Document:

Exhibit 10.2

 

SALE
AND SERVICING AGREEMENT

by and among

ARCC
COMMERCIAL LOAN TRUST 2006,

as the Issuer,

ARCC
CLO 2006 LLC,

as the Trust Depositor,

ARES
CAPITAL CORPORATION,

as the Originator and as the Servicer,

U.S.
BANK NATIONAL ASSOCIATION,

as the Trustee and as the Collateral Administrator,

LYON
FINANCIAL SERVICES, INC. (d/b/a U.S. BANK PORTFOLIO SERVICES),

as the Backup Servicer,

and

WILMINGTON
TRUST COMPANY,

as the Owner Trustee

Dated as of July
7, 2006

 

 

ARCC Commercial
Loan Trust 2006 Notes, Series 2006

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

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

 

TABLE
OF CONTENTS

	
  

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE I

  	
   

  	
  DEFINITIONS

  	
   

  	
  2

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 1.01.

  	
   

  	
  Definitions

  	
   

  	
  2

  
	
  Section 1.02.

  	
   

  	
  Usage of Terms

  	
   

  	
  71

  
	
  Section 1.03.

  	
   

  	
  Section
  References

  	
   

  	
  72

  
	
  Section 1.04.

  	
   

  	
  Calculations

  	
   

  	
  72

  
	
  Section 1.05.

  	
   

  	
  Accounting Terms

  	
   

  	
  72

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
   

  	
  ESTABLISHMENT OF
  ISSUER; TRANSFER OF LOAN ASSETS

  	
   

  	
  72

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 2.01.

  	
   

  	
  Creation and
  Funding of Issuer; Transfer of Loan Assets

  	
   

  	
  72

  
	
  Section 2.02.

  	
   

  	
  Conditions to
  Transfer of Initial Loan Assets to Issuer

  	
   

  	
  74

  
	
  Section 2.03.

  	
   

  	
  Issuance of the
  Notes

  	
   

  	
  75

  
	
  Section 2.04.

  	
   

  	
  [Reserved.]

  	
   

  	
  75

  
	
  Section 2.05.

  	
   

  	
  Sales of Loans

  	
   

  	
  75

  
	
  Section 2.06.

  	
   

  	
  Conveyance of
  Additional Loans; Effective Date Ratings Confirmation

  	
   

  	
  76

  
	
  Section 2.07.

  	
   

  	
  Release of
  Excluded Amounts

  	
   

  	
  79

  
	
  Section 2.08.

  	
   

  	
  Delivery of
  Documents in the Loan File

  	
   

  	
  79

  
	
  Section 2.09.

  	
   

  	
  [Reserved]

  	
   

  	
  79

  
	
  Section 2.10.

  	
   

  	
  Certification by
  Trustee; Possession of Loan Files

  	
   

  	
  79

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
   

  	
  REPRESENTATIONS
  AND WARRANTIES

  	
   

  	
  81

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 3.01.

  	
   

  	
  Representations
  and Warranties Regarding the Trust Depositor

  	
   

  	
  81

  
	
  Section 3.02. 

  	
   

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

  	
   

  	
  88

  
	
  Section 3.03.

  	
   

  	
  [Reserved]

  	
   

  	
  89

  
	
  Section 3.04.

  	
   

  	
  Representations
  and Warranties Regarding the Required Loan Documents

  	
   

  	
   

  
	
  Section 3.05.

  	
   

  	
  [Reserved]

  	
   

  	
  89

  
	
  Section 3.06.

  	
   

  	
  Representations
  and Warranties Regarding the Servicer

  	
   

  	
  89

  
	
  Section 3.07.

  	
   

  	
  Representations
  and Warranties of the Backup Servicer

  	
   

  	
  90

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV 

  	
   

  	
  PERFECTION OF
  TRANSFER AND PROTECTION OF SECURITY INTERESTS

  	
   

  	
  91

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 4.01.

  	
   

  	
  Custody of Loans

  	
   

  	
  91

  
	
  Section 4.02.

  	
   

  	
  Filing

  	
   

  	
  92

  
	
  Section 4.03.

  	
   

  	
  Changes in Name,
  Corporate Structure or Location

  	
   

  	
  92

  
	
  Section 4.04.

  	
   

  	
  Costs and
  Expenses

  	
   

  	
  92

  
	
  Section 4.05.

  	
   

  	
  Sale Treatment

  	
   

  	
  93

  
	
  Section 4.06.

  	
   

  	
  Separateness
  from Trust Depositor

  	
   

  	
  93

  

 

 i
 

 

 

	
  ARTICLE V

  	
   

  	
  SERVICING OF
  LOANS

  	
   

  	
  93

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 5.01.

  	
   

  	
  Appointment and
  Acceptance

  	
   

  	
  93

  
	
  Section 5.02.

  	
   

  	
  Duties of the
  Servicer

  	
   

  	
  93

  
	
  Section 5.03.

  	
   

  	
  Liquidation of
  Loans

  	
   

  	
  100

  
	
  Section 5.04.

  	
   

  	
  [Reserved]

  	
   

  	
  101

  
	
  Section 5.05.

  	
   

  	
  [Reserved]

  	
   

  	
  101

  
	
  Section 5.06.

  	
   

  	
  Collection of
  Certain Loan Payments

  	
   

  	
  101

  
	
  Section 5.07. 

  	
   

  	
  Access to
  Certain Documentation and Information Regarding the Loans

  	
   

  	
  101

  
	
  Section 5.08.

  	
   

  	
  Satisfaction of
  Collateral and Release of Loan Files

  	
   

  	
  101

  
	
  Section 5.09. 

  	
   

  	
  Scheduled
  Payment Advances; Servicing Advances and Nonrecoverable Advances

  	
   

  	
  103

  
	
  Section 5.10.

  	
   

  	
  Title,
  Management and Disposition of Foreclosed Property

  	
   

  	
  104

  
	
  Section 5.11.

  	
   

  	
  Servicing
  Compensation

  	
   

  	
  105

  
	
  Section 5.12.

  	
   

  	
  Assignment;
  Resignation

  	
   

  	
  105

  
	
  Section 5.13.

  	
   

  	
  Merger or
  Consolidation of Servicer

  	
   

  	
  106

  
	
  Section 5.14.

  	
   

  	
  Limitation on
  Liability of the Servicer and Others

  	
   

  	
  106

  
	
  Section 5.15.

  	
   

  	
  The Backup
  Servicer

  	
   

  	
  107

  
	
  Section 5.16.

  	
   

  	
  Covenants of the
  Backup Servicer

  	
   

  	
  109

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
   

  	
  COVENANTS OF THE
  TRUST DEPOSITOR

  	
   

  	
  110

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 6.01.

  	
   

  	
  Legal Existence

  	
   

  	
  110

  
	
  Section 6.02.

  	
   

  	
  Loans Not to Be
  Evidenced by Promissory Notes

  	
   

  	
  110

  
	
  Section 6.03.

  	
   

  	
  Security
  Interests

  	
   

  	
  110

  
	
  Section 6.04.

  	
   

  	
  Delivery of
  Principal Collections and Interest Collections

  	
   

  	
  111

  
	
  Section 6.05.

  	
   

  	
  Regulatory
  Filings

  	
   

  	
  111

  
	
  Section 6.06.

  	
   

  	
  Compliance with
  Law

  	
   

  	
  111

  
	
  Section 6.07. 

  	
   

  	
  Activities;
  Transfers of Notes or Certificates by Trust Depositor

  	
   

  	
  111

  
	
  Section 6.08.

  	
   

  	
  Indebtedness

  	
   

  	
  111

  
	
  Section 6.09.

  	
   

  	
  Guarantees

  	
   

  	
  112

  
	
  Section 6.10.

  	
   

  	
  Investments

  	
   

  	
  112

  
	
  Section 6.11.

  	
   

  	
  Merger; Sales

  	
   

  	
  112

  
	
  Section 6.12.

  	
   

  	
  Distributions

  	
   

  	
  112

  
	
  Section 6.13.

  	
   

  	
  Other Agreements

  	
   

  	
  112

  
	
  Section 6.14.

  	
   

  	
  Separate Legal
  Existence

  	
   

  	
  113

  
	
  Section 6.15.

  	
   

  	
  Location;
  Records

  	
   

  	
  113

  
	
  Section 6.16.

  	
   

  	
  Liability of
  Trust Depositor

  	
   

  	
  113

  
	
  Section 6.17.

  	
   

  	
  Bankruptcy
  Limitations

  	
   

  	
  113

  
	
  Section 6.18.

  	
   

  	
  Limitation on
  Liability of Trust Depositor and Others

  	
   

  	
  114

  
	
  Section 6.19.

  	
   

  	
  Insurance
  Policies

  	
   

  	
  114

  
	
  Section 6.20.

  	
   

  	
  Payments from
  Obligors

  	
   

  	
  114

  

 

 ii
 

 

 

	
  ARTICLE VII 

  	
   

  	
  ESTABLISHMENT OF
  ACCOUNTS; DISTRIBUTIONS; RESERVE FUND

  	
   

  	
  114

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 7.01. 

  	
   

  	
  Note
  Distribution Account, Certificate Account, Class A-1A VFN Funding Account and
  Reserve Fund

  	
   

  	
  114

  
	
  Section 7.02.

  	
   

  	
  [Reserved]

  	
   

  	
  116

  
	
  Section 7.03.

  	
   

  	
  Principal and
  Interest Account

  	
   

  	
  116

  
	
  Section 7.04.

  	
   

  	
  Securityholder
  Distributions

  	
   

  	
  119

  
	
  Section 7.05.

  	
   

  	
  Allocations and
  Distributions

  	
   

  	
  119

  
	
  Section 7.06.

  	
   

  	
  Determination of
  LIBOR

  	
   

  	
  126

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  	
   

  	
  SERVICER
  DEFAULT; SERVICER TRANSFER

  	
   

  	
  127

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 8.01.

  	
   

  	
  Servicer Default

  	
   

  	
  127

  
	
  Section 8.02.

  	
   

  	
  Servicer
  Transfer

  	
   

  	
  128

  
	
  Section 8.03. 

  	
   

  	
  Appointment of
  Successor Servicer; Reconveyance; Successor Servicer to Act

  	
   

  	
  129

  
	
  Section 8.04.

  	
   

  	
  Notification to
  Securityholders

  	
   

  	
  131

  
	
  Section 8.05.

  	
   

  	
  Effect of
  Transfer

  	
   

  	
  132

  
	
  Section 8.06.

  	
   

  	
  Database File

  	
   

  	
  132

  
	
  Section 8.07.

  	
   

  	
  Waiver of
  Defaults

  	
   

  	
  132

  
	
  Section 8.08.

  	
   

  	
  Responsibilities
  of the Successor Servicer

  	
   

  	
  132

  
	
  Section 8.09.

  	
   

  	
  Rating Agency
  Condition for Servicer Transfer

  	
   

  	
  133

  
	
  Section 8.10.

  	
   

  	
  Appointment of
  Successor Backup Servicer; Successor Backup

  	
   

  	
   

  
	
   

  	
   

  	
  Servicer to Act

  	
   

  	
  133

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IX

  	
   

  	
  REPORTS

  	
   

  	
  134

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 9.01.

  	
   

  	
  Quarterly
  Reports

  	
   

  	
  134

  
	
  Section 9.02.

  	
   

  	
  Officer’s
  Certificate

  	
   

  	
  135

  
	
  Section 9.03.

  	
   

  	
  Other Data;
  Obligor Financial Information

  	
   

  	
  135

  
	
  Section 9.04.

  	
   

  	
  Annual Report of
  Accountants

  	
   

  	
  136

  
	
  Section 9.05.

  	
   

  	
  Annual Statement
  of Compliance from Servicer

  	
   

  	
  136

  
	
  Section 9.06.

  	
   

  	
  [Reserved]

  	
   

  	
  137

  
	
  Section 9.07.

  	
   

  	
  Notices of Event
  of Default or Servicer Default

  	
   

  	
  137

  
	
  Section 9.08. 

  	
   

  	
  Trustee’s Right
  to Examine Servicer Records, Audit Operations and Deliver Information to
  Noteholders

  	
   

  	
  137

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE X

  	
   

  	
  TERMINATION

  	
   

  	
  137

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 10.01.

  	
   

  	
  Optional
  Repurchase and Refinancing of Notes

  	
   

  	
  137

  
	
  Section 10.02.

  	
   

  	
  Termination

  	
   

  	
  138

  

 

 iii
 

 

 

	
  ARTICLE XI

  	
   

  	
  REMEDIES UPON
  MISREPRESENTATION

  	
   

  	
  138

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 11.01. 

  	
   

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

  	
   

  	
  138

  
	
  Section 11.02.

  	
   

  	
  Reassignment of
  Repurchased or Substituted Loans

  	
   

  	
  141

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XII

  	
   

  	
  INDEMNITIES

  	
   

  	
  142

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 12.01.

  	
   

  	
  Indemnification
  by Servicer

  	
   

  	
  142

  
	
  Section 12.02.

  	
   

  	
  Indemnification
  by Trust Depositor

  	
   

  	
  142

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XIII

  	
   

  	
  MISCELLANEOUS

  	
   

  	
  143

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 13.01.

  	
   

  	
  Amendment

  	
   

  	
  143

  
	
  Section 13.02.

  	
   

  	
  Reserved

  	
   

  	
  145

  
	
  Section 13.03.

  	
   

  	
  Governing Law

  	
   

  	
  145

  
	
  Section 13.04.

  	
   

  	
  Notices

  	
   

  	
  145

  
	
  Section 13.05.

  	
   

  	
  Severability of
  Provisions

  	
   

  	
  149

  
	
  Section 13.06.

  	
   

  	
  Third Party
  Beneficiaries

  	
   

  	
  149

  
	
  Section 13.07.

  	
   

  	
  Counterparts

  	
   

  	
  149

  
	
  Section 13.08.

  	
   

  	
  Headings

  	
   

  	
  149

  
	
  Section 13.09.

  	
   

  	
  No Bankruptcy
  Petition; Disclaimer

  	
   

  	
  149

  
	
  Section 13.10.

  	
   

  	
  Jurisdiction

  	
   

  	
  150

  
	
  Section 13.11.

  	
   

  	
  Tax
  Characterization

  	
   

  	
  150

  
	
  Section 13.12.

  	
   

  	
  Prohibited
  Transactions with Respect to the Issuer

  	
   

  	
  151

  
	
  Section 13.13.

  	
   

  	
  Limitation of
  Liability of Owner Trustee

  	
   

  	
  151

  
	
  Section 13.14.

  	
   

  	
  Reserved

  	
   

  	
  152

  
	
  Section 13.15.

  	
   

  	
  No Partnership

  	
   

  	
  152

  
	
  Section 13.16.

  	
   

  	
  Successors and
  Assigns

  	
   

  	
  152

  
	
  Section 13.17.

  	
   

  	
  Acts of Holders

  	
   

  	
  152

  
	
  Section 13.18.

  	
   

  	
  Duration of
  Agreement

  	
   

  	
  152

  
	
  Section 13.19.

  	
   

  	
  Limited Recourse

  	
   

  	
  152

  
	
  Section 13.20.

  	
   

  	
  Confidentiality

  	
   

  	
  152

  
	
  Section 13.21.

  	
   

  	
  Non-Confidentiality
  of Tax Treatment

  	
   

  	
  153

  
	
  Section 13.22.

  	
   

  	
  Temporary
  Subparticipation and Elevation

  	
   

  	
  153

  

 

 iv
 

 

EXHIBITS, SCHEDULES AND APPENDIX

	
  Exhibit A

  	
   

  	
  Form of Assignment

  	
   

  	
  A-1A

  
	
  Exhibit B

  	
   

  	
  Form of Closing Certificate of Trust Depositor

  	
   

  	
  B-1

  
	
  Exhibit C

  	
   

  	
  Form of Closing Certificate of Servicer/Originator

  	
   

  	
  C-1

  
	
  Exhibit D

  	
   

  	
  Form of Liquidation Report

  	
   

  	
  D-1

  
	
  Exhibit E

  	
   

  	
  Form of Principal and Interest Account Letter
  Agreement

  	
   

  	
  E-1

  
	
  Exhibit F

  	
   

  	
  Form of Loan Asset Certificate

  	
   

  	
  F-1

  
	
  Exhibit G

  	
   

  	
  List of Loans

  	
   

  	
  G-1

  
	
  Exhibit H

  	
   

  	
  [Reserved]

  	
   

  	
  H-1

  
	
  Exhibit I

  	
   

  	
  [Reserved]

  	
   

  	
  I-1

  
	
  Exhibit J

  	
   

  	
  [Reserved]

  	
   

  	
  J-1

  
	
  Exhibit K

  	
   

  	
  Credit and Collection Policy

  	
   

  	
  K-1

  
	
  Exhibit L-1

  	
   

  	
  Form of Initial Certification

  	
   

  	
  L-1

  
	
  Exhibit L-2

  	
   

  	
  Form of Final Certification

  	
   

  	
  L-2

  
	
  Exhibit M

  	
   

  	
  Form of Request For Release Of Documents

  	
   

  	
  M-1

  
	
  Schedule I

  	
   

  	
  [Reserved]

  	
   

  	
  Schedule I

  
	
  Schedule II

  	
   

  	
  Interim Tests

  	
   

  	
  Schedule II

  
	
  Annex A

  	
   

  	
  Diversity Score Calculation

  	
   

  	
  Annex A

  
	
  Annex B

  	
   

  	
  Moody’s RiskCalc Calculation

  	
   

  	
  Annex B

  

 

 v

SALE AND
SERVICING AGREEMENT

THIS
SALE AND SERVICING AGREEMENT, dated as of July 7, 2006 (this “Agreement”),
is by and among:

(1)                                  ARCC COMMERCIAL LOAN TRUST 2006, a
statutory trust created and existing under the laws of the State of Delaware,
as the issuer (together with its successors and assigns, the “Issuer”);

(2)                                  ARCC CLO 2006 LLC, a Delaware limited
liability company, as the trust depositor (together with its successor and
assigns, in such capacity, the “Trust Depositor”);

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

(4)                                  U.S. BANK NATIONAL ASSOCIATION (together
with its successors and assigns, “U.S. Bank”), not in its individual
capacity, but as the trustee (together with its successors and assigns, in such
capacity, the “Trustee”), and as the collateral administrator (together
with its successor and assigns, in such capacity, the “Collateral
Administrator”);

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

(6)                                  WILMINGTON TRUST COMPANY (together with its
successors and assigns, “Wilmington Trust”), not in its individual
capacity but as the owner trustee (together with its successors and assigns, in
such capacity, the “Owner Trustee”).

R E C I T A L S

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

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

WHEREAS,
during the Ramp-Up Period and the Replenishment Period, the Issuer intends to
acquire Additional Loans from the Trust Depositor from time to time using the
proceeds of Draws under the Class A-1A VFN Notes, amounts on deposit in the
Class A-1A VFN Funding Account and Principal Collections with respect to the
Loan Assets; and the Trust Depositor wishes to convey any such Additional Loans
to the Issuer;

 

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

WHEREAS,
on the Closing Date, the Trust Depositor will fund the Issuer by selling,
conveying and assigning all its right, title and interest in the Initial Loan
Assets and certain other assets to the Issuer;

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

WHEREAS,
the Servicer is willing to service the Loan Assets for the benefit and account
of the Issuer pursuant to the terms hereof.

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

ARTICLE
I.

DEFINITIONS

Section
1.01.        Definitions

Whenever used in this
Agreement, the following words and phrases, unless the context otherwise
requires, shall have the following meanings:

“1940 Act” means the Investment Company Act of
1940, as amended.

“Accountants’ Effective Date Certificate” shall
have the meaning provided in Section 2.06(g).

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

“Additional Loan” means any Loan, other than an
Initial Loan, acquired by the Issuer from the Trust Depositor for inclusion in
the Collateral and having a Cut-Off Date during the Ramp-Up Period or the
Replenishment Period.

“Additional Loan Assets” means any assets
acquired by the Trust Depositor from the Originator and by the Issuer from the
Trust Depositor during the Ramp-Up Period and the Replenishment Period pursuant
to Section 2.06(a), which assets shall include the Trust Depositor’s (or
Originator’s, as applicable) right, title and interest in the following:

(i)            the Additional Loans listed in the
related Subsequent List of Loans, all payments paid in respect thereof and all
monies due, to become due or paid in respect thereof

 2
 

 

accruing on and after the applicable Cut-Off Date and
all Liquidation Proceeds and recoveries thereon, in each case as they arise
after the applicable Cut-Off Date;

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

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

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

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

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

“Additional Principal Amount” means with
respect to any Distribution Date, an amount equal to the excess, if any, of the
Cumulative Charged-Off Amount over the Cumulative Additional Principal Amount.

“Administrative Expenses” means fees and expenses
(excluding amounts related to indemnification) due or accrued with respect to
any Distribution Date and payable by the Issuer as provided for in the relevant
fee letter:

(a)           to the Trustee, (i) any quarterly
fees to be paid to it pursuant to the Transaction Documents, (ii) any
additional fees, expenses or other amounts and (iii) if a Successor Servicer is
being appointed, any Servicing Transfer Costs incurred by the Trustee;

(b)           to the Owner Trustee, (i) any
quarterly fees to be paid to it pursuant to the Transaction Documents and (ii)
any additional fees, expenses or other amounts;

(c)           to the Backup Servicer, (i) any
quarterly fees to be paid to it pursuant to the Transaction Documents, (ii) any
additional fees, expenses or other amounts and (iii) if a Successor Servicer is
being appointed, any Servicing Transfer Costs incurred by the Backup Servicer;

(d)           the independent accountants, agents
and counsel of the Issuer for fees and expenses including, but not limited to,
audit fees and expenses;

(e)           the Class A-1A VFN Agent under the
Class A-1A VFN Purchase Agreements for expenses of the Class A-1A VFN Agent;

 3
 

 

(f)            any other Person in respect of any
governmental fee, charge or tax in relation to the Issuer;

(g)           to the Trustee, for unpaid fees and
expenses (including fees and expenses of its agents and counsel) incurred in
the exercise of its rights and remedies on behalf of the Securityholders
pursuant to Article V of the Indenture;

(h)           to S&P and Moody’s, for their
respective ongoing surveillance fees;

(i)            to the Persons entitled thereto, any
amounts due in respect of listing the Listed Notes on the Irish Stock Exchange;
and

(j)            to the Collateral Administrator
under the Collateral Administration Agreement for expenses of the Collateral
Administrator.

provided that (x)
amounts payable as Administrative Expenses pursuant to clauses (a)(ii), b(ii),
c(ii), (d), (e), (f) , (g), (i) and (j) above shall in no event exceed $100,000
in the aggregate for any 12-month period, except that in the case of a
Distribution Date after the occurrence of an Event of Default, amounts payable
as Administrative Expenses pursuant to clause (g) above may be paid in an
amount up to $20,000 and (y) Administrative Expenses will not include (A) any
amounts due or accrued with respect to the actions taken on or in connection
with the Closing Date, (B) any principal of, interest or commitment fee on, any
Notes, (C) Class A-1A VFN Increased Costs and Class A-1A VFN Breakage Costs or
(D) amounts payable to Trustee, the Backup Servicer and the Owner Trustee in
respect of indemnification.

“Affiliate” of any specified Person means any
other Person that, directly or indirectly, controls, is controlled by, or is
under common control with, such Person, or is a director or officer of such
Person; provided that for
purposes of determining whether any Loan is an Eligible Loan or any Obligor is
an Eligible Obligor, the term Affiliate shall not include any Affiliate
relationship which may exist solely as a result of direct or indirect ownership
of, or control by, a common Person, including any Subsidiary of such Person,
whose principal business activity is acquiring, holding and selling investments
(including controlling interests) in otherwise unrelated companies that each
are distinct legal entities with separate management, books and records and
bank accounts, whose operations are not integrated with one another and whose
financial condition and creditworthiness are independent of the other companies
in which such Person acquires, holds or sells investments. For the purposes of
this definition, “control” (including the terms “controlling”, “controlled by”
and “under common control with”) when used with respect to any specified Person
means the possession, direct or indirect, of the power to vote 20% or more of
the voting securities of such Person or to direct or cause the direction of the
management and policies of such Person, whether through the ownership of voting
securities, by contract or otherwise. Each of the Trustee and the Owner Trustee
may conclusively presume that a Person is not an Affiliate of another Person
unless a Responsible Officer of such trustee has actual knowledge to the
contrary.

“Agented Loans” means, with respect to any
Loan, (a) the Loan is originated or purchased by the Originator in accordance
with the Credit and Collection Policy and the Servicing Standard as a part of a
syndicated loan transaction that has been fully consummated prior to such Loan

 4
 

 

becoming part of the Collateral, (b) upon the sale of
the Loan under this Agreement to the Issuer, the Required Loan Documents with
respect thereto shall have been provided to the Trustee, as applicable, (c) the
Issuer, as assignee of the Loan, has all of the rights and obligations of the
Originator (other than the Originator’s obligations as lead agent, collateral
agent or paying agent or in similar capacities with respect to such Loan) with
respect to such Loan and the Originator’s right, title and interest in and to
the Related Property, (d) the Loan is secured by an undivided interest in the
Related Property that also secures and is shared by, on a pro rata basis, all other holders of such
Obligor’s notes of equal priority issued in such syndicated loan transaction
and (e) the Originator (or a wholly owned subsidiary of the Originator) is the
lead agent, collateral agent and paying agent for all lenders in such
syndicated loan transaction and receives payment directly from the Obligor
thereof on behalf of such lenders.

“Aggregate Outstanding Loan Balance” means, as
of any date, the sum of the Outstanding Loan Balance for each Loan included as
part of the Collateral on such date, minus the Outstanding Loan Balance of any
Charged-Off Loans; provided that
for purposes of calculating the Aggregate Outstanding Loan Balance, the
Outstanding Loan Balance of each Revolving Loan and each Delayed Draw Term Loan
shall be deemed to be the maximum permissible principal balance thereof under
the Underlying Loan Agreements with respect to such Loan.

“Aggregate Outstanding Principal Balance”
means, as of any date of determination, the sum of the Outstanding Principal
Balances of each Class of Notes outstanding on such date.

“Applicable Law” means for any Person or
property of such 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 and Regulation B of the Board of Governors of the Federal Reserve
System), and applicable judgments, decrees, injunctions, writs, awards or
orders of any court, arbitrator or other administrative, judicial, or
quasi-judicial tribunal or agency of competent jurisdiction.

“Ares Capital CP Funding LLC” means Ares
Capital CP Funding LLC, a Delaware limited liability company and a wholly owned
subsidiary of Ares Capital.

“Ares Capital Prime Rate” means an annual rate
of interest payable at the applicable prime rate established by the Servicer
with respect to each Scheduled Payment Advance and each Servicing Advance.

“Asset Specific Swap” means an interest rate
exchange agreement with respect to a particular Loan, entered into by the
Originator with a Swap Counterparty, and assigned by the Originator, directly
or indirectly, to the Issuer, which entitles the Issuer to exchange scheduled
fixed rate interest payable in respect of such Loan for LIBOR payments and
satisfies the following conditions:

(i)            the notional balance of such Asset
Specific Swap shall be equal to the scheduled principal amount of the related
Loan;

 5

 

(ii)           such Asset Specific Swap shall
amortize according to the same schedule as, and terminate no earlier than the
maturity date of, the related Loan;

(iii)          payments under such Asset Specific
Swap shall be due on each date on which a Scheduled Payment is to be made under
the related Loan;

(iv)          such Asset Specific Swap by its terms
shall provide for termination upon (i) the related Loan becoming a Charged-Off
Loan or a Delinquent Loan or (ii) prepayment of the related Loan in full;

(v)           such Asset Specific Swap contains
appropriate limited recourse and non-petition provisions equivalent (mutatis mutandis) to those contained in
this Agreement and the Indenture; and

(vi)          all of the Originator’s rights and
obligations (other than its obligation to make payments to the Swap
Counterparty in connection with the termination, transfer, reduction or
amendment of such Asset Specific Swap, or any portion thereof) with respect to
such Asset Specific Swap have been assigned to the Issuer.

“Assignment” means each assignment, substantially
in the form of Exhibit A, relating to an assignment, transfer and
conveyance of the Loans and the Related Property by the Trust Depositor to the
Issuer.

“Average Life” means, on any Measurement Date
with respect to any Loan, the number (rounded to the nearest one tenth)
obtained by dividing (a) the sum of the products of (i) the number of years
from such Measurement Date to the respective dates of each successive Scheduled
Payment of principal of such Loan and (ii) the respective amounts of principal
of such Scheduled Payments by (b) the sum of all future Scheduled Payments of
principal on such Loan.

“B Excess Amount” means an amount equal to $0.

“BB Excess Amount” means an amount equal to $0.

“Backup Servicer” means the Person acting as
Backup Servicer hereunder, its successors in interest and any Successor Backup
Servicer hereunder.

“Backup Servicer Fee Letter” means the fee
letter, dated as of the date hereof, between the Issuer and the Backup
Servicer.

“Backup Servicer Termination Notice” shall have
the meaning provided in Section 8.10(a).

“Backup Servicer Transfer” shall have the
meaning provided in Section 8.10(b).

“Backup Servicing Fee” shall have the meaning
provided in the Backup Servicer Fee Letter.

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

 6
 

 

“BIF” means the Bank Insurance Fund, or any
successor thereto.

“Broadly Syndicated Loan” means any Loan to an
Obligor issued as part of a loan facility with an original loan size (including
any first and second lien loans included in such facility) greater than
$250,000,000, including for purposes of this definition the maximum available
amount of commitments under any Revolving Loans and Delayed Draw Term Loans.

“Business Day” means any day other than (a) a
Saturday or Sunday, or (b) a day on which banking institutions in the city of
New York, New York, and the city in which the corporate trust office of the
Trustee is located are authorized or obligated by law or executive order to be
closed; provided that if any
action is required of the Ireland Paying Agent or the Backup Servicer, then,
for purposes of determining when such Ireland Paying Agent or Backup Servicer
action is required, Dublin, Ireland and Marshall, Minnesota, respectively will
be considered in determining “Business Day”.

“CCC Excess Amount” means, as of any date of
determination, an amount equal to the greater of: (i) 50% of the excess of (a)
the sum of the Outstanding Loan Balances of all Loans included in the
Collateral that have an S&P Rating of “CCC+” or lower over (b) the product
of (x) the Expected Aggregate Outstanding Loan Balance times (y) 25%, and (ii)
zero.

“CCC Excess Condition” means, as of any date of
determination, a condition that is satisfied if the CCC Excess Amount is equal
to or less than 13.50% of the Expected Aggregate Outstanding Loan Balance.

“CCC Excess Failure” means the failure to
satisfy the CCC Excess Condition within a period of ten Business Days following
the discovery by the Servicer of the failure to satisfy such condition.

“Certificate” means the ARCC Commercial Loan
Trust 2006 Certificate representing a beneficial equity interest in the Issuer
and issued pursuant to the Trust Agreement.

“Certificate Account” shall have the meaning
provided in Section 5.01 of the Trust Agreement.

“Certificateholder” means each registered
Holder of a fractional undivided ownership interest in the Certificate.

“Certificate Register” shall have the meaning
provided in the Trust Agreement.

“Charged-Off Loan” means a Loan in the
Collateral (other than a Current Pay Loan) with respect to which there has
occurred one or more of the following:

(i)            the occurrence of both (a) any
portion of a payment of interest on or principal of such Loan is not paid when
due (without giving effect to any grace period or any Scheduled Payment Advance
made in respect of such payment of interest or principal) or would be so
delinquent but for any amendment or modification made to such Loan resulting
from the Obligor’s inability to pay such Loan in accordance with its terms and
(b) within 120 days of when such delinquent payment was first due, all
delinquencies have not been cured;

(ii)           an Insolvency Event has occurred with
respect to the related Obligor;

 7
 

 

(iii)          the related Obligor has suffered any
material adverse change that materially affects its viability as a going
concern, as determined by Servicer in its sole discretion in accordance with
the Credit and Collection Policy;

(iv)          the Servicer has determined, in its
sole discretion, in accordance with the Credit and Collection Policy, that all
or a portion of such Loan is not collectible;

(v)           any portion of the proceeds used to
make payments of principal of or interest on such Loan have come from a new
loan by the Originator or an entity controlled by the Originator to the Obligor
or any of its Affiliates, which new loan was made to the Obligor due to the
Obligor’s inability to make such payments of principal or interest; or

(vi)          the related Obligor is rated “D” or “SD”
by S&P.

“Class” means any group of Notes identified
herein, as applicable, as the Class A-1A Notes, the Class A-1A VFN Notes, the
Class A-1B Notes, the Class A-2A Notes, the Class A-2B Notes, the Class B
Notes, the Class C Notes, the Class D Notes, and the Class E Notes.

“Class A Noteholder” means a Holder of Class
A-1 Notes or Class A-2 Notes.

“Class A Notes” means the Class A-1 Notes and
the Class A-2 Notes.

“Class A-1 Noteholder” means a Holder of Class
A-1A Notes, Class A-1A VFN Notes or Class A-1B Notes.

“Class A-1 Notes” means, collectively, the
Class A-1A Notes, the Class A-1A VFN Notes and the Class A-1B Notes.

“Class A-1A Interest Amount” means, for each
Interest Period, the product of (i) the Note Interest Rate applicable to the
Class A-1A Notes for such Interest Period, (ii) the Outstanding Principal
Balance of the Class A-1A Notes as of the first day of such Interest Period
(after giving effect to all distributions made on such day) and (iii) a
fraction, the numerator of which is the number of days in such Interest Period
and the denominator of which is 360.

“Class A-1A Interest Shortfall” means the
Interest Shortfall with respect to the Class A-1A Notes.

“Class A-1A Note Interest Rate” means the
annual rate of interest payable with respect to the Class A-1A Notes, which
shall be equal to LIBOR plus 0.25% per annum.

“Class A-1A Noteholder” means a Holder of Class
A-1A Notes.

“Class A-1A Notes” means the ARCC Commercial
Loan Trust 2006 Notes, Series 2006, Class A-1A Notes, issued pursuant to the Indenture.

“Class A-1A VFN Agent” means U.S. Bank National
Association, in its capacity as Class A-1A VFN Agent under the Class A-1A VFN
Purchase Agreement, together with its successors in such capacity.

 8
 

 

“Class A-1A VFN Breakage Costs” means, with
respect to any Due Period, “breakage costs”, if any, incurred by Class A-1A VFN
Noteholders as a result of (i) a prepayment of amounts under the Class A-1A VFN
Notes on a day other than a Permitted Prepayment Date and calculated as
provided in the Class A-1A VFN Purchase Agreement or (ii) a failure by the
Issuer to effect a Draw on the scheduled date therefor after having submitted a
request for a Draw to the Class A-1A VFN Agent in accordance with the
provisions of the Class A-1A VFN Purchase Agreement (unless such failure is due
to the failure of the Class A-1A VFN Noteholders to fund such Draw).

“Class A-1A VFN Commitment” means, with respect
to any Class A-1A VFN Note at any time, the maximum aggregate outstanding
principal amount of advances, whether at the time funded or unfunded, that the
Class A-1A VFN Noteholder (or any Liquidity Providers with respect to such
Noteholder) is obligated from time to time under the Class A-1A VFN Purchase
Agreement to make to the Issuer; provided that
the aggregate Class A-1A VFN Commitments in effect at any time shall not exceed
the Maximum Class A-1A VFN Commitment.

“Class A-1A VFN Commitment Fee” means the fee
payable in respect of the undrawn amount of the Class A-1A VFN Notes (and on
the amount of any Draw funded by a Class A-1A VFN Noteholder in connection with
such Noteholder’s failure to satisfy the Rating Criteria) until the Commitment
Termination Date at the Class A-1A VFN Commitment Fee Rate, payable quarterly
in arrears on each Distribution Date and calculated on the basis of a 360-day
year and the actual number of days elapsed.

“Class A-1A VFN Commitment Fee Rate” means a
rate per annum of 0.175%.

“Class A-1A VFN Funding Account” means the
trust account so designated and established and maintained in accordance with Section
7.01 and the Indenture.

“Class A-1A VFN Funding Test” means a test that
will be satisfied as of any date of determination (a) prior to the Commitment
Termination Date, if (i) the sum of (x) the undrawn amount of the Class A-1A
VFN Commitments (excluding the Class A-1A VFN Commitment of any Class A-1A VFN
Noteholder which has been required to fund a Draw in the amount of the unused
portion of such Noteholder’s Class A-1A VFN Commitment in connection with its
failure to satisfy the Rating Criteria) plus
(y) the amount standing to the credit of the Class A-1A VFN Funding Account
equals or exceeds (ii) the aggregate Exposure Amount of Revolving Loans and
Delayed Draw Term Loans then included in the Collateral, (b) on and after a
Commitment Termination Date of the type specified in clause (i) or (ii)
of the definition thereof, if the amount standing to the credit of the Class
A-1A VFN Funding Account equals or exceeds the aggregate Exposure Amount of
Revolving Loans and Delayed Draw Term Loans then included in the Collateral and
(c) on and after a Commitment Termination Date of the type specified in clause
(iii) of the definition thereof shall be deemed satisfied.

“Class A-1A VFN Increased Costs” means, with
respect to any Distribution Date, the amount as set forth in a certificate of a
Class A-1A VFN Noteholder delivered to the Issuer and the Trustee on or prior
to the related Determination Date, necessary to compensate such Class A-1A VFN
Noteholder or any Funding Entity for (a) any increase in cost to such Class
A-1A VFN Noteholder or Funding Entity of making or maintaining any loan or
asset purchase under the Class A-1A VFN Purchase Agreement or such Liquidity
Facility (or maintaining its obligation to

 9
 

 

make any such loan or asset purchase) resulting from a
change in law applicable to such Class A-1A VFN Noteholder or Funding Entity,
(b) any reduction in any amount received or receivable by a Class A-1A VFN
Noteholder or Funding Entity under the Class A-1A VFN Purchase Agreement or
such Liquidity Facility resulting from a change in law applicable to such Class
A-1A VFN Noteholder or Funding Entity or (c) any reduction in the rate of
return on the capital of a Class A-1A VFN Noteholder or Funding Entity or its
parent/holding company resulting from a change in law applicable to such Class
A-1A VFN Noteholder or Funding Entity or parent/holding company to a level
below that which such Class A-1A VFN Noteholder or Funding Entity or
parent/holding company could have achieved but for such change in law.

“Class A-1A VFN Interest Allocation Percentage”
means, for each Interest Period and with respect to each Class A-1A VFN
Noteholder, a fraction, expressed as a percentage, (a) the numerator of which
is the average Outstanding Principal Balance of the Class A-1A VFN Note of such
Holder during such Interest Period, and (b) the denominator of which is the
average Outstanding Principal Balance of all Class A-1A VFN Notes during such
Interest Period (excluding the amount of any Draw funded by a Class A-1A VFN
Noteholder in connection with its failure to satisfy the Rating Criteria).

“Class A-1A VFN Interest Amount” means, for
each Interest Period, the product of (i) the Note Interest Rate applicable to
the Class A-1A VFN Notes for such Interest Period, (ii) the weighted average
Outstanding Principal Balance of the Class A-1A VFN Notes during such Interest
Period (excluding the amount of any Draw funded by a Class A-1A VFN Noteholder
in connection with its failure to satisfy the Rating Criteria) and (iii) a
fraction, the numerator of which is the number of days in such Interest Period
and the denominator of which is 360, such product to be remitted to each Class
A-1A VFN Noteholder pursuant to the Priority of Payments in accordance with
such Class A-1A VFN Noteholder’s Class A-1A VFN Interest Allocation Percentage.

“Class A-1A VFN Interest Shortfall” means the
Interest Shortfall with respect to the Class A-1A VFN Notes.

“Class A-1A VFN Note Interest Rate” means the
annual rate of interest payable with respect to the Class A-1A VFN Notes, which
shall be equal to LIBOR plus 0.28% per annum.

“Class A-1A VFN Noteholder” means a Holder of
Class A-1A VFN Notes.

“Class A-1A VFN Notes” means the ARCC
Commercial Loan Trust 2006 Notes, Series 2006, Class A-1A VFN Notes, issued
pursuant to the Indenture.

“Class A-1A VFN Prepayment” means any payment
of principal of the Class A-1A VFN Notes occurring prior to the Stated Maturity
Date.

“Class A-1A VFN Purchase Agreement” means the
Class A-1A VFN Purchase Agreement, dated as of the Closing Date, among the
Issuer, the Class A-1A VFN Agent and the respective Holders of the Class A-1A
VFN Notes, as such agreement may be amended, modified, restated, waived or
supplemented and in effect from time to time.

“Class A-1B Interest Amount” means, for each Interest
Period, the product of (i) the Note Interest Rate applicable to the Class A-1B
Notes for such Interest Period, (ii) the Outstanding

 10
 

 

Principal Balance of the Class A-1B Notes as of the
first day of such Interest Period (after giving effect to all distributions
made on such day) and (iii) a fraction, the numerator of which is the number of
days in such Interest Period and the denominator of which is 360.

“Class A-1B Interest Shortfall” means the
Interest Shortfall with respect to the Class A-1B Notes.

“Class A-1B Note Interest Rate” means the
annual rate of interest payable with respect to the Class A-1B Notes, which
shall be equal to LIBOR plus 0.37% per annum.

“Class A-1B Noteholder” means a Holder of Class
A-1B Notes.

“Class A-1B Notes” means the ARCC Commercial
Loan Trust 2006 Notes, Series 2006, Class A-1B Notes, issued pursuant to the
Indenture.

“Class A-2A Interest Amount” means, for each
Interest Period, the product of (a) the Note Interest Rate applicable to the
Class A-2A Notes for such Interest Period, (b) the Outstanding Principal
Balance of the Class A-2A Notes as of the first day of such Interest Period
(after giving effect to all distributions made on such day) and (c) a fraction,
the numerator of which is the number of days in such Interest Period and the
denominator of which is 360.

“Class A-2A Interest Shortfall” means the
Interest Shortfall with respect to the Class A-2A Notes.

“Class A-2A Note Interest Rate” means the
annual rate of interest payable with respect to the Class A-2A Notes, which
shall be equal to LIBOR plus 0.22% per annum.

“Class A-2A Noteholder” means a Holder of Class
A-2A Notes.

“Class A-2A Notes” means the ARCC Commercial
Loan Trust 2006 Notes, Series 2006, Class A-2A Floating Rate Notes, issued
pursuant to the Indenture.

“Class A-2B Interest Amount” means, for each
Interest Period, the product of (a) the Note Interest Rate applicable to the
Class A-2B Notes for such Interest Period, (b) the Outstanding Principal
Balance of the Class A-2B Notes as of the first day of such Interest Period
(after giving effect to all distributions made on such day) and (c) a fraction,
the numerator of which is the number of days in such Interest Period and the
denominator of which is 360.

“Class A-2B Interest Shortfall” means the
Interest Shortfall with respect to the Class A-2B Notes.

“Class A-2B Note Interest Rate” means the
annual rate of interest payable with respect to the Class A-2B Notes, which
shall be equal to LIBOR plus 0.35% per annum.

“Class A-2B Noteholder” means a Holder of Class
A-2B Notes.

“Class A-2B Notes” means the ARCC Commercial
Loan Trust 2006 Notes, Series 2006, Class A-2B Floating Rate Notes, issued
pursuant to the Indenture.

“Class A-2 Noteholder” means a Holder of Class
A-2A Notes or Class A-2B Notes.

“Class A-2 Notes” means the Class A-2A Notes
and the Class A-2B Notes.

 11
 

 

“Class B Accrued Payable” means, for any
Distribution Date with respect to which the Class B Interest Amount is
calculated using clause (ii)(b) of the definition thereof, the excess,
if any, of (i) the amount that would have been calculated as the Class B
Interest Amount on such Distribution Date if the calculation was made using clause
(ii)(a) of the definition of Class B Interest Amount and not clause
(ii)(b) of such definition over (ii) the amount calculated as the Class B
Interest Amount on such Distribution Date, together with the unpaid portion of
any such excess from prior Distribution Dates (and interest accrued thereon at
the Class B Note Interest Rate).

“Class B Interest Amount” means, for each
Interest Period, the product of (i) the Note Interest Rate applicable to the
Class B for such Interest Period, (ii) the lesser of (a) the Outstanding
Principal Balance of the Class B Notes as of the first day of such Interest
Period (after giving effect to all distributions made on such day) and (b) the
excess, if any, of (1) the Aggregate Outstanding Loan Balance as of the last
day of the Due Period immediately preceding the start of such Interest Period
over (2) the Outstanding Principal Balance of the Class A Notes as of the first
day of such Interest Period (after giving effect to all distributions made on
such day), and (iii) a fraction, the numerator of which is the number of days
in such Interest Period and the denominator of which is 360.

“Class B Interest Shortfall” means the Interest
Shortfall with respect to the Class B Notes.

“Class B Note Interest Rate” means the annual
rate of interest payable with respect to the Class B Notes, which shall be
equal to LIBOR plus 0.43% per annum.

“Class B Noteholder” means a Holder of Class B
Notes.

“Class B Notes” means the ARCC Commercial Loan
Trust 2006 Notes, Series 2006, Class B Floating Rate Deferrable Interest Notes,
issued pursuant to the Indenture.

“Class C Accrued Payable” means, for any
Distribution Date with respect to which the Class C Interest Amount is
calculated using clause (ii)(b) of the definition thereof, an amount
equal to the excess, if any, of (i) the amount that would have been calculated
as the Class C Interest Amount on such Distribution Date if the calculation was
made using clause (ii)(a) of the definition of Class C Interest Amount
and not clause (ii)(b) of such definition over (ii) the amount
calculated as the Class C Interest Amount on such Distribution Date, together
with the unpaid portion of any such excess from prior Distribution Dates (and
interest accrued thereon at the Class C Note Interest Rate).

“Class C Interest Amount” means, for each
Interest Period, the product of (i) the Class C Note Interest Rate for such
Interest Period, (ii) the lesser of (a) the Outstanding Principal Balance of
the Class C Notes as of the first day of such Interest Period (after giving
effect to all distributions made on such day) and (b) the excess, if any, of
(1) the Aggregate Outstanding Loan Balance as of the last day of the Due Period
immediately preceding the start of such Interest Period over (2) the
Outstanding Principal Balance of the Class A Notes and the Class B Notes as of
the first day of such Interest Period (after giving effect to all distributions
made on such day), and (iii) a fraction, the numerator of which is the number
of days in such Interest Period and the denominator of which is 360.

 12
 

 

“Class C Interest Shortfall” means the Interest
Shortfall with respect to the Class C Notes.

“Class C Note Interest Rate” means the annual
rate of interest payable with respect to the Class C Notes, which shall be
equal to LIBOR plus 0.70% per annum.

“Class C Noteholder” means a Holder of Class C
Notes.

“Class C Notes” means the ARCC Commercial Loan
Trust 2006 Notes, Series 2006, Class C Floating Rate Deferrable Interest Notes,
issued pursuant to the Indenture.

“Class D Accrued Payable” means, for any
Distribution Date with respect to which the Class D Interest Amount is
calculated using clause (ii)(b) of the definition thereof, the excess,
if any, of (i) the amount that would have been calculated as the Class D
Interest Amount on such Distribution Date if the calculation was made using clause
(ii)(a) of the definition of Class D Interest Amount and not clause
(ii)(b) of such definition over (ii) the amount calculated as the Class D
Interest Amount on such Distribution Date, together with the unpaid portion of
any such excess from prior Distribution Dates (and interest accrued thereon at
the Class D Note Interest Rate).

“Class D Interest Amount” means, for each
Interest Period, the product of (i) the Note Interest Rate applicable to the
Class D Notes for such Interest Period, (ii) the lesser of (a) the Outstanding
Principal Balance of the Class D Notes as of the first day of such Interest
Period (after giving effect to all distributions made on such day) and (b) the
excess, if any, of (1) the Aggregate Outstanding Loan Balance as of the last
day of the Due Period immediately preceding the start of such Interest Period
over (2) the Outstanding Principal Balance of the Class A Notes, the Class B
Notes and the Class C Notes as of the first day of such Interest Period (after
giving effect to all distributions made on such day) and (iii) a fraction, the numerator
of which is the number of days in such Interest Period and the denominator of
which is 360.

“Class D Interest Shortfall” means the Interest
Shortfall with respect to the Class D Notes.

“Class D Note Interest Rate” means the annual
rate of interest payable with respect to the Class D Notes, which shall be
equal to LIBOR plus 1.35% per annum.

“Class D Noteholder” means a Holder of Class D
Notes.

“Class D Notes” means the ARCC Commercial Loan
Trust 2006 Notes, Series 2006, Class D Floating Rate Deferrable Interest Notes,
issued pursuant to the Indenture.

“Class E Noteholder” means a Holder of Class E
Notes.

“Class E Notes” means the ARCC Commercial Loan
Trust 2006 Notes, Series 2006, Class E Principal Only Notes, issued pursuant to
the Indenture.

“Class Scenario Loss Rate” means, with respect
to any Class rated by S&P, at any time, an estimate of the cumulative
default rate for the Current Portfolio or the Proposed Portfolio, as
applicable, consistent with S&P’s rating of such Class on the Closing Date,
determined by application of the S&P CDO Monitor at such time.

 13
 

 

“Closing Date” means July 7, 2006.

“Code” means the Internal Revenue Code of 1986,
as amended, or any successor legislation thereto.

“Collateral” means, as of any date, the “Indenture
Collateral,” as such term is defined in the Indenture.

“Collateral Administration Agreement” means the
Collateral Administration Agreement, dated as of the Closing Date, among the
Issuer, the Servicer and the Collateral Administrator.

“Collateral Administrator” means U.S. Bank
National Association, solely in its capacity as Collateral Administrator under
the Collateral Administration Agreement, until a successor Person shall have
become the Collateral Administrator pursuant to the applicable provisions of
the Collateral Administration Agreement, and thereafter “Collateral
Administrator” shall mean such successor Person.

“Collateral Quality Table” means, as set forth
below, the table that shall be used in determining, for the Loans included in
the Collateral as of any date of determination after the Effective Date,
compliance with the Weighted Average Spread Test, the Diversity Test and the
Moody’s Weighted Average Rating Factor Test:

	
  Weighted Average

  	
   

  	
   

  	
   

  	
  Weighted Average

  
	
  Spread

  	
   

  	
  Diversity Score

  	
   

  	
  Rating Factor

  
	
  5.25%

  	
   

  	
  28

  	
   

  	
  3690

  
	
  5.00%

  	
   

  	
  28

  	
   

  	
  3600

  
	
  4.75%

  	
   

  	
  28

  	
   

  	
  3510

  
	
  5.25%

  	
   

  	
  25

  	
   

  	
  3555

  
	
  5.00%

  	
   

  	
  25

  	
   

  	
  3500

  
	
  4.75%

  	
   

  	
  25

  	
   

  	
  3410

  
	
  5.25%

  	
   

  	
  22

  	
   

  	
  3385

  
	
  5.00%

  	
   

  	
  22

  	
   

  	
  3340

  
	
  4.75%

  	
   

  	
  22

  	
   

  	
  3270

  

“Collections” means the aggregate of Interest
Collections and Principal Collections.

“Commission” means the United States Securities
and Exchange Commission.

“Commitment Fee Amount” means, with respect to
the Class A-1A VFN Notes as of any Distribution Date, the sum of (a) the amount
determined for the related Interest Period by multiplying (i) the Class A-1A
VFN Commitment Fee Rate, (ii) the excess, if any, of (x) the weighted average
aggregate Class A-1A VFN Commitments during such Interest Period over (y) the
weighted average Outstanding Principal Balance of the Class A-1A VFN Notes during
such Interest Period (excluding the amount of any Draw funded by a Class A-1A
VFN Noteholder in connection with its failure to satisfy the Rating Criteria)
and (iii) a fraction, the numerator of which is the number of days in such
Interest Period and the denominator of which is 360, plus (b) any unpaid Commitment Fee Amount due in respect of
any prior Distribution Date, plus
(c)

 14
 

 

interest at the Note Interest Rate applicable to the
Class A-1A VFN Notes on any accrued and unpaid Commitment Fee Amount due in
respect of any prior Distribution Date from the date such unpaid Commitment Fee
Amount was originally due and payable.

“Commitment Termination Date” means the date on
which any of the following first occurs: (i) the last day of the Replenishment
Period; (ii) the date on which the Class A-1A VFN Commitments are declared
terminated following an Event of Default described in Sections 5.01(vi), (vii)
and (ix) of the Indenture; or (iii) the Repurchase Date.

“Compliance Plan” means a plan intended to
result in compliance by the Issuer with the Portfolio Criteria as of the
Effective Date.

“Computer Records” means the computer records
generated by the Servicer that provide information relating to the Loans and
that were used by the Originator in selecting the Loans conveyed to the Trust
Depositor pursuant to Section 2.01 (and any Additional Loans and any
Substitute Loans conveyed to the Trust Depositor pursuant to Section 2.06
and Section 11.01, respectively).

“Contractual Obligation” means, with respect to
any Person, 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.

“Corporate Trust Office” means, with respect to
the Trustee or Owner Trustee, as applicable, the office of the Trustee or Owner
Trustee at which at any particular time its corporate trust business shall be
principally administered, which offices at the date of the execution of this
Agreement are located at the addresses set forth in Section 13.04.

“Credit and Collection Policy” means the
written credit policy and procedures manual (which covers credit, collection
and servicing policies and procedures) of the Originator and the Servicer in
effect on the Closing Date (a copy of which is attached as Exhibit K),
as amended or supplemented from time to time in accordance with Section
5.02(l), a copy of which has been provided to the Trust Depositor, the Issuer,
the Owner Trustee and the Trustee; and with respect to any Successor Servicer,
the written collection policies and procedures of such Person at the time such
Person becomes a Successor Servicer.

“Credit Impaired Criteria” with respect to any
Loan, the occurrence of any of the following:

(i)            such Loan has been downgraded or
placed on watch list for possible downgrade by Moody’s since the date on which
such Loan was purchased by the Issuer; or

(ii)           (a) the spread for such Loan has been
increased since the date of purchase by (1) 0.25% or more (in the case of a
Loan with a spread over the applicable reference rate selected by the Servicer
in the exercise of its reasonable business judgment (prior to such increase)
less than or equal to 2.0%), (2) 0.375% or more (in the case of a Loan with a
spread over the applicable reference rate selected by the Servicer in the
exercise of its reasonable business judgment (prior to such increase) greater
than 2.0% but less than or equal to 4.0%) or (3) 0.5% or more (in the case of a
Loan with a spread over the applicable reference rate selected by the

 15
 

 

Servicer in the exercise of its reasonable business
judgment (prior to such increase) greater than 4.0%) due, in each case, to a
deterioration in the related borrower’s financial ratio or financial results in
accordance with the underlying Loan or (b) other than in case of any Fixed Rate
Loan, the Market Value of such Loan has decreased by at least 1.0% of the price
paid by the Issuer for such Loan due to a deterioration in the related Obligor’s
financial ratio or financial results with respect to such Loan.

“Credit Impaired Loan” means any Loan in the
Collateral that is not a Charged-Off Loan but which, in the Servicer’s
reasonable business judgment, has a significant risk of declining in credit
quality or becoming a Charged-Off Loan; provided
that, if the rating of the Class A Notes or Class B Notes has been reduced by
one or more rating subcategories from that in effect on the Closing Date or
withdrawn by Moody’s or S&P (unless it has been reinstated to the rating
assigned on the Closing Date), or the rating of the Class C Notes or the Class
D Notes has been reduced by two or more rating subcategories from that in
effect on the Closing Date or withdrawn by Moody’s (unless it has been
reinstated to the rating assigned on the Closing Date), then such Loan shall
not be considered a Credit Impaired Loan unless it satisfies the Credit
Impaired Criteria.

“Cumulative Additional Principal Amount” means,
(a) as of the initial Distribution Date, an amount equal to zero, or (b) as of
any Distribution Date after the initial Distribution Date, an amount equal to
the aggregate of amounts applied as Additional Principal Amounts on prior
Distribution Dates.

“Cumulative Charged-Off Amount” means, as of
any Distribution Date, an amount equal to the sum of (i) the sum of the
Outstanding Loan Balances of all Loans which have become Charged-Off Loans
minus the sum of the Recovery Value of all Loans which have become Charged-Off
Loans and (ii) the sum, for all
Loans (other than Charged-Off Loans) which have been sold pursuant to this
Agreement, of the excess, if any, of the Outstanding Loan Balance of each such
Loan at the time of sale over the applicable Sale Proceeds (exclusive of
accrued interest and of any amount reimbursable to the Servicer therefrom
pursuant to this Agreement) received with respect to such Loan, in each case
during the period from the Closing Date or the Cut-Off Date, as applicable, to
and including the last day of the Due Period immediately preceding such
Distribution Date.

“Current Pay Loan” means a Loan in the
Collateral (other than a DIP Loan) that would be a Charged-Off Loan but for the
exclusion of Current Pay Loans from the definition thereof and:

(i)            as to which all interest and
principal payments due (other than any principal payments due solely as a
result of the commencement of an Insolvency Proceeding) have been paid in cash
and the Servicer has documented and certified its assessment that it reasonably
expects that the remaining scheduled interest and principal payments due will
be paid in cash when due;

(ii)           (a) such Loan has a Moody’s Rating of
either (1) at least “Caa1” (and if rated “Caa1”, such rating is not on “Watch
List” for downgrade) and the Market Value of such Loan is at least 80% of par,
or (2) at least “Caa2” (or “Caa1” and on “Watch List” for downgrade) and the
Market Value of such Loan is at least 85% of par and, in the case of a rating
of “Caa2”, such

 16
 

 

rating is not on “Watch
List” for downgrade, provided
that if the Moody’s Rating of such Loan has been withdrawn, then, solely for
the purposes of this definition, the rating of such Loan shall be deemed to be
the Moody’s Rating of such Loan immediately prior to the withdrawal of such
rating; and (b) if the Obligor is the subject of a bankruptcy proceeding an
order of the bankruptcy court shall have been entered that permits such Obligor
to make the scheduled interest payments on such Loan; and

(iii)          the S&P Rating Condition shall
have been satisfied with respect to the classification of such Loan as a
Current Pay Loan;

provided that not
more than 7.5% of the Aggregate Outstanding Loan Balance as of the last day of
any Due Period may consist of Current Pay Loans, and, to the extent that the
aggregate Outstanding Loan Balance of Current Pay Loans included in the
Collateral exceeds 7.5% of the Aggregate Outstanding Loan Balance as of any
such day, the Current Pay Loans representing such excess Outstanding Loan
Balance shall constitute Charged-Off Loans and not Current Pay Loans.

“Current Portfolio” means the portfolio
(measured by the outstanding principal balance and treating Revolving Loans and
Delayed Draw Term Loans as fully funded) of (a) the Loans, (b) Principal
Collections held as cash and (c) Permitted Investments purchased with Principal
Collections existing immediately prior to the applicable Measurement Date.

“Curtailment” means, with respect to a Loan,
any payment of principal received by the Issuer during a Due Period as part of
a payment allocable to a Loan that is in excess of the principal portion of the
Scheduled Payment due for such Due Period and which is not intended to satisfy
the Loan in full, nor is intended to cure a delinquency, including any
accelerated amortization due to structural features of the related Loan.

“Cut-Off Date” means each date after the
Closing Date on which an Additional Loan or Substitute Loan is transferred to
the Issuer.

“Delaware Statutory Trust Act” means Chapter 38
of Title 12 of the Delaware Code, 12 Del. C. §§ 3801 et seq., as
the same may be amended from time to time.

“Delayed Draw Term Loan” means a Loan that is
fully committed on the initial funding date thereof and is required by its
terms to be fully funded in one or more installments on draw dates to occur within
three years after the closing date thereof but which, once fully funded, has
the characteristics of a Term Loan; provided
that, once fully funded, such Loan will cease to be a Delayed Draw Term Loan.

“Delinquent Loan” means a Loan (that is not a
Charged Off Loan) in the Collateral as to which there has occurred one or more
of the following:

(a)                                  in
the case of a Loan which is neither publicly rated by Moody’s nor publicly
rated by S&P, any portion of a payment of interest on or principal of such
Loan is not paid when due (after giving effect to any applicable grace period
(subject in all cases to a maximum grace period of five Business Days) but
without giving effect to any Scheduled Payment Advance made in respect of such
payment of

 17
 

 

interest or principal); provided
that, if the Servicer reasonably believes all delinquencies will be cured
within 60 calendar days of when such delinquent payment was first due, such
Loan shall only be deemed a Delinquent Loan if all such delinquencies are not
cured within such 60 day period; provided
further that the Servicer’s
option described in the foregoing proviso shall at any time extend only to the
lesser of (1) three Loans and (2) five percent of the Aggregate Outstanding
Loan Balance;

(b)                                 in
the case of a Loan which is publicly rated by Moody’s or S&P, any portion
of a payment of interest on or principal of such Loan is not paid when due
(after giving effect to any applicable grace period (subject in all cases to a
maximum grace period of five Business Days) but without giving effect to any
Scheduled Payment Advance made in respect of such payment of interest or
principal);

(c)                                  consistent
with the Credit and Collection Policy such Loan would be classified as
delinquent by the Servicer or the Originator;

(d)                                 the
Loan shall have been amended or modified due to the Obligor’s inability to make
payments of principal or interest under such Loan in a manner that would reduce
the interest rate payable by the Obligor thereunder;

(e)                                  the
Loan shall have been amended or modified in a manner other than as specified in
clause (d) above due to the Obligor’s inability to make any portion of a
payment of interest on or principal of such Loan when due (after giving effect
to any applicable grace period, subject in all cases to a maximum grace period
of five Business Days);

(f)                                    the
Loan shall have been subject to a modification of the type described in clause
(e) of the definition of Specified Amendment;

(g)                                 the
Loan shall have been subject to a modification of the type specified in clauses
(a) through (d) of the definition of Specified Amendment and within 60 days
after the effective date of the relevant Specified Amendment the Servicer has
not delivered notice to S&P of such modification; or

(h)                                 any
Additional Loan or Substitute Loan which, within 60 days after the related Cut
Off Date, the Servicer has not submitted to each Rating Agency for rating; provided that such Loan shall not be
deemed a Delinquent Loan by reason of the Servicer’s failure to present such
Loan to Moody’s if such Loan has a Moody’s Rating determined in accordance with
clause (e) of the definition thereof;

provided that if
any Loan to an Obligor is a Delinquent Loan, or if any Loan to an Obligor from
the Originator or any entity controlled by the Originator would be a Delinquent
Loan if owned by the Issuer, then all Loans to that Obligor ranked equally
with, or subordinated in right of payment to, such Delinquent Loans shall be
deemed to be Delinquent Loans; provided
further that such Loan or Loans shall cease to be deemed delinquent
as of the date that each Loan which caused any other Loan to be deemed
delinquent in accordance with the preceding proviso has become a performing
Loan and maintained such status for a period of 12 consecutive months.

 18

 

“Determination Date” means, with respect to a
Distribution Date, the close of business on the fifth Business Day prior to
such Distribution Date.

“DIP Loan” means a loan to an Obligor that is a
“debtor-in-possession” as defined under the Bankruptcy Code, the terms of which
have been approved by an order of the United States Bankruptcy Court, the
United States District Court or any other court of competent jurisdiction, the
enforceability of which order is not subject to any pending contested matter or
proceeding (as such terms are defined in the Federal Rules of Bankruptcy
Procedure) and which order provides that: (i)(a) such DIP Loan is fully secured
by liens on the debtor’s otherwise unencumbered assets pursuant to §364(c)(2)
of the Bankruptcy Code or any other applicable bankruptcy or insolvency law, or
(b) such DIP Loan is secured by liens of equal or senior priority on property
of such debtor’s estate that is otherwise subject to a lien pursuant to §364(d)
of the Bankruptcy Code or any other applicable bankruptcy or insolvency law,
and (ii) such DIP Loan is fully secured based upon a current valuation or
appraisal report. Notwithstanding the foregoing, such a Loan shall not be
deemed to be a DIP Loan following the emergence of the related debtor-in-possession
from bankruptcy protection under Chapter 11 of the Bankruptcy Code.

“Distribution Date” means each 20th day of each
December, March, June and September commencing on December 20, 2006 and ending
on the Stated Maturity Date; provided
that, if any such date is not a Business Day, the date of payment will be the
next succeeding Business Day.

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

“Diversity Test” means a test that will be
satisfied, as of any date of determination, if the Diversity Score equals or
exceeds the Diversity Score set forth in the Collateral Quality Table in the
appropriate column opposite the then-current Reference Spread, in each case as
of such date of determination.

“Dollar” and “$” means the lawful
currency of the United States.

“Downgrade Event” means the reduction or
withdrawal of the rating issued by either of Moody’s or S&P on the Closing Date
with respect to any outstanding class of Offered Notes and the Class D Notes.

“Draw” means a borrowing made by the Issuer (at
the direction of the Servicer) in accordance with the Class A-1A VFN Purchase
Agreement under the Class A-1A VFN Notes on any Business Day prior to the
Commitment Termination Date.

“Draw Date” means the date of any Draw.

“Due Period” means, with respect to the first
Distribution Date, the period from and including the Closing Date to but
excluding the 5th day of the calendar month in which the first
Distribution Date occurs, and for any Distribution Date thereafter, the period
from and including the 5th day of the calendar month in which the prior
Distribution Date occurred to but excluding the 5th day of the calendar month in which such
Distribution Date occurs.

 19
 

 

“Effective Date”
means the earlier of (a) the date which is fifteen Business Days prior to the
Distribution Date occurring in June, 2007 and (b) the date on which the
Servicer certifies to the Trustee that the Aggregate Outstanding Loan Balance
of the Loans purchased by the Issuer for inclusion in the Collateral, together
with any Principal Collections, equals the Expected Aggregate Outstanding Loan
Balance.

“Effective Date Ratings Confirmation” shall
have the meaning provided in Section 2.06(g).

“Elevation” shall have the meaning provided in Section
13.22.

“Elevation Date” shall have the meaning
provided in Section 13.22.

“Eligible Asset” shall have the meaning
provided in Rule 3a-7 under the 1940 Act.

“Eligible Deposit Account” means either (a) a
segregated account with a Qualified Institution, or (b) a segregated trust
account with the corporate trust department of a depository institution
organized under the laws of the United States or any one of the states thereof,
including the District of Columbia (or any domestic branch of a foreign bank),
and acting as a trustee for funds deposited in such account, so long as any of
the securities of such depository institution shall have, in the case of Moody’s,
a short-term credit rating of “P-1” and in the case of S&P a commercial
paper short-term debt rating of “A-1+” and a long-term unsecured debt rating of
at least “AA–”.

“Eligible Loan” means, on and as of the Closing
Date (or, in the case of a Participation described in clause (ix) below,
the date that is 60 days after the Closing Date) in the case of the Initial
Loans and as of the related Cut-Off Date in the case of any Additional Loans or
Substitute Loans, a Loan as to which each of the following is true; provided that any Loan which has an
S&P Rating shall not include a “p”, “pi”, “q”, “r” or “t” subscript:

(i)            the Loan is a Large Middle Market
Loan, Traditional Middle Market Loan, Broadly Syndicated Loan (and including,
for a period of 60 calendar days after the Closing Date, Participations
therein) or a Qualified Participated Loan;

(ii)           the Loan is an Eligible Asset;

(iii)          the Loan is Registered;

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

(v)           the Loan is denominated and payable
only in U.S. Dollars and does not permit the currency in which or country in
which the Loan is payable to be changed;

(vi)          the Obligor with respect to the Loan
or, if such Loan is an Agented Loan, the paying agent with respect thereto, has
been directed to make all Scheduled Payments to the Principal and Interest
Account;

(vii)         the Loan does not contravene any
Applicable Laws (including, without limitation, laws, rules and regulations, if
applicable, relating to usury, truth in lending, fair credit

 20
 

 

billing, fair credit
reporting, equal credit opportunity, fair debt collection practices, licensing
and privacy) and no part thereof is in violation of Applicable Law;

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

(ix)           the Loan is eligible under the
Underlying Loan Agreement to be sold, assigned or transferred to the Trust
Depositor and the Issuer, respectively (giving effect to the provisions of
Sections 9-406 and 9-408 of the UCC), and neither the sale, transfer or
assignment of the Loan under the Loan Sale Agreement and this Agreement to the
Trust Depositor and the Issuer, respectively, nor the granting of a security
interest under the Indenture to the Trustee, violates, conflicts with or
contravenes any Applicable Law or any contractual or other restriction,
limitation or encumbrance; provided
that this clause shall not apply (a) to Qualified Participated Loans or (b) for
a period of 60 days after the Closing Date, to all other Participated Loans,
which will be converted to full assignments within 60 days following the
Closing Date;

(x)            the Loan is not the subject of an
offer of exchange or tender by its issuer, for cash, securities or any other
type of consideration, and has not been called for redemption or tender into
any other security or property;

(xi)           the Loan (a) is not an equity
security, (b) does not provide for the conversion or exchange into an equity
security at any time on or after the date it is included as part of the
Collateral, and (c) does not constitute, and none of the Related Property
securing the Loan constitutes, Margin Stock;

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

(xiii)         the Loan provides for a fixed amount of
principal payable in cash no later than its stated or legal maturity;

(xiv)        all payments in respect of the Loan are
required to 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 Applicable Law in which case the Obligor thereof is required to make “gross-up”
payments that cover the full amount of any such withholding taxes on an after-tax
basis;

(xv)         the information with respect to such
Loan set forth on the list of Loans delivered to the Trustee is true and
complete;

(xvi)        the repayment of the Loan is not subject
to material non-credit related risk (for example, a Loan, the payment of which
is expressly contingent upon the nonoccurrence of a catastrophe), as reasonably
determined by the Servicer in accordance with the Credit and Collection Policy;

 21
 

 

(xvii)       to the best of the Originator’s or the
Trust Depositor’s knowledge, as applicable, if the Loan is a Third Party
Acquired Loan, then immediately prior to the transfer and assignment (if
applicable) contemplated by the instruments of conveyance relating to such
Loan, the assignor (if any) held good and indefeasible title to, and was the sole
owner of, the Loans being transferred to the Issuer, subject to no Liens except
Liens which will be released simultaneously with such transfer and assignment
(if applicable) and Liens permitted by the Transfer and Servicing Agreements;
and immediately upon the transfer and assignment (if applicable) contemplated
by the instruments of conveyance relating to such Loan, the Issuer will hold
good and indefeasible title to, and be the sole owner of, each Loan, subject to
no Liens except Liens in favor of the Trustee;

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

(xix)         to the best of the Originator’s or the
Trust Depositor’s knowledge, as applicable, all parties that have had any
interest in the Loan, whether as mortgagee, assignee, pledgee or otherwise, are
(or, during the period in which they held and disposed of such interest, were)
(i) in compliance with any and all applicable licensing requirements of the
laws of the state wherein any Related Property is located, and (ii) (A)
organized under the laws of such state, (B) qualified to do business in such state,
(C) federal savings and loan associations or national banks having principal
offices in such state or (D) not doing business in such state;

(xx)          the Loan (i) was originated and
underwritten, or purchased and re-underwritten, by the Originator, subject to,
without limitation, the completion of a due diligence review, (ii) is fully
documented, and (iii) is being serviced by the Servicer, in accordance with the
Credit and Collection Policy and the Servicing Standard;

(xxi)         in the case of a Third Party Acquired
Loan, such Loan (i) was acquired by the Issuer in an arm’s length transaction
at the fair market value thereof as of the related date of acquisition, (ii) is
fully documented and (iii) is being serviced by the Servicer, in each case in
accordance with the Credit and Collection Policy and the Servicing Standard;

(xxii)        the Loan has an original term to
maturity that does not exceed 120 months and the Loan matures prior to the
Stated Maturity Date;

(xxiii)       all of the original or certified Required
Loan Documents with respect to the Loan have been, or will be, delivered to the
Trustee on or prior to the Closing Date (in the case of an Initial Loan) and
the applicable Cut-Off Date (in the case of an Additional Loan or

 22
 

 

Substitute Loan), and all
Servicing Files are being or shall be maintained at the principal place of
business of the Servicer in accordance with the Servicing Standard;

(xxiv)       the Loan is not currently delinquent in
payment and, since its origination or purchase, the Loan has never been more than
30 days delinquent in payment of either principal or interest;

(xxv)        the Originator has not received notice
of a material default, breach, violation or event or condition which would give
rise to a right of acceleration existing under the Underlying Loan Agreement
related to the Loan and no event which, with the passage of time or with notice
and the expiration of any grace or cure period, would constitute a material
default, breach, violation or event or condition which would give rise to a
right of acceleration of the Loan;

(xxvi)       to the best of the Originator’s or the
Trust Depositor’s knowledge, as applicable, no provision of the Required Loan
Documents has been waived, modified, or altered in any respect by the
Originator or any of its Affiliates on or after (i) the date on which the
Originator originated or acquired the related Loan, in the case of a Loan
acquired by the Issuer from the Originator, or (ii) the date on which the
Issuer acquired the related Loan, in the case of a Third Party Acquired Loan,
except in accordance with the Credit and Collection Policy and the Servicing
Standard and by instruments duly authorized and executed and contained in the
Required Loan Documents and recorded, if necessary, to protect the interests of
the Noteholders and which has been delivered to the Trustee or, with respect to
any Agented Loan, to the custodian or collateral agent with respect thereto;

(xxvii)      the Loan is neither a new loan that
replaced a prior loan by the Originator or any of its Affiliates to the Obligor
that was a Delinquent Loan or a Charged-Off Loan nor an extension of credit by
the Originator to the Obligor for the purpose of (i) making any past due
principal, interest or other payments due on the Loan, (ii) preventing such
Loan or any other loan to the related Obligor from becoming past due or (iii)
causing a Delinquent Loan or a Charged-Off Loan to cease to be so classified;

(xxviii)     other than in the case of Permitted PIK
Loans, the Loan does not permit interest to be deferred or capitalized;

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

(xxx)        the Loan does not contain a
confidentiality provision that restricts or purports to restrict the ability of
the Trustee to exercise its rights under the Transfer and Servicing

 23
 

 

Agreements, including,
without limitation, its rights to review the Loan, the Required Loan Documents
and Loan File;

(xxxi)       other than with respect to Agented Loans,
the Originator has caused, and will cause, to be performed any and all acts
reasonably required to be performed to preserve the rights and remedies of the
Trustee as specified in this Agreement and in the Indenture and in any
Insurance Policies applicable to the Loan;

(xxxii)      the Loan provides for cash payments that
fully amortize the Outstanding Loan Balance of such Loan on or by its maturity
and does not provide for such Outstanding Loan Balance to be discounted
pursuant to a prepayment in full;

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

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

(xxxv)      such Loan was purchased for a price equal
to or greater than 90% of par, provided that Loans purchased for a price lower
than 90% of par may comprise 7.5% of the Aggregate Outstanding Loan Balance;

(xxxvi)     such Loan is not a Revolving Loan or a
Delayed Draw Term Loan, provided
that any such Loan shall be deemed an Eligible Loan if the sum of the
Outstanding Loan Balances of all Revolving Loans plus the sum of the undrawn
portions of all Delayed Draw Term Loans does not exceed 12.5% of the Aggregate
Outstanding Loan Balance;

(xxxvii)    if the Loan is one of a number of loans made
to the same Obligor at the same seniority in such Obligor’s capital structure,
such Loan and any other loans to the same Obligor contain standard
cross-collateralization and cross-default provisions; and

(xxxviii)   if the Loan is an Agented Loan:

(i)                                     the
related Required Loan Documents (A) shall include a note purchase or similar
agreement containing provisions relating to the appointment and duties of a
paying agent and a collateral agent and in such capacity such agent has the
right to receive and collect payments and to enforce the Obligor’s obligations
on behalf of all holders of the Obligor’s underlying indebtedness at the
direction of the requisite majority of the underlying lenders and (B) if the
note in respect of such Agented Loan was issued in a transaction involving more
than one class of notes, intercreditor provisions;

(ii)                                  if
the entity serving as the collateral agent of the security for all notes of the
Obligor issued under the applicable Underlying Loan Agreement has changed from
the time of the origination of the Loan, all appropriate

 24
 

 

 

assignments
of the collateral agent’s rights in and to the collateral on behalf of the
holders of the indebtedness of the Obligor under such facility have been
executed and filed or recorded as appropriate prior to such Loan becoming a
part of the Collateral;

(iii)                               all required notifications,
if any, have been given to the collateral agent, the paying agent and any other
parties required by the Underlying Loan Agreement of, and all required
consents, if any, have been obtained with respect to, the Originator’s
assignment of such Loan and the Originator’s right, title and interest in the
Related Property to the Trust Depositor, the assignment thereof to the Issuer
and the Trustee’s security interest therein on behalf of the Noteholders;

(iv)                              the
right to control the actions of and replace the collateral agent and/or the
paying agent of the Obligor’s indebtedness under the facility is to be
exercised by at least a majority in interest of all holders of such
indebtedness; and

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

“Eligible Obligor” means, on any date of
determination, any Obligor that:

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

(ii)           such Obligor is duly organized and
validly existing under the laws of, or all or substantially all of its assets
are located in, the United States, Canada, or any Group I Country, Group II
Country or Group III Country;

(iii)          is a legal operating entity or holding
company (except with respect to a Loan to an SPE Obligor);

(iv)          is not a Governmental Authority;

(v)           is not an Affiliate (other than with
respect to an SPE Obligor) of Ares Capital, the Servicer, the Trust Depositor
or the Issuer;

(vi)          is not the subject of an Insolvency
Proceeding; and

(vii)         is not an Obligor of a Charged-Off Loan
or Delinquent Loan; provided that
an Obligor with respect to a Charged-Off Loan or a Delinquent Loan shall cease
to be disqualified

 25
 

 

 

under this clause (vii) as of the date that
each Loan which caused such Obligor to be so disqualified has become a
performing Loan and maintained such status for a period of 6 consecutive
months.

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

“Enterprise Value” means, with respect to any
Obligor, as of any date of determination, (i) if such Obligor has been the
subject of a merger, acquisition or recapitalization transaction within the
most recent three months, the valuation of such Obligor as an entirety as
determined in connection with such transaction, as such valuation may be
reduced as determined by the Servicer in its reasonable discretion and in a
manner consistent with the Credit and Collection Policy, giving due
consideration to transactions involving enterprises comparable to such Obligor
occurring during such three month period, and (ii) in all other cases, the
valuation of such Obligor as an entirety as determined by the Servicer in its
reasonable discretion and in a manner consistent with the Credit and Collection
Policy, giving due consideration to transactions involving enterprises
comparable to such Obligor which have been consummated within the three months
prior to such date.

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

“Event of Default” shall have the meaning
specified in Section 5.01 of the Indenture.

“Excess Liquidation Proceeds” means, as of any
Distribution Date, the positive excess of the cumulative Liquidation Proceeds
received on Charged-Off Loans over the sum of the cumulative Recovery Values of
all Charged-Off Loans and the aggregate of all Excess Liquidation Proceeds
distributed on prior Distribution Dates.

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

 26
 

 

 

“Excluded Amounts” means (i) any amount
received by, on or with respect to any Loan in the Collateral, which amount is
attributable to the payment of any tax, fee or other charge imposed by any
Governmental Authority on such Loan, (ii) any amount representing escrows
relating to taxes, insurance and other amounts in connection with any Loan
which is held in an escrow account for the benefit of the related Obligor and
the secured party pursuant to escrow arrangements, (iii) any amount with
respect to any Loan substituted, sold, retransferred or replaced under Sections
2.05, 2.06 or 11.01, to the extent such amount is
attributable to a time after the effective date of such substitution, sale,
retransfer or replacement, (iv) any fee retained by the Originator in
connection with the origination of any Loan, and (v) any amount permitted to be
retained by the Servicer as an Excluded Amount hereunder.

“Expected Aggregate Outstanding Loan Balance”
means $400,000,000.

“Exposure Amount” as of any date means, with
respect to any Revolving Loan or Delayed Draw Term Loan, the excess, if any, of
(a) the maximum commitment of the Issuer under the terms of the related loan
agreement to make loans or issue, fund, reimburse or cash collateralize letters
of credit (and, for the avoidance of doubt, the Issuer’s commitment in respect
of a Charged-Off Loan or a Loan as to which the commitment to make additional
loans or issue, fund, reimburse or cash collateralize letters of credit
thereunder has been terminated shall be zero) over (b) the sum of the
outstanding principal balance and the aggregate amount of all issued and
outstanding letters of credit with respect to such Revolving Loan or Delayed
Draw Term Loan, as the case may be, as of such date.

“Fair Market Value” means for a Loan (including
a Charged-Off Loan) the value determined within ten days prior to the sale of
such Loan to an Affiliate:

(i)                                     as
the average of the bid side prices determined by the Servicer based upon
information from three unaffiliated loan market participants (or, if the
Servicer is unable to obtain bids from three such participants, then from such
lesser number of unaffiliated loan market participants as the Servicer can
obtain using efforts consistent with the Servicing Standard);

(ii)                                  if
a value cannot be obtained pursuant to the means contemplated by clause (i)
after reasonable efforts by the Servicer, through a Valuation; or

(iii)                               if a value cannot be
obtained pursuant to the means contemplated by clauses (i) and (ii) after
reasonable efforts by the Servicer, by the Servicer in its judgment exercised
in accordance with the Servicing Standard.

“FDIC” shall mean the Federal Deposit Insurance
Corporation and any successor thereto.

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

“First Lien Loan” means a Loan which (i) is
not, except as provided in the last sentence of this definition, by its terms
(and is not expressly permitted by its terms to become) subordinate in right of
payment to any other obligation for borrowed money of the Obligor of such Loan,
(ii) is secured by a valid first priority perfected security interest or Lien
in, to or on specified Related

 27
 

 

 

Property subject to customary permitted Liens (whether
or not the Issuer and any other lenders are also granted a security interest of
a lower priority in additional Related Property), and (iii) is secured by
Related Property having a value (determined as set forth below) not less than
the Outstanding Loan Balance of such Loan plus the aggregate Outstanding Loan
Balance of all other Loans of equal seniority secured by a first Lien or
security interest in the same Related Property. The determination as to whether
condition (iii) of this definition is satisfied shall be based on the Servicer’s
judgment at the time the Loan is included in the Collateral. The right to
receive the proceeds of designated Related Property subject to a set of
contractual payment priorities affecting debt issued under or governed by the
same Underlying Loan Agreement will not prevent a Loan that satisfies the
express requirements hereof from being a First Lien Loan.

“Fixed Rate Excess” means, as of any date of
determination, an amount equal to a fraction (expressed as a percentage), the
numerator of which is equal to the product of (a) the excess, if any, of the
Weighted Average Coupon for such date over 12% and (b) the sum of the
Outstanding Loan Balances of all Fixed Rate Loans (excluding any Charged-Off
Loans, Delinquent Loans and Credit Impaired Loans) in the Collateral as of such
date and the denominator of which is equal to the Aggregate Outstanding Loan
Balance, in each case solely to the extent that the Fixed Rate Excess is
included in the calculation of the Weighted Average Spread as of such date. In
determining the Fixed Rate Excess on any date of determination, the Weighted
Average Coupon will be calculated as if the Floating Rate Excess were equal to
zero, and Loans that are Charged-Off Loans, Delinquent Loans and Credit
Impaired Loans will be included in the calculations described herein if, as of
such date, such Loans are paying in full current interest pursuant to the terms
of their Underlying Note or, if a Noteless Loan, the related Underlying Loan
Agreement.

“Fixed Rate Loan” means a Loan, other than a
Floating Rate Loan, where the Loan Rate payable by the Obligor thereunder is
expressed as a fixed rate of interest.

“Floating LIBOR Rate Loan” means, as of any
date of determination, a Loan where the Loan Rate payable by the Obligor
thereof in respect of the majority of the Outstanding Loan Balance of such Loan
is based on the Underlying LIBOR Rate plus some specified percentage in
addition thereto, and the Loan provides that such Loan Rate will reset upon any
change in the related Underlying LIBOR Rate.

“Floating Prime Rate Loan” means, as of any
date of determination, a Loan where the Loan Rate payable by the Obligor
thereof in respect of the majority of the Outstanding Loan Balance of such Loan
is based on the Underlying Prime Rate plus some specified percentage in
addition thereto, and the Loan provides that such Loan Rate will reset upon any
change in the related Underlying Prime Rate.

“Floating Rate Excess” means, as of any date of
determination, a fraction (expressed as a percentage), the numerator of which
is equal to the product of (a) the excess, if any, of the Weighted Average
Spread for such date over the Minimum Weighted Average Spread for such date and
(b) the sum of the Outstanding Loan Balances of all Floating Rate Loans
(excluding Charged-Off Loans, Delinquent Loans and Credit Impaired Loans) in
the Collateral as of such date, and the denominator of which is the Aggregate
Outstanding Loan Balance, in each case solely to the extent that the Floating
Rate Excess is included in the calculation of the Weighted

 28
 

 

 

Average Coupon in the Collateral as of such date. In
computing the Floating Rate Excess on any date of determination, the Weighted
Average Spread for such date will be computed as if the Fixed Rate Excess were
equal to zero, and Loans that are Charged-Off Loans, Delinquent Loans and
Credit Impaired Loans will be included in the calculations described herein if,
as of such date, such Loans are paying in full current interest pursuant to the
terms of their respective Underlying Note or, if a Noteless Loan, the related
Underlying Loan Agreement.

“Floating Prime Rate Loan” means, as of any
date of determination, a Loan where the Loan Rate payable by the Obligor
thereof in respect of the majority of the Outstanding Loan Balance of such Loan
is based on the Underlying Prime Rate plus some specified percentage in
addition thereto, and the Loan provides that such Loan Rate will reset upon any
change in the related Underlying Prime Rate.

“Floating Rate Loan” means a Floating LIBOR
Rate Loan, a Floating Prime Rate Loan or a Swapped Floating Rate Loan.

“Foreclosed Property” means Related Property
acquired by the Issuer for the benefit of the Noteholders in foreclosure or by
deed in lieu of foreclosure or by other legal process.

“Funding Entity” means, with respect to any
Class A-1A VFN Noteholder, any Liquidity Provider party to a Liquidity Facility
entered into by such Holder in connection with the Class A-1A VFN Purchase
Agreement or a guarantor of such Liquidity Provider.

“Funding I Transaction” means the Sale and
Servicing Agreement, dated as of November 3, 2004 (as amended or supplemented
from time to time) by and among Ares Capital, as originator and as servicer,
Ares Capital CP Funding LLC, as borrower, each of the conduit purchasers and
institutional purchasers party thereto, each of the purchaser agents from time
to time party thereto, Wachovia Capital Markets, as administrative agent, and
Lyon Financial Services, Inc. (d/b/a U.S. Bank Portfolio Services) as backup
servicer and U.S. Bank National Association, as trustee, as amended.

“Governmental Authority” means 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 I Country” means any of The Netherlands,
the United Kingdom, Australia and New Zealand.

“Group II Country” means any of Germany,
Ireland, Sweden and Switzerland.

“Group III Country” means any of Austria,
Belgium, Denmark, Finland, France, Iceland, Liechtenstein, Luxembourg, Norway and
Spain.

“Highest Required Investment Category” means
(a) with respect to ratings assigned by Moody’s, “Aa2” and “P-1”, and (b) with
respect to rating assigned by S&P, “A-1” for short-term instruments and “A”
for long-term instruments.

 29

 

 

“Holder” means (a) with respect to a
Certificate, the Person in whose name such Certificate is registered in the
Certificate Register, and (b) with respect to a Note, the Person in whose name
such Note is registered in the Note Register; provided
that, unless repugnant to the context, Holder shall be deemed to include the
beneficial owner of such Certificate or Note.

“Indebtedness” means, with respect to any
Person at any date, (a) all indebtedness of such Person for borrowed money or
for the deferred purchase price of property or services (other than current
liabilities incurred in the ordinary course of business and payable in
accordance with customary trade practices) or which 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, and (d) all liabilities
secured by any Lien on any property owned by such Person even though such Person
has not assumed or otherwise become liable for the payment thereof.

“Indenture” means the Indenture, dated as of
the Closing Date, between the Issuer and the Trustee, as such agreement may be
amended, modified, waived, supplemented or restated from time to time.

“Indenture Collateral” shall have the meaning
provided in the “granting clause” of the Indenture.

“Independent” means, when used with respect to
any specified Person, the Person (a) is in fact independent of the Issuer, any
other obligor on the Notes, the Trust Depositor and any Affiliate of any of the
foregoing Persons, (b) does not have any direct financial interest or any
material indirect financial interest in the Issuer, any such other obligor, the
Trust Depositor or any Affiliate of any of the foregoing Persons and (c) is not
connected with the Issuer, any such other obligor, the Trust Depositor or any
Affiliate of any of the foregoing Persons as an officer, employee, trustee,
partner, director or person performing similar functions.

“Independent Accountants” shall have the
meaning provided in Section 2.06(g).

“Ineligible Loan” means any Loan that is not an
Eligible Loan due to a breach of a representation or warranty as of its date of
transfer to the Issuer which materially and adversely affects the value of the
Loan or the interest of the Securityholders therein (notwithstanding that such
representation or warranty was made to the Originator’s or the Trust Depositor’s
best knowledge).

“Initial Aggregate Outstanding Loan Balance”
means the Aggregate Outstanding Loan Balance as of the Closing Date of the
Initial Loans transferred to the Issuer on the Closing Date.

“Initial Class A-1A Principal Balance” means
$75,000,000.

“Initial Class A-1A VFN Principal Balance”
means an amount equal to zero.

“Initial Class A-1B Principal Balance” means
$14,000,000.

“Initial Class A-2A Principal Balance” means
$75,000,000.

“Initial Class A-2B Principal Balance” means
$33,000,000.

 30
 

 

 

“Initial Class B Principal Balance” means
$23,000,000.

“Initial Class C Principal Balance” means
$44,000,000.

“Initial Class D Principal Balance” means
$32,000,000.

“Initial Class E Principal Balance” means
$54,000,000.

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

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

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

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

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

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

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

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

“Initial Loans” means those Loans conveyed to
the Issuer on the Closing Date and identified on the initial List of Loans
required to be delivered pursuant to Section 2.02(d).

“Initial Purchaser” means Wachovia Capital
Markets, LLC.

“Insolvency Event” means, with respect to a
specified Person, (i) 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

 31
 

 

 

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 or undismissed and in effect for a period of 60 consecutive days; or
(ii) 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 other Governmental Authority relating to any
Insolvency Event.

“Insurance Policy” means, with respect to any
Loan, an insurance policy covering liability and physical damage to or loss of
the applicable Related Property, including, but not limited to, title, hazard,
life, accident and/or flood insurance policies.

“Insurance Proceeds” means any amounts payable
or any payments made on or with respect to a Loan or the Related Property under
any Insurance Policy which are not applied or paid by the Obligor or the
Servicer, as applicable, to the restoration or repair of the Related Property
or released to the Obligor, another creditor or any other Person in accordance
with the Applicable Law, the Required Loan Documents, the Credit and Collection
Policy, the Servicing Standard and this Agreement, net of costs of collection.

“Interest Amount” means, with respect to any
Distribution Date, the Class A-1A Interest Amount, the Class A-1A VFN Interest
Amount, the Class A-1B Interest Amount, the Class A-2A Interest Amount, the
Class A-2B Interest Amount, the Class B Interest Amount, the Class C Interest
Amount, and the Class D Interest Amount payable on such Distribution Date, as
applicable.

“Interest Collection Account” means a
sub-account of the Principal and Interest Account established and maintained
pursuant to Section 7.03(a).

“Interest Collections” means the aggregate of:

(i)            amounts deposited into the Principal
and Interest Account in respect of:

(a)           all
payments received on or after the Closing Date on account of interest on the
Loans (including Net Trust Swap Receipts, Finance Charges, fees and the
deferred interest component of a Permitted PIK Loan) and all late payment,
default and waiver charges;

 32
 

 

 

(b)           the Excess Liquidation Proceeds;

(c)           Insurance
Proceeds (other than amounts to be applied to the restoration or repair of the
Related Property, or released or to be released to the Obligor or others);

(d)           all
proceeds from any other Related Property securing the Loans (other than amounts
released or to be released to the Obligor or others);

(e)           the
interest portion of any amounts received (1) in connection with the purchase or
repurchase of any Loan and the amount of any adjustment for substituted Loans
and (2) as Scheduled Payment Advances that the Servicer determines to make; and

(f)            the
portion of any Sale Proceeds which constitute Sale Premiums and accrued
interest; and

(g)           Swap Breakage Receipts plus

(ii)           investment earnings on funds invested
in Permitted Investments in the Transaction Accounts; minus

(iii)          the amount of any losses incurred in
connection with investments in Permitted Investments in the Transaction
Accounts.

“Interest Distributable Amount” means, as of
any Distribution Date, the amount of Interest Collections remaining after
distribution of amounts under clauses 1 through 7 under Section
7.05(a).

“Interest Distributable Test” means a test
satisfied on any Distribution Date if the Interest Distributable Amount exceeds
the sum of the Additional Principal Amount and the Required Reserve Amount for
such Distribution Date.

“Interest Period” means, for the first
Distribution Date, the period commencing on the Closing Date (or, in the case
of the Class A-1A VFN Notes, on the date of any Draw under the Class A-1A VFN
Notes) and ending on the day before the first Distribution Date (or, in the
case of prepayment of any portion of the Class A-1A VFN Notes before such
Distribution Date, ending on the day before the related Interim Distribution
Date); and thereafter, the period commencing on a Distribution Date (or, in the
case of any incremental Draw under the Class A-1A VFN Notes, from the date of
such Draw) and ending on the day before the next Distribution Date (or, in the
case of prepayment of any portion of the Class A-1A VFN Notes before such
Distribution Date, ending on the day before the related Interim Distribution
Date).

“Interest Shortfall” means, with respect to
each Class of Offered Notes and Class D Notes and any Distribution Date, as
applicable, an amount equal to the excess, if any, of (i) the Interest Amount
with respect to such Class of Notes over (ii) the amount of interest actually
paid to such Class of Notes, together with the unpaid portion of any such
excess from prior Distribution Dates (and interest accrued thereon at the then
applicable Note Interest Rate).

 33
 

 

 

“Interim Distribution Date” means any Business
Day occurring prior to the Stated Maturity Date on which a Class A-1A VFN
Prepayment is made.

“Interim Test Date” means each Distribution
Date occurring during the Ramp-Up Period.

“Interim Tests” means tests that are satisfied
if, as of any Interim Test Date, (a) the Issuer has achieved the target level
set forth in such Schedule II with respect to (i) the Diversity Score,
(ii) the Moody’s Weighted Average Rating, (iii) the Weighted Average Spread and
(iv) the Aggregate Outstanding Loan Balance or (b) in the event that any of the
tests set forth in clause (a) are not satisfied as of such date, the
Servicer, on behalf of the Issuer, has delivered a Compliance Plan to the
Trustee and the Rating Agencies.

“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 Loans pursuant to the Transaction
Documents.

“Investment Earnings” means the investment
earnings (net of losses and investment expenses) on amounts on deposit in the
Principal and Interest Account, the Note Distribution Account and the Reserve
Fund, to be credited to the Principal and Interest Account on the applicable
Distribution Date pursuant to Section 7.01 and Section 7.03.

“Ireland Paying Agent” means initially, the
Paying Agent in Ireland appointed by the Issuer pursuant to Section 3.03 of the
Indenture, and any successor Paying Agent appointed by the Issuer pursuant to
such Section 3.03 of the Indenture.

“Irish Stock Exchange” means the Irish Stock
Exchange and any successor securities exchange thereto on which the Listed
Notes may be listed for trading.

“Issuer” means the trust created by the Trust
Agreement and funded pursuant to this Agreement, consisting of the Loan Assets.

“Large Middle Market Loan” means any Loan
issued as part of a loan facility with an original loan size (including any
first and second lien loans included in the facility) greater than $125,000,000
but less than $250,000,000, including for purposes of this definition the
maximum available amount of commitments under any Revolving Loans and Delayed
Draw Term Loans.

“LIBOR” shall have the meaning provided in Section
7.06.

“LIBOR Determination Date” shall have the
meaning provided in Section 7.06.

“Lien” means any mortgage, deed of trust,
pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien
(statutory or other), preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever, including, without
limitation, any conditional sale or other title retention agreement, and any
financing lease having substantially the same economic effect as any of the
foregoing (including any UCC financing statement or any similar instrument
filed against a Person’s assets or properties).

 34
 

 

 

“Liquidation Expenses” means, with respect to
any Loan, the aggregate amount of all out-of-pocket expenses reasonably
incurred by the Servicer (including amounts paid to any Subservicer) and any
reasonably allocated costs of counsel (if any), in each case in accordance with
the Servicer’s customary procedures in connection with the repossession,
refurbishing and disposition of any Related Property securing such Loan upon or
after the expiration or earlier termination of such Loan and other
out-of-pocket costs related to the liquidation of any such Related Property,
including the attempted collection of any amount owing pursuant to such Loan if
it is a Charged-Off Loan and, if requested by the Trustee, the Servicer must
provide to the Trustee a breakdown of the Liquidation Expenses for any Loan
along with any supporting documentation therefor.

“Liquidation Proceeds” means, with respect to
any Charged-Off Loan, whatever is receivable or received when such Loan or the
Related Property is sold, liquidated, foreclosed, exchanged, or otherwise
disposed of, whether such disposition is voluntary or involuntary, and includes
all amounts representing late fees and penalties relating thereto net of,
without duplication, (i) Liquidation Expenses relating to such Loan or Related
Property reimbursed to the Servicer therefrom pursuant to the terms of this
Agreement and (ii) amounts required to be released to other creditors,
including any other costs, expenses and taxes, or the related Obligor or
grantor pursuant to applicable law or the governing Required Loan Documents.

“Liquidation Report” shall have the meaning
provided in Section 5.03(c).

“Liquidity Facility” means a liquidity loan
agreement, credit facility and/or purchase agreement providing for the several
commitments of the Liquidity Providers party thereto in the aggregate to make
loans to, or acquire interests in the assets of, a Class A-1A VFN Noteholder in
an aggregate principal amount at any one time outstanding at least equal to the
Class A-1A VFN Commitments of such Holder.

“Liquidity Provider” means one or more banks or
other institutions or entities from which a Class A-1A VFN Noteholder is
entitled to borrow from or to which a Class A-1A VFN Noteholder is entitled to
sell an interest in assets under a Liquidity Facility and any guarantor of any
such Liquidity Facility.

“List of Loans” means the list identifying each
Loan constituting part of the Loan Assets, which list shall consist of the
initial List of Loans reflecting the Initial Loans transferred to the Issuer on
the Closing Date, together with any Subsequent List of Loans amending the most
current List of Loans reflecting the Additional Loans or Substitute Loans
transferred to the Issuer on the related Cut-Off Date (together with, if
applicable, a deletion from such list of the related Loan or Loans identified
on the corresponding Loan Asset Certificate), and which list in each case (a)
identifies by account number and primary Obligor name of each such Loan
included in the Collateral and (b) sets forth as to each such Loan (i) the
Outstanding Loan Balance as of the Closing Date in the case of the Initial
Loans and the related Cut-Off Date in the case of Additional Loans or
Substitute Loans, and (ii) the maturity date, and which list (as in effect on
the Closing Date) is attached to this Agreement as Exhibit G.

“Listed Notes” means the Class A-1A Notes, the
Class A-1B Notes, the Class A-2A Notes, the Class A-2B Notes, Class B Notes,
Class C Notes and the Class D Notes.

 35
 

 

 

“Loan” means, an individual loan to an Obligor,
or portion thereof including, as applicable, Traditional Middle Market Loans,
Large Middle Market Loans and Broadly Syndicated Loans that satisfy certain
representations and warranties described herein and that arise under certain
single lender or multi-lender commercial loan or credit agreements or other
debt agreements or instruments customary for the applicable type of Loan
originated or acquired by Ares Capital or one of its Affiliates, and include
Term Loans, Delayed Draw Term Loans and Revolving Loans, First Lien Loans,
Second Lien Loans and Subordinated Loans and, for a period of 60 calendar days
after the Closing Date (other than in the case of Qualified Participated Loans
which the Originator expects will become part of the Collateral during the
Ramp-Up Period as Additional Loans and will remain Participated Loans for so
long as such Loans are included in the Collateral, which would represent not
more than 5% of the Aggregate Outstanding Loan Balance), Participations
therein, which are expected to be converted into full assignments within 60
days following the Closing Date.

“Loan Asset Certificate” means, with respect to
any repurchase of Ineligible Loans or any transfer of Substitute Loans or
Additional Loans to the Issuer in accordance with Section 11.01 or Section
2.06, as applicable (and the Trust Depositor’s corresponding prior purchase
of such Loans from the Originator), a notice in the form of Exhibit F,
signed both by the Trust Depositor and the Originator, (i) identifying the
Loans to be repurchased or the Substitute Loans or Additional Loans to be
transferred, and the date of repurchase or Cut-Off Date with respect to such
Loan Assets to be repurchased, Substitute Loans or Additional Loans, and (x) in
the case of a Loan Asset Certificate relating to Additional Loans, the
Outstanding Loan Balance of such Loans, or (y) in the case of a Loan Asset
Certificate relating to Loan Assets to be repurchased or Substitute Loans, the
reasons for the repurchase or substitution and the Transfer Deposit Amount in
respect of such Loan Assets, and (ii) certifying that after giving effect to
the acquisition or substitution of such Loans by the Issuer, the Portfolio
Acquisition and Disposition Requirements and, solely with respect to any such
acquisition or substitution effected after the Effective Date, the Portfolio
Criteria, are satisfied.

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

“Loan Checklist” means the list delivered by
the Trust Depositor (or Servicer on its behalf) to the Trustee pursuant to Section
2.08 that identifies the type of loan being delivered and the items
contained in the related Loan File.

“Loan File” means, with respect to any Loan and
Related Property, each of the Required Loan Documents and, duly executed
originals (to the extent required by the Credit and Collection Policy) and
copies of any other Records relating to such Loan and Related Property (as
identified in the Loan Checklist delivered to the Trustee).

“Loan Rate” means, (i) with respect to any Loan
in a Due Period (other than a Swapped Floating Rate Loan), the current cash pay
interest rate for such Loan in such period, as specified in the Underlying
Notes or related Required Loan Documents and (ii) with respect to any Swapped
Floating Rate Loan in a Due Period, the sum of (a) the excess of (1) the
current cash pay interest rate for such Swapped Floating Rate Loan in such
period as specified in the Underlying Notes or Required Loan Documents for such
Loan over (2) the fixed rate of interest payable to the Swap

 36
 

 

 

Counterparty for such Swapped Floating Rate Loan in
such period as specified in the related Asset Specific Swap and (b) the
floating rate of interest payable by the Swap Counterparty for such Swapped
Floating Rate Loan in such period as specified in the related Asset Specific
Swap.

“Loan Rate Index” means (a) in the case of a
Floating Prime Rate Loan, the Underlying Prime Rate (b) in the case of a
Floating LIBOR Rate Loan, the Underlying LIBOR Rate and (c) in the case of a
Fixed Rate Loan, a fixed rate of interest.

“Loan Register” means, with respect to each
Noteless Loan, the register in which the obligor (acting as an agent of the
holder of such Noteless Loan) or the agent or collateral agent on such Loan
will record, among other things, (i) the amount of such Loan, (ii) the amount
of any principal or interest due and payable or to become due and payable from
the Obligor thereunder, (iii) the amount of any sum in respect of such Loan
received from the Obligor and each lender’s share thereof, (iv) the date of
origination of such Loan and (v) the maturity date of such Loan.

“Loan Sale Agreement” means the Commercial Loan
Sale Agreement, dated as of the date hereof, between the Originator and the
Trust Depositor, as such agreement may be amended, modified, waived,
supplemented or restated from time to time.

“Loan-to-Value” means, with respect to any
Loan, as of any date of determination, the percentage equivalent of a fraction
(a) the numerator of which is equal to the sum of (i) the maximum availability
(as provided in the applicable loan documentation) of such Loan as of the date
of its origination plus (ii) the
maximum availability under all other indebtedness of the related Obligor which
ranks either senior to, or pari passu
with, such Loan and (b) the denominator of which is equal to the Enterprise
Value of the Obligor with respect to such Loan.

“London Banking Day” means any day on which
dealings in deposits in U.S. Dollars are transacted in the London interbank
market.

“Majority Noteholders” means, as of any date of
determination (i) prior to the payment in full of the Offered Notes and the
Class D Notes, the Noteholders evidencing more than 50% of the aggregate
Outstanding Principal Balance of all Offered Notes and Class D Notes (voting as
a single Class); provided that
for purposes of the calculation described herein, the Class A-1A VFN Notes will
be treated as Outstanding to the extent of the aggregate Class A-1A VFN
Commitments in effect as of such date and (ii) from and after the payment in
full of the Offered Notes and the Class D Notes, the Class E Noteholders
evidencing more than 50% of the aggregate Outstanding Principal Balance of the
Class E Notes.

“Mandatory Repurchase” shall have the meaning
provided in Section 11.01.

“Mandatory Substitution” shall have the meaning
provided in Section 11.01.

“Margin Stock” means “Margin Stock” as defined
under Regulation U issued by the Board of Governors of the Federal Reserve
System.

“Market Value” means, for any Charged-Off Loan,
Delinquent Loan or, for the purposes of determining whether such Loan is a
Current Pay Loan or satisfies the Credit Impaired Criteria,

 37
 

 

 

any Loan, the value of such Loan, as of the last day
of the immediately preceding Due Period, determined as follows:

(a)                                  with
respect to any Broadly Syndicated Loan or any Loan which is publicly rated by
Moody’s or S&P:

(i)                                     the
value determined as the average of the bid side prices determined by the
Servicer based upon information from three unaffiliated loan market
participants (or, if the Servicer is unable to obtain bids from three such
participants, then the lower of such bids from two unaffiliated loan market
participants);

(ii)                                  if
a value cannot be obtained pursuant to the means contemplated by clause
(a)(i) after reasonable efforts by the Servicer, the value determined
through a valuation of the fair market value of such Loan established by
reference to a third-party pricing service such a LoanX or LPC or other service
selected by the Servicer in accordance with the Servicing Standard (provided that, if the fair market value is
available from more than one pricing service, the highest such value so
obtained shall be used) performed within 20 days following the applicable date
of determination; or

(iii)                               if a value cannot be
obtained pursuant to the means contemplated by clauses (a)(i) and (a)(ii)
after reasonable efforts by the Servicer, the Market Value of such Loan for a
period of 30 days after such date of determination shall be the market value
determined by the Servicer in its judgment exercised in accordance with the
Servicing Standard, and the Market Value of such Loan after such 30-day period
shall be deemed to be zero; provided
that the Servicer shall deliver an Officer’s Certificate to the Trustee and the
Rating Agencies certifying that the Market Value of such Loan determined
pursuant to this clause (a)(iii) is equal to a price at which the
Servicer reasonably believes such Loan can be sold for within such 30-day
period;

(b)                                 with
respect to any other Loan, the value determined by the Servicer in its judgment
exercised in accordance with the Servicing Standard.

“Material Adverse Effect” means, with respect
to any event or circumstance, a material adverse effect on (i) the business,
financial condition, operations, performance or properties of the Originator,
the Trust Depositor, the Issuer or the Servicer, (ii) the validity,
enforceability or collectibility of this Agreement or any other Transaction
Document, or the validity, enforceability or collectibility of the Loans
generally or any material portion of the Loans, (iii) the rights and remedies
of the Trustee on behalf of the Noteholders, (iv) the ability of the
Originator, the Trust Depositor, the Issuer, the Servicer, the Backup Servicer
or the Trustee to perform in all material respects their respective obligations
under this Agreement or any Transaction Document, or (v) the status, existence,
perfection, priority or enforceability of the Trustee’s security interest in
the Collateral on behalf of the Noteholders.

 38
 

 

 

“Material Modification” means:

 

(i)            a
termination or release (including pursuant to prepayment), or an amendment,
modification or waiver, or equivalent similar undertaking or agreement, by the
Servicer with respect to a Loan and the related Underlying Note (or in case of
a Noteless Loan, the related Underlying Loan Agreement) which would not
otherwise be permitted under the standards and criteria set forth in Section
5.02(e)(i); or

 

(ii)           a
termination or release (including pursuant to prepayment), or an amendment,
modification or waiver, or equivalent similar undertaking or agreement, by the
Servicer with respect to a Loan and the related Underlying Note (or in case of
a Noteless Loan, the related Underlying Loan Agreement) which is entered into
for reasons related to the inability of the applicable Obligor to make payments
of principal or interest under such Loan, as determined in accordance with the
Credit and Collection Policy and the Servicing Standard.

 

“Maximum Class A-1A VFN Commitment” means an
amount equal to $50,000,000.

 

“Maximum Weighted Average Life” means, as of
the Closing Date, 9.0 years, declining by 0.50 years for the first Due Period
and declining by 0.25 years for each Due Period elapsed thereafter.

 

“Measurement Date” means (i) the Effective Date
and (ii) after the Effective Date, each Cut-Off Date with respect to an
Additional Loan or a Substitute Loan and each Determination Date.

 

“Minimum Weighted Average Spread” means, as of
any date of determination, the then current Reference Spread set forth in the
Collateral Quality Table.

 

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

 

“Moody’s Industry Classification Group” means
any of the Moody’s industry classification groups, any additional
classification groups established by Moody’s with respect to the Initial Loans,
and any classification groups that may be subsequently established by Moody’s
with respect to any Additional Loan acquired after the Closing Date or a
Substitute Loan and provided, in each case, by the Servicer or Moody’s to the
Trustee.

 

“Moody’s Rating” means, with respect to any
Loan, the rating assigned to such Loan by Moody’s; provided that, other than in the case of a DIP Loan, prior
to the time that such Loan has been assigned a rating by Moody’s, the Moody’s
Rating shall be deemed to be, with respect to such Loan:

 

(i)            the
Moody’s Rating determined as follows (all references to “rating” in clauses
(a) through (d) below are to ratings by Moody’s):

 

(a)           if the Obligor of such Loan has a
corporate family rating from Moody’s, then the Moody’s Rating of such Loan
shall be such rating;

 

(b)           if the Obligor of such Loan does not
have a senior unsecured obligation publicly rated by Moody’s but the Loan
itself is rated by Moody’s then the Moody’s Rating of such Loan shall be such
rating;

 

 39

 

(c)           if
the Obligor of such Loan has a senior unsecured obligation publicly rated by
Moody’s, then the Moody’s Rating of such Loan shall be one subcategory above
such rating;

(d)           if
neither such Loan nor any senior unsecured obligation of the Obligor has been
publicly rated by Moody’s, but another obligation of the Obligor has been so
rated, then the Moody’s Rating Loan shall be determined as though such Loan
were a senior unsecured Loan, as follows:

(1)           if
there is a rating by Moody’s on a senior secured obligation of the Obligor,
then the Moody’s Rating of such Loan shall equal such rating if such Loan is
also a senior secured obligation of the Obligor, shall be one subcategory below
such rating if such Loan is a senior unsecured obligation of the Obligor, and
shall be three subcategories below such rating if such rating is “Ba3” or
higher or two subcategories below such rating if such rating is “B1” or lower,
in each case if such Loan is a subordinated obligation of the Obligor,

(2)           if
there is a rating by Moody’s on a senior unsecured obligation of the Obligor,
then the Moody’s Rating of such Loan shall equal such rating if such Loan is
also a senior unsecured obligation of the Obligor, shall equal such rating if
such rating is “Baa3” or higher or shall equal one subcategory above such
rating if such rating is “Ba1” or lower, in each case if such Loan is a senior
secured obligation of the Obligor, and shall be two subcategories below such
rating if such rating is “B1” or higher or one subcategory below such rating if
such rating is “B2” or lower, in each case if such Loan is a subordinated
obligation of the Obligor: or

(3)           if
there is a rating by Moody’s on a subordinated obligation of the Obligor, then
the Moody’s Rating of such Loan

(A)          shall
equal such rating if such Loan is also a subordinated obligation of the Obligor
or if such rating is equal to “Caa1”, “Caa2”, “Caa3”, “Ca” or “C”,

(B)           shall
be one subcategory above such rating if such rating is “Baa3” or higher and
such Loan is a senior (either secured or unsecured) obligation of the Obligor,

(C)           shall
be two subcategories above such rating if such rating is below “Baa3” and such
Loan is a senior secured obligation of the Obligor (except that if such rating
is “B3”, the Moody’s Rating of such Loan shall be “B2”), and

(D) shall be one subcategory above such rating if such
rating is below “Baa3” and such Loan is a senior unsecured obligation of the
Obligor;

provided that if
the operation of clauses (1) through (3) above shall result in
two or more inconsistent Moody’s Ratings, then the Moody’s Rating of the
related Loan shall be the lowest of such Moody’s Ratings.

 40
 

 

(ii)           If a Moody’s Rating cannot be
determined pursuant to clause (i) above, then at the election of the
Servicer, the Moody’s Rating of such Loan may be determined using any one of
the methods provided below:

 

(a)           if
there are public ratings on the obligations of the underlying borrower by
S&P then the Moody’s Rating of such Loan will be the public rating
according to clause (i) above using such S&P ratings; provided that bank loan ratings by S&P
may not be used; provided further
that such resulting rating will be reduced by (x) one rating subcategory if it
is “BBB-” or higher and (y) two rating subcategories if it is “BB+” or lower; provided further that no more than 10% of
the Aggregate Outstanding Loan Balance may be Loans given a Moody’s Rating
based on a rating given by S&P as provided in this subclause (ii)(a).

(b)           with respect to a senior secured Loan
issued by a U.S. Obligor, if

(1)           neither
the Obligor nor any of its affiliates is subject to reorganization or
bankruptcy proceedings,

(2)           no debt securities or obligations of
the Obligor are in default,

(3)           neither
the Obligor nor any of its affiliates has defaulted on any debt during the past
two years,

(4)           the Obligor has been in existence for
the past five years,

(5)           the Obligor is current on any
cumulative dividends,

(6)           the
fixed-charge ratio for the Obligor exceeds 125% for each of the past two fiscal
years and for the most recent quarter,

(7)           the
Obligor had a net profit before tax in the past fiscal year and the most recent
quarter; and

(8)           the
annual financial statements of the Obligor are unqualified and certified by a
firm of independent accountants of international reputation, and quarterly
statements are unaudited but signed by a corporate officer, the Moody’s Rating
of such Loan will be “B3”;

(c)           with respect to a senior secured Loan
issued by a U.S. Obligor, if

(1)           neither
the Obligor nor any of its affiliates is subject to reorganization or
bankruptcy proceedings and

(2)           no
debt security or obligation of the Obligor has been in default during the past
two years, the Moody’s Rating of such Loan will be “Caa2”;

 41
 

 

provided further
that if a Moody’s Rating is obtained pursuant to this subclause (ii)(c)
the Obligor must confirm such Rating with Moody’s within 30 days pursuant to clause
(iii) below: and

 

(d)           if
a debt security or obligation of the Obligor has been in default during the
past two years, the Moody’s Rating of such Loan will be “Ca”.

(iii)          If such Loan is not rated by Moody’s
or S&P, and no other security or obligation of the Obligor is rated by
Moody’s or S&P, or if the rating of such Loan is not addressed in any of clauses
(i) or (ii) above, then the Issuer or the Servicer on behalf of the
Issuer, may present such Loan to Moody’s for an estimate of such Loan’s Moody’s
Rating Factor, from which its corresponding Moody’s Rating shall be determined;
provided that pending the receipt
from Moody’s of such estimate, the Moody’s Rating of such Loan shall be the
rating as may be estimated in good faith by the Servicer; provided further that such estimated
rating shall not be higher than “B3” for the first 60 Business Days following
the applicable Cut-Off Date and not higher than “Caa2” thereafter.

(iv)          In all cases, if a Loan is (x) on
watch for upgrade it shall be treated as upgraded by one rating subcategory or
(y) on watch for downgrade it shall be treated as downgraded by one rating
subcategory unless in each case, Moody’s has advised the Servicer in writing
that such treatment is no longer required.

(v)           The Moody’s Rating may in the
Servicer’s discretion be determined in accordance with Annex B as of the
Cut-Off Date for such Loan subject to the satisfaction of the qualifications
set forth therein (a) at all times prior to the end of the Replenishment Period
with respect to Loans representing not more than 30% of the Expected Aggregate
Outstanding Loan Balance (as such percentage may be adjusted in the discretion
of Moody’s) and (b) following the Replenishment Period with respect to Loans
representing the greater of (1) 30% of the Expected Aggregate Outstanding Loan
Balance as of the applicable date of determination (as such percentage may be
adjusted in the discretion of Moody’s) and (2) the Outstanding Loan Balance of
Loans included in the Collateral as of such date which have a Moody’s Rating
previously determined under this clause (v). The Servicer shall
re-determine and report to Moody’s the Moody’s Rating for each Loan with a
Moody’s Rating determined under this clause (v) within 30 days after
receipt of annual financial statements from the related Obligor.

“Moody’s Rating Condition” means, with respect
to any action or series of related actions or proposed transaction or series of
proposed transactions, that Moody’s shall have notified the Trust Depositor,
the Servicer, the Owner Trustee and the Trustee in writing that such action or
series of related actions or the consummation of such proposed transaction or
series of related transactions will not result in a reduction or withdrawal of
the then-current rating by Moody’s with respect to any outstanding Class of
Notes as a result of such action or series of related actions or the
consummation of such proposed transaction or series of related transactions.

“Moody’s Rating Factor” means, for any Loan with a Moody’s
Rating, the number set forth below under the heading “Moody’s Rating Factor”
across from the Moody’s Rating of such Loan or, in the case of a rating
assigned by Moody’s at the request of
the Issuer (or the Servicer on behalf of the Issuer), the Moody’s Rating Factor
as assigned by Moody’s.

 42
 

 

 

	
  Moody’s Rating of Loan

  	
   

  	
  Moody’s Rating Factor

  
	
   

  	
   

  	
   

  
	
  Aaa(1)

  	
   

  	
  1

  
	
  Aa1

  	
   

  	
  10

  
	
  Aa2

  	
   

  	
  20

  
	
  Aa3

  	
   

  	
  40

  
	
  A1

  	
   

  	
  70

  
	
  A2

  	
   

  	
  120

  
	
  A3

  	
   

  	
  180

  
	
  Baa1

  	
   

  	
  260

  
	
  Baa2

  	
   

  	
  360

  
	
  Baa3

  	
   

  	
  610

  
	
  Ba1

  	
   

  	
  940

  
	
  Ba2

  	
   

  	
  1,350

  
	
  Ba3

  	
   

  	
  1,766

  
	
  B1

  	
   

  	
  2,220

  
	
  B2

  	
   

  	
  2,720

  
	
  B3

  	
   

  	
  3,490

  
	
  Caa1

  	
   

  	
  4,770

  
	
  Caa2

  	
   

  	
  6,500

  
	
  Caa3

  	
   

  	
  8,070

  
	
  Ca

  	
   

  	
  10,000

  
	
  C

  	
   

  	
  10,000

  

 

(1)           Includes any security issued or
guaranteed as to the payment of principal and interest by the United States
government or any agency or instrumentality thereof.

“Moody’s Recovery Rate” means, with respect to any Loan, the
recovery rate specified by Moody’s for such Loan; provided that (i) the Moody’s Recovery Rate for any Loan for
which the Moody’s Rating has been determined pursuant to clause (e) of
the definition of “Moody’s Rating”, shall be determined in accordance with Annex
B, and (ii) prior to the time that such recovery rate has been specified by
Moody’s or so determined, the Moody’s Recovery Rate with respect to such loan
shall be deemed to be the percentage specified in the table below:

	
  Moody’s Category

  	
   

  	
  Recovery Rate

  
	
   

  	
   

  	
   

  
	
  Type 1: U.S. or
  Canadian Obligor

  	
   

  	
   

  
	
  senior secured Loan with
  first priority perfected Lien

  	
   

  	
  50%

  
	
   

  	
   

  	
   

  
	
  Type 2: U.S. or
  Canadian Obligor

  	
   

  	
   

  
	
  senior secured “second lien”
  or “last-out” Loan

  	
   

  	
  40%

  
	
   

  	
   

  	
   

  
	
  Type 3: U.S. or
  Canadian Obligor

  	
   

  	
   

  
	
  senior unsecured Loan

  	
   

  	
  30%

  
	
   

  	
   

  	
   

  
	
  Type 4: Non-U.S.,
  Non-Canadian Obligor

  	
   

  	
   

  
	
  any Loan

  	
   

  	
  0%

  

 

 43
 

 

“Moody’s Weighted Average Rating” means, as of
any date of determination, the number obtained by dividing (a) the sum of the
products obtained by multiplying the Outstanding Loan Balance of each Loan by
its Moody’s Rating Factor as of
such date by (b) the Aggregate Outstanding Loan Balance as of such date.

“Moody’s Weighted Average Rating Factor Test”
means a test that will be satisfied, as of any date of determination, if the
Weighted Average Rating is less than or equal to the sum of (a) the number in
the appropriate column in the Collateral Quality Table opposite the
then-current Reference Spread plus (b) the Recovery Rate Modifier, in each case
as of such date of determination.

“Moody’s Weighted Average Recovery Rate” means, as of any Measurement Date, the
percentage (rounded up to the first decimal place) obtained by dividing (a) the
sum of the products obtained by multiplying the Outstanding Loan Balance of
each Loan by its Moody’s Recovery Rate, by (b) the Aggregate Outstanding Loan
Balance.

“Net Trust Swap Payments” means net trust swap
amounts payable by the Issuer to the Swap Counterparties with respect to Asset
Specific Swaps.

“Net Trust Swap Receipts” means net trust swap
amounts payable by the Swap Counterparties to the Issuer with respect to Asset
Specific Swaps.

“New York Business Day” means any Business Day
in the city of New York, New York.

“Nonrecoverable Advance” means any Scheduled
Payment Advance or Servicing Advance, as applicable, previously made in respect
of a Loan or any Related Property that, as determined by the Servicer in its
reasonable, good faith judgment, will not be ultimately recoverable from
subsequent payments or collections with respect to the applicable Loan
including, without limitation, payments or reimbursements from the related
Obligor, Insurance Proceeds or Liquidation Proceeds on or in respect of such
Loan or Related Property; provided
that for purposes of the Servicer’s ability to reimburse itself for
Nonrecoverable Advances pursuant to Section 5.09 and clause (2)
of Section 7.05(a), Scheduled Payment Advances of interest made in
respect of Delinquent Loans shall be deemed not to be Nonrecoverable Advances.

“Note” means any one of the notes of the Issuer
of any Class executed and authenticated in accordance with the Indenture.

“Note Break-Even Loss Rate” means, with respect
to any Class of Notes rated by S&P, at any time, the maximum percentage of
defaults (as determined by S&P through application of the S&P CDO
Monitor) that the Current Portfolio or the Proposed Portfolio, as applicable,
can sustain such that, after giving effect to S&P assumptions on recoveries
and timing and to the Priority of Payments with respect to the Notes, will
result in sufficient funds remaining for the

 44
 

 

ultimate payment of principal of and interest on such
Class of Notes in full by its stated maturity date and the timely payment of
interest on such Class of Notes.

“Note Distribution Account” means the
non-interest bearing trust account so designated and established and maintained
pursuant to Section 7.01.

“Note Interest Rate” means, as the context
requires, any of the Class A-1A Note Interest Rate, the Class A-1A VFN Note
Interest Rate, the Class A-1B Note Interest Rate, the Class A-2A Note Interest
Rate, the Class A-2B Note Interest Rate, the Class B Note Interest Rate, the
Class C Note Interest Rate, and the Class D Note Interest Rate.

“Noteholder” means each Person in whose name a
Note is registered in the Note Register.

“Noteless Loan” means a Loan with respect to
which (i) the related Underlying Loan Agreement does not require the Obligor to
execute and deliver an Underlying Note to evidence the indebtedness created
under such Loan and (ii) no Underlying Notes are outstanding with respect to
the portion of the Loan transferred to the Issuer.

“Note Register” shall have the meaning provided
in Section 1.01 of the Indenture.

“Notes Loss Differential” means, with respect to any Class of Notes
rated by S&P, at any time, the rate calculated by subtracting the Class
Scenario Loss Rate at such time from the Note Break-Even Loss Rate for such
Class of Notes at such time.

“Obligor” means, with respect to any Loan, any
Person or Persons obligated to make payments pursuant to or with respect to
such Loan, including any guarantor thereof, but excluding, in each case, any
such Person that is an obligor or guarantor that is in addition to the primary obligors
or guarantors with respect to the assets, cash flows or credit of which the
related Loan is principally underwritten.

“OCC” means the Office of the Comptroller of
the Currency.

“Offered Notes” means the Class A Notes, the
Class B Notes and the Class C Notes.

“Offering Memorandum” means the Offering
Memorandum, dated July 7, 2006 prepared in connection with the offer and sale
of the Offered Notes.

“Officer’s Certificate” means a certificate
delivered to the Trustee or the Owner Trustee, as the case may be, signed by a
Responsible Officer of the Trust Depositor, the Servicer or the Originator on
behalf of such Person, or by a Responsible Officer of the Owner Trustee (or
another Person) on behalf of the Issuer, as required by this Agreement or any
other Transaction Document.

“Opinion of Counsel” means a written opinion of
counsel, who may be outside counsel, or internal counsel (except with respect
to federal securities law, tax law, bankruptcy law or UCC matters), for the
Trust Depositor or the Servicer, including Latham & Watkins, LLP or other
counsel reasonably acceptable to the Owner Trustee or the Trustee, as the case
may be.

 45
 

 

“Optional Repurchase” means a repurchase of the
Notes pursuant to Section 10.01.

“Originator” shall have the meaning provided in
the Preamble.

“Outstanding” shall have the meaning provided
in the Indenture.

“Outstanding Loan Balance” of a Loan means the
excess of (a) the sum, without duplication, of (i) the outstanding principal
amount of such Loan or portion thereof transferred to the Issuer as of the
Closing Date or the Cut-Off Date, as applicable, or, if the Loan is acquired by
the Issuer for a purchase price which is less than 90% of the outstanding
principal amount of such Loan or portion thereof transferred to the Issuer as
of the Closing Date or the Cut-Off Date, as applicable, then the purchase price
paid by the Issuer therefor plus (ii) the principal amount advanced by the
Issuer with respect to any Revolving Loan or Delayed Draw Term Loan on or after
the Closing Date, as applicable, over (b) all Principal Collections received on
such Loan, or portion thereof, transferred to the Issuer since the Closing Date
or the related Cut-Off Date, as applicable; provided
that for all purposes other than (x) determining the Transfer Deposit Amount
with respect to a Loan and (y) the determination of the Cumulative Charged-Off
Amount and (ii) any Loan or portion of any Loan charged–off pursuant to clause
(iv) of the definition of Charged–Off Loan will be deemed to have an
Outstanding Loan Balance equal to zero; and provided
further that, for any Permitted PIK Loan, the Outstanding Loan
Balance of such Permitted PIK Loan shall not include any Accreted Interest with
respect thereto.

“Outstanding Principal Balance” means, as of
any date of determination and with respect to any Note or Class of Notes, as
the context requires, other than any Class A-1A VFN Notes, the original
principal amount of such Notes on the Closing Date, as reduced by all amounts
paid by the Issuer with respect to such principal amount up to such date, and
with respect to any Class A-1A VFN Note or the Class A-1A VFN Notes in the
aggregate, as the context requires, the outstanding principal amount thereof as
of such date of determination (after giving effect to all distributions made on
such date) unless otherwise expressly required in the context used.

“Owner Trustee” means the Person acting, not in
its individual capacity, but solely as Owner Trustee, under the Trust
Agreement, its successors in interest and any successor owner trustee under the
Trust Agreement.

“Participated Loans” means the Loans in which
the Issuer holds a Participation interest as of the Closing Date or the related
Cut-Off Date (if after the Closing Date), as the case may be.

“Participated Portion” shall have the meaning
provided in Section 13.22.

“Participation” means an undivided 100%
participation interest or subparticipation (including any participation in a
subparticipation) granted by the Trust Depositor in and to the Participated
Loans and all Related Property therefor.

“Paying Agent” shall have the meaning provided
in Section 3.03 of the Indenture and Section 3.09 of the Trust Agreement.

“Percentage Interest” means, for the Holder of
a Class of Notes, the fraction, expressed as a percentage, the numerator of
which is the then current outstanding principal amount represented

 46
 

 

by such Note and the denominator of which is the then
current Outstanding Principal Balance of all Notes of the applicable Class.

“Permitted Investments” means negotiable instruments
or securities or other investments (a) which, except in the case of demand or
time deposits, investments in money market funds and Eligible Repurchase
Obligations, are represented by instruments in bearer or registered form or
ownership of which is represented by book entries by a Clearing Agency or by a
Federal Reserve Bank in favor of depository institutions eligible to have an
account with such Federal Reserve Bank who hold such investments on behalf of
their customers, (b) that, as of any date of determination, mature by their
terms on or prior to the Distribution Date immediately following such date of
determination, and (c) that evidence:

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

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

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

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

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

(vi)          investments in taxable money market
funds or other regulated investment companies having, at the time of the Issuer’s
investment or contractual commitment to invest therein, a rating of “Aaa” and “MR1+”
from Moody’s and a rating of “AAAm” from S&P or otherwise subject to
satisfaction of the Rating Agency Condition;

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

 47
 

 

(viii)        Eligible Repurchase Obligations with a
rating acceptable to the Rating Agencies, which in the case of S&P shall be
at least “A-1”; or

(ix)           any negotiable instruments or
securities or other investments subject to satisfaction of the Rating Agency
Condition.

Permitted Investments shall not include any
instrument, security or investment (w) which, if purchased at a price
(excluding accrued interest) in excess of 100% of par, is subject to
substantial non-credit risk as determined by the Servicer in its reasonable
business judgment, (x) the S&P rating of which includes a “p”, “pi”, “q”, “r”
or “t” subscript, (y) subject to a tender offer or other offer to exchange such
instruments, security or investment for cash or another instrument, security or
investment or (z) which, is an interest only security, a mortgage backed
security or a security the payments on which from the obligor to the Issuer
would be subject to withholding tax in any jurisdiction. Investments in
Permitted Investments rated “A-1” by S&P may not exceed 20% of the
Outstanding Principal Balance. The Trustee may, pursuant to the direction of
the Servicer, purchase or sell to itself or an Affiliate, as principal or
agent, the Permitted Investments described above.

“Permitted Liens” means

(i)            with respect to the interest of the
Originator, the Trust Depositor and the Issuer in the Loans: (a) Liens in favor
of the Trust Depositor created pursuant to the Loan Sale Agreement and
transferred to the Issuer pursuant hereto, (b) Liens in favor of the Issuer
created pursuant to this Agreement, (c) Liens in favor of the Trustee created
pursuant to the Indenture and/or this Agreement, and (d) Liens, if any, which
have priority over first priority perfected security interests in the Loans or
any portion thereof under the UCC or any other Applicable Law; and

(ii)           with respect to the interest of the
Originator, the Trust Depositor and the Issuer in the other Collateral
(including any Related Property): (a) materialmen’s, warehousemen’s, mechanics’
and other Liens arising by operation of law in the ordinary course of business
for sums not due or sums that are being contested in good faith, (b) purchase
money security interests in certain items of equipment, (c) Liens for state,
municipal and other local taxes if such taxes shall not at the time be due and
payable or the validity or amount thereof is currently being contested by an
appropriate Person in good faith by appropriate proceedings, (d) other customary
Liens permitted with respect thereto consistent with the Servicing Standard,
(e) Liens in favor of the Trust Depositor created by the Originator and
transferred by the Trust Depositor to the Issuer pursuant to this Agreement,
(f) Liens in favor of the Issuer created pursuant to this Agreement, (g) Liens
in favor of the Trustee created pursuant to the Indenture and/or this
Agreement, (h) Liens which have priority over first priority perfected security
interests in the other Collateral, the Indenture Collateral or any portion
thereof under the UCC or any other Applicable Law, (i) with respect to Agented
Loans, Liens in favor of the lead agent, the collateral agent or the paying
agent on behalf of all holders of indebtedness of such Obligor under the
related facility and (j) with respect to any Subordinated Loans, Liens in favor
of senior lenders with respect to the related Obligor, its property and assets.

 48
 

 

“Permitted PIK Loan” means a Loan that requires
the Obligor to pay only a portion of the accrued and unpaid interest in cash on
a current basis, the remainder of which is deferred and paid later together
with interest thereon as a lump sum and is treated as Interest Collections at
the time it is received, and carries a current cash pay interest rate of not less
than 2.5% per annum.

“Permitted Prepayment Date” means an Interim
Distribution Date that does not fall on (a) a Distribution Date or (b) the 20th
calendar day of any calendar month in which no Distribution Date occurs.

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

“Portfolio Acquisition and Disposition Requirements”
means, with respect to any acquisition (whether by purchase or substitution) or
disposition of a Loan, each of the following conditions: (a) such Loan, if
being acquired by the Issuer, is an Eligible Loan; (b) such Loan is being
acquired or disposed of in accordance with the terms and conditions set forth
in this Agreement; (c) the acquisition or disposition of such Loan does not
result in a reduction or withdrawal of the then-current rating issued by any
Rating Agency on any Class of Notes then outstanding; and (d) such Loan is not
being acquired or disposed of for the primary purpose of recognizing gains or
decreasing losses resulting from market value changes.

“Portfolio Criteria” means the following tests
and conditions:

(a)           the S&P CDO Monitor Test is
satisfied;

(b)           the Moody’s Weighted Average Rating
Factor Test is satisfied;

(c)           the Weighted Average Spread Test is
satisfied;

(d)           the Diversity Test is satisfied;

(e)           the Weighted Average Life Test is
satisfied;

(f)            the Weighted Average Coupon equals
or exceeds 12.0%;

(g)           the Moody’s Weighted Average Recovery
Rate equals or exceeds 38.5%;

(h)           the S&P Weighted Average Recovery
Rate equals or exceeds 43.4%;

(i)            the Class A-1A VFN Funding Test is
satisfied.

(j)            not
more than 15.0% of the Aggregate Outstanding Loan Balance may consist of Fixed
Rate Loans;

(k)           not
more than 20.0% of the Aggregate Outstanding Loan Balance may consist of
Floating Prime Rate Loans;

 

 49

 

(l)            not
more than 60.0% of the Aggregate Outstanding Loan Balance may consist of Second
Lien Loans and Subordinated Loans;

(m)          not
more than 15.0% of the Aggregate Outstanding Loan Balance may consist of
Subordinated Loans;

(n)           not
more than 10.0% of the Aggregate Outstanding Loan Balance may consist of Loans
that pay interest less frequently than quarterly;

(o)           not
more than 15.0% of the Aggregate Outstanding Loan Balance may consist of Loans
(other than Charged-Off Loans) with a Moody’s Rating of “Caa1” or lower;

(p)           not
more than 15.0% of the Aggregate Outstanding Loan Balance may consist of Loans
(other than Charged Off Loans) with an S&P Rating of “CCC+” or lower;

(q)           not
more than 10.0% of the Aggregate Outstanding Loan Balance may consist of Loans
to Obligors organized under the laws of, or all or substantially all of the
assets of which are located in, any country other than the United States;

(r)            the
sum of the Outstanding Loan Balances of Loans to Obligors organized under the
laws of, or all or substantially all of the assets of which are located in,
Group I Countries, Group II Countries or Group III Countries may not exceed
5.0% of the Aggregate Outstanding Loan Balance;

(s)           not
more than 2.5% of the Aggregate Outstanding Loan Balance may consist of Loans
to a single Obligor organized under the laws of, or all or substantially all of
the assets of which are located in, a Group II Country or a Group III Country;

(t)            not
more than 3.0% of the Aggregate Outstanding Loan Balance may consist of Loans
to a single Obligor, except that the Outstanding Loan Balance of Loans to any
three single Obligors may each be up to 4.0% of the Aggregate Outstanding Loan
Balance;

(u)           not
more than 5.0% of the Aggregate Outstanding Loan Balance may consist of
Qualified Participated Loans;

(v)           not
more than 5.0% of the Aggregate Outstanding Loan Balance may consist of Swapped
Floating Rate Loans;

(w)          not
more than 7.5% of the Aggregate Outstanding Loan Balance may consist of DIP
Loans; provided that the
aggregate Outstanding Loan Balance of all DIP Loans of any single Obligor shall
not exceed 2% of the Aggregate Outstanding Loan Balance;

(x)            the
sum of the Outstanding Loan Balances of Loans for which the Obligors are
classified in any single Moody’s Industry Classification Group does not

 50
 

 

exceed
15.0% of the Aggregate Outstanding Loan Balance, except that the Outstanding
Loan Balance of Loans for which the Obligors are classified in any two Moody’s
Industry Classification Groups may each be up to 20.0% of the Aggregate
Outstanding Loan Balance; and

(y)           not
less than 40.0% of the Aggregate Outstanding Loan Balance may consist of First
Lien Loans.

Compliance with the above
criteria will be determined, in the case of a Measurement Date relating to any
Additional Loan or Substitute Loan, after giving effect to the acquisition or
substitution of all Additional Loans or Substitute Loans, as applicable, on
such date.

“Pre-Paid Loan” means any Loan (other than a
Charged-Off Loan) that has been terminated or has been prepaid in full or in
part prior to its scheduled expiration date.

“Prepayments” means any and all (i) full
prepayments, including prepayment premiums, on or with respect to a Loan
(including, with respect to any Loan and any Due Period, any Scheduled Payment,
Finance Charge or portion thereof that is due in a subsequent Due Period that
the Servicer has received and expressly permitted the related Obligor to make
in advance of its scheduled due date, and that will be applied to such
Scheduled Payment on such due date), (ii) Liquidation Proceeds, and (iii)
Insurance Proceeds.

“Principal and Interest Account” means the
trust account so designated and established and maintained pursuant to Section
7.03.

“Principal Collection Account” means a
sub-account of the Principal and Interest Account established and maintained
pursuant to Section 7.03(a).

“Principal Collections” means amounts deposited
into the Principal and Interest Account in respect of payments received on or
after the Closing Date in the case of the Initial Loans and the applicable
Cut-Off Date in the case of any Additional Loans or Substitute Loans on account
of principal on the Loans, including:

(i)            the principal portion of:

(a)           any
Scheduled Payments and Prepayments (other than Liquidation Proceeds); and

(b)           any
amounts received (1) in connection with the purchase or repurchase of any Loan
and the amount of any adjustment for substituted Loans and (2) any Scheduled
Payment Advances that the Servicer determines to make;

(ii)           Curtailments and Liquidation Proceeds
other than Excess Liquidation Proceeds;

(iii)          all Sale Proceeds not attributable to
accrued interest or Sale Premium;

 51
 

 

(iv)          amounts previously deposited in
accordance with the procedures for the substitution of Loans that have not been
applied to purchase one or more Substitute Loans within 90 days of their
deposit into the Principal Collection Account; provided
that prior to the expiration of 90 days after the deposit of such amounts into
the Principal Collection Account, such amounts shall not be deemed to be Principal
Collections for purposes of the requirement that all Principal Collections then
held in the Principal Collection Account be transferred to the Note
Distribution Account on each Distribution Date; provided further that following the expiration of such 90
day period, such amounts shall be deemed to have been Principal Collections as
of the date deposit of such amounts for purposes of effecting a Special
Redemption; and

 

(v)           all other amounts not specifically
included in Interest Collections.

“Priority of Payments” means, collectively, the
payments made on each Distribution Date in accordance with Section 7.05(a)
and Section 7.05(b).

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

“Proposed Portfolio” means the portfolio (measured
by the outstanding principal balance and treating Revolving Loans and Delayed
Draw Term Loans as fully funded) of (a) the Loans, (b) Principal Collections
held as cash and (c) Permitted Investments purchased with Principal Collections
resulting from the repurchase, maturity or other disposition of Loan or a
proposed acquisition of an Additional Loan or substitution of a Substitute
Loan, as the case may be.

“Pro Rata Distribution Date” means any
Distribution Date other than a Sequential Distribution Date.

“Purchase Agreement” means the Purchase
Agreement, dated as of the Closing Date, among the Issuer, the Trust Depositor
and the Initial Purchaser, as amended, modified, restated, waived or
supplemented from time to time.

“Qualified Institution” means (a) the corporate
trust department of the Trustee or (b) 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),
(i)(A) that has either (1) a long-term unsecured debt rating acceptable to the
Rating Agencies, which, in the case of S&P, shall be “AA–” and in the case
of Moody’s, shall be “Aa3” or (2) a short-term unsecured debt rating or
certificate of deposit rating acceptable to the Rating Agencies, which, in the
case of S&P, shall be “A-1+” and in the case of Moody’s, shall be “P-1”,
(B) the parent corporation, if such parent corporation guarantees the
obligations of the depository institution, of which has either (1) a long-term
unsecured debt rating acceptable to the Rating Agencies, which, in the case of
S&P, shall be “AA–”, and in the case of Moody’s, shall be “Aa3” or (2) a
short-term unsecured debt rating or certificate of deposit rating acceptable to
the Rating Agencies, which, in the case of S&P, shall be “A-1+” and in the
case of Moody’s, shall be “A-1”, or (C)

 52
 

 

otherwise satisfies the Rating Agency Condition, and
(ii) whose deposits are insured by the FDIC and satisfies the Rating Agency
Condition.

“Qualified Participated Loan” means a
Participated Loan acquired from an institution that is rated at least “A” by
S&P and “A2” by Moody’s at the time of sale.

“Qualified Second Lien Loan” means any Second
Lien Loan (a) which has a Loan-to-Value of not greater than 70%, (b) as to
which the ratio, for the related Obligor, of (x) the sum of (i) the maximum
availability (as provided in the applicable loan documentation) of such Loan as
of the date of its origination plus (ii) the maximum availability under all
other indebtedness of the related Obligor which ranks either senior to, or pari passu with, such Loan to (y) such
Obligor’s earnings before interest, taxes, depreciation and amortization (or
similar term as defined in the related Underlying Loan Agreements) for the
twelve calendar months preceding such date shall not exceed (I) in the case of
Obligors in the media and telecommunications industries, 7.5:1.0 and (II) in
the case of all other Obligors, 5.5:1.0, provided
that for the avoidance of doubt, an Obligor’s earnings before interest, taxes,
depreciation and amortization shall be calculated in accordance with the Credit
and Collection Policy; and (c) with respect to which the Underlying Loan
Agreement (i) contains a limit on the amount of first-lien senior debt which may
be incurred by the related Obligor, (ii) preserves enforcement rights for the
second lien lender after a default under the related Underlying Loan Agreement,
and (iii) contains either or both (x) a standstill period applicable to the
holders of such Second Lien Loan of not longer than 180 days following a
default under the loan agreement governing the senior indebtedness of such
Obligor, and (y) provisions requiring the consent of the holders of such Second
Lien Loan to release of all or substantially all of the Related Property
securing such Loan unless the majority of the proceeds of the disposition of
such Related Property are used to repay the indebtedness which is senior to or pari passu with such Second Lien Loan, or
to repay such Second Lien Loan.

“Qualified Transferee” means:

(i)            the Trust Depositor, the Issuer, the
Trustee and any Affiliate thereof; or

(ii)           any other Person which:

(a)           has
at least $50,000,000 in capital/statutory surplus or shareholders’ equity
(except with respect to a pension advisory firm or similar fiduciary); and

(b)           is one of the following:

(1)           an
insurance company, bank, savings and loan association, investment bank, trust
company, commercial credit corporation, pension plan, pension fund, pension
fund advisory firm, mutual fund, real estate investment trust, governmental
entity or plan;

(2)           an
investment company, money management firm or a “qualified institutional buyer”
within the meaning of Rule 144A under the Securities Act, or an “institutional
accredited investor” within the meaning of Regulation D;

 53
 

 

(3)           the
trustee, collateral agent or administrative agent in connection with (x) a
securitization of the subject Loan through the creation of collateralized debt
or loan obligations or (y) an asset-backed commercial paper funded transaction
funded by a commercial paper conduit whose commercial paper notes are rated at
least “A-1” by S&P and at least “P-1” by Moody’s, or (z) a repurchase
transaction funded by an entity which would otherwise be a Qualified Transferee
so long as the “equity interest” (other than any nominal or de minimis equity
interest) in the special purpose entity that issues notes or certificates in
connection with any such collateralized debt or loan obligation, asset-backed
commercial paper funded transaction or repurchase transaction is owned by one
or more entities that are Qualified Transferees under subclause (ii)(b)(1)
or (ii)(b)(2) above; or

(4)           any
entity Controlled (as defined below) by any of the entities described in clause
(ii)(a) or clause (ii)(b) above.

For purposes of this definition only, “Control” means
the ownership, directly or indirectly, in the aggregate of more than fifty
percent (50%) of the beneficial ownership interests of an entity and the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of an entity, whether through the
ability to exercise voting power, by contract or otherwise, and “Controlled”
has the meaning correlative thereto.

“Quarterly Report” has the meaning provided in Section
9.01.

“Ramp-Up Period” means the period commencing on
the Closing Date and ending on the Effective Date.

“Rating Agency” means each of S&P and Moody’s,
so long as such Persons maintain a rating on any of the Offered Notes or the
Class D Notes; and if either of S&P or Moody’s no longer maintains a rating
on any of the Offered Notes or the Class D Notes, such other nationally
recognized statistical rating organization, if any, selected by the Trust
Depositor.

“Rating Agency Condition” means, with respect
to any action or series of related actions or proposed transaction or series of
related proposed transactions, a condition that is satisfied when each
applicable Rating Agency shall have notified the Trust Depositor, the Servicer,
the Issuer, the Owner Trustee and the Trustee in writing that such action or
series of related actions or the consummation of such proposed transaction or
series of related transactions will not result in a Ratings Effect.

“Ratings Confirmation Failure” shall have the
meaning provided in Section 2.06(g).

“Rating Criteria” means the criteria which will
be satisfied of any date with respect to any Class A-1A VFN Noteholder if:

(i)            the short-term debt, deposit or
similar obligations of such Class A-1A VFN Noteholder are rated “P-1” and not
on watch for possible downgrade by Moody’s and at least “A-1” by S&P and
the long-term debt obligations of such Class A-1A VFN Noteholder are rated at
least “AA-” by S&P;

 54
 

 

(ii)           the obligations of such Class A-1A
VFN Noteholder under the Class A-1A VFN Purchase Agreement are guaranteed
(pursuant to a guarantee which complies with the then-current S&P criteria
regarding guarantees) by an entity meeting the Rating Criteria set forth in clause
(i) above; or

(iii)          such Class A-1A VFN Noteholder is then
entitled under a Liquidity Facility to borrow from, or sell an interest in
assets to, one or more Liquidity Providers so long as:

(a)           the
short-term debt, deposit or similar obligations of each such Liquidity Provider
are on such date rated “P-1” and not on watch for possible downgrade by Moody’s
and at least “A-1” by S&P and the long-term debt obligations of such
Liquidity Provider are rated at least “AA-” by S&P; and

(b)           the
aggregate amount of commitments to make loans or purchase interests in assets
under such Liquidity Facility held by Liquidity Providers whose short-term
debt, deposit or similar obligations are on such date rated “P-1” and not on
watch for possible downgrade by Moody’s and at least “A-1” by S&P is not
less than the Class A-1A VFN Commitment in respect of the Class A-1A VFN Notes
held by such Class A-1A VFN Noteholder.

“Ratings Effect” means, with respect to any
action or series of related actions or proposed transaction or series of
related proposed transactions, a reduction or withdrawal of the then-current
rating issued by a Rating Agency with respect to any outstanding Class of Notes
as a result of such action or series of related actions or the consummation of
such proposed transaction or series of related transactions.

“Record Date” means, for book-entry Notes, the
calendar day immediately preceding the applicable Distribution Date; the
Repurchase Date or Refinancing Date, as applicable, and for the definitive
Notes, the last Business Day of the calendar month preceding the related
Distribution Date, the Repurchase Date or the Refinancing Date, as applicable.

“Records” means all Loan and other documents,
books, records and other information (including, without limitation, computer
programs, tapes, disks, data processing software and related property and
rights) executed in connection with the origination or acquisition of the Loans
or maintained with respect to the Loans and the related Obligors that the
Originator or the Servicer have generated, in which the Originator, the Trust Depositor,
the Issuer, the Trustee or the Servicer have acquired an interest pursuant to
the Transfer and Servicing Agreements or in which the Originator, the Trust
Depositor, the Issuer, the Trustee or the Servicer have otherwise obtained an
interest to the extent transferable, and subject to any confidentiality and/or
transferability restrictions.

“Recovery Rate Modifier” means an amount equal
to, as of any date of determination, the product of (i) the excess, if any, of
the Moody’s Weighted Average Recovery Rate as of such date of determination
minus 38.5% times (ii) 5,500; provided
that, if the Moody’s Weighted Average Recovery Rate shall be (x) greater than
or equal to 60%, then solely for the purposes of the calculation of the
Recovery Rate Modifier, the Moody’s Weighted Average Recovery Rate shall be
deemed to be equal to 60% (or, such other value, with respect to which the
Rating

 55
 

 

Agency Condition shall be satisfied), or (y) less than
or equal to 38.5%, then solely for the purposes of the calculation of the
Recovery Rate Modifier, the Moody’s Weighted Average Recovery Rate shall be
deemed to be equal to 38.5%.

“Recovery Value” means, with respect to any
Charged-Off Loan or Delinquent Loan, the lower of (a) the product obtained by
multiplying (i) the lower of (A) the Moody’s Recovery Rate applicable to such
Loan and (B) the S&P Priority Category Recovery Rate applicable to such
Loan and (ii) the Outstanding Loan Balance immediately before such Loan became
a Charged-Off Loan or Delinquent Loan, as applicable, and (b) the Market Value
of such Loan.

“Reference Banks” means leading banks selected
by the Trustee and engaged in transactions in Eurodollar deposits in the
international Eurocurrency market.

“Reference Spread” means, initially 5.0%, or
such other percentage set forth in the Collateral Quality Table under the
heading “Weighted Average Spread” that has been most recently specified by the
Servicer in a notice to the Trustee as the level that will apply for purposes
of determining compliance with the Weighted Average Spread Test, the Diversity
Test and the Moody’s Weighted Average Rating Factor Test; provided that no such specification shall
be effective unless, on the date of such notice and immediately after giving
effect to such specification, the Moody’s Weighted Average Rating of the Loans
in the Collateral is equal to or less than, and the Diversity Score is equal to
or greater than, the number specified in the applicable column in the
Collateral Quality Table opposite the specified Reference Spread.

“Refinancing” means a refinancing of the
Offered Notes and the Class D Notes pursuant to Section 10.03(a) of the
Indenture.

“Refinancing Date” means the Distribution Date
on or after the Distribution Date occurring in June, 2010 designated as such by
the Issuer (at the direction of the Holders representing at least 66-2/3% of
the aggregate Outstanding Principal Balance of the Class E Notes) in connection
with a Refinancing.

“Refinancing Price” means an amount equal to
the sum of (i) the then Outstanding Principal Balance of each Class of Offered
Notes and the Class D Notes plus accrued and unpaid interest thereon to but
excluding the Refinancing Date and all other amounts accrued and unpaid with
respect thereto, plus (ii) with
respect to the Class A-1A VFN Notes, any accrued and previously unpaid Class
A-1A VFN Breakage Costs, Class A-1A VFN Increased Costs and Class A-1A VFN
Commitment Fee, plus (iii) all
administrative and other fees, expenses, advances and other amounts then
accrued and payable or reimbursable in accordance with the Priority of Payments
(excluding any amounts payable to the Class E Noteholders or to the
Certificateholders).

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

“Related Property” means, with respect to any
Loan and as applicable in the context used, the interest of the Obligor, or the
interest of the Originator, the Trust Depositor or the Issuer under the Loan, in
any property or other assets designated and pledged or mortgaged as collateral
to secure repayment of such Loan (including, without limitation, a pledge of
the stock, membership

 56
 

 

or other ownership interests in the Obligor),
including all Proceeds from any sale or other disposition of such property or
other assets.

“Replenishment Period” means the period
beginning on the Effective Date and terminating on the earlier to occur of (a)
the Business Day preceding the Distribution Date in June, 2011, (b) an Event of
Default, (c) the Distribution Date following the date on which the Servicer
notifies the Trustee in writing that, in light of the composition of the Loans,
general market conditions and other factors, the Servicer (in its sole
discretion) has determined that investments in Additional Loans within the
foreseeable future would either be impractical or not beneficial, or (d) the
Distribution Date on which the Class D Accrued Payable first exceeds zero; provided that, (i) if the Replenishment
Period terminates as described in clauses (a) or (d) above, the
Replenishment Period may not be extended or reinstated without the consent of
the Servicer and the Majority Noteholders and satisfaction of the Moody’s
Rating Condition and the S&P Rating Condition with respect to the extension
of the Replenishment Period, and (ii) if the Replenishment Period terminates as
a result of the occurrence of an Event of Default, the Replenishment Period may
not be reinstated unless (w) the event giving rise to such termination has been
cured or waived, (x) no other events that would terminate the Replenishment
Period have occurred, (y) the Servicer and the Majority Noteholders have
consented to such reinstatement and (z) the S&P Rating Condition and the
Moody’s Rating Condition have been satisfied with respect to the reinstatement
of the Replenishment Period.

“Repossessed Property” means items of Related
Property taken in the name of the Issuer as a result of legal action enforcing
the Lien on the Related Property resulting from a default on the related Loan.

“Representative Amount” means an amount that is
representative for a single transaction in the relevant market at the relevant
time.

“Repurchase Date” means the Distribution Date
designated as such by the Issuer (at the direction of the Holders representing
at least 66-2/3% of the aggregate Outstanding Principal Balance of the Class E
Notes) in a notice of the election to effect an Optional Repurchase, delivered
at least 15 Business Days prior to such Distribution Date to the Issuer and the
Trustee.

“Repurchase Price” means, in the case of a
repurchase of the Notes pursuant to Section 10.01 of the Indenture, an amount
equal to the sum of (i) the then Outstanding Principal Balance of each Class of
Offered Notes and the Class D Notes to be repurchased plus accrued and unpaid
interest thereon to but excluding the Repurchase Date and all other amounts
accrued and unpaid with respect thereto, plus (i) any accrued and previously
unpaid Class A-1A VFN Breakage Costs, Class A-1A VFN Increased Costs and Class
A-1A VFN Commitment Fee, plus (iii) all administrative and other fees,
expenses, advances, and other amounts then accrued and payable or reimbursable
in accordance with the Priority of Payments (including fees and expenses, if
any, incurred by the Trustee and the Servicer in connection with any sale of
loans in connection with a repurchase).

“Required Loan Documents” means, with respect
to:

(i)            all Loans in the aggregate:

 57
 

 

(a)           a
blanket assignment of all of the Originator’s and Trust Depositor’s right,
title and interest in and to all Related Property securing the Loans at any
time transferred to the Issuer, including, without limitation, all rights under
applicable guarantees and Insurance Policies; such assignment shall be in the
name of “U.S. Bank National Association, its successors and assigns, as Trustee
under the Indenture, dated as of July 7, 2006 relating to ARCC Commercial Loan
Trust 2006”;

(b)           irrevocable
powers of attorney of the Trustee, the Originator, the Trust Depositor and the
Issuer to the Servicer to execute, deliver, file or record and otherwise deal
with the Related Property for the Loans at any time transferred to the Issuer. The
powers of attorney will permit the Servicer to prepare, execute and file or
record UCC financing statements and notices to insurers; and

(c)           blanket
UCC-1 financing statements identifying by type all Related Loan Assets for the
Loans at any time transferred to the Issuer as Collateral under the Indenture
and naming the Issuer and the Trustee, as assignee of the Issuer, as “Secured
Party” and the Trust Depositor as the “Debtor”. The UCC-1 Financing Statements
will be filed promptly following the Closing Date in Delaware and will be in
the nature of protective notice filings rather than the financing statements;

(ii)           for each Loan:

(a)           (1)
other than in the case of a Noteless Loan or a Participated Loan, the original
or, if accompanied by “lost note” affidavit and indemnity, a copy of, the
Underlying Note, endorsed by the prior holder of record either in blank or to
the Trustee (and evidencing an unbroken chain of endorsements from the prior
holder thereof evidenced in the chain of endorsements to the Trustee), with any
endorsement to the Trustee to be in the following form: “U.S. Bank National Association,
its successors and assigns, as Trustee under the Indenture, dated as of July 7,
2006, relating to ARCC Commercial Loan Trust 2006”, and (2) in the case of a
Noteless Loan or a Participated Loan, (A) a copy of each executed transfer
document or instrument relating to such Noteless Loan or a Participated Loan
either (1) evidencing the assignment of such Noteless Loan or Participated Loan
to the Originator, from the Originator to the Trust Depositor and from the
Trust Depositor either to the Trustee or in blank, or (2) in the case of a
Third Party Acquired Loan, from the prior third party owner thereof either to
the Trustee or in blank and (B) executed copies or executed originals, as
applicable, a copy of the related credit agreement, note purchase agreement or
sale and servicing agreement (or equivalent agreement), as applicable, together
with executed copies or executed originals, as applicable, of all other
documents and instruments described in clauses (ii)(b), (c) and (d)
with respect to such Noteless Loan or Participated Loan;

(b)           other
than in the case of a Noteless Loan, originals or copies of each of the
following, to the extent applicable to the related Loan: any related loan
agreement, credit agreement, note purchase agreement, security agreement, sale
and servicing agreement, acquisition agreement, subordination agreement,
intercreditor agreement or similar instruments, guarantee, Insurance Policy,
assumption or substitution agreement or similar

 58
 

 

material
operative document, in each case together with any amendment or modification
thereto, as set forth on the Loan Checklist;

(c)           other
than in the case of a Noteless Loan or a Participated Loan, with respect to any
Loan in respect of which the Originator (or a wholly owned subsidiary of the Originator)
is the lead agent, collateral agent and paying agent and receives payment
directly from the Obligor of such Loan, either (1) copies of the UCC-1
financing statements, if any, and any related continuation statements, showing
the Obligor, as debtor and the Originator as secured party or (2) copies of any
such financing statements certified by the Servicer to be true and complete
copies thereof in instances where the original financing statements have been
sent to the appropriate public filing office for filing, as set forth on the
Loan Checklist;

(d)           a copy of the related Loan Checklist;
and

(e)           in
the case of a Swapped Floating Rate Loan, copies of the related Asset Specific
Swap and assignment of the rights thereunder to the Issuer.

“Required Reserve Amount” means, with respect
to each Distribution Date, an amount equal to the excess of the aggregate
Outstanding Loan Balance of Delinquent Loans over the aggregate Recovery Value
of Delinquent Loans.

“Reserve Fund” means the trust account so
designated and established and maintained pursuant to Section 7.01.

“Responsible Officer” means, when used with
respect to (a) the Owner Trustee or the Trustee, any officer assigned to the
corporate trust office (and, with respect to the Trustee, the CDO Group) having
direct responsibility for the administration of the Trust Agreement or the
Indenture, as the case may be, or the transactions contemplated thereby,
including any Chief Executive Officer, President, Executive Vice President,
Vice President, Assistant Vice President, Secretary, any Assistant Secretary,
any trust officer or any other officer of the Owner Trustee or the Trustee
customarily performing functions similar to those performed by any of the above
designated officers 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 and (b) the Trust Depositor, the
Issuer, the Originator or the Servicer, the Chief Executive Officer, the Chief
Investment Officer, Chief Financial Officer or any Managing Director thereof
who is also a Servicing Officer of such Person or of the designated manager of
such Person, as applicable.

“Revolving Loan” means a Loan that is a line of
credit arising from an extension of credit by the Originator to or on behalf of
an Obligor with a commitment that is fixed pursuant to the terms of the related
Required Loan Documents.

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

 59

 

“S&P CDO Monitor” means the dynamic,
analytical computer program provided by S&P to the Servicer and the Trustee
within 30 days after the Closing Date for the purpose of estimating the default
risk of Loans.

“S&P CDO Monitor Test” means the test that
will be satisfied on any Measurement Date if after giving effect to the
substitution of a Substitute Loan, the acquisition of an Additional Loan or the
sale of a Loan (or any combination of the foregoing), as the case may be, on
such Measurement Date, the Notes Loss Differential of the Proposed Portfolio is
positive; or if the Notes Loss Differential of the Proposed Portfolio is
negative prior to giving effect to such substitution, acquisition or sale, as
the case may be, the extent of compliance is improved after giving effect to
such substitution, acquisition or sale. The S&P CDO Monitor Test will be
considered improved if the Notes Loss Differential of the Proposed Portfolio is
greater than the corresponding Notes Loss Differential of the Current Portfolio.
In the event such test is updated or otherwise modified by S&P after the
Closing Date, the “S&P CDO Monitor Test” shall mean such test as so updated
or otherwise modified.

“S&P Priority Category Recovery Rate”
means, with respect to any Loan, unless otherwise specified by S&P, the
percentage specified in the table below:

	
  S&P Priority Category

  	
   

  	
  Recovery Rate

  
	
   

  	
   

  	
   

  
	
  First Lien Loan

  	
   

  	
  57%

  
	
   

  	
   

  	
   

  
	
  Qualified Second Lien Loan

  	
   

  	
  43.5%

  
	
   

  	
   

  	
   

  
	
  Second Lien Loan (other than
  a Qualified Second

  	
   

  	
  38%

  
	
  Lien Loan), up to an
  aggregate of Outstanding Loan

  	
   

  	
   

  
	
  Balances of such Second Lien
  Loans of less than or

  	
   

  	
   

  
	
  equal to 15% of the Expected
  Aggregate

  	
   

  	
   

  
	
  Outstanding Loan Balance

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Second Lien Loans (other
  than a Qualified Second

  	
   

  	
  23%

  
	
  Lien Loan), representing the
  aggregate of

  	
   

  	
   

  
	
  Outstanding Loan Balances of
  such Second Lien

  	
   

  	
   

  
	
  Loans in excess of 15% of
  the Expected Aggregate

  	
   

  	
   

  
	
  Outstanding Loan Balance

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Subordinated Loan

  	
   

  	
  23%

  

“S&P Rating” means, with respect to any
Loan, if such Loan is rated by S&P, for determining the S&P Rating as
of any date of determination:

(i)            if there is an issuer credit rating
of the Obligor of such Loan, or the guarantor who unconditionally and
irrevocably guarantees such Loan, then the S&P Rating shall be such rating
(regardless of whether there is a published rating by S&P on such Loan in
the Collateral);

(ii)           if there is no issuer credit rating
of the Obligor and no other security or obligation of the Obligor is rated by
S&P, then the Issuer shall apply to S&P for a corporate credit estimate
after the acquisition of such Loan, which shall be its S&P Rating; provided that

 60
 

 

pending the receipt from S&P’s of such estimate,
the S&P’s Rating of such Loan shall be the rating as may be estimated in
good faith by the Servicer; provided further
that such estimated rating shall not be higher than “B-” for the first 60
Business Days following the applicable Cut-Off Date and not higher than “CCC”
thereafter;

(iii)          if there is no issuer credit rating of
the Obligor and such Loan is not rated by S&P, but another security or
obligation of the Obligor is rated by S&P and the Issuer does not obtain a
S&P Rating for such Loan pursuant to clause (ii) above, then the
S&P Rating of such Loan shall be the issuer credit rating or shall be
determined as follows: (a) if there is a rating on a senior secured obligation
of the Obligor, then the S&P Rating of such Loan shall be one rating
subcategory below such rating; (b) if there is a rating on a senior unsecured
obligation of the Obligor, then the S&P Rating of such Loan shall equal
such rating; and (c) if there is a rating on a subordinated obligation of the
Obligor, then the S&P Rating of such Loan shall be one rating subcategory
above such rating;

(iv)          if there is no issuer credit rating of
the Obligor published by S&P and such Loan is not rated by S&P and no
other security or obligation of the Obligor is rated by S&P and the Issuer
does not obtain a S&P Rating for such Loan pursuant to clause (ii)
above, then the S&P Rating of such Loan shall be determined as follows: If
such Loan has a public rating by Moody’s, then the S&P Rating of such Loan
shall be (a) one rating subcategory below the S&P equivalent of the rating
assigned by Moody’s if such Loan is rated “Baa3” or higher by Moody’s, and (b)
two rating subcategories below the S&P equivalent of the rating assigned by
Moody’s if such Loan is rated “Bal” or lower by Moody’s; provided that not more than 10% (or such
higher percentage as S&P may specify in writing to the Issuer and the Trustee
from time to time) of the Aggregate Outstanding Loan Balance shall be deemed to
have a S&P Rating based on a rating assigned by Moody’s as provided in this
clause iv; and

(v)           if (a) the S&P Rating previously
provided for a Loan expires 13 months after issuance without such S&P
Rating being renewed, (b) the Servicer fails to provide S&P with requested
materials in connection with obtaining an S&P Rating for a Loan, (c) the
Servicer fails to provide financial statements with respect to any Obligor
every 13 months from the date the applicable Loan is included in the
Collateral, until such Loan is paid in full or (d) no other rating for such
Loan applies by operation of clauses (i) through (iv) above, the
applicable Loan will be deemed to have an S&P Rating of “CCC–”.

“S&P Rating
Condition” means, with respect to any action or series of related actions
or proposed transaction or series of proposed transactions, that S&P shall
have notified the Trust Depositor, the Servicer, the Owner Trustee and the
Trustee in writing that such action or series of related actions or the
consummation of such proposed transaction or series of related transactions
will not result in a reduction or withdrawal of the then-current rating issued
by S&P with respect to any outstanding Class of Notes as a result of such
action or series of related actions or the consummation of such proposed
transaction or series of related transactions.

“S&P Weighted Average Recovery Rate” means,
as of any Measurement Date, the percentage (rounded up to the first decimal
place) obtained by dividing (a) the sum of the products obtained by multiplying
the Outstanding Loan Balance of each Loan by its S&P Priority Category
Recovery Rate, by (b) the Aggregate Outstanding Loan Balance.

 61
 

 

“SAIF” means the Savings Association Insurance
Fund, or any successor thereto.

“Sale Premium” means, with respect to any Loan
sold pursuant to this Agreement, the excess, if any, of the applicable Sale
Proceeds (exclusive of accrued interest and of any amounts reimbursable to the
Servicer therefrom pursuant to Section 7.03(h)) over the Outstanding
Loan Balance of such Loan at the time of sale.

“Sale Proceeds” means, with respect to a Loan
(other than a Charged-Off Loan), all proceeds received as a result of a sale of
such Loan pursuant to this Agreement, net of any sales, brokerage and related
administrative or sales expenses of the Servicer or the Trustee in connection
with any such sale.

“Scheduled Payment” means, with respect to any
Loan, each payment of principal and/or interest scheduled to be made by the
related Obligor under the terms of such Loan after (a) in the case of the
Initial Loans, the Closing Date or (b) in the case of Additional Loans or
Substitute Loans, the related Cut–Off Date, as adjusted pursuant to the terms
of the related Underlying Note and/or Required Loan Documents.

“Scheduled Payment Advance” means, with respect
to any Distribution Date, the amounts, if any, deposited by the Servicer in the
Principal and Interest Account for such Distribution Date in respect of
Scheduled Payments (or portions thereof) pursuant to Section 5.09.

“Second Lien Loan” means a Loan which (i) is
not by its terms (and is not expressly permitted by its terms to become)
subordinate in right of payment to any other obligation for borrowed money of
the Obligor of such Loan, other than a First Lien Loan, (ii) is secured by a
valid second priority perfected security interest or Lien in, to or on
specified Related Property, subject to customary permitted liens (whether or
not the Issuer and any other lenders are also granted a security interest of a
higher or lower priority in additional Related Property), (iii) is secured by
Related Property having a value (determined as set forth below) not less than
the Outstanding Loan Balance of such Loan plus the aggregate Outstanding Loan
Balances of all other Loans of equal or higher seniority secured by a first or
second Lien or security interest in the same Related Property, and (iv) does
not qualify as an First Lien Loan. The determination as to whether condition
(iii) of this definition is satisfied shall be based on the Servicer’s judgment
at the time the Loan is included in the Collateral.

“Securities” means the Notes and the
Certificate, or any of them.

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

“Securityholders” means, collectively, the
Noteholders and the Certificateholders.

“Senior Servicing Fee” shall have the meaning
provided in Section 5.11.

“Sequential Distribution Date” means any
Distribution Date (a) following the occurrence of a Servicer Default, an Event
of Default, a Downgrade Event, the Sequential Pool Condition, the existence of
any Class D Accrued Payable or a Ratings Confirmation Failure, (b) on which the
Interest Distributable Test is not satisfied or (c) on which a CCC Excess
Failure occurs; provided that in
the case of a Sequential Distribution Date arising due to a Ratings
Confirmation Failure,

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only the first Distribution Date following such
Ratings Confirmation Failure and each subsequent Distribution Date prior to the
earlier of (i) the date on which the Effective Date Ratings Confirmation is
delivered and (ii) the date on which the Outstanding Principal Balance of each
Class of Offered Notes and the Class D Notes has been reduced to zero shall be
a Sequential Distribution Date.

“Sequential Pool Condition” means a condition
that will be satisfied following the Replenishment Period, as of the first
Distribution Date on or after the date on which the Aggregate Outstanding Loan
Balance is less than 45.0% of the Expected Aggregate Outstanding Loan Balance.

“Servicer” means initially Ares Capital, or its
successors in interest, until any Servicer Transfer hereunder or the
resignation or permitted assignment by the Servicer and, thereafter, means the
Successor Servicer appointed pursuant to Article VIII with respect to
the duties and obligations required of the Servicer under this Agreement.

“Servicer Default” shall have the meaning
specified in Section 8.01.

“Servicer Transfer” shall have the meaning
specified in Section 8.02(b).

“Servicing Advances” means, all reasonable and
customary “out-of-pocket” costs, expenses and taxes incurred in the performance
by the Servicer of its servicing obligations, including, but not limited to,
the cost of (i) the preservation, restoration and protection of the Related
Property, (ii) any enforcement or judicial proceedings, including foreclosures,
(iii) the management and liquidation of the Foreclosed Property or Repossessed
Property, (iv) compliance with its obligations under this Agreement and the
other Transaction Documents, and (v) services rendered in connection with the
liquidation of a Loan (other than Liquidation Expenses), for all of which costs
and expenses the Servicer is entitled to reimbursement thereof with interest
thereon as provided in this Agreement.

“Servicing Fee”
shall have the meaning provided in Section 5.11.

“Servicing Fee
Percentage” means 0.50% per annum.

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

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

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

“Servicing Officer” means any officer of the
Servicer involved in, or responsible for, the administration and servicing of
Loans whose name appears on a list of servicing officers appearing in an
Officer’s Certificate furnished to the Trustee by the Servicer, as the same may
be amended from time to time.

“Servicing Standard” means, with respect to any
Loans included in the Collateral, to service and administer such Loans in
accordance with the Underlying Loan Agreements and all customary

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and usual servicing practices (A) which are consistent
with the higher of: (x) the customary and usual servicing practices that a prudent
loan investor or lender would use in servicing loans like the Loans for its own
account, and (y) the same care, skill, prudence and diligence with which the
Servicer services and administers loans for its own account or for the account
of others; (B) with a view to maximize the value of the Loans; and (C) without
regard to: (1) the Servicer’s obligations to incur servicing and administrative
expenses with respect to a Loan, (2) the Servicer’s right to receive
compensation for its services hereunder or with respect to any particular
transaction, (3) the ownership by the Servicer or any Affiliate of any Loans,
(4) the ownership, servicing or management for others by the Servicer of any
other Loans or property by the Servicer or (5) any relationship that the
Servicer or any Affiliate of the Servicer may have with any holder of mezzanine
loans of the Obligor with respect to such Loans.

“Servicing Transfer Costs” means, costs and
expenses, if any, incurred by the Trustee, by the Collateral Administrator or by
the Backup Servicer for costs and expenses associated with the transfer of
servicing to the Successor Servicer, which shall not exceed $100,000 in the
aggregate for any given servicing transfer.

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

“SPE Obligor” means, with respect to any Loan,
an Obligor that is organized as a special purpose entity and is not an
operating company.

“Special Redemption” means principal payments
on the Notes made by the Issuer on any Distribution Date during the
Replenishment Period following written notice delivered by the Servicer to the
Trustee on or before the end of the related Due Period that:

(a)           (i)
any Principal Collections have remained on deposit in the Principal Collection
Account for at least 90 days from the date of their deposit to that account,
and (ii) the servicer has elected not to apply those amounts to the Class A-1A
VFN Funding Account or to reduce the Outstanding Principal Balance of the Class
A-1A VFN Notes; and

(b)           the
amounts described in the preceding clause (a) equal or exceed $1,000,000
in the aggregate.

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“Special Redemption
Amount” means those amounts to be distributed pursuant to a Special Redemption
and in accordance with the priority of payments set forth in Section 7.05
(b)(I).

“Specified Amendment” means, with respect to
any Loan (other than a Loan which is publicly rated by S&P and Moody’s),
any waiver, modification, amendment or variance of such Loan which does not
constitute a Material Modification of the type specified in clause (ii)
of the definition thereof and which effects any term of such Loan in a manner
that would:

(i)            modify the amortization schedule
with respect to such Loan in a manner that (i) reduces the dollar amount of any
Scheduled Payment by more than the greater of (x) 25% and (y) $250,000, (ii)
postpones any Scheduled Payment by more than two payment periods or (iii)
causes the weighted average life of the applicable Loan to increase by more
than 25%; or

(ii)           reduce or increase the cash interest
rate payable by the Obligor thereunder by more than 100 basis points (excluding
any increase in an interest rate arising by operation of a default or penalty
interest clause under a Loan or as a result of an increase in the interest rate
index for any reason other than such amendment, waiver or modification); or

(iii)          extend the stated maturity date of
such Loan by more than 24 months; provided
that any such extension shall be deemed not to have been made until the
business day following the original stated maturity date of such Loan; provided further that such extension shall
not cause the weighted average life of such Loan to increase by more than 25%;
or

(iv)          release any party from its obligations
under such Loan, if such release would have a Material Adverse Effect on the
Loan; or

(v)           reduce the principal amount thereof.

“Stated Maturity Date” means December 20, 2019.

“Subordinated Loan” means any Loan which is by
its terms (or is expressly permitted by its terms to become) subordinate in
right of payment to any First Lien Loan or Second Lien Loan (including any
Qualified Second Lien Loan) or other senior obligation of the Obligor of such
Loan.

“Subordinated Servicing Fee” shall have the
meaning provided in Section 5.11.

“Subparticipated Period” shall have the meaning
provided in Section 13.22.

“Subparticipated Portion” shall have the
meaning provided in Section 13.22.

“Subparticipation” shall have the meaning
provided in Section 13.22.

“Subsequent List of Loans” means a list, in the
form of the initial List of Loans delivered on the Closing Date, but listing
each Additional Loan or Substitute Loan, as the case may be, transferred to the
Issuer pursuant to Section 2.06 or Section 11.01.

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“Subservicer” means any direct or indirect
wholly owned subsidiary of Ares Capital that Ares Capital has identified as a
subservicer or additional collateral agent or any other Person with whom the
Servicer has entered into a Subservicing Agreement and who satisfies the
requirements set forth in Section 5.02(b) in respect of the
qualification of a Subservicer.

“Subservicing Agreement” means any agreement
between the Servicer and any Subservicer relating to subservicing and/or
administration of certain Loans as provided in this Agreement, a copy of which
shall be delivered, along with any modifications thereto, to the Trustee.

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

“Substitute Loan” means one or more Eligible
Loans transferred by the Originator to the Trust Depositor and by the Trust
Depositor to the Issuer pursuant to a substitution effected under and in
accordance with Section 11.01 and identified in the related Loan Asset
Certificate.

“Substitute Loan Assets” means any assets
acquired by the Trust Depositor from the Originator and by the Issuer from the
Trust Depositor in connection with a substitution of one or more Substitute
Loans pursuant to Section 11.01, which assets shall include the Trust
Depositor’s (or Originator’s, as applicable) right, title and interest in the
following:

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

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

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

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

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

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

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consisting of, arising
out of, or related to the foregoing, but excluding any Excluded Amount with
respect thereto.

“Substitute Loan Qualification Conditions”
means, with respect to any Substitute Loans being transferred to the Issuer in
connection with a Mandatory Substitution effected pursuant to Section 11.01,
the accuracy of each of the following statements as of the related Cut-Off Date
for each such Loan:

(i)            the Outstanding Loan Balance of such
Substitute Loan or, if more than one Substitute Loan will be added in
replacement of a Loan to be reassigned by the Issuer to the Trust Depositor,
the sum of the Outstanding Loan Balances of such Substitute Loans, is not less
than that of the Loan identified on the related Loan Asset Certificate as the
Loan to be reassigned by the Issuer to the Trust Depositor and reconveyed to
the Originator in exchange for such Substitute Loan or Loans;

(ii)           no selection procedures believed by
the Originator or the Trust Depositor to be adverse shall have been employed in
the selection of such Loan being substituted from the Originator’s portfolio;
and

(iii)          all actions or additional actions (if
any) necessary to perfect the security interest and assignment of such
Substitute Loan and Related Property to the Trust Depositor, the Issuer, and
the Trustee shall have been taken as of or prior to the related Cut-Off Date.

(iv)          the Substitute Loan has a maturity
date that is prior to the Stated Maturity Date.

“Successor Backup Servicer” shall have the
meaning provided in Section 8.10(a).

“Successor Servicer” shall have the meaning
provided in Section 8.02(b).

“Swap Breakage Receipts” means, any amount
payable to the Issuer in connection with the termination, transfer, reduction
or amendment of an Asset Specific Swap, or any portion thereof, in accordance
with the provisions of the such Asset Specific Swap.

“Swap Counterparty” with respect to any Asset
Specific Swap, means a party that is a recognized dealer in interest rate swaps
and interest rate caps, organized under the laws of the United States or a
jurisdiction located therein (or another jurisdiction reasonably acceptable to
the Issuer and each Rating Agency), that: 
(a) at the time it becomes a Swap Counterparty has a short-term rating
of at least “A-1” by S&P or a long-term senior unsecured debt rating of at
least “A+” by S&P if such Person does not have a short term rating by
S&P (for so long as any of the Offered Notes or Class D Notes are deemed
outstanding and are rated by S&P), and either a long-term senior unsecured
debt rating of at least “Aa3” by Moody’s (if such Person does not have at least
a “P-1” short-term debt rating by Moody’s) or a long-term senior unsecured debt
rating of at least “A1” by Moody’s and not subject to the qualification that
the party has been placed on credit watch with negative implications (only if
the short-term debt of such Person is rated at least “P-1” by Moody’s and not
subject to the qualification that the party has been placed on credit watch
with negative implications) (for so long as any of the Offered Notes or Class D
Notes are deemed outstanding and are rated by Moody’s), and either a long-term
senior

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unsecured debt rating of at least “A1” by Moody’s (if
such Person does not have at least a “P-1” short-term debt rating by Moody’s)
or a long-term senior unsecured debt rating of at least “A2” by Moody’s (only
if the short-term debt of such Person is rated at least “P-1” by Moody’s) (for
so long as any of the Offered Notes or Class D Notes are deemed outstanding and
are rated by Moody’s); provided
that, should a Rating Agency effect an overall downward adjustment of its
short-term or long-term debt ratings, then the rating required of that Rating
Agency under this clause (a) for a party to constitute a Swap
Counterparty shall be downwardly adjusted accordingly; provided further that any adjustment to a
rating shall be subject to the prior written consent of the applicable Rating
Agency, (b) legally and effectively accepts the rights and obligations under
the applicable Asset Specific Swap and (c) in connection with a substitute Swap
Counterparty, otherwise satisfies the Rating Agency Condition.

“Swapped Floating Rate Loan” means a Loan where
the interest rate payable by the Obligor thereunder has been swapped to a
floating rate index pursuant to an Asset Specific Swap; provided that upon the termination of, or
the occurrence of a payment default by the Swap Counterparty under, such Asset
Specific Swap, the related Loan shall no longer constitute a Swapped Floating
Rate Loan and shall be treated as a Fixed Rate Loan for all purposes.

“Tape” shall have the meaning provided in Section
5.15(b)(ii).

“Telerate Page 3750” means the display page
currently so designated on the Moneyline Telerate Service (or such other page
as may replace that page on that service for the purpose of displaying
comparable rates or prices).

“Termination Notice” shall have the meaning
provided in Section 8.02(a).

“Term Loan” means a loan that is a closed-end
extension of credit by the Originator to an Obligor which may be fully funded
or partially funded at the closing thereof, and which provides for full
amortization of the principal thereof prior to or upon maturity.

“Third Party Acquired Loan” means any Initial Loan
or Additional Loan acquired by the Issuer directly from a third party in a
transaction arranged and underwritten by the Originator or any transaction in
which the Issuer is the designee of the Originator under the instruments of
conveyance relating to the applicable Loan.

“Three Month Index Maturity” shall have the
meaning provided in Section 7.06.

“Three Month LIBOR” means LIBOR for the Three
Month Index Maturity.

“Traditional Middle Market Loan” means any Loan
issued as part of a loan facility with an original loan size (including any
first and second lien loans included in the facility) of $125,000,000 or less,
including for purposes of this definition the maximum available amount of
commitments under any Revolving Loans and Delayed Draw Term Loans.

“Transaction Account Property” means the
Transaction Accounts, all amounts and investments held from time to time in any
Transaction Account (whether in the form of deposit accounts, physical
property, book-entry securities, uncertificated securities or otherwise), and
all proceeds of the foregoing.

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“Transaction Accounts” means, collectively, the
Principal and Interest Account, the Note Distribution Account, the Reserve
Fund, the Class A-1A VFN Funding Account and the Certificate Account.

“Transaction Documents” means this Agreement,
the Indenture, the Trust Agreement, the Loan Sale Agreement, the Purchase
Agreement, the Class A-1A VFN Purchase Agreement, the Collateral Administration
Agreement, the Notes, the Certificate, any fee letters, any UCC financing
statements filed pursuant to the terms of the Transaction Documents, and any
additional document the execution of which is necessary or incidental to
carrying out the terms of, or which is identified as a “Transaction Document”
in the foregoing documents, all as such documents are amended, modified,
restated, replaced, waived, substituted, supplemented or extended from time to
time.

“Transfer and Servicing Agreements” means
collectively this Agreement, the Loan Sale Agreement, the Indenture and the
Trust Agreement.

“Transfer Deposit Amount” means, on any date of
determination with respect to any Loan an amount equal to the sum of the
Outstanding Loan Balance of such Loan, together with accrued interest thereon
through such date of determination at the Loan Rate provided for thereunder,
and any outstanding Scheduled Payment Advances and Servicing Advances thereon
that have not been waived by the Servicer entitled thereto, together with
accrued interest thereon due the Servicer.

“Trust Agreement” means the Amended and
Restated Trust Agreement, dated on or about July 7, 2006, between the Trust
Depositor and the Owner Trustee, among others, as such agreement may be further
amended, modified, waived, supplemented or restated from time to time.

“Trust Depositor” shall have the meaning
provided in the Preamble.

“Trust Estate” shall have the meaning provided
in the Trust Agreement.

“Trustee” means the Person acting as Trustee
under the Indenture, its successors in interest and any successor trustee under
the Indenture.

“Trustee Fee” shall have the meaning provided
in the fee letter, dated as of the date hereof between the Issuer and the
Trustee.

“Trustees” means the Owner Trustee and the
Trustee, or any of them individually as the context may require.

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

“Underlying LIBOR Rate”
means, with respect to any Loan, “LIBOR” (or similar definition) as determined
in accordance with the Underlying Loan Agreement related to such Loan.

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“Underlying Loan Agreement” means each single
lender or multi-lender commercial loan or credit agreements or other debt
agreements or instruments customary for the applicable type of Loan originated
or acquired by Ares Capital or one of its Affiliates.

“Underlying Note” means the one or more
promissory notes executed by an Obligor evidencing a Loan.

“Underlying Prime Rate” means, with respect to
any Loan, the “prime rate” or “base rate” as determined in accordance with the
Underlying Loan Agreement related to such Loan.

“United States” means the United States of
America.

“U.S. Dollar” and “$” means lawful
currency of the United States.

“USD-LIBOR-Reference Banks” shall have the
meaning provided in Section 7.06(a).

“Valuation” means, with respect to any Loan, a
valuation of the fair market value of such Loan established by reference to (i)
a third-party pricing service such as LoanX or LPC or other service selected by
the Servicer in accordance with the Servicing Standard; provided that if a fair market value is
available from more than one pricing service the highest such value so obtained
shall be used, or (ii) if data for such Loan is not available from such a
pricing service, an analysis performed by a nationally recognized valuation
firm to establish a fair market value of such Loan which reflects the price
that would be paid by a willing buyer to a willing seller of such Loan in an
expedited sale on an arm’s-length basis.

“Warehouse Facilities” means initially, the
Funding I Transaction and any similar collateralized financing facility the
Originator and the Servicer may enter into after the Closing Date.

“Weighted Average Coupon” means, as of any
Measurement Date, a fraction (expressed as a percentage and rounded up to the
next 0.001%), (a) the numerator of which is the sum of the products determined
by multiplying the Outstanding Loan Balance of each Fixed Rate Loan (excluding
Charged-Off Loans, Delinquent Loans and Credit Impaired Loans) in the
Collateral as of such Measurement Date by the current Loan Rate on such Loan,
and (b) the denominator of which is the sum of the Outstanding Loan Balances of
all Fixed Rate Loans (excluding Charged-Off Loans, Delinquent Loans and Credit
Impaired Loans) in the Collateral as of such Measurement Date; provided that if the foregoing amount is
less than 12.0% for such Measurement Date, any Floating Rate Excess as of such
Measurement Date shall be added to such amount; and provided further that, for purposes of this definition: (1)
no contingent payment of interest will be included in such calculation; (2) any
stated coupon shall exclude any portion of the interest that is currently being
deferred in violation of the terms of the related Underlying Loan Documents;
and (3) Loans that are Charged-Off Loans, Delinquent Loans and Credit Impaired
Loans will be included in the calculations described herein if, as of such
Measurement Date, such Loans are paying in full current interest pursuant to
the terms of their respective Underlying Note, or, if a Noteless Loan, pursuant
to the terms of the related Underlying Loan Agreement.

“Weighted Average Life” means, as of any
Measurement Date with respect to any Loan, the number obtained by dividing (a)
the sum of the products obtained by multiplying (i) the Average

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Life at such time of each Loan (excluding Charged-Off
Loans) by (ii) the Outstanding Loan Balance of such Loan by (b) the Aggregate
Outstanding Loan Balance (excluding Charged-Off Loans) as of such date.

“Weighted Average Life Test” means a test that
(a) will be satisfied as of any Measurement Date during the Replenishment
Period if the Weighted Average Life is less than the Maximum Weighted Average
Life and (b) will be deemed satisfied at all times after the Replenishment
Period.

“Weighted Average Spread” means, as of any date
of determination, a fraction (expressed as a percentage and rounded up to the
next 0.001%), (a) the numerator of which is the sum of the products determined
by multiplying the Outstanding Loan Balance of each Floating Rate Loan
(excluding Charged-Off Loans, Delinquent Loans and Credit Impaired Loans) in
the Collateral as of such date by the stated spread above or below LIBOR of the
current Loan Rate applicable to such Loan, and (b) the denominator of which is
the sum of the Outstanding Loan Balances of all Floating Rate Loans (excluding
Charged-Off Loans, Delinquent Loans and Credit Impaired Loans) in the
Collateral as of such date; provided
that if the foregoing amount is less than the Minimum Weighted Average Spread
for such date of determination, any Fixed Rate Excess as of such date shall be
added to such amount; and provided further
that, for purposes of this definition: (1) no contingent payment of interest
will be included in such calculation, (2) any Loan Rate shall exclude any
portion of the interest that is currently being deferred in violation of the
terms of the related Loan Documents, (3) in the case of a Floating Rate Loan,
other than a Swapped Floating Rate Loan, with a Loan Rate not expressed as a
stated spread above or below LIBOR (including Floating Prime Rate Loans), the
stated spread to LIBOR relating to such Loan shall be calculated on any date of
determination by the Servicer in its sole discretion on behalf of the Issuer by
subtracting LIBOR from the Loan Rate of such Loan, (4) in the case of a Swapped
Floating Rate Loan, the stated spread for such Loan shall be equal to the
excess of the current cash pay interest rate for such Loan as specified in the
related Underlying Notes or Required Loan Documents over the fixed rate of
interest payable to the Swap Counterparty for such Loan as specified in the
related Asset Specific Swap, and (5) Loans that are Charged-Off Loans,
Delinquent Loans and Credit Impaired Loans will be included in the calculations
described herein if, as of such date, such Loans are paying in full current
interest pursuant to the terms of their respective Underlying Note, or, in the
case of a Noteless Loan, the related Underlying Loan Agreement.

“Weighted Average Spread Test” means a test
that will be satisfied, as of any date of determination, if the Weighted
Average Spread equals or exceeds the Minimum Weighted Average Spread.

Section 1.02.        Usage
of Terms

With respect to all terms
in this Agreement, the singular includes the plural and the plural the
singular. Words importing any gender include the other genders. References to “writing”
include printing, typing, lithography and other means of reproducing words in a
visible form. References to Persons include their permitted successors and
assigns, The term “including” means “including without limitation”.

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References to agreements
or documents in this Agreement are to be construed to include all such
agreements and documents as amended, modified or supplemented from time to time
pursuant to the terms thereof. References to statutes in this Agreement are to
be construed as including all statutory provisions consolidating, amending,
modifying, codifying, reenacting or replacing, from time to time, the statute
to which reference is made and all regulations promulgated pursuant to such
statutes.

Section 1.03.        Section
References

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

Section 1.04.        Calculations

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

Section 1.05.        Accounting
Terms

All accounting terms used
but not specifically defined herein shall be construed in accordance with
generally accepted accounting principles in the United States.

ARTICLE
II.

ESTABLISHMENT
OF ISSUER; TRANSFER OF LOAN ASSETS

Section 2.01.        Creation
and Funding of Issuer; Transfer of Loan Assets

(a)           The
Issuer was created pursuant to the terms and conditions of the Trust Agreement,
upon the execution and delivery of the Trust Agreement and the filing by the
Owner Trustee of the Certificate of Trust (as defined in the Trust Agreement)
under the Delaware Statutory Trust Act. The Trust Depositor, as settlor of the
Issuer, shall fund and convey assets to the Issuer pursuant to the terms and
provisions hereof. The Issuer shall be administered pursuant to the provisions of
this Agreement and the Trust Agreement for the benefit of the Securityholders.
The Servicer is hereby specifically recognized by the parties hereto as
empowered to act on behalf of the Issuer and the Owner Trustee in accordance
with Section 5.02(e), Section 5.02(g) and otherwise to perform
the duties and obligations required to be performed by the Servicer under the
Transaction Documents.

(b)           Subject
to and upon the terms and conditions set forth herein (including, without
limitation, Section 13.22), the Trust Depositor hereby sells, transfers,
assigns, sets over and otherwise conveys to the Issuer, for a purchase price
consisting of $296,000,000 in cash (less placement expenses and certain other
expenses associated with the initial offer and sale of the Notes the proceeds
of which represent consideration paid by the Issuer herein), $32,000,000 in
aggregate principal amount of the Class D Notes, $54,000,000 in aggregate
principal amount of the Class E Notes and the Certificate, all the right, title
and interest of the Trust Depositor in and to the Initial Loan Assets.

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

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

(e)           The
sale, transfer, assignment, set-over and conveyance of the Loan Assets by the
Trust Depositor to the Issuer pursuant to this Agreement does not constitute
and is not intended to result in a creation or an assumption by the Trust
Depositor or the Issuer of any obligation of the Originator as lead agent,
collateral agent or paying agent under any Agented Loan. The Trust Depositor
also hereby assigns to the Issuer all of the Trust Depositor’s right, title and
interest (but none of its obligations) under the Loan Sale Agreement, including
but not limited to the Trust Depositor’s right to exercise the remedies created
by the Loan Sale Agreement.

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

(g)           If
any such transfer of the Loan Assets is deemed to be a mere grant of a security
interest to secure a borrowing, the Trust Depositor may, to secure the Trust
Depositor’s own borrowing under the Loan Sale Agreement (to the extent that the
transfer of the Loan Assets thereunder is deemed to be a mere grant of a
security interest to secure a borrowing), repledge and reassign (i) all or a
portion of the Loan Assets pledged to Trust Depositor by the Originator

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with respect to which the Trust Depositor has not
released its security interest at the time of such pledge and assignment, and
(ii) all proceeds thereof. Such repledge and reassignment may be made by the
Trust Depositor with or without a repledge and reassignment by the Trust
Depositor of its rights under any agreement with the Originator and without
further notice to or acknowledgment from the Originator. The Originator waives,
to the extent permitted by Applicable Law, all claims, causes of action and
remedies, whether legal or equitable (including any right of setoff), against
the Trust Depositor or any assignee of Trust Depositor relating to such action
by the Trust Depositor in connection with the transactions contemplated by this
Agreement.

Section 2.02.        Conditions
to Transfer of Initial Loan Assets to Issuer

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

(a)           an
Officer’s Certificate from the Originator substantially in the form of Exhibit
C;

(b)           copies
of the minutes of the board of directors of the Originator, the Servicer and
the Trust Depositor or of the executive committee of the board of directors of
the Originator, the Servicer and the Trust Depositor approving the execution,
delivery and performance of this Agreement and the transactions contemplated
hereunder, certified in each case by a Responsible Officer of the Originator,
the Servicer and the Trust Depositor;

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

(d)           the
initial List of Loans, certified by a Responsible Officer of the Trust
Depositor, together with an Assignment substantially in the form of Exhibit
A (along with the delivery of any instruments and Loan Files as required
under Section 2.08);

(e)           an
Officer’s Certificate from the Trust Depositor substantially in the form of Exhibit
B;

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

(g)           officially
certified evidence dated within 30 days prior to the Closing Date of due
organization and good standing of the Trust Depositor under the laws of the
State of Delaware;

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

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appropriate offices in the State of Delaware of a UCC
financing statement listing the Trust Depositor, as debtor, naming the Trustee
as total assignee and identifying the Loan Assets as collateral; and evidence
of proper filing with appropriate offices in the State of Delaware of a UCC
financing statement naming the Issuer, as debtor, naming the Trustee as secured
party and identifying the Indenture Collateral, as collateral;

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

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

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

Section 2.03.        Issuance
of the Notes

On the Closing Date, if
the conditions set forth in Section 2.02 have been satisfied, the Issuer
shall issue, to or upon the written order of the Trust Depositor, the
Certificate representing ownership of a beneficial interest in 100% of the
Issuer and the Issuer shall issue, and the Trustee shall authenticate, to or
upon the written order of the Trust Depositor, the Notes secured by the
Collateral.

Section 2.04.        [Reserved.]

Section 2.05.        Sales
of Loans

(a)           Except
as otherwise expressly permitted or required by this Agreement, the Servicer
(on behalf of the Issuer) shall not sell, transfer, exchange or otherwise
dispose of any Loan; provided
that the Servicer (on behalf of the Issuer) may direct the Trustee to sell (and
the Trustee shall sell in accordance with such instructions) for cash any Loan,
if on or prior to the trade date for such sale, transfer, exchange or other
disposition, the Servicer has certified to the Trustee that each of the
conditions applicable to such sale, transfer, exchange or other disposition set
forth below has been satisfied:

(i)            the
applicable Loan is a Delinquent Loan, Credit Impaired Loan or Charged-Off Loan;

(ii)           the
sale will be undertaken in accordance with the Portfolio Acquisition and
Disposition Requirements;

(iii)          after
giving effect to the sale, the S&P CDO Monitor Test will be maintained or
improved;

(iv)          the
Moody’s or S&P rating of the Class A Notes is not lower than the Moody’s or
S&P rating of such Notes on the Closing Date;

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(v)           the
Moody’s or S&P rating of the Class B Notes, the Class C Notes or the Class
D Notes is not more than one rating subcategory below the respective Moody’s or
S&P rating of such Notes on the Closing Date;

(vi)          no
Servicer Default or Event of Default has occurred; and

(vii)         if
such Loan is purchased by the Servicer or an Affiliate thereof, (A) such
purchase represents the best execution for the Issuer and (B) such Person
purchases such Loan at a price that is at least equal to the Fair Market Value
of such Loan.

(b)           The
Servicer and the Issuer hereby expressly agree that no sale of Loans shall be
executed in a manner that can reasonably be expected to cause the Issuer or the
assets of the Issuer not to be in compliance with the requirements of Rule 3a-7
under the 1940 Act.

(c)           The
Sale Proceeds from any sale pursuant to this Section 2.05 will be
deposited into the Principal and Interest Account and allocated as provided in Section
7.05. Upon receipt by the Servicer for deposit in the Principal and
Interest Account of the amounts of Sale Proceeds received in connection with
any such sale, and upon receipt by the Trustee of an Officer’s Certificate of
the Servicer as to the satisfaction of all applicable conditions of this Section
2.05, the Trustee shall assign to the party designated by the Servicer (or to
the Servicer itself) all of the Issuer’s right, title and interest in the
repurchased or substituted Loan and related Loan Assets without recourse,
representation or warranty. Such reassigned Loan shall no longer thereafter be
included in the Collateral.

(d)           In
the event that the Servicer has notified the Trustee of an Optional Repurchase
of the Notes, the Servicer may at any time direct the Trustee to sell, and the
Trustee shall sell in the manner directed by the Servicer, any Loan without
regard to the foregoing limitations in this Section 2.05; provided that (i) the Servicer certifies
to the Trustee that in its judgment exercised in accordance with the Servicing
Standard and based on calculations included in the certification (which shall
include the sales prices of the Loans), the Sale Proceeds from the sale of one
or more of the Loans shall be sufficient to pay the Repurchase Price with
respect to all the Notes and (ii) the Servicer shall sell any Loan pursuant to
this Section 2.05 only at a price that is commercially reasonable as
reasonably determined by the Servicer in accordance with the Servicing
Standard.

Section
2.06.        Conveyance
of Additional Loans; Effective Date Ratings Confirmation

(a)           Conveyance
of Additional Loans. The Issuer may (and the Trustee shall upon instruction
of the Servicer acting on behalf of the Issuer), at any time during the Ramp-Up
Period and the Replenishment Period and subject to the conditions set forth in
this Section 2.06, apply Principal Collections standing to the credit of
the Principal Collection Account, Draws under the Class A-1A VFN Notes and
amounts standing to the credit of the Class A-1A VFN Funding Account to
purchase Additional Loan Assets from the Trust Depositor. The purchase price
paid by the Issuer for any Additional Loan shall be an amount equal to (x) in
the case of a Loan originated by the Originator, the Outstanding Loan Balance
thereof or (y) in the case of a

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Loan acquired by the Originator from a third party,
the purchase price paid for such Loan, as applicable, plus, in each case,
accrued and unpaid interest thereon.

(b)           Upon
the acquisition of any Additional Loan Assets pursuant to and in accordance
with this Section 2.06, such Additional Loan Assets shall become part of
the Collateral subject to the Lien of the Indenture. The Servicer represents
and warrants in connection with the foregoing that it will not cause the Issuer
to acquire any Additional Loan pursuant to this Section 2.06 for the
primary purpose of recognizing gains or decreasing losses resulting from market
value changes in the Loans.

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

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

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

(iii)          (A)
the Originator shall have delivered to the Trust Depositor and Trustee and (B)
the Trust Depositor shall have delivered to the Issuer a duly updated
Subsequent List of Loans listing the Additional Loans;

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

(v)           as
of each Cut-Off Date, each of the Originator and the Trust Depositor was
Solvent and neither of them have been made not Solvent by such transfer nor is
either of them aware of any pending insolvency;

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

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

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

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

(f)            The
Servicer on behalf of the Issuer shall present each Additional Loan proposed to
be included in the Collateral to each Rating Agency for review by such Rating
Agency in order that each Rating Agency may provide a rating and a recovery
rate with respect to such Loan; provided
that (i) such Loan may become a part of the Collateral prior to the Servicer’s
presentment of the Loan to the Rating Agencies as described herein, (ii) the
Servicer’s failure to present a Loan to the Rating Agencies as described herein
shall not constitute an independent breach of, or default under, this Agreement
or any other Transaction Document, (iii) with respect to S&P, the recovery
rate shall be determined in accordance with the S&P Priority Category
Recovery Rate and (iv) with respect to Moody’s, the Servicer shall have no
obligation to present an Additional Loan if a Moody’s Rating for such Loan has
been determined by reference to clause (v) of the definition of Moody’s
Rating.

(g)           Effective
Date Ratings Downgrade. On or before the Effective Date, but in no case
later than the date which is 15 Business Days prior to the Distribution Date
occurring in June, 2007, the Servicer will (i) cause a firm of nationally
recognized independent certified public accountants (the “Independent Accountants”)
to determine the extent of compliance with the Portfolio Criteria of the Loans
included in the Collateral as of the Effective Date, (ii) deliver a report of
such Independent Accountants certifying the results of that determination to
the Trustee and the Rating Agencies (such report, the “Accountants’
Effective Date Certificate”) and (iii) request that each Rating Agency
confirm in writing (the “Effective Date Ratings Confirmation”), within
30 days after the Effective Date (or such later date as such Rating Agency may
determine), that it has not reduced or withdrawn any of the ratings assigned to
the Offered Notes or the Class D Notes on the Closing Date. In the event that
(A) any rating assigned to the Offered Notes or the Class D Notes on the Closing
Date is reduced or withdrawn or (B) the Issuer is not in compliance with the
Portfolio Criteria as of the Effective Date and the Servicer does not receive
the Effective Date Ratings Confirmation from Moody’s (in each case, such event,
a “Ratings Confirmation Failure”), the next and succeeding Distribution
Dates shall be Sequential Distribution Dates until the earlier of (x) such date
as each such Rating Agency shall confirm its respective ratings of the Offered
Notes and the Class D Notes assigned on the Closing Date and (y) the
Outstanding Principal Balance of each Class of Offered Notes and the Class D
Notes is reduced to zero.

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Section 2.07.        Release
of Excluded Amounts

(a)           The
parties hereto acknowledge and agree that the Issuer has no interest in the
Excluded Amounts. The Trustee hereby agrees to release to the Issuer from the
Loan Assets, and the Issuer hereby agrees to release to the Trust Depositor,
any Excluded Amounts immediately upon identification thereof and upon receipt
of an Officer’s Certificate of the Servicer, which release shall be automatic
and shall require no further act by the Trustee or the Issuer; provided that the Trustee and the Owner
Trustee shall execute and deliver such instruments of release and assignment or
other documents, or otherwise confirm the foregoing release, as may reasonably
be requested by the Trust Depositor in writing. Such Excluded Amounts shall not
constitute and shall not be included in the Loan Assets.

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

Section 2.08.        Delivery
of Documents in the Loan File

(a)           Subject
to the delivery requirements set forth in Section 2.08(b), the Issuer
hereby authorizes and directs the Originator and the Trust Depositor to deliver
possession of all the Loan Files and the related Loan Checklists to the Trustee
(with copies to be held by the Servicer) on behalf of and for the account of
the Noteholders. The Originator and the Trust Depositor shall also identify on
the List of Loans (including any deemed amendment thereof associated with any
Additional Loans or Substitute Loans), whether by attached schedule or marking
or other effective identifying designation, all Loans that are or are evidenced
by such instruments.

(b)           With
respect to each Loan in the Collateral, before the Closing Date in the case of
the Initial Loans, and before the related Cut-Off Date in the case of any
Additional Loans or Substitute Loans, the Trust Depositor will deliver or cause
to be delivered to the Trustee, to the extent not previously delivered, each of
the documents in the Loan File with respect to such Loan.

Section 2.09.        [Reserved]

Section 2.10.        Certification
by Trustee; Possession of Loan Files

(a)           Review;
Certification. On or prior to the Closing Date, in the case of the Initial
Loans, and the related Cut-Off Date, in the case of any Additional Loans or
Substitute Loans, the Trustee shall review the portion of each Loan File
constituting the Required Loan Documents required to be delivered pursuant to Section
2.08(b) on the Closing Date in the case of the Initial Loans and the
related Cut-Off Date, in the case of any Additional Loans or Substitute Loans,
and shall deliver to the Originator, the Trust Depositor, and the Servicer a
certification in the form attached hereto as Exhibit L-1 on or prior to
the Closing Date in the case of the Initial Loans and the related Cut-Off Date
in the case of any Additional Loans or Substitute Loans. Within two Business
Days after the Trustee receives the portion of the Loan

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File permitted to be delivered after the Closing Date
in the case of the Initial Loans and the related Cut-Off Date in the case of
any Additional Loans or Substitute Loans pursuant to Section 2.10(b),
the Trustee shall deliver to the Originator, the Trust Depositor, and the
Servicer a certification in the form attached hereto as Exhibit L-2.

(b)           Non-Conforming
Loan Files. If the Trustee during the process of reviewing the Loan Files
finds any document constituting a part of a Loan File which is not properly
executed, is missing, is unrelated to a Loan identified in the List of Loans,
or does not conform in a material respect to the requirements of the definition
of Loan File, or the description thereof as set forth in the List of Loans, the
Trustee shall promptly so notify the Originator, the Trust Depositor and the
Servicer. In performing any such review, the Trustee may conclusively rely on
the Originator as to the purported genuineness of any such document and any
signature thereon. It is understood that the scope of the Trustee’s review of
the Loan Files is limited solely to confirming that the documents listed in the
definition of Required Loan Documents have been executed and received and
relate to the Loans identified in the List of Loans; provided with respect to the UCC financing statements
referenced in clause (ii)(c) of the definition of Required Loan
Documents, the Trustee’s sole responsibility will be to confirm that the Loan
File contains UCC financing statements (to the extent required by such
definition) and not to make determinations about the materiality of such UCC
financing statements. The Originator agrees to use reasonable efforts to remedy
a material defect in a document constituting part of a Loan File of which it is
so notified by the Trustee. If, however, within 30 days after the Trustee’s
notice to it respecting such material defect the Originator has not remedied
the defect and such defect materially and adversely affects the value of the
related Loan, such Loan will be treated as an Ineligible Loan and the
Originator shall (i) substitute in lieu of such Loan a Substitute Loan or (ii)
repurchase such Loan, in each case, in the manner and subject to the conditions
set forth in Section 11.01.

(c)           Release
of Entire Loan File Upon Sale, Substitution or Repurchase. Subject to Section
5.08(a), upon receipt by the Trustee of a certification of a Servicing
Officer of the Servicer of such substitution or of such purchase and the
deposit of the amounts then required to be deposited as described in Section
2.05, Section 2.10(b) or Section 11.01, as applicable, in the
Principal and Interest Account (which certification shall be in the form of Exhibit
M), the Trustee shall release to the Servicer for release to the Originator
the related Loan File and the Trustee and the Issuer shall execute, without
recourse, and deliver such instruments of transfer necessary to transfer all
right, title and interest in such Loan to the Originator free and clear of any
Liens created by the Transaction Documents. All costs of any such transfer
shall be borne by the Originator.

(d)           Partial
Release of Loan File and/or Related Property. Subject to Section 5.08(b),
if in connection with taking any action in connection with a Loan (including,
without limitation, the amendment to documents in the Loan File and/or a
revision to Related Property) the Servicer requires any item constituting part
of the Loan File, or the release from the Lien of the related Loan of all or
part of any Related Property, the Servicer shall deliver to the Trustee a
certificate to such effect in the form attached as Exhibit M hereto. Subject
to Section 5.08(d), upon receipt of such certification, the Trustee
shall deliver to the Servicer within two Business Days of such request (if such
request was received by 1:00 p.m., New York City time), the requested
documentation, and the Trustee shall execute, without recourse, and deliver

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such instruments of transfer necessary to release all
or the requested part of the Related Property from the Lien of the related Loan
and/or the Lien under the Transaction Documents.

(e)           Annual
Reporting. On the Distribution Date in December of each year, commencing
December 20, 2006, the Trustee shall deliver to the Originator, the Trust
Depositor, and the Servicer a report detailing all transactions with respect to
the Loans for which the Trustee holds the Loan Files pursuant to this Agreement
during the prior calendar year. Such report shall list all Loan Files which
were released by or returned to the Trustee during the prior calendar year, the
date of such release or return and the reason for such release or return as identified
or the related request for release delivered by the Servicer.

ARTICLE
III.

REPRESENTATIONS
AND WARRANTIES

The Trust Depositor
makes, and upon acquiring any Additional Loan or Substitute Loan is deemed to
make, the representations and warranties in Section 3.01 through Section
3.04, on which the Issuer will rely in purchasing the Initial Loan Assets
on the Closing Date and on which the Securityholders will rely.

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

Section 3.01.        Representations
and Warranties Regarding the Trust Depositor

By its execution of this
Agreement, the Trust Depositor represents and warrants to the Issuer, the
Trustee, the Securityholders that:

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

(b)           Authorization;
Valid Sale; Binding Obligations. The Trust Depositor has the power and
authority to make, execute, deliver and perform this Agreement and the other
Transaction Documents to which it is a party and all of the transactions
contemplated under this Agreement and the other Transaction Documents to which
it is a party, and to create the Issuer and cause it to make, execute, deliver
and perform its obligations under this Agreement and the other Transaction Documents
to which the Issuer is a party, and the Trust Depositor has taken all necessary
limited liability company action to authorize the execution, delivery and
performance of this Agreement and the other Transaction Documents to which it
is a party and to cause the

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Issuer to be created. This Agreement shall effect a
valid sale, transfer and assignment of or grant a security interest in the Loan
Assets from the Trust Depositor to the Issuer. This Agreement and the other
Transaction Documents to which the Trust Depositor is a party constitute the
legal, valid and binding obligation of the Trust Depositor enforceable in
accordance with their respective terms, except as enforcement of such terms may
be limited by applicable Insolvency Laws and general principles of equity,
whether considered in a suit at law or in equity.

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

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

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

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

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

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

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

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

(k)           Security
Interest.

(i)            This
Agreement creates a valid and continuing security interest in favor of the
Issuer (as defined in the applicable UCC) in all right, title and interest of
Trust Depositor in the Loan Assets, which security interest is prior to all
other Liens (except for Permitted Liens), and is enforceable as such against
creditors of and purchasers from the Trust Depositor;

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

(iii)          the
Trust Depositor owns and has, and upon the sale and transfer thereof by the
Trust Depositor to the Issuer, the Issuer will have, good and marketable title
to the Loan Assets free and clear of any Lien (other than Permitted Liens),
claim or encumbrance of any Person;

(iv)          the
Trust Depositor has, within 10 days of the acquisition of a Loan, received all
consents and approvals required by the terms of the Loan Assets to the sale of
the Loan Assets hereunder to the Issuer;

(v)           the
Trust Depositor has caused the filing of all appropriate financing statements
in the proper filing office in the appropriate jurisdictions under applicable
law in order to perfect the security interest in such Loan Assets granted to the
Issuer under this Agreement;

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

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

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

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

(l)            Value
Given. The cash payments and Securities of the Issuer received by the Trust
Depositor in respect of the purchase price of the Loans sold hereunder,
together with the Issuer’s assumption of the future funding obligations under
the Revolving Loans and Delayed Draw Term Loans, constitutes reasonably
equivalent value in consideration for the transfer to the Issuer of such Loans
under this Agreement, such transfer was not made for or on account of an
antecedent debt owed by the Originator to the Trust Depositor, and such
transfer was not and is not voidable or subject to avoidance under any
Insolvency Law.

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

(n)           No
Defaults. The Trust Depositor is not in default with respect to any order
or decree of any court or any order, regulation or demand of any federal,
state, municipal or governmental agency, which default might have consequences
that would have a Material Adverse Effect with respect to the Trust Depositor.

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

(p)           Origination
and Collection Practices. The origination and collection practices used by
any Affiliate of the Trust Depositor with respect to each Loan have been in all
material respects legal, proper and prudent and comply with the Credit and
Collection Policy.

(q)           Adequacy
of Consideration. The Trust Depositor will receive fair consideration and
reasonably equivalent value in exchange for the sale of the Loans.

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

(s)           Nonconsolidation.
Each of the Issuer and the Trust Depositor conducts its affairs such that the
Issuer or the Trust Depositor would not be substantively consolidated in

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each others estate and their respective separate
existences would not be disregarded in the event of the Trust Depositor’s
bankruptcy. Without limitation to any of the foregoing, (A) with respect to clauses
(s)(xxix) and (s)(xxx), the Trust Depositor and (B) with respect to
each other subclauses of this clause (s), each of the Issuer and the
Trust Depositor, has not and shall not:

	
  (i)

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

  
	
   

  	
   

  
	
  (ii)

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

  
	
   

  	
   

  
	
  (iii)

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

  
	
   

  	
   

  
	
  (iv)

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

  
	
   

  	
   

  
	
  (v)

  	
  own any Subsidiary or make any Investment in any
  Person;

  
	
   

  	
   

  
	
  (vi)

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

  
	
   

  	
   

  
	
  (vii)

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

  
	
   

  	
   

  
	
  (viii)

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

  
	
   

  	
   

  
	
  (ix)

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

  
	
   

  	
   

  
	
  (x)

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

  

 85
 

 

 

	
  (xi)

  	
  seek its dissolution or winding up in whole or in
  part;

  
	
   

  	
   

  
	
  (xii)

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

  
	
   

  	
   

  
	
  (xiii)

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

  
	
   

  	
   

  
	
  (xiv)

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

  
	
   

  	
   

  
	
  (xv)

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

  
	
   

  	
   

  
	
  (xvi)

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

  
	
   

  	
   

  
	
  (xvii)

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

  
	
   

  	
   

  
	
  (xviii)

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

  
	
   

  	
   

  
	
  (xix)

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

  
	
   

  	
   

  
	
  (xx)

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

  
	
   

  	
   

  
	
  (xxi)

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

  

 

 86

 

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

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

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

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

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

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

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

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

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

 87
 

 

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

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

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

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

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

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

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

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

(b)           Eligible
Loan. Such Loan satisfies the criteria for the definition of Eligible Loan
set forth in this Agreement as of the date of its conveyance hereunder.

(c)           Loans
Secured by Real Property. To the Trust Depositor’s best knowledge after
reasonable inquiry, less than 40% of the Aggregate Outstanding Loan Balance of
the Collateral as of the Closing Date consists of Loans principally secured by
real property and the Trust Depositor will not effectuate the transfer of an
Additional Loan or Substitute Loan

 88
 

 

if the Trust Depositor
knows after reasonable inquiry that such transfer would cause more than 40% of
the Aggregate Outstanding Loan Balance of the Collateral as of any Cut-Off Date
to consist of Loans principally secured by real property; provided that, for this purpose, a Loan
will be considered principally secured by real property if the Trust Depositor
knows, after reasonable inquiry that the fair market value of the interest in
real property securing the Loan exceeds 50% of its Outstanding Loan Balance.

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

Section 3.03.        [Reserved]

Section
3.04.        Representations
and Warranties Regarding the Required Loan Documents

The Trust Depositor
represents and warrants on the Closing Date with respect to the Initial Loans
(or as of the related Cut-Off Date, with respect to Additional Loans and
Substitute Loans), that except as otherwise provided in Section 2.08,
the Required Loan Documents and each other item identified on each Loan
Checklist with respect to the Loan File for each Loan are in the possession of
the Trustee.

Section 3.05.        [Reserved]

Section 3.06.        Representations
and Warranties Regarding the Servicer

The Servicer represents
and warrants to the Owner Trustee, the Trustee and the Securityholders that:

(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 and has the power to own its assets and to transact the business
in which it is currently engaged. The Servicer is duly qualified to do business
as a foreign corporation and is in good standing in each jurisdiction in which
the character of the business transacted by it or properties owned or leased by
it requires such qualification and in which the failure so to qualify would
have a Material Adverse Effect on the business, properties, assets, or
condition (financial or otherwise) of the Servicer or the Issuer. The Servicer
is properly licensed in each jurisdiction to the extent required by the laws of
such jurisdiction to service the Loans in accordance with the terms hereof and
in which the failure to so qualify would have a Material Adverse Effect on the
business, properties, assets, or condition (financial or otherwise) of the
Servicer or Issuer.

(b)           Authorization;
Binding Obligations. The Servicer has the power and authority to make,
execute, deliver and perform this Agreement and the other Transaction Documents
to which the Servicer is a party and all of the transactions contemplated under
this Agreement and the other Transaction Documents to which the Servicer is a
party, and has taken all necessary corporate action to authorize the execution,
delivery and performance of this Agreement and the other Transaction Documents
to which the Servicer is a party. This Agreement and the other Transaction
Documents to which the Servicer is a party constitute the

 89
 

 

legal, valid and binding
obligations of the Servicer enforceable in accordance with their respective
terms, except as enforcement of such terms may be limited by Insolvency Laws
and general principles of equity, whether considered in a suit at law or in
equity.

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

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

(e)           Litigation.
No litigation or administrative proceeding of or before any court, tribunal or
governmental body is currently pending, or to the knowledge of the Servicer
threatened, against the Servicer or any of its properties or with respect to
this Agreement, or any other Transaction Document to which the Servicer is a
party that, if adversely determined, would in the reasonable judgment of the
Servicer be expected to have a Material Adverse Effect with respect to the
Servicer or the Issuer.

(f)            Reports.
All reports, certificates and other written information furnished by the
Servicer with respect to the Loans are correct in all material respects.

Section 3.07.        Representations
and Warranties of the Backup Servicer

The Backup Servicer
hereby represents and warrants to the Owner Trustee, the Trustee, the
Securityholders, as follows:

(a)           Organization.
It is a Minnesota corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation with all
requisite 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)           Good
Standing. The Backup Servicer is duly qualified to do business and is in
good standing, and has obtained all necessary licenses and approvals, in all
jurisdictions in which the ownership or lease of its property and the conduct
of its business requires such qualification, licenses or approvals, except
where the failure to so qualify or have such licenses or approvals has not had,
and would not be reasonably expected to have, a Material Adverse Effect on the
interests of the Securityholders.

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

(d)           No
Violations. The consummation of the transactions contemplated by, and the
fulfillment of the terms of, this Agreement by it will not violate any
Applicable Law or conflict with, result in any breach of any of the terms or
provisions of, or constitute a default under, its organizational documents or
any Contractual Obligations by which it or any of its property is bound or
result in the creation or imposition of any Lien upon any of its properties
pursuant to the terms of any Contractual Obligations.

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

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

(g)           Litigation.
There are no proceedings or investigations pending or, to the best of its
knowledge, threatened, against it 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 its reasonable judgment)
have a Material Adverse Effect on the interests of the Securityholders.

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

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

ARTICLE
IV.

PERFECTION
OF TRANSFER AND PROTECTION OF SECURITY INTERESTS

Section 4.01.        Custody
of Loans

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

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Section 4.02.        Filing

On or prior to the
Closing Date, the Originator, Trust Depositor and Servicer shall cause the UCC
financing statement(s) referred to in Section 2.02(h) to be filed, and from
time to time the Servicer, on behalf of the Issuer, shall take and cause to be
taken such actions and execute such documents as are necessary or desirable or
as the Issuer or Trustee (acting at the direction of the Majority Noteholders)
may reasonably request to perfect and protect the Trustee’s first priority
perfected security interest in the Loan Assets against all other Persons,
including, without limitation, the filing of financing statements, amendments
thereto and continuation statements, the execution of transfer instruments and
the making of notations on or taking possession of all records or documents of
title. Notwithstanding the obligations of the Originator, Trust Depositor and
Servicer set forth in the preceding sentence, the Originator, Trust Depositor
and Issuer hereby authorize the Servicer to prepare and file, at the expense of
the Servicer, UCC financing statements (including but not limited to renewal,
continuation or in lieu statements) and amendments or supplements thereto or
other instruments as the Servicer may from time to time deem necessary or
appropriate in order to perfect and maintain the security interest granted hereunder
in accordance with the UCC.

Section 4.03.        Changes
in Name, Corporate Structure or Location

(a)           During
the term of this Agreement, none of the Originator, the Servicer, the Trust
Depositor or the Issuer shall change its name, form of organization, existence,
state of formation or location without first giving at least 30 days’ prior
written notice to the Owner Trustee, the Trustee, and the other parties hereto.

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

Section 4.04.        Costs
and Expenses

The Servicer agrees to
pay all reasonable costs and disbursements in connection with the perfection
and the maintenance of perfection, as against all third parties, of the
Trustees’ and Issuer’s right, title and interest in and to the Loan Assets
(including, without limitation, the security interest in the Related Property
related thereto and the security interests provided for in the Indenture); provided to the extent permitted by the
Required Loan Documents, the Servicer may seek reimbursement for such costs and
disbursements from the related Obligors.

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Section 4.05.        Sale
Treatment

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

Section 4.06.        Separateness
from Trust Depositor

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

ARTICLE
V.

SERVICING
OF LOANS

Section
5.01.        Appointment
and Acceptance

Ares Capital is hereby
appointed as Servicer pursuant to this Agreement and pursuant to the other
Transaction Documents under which the Servicer has any rights, duties or
obligations. Ares Capital accepts such appointment and agrees to act as the
Servicer pursuant to this Agreement and pursuant to the other Transaction
Documents under which Ares Capital, as Servicer, has any rights, duties or
obligations.

Section 5.02.        Duties
of the Servicer

(a)           The
Servicer, as an independent contract servicer, shall service and administer the
Loans and shall have full power and authority, acting alone, to do any and all
things in connection with such servicing and administration which the Servicer
may deem necessary or desirable and consistent with the terms of this
Agreement, the Credit and Collection Policy and the Servicing Standard. The
parties hereto each acknowledge, and the Noteholders and the Certificateholder
are hereby deemed to acknowledge, that the Servicer, as Servicer under this
Agreement, possesses only such rights with respect to the enforcement of rights
and remedies with respect to the Loans and the Related Property and under the
Required Loan Documents as those which have been transferred to the Issuer with
respect to the related Loan. Therefore, the provisions of this Article V
shall only apply to Agented Loans with respect to which the Servicer is the
lead agent and to the extent not inconsistent with the related Required Loan
Documents.

(b)           The
Servicer may perform its duties directly or, consistent with the Servicing
Standard, through agents, accountants, experts, attorneys, brokers, consultants
or nominees selected with reasonable care by the Servicer. The Servicer will
remain fully responsible and fully liable for its duties and obligations
hereunder and under any other Transaction Document notwithstanding any such
delegation to a third party. Performance by any such third party of any of the
duties of the Servicer hereunder or under any other Transaction Document shall
be deemed to be performance thereof by the Servicer. In addition, the Servicer
may enter into Subservicing Agreements for any servicing and administration of
Loans with any

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entity; provided that the Rating Agency Condition
is satisfied with respect to the entry of the Servicer into any such
Subservicing Agreement. The Servicer shall be entitled to terminate any
Subservicing Agreement in accordance with the terms and conditions of such
Subservicing Agreement and to either itself directly service the related Loans
or enter into a Subservicing Agreement with a successor Subservicer which qualifies
hereunder. Notwithstanding any Subservicing Agreement, any of the provisions of
this Agreement relating to agreements or arrangements between the Servicer and
a Subservicer or reference to actions taken through a Subservicer or otherwise,
so long as this Agreement shall remain effective, the Servicer shall remain
obligated and primarily liable to the Trustee, for itself and on behalf of the
Securityholders, for the servicing and administering of the Loans in accordance
with the provisions of this Agreement, the Credit and Collection Policy and the
Servicing Standard, without diminution of such obligation or liability by
virtue of such Subservicing Agreements or other arrangements with third parties
pursuant to this clause (b) or by virtue of indemnification from the
Subservicer and to the same extent and under the same terms and conditions as
if the Servicer alone were servicing and administering the Loans. For purposes
of this Agreement, the Servicer shall be deemed to have received payments on
Loans when any Subservicer has received such payments. The Servicer shall be
entitled to enter into any agreement with a Subservicer for indemnification of
the Servicer by such Subservicer, and nothing contained in this Agreement shall
be deemed to limit or modify such indemnification.

(c)           Any
Subservicing Agreement that may be entered into and any transactions or
services relating to the Loans involving a Subservicer in its capacity as such
and not as an originator shall be deemed to be between the Subservicer and the
Servicer alone, and the Trustee and the Securityholders shall not be deemed
parties thereto and shall have no claims, rights, obligations, duties or
liabilities with respect to the Subservicer except as set forth in Section
5.02(d). Notwithstanding the foregoing, the Servicer shall (i) at its
expense and without reimbursement, deliver to the Trustee a copy of each
Subservicing Agreement and (ii) provide notice of the termination of any
Subservicer within a reasonable time after such Subservicer’s termination to
the Trustee.

(d)           In
the event the Servicer shall for any reason no longer be the Servicer, the
Servicer at its expense and without right of reimbursement therefor, shall,
upon request of the Trustee, deliver to the Successor Servicer all documents
and records (including computer tapes and diskettes) in it possession relating
to each Subservicing Agreement and the Loans then being serviced hereunder and
an accounting of amounts collected and held by it hereunder and otherwise use
its best efforts to effect the orderly and efficient transfer of the
Subservicing Agreements and of any other arrangements with third parties
pursuant to clause (a) of this Section 5.02 to the Successor
Servicer to the extent permitted thereby.

(e)           Modifications
and Waivers Relating to Loans.

(i)            So
long as it is consistent with the Credit and Collection Policy and the
Servicing Standard, the Servicer may waive, modify or vary any term of any Loan
if in the Servicer’s determination such waiver, modification or variance (1)
will not extend the stated maturity date of such Loan to the Stated Maturity
Date or beyond, and (2) can reasonably be expected to increase the
collectability of or realization on such Loan when compared to expected
Collections in the absence of such waiver, modification or variance; provided the Servicer may

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not enter into any
amendment, waiver, modification or variance with respect to any loan for the
purpose or with the intention of causing a breach of a representation or
warranty hereunder to occur with respect to such Loan solely in order to render
such loan eligible for repurchase or substitution hereunder or to otherwise
make such Loan eligible for repurchase pursuant to Section 11.01.

(ii)           Except
as expressly set forth in Section 5.02(e)(i), the Servicer may execute
any amendments, waivers, modifications or variances related to such Loan and
any documents related thereto on behalf of the Issuer. The Servicer will
provide each Rating Agency with a written summary of any such amendment,
waiver, modification or variance promptly after its execution and, promptly
upon request by any Rating Agency, a copy of any such waiver, modification or
variance. Such summary shall set forth a brief description of the reasons for,
and the effect of, such waiver, modification or variance, and shall indicate
whether such waiver, modification or variance constitutes a Specified
Amendment.

(iii)          Although
costs incurred by the Servicer or any Subservicer in respect of Servicing
Advances, including any interest owed with respect thereto, may be added to the
amount owing by the Obligor under the related Loan, such amounts shall not be
so added for the purposes of calculating distributions to Noteholders. Any fees
and costs imposed in connection therewith on the Obligor of the related Loan,
and any reimbursement thereof by any Obligor or out of Sale Proceeds,
Liquidation Proceeds or Insurance Proceeds received with respect to the related
Loan or its Related Property shall be withdrawn and payable to the Servicer
from the Principal and Interest Account pursuant to Section 7.03(h). Without
limiting the generality of the foregoing, so long as it is consistent with the
Credit and Collection Policy and the Servicing Standard, the Servicer shall
continue, and is hereby authorized and empowered to execute and deliver on
behalf of the Issuer, the Trustee, the Owner Trustee, and each Securityholder,
all instruments of amendment, waiver, satisfaction or cancellation, or of
partial or full release, discharge and all other comparable instruments, with
respect to the Loans and with respect to any Related Property. Such authority
shall include, but not be limited to, the authority to substitute or release
items of Related Property consistent with the Credit and Collection Policy and
the Servicing Agreement and sell participations or assignments in Loans
previously transferred to the Issuer. The Issuer, the Trustee and the Owner
Trustee have granted a power of attorney to the Servicer with respect thereto,
pursuant to Section 5.02(x). In connection with any such sale, the
Servicer shall deposit in the Principal and Interest Account, pursuant to Section
7.03(b), all proceeds received upon such sale (other than Excluded Amounts).
If reasonably required by the Servicer, the Issuer, the Trustee and the Owner
Trustee, shall furnish the Servicer, within five Business Days of receipt of
the Servicer’s request, with any powers of attorney and other documents
necessary or appropriate to enable the Servicer to carry out its servicing and
administrative duties under this Agreement or under any of the other
Transaction Documents. Any such request by the Servicer to the Issuer, the
Trustee or the Owner Trustee, shall be accompanied by a certification in the
form of Exhibit L signed by a Servicing Officer. In connection with any
substitution of Related Property, the Servicer shall deliver to the Trustee the
items required by, and within the time frame, set forth in Section 2.08,
assuming that the date of substitution is the relevant Cut-Off Date.

(f)            The
Servicer, in servicing and administering the Loans, shall act in a manner,
consistent with the Credit and Collection Policy and the Servicing Standard
(which

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includes, without
limitation to any of the foregoing, the duty to act in good faith and exercise
commercially reasonable judgment and reasonable care), employ or cause to be
employed procedures (including collection, foreclosure, Foreclosed Property and
Repossessed Property management procedures), in accordance with the Required
Loan Documents, the Credit and Collection Policy and the Servicing Standard.

(g)           In
accordance with the power set forth in Section 2.01(a), the Servicer
shall perform the duties of the Issuer and the Owner Trustee under the
Transaction Documents. In furtherance of the foregoing, the Servicer shall
consult with the Owner Trustee as the Servicer deems appropriate regarding the
duties of the Issuer and the Owner Trustee under the Transaction Documents. The
Servicer shall monitor the performance of the Issuer and the Owner Trustee and
shall recommend to the Owner Trustee actions necessary to comply with the
Issuer’s or the Owner Trustee’s duties under the Transaction Documents. The
Servicer shall prepare for execution by the Owner Trustee or the Issuer or
shall cause the preparation by other appropriate Persons of all such documents,
reports, filings, instruments, certificates and opinions as it shall be the
duty of the Issuer or the Owner Trustee to prepare, file or deliver pursuant to
the Transaction Documents.

(h)           In
addition to the duties of the Servicer set forth in this Agreement or any of
the Transaction Documents, the Servicer shall perform or shall cause to be
performed such calculations and shall prepare for execution by the Issuer or
the Owner Trustee or shall cause the preparation by other appropriate Persons
of all such documents, reports, filings, instruments, certificates and opinions
as it shall be the duty of the Issuer to prepare, file or deliver pursuant to
state and federal tax and securities laws. In accordance with the directions of
the Issuer or the Owner Trustee, as applicable, the Servicer shall administer,
perform or supervise the performance of such other activities in connection
with the Issuer as are not covered by any of the foregoing provisions and as
are expressly requested by the Issuer or the Owner Trustee and are reasonably
within the capability of the Servicer.

(i)            Notwithstanding
anything in this Agreement or any of the Transaction Documents to the contrary,
the Servicer shall be responsible for promptly (upon a Responsible Officer of
the Servicer having actual knowledge thereof) notifying the Trustee in the
event that any withholding tax is imposed on the Issuer’s payments (or
allocations of income) to a Securityholder. Any such notice shall be in writing
and specify the amount of any withholding tax required to be withheld pursuant
to such provision.

(j)            All
tax returns required to be signed by the Issuer, if any, will be signed by the
Servicer on behalf of the Issuer.

(k)           The
Servicer shall maintain appropriate books of account and records relating to
services performed under this Agreement, which books of account and records
shall be reasonably accessible for inspection by the Owner Trustee at any time
during the Servicer’s normal business hours upon not less than three Business
Days’ prior written notice.

(l)            Without
the prior written consent of the Majority Noteholders and subject to the
satisfaction of the Rating Agency Condition, the Servicer shall not agree or
consent to, or otherwise permit to occur, any material amendment, modification,
change, supplement or

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rescission of or to the
Credit and Collection Policy, in whole or in part, in any manner that could
have a Material Adverse Effect on the Loans.

(m)          For
so long as any of the Notes are outstanding and are “restricted securities”
within the meaning of Rule 144(a)(3) under the Securities Act, (i) the Servicer
will provide or cause to be provided to any holder of such Notes and any
prospective purchaser thereof designated by such holder, upon the request of
such a holder or prospective purchaser, the information required to be provided
to such holder or prospective purchaser by Rule 144A(d)(4) under the Securities
Act; and (ii) the Servicer shall update such information from time to time in
order to prevent such information from becoming false and misleading and will
take such other actions as are necessary to ensure that the safe harbor
exemption from the registration requirements of the Securities Act under Rule
144A is and will be available for resales of such Notes conducted in accordance
with Rule 144A.

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

(o)           The
Servicer shall be obligated to make the Servicing Advances (but not Scheduled
Payment Advances) incurred in the performance of its servicing duties hereunder
as provided in Section 5.09. The Servicer shall be entitled to
reimbursement for such Servicing Advances from the Collections received from
the Loan to which such Servicing Advances relate pursuant to Section 5.10(d)
and Section 7.03(h). Notwithstanding anything contained herein to the
contrary, in no event shall the application of Servicing Advances or Scheduled
Payment Advances prevent a Loan from being or becoming a Delinquent Loan or
Charged-Off Loan, as applicable.

(p)           The
Servicer shall not be responsible for any taxes on the Issuer (except to the
extent of taxes attributable to the Servicer’s ownership, if any, of equity
interests in the Issuer) or any Servicing Fees payable to any Successor
Servicer.

(q)           All
payments received on Loans by the Servicer will be applied by the Servicer to
amounts due by the Obligor in accordance with the provisions of the related Underlying
Loan Agreement or, if to be applied at the discretion of the Servicer, then
consistent with the Credit and Collection Policy and the Servicing Standard.

(r)            The
Servicer shall be responsible for any tax reporting, disclosure, record keeping
or list maintenance requirements of the Issuer under Sections 6011(a), 6111(d)
or 6112 of the Code, including, but not limited to, the preparation of IRS Form
8886 pursuant to Federal Income Tax Regulations Section 1.6011-4(d) or any
successor provision and any required list maintenance under Federal Income Tax
Regulations Section 301.6112-1 or any successor provision.

(s)           The
Servicer shall notify the Backup Servicer of any material modification to its
servicing system.

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(t)            The Servicer shall provide to Moody’s
and S&P (a) annual financial statements for each Obligor of a Loan included
in the Collateral (other than a Loan which is publicly rated by Moody’s or
S&P, as applicable) as promptly as reasonably practicable after receipt of
such annual financial statements by the Servicer with respect to the end of the
fiscal year of such Obligor, until such time as the related Loan has been paid
in full or is no longer part of the Collateral, (b) promptly after a
Responsible Officer of the Servicer becomes aware thereof, email notice of any
payment default (following the expiration of any applicable grace period) under
a Loan and (c) copies of all notices (other than agent bank rate reset and
payment notices) sent to the Trustee. The Servicer shall notify S&P if any
Obligor of a Loan included in the Collateral fails to provide annual financial
statements within 135 days after the end of the fiscal year of each such
Obligor.

(u)           The Servicer shall provide each
Rating Agency (i) within 60 days after each calendar quarter (except the fourth
calendar quarter), commencing with the quarter ending September 30, 2006, the
unaudited quarterly financial statements of the Servicer and (ii) within 90
days after each fiscal year of the Servicer, commencing with the fiscal year
ending December 31, 2006, the audited annual financial statements of the
Servicer, together with the related report of the independent accountants to
the Servicer.

(v)           The initial Servicer will maintain
the Servicing Files at the principal place of business of the Servicer at the
address set forth in Section 13.04 in accordance with the Servicing
Standard.

(w)          Promptly following any extension of
the Replenishment Period or any early termination of the Replenishment Period,
the Servicer shall give written notice thereof to the Trustees, the Trust
Depositor and the Rating Agencies at the addresses described in Section
13.04.

(x)            The Servicer shall deliver the
Accountants’ Effective Date Certificate to the Trustee and the Rating Agencies.

(y)           The Trust Depositor, the Issuer, the
Owner Trustee and the Trustee each hereby irrevocably (except as provided
below) appoint the Servicer its respective true and lawful agent and
attorney-in-fact (with full power of substitution) in its name, place and stead
and at the Issuer’s expense, in connection with the performance of the Servicer’s
duties provided for in this Agreement and in the other Transaction Documents,
including the following powers: (a) to give any necessary receipts or acquittance
for amounts collected or received on or with respect to the Loans and the
Related Property, (b) to make all necessary transfers of the Loans, and/or of
the Related Property, as applicable, in accordance herewith and therewith, (c)
to execute (under hand, under seal or as a deed) and deliver all necessary or
appropriate bills of sale, assignments, agreements and other instruments and
endorsements in connection with any such transfer, and (d) to execute (under
hand, under seal or as a deed) any votes, consents, directions, releases,
amendments, waivers, satisfactions and cancellations, agreements, instruments,
orders or other documents or certificates in connection with or pursuant to
this Agreement or the other Transaction Documents relating thereto or to the
duties of the Servicer hereunder or thereunder, the Trust Depositor, the
Issuer, the Owner Trustee and the Trustee hereby ratifying and confirming all
that such attorney-in-fact (or any substitute) shall lawfully do under this
power of

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attorney and in
accordance with this Agreement and the other Transaction Documents as
applicable thereto. Nevertheless, if so requested by the Servicer, the Trust
Depositor, the Issuer, the Owner Trustee and the Trustee or any thereof, as
requested, shall ratify and confirm any such act by executing and delivering to
the Servicer or as directed by the Servicer all proper bills of sale,
assignments, releases, endorsements and other certificates, instruments and
documents of whatever nature as may reasonably be designated in any such
request. This power of attorney shall, however, expire, and the Servicer and
any substitute agent or attorney-in-fact appointed by the Servicer pursuant
hereto shall cease to have any power to act as the agent or attorney-in-fact of
the Issuer, the Trustee or of the Owner Trustee upon termination of this
Agreement or upon a Servicer Transfer from and after which the Successor
Servicer shall be deemed to have the rights of the Servicer pursuant to this clause
(x).

(z)            The Servicer shall execute and file
such financing statements and cause to be executed and filed such continuation
statements, all in such manner and in such places as may be required by law
fully to preserve, maintain and protect the interest of the Issuer, the
Securityholders, the Trustee and the Owner Trustee in the Loans and in the
proceeds thereof. The Servicer shall deliver (or cause to be delivered) to the
Owner Trustee and the Trustee file-stamped copies of, or filing receipts for,
any document filed as provided above, as soon as available following such
filing.

(aa) The Servicer shall
transfer an amount of Principal Collections sufficient to cause the Class A-1A
VFN Funding Test to be satisfied from the Principal Collection Account to the
Class A-1A VFN Funding Account if: (i) at any time during the Replenishment
Period the Issuer receives a payment of principal with respect to a Revolving
Loan; and (ii) after giving effect to such payment (and any corresponding
increase in the Exposure Amount) the Class A-1A VFN Funding Test is not
satisfied.

(bb) Notwithstanding any
other provision of this Agreement, if any material conflict or material
inconsistency exists among the Required Loan Documents, the Credit and
Collection Policy and the Servicing Standard, the provisions of the Required
Loan Documents shall control.

(cc) Notwithstanding
anything in this Agreement or any Transaction Document to the contrary, the
Owner Trustee shall have no duty or obligation to supervise or otherwise
monitor the Servicer or any agents, employees or servants thereof, nor shall
the Owner Trustee (as such and in its individual capacity) have any liability
for any act or omission of the Servicer or any agents, employees or servants
thereof in preparing, executing, delivering or filing any document or in otherwise
carrying out its duties hereunder or under any Transaction Document. The Owner
Trustee shall be fully protected in relying on any recommendation of the
Servicer hereunder or under any Transaction Document.

(dd) The Servicer on
behalf of the Issuer shall deliver to the Rating Agencies a Compliance Plan in
the event that any Interim Test is not satisfied as of any Interim Test Date.

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Section 5.03.        Liquidation
of Loans

(a)           In the event that any payment due
under any Loan and not postponed pursuant to Section 5.02 is not paid
when the same becomes due and payable, or in the event the Obligor fails to
perform any other covenant or obligation under the Loan, the Servicer in
accordance with the Required Loan Documents, the Credit and Collection Policy
and the Servicing Standard shall take such action as shall maximize the amount
of recovery thereon and as the Servicer shall deem to be in the best interests
of the Noteholders.

(b)           The Servicer, consistent with its
Credit and Collection Policy and the Servicing Standard, may accelerate all
payments due under any Loan to the extent permitted by the Required Loan
Documents and may foreclose upon at a public or private sale or otherwise
comparably effect the ownership of Related Property relating to Charged-Off Loans
for which the related Loan is still outstanding and as to which no satisfactory
arrangements can be made for collection of delinquent payments in accordance
with the provisions of Section 5.10 and, subject to applicable laws, may
act, or may engage an experienced Person qualified to act, as sales and
processing agent for the Related Property that is foreclosed upon. In
connection with any such foreclosure or other conversion and any other
liquidation action or enforcement of remedies, the Servicer shall exercise
collection and foreclosure procedures in accordance with the Credit and
Collection Policy and the Servicing Standard. Without limiting the generality
of the foregoing, the Servicer may (i) sell any such Related Property by using
commercially reasonable efforts to obtain bids to purchase such Related
Property from at least three Persons (other than the Servicer or any of its
Affiliates) or (ii) in its discretion purchase, or procure that any of its
Affiliates purchases, any such Related Property for a price equal to the then
Fair Market Value of such Related Property. If the Servicer elects to obtain
bids for the sale of the Related Property it may sell the Related Property to
the highest bidder (if any bids are received) or the Servicer or an Affiliate
may purchase the Related Property for a price equal to the highest bid, but in
no event may the Servicer sell any Related Property to the Servicer or any of
its Affiliates for a purchase price less than the then Fair Market Value of
such Related Property. Any purchase of the Related Property by the Servicer or
any of its Affiliates other than pursuant to a bid price is to be evidenced by
a certificate of a Responsible Officer of the Servicer delivered to the Trustee
setting forth the Loan, the Related Property, the sale price of the Related
Property and certifying that such sale price is the Fair Market Value of such
Related Property. In any case in which any such Related Property has suffered
damage, the Servicer will not expend funds in connection with any repair or
toward the repossession of such Related Property unless it reasonably
determines that such repair and/or repossession will increase the Liquidation
Proceeds by an amount greater than the amount of such expenses.

(c)           After a Loan has been liquidated, the
Servicer shall promptly prepare and forward to the Trustee and upon request,
any Securityholder, a report (the “Liquidation Report”), in the form
attached hereto as Exhibit D, detailing the Liquidation Proceeds
received from such Loan, the Liquidation Expenses incurred and reimbursed to
the Servicer with respect thereto, any Scheduled Payment Advances and Servicing
Advances, together with interest due thereon, reimbursed to the Servicer
therefrom, any loss incurred in connection therewith, and any Nonrecoverable
Advances to be reimbursed to the Servicer with respect thereto in accordance
with the Priority of Payments in Section 7.05.

 

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Section 5.04.        [Reserved]

Section 5.05.        [Reserved]

Section 5.06.        Collection
of Certain Loan Payments

(a)           The Servicer shall make reasonable
efforts, consistent with the Credit and Collection Policy and the Servicing
Standard, to collect all payments required under the terms and provisions of
the Loans. Consistent with the foregoing and the Credit and Collection Policy
and the Servicing Standard, the Servicer may in its discretion waive or permit
to be waived any fee or charge which the Servicer would be entitled to retain
hereunder as servicing compensation and extend the due date for payments due on
a Loan as provided in Section 5.02(e).

(b)           Except as otherwise permitted under
this Agreement, the Servicer agrees not to make, or consent to, any change, in
the direction of, or instructions with respect to, any payments to be made by
an Obligor or, in connection with an Agented Loan, the paying agent with
respect thereto, in any manner that would diminish, impair, delay or otherwise
adversely affect the timing or receipt of such payments to the Principal and
Interest Account without the prior written consent of the Trustee and with the
consent of the Majority Noteholders.

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

The Servicer shall
provide to the Owner Trustee, the Trustee, the Backup Servicer, any bank,
thrift or insurance company regulatory authority and the supervisory agents and
examiners of the foregoing, access to the documentation regarding the Loans
required by applicable local, state and federal regulations, such access being
afforded without charge but only upon not less than three Business Days prior
written request by the Owner Trustee, the Trustee or any such regulated
Noteholder and during normal business hours at the offices of the Servicer
designated by it and in a manner that does not unreasonably interfere with the
Servicer’s normal operations or customer or employee relations. The Trustee,
the Owner Trustee, such Noteholder and the representative of any such
regulatory authority designated by the related Noteholder to view such
information shall and shall cause their representatives to hold in confidence
all such information except to the extent disclosure may be required by law
(and all reasonable applications for confidential treatment are unavailing) and
except to the extent that the Trustee and the Owner Trustee may reasonably
determine that such disclosure is consistent with their obligations hereunder. The
Servicer may request that any such Person not a party hereto enter into a
confidentiality agreement reasonably acceptable to the Servicer prior to
permitting such Person to view such information.

Section 5.08.        Satisfaction
of Collateral and Release of Loan Files

(a)           Upon the payment in full of any Loan,
the receipt by the Servicer of a notification that payment in full will be
escrowed in a manner customary for such purposes or the deposit into the
Principal and Interest Account of the purchase price of any Loan acquired by
the Trust Depositor, the Servicer or another Person pursuant to this Agreement,
or any other Transaction Document, the Servicer will immediately notify the
Trustee by a certification in the form of Exhibit M (which certification
shall include a statement to the effect that all amounts received or to be
received in connection with such payment which are required to be deposited in

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the Principal and
Interest Account pursuant to Section 7.03(b) have been or will be so
deposited) of a Servicing Officer and shall request delivery to it of the Loan
File. Upon receipt of such certification and request, the Trustee in accordance
with Section 2.10(c), shall release, within two Business Days (if such
request was received by 1:00 p.m. New York City time), the related Loan File to
the Servicer. Expenses incurred in connection with any instrument of
satisfaction or deed of reconveyance shall be payable by the Servicer and shall
not be chargeable to the Principal and Interest Account or the Note
Distribution Account; provided
that the Servicer may collect and retain such expenses from the underlying
Obligor.

(b)           From time to time and as appropriate
for the servicing or foreclosure of any Loan, the Trustee shall, upon request
of the Servicer and delivery to the Trustee of a certification in the form of Exhibit
M signed by a Servicing Officer, release the related Loan File to the
Servicer within two Business Days (if such request was received by 1:00 p.m.
New York City time), and the Trustee shall execute such documents as shall be
necessary to the prosecution of any such proceedings. The Servicer shall return
the Loan File to the Trustee when the need therefor by the Servicer no longer
exists, unless the Loan has been liquidated and the Liquidation Proceeds
relating to the Loan have been deposited in the Principal and Interest Account
and remitted to the Trustee for deposit in the Note Distribution Account or the
Loan File or such document has been delivered to an attorney, or to a public
trustee or other public official as required by law, for purposes of initiating
or pursuing legal action or other proceedings for the foreclosure or
repossession of Related Property either judicially or non-judicially, and the
Servicer has delivered to the Trustee a certificate of a Servicing Officer
certifying as to the name and address of the Person to whom such Loan File or
such document was delivered and the purpose or purposes of such delivery. Upon
receipt of a certificate of a Servicing Officer stating that such Loan was
liquidated, the servicing receipt relating to such Loan shall be released by
the Trustee to the Servicer.

(c)           The Trustee shall execute and deliver
to the Servicer any court pleadings, requests for trustee’s sale or other
documents provided to it necessary to the foreclosure or trustee’s sale in
respect of Related Property or to any legal action brought to obtain judgment
against any Obligor on the related loan agreement (including any Underlying
Note or other agreement securing Related Property) or to obtain a deficiency
judgment, or to enforce any other remedies or rights provided by the related
loan agreement (including any Underlying Note or other agreement securing
Related Property) or otherwise available at law or in equity. Together with
such documents or pleadings, the Servicer shall deliver to the Trustee a
certificate of a Servicing Officer requesting that such pleadings or documents
be executed by the Trustee and certifying as to the reason such documents or
pleadings are required and that the execution and delivery thereof by the
Trustee will not invalidate or otherwise adversely affect the Lien of the
agreement securing Related Property, except for the termination of such a Lien
upon completion of the foreclosure or trustee’s sale. The Trustee shall, upon
receipt of a written request from a Servicing Officer, execute any document
provided to the Trustee by the Servicer or take any other action requested in
such request, that is, in the opinion of the Servicer as evidenced by such
request, required or appropriate by any state or other jurisdiction to
discharge the Lien securing Related Property upon the satisfaction thereof and
the Trustee will sign and post, but will not guarantee receipt of, any such
documents to the Servicer, or such other party as the Servicer may direct,
within five Business Days of the Trustee’s receipt of such certificate or
documents. Such certificate or documents shall establish to the Trustee’s
satisfaction that the related Loan has

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been paid in full by or
on behalf of the Obligor (or subject to a deficiency claim against such
Obligor) and that such payment has been deposited in the Principal and Interest
Account.

(d)           Notwithstanding anything contained in
this Section 5.08 to the contrary, in no event may the Servicer possess
in excess of 10 Loan Files (excluding Loan Files for Loans which have been paid
in full or repurchased) at any given time.

Section
5.09.        Scheduled Payment
Advances; Servicing Advances and Nonrecoverable Advances

(a)           For each Due Period, if the Servicer
determines that any Scheduled Payment (or portion thereof) that was due and
payable pursuant to a Loan in the Collateral during such Due Period was not received
prior to the end of such Due Period, the Servicer has the right to elect, but
is not obligated, to make a Scheduled Payment Advance in an amount up to the
amount of such delinquent Scheduled Payment (or portion thereof) unless the
Servicer believes in good faith that pursuant to Section 5.09(b) that
such advance will be a Nonrecoverable Advance, in an amount of up to 60 days’
accrued interest in respect of a Loan paying interest monthly and the amount of
interest accrued in one interest period in respect of Loans paying interest
less frequently than monthly. The Servicer will deposit any Scheduled Payment
Advances into the Principal and Interest Account on or prior to 1:00 p.m. (New
York City time) on the related Determination Date, in immediately available
funds. The Servicer will be entitled to be reimbursed for Scheduled Payment
Advances, together with accrued and unpaid interest thereon, pursuant to Section
7.03, Section 7.05(a) and Section 7.05(b).

(b)           The Servicer will not make a
Scheduled Payment Advance or a Servicing Advance if the Servicer has determined
in its sole discretion, exercised in good faith and consistent with the
Servicing Standard, that the amount of such Scheduled Payment Advance or
Servicing Advance proposed to be advanced plus interest expected to accrue
thereon, will be a Nonrecoverable Advance. Absent bad faith, the Servicer’s
determination as to whether any Scheduled Payment Advance or Servicing Advance
is expected to be a Nonrecoverable Advance or whether, once advanced, it is a
Nonrecoverable Advance, shall be conclusive and binding on the Issuer and on
the Noteholders. The determination by the Servicer that any proposed Servicing
Advance, if made, would constitute a Nonrecoverable Advance or that it has made
a Nonrecoverable Advance shall be made by the Servicer and shall be evidenced
by an Officer’s Certificate delivered promptly to the Trustee, setting forth
the basis for such determination.

(c)           The Servicer will be entitled to
recover any Scheduled Payment Advance made by it, together with accrued
interest due thereon, from Interest Collections in the case of Scheduled
Payment Advances of interest, and from Principal Collections in the case of
Scheduled Payment Advance of principal, in each case received from the Obligor with
respect to the specific Loan for which such Scheduled Payment Advance was made
or other collections or proceeds with respect to such Loan or the Related
Property pursuant to the Priority of Payments; provided
that, if at any time a Scheduled Payment Advance, together with accrued
interest thereon, made by the Servicer is subsequently determined to be a
Nonrecoverable Advance, the Servicer will be entitled to recover the amount of
such Nonrecoverable Advance from the Principal and Interest Account on any Business
Day during any Due Period prior to the related Determination Date (or on a
Distribution Date prior to any payment of interest on or principal of

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the Notes in accordance
with the Priority of Payments). The Servicer will be entitled to recover the amount
of any Servicing Advance, together with accrued interest thereon, from the
Principal and Interest Account from amounts received from or with respect to
the specific Loan or Related Property with respect to which such Servicing
Advance was made on any Business Day during any Due Period prior to the related
Determination Date, provided
that, if at any time a Servicing Advance of interest, together with accrued
interest thereon, is subsequently determined to be a Nonrecoverable Advance,
the Servicer will be entitled to recover the amount of such Nonrecoverable
Advance from the Principal and Interest Account on any Business Day during any
Due Period prior to the related Determination Date (or on any Distribution Date
prior to any payment of interest on or principal of the Notes in accordance
with the Priority of Payments), provided
further that, if at any time a Servicing Advance of principal,
together with accrued interest thereon, is subsequently determined to be a
Nonrecoverable Advance, the Servicer will be entitled to recover the amount of
such Nonrecoverable Advance on a Distribution Date to the extent then permitted
in accordance with the Priority of Payments.

(d)           The Servicer shall be entitled to an
annual rate of interest payable at the Ares Capital Prime Rate (and, in the
case of any Successor Servicer, at the rate published in The Wall Street
Journal from time to time as the prime rate in the United States) with respect
to each Scheduled Payment Advance and each Servicing Advance from and including
the date such advance is made by the Servicer to but not including the date of
reimbursement of such advance to the Servicer. The Servicer shall deliver to
the Trustee promptly after the end of a Due Period a certificate setting forth
the amount of compound interest due to the Servicer on the next Distribution
Date.

Section 5.10.        Title,
Management and Disposition of Foreclosed Property

(a)           In the event that title to Related
Property is acquired by the Servicer hereunder in foreclosure or by deed in
lieu of foreclosure or by other legal process, the deed or certificate of sale,
or the Repossessed Property, shall be taken in the name of the Issuer for the
benefit of the Securityholders.

(b)           The Servicer, subject to the
provisions of this Article V, shall manage, conserve, protect and
operate each such Foreclosed Property or other Repossessed Property for the
Securityholders solely for the purpose of its prudent and prompt disposition
and sale. The Servicer shall, either itself or through an agent selected by the
Servicer, manage, conserve, protect and operate the Foreclosed Property or
other Repossessed Property in a manner consistent with the Credit and
Collection Policy and the Servicing Standard. The Servicer shall attempt to
sell the same (and may temporarily rent the same) on such terms and conditions
as the Servicer deems to be in the best interest of the Securityholders.

(c)           The Servicer shall cause to be
deposited in the Principal and Interest Account, no later than two Business
Days after the receipt thereof, all revenues received with respect to the
conservation and disposition of the related Foreclosed Property or other
Repossessed Property net of Liquidation Expenses.

(d)           The Servicer shall, subject to Section
5.02(p) and Section 7.03, reimburse itself for any related
unreimbursed Scheduled Payment Advances and Servicing Advances,

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together with accrued and
unpaid interest due thereon, and unpaid Servicing Fees, and the Servicer shall
deposit in the Principal and Interest Account the net cash proceeds of the sale
of any Foreclosed Property or other Repossessed Property to be distributed to
the Securityholders in accordance with Section 7.05.

Section 5.11.        Servicing
Compensation

(a)           As compensation for its servicing
activities hereunder and reimbursement for its expenses, the Servicer shall be
entitled to receive a servicing fee calculated and payable quarterly in arrears
on each Distribution Date prior to the termination of the Issuer (with respect
to each Due Period, the “Servicing Fee”), which will comprise of the
senior servicing fee (the “Senior Servicing Fee”) and the subordinated
servicing fee (the “Subordinated Servicing Fee”), each of which will be
in an amount equal to the product of: (i) the Servicing Fee Percentage, (ii)
the Aggregate Outstanding Loan Balance as of the beginning of the related Due
Period (or, with respect to the first Due Period, as of the Closing Date) and
(iii) a fraction, the numerator of which is equal to the number of days in the
related Due Period (or, with respect to the first Due Period, the number of
days from the Closing Date to the end of the first Due Period) and the
denominator of which is 360. The Servicing Fee is payable out of Collections
pursuant to Section 7.05(a) and Section 7.05(b). If the Servicer
is replaced, the Originator shall be responsible for the payment of any fee
payable to a Successor Servicer in excess of the Servicing Fee to the extent
such fee is not paid pursuant to Section 7.05(a) and Section 7.05(b).

(b)           In addition to the Servicing Fee, the
Servicer shall be entitled to retain for itself as additional servicing
compensation assumption and other administrative fees paid or payable in
connection with any Loan.

Section 5.12.        Assignment;
Resignation

The Servicer shall not
assign its rights and duties under this Agreement (other than in connection
with a subservicing or other arrangement permitted under this Agreement) nor
resign from the obligations and duties hereby imposed on it as Servicer except
(a) by mutual consent of the Servicer, the Trustee and the Majority
Noteholders, (b) in connection with a merger, conversion or consolidation
permitted pursuant to Section 5.13 (in which case, subject to the Rating
Agency Condition being satisfied with respect thereto, the Person resulting
from the merger, conversion or consolidation shall be the successor of the
Servicer, or the Servicer, with the consent of the Trustee and the Backup
Servicer (which shall not be unreasonably withheld or delayed), may appoint a
successor Servicer which satisfies the criteria set forth in this Agreement,
such successor Servicer accepts such appointment, and the Rating Agency
Condition is satisfied with respect thereto), (c) upon the reasonable
determination by the Servicer that the Servicer’s duties thereunder are no
longer permissible under Applicable Law or administrative determination and
such incapacity cannot be cured by the Servicer or (d) upon the reasonable
determination by the Servicer that the continued performance of its duties as
Servicer will cause a materially adverse accounting, regulatory or tax result
for the Servicer or its investment advisor. Any such determination permitting
the resignation of the Servicer shall be evidenced by a written Opinion of
Counsel (who may be counsel for the Servicer) to such effect delivered to the
Trustee, which Opinion of Counsel shall be in form and substance reasonably
acceptable to

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the Trustee. No such
resignation shall become effective until a successor has assumed the Servicer’s
responsibilities and obligations hereunder in accordance with Section 8.03.

Section 5.13.        Merger
or Consolidation of Servicer

(a)           Any Person into which the Servicer
may be merged or consolidated, or any Person resulting from such merger,
conversion or consolidation to which the Servicer is a party, or any Person
succeeding to substantially all of the business of the Servicer, and who shall
be an established commercial loan servicing institution that on a consolidated
basis has a net worth of at least $50,000,000, shall be the Successor Servicer
hereunder without execution or filing of any paper or any further act on the
part of any of the parties hereto, notwithstanding anything herein to the
contrary; provided that no such merger, conversion or
consolidation of the Servicer or transfer of all or substantially all or the
Servicer assets or business shall be permitted hereunder unless the Rating
Agency Condition is satisfied with respect thereto or unless the Servicer
appoints a Successor Servicer which meets such requirements and accepts such
appointment to become Servicer hereunder and the Rating Agency Condition is
satisfied with respect thereto. Such Successor Servicer shall be a permitted
assignee of the Servicer. The provisions of Section 8.03(c) and (e)
shall apply to any such servicing transfer.

(b)           So long as the Servicer is the
Originator, upon the occurrence of any merger or consolidation of the
Originator or transfer of substantially all of its assets and its business
which, in the case of a merger or consolidation, results in the failure of the
holders of the common voting stock of the Originator as of the Closing Date to
own 51% of the outstanding common voting stock of the Originator or any
successor entity with or into which the Originator shall have been merged or
consolidated, the Servicer shall (i) provide the Trust Depositor, the Trustee,
and the Rating Agencies with notice of such change-in-control within 30 days
after completion of the same, and (ii) satisfy the Rating Agency Condition
after completion of the same.

Section 5.14.        Limitation
on Liability of the Servicer and Others

The Servicer and any
stockholder, partner, member, manager, director, officer, employee or agent of
the Servicer may rely on any document of any kind which it in good faith
reasonably believes to be genuine and to have been adopted or signed by the
proper authorities or persons respecting any matters arising hereunder. Except
as otherwise provided in Section 5.02(b), the Servicer shall not be
liable for any errors, inaccuracies or omissions of any Person not affiliated
with the Servicer contained in any information, report, certificate, data or
other document delivered to the Servicer or on which the Servicer must rely in
order to perform its obligations hereunder and under the other Transaction
Documents. The Servicer shall not be in default hereunder or incur any
liability, except as provided in the proviso in the last sentence of this Section
5.14 for any failure, error or delay in carrying out its duties hereunder
or under any other Transaction Document if such failure, error or delay results
from the Servicer acting in accordance with information prepared or supplied by
a Person other than the Servicer or any of its Affiliates or the failure or
delay of any such Person to prepare or provide such information. Subject to the
terms of Section 12.01 herein, the Servicer shall have no obligation to
appear with respect to, prosecute or defend any legal action which is not
incidental to the Servicer’s duty to service the Loans in accordance with this
Agreement. The Servicer shall not be responsible for

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the payment of any taxes
imposed on or with respect to the Issuer (except to the extent of taxes
attributable to the Servicer’s ownership, if any, of equity interests in the
Issuer) or for the fees of any Successor Servicer. Except as provided herein,
the Servicer shall not be under any liability to any other party to the
Agreement, the Noteholder, or the Certificateholder or any other Person for any
action taken or for refraining from taking any action pursuant to this Agreement
whether arising from express or implied duties under this Agreement; provided notwithstanding anything to the
contrary contained herein, nothing shall protect the Servicer against any
liability that would otherwise be imposed by reason of its willful misfeasance,
bad faith or negligence in the performance of duties or by reason of its
willful misconduct hereunder.

Section 5.15.        The
Backup Servicer

(a)           The Issuer, the Trustee and the Trust
Depositor hereby appoint Lyon Financial Services, Inc. (d/b/a U.S. Bank
Portfolio Services) to act as Backup Servicer in accordance with the terms of
this Agreement. Lyon Financial Services, Inc. (d/b/a U.S. Bank Portfolio
Services) hereby accepts such appointment and agrees to perform the duties and
responsibilities with respect thereto set forth herein.

(b)           The Backup Servicer shall perform the
following duties and obligations:

(i)            On or before the Closing Date, the
Backup Servicer shall accept from the Servicer delivery of the information
required to be set forth in the Quarterly Reports in hard copy and in an agreed
upon electronic format.

(ii)           Not later than 12:00 noon New York
City time four Business Days after the end of the related Due Period, the
Servicer shall provide to the Backup Servicer and the Backup Servicer shall
accept delivery of tape in an agreed upon electronic format (the “Tape”)
from the Servicer, which shall include but not be limited to the following
information: (A) for each Loan, (1) Loan number, (2) Loan category (i.e.,
Traditional Middle Market Loan, Large Middle Market Loan, or Broadly Syndicated
Loan), (3) Moody’s and S&P Industry Classification Group, (4) type of Loan
(i.e., Term Loan, Delayed Draw Term Loan or Revolving Loan), (5) type of
security interest (i.e., First Lien Loan, Second Lien Loan, or Subordinated
Loan), (6) origination date, (7) maturity date, (8) benchmark for Loan Rate,
(9) margin, (10) frequency of Scheduled Payments, (11) the collection status,
and (12) the Outstanding Loan Balance and (B) the Aggregate Outstanding Loan
Balance. With respect to its duties pursuant to this Section 5.15(b)(ii),
the Backup Servicer shall have no duty to confirm that the Tape contains the
foregoing information nor shall it be required to verify, recompute, reconcile
or recalculate any such data or information.

(iii)          Prior to the Distribution Date, the
Backup Servicer shall review the Quarterly Report to ensure that it is complete
on its face, and based solely on the information provided to the Backup
Servicer pursuant to

Section 5.15(b)(ii), that the following items in such Quarterly Report
have been accurately calculated, if applicable, and reported: (A) the Aggregate
Outstanding Loan Balance, (B) the Backup Servicing Fee, (C) the Loans that are
more than 60 days delinquent (other than Charged-Off Loans), (D) the
Charged-Off Loans, and (E) the Priority of Payments. The Backup Servicer shall
notify the Trustee, the Initial Purchaser and the Servicer

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of any discrepancies with
the Quarterly Report based on such review not later than the Business Day
preceding such Distribution Date.

(iv)          If the Servicer disagrees with the
report provided under paragraph (iii) above by the Backup Servicer or if the
Servicer or any subservicer has not reconciled such discrepancy, the Backup
Servicer agrees to confer with the Servicer to resolve such disagreement on or
prior to the next succeeding Determination Date and shall settle such
discrepancy with the Servicer if possible, and notify the Trustee, the Initial
Purchaser and the Rating Agencies of the resolution thereof. The Servicer
hereby agrees to cooperate at its own expense with the Backup Servicer in
reconciling any discrepancies herein. If within 20 days after the delivery of
the report provided under paragraph (iii) above by the Backup Servicer, such discrepancy
is not resolved, the Backup Servicer shall promptly notify the Servicer,
Trustee, the Initial Purchaser and the Rating Agencies of the continued
existence of such discrepancy. Following receipt of such notice by the Trustee,
the Initial Purchaser and the Rating Agencies, the Servicer shall deliver to
the Trustee, the Initial Purchaser, the Backup Servicer and the Rating Agencies
no later than the related Distribution Date a certificate describing the nature
and amount of such discrepancies and the actions the Servicer proposes to take
with respect thereto.

With respect to the
foregoing, the Backup Servicer, in the performance of its duties and
obligations hereunder, is entitled to rely conclusively, and shall be fully
protected in so relying, on the contents of each Tape, including, but not
limited to, the completeness and accuracy thereof, provided by the Servicer.

(c)           After the termination or resignation
by the Servicer in accordance with this Agreement, all authority, power, rights
and responsibilities of the Servicer, under this Agreement, whether with
respect to the Loans or otherwise, shall pass to and be vested in the Successor
Servicer or the Backup Servicer, as applicable in accordance with Section
8.03 and such applicable party shall be deemed the Successor Servicer,
subject to and in accordance with the provisions of Section 8.03, as
long as such named Successor Servicer is not prohibited by any Applicable Law
from fulfilling the same, as evidenced by an Opinion of Counsel; provided if Lyon as Backup Servicer
becomes the Successor Servicer, it will not make any Scheduled Payment
Advances.

(d)           Any Person (i) into which the Backup
Servicer may be merged or consolidated, (ii) that may result from any merger or
consolidation to which the Backup Servicer shall be a party, or (iii) that may
succeed to the properties and assets of the Backup Servicer substantially as a
whole, which Person in any of the foregoing cases executes an agreement of
assumption to perform every obligation of the Backup Servicer hereunder, shall
be the successor to the Backup Servicer under this Agreement without further
act on the part of any of the parties to this Agreement.

(e)           As compensation for its backup
servicing activities hereunder, the Backup Servicer shall be entitled to
receive the Backup Servicing Fee. The Backup Servicing Fee shall be calculated
and payable quarterly in arrears on each Distribution Date. The Backup Servicer’s
entitlement to receive the portion of the Backup Servicing Fee related to its
Backup Servicer duties (other than due and unpaid Backup Servicer Fees owed
through such date) shall cease on

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the earliest to occur of:
(i) it becoming the Successor Servicer, (ii) its removal as Backup Servicer, or
(iii) the termination of this Agreement.

(f)            The Backup Servicer may be removed
and replaced as provided in Section 8.10.

(g)           The Backup Servicer undertakes to
perform only such duties and obligations as are specifically set forth in this
Agreement, it being expressly understood by all parties hereto that there are
no implied duties or obligations of the Backup Servicer hereunder. Without
limiting the generality of the foregoing, the Backup Servicer, except as
expressly set forth herein, shall have no obligation to supervise, verify,
monitor or administer the performance of the Servicer. The Backup Servicer may
act through its agents, attorneys and custodians in performing any of its
duties and obligations under this Agreement, it being understood by the parties
hereto that the Backup Servicer will be responsible for any misconduct or
negligence on the part of such agents, attorneys or custodians acting for and
on behalf of the Backup Servicer. Neither the Backup Servicer nor any of its
officers, directors, employees or agents shall be liable, directly or
indirectly, for any damages or expenses arising out of the services performed
under this Agreement other than damages or expenses that result from the
negligence or willful misconduct of it or them or the failure to perform
materially in accordance with this Agreement.

(h)           Limitation on Liability. The
Backup Servicer shall not be liable for any obligation of the Servicer
contained in this Agreement or for any errors of the Servicer contained in any
Tape, certificate or other data or document delivered to the Backup Servicer
hereunder or on which the Backup Servicer must rely in order to perform its
obligations hereunder, and the parties hereto each agree to look only to the
Servicer to perform such obligations. The Backup Servicer shall have no
responsibility and shall not be in default hereunder or incur any liability for
any failure, error, malfunction or any delay in carrying out any of its
respective duties under this Agreement if such failure or delay results from
the Backup Servicer acting in accordance with information prepared or supplied
by a Person other than the Backup Servicer or the failure of any such other
Person to prepare or provide such information. The Backup Servicer shall have
no responsibility, shall not be in default and shall incur no liability for (i)
any act or failure to act of any third party, including the Servicer (other
than any agent, attorney or custodian acting on behalf of the Backup Servicer),
(ii) any inaccuracy or omission in a notice or communication received by the
Backup Servicer from any third party (other than any agent, attorney or
custodian acting on behalf of the Backup Servicer), (iii) the invalidity or
unenforceability of any Loan under Applicable Law, (iv) the breach or
inaccuracy of any representation or warranty made with respect to any Loan, or
(v) the acts or omissions of any Successor Backup Servicer.

Section 5.16.        Covenants
of the Backup Servicer

The
Backup Servicer hereby covenants that:

(a)           The Backup Servicer will comply in
all material respects with all Applicable Law.

 

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(b)                                 The
Backup Servicer will preserve and maintain its existence, rights and franchises
as a corporation in good standing under the laws of the jurisdiction of its
incorporation and will obtain and preserve its qualification to do business in
each jurisdiction in which such qualification is or shall be necessary to
protect the validity and enforceability of this Agreement, the other
Transaction Documents and each other instrument or agreement necessary or
appropriate to the proper administration of this Agreement and the transactions
contemplated hereby.

(c)                                  The
Backup Servicer shall perform in all material respects all of its obligations
and duties under this Agreement.

ARTICLE VI.

COVENANTS OF THE TRUST DEPOSITOR

Section 6.01.                         Legal Existence

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

Section 6.02.                         Loans Not to Be Evidenced
by Promissory Notes

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

Section 6.03.                         Security Interests

The Trust
Depositor will not sell, pledge, assign or transfer to any Person other than
the Issuer, or grant, create, incur, assume or suffer to exist any Lien on any
Loan in the Collateral or its interest in any Related Property, other than the
Lien granted to the Issuer, whether now existing or hereafter transferred to
the Issuer, or any interest therein.  The
Trust Depositor will immediately notify the Owner Trustee and the Trustee of
the existence of any Lien on any Loan in the Collateral or its interest in any
Related Property; and the Trust Depositor shall defend the right, title and
interest of the Issuer in, to and under the Loans in the Collateral and the
Issuer’s interest in any Related Property, against all claims of third parties;
provided that nothing in this Section 6.03
shall prevent or be deemed to prohibit the Trust Depositor from suffering to
exist Permitted Liens upon any of the Loans in the Collateral or its interest
in any Related Property.

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Section 6.04.                         Delivery of Principal
Collections and Interest Collections

The Trust
Depositor agrees to pay to the Servicer promptly (but in no event later than
two Business Days after receipt) all Collections received by the Trust
Depositor in respect of the Loans, for application in accordance with Section 7.05.

Section 6.05.                         Regulatory Filings

The Trust
Depositor shall make any filings, reports, notices, applications and
registrations with, and seek any consents or authorizations from, the
Commission and any state securities authority on behalf of the Issuer as may be
necessary or that the Trust Depositor deems advisable to comply with any
federal or state securities or reporting requirements laws.

Section 6.06.                         Compliance with Law

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

Section 6.07.                         Activities; Transfers of
Notes or Certificates by Trust Depositor

Except as
contemplated by this Agreement or the other Transaction Documents, the Trust
Depositor shall not engage in any business or activity of any kind, or enter
into any transaction or indenture, mortgage, instrument, agreement, contract,
lease or other undertaking, which is not directly related to the transactions
contemplated and authorized by this Agreement or the other Transaction
Documents; provided that the
Trust Depositor may purchase and sell (or grant Liens in respect of) assets
similar to the Loan Assets to other Persons in securitization or other
non-recourse financing transactions involving the Originator or any of its
Affiliates on terms and conditions (with respect to liabilities and
restrictions on its activities, as well as restrictions on its interactions
with the Originator or its Affiliates, relevant to the “bankruptcy remoteness”
or “substantive consolidation” analysis relating to the Trust Depositor)
substantially similar to the terms and conditions applicable to the Trust
Depositor under the Transaction Documents so long as the Securityholders are
not materially adversely affected thereby and the Rating Agency Condition is
satisfied.  Notwithstanding anything to
the contrary contained herein, the Trust Depositor may assign, transfer, convey
or finance all or any portion of any Class of Notes or the Certificate
owned by it provided such assignment, transfer, conveyance or financing is done
in accordance with the terms of Section 4.02 of the Indenture.

Section 6.08.                         Indebtedness

The Trust Depositor
shall not create, incur, assume or suffer to exist any Indebtedness or other
liability whatsoever, except (a) obligations incurred under this Agreement
or the other Transaction Documents or to the Originator, (b) liabilities
incident to the maintenance of its limited liability company existence in good
standing or (c) liabilities necessarily incurred to facilitate
transactions permitted by Section 6.07.

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Section 6.09.                         Guarantees

The Trust
Depositor shall not become or remain liable, directly or contingently, 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 except in connection with the transactions permitted by Section 6.07.

Section 6.10.                         Investments

The Trust
Depositor 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 (a) transfers of Loan Assets to the Issuer as
contemplated by the Transaction Documents and the receipt of $54,000,000 in
aggregate principal amount of the Class E Notes and the Certificate as
partial consideration for the transfer of the Loan Assets to the Issuer or (b) as
may be necessary to facilitate transactions permitted by Section 6.07.  Without limiting the generality of the
foregoing or restricting the ability of the Trust Depositor to make capital
contributions to the Issuer, the Trust Depositor shall not (i) provide
credit to any other Securityholder for the purpose of enabling such
Securityholder to purchase any Securities or (ii) lend any money to the
Issuer.

Section 6.11.                         Merger; Sales

The Trust
Depositor 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, lease or otherwise
dispose of all or substantially all of its property or business.

Section 6.12.                         Distributions

The Trust
Depositor shall not declare or pay, directly or indirectly, any dividend or
make any other distribution (whether in cash or other property) with respect to
the profits, assets or capital of the Trust Depositor or any Person’s interest
therein, or purchase, redeem or otherwise acquire for value any of its members’
interests now or hereafter outstanding, except that, so long as no Event of
Default has occurred and is continuing and no Event of Default would occur as a
result thereof or after giving effect thereto and the Trust Depositor would
continue to be Solvent as a result thereof and after giving effect thereto, the
Trust Depositor may declare and pay distributions to its members.

Section 6.13.                         Other Agreements

Except as provided
in this Agreement or the other Transaction Documents, the Trust Depositor shall
not become a party to, or permit any of its properties to be bound by, any
indenture, mortgage, instrument, contract, agreement, lease or other
undertaking, except this Agreement and the other Transaction Documents to which
it is a party and any agreement relating to another transaction permitted by Section 6.07;
nor shall it amend or modify without

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the prior satisfaction of
the Rating Condition the provisions of its organizational documents which
relate to its bankruptcy remote nature or separateness covenants as required by
the Rating Agencies or in connection with the true sale and substantial
nonconsolidation opinions delivered on the Closing Date, or issue any power of
attorney except to the Owner Trustee, the Trustee or the Servicer in accordance
with the Transaction Documents or in connection with another transaction
permitted by Section 6.07.

Section 6.14.                         Separate Legal Existence

The Trust
Depositor shall (a) maintain compliance with the covenants set forth in
the Limited Liability Company Operating Agreement of the Trust Depositor, dated
as of June 20, 2006, by Ares Capital Corporation and Philip A. Martone and
(b) take or refrain from taking, as applicable, each of the activities
specified in the “substantive consolidation” opinion of Latham &
Watkins, LLP, delivered on the Closing Date, upon which the conclusions
expressed therein are based.

Section 6.15.                         Location; Records

The Trust
Depositor shall (a) not move its location outside the State of New York or
its jurisdiction of formation outside of the State of Delaware without 30 days’
prior written notice to the Owner Trustee and the Trustee and (b) will
promptly take all actions (if any) required (including, but not limited to, all
filings and other acts necessary or advisable under the UCC of each relevant
jurisdiction) in order to continue the first priority perfected security
interest of the Trustee in all Loans.

Section 6.16.                         Liability of Trust
Depositor

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

Section 6.17.                         Bankruptcy Limitations

The Trust
Depositor shall not, without the affirmative vote of a majority of the managers
of the Trust Depositor (which must include the affirmative vote of at least one
(1) duly appointed Independent managers) (a) dissolve or liquidate,
in whole or in part, or institute proceedings to be adjudicated bankrupt or
insolvent, (b) consent to the institution of bankruptcy or insolvency
proceedings against it, (c) file a petition seeking or consent to
reorganization or relief under any applicable federal or state law relating to
bankruptcy, (d) consent to the appointment of a receiver, liquidator,
assignee, trustee, sequestrator (or other similar official) of the limited
liability company or a substantial part of its property, (e) make a
general assignment for the benefit of creditors, (f) admit in writing its
inability to pay its debts generally as they become due, or (g) take any
limited liability company action in furtherance of the actions set forth in clauses
(a) through (f) above; provided
that no manager may be required by any member of the Trust Depositor to consent
to the institution of bankruptcy or insolvency proceedings against the Trust
Depositor so long as it is Solvent.  The
provisions of this Section 6.17 shall survive the termination of
this Agreement.

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Section 6.18.                         Limitation on Liability of
Trust Depositor and Others

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

Section 6.19.                         Insurance Policies

Upon and after an
Event of Default or Servicer Default, the Trust Depositor will cause to be
performed any and all acts reasonably required to be performed to preserve the
rights and remedies of the Trustee and the Issuer in any insurance policies
applicable to the Loans or to transfer the Servicer’s rights and remedies
therein to the Successor Servicer appointed pursuant to Section 8.03,
including, without limitation, in each case, any necessary notifications of
insurers, assignments of policies or interests therein, and establishments of
co-insured, joint loss payee and mortgagee rights in favor of the Trustee, the
Issuer, or the Successor Servicer, respectively.

Section 6.20.                         Payments from Obligors

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

ARTICLE VII.

ESTABLISHMENT OF ACCOUNTS;

DISTRIBUTIONS; RESERVE FUND

Section 7.01.                         Note Distribution Account,
Certificate Account, Class A-1A VFN Funding Account and Reserve Fund

(a)                                  On
or before the Closing Date, the Servicer (i) shall establish the Note
Distribution Account with and in the name of the Trustee for the benefit of the
Securityholders and (ii) shall establish with and in the name of the
Trustee the Class A-1A VFN Funding Account for the benefit of the
Securityholders.  On or before the
Closing Date, the Trust Depositor shall establish the Reserve Fund in the name
of, and to be maintained by, the Trustee. 
The Paying Agent under the Trust Agreement shall establish and maintain
with the Trustee the Certificate Account as a non-interest bearing trust
account.  The Servicer and Trustee (so
long as such account is maintained with the Trustee) are hereby required to
ensure that each of the Note

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Distribution Account and
the Reserve Fund is established and maintained as an Eligible Deposit Account
with a Qualified Institution.  If any
institution with which any of the accounts are established pursuant to this Section 7.01(a) ceases
to be a Qualified Institution, the Servicer, or if the Servicer fails to do so,
the Trustee (as the case may be) shall within ten Business Days establish a
replacement account at a Qualified Institution after notice of such event.  In no event shall the Trustee be responsible
for monitoring whether such institution shall remain a Qualified Institution.  Each Qualified Institution maintaining an
Eligible Deposit Account shall agree in writing to comply with all instructions
originated by the Trustee or, with respect to the Principal and Interest
Account only, the Servicer directing disposition of the funds in the Eligible
Deposit Account without the further consent of the Trust Depositor or the
Issuer.

(b)                                 Prior
to the occurrence of a Servicer Default or an Event of Default, to the extent
there are uninvested available amounts deposited in the Principal and Interest
Account or in the Reserve Fund on or before 3:00 p.m. (New York City
time), all such amounts shall be invested in Permitted Investments selected by
the Servicer in written instructions (which may be in the form of standing
instructions) delivered to the Trustee and to the Qualified Institution holding
such Transaction Account, if other than the Trustee, that mature no later than
the Business Day immediately preceding the next Distribution Date; to the
extent that there are uninvested available funds deposited after 3:00 p.m.  (New York City time), such funds shall be
swept into the overnight funds investment which shall be a Permitted Investment
selected by the Servicer in written instructions (which may be in the form of
standing instructions) delivered to the Trustee and to the Qualified
Institution holding such Transaction Account, if other than the Trustee.  From and after the occurrence of a Servicer
Default or an Event of Default, to the extent there are uninvested amounts in
the Principal and Interest Account or in the Reserve Fund (net of any losses
and investment expenses), all amounts may be invested in Permitted Investments
described in clause (vi) of the definition thereof selected by the
Trustee and if any such Transaction Account is held by a Qualified Institution
other than the Trustee, then upon written instructions (which may be in the
form of standing instructions) from the Trustee to such Qualified Institution,
that mature no later than the Business Day immediately preceding the next
Distribution Date.  Once such funds are
invested, the Trustee shall not change the investment of such funds other than
in connection with the withdrawal or liquidation of such investments and the
transfer of such funds as provided herein on or prior to the next succeeding
Distribution Date.  Subject to the
restrictions herein, the Servicer or Trustee may purchase a Permitted
Investment from itself or an Affiliate with respect to investment of funds in
the Transaction Accounts.  Subject to the
other provisions hereof, the Servicer in the case of the Principal and Interest
Account and the Class A-1A VFN Funding Account and the Trustee in the case
of all other Transaction Accounts shall have sole control over each such
investment and the income thereon, and any certificate or other instrument
evidencing any such investment, if any, shall be delivered directly to the
Servicer or its agent or the Trustee or its agent, as applicable, together with
each document of transfer, if any, necessary to transfer title to such
investment to the Servicer or Trustee, as applicable, in a manner which
complies with this Section 7.01. 
All Investment Earnings on investments of funds in the Transaction
Accounts shall be deposited in the Principal and Interest Account pursuant to Section 7.03
and distributed on the next Distribution Date pursuant to Section 7.05.  The Trust Depositor and the Issuer agree and
acknowledge that the Servicer and Trustee are to have “control” (within the
meaning of the UCC) of collateral comprised of “investment property” (within
the meaning of the UCC) for all purposes of this Agreement.  In the absence of timely written direction
from the Servicer or the Trust Depositor,

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the Trustee shall invest
amounts in the Note Distribution Account and the Reserve Fund Account in
Permitted Investments of the type specified in clause (vi) of the
definition of Permitted Investments herein.

(c)                                  On
or prior to the Closing Date, the Servicer will establish the Class A-1A
VFN Funding Account for the benefit of the Securityholders in accordance with clause
(a) of this Section 7.01 and into which amounts will be
deposited from time to time in accordance with the Priority of Payments and in
the circumstances described herein, including in connection with a Draw funded
by a Class A-1A VFN Noteholder that has failed to satisfy the Rating
Criteria.  Amounts standing to the credit
of the Class A-1A VFN Funding Account may be withdrawn by the Servicer on
behalf of the Issuer at any time to fund Exposure Amounts with respect to
Revolving Loans and Delayed Draw Term Loans and may be applied during the
Ramp-up Period and the Replenishment Period to acquire Additional Loans.  Any interest earned on Permitted Investments
held in the Class A-1A VFN Funding Account will be applied as Interest
Collections.

(d)                                 The
Servicer will deposit amounts representing payments sent by Obligors and by
paying agents under Agented Loans with respect to Loans pledged to the Trustee
as well as with respect to Loans not pledged to the Trustee to the Principal
and Interest Account.

Section 7.02.                         [Reserved]

Section 7.03.                         Principal and Interest
Account

(a)                                  The
Servicer shall cause to be established and maintained with and in the name of
the Trustee the Principal and Interest Account including two subaccounts, one
designated as the Interest Collection Account and the other designated as the
Principal Collection Account titled “Principal and Interest Account for Ares
Capital Corporation, its successors and assigns as Servicer for ARCC Commercial
Loan Trust 2006 subject to the lien of U.S. Bank National Association, its
successors and assigns, as Trustee on behalf of the registered holders of ARCC
Commercial Loan Trust 2006, Series 2006 Notes”.  The Principal and Interest Account shall be
held in one or more Eligible Deposit Accounts with a Qualified Institution in
the form of time deposit or demand accounts, which may be interest-bearing or
such accounts may be trust accounts wherein the moneys therein are invested in
Permitted Investments titled “Ares Capital Corporation, as Servicer, in trust
for the registered holders of Ares Capital Loan Trust Notes, Series 2006 Class A-1A,
Class A-1A VFN, Class A-1B, Class A-2A Notes, Class A-2B
Notes, Class B, Class C, Class D, and Class E Notes”.  All funds in such Principal and Interest
Account not so invested shall be insured to the extent and the amount permitted
by the BIF or SAIF of the FDIC to the maximum extent provided by law.  The creation of any Principal and Interest
Account shall be evidenced by a letter agreement in the form of Exhibit E.  A copy of such letter agreement shall be
furnished to the Trustee, the Owner Trustee, the Servicer, and, upon request,
any Securityholder.  The Servicer may,
upon written notice to the Trustee, transfer any Principal and Interest Account
to a different Eligible Deposit Account.

(b)                                 The
Servicer shall deposit or cause to be deposited (within two Business Days of
receipt thereof) in the applicable Principal and Interest Account and retain
therein, subject to withdrawal as permitted by this Section 7.03,
the following amounts received by the

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Servicer (and shall
segregate and deposit Interest Collections into the Interest Collections
Account and Principal Collections into the Principal Collection Account):

(i)                                     all
Principal Collections accruing and received on or after the Closing Date or the
related Cut-Off Date, as applicable;

(ii)                                  all
Interest Collections accruing and received on or after the Closing Date;

(iii)                               all
Insurance Proceeds (other than amounts to be applied to restoration or repair
of any Related Property or to be released to the Obligor, other creditors or
any other Person in accordance with the Required Loan Documents, the Credit and
Collection Policy and the Servicing Standard);

(iv)                              any
other proceeds from any other Related Property securing the Loans (other than
amounts released to the Obligor, other creditors or any other Person in
accordance with Applicable Law, the Required Loan Documents, the Credit and
Collection Policy and the Servicing Standard);

(v)                                 any
amounts paid in connection with the purchase or repurchase of any Loan;

(vi)                              any
amount required to be deposited in the Principal and Interest Account pursuant
to Section 5.10 or this Section 7.03; and

(vii)                           the
amount of any gains and interest incurred in connection with investments in
Permitted Investments.

(c)                                  The
Servicer shall have no obligation to deposit into the Principal and Interest
Account any Excluded Amounts.

(d)                                 Not
later than the close of business on each Determination Date immediately
preceding a Distribution Date, the Servicer will remit to the Principal and
Interest Account any Scheduled Payment Advance that the Servicer determines to
make.

(e)                                  Notwithstanding
Section 7.03(b), if: (i) at any time during the Replenishment
Period the Issuer receives a payment of principal with respect to a Revolving
Loan and, after giving effect to such payment (and any corresponding increase
in the Exposure Amount), the Class A-1A VFN Funding Test is not satisfied,
the Servicer will transfer an amount of Principal Collections sufficient to
cause the Class A-1A VFN Funding Test to be satisfied from the Principal
Collection Account to the Class A-1A VFN Funding Account; (ii) the
Servicer: (A) makes a deposit into the Principal and Interest 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 (B) 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 Principal and Interest Account to reflect such
dishonored check or mistake, and any Scheduled

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Payment in respect of
which a dishonored check is received shall be deemed not to have been paid.

(f)                                    The
foregoing requirements for deposit in the Principal and Interest Accounts shall
be exclusive, it being understood and agreed that, without limiting the
generality of the foregoing, payments with respect to the Servicing Fee,
Liquidation Expenses and Excluded Amounts may not be deposited by the Servicer
in the Principal and Interest Account.

(g)                                 So
long as no Servicer Default shall have occurred and be continuing, and
consistent with any requirements of the Code, the Principal and Interest
Account shall either be maintained within an Eligible Deposit Account as an
interest-bearing account meeting the requirements set forth in Section 7.03(a),
or the funds held therein may be invested by the Servicer (to the extent
practicable) in Permitted Investments, as directed in writing by the Servicer,
and, in each case, with a stated maturity date (giving effect to any applicable
grace period) no later than the Business Day immediately preceding the
Distribution Date next following the Due Period in which the date of investment
occurs.  All Permitted Investments must
be held by or registered in the name of “Ares Capital Corporation, as Servicer,
in trust for the registered holders of ARCC Commercial Loan Trust 2006, Series 2006
Notes”.  Any Investment Earnings on funds
held in the Principal and Interest Account shall be deemed part of the Interest
Collection Account and shall be deposited therein pursuant to Section 7.03
and distributed on the next Distribution Date pursuant to Section 7.05.  The amount of any losses incurred in
connection with the investment of funds in the Principal and Interest Account
in Permitted Investments directed by the Servicer shall be deposited in the
Principal and Interest Account by the Servicer from its own funds immediately
as realized without reimbursement therefor.

(h)                                 The
Servicer may (and, for the purposes of clause (i) below, shall), at
any time upon one Business Day’s notice to the Trustee (so long as it is held
by the Trustee), make withdrawals from the Principal and Interest Account for
the following purposes:

(i)                                     to
remit to the Trustee on the Business Day immediately preceding a Distribution
Date, for deposit in the Note Distribution Account, Interest Collections and
Principal Collections received during the immediately preceding Due Period
(other than such amounts which are deemed herein not to be Principal
Collections at such time);

(ii)                                  subject
to Section 5.02(q), to reimburse itself for any unreimbursed
Scheduled Payment Advances and Servicing Advances, together with accrued and
unpaid interest due thereon, to the extent deposited in the Principal and
Interest Account (and not netted from Scheduled Payments or other amounts
received from the Obligor of the related Loans or from other proceeds received
with respect to such Obligor or the Related Property);

(iii)                               to
withdraw any amount received from an Obligor that is recoverable and sought to
be recovered as a voidable preference by a trustee in bankruptcy pursuant to
the United States Bankruptcy Code in accordance with a final, nonappealable
order of a court having competent jurisdiction;

(iv)                              to
make investments in Permitted Investments;

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(v)                                 to
withdraw any funds deposited in the Principal and Interest Account that were
not required or permitted to be deposited therein or were deposited therein in
error;

(vi)                              prior
to a Servicer Default, to pay itself certain additional servicing compensation
as permitted under Section 5.11(b);

(vii)                           to
purchase Substitute Loans pursuant to Section 11.01, to the extent
funds have previously been deposited by the Originator for such purpose;

(viii)                        during
the Ramp-Up Period and the Replenishment Period, to acquire Additional Loans
pursuant to Section 2.06;

(ix)                                to
clear and terminate the Principal and Interest Account upon the termination of
the Agreement; and

(x)                                   to
make scheduled periodic payments (excluding any termination payments) due under
any Asset Specific Swap to the extent Interest Collections deposited in the Principal
and Interest Account from the specific related Loan (and not netted from
Scheduled Payments or other amounts received from the Obligor of the related
Loan or from other proceeds received with respect to such Obligor or the
Related Property).

Section 7.04.                         Securityholder
Distributions

(a)                                  Each
Securityholder as of the related Record Date shall be paid on the next
succeeding Distribution Date by check mailed to such Securityholder at the
address for such Securityholder appearing on the Note Register or Certificate
Register or by wire transfer to the account directed by such Securityholder if
such Securityholder provides written instructions to the Trustee, or Owner
Trustee, respectively, at least ten days prior to such Distribution Date, which
instructions may be in the form of a standing order.

(b)                                 The
Trustee shall serve as the Paying Agent hereunder and shall make the payments
to the Securityholders required hereunder. 
The Trustee hereby agrees that all amounts held by it for payment
hereunder will be held in trust for the benefit of the Securityholders.

Section 7.05.                         Allocations and
Distributions

(a)                                  Interest
Allocations.  On each Distribution
Date, (i) the Trustee shall deposit into the Note Distribution Account all
funds on deposit in the Reserve Fund and (ii) the Trustee shall withdraw,
in accordance with the Quarterly Report, from the Note Distribution Account (A) the
Interest Collections and (B) amounts deposited therein from the Reserve
Fund to the extent necessary to make the following payments.  The payments listed below will be made only
to the extent there are sufficient amounts available in the Note Distribution
Account on the Distribution Date; provided
that if on the initial Distribution Date, the amounts on deposit in the Note
Distribution Account are not sufficient to make the following payments, the
Servicer may make a Servicing Advance to the extent of the deficiency (subject
to the Servicer’s reasonable expectation that the payments on the Loans with
respect to which such Servicing Advance is made will be paid on the next
payment date under the Loans) by making a deposit in

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the Note Distribution
Account no later than the Business Day preceding such Distribution Date.  Payments will be made in the order of
priority listed below.  With respect to pro rata payments of principal on the
Notes, such payments shall be made pro rata
to the Classes of Notes then outstanding based on the respective Outstanding
Principal Balance of each such Class of Notes as of the last day of the
Due Period as set forth in the Quarterly Report.  If on any Pro Rata Distribution Date the
Outstanding Principal Balance of any Class of Notes shall be reduced to
zero after application of any payments in respect of principal on such
Distribution Date, the amount remaining for distribution in respect of
principal on such date shall be distributed pro
rata to the Classes of Notes which then have Outstanding Principal
Balances based on the respective original principal amounts of such Classes of
Notes.  Payments shall be made in the
following order of priority:

1.                                       pro rata, based on the amounts payable
under this clause 1, to the payment of Administrative Expenses, subject
to the limitations set forth in the definition thereof;

2.                                       to
the Servicer, to the extent not previously reimbursed, the sum of (i) Scheduled
Payment Advances relating to interest on the Loans, together with accrued
interest thereon, from Interest Collections received on the Loans for which
such Scheduled Payment Advances were made, (ii) Servicing Advances,
together with accrued interest thereon, from Interest Collections received on
the Loans for which such Servicing Advances were made and (iii) all
Nonrecoverable Advances relating to interest, together with accrued interest
thereon;

3.                                       to
the Servicer, its accrued and unpaid Senior Servicing Fee;

4.                                       pro rata, based on the amounts payable
under this clause 4, to the Class A-1 Noteholders and the Class A-2
Noteholders; provided that:

(a)                                  all
Interest Collections allocated to the Class A-1 Noteholders shall be
distributed in the following order of priority: (1) pro rata based upon amounts payable under
this clause (4)(a)(1) (A) to the Class A-1A Noteholders, the Class A-1A
Interest Amount for the related Interest Period and the Class A-1A
Interest Shortfall, if any, and (B) to the Class A-1A VFN
Noteholders, the Commitment Fee Amount, the Class A-1A VFN Interest Amount
for the related Interest Period and the Class A-1A VFN Interest Shortfall,
if any, and (2) to the Class A-1B Noteholders, the Class A-1B
Interest Amount for the related Interest Period and the Class A-1B
Interest Shortfall, if any; and

(b)                                 all
Interest Collections allocated to the Class A-2 Noteholders shall be
distributed in the following order of priority: (1) to the Class A-2A
Noteholders, the Class A-2A Interest Amount for the related Interest
Period and the Class A-2A Interest Shortfall, if any, and (2) to the Class A-2B
Noteholders, the Class A-2B Interest Amount for the related Interest
Period and the Class A-2B Interest Shortfall, if any;

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5.                                       to
the Class B Noteholders, the Class B Interest Amount for the related
Interest Period and the Class B Interest Shortfall, if any;

6.                                       to
the Class C Noteholders, the Class C Interest Amount for the related
Interest Period and the Class C Interest Shortfall, if any;

7.                                       to
the Class D Noteholders, the Class D Interest Amount for the related
Interest Period and the Class D Interest Shortfall, if any;

8.                                       (i) prior
to the occurrence of a Servicer Default or an Event of Default, an amount equal
to the Additional Principal Amount, to be paid as follows:

(a)                                  if
such Distribution Date is a Pro Rata Distribution Date, to the Class A-1A
Noteholders, Class A-1A VFN Noteholders, Class A-1B Noteholders, Class A-2A
Noteholders and Class A-2B Noteholders, the Class B Noteholders, the Class C
Noteholders, and the Class D Noteholders, pro
rata, until the Additional Principal Amount is reduced to zero; and

(b)                                 if
such Distribution Date is a Sequential Distribution Date, to the Class A
Noteholders, the Class B Noteholders, the Class C Noteholders and Class D
Noteholders, sequentially until the Additional Principal Amount is reduced to
zero, as follows:

(I)                                    to
the Class A-1 Noteholders and the Class A-2 Noteholders, pro rata, until the Outstanding Principal
Balance of the Class A Notes is reduced to zero; provided that (A) amounts paid to the
Class A-1 Noteholders will be paid to the Class A-1A Notes and Class A-1A
VFN Notes pro rata based on their
Outstanding Principal Balances prior to the Class A-1B Notes and (B) amounts
paid to the Class A-2 Noteholders will be paid to the Class A-2A
Notes prior to the Class A-2B Notes;

(II)                                to
the Class B Noteholders, the Class B Accrued Payable, if any;

(III)                            to
the Class B Noteholders until the Outstanding Principal Balance of the Class B
Notes is reduced to zero;

(IV)                            to
the Class C Noteholders, the Class C Accrued Payable, if any;

(V)                                to
the Class C Noteholders until the Outstanding Principal Balance of the Class C
Notes is reduced to zero;

(VI)                            to
the Class D Noteholders, the Class D Accrued Payable, if any; and

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(VII)                        to
the Class D Noteholders until the Outstanding Principal Balance of the Class D
Notes is reduced to zero;

(ii)                                  on
and after the occurrence of a Servicer Default or an Event of Default, the
Interest Distributable Amount will be treated as funds available for principal
distributions and will be distributed in accordance with Section 7.05(b)(II);

9.                                       to
the Reserve Fund, until the amount therein equals the Required Reserve Amount;

10.                                 to
the Servicer, its accrued and unpaid Subordinated Servicing Fee;

11.                                 to
the Class A-1A VFN Noteholders, any accrued and unpaid Class A-1A VFN
Increased Costs and Class A-1A VFN Breakage Costs;

12.           to the Servicer, to the extent not
reimbursed pursuant to clause 2 above, reimbursement for the amount of any
Scheduled Payment Advances relating to interest on the Loans, together with
accrued interest thereon;

13.                                 pro rata, based on the amounts owed to
such Persons under this clause 13, Administrative Expenses, to the
extent not paid pursuant to clause 1 due to the limitations set forth in
the definition thereof, and any other amounts payable to the Trustee, the Class A-1A
VFN Note Agent, the Owner Trustee, the Collateral Administrator and the Backup
Servicer related to indemnification, and, to the Trustee, the Collateral
Administrator, the Backup Servicer and any Successor Servicer, any Servicing
Transfer Costs payable to such party to the extent not paid pursuant to clause
1; and

15.                                 any
remaining amounts to the Certificateholders.

(b)                                 (I)
Principal Allocations on any Pro Rata Distribution Date.  On each Pro Rata Distribution Date, the
Trustee will distribute all Principal Collections and all other funds available
for principal distributions on deposit in the Note Distribution Account, in
accordance with the Quarterly Report, to the extent there are sufficient funds,
to the following parties in the order of priority listed below.  With respect to pro rata payments of principal of the Notes, such payments
shall be made pro rata to the
Classes then outstanding based on the respective Outstanding Principal Balances
of each such Class of Notes as of the last day of the related Due Period,
as set forth in the Quarterly Report.  If
on any Pro Rata Distribution Date the Outstanding Principal Balance of any Class shall
be reduced to zero after application of any payments in respect of principal on
such Distribution Date, the amount remaining for distribution in respect of
principal on such date shall be distributed pro
rata to the Classes of Notes which then have Outstanding Principal
Balances based on the respective original principal amounts of such Classes of
Notes.  On any Pro Rata Distribution Date
during the Ramp-Up Period and the Replenishment Period, payments of principal
to the Class A-1A VFN Notes may be applied, in the Servicer’s discretion
and in proportions as the Servicer may determine, (i) to repay the
Outstanding Principal Balance of the Class A-1A VFN Notes and/or (ii) to
the Class A-1A VFN Funding Account. 
On any Pro Rata Distribution Date, principal payments on the Notes will
be made to the Class A Notes, the Class B Notes, the Class C
Notes, the Class D Notes and the

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Class E Notes, pro rata until the Outstanding Principal
Balance of each such Class of Notes is reduced to zero.  Payments shall be made in the following order
of priority:

1.                                       to
the Servicer, to the extent not previously reimbursed, from Principal
Collections received from the specific Loans for which Scheduled Payment
Advances or Servicing Advances were made, as applicable, reimbursement for the
amount of any such Scheduled Payment Advances or Servicing Advances relating to
the principal on such Loans, together with accrued interest thereon;

2.                                       during
the Ramp-Up Period and the Replenishment Period, to the Class A-1A VFN
Noteholders, in the Servicer’s discretion and in such amounts as the Servicer
may determine to repay the principal of the Class A-1A VFN Notes;

3.                                       to
the Class A-1A VFN Funding Account, the amount required to cause the Class A-1A
VFN Funding Test to be satisfied;

4.                                       during
the Ramp-Up Period and the Replenishment Period, all remaining Principal
Collections shall be deposited to the Principal Collection Account for use in
the acquisition of Additional Loans; provided
that no Principal Collections constituting the Special Redemption Amount shall
be deposited to the Principal Collection Account pursuant to this clause 4
but shall be distributed pursuant to clause 5;

5.                                       after
the Replenishment Period (or, in the case of the Special Redemption Amount, on
any Distribution Date), to the Class A-1A Noteholders, the Class A-1A
VFN Noteholders, the Class A-1B Noteholders, the Class A-2A
Noteholders, the Class A-2B Noteholders, the Class B Noteholders, the
Class C Noteholders, the Class D Noteholders and the Class E
Noteholders, pro rata until the
Outstanding Principal Balance of each such Class of Notes is reduced to
zero;

6.                                       to
the Servicer, to the extent not reimbursed pursuant to clause 1 above,
reimbursement for the amount of (i) any Scheduled Payment Advances
relating to principal on the Loans, together with accrued interest thereon, (ii) Servicing
Advances, together with accrued interest thereon and (iii) all
Nonrecoverable Advances (other than those relating to interest), together with
accrued interest thereon;

7.                                       to
the Servicer, an amount equal to its accrued and unpaid Servicing Fee, to the
extent not previously paid;

8.                                       pro rata, to the persons entitled thereto,
based upon the amounts owed to such Persons under this clause 8,
Administrative Expenses, to the extent not previously paid, and amounts owed to
the Trustee, the Class A-1A VFN Note Agent, the Collateral Administrator,
the Owner Trustee and the Backup Servicer for fees and expenses and other
amounts, including such amounts related to indemnification, and, to the Trustee,
the Backup Servicer, Collateral Administrator, and any Successor Servicer, to
the extent not previously paid, any Servicing Transfer Costs payable to such
party to the extent not previously paid; and

9.                                       any
remaining Principal Collections to the Certificateholders.

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(II)                                Principal
Allocations on any Sequential Distribution Date.  On each Sequential Distribution Date, the
Trustee will distribute all Principal Collections and all other funds available
for principal distributions on deposit in the Note Distribution Account, in
accordance with the Quarterly Report, to the extent there are sufficient funds,
to the following parties in the order of priority listed below:

1.                                       to
the Servicer, to the extent not previously reimbursed, from Principal Collections
received from the specific Loans for which Scheduled Payment Advances or
Servicing Advances were made, as applicable, reimbursement for the amount of
any such Scheduled Payment Advances or Servicing Advances relating to the
principal on such Loans, together with accrued interest thereon;

2.                                       to
the Class A-1A VFN Funding Account, the amount required to cause the Class A-1A
VFN Funding Test to be satisfied;

3.                                       pro rata, based on the amounts payable
under this clause 3, to the Class A-1 Noteholders and the Class A-2
Noteholders;

provided
that all Principal Collections allocated to the Class A-1 Noteholders
shall be paid as follows:

(a)                                  to
the Class A-1 Noteholders, in the following order of priority:

(1)                                  pro rata (A) to the Class A-1A
Noteholders, the Class A-1A Interest Amount for the related Interest
Period and the Class A-1A Interest Shortfall, if any, and (B) to the Class A-1A
VFN Noteholders, the Commitment Fee Amount, the Class A-1A VFN Interest
Amount for the related Interest Period and the Class A-1A VFN Interest
Shortfall, if any;

(2)                                  pro rata to the Class A-1A
Noteholders and the Class A-1A VFN Noteholders until the Outstanding
Principal Balance of the Class A-1A Notes and Class A-1A VFN Notes is
reduced to zero;

(3)                                  to
the Class A-1B Noteholders, the Class A-1B Interest Amount for the
related Interest Period and the Class A-1B Interest Shortfall Amount, if
any; and

(4)                                  to
the Class A-1B Noteholders until the Outstanding Principal Balance of the Class A-1B
Notes is reduced to zero;

provided further
that all Principal Collections allocated to the Class A-2 Noteholders will
be paid as follows:

(b)                                 to
the Class A-2 Noteholders, in the following order of priority:

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(1)                                  to
the Class A-2A Noteholders, the Class A-2A Interest Amount for the
related Interest Period and the Class A-2A Interest Shortfall, if any;

(2)                                  to
the Class A-2A Noteholders until the Outstanding Principal Balance of the Class A-2A
Notes is reduced to zero;

(3)                                  to
the Class A-2B Noteholders, the Class A-2B Interest Amount for the
related Interest Period and the Class A-2B Interest Shortfall Amount, if
any; and

(4)                                  to
the Class A-2B Noteholders until the Outstanding Principal Balance of the Class A-2B
Notes is reduced to zero;

4.                                       to
the Class B Noteholders, in the following order: (i) any unpaid Class B
Interest Amount, (ii) any unpaid Class B Interest Shortfall and (iii) the
Class B Accrued Payable, if any;

5.                                       to
the Class B Noteholders until the Outstanding Principal Balance of the Class B
Notes is reduced to zero;

6.                                       to
the Class C Noteholders, in the following order: (i) any unpaid Class C
Interest Amount, (ii) any unpaid Class C Interest Shortfall and (iii) the
Class C Accrued Payable, if any;

7.                                       to
the Class C Noteholders until the Outstanding Principal Balance of the Class C
Notes is reduced to zero;

8.                                       to
the Class D Noteholders, in the following order: (i) any unpaid Class D
Interest Amount, (ii) any unpaid Class D Interest Shortfall and (iii) the
Class D Accrued Payable, if any;

9.                                       to
the Class D Noteholders until the Outstanding Principal Balance of the Class D
Notes is reduced to zero;

10.                                 to
the Servicer, to the extent not reimbursed pursuant to clause 1 above,
reimbursement for the amount of (i) any Scheduled Payment Advances
relating to principal on the Loans, together with accrued interest thereon, (ii) Servicing
Advances, together with accrued interest thereon and (iii) all
Nonrecoverable Advances (other than those relating to interest), together with
accrued interest thereon;

11.                                 to
the Servicer, an amount equal to its accrued and unpaid Servicing Fee, to the
extent not previously paid;

12.                                 pro rata, based upon the amounts owed to
such Persons under this clause 13, to the payment of Administrative
Expenses, to the extent not previously paid, amounts

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owed to the Trustee, the Class A-1A
VFN Note Agent, the Owner Trustee, the Collateral Administrator and the Backup
Servicer for fees and expenses and other amounts, including such amounts
related to indemnification, and, to the Trustee, the Backup Servicer, the
Collateral Administrator and any Successor Servicer, any Servicing Transfer
Costs payable to such party to the extent not previously paid;

13.                                 to
the Class E Noteholders until the Outstanding Principal Balance of the Class E
Notes is reduced to zero; and

14.                                 any
remaining Principal Collections to the Certificateholder.

Section 7.06.                         Determination of LIBOR

(a)                                  The
Trustee will determine the interest rate for each Interest Period by
determining the London interbank offered rate (“LIBOR”) for deposits in
U.S. Dollars for a period of three months (the “Three Month Index Maturity”)
which appears on Telerate Page 3750 as of 11:00 a.m., London time, on
the day that is two London Banking Days preceding that Interest Period (“LIBOR
Determination Date”).  If such rate
does not appear on Telerate Page 3750 on the related LIBOR Determination
Date, the rate for that Interest Period will be determined as if the parties
had specified “USD-LIBOR-Reference Banks” as the applicable rate.  “USD-LIBOR-Reference Banks” means that
the interest rate for an Interest Period will be determined on the basis of the
rates at which deposits in U.S. Dollars are offered by the Reference Banks at
approximately 11:00 a.m., London time, on the related LIBOR Determination
Date to prime banks in the London interbank market for the Three Month Index
Maturity commencing on the beginning of that Interest Period and in a
Representative Amount.  The Trustee will
request the principal London office of each of the Reference Banks to provide a
quotation of its rate.  If at least two
such quotations are provided, the rate for that Interest Period will be the
arithmetic mean of the quotations.  If
fewer than two quotations are provided as requested, the rate for that Interest
Period will be the arithmetic mean of the rates quoted by major banks in New
York City, selected by the Trustee, at 11:00 a.m., New York City time, on
the beginning of that Interest Period for loans in U.S. Dollars to leading
European banks for the Three Month Index Maturity commencing at the beginning
of that Interest Period and in a Representative Amount.

(b)                                 In
the case of the Class A-1A VFN Notes, for any Interest Period (other than
the First Interest Period) having a term other than three months, LIBOR shall
be determined through the use of straight-line interpolation by reference to
two rates calculated in accordance with the foregoing procedures, one of which
shall be determined as if such maturity of the U.S. Dollar deposits referred to
therein were the period of time for which rates are available next shorter than
such Interest Period and the other of which will be determined as if such
maturity were the period of time for which rates are available next longer than
such Interest Period; provided
that, if an Interest Period is less than or equal to seven days, then LIBOR
shall be determined by reference to a rate calculated in accordance with Section 7.06(a) as
if such maturity of the U.S. Dollar deposits referred to therein were a period
of time equal to seven days; provided
further that for purposes of this
Section 7.06(b), the LIBOR Determination Date shall be the date on
which notice of a proposed Draw is given by the Issuer to the Class A-1A
VFN Agent pursuant to the Class A-1A VFN Purchase Agreement.

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(c)                                  With
respect to an Interest Period having a designated maturity other than three
months, LIBOR shall be determined through the use of a straight-line
interpolation by reference to two rates calculated in accordance with Section 7.06(a),
one of which shall be determined as if the maturity of the U.S. Dollar deposits
referred to therein were the period of time for which rates are available next
shorter than such Interest Period, and the other of which shall be determined
as if the maturity were the period of time for which rates are available next
longer than such Interest Period.

(d)                                 The
establishment of LIBOR on the applicable London Banking Day by the Trustee and
the Trustee’s subsequent calculation of the rates of interest applicable to the
Notes for the related Distribution Date shall, in the absence of manifest
error, be final and binding.  Each such
rate of interest may be obtained by access to the Trustee’s website.

ARTICLE VIII.

SERVICER DEFAULT; SERVICER TRANSFER

                                                Section 8.01.                         Servicer Default

“Servicer Default”
means the occurrence of any of the following:

(a)                                  any
failure by the Servicer to remit or cause to be remitted when due any payment
required to be remitted by the Servicer made under the terms of this Agreement
or the other Transaction Documents which continues unremedied for a period of
two Business Days, it being understood that the Servicer shall not be
responsible for the failure of either the Issuer or the Trustee to remit funds
that were received by the Issuer or the Trustee from or on behalf of the
Servicer in accordance with this Agreement or the other Transaction Documents;
or

(b)                                 failure
by 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 the
other Transaction Documents, or any representation or warranty of the Servicer
made in this Agreement or the other Transaction Documents or in any certificate
delivered thereto proves to have been incorrect when made, and which failure or
breach has a Material Adverse Effect on the rights of the Noteholders and which
failure continues unremedied for a period of 30 days (if such failure or breach
can be remedied) 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 a Responsible Officer of the Servicer by the Trustee, or a Responsible
Officer of the Servicer and the Trustee by the Holders of at least 25% of the
Aggregate Outstanding Principal Balance of the Notes, and (ii) the date on
which a Responsible Officer of the Servicer receives actual knowledge of such
failure or breach; or

(c)                                  a
decree or order of a court or agency or supervisory authority having
jurisdiction for the appointment of a conservator or receiver or liquidator in
any Insolvency Proceedings, or for the winding-up or liquidation of its
affairs, shall have been entered against the Servicer and such decree or order
shall have remained in force, undischarged or unstayed for a period of 60
consecutive days; or

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(d)                                 the
Servicer shall consent to the appointment of a conservator or receiver or
liquidator in any Insolvency Proceedings of or relating to the Servicer or of
or relating to all or substantially all of the Servicer’s property; or

(e)                                  the
Servicer shall file a petition to take advantage of any applicable Insolvency
Laws, make an assignment for the benefit of its creditors or generally fail to
pay its debts as they become due; or

(f)                                    without
the consent of the Majority Noteholders, the Servicer agrees or consents to, or
otherwise permits to occur, any material amendment, modification, change,
supplement or rescission of or to the Credit and Collection Policy or the
Servicing Standard, in whole or in part, that would have a Material Adverse
Effect on the Collateral; provided
that such consent shall not be required in the case of an amendment which was
mandated by Applicable Law or any Governmental Authority; or

(g)                                 failure
by the Servicer to observe or perform the Credit and Collection Policy or the
Servicing Standard regarding the servicing of the Loans in any manner that
would have a Material Adverse Effect on the Loans and continues unremedied for
a period of 30 days (if such failure or breach can be remedied) 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 a Responsible Officer of the
Servicer by the Trustee, or a Responsible Officer of the Servicer and the
Trustee by Holders of at least 25% of the Aggregate Outstanding Principal
Balance of the Notes, and (ii) the date on which a Responsible Officer of
the Servicer receives actual knowledge of such failure or breach; or

(h)                                 the
Servicer shall cease to be managed by Ares Capital Management LLC.

Section 8.02.                         Servicer Transfer

(a)                                  If
a Servicer Default has occurred and is continuing, the Majority Noteholders
may, by written notice (a “Termination Notice”) delivered to the parties
hereto, terminate all (but not less than all) of the Servicer’s management,
administrative, servicing, custodial and collection functions; provided no Termination Notice shall be
required as a condition to termination with respect to any Servicer Default
described under Section 8.01(c), Section 8.01(d) and
Section 8.01(e).

(b)                                 Upon
delivery of the notice contemplated by Section 8.02(a) (or, if
later, on a date designated therein or, without notice if permitted under Section 8.02(a)),
and on the date that a Successor Servicer shall have been appointed and
accepted such appointment pursuant to Section 8.03 (such
appointment being herein called a “Servicer Transfer”), all rights,
benefits, fees, indemnities, authority and power of the Servicer under this
Agreement, whether with respect to the Loans, the Loan Files or otherwise,
shall pass to and be vested in such successor (the “Successor Servicer”)
pursuant to and under this Section 8.02; and, without limitation,
the Successor Servicer is authorized and empowered to execute and deliver on
behalf of the Servicer, as attorney-in-fact or otherwise, any and all documents
and other instruments, and to do any and all acts or things necessary or
appropriate to effect the purposes of such notice of termination.  The Servicer agrees to cooperate with the
Successor Servicer in effecting the

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termination of the
responsibilities and rights of the Servicer hereunder, including, without
limitation, the transfer to the Successor Servicer for administration by it of
all cash amounts which shall at the time be held by the Servicer for deposit,
or have been deposited by the Servicer, in the Principal and Interest Account,
or thereafter received with respect to the Loans.  The Servicer shall transfer to the Successor
Servicer (i) all records held by the Servicer relating to the Loans in
such electronic form as the Successor Servicer may reasonably request and (ii) any
Loan Files in the Servicer’s possession. 
In addition, the Servicer shall permit access to its premises (including
all Computer Records and programs) to the Successor Servicer or its designee,
and shall pay the reasonable transition expenses of the Successor
Servicer.  Upon a Servicer Transfer, the
Successor Servicer shall also be entitled to receive the Servicing Fee
thereafter payable for performing the obligations of the Servicer.  Any indemnities provided in this Agreement or
the other Transaction Documents in favor of the Servicer and any Servicing Fee
or other fees, costs, expenses, Scheduled Payment Advances and Servicing
Advances, together with accrued interest due the Servicer thereon, and
Nonrecoverable Advances which have accrued and/or are unpaid or unreimbursed to
the Servicer shall survive the resignation or termination of the Servicer and
the appointment of a Successor Servicer pursuant to Section 5.13
and the Servicer being replaced shall remain entitled thereto until paid
hereunder out of the Principal and Interest Account or the Note Distribution
Account in accordance with the Priority of Payments.

Section 8.03.                         Appointment of Successor
Servicer; Reconveyance; Successor Servicer to Act

(a)                                  Upon
delivery of the notice required by Section 8.02(a) (or, if
later, on a date designated therein), the Servicer shall continue to perform
all servicing functions under this Agreement until the date specified in the
Termination Notice or, if no such date is specified, until a date mutually
agreed by the Servicer and the Trustee. 
The Trustee shall as promptly as possible after the giving of or receipt
of a Termination Notice, appoint a Successor Servicer, which shall be the
Backup Servicer, in accordance with Section 5.15(c), and named
Successor Servicer shall accept its appointment by a written assumption in a
form acceptable to the Trustee and Owner Trustee; provided that no appointment of a Successor Servicer or
acceptance and assumption by a proposed Successor Servicer shall be effective
without the prior satisfaction of the Rating Agency Condition.  If within 60 days of delivery of a
Termination Notice a Successor Servicer is not appointed and the Servicer shall
have yet to cure the Servicer Default, then the Trustee shall offer the Trust
Depositor, and the Trust Depositor shall offer the Originator, the right to
accept retransfer of all the Loan Assets, and such parties may accept
retransfer of such Loan Assets in consideration of the Trust Depositor’s
delivery to the Principal and Interest Account on or prior to the next upcoming
Distribution Date of a sum equal to the Aggregate Outstanding Principal Balance
of all Securities (other than the Certificates) then outstanding, together with
accrued and unpaid interest thereon through such date of deposit and all other
amounts due and owing to any Person under the Transaction Documents; provided that the Trustee, if so directed
by the Majority Noteholders in writing, need not accept and effect such
reconveyance in the absence of evidence (which may include valuations of an
investment bank or similar entity) reasonably acceptable to such Trustee or
Majority Noteholders that such retransfer would not constitute a fraudulent
conveyance of the Trust Depositor or the Originator.

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(b)           The
Backup Servicer may, in its discretion, or shall, if it is unable to so act or
if the Majority Noteholders request in writing to the Backup Servicer, appoint,
or petition a court of competent jurisdiction to appoint, any established
servicing institution having a net worth of not less than $50,000,000 as the
Successor Servicer in the assumption of all or any part of the
responsibilities, duties or liabilities of the Servicer.

(c)           As
compensation, any Successor Servicer (including, without limitation, the Backup
Servicer) so appointed shall be entitled to receive the Servicing Fee, together
with any other servicing compensation in the form of assumption fees, late
payment charges or otherwise as provided herein that accrued prior thereto;
including, without limitation, all reasonable costs (including reasonable
attorneys’ fees) incurred in connection with transferring the servicing
obligations under the Agreement and amending the Agreement to reflect such
transfer.

(d)           In
the event the Backup Servicer is requested by the Servicer to solicit bids, the
Backup Servicer shall solicit, by public announcement, bids from banks and loan
servicing institutions meeting the qualifications set forth above.  Such public announcement shall specify that
the Successor Servicer shall be entitled to the full amount of the Servicing
Fee as servicing compensation, together with the other servicing compensation
in the form of assumption fees, late payment charges or otherwise that accrued
prior thereto.  Within 30 days after any
such public announcement, the Backup Servicer shall negotiate and effect the
sale, transfer and assignment of the servicing rights and responsibilities
hereunder to the qualified party submitting the highest qualifying bid.  The Backup Servicer shall deduct from any sum
received by the Backup Servicer from the successor to the Servicer in respect
of such sale, transfer and assignment all costs and expenses of any public
announcement and of any sale, transfer and assignment of the servicing rights and
responsibilities hereunder and the amount of any unreimbursed Servicing
Advances.  After such deductions, the
remainder of such sum shall be paid by the Backup Servicer to the Servicer at
the time of such sale, transfer and assignment to the Servicer’s successor.  The Backup Servicer and such successor shall
take such action, consistent with the Agreement, as shall be necessary to
effectuate any such succession.  Neither
the Backup Servicer nor any other Successor Servicer shall be held liable by
reason of any failure to make, or any delay in making, any distribution
hereunder or any portion thereof caused by (i) the failure of the Servicer to
deliver, or any delay in delivering, cash, documents or records to it, or (ii)
restrictions imposed by any regulatory authority having jurisdiction over the
Servicer hereunder.  No appointment of a
successor to the Servicer under this clause (d) shall be effective until
written notice of such proposed appointment shall have been provided by the
Trustee and to each Securityholder and the Backup Servicer shall have consented
thereto.  The Backup Servicer shall not
resign as Servicer until a Successor Servicer has been appointed and accepted
such appointment.

(e)           On
or after a Servicer Transfer, the Successor Servicer shall be the successor in
all respects to the Servicer in its capacity as servicer under this Agreement
and the transactions set forth or provided for herein with respect to the
servicing of the Loans and shall be subject to all the responsibilities, duties
and liabilities relating thereto placed on the Servicer by the terms and
provisions hereof, and the terminated Servicer shall be relieved of such
responsibilities, duties and liabilities arising after such Servicer Transfer; provided that (i) the Successor Servicer
will not assume any obligations of the Servicer described in Section 8.02,
(ii)

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the Successor Servicer
shall not be liable for any acts or omissions of the Servicer occurring prior
to such Servicer Transfer or for any breach by the Servicer of any of its
representations and warranties contained herein or in any other Transaction
Document, (iii) no obligation to perform any repurchase or advancing
obligations, if any, of the Servicer, (iv) no obligation to pay any taxes
required to be paid by the Servicer, (v) no obligation to pay any of the fees
and expenses of any other party involved in this transaction and (vi) no
liability or obligation with respect to any Servicer indemnification
obligations of any prior servicer including the original servicer.  The indemnification obligations of the Backup
Servicer, upon becoming a successor Servicer are expressly limited to those
instances of negligence, willful misconduct or fraud of the Backup Servicer in
its role as successor Servicer. 
Notwithstanding anything else herein to the contrary, in no event shall
the Trustee or the Backup Servicer be liable for any Servicing Fee or for any
differential in the amount of the servicing fee paid hereunder and the amount
necessary to induce any Successor Servicer to act as Successor Servicer under
this Agreement and the transactions set forth or provided for herein, including
any Servicing Transfer Costs.  The
Issuer, Securityholders and the Trustee and such successor shall take such
action, consistent with this Agreement, as shall be necessary to effectuate any
such succession.  The terminated Servicer
shall remain entitled to payment and reimbursement of the amounts set forth in
the last sentence of Section 8.02(b) notwithstanding its termination
hereunder, to the same extent as if it had continued to service the Loans
hereunder.

(f)            Notwithstanding
anything contained in this Agreement to the contrary, a Successor Servicer is
authorized to accept and rely on all of the accounting, records (including
computer records) and work of the prior Servicer relating to the Loans
(collectively, the “Predecessor Servicer Work Product”) without any
audit or other examination thereof, and such Successor Servicer shall have no
duty, responsibility, obligation or liability for the acts and omissions of the
prior Servicer.  If any error,
inaccuracy, omission or incorrect or non-standard practice or procedure
(collectively, “Errors”) exist in any Predecessor Servicer Work Product
and such Errors make it materially more difficult to service or should cause or
materially contribute to the Successor Servicer making or continuing any Errors
(collectively, “Continued Errors”), such Successor Servicer shall have
no duty, responsibility, obligation or liability for such Continued Errors; provided that such Successor Servicer
agrees to use its best commercially reasonable efforts to prevent further
Continued Errors.  In the event that the
Successor Servicer becomes aware of Errors or Continued Errors, it shall use
its best efforts to reconstruct and reconcile such data as is commercially
reasonable to correct such Errors and Continued Errors and to prevent future
Continued Errors.  Such Successor
Servicer shall be entitled to recover its costs thereby expended as Servicing
Transfer Costs.

Section 8.04.                Notification
to Securityholders

(a)           Promptly
following the occurrence of any Servicer Default, the Servicer shall give
written notice thereof to the Trustee, the Owner Trustee, the Trust Depositor
and each Rating Agency at the addresses described in Section 13.04 and
to the Noteholders and Certificateholder at their respective addresses
appearing on the Note Register and the Certificate Register, respectively, as
provided under the Indenture.

(b)           Within
ten days following any termination of the Servicer or appointment of a
Successor Servicer pursuant to this Article VIII, the Trustee shall give
written notice thereof

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to each Rating Agency and the Trust Depositor at the
addresses described in Section 13.04 and to the Noteholders and
Certificateholder at their respective addresses appearing on the Note Register
and the Certificate Register, respectively, as provided under the Indenture.

Section 8.05.                Effect
of Transfer

(a)           After
a Servicer Transfer, the terminated Servicer shall have no further obligations
with respect to the management, administration, servicing, custody or
collection of the Loans and the Successor Servicer appointed pursuant to Section
8.03 shall have all of such obligations, except that the terminated
Servicer will transmit or cause to be transmitted directly to the Successor
Servicer for its own account, promptly on receipt and in the same form in which
received, any amounts (properly endorsed where required for the Successor
Servicer to collect them) received as payments upon or otherwise in connection
with the Loans.

(b)           A
Servicer Transfer shall not affect the rights and duties of the parties
hereunder (including but not limited to the indemnities of the Servicer) other
than those relating to the management, administration, servicing, custody or
collection of the Loans.

Section 8.06.                Database
File

Upon reasonable request
by the Trustee or the Backup Servicer, the Servicer will provide the Successor
Servicer with a magnetic tape or excel file or similar spreadsheet file containing
the database file for each Loan (a) as of the Closing Date, (b) as of each
Cut-Off Date, (c) as of each Determination Date prior to a Servicer Default and
(d) on and as of the Business Day before the actual commencement of servicing
functions by the Successor Servicer following the occurrence of a Servicer
Default.

Section 8.07.                Waiver
of Defaults

The Majority Noteholders
may, on behalf of all the Securityholders, and subject to satisfying the Rating
Agency Condition, waive any events permitting removal of the Servicer pursuant
to this Article VIII; provided
that the Majority Noteholders may not waive a default in making a required
distribution on a Note without the consent of each Holder of a Note and each
Rating Agency must confirm that such waiver will not result in a Ratings
Effect.  Upon any waiver or cure of a
past default, such default shall cease to exist, and any Servicer Default or
Event of Default arising therefrom shall be deemed to have been remedied for
every purpose of this Agreement.  No such
waiver or cure shall extend to any subsequent or other default or impair any
right consequent thereto except to the extent expressly so waived.

Section 8.08.                Responsibilities
of the Successor Servicer

(a)           The
Successor Servicer will not be responsible for delays attributable to the
Servicer’s failure to deliver information, defects in the information supplied
by the Servicer or other circumstances beyond the control of the Successor
Servicer.

(b)           The
Successor Servicer will make arrangements with the Servicer for the prompt and
safe transfer of, and the Servicer shall provide to the Successor Servicer, all
necessary servicing files and records, including (as deemed necessary by the
Successor Servicer

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at such time): (i)
microfiche loan documentation, (ii) servicing system tapes, (iii) Loan payment
history, (iv) collections history and (v) the trial balances, as of the close
of business on the day immediately preceding conversion to the Successor
Servicer, reflecting all applicable Loan information.  The current Servicer shall be obligated to
pay the costs associated with the transfer of the servicing files and records
to the Successor Servicer, to the extent such costs are not paid pursuant to
the Priority of Payments as Servicing Transfer Costs due to the limit set forth
in the definition of Servicing Transfer Costs.

(c)           The
Successor Servicer shall have no responsibility and shall not be in default
hereunder nor incur any liability for any failure, error, malfunction or any
delay in carrying out any of its duties under this Agreement if any such
failure or delay results from the Successor Servicer acting in accordance with
information prepared or supplied by a Person other than the Successor Servicer
or the failure of any such Person to prepare or provide such information.  The Successor Servicer shall have no
responsibility, shall not be in default and shall incur no liability (i) for
any act or failure to act by any third party, including the Servicer, the Trust
Depositor, the Owner Trustee or the Trustee or for any inaccuracy or omission
in a notice or communication received by the Successor Servicer from any third
party or (ii) which is due to or results from the invalidity, unenforceability
of any Loan with applicable law or the breach or the inaccuracy of any
representation or warranty made with respect to any Loan.

(d)           If
the Backup Servicer or any other Successor Servicer assumes the role of
Successor Servicer hereunder, such Successor Servicer shall be entitled to the
benefits of (and subject to the provisions of) Section 5.02 concerning
delegation of duties to subservicers and other third parties.

Section 8.09.                Rating
Agency Condition for Servicer Transfer

Notwithstanding the
foregoing provisions relating to a Servicer Transfer, no Servicer Transfer
shall be effective hereunder unless prior written notice thereof shall have
been given to the Rating Agencies, and the Rating Agency Condition shall have
been satisfied with respect thereto.

Section
8.10.                Appointment
of Successor Backup Servicer; Successor Backup Servicer to Act

(a)           The
Backup Servicer may be removed, with or without cause, by the Servicer so long
as no Servicer Default or Event of Default has occurred and is continuing or,
if such an event exists, then the Trustee, at the direction of the Majority
Noteholders, by notice given in writing to the Backup Servicer (the “Backup
Servicer Termination Notice”), a copy of which shall be provided to S&P
promptly after it is delivered to the Backup Servicer.  The Backup Servicer shall continue to perform
all backup servicing functions under this Agreement until the date specified in
the Backup Servicer Termination Notice or, if no such date is specified, until
a date mutually agreed by the Backup Servicer and the party giving the Backup
Servicer Termination Notice.  As promptly
as possible after the giving of a Backup Servicer Termination Notice, party
giving the Backup Servicer Termination Notice to the Servicer with the consent
of the Majority Noteholders, not to be unreasonably withheld, if the Servicer
sent the Backup Servicer Termination Notice and otherwise shall appoint a
Successor Backup Servicer

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(the “Successor Backup
Servicer”) and such Successor Backup Servicer shall accept its appointment
by a written assumption in a form acceptable to the Trustee and Owner Trustee.

(b)           In
the event that a Successor Backup Servicer has not been appointed and has not
accepted its appointment at the time when the then Backup Servicer has ceased
to act as Backup Servicer, the Trustee shall petition a court of competent
jurisdiction to appoint any established financial institution having a net
worth of at least $50,000,000 and whose regular business includes the backup
servicing of loans similar to the Loans as the Successor Backup Servicer
hereunder and the Successor Backup Servicer shall be the successor in all
respects to the Backup Servicer in its capacity as Backup Servicer under this
Agreement and the transactions set forth or provided for herein and shall be
subject to all the responsibilities, duties and liabilities relating thereto
placed on the Backup Servicer by the terms and provisions hereof, and the
terminated Backup Servicer shall be relieved of such responsibilities, duties
and liabilities arising after such backup servicer transfer (the “Backup
Servicer Transfer”); provided
that the Successor Backup Servicer shall not be liable for any acts or
omissions of the Backup Servicer occurring prior to such Backup Servicer
Transfer or for any breach by the Backup Servicer of any of its representations
and warranties contained herein or in any related document or agreement.  As compensation therefor, the Successor
Backup Servicer shall be entitled to receive reasonable compensation equal to
the monthly Backup Servicing Fee. 
Notwithstanding anything else herein to the contrary, in no event shall
the Trustee or the Servicer be liable for any Backup Servicing Fee or for any
differential in the amount of the backup servicing fee paid hereunder and the
amount necessary to induce any Successor Backup Servicer to act as Backup
Servicer under this Agreement and the transactions set forth or provided for
herein.  The Issuer, Securityholders and
the Trustee and such successor shall take such action, consistent with this Agreement,
as shall be necessary to effectuate any such succession.

ARTICLE
IX.

REPORTS

Section 9.01.                Quarterly
Reports

On each Determination
Date, the Issuer shall provide to the Backup Servicer, the Owner Trustee, the
Trustee, the Initial Purchaser and each Rating Agency, a quarterly statement (a
“Quarterly Report”) with respect to the related Distribution Date and
Due Period.  The Quarterly Report shall
include, without limitation, the following information determined as of the end
of the related Due Period or as otherwise specified below:

(a)           (i)
the Aggregate Outstanding Principal Balance of the Notes of each Class as of
the immediately preceding Distribution Date after giving effect to any payment
of principal on such Distribution Date (including as a percentage of the
original Aggregate Outstanding Principal Balance of the Notes after giving
effect to such payment), (ii) the amount of principal payments to be made on
the Notes of each Class on the related Distribution Date, (iii) the Aggregate
Outstanding Principal Balance of the Notes of each Class after giving effect to
any payment of principal on the related Distribution Date (including as a
percentage of the original Aggregate Outstanding Principal Balance of the Notes
of such Class after giving effect to such payment), (iv) the amount of any
Class B Accrued Payable, Class C Accrued Payable

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and Class D Accrued
Payable on the related Distribution Date; and (v) the amount of Class A-1A VFN
Commitments (whether funded or unfunded) which remains outstanding;

(b)           the
interest payable on each Class of Notes on the related Distribution Date,
including any Interest Shortfall thereon (in the aggregate and separately for
each Class) and the Class A-1A VFN Commitment Fee accrued with respect to the
related Distribution Date;

(c)           the
Administrative Expenses payable on the related Distribution Date on an itemized
basis; and

(d)           a
list of Loans which are subject to an Asset Specific Swap.

Section 9.02.                Officer’s
Certificate

Each Quarterly Report
delivered pursuant to Section 9.01 shall be accompanied by a certificate
of a Responsible Officer of the Issuer certifying the accuracy of the Quarterly
Report and a certificate of a Responsible Officer of the Servicer certifying
that no Servicer Default or event that with notice or lapse of time or both would
become a Servicer Default has occurred, or if such event has occurred and is
continuing, specifying the event and its status.

Section 9.03.                Other
Data; Obligor Financial Information

(a)           In
addition, the Issuer shall, upon the request of any Trustee, the Backup
Servicer or any Rating Agency, furnish such Trustee, Rating Agency or the
Backup Servicer, as the case may be, such underlying data in the possession of
the Issuer used to generate a Quarterly Report as may be reasonably requested.  The Servicer will also forward to the
Trustee, the Owner Trustee, the Backup Servicer and each Rating Agency (i)
within 60 days after each calendar quarter (except the fourth calendar
quarter), commencing with the quarter ending September 30, 2006, the unaudited
quarterly financial statements of the Servicer and (ii) within 90 days after
each fiscal year of the Servicer, commencing with the fiscal year ending
December 31, 2006, the audited annual financial statements of the Servicer,
together with the related report of the independent accountants to the
Servicer.

(b)           The
Servicer will forward to Moody’s and S&P: (i) copies of all financial
statements of each Obligor of a Loan included in the Collateral (other than a
Loan which is publicly rated by Moody’s or S&P, as applicable) as promptly
as reasonably practicable after receipt of such financial statements by the
Servicer with respect to the end of the fiscal year of such Obligor, until such
time as the related Loan has been paid in full and is no longer part of the Collateral;
(ii) email notice of any payment default (following the expiration of any
applicable grace period) under a Loan promptly after a Responsible Officer of
the Servicer becomes aware thereof; and (iii) notice of failure, by any Obligor
of a Loan included in the Collateral, to provide annual financial statements
within 135 days after the end of the fiscal year of such Obligor.

(c)           The
Servicer will forward to Moody’s and S&P promptly upon request any
additional financial information in the Servicer’s possession or reasonably
obtainable by the Servicer as Moody’s and S&P shall reasonably request with
respect to an Obligor as to which any Scheduled Payment is past due for at
least ten days.

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(d)           Upon
any Loan becoming a Delinquent Loan, and without any request therefor by Moody’s
and S&P, and promptly after receipt thereof by the Servicer, the Servicer
will forward to Moody’s and S&P updated financial information with respect
to the related Obligor.

(e)           The
Servicer will provide to the Rating Agencies such financial information,
documents and other materials in the Servicer’s possession or reasonably
obtainable by the Servicer as the Rating Agencies shall reasonably request in
connection with any annual review and/or re-grading of the Loans in the and the
related Obligors which the Rating Agencies may undertake.

Section 9.04.                Annual
Report of Accountants

On or before April 1 of
each year (commencing April 1, 2007), the Issuer shall cause to be delivered to
the Trustee and each of the Rating Agencies a statement from a firm of
Independent Accountants indicating (i) that such firm has reviewed the
Quarterly Reports received since the last review and applicable information
from the Trustee, (ii) that the calculations within those Quarterly Reports
have been performed in accordance with the applicable provisions of this
Agreement, (iii) the Aggregate Outstanding Loan Balance as of the immediately
preceding Distribution Date and (iv) whether the remaining Scheduled Payments
on the Collateral shall be sufficient to pay the principal of the Notes by the
Stated Maturity Date with interest due thereon at the applicable Note Interest
Rate; provided that in the event
of a conflict between such firm of Independent Accountants and the Issuer with
respect to any matter in this paragraph, the determination by such firm of
Independent Accountants shall be conclusive. 
In the event such firm of Independent Accountants requires the Trustee
to agree to the procedures performed by such firm of Independent Accountants,
the Servicer shall direct the Trustee in writing to so agree; and the Trustee
will deliver such letter of agreement in conclusive reliance upon the direction
of the Servicer, on behalf of the Issuer, and the Trustee will not make any
independent inquiry or investigation as to, and shall have no obligation or
liability in respect of, the sufficiency, validity or correctness of such
procedures.  The Independent Accountants’
report shall also indicate that the firm is independent of the Servicer within
the meaning of the Code of Professional Ethics of the American Institute of
Certified Public Accountants.

Section 9.05.                Annual
Statement of Compliance from Servicer

The Servicer will deliver
to the Trustee and the Owner Trustee within 90 days of the end of each fiscal
year commencing with the year ending December 31, 2006, an Officer’s
Certificate stating that (a) the Servicer has fully complied in all material
respects with certain provisions of the Agreement relating to servicing of the
Loans and payments on the Notes, (b) a review of the activities of the Servicer
during the prior calendar year and of its performance under this Agreement was
made under the supervision of the officer signing such certificate and (c) to
the best of such officer’s knowledge, based on such review, the Servicer has
fully performed or caused to be performed in all material respects all its
obligations under this Agreement for such year, or, if there has been a
Servicer Default or default in any of its obligations which, with notice or
passage of time, could become a Servicer Default, specifying each such default
known to such officer and the nature and status thereof and the steps being
taken or necessary to be taken to remedy such event.

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Section 9.06.                [Reserved]

Section 9.07.                Notices
of Event of Default or Servicer Default

(a)           Promptly
upon a Responsible Officer of the Servicer becoming aware thereof, the Servicer
shall furnish to the Trustee and the Backup Servicer notice of the occurrence
of any Event of Default or Servicer Default or of any situation which the
Servicer reasonably expects to develop into an Event of Default or Servicer
Default.

Section
9.08.                Trustee’s
Right to Examine Servicer Records, Audit Operations and Deliver Information to
Noteholders

The Trustee shall have
the right upon reasonable prior notice, during normal business hours, in a
manner that does not unreasonably interfere with the Servicer’s normal
operations or customer or employee relations, no more often than once a year
unless an Event of Default or Servicer Default shall have occurred and be
continuing in which case as often as reasonably required, to examine and audit
any and all of the books, records or other information of the Servicer, whether
held by the Servicer or by another on behalf of the Servicer, which may be
relevant to the performance or observance by the Servicer of the terms,
covenants or conditions of this Agreement. 
No amounts payable in respect of the foregoing shall be paid from the
Loan Assets.

The Trustee shall have the right, in accordance with
the Indenture, to deliver information provided by the Servicer to any
Noteholder requesting the same.

ARTICLE
X.

TERMINATION

Section
10.01.              Optional
Repurchase and Refinancing of Notes

(a)           Optional
Repurchase.

(i)            At
any time after the date on which the Aggregate Outstanding Loan Balance shall
be less than 15.0% of the Expected Aggregate Outstanding Loan Balance or, if
less, the Aggregate Outstanding Loan Balance as of the Effective Date, the Issuer,
at the direction of the Holders representing at least 66-2/3% of the
Outstanding Principal Balance of the Class E Notes, may effect an Optional
Repurchase of the Offered Notes and the Class D Notes, in whole but not in
part, at the Repurchase Price, on the Repurchase Date, pursuant to the
Indenture and the other Transaction Documents. 
To exercise such option, the Servicer on behalf of the Issuer shall
deposit in the Note Distribution Account an amount equal to the Repurchase
Price and shall comply with the requirements of Section 10.01 of the Indenture.

(ii)           Notice
of any purchase pursuant to Section 10.01(a)(i) shall be given, at least
ten Business Days prior to the proposed Repurchase Date, by the Servicer to the
Issuer, the Trustee, the Class A-1A VFN Agent, the Owner Trustee and the Rating
Agencies and by the Trustee to each Holder of Notes.  The Issuer may withdraw any notice of
repurchase or specify a new Repurchase Date at any time prior to the second Business
Day preceding the

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proposed Repurchase Date
set forth in any prior notice of repurchase by providing written notice to the
Trustee.

(b)           Optional
Refinancing.

(i)            The
Issuer, at the direction of the Holders representing at least 66-2/3% of the
Outstanding Principal Balance of the Class E Notes, may effect a Refinancing of
the Offered Notes and the Class D Notes on any Refinancing Date by payment to
the Holders of the Offered Notes and the Class D Notes and other Persons
entitled thereto the Refinancing Price pursuant to the Indenture and the other
Transaction Documents.  To effect a
Refinancing, the Servicer on behalf of the Issuer shall deposit in the Note
Distribution Account an amount equal to the Refinancing Price and shall comply
with the provisions of Section 10.04 of the Indenture.

(ii)           Notice
of any Refinancing pursuant to Section 10.01(b)(i) shall be given, at
least ten Business Days prior to the proposed Refinancing Date, by the Issuer
to the Servicer, the Trustee, the Class A-1A VFN Agent, the Owner Trustee and
the Rating Agencies and by the Trustee to each Holder of Notes.

Section 10.02.              Termination

(a)           This
Agreement shall terminate upon notice to the Trustee of the earlier of the
following events: (i) the final payment on or the disposition or other
liquidation by the Issuer of the last Loan (including, without limitation, in
connection with a redemption by the Issuer of all outstanding Notes pursuant to
Section 10.01) or the disposition of all property acquired upon
foreclosure or deed in lieu of foreclosure of any Loan and the remittance of
all funds due thereunder with respect thereto, or (ii) mutual written consent
of the Servicer, the Trust Depositor, Trustee, the Originator and all
Securityholders.

(b)           Notice
of any termination, specifying the Distribution Date upon which the Issuer will
terminate and that the Noteholders shall surrender their Notes to the Trustee
for payment of the final distribution and cancellation shall be given promptly
by the Servicer to the Trustee and by the Trustee to all Noteholders during the
month of such final distribution before the Determination Date in such month,
specifying (i) the Distribution Date upon which final payment of the Notes (or
Repurchase Price, as applicable) will be made upon presentation and surrender
of Notes at the office of the Trustee therein designated, (ii) the amount of
any such final payment and (iii) that the Record Date otherwise applicable to
such Distribution Date is not applicable, payments being made only upon
presentation and surrender of the Notes at the office of the Trustee therein
specified.

ARTICLE
XI.

REMEDIES
UPON MISREPRESENTATION

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

(a)           In
the event that the Issuer determines that a Loan is an Ineligible Loan then the
Trust Depositor and the Originator must either repurchase such Ineligible Loan

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

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

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

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

(c)           The
Originator shall provide written notice to each Rating Agency of the transfer
of a Substitute Loan to the Issuer.  The
Servicer on behalf of the Issuer will present each Substitute Loan proposed to
be included in the Collateral to each Rating Agency in order to obtain a rating
and a recovery rate with respect to such Loan; provided
that (a) such Loan may become a part of the Collateral prior to the Servicer’s
presentment of the Loan to the Rating Agencies as described herein, (b) the
Servicer’s failure to present a Loan to the Rating Agencies as described herein
shall not constitute an independent breach of, or default under, any
Transaction Document, (c) with respect to S&P, the recovery rate shall be
determined in

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accordance with the
S&P Priority Category Recovery Rate and (d) the Servicer shall have no
obligation to present a Substitute Loan to Moody’s if a Moody’s Rating for such
Loan has been determined by reference to clause (e) of the definition of
Moody’s Rating.

(d)           Prior
to any substitution or repurchase effected pursuant to this Section 11.01,
the Servicer shall deliver a written notice to the Trustee setting forth (1)
the Originator’s intent to effect such a substitution or repurchase, (2) the
specific Loan or Loans to be substituted or repurchased and (3) the reasons for
such substitution or repurchase.

(e)           With
respect to any Substitute Loans to be conveyed to the Trust Depositor by the
Originator pursuant to this Section 11.01 and in accordance with the
Loan Sale Agreement, the Originator shall sell, transfer, assign, set over and
otherwise convey to the Trust Depositor, without recourse other than as
expressly provided herein and therein (and the Trust Depositor shall be
required to purchase through cash payment or by exchange of one or more related
Loans released by the Issuer to the Trust Depositor on the related Cut-Off
Date), all the right, title and interest of the Originator in and to the
Substitute Loan Assets.  To the extent
the purchase price paid to the Originator for any Substitute Loan is less than
the fair market value, as determined by the Servicer, of such Substitute Loan,
the difference between such fair market value and the purchase price shall be
deemed to be a capital contribution made by the Originator to the Trust
Depositor on the relevant Cut-Off Date.

(f)            Subject
to the conditions set forth in Section 11.01(g), the Trust Depositor
shall sell, transfer, assign, set over and otherwise convey to the Issuer,
without recourse other than as expressly provided herein, (i) all the right,
title and interest of the Trust Depositor in and to the Substitute Loans
purchased pursuant to this Section 11.01, and (ii) all other rights and
property interests consisting of Substitute Loan Assets related to such
Substitute Loans (the property in clauses (i) and (ii) above,
upon such transfer, becoming part of the Collateral).

(g)           The
Originator shall transfer to the Trust Depositor and the Trust Depositor shall
transfer to the Issuer the Substitute Loans and the other property and rights
related thereto described in Sections 11.01(e) and (f) only upon
the satisfaction of each of the following conditions on or prior to the related
Cut-Off Date and the delivery of a related Loan Asset Certificate by the Trust
Depositor shall be deemed a representation and warranty by the Trust Depositor
and by the Originator that such conditions have been or will be, as of the
related Cut-Off Date, satisfied:

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

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

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

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

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

(vi)          each
of the representations and warranties made by the Trust Depositor pursuant to Section
3.02 (including, without limitation, the representations and warranties
made pursuant to Section 3.02(b) (“Eligible Loan”) and Section
3.02(c) (“Loans Secured by Real Property”)) and Section 3.04
applicable to the Substitute Loan shall be true and correct as of the related
Cut-Off Date; and

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

(h)           The
Originator shall provide written notice of each substitution effected pursuant
to this Section 11.01 to each Rating Agency.

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

Section
11.02.      Reassignment
of Repurchased or Substituted Loans

Upon receipt by the
Trustee for deposit in the Principal and Interest Account of any amounts
described in Section 11.01 (or upon the Cut-Off Date related to a
Substitute Loan in the case of a contemporaneous substitution described in Section
11.01), and upon receipt of a Loan Asset Certificate in the form attached
hereto as Exhibit F, the Trustee shall assign to the Trust Depositor and
the Trust Depositor shall assign to the Originator all of the Issuer’s (or
Trust Depositor’s, as applicable) right, title and interest in the repurchased
or substituted Loan and

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related Loan Assets without recourse, representation
or warranty.  Such reassigned Loan shall
no longer thereafter be included in any calculations of Outstanding Loan
Balances required to be made hereunder or otherwise be deemed a part of the
Issuer.

ARTICLE
XII.

INDEMNITIES

Section 12.01.              Indemnification
by Servicer

The Servicer agrees to
indemnify, defend and hold the Trustee (as such and in its individual
capacity), the Owner Trustee (as such and in its individual capacity), the
Backup Servicer, the Collateral Administrator, a Successor Servicer, and the
Issuer harmless from and against any and all claims, losses, penalties, fines,
forfeitures, reasonable legal fees and related costs, judgments (provided that any indemnification for
damages is limited to actual damages, not consequential, special or punitive
damages), reasonable legal fees and related costs and any other reasonable
costs, fees and expenses that such Person may sustain as a result of the
Servicer’s gross negligence, willful misconduct or fraud in the performance of
its duties hereunder, except to the extent such damages arise from the gross
negligence, willful misconduct or fraud on the part of the Person claiming
indemnification.  Any Person seeking
indemnification hereunder shall promptly notify the Servicer if such Person
receives a complaint, claim, compulsory process or other notice of any loss,
claim, damage or liability giving rise to a claim of indemnification hereunder
but failure to provide such notice shall not relieve the Servicer of its
indemnification obligations hereunder unless the Servicer is deprived of
material substantive or procedural rights or defenses as a result thereof.  The Servicer shall assume (with the consent
of the indemnified party, such consent not to be unreasonably withheld) the
defense and any settlement of any such claim and promptly pay, discharge and
satisfy any judgment or decree which may be entered against the indemnified
party in respect of such claim.  If the
consent of the indemnified party required in the immediately preceding sentence
is unreasonably withheld, the Servicer is relieved of its indemnification
obligations hereunder with respect to such Person.  The parties agree that the provisions of this
Section 12.01 shall not be interpreted to provide recourse to the
Servicer against loss by reason of the bankruptcy, insolvency or lack of
creditworthiness of an Obligor with respect to a Loan.  The Servicer shall have no liability for
making indemnification hereunder to the extent any such indemnification constitutes
recourse for uncollectible or uncollected Loans.  The provisions of this Section 12.01
shall survive the termination of this Agreement and the earlier resignation or
removal of the Trustee, the Owner Trustee, the Backup Servicer or the
Collateral Administrator.  Any
indemnification pursuant to this Section 12.01 shall not be payable from
the Collateral.

Section 12.02.              Indemnification
by Trust Depositor

(a)           The
Trust Depositor agrees to indemnify, defend, and hold the Trustee (as such and
in its individual capacity), the Owner Trustee (as such and in its individual
capacity), the Backup Servicer, the Successor Servicer, the Collateral
Administrator, and the Issuer harmless from and against any and all claims,
losses, penalties, fines, forfeitures, reasonable legal fees and related costs,
judgments (provided that any
indemnification for damages is limited to actual damages, not consequential,
special or punitive damages), and any other reasonable

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costs, fees and expenses
that such Person may sustain as a result of the Trust Depositor’s gross
negligence, willful misconduct or fraud in the performance of its duties
hereunder, except to the extent such damages arise from the gross negligence,
willful misconduct or fraud on the part of the Person claiming indemnification.  Any Person seeking indemnification hereunder
shall promptly notify the Trust Depositor if such Person receives a complaint,
claim, compulsory process or other notice of any loss, claim, damage or
liability giving rise to a claim of indemnification hereunder but failure to provide
such notice shall not relieve the Trust Depositor of its indemnification
obligations hereunder unless the Trust Depositor is deprived of material
substantive or procedural rights or defenses as a result thereof.  The Trust Depositor shall assume (with the
consent of the indemnified party, such consent not to be unreasonably withheld)
the defense and any settlement of any such claim and promptly pay, discharge
and satisfy any judgment or decree which may be entered against the indemnified
party in respect of such claim.  If the
consent of the indemnified party required in the immediately preceding sentence
is unreasonably withheld, the Trust Depositor is relieved of its
indemnification obligations hereunder with respect to such Person.  The provisions of this Section 12.02
shall survive the termination of this Agreement and the earlier resignation or
removal of the Trustee or the Owner Trustee. 
If the Trust Depositor has made any indemnity payment pursuant to this
Section and such payment fully indemnified the recipient thereof and the
recipient thereafter collects payments from others, the recipient shall repay
to the Trust Depositor an amount equal to the lesser of: (i) the amount it has
collected from others in respect of such indemnified amounts; and (ii) any
indemnity payment it has received from the Trust Depositor.

(b)           The
Trust Depositor shall indemnify, defend and hold harmless the Issuer, the Owner
Trustee (as such and in its individual capacity), the Backup Servicer, the
Successor Servicer, and the Trustee (as such and in its individual capacity),
the Collateral Administrator, their officers, directors, agents and employees,
from and against all costs, expenses, losses, claims, damages and liabilities
arising out of or as a result of this Agreement or the ownership of an interest
in the Collateral or in respect of any Loan included in the Collateral, except
to the extent that such cost, expense, loss, claim, damage or liability in the
case of (i) the Owner Trustee, shall be due to the willful misfeasance, bad
faith or gross negligence of the Owner Trustee, or shall arise from the breach
by the Owner Trustee of any of its representations or warranties set forth in
Section 7.03 of the Trust Agreement, (ii) the Trustee, shall be due to the
willful misfeasance, bad faith or negligence of the Trustee, or (iii) the
Collateral Administrator, shall be due to the willful misfeasance, bad faith or
negligence of the Collateral Administrator.

ARTICLE
XIII.

MISCELLANEOUS

Section 13.01.              Amendment

(a)           This
Agreement may be amended from time to time by the Issuer, the Trust Depositor,
the Originator, the Servicer, the Backup Servicer (if such amendment changes
the rights or obligations of the Backup Servicer) and the Trustee by written
agreement, with notice to the Owner Trustee and the Backup Servicer but without
notice to or consent of the Securityholders, to cure any ambiguity, to correct
or supplement any provisions herein, to comply with any changes in the Code, to
conform this Agreement to the Offering Memorandum,

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to modify any Schedule or
Annex B or to make any other provisions with respect to matters or
questions arising under this Agreement which shall not be inconsistent with the
provisions of this Agreement; provided that
such action shall not, as evidenced by an Opinion of Counsel delivered to the
Trustee, materially adversely affect the interests of any Securityholder, which
Opinion of Counsel may rely upon an officer’s certificate with respect to the
effect of any such amendment on the economic interests of any Securityholder; provided further that no such amendment
shall reduce in any manner the amount of, or delay the timing of, any amounts
received on Loans which are required to be distributed on any Note or
Certificate without the consent of the Holder of such Note or Certificate, or
change the rights or obligations of any other party hereto (including the
Backup Servicer) without the consent of such party.

(b)           Except
as provided in Section 13.01(a), this Agreement may be amended from time
to time by the Issuer, the Trust Depositor, the Originator, the Servicer and
the Trustee by written agreement, with the consent of the Majority Noteholders
adversely affected thereby with notice to the Owner Trustee, for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Agreement or of modifying in any manner the rights of the
Holders of the Notes or Certificates; provided
that (i) no such amendment shall reduce in any manner the amount of, or delay
the timing of, any amounts which are required to be distributed on any Note or
Certificate without the consent of the Holder of such Note or Certificate or
reduce the percentage of Holders of any Note or Certificate which are required
to consent to any such amendment without the consent of the Holders of 100% of
the Notes affected thereby, and (ii) no amendment affecting only one Class
shall require the approval of the Holders of any other Class.

(c)           Prior
to the execution of any such amendment or consent (other than any amendment to Annex
B or the List of Loans), the Trustee shall furnish written notification of
the substance of such amendment or consent, together with a copy thereof, to
each Rating Agency.  Prior to the
execution of any amendment pursuant to Section 13.01, the Issuer shall
obtain written confirmation from Moody’s and S&P that entry into such
amendment satisfies the Moody’s Rating Condition and the S&P Rating
Condition.

(d)           Promptly
after the execution of any such amendment or consent, written notification of
the substance of such amendment or consent shall be furnished by the Trustee to
the Noteholders, the Issuer, the Owner Trustee and the Certificateholders.  It shall not be necessary for the consent of
any Securityholders pursuant to Section 13.01(b) to approve the
particular form of any proposed amendment or consent, but it shall be
sufficient if such consent shall approve the substance thereof.  The manner of obtaining such consents and of
evidencing the authorization by the Securityholders of the execution thereof
shall be subject to such reasonable requirements as the Trustee may prescribe
for the Noteholders and as the Owner Trustee may prescribe for the
Certificateholders.

(e)           Notwithstanding
the above, any amendment to this Agreement that would have the effect of
amending or modifying the Portfolio Criteria shall be subject to the following
requirements and restrictions: (a) only clauses (b) through (i)
of the definition of Portfolio Criteria may be amended, (b) such amendment
shall satisfy the Rating Agency Condition, (c) such amendment shall not, as
evidenced by an officer’s certificate of the Servicer delivered to the Trustee,
materially adversely affect the interests of any Securityholder and (d) the
Issuer shall

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deliver to the Noteholders
the proposed amendment and the Majority Noteholders shall not have objected to
such amendment within ten Business Days from the receipt thereof; provided that any amendment that would
have the effect of modifying the calculation of clauses (b) through (i)
of the definition of Portfolio Criteria in order to correspond to written
changes in the guidelines, methodology or standards established by the Rating
Agencies shall only be subject to satisfaction of the Rating Agency Condition.

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

(g)           Prior
to the execution of any amendment to Annex B, the Issuer shall obtain
written confirmation from Moody’s that entry into such amendment satisfies the
Moody’s Rating Condition.

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

Section 13.02.              Reserved

Section 13.03.              Governing
Law

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

(b)           EACH
PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY
OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT.  EACH PARTY HERETO (I) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (II) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 13.03(b).

Section 13.04.              Notices

All notices, demands,
certificates, requests and communications hereunder (“notices”) shall be in
writing and shall be effective (a) upon receipt when sent through the U.S.
mails, registered or certified mail, return receipt requested, postage prepaid,
with such receipt to be

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effective the date of delivery indicated on the return
receipt, or (b) one Business Day after delivery to an overnight courier, or (c)
on the date personally delivered to an Responsible Officer of the party to
which sent, or (d) on the date transmitted by legible telecopier or electronic
mail transmission with a confirmation of receipt, in all cases addressed to the
recipient as follows:

(a)           if
to the Servicer or the Originator:

Ares Capital
Corporation

280 Park Avenue, 22nd Floor, Building East

New York, New York 10017

Attention: Michael J. Arougheti

Facsimile No.: (212) 750-1777

with a copy to:

Ares Capital
Management LLC

1999 Avenue of the Stars, Suite 1900

Los Angeles, California 90067

Attention: Daniel F. Nguyen

Facsimile No.: (312) 201-4189

(b)           if
to the Trust Depositor:

ARCC CLO 2006 LLC

280 Park Avenue, 22nd Floor, Building East

New York, New York 10017

Attention: Michael J. Arougheti

Facsimile No.: (212) 750-1777

with a copy to:

Ares Capital
Management LLC

1999 Avenue of the Stars, Suite 1900

Los Angeles, California 90067

Attention: Daniel F. Nguyen

Facsimile No.: (312) 201-4189

(c)           if
to the Trustee or the Collateral Administrator:

U.S. Bank National
Association

One Federal Street, 3rd Floor

Boston, Massachusetts 02110

Attention: CDO Unit ARCC 2006-1

Facsimile No.: (866) 386-0156

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if to Trustee with
respect to Loan Files

U.S. Bank National
Association

1719 Range Way

Florence, South Carolina 29501

Attention: Sandra Farrow

Email Address: Sandra.farrow@usbank.com

Ref: ARCC 2006-1

Mail Code: Ex – SC – FLOR

Facsimile No.: 843-673-4925

Telephone No.: 843-673-4929

with a copy to:

U.S. Bank National Association

Corporate Trust Services-CDO Unit

One Federal Street, Third Floor

Boston, Massachusetts

Attention: Joel Cough

Email Address: Joel.cough@usbank.com

Ref: ARCC 2006

Facsimile No.: 866-386-0156

Telephone No.: 617-603-6491

(d)           if
to the Backup Servicer:

Lyon Financial
Services, Inc.

d/b/a U.S. Bank Portfolio Services

1310 Madrid, Suite 103

Marshall, Minnesota 56258

Attention: Joe Andries

Ref: ARCC 2006

Facsimile No.: 507-532-7129

Telephone No.: 507-537-5201

(e)           if
to the Owner Trustee:

Wilmington Trust
Company

1100 North Market Street

Wilmington, Delaware 19890

Attention: Ian P. Monigle

Facsimile No.: (302) 636-4140

with a copy to:

the Originator and the Servicer as provided in clause (a) above

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(f)            if
to the Issuer:

ARCC Commercial
Loan Trust 2006

c/o Wilmington Trust Company

1100 North Market Street

Wilmington, Delaware 19890

Attention: Ian P. Monigle

Facsimile No.: (302) 636-4140

with a copy to:

the Originator as provided in clause (a) above

(g)           if
to S&P:

Standard and Poor’s
Inc.

55 Water Street

41st Floor

New York, New York 10041

Attention: Surveillance: Asset-Backed Services

Facsimile No.: (212) 438-2662

Email: cdo_surveillance@sandp.com (all Quarterly Reports)

(h)           if
to Moody’s:

Moody’s Investors
Service

99 Church Street

New York, New York 10007

Attention: CDO Monitoring Department

Facsimile No.: (212) 553-0344

Email: cdomonitoring@moodys.com; and

(i)            if
to the Initial Purchaser:

Wachovia Capital
Markets, LLC

One Wachovia Center, Mail Code: NC0602

301 South College Street

Charlotte, North Carolina 28288-0610

Attention: Mary Katherine DuBose

Facsimile No.: (704) 374-6495.

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

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Section 13.05.              Severability of Provisions

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

Section 13.06.              Third Party Beneficiaries

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

Section 13.07.              Counterparts

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

Section 13.08.              Headings

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

Section 13.09.              No Bankruptcy Petition;
Disclaimer

(a)           Each of the Originator, the Trustee,
the Servicer, the Issuer and each Holder (by acceptance of the applicable
Securities) covenants and agrees that, prior to the date that is one year and
one day (or, if longer, the then applicable preference period and one day)
after the payment in full of all amounts owing in respect of all outstanding
Classes of Notes rated by any Rating Agency, it will not institute against the
Trust Depositor or the Issuer, or join any other Person in instituting against
the Trust Depositor or the Issuer, any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings or other similar proceedings under the
laws of the United States or any state of the United States; provided that nothing herein shall
prohibit the Trustee from filing proofs of claim or otherwise participating in
any such proceedings instituted by any other Person.  This Section 13.09 will survive
the termination of this Agreement.

(b)           The Issuer acknowledges and agrees
that the Certificates represent a beneficial interest in the Issuer and Loan
Assets only and the Securities do not represent an interest in any assets
(other than the Loan Assets) of the Trust Depositor (including by virtue of any
deficiency claim in respect of obligations not paid or otherwise satisfied from
the Loan Assets and proceeds thereof). 
In furtherance of and not in derogation of the foregoing, to the extent
that the Trust Depositor enters into other transactions as contemplated in Section 6.07,
the Issuer acknowledges and agrees that it shall have no right, title or
interest in or to any assets (or interests therein), other than the Loan
Assets, conveyed or purported to be conveyed (whether by

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way of a sale, capital
contribution or by the granting of a Lien) by the Trust Depositor to any Person
other than the Issuer (the “Other Assets”).

(c)           To the extent that notwithstanding
the agreements contained in this Section 13.09, the Issuer or any
Securityholder, either (i) asserts an interest in or claim to, or benefit
from any Other Assets, whether asserted against or through the Trust Depositor
or any other Person owned by the Trust Depositor, or (ii) is deemed to
have any interest, claim or benefit in or from any Other Assets, whether by
operation of law, legal process, pursuant to applicable provisions of
Insolvency Laws or otherwise (including without limitation pursuant to Section 1111(b) of
the federal Bankruptcy Code, as amended) and whether deemed asserted against or
through the Trust Depositor or any other Person owned by the Trust Depositor,
then the Issuer and each Securityholder by accepting a Note or Certificate
further acknowledges and agrees that any such interest, claim or benefit in or
from the Other Assets is and shall be expressly subordinated to the
indefeasible payment in full of all obligations and liabilities of the Trust
Depositor that, under the terms of the documents relating to the securitization
of the Other Assets, are entitled to be paid from, entitled to the benefits of,
or otherwise secured by such Other Assets (whether or not any such entitlement
or security interest is legally perfected or otherwise entitled to a priority
of distribution under applicable law, including Insolvency Laws, and whether
asserted against the Trust Depositor or any other Person owned by the Trust
Depositor) including, without limitation, the payment of post-petition interest
on such other obligations and liabilities. 
This subordination agreement shall be deemed a subordination agreement
within the meaning of Section 510(a) of the Bankruptcy Code.  Each of the Issuer and the Securityholders is
deemed to have acknowledged and agreed that no adequate remedy at law exists
for a breach of this Section 13.09 and that the terms and
provisions of this Section 13.09 may be enforced by an action for
specific performance.

(d)           The provisions of this Section 13.09
shall be for the third party benefit of those entitled to rely thereon,
including the Securityholders, and shall survive the termination of this
Agreement.

Section 13.10.              Jurisdiction

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

Section 13.11.              Tax Characterization

Notwithstanding
the provisions of Section 2.01 and Section 11.01,
pursuant to Treasury Regulations Section 301.7701-3(b)(1) and for
federal income tax purposes, in the event that the Certificates and the Class E
Notes are owned by more than one Holder, the Issuer will be treated as a
partnership, the partners of which shall be the Certificateholders and the
Holders of the Class E Notes.  It is
the intention of the parties to this Agreement that the Class E Notes and
the

 150
 

 

Certificate shall be
owned by a single Holder and the Issuer shall be treated as a disregarded
entity for federal income tax purposes. 
Furthermore, it is the intention of the parties to this Agreement that
the Offered Notes and the Class D Notes shall be treated as debt of the
sole owner of the Issuer for federal income tax purposes.  No party to this Agreement shall make an
election to treat the Issuer as an association taxable as a corporation for
federal income tax purposes.

Section 13.12.              Prohibited Transactions with
Respect to the Issuer

The Originator shall not:

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

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

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

Section 13.13.              Limitation of Liability of
Owner Trustee

Wilmington Trust
Company acts on behalf of the Issuer solely as Owner Trustee hereunder and not
in its individual capacity, and all Persons having any claim against the Owner
Trustee (as such or in its individual capacity) or the Issuer by reason of the
transactions contemplated by this Agreement or any other Transaction Document
shall look only to the Trust Estate under the Trust Agreement for payment or
satisfaction thereof.  The Owner Trustee
(as such or in its individual capacity) makes no representations as to the
validity or sufficiency of this Agreement, any other Transaction Document or
the Notes, or of any Loan or related documents. 
The Owner Trustee (as such or in its individual capacity) shall at no
time have any responsibility or liability for or with respect to the legality,
validity and enforceability of any Loan, or the perfection and priority of any
security interest created by any Loan in any Collateral or the maintenance of
any such perfection and priority, or for or with respect to the sufficiency of
the Trust Estate under the Trust Agreement or its ability to generate the
payments to be distributed to the Certificateholder under the Trust Agreement
or the Noteholders under the Indenture, including, without limitation, the
existence, condition and ownership of any Collateral; the existence and
enforceability of any insurance thereon; the existence and contents of any Loan
on any computer or other record thereof; the validity of the assignment of any
Loan to the Issuer or of any intervening assignment; the completeness of any
Loan; the performance or enforcement of any Loan; the compliance by the Issuer,
the Trust Depositor, the Servicer or any other Person with any covenant,
agreement or other obligation or any warranty or representation made under any
Transaction Document or in any related document or the accuracy of any such
warranty or representation; or any action of the Trustee, the Servicer or any
subservicer, or any other Person taken in the name of the Owner Trustee or the
Issuer, and for all purposes of this Agreement and each other Transaction
Document, the Owner Trustee (as such or in its individual capacity) shall be
entitled to the benefits of the Trust Agreement.

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Section 13.14.              Reserved

Section 13.15.              No Partnership

Nothing herein
contained shall be deemed or construed to create a co-partnership or joint
venture between the parties hereto, and the services of the Servicer shall be
rendered as an independent contractor and not as agent or as a fiduciary for
any party hereto or for the Securityholders.

Section 13.16.              Successors and Assigns

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

Section 13.17.              Acts of Holders

Except as
otherwise specifically provided herein, whenever Holder action, consent or
approval is required under this Agreement, such action, consent or approval
shall be deemed to have been taken or given on behalf of, and shall be binding
upon, all Holders if the Majority Noteholders agree to take such action or give
such consent or approval.

Section 13.18.              Duration of Agreement

This Agreement
shall continue in existence and effect until terminated as herein provided.

Section 13.19.              Limited Recourse

The obligations of
the Trust Depositor, the Originator, the Issuer and the Servicer under this
Agreement and the other Transaction Documents are solely the obligations of the
Trust Depositor, the Originator, the Issuer and the Servicer, respectively.  No recourse shall be had for the payment of
any amount owing by the Trust Depositor, the Originator, the Issuer or the
Servicer or otherwise under this Agreement or under the other Transaction
Documents or for the payment by the Trust Depositor, the Originator, the Issuer
or the Servicer of any fee in respect hereof or thereof or any other obligation
or claim of or against the Trust Depositor, the Originator, the Issuer or the
Servicer arising out of or based upon this Agreement or on any other
Transaction Document, against any Affiliate, shareholder, partner, manager,
member, director, officer, employee, representative or agent of the Trust
Depositor, the Originator, the Issuer or the Servicer or of any Affiliate of
such Person.  The provisions of this Section 13.19
shall survive termination of this Agreement.

Section 13.20.              Confidentiality

Each of the
Issuer, the Trust Depositor, the Servicer (if other than Ares Capital), the
Trustee and the Backup Servicer shall maintain and shall cause each of its
employees, officers, agents and Affiliates to maintain the confidentiality of
material non-public information concerning Ares Capital and its Affiliates or
about the Obligors obtained by it or them in connection with the structuring,
negotiating, execution and performance of the transactions contemplated by the
Transaction Documents, except that each such party and its employees, officers,
agents and Affiliates may disclose such information to other parties to the
Transaction

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Documents and to its
external accountants, attorneys, any potential subservicers and the agents of
such Persons, provided such
Persons expressly agree to maintain the confidentiality of such information,
and as required by an applicable law or order of any judicial or administrative
proceeding.

Section 13.21.              Non-Confidentiality of Tax
Treatment

All parties hereto
agree that each of them and each of their managers, officers, employees,
representatives, and other agents may disclose to any and all persons, without
limitation of any kind, the tax treatment and tax structure of the transaction
and all materials of any kind (including opinions or other tax analyses) that
are provided to any of them relating to such tax treatment and tax
structure.  “Tax treatment” and “tax
structure” shall have the same meaning as such terms have for purposes of
Treasury Regulation Section 1.6011-4.

Section 13.22.              Temporary Subparticipation and
Elevation

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

(b)           From and after the date hereof, the
Originator, Servicer and Issuer shall use commercially reasonable efforts to
cause the Issuer to become the record lender in respect of, and holder of legal
title to, each of the Initial Loans, in accordance with the terms of the credit
documentation in respect of such Initial Loan (an “Elevation,” and the
date of an Elevation, an “Elevation Date”).  On the Elevation Date with respect to each
Initial Loan, without any further action by any entity, the Subparticipation
shall terminate and shall be of no further force or effect with respect to such
Initial Loan (except that each party shall remain liable for any liabilities
and

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obligations under this Section 13.22
that arose before such Elevation Date), and the Trust Depositor shall be deemed
to have granted and conveyed the corresponding Initial Loan Assets by
assignment to the Issuer.  Without
limiting the generality of the foregoing, (i) the Originator agrees to
enter into such assignment documentation with the Issuer as may be required by
the credit documentation in respect of any Initial Loan included in the
Participated Portion in order to cause the Elevation with respect to such
Initial Loan to occur, (ii) the Originator agrees to use commercially
reasonable efforts to cause Ares Capital CP Funding LLC to enter into such
assignment documentation with the Issuer as may be required by the credit
documentation in respect of any Initial Loan included in the Subparticipated
Portion in order to cause the Elevation with respect to such Initial Loan to
occur, and (iii) the Originator, Servicer and Issuer agree to use
commercially reasonable efforts to cause the Elevation with respect to each
Initial Loan to occur within 60 days following the Closing Date.

(c)           The Trust Depositor shall not be held
to the standard of care of a fiduciary or agent and shall not be a fiduciary or
agent for the Issuer but shall exercise only the same care in the
administration of the Subparticipation as if it had retained such interest
beneficially for its own account. 
Without limiting the generality of the foregoing, (i) the Trust
Depositor shall not be liable for any error in judgment or for any action taken
or omitted to be taken by it hereunder except for its gross negligence or
willful misconduct and (ii) the Trust Depositor may rely on legal counsel,
independent public accountants and other experts selected or accepted by the
Trust Depositor and shall not be liable for any action taken or omitted to be
taken in good faith by the Trust Depositor in accordance with the advice of
such counsel, accountants or experts. 
For the avoidance of doubt, (i) this Section 13.22(c) shall
apply only to responsibilities of, and actions taken by, the Trust Depositor
exclusively as a result of its status as grantor of the Subparticipation
pursuant to this Section 13.22, and (ii) nothing contained in this Section 13.22
shall relieve the Trust Depositor of its obligation to comply with the terms
and provisions of this Agreement or from any liability for any breach of its
representations, warranties, covenants or agreements contained herein.

[Remainder of Page Intentionally
Left Blank]

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

 

	
  

  	
  ARCC COMMERCIAL LOAN TRUST 2006, as
  the Issuer

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Wilmington Trust Company, not in its

  
	
   

  	
   

  	
  individual capacity, but solely as Owner

  
	
   

  	
   

  	
  Trustee on behalf of the Issuer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michele C. Harra

  	
   

  
	
   

  	
  Name:

  	
  Michele C. Harra

  
	
   

  	
  Title:

  	
  Financial
  Services Officer

  
	
   

  	
   

  	
   

  
	
   

  	
  ARCC CLO 2006 LLC, as the
  Trust Depositor

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  ARES CAPITAL CORPORATION, its sole 

  member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  ARES CAPITAL CORPORATION, as
  the

  
	
   

  	
  Originator and as the Servicer

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
						

 

[Signatures Continued on the Following Page]

 

ARCC Commercial Loan Trust 2006

Sale and Servicing Agreement

 

 

 

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

 

	
  

  	
  ARCC COMMERCIAL LOAN TRUST 2006, as
  the Issuer

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Wilmington Trust Company, not in its

  
	
   

  	
   

  	
  individual capacity, but solely as Owner

  
	
   

  	
   

  	
  Trustee on behalf of the Issuer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  ARCC CLO 2006 LLC, as the
  Trust Depositor

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  ARES CAPITAL CORPORATION, its sole 

  member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael
  Arougheti

  	
   

  
	
   

  	
  Name:

  	
  Michael Arougheti

  
	
   

  	
  Title:

  	
  President

  
	
   

  	
   

  	
   

  
	
   

  	
  ARES CAPITAL CORPORATION, as
  the

  
	
   

  	
  Originator and as the Servicer

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael
  Arougheti

  	
   

  
	
   

  	
  Name:

  	
  Michael Arougheti

  
	
   

  	
  Title:

  	
  President

  
						

 

[Signatures Continued on the Following Page]

 

ARCC Commercial Loan Trust 2006

Sale and Servicing Agreement

 

 

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

 

	
  

  	
   

  	
  WILMINGTON TRUST COMPANY, not
  in its 

  individual capacity but as the Owner Trustee

  
	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
  By:

  	
  /s/ Michele C.
  Harra

  	
   

  	 

	
   

  	
   

  	
  Name:

  	
  Michele C. Harra

  	 

	
   

  	
   

  	
  Title:

  	
  Financial
  Services Officer

  	 

							

 

 

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

 

	
  

  	
   

  	
  U.S. BANK NATIONAL ASSOCIATION,
  not in

  
	
   

  	
   

  	
  its individual capacity but as the Trustee and the 

  Collateral Administrator

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Joel D.
  Cough

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Joel D. Cough

  
	
   

  	
   

  	
  Title:

  	
  Assistant Vice
  President

  
						

 

 

 

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

 

	
  

  	
   

  	
  LYON FINANCIAL SERVICES, INC. (d/b/a

  
	
   

  	
   

  	
  U.S. BANK PORTFOLIO SERVICES),
  not in its 

  individual capacity but as the Backup Servicer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Joseph
  Andries

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Joseph Andries

  
	
   

  	
   

  	
  Title:

  	
  Senior Vice
  President

  
						

 

 

ANNEX A

 

Diversity Score Calculation

The Diversity
Score for the Loans is calculated by summing each of the Industry Diversity
Scores, which are calculated as follows:

(i)            An
“Obligor Par Amount” is calculated for each Obligor represented in the
Collateral by summing the Outstanding Loan Balance of each Loan in the
Collateral of that Obligor or any Affiliate of that Obligor.

(ii)           An
“Average Par Amount” is calculated by summing the Obligor Par Amounts
and dividing by the number of Obligors represented.  For purposes of calculating the number of
Obligors, any Obligors which are Affiliates will be considered one Obligor.

(iii)          An
“Equivalent Unit Score” is calculated for each Obligor represented in
the Collateral by taking the lesser of (a) one and (b) the Obligor
Par Amount for such Obligor divided by the Average Par Amount.  For purposes of calculating the Equivalent
Unit Score, any Obligors which are Affiliates will be considered one Obligor.

(iv)          An
“Aggregate Industry Equivalent Unit Score” is then calculated for each
of the Moody’s industrial classification groups by summing the Equivalent Unit
Scores for each Obligor in the industry.

(v)           An
“Industry Diversity Score” is then established by reference to the
Diversity Score Table shown below for the related Aggregate Industry Equivalent
Unit Score.  If any Aggregate Industry
Equivalent Unit Score falls between any two scores then the applicable Industry
Diversity Score will be the lower of the two Industry Diversity Scores.

(vi)          Charged-Off
Loans shall be excluded from the calculation of the Diversity Score.

 

 

Diversity Score Table

	
  Aggregate

  	
   

  	
   

  	
   

  	
  Aggregate

  	
   

  	
   

  	
   

  	
  Aggregate

  	
   

  	
   

  	
   

  	
  Aggregate

  	
   

  	
   

  	
   

  
	
  Industry

  	
   

  	
   

  	
   

  	
  Industry

  	
   

  	
   

  	
   

  	
  Industry

  	
   

  	
   

  	
   

  	
  Industry

  	
   

  	
   

  	
   

  
	
  Equivalent

  	
   

  	
  Diversity

  	
   

  	
  Equivalent

  	
   

  	
  Diversity

  	
   

  	
  Equivalent

  	
   

  	
  Diversity

  	
   

  	
  Equivalent

  	
   

  	
  Diversity

  	
   

  
	
  Unit Score

  	
   

  	
  Score

  	
   

  	
  Unit Score

  	
   

  	
  Score

  	
   

  	
  Unit Score

  	
   

  	
  Score

  	
   

  	
  Unit Score

  	
   

  	
  Score

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  0.0000

  	
   

  	
  0.0000

  	
   

  	
  5.0500

  	
   

  	
  2.7000

  	
   

  	
  10.1500

  	
   

  	
  4.0200

  	
   

  	
  15.2500

  	
   

  	
  4.5300

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  0.0500

  	
   

  	
  0.1000

  	
   

  	
  5.1500

  	
   

  	
  2.7333

  	
   

  	
  10.2500

  	
   

  	
  4.0300

  	
   

  	
  15.3500

  	
   

  	
  4.5400

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  0.1500

  	
   

  	
  0.2000

  	
   

  	
  5.2500

  	
   

  	
  2.7667

  	
   

  	
  10.3500

  	
   

  	
  4.0400

  	
   

  	
  15.4500

  	
   

  	
  4.5500

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  0.2500

  	
   

  	
  0.3000

  	
   

  	
  5.3500

  	
   

  	
  2.8000

  	
   

  	
  10.4500

  	
   

  	
  4.0500

  	
   

  	
  15.5500

  	
   

  	
  4.5600

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  0.3500

  	
   

  	
  0.4000

  	
   

  	
  5.4500

  	
   

  	
  2.8333

  	
   

  	
  10.5500

  	
   

  	
  4.0600

  	
   

  	
  15.6500

  	
   

  	
  4.5700

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  0.4500

  	
   

  	
  0.5000

  	
   

  	
  5.5500

  	
   

  	
  2.8667

  	
   

  	
  10.6500

  	
   

  	
  4.0700

  	
   

  	
  15.7500

  	
   

  	
  4.5800

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  0.5500

  	
   

  	
  0.6000

  	
   

  	
  5.6500

  	
   

  	
  2.9000

  	
   

  	
  10.7500

  	
   

  	
  4.0800

  	
   

  	
  15.8500

  	
   

  	
  4.5900

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  0.6500

  	
   

  	
  0.7000

  	
   

  	
  5.7500

  	
   

  	
  2.9333

  	
   

  	
  10.8500

  	
   

  	
  4.0900

  	
   

  	
  15.9500

  	
   

  	
  4.6000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  0.7500

  	
   

  	
  0.8000

  	
   

  	
  5.8500

  	
   

  	
  2.9667

  	
   

  	
  10.9500

  	
   

  	
  4.1000

  	
   

  	
  16.0500

  	
   

  	
  4.6100

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  0.8500

  	
   

  	
  0.9000

  	
   

  	
  5.9500

  	
   

  	
  3.0000

  	
   

  	
  11.0500

  	
   

  	
  4.1100

  	
   

  	
  16.1500

  	
   

  	
  4.6200

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  0.9500

  	
   

  	
  1.0000

  	
   

  	
  6.0500

  	
   

  	
  3.0250

  	
   

  	
  11.1500

  	
   

  	
  4.1200

  	
   

  	
  16.2500

  	
   

  	
  4.6300

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.0500

  	
   

  	
  1.0500

  	
   

  	
  6.1500

  	
   

  	
  3.0500

  	
   

  	
  11.2500

  	
   

  	
  4.1300

  	
   

  	
  16.3500

  	
   

  	
  4.6400

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.1500

  	
   

  	
  1.1000

  	
   

  	
  6.2500

  	
   

  	
  3.0750

  	
   

  	
  11.3500

  	
   

  	
  4.1400

  	
   

  	
  16.4500

  	
   

  	
  4.6500

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.2500

  	
   

  	
  1.1500

  	
   

  	
  6.3500

  	
   

  	
  3.1000

  	
   

  	
  11.4500

  	
   

  	
  4.1500

  	
   

  	
  16.5500

  	
   

  	
  4.6600

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.3500

  	
   

  	
  1.2000

  	
   

  	
  6.4500

  	
   

  	
  3.1250

  	
   

  	
  11.5500

  	
   

  	
  4.1600

  	
   

  	
  16.6500

  	
   

  	
  4.6700

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.4500

  	
   

  	
  1.2500

  	
   

  	
  6.5500

  	
   

  	
  3.1500

  	
   

  	
  11.6500

  	
   

  	
  4.1700

  	
   

  	
  16.7500

  	
   

  	
  4.6800

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.5500

  	
   

  	
  1.3000

  	
   

  	
  6.6500

  	
   

  	
  3.1750

  	
   

  	
  11.7500

  	
   

  	
  4.1800

  	
   

  	
  16.8500

  	
   

  	
  4.6900

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.6500

  	
   

  	
  1.3500

  	
   

  	
  6.7500

  	
   

  	
  3.2000

  	
   

  	
  11.8500

  	
   

  	
  4.1900

  	
   

  	
  16.9500

  	
   

  	
  4.7000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.7500

  	
   

  	
  1.4000

  	
   

  	
  6.8500

  	
   

  	
  3.2250

  	
   

  	
  11.9500

  	
   

  	
  4.2000

  	
   

  	
  17.0500

  	
   

  	
  4.7100

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.8500

  	
   

  	
  1.4500

  	
   

  	
  6.9500

  	
   

  	
  3.2500

  	
   

  	
  12.0500

  	
   

  	
  4.2100

  	
   

  	
  17.1500

  	
   

  	
  4.7200

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.9500

  	
   

  	
  1.5000

  	
   

  	
  7.0500

  	
   

  	
  3.2750

  	
   

  	
  12.1500

  	
   

  	
  4.2200

  	
   

  	
  17.2500

  	
   

  	
  4.7300

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.0500

  	
   

  	
  1.5500

  	
   

  	
  7.1500

  	
   

  	
  3.3000

  	
   

  	
  12.2500

  	
   

  	
  4.2300

  	
   

  	
  17.3500

  	
   

  	
  4.7400

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.1500

  	
   

  	
  1.6000

  	
   

  	
  7.2500

  	
   

  	
  3.3250

  	
   

  	
  12.3500

  	
   

  	
  4.2400

  	
   

  	
  17.4500

  	
   

  	
  4.7500

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.2500

  	
   

  	
  1.6500

  	
   

  	
  7.3500

  	
   

  	
  3.3500

  	
   

  	
  12.4500

  	
   

  	
  4.2500

  	
   

  	
  17.5500

  	
   

  	
  4.7600

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.3500

  	
   

  	
  1.7000

  	
   

  	
  7.4500

  	
   

  	
  3.3750

  	
   

  	
  12.5500

  	
   

  	
  4.2600

  	
   

  	
  17.6500

  	
   

  	
  4.7700

  	
   

  

 

 

	
  Aggregate

  	
   

  	
   

  	
   

  	
  Aggregate

  	
   

  	
   

  	
   

  	
  Aggregate

  	
   

  	
   

  	
   

  	
  Aggregate

  	
   

  	
   

  	
   

  
	
  Industry

  	
   

  	
   

  	
   

  	
  Industry

  	
   

  	
   

  	
   

  	
  Industry

  	
   

  	
   

  	
   

  	
  Industry

  	
   

  	
   

  	
   

  
	
  Equivalent

  	
   

  	
  Diversity

  	
   

  	
  Equivalent

  	
   

  	
  Diversity

  	
   

  	
  Equivalent

  	
   

  	
  Diversity

  	
   

  	
  Equivalent

  	
   

  	
  Diversity

  	
   

  
	
  Unit Score

  	
   

  	
  Score

  	
   

  	
  Unit Score

  	
   

  	
  Score

  	
   

  	
  Unit Score

  	
   

  	
  Score

  	
   

  	
  Unit Score

  	
   

  	
  Score

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.4500

  	
   

  	
  1.7500

  	
   

  	
  7.5500

  	
   

  	
  3.4000

  	
   

  	
  12.6500

  	
   

  	
  4.2700

  	
   

  	
  17.7500

  	
   

  	
  4.7800

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.5500

  	
   

  	
  1.8000

  	
   

  	
  7.6500

  	
   

  	
  3.4250

  	
   

  	
  12.7500

  	
   

  	
  4.2800

  	
   

  	
  17.8500

  	
   

  	
  4.7900

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.6500

  	
   

  	
  1.8500

  	
   

  	
  7.7500

  	
   

  	
  3.4500

  	
   

  	
  12.8500

  	
   

  	
  4.2900

  	
   

  	
  17.9500

  	
   

  	
  4.8000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.7500

  	
   

  	
  1.9000

  	
   

  	
  7.8500

  	
   

  	
  3.4750

  	
   

  	
  12.9500

  	
   

  	
  4.3000

  	
   

  	
  18.0500

  	
   

  	
  4.8100

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.8500

  	
   

  	
  1.9500

  	
   

  	
  7.9500

  	
   

  	
  3.5000

  	
   

  	
  13.0500

  	
   

  	
  4.3100

  	
   

  	
  18.1500

  	
   

  	
  4.8200

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.9500

  	
   

  	
  2.0000

  	
   

  	
  8.0500

  	
   

  	
  3.5250

  	
   

  	
  13.1500

  	
   

  	
  4.3200

  	
   

  	
  18.2500

  	
   

  	
  4.8300

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.0500

  	
   

  	
  2.0333

  	
   

  	
  8.1500

  	
   

  	
  3.5500

  	
   

  	
  13.2500

  	
   

  	
  4.3300

  	
   

  	
  18.3500

  	
   

  	
  4.8400

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.1500

  	
   

  	
  2.0667

  	
   

  	
  8.2500

  	
   

  	
  3.5750

  	
   

  	
  13.3500

  	
   

  	
  4.3400

  	
   

  	
  18.4500

  	
   

  	
  4.8500

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.2500

  	
   

  	
  2.1000

  	
   

  	
  8.3500

  	
   

  	
  3.6000

  	
   

  	
  13.4500

  	
   

  	
  4.3500

  	
   

  	
  18.5500

  	
   

  	
  4.8600

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.3500

  	
   

  	
  2.1333

  	
   

  	
  8.4500

  	
   

  	
  3.6250

  	
   

  	
  13.5500

  	
   

  	
  4.3600

  	
   

  	
  18.6500

  	
   

  	
  4.8700

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.4500

  	
   

  	
  2.1667

  	
   

  	
  8.5500

  	
   

  	
  3.6500

  	
   

  	
  13.6500

  	
   

  	
  4.3700

  	
   

  	
  18.7500

  	
   

  	
  4.8800

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.5500

  	
   

  	
  2.2000

  	
   

  	
  8.6500

  	
   

  	
  3.6750

  	
   

  	
  13.7500

  	
   

  	
  4.3800

  	
   

  	
  18.8500

  	
   

  	
  4.8900

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.6500

  	
   

  	
  2.2333

  	
   

  	
  8.7500

  	
   

  	
  3.7000

  	
   

  	
  13.8500

  	
   

  	
  4.3900

  	
   

  	
  18.9500

  	
   

  	
  4.9000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.7500

  	
   

  	
  2.2667

  	
   

  	
  8.8500

  	
   

  	
  3.7250

  	
   

  	
  13.9500

  	
   

  	
  4.4000

  	
   

  	
  19.0500

  	
   

  	
  4.9100

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.8500

  	
   

  	
  2.3000

  	
   

  	
  8.9500

  	
   

  	
  3.7500

  	
   

  	
  14.0500

  	
   

  	
  4.4100

  	
   

  	
  19.1500

  	
   

  	
  4.9200

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.9500

  	
   

  	
  2.3333

  	
   

  	
  9.0500

  	
   

  	
  3.7750

  	
   

  	
  14.1500

  	
   

  	
  4.4200

  	
   

  	
  19.2500

  	
   

  	
  4.9300

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.0500

  	
   

  	
  2.3667

  	
   

  	
  9.1500

  	
   

  	
  3.8000

  	
   

  	
  14.2500

  	
   

  	
  4.4300

  	
   

  	
  19.3500

  	
   

  	
  4.9400

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.1500

  	
   

  	
  2.4000

  	
   

  	
  9.2500

  	
   

  	
  3.8250

  	
   

  	
  14.3500

  	
   

  	
  4.4400

  	
   

  	
  19.4500

  	
   

  	
  4.9500

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.2500

  	
   

  	
  2.4333

  	
   

  	
  9.3500

  	
   

  	
  3.8500

  	
   

  	
  14.4500

  	
   

  	
  4.4500

  	
   

  	
  19.5500

  	
   

  	
  4.9600

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.3500

  	
   

  	
  2.4667

  	
   

  	
  9.4500

  	
   

  	
  3.8750

  	
   

  	
  14.5500

  	
   

  	
  4.4600

  	
   

  	
  19.6500

  	
   

  	
  4.9700

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.4500

  	
   

  	
  2.5000

  	
   

  	
  9.5500

  	
   

  	
  3.9000

  	
   

  	
  14.6500

  	
   

  	
  4.4700

  	
   

  	
  19.7500

  	
   

  	
  4.9800

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.5500

  	
   

  	
  2.5333

  	
   

  	
  9.6500

  	
   

  	
  3.9250

  	
   

  	
  14.7500

  	
   

  	
  4.4800

  	
   

  	
  19.8500

  	
   

  	
  4.9900

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.6500

  	
   

  	
  2.5667

  	
   

  	
  9.7500

  	
   

  	
  3.9500

  	
   

  	
  14.8500

  	
   

  	
  4.4900

  	
   

  	
  19.9500

  	
   

  	
  5.0000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.7500

  	
   

  	
  2.6000

  	
   

  	
  9.8500

  	
   

  	
  3.9750

  	
   

  	
  14.9500

  	
   

  	
  4.5000

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.8500

  	
   

  	
  2.6333

  	
   

  	
  9.9500

  	
   

  	
  4.0000

  	
   

  	
  15.0500

  	
   

  	
  4.5100

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.9500

  	
   

  	
  2.6667

  	
   

  	
  10.0500

  	
   

  	
  4.0100

  	
   

  	
  15.1500

  	
   

  	
  4.5200

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

ANNEX B

Moody’s RiskCalc Calculation

1.             Defined Terms.  The following terms shall be used in this Annex
B, the meanings provided below.

“EDF”
means, with respect to any Loan, the lowest 5-year expected default frequency
for such Loan as determined by running the current version Moody’s RiskCalc in
both the Financial Statement Only (“FSO”) and the Credit Cycle Adjusted
(“CAA”) modes.

“Moody’s
Industries” means any one of the Moody’s industrial classification groups
as published by Moody’s from time to time.

“Pre-Qualifying
Conditions” means, with respect to any Loan, conditions that will be
satisfied if the Obligor with respect to the applicable Loan satisfies the
following criteria:

(a)           the
independent accountants of such Obligor shall have issued an unqualified audit
opinion of the most recent fiscal year financial statements, including no
explanatory paragraph addressing going concern or other issues;

(b)           the
Obligor’s EBITDA is equal to or greater than $5,000,000;

(c)           the
Obligor’s annual sales are equal to or greater than $10,000,000;

(d)           the
Obligor’s book assets are equal to or greater than $10,000,000;

1.             the Obligor represents not more
than 4.0% of the Expected Aggregate Outstanding Loan Balance;

2.             the
Obligor is a private company with no public rating from Moody’s;

3.             the Loan is a Traditional Middle
Market Loan, Large Middle Market Loan, or Broadly Syndicated Loan;

4.             for
the current and prior fiscal year, such Obligors:

(a)           EBIT/interest
expense ratio is greater than 1:00 and 1:25 with respect to retail (adjusted
for rent expense).

(b)           debt/EBITDA
rate is less than 6.0, provided
that the debt/EBITDA rate is less than 8.0 for any Loans with respect to the
following Moody’s Industries: (a) Telecommunications (Moody’s industrial
classification group #29), (b) Printing and Publishing (Moody’s industrial
classification group #26) or (c) Broadcasting and Entertainment (Moody’s
industrial classification group #33).

5.             no greater than 25% of the company’s
revenue is generated from any one customer of the Obligor.

 

6.             the Obligor is a for-profit
operating company in any one of the Moody’s Industries with the exception of (i) Buildings
and Real Estate (Moody’s industrial classification group #5), (ii) Finance
(Moody’s industrial classification group #14), and (iii) Insurance (Moody’s
industrial classification group #20);

7.             The Servicer shall calculate the
..EDF for each of the Loans to be rated pursuant to this Annex B.  The Servicer shall also provide Moody’s with
the .EDF and the information necessary to calculate such .EDF upon request from
Moody’s.  Moody’s shall have the right
(in its sole discretion) to (i) amend or modify any of the information
utilized to calculate the .EDF and recalculate the .EDF based upon such revised
information, in which case such .EDF shall be determined using the table in # 3
below in order to determine the applicable Moody’s Rating, or ii) have a Moody’s
credit analyst provide a rating estimate for any Loan rated pursuant to this Annex
B, in which case such rating estimate provided by such credit analyst shall
be the applicable Moody’s Rating.

8.             The Moody’s Rating for each Loan
that satisfies the Pre-Qualifying Conditions shall be the lower of (i) the
Servicer’s internal rating or (ii) the rating based on the .EDF for such
Loan, in accordance with the table below:

	
  Lowest .EDF

  	
   

  	
  Moody’s Rating

  
	
  less than or equal to .baa

  	
   

  	
  Ba3

  
	
  .ba1

  	
   

  	
  B1

  
	
  .ba2, .ba3 or .b1

  	
   

  	
  B2

  
	
  .b2 or.b3

  	
   

  	
  B3

  
	
  .caa

  	
   

  	
  Caa1

  

 

provided
that the Moody’s Rating determined pursuant the chart above will be reduced by
an additional one-half rating subcategory for leveraged buyout transactions.

9.             For each Loan that meets the
Pre-Qualifying Conditions, the Moody’s Recovery Rate shall be the lower of (i) the
Servicer’s internal recovery rate or (ii) the recovery rate as determined
in accordance with the following:

	
  Type of Loan

  	
   

  	
  Moody’s Recovery Rate

  
	
  senior secured, first
  priority,

  	
   

  	
  50%

  
	
  first lien and first out

  	
   

  	
   

  
	
  second lien, first lien and last out, all other senior
  secured

  	
   

  	
  40%

  
	
  senior unsecured

  	
   

  	
  30%

  
	
  all other loans

  	
   

  	
  10%

  

 

provided
that Moody’s shall have the right (in its sole discretion) to issue a recovery
rate assigned by one of its credit analysts, in which case such recovery rate
provided by such credit analyst shall be the applicable Moody’s Recovery RateExhibit 10.3

 

 

COMMERCIAL LOAN SALE AGREEMENT

by and between

ARES CAPITAL CORPORATION,

as the Originator

and

ARCC CLO 2006 LLC,

as the Trust Depositor

Dated as of July 7, 2006

 

 

ARCC Commercial Loan
Trust 2006 Notes, Series 2006

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

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

 

 

TABLE OF CONTENTS

	
  

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE I            DEFINITIONS

  	
   

  	
  2

  
	
   

  	
   

  	
   

  
	
  Section 1.01

  	
   

  	
  Definitions

  	
   

  	
  2

  
	
  Section 1.02

  	
   

  	
  Other Terms

  	
   

  	
  4

  
	
  Section 1.03

  	
   

  	
  Computation of Time Periods

  	
   

  	
  4

  
	
  Section 1.04

  	
   

  	
  Interpretation

  	
   

  	
  4

  
	
  Section 1.05

  	
   

  	
  References

  	
   

  	
  5

  
	
  Section 1.06

  	
   

  	
  Calculations

  	
   

  	
  5

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II           TRANSFER
  OF LOAN ASSETS

  	
   

  	
  5

  
	
   

  	
   

  	
   

  
	
  Section 2.01

  	
   

  	
  Transfer of Loan Assets

  	
   

  	
  5

  
	
  Section 2.02

  	
   

  	
  Conditions to Transfer of Loan Assets to the Trust
  Depositor

  	
   

  	
  7

  
	
  Section 2.03

  	
   

  	
  Acceptance by the Trust Depositor

  	
   

  	
  8

  
	
  Section 2.04

  	
   

  	
  [Reserved]

  	
   

  	
  8

  
	
  Section 2.05

  	
   

  	
  Conveyance of Additional Loans

  	
   

  	
  8

  
	
  Section 2.06

  	
   

  	
  Release of Excluded Amounts

  	
   

  	
  9

  
	
  Section 2.07

  	
   

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

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III          REPRESENTATIONS
  AND WARRANTIES

  	
   

  	
  10

  
	
   

  	
   

  	
   

  
	
  Section 3.01

  	
   

  	
  Representations and Warranties Regarding the
  Originator

  	
   

  	
  10

  
	
  Section 3.02

  	
   

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

  	
   

  	
  17

  
	
  Section 3.03

  	
   

  	
  [Reserved]

  	
   

  	
  18

  
	
  Section 3.04

  	
   

  	
  Representations and Warranties Regarding the
  Required Loan Documents

  	
   

  	
  18

  
	
  Section 3.05

  	
   

  	
  [Reserved]

  	
   

  	
  18

  
	
  Section 3.06

  	
   

  	
  Representations and Warranties Regarding the Trust
  Depositor

  	
   

  	
  18

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV          PERFECTION
  OF TRANSFER AND PROTECTION OF SECURITY INTERESTS

  	
   

  	
  20

  
	
   

  	
   

  	
   

  
	
  Section 4.01

  	
   

  	
  Custody of Loans

  	
   

  	
  20

  
	
  Section 4.02

  	
   

  	
  Filing

  	
   

  	
  20

  
	
  Section 4.03

  	
   

  	
  Changes in Name, Corporate Structure or Location

  	
   

  	
  20

  
	
  Section 4.04

  	
   

  	
  Sale Treatment

  	
   

  	
  20

  
	
  Section 4.05

  	
   

  	
  Separateness from Trust Depositor

  	
   

  	
  21

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V           COVENANTS
  OF THE ORIGINATOR

  	
   

  	
  21

  
	
   

  	
   

  	
   

  
	
  Section 5.01

  	
   

  	
  Corporate Existence

  	
   

  	
  21

  
	
  Section 5.02

  	
   

  	
  Loans Not to Be Evidenced by Promissory Notes

  	
   

  	
  21

  
	
  Section 5.03

  	
   

  	
  Security Interests

  	
   

  	
  21

  
	
  Section 5.04

  	
   

  	
  Compliance with Law

  	
   

  	
  22

  

 

 

 

	
  Section 5.05

  	
   

  	
  Liability of Originator

  	
   

  	
  22

  
	
  Section 5.06

  	
   

  	
  Limitation on Liability of Originator and Others

  	
   

  	
  22

  
	
  Section 5.07

  	
   

  	
  Merger or Consolidation of Originator;
  Change-in-Control

  	
   

  	
  22

  
	
  Section 5.08

  	
   

  	
  Delivery of Collections

  	
   

  	
  23

  
	
  Section 5.09

  	
   

  	
  Payments from Principal and Interest Account

  	
   

  	
  23

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI          REMEDIES
  UPON MISREPRESENTATION

  	
   

  	
  23

  
	
   

  	
   

  	
   

  
	
  Section 6.01

  	
   

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

  	
   

  	
  23

  
	
  Section 6.02

  	
   

  	
  Reassignment of Repurchased or Substituted Loans

  	
   

  	
  26

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII        INDEMNIFICATION
  BY THE ORIGINATOR

  	
   

  	
  26

  
	
   

  	
   

  	
   

  
	
  Section 7.01

  	
   

  	
  Indemnification

  	
   

  	
  26

  
	
  Section 7.02

  	
   

  	
  Liabilities to Obligors

  	
   

  	
  27

  
	
  Section 7.03

  	
   

  	
  Operation of Indemnities

  	
   

  	
  27

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VIII       MISCELLANEOUS

  	
   

  	
  27

  
	
   

  	
   

  	
   

  
	
  Section 8.01

  	
   

  	
  Amendment

  	
   

  	
  27

  
	
  Section 8.02

  	
   

  	
  Governing Law

  	
   

  	
  29

  
	
  Section 8.03

  	
   

  	
  Notices

  	
   

  	
  29

  
	
  Section 8.04

  	
   

  	
  Severability of Provisions

  	
   

  	
  30

  
	
  Section 8.05

  	
   

  	
  Third Party Beneficiaries

  	
   

  	
  30

  
	
  Section 8.06

  	
   

  	
  Counterparts

  	
   

  	
  30

  
	
  Section 8.07

  	
   

  	
  Headings

  	
   

  	
  30

  
	
  Section 8.08

  	
   

  	
  No Bankruptcy Petition; Disclaimer

  	
   

  	
  31

  
	
  Section 8.09

  	
   

  	
  Jurisdiction

  	
   

  	
  31

  
	
  Section 8.10

  	
   

  	
  Prohibited Transactions with Respect to the Issuer

  	
   

  	
  31

  
	
  Section 8.11

  	
   

  	
  No Partnership

  	
   

  	
  31

  
	
  Section 8.12

  	
   

  	
  Successors and Assigns

  	
   

  	
  31

  
	
  Section 8.13

  	
   

  	
  Duration of Agreement

  	
   

  	
  32

  
	
  Section 8.14

  	
   

  	
  Limited Recourse

  	
   

  	
  32

  

 

 

COMMERCIAL
LOAN SALE AGREEMENT

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

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

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

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

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

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

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

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

 

 

ARTICLE I

DEFINITIONS

Section 1.01         Definitions.

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

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

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

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

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

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

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

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

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

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

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

 2
 

 

 

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

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

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

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

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

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

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

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

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

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

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

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

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

 3
 

 

 

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

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

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

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

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

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

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

Section
1.02         Other Terms.

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

Section
1.03         Computation of Time Periods.

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

Section
1.04         Interpretation.

In this Agreement,
unless a contrary intention appears:

 4
 

 

 

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

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

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

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

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

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

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

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

Section
1.05         References.

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

Section
1.06         Calculations.

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

 5
 

 

 

ARTICLE
II

TRANSFER OF LOAN ASSETS

Section
2.01         Transfer of Loan Assets.

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

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

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

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

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

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

 6
 

 

 

(f)            If any such transfer of the Loan
Assets is deemed to be a mere grant of a security interest to secure a
borrowing, the Trust Depositor may, to secure the Trust Depositor’s own
borrowing under the Sale and Servicing Agreement (to the extent that the
transfer of the Loan Assets thereunder is deemed to be a mere grant of a
security interest to secure a borrowing), repledge and reassign (i) all or a
portion of the Loan Assets pledged to the Trust Depositor by the Originator and
with respect to which the Trust Depositor has not released its security
interest at the time of such pledge and assignment, and (ii) all proceeds
thereof.  Such repledge and reassignment
may be made by the Trust Depositor with or without a repledge and reassignment
by the Trust Depositor of its rights under any agreement with the Originator,
and without further notice to or acknowledgment from the Originator.  The Originator waives, to the extent
permitted by Applicable Law, all claims, causes of action and remedies, whether
legal or equitable (including any right of setoff), against the Trust Depositor
or any assignee of the Trust Depositor relating to such action by the Trust
Depositor in connection with the transactions contemplated by this Agreement
and the Transaction Documents.

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

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

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

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

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

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

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

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

 7
 

 

 

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

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

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

Section
2.03         Acceptance by the Trust
Depositor.

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

Section
2.04         [Reserved]

Section
2.05         Conveyance of Additional
Loans.

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

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

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

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

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

 8
 

 

 

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

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

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

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

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

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

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

Section
2.06         Release of Excluded Amounts.

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

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

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

 9
 

 

 

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

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

ARTICLE
III

REPRESENTATIONS
AND WARRANTIES

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

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

 10

 

 

Section 3.01         Representations
and Warranties Regarding the Originator.

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

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

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

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

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

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

 11
 

 

 

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

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

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

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

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

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

(k)           Security Interest.

(i)            This
Agreement creates a valid and continuing security interest (as defined in the
applicable UCC) in favor of the Trust Depositor in all right, title and
interest of Originator in the Loan Assets, which security interest is prior to
all other Liens (except for Permitted Liens), and is enforceable as such
against creditors of and purchasers from the Originator;

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

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

 12
 

 

 

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

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

(v)           the Originator has caused the filing
of all appropriate financing statements in the proper filing office in the
appropriate jurisdictions under Applicable Law in order to perfect the security
interest in such Loan Assets granted to the Trust Depositor under this
Agreement in the name of the Trustee, for the benefit of, and as agent for, the
Securityholders;

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

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

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

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

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

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

 13
 

 

 

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

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

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

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

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

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

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

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

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

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

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

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

 14
 

 

 

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

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

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

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

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

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

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

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

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

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

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

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

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

 15
 

 

 

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

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

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

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

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

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

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

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

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

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

 16
 

 

 

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

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

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

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

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

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

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

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

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

 17
 

 

 

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

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

Section
3.03         [Reserved]

Section
3.04         Representations and
Warranties Regarding the Required Loan Documents.

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

Section
3.05         [Reserved].

Section
3.06         Representations and
Warranties Regarding the Trust Depositor.

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

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

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

 18
 

 

 

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

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

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

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

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

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

 19
 

 

 

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

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

ARTICLE
IV

PERFECTION OF TRANSFER AND

PROTECTION OF SECURITY INTERESTS

Section
4.01         Custody of Loans.

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

Section
4.02         Filing.

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

Section
4.03         Changes in Name, Corporate
Structure or Location.

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

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

 20
 

 

 

Section
4.04         Sale Treatment.

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

Section
4.05         Separateness from Trust
Depositor.

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

ARTICLE
V

COVENANTS OF THE ORIGINATOR

Section
5.01         Corporate Existence.

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

Section
5.02         Loans Not to Be Evidenced by
Promissory Notes.

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

Section
5.03         Security Interests.

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

 21
 

 

 

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

Section
5.04         Compliance with Law.

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

Section
5.05         Liability of Originator.

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

Section
5.06         Limitation on Liability of
Originator and Others.

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

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

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

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

 22
 

 

 

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

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

Section
5.08         Delivery of Collections.

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

Section
5.09         Payments from Principal and
Interest Account.

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

ARTICLE
VI

REMEDIES UPON MISREPRESENTATION

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

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

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

 23
 

 

 

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

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

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

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

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

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

 24
 

 

 

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

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

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

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

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

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

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

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

 25
 

 

 

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

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

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

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

Section
6.02         Reassignment of Repurchased
or Substituted Loans.

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

ARTICLE
VII

INDEMNIFICATION BY THE ORIGINATOR

Section
7.01         Indemnification.

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

 26
 

 

 

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

Section
7.02         Liabilities to Obligors.

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

Section
7.03         Operation of Indemnities.

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

ARTICLE
VIII

MISCELLANEOUS

Section
8.01         Amendment.

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

 27
 

 

 

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

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

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

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

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

 28
 

 

 

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

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

Section
8.02         Governing Law.

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

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

Section
8.03         Notices.

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

(a)           if to the Originator:

Ares Capital
Corporation

280 Park Avenue, 22nd Floor, Building East

New York, New York 10017

Attention: Michael J. Arougheti

Facsimile No.: (212) 750-1777

 29
 

 

 

with a copy to:

Ares Capital
Management LLC

1999 Avenue of the Stars, Suite 1900

Los Angeles, California 90067

Attention: Daniel F. Nguyen

Facsimile No.: (312) 201-4189

(b)           if to the Trust Depositor:

ARCC CLO 2006 LLC

280 Park Avenue, 22nd Floor, Building East

New York, New York 10017

Attention: Michael J. Arougheti

Facsimile No.: (212) 750-1777

with a copy to:

Ares Capital
Management LLC

1999 Avenue of the Stars, Suite 1900

Los Angeles, California 90067

Attention: Daniel F. Nguyen

Facsimile No.: (312) 201-4189

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

Section
8.04         Severability of Provisions.

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

Section
8.05         Third Party Beneficiaries.

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

 30
 

 

 

Section
8.06         Counterparts.

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

Section
8.07         Headings.

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

Section
8.08         No Bankruptcy Petition;
Disclaimer.

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

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

Section
8.09         Jurisdiction.

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

Section
8.10 Prohibited Transactions with Respect to the Issuer.

The Originator
shall not:

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

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

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

 31
 

 

 

Section
8.11         No Partnership.

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

Section
8.12         Successors and Assigns.

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

Section
8.13         Duration of Agreement.

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

Section
8.14         Limited Recourse.

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

Section 8.15.        Temporary
Participation and Elevation.

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

 32
 

 

 

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

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

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

[Remainder
of Page Intentionally Left Blank.]

 33
 

 

 

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

 

	
   

  	
  ARES CAPITAL CORPORATION,

  as the originator

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael
  Arougheti

  	
   

  
	
   

  	
  Name:

  	
  Michael
  Arougheti

  	
   

  
	
   

  	
  Title: 

  	
  President

  	
   

  
	
   

  	
   

  
	
   

  	
  ARES
  CLO 2006 LLC, as the Trust Depositor

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  ARES CAPITAL
  CORPORATION, its sole

  member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael
  Arougheti

  	
   

  
	
   

  	
  Name: 

  	
  Michael
  Arougheti

  	
   

  
	
   

  	
  Title: 

  	
  President

  	
   

  
					

 

 34

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