Document:

Exhibit
10.6

COLLATERAL
ADMINISTRATION AGREEMENT

This COLLATERAL
ADMINISTRATION AGREEMENT, dated as of July 7, 2006 (the “Agreement”) is
entered into by and among 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”), ARES CAPITAL
CORPORATION, a Maryland corporation, as the servicer (together with its
successors and assigns, the “Servicer”), and U.S. BANK NATIONAL
ASSOCIATION (“U.S. Bank”), acting as collateral administrator under and
for purposes of this Agreement (in such capacity, and together with any
successor Collateral Administrator hereunder, the “Collateral Administrator”).

WITNESSETH:

WHEREAS, the Issuer will
issue U.S.$75,000,000 Class A-1A Floating Rate Notes (the “Class A-1A Notes”),
U.S.$50,000,000 Class A-1A VFN Revolving Floating Rate Notes (the “Class
A-1A VFN Notes”), U.S.$14,000,000 Class A-1B Floating Rate Notes (the “Class
A-1B Notes” and, together with the Class A-1A Notes and the Class A-1A VFN
Notes, the “Class A-1 Notes”), U.S.$75,000,000 Class A-2A Floating Rate
Notes (the “Class A-2A Notes”), U.S. $33,000,000 Class A-2B Floating
Rates Notes (the “Class A-2B Notes” and, together with the Class A-2A
Notes, the “Class A-2 Notes” and, the Class A-2 Notes together with the
Class A-1 Notes, the “Class A Notes”), U.S.$23,000,000 Class B Floating
Rate Deferrable Interest Notes (the “Class B Notes”), U.S.$44,000,000
Class C Floating Rate Deferrable Interest Notes (the “Class C Notes”
and, together with the Class A Notes and the Class B Notes, the “Offered
Notes”), U.S.$32,000,000 Class D Floating Rate Deferrable Interest Notes
(the “Class D Notes”) and the U.S.$54,000,000 Class E Principal Only
Notes (the “Class E Notes” and, together with the Offered Notes and the
Class D Notes, the “Notes”);

WHEREAS, the Servicer,
the Issuer, ARCC CLO 2006 LLC, as the trust depositor, U.S. Bank, 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, have entered into a Sale and Servicing
Agreement dated as of July 7, 2006 (the “Sale and Servicing Agreement”);

WHEREAS, pursuant to the
terms of the Indenture dated as of July 7, 2006, (the “Indenture”) by
and between the Issuer, and U.S. Bank, as trustee (in such capacity, the “Trustee”),
the Issuer has pledged certain Loans, Permitted Investments and certain other
Indenture Collateral (the “Collateral”) as security for the Notes;

WHEREAS, the Issuer
wishes to engage U.S. Bank to act as Collateral Administrator, and thereby to
engage it to perform certain administrative duties with respect to the
Collateral pursuant to the terms of this Agreement; and

WHEREAS, U.S. Bank is
prepared to perform as Collateral Administrator certain specified obligations
of the Issuer, or the Servicer on its behalf, under the Sale and Servicing
Agreement (and certain other services) as specified herein, upon and subject to
the terms of this Agreement (but without assuming the obligations and
liabilities of the Issuer or the Servicer under the Sale and Servicing
Agreement).

 

NOW, THEREFORE, in
consideration of the mutual covenants contained herein, and other good and
valuable consideration the receipt of which is hereby acknowledged, the parties
hereto agree as follows:

1.                                       Definitions.
Capitalized terms not otherwise defined in this Agreement shall have the
meanings set forth in the Sale and Servicing Agreement or the Indenture.

2.                                       Powers
and Duties of Collateral Administrator.

(a)                                  U.S.
Bank shall act as Collateral Administrator pursuant to the terms of this
Agreement, until U.S. Bank’s resignation or removal as Collateral Administrator
pursuant to Section 7. In such capacity, the Collateral Administrator
shall assist the Issuer and the Servicer in connection with monitoring the
Collateral solely by maintaining a database of certain characteristics of the
Loans and Permitted Investments on an ongoing basis, and in providing to the
Issuer and the Servicer certain reports, schedules and calculations, all as
more particularly described in Section 2(b) (in each case in such form
and content, and in such greater detail, as may be mutually agreed upon by the
parties hereto from time to time and as may be required by the Sale and
Servicing Agreement), based upon information and data received from the Issuer
and/or the Servicer, which reports, schedules and calculations the Issuer or
the Servicer, on its behalf, is required to prepare and deliver (or which are
necessary to be performed in order that certain reports, schedules and
calculations can be performed as required) under Article IX of the Sale and
Servicing Agreement. U.S. Bank’s duties and authority to act as Collateral
Administrator hereunder are limited to the duties and authority specifically
set forth in this Agreement. By entering into, or performing its duties under,
this Agreement, the Collateral Administrator shall not be deemed to assume any
obligations or liabilities of the Issuer or of the Servicer under the Sale and
Servicing Agreement, and nothing herein contained shall be deemed to release,
terminate, discharge, limit, reduce, diminish, modify, amend or otherwise alter
in any respect the duties, obligations or liabilities of the Issuer, or the
Trustee under or pursuant to the Indenture or of the Issuer or the Servicer
under or pursuant to the Sale and Servicing Agreement.

(b)                                 The
Collateral Administrator shall perform the following general functions from
time to time:

(i)                                     Within
30 days after the Closing Date, create a collateral database with respect to
the Collateral that is part of the trust estate granted to the Trustee from
time to time, as provided in this Agreement (the “Collateral Database”);

(ii)                                  Update
the Collateral Database on a periodic basis for changes, including for ratings
changes; and to reflect the sale or other disposition of the Loans included in
the Collateral and the addition to the trust estate of additional Collateral
from time to time, in each case based upon, and to the extent of, information
furnished to the Collateral Administrator by the Issuer or the Servicer as may
be reasonably required by the Collateral Administrator from time to time;

(iii)                               Track
the receipt and daily allocation to the Transaction Accounts of Interest
Collections and Principal Collections and any withdrawals therefrom and, on
each

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Business Day, provide to the Servicer daily reports
reflecting such actions to the Transaction Accounts as of the close of business
on the preceding Business Day;

(iv)                              Prepare,
on behalf of the Issuer, and arrange for delivery in accordance with the Sale
and Servicing Agreement within the time frames stated therein, the Quarterly
Report pursuant to the terms of Section 9.01 of the Sale and Servicing
Agreement, on the basis of the information contained in the Collateral Database
as of the applicable Determination Date and such other information as may be
provided by the Servicer;

(v)                                 Reasonably
cooperate with the Independent Accountants appointed by the Issuer in the
preparation by such accountants of the reports required under Sections 9.04 of
the Sale and Servicing Agreement;

(vi)                              Reasonably
cooperate with the Issuer and the Servicer in providing the Rating Agencies
with such information as is contained in the Collateral Database, or routinely
maintained by it in performing its Trustee function, and required to be
delivered under Section 9.03 of the Sale and Servicing Agreement and such
additional information as may be reasonably requested by the Rating Agencies
and that can be provided without unreasonable burden or expense; and

(vii)                           Provide
other such information with respect to the Collateral granted to the Trustee
and not released from the trust estate as may be routinely maintained by the Collateral
Administrator in performing its ordinary Trustee function pursuant to the
Indenture (so long as the Collateral Administrator shall also serve as Trustee
under the Indenture or the Sale and Servicing Agreement), or as may be required
by the Indenture or the Sale and Servicing Agreement, as the Issuer or the
Servicer may reasonably request from time to time.

(c)                                  After
the Effective Date, upon the written request of the Servicer on any Business
Day and within three hours after the Collateral Administrator’s receipt of such
request (provided such request is received by 1:00 pm (New York time) on such
date (otherwise such request will be deemed made on the next succeeding
Business Day), the Collateral Administrator shall perform the following
functions: (A) as of the date the Servicer commits on behalf of the Issuer to
purchase Additional Loans or Substitute Loans to be included in the Collateral
and (B) as of the date of such request, for the purpose of evaluating the
inclusion of proposed Substitute Loans or Additional Loans, perform a pro forma
calculation of the tests and other requirements constituting the Portfolio
Criteria set forth in Section 2.06(c)(ii) of the Sale and Servicing Agreement,
in the case of Additional Loans, Section 11.01(g)(iii) of the Sale and
Servicing Agreement, in the case of Substitute Loans, in each case, based upon
information contained in the Collateral Database and information furnished by
the Issuer or the Servicer as to the proposed Substitute Loans or Additional
Loans, compare the results thereof against the applicable requirements set
forth in said Sections 2.06(c)(ii) and 11.01(g)(iii) and report the results
thereof to the Servicer in a mutually agreed format.

(d)                                 The
Servicer shall cooperate with the Collateral Administrator in connection with
the preparation by the Collateral Administrator of the Quarterly Reports. Without
limiting the generality of the foregoing, the Servicer shall supply in a timely
fashion any information maintained by it that the Collateral Administrator may
from time to time request

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with respect to the Collateral and reasonably need to
complete the reports and certificates required to be prepared by the Collateral
Administrator hereunder or required to permit the Collateral Administrator to
perform its obligations hereunder, including without limitation, the Fair
Market Value or Market Value of a Loan to the extent required by the Sale and
Servicing Agreement and any other information that may be reasonably required
under the Sale and Servicing Agreement with respect to the Collateral,
including, without limitation, a Charged-Off Loan (including notifying the
Collateral Administrator promptly upon a Loan becoming a Charged-Off Loan),
Delinquent Loan, Swapped Floating Rate Loan and related Asset Specific Swap,
Permitted PIK Loan, Credit Impaired Loan and Current Pay Loan. The Servicer
shall review and verify the contents of the aforesaid reports, instructions,
statements and certificates and shall send such reports, instructions,
statements and certificates to the Issuer for execution.

(e)                                  If,
in performing its duties under this Agreement, the Collateral Administrator is
required to decide between alternative courses of action, the Collateral
Administrator may request written instructions from the Servicer, acting on
behalf of the Issuer, as to the course of action desired by it. If the
Collateral Administrator does not receive such instructions within two Business
Days after it has requested them, the Collateral Administrator may, but shall
be under no duty to, take or refrain from taking any such courses of action.
The Collateral Administrator shall act in accordance with instructions received
after such two-day period except to the extent it has already taken, or
committed itself to take action inconsistent with such instructions. The
Collateral Administrator shall be entitled to rely on the advice of legal
counsel and independent accountants in performing its duties hereunder and
shall be deemed to have acted in good faith if it acts in accordance with such
advice.

(f)                                    Nothing
herein shall prevent the Collateral Administrator or any of its Affiliates from
engaging in other businesses or from rendering services of any kind to any
Person.

3.                                       Compensation.
The Issuer agrees to pay, and the Collateral Administrator shall be entitled to
receive compensation for, and reimbursement for expenses in connection with,
the Collateral Administrator’s performance of the duties called for herein; provided that such amounts will be payable
solely from and pursuant to Section 7.05 of the Sale and Servicing Agreement.

4.                                       Limitation
of Responsibility of the Collateral Administrator; Indemnification.

(a)                                  The
Collateral Administrator will have no responsibility under this Agreement other
than to render the services expressly called for hereunder in good faith and
without willful misfeasance, gross negligence or reckless disregard of its
duties hereunder. The Collateral Administrator shall incur no liability to
anyone in acting upon any signature, instrument, statement, notice, resolution,
request, direction, consent, order, certificate, report, opinion, bond or other
document or paper reasonably believed by it to be genuine and reasonably
believed by it to be signed by the proper party or parties. The Collateral
Administrator may exercise any of its rights or powers hereunder or perform any
of its duties hereunder either directly or, upon notice to the Servicer, by or
through agents or attorneys, and the Collateral Administrator shall not be
responsible for any misconduct or negligence on the part of any agent or
attorney appointed hereunder with due care by it. Neither the Collateral
Administrator nor any

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of its affiliates, directors, officers, shareholders,
agents or employees will be liable to the Servicer, the Issuer or any other
Person, except by reason of acts or omissions by the Collateral Administrator
constituting bad faith, willful misfeasance, gross negligence or reckless
disregard of the Collateral Administrator’s duties hereunder. The Collateral
Administrator shall in no event have any liability for the actions or omissions
of the Issuer, the Servicer or any other Person, and shall have no liability
for any inaccuracy or error in any duty performed or information or report
provided by it that results from or is caused by inaccurate, untimely or
incomplete information or data received by it from the Issuer, the Servicer or
another Person (other than the Trustee, if the same entity shall be serving as
Trustee and Collateral Administrator hereunder) except to the extent that such
inaccuracies or errors are caused by the Collateral Administrator’s own bad
faith, willful misfeasance, gross negligence or reckless disregard of its
duties hereunder. The Collateral Administrator shall not be liable for failing
to perform or delay in performing its specified duties hereunder which results
from or is caused by a failure or delay on the part of the Issuer, the Servicer
or another Person (other than the Trustee, if the same entity shall be serving
as Trustee and Collateral Administrator hereunder) in furnishing necessary,
timely and accurate information to the Collateral Administrator. The duties and
obligations of the Collateral Administrator and its employees or agents shall
be determined solely by the express provisions of this Agreement and they shall
not be under any obligation or duty except for the performance of such duties
and obligations as are specifically set forth herein, and no implied covenants
shall be read into this Agreement against them. The Collateral Administrator
may consult with counsel and shall be protected in any action reasonably taken
in good faith in accordance with the advice of such counsel.

(b)                                 The
Collateral Administrator may rely conclusively on any notice, certificate or
other document (including, without limitation, telecopier or other
electronically transmitted instructions, documents or information) furnished to
it hereunder and reasonably believed by it in good faith to be genuine. The
Collateral Administrator shall not be liable for any action taken by it in good
faith and reasonably believed by it to be within the discretion or powers
conferred upon it, or taken by it pursuant to any direction or instruction by
which it is governed hereunder, or omitted to be taken by it by reason of the
lack of direction or instruction required hereby for such action. The
Collateral Administrator shall not be bound to make any investigation into the
facts or matters stated in any certificate, report or other document; provided,
however, that, if the form thereof is prescribed by this Agreement, the
Collateral Administrator shall examine the same to determine whether it
conforms on its face to the requirements hereof. The Collateral Administrator
shall not be deemed to have knowledge or notice of any matter unless actually
known to a Responsible Officer working in its Corporate Trust Services
Division/CDO Department (or successor group). Under no circumstances shall the
Collateral Administrator be liable for indirect, punitive, special or
consequential damages under or pursuant to this Agreement, its duties or
obligations hereunder or arising out of or relating to the subject matter
hereof. It is expressly acknowledged by the Issuer and the Servicer that
application and performance by the Collateral Administrator of its various
duties hereunder (including recalculations to be performed in respect of the
matters contemplated hereby) shall be based upon, and in reliance upon, data
and information provided to it by the Servicer (and/or the Issuer) with respect
to the Collateral, and the Collateral Administrator shall have no
responsibility for the accuracy of any such information or data provided to it
by such persons. Nothing herein shall impose or imply any duty or obligation on
the part of the Collateral Administrator to verify, investigate or audit any
such information or data (except to the extent

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any such information provided is patently incorrect or
inconsistent with any proximally received information or instruction, in which
case the Collateral Administrator shall investigate any such information), or
to determine or monitor on an independent basis whether any issuer of or
Obligor under the Collateral is in default or in compliance with the underlying
documents governing or securing such securities, from time to time, the role of
the Collateral Administrator hereunder being solely to perform certain
mathematical computations and data comparisons as provided herein. For purposes
of monitoring changes in ratings, the Collateral Administrator shall be
entitled to use and rely (in good faith) exclusively upon a single reputable
electronic financial information reporting services (which for ratings by
S&P shall be www.standardandpoors.com or www.ratingsdirect.com) and shall
have no liability for any inaccuracies in the information reported by, of other
errors or omissions of, any such service.

(c)                                  The
Issuer shall, and hereby agrees to, reimburse, indemnify and hold harmless the
Collateral Administrator and its affiliates, directors, officers, shareholders,
agents and employees for and from any and all losses, damages, liabilities,
demands, charges, costs, expenses (including the reasonable fees and expenses
of counsel and other experts) and claims of any nature in respect of, or
arising from any acts or omissions performed or omitted by the Collateral
Administrator, its affiliates, directors, officers, shareholders, agents or
employees pursuant to or in connection with the terms of this Agreement, or in
the performance or observance of its duties or obligations under this
Agreement; provided the same are in good faith and without willful misfeasance
and/or gross negligence on the part of the Collateral Administrator or without
reckless disregard of its duties hereunder provided that such amounts will be
payable solely from and pursuant to Section 7.05 of the Sale and Servicing
Agreement.

(d)                                 The
Servicer shall, and hereby agrees to, reimburse, indemnify and hold harmless
the Collateral Administrator and its affiliates, directors, officers,
shareholders, agents and employees with respect to all expenses, losses,
damages, liabilities, demands, charges, costs, expenses (including the
reasonable fees and expenses of counsel) and claims of any nature in respect
of, or arising out of any acts or omissions performed or omitted by the
Servicer, its affiliates, directors, officers, shareholders, agents or
employees hereunder in bad faith or with willful misfeasance, gross negligence
or reckless disregard of its duties hereunder.

(e)                                  Without
limiting the generality of any terms of this Section 4, the Collateral
Administrator shall have no liability for any failure, inability or
unwillingness on the part of the Servicer or Issuer (or Trustee, if not the
same Person as the Collateral Administrator) to provide accurate and complete
information on a timely basis to the Collateral Administrator, or otherwise on
the part of any such party to comply with the terms of this Agreement, the
Indenture, or the Sale and Servicing Agreement, and shall have no liability for
any inaccuracy or error in the performance or observance on the Collateral
Administrator’s part of any of its duties hereunder that is caused by or
results from any such inaccurate, incomplete or untimely information received
by it, or other failure on the part of any such other party to comply with the
terms hereof.

Nothing herein shall
obligate the Collateral Administrator to determine independently the
characteristics of any Collateral, including whether any item of Collateral is
a Margin Stock, a Current Pay Loan, a Charged-Off Loan, a Delinquent Loan, a
Permitted PIK Loan, or a Credit Impaired Loan, it being understood that any
such determination shall be based

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exclusively upon notification the Collateral
Administrator may receive from the Servicer or from (or in its capacity as) the
Trustee (based upon notices received by the Trustee from the Obligor, or
trustee or agent bank under an Underlying Loan Agreement, or similar source).

5.                                       No
Joint Venture. Nothing contained in this Agreement (i) shall constitute the
Issuer, the Collateral Administrator and the Servicer members of any
partnership, joint venture, association, syndicate, unincorporated business or
other separate entity, (ii) shall be construed to impose any liability as such
on any of them or (iii) shall be deemed to confer on any of them any express,
implied or apparent authority to incur any obligation or liability on behalf of
the others.

6.                                       Term.
This Agreement shall continue in effect so long as the Indenture remains in
effect with respect to the Notes, unless this Agreement has been previously
terminated in accordance with Section 7.

7.                                       Termination.

(a)                                  This
Agreement may be terminated without cause by any party hereto upon not less
than 90 days’ written notice to the other parties.

(b)                                 If
at any time prior to the payment in full of the obligations under the Notes the
Collateral Administrator shall resign or be removed as Trustee under the
Indenture, such resignation or removal shall be deemed a resignation or removal
of the Collateral Administrator hereunder.

(c)                                  At
the option of the Issuer, this Agreement may be terminated upon ten days’
written notice of termination from the Issuer to the Collateral Administrator
if any of the following events shall occur:

(i)                                     The
Collateral Administrator shall (i) willfully or with reckless regard default in
the performance of any of its duties under this Agreement or (ii) breach any
material provision of this Agreement and shall not cure such default or breach
within 30 days (or, if such default or breach cannot be cured in such time, the
Collateral Administrator shall not have given within 30 days such assurance of
cure as shall be reasonably satisfactory to the Issuer);

(ii)                                  A
court having jurisdiction in the premises shall enter a decree or order for
relief in respect of the Collateral Administrator in any involuntary case under
any applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or appoint a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or similar official) of the Collateral Administrator or for any
substantial part of its property, or order the winding up or liquidation of its
affairs; or

(iii) The Collateral
Administrator shall (A) commence a voluntary case under applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, or consent to the
entry of an order for relief in an involuntary case under any such law, or
shall consent to the appointment of or taking possession by a receiver,
liquidator, assignee, trustee, custodian, sequestrator (or similar official) of
the Collateral Administrator or for any substantial part of its property, or
make any general assignment for the benefit of creditors; (B) fail

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generally to pay its debts as they become due; or (C)
permit or suffer all or substantially all of its properties or assets to be
sequestered or attached by a court order, which order remains undismissed for
60 days.

If any of the events
specified in clauses (ii) or (iii) of this Section 7 shall occur, the
Collateral Administrator shall give written notice thereof to the Servicer and
the Issuer within one Business Day after the happening of such event.

(d)                                 Except
when the Collateral Administrator shall be removed pursuant to subsection (b)
of this Section 7 or shall resign pursuant to Section 7, no
removal or resignation of the Collateral Administrator shall be effective until
the date as of which a successor Collateral Administrator reasonably acceptable
to the Issuer shall have agreed in writing to assume all of the Collateral
Administrator’s duties and obligations pursuant to this Agreement and shall
have executed and delivered an agreement in form and content reasonably
satisfactory to the Issuer, the Servicer and the Trustee.

(e)                                  Notwithstanding
the foregoing, the Collateral Administrator may resign its duties hereunder
without any requirement that a successor Collateral Administrator be obligated
hereunder and without any liability for further performance of any duties
hereunder (i) immediately upon the termination (whether by resignation or
removal) of U.S. Bank as Trustee under the Indenture, (ii) with at least 30
days, prior written notice to the Servicer and the Issuer, upon any reasonable
determination by U.S. Bank that the taking of any action, or performance of any
duty, on its part as Collateral Administrator pursuant to the terms of this
Agreement would be in conflict with or in violation of its duties or
obligations as Trustee under the Indenture, or (C) upon at least 60 days’ prior
written notice of termination to the Servicer and the Issuer upon the
occurrence of any of the following events and the failure to cure such event
within such 60 day notice period: (i) failure of the Issuer to pay any of the
amounts specified in Section 3 within 60 days after such amount is due
pursuant to Section 3 (to the extent not already paid to U.S. Bank
pursuant to Section 6.07 of the Indenture) or (B) failure of the Issuer to
provide any indemnity payment to U.S. Bank pursuant to the terms of this
Agreement, as the case may be, within 60 days of the receipt by the Issuer of a
written request for such payment or reimbursement (to the extent not already
paid to U.S. Bank pursuant to Section 6.07 of the Indenture).

(f)                                    The
Collateral Administrator shall provide notice of any such termination to the
Rating Agencies.

8.                                       Representations
and Warranties.

(a)                                  The
Servicer hereby represents and warrants to U.S. Bank and the Issuer as follows:

(i)                                     The
Servicer is a Maryland corporation and has the full corporate power and
authority to execute, deliver and perform this Agreement and all obligations
required hereunder and has taken all necessary corporate action to authorize
this Agreement on the terms and conditions hereof, the execution, delivery and
performance of this Agreement and the performance of all obligations imposed
upon it hereunder. No consent of any other person

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including, without limitation, stockholder and
creditors of the Servicer, and no license, permit, approval or authorization
of, exemption by, notice or report to, or registration, filing or declaration with,
any Governmental Authority is required by the Servicer in connection with this
Agreement or the execution, delivery, performance, validity or enforceability
of this Agreement and the obligations imposed upon it hereunder. This Agreement
constitutes the legal, valid and binding obligation of the Servicer enforceable
against the Servicer in accordance with its terms subject, as to enforcement,
(A) to the effect of bankruptcy, insolvency or similar laws affecting generally
the enforcement of creditors’ rights as such laws would apply in the event of
any bankruptcy, receivership, insolvency or similar event applicable to the
Servicer and (B) to general equitable principles (whether enforceability of
such principles is considered in a proceeding at law or in equity).

(ii)                                  The
execution, delivery and performance of this Agreement and the documents and
instruments required hereunder will not violate any provision of any existing
law or regulation binding on the Servicer, or any order, judgment, award or
decree of any court, arbitrator or Governmental Authority binding on the
Servicer, or the governing instruments of, or any securities or equity
interests issued by, the Servicer or of any mortgage, indenture, lease,
contract or other agreement, instrument or undertaking to which the Servicer is
a party or by which the Servicer or any of its assets may be bound, the
violation of which would have a material adverse effect on the business,
operations, assets or financial condition of the Servicer and will not result
in, or require, the creation or imposition of any lien on any of its property,
assets or revenues pursuant to the provisions of any such mortgage, indenture,
lease, contract or other agreement, instrument or undertaking.

(b)                                 The
Issuer hereby represents and warrants to the Collateral Administrator and the
Servicer as follows:

(i)                                     The
Issuer is a statutory trust duly created and validly existing and in good
standing under the laws of the State of Delaware and has the full power and
authority to execute, deliver and perform this Agreement and all obligations
required hereunder and has taken all necessary action to authorize this
Agreement on the terms and conditions hereof, the execution, delivery and
performance of this Agreement and the performance of all obligations imposed
upon it hereunder. No consent of any other person including, without
limitation, creditors of the Issuer, and no license, permit, approval or
authorization of, exemption by, notice or report to, or registration, tiling or
declaration with, any Governmental Authority is required by the Issuer in
connection with this Agreement or the execution, delivery, performance,
validity or enforceability of this Agreement and the obligations imposed upon
it hereunder. This Agreement constitutes the legal, valid and binding
obligation of the Issuer enforceable against the Issuer in accordance with its
terms subject, as to enforcement, (A) to the effect of bankruptcy, insolvency
or similar laws affecting generally the enforcement of creditors’ rights as such
laws would apply in the event of any bankruptcy, receivership, insolvency or
similar event applicable to the Issuer and (B) to general equitable principles
(whether unenforceability of such principles is considered in a proceeding at
law or in equity).

(ii)                                  The
execution, delivery and performance of this Agreement and the documents and
instruments required hereunder will not violate any provision of any existing
law or regulation binding on the Issuer, or any order, judgment, award or
decree of any court,

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arbitrator or Governmental Authority binding on the
Issuer, or the governing instruments of, or any securities issued by, the
Issuer or of any mortgage, indenture, lease, contract or other agreement,
instrument or undertaking to which the Issuer is a party or by which the Issuer
or any of its assets may be bound, the violation of which would have a material
adverse effect on the business, operations, assets or financial condition of
the Issuer and will not result in, or require, the creation or imposition of
any lien on any of its property, assets or revenues pursuant to the provisions
of any such mortgage, indenture, lease, contract or other agreement, instrument
or undertaking.

(c)                                  The
Collateral Administrator hereby represents and warrants to the Servicer and the
Issuer as follows:

(i)                                     The
Collateral Administrator is a national banking association duly organized,
validly existing and in good standing under the laws of The United States of
America and has full corporate power and authority to execute, deliver and
perform this Agreement and all obligations required hereunder and has taken all
necessary corporate action to authorize this Agreement on the terms and
conditions hereof, the execution, delivery and performance of this Agreement
and all obligations required hereunder. No consent of any other person
including, without limitation, stockholders and creditors of the Collateral
Administrator, and no license, permit, approval or authorization of, exemption
by, notice or report to, or registration, filing or declaration with, any
Governmental Authority is required by the Collateral Administrator in
connection with this Agreement or the execution, delivery, performance,
validity or enforceability of this Agreement and the obligations imposed upon
it hereunder. This Agreement constitutes the legal, valid and binding
obligations of the Collateral Administrator enforceable against the Collateral
Administrator in accordance with their terms subject, as to enforcement, (A) to
the effect of bankruptcy, insolvency or similar laws affecting generally the
enforcement of creditors’ rights as such laws would apply in the event of any
bankruptcy, receivership, insolvency or similar event applicable to the
Collateral Administrator and (B) to general equitable principles (whether
enforceability of such principles is considered in a proceeding at law or in
equity).

(ii)                                  The
execution, delivery and performance of this Agreement and the documents and
instruments required hereunder will not violate any provision of any existing
law or regulation binding on the Collateral Administrator, or any order,
judgment, award or decree of any court, arbitrator or Governmental Authority
binding on the Collateral Administrator, or the Amended and Restated Articles
of Association or Amended and Restated Bylaws of the Collateral Administrator
or of any mortgage, indenture, lease, contract or other agreement, instrument
or undertaking to which the Collateral Administrator is a party or by which the
Collateral Administrator or any of its assets may be bound, the violation of
which would have a material adverse effect on the business, operations, assets
or financial condition of the Collateral Administrator and will not result in,
or require, the creation or imposition of any lien on any of its property,
assets or revenues pursuant to the provisions of any such mortgage, indenture,
lease, contact or other agreement, instrument or undertaking.

9.                                       Amendments;
Instrument Under Seal. This Agreement may not be amended, changed, modified
or terminated (except as otherwise expressly provided herein) except (i) by the
Servicer, the Issuer and the Collateral Administrator in writing and (ii) with
prior written

 10
 

 

notice to the Rating Agencies. This Agreement is
intended to take effect as an instrument under seal.

10.                                 Governing
Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN CONFORMITY WITH
THE LAWS OF THE STATE OF NEW YORK WITH RESPECT TO AGREEMENTS MADE AND TO BE
PERFORMED THEREIN (WITHOUT REGARD TO ITS CHOICE OF LAW RULES).

11.                                 Notices.
All notices, requests, directions and other communications permitted or
required hereunder shall be in writing and shall be deemed to have been duly
given when received.

If to
the Collateral Administrator, to:

U.S.
Bank National Association

Corporate Trust Services/CDO Department

One Federal Street, Third Floor

Boston, Massachusetts 02110

Ref:  ARCC Commercial Loan Trust 2006

Facsimile No.:  (508) 258-6020

If to
the Servicer, to:

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

If to
the Issuer, to:

ARCC
Commercial Loan Trust 2006

c/o Wilmington Trust Company

1100 North Market Street

Wilmington, Delaware 19801

Attention: Ian P. Monigle

Facsimile No.: (302) 636-4140

 11
 

 

with a
copy to:

the
Servicer

12.                                 Successors
and Assigns. This Agreement shall inure to the benefit of, and be binding
upon, the successors and assigns of each of the Servicer, the Issuer and the
Collateral Administrator, provided
however, that the Collateral Administrator may not assign (by operation of law
or otherwise) its rights and obligations hereunder without the prior written
consent of the Servicer and the Issuer, and prior notice to the Rating
Agencies, except that U.S. Bank as Collateral Administrator may delegate to,
employ as agent, or otherwise cause any duty or obligation hereunder to be
performed by, any direct or indirect wholly owned subsidiary of U.S. Bank
National Association or its successors without the prior written consent of the
Servicer and the Issuer (provided that in such event U.S. Bank as Collateral
Administrator shall remain responsible for the performance of its duties as
Collateral Administrator hereunder).

13.                                 Counterparts.
This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original, but all of which together shall constitute
but one and the same instrument.

14.                                 Conflict
with the Sale and Servicing Agreement. If this Agreement shall require that
any action be taken with respect to any matter and the Sale and Servicing
Agreement shall require that a different action be taken with respect to such
matter, and such actions shall be mutually exclusive, or if this Agreement
should otherwise conflict with the Sale and Servicing Agreement, the provisions
of the Sale and Servicing Agreement in respect thereof shall control.

15.                                 Subordination.
The Collateral Administrator agrees that the payment of all amounts to which it
is entitled pursuant to under this Agreement shall be subordinated to the
extent set forth in, and the Collateral Administrator agrees to be bound by the
provisions of, the Indenture (as if it were a party to the Indenture, in the
case of any successor Collateral Administrator that is not also serving as
Trustee under the Indenture). The obligations of the Issuer hereunder are
limited recourse obligations of the Issuer payable solely from the Collateral
(except as otherwise provided in the fee letter between the Collateral
Administrator and the Issuer) and following realization of the Collateral,
application of the proceeds thereof in accordance with the Sale and Servicing
Agreement and their reduction of the Outstanding Loan Balance to zero, any
obligations of, or claims against the Issuer for any shortfall after such
realization shall be extinguished and shall not thereafter revive. The
Collateral Administrator further agrees that it will not have any recourse
against the Issuer or its employees and agents for any such amounts. The
Collateral Administrator consents to the assignment of this Agreement as
provided in the granting clause of the Indenture.

16.                                 Survival.
Notwithstanding any term herein to the contrary, all indemnifications set forth
or provided for in this Agreement, together with Sections 15 and 17
shall survive the terminations of this Agreement.

17.                                 No
Petition in Bankruptcy. The Collateral Administrator agrees not to file or
join in the filing of an involuntary petition in bankruptcy in any jurisdiction
against the Issuer for the nonpayment of the Collateral Administrator’s fees or
other amounts payable by the Issuer under

 12
 

 

this Agreement until the payment in full of all Notes
issued under the Indenture and the expiration of a period equal to the
applicable preference period under the Bankruptcy Code plus one day following
said payment. In no circumstances will the Collateral Administrator seek to
bring any action against any employee, agent or affiliate of the Issuer for any
amounts owing hereunder.

REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK

 

 

 13

 

IN WITNESS WHEREOF, the
parties hereto have caused this Collateral Administration Agreement to be
executed effective as of the day first above written.

	
  

  	
  ARCC
  COMMERCIAL LOAN TRUST 2006, as

  Issuer

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Wilmington
  Trust Company, not in its

  individual capacity, but solely as Owner

  Trustee on behalf of the Issuer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Robert J.
  Perkins

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Robert
  J. Perkins

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Financial
  Services Officer

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  ARES CAPITAL CORPORATION, as Servicer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  U.S. BANK NATIONAL ASSOCIATION, as

  Collateral Administrator

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
						

 

 

IN WITNESS WHEREOF, the
parties hereto have caused this Collateral Administration Agreement to be
executed effective as of the day first above written.

	
  

  	
  ARCC
  COMMERCIAL LOAN TRUST 2006, as

  Issuer

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Wilmington
  Trust Company, not in its

  individual capacity, but solely as Owner

  Trustee on behalf of the Issuer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  ARES CAPITAL CORPORATION, as Servicer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael
  Arougheti

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Michael Arougheti

  
	
   

  	
   

  	
  Title:

  	
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  U.S. BANK NATIONAL ASSOCIATION, as

  Collateral Administrator

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
						

 

 

IN WITNESS WHEREOF, the
parties hereto have caused this Collateral Administration Agreement to be
executed effective as of the day first above written.

	
  

  	
  ARCC
  COMMERCIAL LOAN TRUST 2006, as

  Issuer

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Wilmington
  Trust Company, not in its

  individual capacity, but solely as Owner

  Trustee on behalf of the Issuer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  ARES CAPITAL CORPORATION, as Servicer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  U.S. BANK NATIONAL ASSOCIATION, as

  Collateral Administrator

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Joel D. Cough

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Joel D.
  Cough

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Assistant
  Vice PresidentExhibit
10.7

 

MASTER
PARTICIPATION AGREEMENT

 

This Master Participation
Agreement (this “Agreement”) is entered into as of July 7, 2006, between
Ares Capital CP Funding LLC (“Seller”) and Ares Capital Corporation (“Purchaser”).

 

RECITALS:

 

Whereas,
Seller owns interests in (a) the loans and other securities and investments
identified in Exhibit A (each a “Loan”
and collectively, the “Loans”)
consisting of loans, advances and notes and interests in, to and under the
related Credit Documents, as hereinafter defined (each a “Loan Interest” and collectively, the “Loan Interests”),
pursuant to various credit agreements, indentures, note purchase agreements and
other similar documents, each between a borrower (each, a “Borrower” and
collectively, the “Borrowers”), an agent for the relevant lenders or
noteholders (if applicable), and one or more financial institutions acting as
lenders or noteholders (such credit agreements, as amended, supplemented,
novated or otherwise modified from time to time, together with all guarantees,
security agreements, mortgages, deeds of trust, letters of credit,
reimbursement agreements, waivers and any other documents executed in
connection therewith, hereinafter are referred to as the “Credit Documents”);
and

 

Whereas,
Seller desires to sell and grant to Purchaser, without recourse, a
participation interest in all of Seller’s Loan Interests, and Purchaser desires
to purchase and take from Seller, without recourse, a participation interest in
all of Seller’s Loan Interests.

 

AGREEMENT

 

Now
therefore, in consideration of the premises and for other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Seller and Purchaser hereby agree as follows:

 

1.             Participation. Seller
hereby sells and grants to Purchaser, and Purchaser hereby purchases and takes
from Seller, as of the Effective Date (as hereinafter defined), an undivided
100% participation interest in and to (i) each of the Loan Interests, (ii) all
Collections and payments paid in respect thereof and all monies due, to become
due or paid in respect thereof accruing on and after the Effective Date, (iii)
all security interests, liens and collateral subject thereto from time to time
purporting to secure payment by the applicable Obligor(s), (iv) all guaranties,
indemnities and warranties, and other agreements or arrangements of whatever
character from time to time supporting or securing payment of such Loan
Interests, (v) all collections and records with respect to the foregoing, 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 ((i)-(vi)
collectively, the “Participated Assets”) (each such participation
interest, a “Participation Interest” and,
collectively, the “Participation Interests”).

 

The term “Obligors”
as used herein shall mean, collectively, the Borrowers and each guarantor,
pledgor, subordinator or other person or entity directly or indirectly
obligated in respect of the Loans.

 

 

The
term “Collections” as used herein shall mean and include all payments or
distributions received by or on behalf of Seller from any Obligor in respect of
the Loan Interests and the proceeds of any collateral applied by Seller to such
Loan Interests. Seller shall promptly remit to Purchaser, as received, all such
Collections without set-off, counterclaim or deduction of any kind within three
business days after receipt thereof from an Obligor or following application of
any collateral therefor, as applicable, to the account specified below
Purchaser’s signature hereto.

 

It is the intention of
the parties hereto that each sale of interests in Loans hereunder shall be
absolute and irrevocable and will provide Purchaser with the full risks and
benefits of ownership of such interests so purchased (such that the Loan
Interests would not constitute property of Seller’s estate in the event of
Seller’s bankruptcy) and shall constitute a “sale of accounts,” as such term is
used in Article 9 of the Uniform Commercial Code of the State of New York, to
the extent applicable, and not a loan secured by such Loan Interests. In the
event that, contrary to the mutual intent of Seller and Purchaser, any purchase
of Loan Interests hereunder is not characterized as a sale but rather as a
collateral transfer for security (or the transactions contemplated hereby are
characterized as a financing transaction), it is the intent of the parties
hereto that this Agreement shall constitute a security agreement under
applicable law and that such purchase of the Loan Interests shall be deemed to
be a secured financing, secured by a security interest in all of Seller’s
right, title and interest now or hereafter existing and hereafter arising in,
to and under (i) all Loan Interests, (ii) all Collections and (iii) all
proceeds of the foregoing (collectively, the “Seller Collateral”). In
furtherance of the foregoing, Seller hereby grants to Purchaser a security
interest in all of Seller’s right, title and interest now or hereafter existing
in, to and under the Seller Collateral to secure the repayment of all amounts
due and owing by Seller to Purchaser hereunder with accrued interest thereon,
if applicable, whether now or hereafter existing, due or to become due, direct
or indirect, or absolute or contingent.

 

2.             Effective Date. From
and after the date of Seller’s receipt of the purchase price mutually agreed
between Seller and Purchaser (the “Effective Date”), the Participation
Interests purchased hereunder shall be for the account and risk of Purchaser,
without any recourse to Seller, except as expressly provided herein. The
transfer of the Participation Interests shall be deemed effective as of the
Effective Date. The Purchaser hereby assumes full risk and responsibility with
respect to repayment of the Participation Interests without recourse to Seller
and, in the event of any failure by any Borrower to fulfill any of its
obligations under the terms of the related Credit Documents, Seller shall not
be under any liability to Purchaser for payment of principal, interest or fees
other than as provided in Paragraph 3.

 

3.             Sharing of Liabilities and
Expenses. Purchaser shall pay to Seller, from time to time and upon
Seller’s demand therefor, an amount equal to all liabilities, losses,
out-of-pocket costs and expenses (including reasonable attorneys’ fees)
(collectively, the “Liabilities”) suffered or incurred by Seller from
and after the Effective Date in administering and collecting on the Loan
Interests or which otherwise arise in connection therewith or in connection
with preserving any collateral security therefor, except for such Liabilities
as may be caused by the negligence or willful misconduct of Seller and except
to the extent that Seller has theretofore been reimbursed for such Liabilities
by or on behalf of any Borrower. Purchaser shall be entitled to any such
amounts recovered by Seller from, or on behalf of, any Borrower after Purchaser
has paid Seller with respect to such Liabilities. Seller shall promptly remit
to Purchaser an amount equal to any payment received by Seller on account of
increased costs, break funding payments or expenses incurred by Purchaser in
connection with the Participation Interest.

 

4.             Information; No Recourse
or Warranty; Responsibilities. Seller holds in its possession for
the benefit of itself and Purchaser true and complete copies of all of the
documents in connection with the Loan Interests which constitute all documents
that Purchaser considers necessary in deciding to enter into this Agreement and
participate in the Loan Interests as provided herein. It is understood and
agreed that Seller does not make any express or implied representations or
warranties of any kind or character with 

 2
 

 

respect to the genuineness, validity, effectiveness,
enforceability, value, priority, perfection or collectability of the Loan
Interests, any collateral security therefor or the Credit Documents, nor with
respect to the solvency, financial condition or financial statements of any of
the Borrowers, and by its acceptance hereof, Purchaser agrees that Seller shall
be free of liability on account of Purchaser’s Participation Interests
described herein with respect to anything Seller may do or refrain from doing
in good faith and in the exercise of its judgment, provided,
however, that Seller agrees to use the same care in protecting the
interests of Purchaser in the Loan Interests as it uses for similar interests
held by it solely for its own account and Seller agrees to account to Purchaser
as herein set forth for the share from time to time applicable to Purchaser’s
Participation Interests hereunder in Collections. Whenever Seller receives a
payment of principal of, or interest, fees and make-whole amounts, if any, on,
the Loan Interests, Seller will accept such payment for the account and sole
benefit of, and as agent for, Purchaser and promptly pay over to Purchaser the
amount so received. In administering the Loan Interests and the Credit
Documents, Seller shall not be bound to ascertain or inquire as to the
performance of any of the terms, provisions or conditions of any thereof on the
part of any Borrower or any other person, shall be entitled to rely upon any
statement or notice, however sent, believed by it to be genuine and correct and
believed by it to be sent by the proper person, may consult with counsel and
shall be fully protected in any action taken or omitted to be taken by it in
accordance with the advice or opinion of such counsel, may employ agents or
attorneys-in-fact and shall not be liable for the default or misconduct of any
such person selected by it with due care, and shall not be responsible for the
performance of the payment or other obligations of the Borrowers or the value
of any collateral securing the same.

 

5.             Borrower Information.
Upon the request of Purchaser, Seller shall provide Purchaser with copies of
any information in Seller’s possession which was received pursuant to the
provisions of any Credit Document and, to the extent not otherwise available to
Purchaser, Seller shall use its best efforts to provide Purchaser, following
Purchaser’s written request therefor, such current factual information that
Purchaser specifically requests which is then in Seller’s possession and
relating to the status of the Loan Interests or any Borrower’s financial
condition; provided  that
Seller shall not be required to provide Purchaser with any information in
violation of any law or any contractual restriction set forth in the Credit
Documents on the disclosure thereof.

 

6.             Representations and
Warranties. (a) Purchaser represents and warrants to Seller that (i)
without characterizing the Loan Interests, the Participation Interests, or any
portion thereof as securities, Purchaser is purchasing the Participation
Interests hereunder for its own account in the ordinary course of business not
with a view to, or in connection, with any subdivision, resale, or distribution
thereof in violation of any applicable securities laws, (ii) Purchaser is
engaged in the business of entering into transactions of the nature
contemplated herein, and (iii) Purchaser has full power and authority to
execute, deliver and perform its obligations under this Agreement.

 

(b) Seller represents and
warrants to Purchaser that, as of the date hereof and as of the Effective Date,
(i) Seller is the sole legal and beneficial owner and holder of the rights
comprising each Loan Interest with good title thereto, free and clear of all
liens, charges, encumbrances or other security interests as of the date hereof,
and is not a party to any agreement (other than this Agreement) which would
result in any lien, charge or other encumbrance, (ii) the aggregate amounts
owed by the respective Borrowers under or in respect of the respective Loan
Interests are not less than the amounts set forth in Exhibit A hereto,
and (iii) Seller has full power and authority to execute, deliver and perform
its obligations under this Agreement.

 

7.             Further Assurances. From
and after the date hereof, each of Purchaser and Seller covenants and agrees to
execute and deliver all such agreements, instruments and documents and to take
all such further actions as the other party hereto may reasonably deem
necessary from time to time to carry out the intent and purposes of this
Agreement and to consummate the transactions contemplated hereby.

 3
 

 

8.             Other Financings.
Purchaser shall have no interest, by virtue of this Agreement and Purchaser’s
rights hereunder or otherwise, in any future extension of credit or financing
transactions by Seller to, on behalf of, or with, any Borrower or any
guarantees or collateral therefor, or any property now or hereafter in the
possession or control of Seller which may be or become security for the obligations
of any Borrower arising under any Credit Document by reason of the general
description of indebtedness, secured or otherwise; provided
that, if payments in respect of any guarantees or the proceeds of
any such collateral shall be applied to any of the obligations of any Borrower
described in clauses (a) and (b) of Section 1 hereof, then Purchaser shall be
entitled to share in such application as set forth in Section 1 hereof.

 

9.             Amendments, Waivers, etc. Subject
to the terms of the Credit Documents, Seller may not enter into any amendment
or modification of, or waive compliance with the terms of, any Credit Document
without the consent of Purchaser. If Seller shall at any time request in
writing Purchaser’s consent to any such matter for which Purchaser’s consent is
required and shall not receive a response to such request within five business
days after Purchaser has received such request (or within such earlier period
as Seller may notify to Purchaser in connection with a specific request),
Purchaser shall be conclusively deemed to have refused to give such consent and
Seller shall be entitled to thereafter act on the basis that Purchaser has
denied such consent.

 

10.           Savings Clause. Notwithstanding
any other provision of this Agreement, with respect to each Participation
Interest: (i) nothing contained herein shall grant to Purchaser any rights
which the relevant Credit Documents require Seller to retain; (ii) this
Agreement shall be deemed to incorporate any provisions required by any Credit
Document to be incorporated in order to transfer the related Participation
Interest hereunder; and (iii) this Agreement shall be deemed to omit any
provision which any Credit Document requires to be omitted in order to transfer
the related Participation Interest hereunder.

 

11.           Further Sale and
Assignment. To the extent permitted under the related Credit
Documents, Purchaser shall be entitled to freely pledge, sell, transfer, or
convey (each, a “Transfer”) any Participation Interest hereunder to any
person (a “Transferee”), provided that each of the following conditions
are met: (i) Purchaser shall obtain the prior written consent of Seller to such
Transfer (which consent shall not be unreasonably withheld); and (ii) as a
result of the Transfer, at the discretion of Seller, either (A) Transferee
shall hold a participation directly from Seller governed by such agreements as
Seller and the Transferee shall reasonably agree and not governed by this
Agreement, or (B) the Participation Interest shall be terminated with respect
to such interest and Seller shall assign all of its right, title and interest
in and to the relevant Loan Interest to the Transferee pursuant to such
documentation as may be required by the relevant Credit Documents. Notwithstanding the foregoing, Purchaser
may grant a subparticipation interest in any or all of the Participation
Interests without the consent of, or notice to, Seller, but only if
such subparticipation does not violate any applicable law or regulation or
cause Seller to violate or be in breach of any provision of the Credit
Documents. Purchaser
agrees that any sale or disposition of Purchaser’s Participation Interest will
be made in accordance with applicable securities laws.

 

Seller
shall not sell, assign, transfer, mortgage, pledge, grant a lien on or
otherwise deal with or encumber any of its rights or obligations in or to the
Loan Interests to the extent such interests relate to the Participation
Interests or any other distributions or payments with respect thereto or any of
its rights or obligations under this Agreement without the prior written
consent of Purchaser.

 

12.           Waivers. No
delay or omission by any party to exercise any right under this Agreement shall
impair any such right, nor shall it be construed to be a waiver thereof. No waiver
of any single breach or default under this Agreement shall be deemed a waiver
of any other breach or default.

 4
 

 

13.           Withholding Tax.
Purchaser represents and warrants that payments to it under this Agreement are
not subject to U.S. withholding tax. Upon request from time to time, Purchaser
shall promptly provide to Seller an appropriately executed Internal Revenue
Service form or such other evidence as shall be necessary to establish that
payments made to Purchaser hereunder are exempt from U.S. withholding tax.

 

14.           Notices. Whenever
this Agreement requires or permits any consent, approval, notice, request, or
demand from one party to another, the consent, approval, notice, request, or
demand must be in writing and shall be deemed effective when delivered, if sent
by courier or by registered or certified mail, or when receipt is confirmed, if
sent by telecopy, each case at the address or telecopy number set forth below
the relevant party’s signature hereto or at such other address or telecopy
number as may be provided by either party to the other party.

 

15.           Illegality. Construction;
Governing Law. The illegality or unenforceability of any provision
of this Agreement shall not in any way affect or impair the legality or
enforceability of the remaining provisions of this Agreement. Paragraph
headings used in this Agreement are for convenience of reference only and shall
not affect the construction of this Agreement. The laws of the State of New
York shall govern the rights and duties of the parties hereto and the
interpretation hereof (without regard to any conflicts of law provision that
would require the application of the law of any other jurisdiction).

 

16.           Termination. From
and after the date hereof, Seller and Purchaser agree to use diligent efforts
to promptly effect an outright assignment to Purchaser or Purchaser’s designee
of each Loan relating to each Participation Interest. With respect to each
Participation Interest, effective upon (i) obtaining such consents,
acknowledgements and authorizations as may be required under the relevant
Credit Documents to effect each such assignment, (ii) execution and delivery of
such assignment agreements as are required under the terms of the relevant
Credit Documents to effect such assignment, and (iii) the satisfaction of all
other conditions to the effectiveness of such assignment under the terms of the
relevant Credit Documents, such Participation Interest shall automatically
convert to and become, and Seller hereby grants and conveys, an outright
assignment of the relevant Participated Assets to Purchaser and Purchaser
hereby assumes all of the obligations of Seller arising under and relating to
such Participated Assets and this Agreement shall be deemed to be an agreement
for the outright assignment of such Participated Assets upon the effective date
of the relevant assignment agreement (each such date, an “Elevation Date”),
and the terms hereof shall be construed accordingly, mutatis mutandis.

 

17.           Survival of
Representations and Warranties. All representations and warranties
made herein by the parties hereto shall survive the execution, delivery and
performance of this Agreement.

 

18.           Relationship Between
Seller and Purchaser. The relationship between Seller and Purchaser
shall be that of seller and buyer and not that of debtor and creditor. Nothing
contained in this Agreement shall establish any fiduciary, partnership, joint
venture or similar relationship between or among the parties hereto. This
Agreement is intended to, and upon execution hereof and satisfaction or waiver
of the conditions precedent set forth herein shall, effect a true sale of the
Participation Interests.

 

19.           Entire Agreement.
This Agreement (a) embodies the entire Agreement between the parities,
supersedes all prior agreements and understandings between the parties, if any,
relating to the subject matter hereof, and may be amended, and any provision
hereof may be waived, only by an instrument in writing executed by each party
hereto, and (b) may be executed in any number of identical counterparts, each
of which shall be deemed an original for all purposes and all of which shall
constitute, collectively, one Agreement. Transmission by telecopier of an
executed counterpart of this Agreement shall be deemed to constitute due and
sufficient delivery of such counterpart.

 5
 

 

[The remainder of the
page is intentionally blank.]

 6
 

 

IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date first above written by their respective duly authorized
officers.

 

	
   

  	
  SELLER:

  
	
   

  	
   

  
	
   

  	
  ARES CAPITAL CP
  FUNDING LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/
  Daniel F. Nguyen

  	
   

  
	
   

  	
   

  	
  Name: Daniel F.
  Nguyen

  
	
   

  	
   

  	
  Title:   Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PURCHASER:

  
	
   

  	
   

  
	
   

  	
  ARES CAPITAL
  CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/
  Merritt S. Hooper

  	
   

  
	
   

  	
   

  	
  Name: Merritt S.
  Hooper

  
	
   

  	
   

  	
  Title:   Vice President

  

 7
 

 

EXHIBIT A

 

Loans

 

	
  Borrower

  	
   

  	
  Credit Agreement

  	
   

  	
  Tranche

  	
   

  	
  Aggregate

  Amount

  
	
  Qualitor Acquisition
  Corp. (First Lien)

  	
   

  	
  Credit Agreement dated as of December 21, 2004
  (as amended, amended and restated, supplemented or otherwise modified from
  time to time), among Transportation Aftermarket Enterpriser Inc., Qualitor
  Acquisition Corp., BLD Products, Ltd., Hebco Products, Inc., International
  Brake Industries, Inc., Longman Enterprises, Inc., McGuane Industries, Inc.,
  Novo Products Inc., Pylon Manufacturing Corp., Anstro Manufacturing, Inc.,
  Antares Capital Corporation, as agent for the benefit of all lenders, and the
  lenders who are parties thereto

  	
   

  	
  Term Loan B

  	
   

  	
  $1,975,000.00

  
	
  Qualitor Acquisition
  Corp. (Second Lien)

  	
   

  	
  Second Lien Credit Agreement dated as of
  December 21, 2004 (as amended, amended and restated, supplemented or
  otherwise modified from time to time), among Transportation Aftermarket
  Enterpriser Inc., Qualitor Acquisition Corp., BLD Products, Ltd., Hebco Products,
  Inc., International Brake Industries, Inc., Longman Enterprises, Inc.,
  McGuane Industries, Inc., Novo Products Inc., Pylon Manufacturing Corp.,
  Anstro Manufacturing, Inc., Antares Capital Corporation, as agent for the
  benefit of all lenders, and the lenders who are parties thereto

  	
   

  	
  Term Loan

  	
   

  	
  $5,000,000.00

  
	
  SMS Holdings, LLC

  	
   

  	
  Credit Agreement dated as of July 2, 2004 (as
  amended, amended and restated, supplemented or otherwise modified from time
  to time), among Shoes For Crews, LLC, Mighty Mat, LLC, SMS Holdings, LLC, the
  various financial institutions and other persons from time to time party
  thereto, Royal Bank of Canada, as administrative agent, The Bank Of New York,
  as syndication agent, Antares Capital Corporation, as documentation agent,
  and RBC Capital Partners, as arranger

  	
   

  	
  Term Loans

  	
   

  	
  $1,478,167.43

  
	
  Miller Heiman
  Acquisition Corp.

  	
   

  	
  Second Amended and Restated Credit Agreement dated
  as of June 1, 2005 (as amended, amended and restated, supplemented or
  otherwise modified from time to time), among Miller Heiman Inc., Miller
  Heiman Acquisition Corp., the lenders party thereto, and CIT Lending Services
  Corporation, as administrative agent and collateral agent, CIT Capital
  Securities LLC, as arranger, and any documentation agent designated in
  accordance with the terms thereof

  	
   

  	
  Term Loan A 

  

  Term Loan B

  	
   

  	
  $3,900,285.34

  

  

  $4,048,182.20 

  
	
  Canon Communications
  Merger Sub

  LLC

  	
   

  	
  Second Lien Credit Agreement dated as of May 31,
  2005 (as amended, amended and restated, supplemented or otherwise modified
  from time to time), among Canon Communications Merger Sub LLC, Canon
  Communications Holdings, LLC, the Subsidiary Guarantors (as defined therein),
  the Lenders (as defined therein), and Credit Suisse, Cayman Islands Branch,
  as collateral agent for the Secured Parties (as defined therein) and as
  administrative agent for the Lenders (as defined therein)

  	
   

  	
  Term Loans

  	
   

  	
  $12,000,000.00

  

 

 8
 

 

	
  Borrower

  	
   

  	
  Credit Agreement

  	
   

  	
  Tranche

  	
   

  	
  Aggregate

  Amount

  
	
  DCS Business Services,
  Inc.

  	
   

  	
  Amended and Restated Credit Agreement dated as of
  February 4, 2005 (as amended, amended and restated, supplemented or otherwise
  modified from time to time), among DCS Business Services, Inc., the financial
  institutions party thereto from time to time, Madison Capital Funding LLC, as
  agent and lead arranger, Key Bank National Association, as syndication agent
  and arranger, and Bank of America, N.A., as documentation agent

  	
   

  	
  Term A Loan 

  

  Term B Loan

  	
   

  	
  $5,242,026.40 

  

  

  $6,757,973.60

  
	
  Thermal Solutions LLC

  	
   

  	
  Amended and Restated Credit Agreement dated as of
  March 21, 2006 (as amended, amended and restated, supplemented or otherwise
  modified from time to time), among Thermal Solutions LLC, the financial
  institutions party thereto from time to time, Newstar Financial, Inc., as
  syndication agent, and Madison Capital Funding LLC, as agent

  	
   

  	
  Term A Loan 

  

  Term B Loan

  	
   

  	
  $1,750,000.00 

  

  

  $3,250,000.00

  
	
  Making Memories
  Wholesale, Inc.

  	
   

  	
  Credit Agreement dated as of May 6, 2005 (as
  amended, amended and restated, supplemented or otherwise modified from time
  to time), among Making Memories Wholesale, Inc., MMW Holdings Corp., the
  various financial institutions and other persons from time to time party
  thereto, The Royal Bank Scotland plc, as administrative agent, Ares Capital
  Corporation and The Royal Bank of Scotland plc, as joint lead arrangers, and
  Ares Capital Corporation, as documentation agent

  	
   

  	
  Term Loans

  	
   

  	
  $8,075,000.00

  
	
  Tiger III, Inc.

  	
   

  	
  Agreement dated October 4, 2004 (as amended, amended
  and restated, supplemented or otherwise modified from time to time), among
  Tiger III, Inc., the financial institutions listed therein as lenders, The
  Royal Bank of Scotland plc, as mandated lead arranger, agent, and security
  trustee

  	
   

  	
  Facility

  B

  

  Facility

  C

  	
   

  	
  $2,500,000.00 

  

  $5,000,000.00

  
	
  Varel International Acquisition, L.P.

  	
   

  	
  Credit and Guaranty Agreement dated as of June 1,
  2005 (as amended, amended and restated, supplemented or otherwise modified
  from time to time), among Varel International Acquisition, L.P., Varel GP
  Newco, LLC, Varel Holding, Inc., the lenders party thereto from time to time,
  The Royal Bank of Scotland plc, as sole lead arranger, administrative agent,
  and collateral agent, Freeport Loan Fund, LLC, as syndication agent, and Ares
  Capital Corporation, as documentations agent

  	
   

  	
  Tranche B Term
  Loans
 

  Tranche C Term Loans

  	
   

  	
  $8,600,422.93 

  

  

  $3,333,333.33

  
								

 

 9

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