston-Salem, North Carolina 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 a rate
equal to the Default 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).

 

45

 

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 and the Liquidity
Agreements.  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 (a)
notice of such prepayment shall have been delivered to such CP Lender in
accordance with the provisions of Section 2.3(b) or Section 7.7(c),
(b) such prepayment is made on a Payment Date, and (c) such prepayment does not
exceed the lesser of (i) 20% of the Advances made by such CP Lender and (ii) $20,000,000.

 

Section 2.12         Increased
Costs; Capital Adequacy; Illegality.

 

(a)           If after the date hereof, any
Managing Agent, Lender, Liquidity Bank 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(a)) 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 

 

46

 

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 providing liquidity support, credit enhancement or other similar
support to such Affected Party in connection with this Agreement or the funding
or maintenance of Advances hereunder, then within ten (10) 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.

 

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 

 

47

 

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 (10) days from the date such Lender, Managing Agent or
the Administrative Agent (as the case may be) makes written demand therefor.

 

(c)           Within thirty (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 fifteen (15) days after the date hereof, or, if later, the
date on which such Lender becomes a Lender hereof 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 thirty (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 

 

48

 

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 or other
similar support 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 (10) 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 each CP Lender member of a Lender Group, if any, may, in its
sole discretion make, and if it does not, the Committed Lenders shall make an
advance (each, a “Revolver Loan Funding”) in an
amount equal to such Committed Lender’s ratable share of the aggregate
outstanding unfunded commitments under the Revolver Loans (collectively, the “Revolver Loan Funding 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 the applicable Lender, and maintained at a
Qualified Institution.  Each 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 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 Lender shall not constitute an Advance
(and such 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).

 

(b)           From and after the establishment of a
Revolver Loan Funding Account with respect to any Lender, and until the earlier
of (i) the reduction to zero of all outstanding commitments in respect of
Revolver Loans and (ii) two years following the Revolver Loan Funding Date, all
Post-Termination Revolver Loan Fundings to be made by such 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, 

 

49

 

deposit the lesser of (A) the
amount allocable to the repayment of principal to the 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
Lender, such 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) two 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 Lender, and thereafter all payments made in respect of the Loans (whether
or not originally funded from such Lender’s Revolver Loan Funding Account)
shall be paid directly to the applicable Managing Agent, on behalf of such
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.

 

(d)           Proceeds in a Revolver Loan Funding
Account shall be invested, at the written direction of the applicable 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 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 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, 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 pursuant to this Agreement and a Deposit
Account Control Agreement, 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 Unrestricted Eligible Loans therefrom.

 

50

 

(b)           The Borrower may 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 that a Borrower
Notice containing certification thereto has been delivered and (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
ELEVENTH above on the next Payment Date pursuant to Section 2.8(a) above.

 

(c)           Funds deposited in the Pending
Account shall be used to purchase Unrestricted 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.

 

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)           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;

 

(c)           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 

 

51

 

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; and

 

(d)           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 Section 4.1 and Section 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 Early 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 Borrowing Base
Test shall be satisfied, as calculated on such date;

 

(d)           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;

 

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

 

(f)            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; 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.

 

52

 

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 a 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 

 

53

 

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 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 

 

54

 

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 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 

 

55

 

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.

 

(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 Section
2.1 and Section 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 Section 2.1 and Section
2.2 is an Eligible Loan.

 

56

 

Section 4.2            Joint Representations and Warranties Regarding
Ordinary Course of Business.

 

(a)           Each of the Borrower and the
Administrative Agent represents and warrants as to itself that each remittance
of Collections by the Borrower to the Administrative Agent pursuant to the
terms of this Agreement will have been (i) in payment of a debt incurred
by the Borrower in the ordinary course of business or financial affairs of the
Borrower and the Administrative Agent and (ii) made in the ordinary course
of business or financial affairs of the Borrower and the Administrative Agent.

 

(b)           The representations and warranties
set forth in this Section 4.2 and shall survive the termination of
this Agreement.

 

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 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.

 

57

 

(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.

 

(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.

 

58

 

(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.

 

(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 thirty (30) days’
prior 

 

59

 

written notice to the
Administrative Agent and (y) shall not move, or consent to the Servicer or
Collateral Custodian moving, the Loan Documents without thirty (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 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.

 

60

 

(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 twenty (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.

 

(u)           Subordination Events.  The Borrower will not engage or permit any
Affiliate to engage in any activities relating to any Obligor and/or with
respect to any Loan that would subject a Loan to the risk of (i) equitable
subordination under Section 510(c) of the Bankruptcy Code, or (ii) recharacterization
as an equity security under Section 105(a) of the Bankruptcy Code or
otherwise, as a result of the conduct of the Borrower, the Servicer, the
Originator or any of their respective Affiliates (items (i), and (ii) above,
each a “Subordination Event”).

 

61

 

(v)           Compliance With Loan Documents.  The Borrower will act in strict conformity
with all material terms and conditions of the Loan Documents, including the
prompt enforcement of its rights thereunder.

 

Section 5.2            Hedging Agreement.

 

(a)           If at any time the aggregate
Outstanding Loan Balances of Loans bearing fixed rates of interest (“Fixed Rate Loans”) exceeds 10% of the Aggregate Outstanding
Loan Balance, the Borrower may, and shall at the request of the Managing
Agents, with respect only to such Outstanding Loan Balance of Fixed Rate Loans
aggregating in excess of 10% of the Aggregate Outstanding Loan 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 or swaps having a notional amount and amortization
schedule as shall be determined by the Managing Agents upon consultation with
the Borrower 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.

 

(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 

 

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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 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.

 

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 

 

63

 

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 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 Securitization, if, upon
application of the proceeds of such transaction in accordance with Section 2.8
either (x) all Advances Outstanding hereunder shall have been reduced to
zero or (y) (i) the Required Equity Investment shall be maintained, (ii) the
Borrowing Base Test shall be met, (iii) the Collateral Quality Test shall
be met and (iv) no Early Termination Event or Unmatured Termination Event
shall result therefrom or shall have occurred and be continuing, 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 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 

 

64

 

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.

 

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:

 

65

 

(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 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

 

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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 (A) asserted
by an Obligor with respect to any Transferred Loan; or (B) reasonably
expected to have a Material Adverse Effect; and

 

(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.  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 

 

67

 

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.

 

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 

 

68

 

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 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. (Winston-Salem, North Carolina 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 to 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 

 

69

 

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 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; provided, however, that no more than six Transferred
Loans may be purchased pursuant to this paragraph (b) during
the term of this Agreement.

 

(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, either (i) remit
to the Borrower in immediately available funds an amount equal to the
Repurchase Price therefor or (ii) in the case of a purchase of a
Transferred Loan by the Originator, cause an entry to be made in the books of
the Borrower to show a reduction in the Originator’s equity investment in the
Borrower by an amount equal to the Repurchase Price for such Transferred
Loan.  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 

 

70

 

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 such 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 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 a 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.

 

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(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.

 

(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 

 

72

 

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)           No
Bankruptcy Petition.  With respect to
any CP Lender, prior to the date that is one year and one (1) day after
the payment in full of all amounts owing in respect of all outstanding
commercial paper issued by such CP Lender and, with respect to the Borrower,
prior to the date that is one year and one (1) day after the Collection
Date, the Servicer will not institute against the Borrower or such CP Lender,
or join any other Person in instituting against the Borrower or such CP Lender,
any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings or other similar proceedings under the laws of the United States or
any state of the United States.  This Section 7.9(e) will
survive the termination of this Agreement.

 

(f)            Change
of Name or Jurisdiction; Records. 
The Servicer (i) shall not change its name or jurisdiction of
incorporation, without thirty (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 thirty (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 twenty (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 Required
Committed Lenders (in their 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.

 

(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 

 

73

 

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.

 

(k)           Subordination
Events.  The Servicer will not engage
or permit any Affiliate to engage in any activities relating to any Obligor
and/or with respect to any Loan that would subject a Loan to the risk of a
Subordination Event.

 

(l)            Compliance
With Loan Documents.  The Servicer
will, on behalf of the Borrower, act in strict conformity with all material
terms and conditions of the Loan Documents, including the prompt enforcement of
the Borrower’s rights thereunder.

 

Section 7.10         Payment
of Certain Expenses by Servicer.

 

The Servicer, so long as it
shall be an Affiliate of the Borrower, 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:  (a) all reasonable fees and expenses
owing to any bank or trust company in connection with the maintenance of the
Collection Account; (b) the Backup Servicer Fee pursuant to the Backup
Servicing Agreement; and (c) 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.  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 180 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 

 

74

 

statement of cash flows) for such fiscal year certified in a manner
acceptable to the Administrative Agent by independent public accountants
acceptable to the Administrative Agent. The provisions of this paragraph (c) shall
not apply to any Successor Servicer, including the Backup Servicer.

 

(d)           Quarterly
Reporting.  The Servicer shall
deliver, within 45 days after the close of each quarterly period 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 flows for
the period from the beginning of such fiscal year to the end of such quarter,
all certified by its chief financial officer. 
The provisions of this paragraph (d) shall not apply to any
Successor Servicer, including the Backup Servicer.

 

(e)           Financial
Statements.  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(a) 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 ninety (90) days following the end of each fiscal year of the
Servicer, commencing with the fiscal year ending on March 31, 2008, 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 

 

75

 

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.

 

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 Servicer 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:

 

76

 

(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 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;

 

(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 (2) Business
Days after the date such instructions, notice or

 

77

 

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 five (5) 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 should have become aware thereof;

 

(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;

 

(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 thirty (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
the collectibility of the Transferred Loans;

 

78

 

(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 Net Worth equal to the
sum of (i) $169,000,000 plus (ii) 50%; of any equity and Subordinated
Debt issued by the Performance Guarantor after the Effective Date;

 

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

 

(xvi)        the
Performance Guarantor shall pay any cash dividends; provided that
Performance Guarantor shall be permitted to pay cash dividends if the Servicer
shall have caused the Performance Guarantor to have delivered a certificate to
the Administrative Agent at least 10 Business Days prior to the making of any
such cash dividend stating that (i) the amount of the declared dividend
has been determined in good faith by the Board of Directors of the Performance
Guarantor on the basis of the most current financial information of the
Performance Guarantor then available for the related period; (ii) the
amount of the declared dividend does not exceed the net investment income and
the net capital gain realized by the Performance Guarantor  for the related period, based on the
financial information referred to in clause (i) above; and (iii) to
the extent the declared dividend does not equal the net investment income and
the net capital gain realized by the Performance Guarantor for the related
period, the proposed dividend to be declared by the Performance Guarantor  for the immediately ensuing period shall be
either (x) reduced by the amount such dividend for the immediately
preceding period exceeded the net investment income and the net capital gain
realized by the Performance Guarantor 
for the immediately preceding period or (y) increased by the amount
such dividend or distribution for the immediately preceding period was less
than the net investment income and the net capital gains realized by the
Performance Guarantor for the immediately preceding period;

 

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 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.

 

79

 

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.

 

(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
Successor Servicer hereunder pursuant to the foregoing provisions of this Section

 

80

 

7.19, the Backup Servicer will promptly begin the
transition to its role as Successor 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 five (5) 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 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

 

81

 

(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) $5,000,000 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 thirty (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 $5,000,000 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)            a
Key Man Event occurs; or

 

(m)          on
any Determination Date, the Portfolio Yield does not equal or exceed 7.0% on
and such failure continues on the next succeeding Determination Date; or

 

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

 

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

 

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

 

(q)           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

 

(r)            on
any Determination Date, the Interest Coverage Ratio does not equal or exceed
200.0% and such failure continues on the next succeeding Determination Date; or

 

82

 

(s)           any
Material Adverse Change occurs with respect to the Borrower, the Originator or
the Servicer; or

 

(t)            (i) the
difference between (A) the Aggregate Outstanding Loan Balance minus (B) the
Advances Outstanding shall be less than (ii) an amount equal to 50% of the
Required Equity Investment;

 

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.

 

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;

 

83

 

(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 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;

 

84

 

(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;

 

(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; or

 

(xiv)        the
occurrence of a Subordination Event.

 

(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 

 

85

 

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, (iv) any litigation, proceedings or investigation
against the Servicer, or (v) the occurrence of a Subordination Event,
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
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,
any 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 BB&T as Administrative Agent
hereunder, and authorizes BB&T 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.

 

86

 

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 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.  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.

 

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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.

 

(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 

 

88

 

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
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 

 

89

 

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 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 five (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 five (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 five (5) day
period, then effective upon the expiration of such five (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 the 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 

 

90

 

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 five (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 five (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 five (5) day
period, then effective upon the expiration of such five (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 (B) to any Lender or any Affiliate of a
Lender hereunder, or (iii) to any other Eligible Assignee; 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 in
such Committed Lender’s Lender Group, if any, shall be required prior to the
effectiveness of any such assignment.  In
addition, so long as no 

 

91

 

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 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.

 

(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 

 

92

 

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 a selling Committed Lender and a
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 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 any amendment, supplement,
waiver or modification set forth in Section 12.1 of this Agreement.

 

93

 

(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
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.

 

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
Committed 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 Section 2.11, Section 11.1(a), Section 12.1,
Section 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 

 

94

 

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.

 

Section 12.2         Notices,
Etc.

 

(a)           Except
in the case of notices and other communications expressly permitted to be given
by telephone (and except as provided in paragraph (b) below), all notices
and other communications provided for herein shall be in writing and shall be
delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by telecopier as follows:

 

(i)            if to the Borrower, to it at 1521 Westbranch Drive, Suite 200,
McLean, Virginia 22102, Attention of Chairman, President and Treasurer
(Telecopier No. (703) 287-5801; Telephone No. (703) 287-5800). e-mail
Gary.Gerson@gladstonemanagement.com, David.Dullum@gladstonecompanies.com,
Chip.Stelljes@gladstonecompanies.com;

 

(ii)           if to the Administrative Agent, to Branch Banking and
Trust Company at 200 West Second Street, 16th Floor, Winston-Salem, NC 27101, Attention of
Greg Drabik (Telecopier No. (336) 733-2740; Telephone No. (336) 733-2730),
e-mail gdrabik@bbandt.com;

 

(iii)          if to a Lender, to it at its address (or telecopier number)
set forth on its signature page hereto.

 

Notices sent by hand or
overnight courier service, or mailed by certified or registered mail, shall be
deemed to have been given when received; notices sent by telecopier shall be
deemed to have been given when sent (except that, if not given during normal
business hours for the recipient, shall be deemed to have been given at the
opening of business on the next business day for the recipient).  Notices delivered through electronic
communications to the extent provided in paragraph (b) below, shall
be effective as provided in said paragraph (b).

 

(b)           Electronic
Communications.  Notices and other
communications to the Lenders hereunder may be delivered or furnished by
electronic communication (including e-mail and internet or intranet websites)
pursuant to procedures approved by the 

 

95

 

Administrative Agent, provided that the foregoing shall not
apply to notices to any Lender pursuant to Article II if such Lender has
notified the Administrative Agent that it is incapable of receiving notices
under such Article by electronic communication.  The Administrative Agent or the Borrower may,
in its discretion, agree to accept notices and other communications to it
hereunder by electronic communications pursuant to procedures approved by it, provided
that approval of such procedures may be limited to particular notices or
communications.

 

Unless the Administrative
Agent otherwise prescribes, (i) notices and other communications sent to
an e-mail address shall be deemed received upon the sender’s receipt of an
acknowledgement from the intended recipient (such as by the “return receipt
requested” function, as available, return e-mail or other written
acknowledgement), provided that if such notice or other communication is
not sent during the normal business hours of the recipient, such notice or
communication shall be deemed to have been sent at the opening of business on
the next business day for the recipient, and (ii) notices or
communications posted to an internet or intranet website shall be deemed
received upon the deemed receipt by the intended recipient at its e-mail
address as described in the foregoing clause (i) of notification that
such notice or communication is available and identifying the website address
therefor.

 

(c)           Change
of Address, Etc.  Any party hereto may
change its address or telecopier number for notices and other communications
hereunder by notice to the other parties hereto.

 

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 Section 2.8, Section 7.18, Section 9.1
and Section 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 

 

96

 

or
deemed made by the Borrower pursuant to Article III and Article 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 NORTH
CAROLINA.  EACH OF THE SECURED PARTIES,
THE BORROWER AND THE ADMINISTRATIVE AGENT HEREBY IRREVOCABLY AND
UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE
JURISDICTION OF THE COURTS OF THE STATE OF NORTH CAROLINA SITTING IN FORSYTH
COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE MIDDLE DISTRICT OF NORTH
CAROLINA, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR FOR
RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO
IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH
ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NORTH CAROLINA
STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH
FEDERAL COURT.  EACH OF THE PARTIES
HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE
CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE
JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.  NOTHING IN THIS AGREEMENT OR IN ANY OTHER
TRANSACTION DOCUMENT SHALL AFFECT ANY RIGHT THAT THE ADMINISTRATIVE AGENT OR ANY
LENDER MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO
THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT AGAINST THE BORROWER OR ITS
PROPERTIES IN THE COURTS OF ANY JURISDICTION.

 

THE PARTIES HERETO
IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF
VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO IN PARAGRAPH (A) OF
THIS SECTION.  EACH OF THE PARTIES HERETO
HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR
PROCEEDING IN ANY SUCH COURT.

 

EACH PARTY HERETO
IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES
IN SECTION 12.2 (EXCEPT THAT FACSIMILE NOTICES SHALL NOT BE EFFECTIVE FOR
SERVICE OF PROCESS).  NOTHING IN THIS
AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY APPLICABLE LAW.

 

97

 

Section 12.7         WAIVER OF
JURY TRIAL.

 

EACH PARTY HERETO HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY
RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY). 
EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO
HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

 

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.

 

(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 

 

98

 

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 (1) 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 the United States or any state of the United States.  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 (1) year and one (1) 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)           Each of parties hereto hereby acknowledges and
agrees that any other transactions with a CP Lender hereunder shall be without
recourse of any kind to such CP Lender. 
A CP Lender shall have no obligation to pay any amounts owing hereunder
in excess of any amount available to such CP Lender after paying or making provision
for the payment of any commercial paper notes of such CP Lender.  In addition, each party hereto agrees that a
CP Lender shall have no obligation to pay any other party, 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 and such amounts are
not required to pay the commercial paper of such CP Lender.

 

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

 

99

 

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 (5) 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 

 

100

 

statement filed pursuant to this Agreement or in connection with any
Advance hereunder, unless the Collection Date shall have occurred:

 

(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
this 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 this 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 agree 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.

 

101

 

(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 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 the Fee Letter.

 

Section 12.14       Amendment and Restatement.

 

This Agreement amends and
restates in its entirety that certain Amended and Restated Credit Agreement
dated as of October 16, 2008, among the Borrower, the Servicer, the
lenders party thereto, the managing agents named therein, and Deutsche Bank AG,
New York Branch, as administrative agent.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

102

 

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 INVESTMENT, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:  

  	
   

  
	
   

  	
   

  	
  Name: David Dullum

  
	
   

  	
   

  	
  Title: President

  
	
   

  	
   

  	
   

  
	
   

  	
  Gladstone Business Investment, LLC

  
	
   

  	
  1521 Westbranch Drive, Suite 200

  
	
   

  	
  McLean, Virginia 22102

  
	
   

  	
  Attention: President

  
	
   

  	
  Facsimile No.: (703) 287-5801

  
	
   

  	
  Telephone No.: (703) 286-7000

  
	
   

  	
  E-mail: David.Dullum@gladstonecompanies.com

  

 

 

	
   

  	
  SERVICER:

  
	
   

  	
   

  	
   

  
	
   

  	
  GLADSTONE MANAGEMENT CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:  

  	
   

  
	
   

  	
   

  	
  Name: David Gladstone

  
	
   

  	
   

  	
  Title: Chairman

  
	
   

  	
   

  	
   

  
	
   

  	
  Gladstone Management Corporation

  
	
   

  	
  1521 Westbranch Drive, Suite 200

  
	
   

  	
  McLean, Virginia 22102

  
	
   

  	
  Attention: Chairman

  
	
   

  	
  Facsimile No.: (703) 287-5801

  
	
   

  	
  Telephone No.: (703) 286-7000

  
	
   

  	
  E-mail: David.Gladstone@gladstonecompanies.com

  

 

 

	
   

  	
  COMMITTED LENDER and MANAGING AGENT:

  
	
   

  	
   

  	
   

  
	
   

  	
  BRANCH BANKING AND TRUST COMPANY

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:  

  	
   

  
	
   

  	
   

  	
  Name:  

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Commitment: $25,000,000

  
	
   

  	
   

  
	
   

  	
  200 W. 2nd Street

  
	
   

  	
  Winston-Salem,
  NC 27101

  
	
   

  	
  Attention: Greg
  Drabik

  
	
   

  	
  Facsimile No.:
  (336)733-2740

  
	
   

  	
  Telephone No.:
  (336)733-2730

  
	
   

  	
  E-mail:
  gdrabik@bbandt.com

  

 

 

	
   

  	
  COMMITTED LENDER and MANAGING AGENT for the Key Lender Group:

  
	
   

  	
   

  	
   

  
	
   

  	
  KEY EQUIPMENT FINANCE INC.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:  

  	
   

  
	
   

  	
   

  	
  Name:  

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:  

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Commitment: $25,000,000

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  1000
  South McCaslin Blvd.

  
	
   

  	
  Mailstop:
  CO-18-SP-0105

  
	
   

  	
  Superior,
  CO 80027

  
	
   

  	
  Attention:
  Todd T. Oliver

  
	
   

  	
  Facsimile
  No.: (720) 304-1470

  
	
   

  	
  Telephone
  No.: (720) 304-1245

  
	
   

  	
  E-mail: 
  LAS.Operations.KEF@key.com

  
	
   

  	
   

  	
   

  
	
   

  	
  with
  a copy to:

  
	
   

  	
   

  	
   

  
	
   

  	
  19100 Von Karman Avenue

  
	
   

  	
  Suite 250

  
	
   

  	
  Mailstop: CA-01-19-0250

  
	
   

  	
  Irvine, CA 92612

  
	
   

  	
  Attention: Rian Emmett

  
	
   

  	
  Facsimile No.: (216) 357-6708

  
	
   

  	
  Telephone No.: (949) 757-8942

  
	
   

  	
  E-mail:  rian.w.emmett@key.com

  

 

 

	
   

  	
  ADMINISTRATIVE AGENT:

  
	
   

  	
   

  	
   

  
	
   

  	
  BRANCH BANKING AND TRUST COMPANY

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:  

  	
   

  
	
   

  	
   

  	
  Name:  

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  200 W. 2nd Street

  
	
   

  	
  Winston-Salem,
  NC 27101

  
	
   

  	
  Attention: Greg
  Drabik

  
	
   

  	
  Facsimile No.:
  (336)733-2740

  
	
   

  	
  Telephone No.:
  (336)733-2730

  
	
   

  	
  E-mail:
  gdrabik@bbandt.comExhibit 4.3

 

PROSPER MARKETPLACE, INC.

 

BORROWER
PAYMENT DEPENDENT NOTES

 

INDENTURE

 

DATED AS
OF [      , 2009]

 

                                                                                      ,

AS TRUSTEE

 

 

CROSS REFERENCE TABLE(1)

 

	
  TIA

  	
   

  	
  INDENTURE

  
	
  SECTION

  	
   

  	
  SECTION

  
	
  310

  	
  (a)(1)

  	
  6.8; 6.10

  
	
   

  	
  (a)(2)

  	
  6.10

  
	
   

  	
  (a)(3)

  	
  N.A.

  
	
   

  	
  (a)(4)

  	
  N.A.

  
	
   

  	
  (a)(5)

  	
  6.10

  
	
   

  	
  (b)

  	
  6.8; 6.10

  
	
   

  	
  (c)

  	
  N.A.

  
	
  311

  	
  (a)

  	
  6.11

  
	
   

  	
  (b)

  	
  6.11

  
	
   

  	
  (c)

  	
  N.A.

  
	
  312

  	
  (a)

  	
  2.6

  
	
   

  	
  (b)

  	
  9.3

  
	
   

  	
  (c)

  	
  9.3

  
	
  313

  	
  (a)

  	
  6.6

  
	
   

  	
  (b)

  	
  6.6

  
	
   

  	
  (c)

  	
  6.6; 9.2

  
	
   

  	
  (d)

  	
  6.6

  
	
  314

  	
  (a)

  	
  3.2; 9.2

  
	
   

  	
  (b)

  	
  N.A.

  
	
   

  	
  (c)(1)

  	
  9.4

  
	
   

  	
  (c)(2)

  	
  9.4

  
	
   

  	
  (c)(3)

  	
  N.A.

  
	
   

  	
  (d)

  	
  N.A.

  
	
   

  	
  (e)

  	
  9.6

  
	
   

  	
  (f)

  	
  3.3

  
	
  315

  	
  (a)

  	
  6.1

  
	
   

  	
  (b)

  	
  6.5; 9.2

  
	
   

  	
  (c)

  	
  6.1

  
	
   

  	
  (d)

  	
  6.1

  
	
   

  	
  (e)

  	
  5.11

  
	
  316

  	
  (a)(1)(A)

  	
  5.5

  
	
   

  	
  (a)(1)(B)

  	
  5.4

  
	
   

  	
  (a)(2)

  	
  N.A.

  
	
   

  	
  (b)

  	
  5.7

  
	
   

  	
  (c)

  	
  N.A.

  
	
  317

  	
  (a)(1)

  	
  5.8

  
	
   

  	
  (a)(2)

  	
  5.9

  
	
   

  	
  (b)

  	
  2.5

  
	
  318

  	
  (a)

  	
  9.1

  

 

N.A.
means not applicable.

 

(1)   Note: This Cross Reference Table shall not,
for any purpose, be deemed to be part of the Indenture.

 

i

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE I

  	
  DEFINITIONS
  AND INCORPORATION BY REFERENCE

  	
  1

  
	
  Section 1.1

  	
  DEFINITIONS

  	
  1

  
	
  Section 1.2

  	
  OTHER
  DEFINITIONS

  	
  4

  
	
  Section 1.3

  	
  INCORPORATION
  BY REFERENCE OF TRUST INDENTURE ACT

  	
  4

  
	
  Section 1.4

  	
  RULES
  OF CONSTRUCTION

  	
  5

  
	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
  THE
  SECURITIES

  	
  5

  
	
  Section 2.1

  	
  FORMS
  GENERALLY

  	
  5

  
	
  Section 2.2

  	
  TITLE,
  TERMS AND DENOMINATIONS

  	
  5

  
	
  Section 2.3

  	
  EXECUTION,
  AUTHENTICATION, DELIVERY AND DATING

  	
  7

  
	
  Section 2.4

  	
  REGISTRAR
  AND PAYING AGENT

  	
  8

  
	
  Section 2.5

  	
  PAYING
  AGENT TO HOLD MONEY AND SECURITIES IN TRUST

  	
  8

  
	
  Section 2.6

  	
  SECURITYHOLDER
  LISTS

  	
  8

  
	
  Section 2.7

  	
  TRANSFER

  	
  8

  
	
  Section 2.8

  	
  OUTSTANDING
  SECURITIES; DETERMINATIONS OF HOLDERS’ ACTION

  	
  9

  
	
  Section 2.9

  	
  CANCELLATION

  	
  9

  
	
  Section 2.10

  	
  PAYMENTS

  	
  9

  
	
  Section 2.11

  	
  PERSONS
  DEEMED OWNERS

  	
  9

  
	
  Section 2.12

  	
  CUSIP
  NUMBERS

  	
  9

  
	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
  COVENANTS

  	
  10

  
	
  Section 3.1

  	
  PAYMENT
  OF SECURITIES

  	
  10

  
	
  Section 3.2

  	
  SEC
  REPORTS

  	
  10

  
	
  Section 3.3

  	
  COMPLIANCE
  CERTIFICATE; STATEMENT BY OFFICERS AS TO DEFAULT

  	
  10

  
	
  Section 3.4

  	
  FURTHER
  INSTRUMENTS AND ACTS

  	
  10

  
	
  Section 3.5

  	
  MAINTENANCE
  OF OFFICE OR AGENCY

  	
  10

  
	
  Section 3.6

  	
  BORROWER
  LOAN SERVICING

  	
  10

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
  SUCCESSOR
  CORPORATION

  	
  11

  
					

 

ii

 

	
  Section 4.1

  	
  WHEN
  COMPANY MAY MERGE OR TRANSFER ASSETS

  	
  11

  
	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
  DEFAULTS
  AND REMEDIES

  	
  11

  
	
  Section 5.1

  	
  EVENTS
  OF DEFAULT

  	
  11

  
	
  Section 5.2

  	
  ACCELERATION

  	
  12

  
	
  Section 5.3

  	
  OTHER
  REMEDIES

  	
  12

  
	
  Section 5.4

  	
  WAIVER
  OF PAST DEFAULTS

  	
  13

  
	
  Section 5.5

  	
  CONTROL
  BY MAJORITY

  	
  13

  
	
  Section 5.6

  	
  LIMITATION
  ON SUITS

  	
  13

  
	
  Section 5.7

  	
  RIGHTS
  OF HOLDERS TO RECEIVE PAYMENT

  	
  13

  
	
  Section 5.8

  	
  COLLECTION
  SUIT BY TRUSTEE

  	
  13

  
	
  Section 5.9

  	
  TRUSTEE
  MAY FILE PROOFS OF CLAIM

  	
  13

  
	
  Section 5.10

  	
  PRIORITIES

  	
  14

  
	
  Section 5.11

  	
  UNDERTAKING
  FOR COSTS

  	
  14

  
	
  Section 5.12

  	
  WAIVER
  OF STAY, EXTENSION OR USURY LAWS

  	
  14

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
  TRUSTEE

  	
  15

  
	
  Section 6.1

  	
  DUTIES
  OF TRUSTEE

  	
  15

  
	
  Section 6.2

  	
  RIGHTS
  OF TRUSTEE

  	
  15

  
	
  Section 6.3

  	
  INDIVIDUAL
  RIGHTS OF TRUSTEE, ETC.

  	
  17

  
	
  Section 6.4

  	
  TRUSTEE’S
  DISCLAIMER

  	
  17

  
	
  Section 6.5

  	
  NOTICE
  OF DEFAULTS

  	
  17

  
	
  Section 6.6

  	
  REPORTS
  BY TRUSTEE TO HOLDERS

  	
  17

  
	
  Section 6.7

  	
  COMPENSATION
  AND INDEMNITY

  	
  17

  
	
  Section 6.8

  	
  REPLACEMENT
  OF TRUSTEE

  	
  18

  
	
  Section 6.9

  	
  SUCCESSOR
  TRUSTEE BY MERGER

  	
  19

  
	
  Section 6.10

  	
  ELIGIBILITY;
  DISQUALIFICATION

  	
  19

  
	
  Section 6.11

  	
  PREFERENTIAL
  COLLECTION OF CLAIMS AGAINST COMPANY

  	
  19

  
	
  Section 6.12

  	
  SECURITY
  INTEREST

  	
  19

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
  SATISFACTION
  AND DISCHARGE

  	
  19

  
					

 

iii

 

	
  Section 7.1

  	
  DISCHARGE
  OF LIABILITY ON SECURITIES

  	
  19

  
	
  Section 7.2

  	
  REPAYMENT
  TO THE COMPANY

  	
  20

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  	
  SUPPLEMENTAL
  INDENTURES

  	
  20

  
	
  Section 8.1

  	
  SUPPLEMENTAL
  INDENTURES WITHOUT CONSENT OF HOLDERS

  	
  20

  
	
  Section 8.2

  	
  SUPPLEMENTAL
  INDENTURES WITH CONSENT OF HOLDERS

  	
  21

  
	
  Section 8.3

  	
  COMPLIANCE
  WITH TRUST INDENTURE ACT

  	
  22

  
	
  Section 8.4

  	
  REVOCATION
  AND EFFECT OF CONSENTS, WAIVERS AND ACTIONS

  	
  22

  
	
  Section 8.5

  	
  NOTATION
  ON OR EXCHANGE OF SECURITIES

  	
  22

  
	
  Section 8.6

  	
  TRUSTEE
  TO SIGN SUPPLEMENTAL INDENTURES

  	
  22

  
	
  Section 8.7

  	
  EFFECT
  OF SUPPLEMENTAL INDENTURES

  	
  22

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX

  	
  MISCELLANEOUS

  	
  22

  
	
  Section 9.1

  	
  TRUST
  INDENTURE ACT CONTROLS

  	
  22

  
	
  Section 9.2

  	
  NOTICES

  	
  22

  
	
  Section 9.3

  	
  COMMUNICATION
  BY HOLDERS WITH OTHER HOLDERS

  	
  23

  
	
  Section 9.4

  	
  CERTIFICATE
  AND OPINION AS TO CONDITIONS PRECEDENT

  	
  23

  
	
  Section 9.5

  	
  FORM
  OF DOCUMENTS DELIVERED TO TRUSTEE

  	
  24

  
	
  Section 9.6

  	
  STATEMENTS
  REQUIRED IN CERTIFICATE OR OPINION

  	
  24

  
	
  Section 9.7

  	
  SEPARABILITY
  CLAUSE

  	
  24

  
	
  Section 9.8

  	
  RULES
  BY TRUSTEE, PAYING AGENT AND REGISTRAR

  	
  24

  
	
  Section 9.9

  	
  LEGAL
  HOLIDAYS

  	
  24

  
	
  Section 9.10

  	
  GOVERNING
  LAW AND JURISDICTION; WAIVER OF JURY TRIAL

  	
  24

  
	
  Section 9.11

  	
  NO
  RECOURSE AGAINST OTHERS

  	
  25

  
	
  Section 9.12

  	
  SUCCESSORS

  	
  25

  
	
  Section 9.13

  	
  EFFECT
  OF HEADINGS AND TABLE OF CONTENTS

  	
  25

  
	
  Section 9.14

  	
  BENEFITS
  OF INDENTURE

  	
  25

  
	
  Section 9.15

  	
  MULTIPLE
  ORIGINALS

  	
  25

  
	
  Section 9.16

  	
  FORCE
  MAJEURE

  	
  25

  
	
   

  	
   

  
	
  EXHIBIT A - FORM OF PROSPER BORROWER PAYMENT
  DEPENDENT NOTE SECURITY 

  	
  A-1

  
					

 

iv

 

	
  EXHIBIT B - FORM OF OPEN MARKET BORROWER PAYMENT
  DEPENDENT NOTE 

  	
  B-1

  

 

v

 

INDENTURE
dated as of [      ], 2009, by and between Prosper
Marketplace, Inc., a Delaware corporation (“Company”),
and                            ,
a                       incorporated
and existing under the laws of the United States of America, as trustee (“Trustee”).

 

RECITALS OF THE COMPANY

 

The
Company has duly authorized the execution and delivery of this Indenture to
provide for the issuance from time to time of two separate classes of special
limited obligations of the Company referred to as Prosper Borrower Payment
Dependent Notes and Open Market Borrower Payment Dependent Notes (herein,
individually and collectively, the “Securities”), with each class to be
issued in series as in this Indenture provided.

 

For
and in consideration of the premises and the purchase of the Securities by the
Holders thereof, it is mutually covenanted and agreed, for the equal and
ratable benefit of the Holders of the Securities or each series thereof as
follows:

 

ARTICLE I

 

DEFINITIONS AND INCORPORATION BY
REFERENCE

 

Section 1.1             DEFINITIONS.

 

“ACH System” means the Automated Clearing
House system of the U.S. Federal Reserve Board or a successor system providing
electronic funds transfers between banks.

 

“Affiliate” of any specified person means any
other person directly or indirectly controlling or controlled by or under
direct or indirect common control with such specified person.  For the purposes of this definition, “Control”
when used with respect to any specified person means the power to direct or
cause the direction of the management and policies of such person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms “Controlling” and “Controlled” have meanings
correlative to the foregoing.

 

“Board of Directors” means the board of
directors of the Company or any committee of such board authorized with respect
to any matter to exercise the powers of the Board of Directors of the Company.

 

“Board Resolution” means a copy of a
resolution certified by the Secretary or an Assistant Secretary of the Company
to have been duly adopted by the Board of Directors and to be in full force and
effect on the date of such certification, and delivered to the Trustee.

 

“Borrower Loan” means a Prosper Borrower Loan
and/or Open Market Loan.

 

“Borrower Loan Net Payment,” means, with
respect to each Borrower Loan, all Borrower Loan Payments net of Other Payments
and Charges.

 

“Borrower Loan Payment,” means, with respect
to each Borrower Loan, all amounts received by the Company, and not reversed
through the ACH System or by virtue of checks returned unpaid due to
insufficient funds or for other reasons, in connection with the repayment of
such Borrower Loan, including without limitation, all payments or prepayments
of principal and interest, any late fees and any amounts received by the
Company upon collection efforts.

 

“Business Day” means, except as otherwise
specified as contemplated by Section 2.2(c), with respect to any Place of
Payment or any other particular location referred to in this Indenture or in
the Securities, each Monday, Tuesday, Wednesday, Thursday and Friday that is (1) not
a day on which the ACH System is closed and (2) not a day on which banking
institutions are authorized or obligated by law or executive order to close in
San Francisco, California or New York, New York.

 

“Capital Stock” for any corporation means any
and all shares, interests, rights to purchase, warrants, options, participations
or other equivalents of or interests in (however designated) stock issued by
that corporation.

 

“Company” means the party named as the “Company”
in the first paragraph of this Indenture until a successor replaces it pursuant
to the applicable provisions of this Indenture and, thereafter, shall mean such
successor.

 

1

 

“Company Request” or “Company Order”
means a written request or order signed in the name of the Company (i) by
its Chairman of the Board, a Vice Chairman, its Chief Executive Officer, its
President or a Vice President, and (ii) by its Treasurer, an Assistant
Treasurer, its Secretary or an Assistant Secretary, and delivered to the
Trustee or, with respect to Sections 2.1, 2.2(c), 2.3, and 6.2, any other
employee of the Company named in an Officers’ Certificate delivered to the
Trustee.

 

“Corresponding Borrower Loan” means the
Corresponding Prosper Borrower Loan and/or Corresponding Open Market Loan.

 

“Corresponding Prosper Borrower Loan” means the Prosper Borrower Loan upon
which a series of Prosper Borrower Notes is dependent for payment.

 

“Corresponding Open Market Loan” means the Open Market Loan upon which a
series of Prosper Open Market Notes is dependent for payment.

 

“Default” means any event which is, or after
notice or passage of time or both would be, an Event of Default.

 

“Deposit Account” means the deposit account, as defined in Section 9-108
of the UCC, in the name of Prosper entitled “              “,
held by the Trustee, or such additional or replacement account as may from time
to time exist, provided such account is deemed a deposit account under Section 9-108
of the UCC and is held by the Trustee.

 

“Dollar” or “$” means a dollar or
other equivalent unit in such coin or currency of the United States as at the
time shall be legal tender for the payment of public and private debts.

 

“Exchange Act” means the Securities Exchange
Act of 1934, as amended.

 

“Final Maturity” means the date to which the
Initial Maturity Date may be extended, as provided in any Security.

 

“Holder” or “Securityholder,” when
used with respect to any Security, means, the person in whose name a Security
is registered on the Registrar’s books.

 

“Indenture” means this Indenture, as amended
or supplemented from time to time in accordance with the terms hereof and shall
include the terms of a particular series of Securities established as
contemplated in Section 2.2(c).

 

“Initial Maturity Date” means the scheduled
due date on which the final installment of principal and interest is payable in
any Security.

 

“Interest Payment Date,” when used with
respect to any Security, means the Stated Maturity of an installment of
interest on such Security.

 

“Lien” means, with respect to any property or assets, any mortgage, charge,
hypothecation, pledge or other security interest or encumbrance on such
property or assets.

 

“Maturity,” when used with respect to any
Security, means the date on which an installment of Principal thereof or
interest thereon becomes due and payable as therein or herein provided, whether
at the Stated Maturity, Initial Maturity or Final Maturity, by declaration of
acceleration, or otherwise.

 

“Non-sufficient Funds Fees” means any fee
imposed by the Company or a third-party servicer or collection agency in
respect of a Borrower Loan when the Company’s payment request is denied for any
reason, including but not limited to non-sufficient funds in the borrower’s
bank account or the closing of such bank account.

 

“Officer” means the Chairman of the Board,
any Vice Chairman, the Chief Executive Officer, the President, any Vice
President, the Treasurer, the Secretary, any Assistant Treasurer or any
Assistant Secretary of the Company.

 

2

 

“Officers’ Certificate” means a written
certificate containing the information specified in Sections 9.4 and 9.6,
signed in the name of the Company (i) by its Chairman of the Board, a Vice
Chairman, its Chief Executive Officer, its President or a Vice President, and (ii) by
its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary,
and delivered to the Trustee.

 

“Open Market Loan” means a direct loan or a
retail installment sale contract sold through the Company’s platform on its
website www.prosper.com or any successor website, with a borrower that may be
an individual, corporation, partnership or other type of entity.

 

“Opinion of Counsel” means a written opinion
containing the information specified in Sections 9.4 and 9.6, from legal
counsel who is acceptable to the Trustee. 
The counsel may be an employee of, or counsel to, the Company or the
Trustee.

 

“Other Payments and Charges” means (i) any
Non-sufficient Funds Fees or fees charged to the borrower for making payments
in a manner other than as provided in the Borrower Loan, which are received by
the Company, a third-party servicer or collection agency in respect of such
Borrower Loan, and (2) attorneys’ fees or any collection fees imposed in
connection with collection efforts on a delinquent Borrower Loan by the
Company, a third-party servicer or collection agency, other than late payment
fees specifically included in Borrower Loan Payments.

 

“Payment Date” means any Principal Payment
Date or Interest Payment Date.

 

“Person” means any individual, corporation, partnership,
joint venture, association, joint-stock company, limited liability company,
trust, unincorporated organization, or government or any agency or political
subdivision thereof.

 

“Place of Payment,” when used with respect to
the Securities of any series, means the place or places where, subject to the
provisions of Section 3.5, the Principal of and any interest on the
Securities of that series are payable as specified as contemplated by Section 2.2(c).

 

“Platform” means the Company’s online auction-style
marketplace for loans that facilitates loans to borrowers, and sales of
previously-funded loans, with interest rates set through auction-style
competitive bidding among individuals or institutions who become eligible to
bid in the marketplace by registering with the Company.

 

“Principal” or “Principal Amount” of a
Security, except as otherwise specifically provided in this Indenture, means
the outstanding principal of the Security.

 

“Principal Payment Date,” when used with
respect to any Security, means the Stated Maturity of an installment of
Principal on such Security.

 

“Prosper Borrower Loan” means a direct loan
originated through the Company’s platform on its website www.prosper.com or any
successor website, with a borrower that is an individual.

 

“Prosper Borrower Notes” means the class of
special limited obligations of the Company referred to as Prosper Borrower
Payment Dependent Notes to be issued in series and authenticated and delivered
under this Indenture.

 

“Prosper Open Market Notes” means the class
of special limited obligations of the Company referred to as Open Market
Borrower Payment Dependent Notes to be issued in series and authenticated and
delivered under this Indenture.

 

“Record Date” for the amounts payable on any
Payment Date on the Securities of any series means the date specified for that
purpose as contemplated by Section 2.2(c).

 

“SEC” means the Securities and Exchange
Commission.

 

“Security” or “Securities” means
Prosper Borrower Notes and/or Prosper Open Market Notes.

 

“Securities Act” means the Securities Act of
1933, as amended.

 

3

 

“Securityholder” or “Holder,” when
used with respect to any Security, means a person in whose name a Security is
registered on the Registrar’s books.

 

“Servicing Fee” means, with respect to any
Borrower Loan, an annualized percentage rate, as specified by the Company and,
if applicable, a third-party servicer with respect to a series of Securities,
of the outstanding principal balance of the Borrower Loan.

 

“Stated Maturity,” when used with respect to
any installment of Principal thereof or interest thereon, means the date
specified in such Security as the fixed date on which an amount equal to such
installment of Principal thereof or interest thereon is due and payable.

 

“Subsidiary” means, with respect to any
person, a corporation of which a majority of the Capital Stock having voting
power under ordinary circumstances to elect a majority of the board of
directors of such corporation is owned by (i) such person, (ii) such
person and one or more Subsidiaries or (iii) one or more Subsidiaries of
such person.

 

“TIA” means the Trust Indenture Act of 1939
as in effect on the date of this Indenture, except as provided in Section 8.3.

 

“Trust Officer” means, when used with respect
to the Trustee, any officer within the corporate trust department of the
Trustee, including any vice president, assistant vice president, trust officer
or any other officer of the Trustee who customarily performs functions similar
to those performed by the Persons who at the time shall be such officers,
respectively, or to whom any corporate trust matter is referred because of such
person’s knowledge of and familiarity with the particular subject and who shall
have direct responsibility for the administration of this Indenture.

 

“Trustee” means the party named as the “Trustee”
in the first paragraph of this Indenture until a successor replaces it pursuant
to the applicable provisions of this Indenture and, thereafter, shall mean such
successor.

 

“UCC” means the Uniform Commercial Code as the same may,
from time to time, be in effect in the State of New York, except
with respect to perfection matters which shall be governed by the Uniform
Commercial Code of the relevant
jurisdiction necessary to effect the perfection of a security interest.

 

“United States” means the United States of
America, its territories, its possessions (including the Commonwealth of Puerto
Rico), and other areas subject to its jurisdiction.

 

Section 1.2             OTHER
DEFINITIONS.

 

	
  Term

  	
   

  	
  Defined in Section

  	
   

  
	
  “Bankruptcy Law”

  	
   

  	
  5.1

  	
   

  
	
  “Custodian”

  	
   

  	
  5.1

  	
   

  
	
  “Defaulted Payment”

  	
   

  	
  2.10

  	
   

  
	
  “Event of Default”

  	
   

  	
  5.1

  	
   

  
	
  “Legal Holiday”

  	
   

  	
  9.9

  	
   

  
	
  “Notice of Default”

  	
   

  	
  5.1

  	
   

  
	
  “Outstanding”

  	
   

  	
  2.8

  	
   

  
	
  “Paying Agent”

  	
   

  	
  2.4

  	
   

  
	
  “Registrar”

  	
   

  	
  2.4

  	
   

  
	
  “Collateral”

  	
   

  	
  6.12

  	
   

  

 

Section 1.3             INCORPORATION
BY REFERENCE OF TRUST INDENTURE ACT. 
Whenever this Indenture refers to a provision of the TIA, the provision
is incorporated by reference in and made a part of this Indenture.  The following TIA terms used in this
Indenture have the following meanings:

 

“Commission” means the SEC.

 

“Indenture Securities” means the Securities.

 

4

 

“Indenture Security Holder” means a
Holder or Securityholder.

 

“Indenture to be Qualified” means this
Indenture.

 

“Indenture Trustee” or “Institutional
Trustee” means the Trustee.

 

“Obligor” on the indenture securities
means the Company.

 

All other TIA terms used in this Indenture
that are defined by the TIA, defined by TIA reference to another statute or
defined by SEC rule have the meanings assigned to them by such
definitions.

 

Section 1.4                                      RULES OF
CONSTRUCTION.  Unless the context
otherwise requires:

 

(a)                                                                                  a
term has the meaning assigned to it;

 

(b)                                                                                 an
accounting term not otherwise defined has the meaning assigned to it in
accordance with generally accepted accounting principles in the United States
as in effect from time to time;

 

(c)                                                                                  “or”
is not exclusive;

 

(d)                                                                                 “including”
means including, without limitation; and

 

(e)                                                                                  words
in the singular include the plural, and words in the plural include the
singular.

 

ARTICLE
II

 

THE
SECURITIES

 

Section 2.1                                      FORMS
GENERALLY.  The Prosper Borrower
Notes of each series and the certificate of authentication in respect thereof
shall be in substantially the form set forth on Exhibit A and the
Prosper Open Market Notes of each series and the certificate of authentication
in respect thereof shall be in substantially the form set forth on Exhibit B,
each as shall be established by delivery to the Trustee of a Company Order, in
each case with such appropriate insertions, omissions, substitutions and other
variations as are required or permitted by this Indenture, and may have such
letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may, consistently herewith, be determined by the
Officers executing such Securities as evidenced by their execution of the
Securities.  The Securities shall be in
fully registered form only and shall be printed, lithographed, engraved, word
processed or evidenced in electronic form or produced by any combination of
these methods or may be produced in any other manner, all as determined by the
Officers executing such Securities as evidenced by their execution of such
Securities.

 

Section 2.2                                      TITLE,
TERMS AND DENOMINATIONS.

 

(a)                                                                                  The
aggregate Principal Amount of Securities that may be authenticated and
delivered under this Indenture shall be unlimited.

 

(b)                                                                                 To
the extent provided in, and except as otherwise permitted by, this Indenture, (1) the
Securities shall be special limited obligations of the Company and (2) no
payments of Principal and interest on the Securities of any series shall be
payable unless the Company has received Borrower Loan Payments in respect of
the Borrower Loan corresponding to such series, and then shall be payable
equally and ratably on the Securities of such series only to the extent of the
Borrower Loan Net Payments related to the Borrower Loan corresponding to such
series.  No Holder of a Security shall
have any recourse against the Company unless and then only to the extent that
the Company (1) has failed to pay such Holder the Borrower Loan Net
Payments in respect of the Borrower Loan corresponding to such Holder’s
Security or (2) has otherwise breached a covenant in this Indenture.

 

5

 

(c)                                                                                  For
each series of Securities there shall be established and, subject to Section 2.3,
set forth, or determined in the manner provided, in a Company Order:

 

(i)                                                                                     the
class of Securities (which shall distinguish the class of the Securities from
all other classes of securities);

 

(ii)                                                                                  the
title of the Securities of the series (which shall distinguish the Securities
of the series from all other Securities);

 

(iii)                                                                               the
limit upon the aggregate Principal Amount of the Securities of the series which
may be authenticated and delivered under this Indenture (except for Securities
authenticated and delivered upon registration of transfer of Securities of the
series pursuant to Sections 2.7 or 8.5);

 

(iv)                                                                              the
Borrower Loan that corresponds to Securities of the series;

 

(v)                                                                                 the
Stated Maturity and Payment Dates of the Securities of the series and the
Record Date for any amounts payable on any Payment Date;

 

(vi)                                                                              the
stated rate at which the Securities of the series shall bear interest;

 

(vii)                                                                           the
place or places where, subject to the provisions of Section 3.5, the
Principal of and or interest on Securities of the series shall be payable, any
Securities of the series may be surrendered for registration of transfer and
notices and demands to or upon the Company in respect of the Securities of the
series and this Indenture may be served;

 

(viii)                                                                        any
restrictions on the transfer or transferability of Securities of the series;

 

(ix)                                                                                the
obligation, if any, of the Company to redeem Securities of the series at the
option of a Holder thereof, the conditions, if any, giving rise to such
obligation, and the period or periods within which, the price or prices at
which and the terms and conditions upon which Securities of the series shall be
purchased, in whole or in part;

 

(x)                                                                                   the
denominations in which any Securities of the series shall be issuable;

 

(xi)                                                                                any
addition to or change in the Events of Default which apply to any Securities of
the series and any change in the right of the Trustee or the requisite Holders
of such Securities to declare the principal amount thereof due and payable
pursuant to Section 5.2;

 

(xii)                                                                             any
addition to or change in the covenants set forth in Article III which
apply to Securities of the series;

 

(xiii)                                                                          any
other terms of the series (which terms shall not be inconsistent with the
provisions of this Indenture, except as permitted by Section 8.1(g)); and

 

(xiv)                                                                         any
endorsement reflecting the transfer of any Security upon sale of such Security.

 

All Securities of a series shall be
substantially identical except as to denomination and except as may otherwise
be provided in or pursuant to a Company Order pursuant to this Section 2.2(c) or
in any indenture supplemental hereto.

 

(d)                                                                                 Prior
to the issuance of the initial series of each class of Securities under this
Indenture, a copy of the Board Resolution authorizing the execution, delivery
and performance of this Indenture, shall be certified by the Secretary or an
Assistant Secretary of the Company and delivered to the Trustee at or prior to
the delivery of an Officers’ Certificate setting forth the general terms of the
Securities.  Such Board Resolution and
Officers’ Certificate shall provide general terms for Securities and provide
either that the specific terms of each series shall be specified in a Company
Order or that such terms shall be determined by the Company, or one or more of
the Company’s agents designated in an Officers’ Certificate, in accordance with
the Company Order as contemplated by Section 2.3.

 

6

 

Section 2.3                                      EXECUTION,
AUTHENTICATION, DELIVERY AND DATING. 
The Securities shall be executed on behalf of the Company by its
Chairman of the Board, one of its Vice Chairmen, its President or one of its
Vice Presidents, or the Treasurer or any Assistant Treasurer.  The signature of any of these officers on the
Securities may be electronic, manual or facsimile.

 

Securities bearing the electronic, manual or
facsimile signatures of individuals who were at any time the proper officers of
the Company shall bind the Company, notwithstanding that such individuals or
any of them have ceased to hold such offices prior to the authentication and
delivery of such Securities or did not hold such offices at the date of such
Securities.

 

At any time and from time to time after the
execution and delivery of this Indenture (and subject to delivery of the Board
Resolution and Officers’ Certificate as set forth in Section 2.2 prior to
the issuance of the initial series of Securities), the Company may authenticate
and deliver Securities of any series and upon such authentication and delivery
shall promptly provide a record of all such Securities executed and
authenticated by the Company to the Trustee, together with a copy of the
Company Order authorizing the authentication and delivery of such Securities;

 

In addition, prior to the issuance of the
initial series of Securities, the Trustee shall receive, and shall be fully
protected in conclusively relying upon, an Opinion of Counsel stating:

 

(a)                                                                                  that
the forms of such Securities have been, and the terms of such Securities (when
established in accordance with such procedures as may be specified from time to
time in a Company Order, all as contemplated by and in accordance with a Board
Resolution pursuant to Section 2.2(d), as the case may be) will have been,
duly authorized by the Company and established in conformity with the
provisions of this Indenture;

 

(b)                                                                                 that
such Securities, when (1) executed by the Company, (2) completed,
authenticated and delivered by the Company in accordance with this Indenture,
and (3) issued by the Company in the manner and subject to any conditions
specified in such Opinion of Counsel, will constitute valid and legally binding
obligations of the Company, enforceable in accordance with their terms, subject
to customary exceptions; and

 

(c)                                                                                  that
all laws and requirements in respect of the execution and delivery by the
Company of such Securities have been complied with.

 

The Trustee may conclusively rely, as to the
authorization by the Company of any series of Securities, the form and terms
thereof and the legality, validity, binding effect and enforceability thereof,
upon the Opinion of Counsel and other documents delivered pursuant to
Sections 2.1, 2.2(c) and 2.2(d) and this Section, as applicable,
at or prior to the time of the first authentication of Securities of the
initial series of Securities unless and until it has received written
notification that such opinion or other documents have been superseded or
revoked.  In connection with the
authentication and delivery of Securities, the Trustee shall be entitled to
assume, unless it has received written notice to the contrary or any of its
Trust Officers has actual knowledge to the contrary, that the Company’s
authentication and delivery such Securities do not violate any rules,
regulations or orders of any governmental agency or commission having
jurisdiction over the Company.

 

Each Security shall be dated the date of its
authentication.

 

The Company may appoint an authenticating
agent acceptable to the Trustee to authenticate Securities.  Unless otherwise provided in the appointment,
an authenticating agent may authenticate Securities whenever the Company may do
so.  Each reference in this Indenture to
authentication by the Company includes authentication by such agent.

 

No Security shall be entitled to any benefit
under this Indenture or be valid or obligatory for any purpose unless there
appears on such Security a certificate of authentication substantially in the
form provided for herein duly executed by the Company by electronic or manual
signature of an authorized signatory, and such certificate upon any Security
shall be conclusive evidence, and the only evidence, that such Security
has been duly authenticated and delivered hereunder.  The Company’s certificate of authentication
shall be in substantially the following form:

 

7

 

This is one of
the Securities of the series designated therein referred to in the
within-mentioned Indenture.

 

	
   

  	
  PROSPER MARKETPLACE, INC.

  as Authenticating Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

Section 2.4                                      REGISTRAR AND
PAYING AGENT.  The Company shall
maintain, with respect to each series of Securities, an office or agency where
such Securities may be presented for registration of transfer or for exchange (“Registrar”)
and an office or agency where such Securities may be presented for purchase or
payment (“Paying Agent”).  The
Registrar shall keep a register of the Securities and of their transfer and
exchange.  The Company may have one or
more co-registrars and one or more additional paying agents.  The term Paying Agent includes any additional
paying agent.

 

The Company shall enter into an appropriate
agency agreement with respect to each series of Securities with any Registrar,
Paying Agent or co-registrar.  The
agreement shall implement the provisions of this Indenture that relate to such
agent.  The Company shall notify the
Trustee of the name and address of any such agent.  The Company or any Subsidiary or an Affiliate
of either of them may act as Paying Agent, Registrar or co-registrar.

 

The Company initially will serve as the
Registrar and Paying Agent in connection with such Securities.

 

Section 2.5                                      PAYING AGENT
TO HOLD MONEY AND SECURITIES IN TRUST. 
Except as otherwise provided herein, prior to or on each due date of
payments in respect of any series of Securities, the Company shall deposit with
the Paying Agent with respect to such Securities a sum of money sufficient to
make such payments when so becoming due. 
The Company shall require each Paying Agent (other than the Trustee or
the Company) to agree in writing that the Paying Agent shall hold in trust for
the benefit of Holders or the Trustee all money held by such Paying Agent for
the making of payments in respect of the Securities of such series and shall
notify the Trustee in writing of any default by the Company in making any such
payment.  At any time during the
continuance of any such default, a Paying Agent shall, upon the written request
of the Trustee, forthwith pay to the Trustee all money so held in trust with
respect to such Securities.  If the Company,
a Subsidiary or an Affiliate of either of them acts as Paying Agent for a
series of Securities, it shall segregate the money held by it as Paying Agent
with respect to such Securities.  The
Company at any time may require a Paying Agent for a series of Securities to
pay all money held by it with respect to such Securities to the Trustee and to
account for any money disbursed by it. 
Upon doing so, such Paying Agent shall have no further liability for the
money.

 

Section 2.6                                      SECURITYHOLDER
LISTS.  The Trustee shall preserve in
as current a form as is reasonably practicable the most recent list available
to it of the names and addresses of Holders of each series of Securities.  The Company shall cause to be furnished to
the Trustee at least monthly on the first business day of each month a listing
of Holders of each series of Securities dated within 15 days of the date
on which the list is furnished and at such other times as the Trustee may
request in writing a list in such form and as of such date as the Trustee may
reasonably require of the names and addresses of Securityholders of each series
of Securities.

 

Section 2.7                                      TRANSFER.  Subject to any limitations on transferability
set forth in a Security, upon surrender for registration of transfer of such
Security at the office or agency of the Company designated pursuant to Section 3.5
for such purpose in a Place of Payment, the Company shall execute, authenticate
and deliver, in the name of the designated transferee or transferees, one or
more new Securities of any authorized denomination or denominations of a like
aggregate Principal Amount and tenor. 
The Company may (1) impose a reasonable administrative fee for any
registration of transfer or exchange, which fee shall be described on the
Company’s website www.prosper.com and may be changed or waived from time to
time and (2)  require payment of a sum sufficient to pay all taxes,
assessments or other governmental charges that may be imposed in connection
with the transfer of the Securities from the Securityholder requesting such
transfer.

 

All Securities issued upon any registration
of transfer of Securities shall be the valid obligations of the Company,
evidencing the same debt, and entitled to the same benefits under this
Indenture, as the Securities surrendered upon such registration of transfer.

 

8

 

Every Security presented or surrendered for
registration of transfer shall be accompanied by a written instrument of
transfer in form satisfactory to the Company and the Registrar duly executed,
by the Holder thereof or his attorney duly electronically or in writing.

 

Section 2.8                                      OUTSTANDING
SECURITIES; DETERMINATIONS OF HOLDERS’ ACTION.  Securities of any series “Outstanding” at any
time are, as of the date of determination, all the Securities of such series
theretofore authenticated by the Company for such series except for those
cancelled by it, those delivered to it for cancellation and those described in
this Section 2.8 as not outstanding. 
A Security does not cease to be “Outstanding” because the Company or an
Affiliate thereof is the Holder of the Security; provided, however,
that in determining whether the Holders of the requisite Principal Amount of
Outstanding Securities have given or concurred in any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities owned
by the Company or any Affiliate of the Company shall be disregarded and deemed
not to be outstanding, except that, in determining whether the Trustee shall be
protected in conclusively relying upon any such request, demand, authorization,
direction, notice, consent or waiver, only Securities which a Trust Officer of
the Trustee actually knows to be so owned shall be so disregarded.  Securities so owned which have been pledged
in good faith may be regarded as Outstanding if the pledgee establishes to the
satisfaction of the Trustee the pledgee’s right so to act with respect to such
Securities and that the pledgee is not the Company or any Affiliate of the
Company.  Subject to the foregoing, only
Securities outstanding at the time of such determination shall be considered in
any such determination.

 

If the Paying Agent (other than the Company)
holds, in accordance with this Indenture, on the final Stated Maturity, money
sufficient to pay Securities payable on that date in full, then on and after
that date such Securities shall cease to be Outstanding.

 

Section 2.9                                      CANCELLATION.  All Securities surrendered for payment, or
registration of transfer, shall, if surrendered to any person other than the
Company, be delivered to the Company and all Securities so delivered shall be
promptly cancelled by it.  The Company
may at any time cancel any Securities previously authenticated and delivered
hereunder which the Company may have acquired in any manner whatsoever and may
cancel any Securities previously authenticated hereunder that the Company has
not issued and sold.  The Company may not
reissue, or issue new Securities to replace, Securities it has cancelled.

 

No Securities shall be authenticated in lieu
of or in exchange for any Securities cancelled as provided in this Section,
except as expressly permitted in the form of Securities for any particular
series or as permitted by this Indenture.

 

Section 2.10                                PAYMENTS.  Payment of Principal and interest on any
Security which is payable, and is punctually paid or duly provided for, on any
Payment Date shall be paid to the person in whose name that Security is
registered at the close of business on the Record Date for such Payment Date.

 

Any payment on any Security of any series
which is payable, but is not punctually paid or duly provided for, on any
Payment Date (herein called “Defaulted Payment”) shall forthwith cease
to be payable to the Holder on the relevant Record Date, and such Defaulted
Payment may be paid by the Company to the Holder of the Security on a record
date chosen by the Company and in any lawful manner, if, after notice given by
the Company to the Trustee of the proposed payment pursuant to this paragraph, such
manner of payment shall be deemed practicable by the Trustee.

 

Subject to the foregoing provisions of this Section and
Section 2.7, each Security delivered under this Indenture upon
registration of transfer of any other Security shall carry the rights to
payments, which were carried by such other Security.

 

Section 2.11                                PERSONS DEEMED
OWNERS.  Prior to due presentment of
a Security for registration of transfer, the Company, the Trustee and any agent
of the Company or the Trustee may treat the person in whose name such Security
is registered as the owner of such Security for the purpose of receiving
payment of Principal of and interest on such Security and for all other
purposes whatsoever, whether or not such Security be overdue, and neither the
Company, the Trustee nor any agent of the Company or the Trustee shall be
affected by notice to the contrary.

 

Section 2.12                                CUSIP NUMBERS.  The Company in issuing the Securities may use
“CUSIP” numbers (if then generally in use), and, if so, the Trustee shall use “CUSIP”
numbers in notices of redemption as a convenience to Holders; provided that any
such notice may state that no representation is made as to the correctness of
such numbers either as printed on the Securities or as contained in any notice
of a redemption and that reliance may be placed only on the other
identification numbers printed on the Securities, and any such redemption shall
not be affected by any defect in or omission of such numbers.  The Company will promptly notify the Trustee
in writing of any change in the “CUSIP” numbers.

 

9

 

ARTICLE
III

 

COVENANTS

 

Section 3.1                                      PAYMENT OF
SECURITIES.  The Company shall
promptly make all payments in respect of each series of Securities in lawful
money of the United States on the dates and in the manner provided in the
Securities but solely from the sources provided pursuant to Section 2.2(b) and,
to the extent not otherwise so provided, pursuant to this Indenture.  The Company shall have no liability or
obligation with respect to the payment of principal and interest on any
Securities except to the extent of the Borrower Loan Net Payments in respect of
the Borrower Loan corresponding to such series. 
At the Company’s option, payments of Principal or interest may be made
by check or by transfer into an account administered by the Company “for the
benefit of” the payee or to an account maintained by the Trustee.

 

Section 3.2                                      SEC REPORTS.  The Company shall file with the Trustee,
within 15 days after it files such annual and quarterly reports,
information, documents and other reports with the SEC, copies of its annual
report and of the information, documents and other reports (or copies of such
portions of any of the foregoing as the SEC may by rules and regulations prescribe)
which the Company is required to file with the SEC pursuant to Section 13
or 15(d) of the Exchange Act.  The
Company also shall comply with the other provisions of TIA Section 314(a).

 

Section 3.3                                      COMPLIANCE
CERTIFICATE; STATEMENT BY OFFICERS AS TO DEFAULT.  The Company shall deliver to the Trustee
within 120 days after the end of each fiscal year (beginning with the
fiscal year ending on December 31, 2009) an Officers’ Certificate, one of
the signers of which shall be the principal executive officer, principal
financial officer or principal accounting officer of the Company, stating
whether or not the signers know of any Default that occurred during such
period.  If they do, such Officers’
Certificate shall describe the Default and its status.

 

The Company shall deliver to the Trustee, as
soon as possible and in any event within five days after the Company becomes
aware of the occurrence of any Event of Default or an event which, with notice
or the lapse of time or both, would constitute an Event of Default, an Officers’
Certificate setting forth the details of such Event of Default or default and
the action which the Company proposes to take with respect thereto.

 

Section 3.4                                      FURTHER
INSTRUMENTS AND ACTS.  Upon request
of the Trustee, the Company will execute and deliver such further instruments
and do such further acts as may be reasonably necessary or proper to carry out
more effectively the purposes of this Indenture.

 

Section 3.5                                      MAINTENANCE OF
OFFICE OR AGENCY.  The Company will
maintain in each Place of Payment for such series an office or agency where
Securities of that series may be presented or surrendered for payment, where
Securities of that series may be surrendered for registration of transfer or
exchange and where notices and demands to or upon the Company in respect of the
Securities of that series and this Indenture may be served.  The office of the Company at 111 Sutter
Street, 22nd Floor, San Francisco, California 94104 shall
be such office or agency for all of the aforesaid purposes unless the Company
shall maintain some other office or agency for such purposes and shall give
prompt written notice to the Trustee of the location, and any change in the
location, of such other office or agency.

 

The Company may also from time to time designate
one or more other offices or agencies where the Securities of one or more
series may be presented or surrendered for any or all such purposes and may
from time to time rescind such designations; provided, however,
that no such designation or rescission shall in any manner relieve the Company
of its obligation to maintain an office or agency in accordance with the
requirements set forth above for Securities of any series for such
purposes.  The Company will give prompt
written notice to the Trustee of any such designation or rescission and of any
change in the location of any such other office or agency.

 

Section 3.6                                      BORROWER
LOAN SERVICING.

 

(a)                                                                                  With
respect to each series of Securities, the Company or a third-party servicer
shall use commercially reasonable efforts to service and collect the Borrower
Loan corresponding to such series, in good faith, accurately and in accordance
with industry standards customary for servicing loans such as the Borrower
Loans.  Notwithstanding the generality of
the foregoing, (1) referral of a delinquent Borrower Loan to a collection
agency on the 31st day of its delinquency shall be deemed to
constitute commercially reasonable servicing and collection efforts; and (2) the
Company and any third-party servicer of a Borrower 

 

10

 

Loan shall have the right, at any time and from time
to time and subject to the foregoing servicing standard, to change the Stated
Maturity of the principal of, or any installment of principal or interest on,
any Borrower Loan, or reduce the principal amount thereof or the rate of
interest thereon or change the Place of Payment where, or change the coin or
currency in which, any installment of principal and interest on any such
Security is payable or impair the right to institute suit for the enforcement
of any such payment on or after the Stated Maturity thereof, or amend or waive
any term of such Borrower Loan, or write off and cancel such Borrower Loan
without the consent of any Holder of any Securities of the series corresponding
to such Borrower Loan.

 

(b)                                                                                 With
respect to each series of Securities, the Company shall use commercially
reasonable efforts to maintain backup servicing arrangements providing for the
Borrower Loan corresponding to such series to be serviced and collected in good
faith, accurately and in accordance with industry standards customary for
servicing loans such as the Borrower Loans.

 

ARTICLE
IV

 

SUCCESSOR
CORPORATION

 

Section 4.1                                      WHEN COMPANY MAY MERGE
OR TRANSFER ASSETS.  The Company
shall not consolidate with or merge with or into any other person or convey,
transfer or lease its properties and assets substantially as an entirety to any
person, unless:

 

(a)                                                                                  either
(1) the Company shall be the continuing corporation or (2) the person
(if other than the Company) formed by such consolidation or into which the
Company is merged or the person which acquires by conveyance, transfer or lease
the properties and assets of the Company substantially as an entirety (i) shall
be a corporation, limited liability company, partnership or trust organized and
validly existing under the laws of the United States or any state thereof or
the District of Columbia and (ii) shall expressly assume, by an indenture
supplemental hereto, executed and delivered to the Trustee, in form
satisfactory to the Trustee, all of the obligations of the Company under the
Securities and this Indenture;

 

(b)                                                                                 immediately
after giving effect to such transaction, no Default shall have occurred and be
continuing; and

 

(c)                                                                                  the
Company shall have delivered to the Trustee an Officers’ Certificate and an
Opinion of Counsel, each stating that such consolidation, merger, conveyance,
transfer or lease and, if a supplemental indenture is required in connection
with such transaction, such supplemental indenture, comply with this Article and
that all conditions precedent herein provided for relating to such transaction
have been satisfied.

 

The successor person formed by such
consolidation or into which the Company is merged or the successor person to
which such conveyance, transfer or lease is made shall succeed to, and be
substituted for, and may exercise every right and power of the Company under
this Indenture with the same effect as if such successor had been named as the
Company herein; and thereafter, except in the case of a lease of its properties
and assets substantially as an entirety, the Company shall be discharged from
all obligations and covenants under this Indenture, and the Securities.

 

ARTICLE
V

 

DEFAULTS
AND REMEDIES

 

Section 5.1                                      EVENTS
OF DEFAULT.  Unless otherwise
specified as contemplated by Section 2.2(c) with respect to any
series of securities, an “Event of Default” occurs, with respect to each
series of the Securities individually, if:

 

(a)                                                                                  the
Company defaults, subject in each case, to the limitations set forth in
Sections 2.2(b) and 3.1 and in the Securities in the payment of any
Principal of, or interest upon, any Security of such series when the same
becomes due and payable and continuance of such default for a period of
30 days;

 

(b)                                                                                 the
Company fails to comply with any of its agreements in the Securities or this
Indenture (other than those referred to in clause (a) above and other than
a covenant or warranty a default in whose performance or whose breach is elsewhere
in this Section specifically dealt with or which has been expressly
included in this Indenture solely for the benefit of a series of Securities
other than such series) and such failure continues for 90 days after
receipt by the Company of a Notice of Default; 

 

11

 

provided, however, that if
the Company shall proceed to take curative action which, if begun and
prosecuted with due diligence, cannot be completed within a period of
90 days, then such period shall be increased to such extent as shall be
necessary to enable the Company diligently to complete such curative action;

 

(c)                                                                                  there
shall have been the entry by a court of competent jurisdiction of (i) a
decree or order for relief in respect of the Company in an involuntary case or
proceeding under any applicable Bankruptcy Law or (ii) a decree or order
adjudging the Company bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment or composition of or in respect of the Company under any
applicable federal or state law, or appointing a custodian, receiver,
liquidator, assignee, trustee, sequestrator (or other similar official) of the
Company or of any substantial part of its property, or ordering the wind up or
liquidation of its affairs, and any such decree or order for relief shall
continue to be in effect, or any such other decree or order shall be unstayed
and in effect, for a period of 60 consecutive days;

 

(d)                                                                                 (i) the
Company commences a voluntary case or proceeding under any applicable
Bankruptcy Law or any other case or proceeding to be adjudicated bankrupt or
insolvent, (ii) the Company consents to the entry of a decree or order for
relief in respect of the Company in an involuntary case or proceeding under any
applicable Bankruptcy Law or to the commencement of any bankruptcy or
insolvency case or proceeding against it, (iii) the Company files a
petition or answer or consent seeking reorganization or substantially
comparable relief under any applicable federal state law, (iv) the Company
(1) consents to the filing of such petition or the appointment of, or
taking possession by, a custodian, receiver, liquidator, assignee, trustee,
sequestrator or similar official of the Company or of any substantial part of
its property, (2) makes an assignment for the benefit of creditors or (3) admits
in writing its inability to pay its debts generally as they become due or (v) the
Company takes any corporate action in furtherance of any such actions in this
clause (d); or

 

(e)                                                                                  any
other Event of Default specifically provided with respect to Securities of that
series occurs.

 

“Bankruptcy Law” means Title 11, United
States Code, or any similar federal or state law for the relief of
debtors.  “Custodian” means any receiver,
trustee, assignee, liquidator, custodian or similar official under any
Bankruptcy Law.

 

A Default under clause (b) above is not
an Event of Default until the Trustee notifies the Company, or the Holders of
at least 25% in aggregate Principal Amount of the Outstanding Securities of all
series for which such Default exists notify the Company and the Trustee, of the
Default and the Company does not cure such Default within the time specified in
clause (b) above after receipt of such notice.  Any such notice must specify the Default, demand
that it be remedied and state that such notice is a “Notice of Default.”

 

Section 5.2                                      ACCELERATION.  If an Event of Default specified in Section 5.1(c) or
(d) occurs and is continuing, the Principal (or portion thereof) of all
the Securities shall become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any Securityholders,
notwithstanding the second sentence of Section 3.1 hereof and without
respect to whether there are or will be Borrower Loan Net Payments in respect
of the Borrower Loans corresponding to the Securities.  The Holders of a majority in aggregate
Principal Amount of all Outstanding Securities, by notice to the Trustee (and
without notice to any other Securityholder) may rescind an acceleration and its
consequences if (a) the rescission would not conflict with any judgment or
decree, and (b) all Events of Default specified in Section 5.1(c) or
(d) have been cured or waived.  No
such rescission shall affect any subsequent Default or impair any right
consequent thereto.  For avoidance of
doubt, there shall be no acceleration of the Principal (or portion thereof) of
any Securities upon the occurrence of and Event of Default other than an Event
of Default specified in Section 5.1(c) or (d).

 

Section 5.3                                      OTHER REMEDIES.  If an Event of Default with respect to a
series of Outstanding Securities occurs and is continuing, the Trustee may
pursue any available remedy to (a) collect the payment of the whole amount
then due and payable on such Securities for Principal and interest, with
interest upon the overdue Principal and, to the extent that payment of such
interest shall be legally enforceable, upon overdue installments of interest
from the date such interest was due, at the rate or rates prescribed therefor
in such Securities and, in addition thereto, such further amount as shall be
sufficient to cover the costs and expenses of collection, including amounts due
the Trustee under Section 6.7, (b) exercise any and all rights of a
secured party under the UCC and other applicable law pursuant to the security
interest granted to the Trustee under Section 6.12, or (c) enforce
the performance of any provision of the Securities or this Indenture.

 

The Trustee may maintain a proceeding even if
the Trustee does not possess any of the Securities or does not produce any of
the Securities in the proceeding.  A
delay or omission by the Trustee or any Securityholder in exercising any right
or remedy accruing upon an Event of Default shall not impair the right or remedy
or constitute a waiver of, or acquiescence in, the Event of Default.  No remedy is exclusive of any other
remedy.  All available remedies are
cumulative.

 

12

 

Section 5.4                                      WAIVER OF PAST
DEFAULTS.  The Holders of a majority
in aggregate Principal Amount of the Outstanding Securities of any series, by
notice to the Trustee (and without notice to any other Securityholder), may on
behalf of the Holders of all the Securities of such series waive an existing Default
with respect to such series and its consequences except (a) an Event of
Default described in Section 5.1(a) with respect to such series or (b) a
Default in respect of a provision that under Section 8.2 cannot be amended
without the consent of the Holder of each Outstanding Security of such series
affected.  When a Default is waived, it
is deemed cured, but no such waiver shall extend to any subsequent or other
Default or impair any consequent right.

 

Section 5.5                                      CONTROL BY
MAJORITY.  The Holders of a majority
in aggregate Principal Amount of the Outstanding Securities may direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee or of exercising any trust or power conferred on the Trustee with
respect to the Securities.  However, the
Trustee may refuse to follow any direction that conflicts with law or this
Indenture or that the Trustee determines in good faith is unduly prejudicial to
the rights of other Securityholders or would involve the Trustee in personal
liability.

 

Section 5.6                                      LIMITATION
ON SUITS.  A Holder of any Security
of any series may not pursue any remedy with respect to this Indenture or the
Securities unless:

 

(a)                                                                                  the
Holder gives to the Trustee written notice stating that an Event of Default
with respect to the Securities of that series is continuing;

 

(b)                                                                                 the
Holders of at least 25% in aggregate Principal Amount of the Outstanding
Securities of that series make a written request to the Trustee to pursue the
remedy;

 

(c)                                                                                  such
Holder or Holders offer to the Trustee security or indemnity satisfactory to it
against any loss, liability or expense satisfactory to the Trustee;

 

(d)                                                                                 the
Trustee does not comply with the request within 60 days after receipt of
the notice, the request and the offer of security or indemnity; and

 

(e)                                                                                  the
Holders of a majority in aggregate Principal Amount of the Outstanding
Securities of that series do not give the Trustee a direction inconsistent with
such request during such 60-day period.

 

A Securityholder may not use this Indenture
to prejudice the rights of any other Securityholder or to obtain a preference
or priority over any other Securityholder (it being understood that the Trustee
does not have an affirmative duty to ascertain whether or not such actions or
forbearances are unduly prejudicial to such Holders).

 

Section 5.7                                      RIGHTS OF
HOLDERS TO RECEIVE PAYMENT.  Subject
to Section 3.6(a), the right, which is absolute and unconditional, of any
Holder of any Security to receive payment of the Principal of and interest on
(subject to Sections 2.2(b) and 2.10) such Security on the Stated
Maturity or Maturities expressed in such Security held by such Holder, on or
after the respective due dates expressed in the Securities, or to bring suit
for the enforcement of any such payment on or after such respective dates,
shall not be impaired or affected adversely without the consent of each such
Holder.

 

Section 5.8                                      COLLECTION
SUIT BY TRUSTEE.  If an Event of
Default described in Section 5.1(1) with respect to Securities of any
series occurs and is continuing, the Trustee may recover judgment in its own
name and as trustee of an express trust against the Company for the whole
amount owing with respect to such series of Securities and the amounts provided
for in Section 6.7.

 

Section 5.9                                      TRUSTEE MAY FILE
PROOFS OF CLAIM.  In case of the
pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relative to the Company or any other obligor upon the Securities or
the property of the Company or of such other obligor or their creditors, the
Trustee (irrespective of whether the Principal of the Securities shall then be
due and payable as therein expressed or by declaration or otherwise and irrespective
of whether the Trustee shall have made any demand on the Company for the
payment of overdue Principal or interest) shall be entitled and empowered, by
intervention in such proceeding or otherwise,

 

(a)                                  to
file and prove a claim for the whole amount of Principal and interest owing and
unpaid in respect of the Securities and to file such other papers or documents
as may be necessary or advisable in order to have the claims of the 

 

13

 

Trustee (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel and any other amount due the Trustee under Section 6.7) and of
the Holders of Securities allowed in such judicial proceeding,

 

(b)                                                                                 to
terminate the Company’s rights to service the Borrower Loans and require the
substitution of a backup servicer in place of the Company, and

 

(c)                                                                                  to
collect and receive any moneys or other property payable or deliverable on any
such claims and to distribute the same; and any custodian, receiver, assignee,
trustee, liquidator, sequestrator or similar official in any such judicial
proceeding is hereby authorized by each Holder of Securities to make such
payments to the Trustee and, in the event that the Trustee shall consent to the
making of such payments directly to the Holders of Securities, to pay the
Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any
other amounts due the Trustee under Section 6.7.

 

Nothing herein contained shall be deemed to
authorize the Trustee or the holders of Securities to authorize or consent to
or accept or adopt on behalf of any Holder of a Security any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder of a Security in any such proceeding.

 

Section 5.10                                PRIORITIES.  If the Trustee collects any money pursuant to
this Article V, it shall pay out the money in the following order and, in
case of the distribution of such money on account of Principal or interest,
upon presentation of the Securities, or both, as the case may be, and the
notation thereon of the payment if only partially paid and upon surrender
thereof if fully paid:

 

FIRST: to the Trustee for amounts due under Section 6.7;

 

SECOND: to Securityholders for amounts due
and unpaid for the Principal and interest on the Securities in respect of which
or for the benefit of which such money has been collected, ratably, without
preference or priority of any kind, according to the amounts due and payable on
such Securities for Principal and interest, respectively; and

 

THIRD: the balance, if any, to the Company.

 

The Trustee may fix a record date and payment
date for any payment to Securityholders pursuant to this Section 5.10.  At least 15 days before such record
date, the Company shall mail or electronically transmit to each Securityholder
and the Trustee a notice that states the record date, the payment date and
amount to be paid.

 

Section 5.11                                UNDERTAKING FOR
COSTS.  In any suit for the
enforcement of any right or remedy under this Indenture or in any suit against
the Trustee for any action taken or omitted by it as Trustee, a court in its
discretion may require the filing by any party litigant (other than the
Trustee) in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys’ fees and expenses, against any party litigant in the suit, having
due regard to the merits and good faith of the claims or defenses made by the
party litigant.  This Section 5.11
does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 5.7
or a suit by Holders of more than 10% in aggregate Principal Amount of the
Outstanding Securities of any series, or to any suit instituted by any Holder
of any Security or coupon for the enforcement of the payment of the Principal of
or interest on any Security or the payment of any coupon on or after the Stated
Maturity or Maturities expressed in such Security.

 

Section 5.12                                WAIVER OF STAY,
EXTENSION OR USURY LAWS.  The Company
covenants (to the extent that it may lawfully do so) that it will not at any
time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay or extension law or any usury or other law
wherever enacted, now or at any time hereafter in force, which may affect the
covenants or the performance of this Indenture; and the Company (to the extent
that it may lawfully do so) hereby expressly waives all benefit or advantage of
any such law, and covenants that it will not hinder, delay or impede the
execution of any power herein granted to the Trustee, but will suffer and
permit the execution of every such power as though no such law had been
enacted.

 

14

 

ARTICLE
VI

TRUSTEE

 

Section 6.1             DUTIES OF TRUSTEE.

 

(a)                           If
an Event of Default has occurred and is continuing, the Trustee shall exercise
the rights and powers vested in it by this Indenture and use the same degree of
care and skill in its exercise as a prudent person would exercise or use under
the circumstances in the conduct of his or her own affairs.

 

(b)                           Except during the
continuance of an Event of Default with respect to Securities of any series:

 

(i)                            the
Trustee need perform only those duties that are specifically set forth in this
Indenture and no implied covenants or obligations shall be read into this
Indenture against the Trustee; and

 

(ii)                           in
the absence of bad faith on its part, the Trustee may conclusively rely, as to
the truth of the statements and the correctness of the opinions expressed
therein, upon certificates or opinions furnished to the Trustee and conforming
to the requirements of this Indenture. 
However, in the case of any such certificates or opinions which by any
provision hereof are specifically required to be furnished to the Trustee, the
Trustee shall be under a duty to examine the same to determine whether or not
they conform to the requirements of this Indenture (but need not confirm or
investigate the accuracy of mathematical calculations or other facts stated
therein).

 

(c)                           The Trustee may not
be relieved from liability for its own negligent action, its own negligent
failure to act or its own willful misconduct, except that:

 

(i)                            this
paragraph (c) does not limit the effect of paragraph (b) of this Section 6.1;

 

(ii)                           the
Trustee shall not be liable for any error of judgment made in good faith by a
Trust Officer unless it is proved that the Trustee was negligent in
ascertaining the pertinent facts; and

 

(iii)                          the
Trustee shall not be liable with respect to any action it takes or omits to
take in good faith in accordance with a direction received by it pursuant to Section 5.5
or exercising any trust or power conferred upon the Trustee under this
Indenture.

 

(d)                           Every
provision of this Indenture that in any way relates to the Trustee is subject
to paragraphs (a), (b), (c) and (e) of this Section 6.1.

 

(e)                           The
Trustee may refuse to perform any duty or exercise any right or power or extend
or risk its own funds or otherwise incur any financial liability unless it
receives indemnity satisfactory to it against any loss, liability or expense.

 

(f)                            Money
held by the Trustee in trust hereunder need not be segregated from other funds
except to the extent required by law. 
The Trustee shall not be liable for any interest on any money received
by it except as the Trustee may otherwise agree in writing with the Company.

 

Section 6.2             RIGHTS OF TRUSTEE.

 

(a)                           The
Trustee may conclusively rely on any document believed by it to be genuine and
to have been signed or presented by the proper person.  The Trustee need not investigate any fact or
matter stated in the document.

 

(b)                           Before
the Trustee acts or refrains from acting, it may require an Officers’
Certificate or an Opinion of Counsel. 
The Trustee shall not be liable for any action it takes or omits to take
in good faith in reliance on such Officers’ Certificate or Opinion of Counsel.

 

(c)                           The
Trustee shall not be liable for any action it takes or omits to take in good
faith which it believes to be authorized or within its rights or powers.

 

15

 

(d)                           The
Trustee may conclusively rely and shall be protected in acting or refraining
from acting upon any resolution, Officers’ Certificate, Opinion of Counsel (or
both), Company Order or any other certificate, statement, instrument, opinion,
report, notice, request, consent, order, bond, debenture, note, coupon,
security or other paper believed to be genuine and to have been signed or
presented by the proper party or parties.

 

(e)                           Any
request, direction, order or demand of the Company mentioned herein shall be
sufficiently evidenced by an Officers’ Certificate (unless other evidence in
respect thereof be herein specifically prescribed); and any resolution of the
Board of Directors may be evidenced to the Trustee by a copy thereof certified
by the secretary or an assistant secretary of the Company.

 

(f)                            The
Trustee may consult with counsel of its selection and any advice or Opinion of
Counsel shall be full and complete authorization and protection in respect of
any action taken, suffered or omitted to be taken by it hereunder in good faith
and in reliance thereon in accordance with such advice or Opinion of Counsel.

 

(g)                           The
Trustee shall be under no obligation to exercise any of the trusts or powers
vested in it by this Indenture at the request, order or direction of any of the
Securityholders pursuant to the provisions of this Indenture, unless such
Securityholders shall have offered to the Trustee security or indemnity
satisfactory to it against the costs, expenses and liabilities which might be
incurred therein or thereby.

 

(h)                           Prior
to the occurrence of an Event of Default hereunder and after the curing or
waiving of all Events of Default, the Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent, order,
approval, appraisal, bond, debenture, note, security or other paper or document
unless requested in writing to do so by the Holders of not less than a majority
in the aggregate principal amount of the Securities of such series then
Outstanding; provided, that, if the payment within a reasonable time to the
Trustee of the costs, expenses or liabilities likely to be incurred by it in
the making of any such investigation is, in the opinion of the Trustee, not
reasonably assured to the Trustee by the security afforded to it by the terms
of this Indenture, the Trustee may require indemnity satisfactory to it against
such expense or liabilities as a condition to proceeding; the reasonable
expense of every such investigation shall be paid by the Company or, if paid by
the Trustee or any predecessor trustee, shall be repaid by the Company upon
demand.

 

(i)                            The
Trustee may execute any of the trusts or powers hereunder or perform any duties
hereunder either directly or by or through agents or attorneys not regularly in
its employ and the Trustee shall not be responsible for any misconduct or negligence
on the part of any such agent or attorney appointed with due care by it
hereunder.

 

(j)                            The
Trustee shall not be liable for any action taken, suffered, or omitted to be
taken by it in good faith and reasonably believed by it to be authorized or within
the discretion or rights or powers conferred upon it by this Indenture.

 

(k)                           In
no event shall the Trustee be responsible or liable for special, indirect,
punitive or consequential loss or damage of any kind whatsoever (including, but
not limited to, loss of profit) irrespective of whether the Trustee has been
advised of the likelihood of such loss or damage and regardless of the form of
action.

 

(l)                            The
Trustee shall not be deemed to have notice of any Default or Event of Default
unless a Trust Officer of the Trustee has actual knowledge thereof or unless
written notice of any event which is in fact such a default is received by the
Trustee at the designated corporate trust office of the Trustee, and such
notice references the Securities and this Indenture.

 

(m)                          The
rights, privileges, protections, immunities and benefits given to the Trustee,
including, without limitation, its right to be indemnified, are extended to,
and shall be enforceable by, the Trustee in each of its capacities hereunder,
and each agent, custodian and other Person employed to act hereunder.

 

(n)                           The
Trustee shall not be required to give any bond or surety in respect of the
performance of its powers and duties hereunder.

 

(o)                           The
Trustee may request that the Company deliver a certificate setting forth the
names of individuals and/or titles of officers authorized at such time to take
specified actions pursuant to this Indenture.

 

16

 

Section 6.3             INDIVIDUAL
RIGHTS OF TRUSTEE, ETC.  The Trustee
in its individual or any other capacity may become the owner or pledgee of
Securities and may otherwise deal with the Company or its Affiliates with the
same rights it would have if it were not Trustee.  Any Paying Agent, Authenticating Agent, Registrar
or co-registrar or any other agent of the Company may do the same with like
rights.  However, the Trustee must comply
with Sections 6.10 and 6.11.

 

Section 6.4             TRUSTEE’S
DISCLAIMER.  The recitals contained
herein and in the Securities shall be taken as the statements of the Company,
and the Trustee assumes no responsibility for the correctness of the same.  The Trustee makes no representation as to the
validity or adequacy of this Indenture or the Securities.  The Trustee shall not be accountable for the
Company’s use of the proceeds from the Securities and, shall not be responsible
for any statement in the registration statement for the Securities under the
Securities Act of 1933, as amended, or in the Indenture or the Securities or
for the determination as to which beneficial owners are entitled to receive any
notices hereunder.

 

Section 6.5             NOTICE
OF DEFAULTS.  If a Default with
respect to the Securities of any series occurs and is continuing and if it is
known to the Trustee, the Trustee shall give to each Holder of Securities of
such series notice of such Default in the manner set forth in TIA Section 315(b) within
90 days after it occurs.  Except in
the case of a Default described in Section 5.1(a) with respect to any
Security of such series or a Default in the payment of any sinking fund
installment with respect to any Security of such series, the Trustee may
withhold the notice if and so long as a committee of its Trust Officers in good
faith determines that withholding the notice is in the interests of the Holders
of Securities of such series.

 

Section 6.6             REPORTS
BY TRUSTEE TO HOLDERS.  If required
by Section 313(a) of the TIA, within 60 days after each May 15
beginning with the May 15 following the date of this Indenture, the
Trustee shall mail or transmit electronically to each Holder of Securities a
brief report dated as of such May 15 that complies with TIA Section 313(a).  ). If the Trustee is required to prepare such
report pursuant to Section 313(a) of the TIA and if it chooses to
transmit such report electronically, the Trustee appoints the Company, and the
Company agrees to act as the Trustee’s agent to transmit such report
electronically to each Holder of Securities and to the SEC as provided in the
immediately following paragraph. Promptly following such transmissions, the
Company shall certify, in writing, to the Trustee that it has effected each of
such transmissions to Holders of Securities and to the SEC. The Trustee also
shall comply with TIA Section 313(b) and (c).

 

A copy of each report at the time of its
mailing or transmission to Holders of Securities shall be filed with the SEC.

 

Section 6.7             COMPENSATION AND INDEMNITY.  The Company agrees:

 

(a)                           to
pay to the Trustee from time to time such compensation as shall be agreed in
writing between the Company and the Trustee for all services rendered by it
hereunder (which compensation shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust);

 

(b)                           to
reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in accordance with
any provision of this Indenture (including the reasonable compensation and the
expenses, advances and disbursements of its agents and counsel), except any
such expense, disbursement or advance as may be attributable to its negligence
or willful misconduct; and

 

(c)                           to
indemnify the Trustee for, and to hold it harmless against, any and all loss,
liability, damage, claim or expense incurred without negligence or willful
misconduct on its part, arising out of or in connection with the acceptance or
administration of this trust, including the costs and expenses of defending
itself against any claim (whether asserted by the Company, a Holder or any
other Person) or liability in connection with the exercise or performance of
any of its powers or duties hereunder.

 

To secure the Company’s payment obligations
in this Section 6.7, the Trustee shall have a lien prior to the Securities
on all money or property held or collected by the Trustee, except that held in
trust to pay the Principal of or interest, if any, on particular Securities.

 

The Company’s obligations pursuant to this Section 6.7
shall survive the discharge or other termination of this Indenture or the
resignation or removal of the Trustee. 
When the Trustee incurs expenses after the occurrence of a Default
specified in Section 5.1(c) or (d), the expenses are intended to
constitute expenses of administration under any Bankruptcy Law.

 

17

 

Section 6.8             REPLACEMENT
OF TRUSTEE.  The Trustee may resign
by so notifying the Company; PROVIDED, HOWEVER, no such resignation shall be
effective until a successor Trustee has accepted its appointment pursuant to
this Section 6.8.  The Holders of a
majority in aggregate Principal Amount of the Outstanding Securities at the
time outstanding may remove the Trustee with respect to the Securities by so
notifying the Trustee and may appoint a successor Trustee, which successor
Trustee shall, in the absence of an Event of Default, be reasonably acceptable
to the Company.  The Company shall remove
the Trustee if:

 

(a)                           the
Trustee fails to comply with Section 6.10;

 

(b)                           the
Trustee is adjudged bankrupt or insolvent;

 

(c)                           a
receiver or public officer takes charge of the Trustee or its property; or

 

(d)                           the
Trustee otherwise becomes incapable of acting.

 

If the Trustee resigns or is removed or if a
vacancy exists in the office of Trustee for any reason, with respect to the
Securities of one or more series, the Company shall promptly appoint, by
resolution of its Board of Directors, a successor Trustee with respect to the
Securities of that or those series (it being understood that any such successor
Trustee may be appointed with respect to the Securities of one or more or all
of such series and that at any time there shall be only one Trustee with
respect to the Securities of any series).

 

In the case of the appointment hereunder of a
successor Trustee with respect to all Securities, every such successor Trustee
shall deliver a written acceptance of its appointment to the retiring Trustee
and to the Company.  Thereupon, the
resignation or removal of the retiring Trustee shall become effective and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture.  The successor
Trustee shall mail or electronically transmit a notice of its succession to
Holders of Securities of the particular series with respect to which such
successor Trustee has been appointed. 
The retiring Trustee shall promptly transfer all property held by it as
Trustee to the successor Trustee, subject to the lien provided for in Section 6.7.

 

In case of the appointment hereunder of a
successor Trustee with respect to the Securities of one or more (but not all)
series, the Company, the retiring Trustee and each successor Trustee with
respect to the Securities of one or more series shall execute and deliver an
indenture supplemental hereto wherein each successor Trustee shall accept such
appointment and which (1) shall contain such provisions as shall be
necessary or desirable to transfer and confirm to, and to vest in, each
successor Trustee all the rights, powers, trusts and duties of the retiring
Trustee with respect to the Securities of that or those series to which the
appointment of such successor Trustee relates, (2) if the retiring Trustee
is not retiring with respect to all Securities, shall contain such provisions
as shall be deemed necessary or desirable to confirm that all the rights,
powers, trusts and duties of the retiring Trustee with respect to the
Securities of that or those series as to which the retiring Trustee is not
retiring shall continue to be vested in the retiring Trustee, and (3) shall
add to or change any of the provisions of this Indenture as shall be necessary
to provide for or facilitate the administration of the trusts hereunder by more
than one Trustee, it being understood that nothing herein or in such
supplemental indenture shall constitute such Trustees as co-Trustees of the
same trust and that each such Trustee shall be trustee of a trust or trusts
hereunder separate and apart from any trust or trusts hereunder administered by
any other such Trustee; and upon the execution and delivery of such supplemental
indenture the resignation or removal of the retiring Trustee shall become
effective to the extent provided therein and each such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee with respect to the
Securities of that or those series to which the appointment of such successor
Trustee relates; but, on request of the Company or any successor Trustee, such
retiring Trustee shall duly assign, transfer and deliver to such successor
Trustee all property and money held by such retiring Trustee hereunder with
respect to the Securities of that or those series to which the appointment of
such successor Trustee relates, subject, nevertheless, to its lien, if any,
provided for in Section 6.7.

 

If a successor Trustee with respect to the
Securities of any series does not take office within 30 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or
the Holders of a majority in aggregate Principal Amount of the Outstanding
Securities of such series at the time outstanding may petition, at the expense
of the Company, any court of competent jurisdiction for the appointment of a
successor Trustee with respect to the Securities of such series.

 

If the Trustee fails to comply with Section 6.10,
any Holder of a Security of such series may petition any court of competent
jurisdiction for the removal of such Trustee and the appointment of a successor
Trustee.

 

18

 

Section 6.9             SUCCESSOR
TRUSTEE BY MERGER.  If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all its corporate trust business or assets to, another corporation, the
resulting, surviving or transferee corporation without any further act shall be
the successor Trustee.

 

Section 6.10           ELIGIBILITY;
DISQUALIFICATION.  The Trustee shall
at all times satisfy the requirements of TIA Section 310(a)(1) and
310(a)(5).  The Trustee shall have a
combined capital and surplus of at least $50,000,000 as set forth in its most
recent published annual report of condition. 
The Trustee shall comply with TIA Section 310(b), including the
optional provision permitted by the second sentence of TIA Section 310(b)(9).  In determining whether the Trustee has
conflicting interests as defined in TIA Section 310(b)(1), the provisions
contained in the proviso to TIA Section 310(b)(1) shall be deemed
incorporated herein.

 

Section 6.11           PREFERENTIAL
COLLECTION OF CLAIMS AGAINST COMPANY. 
The Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b).  A Trustee who has resigned or been removed
shall be subject to TIA Section 311(a) to the extent indicated
therein.

 

Section 6.12           SECURITY
INTEREST.  The Company hereby
pledges, assigns and grants to the Trustee, as security for the due payment and
performance of all the Company’s obligations under this Indenture for the
Securities, for the benefit of the Trustee on behalf of the Holders, a security
interest in and to all of its right, title and interest, whether now or
hereafter existing or acquired, in the following: (a) the Company’s right
to payment under the Corresponding Borrower Loans, (b) the Deposit Account
and all money and other property from time to time credited to the Deposit
Account, (c) all money, cash, instruments, interest, income and other
property from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of the foregoing held for the benefit
and security of the Holders of the Securities, (d) all present and
continuing right, power and authority of the Company, in the name and on behalf
of the Company, as agent and attorney-in-fact, or otherwise, to make claim for
and demand performance on, under or pursuant to any of the foregoing held for
the benefit and security of the Holders of the Securities, to bring actions and
proceedings thereunder or for the specific or other enforcement thereof, or
with respect thereto, to make all waivers and agreements, to grant or refuse
requests, to give or withhold notices, and to exercise all rights, remedies,
powers, privileges and options, to grant or withhold consents and approvals and
do any and all things and exercise all other discretionary rights, options,
privileges or benefits which the Company is or may become entitled to do with
respect to the foregoing held for the benefit of the Holders of the Securities
without notice to, consent or approval by or joinder of the Company, and (e) all
revenues, issues, products, accessions, substitutions, replacements, profits
and proceeds of and from all the foregoing (the “Collateral”).  At the expense of the Company, the Company
agrees to execute, deliver and file such further agreements, instruments and
certificates as may be necessary to preserve, perfect and protect the title and
interests of the Trustee on behalf of the Holders of the Securities, including
but not limited to, the execution by the Company of an instrument of assignment
to the Trustee and the execution by the Company and the filing of financing
statements pursuant to the UCC. The Company shall, at its expense, do any
further acts and execute, acknowledge, deliver, file, register and record any
further documents as are necessary in order to protect the Trustee’s title to
and first priority perfected security interest in the Collateral, subject to no
Liens or charges of any type whatsoever except for Liens pursuant to and
permitted by this Indenture.

 

In furtherance of the grant of the security
interest in the Collateral for the Securities, upon and during continuance of
an Event of Default, the Company grants to the Trustee on behalf of the Holders
the full, exclusive and irrevocable right, power and authority to exercise any and
all rights of the Company with respect to the Collateral held for the benefit
of the Holders of Securities, and each contract, agreement or other document or
instrument included therein.  The Trustee
agrees that, except upon and during the continuance of an Event of Default, it
shall not exercise the power of attorney, or any rights granted to the Trustee
pursuant to this Section 6.12.

 

ARTICLE
VII

 

SATISFACTION AND DISCHARGE

 

Section 7.1             DISCHARGE
OF LIABILITY ON SECURITIES.  This
Indenture shall upon Company Request cease to be of further effect as to all
Outstanding Securities or all Outstanding Securities of any series, as the case
may be (except as to any surviving rights of registration of transfer of
Securities herein expressly provided for), and the Trustee, at the expense of
the Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when:

 

19

 

(a)                           either

 

(i)                            all
Outstanding Securities or all Outstanding Securities of any series, as the case
may be, theretofore authenticated and delivered, (other than Securities or
Securities of such series, as the case may be, for whose payment money has
theretofore been deposited in trust or segregated and held in trust by the
Company and thereafter repaid to the Company or discharged from such trust, as
provided in Section 7.2) have been delivered to the Company or the Trustee
for cancellation; or

 

(ii)                           all such Securities
not theretofore delivered to the Company or the Trustee for cancellation,

 

(1)                           have
become due and payable, or

 

(2)                           will
become due and payable at their Stated Maturity within one year;

 

and
the Company, in the case of (1) or (2) above, has deposited or caused
to be deposited with the Trustee as trust funds in trust for the purpose, an
amount sufficient to pay and discharge the entire indebtedness on such
Securities not theretofore delivered to the Trustee or the Company for
cancellation, for principal and any interest to the date of such deposit (in the
case of Securities which have become due and payable) or to the Stated
Maturity, as the case may be;

 

(b)                           the
Company has paid or caused to be paid all other sums payable hereunder by the
Company; and

 

(c)                           the
Company has delivered to the Trustee an Officers’ Certificate and an Opinion of
Counsel, each stating that all conditions precedent herein provided for
relating to the satisfaction and discharge of this Indenture have been complied
with.

 

The Trustee shall join in the execution of a
document prepared by the Company acknowledging satisfaction and discharge of
this Indenture on demand of the Company accompanied by an Officers’ Certificate
and Opinion of Counsel and at the cost and expense of the Company.

 

Notwithstanding the satisfaction and
discharge of this Indenture with respect to the Securities of any series, the
obligations of the Company to the Trustee with respect to the Securities of
that series under Section 6.7, the obligations of the Company to any
Authenticating Agent and, if money shall have been deposited with the Trustee
pursuant to clause (b) of this Section, Section 7.2 shall
survive.  The Company shall pay and
indemnify the Trustee against any tax, fee or other charge imposed on or
assessed against the principal and interest received in respect thereof other
than any such tax, fee or other charge which by law is for the account of the
Holders of Outstanding Securities.

 

Section 7.2             REPAYMENT
TO THE COMPANY.  The Trustee and the
Paying Agent shall return to the Company on Company Request any money held by
them for the payment of any amount with respect to the Securities that remains
unclaimed for two years.  After return to
the Company, Holders entitled to the money must look to the Company for payment
as general creditors with limited recourse as described herein and in the
Securities unless an applicable abandoned property law designates another
person.

 

ARTICLE
VIII

SUPPLEMENTAL INDENTURES

 

Section 8.1             SUPPLEMENTAL
INDENTURES WITHOUT CONSENT OF HOLDERS. 
Without the consent of any Holders of Securities, the Company and the
Trustee, at any time and from time to time, may enter into one or more
indentures supplemental hereto, in form satisfactory to the Trustee, for any of
the following purposes:

 

(a)                           to
evidence the succession of another corporation to the Company and the
assumption by any such successor of the covenants of the Company herein and in
the Securities; or

 

(b)                           to
add to the covenants, agreements and obligations of the Company for the benefit
of the Holders of all of the Securities or any series thereof, or to surrender
any right or power herein conferred upon the Company; or

 

20

 

(c)                           to
establish the form or terms of Securities of any series as permitted by
Sections 2.1 and 2.2(c), respectively; or

 

(d)                           to
evidence and provide for the acceptance of appointment hereunder by a successor
Trustee with respect to the Securities of one or more series and to add to or
change any of the provisions of this Indenture as shall be necessary to provide
for or facilitate the administration of the trusts hereunder by more than one
Trustee, pursuant to the requirements of Section 6.8; or

 

(e)                           to
cure any ambiguity, defect or inconsistency;

 

(f)                            to
amend restrictions on transferability of any Securities on any series in any
manner that does not adversely affect the rights of any Securityholder in any
material respect; or

 

(g)                           to
add to, change or eliminate any of the provisions of this Indenture (which
addition, change or elimination may apply to one or more series of Securities),
provided that any such addition, change or elimination shall neither (i) apply
to any Security of any series created prior to the execution of such
supplemental indenture and entitled to the benefit of such provision nor (ii) modify
the rights of the Holder of any such Security with respect to such provision;
or

 

(h)                           to
secure the Securities; or

 

(i)                            to
make any other change that does not adversely affect the rights of any
Securityholder in any material respect.

 

Section 8.2             SUPPLEMENTAL
INDENTURES WITH CONSENT OF HOLDERS. 
With the written consent of the Holders of at least a majority in
aggregate Principal Amount of the Outstanding Securities of each series
affected by such supplemental indenture, the Company and the Trustee may amend
this Indenture or the Securities of any series or may enter into an indenture
or indentures supplemental hereto for the purpose of adding any provisions to
or changing in any manner or eliminating any of the provisions of this
Indenture or of modifying in any manner the rights of the Holders of the
Securities of such series and under this Indenture; provided, however,
that no such amendment or supplemental indenture shall, without the consent of
the Holder of each Outstanding Security affected thereby:

 

(a)                           Subject
to Section 3.6(a), change the Stated Maturity of the Principal of, or any
installment of Principal or interest on, any such Security, or reduce the
Principal Amount thereof or the rate of interest thereon that would be due and
payable upon a declaration of acceleration of maturity thereof pursuant to Section 5.2,
or change the Place of Payment where, or change the coin or currency in which,
any installment of principal of or interest on, any such Security is payable,
or impair the right to institute suit for the enforcement of any such payment
on or after the Stated Maturity thereof;

 

(b)                           reduce
the percentage in Principal Amount of the Outstanding Securities of any series,
the consent of whose Holders is required for any such amendment or supplemental
indenture, or the consent of whose Holders is required for any waiver (of
compliance with certain provisions of this Indenture or certain defaults
hereunder and their consequences) with respect to the Securities of such series
provided for in this Indenture; or

 

(c)                           modify
any of the provisions of this Section, Section 5.4 (clauses (a) and
(b)) or 5.7, except to increase the percentage of Outstanding Securities of
such series required for such actions to provide that certain other provisions
of this Indenture cannot be modified or waived without the consent of the
Holder of each Outstanding Security affected thereby.

 

A supplemental indenture which changes or
eliminates any covenant or other provision of this Indenture which has
expressly been included solely for the benefit of one or more particular series
of Securities, or which modifies the rights of the Holders of Securities of
such series with respect to such covenant or other provision, shall be deemed
not to affect the rights under this Indenture of the Holders of Securities of
any other series.

 

It shall not be necessary for the consent of
the Holders under this Section 8.2 to approve the particular form of any
proposed amendment or supplemental indenture, but it shall be sufficient if
such consent approves the substance thereof.

 

21

 

After an amendment or supplemental indenture
under this Section 8.2 becomes effective, the Company shall mail or
electronically transmit to each Holder of the particular Securities affected
thereby a notice briefly describing the amendment.

 

Section 8.3             COMPLIANCE
WITH TRUST INDENTURE ACT.  Every
supplemental indenture executed pursuant to this Article shall comply with
the TIA as then in effect.

 

Section 8.4             REVOCATION
AND EFFECT OF CONSENTS, WAIVERS AND ACTIONS.  Until an amendment or waiver with respect to
a series of Securities becomes effective, a consent to it or any other action
by a Holder of a Security of that series hereunder is a continuing consent by
the Holder and every subsequent Holder of that Security or portion of that
Security that evidences the same obligation as the consenting Holder’s
Security, even if notation of the consent, waiver or action is not made on the
Security.  However, any such Holder or
subsequent Holder may revoke the consent, waiver or action as to such Holder’s
Security or portion of the Security if the Trustee receives the notice of
revocation before the Company or an agent of the Company certifies to the
Trustee that the consent of the requisite aggregate Principal Amount of the
Securities of that series has been obtained. 
After an amendment, waiver or action becomes effective, it shall bind
every Holder of Securities of that series.

 

The Company may, but shall not be obligated
to, fix a record date for the purpose of determining the Holders entitled to
consent to any amendment or waiver with respect to a series of Securities.  If a record date is fixed, then
notwithstanding the first two sentences of the immediately preceding paragraph,
those persons who were Holders of Securities of that series at such record date
(or their duly designated proxies), and only those persons, shall be entitled
to revoke any consent previously given, whether or not such persons continue to
be Holders after such record date.  No
such consent shall be valid or effective for more than 90 days after such
record date.

 

Section 8.5             NOTATION
ON OR EXCHANGE OF SECURITIES. 
Securities of any series authenticated and delivered after the execution
of any supplemental indenture with respect to such series pursuant to this Article may,
and shall if required by the Trustee, bear a notation in form approved by the
Trustee as to any matter provided for in such supplemental indenture.  If the Company shall so determine, new
Securities of such series so modified as to conform, in the opinion of the
Trustee and the Board of Directors, to any such supplemental indenture may be
prepared, executed, authenticated and delivered by the Company in exchange for
outstanding Securities of that series.

 

Section 8.6             TRUSTEE
TO SIGN SUPPLEMENTAL INDENTURES.  The
Trustee shall sign any supplemental indenture authorized pursuant to this Article VIII
if the amendment does not adversely affect the rights, duties, liabilities or
immunities of the Trustee.  If it does,
the Trustee may, but need not, sign it. 
In signing such amendment, the Trustee shall receive, and shall be fully
protected in conclusively relying upon, an Officers’ Certificate and an Opinion
of Counsel stating that such amendment is authorized or permitted by this
Indenture.

 

Section 8.7             EFFECT
OF SUPPLEMENTAL INDENTURES.  Upon the
execution of any supplemental indenture under this Article, this Indenture
shall be modified in accordance therewith, and such supplemental indenture
shall form a part of this Indenture for all purposes; and every Holder of
Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby, except to the extent otherwise set forth thereon.

 

ARTICLE
IX

MISCELLANEOUS

 

Section 9.1             TRUST
INDENTURE ACT CONTROLS.  If any
provision of this Indenture limits, qualifies or conflicts with another
provision hereof which is required to be included in this Indenture by the TIA,
the required provision shall control.

 

Section 9.2             NOTICES.  Any notice or communication shall be in
writing and delivered in person, mailed by first-class mail, postage prepaid or
transmitted electronically to any Holder at the registered address maintained
in the Company’s records; PROVIDED, that any notice or communication by and
among the Trustee and the Company may be made by telecopy and shall be
effective upon receipt thereof and shall be confirmed in writing, mailed by
first-class mail, postage prepaid, and addressed as follows:

 

22

 

	
  if
  to the Company:

  	
   

  
	
  Prosper
  Marketplace, Inc.

  	
   

  
	
  111
  Sutter Street, 22nd Floor

  	
   

  
	
  San
  Francisco, CA 94104

  	
   

  
	
  Attention:
  Chief Executive Officer

  	
   

  
	
  Facsimile: 415-598-1471

  	
   

  
	
  Email: 
  compliance@prosper.com

  	
   

  
	
   

  	
   

  
	
  if
  to the Trustee:

  	
   

  
	
   

  	
   

  
	
  Attention:

  	
   

  
	
  Facsimile:

  	
   

  

 

The Company or the Trustee by notice to the
other may designate additional or different addresses for subsequent notices or
communications.

 

Any notice or communication given to a Holder
of Securities shall be transmitted electronically to or mailed to such
Securityholder at the Securityholder’s address as it appears on the
registration books of the Registrar and shall be sufficiently given if so
mailed within the time prescribed.

 

Where this Indenture provides for notice in
any manner, such notice may be waived in writing by the person entitled to
receive such notice, either before or after the event, and such waiver shall be
the equivalent of such notice.  Waivers
of notice by Holders shall be filed with the Trustee, but such filing shall not
be a condition precedent to the validity of any action taken in reliance upon
such waiver.

 

Failure to electronically transmit or mail a
notice or communication to a Securityholder or any defect in it shall not
affect its sufficiency with respect to other Holders of Securities of the same
series.  If a notice or communication is
electronically transmitted or mailed in the manner provided above, it is duly
given, whether or not received by the addressee.

 

If the Company electronically transmits or
mails a notice or communication to the Holders of Securities of a particular
series, it shall electronically transmit or mail a copy to the Trustee and each
Registrar, co-registrar or Paying Agent, as the case may be, with respect to
such series.

 

In case by reason of the suspension of
regular mail service or by reason of any other cause it shall be impracticable
to give notice to Holders of Securities as set forth above, then such
notification as shall be made with the acceptance of the Trustee shall
constitute a sufficient notification for every purpose hereunder.  In any case where notice to Holders of
Securities is given by mail, neither the failure to mail such notice, nor any
defect in any notice so mailed, to any particular Holder of a Security shall
affect the sufficiency of such notice with respect to other Holders of
Securities.

 

Section 9.3     COMMUNICATION
BY HOLDERS WITH OTHER HOLDERS. 
Securityholders may communicate pursuant to TIA Section 312(b) with
other Securityholders with respect to their rights under this Indenture or the
Securities.  The Company and the Trustee,
the Registrar or the Paying Agent with respect to a particular series of
Securities, and anyone else, shall have the protection of TIA Section 312(c).

 

Section 9.4     CERTIFICATE
AND OPINION AS TO CONDITIONS PRECEDENT. 
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee:

 

(a)                           an
Officers’ Certificate stating that, in the opinion of the signers, all
conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with; and

 

(b)                           an
Opinion of Counsel stating that, in the opinion of such counsel, all such
conditions precedent have been complied with.

 

23

 

Section 9.5             FORM OF
DOCUMENTS DELIVERED TO TRUSTEE.  In
any case where several matters are required to be certified by, or covered by
an opinion of, any specified Person, it is not necessary that all such matters
be certified by, or covered by the opinion of, only one such Person, or that
they be so certified or covered by only one document, but one such Person may
certify or give an opinion with respect to some matters and one or more other such
Persons as to other matters, and any such Person may certify or give an opinion
as to such matters in one or several documents.

 

Any certificate or opinion of an officer of
the Company may be based, insofar as it relates to legal matters, upon a
certificate or opinion of, or representations by, counsel, unless such officer
knows, or in the exercise of reasonable care should know, that the certificate
or opinion or representations with respect to the matters upon which his
certificate or opinion is based are erroneous. 
Any such Opinion of Counsel may be based, insofar as it relates to
factual matters, upon a certificate or opinion of, or representations by, an
officer or officers of the Company stating that the information with respect to
such factual matters is in the possession of the Company, unless such counsel
knows, or in the exercise of reasonable care should know, that the certificate
or opinion or representations with respect to such matters are erroneous.

 

Section 9.6             STATEMENTS REQUIRED IN CERTIFICATE
OR OPINION.  Each Officers’
Certificate or Opinion of Counsel with respect to compliance with a covenant or
condition provided for in this Indenture shall include:

 

(a)                           a
statement that each person making such Officers’ Certificate or Opinion of Counsel
has read such covenant or condition;

 

(b)                           a
brief statement as to the nature and scope of the examination or investigation
upon which the statements or opinions contained in such Officers’ Certificate
or Opinion of Counsel are based;

 

(c)                           a
statement that, in the opinion of each such person, he has made such
examination or investigation as is necessary to enable such person to express
an informed opinion as to whether or not such covenant or condition has been
complied with; and

 

(d)                           a
statement that, in the opinion of such person, such covenant or condition has
been complied with.

 

Section 9.7             SEPARABILITY
CLAUSE.  In case any provision in
this Indenture or in the Securities shall be invalid, illegal or unenforceable,
the validity, legality and enforceability of the remaining provisions shall not
in any way be affected or impaired thereby.

 

Section 9.8             RULES
BY TRUSTEE, PAYING AGENT AND REGISTRAR. 
With respect to the Securities of a particular series, the Trustee with
respect to such series of Securities may make reasonable rules for action
by or a meeting of Holders of such series of Securities.  With respect to the Securities of a
particular series, the Registrar and the Paying Agent with respect to such
series of Securities may make reasonable rules for their functions.

 

Section 9.9             LEGAL
HOLIDAYS.  A “Legal Holiday”
is any day other than a Business Day.  If
any specified date (including an Interest Payment Date or Stated Maturity of
any Security, or a date for giving notice) is a Legal Holiday at any Place of
Payment or place for giving notice, then (notwithstanding any other provision
of this Indenture or of the Securities other than a provision in the Securities
of any series which specifically states that such provision shall apply in lieu
of this Section) payment of interest or Principal need not be made at such
Place of Payment, or such other action need not be taken, on such date, but the
action shall be taken on the next succeeding day that is not a Legal Holiday at
such Place of Payment with the same force and effect as if made on the Interest
Payment Date, or at the Stated Maturity or such other date.

 

Section 9.10           GOVERNING
LAW AND JURISDICTION; WAIVER OF JURY TRIAL. 
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE
AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO ANY PRINCIPLE OF
CONFLICTS OF LAW THAT WOULD REQUIRE OR PERMIT THE APPLICATION OF THE LAWS OF
ANY OTHER JURISDICTION.  THE COMPANY, THE
TRUSTEE, AND EACH HOLDER OF A SECURITY (BY ACCEPTANCE THEREOF) THEREBY, (I) SUBMITS
TO THE EXCLUSIVE JURISDICTION OF THE FEDERAL AND NEW YORK STATE COURTS LOCATED
IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN CONNECTION WITH ANY SUIT,
ACTION OR PROCEEDING RELATED TO THIS INDENTURE, (II) IRREVOCABLY 

 

24

 

WAIVES ANY DEFENSE OF LACK OF PERSONAL JURISDICTION IN
SUCH SUITS AND (III) IRREVOCABLY WAIVES TO THE FULLEST EXTENT IT MAY EFFECTIVELY
DO SO UNDER APPLICABLE LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING BROUGHT IN THE
FEDERAL AND NEW YORK STATE COURTS LOCATED IN THE BOROUGH OF MANHATTAN IN THE
CITY OF NEW YORK AND THAT SUCH SUIT, ACTION OR PROCEEDING HAS BEEN BROUGHT IN
AN INCONVENIENT FORUM.

 

EACH OF THE COMPANY AND THE TRUSTEE HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND
ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING
TO THIS INDENTURE, THE NOTES OR THE TRANSACTION CONTEMPLATED HEREBY.

 

Section 9.11           NO
RECOURSE AGAINST OTHERS.  A director,
officer, employee or stockholder, as such, of the Company shall not have any
liability for any obligations of the Company under the Securities or this
Indenture or for any claim based on, in respect of or by reason of such
obligations or their creation.  By
accepting a Security, each Holder of such Security shall waive and release all
such liability.  The waiver and release
shall be part of the consideration for the issue of the Securities.

 

Section 9.12           SUCCESSORS.  All agreements of the Company in this
Indenture and the Securities shall bind its successor.  All agreements of the Trustee in this
Indenture shall bind its successor.

 

Section 9.13           EFFECT
OF HEADINGS AND TABLE OF CONTENTS. 
The Article and Section headings herein and the Table of
Contents are for convenience only and shall not affect the construction hereof.

 

Section 9.14           BENEFITS
OF INDENTURE.  Nothing in this
Indenture or in the Securities, express or implied, shall give to any person,
other than the parties hereto and their successors hereunder and the Holders of
Securities, any benefits or any legal or equitable right, remedy or claim under
this Indenture.

 

Section 9.15           MULTIPLE
ORIGINALS.  The parties may sign any
number of copies of this Indenture.  Each
signed copy shall be an original, but all of them together represent the same
agreement.  One signed copy is enough to
prove this Indenture.

 

Section 9.16           FORCE
MAJEURE.  In no event shall the
Trustee be responsible or liable for any failure or delay in the performance of
its obligations hereunder arising out of or caused by, directly or indirectly,
forces beyond its control, including, without limitation, strikes, work
stoppages, accidents, acts of war or terrorism, civil or military disturbances,
nuclear or natural catastrophes or acts of God, and interruptions, loss or
malfunctions of utilities, communications or computer (software and hardware) services;
it being understood that the Trustee shall use reasonable efforts which are
consistent with accepted practices in the banking industry to resume
performance as soon as practicable under the circumstances.

 

	
   

  	
  PROSPER MARKETPLACE, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
  Attest:

  	
   

  
	
   

  	
   

  
	
  Name:

  	
   

  
	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  as Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

25

 

EXHIBIT A

 

Form of
Prosper Borrower Payment Dependent Note

 

FOR PURPOSES OF SECTIONS 1272, 1273 AND 1275 OF THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED, THIS NOTE IS BEING ISSUED WITH ORIGINAL ISSUE
DISCOUNT BECAUSE PAYMENTS ON THE NOTE ARE DEPENDENT ON PAYMENTS ON THE
CORRESPONDING PROSPER BORROWER LOAN. THE ISSUE PRICE OF THE PROSPER BORROWER
NOTE (THIS “NOTE”) IS THE STATED PRINCIPAL AMOUNT OF THIS NOTE, AND THE ISSUE
DATE IS THE ORIGINAL ISSUE DATE. UPON REQUEST, THE COMPANY WILL PROMPTLY MAKE
AVAILABLE TO THE HOLDER THE AMOUNT OF OID AND YIELD TO MATURITY OF THIS NOTE. A
HOLDER SHOULD CONTACT PROSPER MEMBER SUPPORT AT (866) 615-6319 OR
support@prosper.com.

 

ANY TRANSFER, PLEDGE OR OTHER USE OF THIS NOTE FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL unless (1) such transfer is effected on a
trading system that is recognized by the Company, and (2) this Note has
been presented by the registered Holder (as defined below) to the Company or
its agent for registration of transfer.

 

PROSPER BORROWER PAYMENT
DEPENDENT NOTE SERIES NO.                     (1)

PROSPER MARKETPLACE, INC.

 

	
  No.

  	
                                

  	
   

  	
   

  	
  [CUSIP

  	
                             

  	
  ]

  

 

	
  HOLDER:

  	
                                           

  	
  (2)

  
	
   

  	
   

  
	
  CORRESPONDING PROSPER BORROWER LOAN:

  	
                                                     

  	
  (3)

  
	
   

  	
   

  
	
  STATED PRINCIPAL AMOUNT OF THIS NOTE: U.S. $

  	
                                                  

  	
  (4)

  
	
   

  	
   

  
	
  AGGREGATE PRINCIPAL AMOUNT OF THIS SERIES OF NOTES: U.S. $

  	
                                           

  	
  (5)

  
	
   

  	
   

  
	
  INTEREST RATE:

  	
                                              

  	
  (6)

  
	
   

  	
   

  
	
  SERVICING FEE: AN ANNUALIZED RATE APPLIED TO THE OUTSTANDING PRINCIPAL
  AMOUNT OF THE CORRESPONDING PROSPER BORROWER LOAN:

  	
   

  	
  (7)

  
	
   

  	
   

  
	
  ORIGINAL ISSUE DATE:

  	
                                                    

  	
  (8)

  
	
   

  	
   

  
	
  INITIAL MATURITY DATE:

  	
                                                       

  	
  (9)

  
	
   

  	
   

  
	
  FINAL MATURITY DATE:

  	
                                                      

  	
  (10)

  
																			

 

EXTENSION OF MATURITY DATE: Each Note will mature on the Initial
Maturity Date, unless the maturity of the Note is extended to the Final
Maturity Date subject to conditions described below.  In no event will the maturity of the Notes be
extended beyond the Final Maturity Date.

 

PAYMENT DATES: Subject to the limitations on payment described below,
the Company will make payments of principal and interest on or before the sixth
Business Day following receipt of any Borrower Loan Net Payments by the Company
in accordance with the payment schedule for this Note, which is available on
the Holder’s account page at www.prosper.com, subject to prepayment at any
time without penalty.

 

(1) Insert loan ID
number for Corresponding Prosper Borrower Loan.

(2) Insert lender member’s screen name and member identification number.

(3) Insert description of Corresponding Prosper Borrower Loan.

 

A-1

 

(4) Insert principal amount of lender member’s Corresponding
Prosper Borrower Note.

(5) Insert aggregate principal amount of Corresponding Borrower
Loan.

(6) Insert final yield percentage.

(7) Insert total servicing fee rate to be charged by Company.

(8) Insert date corresponding to date of funding of Corresponding
Prosper Borrower Loan.

(9) Insert date corresponding to stated maturity of Corresponding
Prosper Borrower Loan.

(10) Insert date that is the first anniversary of the stated
maturity of Corresponding Prosper Borrower Loan.

 

Prosper Marketplace, Inc.,
a corporation duly organized and existing under the laws of the State of Delaware
(herein called the “Company”), for value received, hereby promises to
pay to the person identified as the “Holder” above (the “Holder”),
principal and interest on this Note in U.S. dollars in an amount equal to the
Holder’s equal and ratable share of the Borrower Loan Net Payments on each
Payment Date (in accordance with the payment schedule for this Note, which is
available on the Holder’s account page at www.prosper.com and subject to
prepayment) until the Initial Maturity Date or, if the maturity of the Note has
been extended, until the Final Maturity Date. 
For the avoidance of doubt, (1) no payments of principal and
interest on this Note shall be payable unless the Company has received Borrower
Loan Payments, and then only to the extent of Borrower Loan Net Payments in
respect of those Borrower Loan Payments related to the Corresponding Prosper
Borrower Loan identified above that have been received by the Company, and (2) no
Holder of the Note shall have any recourse against the Company unless, and then
only to the extent that, the Company has failed to pay such Holder the Borrower
Loan Net Payments or otherwise breached a covenant in the Indenture described
below that is applicable to the series of Notes of which this Note forms a
part.  Subject to certain exceptions
provided in the Indenture referred to below, the principal and interest payable
on any Payment Date will be paid to the person in whose name this Note is
registered at the close of business on the Record Date next preceding such Payment
Date or maturity date.

 

“Record Date” shall
mean the second Business Day immediately preceding each Interest Payment Date.

 

“Business Day” shall
mean each Monday, Tuesday, Wednesday, Thursday and Friday that is (1) not
a day on which the Automated Clearing House system operated by the U.S. Federal
Reserve Bank (the “ACH System”) is closed and (2) not a day on
which banking institutions are authorized or obligated by law or executive
order to close in San Francisco, California or New York, New York.

 

If, on the Initial Maturity
Date, any principal or interest payments in respect of the Corresponding
Borrower Loan remain due and payable to the Company, the maturity date of this
Note will be extended to the Final Maturity Date identified above.

 

If, on the Initial Maturity
Date, no principal or interest payments in respect of the Corresponding
Borrower Loan remain due and payable to the Company, the Note will mature on
the Initial Maturity Date and no Borrower Loan Net Payments that the Company
receives in respect of the Corresponding Borrower Loan after such Initial
Maturity Date shall be required to be paid to the Holder of the Note.

 

All payments of principal
and interest on this Note due to the Holder hereof shall be made in U.S.
dollars, in immediately available funds, by intra-institution book entry
transfer to the Holder’s designated sub-account in the trust account maintained
by the Company at                            ,
or such alternate account of the Holder designated by the Trustee in accordance
with the Indenture.

 

All U.S. dollar amounts used
in or resulting from the calculation of amounts due in respect of this Note
shall be rounded to the nearest cent (with one-half cent being rounded upward).

 

This Note is one of a duly
authorized series of a class of special limited obligations of the Company
referred to as Prosper Borrower Payment Dependent Notes (hereinafter called the
“Securities”) all issued or to be issued under and pursuant to an Indenture
dated as of
[                                        ,
2009] (hereinafter called the “Indenture”), duly executed and delivered
by the Company and                         ,
as trustee (hereinafter called the “Trustee”), to which Indenture and
all indentures supplemental thereto reference is hereby made for a description
of the rights, duties and immunities thereunder of the Trustee and the rights
thereunder of the holders of the Securities. 
The terms of the Securities include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of
1939 (the “TIA”), as in effect on the date of the Indenture.  The Securities are subject to, and qualified
by, all such terms, certain of which are summarized hereon, and Holders are
referred to the Indenture and the TIA for a statement of such terms.  As provided in the Indenture, the Securities
may be issued in one or more separate series, which different series may be
issued in various aggregate principal amounts, mature at different times, bear
interest at different rates, be subject to different covenants and events of
default, and otherwise vary as provided or permitted in the Indenture.

 

A-2

 

If an Event of Default
described in Section 5.1(3) or (4) of the Indenture occurs and
is continuing, the unpaid stated principal amount hereof will become and be
immediately due and payable in the manner, with the effect and subject to the
conditions provided in the Indenture.

 

The Indenture provides
that the Company or a third-party servicer shall use commercially
reasonable efforts to service and collect the Corresponding Borrower Loan in
good faith, accurately and in accordance with industry standards customary for
servicing loans such as the Borrower Loans, and may in applying that standard
amend or waive any term of such Borrower Loan, or in the case of a Borrower
Loan that is more than 120 days delinquent, write off and cancel such
Borrower Loan without the consent of any Holder of any Securities of the series
corresponding to such Borrower Loan. The Indenture contains provisions permitting (subject to the servicing
standard)  the Company and the Trustee,
with the consent of the holders of not less than a majority in aggregate
principal amount of each series of Securities affected thereby, at the time
Outstanding, evidenced as provided in the Indenture, to execute supplemental
indentures adding any provisions to or changing in any manner or eliminating
any of the provisions of the Indenture or of any indenture supplemental thereto
or modifying in any manner the rights of the holders of this Note; provided,
however, that no such supplemental indenture shall (1) change the
Stated Maturity of the principal of, or any installment of principal or
interest on, any Security, or reduce the principal amount thereof or the rate
of interest thereon that would be due and payable upon a declaration of
acceleration of maturity thereof or change the place of payment where, or
change the coin or currency in which, any installment of principal and interest
on any such Security is payable or impair the right to institute suit for the
enforcement of any such payment on or after the Stated Maturity thereof, (2) reduce
the percentage in principal amount of the Outstanding Securities, the consent
of whose Holders is required for any such amendment or supplemental indenture,
or the consent of whose Holders is required for any waiver (of compliance with
certain provisions of the Indenture or certain defaults thereunder and their
consequences) with respect to the Securities, or (3) modify any of the
provisions of Section 8.2, Section 5.4 (clauses (a) and (b)) or Section 5.7
of the Indenture, except to increase the percentage of Outstanding Securities
required for such actions to provide that certain other provisions of the
Indenture cannot be modified or waived without the consent of the Holder of
each Outstanding Security affected thereby. 
The Indenture also contains provisions permitting the holders of a
majority in aggregate principal amount of the Securities of all affected series
at the time outstanding, on behalf of the holders of all the Securities of such
series, to waive, insofar as those series are concerned, compliance by the
Company with certain provisions of the Indenture and certain past defaults under
the Indenture and their consequences. 
Any such consent by the Holder of this Note (unless revoked as provided
in the Indenture) shall be conclusive and binding upon such Holder and upon all
future holders and owners of this Note and any Notes which may be issued upon
the registration of transfer hereof or, irrespective of whether or not any
notation thereof is made upon this Note or other such Notes.

 

This Note is not entitled to
any sinking fund.  This Note is not
redeemable at the option of the Holder.  The Company shall redeem all of the
Outstanding Notes of the series of which this Note forms a part for the
remaining unpaid principal balance of such Note if:  (1) the Corresponding Borrower Loan has
been obtained as a result of verifiable identity theft on the part of the
purported borrower member; (2) a material default under the Prosper
Borrower Loan has occurred and (i) a Prosper score different from the
score by the Company for the Prosper Borrower Loan listing at issue was
inserted in that Prosper Borrower Loan listing, or (ii) the Company
incorrectly applied its formula to determine the Prosper score, resulting in a
Prosper Rating different from the Prosper Rating that should have appeared in
the Prosper Borrower Loan listing; or (3) the Company may also offer to
repurchase the Notes if it materially breaches its representations and
warranties in the lender member registration agreement.  The Company may, in its reasonable
discretion, require proof of the identity theft, such as a copy of a police report
filed by the person whose identity was wrongfully used to obtain the
fraudulently-induced Corresponding Borrower Loan, an identity theft affidavit
or a bank verification letter (or all of the above) in order to determine that
verifiable identity theft has occurred. The Company shall not be required to
repurchase a Note until such Note is at least 120 days past-due, provided,
however, that the Company may in its sole discretion elect to repurchase a Note
at an earlier time.

 

The Notes are in registered form
without coupons in denominations of $0.01 to $25,000.  The Notes may not be transferred and the
transfer of Notes shall not be registered as provided in the Indenture unless
such transfer is effected on a trading system that is recognized by the Company.  Upon due presentment for registration of
transfer of this Note at the office or agency of the Company in San Francisco,
California, a new Note or Notes in authorized denominations in Dollars for an
equal aggregate principal amount and like interest rate and maturity will be
issued to the transferee in exchange therefor, subject to the limitations
provided in the Indenture, without charge except for (1) any stamp tax or
other governmental charge imposed in connection therewith and (2) any
transfer charges associated with the Company’s trading platform as described on
its website at www.prosper.com.

 

The Company, the Trustee,
and any paying agent may deem and treat the registered Holder hereof as the
absolute owner of this Note at the Holder’s address as it appears on the
register books of the Company as kept by the Company or duly authorized agent
of the Company (whether or not this Note shall be overdue), for the purpose of
receiving payment of or on account hereof and for all other purposes, and neither
the Company nor the Trustee nor any paying agent shall be affected by any
notice to the contrary.  All 

 

A-3

 

payments made to or upon the order of such registered Holder shall, to
the extent of the sum or sums paid, effectively satisfy and discharge liability
for moneys payable on this Note.

 

No recourse under or upon
any obligation, covenant or agreement contained in the Indenture or any
indenture supplemental thereto or in any Note, or because of any indebtedness
evidenced thereby, shall be had against any incorporator, or against any past,
present or future shareholder, officer or director, as such, of the Company,
either directly or through the Company, under any rule of law, statute or
constitutional provision or by the enforcement of any assessment or penalty or
otherwise, all such personal liability of every such incorporator, shareholder,
officer and director, as such, being expressly waived and released by the
acceptance hereof and as a condition of and as part of the consideration for
the issuance of this Note.

 

Unless otherwise defined
herein, terms used herein which are defined in the Indenture shall have the
respective meanings assigned thereto in the Indenture.  To the extent that provisions contained in
this Note are inconsistent with the provisions set forth in the Indenture, the
provisions contained herein will apply.

 

This Note shall be governed
by and construed in accordance with the laws of the State of New York without
regard to any principle of conflict of laws that would require or permit the
application of the laws of any other jurisdiction.

 

This Note shall not be valid
or become obligatory for any purpose until the Certificate of Authentication
hereon shall have been signed by an authorized officer of the Company or its
duly authorized agent under the Indenture referred to above.

 

IN WITNESS
WHEREOF, Prosper
Marketplace, Inc. has caused this instrument to be signed by its duly
authorized officers.

 

	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  PROSPER MARKETPLACE, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
  CERTIFICATE OF AUTHENTICATION

  	
   

  	
   

  
	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  This is one of the Securities of the series of Securities designated
  therein referred to in the within-mentioned Indenture.

  
	
   

  	
   

  	
   

  
	
  PROSPER MARKETPLACE, INC.

  	
   

  	
   

  
	
  as Authenticating Agent

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
    Name:

  	
   

  	
   

  
	
   

  	
    Title:

  	
   

  	
   

  
							

 

A-4

 

EXHIBIT B

 

Form of
Open Market Borrower Payment Dependent Note

 

FOR PURPOSES OF SECTIONS 1272, 1273 AND 1275 OF THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED, THIS NOTE IS BEING ISSUED WITH ORIGINAL ISSUE
DISCOUNT BECAUSE PAYMENTS ON THE NOTE ARE DEPENDENT ON PAYMENTS ON THE
CORRESPONDING OPEN MARKET LOAN. THE ISSUE PRICE OF THE PROSPER OPEN MARKET NOTE
IS THE STATED PRINCIPAL AMOUNT OF THIS NOTE, AND THE ISSUE DATE IS THE ORIGINAL
ISSUE DATE. UPON REQUEST, THE COMPANY WILL PROMPTLY MAKE AVAILABLE TO THE
HOLDER THE AMOUNT OF OID AND YIELD TO MATURITY OF THIS NOTE. A HOLDER SHOULD
CONTACT PROSPER MEMBER SUPPORT AT (866) 615-6319 OR support@prosper.com.

 

ANY TRANSFER, PLEDGE OR OTHER USE OF THIS NOTE FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL unless (1) such transfer is effected on a
trading system that is recognized by the Company, and (2) this Note has
been presented by the registered Holder (as defined below) to the Company or
its agent for registration of transfer.

 

OPEN MARKET BORROWER PAYMENT
DEPENDENT NOTE SERIES NO.                     (1)

PROSPER MARKETPLACE, INC.

 

	
  No.

  	
                                

  	
   

  	
   

  	
  [CUSIP

  	
                            

  	
  ]

  

 

	
  HOLDER:

  	
                                           

  	
  (2)

  
	
   

  	
   

  
	
  CORRESPONDING OPEN MARKET LOAN:

  	
                                           

  	
  (3)

  
	
   

  	
   

  
	
  STATED PRINCIPAL AMOUNT OF THIS NOTE: U.S. $

  	
                                                  

  	
  (4)

  
	
   

  	
   

  
	
  AGGREGATE PRINCIPAL AMOUNT OF THIS SERIES OF NOTES: U.S. $

  	
                                               

  	
  (5)

  
	
   

  	
   

  
	
  INTEREST RATE:

  	
                                              

  	
  (6)

  
	
   

  	
   

  
	
  SERVICING FEE: AN ANNUALIZED RATE APPLIED TO THE OUTSTANDING PRINCIPAL
  AMOUNT OF THE CORRESPONDING OPEN MARKET LOAN:

  	
   

  	
  (7)

  
	
   

  	
   

  
	
  PURCHASE DATE:

  	
                                                            

  	
  (8)

  
	
   

  	
   

  
	
  INITIAL MATURITY DATE:

  	
                                                       

  	
  (9)

  
	
   

  	
   

  
	
  FINAL MATURITY DATE:

  	
                                                      

  	
  (10)

  
																		

 

EXTENSION OF MATURITY DATE: Each Note will mature on the Initial
Maturity Date, unless the maturity of the Note is extended to the Final
Maturity Date subject to conditions described below.  In no event will the maturity of the Notes be
extended beyond the Final Maturity Date.

 

B-1

 

PAYMENT DATES: Subject to the limitations on payment described below,
the Company will make payments of principal and interest on the 16th day of the month following its
receipt of any Borrower Loan Net Payments by the Company in accordance with the
payment schedule for this Note, which is available on the Holder’s account page at
www.prosper.com, subject to prepayment at any time without penalty.

 

(1) Insert loan ID
number for Corresponding Open Market Loan.

(2) Insert lender member’s screen name and member identification
number.

(3) Insert description of Corresponding Open Market Loan.

(4) Insert principal amount of lender member’s Prosper Open Market
Note.

(5) Insert aggregate principal amount of Corresponding Open Market
Loan.

(6) Insert final yield percentage.

(7) Insert total servicing fee rate to be charged by Company and
third-party servicer, if applicable.

(8) Insert date corresponding to date of purchase of Corresponding
Open Market Loan.

(9) Insert date corresponding to stated maturity of Corresponding
Open Market Loan.

(10) Insert date that is the first anniversary of the stated
maturity of Corresponding Open Market Loan.

 

Prosper Marketplace, Inc.,
a corporation duly organized and existing under the laws of the State of
Delaware (herein called the “Company”), for value received, hereby
promises to pay to the person identified as the “Holder” above (the “Holder”),
principal and interest on this Note in U.S. dollars in an amount equal to the
Holder’s equal and ratable share of the Borrower Loan Net Payments on each
Payment Date (in accordance with the payment schedule for this Note, which is
available on the Holder’s account page at www.prosper.com and subject to
prepayment) until the Initial Maturity Date or, if the maturity of the Note has
been extended, until the Final Maturity Date. 
For the avoidance of doubt, (1) no payments of principal and
interest on this Note shall be payable unless the Company has received Borrower
Loan Payments, and then only to the extent of Borrower Loan Net Payments in
respect of those Borrower Loan Payments related to the Corresponding Open
Market Loan identified above that have been received by the Company, and (2) no
Holder of the Note shall have any recourse against the Company unless, and then
only to the extent that, the Company has failed to pay such Holder the Borrower
Loan Net Payments or otherwise breached a covenant in the Indenture described
below that is applicable to the series of Notes of which this Note forms a
part.  Subject to certain exceptions
provided in the Indenture referred to below, the principal and interest payable
on any Payment Date will be paid to the person in whose name this Note is
registered at the close of business on the Record Date next preceding such
Payment Date or maturity date.

 

“Record Date” shall
mean the second Business Day immediately preceding each Interest Payment Date.

 

“Business Day” shall
mean each Monday, Tuesday, Wednesday, Thursday and Friday that is (1) not
a day on which the Automated Clearing House system operated by the U.S. Federal
Reserve Bank (the “ACH System”) is closed and (2) not a day on
which banking institutions are authorized or obligated by law or executive
order to close in San Francisco, California or New York, New York.

 

If, on the Initial Maturity
Date, any principal or interest payments in respect of the Corresponding
Borrower Loan remain due and payable to the Company, the maturity date of this
Note will be extended to the Final Maturity Date identified above.

 

If, on the Initial Maturity
Date, no principal or interest payments in respect of the Corresponding
Borrower Loan remain due and payable to the Company, the Note will mature on
the Initial Maturity Date and no Borrower Loan Net Payments that the Company
receives in respect of the Corresponding Borrower Loan after such Initial
Maturity Date shall be required to be paid to the Holder of the Note.

 

All payments of principal
and interest on this Note due to the Holder hereof shall be made in U.S.
dollars, in immediately available funds, by intra-institution book entry
transfer to the Holder’s designated sub-account in the trust account maintained
by the Company at                       ,
or such alternate account of the Holder designated by the Trustee in accordance
with the Indenture.

 

All U.S. dollar amounts used
in or resulting from the calculation of amounts due in respect of this Note
shall be rounded to the nearest cent (with one-half cent being rounded upward).

 

B-2

 

This Note is one of a duly
authorized series of a class of special limited obligations of the Company
referred to as Open Market Borrower Payment Dependent Notes (hereinafter called
the “Securities”) all issued or to be issued under and pursuant to an Indenture
dated as of
[                                        ,
2009] (hereinafter called the “Indenture”), duly executed and delivered
by the Company and                   ,
as trustee (hereinafter called the “Trustee”), to which Indenture and
all indentures supplemental thereto reference is hereby made for a description
of the rights, duties and immunities thereunder of the Trustee and the rights
thereunder of the holders of the Securities. 
The terms of the Securities include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of
1939 (the “TIA”), as in effect on the date of the Indenture.  The Securities are subject to, and qualified
by, all such terms, certain of which are summarized hereon, and Holders are
referred to the Indenture and the TIA for a statement of such terms.  As provided in the Indenture, the Securities
may be issued in one or more separate series, which different series may be
issued in various aggregate principal amounts, mature at different times, bear
interest at different rates, be subject to different covenants and events of
default, and otherwise vary as provided or permitted in the Indenture.

 

If an Event of Default
described in Section 5.1(3) or (4) of the Indenture occurs and
is continuing, the unpaid stated principal amount hereof will become and be
immediately due and payable in the manner, with the effect and subject to the
conditions provided in the Indenture.

 

The Indenture provides
that the Company or a third-party servicer shall use commercially
reasonable efforts to service and collect the Corresponding Borrower Loan in
good faith, accurately and in accordance with industry standards customary for
servicing loans such as the Borrower Loans, and may in applying that standard
amend or waive any term of such Borrower Loan, or in the case of a Borrower
Loan that is more than 120 days delinquent, write off and cancel such
Borrower Loan without the consent of any Holder of any Securities of the series
corresponding to such Borrower Loan. The Indenture contains provisions permitting (subject to the servicing
standard)  the Company and the Trustee,
with the consent of the holders of not less than a majority in aggregate
principal amount of each series of Securities affected thereby, at the time
Outstanding, evidenced as provided in the Indenture, to execute supplemental
indentures adding any provisions to or changing in any manner or eliminating
any of the provisions of the Indenture or of any indenture supplemental thereto
or modifying in any manner the rights of the holders of this Note; provided,
however, that no such supplemental indenture shall (1) change the
Stated Maturity of the principal of, or any installment of principal or
interest on, any Security, or reduce the principal amount thereof or the rate
of interest thereon that would be due and payable upon a declaration of
acceleration of maturity thereof or change the place of payment where, or
change the coin or currency in which, any installment of principal and interest
on any such Security is payable or impair the right to institute suit for the
enforcement of any such payment on or after the Stated Maturity thereof, (2) reduce
the percentage in principal amount of the Outstanding Securities, the consent
of whose Holders is required for any such amendment or supplemental indenture,
or the consent of whose Holders is required for any waiver (of compliance with
certain provisions of the Indenture or certain defaults thereunder and their
consequences) with respect to the Securities, or (3) modify any of the
provisions of Section 8.2, Section 5.4 (clauses (a) and (b)) or Section 5.7
of the Indenture, except to increase the percentage of Outstanding Securities
required for such actions to provide that certain other provisions of the
Indenture cannot be modified or waived without the consent of the Holder of
each Outstanding Security affected thereby. 
The Indenture also contains provisions permitting the holders of a
majority in aggregate principal amount of the Securities of all affected series
at the time outstanding, on behalf of the holders of all the Securities of such
series, to waive, insofar as those series are concerned, compliance by the Company
with certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences.  Any
such consent by the Holder of this Note (unless revoked as provided in the
Indenture) shall be conclusive and binding upon such Holder and upon all future
holders and owners of this Note and any Notes which may be issued upon the
registration of transfer hereof or, irrespective of whether or not any notation
thereof is made upon this Note or other such Notes.

 

This Note is not entitled to
any sinking fund.  This Note is not
redeemable at the option of the Holder. 
The Company shall redeem all of the Outstanding Notes of the series of
which this Note forms a part for the remaining unpaid principal balance of such
Note if:  (1) the Corresponding
Borrower Loan has been obtained as a result of verifiable identity theft on the
part of the purported borrower member; (2) a material default under the
Open Market Loan has occurred and (i) a Prosper score different from the
score by the Company for the Open Market Loan listing at issue was inserted in
that Open Market Loan listing, or (ii) the Company incorrectly applied its
formula to determine the Prosper score, resulting in a Prosper Rating different
from the Prosper Rating that should have appeared in the Open Market Loan
listing; or (3) the Company may also offer to repurchase the Notes if it
materially 

 

B-3

 

breaches its representations and warranties in the lender member
registration agreement.  The Company may,
in its reasonable discretion, require proof of the identity theft, such as a
copy of a police report filed by the person whose identity was wrongfully used
to obtain the fraudulently-induced Corresponding Borrower Loan, an identity
theft affidavit or a bank verification letter (or all of the above) in order to
determine that verifiable identity theft has occurred. The Company shall not be
required to repurchase a Note until such Note is at least 120 days past-due,
provided, however, that the Company may in its sole discretion elect to
repurchase a Note at an earlier time.

 

The Notes are in registered
form without coupons in denominations of $0.01 to $25,000.  The Notes may not be transferred and the
transfer of Notes shall not be registered as provided in the Indenture unless
such transfer is effected on a trading system that is recognized by the
Company.  Upon due presentment for
registration of transfer of this Note at the office or agency of the Company in
San Francisco, California, a new Note or Notes in authorized denominations in
Dollars for an equal aggregate principal amount and like interest rate and
maturity will be issued to the transferee in exchange therefor, subject to the
limitations provided in the Indenture, without charge except for (1) any
stamp tax or other governmental charge imposed in connection therewith and (2) any
transfer charges associated with the Company’s trading platform as described on
its website at www.prosper.com.

 

The Company, the Trustee,
and any paying agent may deem and treat the registered Holder hereof as the
absolute owner of this Note at the Holder’s address as it appears on the
register books of the Company as kept by the Company or duly authorized agent
of the Company (whether or not this Note shall be overdue), for the purpose of
receiving payment of or on account hereof and for all other purposes, and
neither the Company nor the Trustee nor any paying agent shall be affected by
any notice to the contrary.  All payments
made to or upon the order of such registered Holder shall, to the extent of the
sum or sums paid, effectively satisfy and discharge liability for moneys
payable on this Note.

 

No recourse under or upon
any obligation, covenant or agreement contained in the Indenture or any
indenture supplemental thereto or in any Note, or because of any indebtedness
evidenced thereby, shall be had against any incorporator, or against any past,
present or future shareholder, officer or director, as such, of the Company,
either directly or through the Company, under any rule of law, statute or
constitutional provision or by the enforcement of any assessment or penalty or
otherwise, all such personal liability of every such incorporator, shareholder,
officer and director, as such, being expressly waived and released by the
acceptance hereof and as a condition of and as part of the consideration for
the issuance of this Note.

 

Unless otherwise defined
herein, terms used herein which are defined in the Indenture shall have the
respective meanings assigned thereto in the Indenture.  To the extent that provisions contained in
this Note are inconsistent with the provisions set forth in the Indenture, the
provisions contained herein will apply.

 

This Note shall be governed
by and construed in accordance with the laws of the State of New York without
regard to any principle of conflict of laws that would require or permit the
application of the laws of any other jurisdiction.

 

This Note shall not be valid
or become obligatory for any purpose until the Certificate of Authentication
hereon shall have been signed by an authorized officer of the Company or its
duly authorized agent under the Indenture referred to above.

 

B-4

 

IN WITNESS
WHEREOF, Prosper
Marketplace, Inc. has caused this instrument to be signed by its duly
authorized officers.

 

 

	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  PROSPER MARKETPLACE, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
  CERTIFICATE OF AUTHENTICATION

  	
   

  	
   

  
	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  This is one of the Securities of the series of Securities designated
  therein referred to in the within-mentioned Indenture.

  
	
   

  	
   

  	
   

  
	
  PROSPER MARKETPLACE, INC.

  	
   

  	
   

  
	
  as Authenticating Agent

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
    Name:

  	
   

  	
   

  
	
   

  	
    Title:

  	
   

  	
   

  
							

 

B-5

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