Exhibit 10.1

 

 

U.S. $225,000,000

 

AMENDED AND RESTATED
LOAN FUNDING AND SERVICING AGREEMENT

 

by and among

 

ACS FUNDING TRUST I,
as the Borrower

 

AMERICAN CAPITAL STRATEGIES, LTD.,
as the Servicer

 

VARIABLE FUNDING CAPITAL CORPORATION,
as the Conduit Lender

 

WACHOVIA SECURITIES, LLC,
as the Deal Agent

 

 

WACHOVIA BANK, NATIONAL ASSOCIATION,
as the Swingline Lender

 

and

 

WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION,
as the Backup Servicer and as the Collateral Custodian

 

Dated as of June 13, 2003

 

 

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TABLE OF CONTENTS

 

ARTICLE I       DEFINITIONS

Section 1.1

Certain Defined Terms

Section 1.2

Other Terms

Section 1.3

Computation of Time Periods

Section 1.4

Interpretation

Section 1.5

Section References

Section 1.6

Calculations

ARTICLE II       PURCHASE OF THE STRUCTURED NOTES

Section 2.1

The Structured Notes

Section 2.2

Procedures for Swingline Advances

Section 2.3

Procedures for Advances by the Conduit Lender

Section 2.4

Optional Changes in Facility Amount; Prepayments

Section 2.5

Reimbursement of Swingline Advances

Section 2.6

Notations on the Structured Notes

Section 2.7

Principal Repayments

Section 2.8

Interest Payments

Section 2.9

Settlement Procedures

Section 2.10

Collections and Allocations

Section 2.11

Payments, Computations, Etc

Section 2.12

Reserved

Section 2.13

Fees

Section 2.14

Increased Costs; Capital Adequacy; Illegality

Section 2.15

Taxes

Section 2.16

Assignment of the Purchase Agreement

Section 2.17

Lien Release Dividend

Section 2.18

Appointment of Registrar and Duties

Section 2.19

Substitution of Loans

ARTICLE III       CLOSING; CONDITIONS OF CLOSING AND ADVANCES

Section 3.1

Conditions to Closing and Initial Advances

Section 3.2

Conditions Precedent to All Advances

 

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ARTICLE IV       REPRESENTATIONS AND WARRANTIES

Section 4.1

Representations and Warranties of the Borrower

Section 4.2

Representations and Warranties of the Borrower Relating to the Agreement and the
Loans

Section 4.3

Breach of Certain Representations and Warranties

ARTICLE V       GENERAL COVENANTS OF THE BORROWER

Section 5.1

Covenants of the Borrower

Section 5.2

Hedging Agreement

Section 5.3

Delivery of Loan Files

ARTICLE VI       PERFECTION OF TRANSFER AND PROTECTION OF SECURITY INTERESTS

Section 6.1

Custody of Loans

Section 6.2

Filing

Section 6.3

Changes in Name, Corporate Structure or Location

Section 6.4

Chief Executive Office

Section 6.5

Costs and Expenses

Section 6.6

Sale Treatment

Section 6.7

Separateness from the Borrower

ARTICLE VII       ADMINISTRATION AND SERVICING OF LOANS

Section 7.1

Appointment of the Servicer

Section 7.2

Duties and Responsibilities of the Servicer

Section 7.3

Authorization of the Servicer

Section 7.4

Collection of Payments

Section 7.5

Servicer Advances

Section 7.6

Realization Upon Defaulted Loans or Charged-Off Loans

Section 7.7

Maintenance of Insurance Policies

Section 7.8

Representations and Warranties of the Servicer

Section 7.9

Covenants of the Servicer

Section 7.10

The Collateral Custodian

Section 7.11

Representations and Warranties of the Collateral Custodian

Section 7.12

Covenants of the Collateral Custodian

Section 7.13

The Backup Servicer

Section 7.14

Representations and Warranties of the Backup Servicer

 

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Section 7.15

Covenants of the Backup Servicer

Section 7.16

Payment of Certain Expenses by Servicer

Section 7.17

Reports

Section 7.18

Annual Statement as to Compliance

Section 7.19

Annual Independent Public Accountant’s Servicing Reports

Section 7.20

Limitation on Liability of the Servicer and Others

Section 7.21

The Servicer, the Backup Servicer and the Collateral Custodian Not to Resign

Section 7.22

Access to Certain Documentation and Information Regarding the Loans

Section 7.23

Merger or Consolidation of the Servicer

Section 7.24

Identification of Records

Section 7.25

Servicer Termination Events

Section 7.26

Appointment of Successor Servicer

Section 7.27

Market Servicing Fee

ARTICLE VIII       SECURITY INTEREST

Section 8.1

Grant of Security Interest

Section 8.2

Release of Lien on Loans

Section 8.3

Release of Lien on Supplemental Interests

Section 8.4

Further Assurances

Section 8.5

Remedies

Section 8.6

Waiver of Certain Laws

Section 8.7

Power of Attorney

ARTICLE IX       TERMINATION EVENTS

Section 9.1

Termination Events

ARTICLE X       INDEMNIFICATION

Section 10.1

Indemnities by the Borrower

Section 10.2

Indemnities by the Servicer

ARTICLE XI       THE DEAL AGENT

Section 11.1

Authorization and Action

Section 11.2

Delegation of Duties

Section 11.3

Exculpatory Provisions

Section 11.4

Reliance

 

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Section 11.5

Non-Reliance on Deal Agent

Section 11.6

The Deal Agent in its Individual Capacity

Section 11.7

Successor Deal Agent

ARTICLE XII       MISCELLANEOUS

Section 12.1

Amendments and Waivers

Section 12.2

Notices, Etc

Section 12.3

Liabilities to Obligors

Section 12.4

No Waiver, Rights and Remedies

Section 12.5

Binding Effect

Section 12.6

Term of this Agreement

Section 12.7

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

Section 12.8

WAIVER OF JURY TRIAL

Section 12.9

Costs, Expenses and Taxes

Section 12.10

No Proceedings

Section 12.11

Recourse Against Certain Parties

Section 12.12

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

Section 12.13

Confidentiality

Section 12.14

Third Party Beneficiaries

Section 12.15

Execution in Counterparts; Severability; Integration

Section 12.16

Waiver of Setoff

Section 12.17

Assignments by the Conduit Lender; WCM Transfer

Section 12.18

Heading and Exhibits

Section 12.19

Sharing of Payments on Transferred Loans Subject to the Retained Interest
Provisions

Section 12.20

Non-Confidentiality of Tax Treatment

 

EXHIBITS

 

EXHIBIT A-1

Borrower Notice (Funding Request)

EXHIBIT A-2

Borrower Notice (Swingline Funding Request)

EXHIBIT B-1

Form of VFCC Note

EXHIBIT B-2

Form of Swingline Note

EXHIBIT C

“Limited Purpose” Provisions

EXHIBIT D

Form of Assignment and Acceptance

EXHIBIT E

Form of Monthly Report

EXHIBIT F

Form of Servicer’s Certificate

EXHIBIT G

Credit and Collection Policy

 

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EXHIBIT H

Form of Hedging Agreement (including Schedule and Confirmation)

EXHIBIT I

Form of Certificate of Borrower’s Counsel

EXHIBIT J

Form of Trust Receipt and Initial Certification

EXHIBIT K

Form of Trust Receipt and Final Certification

EXHIBIT L

Form of Request for Release of Loan Documents and Receipt

EXHIBIT M

Form of Assignment of Mortgage

EXHIBIT N

Form of Reinvestment Certification

EXHIBIT O-1

Officer’s Certificate as to Solvency from Originator

EXHIBIT O-2

Officer’s Certificate as to Solvency from Borrower

EXHIBIT P

Officer’s Closing Certificate

EXHIBIT P-1

Officer’s Closing Certificate from Originator

EXHIBIT P-2

Officer’s Closing Certificate from Borrower

EXHIBIT Q-1

Power of Attorney from Originator

EXHIBIT Q-2

Power of Attorney from Borrower

EXHIBIT R

Reserved

EXHIBIT S

Reserved

EXHIBIT T

Form of Agent and Intercreditor Provisions for Agented Notes

EXHIBIT U

Form of Intercreditor and Subordination Agreement

 

SCHEDULES

 

SCHEDULE I

Schedule of Documents

SCHEDULE II

Reserved

SCHEDULE III

Reserved

SCHEDULE IV

Loan List

SCHEDULE V

Location of Loan Files

SCHEDULE VI

Form of Loans

 

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P R E A M B L E

 

THIS AMENDED AND RESTATED LOAN FUNDING AND SERVICING AGREEMENT (such agreement
as amended, modified, waived, supplemented or restated from time to time, the
“Agreement”) is made as of this 13th day of June, 2003, by and among:

 

(1)                                  ACS FUNDING TRUST I, a Delaware statutory
trust, as the borrower (together with its successors and assigns in such
capacity, the “Borrower”);

 

(2)                                  AMERICAN CAPITAL STRATEGIES, LTD., a
Delaware corporation (“American Capital”), as the servicer (together with its
successors and assigns in such capacity, the “Servicer”);

 

(3)                                  VARIABLE FUNDING CAPITAL CORPORATION, a
Delaware corporation (“VFCC”), as the conduit lender (together with its
successors and assigns in such capacity, the “Conduit Lender”);

 

(4)                                  WACHOVIA SECURITIES, LLC, a Delaware
corporation (“WS”), as the deal agent (together with its successors and assigns
in such capacity, the “Deal Agent”);

 

(5)                                  WACHOVIA BANK, NATIONAL ASSOCIATION, a
national banking association (“Wachovia”), as the swingline lender (together
with its successors and assigns in such capacity, the “Swingline Lender”); and

 

(6)                                  WELLS FARGO BANK MINNESOTA, NATIONAL
ASSOCIATION, a national banking association (“Wells Fargo”), not in its
individual capacity, but solely as the backup servicer (together with its
successors and assigns in such capacity, the “Backup Servicer”) and as the
collateral custodian (together with its successors and assigns in such capacity,
the “Collateral Custodian”).

 

R E C I T A L S

 

WHEREAS, the Borrower, the Servicer, VFCC, as the original conduit lender (in
such capacity, the “Original Conduit Lender”), Wachovia, as the original
alternate VFCC investor (in such capacity, the “Original VFCC Alternate
Investor”) and as the original swingline lender (the “Original Swingline Lender”
and together with the Original Conduit Lender and the Original VFCC Alternate
Investor, the “Original Lenders”), WS (f/k/a First Union Capital Markets Corp.),
as the original deal agent (together with its successors and assigns in such
capacity, the “Original Deal Agent”), the Backup Servicer, and the Collateral
Custodian have heretofore executed and delivered a Loan Funding and Servicing
Agreement, dated as of March 31, 1999, as amended by Amendment No. 1, dated as
of June 30, 1999, Amendment No. 2, dated as of September 24, 1999, Amendment No.
3, dated as of December 14, 1999, Amendment No. 4, dated as of June 16, 2000,
Amendment No. 5, dated as of December 20, 2000, Amendment No. 6, dated as of
March 29, 2001, Amendment No. 7, dated as of April 19, 2001, Amendment No. 8,
dated as of January 15, 2002, Amendment No. 9, dated as of March 29, 2002,
Amendment No. 10, dated as of June 19, 2002, Amendment No. 11, dated as of
December 30, 2002 and Amendment No. 12, dated as of March 25, 2003 (as amended,
modified, waived or supplemented, the “Original Loan Funding and Servicing
Agreement”), providing for the

 

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purchase by (i) the Original VFCC Alternate Investor of a Structured Note in the
face amount of $225,000,000 and (ii) the Original Swingline Lender of a
Structured Note in the face amount of $30,000,000;

 

WHEREAS, Section 11.1 of the Original Loan Funding and Servicing Agreement
provides that no amendment shall be effective without the written agreement of
the Borrower, the Original Deal Agent, the Required Lenders (as defined in the
Original Loan Funding and Servicing Agreement), the Backup Servicer, the
Collateral Custodian and the Hedge Counterparty;

 

WHEREAS, the Borrower, the Original Deal Agent, each of the Original Lenders,
the Backup Servicer, the Collateral Custodian and the Hedge Counterparty hereby
desire to amend and restate the Original Loan Funding and Servicing Agreement to
make such changes as are necessary or in the interests of the parties;

 

WHEREAS, each of the Borrower, the Original Deal Agent, the Original Lenders,
the Backup Servicer, the Collateral Custodian and the Hedge Counterparty
consents to the amendments to the Original Loan Funding and Servicing Agreement
effected by this Agreement; and

 

WHEREAS, all other conditions precedent to the execution of this Agreement have
been complied with.

 

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

 

ARTICLE I

 

DEFINITIONS

 

Section 1.1                                   Certain Defined Terms.

 

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

 

(b)                                 As used in this Agreement and its schedules,
exhibits and other attachments, unless the context requires a different meaning,
the following terms shall have the following meanings:

 

1940 Act:  The Investment Company Act of 1940, as amended.

 

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

 

Accrual Period:  With respect to each Advance and Swingline Advance (or portion
thereof) (a) with respect to the first Payment Date, the period from and
including the Closing

 

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Date to and including the last day of the calendar month in which the Closing
Date occurs and (b) with respect to any subsequent Payment Date, the calendar
month immediately preceding the month in which the Payment Date occurs.

 

Add-On Loan:  Any additional loan or extension of credit made subsequent to any
Loan made by the Originator or one of its Subsidiaries to the Obligor of such
Loan in accordance with the Credit and Collection Policy.

 

Adjusted Eurodollar Rate:  For any Accrual Period, an interest rate per annum
equal to a fraction, expressed as a percentage and rounded upwards (if
necessary), to the nearest 1/100 of 1%, (i) the numerator of which is equal to
the LIBOR Rate for such Accrual Period and (ii) the denominator of which is
equal to 100% minus the Eurodollar Reserve Percentage for such Accrual Period.

 

Advance:  Defined in subsection 2.1(b).

 

Advances Outstanding:  On any day, the aggregate principal amount of Advances
outstanding and Swingline Advances outstanding on such day, after giving effect
to all repayments of Advances and Swingline Advances and makings of new Advances
and Swingline Advances on such day; provided, that, the Advances Outstanding
under and as defined in the Original Loan Funding and Servicing Agreement on and
as of the Closing Date shall be deemed to be Advances Outstanding under and for
all purposes of this Agreement.

 

Affected Party:  The Deal Agent, the Conduit Lender, the Swingline Lender, each
Liquidity Bank, all assignees and participants of the Investors each Liquidity
Bank, any successor to WS as Deal Agent and any sub-agent of the Deal Agent.

 

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

 

Agent’s Account:  The Deal Agent’s Account or the Swingline Lender’s Account, as
applicable.

 

Agented Notes:  One or more promissory notes issued by an Eligible Obligor
wherein (a) the note(s) are originated in accordance with the Credit and
Collection Policy as a part of a syndicated loan transaction, (b) upon an
assignment of the note to the Borrower under the Purchase Agreement and the
grant of a security interest in such note under this Agreement, the original
note will be endorsed to the Deal Agent, on behalf of the Secured Parties, and
held by the Collateral Custodian, on behalf of the Secured Parties, (c) the
Borrower, as assignee of the note, will have all of the rights (but none of the
obligations) of the Originator with respect to such note and the Related
Property, including the right to receive and collect payments directly in its
own name and to enforce its rights directly against the Obligor thereof, (d) the
note 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 and (e) the Originator

 

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(or American Capital Financial Services, Inc., a wholly-owned subsidiary of the
Originator) is the collateral agent and payment agent for all noteholders of
such Obligor; provided, however, Agented Notes shall not include (1) the
obligations, if any, of any agents under the Loan Documents evidencing such
Agented Notes, and (2) the interests, rights and obligations under the Loan
Documents evidencing such Agented Notes that are retained by the Originator or
are owned or owed by other noteholders.

 

Aggregate Net Mark to Market Amount:  As of each Determination Date, the sum of
all Net Mark to Market Amounts for such date for all Hedge Transactions,
provided, however, that if such sum shall be a negative number, the Aggregate
Net Mark to Market Amount shall be deemed to be zero (0).

 

Aggregate Outstanding Loan Balance:  As of any date of determination, the sum of
the Outstanding Loan Balances of all Eligible Loans included as part of the
Collateral on such date minus the Outstanding Loan Balance of all Defaulted
Loans included as part of the Collateral on such date.

 

Aggregate Purchased Loan Balance:  As of any date of determination, the sum of
the Purchased Loan Balances of all Eligible Loans included as part of the
Collateral on such date minus the Purchased Loan Balance of all Defaulted Loans
included as part of the Collateral on such date.

 

Agreement:  Defined in the Preamble.

 

Allocation Adjustment Event:  With respect to each Transferred Loan subject to
the Retained Interest provisions of this Agreement, the occurrence of any one or
more of the following under and as defined in any Permitted Securitization
Transaction rated by the Rating Agencies, as applicable:  (i) a “Servicer
Termination Event” or (ii) a “Termination Event”.

 

Alternative Rate:  An interest rate per annum equal to the Adjusted Eurodollar
Rate; provided, however, that the Alternative Rate shall be the Base Rate if a
Eurodollar Disruption Event occurs; provided, further, that the Alternative Rate
for the first two (2) Business Days following any Advance made by a Liquidity
Bank shall be the Base Rate unless such Liquidity Bank has received at least two
(2) Business Days prior notice of such Advance.

 

American Capital:  Defined in the Preamble.

 

Amortization Period:  The period beginning on the Termination Date and ending on
the Collection Date.

 

Applicable Law:  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, predatory lending laws,
the Federal Truth in Lending Act, and Regulation Z and Regulation B of the
Federal Reserve Board), and applicable judgments, decrees, injunctions, writs,
orders, or line action of any court, arbitrator or other administrative,
judicial, or quasi-judicial tribunal or agency of competent jurisdiction.

 

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Assignment:  The Assignment entered into between the Originator and the Borrower
in substantially the form of Exhibit A to the Purchase Agreement.

 

Assignment of Mortgage:  As to each Loan secured by an interest in real
property, one or more assignments, notices of transfer or equivalent
instruments, each in recordable form and sufficient under the laws of the
relevant jurisdiction to reflect the transfer of the related mortgage, deed of
trust, security deed or similar security instrument and all other documents
related to such Loan and to the Borrower and to grant a perfected lien thereon
by the Borrower in favor of the Deal Agent, on behalf of the Secured Parties,
each such Assignment of Mortgage to be substantially in the form of Exhibit M
hereto; provided, however, with respect to Agented Notes, Assignment of Mortgage
shall mean such documents, including assignments, notices of transfer or
equivalent instruments, each in recordable form as necessary, as are sufficient
under the laws of the relevant jurisdiction to reflect the transfer to the
Originator (or American Capital Financial Services, Inc., a wholly owned
subsidiary of the Originator), as collateral agent for all noteholders of the
Obligor, of the related mortgage, deed of trust, security deed or other similar
instrument securing such notes and all other documents relating to such notes
and to grant a perfected lien thereon by the Obligor in favor of the Originator
(or American Capital Financial Services, Inc., a wholly owned subsidiary of the
Originator), as collateral agent for all such noteholders.

 

Availability:  On any day, the excess of (I) the amount by which (a) the lesser
of (i) the product of (A) the Borrowing Base and (B) 75% and (ii) the Facility
Amount exceeds (b) an amount necessary to cure any Overcollateralization
Shortfall and any Required Equity Shortfall over (II) the Advances Outstanding
on such day; provided, however, that, for all purposes of this Agreement other
than determining whether a Termination Event has occurred under Section 9.1(c),
during the Amortization Period, the Availability shall be $0.

 

Available Funds:  With respect to any Payment Date, all amounts received in the
Collection Account (including, without limitation, any Collections on any of the
Collateral) as of the later of (i) the immediately preceding Determination Date
or (ii) the date of the calculations set forth in the most recent Borrower
Notice.

 

Backup Servicer:  Defined in the Preamble.

 

Backup Servicer Expenses:  The reasonable out-of-pocket expenses to be paid to
the Backup Servicer under and in accordance with the Backup Servicer and
Collateral Custodian Fee Letter.

 

Backup Servicer Fee:  The fee to be paid to the Backup Servicer under the terms
of the Backup Servicer and Collateral Custodian Fee Letter.

 

Backup Servicer and Collateral Custodian Fee Letter:  The Amended and Restated
Backup Servicer and Collateral Custodian Fee Letter, dated as of the date
hereof, among the Servicer, the Borrower, the Backup Servicer, the Collateral
Custodian and the Deal Agent.

 

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

 

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

 

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

 

Borrower:  Defined in the Preamble.

 

Borrowing Base:  On any date of determination, an amount equal to (a) the sum of
(i) the Aggregate Purchased Loan Balance on such date and (ii) the Purchased
Loan Balance of all Eligible Loans to become included as part of the Collateral
on such date.

 

Borrower Notice:  A written notice, in the form of Exhibit A-1, to be used for
each Advance, repayment of each Advance or termination or reduction of the
Facility Amount or Prepayments of Advances.

 

Breakage Costs:  Any amount or amounts as shall compensate VFCC for any loss,
cost or expense incurred by VFCC (as reasonably determined by the Deal Agent on
behalf of VFCC) as a result of (i) a prepayment by the Borrower of Advances
Outstanding or Interest or (ii) any difference between the CP Rate and the
Adjusted Eurodollar Rate.  All Breakage Costs shall be due and payable upon
demand.  The determination by the Deal Agent of the amount of any such loss or
expense shall be set forth in a written notice to the Borrower and shall be
conclusive absent manifest error.

 

Business Day:  Any day of the year other than a Saturday or a Sunday on which
(a) banks are not required or authorized to be closed in New York City, New
York, Minneapolis, Minnesota, Charlotte, North Carolina and Baltimore, Maryland,
and (b) if the term “Business Day” is used in connection with the Adjusted
Eurodollar Rate, means the foregoing only if such day is also a day of year on
which dealings in United States dollar deposits are carried on in the London
interbank market.

 

Capital Lease Obligations:  With respect to any Obligor, for any period, the
obligations of such Person to pay rent and other amounts under any lease of (or
other arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP.

 

Change-in-Control:  The date on which (a) any Person or “group” acquires any
“beneficial ownership” (as such terms are defined under Rule 13d-3 of, and
Regulation 13D under the Exchange Act), either directly or indirectly, of
membership interests or other equity interests or any interest convertible into
any such interest in the Originator or Servicer having more than fifty percent
(50%) of the voting power for the election of managers of the Originator, or
Servicer, if any, under ordinary circumstances, or (b) (except in connection
with any Permitted Securitization Transaction) the Originator or Servicer sells,
transfers, conveys, assigns or otherwise disposes of all or substantially all of
the assets of the Originator or Servicer.

 

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Charged-Off Loan:  Any Loan: (i) that is one hundred eighty (180) days or more
past due with respect to any interest or principal payment, (ii) for which an
Insolvency Event has occurred with respect to the related Obligor, (iii) for
which the related Obligor has suffered any Material Adverse Change, or (iv) that
is or should be written off as uncollectible by the Servicer in accordance with
the Credit and Collection Policy.

 

Charged-Off Ratio:  With respect to any Collection Period, the percentage
equivalent of a fraction, calculated as of the Determination Date for such
Collection Period, (a) the numerator of which is equal to the aggregate
Outstanding Loan Balance of all Loans that became Charged-Off Loans during such
Collection Period and (b) the denominator of which is equal to the decimal
equivalent of a fraction (x) the numerator of which is equal to the sum of (A)
the Aggregate Outstanding Loan Balance as of the first day of such Collection
Period and (B) the Aggregate Outstanding Loan Balance as of the last day of such
Collection Period and (y) the denominator of which is 2.

 

Closing Date:  June 13, 2003.

 

Code:  The Internal Revenue Code of 1986, as amended.

 

Collateral:  All right, title and interest, whether now owned or hereafter
acquired or arising, and wherever located, of the Borrower in all accounts, cash
and currency, chattel paper, tangible chattel paper, electronic 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 any of the
following (in each case excluding the Retained Interest and the Excluded
Amounts):

 

(i)                                     the Transferred Loans, and all monies
due or to become due in payment of such Transferred Loans on and after the
related Cut-Off Date, including but not limited to all Collections;

 

(ii)                                  any Related Property securing the
Transferred Loans (to the extent the Seller, other than solely in its capacity
as collateral agent under any loan agreement with an Obligor has been granted a
Lien thereon) including the related security interest granted by the Obligor
under such Loans, all proceeds from any sale or other disposition of such
Related Property;

 

(iii)                               all security interests, liens, guaranties,
warranties, letters of credit, accounts, bank accounts, mortgages or other
encumbrances and property subject thereto from time to time purporting to secure
payment of any Transferred Loan, together with all UCC financing statements or
similar filings relating thereto;

 

(iv)                              all Insurance Policies;

 

(v)                                 the Loan Documents;

 

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(vi)                              the Pledge Agreement and all Supplemental
Interests related to any Transferred Loans to the extent that the Borrower has
any ownership or security interest therein;

 

(vii)                           the Collection Account, each Lockbox and all
Lockbox Accounts, together with all funds held in such accounts, and all
certificates and instruments, if any, from time to time representing or
evidencing each of the foregoing or such funds;

 

(viii)                        any Hedging Agreement and any payment due
thereunder;

 

(ix)                                the Purchase Agreement and the assignment to
the Deal Agent of all UCC financing statements filed by the Borrower against the
Originator under or in connection with the Purchase Agreement;

 

(x)                                   the “Collateral” under and as defined in
the Original Loan Funding and Servicing Agreement; and

 

(xi)                                the proceeds of each of the foregoing.

 

Collateral Custodian:  Defined in the Preamble.

 

Collateral Custodian Expenses:  The reasonable out-of-pocket expenses to be paid
to the Collateral Custodian under and in accordance with the Backup Servicer and
Collateral Custodian Fee Letter.

 

Collateral Custodian Fee:  The fee to be paid to the Collateral Custodian under
the terms of the Backup Servicer and Collateral Custodian Fee Letter, including
the “Collateral Custodian Fee” and “Administration Fee,” each as defined in the
Backup Servicer and Collateral Custodian Fee Letter.

 

Collection Account:  Defined in subsection 7.4(e).

 

Collection Date:  The date following the Termination Date on which the
Obligations have been reduced to zero and indefeasibly paid in full other than
contingent indemnification obligations.

 

Collection Period:  Each calendar month, except in the case of the first
Collection Period, the period beginning on the Closing Date to and including the
last day of the calendar month in which the Closing Date occurs.

 

Collections:  (a) All cash collections or other cash proceeds received by the
Borrower or by the Servicer or Originator on behalf of the Borrower from any
source in payment of any amounts owed in respect of a Transferred Loan,
including, without limitation, Interest Collections, Principal Collections,
Deemed Collections, Insurance Proceeds, interest earnings in the Collection
Account, and all Recoveries, (b) all amounts received by the Borrower in
connection with the repurchase of an Ineligible Loan pursuant to Section 4.3,
(c) any other funds received by or on behalf of the Borrower with respect to any
Transferred Loan or Related

 

8

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Property, and (d) all payments received pursuant to any Hedging Agreement or
Hedge Transaction, but excluding amounts in respect of any Retained Interest and
Excluded Amounts.

 

Commercial Paper Notes:  On any day, any short-term promissory notes issued by
VFCC in the commercial paper market.

 

Commitment:  With respect to the Conduit Lender, the commitment of such Investor
to make Advances and, with respect to the Swingline Lender, the commitment of
such Investor to make Swingline Advances, in accordance herewith in an amount
not to exceed (a) prior to the Termination Date, the amount set forth opposite
such Investor’s name on the signature pages of this Agreement, under the heading
“Commitment,” and (b) on and after the Termination Date, the aggregate Advances
Outstanding.

 

Commitment Termination Date:  June 13, 2006, or such later date as the Deal
Agent, in its sole discretion, shall notify the Borrower of in writing.

 

Computer Records:  The computer records generated by the Servicer or any
subservicer that provide information relating to the Loans and that were used by
the Originator in selecting the Loans in the Collateral.

 

Concentration Limits:  On any day, each of the following (calculated on the
basis of a percentage of the Aggregate Outstanding Loan Balance):

 

(a)                                  the sum of the Outstanding Loan Balances of
Eligible Loans to Obligors whose chief executive office is in any one state
shall not exceed 35%;

 

(b)                                 the sum of the Outstanding Loan Balances of
Eligible Loans to Obligors which are in the same Industry shall not exceed 10%;

 

(c)                                  the sum of the Outstanding Loan Balances of
Eligible Loans to any one Obligor shall not exceed the Large Loan Limit;

 

(d)                                 the sum of the Outstanding Loan Balances of
Eligible Loans the Obligors of which are Grade 2 Obligors shall not exceed 7.5%;

 

(e)                                  the sum of the Outstanding Loan Balances of
Eligible Loans that have interest due and payable monthly shall not be less than
50%;

 

(f)                                    the sum of the Outstanding Loan Balances
of Eligible Loans that are secured by a security interest in all assets of the
related Obligor shall not be less than 75%;

 

(g)                                 the sum of the Outstanding Loan Balances of
Eligible Loans that have at least a portion of the monthly or quarterly interest
that is due under such Loans payable on a current basis by the Obligors thereof
in cash (or such Obligors shall have other Loans included as part of the
Collateral that pay current monthly or quarterly interest on a current basis in
cash) shall not be less than 100%;

 

9

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(h)                                 the sum of the Outstanding Loan Balances of
each Eligible Loan which is a PIK Loan and which is either (a) a Fixed Rate Loan
having a Loan Rate of less than 12% per annum or (b) a Floating Rate Loan having
a Loan Rate of less than 9% per annum shall not exceed 0%; and

 

(i)                                     the sum of the Outstanding Loan Balances
of Eligible Loans principally secured by real property shall not exceed 40%.

 

Conduit Lender:  Defined in the Preamble.

 

Consolidated Subsidiary:  With respect to any Obligor, as of any date of
determination, any Subsidiary or other Person the accounts of which would be
consolidated with those of the Obligor in its consolidated financial statements
if such statements were prepared as of such date.

 

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

 

CP Rate:  For any Accrual Period, the per annum rate equivalent to the weighted
average of the per annum rates paid or payable by VFCC from time to time as
interest on or otherwise (by means of interest rate hedges or otherwise taking
into consideration any incremental carrying costs associated with short-term
promissory notes issued by VFCC maturing on dates other than those certain dates
on which VFCC is to receive funds) in respect of the promissory notes issued by
VFCC that are allocated, in whole or in part, by the Deal Agent (on behalf of
VFCC) to fund or maintain the Advances Outstanding during such period, as
determined by the Deal Agent (on behalf of VFCC) and reported to the Borrower
and the Servicer, which rates shall reflect and give effect to (i) the
commissions of placement agents and dealers in respect of such promissory notes,
to the extent such commissions are allocated, in whole or in part, to such
promissory notes by the Deal Agent (on behalf of VFCC) and (ii) other borrowings
by VFCC, including, without limitation, borrowings to fund small or odd dollar
amounts that are not easily accommodated in the commercial paper market;
provided, however, that if any component of such rate is a discount rate, in
calculating the CP Rate, the Deal Agent shall for such component use the rate
resulting from converting such discount rate to an interest bearing equivalent
rate per annum.

 

Credit and Collection Policy:  Those credit, collection, customer relation and
service policies:  (a) determined by the Borrower, the Originator and the
initial Servicer as of the date hereof relating to the Loans and related Loan
Documents, described in Exhibit G, as the same may be amended or modified from
time to time in accordance with subsection 7.9(g); and (b) with respect to any
Successor Servicer, the collection procedures and policies of such person (as
approved by the Deal Agent) at the time such Person becomes Successor Servicer.

 

Cut-Off Date:  With respect to each Transferred Loan, the date on and after
which Collections on such Transferred Loan become included as part of the
Collateral.

 

Deemed Collection:  Defined in subsection 2.4(c).

 

10

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Defaulted Loan:  Any Loan (that is not a Charged-Off Loan):  (a) that is
forty-five (45) days or more past due with respect to any interest or principal
payments, (b) for which an Insolvency Event has occurred with respect to the
related Obligor, (c) for which the related Obligor has suffered any Material
Adverse Change, or (d) that is or otherwise should be considered a Defaulted
Loan by the Servicer in accordance with the Credit and Collection Policy.

 

Default Ratio:  With respect to any Collection Period, the percentage equivalent
of a fraction, calculated as of the Determination Date for such Collection
Period, (a) the numerator of which is equal to the aggregate Outstanding Loan
Balance of all Defaulted Loans (excluding Charged-Off Loans) and (b) the
denominator of which is equal to the decimal equivalent of a fraction the
numerator of which is equal to the sum of (i) the Aggregate Outstanding Loan
Balance as of the first day of such Collection Period and (ii) the Aggregate
Outstanding Loan Balance as of the last day of such Collection Period and the
denominator of which is 2.

 

Delinquent:  On any day with respect to any Loan, and any specified time period,
(i) any payment, or portion thereof, due with respect thereto, has not been made
by the Obligor of such Loan for the specified time period from the due date of
such payment or (ii) other than with respect to any PIK Loans, the related
Obligor is not paying any of the accrued and unpaid interest thereon on a
current basis.

 

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

 

Determination Date:  The last day of each Collection Period.

 

Dollars:  Means, and the conventional “$” signifies, the lawful currency of the
United States.

 

Eligible Loan:  On any date of determination, any Loan that satisfies each of
the following requirements:

 

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

 

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

 

11

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(iii)                               the Loan is not a Defaulted Loan, and, for
purposes of the initial Advance made with respect to such Loan, no payment or
portion thereof is more than ten (10) days Delinquent;

 

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

 

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

 

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

 

(vii)                           any applicable taxes in connection with the
transfer of such Loan have been paid and the Obligor has been given any
assurances (including with respect to the payment of transfer taxes and
compliance with securities laws) required by the Loan Documents in connection
with the transfer of the Loan;

 

(viii)                        the Loan is denominated and payable only in
Dollars in the United States;

 

(ix)                                the Loan bears some current interest, which
is due and payable monthly or quarterly;

 

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

 

(xi)                                the Loan, together with the related Loan
Documents, is fully assignable, (and, if such Loan is secured by an interest in
real property, an Assignment of Mortgage has been delivered to the Collateral
Custodian);

 

(xii)                             the Loan was documented and closed in
accordance with the Credit and Collection Policy, and there is only one current
original promissory note that has been delivered to the Collateral Custodian,
duly endorsed as collateral;

 

(xiii)                          the Loan and the Borrower’s interest in all
related Collateral and Related Property are free of any Liens, except for
Permitted Liens and all filings and other actions required to perfect the
security interest of (a) the Deal Agent, as agent for the Secured Parties, in
the Collateral have been made or taken and (b) in the case of Agented Notes, the
collateral agent, as agent for all noteholders of the related Obligor, in the
Related Property, have been made or taken;

 

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(xiv)                         the Loan has an original term to maturity of no
more than one hundred twenty (120) months, and is either fully amortizing in
installments (which installments need not be in identical amounts) over such
term or the principal amount thereof is due in a single installment at the end
of such term;

 

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

 

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

 

(xvii)                      the Loan Documents with respect to such Loan are
complete in accordance with the Credit and Collection Policy;

 

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

 

(xix)                           such Loan does not represent payment obligations
relating to “put” rights;

 

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

 

(xxi)                           the Euro-Caribe Loan (notwithstanding any other
criteria set forth in this definition of Eligible Loan);

 

(xxii)                        if such Loan is originated on or after December 1,
2000, with the exception of the Loan to DigitalNet, Inc., the Obligor of such
Loan has waived all rights of set-off and/or counterclaim against the Originator
of the Loan and all assignees thereof;

 

(xxiii)                     with respect to Agented Notes, the related Loan
Documents (a) shall include a note purchase agreement containing provisions
relating to the appointment and duties of a payment agent and a collateral agent
and intercreditor and (if applicable) subordination provisions substantially
similar to the forms provided to and approved by the Deal Agent and attached
hereto as Exhibit T, and (b) are duly authorized, fully and properly executed
and are the valid, binding and unconditional payment obligation of the Obligor
thereof;

 

(xxiv)                    with respect to Agented Notes, the Originator (or
American Capital Financial Services, Inc., a wholly owned subsidiary of the
Originator) has been appointed the collateral agent of the security and the
payment agent for all such notes prior to such Agented Note becoming a part of
the Collateral;

 

(xxv)                       with respect to Agented Notes, if the entity serving
as the collateral agent of the security for all syndicated notes of the Obligor
has or will change from the time of the origination of the notes, all
appropriate assignments of the collateral agent’s rights in and to the
collateral on behalf of the noteholders have been executed and filed or recorded
as appropriate prior to such Agented Note becoming a part of the Collateral;

 

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(xxvi)                    with respect to Agented Notes, all required
notifications, if any, have been given to the collateral agent, the payment
agent and any other parties required by the Loan Documents, and all required
consents, if any, have been obtained with respect to, the Originator’s
assignment of the Agented Notes and the Originator’s right, title and interest
in the Related Property to the Borrower and the Deal Agent’s security interest
therein on behalf of the Secured Parties;

 

(xxvii)                 with respect to Agented Notes, the right to control the
actions of and to replace the collateral agent and/or the paying agent of the
syndicated notes is by the Note Majority; and

 

(xxviii)              with respect to Agented Notes, all syndicated notes of the
Obligor of the same priority are cross-defaulted, the Related Property securing
such notes is held by the collateral agent for the benefit of all holds of the
syndicated notes and all holders of such notes (a) have an undivided interest in
the collateral securing such notes, (b) 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:  On any day, any Obligor that satisfies each of the following
requirements at all times:

 

(i)                                     such Obligor is not in the gaming,
nuclear waste, bio-tech, oil and gas or real estate industries;

 

(ii)                                  such Obligor is not a natural person and
is a legal operating entity, duly organized and validly existing under the laws
of its jurisdiction of organization;

 

(iii)                               the business being financed by such Obligor
has an Operating History of at least sixty (60) months from the date of its
incorporation or formation;

 

(iv)                              such Obligor is not the subject of any
Insolvency Event (and, as of the Funding Date on which such Loan became part of
the Collateral, such Obligor has not experienced a Material Adverse Change);

 

(v)                                 such Obligor is not an Affiliate of any
other Obligor hereto (other than as a result of being an Affiliate of the
Originator);

 

(vi)                              no other Loan of such Obligor is Delinquent
for more than thirty (30) days;

 

(vii)                           such Obligor is not a Governmental Authority;

 

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

 

(ix)                                such Obligor’s principal office and any
Related Property are located in the United States or any other country or
territory of the United States (approved by the Deal

 

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Agent upon receipt and review of satisfactory legal due diligence, Rating Agency
discussions and credit approval);

 

(x)                                   such Obligor has an Eligible Risk Rating.

 

Eligible Risk Rating:  As of any date of determination, with respect to a
designated Obligor, a risk rating of “Grade 2,” “Grade 3,” or “Grade 4.”

 

Equity Contribution:  As of any date of determination, an amount equal to the
excess, if any, of (a) the sum of (i) the Aggregate Purchased Loan Balance on
such date plus (ii) all Principal Collections on deposit in the Principal
Collection Account on such date, minus (b) the Advances Outstanding on such
date.

 

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

 

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

 

Escrow Agent:  The meaning set forth in the Pledge Agreement.

 

Euro-Caribe Loan:  The Loan to Euro-Caribe Packing Company, Inc. in the original
principal aggregate amount of $18,684,052.

 

Eurocurrency Liabilities:  Defined in Regulation D of the Board of Governors of
the Federal Reserve System, as in effect from time to time.

 

Eurodollar Disruption Event: The occurrence of any of the following: (a) the
Swingline Lender or any Liquidity Bank shall have notified the Deal Agent of a
determination by such Swingline Lender, Liquidity Bank or any of their
respective assignees or participants that it would be contrary to law or to the
directive of any central bank or other Governmental Authority (whether or not
having the force of law) to obtain Dollars in the London interbank market to
fund any Advance or Swingline Advance, (b) the Swingline Lender or Liquidity
Bank shall have notified the Deal Agent of the inability, for any reason, of
such Swingline Lender, Liquidity Bank or any of their respective assignees or
participants to determine the Adjusted Eurodollar Rate, (c) any Swingline Lender
or Liquidity Bank shall have notified the Deal Agent of a determination by such
Swingline Lender, Liquidity Bank or any of their respective assignees or
participants that the rate at which deposits of Dollars are being offered to
such Swingline Lender or Liquidity Bank or any of their respective assignees or
participants in the London interbank market does not accurately reflect the cost
to such Swingline Lender or Liquidity Bank, such assignee or such participant of
making, funding or maintaining any Advance or Swingline Advance or (d) any
Swingline Lender or Liquidity Bank shall have notified the Deal Agent of the
inability of such Swingline Lender, Liquidity Bank or any of their respective
assignees or

 

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participants to obtain Dollars in the London interbank market to make, fund or
maintain any Advance or Swingline Advance.

 

Eurodollar Reserve Percentage:  For any period, means the reserve percentage
(expressed as a decimal, rounded upward to the next 1/100th of one percent
(0.01%)), if any, applicable during such period (or, if more than one such
percentage shall be so applicable, the daily average of such percentages for
those days in such period during which any such percentage shall be so
applicable) under regulations issued from time to time by the Board of Governors
of the Federal Reserve System (or any successor) for determining the maximum
reserve requirement (including, without limitation, any basic, emergency,
supplemental, marginal or other reserve requirements) with respect to
liabilities or assets consisting of or including Eurocurrency Liabilities having
a term of one (1) month.

 

Exchange Act:  The Securities Exchange Act of 1934, as amended.

 

Excluded Amounts:  Any Collections received with respect to repurchased Loans,
Replaced Loans or Loans which are the subject of a Lien Release Dividend to the
extent such Collections are attributable to a time after the effective date of
such repurchase, substitution or Lien Release Dividend.

 

Facility Amount:  $225,000,000, as such amount may vary from time to time upon
the written agreement of the parties hereto; provided, that, such amount may not
at any time exceed the aggregate Commitments then in effect; provided, further,
that, on or after the Termination Date, the Facility Amount shall be $0.

 

Facility Fee:  Defined in the Fee Letter.

 

Fair Market Value:  With respect to each Eligible Loan, if such Eligible Loan
has been reduced in value on such date of determination below the original
principal amount (other than as a result of the allocation of a portion of the
original principal amount to warrants) the fair market value of such Eligible
Loan as required by, and in accordance with, the 1940 Act and any orders of the
Securities and Exchange Commission issued to the Originator, to be determined by
the Board of Directors of the Originator and reviewed by its auditors.

 

FATF:  Defined in subsection 4.1(hh).

 

Federal Funds Rate: With respect to any Conduit Lender or the Swingline Lender,
for any period, a fluctuating interest rate per annum equal for each day during
such period to the weighted average of the federal funds rates as quoted by the
Deal Agent or the Swingline Lender, as applicable, and confirmed in Federal
Reserve Board Statistical Release H.15 (519) or any successor or substitute
publication selected by the Deal Agent or the Swingline Lender, as applicable
(or, if such day is not a Business Day, for the preceding Business Day), or, if,
for any reason, such rate is not available on any day, the rate determined, in
the sole opinion of each Deal Agent or the Swingline Lender, as applicable, to
be the rate at which federal funds are being offered for sale in the national
federal funds market at 9:00 a.m. Charlotte, North Carolina time.

 

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Fee Letter:  The Fee Letter, dated as of the date hereof, among the Borrower,
the Servicer, the Deal Agent, as such letter may be amended, supplemented,
modified, waived or restated from time to time.

 

Federal Reserve Board:  The Board of Governors of the Federal Reserve System.

 

Fixed Rate Loan:  A Transferred Loan that is other than a Floating Rate Loan.

 

Fixed Rate Loan Percentage:  As of any date of determination, the percentage
equivalent of a fraction (i) the numerator of which is equal to the sum of the
Outstanding Loan Balances of all Fixed Rate Loans as of such date and (ii) the
denominator of which is equal to the Aggregate Outstanding Loan Balance as of
such date.

 

Floating Rate Loan:  A Transferred Loan where the interest rate payable by the
Obligor thereof is based on the prime interest rate (daily rate) or the London
interbank offered rate (thirty day rate), plus some specified interest
percentage in addition thereto, and such Transferred Loan provides that such
interest rate will reset immediately upon any change in the related prime
interest rate or London interbank offered rate.

 

Funding Date:  Any Business Day on which an Advance or Swingline Advance is
made.

 

Funding Request:  A Borrower Notice requesting an Advance and including the
items required by Sections 2.2 and 2.3.

 

GAAP:  Generally accepted accounting principles as in effect from time to time
in the United States.

 

Governmental Authority:  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, any court
or arbitrator and any accounting board or authority (whether or not a part of
the government) which is responsible for the establishment or interpretation of
national or international accounting principles.

 

Grade 1 Obligor:  As of any date of determination, an Obligor of any Loan that
the Servicer determines to be or, in accordance with the Credit and Collection
Policy, should have determined to be, classified as “Grade 1.”

 

Grade 2 Obligor:  As of any date of determination, an Obligor of any Loan that
the Servicer determines to be or, in accordance with the Credit and Collection
Policy and subsection 7.9(l), should have determined to be, classified as “Grade
2.”

 

Grade 3 Obligor:  As of any date of determination, any Obligor of any Loan that
the Servicer determines to be or, in accordance with the Credit and Collection
Policy, should have determined to be, classified as “Grade 3.”

 

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Grade 4 Obligor:  As of any date of determination, an Obligor of any Loan that
the Servicer determines to be or, in accordance with the Credit and Collection
Policy, should have determined to be, classified as “Grade 4.”

 

Grant:  To grant, bargain, sell, warrant, alienate, remise, demise, release,
convey, assign, transfer, mortgage, pledge, create and grant a security interest
in and right of set-off against, deposit, set over and confirm.  A Grant of any
instrument, shall include all rights, powers and options (but none of the
obligations) of the granting party thereunder, including without limitation, the
immediate and continuing right to claim for, collect, receive and give receipt
for principal and interest payments in respect thereof, and all other monies
payable thereunder, to give and receive notices and other communications, to
make waivers or other agreements, to exercise all rights and options, to bring
any suit in equity, action at law or other judicial or administrative proceeding
in the name of the granting party or otherwise, and generally to do and receive
anything that the granting party may be entitled to do or receive thereunder or
with respect thereto.

 

H.15:  Federal Reserve Statistical Release H.15.

 

Hedge Amount:  On any day, an amount equal to the product of (a) the product of
(i) the Borrowing Base and (ii) the Fixed Rate Loan Percentage and (b) the
Advances Outstanding divided by the Aggregate Outstanding Loan Balance.

 

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

 

Hedge Collateral:  Defined in subsection 5.2(b).

 

Hedge Counterparty:  Wachovia and any other entity that (a) on the date of
entering into any Hedge Transaction (i) is an interest rate swap dealer that has
been approved in writing by the Deal Agent (which approval shall not be
unreasonably withheld), and (ii) has a long-term unsecured debt rating of not
less than “A” by S&P and not less than “A-2” by Moody’s (“Long-term Rating
Requirement”) and a short-term unsecured debt rating of not less than “A-1” by
S&P and not less than “P-1” by Moody’s (“Short-term Rating Requirement”), and
(b) in a Hedging Agreement (i) consents to the assignment of the Borrower’s
rights under the Hedging Agreement to the Deal Agent pursuant to subsection
5.2(b) and (ii) agrees that in the event that Moody’s or S&P reduces its
long-term unsecured debt rating below the Long-term Rating Requirement, it shall
transfer its rights and obligations under each Hedging Transaction to another
entity that meets the requirements of clause (a) and (b) hereof and has entered
onto a Hedging Agreement with the Borrower on or prior to the date of such
transfer.

 

Hedge Notional Amount:  The aggregate notional amount in effect on any day under
all Hedge Transactions entered into pursuant to subsection 5.2(a), that have not
matured, been terminated or cancelled.

 

Hedge Percentage:  (a) On any day that the Aggregate Outstanding Loan Balance
exceeds $150,000,000, (i) an amount equal to 100% if the sum of the Outstanding
Loan Balances of all Fixed Rate Loans on such date exceeds $50,000,000, or
(ii) an amount equal to 0% if the sum of the Outstanding Loan Balances of all
Fixed Rate Loans is less than or equal to $50,000,000, or

 

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(b) on any day that the Aggregate Outstanding Loan Balance is less than or equal
to $150,000,000, (i) an amount equal to 100% if the sum of the Outstanding Loan
Balances of all Fixed Rate Loans on such date exceeds $20,000,000, or (ii) an
amount equal to 0% if the sum of the Outstanding Loan Balances of all Fixed Rate
Loans on such date is less than or equal to $20,000,000.

 

Hedge Transaction: Each interest rate swap transaction between the Borrower and
a Hedge Counterparty that is entered into pursuant to subsection 5.2(a) and is
governed by a Hedging Agreement.

 

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

 

Increased Costs:  Any amounts required to be paid by the Borrower to an Affected
Party pursuant to Section 2.14.

 

Indebtedness:  With respect to any Person as of any date, (a) all indebtedness
of such Person for borrowed money or for the deferred purchase price of property
or services (other than current liabilities incurred in the ordinary course of
business and payable in accordance with customary trade practices) or that is
evidenced by a note, bond, debenture or similar instrument, (b) all obligations
of such Person under capital leases, (c) all obligations of such Person in
respect of acceptances issued or created for the account of such Person, (d) all
liabilities secured by any Lien on any property owned by such Person even though
such Person has not assumed or otherwise become liable for the payment thereof,
and (e) all indebtedness, obligations or liabilities of that Person in respect
of Derivatives, and (f) obligations under direct or indirect guaranties in
respect of obligation (contingent or otherwise) to purchase or otherwise
acquire, or to otherwise assure a creditor against loss in respect of, clauses
(a) through (e) above.

 

Indemnified Amounts:  Defined in Section 10.1.

 

Indemnified Parties:  Defined in Section 10.1.

 

Industry:  The industry of an Obligor as determined by reference to the four
digit standard industry classification (SIC) codes.

 

Initial Advance:  The first Advance.

 

Insolvency Event:  With respect to a specified Person, (a) the filing of a
decree or order for relief by a court having jurisdiction in the premises in
respect of such Person or any substantial part of its property in an involuntary
case under any applicable Insolvency Law now or hereafter in effect, or
appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official for such Person or for any substantial part of its property, or
ordering the winding-up or liquidation of such Person’s affairs, and such decree
or order shall remain unstayed and in effect for a period of sixty (60)
consecutive days; or (b) the

 

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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:  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:  Any case, action or proceeding before any court or
Governmental Authority relating to an Insolvency Event.

 

Insurance Policy:  With respect to any Transferred Loan included in the
Collateral, an insurance policy covering physical damage to or loss to any
assets or Related Property of the Obligor securing such Transferred Loan.

 

Insurance Proceeds:  Any amounts payable or any payments made to the Borrower or
to the Servicer on its behalf under any Insurance Policy.

 

Intercreditor Agreement:  The Second Amended and Restated Intercreditor and
Lockbox Administration Agreement, dated as of May 21, 2003, among Wells Fargo
Bank of Minnesota, National Association, as the indenture trustee, Wachovia
Securities, LLC, as the conduit agent, each Securitization Agent that from time
to time executes a joinder thereto, and American Capital Strategies, Ltd., as
such agreement may be amended, modified, waived, supplemented or restated from
time to time.

 

Interest: For each Accrual Period and each Advance and each Swingline Advance
outstanding during such Accrual Period, the sum of the products (for each day
during such Accrual Period) of:

 

IR x P x

1

 

D

 

where

 

IR                                    =                                        
the Interest Rate applicable on such day;

 

P                                        
=                                         the principal amount of such Advance
or Swingline Advance on such day; and

 

D                                      
=                                         360 or, to the extent the Interest
Rate is based on the Base Rate, 365 or 366 days, as applicable.

 

20

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

 

Interest Collection Account:  The subaccount of the Collection Account into
which all Interest Collections are deposited by the Borrower or the Servicer on
behalf of the Borrower in accordance with Section 2.10.

 

Interest Collections:  Any and all amounts received on a Loan from or on behalf
of any Obligors that are deposited into the Collection Account, or received by
the Borrower or by the Servicer or Originator on behalf of the Borrower in
respect of Loans, not constituting Principal Collections and, solely for
purposes of calculating the Portfolio Rate, any and all amounts accrued in
respect of any fees (but only to the extent such fees are not part of the
Retained Interest or were not received during such Collection Period) owed by
any Obligor in respect of any Eligible Loan.

 

Interest Expense:  With respect to any Obligor, as of any date of determination,
the total interest expense for all obligations of such Obligor (including,
without limitation Capital Lease Obligations and hedging agreements) determined
on a consolidated basis, without duplication, for such Obligor and its
Consolidated Subsidiaries in accordance with GAAP (calculated on a rolling
twelve (12) month basis).

 

Interest Rate:  For each Accrual Period and for each Advance and each Swingline
Advance outstanding by an Investor for each day during such Accrual Period:

 

(a)                                  to the extent the applicable Investor has
funded the Advance through the issuance of Commercial Paper Notes, a rate equal
to the applicable CP Rate; or

 

(b)                                 to the extent the applicable Investor did
not fund its Advance or Swingline Advance through the issuance of Commercial
Paper Notes, a rate equal to the Alternative Rate;

 

provided, that, the Interest Rate shall be the Base Rate for any Accrual Period
for any Advance as to which the related Investor has funded the making or
maintenance thereof by a sale of an interest therein to any Liquidity Bank under
the Liquidity Agreement on any day other than the first day of such Accrual
Period and without giving such Liquidity Bank at least two (2) Business Days’
prior notice of such assignment; provided, further, that, the Interest Rate
shall be the Base Rate if the relevant Investor, Swingline Lender, Liquidity
Bank shall have notified the Deal Agent that a Eurodollar Disruption Event has
occurred.

 

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
assets pursuant to the Purchase Agreement and excluding commission, travel and
similar advances to officers, employees and directors made in the ordinary
course of business.

 

Investor:  (a) VFCC and (b) the Swingline Lender, and Investors means
collectively (i) VFCC and (ii) the Swingline Lender.

 

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ISDA Definitions:  The 2000 ISDA Definitions, as published by the International
Swaps and Derivatives Association, Inc.

 

Issuer:  VFCC and any other Investor whose principal business consists of
issuing Commercial Paper Notes or other securities to fund its acquisition and
maintenance of receivables, accounts, instruments, chattel paper, general
intangibles and other similar Collateral.

 

Large Loan Limit:  (a) $10,000,000, provided the Aggregate Outstanding Loan
Balance is less than $200,000,000; (b) $13,000,000, provided the Aggregate
Outstanding Loan Balance is at least $200,000,000 but less than $300,000,000;
(c) $15,000,000, provided the Aggregate Outstanding Loan Balance is at least
$300,000,000 but less than $325,000,000; (d) $17,000,000, provided the Aggregate
Outstanding Loan Balance is at least $325,000,000 but less than $350,000,000;
and (e) $20,000,000, provided the Aggregate Outstanding Loan Balance is equal to
or greater than $350,000,000.

 

LIBOR Rate:  For any Accrual Period and any Advance or Swingline Advance, an
interest rate per annum equal to:

 

(a)                                  the posted rate for thirty (30) day
deposits in Dollars appearing on Telerate page 3750 as of 11:00 a.m. (London
time) on the Business Day that is the second (2nd) Business Day immediately
preceding the applicable Funding Date (with respect to the initial Accrual
Period for such Advance or Swingline Advance) and as of the second (2nd)
Business Day immediately preceding the first (1st) day of the applicable Accrual
Period (with respect to all subsequent Accrual Periods for such Advance or
Swingline Advance); or

 

(b)                                 if no rate appears on Telerate page 3750 at
such time and day, then the LIBOR Rate shall be determined by Wachovia at its
principal office in Charlotte, North Carolina as its rate (each such
determination, absent manifest error, to be conclusive and binding on all
parties hereto and their assignees) at which thirty (30) day deposits in Dollars
are being, have been, or would be offered or quoted by Wachovia to major banks
in the applicable interbank market for Eurodollar deposits at or about 11:00
a.m. (Charlotte, North Carolina time) on such day.

 

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

 

Lien Release Dividend:  Defined in subsection 2.17(a).

 

Lien Release Dividend Date:  The date specified by the Borrower, which date may
be any Business Day, provided written notice is given in accordance with
subsection 2.17(a).

 

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

 

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Liquidity Bank:  Each liquidity bank that is a party to the Liquidity Purchase
Agreement.

 

Liquidity Purchase Agreement:  The Amended and Restated Liquidity Purchase
Agreement, dated as of June 13, 2003 by and among VFCC, the Deal Agent, and
Wachovia, as the VFCC liquidity agent and as an investor, and each other
Liquidity Bank a party thereto, as such agreement may be amended, modified,
waived, supplement or restated from time to time.

 

Loan:  Any senior or subordinate loan arising from the extension of credit to an
Obligor by the Originator in the ordinary course of the Originator’s business
including, without limitation, all Add-On Loans, Revolving Loans, PIK Loans, the
Euro-Caribe Loan and Agented Notes, monies due or owing and all Interest
Collections, Principal Collections and other amounts received from time to time
with respect to such loan receivable and all Proceeds.

 

Loan Documents:  With respect to any Loan, the related promissory note and any
related loan agreement, security agreement, mortgage, assignment of Loans, all
guarantees, note purchase agreement, intercreditor and/or subordination
agreement, and UCC financing statements and continuation statements (including
amendments or modifications thereof) executed by the Obligor thereof or by
another Person on the Obligor’s behalf in respect of such Loan and related
promissory note, including, without limitation, general or limited guaranties
and, for each Loan secured by real property an Assignment of Mortgage, and for
all Loans with a Note, an assignment (which may be by allonge), in blank, signed
by an officer of the Originator.

 

Loan File:  With respect to any Loan, each of the Loan Documents related
thereto.

 

Loan List:  The Loan List provided by the Borrower to the Deal Agent and the
Collateral Custodian in connection with each Advance or Swingline Advance or as
new Eligible Loans are added to the Collateral, initially as set forth in
Schedule IV hereto (which shall include the specific documents that should be
included in each Loan File), as the same may be amended, modified or
supplemented from time to time in accordance with the provisions hereof.

 

Loan Rate:  For each Loan in a Collection Period, the current cash pay interest
rate for such Loan in such period, as specified in the related Loan Documents.

 

Lock-Box:  A post office box to which Collections are remitted for retrieval by
the Lock-Box Bank and deposited by such Lock-Box Bank into the Lock-Box Account.

 

Lock-Box Account:  Account number 4000037515 maintained in the name of the
Borrower for the purpose of receiving Collections at the Lock-Box Bank.

 

Lock-Box Agreement:  The Five Party Lockbox Agreement, dated as of August 8,
2002, by and among Wells Fargo Bank, N.A., Regulus West LLC, Wachovia
Securities, LLC, American Capital Strategies, Ltd. and ACS Funding Trust I, as
such agreement may be amended, modified, waived, supplemented or restated from
time to time.

 

Lock-Box Bank:  Wells Fargo Bank, N.A.

 

Market Servicing Fee:  Defined in Section 7.27.

 

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Market Servicing Fee Differential:  On any date of determination, an amount
equal to the positive difference between the Market Servicing Fee and Servicing
Fee.

 

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

 

Material Adverse Effect:  With respect to any event or circumstance, means a
material adverse effect on (a) the business, condition (financial or otherwise),
operations, performance, properties or prospects of the Servicer, the Borrower,
the Backup Servicer or the Collateral Custodian, (b) the validity,
enforceability or collectibility of this Agreement or any other Transaction
Document or the validity, enforceability or collectibility of the Loans, (c) the
rights and remedies of the Deal Agent or any Secured Party under this Agreement
or any Transaction Document or (d) the ability of the Servicer, the Borrower,
the Backup Servicer or the Collateral Custodian to perform its obligations under
this Agreement or any other Transaction Document, or (e) the status, existence,
perfection, priority, or enforceability of the Deal Agent’s or Secured Parties’
interest in the Collateral.

 

Maximum Lawful Rate:  Defined in subsection 2.8(c).

 

Minimum Overcollateralization Amount:  As of any date of determination, an
amount equal to the sum of (I) the greater of (a) the Required Equity
Contribution and (b) the amount determined by multiplying (i) the Aggregate
Purchased Loan Balance on such date by (ii) one minus the quotient of one
divided by the Minimum Overcollateralization Percentage plus (II) the Aggregate
Net Mark to Market Amount, as reported in the most recent Monthly Report.

 

Minimum Overcollateralization Percentage:  133 1/3%.

 

Minimum Portfolio Yield:  6.0%

 

Monthly Report:  Defined in subsection 7.17(a).

 

Moody’s:  Moody’s Investors Service, Inc., or any successor thereto.

 

Multiemployer Plan:  A “multiemployer plan” as defined in Section 4001(a)(3) of
ERISA that is or was at any time during the current year or the immediately
preceding five years contributed to by the Borrower or any ERISA Affiliate on
behalf of its employees.

 

Net Mark to Market Amount:  With respect to each Hedge Counterparty under a
Hedging Agreement entered into on or after June 13, 2003, as set forth on each
Monthly Report for each Determination Date, the net amount that would be payable
by the Borrower to such Hedge Counterparty if all Hedge Transactions of the
Borrower with such Hedge Counterparty were being terminated as of such date,
which amount (i) shall have been provided to the Servicer by such Hedge
Counterparty for inclusion in each Monthly Report and (ii) shall have been
determined by such Hedge Counterparty in good faith and in accordance with its
usual business practices; provided, however, that such valuation will be based
on a mid-market valuation of each such Hedge Transaction and as such is an
indicative valuation calculation provided for purposes of determining the
Minimum Overcollateralization Amount hereunder, it being

 

24

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understood that the net amount that would be payable in the event of any
termination of any Hedge Transaction would be determined in accordance with the
provisions of the applicable Hedging Agreement in the event of a termination due
to an event of default or termination event and would be subject to market
conditions at the time the applicable Hedge Transaction is terminated.

 

Net Worth:  The total of stockholder’s equity (determined in accordance with
GAAP) plus Subordinated Debt, less (i) the total amount of loans to officers,
directors, or employees and (ii) the total amount of any intangible assets,
including without limitation, deferred charges and goodwill.

 

Note Majority:  With respect to Agented Notes, the holders of the Notes
evidencing not less than 66 2/3% of the outstanding amount of all such notes
issued by the Obligor.

 

Notes:  Defined in subsection 2.1(a).

 

Obligations:  All loans, advances, debts, liabilities and obligations, for
monetary amounts owing by the Borrower to the Secured Parties, the Backup
Servicer and the Collateral Custodian or any of their assigns, as the case may
be, whether due or to become due, matured or unmatured, liquidated or
unliquidated, contingent or non-contingent, and all covenants and duties
regarding such amounts, of any kind or nature, present or future, arising under
or in respect of any of this Agreement, any fee letter (including, without
limitation, the Fee Letter and the Backup Servicer and Collateral Custodian Fee
Letter) delivered in connection with the transactions contemplated by this
Agreement, any Transaction Document, or any Hedging Agreement, as amended or
supplemented from time to time, whether or not evidenced by any separate note,
agreement or other instrument.  This term Obligations includes, without
limitation, all Advances Outstanding, Interest (including interest that accrues
after the commencement against the Borrower of any action under the Bankruptcy
Code), Breakage Costs, Hedge Breakage Costs, fees, including, without
limitation, any and all arrangement fees, loan fees, facility fees, and any and
all other fees, expenses, costs or other sums (including attorney costs)
chargeable to the Borrower under any of the Transaction Documents or under any
Hedging Agreement.

 

Obligor:  With respect to any Loan, the Person or Persons obligated to make
payments pursuant to such Loan, including any guarantor thereof.  For purposes
of calculating any of the Concentration Limits, all Loans included in the
Collateral or to become part of the Collateral the Obligor of which is an
Affiliate of another Obligor shall be aggregated with all Loans of such other
Obligor, for example, if Corporation A is an Affiliate of Corporation B; and the
aggregate Outstanding Loan Balance of all of Corporation A’s Loans in the
Collateral constitutes 10% of the Aggregate Outstanding Loan Balance and the
aggregate Outstanding Loan Balance of all Corporation B’s Loans in the
Collateral constitute 10% of the Aggregate Outstanding Loan Balance, the Obligor
concentration for Corporation A would be 20% and the Obligor concentration for
Corporation B would be 20%.

 

Officer’s Certificate:  A certificate signed by any officer of the Borrower or
the Servicer, as the case may be, and delivered to the Backup Servicer and the
Deal Agent.

 

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Operating History:  With respect to any specified Person, the time since the
date of such Person’s incorporation or formation that it has continuously
operated its business; provided, however, the Operating History of any Person,
newly formed as a result of a merger of two or more Persons or as a result of
the acquisition of one or more Persons by a newly formed Person (“Merged
Parties”) shall be based on the weighted average (by relative sales) of the
Operating Histories of the Merged Parties (excluding for such purposes, entities
that are created only for the purpose of being acquisition entities), for
example, if Corporation A with sales of $10 million has an Operating History of
four years and Corporation B with sales of $20 million has an Operating History
of eight years, merge to form NEWCO, the Operating History of NEWCO will be 6.67
years.

 

Opinion of Counsel:  A written opinion of external counsel, who may be external
counsel for the Borrower or the Servicer, as the case may be, and who shall be
reasonably acceptable to the Deal Agent.

 

Original Conduit Lender:  Defined in the Recitals.

 

Original Deal Agent:  Defined in the Recitals.

 

Original Lenders:  Defined in the Recitals.

 

Original Loan Funding and Servicing Agreement:  Defined in the Recitals.

 

Original Swingline Lender:  Defined in the Recitals.

 

Originator:  American Capital Strategies, Ltd.

 

Other Costs:  Defined in subsection 12.9(c).

 

Outstanding Loan Balance:  With respect to any Loan, as of any date of
determination, the total remaining amounts of principal payable by the Obligor
thereof exclusive of (a) interest payments and (b) Accreted Interest; it being
understood that any principal previously covered by a Servicer Advance will be
excluded from the principal amounts payable for purposes of this definition.

 

Overcollateralization Amount:  As of any date of determination, an amount equal
to the product of (a) one (1) minus the quotient of one (1) divided by the
Overcollateralization Percentage on such date and (b) the Aggregate Purchased
Loan Balance on such date.

 

Overcollateralization Percentage:  As of any date of determination, a fraction
expressed as a percentage, (a) the numerator of which is equal to the sum of (i)
the Aggregate Purchased Loan Balance as of such date, and (ii) all Principal
Collections on deposit in the Principal Collection Account on such date and (b)
the denominator of which is equal to the Advances Outstanding on such date.

 

Overcollateralization Shortfall:  As of any date of determination, the positive
difference, if any, of (a) Minimum Overcollateralization Amount on such date
minus (b) the Overcollateralization Amount on such date.

 

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Paying Agent:  American Capital in its capacity as Servicer and any Successor
Servicer.

 

Payment Date:  The tenth (10th) day of each calendar month or, if such day is
not a Business Day, the next succeeding Business Day, commencing January 10,
2003.

 

Permitted Investments:  Any one or more of the following types of investments:

 

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

 

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

 

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

 

(d)                                 repurchase obligations with a term of not
more than ten (10) days for underlying securities of the types described in
clauses (a), (b) and (c) above entered into with any bank of the type described
in clause (c) above;

 

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

 

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

 

Permitted Liens:  (a) With respect to the Loans, Liens in favor of the Deal
Agent, as agent for the Secured Parties, created pursuant to this Agreement, and
(b) with respect to the Borrower’s interest in the related Collateral, any of
the following as to which no enforcement, collection, execution, levy or
foreclosure proceedings shall have been commenced: (i) 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, (ii) Liens for state, municipal and other local taxes if such taxes
are not at the time due and payable or if the Obligor shall currently be
contesting the validity thereof in good faith by appropriate proceedings,
(iii) Liens held by senior lenders with respect to subordinated Loans,
(iv) Liens created pursuant to this Agreement in favor of the Deal Agent, on
behalf of the Secured Parties, and (v) with respect to Agented Notes, Liens in
favor of the collateral agent on behalf of all noteholders of the related
Obligor.

 

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Permitted Securitization Transaction:  Any financing transaction undertaken by
the Borrower or an Affiliate of the Borrower or the Originator that is secured,
directly or indirectly, by the Collateral or any portion thereof or interest
therein, including any sale, lease, whole loan sale, asset securitization,
secured loan or other transfer.

 

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

 

PIK Loan:  A Loan to an Obligor, which provides for a portion of the interest
that accrues thereon to be added to the principal amount of such Loan for some
period of the time prior to such Loan requiring the current cash payment of
interest on a monthly or quarterly basis, which cash payment shall be treated as
Interest Collections at the time it is received.

 

Pledge Agreement:  The Amended and Restated Pledge and Security Agreement, dated
as of the date hereof, by and among the Originator, as the seller, the Borrower,
as the buyer, and Wells Fargo, as the escrow agent, as such agreement may be
amended, modified, waived, supplemented or restated from time to time.

 

Portfolio Yield:  As of each Determination Date, the annualized percentage
equivalent of a fraction (a) the numerator of which is equal to all Interest
Collections deposited in the Collection Account during the related Collection
Period minus the sum of (i) the Interest, (ii) the Servicing Fee, (iii) the
Program Fee, (iv) Facility Fee, (v) net payments due or payable pursuant to the
Hedging Agreement, (vi) any Backup Servicer Fees and (vii) any Collateral
Custodian Fees and (b) denominator of which is equal to the Aggregate
Outstanding Loan Balance as of the first day of the related Collection Period.

 

Prepaid Loan:  Any Loan (other than a Charged-Off Loan) that was terminated or
has been prepaid in full or in part prior to its scheduled maturity date.

 

Prime Rate:  The rate announced by Wachovia from time to time as its prime rate
in the United States, such rate to change as and when such designated rate
changes.  The Prime Rate is not intended to be the lowest rate of interest
charged by Wachovia in connection with extensions of credit to debtors.

 

Principal Collection Account:  The subaccount of the Collection Account into
which all Principal Collections are deposited by the Borrower or by the Servicer
on its behalf in accordance with Section 2.10.

 

Principal Collections:  Any and all amounts received in respect of any principal
due and payable under any Loan from or on behalf of Obligors that are deposited
into the Principal Collection Account, or received by the Borrower or the
Servicer or Originator on behalf of the Borrower in respect of Loans, in the
form of cash, checks, wire transfers, electronic transfers or any other form of
cash payment and applied to reduce the Outstanding Loan Balance of a Loan in
accordance with the Credit and Collection Policy.

 

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Proceeds:  With respect to any Collateral, whatever is receivable or received
when such Collateral is sold, collected, liquidated, foreclosed, exchanged, or
otherwise disposed of, whether such disposition is voluntary or involuntary, and
includes all rights to payment with respect to any Insurance Policy relating to
such Collateral.

 

Program Fee:  (a)  With respect to the Conduit Lender, the Program Fee (as
defined in the Fee Letter) and (B) with respect to the Swingline Lender, the
Swingline Program Fee (as defined in the Fee Letter).

 

Purchase Agreement:  The Amended and Restated Purchase and Sale Agreement, dated
as of the date hereof, by and between the Originator and the Borrower, as such
agreement may be amended, modified, waived, supplemented or restated from time
to time.

 

Purchase Date:  Defined in the Purchase Agreement.

 

Purchased Loan Balance:  As of any date of determination and any Loan, an amount
equal to (a) the lesser of (i) the Outstanding Loan Balance of such Loan on such
date, and (ii) the Fair Market Value of such Loan on such date, minus (b) all
amounts in excess of applicable Concentration Limits on such date.  The
Purchased Loan Balance of a Charged-Off Loan or a Prepaid Loan shall equal $0.

 

Qualified Institution:  Defined in subsection 7.4(e).

 

Rating Agency:  Each of S&P, Moody’s and any other rating agency that has been
requested to issue a rating with respect to the Commercial Paper Notes issued by
the Issuers.

 

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

 

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

 

Reference Bank:  Any bank that furnishes information for purposes of determining
the Adjusted Eurodollar Rate.

 

Registrar:  Wachovia, not in its individual capacity but solely as Registrar,
its successor or successors in interest and any Person which at any time may be
selected by the Borrower upon the resignation of Wachovia to act as Registrar.

 

Related Property:  With respect to any Loan, any property or other assets of the
Obligor thereunder pledged as collateral to secure the repayment of such Loan.

 

Replaced Loan:  Defined in subsection 2.19(a).

 

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Released Amounts:  With respect to any payment or Collection received with
respect to any Loan on any Business Day (whether such payment or Collection is
received by the Servicer, the Originator or the Borrower), an amount equal to
that portion of such payment or collection constituting Excluded Amounts or
Retained Interest.

 

Reporting Date:  The date that is two (2) Business Days prior to each Payment
Date.

 

Required Advance Reduction Amount:  On any day, an amount equal to the positive
difference, if any, of (a) the Advances Outstanding on such day minus (b) the
lesser of (i) the Availability on such day and (ii) the Facility Amount.

 

Required Equity Contribution:  As of any date of determination prior to the
Termination Date, an Equity Contribution of at least $115,000,000.

 

Required Equity Shortfall:  On any day, the positive difference, if any, between
the Required Equity Contribution and the Equity Contribution on such day.

 

Required Reports:  Collectively, the Monthly Report, the Servicer’s Certificate
and the quarterly financial statement of the Servicer required to be delivered
to the Borrower, the Deal Agent and the Backup Servicer pursuant to Section 7.17
hereof.

 

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

 

Restricted Payments:  Defined in subsection 5.1(z).

 

Retained Interest:  With respect to each Loan, the following interests, rights
and obligations in such Loan and under the associated Loan Documents, which are
being retained by the Originator: (a) all of the obligations, if any, to provide
additional funding with respect to such Loan, (b) all of the rights and
obligations, if any, of the agent(s) under the documentation evidencing such
Loan, (c) the applicable portion of the interests, rights and obligations under
the documentation evidencing such Loan that relate to such portion(s) of the
indebtedness that is owned by another lender or is being retained by the
Originator, (d) any unused, commitment or similar fees associated with the
additional funding obligations that are not being transferred in accordance with
clause (a) of this definition, (e) any agency or similar fees associated with
the rights and obligations of the agent that are not being transferred in
accordance with clause (b) of this definition and (f) any advisory, consulting
or similar fees due from the Obligor associated with services provided by the
agent that are not being transferred in accordance with clause (b) of this
definition.

 

Retransfer Price:  Defined in subsection 4.3(a).

 

Revolving Loan:  Any Loan that is a line of credit or other similar extension of
credit by the Originator where the Originator’s commitment under such Loan is
not fully funded and/or the proceeds of such Loan may be repaid and reborrowed.

 

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Revolving Period:  The period commencing on the Closing Date and ending on the
day immediately preceding the Termination Date.

 

Rolling Three-Month Charged-Off Ratio:  For any day, the percentage equivalent
of a fraction (a) the numerator of which is equal to the sum of the three (3)
most recent Charged-Off Ratios and (b) the denominator of which is equal to
three (3).

 

Rolling Three-Month Default Ratio:  For any day, the percentage equivalent of a
fraction (a) the numerator of which is equal to the sum of the three (3) most
recent Default Ratios and (b) the denominator of which is equal to three (3).

 

Rolling Three-Month Portfolio Yield:  For any day, the percentage equivalent of
a fraction the numerator of which is equal to the sum of the three (3) most
recent Portfolio Yields and the denominator of which is equal to three (3).

 

S&P:  Standard & Poor’s Ratings Services, a division of The McGraw-Hill
Companies, Inc., or any successor thereto.

 

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

 

Secured Party:  (a) The Conduit Lender and the Swingline Lender, (b) the Deal
Agent, and (c) each Hedge Counterparty that is either an Investor or an
Affiliate of the Deal Agent that executes a counterpart of this Agreement
agreeing to be bound by the terms of this Agreement applicable to a Secured
Party.

 

Servicer:  Defined in the Preamble.

 

Servicer Advance:  Defined in Section 7.5.

 

Servicer Termination Event:  Defined in Section 7.25.

 

Servicer Termination Notice:  Defined in Section 7.25.

 

Servicer’s Certificate:  Defined in subsection 7.17(b).

 

Servicing Duties:  Defined in Section 7.2.

 

Servicing Fee:  For each Payment Date, an amount equal to the sum of the
products, for each day during the related Collection Period, of (a) a fraction,
the numerator of which is the sum of (i) the Aggregate Outstanding Loan Balance
as of the first day of such Collection Period plus (ii) the Aggregate
Outstanding Loan Balance as of the last day of such Collection Period, and the
denominator of which is two, (b) the Servicing Fee Rate, and (c) a fraction, the
numerator of which is 1 and the denominator of which is 360.

 

Servicing Fee Rate:  A rate equal to 1.0% per annum.

 

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

 

Solvent:  As to any Person at any time, having a state of affairs such that all
of the following conditions are met: (a) the fair value of the property owned by
such Person is greater than the amount of such Person’s liabilities (including
disputed, contingent and unliquidated liabilities) as such value is established
and liabilities evaluated for purposes of Section 101(32) of the Bankruptcy
Code; (b) the present fair salable value of the property owned by such Person in
an orderly liquidation of such Person is not less than the amount that will be
required to pay the probable liability of such Person on its debts as they
become absolute and matured; (c) such Person is able to realize upon its
property and pay its debts and other liabilities (including disputed, contingent
and unliquidated liabilities) as they mature in the normal course of business;
(d) such Person does not intend to, and does not believe that it will, incur
debts or liabilities beyond such Person’s ability to pay as such debts and
liabilities mature; and (e) such Person is not engaged in business or a
transaction, and is not about to engage in a business or a transaction, for
which such Person’s property would constitute unreasonably small capital.

 

Structured Note:  Defined in subsection 2.1(a).

 

Subordinated Debt:  Any debt that is subordinated in right of payment to the
obligations of the Borrower under this Agreement.

 

Subsidiary:  With respect to any Person, means any corporation, partnership,
joint venture, limited liability company, trust or estate of which (or in which)
more than 50% of (a) the issued and outstanding capital stock having ordinary
voting power to elect a majority of the Board of Directors of such entity
(irrespective of whether at the time capital stock of any other class or classes
of such entity shall or might have voting power upon the occurrence of any
contingency), (b) the interest in the capital or profits of such partnership,
limited liability company or joint venture or (c) the beneficial interest in
such trust or estate is at the time directly or indirectly owned or controlled
by such Person, or such Person and one or more of its other Subsidiaries or by
one or more of such Person’s other Subsidiaries.

 

Substitute Loan:  Defined in subsection 2.19.

 

Successor Servicer:  Defined in subsection 7.26(a).

 

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

 

Swingline Advance:  Defined in subsection 2.1(c).

 

Swingline Lender:  Defined in the Preamble.

 

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Swingline Lender’s Account.  A special account (ABA number 053000219; Account
number 01459160000192; Ref:  ACS Special Purpose) in the name of the Swingline
Lender at Wachovia.

 

Swingline Note:  Defined in subsection 2.1(a).

 

Tape:  Defined in subsection 7.13(b)(ii).

 

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

 

Termination Date:  The earliest to occur of (a) the date of the occurrence of a
Termination Event pursuant to Section 9.1, (b) the earlier of (i) June 11, 2004
and (ii) the date that the Liquidity Purchase Agreement shall cease to be in
full force and effect, and (c) the Commitment Termination Date.

 

Termination Event:  Defined in Section 9.1.

 

Transaction Documents:  This Agreement, the Purchase Agreement, the Assignments,
the Liquidity Purchase Agreement, all Hedging Agreements, the Pledge Agreement,
the Intercreditor Agreement, the Lock-Box Agreement, the Structured Notes, the
Fee Letter, the Backup Servicer and Collateral Custodian Fee Letter, any UCC
financing statements filed pursuant to the terms of this Agreement, and any
additional document, letter, fee letter, certificate, opinion, agreement or
writing the execution of which is necessary or incidental to carrying out the
terms of the foregoing documents.

 

Transferred Loans:  Each Loan that is acquired by the Borrower under the
Purchase Agreement and all Loans received by the Borrower in respect of the
Required Equity Contribution; provided, that, the term Transferred Loan shall
not include any Retained Interests, provided, further, that, for avoidance of
doubt, the term Transferred Loan shall include each Transferred Loan acquired or
received by the Borrower under the Original Purchase Agreement and owned by the
Borrower on the Closing Date.

 

Transition Costs:  The reasonable costs and expenses incurred by the Backup
Servicer in transitioning to Servicer; provided, however, in no event shall such
Transition Costs exceed $50,000.00 in the aggregate.

 

UCC:  The Uniform Commercial Code as from time to time in effect in the
specified jurisdiction.

 

Underlying Note:  The promissory note of an Obligor evidencing a Loan.

 

United States:  The United States of America.

 

Unmatured Termination Event:  An event that, with the giving of notice or lapse
of time, or both, would become a Termination Event.

 

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Unreimbursed Servicer Advances:  At any time, the amount of all previous
Servicer Advances (or portions thereof) as to which the Servicer has not been
reimbursed as of such time pursuant to subsection 2.9(a)(ii) and (b)(ii) and
that the Servicer has determined in its sole discretion will not be recoverable
from Collections with respect to the related Loan.

 

Deal Agent:  Defined in the Preamble.

 

Deal Agent’s Account:  A special account (account number 2000002391825) in the
name of the Deal Agent at Wachovia.

 

VFCC Note:  Defined in subsection 2.1(a).

 

Wachovia:  Defined in the Preamble.

 

Warranty Event:  Occurs as to any Loan included as part of the Collateral, if
any representation or warranty herein relating to such Loan was not true and
correct in any material respect when made and such breach is not cured within
the relevant cure period.

 

Wells Fargo:  Defined in the Preamble.

 

WCM:  Defined in subsection 12.17(b).

 

WCM Transfer:  Defined in subsection 12.17(b).

 

WS:  Defined in the Preamble.

 

Section 1.2                                   Other Terms.

 

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

 

Section 1.3                                   Computation of Time Periods.

 

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

 

Section 1.4                                   Interpretation.

 

In each Transaction Document, unless a contrary intention appears:

 

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

 

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

 

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

 

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(iv)                              reference to day or days without further
qualification means calendar days;

 

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

 

Section 1.5                                   Section References.

 

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

 

Section 1.6                                   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.

 

ARTICLE II

 

PURCHASE OF THE STRUCTURED NOTES

 

Section 2.1                                   The Structured Notes.

 

(a)                                  On the terms and conditions hereinafter set
forth, on the Closing Date, the Borrower shall deliver to each of the Deal Agent
and the Swingline Lender, as applicable, at the applicable address set forth on
the signature pages of this Agreement, a duly executed structured note (each a
“Structured Note” and collectively, the “Notes”), in substantially the form of
Exhibits B-1 and B-2, dated as of the date of this Agreement, and otherwise duly
completed.  The Structured Note issued to (i) VFCC (the “VFCC Note”) shall be in
the name of “Wachovia Securities, LLC, as the Deal Agent” and shall be in the
face amount equal to $225,000,000, and (ii) the Swingline Lender (the “Swingline
Note”), shall be in the name of “Wachovia Bank, National Association, as the
Swingline Lender” and be in the face amount equal to $30,000,000.

 

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(b)                                 On the terms and conditions hereinafter set
forth, during the Revolving Period, the Borrower may, at its option, request the
Conduit Lender to make advances of funds (each, an “Advance”) under the VFCC
Note in an aggregate amount up to the Availability as of the date of such
request.  Following the receipt of a Funding Request, subject to the terms and
conditions hereinafter set forth, during the Revolving Period, the Conduit
Lender shall fund such Advance.  Notwithstanding anything to the contrary
contained herein, the Conduit Lender shall not be obligated to provide the Deal
Agent or the Borrower with aggregate funds in connection with an Advance that
would exceed (i) the Conduit Lender’s unused Commitment then in effect or (ii)
the aggregate unused Commitments then in effect.  Each Advance made by the
Conduit Lender hereunder is subordinated to the interests of the Hedge
Counterparties under subsections 2.9(a)(i) and (b)(i) of this Agreement.

 

(c)                                  On the terms and conditions hereinafter set
forth, during the Revolving Period, the Borrower may, at its option, request the
Swingline Lender to increase the principal outstanding on the Swingline Note
(each such request, a “Swingline Funding Request”), each such Swingline Funding
Request to be on the terms and conditions set forth herein and substantially in
the form of Exhibit A-2 hereto.  Subject to the terms and conditions hereinafter
set forth, during the Revolving Period, the Swingline Lender shall advance to
the Borrower the amount requested under a Swingline Funding Request (each, a
“Swingline Advance”).  Notwithstanding anything to the contrary contained
herein, the Swingline Lender shall not be obligated to provide the Borrower with
aggregate funds in connection with a Swingline Advance that would exceed (i) the
Swingline Lender’s unused Commitment then in effect or (ii) the aggregate unused
Commitments then in effect.  Each Swingline Advance made by the Swingline Lender
hereunder is subordinated to the interests of the Hedge Counterparties under
subsections 2.9(a)(i) and (b)(i) of this Agreement.

 

(d)                                 The Borrower may, within sixty (60) days but
not less than forty-five (45) days prior to the expiration of the Liquidity
Purchase Agreement in the case of an extension of the Liquidity Purchase
Agreement or the Commitment Termination Date in the case of an extension of this
Agreement, by written notice make a request to (i) the Deal Agent for each
applicable Liquidity Bank to extend the term of the Liquidity Purchase Agreement
for an additional period of 364 days and (ii) the Deal Agent and the Swingline
Lender for the Conduit Lender and the Swingline Lender, as applicable, to extend
the Commitment Termination Date for an additional period of 364 days.  Each of
the Deal Agent and the Swingline Lender, as applicable, will give prompt notice
to the Liquidity Bank, the Conduit Lender or Swingline Lender, as applicable, of
its receipt of such request, and each of the Liquidity Bank, the Conduit Lender
and the Swingline Lender shall make a determination, each in its respective sole
discretion, not less than fifteen (15) days prior to the expiration of the
Liquidity Purchase Agreement or the Commitment Termination Date, as applicable,
as to whether or not it will agree to the extension requested.  The failure of
the Deal Agent or the Swingline Lender to provide timely notice of the Liquidity
Bank’s, the Conduit Lender’s and the Swingline Lender’s decision to the Borrower
shall be deemed to constitute a refusal by the Liquidity Bank, the Conduit
Lender and the Swingline Lender to extend the term of the Liquidity Purchase
Agreement or this Agreement, as applicable.  The Borrower confirms that the
Liquidity Bank, the Conduit Lender and the Swingline Lender, in their sole and
absolute discretion, without regard to the value or performance of the
Collateral or any other factor, may elect not to extend the Liquidity Agreement
or this Agreement, as applicable.

 

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Section 2.2                                   Procedures for Swingline Advances.

 

Subject to the limitations set forth in Section 2.1, the Borrower may request a
Swingline Advance from the Swingline Lender by delivering to (i) the Deal Agent
and the Swingline Lender a Swingline Funding Request substantially in the form
of Exhibit A-2 hereto and (ii) the Deal Agent, the Swingline Lender and the
Collateral Custodian a duly completed Funding Request (along with a Borrowing
Base Certificate) in accordance with Section 2.3 and each of the other documents
and other information as required under any of the times set forth in Section
2.3.  Each Swingline Funding Request shall include a completed Borrowing Base
Certificate and the Tape updated to the date of such Swingline Funding Request. 
Each Swingline Funding Request (along with the Borrowing Base Certificate) and
Tape must be received by the Deal Agent and the Swingline Lender and each
related Funding Request (along with a Borrowing Base Certificate) must be
received by the Deal Agent no later than 2:00 p.m. (Charlotte, North Carolina
time) on the Business Day for which such Swingline Advance is requested.  If any
Swingline Funding Request (or Borrowing Base Certificate) or Tape is received by
the Deal Agent and the Swingline Lender, or if any related Funding Request (or
Borrowing Base Certificate) is received by the Deal Agent, after 2:00 p.m.
(Charlotte, North Carolina time) on the Business Day for which such Swingline
Advance is requested or on a day that is not a Business Day, such Swingline
Funding Request (or Borrowing Base Certificate) or Tape, or such related Funding
Request (or Borrowing Base Certificate), shall be deemed to be received by the
Deal Agent and the Swingline Lender or the Deal Agent at 9:00 a.m. on the next
following Business Day.  Each such Swingline Funding Request (along with a
Borrowing Base Certificate) shall (i) specify the aggregate amount of the
requested Swingline Advance, which shall be in an amount equal to at least
$1,000,000, (ii) specify the date of the requested Swingline Advance, and
(iii) include a representation that all conditions precedent for a funding have
been met.  Any Swingline Funding Request shall be irrevocable.

 

Section 2.3                                   Procedures for Advances by the
Conduit Lender.

 

(a)                                  Subject to the limitations set forth in
Section 2.1, the Borrower may request an Advance from the Conduit Lender by
delivering to the Deal Agent at certain times the information and documents set
forth in this Section 2.3.

 

(b)                                 No later than 2:00 p.m. (Charlotte, North
Carolina time) two (2) Business Days prior to the proposed Funding Date, the
Borrower shall notify the Collateral Custodian by delivery to the Collateral
Custodian, the Deal Agent of written notice of such proposed Funding Date. 
Subject to its receipt of a written request from the Deal Agent, the Borrower
(or the Servicer on its behalf) shall deliver to the Deal Agent a credit report
and transaction summary for each Loan that is the subject of the proposed
Advance setting forth the credit underwriting by the Originator of such Loan,
including, without limitation, a description of the Obligor and the proposed
Loan transaction in the form of Exhibit S hereto.

 

(c)                                  No later than 2:00 p.m. (Charlotte, North
Carolina time) two (2) Business Days prior to the proposed Funding Date, the
Borrower (or the Servicer on its behalf) shall deliver to the Deal Agent, the
Swingline Lender (if required pursuant to Section 2.2) and the Collateral
Custodian a duly completed Funding Request (along with a Borrowing Base
Certificate).  Each Funding Request (along with a Borrowing Base Certificate)
shall (i) specify the aggregate

 

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amount of the requested Advance, which shall be in an amount equal to at least
$1,000,000, (ii) specify the date of the requested Advance, (iii) specify the
amount of Advances Outstanding, (iv) include a representation that all
conditions precedent for a funding have been met, (v) include a calculation of
the Borrowing Base as of the date the Advance is requested, and (vi) include an
updated Loan List including each Loan that is subject to the requested Advance. 
Any Funding Request shall be irrevocable.

 

(d)                                 No later than 2:00 p.m. (Charlotte, North
Carolina time) on the proposed Funding Date, the Borrower (or the Servicer on
its behalf) shall deliver to the Deal Agent and the Collateral Custodian the
following:

 

(i)                                     a wire disbursement and authorization
form; and

 

(ii)                                  a certification substantially in the form
of Exhibit I from outside counsel to the Borrower concerning the Collateral
Custodian’s receipt of certain documentation relating to the funding of Eligible
Loan(s) related to such Advance.

 

(e)                                  On the Funding Date, the Conduit Lender
shall, subject to the limitations set forth in Section 2.1, and upon
satisfaction of the applicable conditions set forth in Article III, make
available to the Borrower in same day funds, at such bank or other location
reasonably designated by the Borrower in the Funding Request given pursuant to
this Section 2.2 and 2.3, an amount equal to the lesser of (x) the amount
requested by the Borrower for such Advance and (y) an amount equal to the
Availability on such Funding Date.

 

(f)                                    On each Funding Date, the obligation of
each Investor to remit any such Advance shall be several from that of each other
Investor and the failure of an Investor to so make such amount available to the
Borrower shall not relieve any other Investor of its obligation hereunder.

 

Section 2.4                                   Optional Changes in Facility
Amount; Prepayments.

 

(a)                                  The Borrower shall be entitled at its
option, at any time prior to the occurrence of a Termination Event, to terminate
in whole or reduce in part the portion of the Facility Amount that exceeds the
sum of the Advances Outstanding, accrued Interest, Breakage Costs and Hedge
Breakage Costs; provided, that, the Borrower shall give prior written notice of
such reduction to the Deal Agent as provided in subsection 2.4(b) and that any
partial reduction of the Facility Amount shall be in an amount equal to
$5,000,000 or integral multiples thereof to a minimum of $500,000.  Any request
for a reduction or termination pursuant to this subsection 2.4(a) shall be
irrevocable.

 

(b)                                 Prior to the occurrence of a Termination
Event, the Borrower may, upon two (2) Business Days’ prior written notice (such
notice to be received by the Deal Agent and the Hedge Counterparty no later than
5:00 p.m. (Charlotte, North Carolina time) on such day) to the Deal Agent,
reduce the Advances Outstanding by remitting, to the Deal Agent, for payment to
the respective Investors (i) cash and (ii) instructions to reduce such Advances
Outstanding, accrued Interest, Breakage Costs and Hedge Breakage Costs;
provided, that, no such reduction shall be given effect unless the Borrower has
complied with the terms of any Hedging Agreement requiring that one or more
Hedge Transactions be terminated in whole or in part as the result of any such
reduction of the Advances Outstanding, and the Borrower has paid all Hedge
Breakage

 

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Costs owing to the relevant Hedge Counterparty for any such termination.  Any
reduction of the Advances Outstanding (other than with respect to prepayments of
Advances Outstanding to be made by the Borrower to reduce Advances Outstanding
to an amount equal to the Borrowing Base) shall be in a minimum amount of
$1,000,000 with integral multiples of $100,000. Any such reduction will occur
only if sufficient funds have been remitted to pay all such amounts in the
succeeding sentence in full.  Upon receipt of such amounts, the Deal Agent shall
apply such amounts first to the payment of any Hedge Breakage Costs, second to
the pro rata reduction of the Advances Outstanding, third to the payment of
accrued Interest on the amount of the Advances Outstanding to be repaid by
paying such amounts to the respective Investors, and fourth to the payment of
any Breakage Costs.  Any amount so prepaid may, subject to the terms and
conditions hereof, be reborrowed during the Revolving Period.  Any Borrower
Notice relating to any prepayment pursuant to this subsection 2.4(b) shall be
irrevocable.

 

(c)                                  If on any day the Deal Agent, as agent for
the Secured Parties, does not own or have a valid and perfected first priority
security interest in any Loan and Related Property upon the earlier of the
Borrower’s receipt of notice from the Deal Agent or the Borrower becoming aware
thereof and the Borrower’s failure to cure such breach within thirty (30) days,
the Borrower shall be deemed to have received on such day a collection (a
“Deemed Collection”) of such Loan in full and shall on such day pay to the Deal
Agent, on behalf of the Secured Parties, an amount equal to the Outstanding Loan
Balance of such Loan to be applied to the pro rata reduction of the principal of
the VFCC Note and the Swingline Note.  In connection with any such Deemed
Collection, the Deal Agent, as agent for the Secured Parties, shall
automatically and without further action, be deemed to transfer to the Borrower,
free and clear of any Lien created by the Deal Agent, all of the right, title
and interest of the Deal Agent, as agent for the Secured Parties, in, to, and
under the Loan with respect to which the Deal Agent has received such Deemed
Collection, but without any recourse, representation and warranty of any kind,
express or implied.

 

Section 2.5                                   Reimbursement of Swingline
Advances.

 

The Conduit Lender hereby agrees that if the Swingline Lender funds any
Swingline Advance, (i) the Conduit Lender shall reimburse the Swingline Lender
for such Swingline Advance not later than two (2) Business Days after the
Swingline Lender funds such Swingline Advance.  Such reimbursement shall be
accomplished by the Conduit Lender remitting to the Swingline Lender at the
Swingline Lender’s Account or such other account as designated in writing by the
Swingline Lender the amount (up to the amount of the outstanding Swingline
Advance) that the Conduit Lender otherwise would be required to remit to the
account designated by the Borrower pursuant to subsection 2.3(e) in connection
with the Advance being made on the date of such reimbursement.  The Borrower and
the Servicer hereby authorize and instruct the Conduit Lender to reimburse the
Swingline Lender in such manner.

 

Section 2.6                                   Notations on the Structured Notes.

 

(a)                                  The Deal Agent is hereby authorized to
enter on a schedule attached to the VFCC Note a notation (which may be computer
generated) or to otherwise record in its internal books and records or computer
system with respect to each Advance under the VFCC Note made by the Conduit
Lender of:  (i) the date and principal amount thereof and (ii) each payment and

 

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repayment of principal thereof and any such recordation shall constitute prima
facie evidence of the accuracy of the information so recorded.  The failure of
the Deal Agent to make any such notation on the schedule attached to the VFCC
Note shall not limit or otherwise affect the obligation of the Borrower to repay
the Advances under the VFCC Note in accordance with their respective terms as
set forth herein.

 

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

 

Section 2.7                                   Principal Repayments.

 

(a)                                  Unless sooner prepaid pursuant to
subsection 2.4(b) or Section 9.1, the Advances Outstanding shall be repaid in
full on the date that occurs twenty-four (24) months following the Termination
Date.  In addition, Advances Outstanding shall be repaid as and when necessary
to cause (i) the Advances Outstanding not to exceed the Availability, (ii) the
Overcollateralization Amount to equal or exceed on each day the Minimum
Overcollateralization Amount and (iii) the Equity Contribution to equal or
exceed the Required Equity Contribution, and any amount so repaid may, subject
to the terms and conditions hereof, be reborrowed hereunder during the Revolving
Period.

 

(b)                                 Unless sooner reimbursed by the Conduit
Lender pursuant to Section 2.5, Swingline Advances shall be repaid in full by
the Borrower to the Swingline Lender at the Swingline Lender’s Account or such
other account designated in writing by the Swingline Lender two (2) Business
Days following the date such Swingline Advance was funded.  Swingline Advances
shall be with full recourse to the Borrower, and if a Swingline Advance is not
paid, the Swingline Lender will have the rights and remedies provided under the
UCC of each applicable jurisdiction and other Applicable Law, which rights shall
be cumulative.

 

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

 

(d)                                 With respect to any Swingline Advances, (i)
all Interest accrued and unpaid on the amount repaid to (but excluding) the date
of such repayment, and (ii) any and all Hedge Breakage Costs and any other
amounts payable by the Borrower under or with respect to any Hedging Agreement,
shall be paid to the Swingline Lender from the Collection Account on each
Payment Date, monthly in arrears, in accordance with subsections 2.9(a)(vi) and
(vii) and subsections 2.9(b)(vi) and (vii).

 

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Section 2.8                                   Interest Payments.

 

(a)                                  Interest shall accrue on each Advance and
each Swingline Advance during each Accrual Period at the applicable Interest
Rate.  The Borrower shall pay Interest on the unpaid principal amount of each
Advance and Swingline Advance for the period commencing on and including the
Funding Date of such Advance and Swingline Advance through but excluding the
date that such Advance and Swingline Advance shall be paid in full.  Interest
shall accrue during each Accrual Period and be payable on each Advance and
Swingline Advance on each Payment Date, unless earlier paid pursuant to (i) a
prepayment in accordance with Section 2.4 or (ii) a reimbursement or repayment
in accordance with Section 2.5 or Section 2.7, as applicable.

 

(b)                                 The Deal Agent shall determine the CP Rate
and Interest (including unpaid Interest, if any, due and payable on a prior
Payment Date) to be paid by the Borrower with respect to each Advance and
Swingline Advance on each Payment Date for the Accrual Period and shall advise
the Servicer on behalf of the Borrower thereof three (3) Business Days prior to
each Payment Date.

 

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

 

Section 2.9                                   Settlement Procedures.

 

(a)                                  During the Revolving Period.  On each
Payment Date during the Revolving Period, the Servicer on behalf of the Borrower
shall pay to the following Persons pursuant to the Monthly Report, from the
Collection Account, to the extent of Available Funds, the following amounts in
the following order of priority:

 

(i)                                     First, pro rata to each Hedge
Counterparty, any amounts, including any Hedge Breakage Costs, owing that Hedge
Counterparty under its respective Hedging Agreement in respect of any Hedge
Transaction(s), for the payment thereof;

 

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

 

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(iii)                               Third, to the Servicer, in an amount equal
to its accrued and unpaid Servicing Fees to the end of the preceding Collection
Period, for the payment thereof;

 

(iv)                              Fourth, to the extent not paid by the
Servicer, to the Backup Servicer, in amount equal to any accrued and unpaid
currently due Backup Servicing Fee, for the payment thereof;

 

(v)                                 Fifth, to the extent not paid by the
Servicer, to the Collateral Custodian in an amount equal to any accrued and
unpaid currently due Collateral Custodian Fee, for the payment thereof;

 

(vi)                              Sixth, to the Deal Agent and the Swingline
Lender, pro rata in accordance with the amount of Advances Outstanding and
Swingline Advances outstanding hereunder, in an amount equal to any accrued and
unpaid Interest and Breakage Costs, for the payment thereof;

 

(vii)                           Seventh, to the Deal Agent and the Swingline
Lender, pro rata in accordance with the amount of Advances Outstanding and
Swingline Advances outstanding hereunder, in an amount equal to any accrued and
unpaid Program Fee and Facility Fee, for the payment thereof;

 

(viii)                        Eighth, to the Deal Agent, for the account of the
applicable Affected Party, pro rata in accordance with the amount owed to such
Person under this clause Eighth, in an amount equal to any unpaid Increased
Costs, Taxes and any Other Costs, for the payment thereof;

 

(ix)                                Ninth, to the Deal Agent and the Swingline
Lender, if the Required Advance Reduction Amount is greater than zero, an amount
necessary to reduce the Required Advance Reduction Amount to zero, pro rata in
accordance with the amount of Advances Outstanding and Swingline Advances
outstanding hereunder, for the payment thereof;

 

(x)                                   Tenth, to the Deal Agent, the Swingline
Lender, the Investors, the Affected Parties and the Indemnified Parties, pro
rata in accordance with the amount owed to such Person under this clause Tenth,
all other amounts (other than Advances Outstanding and Swingline Advances
outstanding) then due under this Agreement, for the payment thereof;

 

(xi)                                Eleventh, to the extent not paid by the
Servicer, to the Backup Servicer, to the Collateral Custodian, and to any
Successor Servicer, as applicable, pro rata in accordance with the amount owed
to such Person under this clause Eleventh, in an amount equal to any accrued and
unpaid Transition Costs, Backup Servicer Expenses, Collateral Custodian Expenses
and Market Servicing Fee Differential, for the payment thereof;

 

(xii)                             Twelfth, to the Borrower to invest in
additional Eligible Loans that become part of the Collateral within two (2)
Business Days of such date;

 

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(xiii)                          Thirteenth, any remaining amounts shall be
distributed to the Borrower.

 

(b)                                 During the Amortization Period.  On each
Payment Date during the Amortization Period, the Servicer on behalf of the
Borrower shall pay to the following Persons pursuant to the Monthly Report, from
the Collection Account, to the extent of Available Funds, the following amounts
in the following order of priority:

 

(i)                                     First, pro rata to each Hedge
Counterparty, any amounts, including any Hedge Breakage Costs, owing that Hedge
Counterparty under its respective Hedging Agreement in respect of any Hedge
Transaction(s), for the payment thereof;

 

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

 

(iii)                               Third, to the Servicer, in an amount equal
to its accrued and unpaid Servicing Fees to the end of the preceding Collection
Period, for the payment thereof;

 

(iv)                              Fourth, to the extent not paid by the
Servicer, to the Backup Servicer, in amount equal to any accrued and unpaid
currently due Backup Servicing Fee, for the payment thereof;

 

(v)                                 Fifth, to the extent not paid by the
Servicer, to the Collateral Custodian in an amount equal to any accrued and
unpaid currently due Collateral Custodian Fee, for the payment thereof;

 

(vi)                              Sixth, to the Deal Agent and the Swingline
Lender, pro rata in accordance with the amount of Advances Outstanding and
Swingline Advances outstanding hereunder, in an amount equal to any accrued and
unpaid Interest and Breakage Costs, for the payment thereof;

 

(vii)                           Seventh, to the Deal Agent and the Swingline
Lender, pro rata in accordance with the amount of Advances Outstanding and
Swingline Advances outstanding hereunder, in an amount equal to any accrued and
unpaid Program Fee and Facility Fee, for the payment thereof;

 

(viii)                        Eighth, to the Deal Agent, for the account of the
applicable Affected Party, pro rata in accordance with the amount owed to such
Person under this clause Eighth, in an amount equal to any unpaid Increased
Costs, Taxes and any Other Costs, for the payment thereof;

 

(ix)                                Ninth, to the Deal Agent and the Swingline
Lender, pro rata in accordance with the amount of Advances Outstanding and
Swingline Advances outstanding hereunder, for the account of the applicable
Investor, in an amount necessary to reduce the Advances Outstanding, Swingline
Advances outstanding and Obligations to zero, for the payment thereof;

 

(x)                                   Tenth, to the Deal Agent, the Swingline
Lender, the Investors, the Affected Parties and the Indemnified Parties, pro
rata in accordance with the amount

 

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owed to such Person under this clause Tenth, all other amounts (other than
Advances Outstanding and Swingline Advances outstanding) then due under this
Agreement, for the payment thereof;

 

(xi)                                Eleventh, to the extent not paid by the
Servicer, to the Backup Servicer, to the Collateral Custodian, and to any
Successor Servicer, as applicable, pro rata in accordance with the amount owed
to such Person under this clause Eleventh, in an amount equal to any accrued and
unpaid Transition Costs, Backup Servicer Expenses, Collateral Custodian Expenses
and Market Servicing Fee Differential, for the payment thereof;

 

(xii)                             Twelfth, to each Person entitled thereto, pro
rata, an amount equal to all outstanding Obligations owed to such Person;

 

(xiii)                          Thirteenth, any remaining amounts shall be
distributed to the Borrower.

 

Section 2.10                            Collections and Allocations.

 

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

 

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

 

(c)                                  Notwithstanding anything to the contrary
contained herein or in any other Transaction Document, all payments required to
be made by the Borrower hereunder shall be made by the Borrower through the
Servicer acting as its Paying Agent.

 

Section 2.11                            Payments, Computations, Etc.

 

(a)                                  Unless otherwise expressly provided herein,
all amounts to be paid or deposited by the Borrower, the Servicer on behalf of
the Borrower or the Conduit Lender to the Swingline Lender hereunder shall be
paid or deposited in accordance with the terms hereof no later than 10:00 a.m.
(Charlotte, North Carolina time) on the day when due in lawful money of the
United States in immediately available funds to the applicable Agent’s Account. 
The Borrower shall, to the extent permitted by law, pay to the Secured Parties
interest on all amounts not paid or deposited when due hereunder at 2% per annum
above the Base Rate, payable on demand; provided, however, that such interest
rate shall not at any time exceed the Maximum Lawful

 

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Rate.  All computations of interest and all computations of the Interest Rate
and other fees hereunder shall be made on the basis of a year of 360 (other than
calculations with respect to the Base Rate which shall be based on a year
consisting of 365 or 366 days, as applicable) days for the actual number of days
(including the first but excluding the last day) elapsed.

 

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

 

(c)                                  All payments hereunder shall be made
without set-off or counterclaim and in such amounts as may be necessary in order
that all such payments shall not be less than the amounts otherwise specified to
be paid under this Agreement (after withholding for or on account of any
Taxes).  Promptly following the Collection Date, the Deal Agent and the
Swingline Lender shall mark the Notes “Paid” and return them to the Borrower.

 

Section 2.12                            Reserved.

 

Section 2.13                            Fees.

 

(a)                                  The Borrower shall pay to the Deal Agent
and the Swingline Lender from the Collection Account on each Payment Date,
monthly in arrears, in accordance with subsection 2.9(a)(vii) and subsection
2.9(b)(vii), the Program Fee and Facility Fee.

 

(b)                                 The Borrower shall pay to the Servicer from
the Collection Account on each Payment Date, monthly in arrears, in accordance
with subsection 2.9(a)(iii) and subsection 2.9(b)(iii), the Servicing Fee.

 

(c)                                  The Backup Servicer shall be entitled to
receive from the Collection Account on each Payment Date, monthly in arrears, in
accordance with subsection 2.9(a)(iv) and subsection 2.9(b)(iv), the Backup
Servicing Fee.

 

(d)                                 The Collateral Custodian shall be entitled
to receive from the Collection Account on each Payment Date, monthly in arrears,
in accordance with subsection 2.9(a)(v) and subsection 2.9(b)(v), the Collateral
Custodian Fee.

 

(e)                                  The Borrower shall pay to Mayer, Brown,
Rowe & Maw, as counsel to the Deal Agent, in accordance with Section 12.9,
(i) the estimated legal fees and itemized out-of-pocket expenses of each such
counsel as of such date, and (ii) all additional reasonable fees and
out-of-pocket expenses of each such counsel within thirty (30) days Business
Days after receiving an invoice for such amounts; provided, however, all such
fees shall be broken down by time and hourly rates and not value billed.

 

Section 2.14                            Increased Costs; Capital Adequacy;
Illegality.

 

(a)                                  If either (i) the introduction of or any
change (including, without limitation, any change by way of imposition or
increase of reserve requirements) in or in the interpretation of any Applicable
Law or regulation or (ii) the compliance by an Affected Party with any guideline

 

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or request from any central bank or other Governmental Authority (whether or not
having the force of law), (A) shall subject an Affected Party to any Tax (except
for Taxes on the overall net income of such Affected Party), duty or other
charge with respect to an Advance hereunder, or on any payment made hereunder or
(B) shall impose, modify or deem applicable any reserve requirement (including,
without limitation, any reserve requirement imposed by the Federal Reserve
Board, but excluding any reserve requirement, if any, included in the
determination of Interest), special deposit or similar requirement against
assets of, deposits with or for the amount of, or credit extended by, any
Affected Party or (C) shall impose any other condition affecting an Advance or
an Investor’s rights hereunder, the result of which is to increase the cost to
any Affected Party or to reduce the amount of any sum received or receivable by
an Affected Party under this Agreement, then within ten (10) days after demand
by such Affected Party (which demand shall be accompanied by a statement setting
forth the basis for such demand), the Borrower shall pay directly to such
Affected Party such additional amount or amounts as will compensate such
Affected Party for such additional or increased cost incurred or such reduction
suffered.

 

(b)                                 If either (i) the introduction of or any
change in or in the interpretation of any Applicable Law, guideline, rule,
regulation, directive or request or (ii) compliance by any Affected Party with
any Applicable Law, guideline, rule, regulation, directive or request from any
central bank or other Governmental Authority (whether or not having the force of
law), including, without limitation, compliance by an Affected Party with any
request or directive regarding capital adequacy, has or would have the effect of
reducing the rate of return on the capital of any Affected Party as a
consequence of its obligations hereunder or arising in connection herewith to a
level below that which any such Affected Party could have achieved but for such
introduction, change or compliance (taking into consideration the policies of
such Affected Party with respect to capital adequacy) by an amount deemed by
such Affected Party to be material, then from time to time, within ten (10) days
after demand by such Affected Party (which demand shall be accompanied by a
statement setting forth the basis for such demand), the Borrower shall pay
directly to such Affected Party such additional amount or amounts as will
compensate such Affected Party for such reduction.  For avoidance of doubt, any
interpretation of Accounting Research Bulletin No. 51 by the Financial
Accounting Standards Board shall constitute an adoption, change, request or
directive subject to this subsection 2.14(b)

 

(c)                                  If as a result of any event or circumstance
similar to those described in subsections 2.14(a) and (b), any Affected Party is
required to compensate a bank or other financial institution providing liquidity
support, credit enhancement or other similar support to such Affected Party in
connection with this Agreement or the funding or maintenance of Advances
hereunder, then within ten (10) days after demand by such Affected Party, the
Borrower shall pay to such Affected Party such additional amount or amounts as
may be necessary to reimburse such Affected Party for any such amounts paid by
it.

 

(d)                                 In determining any amount provided for in
this Section 2.14, the Affected Party may use any reasonable averaging and
attribution methods.  Any Affected Party making a claim under this section shall
submit to the Borrower a certificate as to such additional or increased cost or
reduction, which certificate shall calculate in reasonable detail any such
charges and shall be conclusive absent demonstrable error.

 

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(e)                                  If an Investor shall notify the Deal Agent
that a Eurodollar Disruption Event as described in clause (a) of the definition
of “Eurodollar Disruption Event” has occurred, the Deal Agent shall in turn so
notify the Borrower, whereupon all Advances and Swingline Advances in respect of
which Interest accrues at the LIBOR Rate shall immediately be converted into
Advances and Swingline Advances in respect of which Interest accrues at the Base
Rate.

 

Section 2.15                            Taxes.

 

(a)                                  All payments made by the Borrower in
respect of any Advance and all payments made by the Borrower or the Servicer on
behalf of the Borrower under this Agreement will be made free and clear of and
without deduction or withholding for or on account of any Taxes, unless such
withholding or deduction is required by law.  In such event, the Borrower shall
pay to the appropriate taxing authority any such Taxes required to be deducted
or withheld and the amount payable to each Secured Party and the Deal Agent (as
the case may be) will be increased (such increase, the “Additional Amount”) such
that every net payment made under this Agreement after deduction or withholding
for or on account of any Taxes (including, without limitation, any Taxes on such
increase) is not less than the amount that would have been paid had no such
deduction or withholding been deducted or withheld.  The foregoing obligation to
pay Additional Amounts, however, will not apply with respect to, and the term
“Additional Amount” shall be deemed not to include net income or franchise taxes
imposed on a Secured Party or the Deal Agent, respectively, with respect to
payments required to be made by the Borrower or Servicer on behalf of the
Borrower under this Agreement, by a taxing jurisdiction in which such Secured
Party or the Deal Agent is organized, conducts business or is paying taxes as of
the Closing Date (as the case may be).  If a Secured Party or the Deal Agent
pays any Taxes in respect of which the Borrower is obligated to pay Additional
Amounts under this subsection 2.15(a), the Borrower shall promptly reimburse
such Secured Party or the Deal Agent, as applicable, in full.

 

(b)                                 The Borrower will indemnify each Secured
Party and the Deal Agent for the full amount of Taxes in respect of which the
Borrower is required to pay Additional Amounts (including, without limitation,
any Taxes imposed by any jurisdiction on such Additional Amounts) paid by such
Secured Party or the Deal Agent (as the case may be) and any liability
(including penalties, interest and expenses) arising therefrom or with respect
thereto; provided, however, that such Secured Party or the Deal Agent, as
appropriate, making a demand for indemnity payment, shall provide the Borrower,
at its address set forth under its name on the signature pages hereof, with a
certificate from the relevant taxing authority or from a Responsible Officer of
such Secured Party or the Deal Agent stating or otherwise evidencing that such
Secured Party or the Deal Agent has made payment of such Taxes and will provide
a copy of or extract from documentation, if available, furnished by such taxing
authority evidencing assertion or payment of such Taxes.  This indemnification
shall be made within ten (10) days from the date the Secured Party or the Deal
Agent (as the case may be) makes written demand therefor.

 

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

 

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(d)                                 If an Investor is not created or organized
under the laws of the United States or a political subdivision thereof, such
Investor shall, to the extent that it may then do so under Applicable Laws,
deliver to the Borrower with a copy to the Deal Agent (i) within fifteen (15)
days after the date hereof, or, if later, the date on which such Investor
becomes an Investor hereof two (or such other number as may from time to time be
prescribed by Applicable Laws) duly completed copies of IRS Form W-8ECI or Form
W-8BEN (or any successor forms or other certificates or statements that may be
required from time to time by the relevant United States taxing authorities or
Applicable Laws), as appropriate, to permit the Borrower to make payments
hereunder for the account of such Investor, as the case may be, without
deduction or withholding of United States federal income or similar Taxes and
(ii) upon the obsolescence of or after the occurrence of any event requiring a
change in, any form or certificate previously delivered pursuant to this
subsection 2.15(d), two copies (or such other number as may from time to time be
prescribed by Applicable Laws) of such additional, amended or successor forms,
certificates or statements as may be required under Applicable Laws to permit
the Borrower to make payments hereunder for the account of such Investor,
without deduction or withholding of United States federal income or similar
Taxes.

 

(e)                                  For any period with respect to which an
Investor or the Deal Agent has failed to provide the Borrower with the
appropriate form, certificate or statement described in subsection 2.15(d)
(other than if such failure is due to a change in law occurring after the date
of this Agreement), the Deal Agent or such Investor, as the case may be, shall
not be entitled to indemnification under clauses (a) or (b) of this subsection
2.15 with respect to any Taxes.

 

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

 

(g)                                 If, in connection with an agreement or other
document providing liquidity support, credit enhancement or other similar
support to the Investors in connection with this Agreement or the funding or
maintenance of Advances hereunder, the Investors are required to compensate a
bank or other financial institution in respect of Taxes under circumstances
similar to those described in this Section 2.15, then within ten (10) days after
demand by the Investors, the Borrower shall pay to the Investors such additional
amount or amounts as may be necessary to reimburse the Investors for any amounts
paid by them.

 

Section 2.16                            Assignment of the Purchase Agreement.

 

The Borrower hereby assigns to the Deal Agent, for the ratable benefit of the
Secured Parties hereunder, all of the Borrower’s right, and title and interest
in and to (but none of its obligators under) the Purchase Agreement.  In
furtherance and not in limitation of the foregoing,

 

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the Borrower hereby assigns to the Deal Agent for the benefit of the Secured
Parties, its right to Indemnification under subsection 9.14(c) of the Purchase
Agreement. The Borrower confirms that following a Termination Event the Deal
Agent shall have the sole right to enforce the Borrower’s rights and remedies
under the Purchase Agreement for the benefit of the Secured Parties, but without
any obligation on the part of the Deal Agent, the Secured Parties or any of
their respective Affiliates, to perform any of the obligations of the Borrower
under the Purchase Agreement.  The Borrower further confirms and agrees that
such assignment to the Deal Agent shall terminate upon the Collection Date;
provided, however, that the rights of the Deal Agent and the Secured Parties
pursuant to such assignment with respect to rights and remedies in connection
with any indemnities and any breach of any representation, warranty or covenants
made by the Originator pursuant to the Purchase Agreement, which rights and
remedies survive the Termination of the Purchase Agreement, shall be continuing
and shall survive any termination of such assignment.

 

Section 2.17                            Lien Release Dividend.

 

(a)                                  Notwithstanding any provision contained in
this Agreement to the contrary, provided there is not then existing an Unmatured
Termination Event, a Termination Event or a Servicer Termination Event, on a
Lien Release Dividend Date, the Borrower may dividend to the Originator a
portion of the Loans or portions thereof (the “Lien Release Dividend”), subject
to the following terms and conditions:

 

(i)                                     The Borrower and the Originator shall
have given the Deal Agent at least two (2) Business Days’ prior written notice
of their intent to effectuate a Lien Release Dividend, unless such notice is
waived by the Deal Agent;

 

(ii)                                  Any Lien Release Dividend shall only be in
connection with a Permitted Securitization Transaction;

 

(iii)                               After giving effect to the Lien Release
Dividend and the transfer to the Originator of the Loans or portions thereof on
the Lien Release Dividend Date, (A) the Advances Outstanding do not exceed the
Availability, (B) the representations and warranties contained in Section 4.1
and 4.2 hereof shall continue to be correct in all material respects, except to
the extent relating to an earlier date, (C) the eligibility of any Transferred
Loan remaining as part of the Collateral after the Lien Release Dividend will be
redetermined as of the Lien Release Dividend Date, (D) the Concentration Limits
will be redetermined as of the Lien Release Dividend Date, and (E) neither an
Unmatured Termination Event, a Termination Event nor a Servicer Termination
Event shall have resulted;

 

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

 

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

 

(vi)                              A portion of a Loan may be transferred
pursuant to a Lien Release Dividend provided that (A) such transfer does not
have an adverse effect on the portion of the Loan remaining as a part of the
Collateral, any other Collateral, the Investors, the Secured Parties or the Deal
Agent, (B) the Loan Documents for such portion of the Loan remaining as a part
of the Collateral have been amended to contain pro rata sharing, intercreditor
and, if applicable, subordination, provisions and (C) a new promissory note for
the portion of the Loan remaining as a part of the Collateral has been executed
by the Obligor, and the original thereof has been endorsed to the Deal Agent and
delivered to the Collateral Custodian; and

 

(vii)                           The Borrower shall deliver a Borrowing Base
Certificate (including a calculation of the Borrowing Base after giving effect
to such Lien Release Dividend) to the Deal Agent.

 

(b)                                 In connection with the Lien Release
Dividend, there shall be sold and assigned to the Borrower, without recourse,
representation or warranty, all of the right, title and interest of the Deal
Agent, on behalf of the Secured Parties, in, to and under the Loans or portions
thereof so transferred (together with, in the case of the transfer of the Loans
but not portions thereof, any related Collateral) and such Loans or portions
thereof so transferred (together with, in the case of the transfer of the Loans
but not portions thereof, any related Collateral) shall be released from the
Lien of this Agreement (subject to the requirements of subsection 2.17(a)(iii)
above).

 

(c)                                  The Borrower hereby agrees to pay the
reasonable legal fees and expenses of the Deal Agent and the Secured Parties in
connection with any Lien Release Dividend (including, but not limited to,
expenses incurred in connection with the release of the Lien of the Deal Agent,
on behalf of the Secured Parties, and any other party having an interest in the
Loans in connection with such Lien Release Dividend).

 

(d)                                 In connection with any Lien Release
Dividend, on the related Lien Release Dividend Date, the Deal Agent, on behalf
of the Secured Parties, shall, at the expense of the Borrower (1) execute such
instruments of release with respect to the Loans or portions thereof to be
transferred to the Borrower (together with, in the case of the transfer of the
Loans but not portions thereof, any related Collateral), in recordable form if
necessary, in favor of the Borrower as the Borrower may reasonably request,
(2) deliver any portion of the Loans or portions thereof to be transferred to
the Borrower (together with, in the case of the transfer of the Loans but not
portions thereof, any related Collateral) in its possession to the Borrower and
(3) otherwise take such actions, and cause or permit the Collateral Custodian to
take such actions, as are necessary and appropriate to release the Lien of the
Deal Agent on behalf of the Secured Parties on the Loans or portions thereof to
be transferred to the Borrower (together with, in the case of the transfer of
the Loans but not portions thereof, any related Collateral) and release and
deliver to the Borrower such Loans or portions thereof to be transferred to the

 

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Borrower (together with, in the case of the transfer of the Loans but not
portions thereof, any related Collateral).

 

Section 2.18                            Appointment of Registrar and Duties.

 

(a)                                  Wachovia is hereby appointed to act as
Registrar under this Agreement and hereby accepts such appointment and agrees to
perform the duties and obligations with respect thereto set forth in the
Agreement.

 

(b)                                 As long as any Advances remain outstanding
under the Notes, the Borrower shall maintain a Registrar therefor.

 

(c)                                  The Borrower shall cause to be kept a
register (the “Note Register”) that contains an accurate and complete list of
those Persons who from time to time shall be holders of the Structured Notes. 
The Note Register shall be maintained by the Registrar, and so long as Wachovia
is the Registrar, the Registrar may not be removed by the Borrower.  Upon the
resignation of any Registrar, the Borrower shall promptly appoint a successor
or, if it elects not to make such an appointment, assume the duties of
Registrar.  So long as Wachovia is the Registrar, the Note Register shall be
kept at One Wachovia Center, Mail Code:  NC0610, Charlotte, North Carolina
28288.

 

(d)                                 Upon the resignation of Wachovia as
Registrar, the Borrower will give the Deal Agent prompt written notice of the
appointment of a successor Registrar and of the location, and any change in the
location, of the Note Register, and the Deal Agent shall have the right to
inspect the Note Register at all reasonable times and to obtain copies thereof,
and the Deal Agent shall have the right to rely upon a certificate executed on
behalf of the Registrar by a Responsible Officer thereof as to the names and
addresses of the holder(s) of the Notes and the principal amounts and the
amounts and number of such Notes.

 

Section 2.19                            Substitution of Loans.

 

On any day prior to the occurrence of a Termination Event (and after the
Termination Date at the discretion of the Deal Agent), the Borrower may, subject
to the conditions set forth in this Section 2.19 and subject to the other
restrictions contained herein, replace any Transferred Loan with one or more
Eligible Loans (each, a “Substitute Loan”), provided that no such replacement
shall occur unless each of the following conditions is satisfied as of the date
of such replacement and substitution:

 

(a)                                  the Borrower has recommended to the Deal
Agent (with a copy to the Collateral Custodian) in writing that the Transferred
Loan to be replaced should be replaced (each a “Replaced Loan”);

 

(b)                                 each Substitute Loan is an Eligible Loan on
the date of substitution;

 

(c)                                  the aggregate Outstanding Loan Balance of
such Substitute Loans shall be equal to or greater than the aggregate
Outstanding Loan Balance of the Replaced Loans;

 

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(d)                                 all representations and warranties of the
Borrower contained in Sections 4.1 and 4.2 shall be true and correct as of the
date of substitution of any such Substitute Loan;

 

(e)                                  the substitution of any Substitute Loan
does not cause a Termination Event or Unmatured Termination Event to occur;

 

(f)                                    as of any date of determination, the sum
of the Outstanding Loan Balances of all Substitute Loans does not exceed 20% of
the highest Aggregate Outstanding Loan Balance of any month during the twelve
(12) month period immediately preceding such date of determination;

 

(g)                                 as of any date of determination, the sum of
the Outstanding Loan Balances of all Substitute Loans substituted for Defaulted
Loans, Charged-Off Loans and Loans subject to a Warranty Event shall not exceed
10% of the highest Aggregate Outstanding Loan Balance of any month during the
twelve (12) month period immediately preceding such date of determination;

 

(h)                                 the remaining maturity of the Substitute
Loan is less than or equal to the remaining maturity of the Replaced Loan;

 

(i)                                     the weighted average life of such
Substitute Loan is less than or equal to that of the Replaced Loan;

 

(j)                                     no adverse selection procedures shall
have been employed in the selection of such Substitute Loan from the
Originator’s portfolio;

 

(k)                                  all actions or additional actions (if any)
necessary to perfect the security interest and assignment of such Substitute
Loan and related Collateral to the Borrower and the Deal Agent shall have been
taken as of or prior to the Substitution Date;

 

(l)                                     the Eligible Risk Rating of the
Substitute Loan is equal to or better than the Replaced Loan;

 

(m)                               the current interest rate on the Substitute
Loan is not less than the current interest rate on the Loan to be replaced and
reconveyed to the Originator in exchange for such Substitute Loan;

 

(n)                                 the total interest rate (inclusive of any
deferred interest component) of the Substitute Loan is greater than or equal to
the interest rate on the Loan to be replaced and reconveyed to the Originator in
exchange for such Substitute Loan; and

 

(o)                                 the Borrower shall deliver to the Deal Agent
on the date of such substitution (i) a certificate of a Responsible Officer
certifying that each of the foregoing is true and correct as of such date and
(ii) a Borrowing Base Certificate (including a calculation of Borrowing Base
after giving effect to such substitution).

 

In addition, the Borrower shall in connection with such substitution deliver to
the Collateral Custodian the related Loan Documents.  In connection with any
such substitution, the Deal Agent, as agent for the Secured Parties, shall,
automatically and without further action, be

 

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deemed to transfer to the Borrower, free and clear of any Lien created by the
Deal Agent, all of the right, title and interest of the Deal Agent, as agent for
the Secured Parties, in, to and under such Replaced Loan, but without any
representation and warranty of any kind, express or implied.

 

ARTICLE III

 

CLOSING; CONDITIONS OF CLOSING AND ADVANCES

 

Section 3.1                                   Conditions to Closing and Initial
Advances.

 

No Investor shall be obligated to make any Advance or any Swingline Advance
hereunder on the occasion of the Initial Advance, nor shall any Investor, the
Deal Agent, the Backup Servicer or the Collateral Custodian be obligated to
take, fulfill or perform any other action hereunder, until the following
conditions have been satisfied, in the sole discretion of, or waived in writing
by, the Deal Agent:

 

(a)                                  This Agreement and all other Transaction
Documents or counterparts hereof or thereof shall have been duly executed by,
and delivered to, the parties hereto and thereto and the Deal Agent shall have
received such other documents, instruments, agreements and legal opinions as the
Deal Agent shall request in connection with the transactions contemplated by
this Agreement, including all those listed in the Schedule of Documents,
attached hereto as Schedule I, as due on the Closing Date, each in form and
substance satisfactory to the Deal Agent.

 

(b)                                 The Deal Agent shall have received (i)
satisfactory evidence that the Borrower and the Servicer have obtained all
required consents and approvals of all Persons, including all requisite
Governmental Authorities, to the execution, delivery and performance of this
Agreement and other Transaction Documents to which each is a party and the
consummation of the transactions contemplated hereby or thereby or (ii) an
Officer’s Certificate from each of the Borrower and the Servicer in form and
substance satisfactory to the Deal Agent affirming that no such consents or
approvals are required.

 

(c)                                  The Borrower and the Servicer shall each be
in compliance in all material respects with all Applicable Laws.

 

(d)                                 The Borrower shall have paid all fees
required to be paid by it on the Closing Date, including all fees required
hereunder and under the Fee Letter to be paid as of such date, and shall have
reimbursed each Investor, the Deal Agent for all fees, costs and expenses of
closing the transactions contemplated hereunder and under the other Transaction
Documents, including the legal and other document preparation costs incurred by
any Investor, the Deal Agent.

 

Section 3.2                                   Conditions Precedent to All
Advances.

 

Each Advance (including the Initial Advance), each Swingline Advance and each
reinvestment of Available Funds made pursuant to subsection 2.9(a)(xii) shall be
subject to the further conditions precedent that:

 

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(a)                                  On the related Funding Date or date of
reinvestment, the Borrower or the Servicer, as the case may be, shall have
certified in the related Borrower Notice or Swingline Funding Request, as
applicable, that:

 

(i)                                     the representations and warranties set
forth in Sections 4.1, 4.2 and 7.8 are true and correct on and as of such date,
before and after giving effect to such borrowing and to the application of the
proceeds therefrom, as though made on and as of such date;

 

(ii)                                  no event has occurred, or would result
from such Advance, such Swingline Advance or from the application of the
proceeds therefrom, that constitutes a Termination Event or Unmatured
Termination Event;

 

(iii)                               such Person is in material compliance with
each of its covenants set forth herein; and

 

(iv)                              no event has occurred that constitutes a
Servicer Termination Event;

 

(b)                                 (i) with respect to the initial Funding
Date, the Deal Agent shall have received all Transaction Documents listed on the
Schedule of Documents, attached hereto as Schedule I, as due on the initial
Funding Date, or counterparts thereof, each of which has been duly executed by,
and delivered to, the parties hereto and each shall be in form and substance
satisfactory to the Deal Agent and (ii) on any date on which Principal
Collections are reinvested pursuant to subsection 2.9(a)(xii), the Deal Agent
shall have received a certification in the form of Exhibit N;

 

(c)                                  the Termination Date shall not have
occurred;

 

(d)                                 (i)  in the case of any Advance, on and as
of such date, before and after giving effect to such Advance and to the
application of proceeds therefrom, Advances Outstanding, do not exceed the
lesser of (i) the Availability as calculated on such date and (ii) the Facility
Amount;

 

(ii)  in the case of each Swingline Advance, on and as of such date, before and
after giving effect to such Swingline Advance and to the application of proceeds
therefrom, (i) the aggregate amount of Swingline Advances do not exceed
$30,000,000 and (ii) the Advances Outstanding do not exceed the lesser of (i)
the Availability as calculated on such date and (ii) the Facility Amount;

 

(e)                                  in the case of each Advance and Swingline
Advance, each Loan submitted by the Borrower for funding on the related Funding
Date or date of reinvestment of Collections pursuant to subsection 2.9(a)(xii)
is an Eligible Loan;

 

(f)                                    with respect to each Loan being funded by
the proceeds of such Swingline Advance, the Deal Agent, the Swingline Lender and
the Collateral Custodian shall have received a faxed copy of the executed
commercial loan note evidencing such Loan and the Certificate of Borrower in the
form of Exhibit I;

 

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

 

(h)                                 there shall have been no Material Adverse
Change in the Borrower since the preceding Advance;

 

(i)                                     the Servicer and Borrower shall have
taken such other action, including delivery of approvals, consents, opinions,
documents, and instruments to the Secured Parties and the Deal Agent as each may
reasonably request;

 

(j)                                     after giving effect to the Advance or
reinvestment of Available Funds, the weighted average life of the Transferred
Loans included in the Collateral (weighted based on Outstanding Loan Balances)
will not exceed eight (8) years; and

 

(k)                                  in the case of each Swingline Advance, the
Deal Agent shall have consented to such Swingline Advance.

 

ARTICLE IV

 

REPRESENTATIONS AND WARRANTIES

 

Section 4.1                                   Representations and Warranties of
the Borrower.

 

The Borrower represents and warrants as follows:

 

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

 

(b)                                 Due Qualification.  The Borrower is duly
qualified to do business and is in good standing as a statutory trust, and has
obtained or will obtain all necessary licenses and approvals, in each
jurisdiction in which the nature of its business requires it to be so qualified.

 

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

 

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

 

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

 

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

 

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

 

(h)                                 Bulk Sales.  The execution, delivery and
performance of this Agreement do not require compliance with any “bulk sales”
law by Borrower.

 

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

 

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

 

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

 

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

 

(m)                               Reserved.

 

(n)                                 Reports Accurate.  All Monthly Reports (if
prepared by the Borrower, or to the extent that information contained therein is
supplied by the Borrower), information, exhibit, financial statement, document,
book, record or report furnished or to be furnished by the

 

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Borrower to the Deal Agent or any Investor in connection with this Agreement are
true, complete and accurate.

 

(o)                                 Location of Offices.  The Borrower’s name is
“ACS Funding Trust I” and its location (within the meaning of Article 9 of the
UCC) is 2 Bethesda Metro Center, 14th Floor, Bethesda, Maryland 20814.  The
Borrower has not changed its name, identity, structure, existence or state of
formation, whether by amendment of its certificate of trust, by reorganization
or otherwise, and has not changed its location (within the meaning of Article 9
of the UCC) within the four (4) months preceding the Closing Date.

 

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

 

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

 

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

 

(s)                                  Special Purpose Entity.  The trust
agreement of the Borrower includes substantially the provisions set forth on
Exhibit C hereto.

 

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

 

(u)                                 Security Interest.

 

(i)                                     This Agreement creates a valid,
continuing and enforceable security interest (as defined in the applicable UCC)
in the Collateral in favor of the Deal Agent, on behalf of the Secured Parties,
which security interest is prior to all other Liens (except for Permitted
Liens), and is enforceable as such against creditors of and purchasers from the
Borrower;

 

(ii)                                  the 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 Borrower owns and has good and
marketable title to the Collateral free and clear of any Lien of any Person
(other than Permitted Liens);

 

(iv)                              the Borrower has received all consents and
approvals required by the terms of the Collateral to the grant of a security
interest in the Collateral hereunder to the Deal Agent, on behalf of the Second
Parties;

 

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(v)                                 the Borrower has caused the filing of all
appropriate financing statements in the proper filing office in the appropriate
jurisdictions under Applicable Law in order to perfect the security interest in
such Collateral granted to the Deal Agent, on behalf of the Secured Parties
under this Agreement;

 

(vi)                              other than the security interest granted to
the Deal Agent, on behalf of the Secured Parties pursuant to this Agreement, the
Borrower has not pledged, assigned, sold, granted a security interest in or
otherwise conveyed any of such Collateral;

 

(vii)                           the Borrower has not authorized the filing of
and is not aware of any financing statements against the Borrower that include a
description of collateral covering such Collateral other than any financing
statement (A) relating to the security interest granted to the Deal Agent, on
behalf of the Secured Parties under this Agreement, or (B) that has been
terminated;

 

(viii)                        the Borrower is not aware of the filing of any
judgment or tax Lien filings against the Borrower;

 

(ix)                                all original executed copies of each
Underlying Note that constitute or evidence any Transferred Loans have been
delivered to the Collateral Custodian;

 

(x)                                   the Borrower has received a written
acknowledgment from the Collateral Custodian that the Collateral Custodian or
its bailee is holding the Underlying Notes that constitute or evidence the
Transferred Loans solely on behalf of and for the benefit of the Secured
Parties; provided, however, notwithstanding the foregoing, with respect to any
Loan to be funded with the proceeds of a Swingline Advance, the Borrower shall
have received a written acknowledgment from the Collateral Custodian (A) that
the Collateral Custodian has received a faxed copy of the Underlying Note and
(B) with two (2) Business Days after such Funding Date, that the Collateral
Custodian or its bailee is holding the Underlying Note that constitute or
evidence the Loans included in the Collateral solely on behalf of the Deal
Agent, as agent for the Secured Parties; and

 

(xi)                                none of the Underlying Notes that constitute
or evidence the Transferred Loans has any marks or notations indicating that it
has been pledged, assigned or otherwise conveyed to any Person other than the
Borrower and the Deal Agent.

 

(v)                                 Reserved.

 

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

 

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

 

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

 

(z)                                   No Broker.  No broker or finder acting on
behalf of the Borrower was employed or utilized in connection with this
Agreement or the other Transaction Documents or the transactions contemplated
hereby or thereby and the Borrower has no obligation to any Person in respect of
any finder’s or brokerage fees in connection therewith.

 

(aa)                            Investment Company Act.

 

(i)                                     The Borrower is not an “investment
company” within the meaning of the 1940 Act.

 

(ii)                                  The Borrower represents and warrants that,
if the Borrower operates in such a manner as to be an “investment company”
within the meaning of the 1940 Act, the Borrower will register as an “investment
company” under the 1940 Act immediately upon being required to do so under the
1940 Act and will conduct its business and other activities in compliance with
the provisions of the 1940 Act and any rules, regulations or orders issued by
the SEC thereunder.

 

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

 

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

 

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

 

(dd)                          Supplemental Interests.  The Supplemental
Interests are not Margin Stock.

 

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(ee)                            Environmental.  At the time of origination of
any Loan and on the Cut-Off Date where real property that is material to the
operations of the related business constitutes Related Property securing such
Loan, the related mortgaged property was free of contamination from toxic
substances or hazardous wastes requiring action under Applicable Law or is
subject to ongoing environmental rehabilitation approved by the Servicer, and,
as of the related Cut-Off Date of such Loan, the Borrower has no knowledge of
any such contamination from toxic substances or hazardous waste material on any
such real property unless such items are below action levels.

 

(ff)                                Material Adverse Change.  Since the Closing
Date, there has been no Material Adverse Change with respect to the Borrower.

 

(gg)                          Credit and Collection Policy.  Since the Closing
Date, there have been no material changes in any Credit and Collection Policy
other than in accordance with this Agreement.  Since such date, no Material
Adverse Change has occurred in the overall rate collection of the Loans, and
Borrower has at all times complied with the Credit and Collection Policy with
respect to each Loan.

 

(hh)                          Coverage Requirement.  The Advances Outstanding do
not exceed the lesser of the amount by which (i) the product of (A) the
Borrowing Base and (B) 75% and (ii) the Facility Amount exceeds (b) an amount
necessary to cure any Overcollateralization Shortfall and any Required Equity
Shortfall.

 

(ii)                                  No Termination Event.  No event has
occurred and is continuing and no condition exists, or would result from any
Advance or Swingline Advance or from the application of the proceeds therefrom,
which constitutes or may be reasonably expected to constitute a Termination
Event.

 

(jj)                                  USA PATRIOT Act.  Neither the Borrower nor
any Affiliate of the Borrower is (1) a country, territory, organization, person
or entity named on an OFAC list, (2) a Person that resides or has a place of
business in a country or territory named on such lists or which is designated as
a Non-Cooperative Jurisdiction by the Financial Action Task Force on Money
Laundering (“FATF”), or whose subscription funds are transferred from or through
such a jurisdiction; (3) a “Foreign Shell Bank” within the meaning of the USA
PATRIOT Act, i.e., a foreign bank that does not have a physical presence in any
country and that is not affiliated with a bank that has a physical presence and
an acceptable level of regulation and supervision; or (4) a person or entity
that resides in or is organized under the laws of a jurisdiction designated by
the United States Secretary of the Treasury under Section 311 or 312 of the USA
PATRIOT Act as warranting special measures due to money laundering concerns.

 

The representations and warranties in Section 4.1 shall survive the termination
of this Agreement.

 

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Section 4.2                                   Representations and Warranties of
the Borrower Relating to the Agreement and the Loans.

 

The Borrower hereby represents and warrants to the Deal Agent and each Secured
Party, as of the Closing Date and as of each Funding Date, that:

 

(a)                                  Security Interest.  This Agreement
constitutes a Grant of a security interest by the Borrower in all Collateral to
the Deal Agent, as agent for the Secured Parties.  The Deal Agent, as agent for
the Secured Parties, has a first priority perfected security interest in the
Collateral.  Neither the Borrower nor any Person claiming through or under the
Borrower shall have any claim to or interest in the Collection Account, except
for the interest of the Borrower in such property as a debtor for purposes of
the UCC.

 

(b)                                 Eligibility of Loans.  As of the Closing
Date, (i) the Loan List and the information contained in the Borrower Notice
delivered pursuant to Sections 2.2 and 2.3 is an accurate and complete listing
in all material respects of all the Loans that are part of the Collateral as of
the Closing Date, and the information contained therein with respect to the
identity of such Loans and the amounts owing thereunder is true and correct in
all material respects as of such date, (ii) each such Loan is an Eligible Loan,
(iii) each such Loan and the Related Property is free and clear of any Lien of
any Person (other than Permitted Liens) and in compliance with all Applicable
Laws and (iv) with respect to each such Loan, all consents, licenses, approvals
or authorizations of or registrations or declarations with any Governmental
Authority or other Person required to be obtained, effected or given by the
Borrower in connection with the transfer of an interest in such Loan and the
Related Property to the Deal Agent, as agent for the Secured Parties, have been
duly obtained, effected or given and are in full force and effect.  On each
Funding Date, the Borrower shall be deemed to represent and warrant that (i) any
additional Loan referenced on the related Borrower Notice delivered pursuant to
Sections 2.2 and 2.3 is an Eligible Loan, (ii) each such Loan and the related
Property is free and clear of any Lien of any Person (other than Permitted
Liens) and in compliance with all Applicable Laws, (iii) with respect to each
such Loan, all consents, licenses, approvals, authorizations, registrations or
declarations with any Governmental Authority or other Person required to be
obtained, effected or given by the Borrower in connection with the addition of
such Loan and the Related Property to the Collateral have been duly obtained,
effected or given and are in full force and effect and (iv) the representations
and warranties set forth in subsection 4.2(a) are true and correct with respect
to each Loan transferred on such day as if made on such day.

 

(c)                                  No Fraud.  Each Loan was originated without
any fraud or material misrepresentation by the Originator or, to the best of the
Borrower’s knowledge, on the part of the Obligor.

 

Section 4.3                                   Breach of Certain Representations
and Warranties.

 

(a)                                  In the event of a breach of any
representation or warranty set forth in Section 4.2 with respect to a
Transferred Loan, Related Property and other related Collateral (each such Loan,
Related Property and other related Collateral, an “Ineligible Loan”), no later
than thirty (30) days after the earlier of (i) knowledge of such breach on the
part of the Borrower and (ii) receipt by the Borrower of written notice thereof
given by the Deal Agent the Borrower shall

 

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either (a) repay Advances Outstanding in an amount equal to the aggregate
Retransfer Price of such Ineligible Loan(s) to which such breach relates on the
terms and conditions set forth below, or (b) substitute for such Ineligible Loan
a Substitute Loan; provided, however, that no such repayment shall be required
to be made with respect to such Ineligible Loan (and such Loan shall cease to be
an Ineligible Loan) if, on or before the expiration of such thirty (30) day
period, the representations and warranties in Section 4.2 with respect to such
Ineligible Loan shall be made true and correct in all material respects with
respect to such Ineligible Loan as if such Ineligible Loan had become part of
the Collateral on such day.  Notwithstanding anything contained in this Section
4.3 to the contrary, in the event of a breach of any representation and warranty
set forth in Section 4.2 with respect to each Transferred Loan, Related Property
and other related Collateral having been (A) granted to the Deal Agent, on
behalf of the Secured Parties, free and clear of any Lien of any Person claiming
through or under the Borrower and its Affiliates and (B) in compliance, in all
material respects, with all requirements of laws applicable to the Borrower,
immediately upon the earlier to occur of the discovery of such breach by the
Borrower or receipt by the Borrower of written notice of such breach given by
the Deal Agent, the Borrower shall repay Advances Outstanding in an amount equal
to the sum of (i) the aggregate Outstanding Loan Balance of such Ineligible
Loan(s), (ii) any accrued and unpaid interest thereon, (iii) any outstanding
Servicer Advances thereon, and (iv) all Hedge Breakage Costs owed to the
relevant Hedge Counterparty for any termination of one or more Hedge
Transactions, in whole or in part, as required by the terms of any Hedge
Agreement (collectively, the “Retransfer Price”), and the Deal Agent and the
Secured Parties shall release to Borrower any such Ineligible Loan(s) and
relinquish any Lien created pursuant to this Agreement or otherwise, and the
Secured Parties shall, in connection with such conveyance and without further
action, be deemed to represent and warrant that they have the corporate
authority and has taken all necessary corporate action to accomplish such
release, but without any other representation or warranty, express or implied. 
In the foregoing instances, the Borrower shall make such repayment and on and
after the date of such repayment, each Ineligible Loan so repaid shall not be
included in the Collateral.  In consideration of any such release by the Secured
Parties, the Borrower shall, on the date of such repayment, remit to the Deal
Agent, on behalf of the Secured Parties, in immediately available funds an
amount equal to the Retransfer Price therefore.  Upon each such repayment, the
Deal Agent, on behalf of the Secured Parties, shall automatically and without
further action be deemed to release to the Borrower all the right, title and
interest of the Secured Parties in, to and under such Ineligible Loan(s) and all
monies due or to become due with respect thereto, all proceeds thereof and all
rights to security for any such Ineligible Loan, and all proceeds and products
of the foregoing.  The Deal Agent shall, at the sole expense of the Borrower,
execute such documents and instruments of transfer as may be prepared by the
Borrower and take such other actions as shall reasonably be requested by the
Borrower to effect the transfer of such Ineligible Loan pursuant to this Section
4.3.

 

(b)                                 The Borrower hereby agrees that (i) if any
real property collateral securing any Transferred Loan becomes the subject of
any claims, proceedings, Liens or encumbrances with respect to any material
violation or claimed material violation of any federal or state environmental
laws or regulations or (ii) in the event of a breach of the representation and
warranty in subsection 4.1(ee), such Transferred Loan shall for all purposes
hereunder be, at and following the time of discovery by the Servicer of such
fact, the Borrower, the Deal Agent or any Secured Party, deemed an Ineligible
Loan and the Borrower shall either repay Advances Outstanding in an amount equal
to the aggregate Retransfer Price of such Ineligible Loan or

 

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substitute for such Ineligible Loan a Substitute Loan.  Such Ineligible Loan
shall otherwise be treated in accordance with subsection 4.3(a) and shall be
subject to the same remedial and recourse provisions hereunder as other
Transferred Loans determined to be Ineligible Loans hereunder.

 

ARTICLE V

 

GENERAL COVENANTS OF THE BORROWER

 

Section 5.1                                   Covenants of the Borrower.

 

The Borrower hereby covenants that:

 

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

 

(b)                                 Preservation of Corporate Existence.  The
Borrower will preserve and maintain its existence, rights, franchises and
privileges in the jurisdiction of its formation, and qualify and remain
qualified in good standing in each jurisdiction where the failure to maintain
such existence, rights, franchises, privileges and qualification has had, or
could reasonably be expected to have, a Material Adverse Effect.

 

(c)                                  Loans Not to Be Evidenced by Promissory
Notes.  The Borrower 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.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(l)                                     Agreements.  The Borrower shall not
become a party to, or permit any of its properties to be bound by, any
indenture, mortgage, instrument, contract, agreement, Loan or other undertaking,
except this Agreement, the Purchase Agreement and any Hedging Agreement or amend
or modify the provisions of its trust agreement, without the consent of the Deal
Agent, or issue any power of attorney except to the Deal Agent or the Servicer.

 

(m)                               Separate Existence.  The Borrower shall:

 

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

 

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

 

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

 

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

 

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

 

(vi)                              Take or refrain from taking, as applicable,
each of the activities specified in the “non-substantive consolidation” opinion
of Winston & Strawn delivered on the Closing Date, upon which the conclusions
expressed therein are based.

 

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

 

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

 

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Mortgage, and (iii) take all additional action that the Deal Agent may
reasonably request to perfect, protect and more fully evidence the respective
interests of the parties to this Agreement in the Collateral.

 

(p)                                 Transactions with Affiliates.  The Borrower
will not enter into, or be a party to, any transaction with any of its
Affiliates, except (i) the transactions permitted or contemplated by this
Agreement, the Purchase Agreement and any Hedging Agreements and (ii) other
transactions (including, without limitation, transactions related to the use of
office space or computer equipment or software by the Borrower to or from an
Affiliate) (A) in the ordinary course of business, (B) pursuant to the
reasonable requirements of the Borrower’s business, (C) upon fair and reasonable
terms that are no less favorable to the Borrower than could be obtained in a
comparable arm’s-length transaction with a Person not an Affiliate of the
Borrower, and (D) not inconsistent with the factual assumptions set forth in the
“non-substantive consolidation” legal opinion letter issued by the Winston &
Strawn and delivered to the Deal Agent as a condition to the initial Advance, as
such assumptions may be modified in any subsequent opinion letters delivered to
the Deal Agent pursuant to Section 3.2 or otherwise.  It is understood that any
compensation arrangement for any trustee shall be permitted under clause (ii)(A)
through (C) above if such arrangement has been expressly approved by the
trustees of the Borrower in accordance with the Borrower’s trust agreement.

 

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

 

(r)                                    Credit and Collection Policy.  The
Borrower will (a) comply in all material respects with the Credit and Collection
Policy in regard to each Loan and the Related Property included in the
Collateral, and (b) furnish to the Deal Agent, prior to its effective date,
prompt notice of any changes in the Credit and Collection Policy.  The Borrower
will not agree to or otherwise permit any material change in the Credit and
Collection Policy, without the prior written consent of the Deal Agent (in its
sole discretion).

 

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

 

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

 

(u)                                 Other.  The Borrower will furnish to the
Deal Agent such other information, documents, records or reports respecting the
Loans or the condition or operations, financial or otherwise, of the Borrower or
Originator as the Deal Agent may from time to time reasonably request in order
to protect the interests of the Deal Agent or the Secured Parties under or as
contemplated by this Agreement.

 

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(v)                                 Notices Under the Purchase Agreement.  The
Borrower will promptly, but in no event later than two (2) Business Days after
its receipt furnish to the Deal Agent copies of any and all notices,
certificates, documents, or reports delivered to it by the Originator under the
Purchase Agreement.

 

(w)                               Inspection of Records.  The Borrower will, at
any time and from time to time during regular business hours, as requested by
the Deal Agent, permit the Deal Agent, or its agents or representatives, (i) to
examine and make copies of and take abstracts from all books, records and
documents (including computer tapes and disks) relating to the Loans and the
related Loan Documents and (ii) to visit the offices and properties of the
Borrower, the Originator or the Servicer, as applicable, for the purpose of
examining such materials described in clause (i), and to discuss matters
relating to the Loans or the Borrower’s, the Originator ‘s or the Servicer’s
performance hereunder, under the Loan Documents and under the other Transaction
Documents to which such Person is a party with any of the officers, directors,
employees or independent public accountants of the Borrower, the Originator or
the Servicer, as applicable, having knowledge of such matters.

 

(x)                                   Keeping of Records.  The Borrower will
maintain and implement administrative and operating procedures (including an
ability to recreate records evidencing Loans and the related Loan Documents in
the event of the destruction of the originals thereof), and keep and maintain,
all documents, books, computer tapes, disks, records and other information
reasonably necessary or advisable for the collection of all Loans (including
records adequate to permit the daily identification of each new Loan and all
Collections of and adjustments to each existing Loan).  The Borrower shall give
the Deal Agent prompt notice of any material change in its administrative and
operating procedures referred to in the previous sentence.

 

(y)                                 Compliance with Loans.  The Borrower will
(i) at its own expense, timely and fully perform and comply with all material
provisions, covenants and other promises required to be observed by it under the
Loans and the related Loan Documents; and (ii) timely and fully comply in all
material respects with the Credit and Collection Policy with respect to each
Loan and the related Loan Document.

 

(z)                                   Restricted Payments.  The Borrower shall
not (i) purchase or redeem any shares of its capital stock, (ii) prepay,
purchase or redeem any Indebtedness, (iii) lend or advance any funds or (iv)
repay any loans or advances to, for or from any of its Affiliates (the amounts
described in clauses (i) through (iv) being referred to as “Restricted
Payments”), except that the Borrower may (a) make Restricted Payments out of
funds received pursuant to Article II and (b) make other Restricted Payments
(including the payment of dividends and Lien Release Dividends) if, after giving
effect thereto, no Termination Event shall have occurred and be continuing.

 

Section 5.2                                   Hedging Agreement.

 

(a)                                  On or prior to each Funding Date, the
Borrower shall enter into one or more Hedge Transactions, provided that each
such Hedge Transaction shall:

 

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(i)                                     be entered into with a Hedge
Counterparty and governed by a Hedging Agreement;

 

(ii)                                  have a schedule of periodic monthly (or
quarterly, as applicable) or quarterly calculation periods the first of which
commences on the Funding Date and the last of which ends on the last Scheduled
Payment due to occur under the Loans to which it relates;

 

(iii)                               have an amortizing notional amount such that
the Hedge Notional Amount in effect on each day during the term of such Hedge
Transactions shall be at least equal to the product of the Hedge Percentage and
the Hedge Amount; and

 

(iv)                              provide for two series of monthly (or
quarterly, as applicable) payments to be netted against each other, one such
series being payments to be made by the Borrower to a Hedge Counterparty (solely
on a net basis) by reference to a fixed rate for that Hedge Transaction, and the
other such series being payments to be made by the Hedge Counterparty (solely on
a net basis) at a floating rate equal to “USD-LIBOR-BBA” (as defined in the ISDA
Definitions), the net amount of which shall be paid into the Collection Account
(if payable by the Hedge Counterparty) or from the Collection Account to the
extent funds are available under subsections 2.9(a)(i) and 2.9(b)(i) of this
Agreement (if payable by the Borrower).

 

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

 

Section 5.3                                   Delivery of Loan Files

 

(a)                                  The Borrower, or the Servicer on its
behalf, shall deliver possession of all “instruments” (within the meaning of
Article 9 of the UCC) not constituting part of “chattel paper” (within the
meaning of Article 9 of the UCC) that evidence any Transferred Loan set forth on
a Loan List, including all Underlying Notes, and all portions of the Loan Files
to the Collateral Custodian on behalf of the Deal Agent, as agent for the
Secured Parties, prior to the applicable Funding Dates in each case endorsed in
blank without recourse; provided, however, notwithstanding the foregoing, in
connection with any Transferred Loan to be purchased by the Borrower with the
proceeds of a Swingline Advance, the Borrower shall (i) have a copy of the
executed Underlying Note faxed to the Collateral Custodian on the applicable
Funding Date with

 

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the original to be received by the Collateral Custodian within two (2) Business
Days after such Funding Date and (ii) within ten (10) Business Days of the
Funding Date deliver all other portions of the Loan File in each case endorsed
in blank without recourse.  Pursuant to Section 7.10, the Borrower is required
to deliver such instruments and Loan Files to the Collateral Custodian for the
benefit of the Deal Agent, as agent for the Secured Parties.  Accordingly, the
Borrower hereby authorizes and directs the Servicer to deliver possession of all
such instruments and Loan Files to the Collateral Custodian on behalf of the
Deal Agent, as agent for the Secured Parties, and agrees that such delivery
shall satisfy the condition set forth in the first sentence of this subsection
5.3(a).  The Servicer shall also identify on the Loan List (including any
amendment thereof), whether by attached schedule or marking or other effective
identifying designation, all Transferred Loans that are evidenced by such
instruments.

 

(b)                                 Prior to the occurrence of a Termination
Event or Servicer Termination Event, the Collateral Custodian shall not record
the Assignments of Mortgage delivered pursuant to subsection 5.3(a) and the
definition of Loan Documents.  Upon the occurrence of a Termination Event or a
Servicer Termination Event, the Collateral Custodian shall cause to be recorded
in the appropriate offices each Assignment of Mortgage delivered to it with
respect to all Transferred Loans except those Transferred Loans covered by the
proviso to the definition of Assignment of Mortgage.  Each such recording shall
be at the expense of the Servicer; provided, however, to the extent the Servicer
does not pay such expenses, the Collateral Custodian shall be reimbursed
pursuant to the provisions of Section 2.9.

 

ARTICLE VI

 

PERFECTION OF TRANSFER AND

PROTECTION OF SECURITY INTERESTS

 

Section 6.1                                   Custody of Loans.

 

The contents of each Loan File shall be held in the custody of the Collateral
Custodian under the terms of the Purchase Agreement and this Agreement for the
benefit of the Deal Agent, as agent for the Secured Parties.

 

Section 6.2                                   Filing.

 

On or prior to the Closing Date, the Borrower and Servicer shall cause the UCC
financing statement(s) referred to in subsection 4.1(u)(v) hereof to be filed,
and from time to time the Servicer shall take and cause to be taken such actions
and execute such documents as are necessary or desirable or as the Deal Agent or
any Secured Party may reasonably request to perfect and protect the first
priority perfected security interest of the Deal Agent, as agent for the Secured
Parties, in the Collateral 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 Borrower and the Servicer set forth in
the preceding sentence, the Borrower and the Servicer hereby authorize the Deal
Agent 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

 

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other instruments as the Deal Agent 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 6.3                                   Changes in Name, Corporate
Structure or Location.

 

(a)                                  During the term of this Agreement, neither
the Servicer nor the Borrower shall change its name, identity, structure,
existence or location (as defined in Article 9 of the UCC) without first giving
at least thirty (30) days’ prior written notice to the Deal Agent and each
Secured Party.

 

(b)                                 If any change in either the Servicer’s or
the Borrower’s name, identity, structure, existence, location (as defined in
Article 9 of the UCC) or other action would make any financing or continuation
statement or notice of ownership interest or Lien relating to any Collateral
seriously misleading within the meaning of applicable provisions of the UCC, the
Servicer, no later than five (5) Business Days after the effective date of such
change, shall file such amendments as may be required to preserve and protect
the security interest of the Deal Agent, as agent for the Secured Parties, in
the Collateral and the proceeds thereof.  Promptly after taking any of the
foregoing actions, the Servicer shall deliver to the Deal Agent and each Secured
Party an Opinion of Counsel reasonably acceptable to the Deal Agent and each
Secured Party stating that, in the opinion of such counsel, all financing
statements or amendments necessary to preserve and protect the security interest
of the Deal Agent, as agent for the Secured Parties, in the Collateral have been
filed, and reciting the details of such filing.

 

Section 6.4                                   Chief Executive Office.

 

During the term of this Agreement, and subject to the other terms and provisions
herein relating to changes in location, the Originator will maintain its chief
executive office in one of the States of the United States.

 

Section 6.5                                   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 Borrower’s and the Deal Agent’s right, title and interest in and
to the Collateral (including, without limitation, the security interest in the
Collateral related thereto and the security interests provided for herein).

 

Section 6.6                                   Sale Treatment.

 

The Borrower shall treat the transfer of Collateral made hereunder for all
purposes (other than for financial accounting purposes) as a sale and purchase
on all of its relevant books, records, financial statements and other applicable
documents.  Notwithstanding the preceding sentence, for federal income tax
purposes, the grant of a security interest in the Collateral by the Borrower
hereunder shall not be treated as a sale and purchase for federal income tax
purposes.

 

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Section 6.7                                   Separateness from the Borrower.

 

The Borrower agrees to take or refrain from taking or engaging in with respect
to the Originator each of the actions or activities specified in the
“substantive consolidation” opinion of Winston & Strawn (including any
certificates of the Originator attached thereto), delivered on the Closing Date,
upon which the conclusions therein are based.

 

ARTICLE VII

 

ADMINISTRATION AND SERVICING OF LOANS

 

Section 7.1                                   Appointment of the Servicer.

 

The Borrower hereby appoints American Capital as the Servicer hereunder to
service the Transferred Loans and enforce its respective rights and interests in
and under each Transferred Loan in accordance with the terms and conditions of
this Article VII and to serve in such capacity until the termination of its
responsibilities pursuant to Section 7.25.  American Capital hereby accepts such
appointment and agrees to perform the duties and obligations with respect
thereto set forth herein.  The Servicer and the Borrower hereby acknowledge that
the Deal Agent and the Secured Parties are third party beneficiaries of the
obligations undertaken by the Servicer hereunder.

 

Section 7.2                                   Duties and Responsibilities of the
Servicer.

 

(a)                                  The Servicer shall conduct the servicing,
administration and collection of the Transferred Loans and shall take, or cause
to be taken, all such actions as may be necessary or advisable to service,
administer and collect Transferred Loans from time to time on behalf of the
Borrower and as the Borrower’s agent.  The Servicer will service, administer and
make collections on the Transferred Loans with reasonable care, using that
degree of skill and attention that the Servicer exercises with respect to all
comparable loans that it services for itself or others.

 

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

 

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

 

(ii)                                  maintaining all necessary Servicing
Records with respect to the Transferred Loans and providing such reports to the
Borrower and the Deal Agent in respect of the servicing of the Transferred Loans
(including information relating to its performance under this Agreement) as may
be required hereunder or as the Borrower or the Deal Agent may reasonably
request;

 

(iii)                               maintaining and implementing administrative
and operating procedures (including, without limitation, an ability to recreate
Servicing Records evidencing the Transferred Loans in the event of the
destruction of the originals thereof) and keeping and maintaining all documents,
books, records and other information reasonably necessary or advisable for the
collection of the Transferred Loans (including, without

 

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limitation, records adequate to permit the identification of each new
Transferred Loan and all Collections of and adjustments to each existing
Transferred Loan); provided, however, that any Successor Servicer shall only be
required to recreate the Servicing Records of each prior Servicer to the extent
such records have been delivered to it in a format reasonably acceptable to such
Successor Servicer;

 

(iv)                              promptly delivering to the Borrower, the Deal
Agent and the Collateral Custodian, from time to time, such information and
Servicing Records (including information relating to its performance under this
Agreement) as the Borrower, the Deal Agent and the Collateral Custodian may from
time to time reasonably request;

 

(v)                                 identifying each Transferred Loan clearly
and unambiguously in its Servicing Records to reflect that such Transferred Loan
is owned by the Borrower and pledged to the Deal Agent, as agent for the Secured
Parties;

 

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

 

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

 

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

 

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

 

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

 

Section 7.3                                   Authorization of the Servicer.

 

(a)                                  Each of the Borrower and the Deal Agent, on
behalf of the Secured Parties, hereby authorizes the Servicer (including any
successor thereto) to take any and all reasonable steps in its name and on its
behalf necessary or desirable and not inconsistent with the pledge of

 

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the Transferred Loans to the Secured Parties, in the determination of the
Servicer, to collect all amounts due under any and all Transferred Loans,
including, without limitation, endorsing any of their names on checks and other
instruments representing Collections, executing and delivering any and all
instruments of satisfaction or cancellation, or of partial or full release or
discharge, and all other comparable instruments, with respect to the Transferred
Loans and, after the delinquency of any Transferred Loan and to the extent
permitted under and in compliance with Applicable Law, to commence proceedings
with respect to enforcing payment thereof, to the same extent as the Originator
could have done if it had continued to own such Loan.  The Borrower shall
furnish the Servicer (and any successors thereto) with any powers of attorney
and other documents necessary or appropriate to enable the Servicer to carry out
its servicing and administrative duties hereunder, and shall cooperate with the
Servicer to the fullest extent in order to ensure the collectibility of the
Transferred Loans.  In no event shall the Servicer be entitled to make the
Borrower, any Secured Party, the Collateral Custodian or the Deal Agent a party
to any litigation without such party’s express prior written consent, or to make
the Borrower a party to any litigation (other than any routine foreclosure or
similar collection procedure) without the Deal Agent’s consent.

 

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

 

Section 7.4                                   Collection of Payments.

 

(a)                                  Collection Efforts, Modification of Loans. 
The Servicer will make reasonable efforts to collect all payments called for
under the terms and provisions of the Loans as and when the same become due, and
will follow those collection procedures which it follows with respect to all
comparable Loans that it services for itself or others.  The Servicer may not
waive, modify or otherwise vary any provision of a Loan, except as may be in
accordance with the provisions of the Credit and Collection Policy, including
the waiver of any late payment charge or any other fees that may be collected in
the ordinary course of servicing any Loan included in the Collateral. 
Notwithstanding anything to the contrary contained herein, if after giving
effect to any sale (i) the Advances Outstanding would exceed the Availability or
(ii) an Unmatured Termination Event, a Termination Event or a Servicer
Termination Event would occur then the Servicer prior to any such sale which
would result in a loss to the Secured Parties based on the Purchased Loan
Balance plus accrued interest and other fees due and payable shall obtain the
prior written consent of the Deal Agent.

 

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(b)                                 Reserved.

 

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

 

(d)                                 Payments to Lock-Box Account:  On or before
the Closing Date, the Servicer shall have instructed all Obligors to make all
payments in respect of Loans included in the Collateral to a Lock-Box or
directly to the Lock-Box Account.  All proceeds in the Lock-Box Account shall be
distributed into the Collection Account within two (2) Business Days as provided
in the Lock-Box Agreement and the Intercreditor Agreement.

 

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

 

(f)                                    Reserved.

 

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

 

(h)                                 Released Amounts.  The Deal Agent and the
Secured Parties hereby agree to release to the Borrower from the Collateral, and
the Borrower hereby agrees to release to the Originator, an amount equal to the
Released Amounts immediately upon identification thereof

 

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and upon receipt of an Officer’s Certificate of the Servicer, which release
shall be automatic and shall require no further act by the Deal Agent, the
Secured Parties or the Issuer; provided, that, the Deal Agent, the Secured
Parties or Issuer shall execute and deliver such instruments of release and
assignment, or otherwise confirm the foregoing release, as may reasonably be
requested by the Originator in writing.  Upon such release, such Released
Amounts shall not constitute and shall not be included in the Collateral. 
Immediately upon the release to the Borrower by the Deal Agent and the Secured
Parties of the Released Amounts, the Borrower hereby irrevocably agrees to
release to the Originator such Released Amounts, which release shall be
automatic and shall require no further act by the Borrower; provided, that, the
Borrower shall execute and deliver such instruments of release and assignment,
or otherwise confirming the foregoing release of any Released Amounts, as may be
reasonably requested by the Originator.

 

Section 7.5                                   Servicer Advances.

 

For each Collection Period, if the Servicer determines that any Scheduled
Payment (or portion thereof) that was due and payable pursuant to a Loan
included in the Collateral during such Collection Period was not received prior
to the end of such Collection Period, the Servicer may, but shall not be
obligated to, make an advance in an amount up to the amount of such delinquent
Scheduled Payment (or portion thereof) if the Servicer reasonably believes that
the advance will be reimbursed by the related Obligor; in addition, if on any
day there are not sufficient funds on deposit in the Interest Collection Account
to pay accrued Interest and Program Fees on any Advance the Collection Period of
which ends on such day, the Servicer may make an advance in the amount necessary
to pay such Interest and Program Fees if the Servicer reasonably believes that
the advance will be reimbursed by the related Obligor (in either case, any such
advance, a “Servicer Advance”).  Notwithstanding the preceding sentence, any
successor Servicer will not be obligated to make any Servicer Advances.  The
Servicer will deposit any Servicer Advances into the Collection Account on or
prior to 11:00 a.m. (Charlotte, North Carolina time) on the related Payment
Date, in immediately available funds.  A Servicer Advance for a delinquent
payment on a Loan will not constitute a reclassification of the delinquency
status of such Loan for reporting purposes and will continue to age as if no
payment has been made.

 

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

 

The Servicer will use its reasonable efforts to repossess or otherwise
comparably convert the ownership of any Related Property with respect to a
Defaulted Loan or Charged-Off Loan and will act as sales and processing agent
for Related Property that it repossesses.  The Servicer will follow the
practices and procedures set forth in the Credit and Collection Policy in order
to realize upon such Related Property.  Without limiting the foregoing, the
Servicer may sell any such Related Property with respect any Defaulted Loan or
Charged-Off Loan to the Servicer or its Affiliates for a purchase price equal to
the then fair market value thereof; any such sale to be evidenced by a
certificate of a Responsible Officer of the Servicer delivered to the Deal Agent
identifying the Defaulted Loan or Charged-Off Loan and the Related Property,
setting forth the sale price of the Related Property and certifying that such
sale price is the fair market value of such Related Property; provided, however,
that if after giving effect to such sale (a) the Advances Outstanding would
exceed the Availability or (b) an Unmatured Termination Event, a

 

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Termination Event or a Servicer Termination Event would occur, then the Servicer
prior to selling any Related Property with respect a Defaulted Loan or
Charged-Off Loan shall obtain the prior written consent of the Deal Agent.  In
any case in which any such Related Property has suffered damage, the Servicer
will not expend funds in connection with any repair or toward the repossession
of such Related Property unless it reasonably determines that such repair and/or
repossession will increase the Recoveries by an amount greater than the amount
of such expenses.  The Servicer will remit to the Collection Account the
Recoveries received in connection with the sale or disposition of Related
Property with respect to a Defaulted Loan or Charged-Off Loan.

 

Section 7.7                                   Maintenance of Insurance Policies.

 

The Servicer will require that each Obligor with respect to a Loan maintain an
Insurance Policy with respect to each Loan and the Related Property in
accordance with the Credit and Collection Policy.  In connection with its
activities as Servicer, the Servicer agrees to present, on behalf of the
Borrower and the Deal Agent, as agent for the Secured Parties, with respect to
the respective interests, claims to the insurer under each Insurance Policy and
any such liability policy, and to settle, adjust and compromise such claims, in
each case, consistent with the terms of each related Loan.

 

Section 7.8                                   Representations and Warranties of
the Servicer.

 

The Servicer hereby represents and warrants as follows:

 

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

 

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

 

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

 

(d)                                 No Violation.  The consummation of the
transactions contemplated by, and the fulfillment of the terms of, this
Agreement by the Servicer (with or without notice or lapse of time) will not (i)
conflict with, result in any breach of any of the terms or provisions of, or

 

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constitute a default under, the articles of incorporation or by-laws of the
Servicer, or any Contractual Obligation to which the Servicer is a party or by
which it or any of its property is bound, (ii) result in the creation or
imposition of any Lien upon any of its properties pursuant to the terms of any
such Contractual Obligation (other than this Agreement or the Purchase
Agreement), or (iii) violate any Applicable Law.

 

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

 

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

 

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

 

(h)                                 Reports Accurate.  All Servicer
Certificates, information, exhibits, financial statements, documents, books,
Servicer Records or reports furnished or to be furnished by the Servicer to the
Deal Agent or any Secured Party in connection with this Agreement are and will
be accurate, true and correct.

 

(i)                                     No Servicer Default.  No event has
occurred and is continuing and no condition exists, or would result from a
purchase in respect of any Investment or from the application of the proceeds
therefrom, which constitutes or may reasonably be expected to constitute a
Servicer Default.

 

(j)                                     Material Adverse Change.  Since December
31, 2002, there has been no Material Adverse Change with respect to Borrower.

 

(k)                                  Credit and Collection Policy.  Since March
17, 2003, there has been no material changes in any Credit and Collection Policy
other than in accordance with this Agreement.  Since such date, no Material
Adverse Change has occurred in the overall rate collection of the Loans.  It has
at all times complied with the Credit and Collection Policy with respect to each
Loan.

 

Section 7.9                                   Covenants of the Servicer.

 

The Servicer hereby covenants that:

 

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

 

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(b)                                 Preservation of Corporate Existence.  The
Servicer will preserve and maintain its corporate existence, rights, franchises
and privileges in the jurisdiction of its formation, and qualify and remain
qualified in good standing as a foreign corporation in each jurisdiction where
the failure to maintain such existence, rights, franchises, privileges and
qualification has had, or could reasonably be expected to have, a Material
Adverse Effect.

 

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

 

(d)                                 Preservation of Security Interest.  The
Borrower or the Servicer on behalf of the Borrower will execute and file (or
cause the execution and filing of) such financing and continuation statements
and any other documents that may be required by any law or regulation of any
Governmental Authority to preserve and protect fully the interest of the Deal
Agent, as agent for the Secured Parties, in, to and under the Collateral.

 

(e)                                  Reserved.

 

(f)                                    Change of Name or Location; Records.  The
Servicer (i) shall not change its name or move the location of its principal
executive office, without thirty (30) days’ prior written notice to the
Borrower, the Deal Agent, and (ii) shall not move, or consent to the Collateral
Custodian moving the Loan Documents without thirty (30) days’ prior written
notice to the Borrower, the Deal Agent and (iii) will promptly take all actions
required of each relevant jurisdiction in order to continue the first priority
perfected security interest of the Deal Agent, as agent for the Secured Parties,
in all Collateral including delivery of an Opinion of Counsel.

 

(g)                                 Credit and Collection Policy.  The Servicer
will (i) comply in all material respects with the Credit and Collection Policy
in regard to each Loan and (ii) furnish to the Deal Agent, prior to its
effective date, prompt notice of any change in the Credit and Collection
Policy.  The Servicer will not agree or otherwise permit to occur any material
change in the Credit and Collection Policy, without the prior written consent of
the Deal Agent (in its sole discretion).

 

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

 

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

 

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

 

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(k)                                  Agented Notes.  The Servicer and the
Originator covenant that they shall not without the prior written consent of the
Deal Agent (i) make or consent to any amendment or alteration of the terms of
any Agented Note or related Loan Documents, including without limitation the
payments due thereunder, (ii) undertake to release or authorize or consent to
the release of any collateral or security for the Agented Notes,
(iii) accelerate or extend the maturity of any Agented Note or (iv) waive any
claim against the Obligor or any applicable guarantor thereof, where the effect
of any of the foregoing would have a material adverse effect on the Collateral,
the Secured Parties or the Deal Agent.

 

(l)                                     Grade 2 Obligor.  In the event that the
Originator or an Affiliate thereof provides to any Obligor an Add-On Loan, a
specific purpose of which is to provide funds for the Obligor to make an
interest and/or principal payment on an Eligible Loan issued to such Obligor,
the Servicer shall designate such Obligor as a Grade 2 Obligor or a Grade 1
Obligor through the date that is one (1) year after the date that such Add-On
Loan is made; provided, that, this subsection 7.9(l) shall not apply in
connection with Add-On Loans that are part of a single plan of financing
(regardless of when such plan of financing is actually funded) involving Add-On
Loans to the Obligor by, in addition to the Obligor, a Person who is neither the
Originator nor an Affiliate thereof; provided, further, that, the restriction
set forth in this subsection 7.9(l) shall not apply after the date on which a
subsequent Add-On Loan is made to the Obligor and neither the Originator nor an
Affiliate thereof is a party to such subsequent Add-On Loan.

 

(m)                               Inspection of Records.  The Servicer will, at
any time and from time to time during regular business hours, as requested by
the Deal Agent, permit the Deal Agent, or its agents or representatives, (i) to
examine and make copies of and take abstracts from all books, records and
documents (including computer tapes and disks) relating to the Loans and the
related Loan Documents and (ii) to visit the offices and properties of the
Borrower, the Originator or the Servicer, as applicable, for the purpose of
examining such materials described in clause (i), and to discuss matters
relating to the Loans or the Borrower’s, the Originator ‘s or the Servicer’s
performance hereunder, under the Loan Documents and under the other Transaction
Documents to which such Person is a party with such officers, directors,
employees or independent public accountants of the Borrower, the Originator or
the Servicer, as applicable, as might reasonably be determined to have knowledge
of such matters.

 

(n)                                 Keeping of Records.  The Servicer will
maintain and implement administrative and operating procedures (including an
ability to recreate records evidencing Loans and the related Loan Documents in
the event of the destruction of the originals thereof), and keep and maintain,
all documents, books, computer tapes, disks, records and other information
reasonably necessary or advisable for the collection of all Loans (including
records adequate to permit the daily identification of each new Loan and all
Collections of and adjustments to each existing Loan).  The Borrower shall give
the Deal Agent prompt notice of any material change in its administrative and
operating procedures referred to in the previous sentence.

 

(o)                                 Compliance with Loans.  The Servicer will
(i) at its own expense, timely and fully perform and comply with all material
provisions, covenants and other promises required to be observed by it under the
Loans and the related Loan Documents; and (ii) timely and fully comply in all
material respects with the Credit and Collection Policy with respect to each
Loan and the related Loan Document.

 

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Section 7.10                            The Collateral Custodian.

 

(a)                                  Appointment; Custodial Duties.  The
Borrower and the Deal Agent each hereby appoints Wells Fargo to act as
Collateral Custodian hereunder, for the benefit of the Borrower, the Deal Agent
and the Secured Parties, as provided herein.  Wells Fargo hereby accepts such
appointment and agrees to perform the duties and responsibilities with respect
thereto set forth herein.

 

The Collateral Custodian shall take and retain custody of the Loan Files
delivered by the Borrower or on its behalf pursuant to Section 5.3 hereof in
accordance with the terms and conditions of this Agreement, all for the benefit
of the Secured Parties and subject to the Lien thereon in favor of the Deal
Agent, as agent for the Secured Parties.  Immediately upon receipt of any such
Loan File, the Collateral Custodian shall deliver to the Deal Agent a custodial
receipt in form of Exhibit J hereto.  Within five (5) Business Days of its
receipt of any Loan File, the Collateral Custodian shall review the related Loan
Documents to verify that each Loan Document listed on the related Loan List has
been received, and executed and has no missing or mutilated pages and to confirm
(in reliance on the related Loan number and Obligor name) that such Loan is
referenced on the related Loan List and shall, at the expiration of such period,
deliver to the Deal Agent a certification in the form of Exhibit K hereto.  In
order to facilitate the foregoing review by the Collateral Custodian, in
connection with each delivery of Loan Files hereunder to the Collateral
Custodian, the Servicer shall provide to the Collateral Custodian an electronic
file in a mutually acceptable electronic format that contains the related Loan
List or that otherwise contains the Loan number and the name of the Obligor with
respect to each related Loan.  If, at the conclusion of such review, the
Collateral Custodian shall determine that any such Loan Document is not executed
or in proper form on its face, or that it is not referenced on such Loan List,
the Collateral Custodian shall promptly notify the Borrower and the Deal Agent
of such determination by providing an exception report to such Persons setting
forth, with particularity, the lack of execution of such Loan Document(s), that
such Loan Document(s) has missing or mutilated pages, or the fact that such Loan
Document(s) was not referenced on the related Loan List.  In addition, unless
instructed otherwise in writing by the Borrower and the Deal Agent within ten
(10) days of the Collateral Custodian’s delivery of such report, the Collateral
Custodian shall return any Loan File not referenced on such Loan List to the
Borrower.  Other than the foregoing, the Collateral Custodian shall not have any
responsibility for reviewing any Loan File.

 

In taking and retaining custody of the Loan Files, the Collateral Custodian
shall be acting as the agent of the Deal Agent and the Secured Parties;
provided, that, the Collateral Custodian makes no representations as to the
existence, perfection or priority of any Lien on the Loan Files or the
instruments therein; provided, further, that, the Collateral Custodian’s duties
as agent shall be limited to those expressly contemplated herein.  All Loan
Files shall be kept in fireproof vaults or cabinets at the locations specified
on Schedule V attached hereto, or at such other office as shall be specified to
the Deal Agent and the Borrower by the Collateral Custodian in a written notice
delivered at least forty-five (45) days prior to such change.  All Loan Files
shall be segregated with an appropriate identifying label and maintained in such
a manner so as to permit retrieval and access.  All Loan Files shall be clearly
segregated from any other documents or instruments maintained by the Collateral
Custodian.  The Collateral Custodian shall clearly indicate that such Loan Files
are the sole property of Borrower, subject to the security interest of

 

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the Deal Agent, on behalf of the Secured Parties.  In performing its duties, the
Collateral Custodian shall use the same degree of care and attention as it
employs with respect to similar loan files that it holds as collateral custodian
for others.

 

(b)                                 Concerning the Collateral Custodian.

 

(i)                                     Except for its gross negligence or bad
faith, the Collateral Custodian may conclusively rely on and shall be fully
protected in acting upon any certificate, instrument, opinion, notice, letter,
telegram or other document delivered to it and that in good faith it reasonably
believes to be genuine and that has been signed by the proper party or parties. 
Except for its gross negligence or bad faith, the Collateral Custodian may rely
conclusively on and shall be fully protected in acting upon the written
instructions of any designated officer of the Deal Agent.

 

(ii)                                  The Collateral Custodian may consult
counsel satisfactory to it and the advice or opinion of such counsel shall be
full and complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in accordance with the
advice or opinion of such counsel.

 

(iii)                               The Collateral Custodian shall not be liable
for any error of judgment, or for any act done or step taken or omitted by it,
in good faith, or for any mistakes of fact or law, or for anything that it may
do or refrain from doing in connection herewith except in the case of its gross
negligence or bad faith.

 

(iv)                              The Collateral Custodian makes no warranty or
representation and shall have no responsibility (except as expressly set forth
in this Agreement) as to the content, enforceability, completeness, validity,
sufficiency, value, genuineness, ownership or transferability of the Loans or
the Loan Documents, and will not be required to and will not make any
representations as to the validity or value of any of the Loans.  The Collateral
Custodian shall not be obligated to take any legal action hereunder that might
in its judgment involve any expense or liability unless it has been furnished
with an indemnity reasonably satisfactory to it.

 

(v)                                 The Collateral Custodian shall have no
duties or responsibilities except such duties and responsibilities as are
specifically set forth in this Agreement and no covenants or obligations shall
be implied in this Agreement against the Collateral Custodian.

 

(vi)                              The Collateral Custodian shall not be required
to expend or risk its own funds in the performance of its duties hereunder.

 

(vii)                           It is expressly agreed and acknowledged that the
Collateral Custodian is not guaranteeing performance of or assuming any
liability for the obligations of the other parties hereto or any parties to the
Loans.

 

(c)                                  Release for Servicing.  From time to time
and as appropriate for the enforcement or servicing of any of the Loans, the
Collateral Custodian is hereby authorized, upon receipt from the Servicer on
behalf of the Borrower, of a written request for release of documents and

 

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receipt in the form annexed hereto as Exhibit L and upon receipt from the Deal
Agent of its written consent to such request and receipt, to release to the
Servicer the related Loan File or the documents set forth in such request and
receipt to the Servicer; provided, however, notwithstanding the foregoing or any
other provision of this Agreement, upon its receipt of written instructions from
the Deal Agent, the Collateral Custodian shall cease releasing documents to the
Servicer.  All documents so released to the Servicer on behalf of the Borrower
shall be held by the Servicer in trust for the benefit of the Borrower, the Deal
Agent, and the Secured Parties, with respect to their respective interests, in
accordance with the terms of this Agreement.  The Servicer, on behalf of the
Borrower, shall return to the Collateral Custodian the Loan File or other such
documents when the Servicer’s need therefor in connection with such foreclosure
or servicing no longer exists, unless the Loan shall be liquidated, in which
case, upon receipt of an additional request for release of documents and receipt
certifying such liquidation from the Servicer to the Collateral Custodian in the
form annexed hereto as Exhibit L, the Servicer’s request and receipt submitted
pursuant to the first sentence of this subsection 7.10(c) shall be released by
the Collateral Custodian to the Servicer.  Notwithstanding anything in this
subsection 7.10(c) to the contrary, in no event shall the Collateral Custodian
release any Loan File or part thereof to the Servicer for any reason without the
Deal Agent’s prior written consent.

 

(d)                                 Release for Payment.  Upon receipt by the
Collateral Custodian of the Servicer’s request for release of documents and
receipt in the form annexed hereto as Exhibit L (which certification shall
include a statement to the effect that all amounts received in connection with
such payment or repurchase have been credited to the Collection Account as
provided in this Agreement), the Collateral Custodian shall promptly release the
related Loan File to the Servicer, on behalf of the Borrower.

 

(e)                                  Collateral Custodian Compensation.  As
compensation for its activities hereunder, the Collateral Custodian shall be
entitled to a Collateral Custodian Fee from the Servicer.  To the extent that
such Collateral Custodian Fee is not paid by the Servicer, the Collateral
Custodian shall be entitled to receive the unpaid balance of such Collateral
Custodian Fee to the extent of funds available therefor pursuant to the
provision of subsections 2.9(a)(v) and 2.9(b)(v).  The Collateral Custodian’s
entitlement to receive the Collateral Custodian Fee (other than due and unpaid
Collateral Custodian Fees owed through such date) shall cease on the earlier to
occur of:  (i) its removal as Collateral Custodian or (ii) the termination of
this Agreement.

 

(f)                                    Replacement of the Collateral Custodian. 
The Collateral Custodian may be replaced by the Borrower with the prior consent
of the Deal Agent; provided, however, no such replacement shall be effective
until a replacement Collateral Custodian has been appointed, has agreed to act
as Collateral Custodian hereunder and has received all Loan Files held by the
previous Collateral Custodian.

 

(g)                                 Release of Loan Documents Following a Lien
Release Dividend.  To the extent that portions of Loans are transferred pursuant
to a Lien Release Dividend under Section 2.17 and such portions of transferred
Loans are part of a Permitted Securitization Transaction, the Collateral
Custodian may, but only with the Deal Agent’s prior written consent, and upon
terms and conditions satisfactory to the Deal Agent, including without
limitation the execution by the servicer of the sold Loans of all such documents
as the Deal Agent may require, release original Loan Documents (excluding the
related original Underlying Note(s)) to the servicer of such sold

 

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Loans for the purposes of enforcing or servicing such Loans in connection with a
Permitted Securitization Transaction.

 

Section 7.11                            Representations and Warranties of the
Collateral Custodian.

 

The Collateral Custodian represents and warrants as follows:

 

(a)                                  Organization and Good Standing. It is a
national banking association duly organized, validly existing and in good
standing under the laws of the United States 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)                                 Due Qualification.  It is duly qualified to
do business as a national banking association 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 or the conduct of its business requires such
qualification, licenses or approval 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.

 

(c)                                  Power and Authority.  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 Violation.  The consummation of the
transactions contemplated by, and the fulfillment of the terms of, this
Agreement by it will not (i) conflict with, result in any breach of any of the
terms or provisions of, or constitute a default under, its articles of
association, or any Contractual Obligation to which it is a party or by which it
or any of its property is bound, (ii) result in the creation or imposition of
any Lien upon any of its properties pursuant to the terms of any Contractual
Obligation, or (iii) violate any Applicable Law.

 

(e)                                  No Consent.  No consent, approval,
authorization, order, registration, filing, qualification, license or permit
(collectively, the “Consents”) 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 (i) applicable
Insolvency Laws and (ii) general principles of equity (whether considered in a
suit at law or in equity).

 

(g)                                 No Proceeding.  There are no proceedings or
investigations pending or, 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.

 

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Section 7.12                            Covenants of the Collateral Custodian.

 

The Collateral Custodian hereby covenants that:

 

(a)                                  Compliance with Law.  The Collateral
Custodian will comply in all material respects with all Applicable Laws.

 

(b)                                 Preservation of Existence.  The Collateral
Custodian will preserve and maintain its existence, rights, franchises and
privileges as a national banking association in good standing under the laws of
the United States.

 

(c)                                  No Bankruptcy Petition.  With respect to
VFCC, prior to the date that is one (1) year and one (1) day after the payment
in full of all amounts owing in respect of all outstanding Commercial Paper
Notes issued by VFCC and, with respect to the Borrower, prior to the date that
is one (1) year and one (1) day after the Collection Date, it will not institute
against the Borrower or VFCC, or join any other Person in instituting against
the Borrower or VFCC, any Insolvency Proceedings or other similar proceedings
under the laws of the United States or any state of the United States.  This
subsection 7.12(c) will survive the termination of this Agreement.

 

(d)                                 Loan Files.  The Collateral Custodian will
not dispose of any documents constituting the Loan Files in any manner that is
inconsistent with the performance of its obligations as the Collateral Custodian
pursuant to this Agreement and will not dispose of any Loan except as
contemplated by this Agreement.

 

(e)                                  Location of Loan Files.  The Loan Files
shall remain at all times in the possession of the Collateral Custodian at the
address set forth herein unless notice of a different address is given in
accordance with the terms hereof.

 

(f)                                    No Changes in Collateral Custodian Fee. 
The Collateral Custodian will not make any changes to the Collateral Custodian
Fee set forth in the Backup Servicer and Collateral Custodian Fee Letter without
the prior written approval of the Deal Agent.

 

Section 7.13                            The Backup Servicer.

 

(a)                                  Appointment.  The Borrower and the Deal
Agent hereby appoint Wells Fargo to act as Backup Servicer for the benefit of
the Borrower, the Deal Agent and the Secured Parties in accordance with the
terms of this Agreement.  Wells Fargo hereby accepts such appointment and agrees
to perform the duties and responsibilities with respect thereto set forth
herein.

 

(b)                                 Duties.  On or before the initial Funding
Date, and until the receipt by the Servicer of a Servicer Termination Notice,
the Backup Servicer shall perform, on behalf of the Borrower and the Deal Agent
and the Secured Parties, 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 Monthly Reports in hard copy and in an agreed
upon electronic format.

 

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(ii)                                  Not later than 12:00 noon (Charlotte,
North Carolina time) on each Reporting Date, 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:  (x) for each Loan, the
name and number of the related Obligor, the collection status, the Loan status,
the date of each Scheduled Payment, the Outstanding Loan Balance and the
Purchased Loan Balance, (y) the Aggregate Purchased Loan Balance, and (z) the
Aggregate Outstanding Loan Balance.

 

(iii)                               Prior to the related Payment Date, the
Backup Servicer shall review the Monthly Report to ensure that it is complete on
its face and that the following items in such Monthly Report have been
accurately calculated, if applicable, and reported:  (A) the Aggregate Purchased
Loan Balance, (B) the Aggregate Outstanding Loan Balance, (C) the Backup
Servicing Fee, (D) the Loans that are thirty (30) or more days Delinquent (other
than Defaulted Loans and Charged-Off Loans), (E) the Defaulted Loans (other than
Charged-Off Loans), (F) the Charged-Off Loans, (G) the Portfolio Yield, (H) the
Default Ratio for the current Collection Period and the two (2) immediately
preceding Collection Periods, (H) the Charged-Off Ratio for the current
Collection Period and the two (2) immediately preceding Collection Periods, (I)
the Rolling Three-Month Default Ratio and (J) the Rolling Three-Month
Charged-Off Ratio.  The Backup Servicer shall notify the Deal Agent, the
Borrower and the Servicer of any disagreements with the Monthly Report based on
such review not later than the Business Day preceding such Payment Date to such
Persons.

 

(iv)                              If the Borrower or the Servicer disagrees with
the report provided under subsection 7.13(b)(iii) by the Backup Servicer or if
the Borrower or the Servicer or any subservicer has not reconciled such
discrepancy, the Backup Servicer agrees to confer with the Borrower or the
Servicer to resolve such disagreement on or prior to the next succeeding
Determination Date and shall settle such discrepancy with the Borrower or the
Servicer if possible, and notify the Deal Agent of the resolution thereof.  The
Borrower or the Servicer hereby agree to cooperate at their own expense, with
the Backup Servicer in reconciling any discrepancies herein.  If within twenty
(20) days after the delivery of the report provided under subsection
7.13(b)(iii) by the Backup Servicer, such discrepancy is not resolved, the
Backup Servicer shall promptly notify the Borrower and the Deal Agent of the
continued existence of such discrepancy.  Following receipt of such notice by
the Deal Agent, the Servicer shall deliver to the Borrower, the Deal Agent, the
Secured Parties and the Backup Servicer no later than the related Payment 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 duties described in this subsection 7.13(b), in the absence
of bad faith or gross negligence, 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.

 

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(c)                                  Transition to Servicer Role.  After the
receipt by the Servicer of an effective Servicer Termination Notice, 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 Backup Servicer, subject to and in accordance with the provisions
of Section 7.26, as long as the Backup Servicer is not prohibited by Applicable
Law from fulfilling the same, as evidenced by an Opinion of Counsel.

 

(d)                                 Merger or Consolidation.  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)                                  Backup Servicing Compensation.  As
compensation for its backup servicing activities hereunder, the Backup Servicer
shall be entitled to receive the Backup Servicing Fee from the Servicer.  To the
extent such Backup Servicing Fee is not paid by the Servicer, the Backup
Servicer shall be entitled to receive the unpaid balance of its Backup Servicing
Fee to the extent of funds available therefor pursuant to the provision of
subsections 2.9(a)(iv) and 2.9(b)(iv).  The Backup Servicer’s entitlement to
receive the Backup Servicing Fee (other than due and unpaid Backup Servicer Fees
owed through such date) shall cease on 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)                                    Backup Servicer Removal.  The Backup
Servicer may be removed with or without cause by the Borrower with the prior
written approval of the Deal Agent by notice given in writing to the Backup
Servicer.  In the event of any such removal, a replacement Backup Servicer may
be appointed by (i) the Borrower, acting with the written consent of the Deal
Agent or (ii) if no such replacement is appointed within thirty (30) days
following such removal, by the Deal Agent.

 

(g)                                 Scope of Backup Servicing Duties.  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 on the routine and ordinary day-to-day operations 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 gross
negligence or bad faith of it or them or the failure to perform materially in
accordance with this Agreement.

 

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(h)                                 Limitation on Liability.  Except for its
gross negligence or bad faith, 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 computer 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 Borrower, the
Secured Parties, the Deal Agent, the Collateral Custodian and the Backup
Servicer each agree to look only to the Servicer to perform such obligations. 
Except for its gross negligence or bad faith, 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 their
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.  Except for its gross negligence or bad
faith, 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 (ii) any inaccuracy or omission in a notice or
communication received by the Backup Servicer from any third party, (iii) the
invalidity or unenforceability of any Loan or Loan Document 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 7.14                            Representations and Warranties of the
Backup Servicer.

 

The Backup Servicer hereby represents and warrants as follows:

 

(a)                                  Organization and Good Standing.  It is a
national banking association duly organized, validly existing and in good
standing under the laws of the United States 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)                                 Due Qualification.  The Backup Servicer is
duly qualified to do business as a national banking association and is in good
standing, and have 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.

 

(c)                                  Power and Authority.  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 Violation.  The consummation of the
transactions contemplated by, and the fulfillment of the terms of, this
Agreement by it will not (i) conflict with, result in any breach of any of the
terms or provisions of, or constitute a default under, its articles of
association or any Contractual Obligation by which it or any of its property is
bound, (ii) result in the creation or imposition of any Lien upon any of its
properties pursuant to the terms of any Contractual Obligation (other than the
Agreement), or (iii) violate any Applicable Law.

 

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(e)                                  No Consent.  No Consents 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 (i) applicable
Insolvency Laws and (ii) general principles of equity (whether considered in a
suit at law or in equity).

 

(g)                                 No Proceeding.  There are no proceedings or
investigations pending or, 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.

 

Section 7.15                            Covenants of the Backup Servicer.

 

The Backup Servicer hereby covenants that:

 

(a)                                  Compliance with Law.  The Backup Servicer
will comply in all material respects with all Applicable Laws.

 

(b)                                 Preservation of Existence.  The Backup
Servicer will preserve and maintain its existence, rights, franchises and
privileges as a national banking association in good standing under the laws of
the United States.

 

(c)                                  No Bankruptcy Petition.  With respect to
VFCC, prior to the date that is one (1) year and one (1) day after the payment
in full of all amounts owing in respect of all outstanding Commercial Paper
Notes issued by VFCC and with respect to the Borrower, prior to the date that is
one (1) year and one (1) day after the Collection Date, the Backup Servicer will
not institute against the Borrower or VFCC, or join any other Person in
instituting against the Borrower or VFCC, 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
subsection 7.15(c) will survive the termination of this Agreement.

 

(d)                                 No Changes in Backup Servicer Fee.  The
Backup Servicer will not make any changes to Backup Servicer Fee set forth in
the Backup Servicer and Collateral Custodian Fee Letter without the prior
written approval of the Deal Agent.

 

Section 7.16                            Payment of Certain Expenses by Servicer.

 

The Servicer will be required to pay all expenses incurred by it in connection
with its activities under this Agreement, including fees and disbursements of
legal counsel and independent accountants, Taxes imposed on the Servicer,
expenses incurred in connection with payments and reports pursuant to this
Agreement, and all other fees and expenses not expressly stated under this
Agreement for the account of the Borrower.  In consideration for the payment by
the Borrower of the Servicing Fee, the Servicer will be required to pay all
reasonable fees and expenses owing to any bank or trust company in connection
with the maintenance of the

 

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Collection Accounts and the Backup Servicer Fee and Collateral Custodian Fee
pursuant to the Backup Servicer and Collateral Custodian Fee Letter.  The
Servicer shall be required to pay such expenses for its own account and shall
not be entitled to any payment therefor other than the Servicing Fee.

 

Section 7.17                            Reports.

 

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

 

(b)                                 Servicer’s Certificate.  Together with each
Monthly Report, the Servicer shall submit to the Borrower, the Backup Servicer
and the Deal Agent a certificate (a “Servicer’s Certificate”), signed by a
Responsible Officer of the Servicer and substantially in the form of Exhibit F. 
Except as otherwise set forth herein, the Backup Servicer shall have no duty to
review any information set forth in the Servicer’s Certificate.

 

(c)                                  Financial Statements.  The Servicer will
submit to the Borrower, the Backup Servicer and the Deal Agent within forty-five
(45) days following the end of each of the Servicer’s fiscal quarters (other
than the final fiscal quarter), commencing for the fiscal quarter ending on June
30, 2003, unaudited financial statements of the Servicer (including an analysis
of delinquencies and losses for each fiscal quarter) as of the end of each such
fiscal quarter.  The Servicer shall submit to the Borrower and the Deal Agent,
within ninety (90) days following the end of the Servicer’s fiscal year,
commencing with the fiscal year ending on December 31, 2003, annual audited
financial statements as of the end of such fiscal year.  Except as otherwise set
forth herein, the Backup Servicer shall have no duty to review any of the
financial information set forth in such financial statements.

 

Section 7.18                            Annual Statement as to Compliance.

 

The Servicer will provide to the Borrower, the Backup Servicer and the Deal
Agent within ninety (90) days following the end of each fiscal year of the
Servicer, commencing with the fiscal year ending on December 31, 2003, an annual
report signed by a Responsible Officer of the Servicer certifying that (a) a
review of the activities of the Servicer, and the Servicer’s performance
pursuant to this Agreement, for the period ending on the last day of such fiscal
year has been made under such Person’s supervision and (b) the Servicer has
performed or has caused to be performed in all material respects all of its
obligations under this Agreement throughout such year and no Servicer
Termination Event has occurred and is continuing (or if a Servicer Termination
Event has so occurred and is continuing, specifying each such event, the nature
and status thereof and the steps necessary to remedy such event, and, if a
Servicer Termination Event occurred during such year and no notice thereof has
been given to the Deal Agent, specifying such Servicer Termination Event and the
steps taken to remedy such event).

 

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Section 7.19                            Annual Independent Public Accountant’s
Servicing Reports.

 

The Servicer will cause a firm of nationally recognized independent public
accountants (who may also render other services to the Servicer) to furnish to
the Borrower and the Deal Agent (with a copy to the Backup Servicer), within
ninety (90) days following the end of each fiscal year of the Servicer,
commencing with the fiscal year ending on December 31, 2003, (i) a report
relating to such fiscal year to the effect that (A) such firm has reviewed
certain documents and records relating to the servicing of the Loans, and (B)
based on such examination, such firm is of the opinion that the Monthly Reports
for such year were prepared in compliance with this Agreement, except for such
exceptions as it believes to be immaterial and such other exceptions as will be
set forth in such firm’s report and (ii) a report covering such fiscal year to
the effect that such accountants have applied certain agreed-upon procedures
(which procedures shall have been approved by the Borrower and Deal Agent) to
certain documents and records relating to the servicing of Loans under this
Agreement, compared the information contained in the Monthly Reports and the
Servicer’s Certificates delivered during the period covered by such report with
such documents and records and that no matters came to the attention of such
accountants that caused them to believe that such servicing was not conducted in
compliance with this Article VI of this Agreement, except for such exceptions as
such accountants shall believe to be immaterial and such other exceptions as
shall be set forth in such statement.

 

Section 7.20                            Limitation on Liability of the Servicer
and Others.

 

Except as provided herein, neither the Servicer nor any of the directors or
officers or employees or agents of the Servicer shall be under any liability to
the Borrower, the Deal Agent, the Secured Parties or any other Person for any
action taken or for refraining from the taking of any action expressly provided
for in this Agreement; provided, however, that this provision shall not protect
the Servicer or any such Person against any liability that would otherwise be
imposed by reason of its willful misfeasance, bad faith or gross negligence in
the performance of duties or by reason of its failure to perform materially in
accordance with this Agreement.

 

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

 

Section 7.21                            The Servicer, the Backup Servicer and
the Collateral Custodian Not to Resign.

 

Neither the Servicer, the Backup Servicer, the Collateral Custodian nor the
Escrow Agent shall resign from the obligations and duties hereby imposed on such
Person except upon such Person’s determination that (i) the performance of its
duties hereunder is or becomes impermissible under Applicable Law and (ii) there
is no reasonable action that such Person could take to make the performance of
its duties hereunder permissible under Applicable Law.  Any such determination
permitting the resignation of the Servicer, the Backup Servicer, the Collateral
Custodian or the Escrow Agent shall be evidenced as to clause (i) above by an
Opinion of

 

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Counsel to such effect delivered to the Borrower, the Deal Agent.  No such
resignation shall become effective until a successor shall have assumed the
responsibilities and obligations of such Person in according with the terms of
this Agreement.

 

Section 7.22                            Access to Certain Documentation and
Information Regarding the Loans.

 

The Borrower, the Servicer or the Collateral Custodian, as applicable, shall
provide to the Deal Agent access to the Loan Documents and all other
documentation regarding the Loans included as part of the Collateral and the
Related Property in such cases where the Deal Agent are required in connection
with the enforcement of the rights or interests of the Investors, or by
applicable statutes or regulations, to review such documentation, such access
being afforded without charge but only (i) upon two (2) Business Days’ prior
written request, (ii) during normal business hours and (iii) subject to the
Servicer’s normal security and confidentiality procedures.  From and after the
Closing Date and periodically thereafter at the discretion of the Deal Agent,
the Deal Agent or their respective agents may review the Borrower’s and the
Servicer’s collection and administration of the Loans in order to assess
compliance by the Servicer with the Servicer’s written policies and procedures,
as well as with this Agreement and may conduct an audit of the Loans, Loan
Documents and Records in conjunction with such a review.  Such review shall be
reasonable in scope and shall be completed in a reasonable period of time.  The
Borrower shall bear the cost of such audits.

 

Section 7.23                            Merger or Consolidation of the Servicer.

 

(a)                                  The Servicer will keep in full force and
effect its existence, rights and franchise as a Delaware corporation, and 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)                                 The Servicer shall not consolidate or merge
with or into, or sell, lease or transfer all or substantially all of its assets
to, any other Person, unless in the case of any such action (i) no Termination
Event or Material Adverse Effect would occur or be reasonably likely to occur as
a result of such transaction, (ii) the Deal Agent provides its prior written
consent to such transaction and (iii) such Person executes and delivers to the
Deal Agent an agreement by which such Person assumes the obligations of the
Servicer hereunder and under the other Transaction Documents to which it is a
party, or confirms that such obligations remain enforceable against it, together
with such certificates and opinions of counsel as Deal Agent may reasonably
request.

 

Section 7.24                            Identification of Records.

 

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

 

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Section 7.25                            Servicer Termination Events.

 

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

 

(a)                                  any failure by the Servicer to make any
payment, transfer or deposit or to give instructions or notice to the Borrower
and the Deal Agent as required by this Agreement, or to deliver any Required
Reports hereunder on or before the date occurring two (2) Business Days after
the date such payment, transfer, deposit, instruction of notice or report is
required to be made or given, as the case may be, under the terms of this
Agreement;

 

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

 

(c)                                  any representation, warranty or
certification made by the Servicer in this Agreement or in any certificate
delivered pursuant to this Agreement shall prove to have been incorrect when
made, and that continues to be unremedied for a period of thirty (30) days after
the first to occur of (i) the date on which written notice of such incorrectness
requiring the same to be remedied shall have been given to the Servicer by the
Deal Agent or the Borrower and (ii) the date on which the Servicer becomes aware
thereof;

 

(d)                                 the Servicer shall fail in any material
respect to service the Loans in accordance with the Credit and Collection
Policy;

 

(e)                                  an Insolvency Event shall occur with
respect to the Servicer or any of its Affiliates;

 

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

 

(g)                                 any financial or asset information
reasonably requested by the Deal Agent or the Secured Parties as provided herein
is not provided as requested within five (5) Business Days of the receipt by the
Servicer of such request;

 

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

 

(i)                                     the failure of the Servicer to make any
payment due with respect to aggregate recourse debt or other obligations with an
aggregate principal amount exceeding U.S. $2,500,000 or the occurrence of any
event or condition that would permit acceleration of such recourse debt or other
obligations if such event or condition has not been waived;

 

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(j)                                     the Servicer fails to maintain a minimum
Net Worth of at least $500,000,000 plus seventy-five (75%) percent of any new
equity and Subordinated Debt issued after September 30, 2002; or

 

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

 

then notwithstanding anything herein to the contrary, so long as any such
Servicer Termination Events shall not have been remedied at the expiration of
any applicable cure period, the Deal Agent, by written notice to the Servicer
and the Backup Servicer (a “Servicer Termination Notice”), may, subject to the
provisions of Section 7.26, terminate all of the rights and obligations of the
Servicer as Servicer under this Agreement.  The Borrower shall pay all
reasonable set-up and conversion costs associated with the transfer of servicing
rights to the Successor Servicer.

 

Section 7.26                            Appointment of Successor Servicer.

 

(a)                                  On and after the receipt by the Servicer of
a Servicer Termination Notice pursuant to Section 7.25, the Servicer shall
continue to perform all servicing functions under this Agreement until the date
specified in the Servicer Termination Notice or otherwise specified by the Deal
Agent to the Servicer and the Backup Servicer in writing.  The Deal Agent may at
the time described in the immediately preceding sentence, in its sole
discretion, appoint the Backup Servicer as the Servicer hereunder, and the
Backup Servicer shall on such date assume all obligations of the Servicer
hereunder, and all authority and power of the Servicer under this Agreement
shall pass to and be vested in the Backup Servicer; provided, however, that any
successor Servicer shall not (i) be responsible or liable for any past actions
or omissions of the outgoing Servicer or (ii) be obligated to make Servicer
Advances.  In the event that the Deal Agent does not so appoint the Backup
Servicer, there is no Backup Servicer or the Backup Servicer is unwilling or
unable to assume such obligations on such date, the Deal Agent shall as promptly
as possible appoint a successor servicer (the “Successor Servicer”), and such
Successor Servicer shall accept its appointment by a written assumption in a
form acceptable to the Deal Agent.  In the event that a Successor Servicer has
not been appointed and has not accepted its appointment at the time when the
Servicer ceases to act as Servicer, the Deal Agent shall petition a court of
competent jurisdiction to appoint any established financial institution having a
net worth of not less than U.S. $100,000,000 and whose regular business includes
the servicing of Loans as the Successor Servicer hereunder.

 

(b)                                 Upon its appointment as successor to the
Servicer, the Backup Servicer (subject to subsection 7.26(a)) or the Successor
Servicer, as applicable, shall be the successor in all respects to the Servicer
with respect to servicing functions under this Agreement, shall assume all
Servicing Duties hereunder and shall be subject to all the responsibilities,
duties and liabilities relating thereto placed on the Servicer by the terms and
provisions hereof, and all references in this Agreement to the Servicer shall be
deemed to refer to the Backup Servicer or the Successor Servicer, as
applicable.  Any Successor Servicer shall be entitled, with the prior consent of
the Deal Agent, to appoint agents to provide some or all of its duties
hereunder, provided that no such appointment shall relieve such Successor
Servicer of the duties and obligations of the

 

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Successor Servicer pursuant to the terms hereof and that any such subcontract
may be terminated upon the occurrence of a Servicer Termination Event.

 

(c)                                  All authority and power granted to the
Servicer under this Agreement shall automatically cease and terminate upon
termination of the Servicer under this Agreement and shall pass to and be vested
in the Successor Servicer, and, without limitation, the Successor Servicer is
hereby authorized and empowered to execute and deliver, on behalf of the
Servicer, as attorney-in-fact or otherwise, all documents and other instruments,
and to do and accomplish all other acts or things necessary or appropriate to
effect the purposes of such transfer of servicing rights.  The Servicer agrees
to cooperate with the Successor Servicer in effecting the termination of the
responsibilities and rights of the Servicer to conduct servicing on the
Collateral.

 

(d)                                 Upon the Backup Servicer receiving notice
that it is required to serve as the Servicer hereunder pursuant to the foregoing
provisions of this Section 7.26, the Backup Servicer will promptly begin the
transition to its role as Servicer.

 

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

 

Section 7.27                            Market Servicing Fee.

 

Notwithstanding anything to the contrary herein, in the event that a Successor
Servicer is appointed, the Servicing Fee shall equal the market rate for
comparable servicing duties to be fixed upon the date of such appointment by
such Successor Servicer with the consent of the Deal Agent; in the event that
the Backup Servicer becomes the Successor Servicer, the Backup Servicer shall
solicit three (3) bids, with a copy to the Borrower and the Deal Agent, from not
less than three (3) entities experienced in the servicing of loans similar to
the Loans and that are not Affiliates of the Backup Servicer, the Servicer or
the Borrower, and the Servicing Fee shall be equal to the average of the fees
proposed as determined by the Backup Servicer with the consent of the Deal Agent
(the “Market Servicing Fee”).

 

ARTICLE VIII

 

SECURITY INTEREST

 

Section 8.1                                   Grant of Security Interest.

 

(a)                                  The parties hereto intend that this
Agreement constitute a security agreement and the transactions effected hereby
constitute secured loans by the Secured Parties to the Borrower under Applicable
Law.  For such purpose, the Borrower hereby Grants as of the Closing Date to the
Deal Agent, as agent for the Secured Parties, a lien and continuing security
interest in all of the Borrower’s right, title and interest in, to and under
(but none of the obligations under) all Collateral (including any Hedging
Agreements), whether now existing or hereafter arising or acquired by the
Borrower, and wherever the same may be located, to secure the prompt, complete
and indefeasible payment and performance in full when due, whether by lapse of
time, acceleration or otherwise, of the Obligations of the Borrower arising in
connection with this Agreement and each other Transaction Document, whether now
or hereafter existing, due or to

 

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become due, direct or indirect, or absolute or contingent.  The Grant of a
security interest under this Section 8.1 does not constitute and is not intended
to result in a creation or an assumption by the Deal Agent or any of the other
Secured Parties of any obligation of the Borrower or any other Person in
connection with any or all of the Collateral or under any agreement or
instrument relating thereto.  Anything herein to the contrary notwithstanding,
(a) the Originator and the Borrower shall remain liable under the Loans and
related Collateral to the extent set forth therein to perform all of their
respective duties and obligations thereunder to the same extent as if this
Agreement had not been executed, (b) the exercise by the Deal Agent, as agent
for the Secured Parties, of any of its rights in the Collateral shall not
release the Originator and the Borrower from any of its duties or obligations
under the Loans and related Collateral, and (c) neither of the Deal Agent nor
any other Secured Party shall have any obligations or liability under the Loans
and related Collateral by reason of this Agreement, nor shall the Deal Agent or
any other Secured Party be obligated to perform any of the obligations or duties
of the Borrower thereunder or to take any action to collect or enforce any claim
for payment assigned hereunder.

 

(b)                                 The Borrower and the Deal Agent, on behalf
of the Secured Parties, hereby acknowledge and agree that the security interest
Granted hereby in the Collateral constitutes continuing collateral security for
all of the Obligations, whether now existing or hereafter arising.

 

Section 8.2                                   Release of Lien on Loans.

 

At the same time as (i) any Loan in the Collateral expires by its terms and all
amounts in respect thereof have been paid in full by the related Obligor and
deposited in the Collection Account, (ii) any Loan becomes a Prepaid Loan and
all amounts in respect thereof have been paid in full by the related Obligor and
deposited in the Collection Account, (iii) such Loan is replaced in accordance
with Section 2.19, (iv) such Loan is repurchased in accordance with Section 4.3,
(v) such Loan is subject to a Lien Release Dividend in accordance with Section
2.17, or (vi) this Agreement terminates in accordance with Section 12.6, the
Deal Agent, as agent for the Secured Parties, will, to the extent requested by
the Servicer, release its interest in such Loan without representation or
warranty express or implied.  In connection with any sale of such Related
Property, the Deal Agent, as agent for the Secured Parties, will after the
deposit by the Servicer of the Proceeds of such sale into the Collection
Account, at the sole expense of the Servicer, execute and deliver to the
Servicer any assignments, bills of sale, termination statements and any other
releases and instruments as the Servicer may reasonably request in order to
effect the release and transfer of such Related Property; provided, that, the
Deal Agent, as agent for the Secured Parties, will make no representation or
warranty, express or implied, with respect to any such Related Property in
connection with such sale or transfer and assignment.  Nothing in this Section
8.2 shall diminish the Servicer’s obligations pursuant to Section 6.6 with
respect to the Proceeds of any such sale.

 

Section 8.3                                   Release of Lien on Supplemental
Interests.

 

If (i) there is no Overcollateralization Shortfall, and (ii) no Termination
Event or Unmatured Termination Event has occurred and is continuing, at the same
time as any Loan that is part of the Collateral expires by its terms and all
amounts in respect thereof have been paid by the related Obligor and deposited
in the Collection Account, the Deal Agent, as agent for the

 

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

 

Section 8.4                                   Further Assurances.

 

The provisions of Section 12.12 shall apply to the security interest granted
under Section 8.1 as well as to the Advances hereunder.

 

Section 8.5                                   Remedies.

 

Upon the occurrence of a Termination Event, the Deal Agent and Secured Parties
shall have, with respect to the Collateral Granted pursuant to Section 8.1, and
in addition to all other rights and remedies available to the Deal Agent and
Secured Parties under this Agreement or other Applicable Law, all rights and
remedies of a secured party upon default under the UCC.

 

Section 8.6                                   Waiver of Certain Laws.

 

Each of the Borrower and the Servicer agrees, to the full extent that it may
lawfully so agree, that neither it nor anyone claiming through or under it will
set up, claim or seek to take advantage of any appraisement, valuation, stay,
extension or redemption law now or hereafter in force in any locality where any
Collateral may be situated in order to prevent, hinder or delay the enforcement
or foreclosure of this Agreement, or the absolute sale of any of the Collateral
or any part thereof, or the final and absolute putting into possession thereof,
immediately after such sale, of the Secured Parties thereof, and each of the
Borrower and the Servicer, for itself and all who may at any time claim through
or under it, hereby waives, to the full extent that it may be lawful so to do,
the benefit of all such laws, and any and all right to have any of the
properties or assets constituting the Collateral marshaled upon any such sale,
and agrees that the Deal Agent or any court having jurisdiction to foreclose the
security interests granted in this Agreement may sell the Collateral as an
entirety or in such parcels as the Deal Agent or such court may determine.

 

Section 8.7                                   Power of Attorney.

 

Each of the Borrower and the Servicer, upon the occurrence and during the
continuance of a Termination Event, hereby irrevocably appoints the Deal Agent
its true and lawful attorney (with full power of substitution) in its name,
place and stead and at its expense, in connection with the enforcement of the
rights and remedies provided for in this Agreement, including without limitation
the following powers:  (a) to give any necessary receipts or acquittance for
amounts collected or received hereunder, (b) to make all necessary transfers of
the Collateral in connection with any such sale or other disposition made
pursuant hereto, (c) to execute and

 

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deliver for value all necessary or appropriate bills of sale, assignments and
other instruments in connection with any such sale or other disposition, the
Borrower and the Servicer hereby ratifying and confirming all that such attorney
(or any substitute) shall lawfully do hereunder and pursuant hereto, and (d) to
sign any agreements, orders or other documents in connection with or pursuant to
any Transaction Document or Hedging Agreement.  Nevertheless, if so requested by
the Deal Agent, the Borrower shall ratify and confirm any such sale or other
disposition by executing and delivering to the Deal Agent all proper bills of
sale, assignments, releases and other instruments as may be designated in any
such request.

 

ARTICLE IX

 

TERMINATION EVENTS

 

Section 9.1                                   Termination Events.

 

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

 

(a)                                  the Borrower shall default in the payment
of any amount required to be made under the terms of this Agreement and such
failure continues unremedied for a period of three (3) Business Days after the
due date set forth herein for such payment, or if no due date is specified, such
failure continues for a period of twenty (20) days after written request for
such payment has been made; or

 

(b)                                 an Overcollateralization Shortfall exists
and continues unremedied for a period of three (3) Business Days; or

 

(c)                                  the amount of Advances Outstanding shall
exceed the Availability, for more than three (3) Business Days; or

 

(d)                                 [Reserved]; or

 

(e)                                  a Required Equity Shortfall exists and
continues unremedied for a period of three (3) Business Days; or

 

(f)                                    (i) the Borrower shall fail to perform or
observe in any material respect any other covenant or other agreement of the
Borrower set forth in this Agreement and any other Transaction Document to which
it is a party, or (ii) the Originator shall fail to perform or observe in any
material respect any term, covenant or agreement of such Originator set forth in
any other Transaction Document to which it is a party, in each case when such
failure continues unremedied for more than twenty (20) days after written notice
thereof shall have been given by the Deal Agent or any Secured Party to such
Person; or

 

(g)                                 any representation or warranty made or
deemed made hereunder shall prove to be incorrect in any material respect as of
the time when the same shall have been made, and such incorrect representation
or warranty shall not have been eliminated or otherwise cured within a period of
twenty (20) days after written notice thereof shall have been given by the Deal
Agent or any Secured Party to the Borrower; or

 

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

 

(i)                                     a Servicer Termination Event occurs; or

 

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

 

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

 

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

 

(m)                               (i) a final judgment for the payment of money
in excess of $5,000,000 shall have been rendered against the Originator or
$100,000 against the Borrower by a court of competent jurisdiction and, if such
judgment relates to the Originator, the Originator shall have either:
(1) discharged or provided for the discharge of such judgment in accordance with
its terms, or (2) perfected a timely appeal of such judgment and caused the
execution thereof to be stayed (by supersedes or otherwise during the pendency
of such appeal or (ii) the Originator or the Borrower, as the case may be, shall
have made payments of amounts in excess of $1,000,000 or $100,000, respectively,
in settlement of any litigation; or

 

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

 

(o)                                 on any day, either (i) the aggregate Hedge
Notional Amount is less than the product of the Hedge Percentage on such day and
the Hedge Amount on that day, or (ii) any Hedge Transaction fails to meet the
requirements set forth in subsection 5.2(a) and such failure continues
unremedied for a period of ten (10) consecutive days; or

 

(p)                                 the Aggregate Net Mark to Market Amount
exceeds $10,000,000 for two consecutive Determination Dates; or

 

(q)                                 on any Determination Date, the Rolling
Three-Month Portfolio Yield does not equal or exceed Minimum Portfolio Yield and
such failure continues for a period of fifteen (15) consecutive days; or

 

(r)                                    the Rolling Three-Month Default Ratio
shall exceed 5.0%; or

 

(s)                                  the Rolling Three-Month Charged-Off Ratio
shall exceed 2.5%; or

 

(t)                                    any two of (i) Malon Wilkus, (ii) Ira
Wagner, and (iii) John Erickson shall cease to be employed by the Borrower or
Originator in the capacity as executive officers thereof; or

 

(u)                                 the Borrower shall become required to
register as an “investment company” under the 1940 Act or the arrangements
contemplated by the Transaction Documents shall require

 

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registration as an “investment company” within the meaning of the 1940 Act or
any rules, regulations or orders issued by the SEC thereunder; or

 

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

 

(w)                               a Material Adverse Change in the operations of
the Originator, the Servicer or the Borrower shall occur; or

 

(x)                                   a change in any binding law or any rule or
regulation having the force of law shall occur, which would cause the legal
conclusions made in the true sale, non-consolidation and perfection opinions
delivered in connection with the Transaction Documents to be incorrect;

 

then, and in any such event, the Deal Agent may, by notice to the Borrower,
declare the Termination Date to have occurred, without demand, protest or future
notice of any kind, all of which are hereby expressly waived by the Borrower,
and all Obligations owing by the Borrower under this Agreement shall be
accelerated and become immediately due and payable; provided, that, in the event
that the Termination Event described in subsection 9.1(h) herein has occurred,
the Termination Date shall automatically occur, without demand, protest or any
notice of any kind, all of which are hereby expressly waived by the Borrower. 
Upon any such declaration or automatic occurrence of the Termination Date, no
Advances or Swingline Advances will be made, and the Deal Agent and the Secured
Parties shall have, in addition to all other rights and remedies under this
Agreement or otherwise, all rights and remedies provided under the UCC of each
applicable jurisdiction and other Applicable Laws, including the right to sell
the Collateral, which rights and remedies shall be cumulative.  The
aforementioned rights and remedies shall be without limitation, and shall be in
addition to all other rights and remedies of the Deal Agent and the Secured
Parties otherwise available under any provision of this Agreement by operation
of law, at equity or otherwise, each of which are expressly preserved.

 

ARTICLE X

 

INDEMNIFICATION

 

Section 10.1                            Indemnities by the Borrower.

 

(a)                                  Without limiting any other rights that any
such Person may have hereunder or under Applicable Law, the Borrower hereby
agrees to indemnify the Deal Agent, the Backup Servicer, the Collateral
Custodian, any Secured Party or its assignee and each of their respective
Affiliates and officers, directors, employees and agents thereof (collectively,
the “Indemnified Parties”), forthwith on demand, from and against any and all
damages, losses, claims, liabilities and related costs and expenses, including
reasonable attorneys’ fees and disbursements (all of the foregoing being
collectively referred to as “Indemnified Amounts”) awarded against or incurred
by, any such Indemnified Party or other non-monetary damages of any such
Indemnified Party

 

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any of them arising out of or as a result of this Agreement, excluding, however,
Indemnified Amounts to the extent resulting from gross negligence or willful
misconduct on the part of any Indemnified Party.  Without limiting the
foregoing, the Borrower shall indemnify the Indemnified Parties for Indemnified
Amounts relating to or resulting from:

 

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

 

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

 

(iii)                               the failure by the Borrower or the Servicer
to comply with any term, provision or covenant contained in this Agreement or
any agreement executed in connection with this Agreement, or with any Applicable
Law with respect to any Loan comprising a portion of the Collateral, or the
nonconformity of any Loan, the Related Property with any such Applicable Law or
any failure by the Originator, the Borrower or any Affiliate thereof to perform
its respective duties under the Loans included as a part of the Collateral;

 

(iv)                              the failure to vest and maintain vested in the
Deal Agent, as agent for the Secured Parties, a first priority perfected
security interest in the Collateral;

 

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

 

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

 

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

 

(viii)                        any products liability claim or environmental
liability claim or personal injury or property damage suit or other similar or
related claim or action of whatever sort arising out of or in connection with
the Related Property, merchandise or services that are the subject of any Loan
included as part of the Collateral or the Related Property included as part of
the Collateral;

 

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

 

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

 

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

 

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

 

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

 

(b)                                 Any amounts subject to the indemnification
provisions of this Section 10.1 shall be paid by the Borrower to the applicable
Indemnified Party within two (2) Business Days following such Person’s demand
therefor.

 

(c)                                  If for any reason the indemnification
provided above in this Section 10.1 is unavailable to the Indemnified Party or
is insufficient to hold an Indemnified Party harmless, then the Borrower, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such loss, claim, damage or liability in such proportion as is appropriate to
reflect not only the relative benefits received by such Indemnified Party on the
one hand and the Borrower, on the other hand but also the relative fault of such
Indemnified Party as well as any other relevant equitable considerations.

 

(d)                                 The obligations of the Borrower under this
Section 10.1 shall survive the removal of the Deal Agent, the Backup Servicer or
the Collateral Custodian and the termination of this Agreement.

 

(e)                                  The parties hereto agree that the
provisions of this Section 10.1 shall not be interpreted to provide recourse to
the Borrower against loss by reason of the bankruptcy, insolvency or lack of
creditworthiness of an Obligor on any Loan.

 

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Section 10.2                            Indemnities by the Servicer.

 

(a)                                  Without limiting any other rights that any
such Person may have hereunder or under Applicable Law, the Servicer hereby
agrees to indemnify each Indemnified Party, forthwith on demand, from and
against any and all Indemnified Amounts awarded against or incurred by any such
Indemnified Party by reason of any acts, omissions or alleged acts or omissions
of the Servicer, including, but not limited to (i) any representation or
warranty made by the Servicer under or in connection with any Transaction
Documents to which it is a party, any Monthly Report, Servicer’s Certificate or
any other information or report delivered by or on behalf of the Servicer
pursuant hereto, which shall have been false, incorrect or misleading in any
material respect when made or deemed made, (ii) the failure by the Servicer to
comply with any Applicable Law, (iii) the failure of the Servicer to comply with
its duties or obligations in accordance with the Agreement, or (iv) any
litigation, proceedings or investigation against the Servicer, excluding,
however, (a) Indemnified Amounts to the extent resulting from gross negligence
or willful misconduct on the part of such Indemnified Party, and (b) under any
Federal, state or local income or franchise taxes or any other Tax imposed on or
measured by income (or any interest or penalties with respect thereto or arising
from a failure to comply therewith) required to be paid by such Indemnified
Party in connection herewith to any taxing authority.  The provisions of this
indemnity shall run directly to and be enforceable by the applicable Indemnified
Party subject to the limitations hereof.  If the Servicer has made any indemnity
payment pursuant to this Section 10.2 and such payment fully indemnified the
recipient thereof and the recipient thereafter collects any payments from others
in respect of such Indemnified Amounts, the recipient shall repay to the
Servicer an amount equal to the amount it has collected from others in respect
of such indemnified amounts.

 

(b)                                 Any amounts subject to the indemnification
provisions of this Section 10.2 shall be paid by the Servicer within two (2)
Business Days following such Person’s demand therefor.

 

(c)                                  If for any reason the indemnification
provided above in this Section 10.2 is unavailable to the Indemnified Party or
is insufficient to hold an Indemnified Party harmless, then Servicer shall
contribute to the amount paid or payable to such Indemnified Party as a result
of such loss, claim, damage or liability in such proportion as is appropriate to
reflect not only the relative benefits received by such Indemnified Party on the
one hand and Servicer on the other hand but also the relative fault of such
Indemnified Party as well as any other relevant equitable considerations.

 

(d)                                 The obligations of the Servicer under this
Section 10.2 shall survive the resignation or removal of the Deal Agent, the
Backup Servicer or the Collateral Custodian and the termination of this
Agreement.

 

(e)                                  The parties hereto agree that the
provisions of this Section 10.2 shall not be interpreted to provide recourse to
the Servicer against loss by reason of the bankruptcy or insolvency (or other
credit condition) of, or default by, related Obligor on, any Loan.

 

(f)                                    Any indemnification pursuant to this
Section 10.2 shall not be payable from the Collateral.

 

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ARTICLE XI

 

THE DEAL AGENT

 

Section 11.1                            Authorization and Action.

 

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

 

Section 11.2                            Delegation of Duties.

 

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

 

Section 11.3                            Exculpatory Provisions.

 

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

 

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Section 11.4                            Reliance.

 

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

 

Section 11.5                            Non-Reliance on Deal Agent.

 

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

 

Section 11.6                            The Deal Agent in its Individual
Capacity.

 

The Deal Agent and any of its Affiliates may make loans to, accept deposits from
and generally engage in any kind of business with the Borrower or any Affiliate
of the Borrower as though the Deal Agent were not the Deal Agent hereunder. 
With respect to the Advances made pursuant to this Agreement, the Deal Agent and
each of its Affiliates shall have the same rights and powers under this
Agreement as the Purchasers and may exercise the same as though it were not the
Deal Agent and the terms “Investor” and “Investors” shall include the Deal Agent
in its individual capacity.

 

Section 11.7                            Successor Deal Agent.

 

The Deal Agent may, upon five (5) days’ notice to the Borrower and VFCC, and the
Deal Agent will, upon the direction of VFCC, resign as Deal Agent.  If the Deal
Agent shall resign, then VFCC, during such five (5) day period, shall appoint a
successor agent.  If for any reason no successor Deal Agent is appointed by VFCC
during such five (5) day period, then effective upon the expiration of such five
(5) day period, the Borrower or the Deal Agent, as applicable, shall make all
payments it otherwise would have made to the Deal Agent in respect of the
Obligations

 

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or under any fee letter delivered in connection herewith directly to VFCC and
for all purposes shall deal directly with VFCC.  After any retiring Deal Agent’s
resignation hereunder as Deal Agent, the provisions of Article X and this
Article XI shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was the Deal Agent under this Agreement.  Notwithstanding
the resignation or removal of WS as the Deal Agent, Wachovia, as the Hedge
Counterparty, shall continue to be a Secured Party hereunder.

 

ARTICLE XII

 

MISCELLANEOUS

 

Section 12.1                            Amendments and Waivers.

 

Except as provided in this Section 12.1, no amendment, waiver or other
modification of any provision of this Agreement shall be effective without the
written agreement of the Borrower, the Deal Agent, and each of the Investors;
provided, that, any amendment of this Agreement that is solely for the purpose
of adding an Investor may be effected with the written consent of the Deal
Agent; provided, further, that any amendment to this Agreement which would (i)
reduce or impair Collections or the payment of Interest or fees to the
Investors, (ii) modify any provisions of this Agreement relating to the timing
of payments required to be made by the Borrower or the application of the
proceeds of such payments, (iii) release any Collateral from the Lien of this
Agreement (other than as provided herein), or (iv) increase the Facility Amount,
any Investor’s Commitment or extend the Commitment Termination Date, shall not
be effective without the written agreement of the Borrower, the Deal Agent and
each of the Investors.  Any waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.

 

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

 

Section 12.2                            Notices, Etc.

 

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

 

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Section 12.3                            Liabilities to Obligors.

 

No obligation or liability to any Obligor under any of the Loans is intended to
be assumed by the Deal Agent and the Secured Parties under or as a result of
this Agreement and the transactions contemplated hereby.

 

Section 12.4                            No Waiver, Rights and Remedies.

 

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

 

Section 12.5                            Binding Effect.

 

This Agreement shall be binding upon and inure to the benefit of the Borrower,
the Deal Agent, the Secured Parties and their respective successors and
permitted assigns and, in addition, the provisions of subsection 2.9(a)(i) and
subsection 2.9(b)(i) shall inure to the benefit of each Hedge Counterparty,
whether or not that Hedge Counterparty is a Secured Party.

 

Section 12.6                            Term of this Agreement.

 

This Agreement, including, without limitation, the Borrower’s obligation to
observe its covenants set forth in Article V and VI, and the Servicer’s
obligation to observe its covenants set forth in Article VII, shall remain in
full force and effect until the Collection Date; provided, however, that the
rights and remedies with respect to any breach of any representation and
warranty made or deemed made by the Borrower pursuant to Article IV and the
indemnification and payment provisions of Article X and the provisions of
Section 12.10 and Section 12.11 shall be continuing and shall survive any
termination of this Agreement.

 

Section 12.7                            GOVERNING LAW; CONSENT TO JURISDICTION;
WAIVER OF OBJECTION TO VENUE.

 

THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW YORK.  EACH OF THE PARTIES HERETO AND THE HEDGE COUNTERPARTY
HEREBY AGREES TO THE NON-EXCLUSIVE JURISDICTION OF ANY FEDERAL COURT LOCATED
WITHIN THE STATE OF NEW YORK.  EACH OF THE PARTIES HERETO AND THE HEDGE
COUNTERPARTY HEREBY WAIVES ANY OBJECTION BASED ON FORUM NON CONVENIENS, AND ANY
OBJECTION TO VENUE OF ANY ACTION INSTITUTED HEREUNDER IN ANY OF THE
AFOREMENTIONED COURTS AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE
RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT.

 

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Section 12.8                            WAIVER OF JURY TRIAL.

 

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

 

Section 12.9                            Costs, Expenses and Taxes.

 

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

 

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

 

(c)                                  The Borrower shall pay on demand all other
costs, expenses and taxes (excluding income taxes) (“Other Costs”), including,
without limitation, all reasonable costs and expenses incurred by the Deal Agent
in connection with periodic audits of the Borrower’s or the Servicer’s books and
records, the cost of rating VFCC’s commercial paper by independent financial
rating agencies, which are incurred as a result of the execution of this
Agreement, and the amount of any taxes and insurance due and unpaid by an
Obligor with respect to any Transferred Loan or Related Property.

 

Section 12.10                     No Proceedings.

 

(a)                                  Each of the parties hereto (other than
VFCC) hereby agrees that it will not institute against, or join any other Person
in instituting against, VFCC any Insolvency Proceeding so long as any Commercial
Paper Notes issued by VFCC shall be outstanding and

 

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there shall not have elapsed one (1) year and one (1) day since the last day on
which any such Commercial Paper Notes shall have been outstanding.

 

(b)                                 Each of the parties hereto (other than the
Deal Agent and the Secured Parties) hereby agrees that it will not institute
against, or join any other Person in instituting against the Borrower any
Insolvency Proceeding so long as there shall not have elapsed one (1) year and
one (1) day since the Collection Date.

 

Section 12.11                     Recourse Against Certain Parties.

 

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

 

(b)                                 Notwithstanding anything in this Agreement
or any other Transaction Document to the contrary, VFCC shall have no obligation
to pay any amount required to be paid by it hereunder or thereunder in excess of
any amount available to VFCC after paying or making provision for the payment of
its Commercial Paper Notes.  All payment obligations of VFCC hereunder are
contingent upon the availability of funds in excess of the amounts necessary to
pay Commercial Paper Notes; and each of the Borrower, the Servicer, the Backup
Servicer, the VFCC Collateral Custodian, the Deal Agent and the Secured Parties
agrees that they shall not have a claim under Section 101(5) of the Bankruptcy
Code if and to the extent that any such payment obligation exceeds the amount
available to VFCC to pay such amounts after paying or making provision for the
payment of its Commercial Paper Notes.

 

(c)                                  The provisions of this Section 12.11 shall
survive the termination of this Agreement.

 

Section 12.12                     Protection of Security Interest; Appointment
of Deal Agent as Attorney-in-Fact.

 

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

 

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shall cooperate fully in connection with the obligations set forth above and
will execute any and all documents reasonably required to fulfill the intent of
this Section 12.12.

 

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

 

(c)                                  If the Borrower or the Servicer fails to
perform any of its obligations hereunder after five (5) Business Days’ notice
from the Deal Agent or any Secured Party may (but shall not be required to)
perform, or cause performance of, such obligation; and the Deal Agent’s or
Secured Party’s reasonable costs and expenses incurred in connection therewith
shall be payable by the Borrower (if the Servicer that fails to so perform is
the Borrower or an Affiliate thereof) as provided in Article X, as applicable. 
The Borrower irrevocably authorizes the Deal Agent and appoints the Deal Agent
as its attorney-in-fact to act on behalf of the Borrower, (i) to execute on
behalf of the Borrower as debtor and to file financing statements necessary or
desirable in the Deal Agent’s sole discretion to perfect and to maintain the
perfection and priority of the interest of the Secured Parties in the Collateral
and (ii) to file a carbon, photographic or other reproduction of this Agreement
or any financing statement with respect to the Collateral as a financing
statement in such offices as the Deal Agent in its sole discretion deems
necessary or desirable to perfect and to maintain the perfection and priority of
the interests of the Investors in the Collateral.  This appointment is coupled
with an interest and is irrevocable.

 

(d)                                 Without limiting the generality of the
foregoing, Borrower will, on June 13th of each year unless the Collection Date
shall have occurred, deliver or cause to be delivered to the Deal Agent an
Opinion of the Counsel for Borrower, in form and substance reasonably
satisfactory to the Deal Agent, confirming and updating the opinion delivered
pursuant to Section 3.1 with respect to perfection and otherwise to the effect
that the Collateral hereunder continues to be subject to a perfected security
interest in favor of the Deal Agent, as agent for the Secured Parties, subject
to no other Liens of record except as provided herein or otherwise permitted
hereunder, which opinion may contain usual and customary assumptions,
limitations and exceptions.

 

Section 12.13                     Confidentiality.

 

(a)                                  Each of the Deal Agent, the Secured Parties
and the Borrower shall maintain and shall cause each of its employees and
officers to maintain the confidentiality of this Agreement and the other
confidential proprietary information with respect to the other parties hereto
and their respective businesses obtained by it or them in connection with the
structuring, negotiating and execution of the transactions contemplated herein,
except that each such party and its officers and employees may (i) disclose such
information to its external accountants and attorneys and as required by an
Applicable Law, as required to be publicly filed with the Securities and
Exchange Commission, or as required by an order of any judicial or
administrative proceeding, (ii) disclose the existence of this Agreement, but
not the financial terms thereof and (iii) disclose the Agreement and such
information in any suit, action,

 

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proceeding or investigation (whether in law or in equity or pursuant to
arbitration) involving and of the Loan Documents or any Hedging Agreement for
the purpose of defending itself, reducing itself, reducing its liability, or
protecting or exercising any of its claims, rights, remedies, or interests under
or in connection with any of the Loan Documents or any Hedging Agreement.

 

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

 

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

 

Section 12.14                     Third Party Beneficiaries.

 

Except as otherwise specifically provided herein, the parties hereto hereby
manifest their intent that no third party, other than the Hedge Counterparties,
shall be deemed a third party beneficiary of this Agreement, and specifically
that the Obligors are not third party beneficiaries of this Agreement.

 

Section 12.15                     Execution in Counterparts; Severability;
Integration.

 

This Agreement may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when so executed shall be
deemed to be an original and all of which when taken together shall constitute
one and the same agreement.  In case any provision in or obligation under this
Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.  This Agreement contains the
final and complete integration of all prior expressions by the parties hereto
with respect to the subject

 

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matter hereof and shall constitute the entire agreement among the parties hereto
with respect to the subject matter hereof, superseding all prior oral or written
understandings other than any fee letter delivered to the Deal Agent and the
Investors.

 

Section 12.16                     Waiver of Setoff.

 

Each of the parties hereto (other than VFCC) hereby waives any right of setoff
it may have or which it may be entitled under this Agreement from time to time
against VFCC or its assets.

 

Section 12.17                     Assignments by the Conduit Lender; WCM
Transfer.

 

(a)                                  With the prior written consent of the
Borrower (which consent shall not be unreasonably withheld), VFCC may at any
time assign, or grant a security interest or sell a participation interest in,
any Advance (or portion thereof) to any Person; provided, that, in the case of
an assignment of the VFCC Note, the assignee (other than any assignee described
in the following provision) executes and delivers to the Servicer and the Deal
Agent a Transferee Letter substantially in the form of Exhibit V hereto;
provided, further, that, VFCC shall not need prior consent to at any time
assign, or grant a security interest or sell a participation interest in, any
Advance (or portion thereof) to a Liquidity Bank or an Affiliate of the Deal
Agent.  The Swingline Lender may at any time assign, or grant a security
interest or sell a participation in, any Swingline Advance (or any portion
thereof) to any Person; provided, that, in the case of an assignment of the
Swingline Note, the assignee executes and delivers to the Servicer and the Deal
Agent a Transferee Letter substantially in the form of Exhibit V hereto.  The
parties to any such assignment, grant or sale of participation interest by VFCC
or the Swingline Lender shall execute and deliver to the Deal Agent, for its
acceptance and recording in its books and records, such agreement or document as
may be satisfactory to such parties and the Deal Agent.  The Borrower shall not
assign or delegate, or grant any interest in, or permit any Lien to exist upon,
any of the Borrower’s rights, obligations or duties under this Agreement without
the prior written consent of the Deal Agent and the Hedge Counterparty.

 

(b)                                 On or about July 1, 2003, certain businesses
of WS will be transferred, assigned or otherwise conveyed (the occurrence of
such event, the “WCM Transfer”) to Wachovia Capital Markets, LLC or another
newly formed Affiliate of WS (“WCM”).  Each of the parties hereto, hereby
expressly consents to the assignment by WS of all of its rights and obligations
hereunder to WCM simultaneous with the WCM Transfer.  Each of the parties hereto
acknowledges and agrees that upon the occurrence of the WCM Transfer, such
assignment shall be effective without any further action by any of the parties
hereto and from and after the WCM Transfer, (i) WCM shall be a party hereto and
shall have the rights and obligations of WS hereunder and (ii) WS shall cease to
be a party hereto and shall be released from its obligations hereunder.

 

Section 12.18                     Heading and Exhibits.

 

The headings of the various Articles and Sections herein are for purposes of
references only and shall not otherwise affect the meaning or interpretation of
any provision hereof.  The schedules and exhibits attached hereto and referred
to herein shall constitute a part of this Agreement and are incorporated into
this Agreement for all purposes.

 

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Section 12.19                     Sharing of Payments on Transferred Loans
Subject to the Retained Interest Provisions.

 

(a)                                  With respect to any Transferred Loan
(including, without limitation, any Revolving Loan) subject to the Retained
Interest provisions of this Agreement, the Borrower will own only the principal
portion of such Transferred Loans outstanding as of the applicable Cut-off
Date.  Principal Collections received by the Servicer on any such Transferred
Loan will be allocated first to the portion of such Transferred Loan owned by
the Borrower, until the principal amount of such portion is reduced to zero, and
then to the portion not owned by the Borrower; provided, however, (i) if a
payment with respect to such Transferred Loan is Delinquent beyond any
applicable grace period or (ii) an Allocation Adjustment Event occurs, then
Principal Collections received on (x) the applicable Transferred Loan (in the
case of clause (i) above) or (y) all the Transferred Loans subject to the
Retained Interest provisions of this Agreement (in the case of clause (ii)
above) will be allocated between the portion owned by the Borrower and the
portion not owned by the Borrower, pro rata based upon the outstanding principal
amount of each such portion.

 

(b)                                 With respect to any Transferred Loan
(including, without limitation, any Revolving Loan) subject to the Retained
Interest provisions of this Agreement, Interest Collections received by the
Servicer on those Transferred Loans will be allocated between the portion not
owned by the Borrower and the portion owned by the Borrower on a pro rata basis
according to the outstanding principal amount of each such portion.

 

(c)                                  Notwithstanding the foregoing or anything
to the contrary contained herein or any Transaction Document, any payments made
by any Hedge Counterparty pursuant to the terms of the Hedge Agreements shall be
solely for the benefit of the Borrower, subject to the lien of the Deal Agent
and the Secured Parties, and shall not be subject to the pro rata sharing
provisions of subsection 12.19(a).  In furtherance of the foregoing clause of
this paragraph, the Originator hereby releases any right, title, or interest it
may have in or to any payment made or to be made at any time by any Hedge
Counterparty pursuant to the terms of any Hedge Agreement.

 

Section 12.20                     Non-Confidentiality of Tax Treatment.

 

All parties hereto agree that each of them and each of their employees,
representatives, and other agents may disclose to any and all persons, without
limitation of any kind, the tax treatment and tax structure of the transaction
and all materials of any kind (including, without limitation, opinions or other
tax analyses) that are provided to any of them relating to such tax treatment
and tax structure.  “Tax treatment” and “tax structure” shall have the same
meaning as such terms have for purposes of Treasury Regulation Section 1.6011-4;
provided, however, that with respect to any document or similar item that in
either case contains information concerning the tax treatment or tax structure
of the transaction as well as other information, the provisions of this Section
12.20 shall only apply to such portions of the document or similar item that
relate to the tax treatment or tax structure of the transactions contemplated
hereby.

 

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

 

 

ACS FUNDING TRUST I, as the Borrower

 

 

 

By:

 

 

 

Name:  Malon Wilkus

 

Title:  Beneficiary Trustee

 

 

 

ACS Funding Trust I

 

c/o American Capital Strategies, Ltd.

 

2 Bethesda Metro Center, 14th Floor

 

Bethesda, Maryland 20814

 

Attention:

Compliance Officer

 

Facsimile No.:

(301) 654-6714

 

Confirmation No.:

(301) 951-6122

 

 

 

 

 

AMERICAN CAPITAL STRATEGIES, LTD.,
as the Servicer

 

 

 

 

 

By:

 

 

 

Name:  John Erickson

 

Title:

Executive Vice President, Chief Financial Officer and Secretary

 

 

 

American Capital Strategies, Ltd.

 

2 Bethesda Metro Center, 14th Floor

 

Bethesda, Maryland 20814

 

Attention:

Compliance Officer

 

Facsimile No.:

(301) 654-6714

 

Confirmation No.:

(301) 951-6122

 

[SIGNATURES CONTINUED ON FOLLOWING PAGE]

 

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Commitment:

VARIABLE FUNDING CAPITAL

 

$225,000,000; provided,

CORPORATION, as a Conduit Lender

 

however, the sum of the Advances

 

 

outstanding under the VFCC Note

 

 

and Swingline Advances

 

 

outstanding shall not exceed

By:

 

 

$225,000,000.

Name:

 

 

 

Title:

 

 

 

 

 

 

Variable Funding Capital Corporation

 

 

c/o Wachovia Securities, LLC

 

 

One Wachovia Center, Mail Code:  NC0610

 

 

Charlotte, North Carolina 28288

 

 

Attention:

Conduit Administration

 

 

Facsimile No.:

(704) 383-6036

 

 

Confirmation No.:

(704) 383-9343

 

 

 

 

 

With a copy to:

 

 

 

 

 

Lord Securities Corp.

 

 

2 Wall Street, 19th Floor

 

 

Attention:

Vice President

 

 

Facsimile No.:

(212) 346-9012

 

 

Confirmation No.:

(212) 346-9008

 

 

[SIGNATURES CONTINUED ON FOLLOWING PAGE]

 

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WACHOVIA SECURITIES, LLC, as the Deal Agent

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

 

 

Wachovia Securities, LLC

 

One Wachovia Center, Mail Code:  NC0610

 

Charlotte, North Carolina 28288

 

Attention:

Mary Katherine Jett

 

Facsimile No.:

(704) 383-4012

 

Telephone No.:

(704) 383-0906

 

 

 

 

Commitment:

WACHOVIA BANK, NATIONAL

$30,000,000; provided,

ASSOCIATION, as the Swingline Lender

however, the sum of the Advances

 

outstanding under the VFCC Note

 

and Swingline Advances

By:

 

 

outstanding shall not exceed

Name:

 

 

$225,000,000.

Title:

 

 

 

 

 

Wachovia Bank, National Association

 

One Wachovia Center, Mail Code:  NC0610

 

Charlotte, North Carolina 28288

 

Attention:

Raj Shah

 

Facsimile No.:

(704) 383-4012

 

Telephone No.:

(704) 374-6230

 

[SIGNATURES CONTINUED ON FOLLOWING PAGE]

 

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WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, as the Backup Servicer and as
the Collateral Custodian

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

 

 

Wells Fargo Bank Minnesota, National Association

 

Sixth Street and Marquette Avenue

 

Minneapolis, MN 55479-0070

 

Attention:

Corporate Trust Services

 

 

Asset-Backed Administration

 

Facsimile No.:

(612) 667-3539

 

Confirmation No.:

(612) 667-8058

 

[SIGNATURES CONTINUED ON FOLLOWING PAGE]

 

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Acknowledged and Agreed to:

 

 

 

WACHOVIA BANK, NATIONAL ASSOCIATION,

 

as the Hedge Counterparty

 

 

By:

 

 

Name:

 

 

 

Title:

 

 

 

 

 

Wachovia Bank, National Association

 

One Wachovia Center, Mail Code: NC0610

 

Charlotte, North Carolina 28288

Attention:

Raj Shah

Facsimile No.:

(704) 383-4012

Confirmation No.:

(704) 374-6230

 

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