exv10w50



 









Exhibit 10.50


EXECUTION COPY





 






U.S. $470,000,000




SALE AND SERVICING AGREEMENT




by and among




CSE QRS FUNDING I LLC,

as the Seller




CSE MORTGAGE LLC,

as the Originator and as the Servicer




VARIABLE FUNDING CAPITAL COMPANY LLC




and




EACH OTHER COMMERCIAL PAPER CONDUIT

FROM TIME TO TIME PARTY HERETO,

as the Conduit Purchasers




WACHOVIA BANK, NATIONAL ASSOCIATION,

as the Swingline Purchaser




WACHOVIA CAPITAL MARKETS, LLC,

as the Administrative Agent and as the VFCC Agent




and




EACH OTHER PURCHASER AGENT

FROM TIME TO TIME PARTY HERETO,

as the Additional Agents




WELLS FARGO BANK, NATIONAL ASSOCIATION,

as the Backup Servicer and as the Collateral Custodian




Dated as of December 28, 2005




 





 









 







TABLE OF CONTENTS








	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page	 
	ARTICLE I DEFINITION	 	 	2	 
	 	 	 	 	 
	 	 	 	 
	Section 1.1	 	Certain Defined Terms
	 	 	2	 
	Section 1.2	 	Other Terms
	 	 	51	 
	Section 1.3	 	Computation of Time Periods
	 	 	51	 
	Section 1.4	 	Interpretation
	 	 	51	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE II PURCHASE OF THE VARIABLE FUNDING CERTIFICATES	 	 	52	 
	 	 	 	 	 
	 	 	 	 
	Section 2.1	 	The Variable Funding Certificates
	 	 	52	 
	Section 2.2	 	Procedures for Swingline Advances by the Swingline Purchaser
	 	 	54	 
	Section 2.3	 	Procedures for Advances by Conduit Purchasers
	 	 	55	 
	Section 2.4	 	Reduction of the Facility Amount; Mandatory and Optional Repayments
	 	 	55	 
	Section 2.5	 	Determination of Interest
	 	 	57	 
	Section 2.6	 	Percentage Evidenced by each Variable Funding Certificate
	 	 	57	 
	Section 2.7	 	Reimbursement of Swingline Advances
	 	 	57	 
	Section 2.8	 	Notations on Variable Funding Certificates
	 	 	58	 
	Section 2.9	 	Settlement Procedures During the Revolving Period
	 	 	58	 
	  Section 2.10	 	Settlement Procedures During the Amortization Period
	 	 	60	 
	  Section 2.11	 	Collections and Allocations
	 	 	61	 
	  Section 2.12	 	Payments,
Computations, Etc.
	 	 	62	 
	  Section 2.13	 	Optional Repurchase
	 	 	63	 
	  Section 2.14	 	Fees
	 	 	63	 
	  Section 2.15	 	Increased Costs; Capital Adequacy; Illegality
	 	 	63	 
	  Section 2.16	 	Taxes
	 	 	65	 
	  Section 2.17	 	Assignment of the Sale Agreement
	 	 	66	 
	  Section 2.18	 	Substitution of Assets
	 	 	66	 
	  Section 2.19	 	Optional Sales
	 	 	68	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE III CONDITIONS TO ADVANCES AND SWINGLINE ADVANCES	 	 	69	 
	 	 	 	 	 
	 	 	 	 
	Section 3.1	 	Conditions to Closing and Initial Advance
	 	 	69	 
	Section 3.2	 	Conditions Precedent to All Advances and Swingline Advances
	 	 	70	 






i









 






TABLE OF CONTENTS
(continued)






	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page	 
	ARTICLE IV REPRESENTATIONS AND WARRANTIES	 	 	73	 
	 	 	 	 	 
	 	 	 	 
	Section 4.1	 	Representations and Warranties of the Seller
	 	 	73	 
	Section 4.2	 	Representations and Warranties of the Seller Relating to the Agreement
and the Collateral
	 	 	83	 
	Section 4.3	 	Representations and Warranties of the Servicer
	 	 	84	 
	Section 4.4	 	Representations and Warranties of the Backup Servicer
	 	 	87	 
	Section 4.5	 	Representations and Warranties of the Collateral Custodian
	 	 	87	 
	Section 4.6	 	Breach of Certain Representations and Warranties
	 	 	88	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE V GENERAL COVENANTS	 	 	89	 
	 	 	 	 	 
	 	 	 	 
	Section 5.1	 	Affirmative Covenants of the Seller
	 	 	89	 
	Section 5.2	 	Negative Covenants of the Seller
	 	 	92	 
	Section 5.3	 	Covenants of the Seller Relating to the Hedging of Assets
	 	 	95	 
	Section 5.4	 	Affirmative Covenants of the Servicer
	 	 	95	 
	Section 5.5	 	Negative Covenants of the Servicer
	 	 	98	 
	Section 5.6	 	Affirmative Covenants of the Backup Servicer
	 	 	99	 
	Section 5.7	 	Negative Covenants of the Backup Servicer
	 	 	100	 
	Section 5.8	 	Affirmative Covenants of the Collateral Custodian
	 	 	100	 
	Section 5.9	 	Negative Covenants of the Collateral Custodian
	 	 	100	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE VI ADMINISTRATION AND SERVICING OF CONTRACTS	 	 	100	 
	 	 	 	 	 
	 	 	 	 
	Section 6.1	 	Designation of the Servicer
	 	 	100	 
	Section 6.2	 	Duties of the Servicer
	 	 	101	 
	Section 6.3	 	Authorization of the Servicer
	 	 	103	 
	Section 6.4	 	Collection of Payments
	 	 	103	 
	Section 6.5	 	Servicer Advances
	 	 	105	 
	Section 6.6	 	Realization Upon Charged-Off Assets
	 	 	106	 
	Section 6.7	 	Maintenance of Insurance Policies
	 	 	106	 
	Section 6.8	 	Servicing Compensation
	 	 	107	 
	Section 6.9	 	Payment of Certain Expenses by Servicer
	 	 	107	 
	  Section 6.10	 	Reports
	 	 	107	 
	  Section 6.11	 	Annual Statement as to Compliance
	 	 	108	 






ii









 






TABLE OF CONTENTS
(continued)





	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page	 
	Section 6.12	 	Annual Independent Public Accountant’s Servicing Reports
	 	 	108	 
	Section 6.13	 	Limitation on Liability of the Servicer and Others
	 	 	108	 
	Section 6.14	 	The Servicer Not to Resign
	 	 	109	 
	Section 6.15	 	Servicer Defaults
	 	 	109	 
	Section 6.16	 	Appointment of Successor Servicer
	 	 	111	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE VII THE BACKUP SERVICER	 	 	113	 
	 	 	 	 	 
	 	 	 	 
	Section 7.1	 	Designation of the Backup Servicer
	 	 	113	 
	Section 7.2	 	Duties of the Backup Servicer
	 	 	113	 
	Section 7.3	 	Merger or Consolidation
	 	 	114	 
	Section 7.4	 	Backup Servicing Compensation
	 	 	115	 
	Section 7.5	 	Backup Servicer Removal
	 	 	115	 
	Section 7.6	 	Limitation on Liability
	 	 	115	 
	Section 7.7	 	The Backup Servicer Not to Resign
	 	 	116	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE VIII THE COLLATERAL CUSTODIAN	 	 	116	 
	 	 	 	 	 
	 	 	 	 
	Section 8.1	 	Designation of Collateral Custodian
	 	 	116	 
	Section 8.2	 	Duties of Collateral Custodian
	 	 	116	 
	Section 8.3	 	Merger or Consolidation
	 	 	118	 
	Section 8.4	 	Collateral Custodian Compensation
	 	 	118	 
	Section 8.5	 	Collateral Custodian Removal
	 	 	118	 
	Section 8.6	 	Limitation on Liability
	 	 	119	 
	Section 8.7	 	The Collateral Custodian Not to Resign
	 	 	120	 
	Section 8.8	 	Release of Documents
	 	 	120	 
	Section 8.9	 	Return of Required Asset Documents
	 	 	121	 
	  Section 8.10	 	Access to Certain Documentation and Information Regarding the
Collateral; Audits
	 	 	121	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE IX SECURITY INTEREST	 	 	121	 
	 	 	 	 	 
	 	 	 	 
	Section 9.1	 	Grant of Security Interest
	 	 	121	 
	Section 9.2	 	Release of Lien on Collateral
	 	 	122	 
	Section 9.3	 	Further Assurances
	 	 	123	 
	Section 9.4	 	Remedies
	 	 	123	 






iii









 






TABLE OF CONTENTS
(continued)





	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page	 
	Section 9.5	 	Waiver of Certain Laws
	 	 	123	 
	Section 9.6	 	Power of Attorney
	 	 	123	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE X TERMINATION EVENTS	 	 	124	 
	 	 	 	 	 
	 	 	 	 
	Section 10.1	 	Termination Events
	 	 	124	 
	Section 10.2	 	Remedies
	 	 	126	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE XI INDEMNIFICATION	 	 	127	 
	 	 	 	 	 
	 	 	 	 
	Section 11.1	 	Indemnities by the Seller
	 	 	127	 
	Section 11.2	 	Indemnities by the Servicer
	 	 	130	 
	Section 11.3	 	After-Tax Basis
	 	 	130	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE XII THE ADMINISTRATIVE AGENT AND PURCHASER AGENTS	 	 	131	 
	 	 	 	 	 
	 	 	 	 
	Section 12.1	 	The Administrative Agent
	 	 	131	 
	Section 12.2	 	VFCC Agent
	 	 	134	 
	Section 12.3	 	Additional Agent
	 	 	135	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE XIII MISCELLANEOUS	 	 	138	 
	 	 	 	 	 
	 	 	 	 
	Section 13.1	 	Amendments and Waivers
	 	 	138	 
	Section 13.2	 	Notices, Etc.
	 	 	138	 
	Section 13.3	 	Ratable Payments
	 	 	138	 
	Section 13.4	 	No Waiver; Remedies
	 	 	138	 
	Section 13.5	 	Binding Effect; Benefit of Agreement
	 	 	139	 
	Section 13.6	 	Term of this Agreement
	 	 	139	 
	Section 13.7	 	Governing Law; Consent to Jurisdiction; Waiver of Objection to Venue
	 	 	139	 
	Section 13.8	 	Waiver of Jury Trial
	 	 	139	 
	Section 13.9	 	Costs, Expenses and Taxes
	 	 	140	 
	  Section 13.10	 	No Proceedings
	 	 	140	 
	  Section 13.11	 	Recourse Against Certain Parties
	 	 	141	 
	  Section 13.12	 	Protection of Right, Title and Interest in the Collateral; Further
Action Evidencing Advances and Swingline Advances
	 	 	142	 
	  Section 13.13	 	Confidentiality
	 	 	143	 
	  Section 13.14	 	Execution in Counterparts; Severability; Integration
	 	 	145	 
	  Section 13.15	 	Waiver of Setoff
	 	 	145	 






iv









 






TABLE OF CONTENTS
(continued)





	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page	 
	Section 13.16	 	Assignments
	 	 	145	 
	Section 13.17	 	Heading and Exhibits
	 	 	146	 
	Section 13.18	 	Loans Subject to Retained Interest Provisions
	 	 	146	 
	Section 13.19	 	Tax Treatment of Advances
	 	 	146	 






	 	 	 
	EXHIBITS
	 	 
	EXHIBIT A-1
	 	Form of Borrowing Notice (Advances and Reduction of Facility Amount)
	EXHIBIT A-1-S
	 	Form of Borrowing Notice (Swingline Funding Request)
	EXHIBIT A-2
	 	Form of Borrowing Notice (Reinvestments of Principal Collections)
	EXHIBIT A-3
	 	Form of Borrowing Base Certificate
	EXHIBIT B-1
	 	Form of Variable Funding Certificate (VFCC)
	EXHIBIT B-2
	 	Form of Variable Funding Certificate (Wachovia Bank, National Association)
	EXHIBIT B-3
	 	Form of Variable Funding Certificate (Additional Purchasers)
	EXHIBIT C
	 	Form of Monthly Report
	EXHIBIT D
	 	Form of Hedging Agreement (including Schedule and Confirmation)
	EXHIBIT E-1
	 	Form of Officer’s Certificate to Solvency (CSE QRS Funding I LLC)
	EXHIBIT E-2
	 	Form of Officer’s Certificate to Solvency (CSE Mortgage LLC)
	EXHIBIT F-1
	 	Form of Officer’s Closing Certificate (CSE QRS Funding I LLC)
	EXHIBIT F-2
	 	Form of Officer’s Closing Certificate (CSE Mortgage LLC)
	EXHIBIT G-1
	 	Form of Power of Attorney(CSE QRS Funding I LLC)
	EXHIBIT G-2
	 	Form of Power of Attorney(CSE Mortgage LLC)
	EXHIBIT H
	 	Form of Release of Required Asset Documents
	EXHIBIT I
	 	Form of Assignment of Mortgage
	EXHIBIT J
	 	Form of Servicer’s Certificate
	EXHIBIT K
	 	Form of Transferee Letter
	EXHIBIT L
	 	Form of Assumption Agreement
	EXHIBIT M
	 	Form of Certificate of Outside Counsel






SCHEDULES




	 	 	 
	SCHEDULE I
	 	Condition Precedent Documents
	SCHEDULE II
	 	List of Lock-Box Banks and Lock-Box Accounts
	SCHEDULE III
	 	Location of Required Asset Documents and Asset Files
	SCHEDULE IV
	 	Asset List
	SCHEDULE V
	 	[Reserved]
	SCHEDULE VI
	 	[Reserved]
	SCHEDULE VII
	 	Form of Senior B-Note Loan
	SCHEDULE VIII
	 	Form of Stretch Senior Secured Loan







v









 








SALE AND SERVICING AGREEMENT




     THIS SALE AND SERVICING AGREEMENT (such agreement as amended, modified, waived, supplemented,
restated or replaced from time to time, the “Agreement”) is made as of this December 28,
2005, by and among:



     (1) CSE QRS FUNDING I LLC, a Delaware limited liability company, as the seller (together with
its successors and assigns in such capacity, the “Seller”);



     (2) CSE MORTGAGE LLC, a Delaware limited liability company (“CSE Mortgage”), as the
originator (together with its successors and assigns in such capacity, the “Originator”),
and as the servicer (together with its successors and assigns in such capacity, the
“Servicer”);



     (3) VARIABLE FUNDING CAPITAL COMPANY LLC, a Delaware limited liability company, as a conduit
purchaser (together with its successors and assigns in such capacity, “VFCC”);



     (4) EACH OTHER COMMERCIAL PAPER CONDUIT FROM TIME TO TIME PARTY HERETO AS AN ADDITIONAL
PURCHASER (together with its successors and assigns in such capacity, an “Additional
Purchaser” and collectively with VFCC, the “Conduit Purchasers”);



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



     (6) WACHOVIA CAPITAL MARKETS, LLC, a Delaware limited liability company (together with its
successors and assigns, “WCM”), as the agent for VFCC (together with its successors and
assigns in such capacity, the “VFCC Agent”) and as the agent for the VFCC Agent and the
Additional Agents (together with its successors and assigns in such capacity, the
“Administrative Agent”);



     (7) EACH OTHER PURCHASER AGENT FROM TIME TO TIME PARTY HERETO as an additional agent (together
with its successors and assigns in such capacity, an “Additional Agent” and collectively,
the “Additional Agents”); and



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



 









 





RECITALS




     WHEREAS, the Seller has acquired, and may from time to time continue to acquire, certain
Assets from the Originator pursuant to the Sale Agreement;



     WHEREAS, the Seller is prepared to transfer and assign, and grant security interests in,
certain Assets and other proceeds with respect thereto to the Purchasers from time to time;



     WHEREAS, the Purchasers may, in accordance with the terms of this Agreement, purchase such
Assets;



     WHEREAS, it is the intention of the parties hereto that (i) in connection with each Advance or
Swingline Advance hereunder, the Seller hereby transfers and assigns to the Administrative Agent,
on behalf of the Purchasers, and hereby grants a security interest to the Administrative Agent, for
the benefit of the Secured Parties, in all of the Seller’s right, title and interest in and to the
Assets and proceeds with respect thereto, and (ii) this Agreement shall constitute a security
agreement under Applicable Law, in respect of the transfer and grant described in the second
Recital above, and all other security interests granted hereunder; 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




DEFINITION




     Section 1.1 Certain Defined Terms.



     (a) Certain capitalized terms used throughout this Agreement are defined above or in this
Section 1.1. 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”: Defined in Section 10.1(i).



“Accrual Period”: (a) with respect to each Advance or Swingline Advance (or portion
thereof) funded at an Interest Rate other than the VFCC CP Rate or an Additional Purchaser CP Rate,
(i) with respect to the first Payment Date, the period from and including the Closing Date to but
excluding such first Payment Date and (ii) with respect to any subsequent Payment Date, the period
from and including the previous Payment Date to but excluding such subsequent Payment Date, and (b)
with respect to each Advance or Swingline Advance (or portion thereof) funded at an Interest Rate
equal to the VFCC CP Rate or an Additional Purchaser CP Rate, (i) with respect to the first Payment
Date, the period from and including the Closing Date to and including the


2









 






last day of the calendar month in which the Closing Date occurs and (ii) with respect to any
subsequent Payment Date, the period ending on the last day of the calendar month immediately
preceding the month in which the Payment Date occurs and commencing on the first (1st) day of such
immediately preceding calendar month.



“Acquired Loan”: A Loan that is originated by a Person other than the Originator,
CapitalSource Finance LLC or any of their respective Subsidiaries and acquired by the Originator in
a “true sale” transaction pursuant to an acquisition agreement substantially in the form of the
“Acquisition Agreement” previously delivered by CapitalSource Finance LLC to the Administrative
Agent in connection with the CS Funding I Transaction or in such other form as shall be adopted by
the Originator and approved in writing by the Administrative Agent at least five days prior to such
Loan becoming part of the Collateral hereunder, provided that the foregoing shall exclude (i) any
CS Funding III Asset that was not an “Acquired Loan” under and as defined in the CS Funding III
Transaction and (ii) any Retained Interest.



“Acquisition Facility”: That certain Loan Certificate and Servicing Agreement, dated as of
February 28, 2003, by and among CapitalSource Acquisition Funding LLC, as the seller, CapitalSource
Finance LLC, as the originator and as the servicer, Variable Funding Capital Company LLC (formerly
known as Variable Funding Capital Corporation), as the purchaser, Wachovia Capital Markets, LLC
(f/k/a Wachovia Securities, Inc.), as the Administrative Agent and as the Purchaser Agent and Wells
Fargo Bank, National Association, successor-by-merger to Wells Fargo Bank Minnesota, National
Association, as the backup servicer and as the Collateral Custodian, as such agreement may be
amended, modified, waived, supplemented or restated from time to time and including any document,
certificate or agreement executed in connection therewith.



“Addition Date”: With respect to any Additional Assets, the date on which such Additional
Assets become part of the Collateral.



“Additional Agent”: Each Person (together with its successors and assigns) that becomes a
party to this Agreement as an Additional Agent, on behalf of any Additional Purchaser, pursuant to
an Additional Purchaser Agreement.



“Additional Agent Fee Letter”: Each Additional Agent Fee Letter Agreement that shall be
entered into by and among the Seller, the Servicer and such Additional Agent in connection with the
transactions contemplated by this Agreement, as amended, modified, waived, supplemented, restated
or replaced from time to time.



“Additional Agent’s Account”: A special account, designated by the Additional Agent in an
Additional Purchaser Agreement, in the name of an Additional Agent maintained with the related
Additional Purchaser.



“Additional Assets”: All Assets that become part of the Collateral after the Closing Date.



“Additional Purchaser”: Each Person (together with its successors and assigns) that
becomes a party to this Agreement as an Additional Purchaser pursuant to an Additional Purchaser
Agreement.




3









 







“Additional Purchaser Agreement”: With respect to each Additional Purchaser, the
Transferee Letter or Assumption Agreement relating to such Additional Purchaser.



“Additional Purchaser Breakage Costs”: Any amount or amounts as shall compensate an
Additional Purchaser for any out of pocket expense incurred by such Additional Purchaser (as
determined by the related Additional Agent on behalf of such Additional Purchaser, in such
Additional Agent’s sole discretion) as a result of (i) a prepayment by the Seller of Advances
Outstanding or Interest or (ii) any difference between the applicable Additional Purchaser CP Rate
and the Adjusted Eurodollar Rate. All Additional Purchaser Breakage Costs shall be due and payable
hereunder upon demand.



“Additional Purchaser CP Rate”: (a) For any Additional Purchaser and any day during any
Accrual Period, the per annum rate equal to the weighted average of the per annum rates paid or
payable by such Additional Purchaser from time to time as interest on or otherwise (by means of
interest rate hedges or otherwise taking into consideration any incremental carrying costs
associated with short-term promissory notes issued by such Additional Purchaser maturing on dates
other than those certain dates on which such Additional Purchaser is to receive funds) in respect
of the promissory notes issued by such Additional Purchaser that are allocated, in whole or in
part, by the related Additional Agent (on behalf of such Additional Purchaser) to fund or maintain
the Advances Outstanding funded by such Additional Purchaser during such period, as determined by
the related Additional Agent (on behalf of such Additional Purchaser) and reported to the Seller
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 related Additional Agent (on behalf
of such Additional Purchaser) and (ii) other borrowings by such Additional Purchaser, including,
without limitation, borrowings to fund small or odd dollar amounts that are not easily accommodated
in the commercial paper market; provided that if any component of such rate is a discount rate, in
calculating the Additional Purchaser CP Rate, the related Additional Agent shall for such component
use the rate resulting from converting such discount rate to an interest bearing equivalent rate
per annum or (b) as otherwise specified by or on behalf of such Additional Purchaser in the
applicable Additional Purchaser Agreement.



“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.



“Administrative Agent”: WCM, in its capacity as administrative agent for the Purchaser
Agents, together with its successors and assigns, including any successor appointed pursuant to
ARTICLE XII.



“Advance”: Defined in Section 2.1(b).




4









 








     “Advance Rate”: With respect to any type of Asset on any date of determination, the
corresponding percentage set forth below:



	 	 	 	 	 
	Type of Asset	 	Advance Rate
	Senior Secured ABL Loans
	 	 	85.0	%
	Senior Secured Term Loans
	 	 	80.0	%
	Stretch Senior Secured Loans
	 	 	75.0	%
	Senior B-Note Loans
	 	 	70.0	%
	Senior Subordinated Loans
	 	 	65.0	%
	Junior Subordinated Loans
	 	 	50.0	%





provided that with respect to any Acquired Loans, Assigned Loans, Agented Notes, Participation
Loans and DIP Loans, the applicable advance rate will be determined by reference to the type of
underlying Loan being acquired, assigned, agented or participated in, as the case may be.



“Advances Outstanding”: On any day, the aggregate principal amount of all Advances and
Swingline Advances outstanding on such day, after giving effect to all repayments of Advances and
Swingline Advances and the making of new Advances or Swingline Advances on such day.



“Affected Party”: The Administrative Agent, the Purchaser Agents, the Purchasers, the
Swingline Purchaser, each Liquidity Bank, all assignees and participants of the Purchasers and each
Liquidity Bank, any successor to WCM as Administrative Agent and any sub-agent of the
Administrative Agent and any successor to a Purchaser Agent.



“Affiliate”: With respect to a Person, means any other Person that, directly or
indirectly, controls, is controlled by or under common control with such Person, or is a director
or officer of such Person. For purposes of this definition, “control” (including the terms
“controlling,” “controlled by” and “under common control with”) when used with respect to any
specified Person means the possession, direct or indirect, of the power to vote 20% or more of the
voting securities of such Person or to direct or cause the direction of the management or policies
of such Person, whether through the ownership of voting securities, by contract or otherwise.



“Agent’s Account”: The VFCC Agent’s Account or any Additional Agent’s Account, as
applicable.



“Agented Notes”: With respect to any Loan, one or more promissory notes of an Eligible
Obligor wherein (a) the note(s) are originated by the Originator in accordance with the Credit and
Collection Policy as a part of a syndicated loan transaction that has been fully consummated
between the Originator and the related Obligor (without regard to any subsequent syndication of
such Loan) prior to such Agented Notes becoming part of the Collateral hereunder, (b) upon an
assignment of the note under the Sale Agreement to the Seller, such original note will be endorsed
to the Administrative Agent and held by the Collateral Custodian, on behalf of the


5









 






Secured Parties, (c) the Seller, 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 Originator’s right, title and
interest in and to 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, if secured, 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 (or a wholly owned subsidiary of the Originator) is the collateral agent and
payment agent for all noteholders of such Obligor.



“Aggregate Outstanding Asset Balance”: On any date of determination, the sum of the
Outstanding Asset Balances of all Eligible Assets included as part of the Collateral on such date,
minus the Outstanding Asset Balances of any Delinquent Assets. Notwithstanding anything to
the contrary contained herein, for purposes of determining the Aggregate Outstanding Asset Balance,
if any portion of an Asset is deemed to be “charged-off” in accordance with the provisions of the
definition of Charged-Off Asset, then the entire Asset shall be deemed to have a zero Outstanding
Asset Balance, except for purposes of calculating Average Pool Charged-Off Ratio.



“Aggregate Unpaids”: At any time, an amount equal to the sum of all unpaid Advances
Outstanding, Interest, Breakage Costs, Hedge Breakage Costs and all other amounts owed by the
Seller to the Purchasers, the Purchaser Agents, the Administrative Agent, the Backup Servicer, each
Hedge Counterparty and the Collateral Custodian hereunder (including, without limitation, all
Indemnified Amounts, other amounts payable under Article XI and amounts required under
Section 2.9, Section 2.10, Section 2.14, Section 2.15 and
Section 2.16 to the Affected Parties or Indemnified Parties) or under any Hedging Agreement
(including, without limitation, payments in respect of the termination of any such Hedging
Agreement) or by the Seller or any other Person under any fee letter (including, without
limitation, the VFCC Fee Letter, any Additional Agent Fee Letter, the Backup Servicer Fee Letter
and the Collateral Custodian Fee Letter) delivered in connection with the transactions contemplated
by this Agreement (whether due or accrued).



“Allocation Adjustment Event”: With respect to each Loan included in the Collateral
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 Default”, (ii) an “Event of Default” or (iii) an
“Accelerated Amortization Event”.



“Alternative Rate”: An interest rate per annum equal to the Adjusted Eurodollar Rate;
provided that the Alternative Rate shall be the Base Rate if a Eurodollar Disruption Event occurs.



“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, the


6









 






Federal Truth in Lending Act, and Regulation Z and Regulation B of the Board of Governors of the
Federal Reserve System), and applicable judgments, decrees, injunctions, writs, awards or orders of
any court, arbitrator or other administrative, judicial, or quasi-judicial tribunal or agency of
competent jurisdiction.



“Asset Checklist”: The list of loan documents attached as Schedule 5 to the Acquisition
Agreement or an electronic list delivered by or on behalf of the Seller to the Collateral Custodian
that identifies each of the items contained in the related Asset File, as amended from time to
time.



“Asset Files”: With respect to any Asset and Related Security, copies of each of the
Required Asset Documents and duly executed originals (to the extent required by the Credit and
Collection Policy) and copies of any other Records relating to such Asset and Related Security.



“Asset List”: The Asset List provided by the Seller to the Administrative Agent and the
Collateral Custodian, in the form of Schedule IV hereto, as such list may be amended,
supplemented or modified from time to time in accordance with this Agreement.



“Asset Loss Reserve”: With respect to each Watchlist Asset, an amount available to cover
any losses with respect to such Watchlist Asset equal to the amounts set forth in the Credit and
Collection Policy.



“Assets”: Loans, individually or collectively, as the context requires.



“Assigned Loan”: A Loan originated by a Person other than the Originator in which a
constant percentage interest has been assigned to the Originator by such Person in accordance with
the Credit and Collection Policy and (i) such transaction has been fully consummated prior to such
Loan becoming part of the Collateral hereunder, (ii) the Originator is a party to a credit
agreement and/or an assignment agreement and a promissory note with the Obligor with respect to
such Loan, (iii) the agent bank receives payment directly from the Obligor thereof on behalf of
each lender that has been assigned a percentage interest in such Loan, and (iv) is substantially in
the form of an “Assigned Loan” previously delivered by the Originator to the Administrative Agent
in connection with the CS Funding I Transaction or such other form as shall be adopted by the
Originator and approved in writing by the Administrative Agent at least five days prior to such
Loan becoming part of the Collateral hereunder; provided that any such Loan shall exclude any
Retained Interest.



“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 Seller and to grant a perfected lien thereon by the Seller in favor
of the Administrative Agent, on behalf of the Secured Parties, each such Assignment of Mortgage to
be substantially in the form of Exhibit I hereto.



“Assumption Agreement”: Defined in Section 13.16(b).




7









 







“Availability”: At any time, an amount equal to the excess, if any, of (i) the amount by
which the lesser of (a) the Facility Amount and (b) the Maximum Availability minus (ii) the
Advances Outstanding on such day; provided that during the Amortization Period, the Availability
shall be zero.



“Available Funds”: With respect to any Payment Date, all amounts received in the
Collection Account (including, without limitation, any Collections on Assets included in the
Collateral and earnings from Permitted Investments in the Collection Account) during the Collection
Period that ended on the last day of the calendar month immediately preceding the calendar month in
which such Payment Date occurs.



“Average Pool Charged-Off Ratio”: As of any Determination Date, the percentage equivalent
of a fraction (i) the numerator of which is equal to the sum of the Outstanding Asset Balance of
all Assets that became Charged-Off Assets (net of Recoveries during such Collection Period) during
the Collection Period related to such Determination Date and each of the 11 preceding Determination
Dates (or such lesser number as shall have elapsed as of such Determination Date), and (ii) the
denominator of which is equal to a fraction the numerator of which is the sum of the Aggregate
Outstanding Asset Balance as of the first day of the Collection Period related to such
Determination Date and each of the 11 preceding Determination Dates (or such lesser number as shall
have elapsed as of such Determination Date) and the denominator of which is twelve (or the
corresponding lesser number of Determination Dates included in the calculations described herein).



“Average Portfolio Charged-Off Ratio”: As of any Determination Date, the percentage
equivalent of a fraction (i) the numerator of which is equal to the sum of the Portfolio
Outstanding Asset Balance of all Portfolio Assets (excluding equity investments) that became
Charged-Off Portfolio Assets (net of Recoveries during such Collection Period) during the
Collection Period related to such Determination Date and each of the 11 preceding Determination
Dates (or such lesser number as shall have elapsed as of such Determination Date), and (ii) the
denominator of which is equal to a fraction the numerator of which is the sum of the Portfolio
Outstanding Asset Balance (excluding equity investments) as of the first day of the Collection
Period related to such Determination Date and each of the 11 preceding Determination Dates (or such
lesser number as shall have elapsed as of such Determination Date) and the denominator of which is
twelve (or the corresponding lesser number of Determination Dates included in the calculations
described herein).



“Average Portfolio Delinquency Ratio”: As of any Determination Date, the percentage
equivalent of a fraction the numerator of which is equal to the sum of the Portfolio Delinquency
Ratio on such Determination Date and each of the two preceding Determination Dates (or such lesser
number as shall have elapsed as of such Determination Date) and the denominator of which is equal
to three (or the corresponding lesser number of Determination Dates included in the calculations
described herein).



“Backup Servicer”: Wells Fargo Bank, National Association, not in its individual capacity,
but solely as Backup Servicer, its successor in interest pursuant to Section 7.3 or such
Person as shall have been appointed as Backup Servicer pursuant to Section 7.5.




8









 







“Backup Servicer Fee Letter”: The Backup Servicer Fee Letter, dated as of the date hereof,
by and among the Servicer, the Administrative Agent, and the Backup Servicer, as such letter may be
amended, modified, supplemented, restated or replaced from time to time.



“Backup Servicer Fee Rate”: The rate per annum set forth in the Backup Servicer Fee Letter
as the “Backup Servicer Fee Rate.”



“Backup Servicer Termination Notice”: Defined in Section 7.5.



“Backup Servicing Fee”: Defined in the Backup Servicer Fee Letter.



“Banded Floating Rate Loan”: A Loan where the interest rate payable by the Obligor thereof
fluctuates between a minimum interest rate and a maximum interest rate allowable under its Required
Asset Documents.



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



“Base Rate”: On any date, a fluctuating interest rate per annum equal to the higher of (a)
the Prime Rate or (b) the Federal Funds Rate plus 1.5%.



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



“Borrowing Base”: On any date of determination, the sum of (i) the Aggregate Outstanding
Asset Balance and (ii) (a) the Outstanding Asset Balances of all Additional Assets that are
Eligible Assets to be included as part of the Collateral on such date minus (b) the amount
(calculated without duplication) by which such Eligible Assets exceed any applicable Pool
Concentration Criteria.



“Borrowing Base Certificate”: Each certificate, in the form of Exhibit A-3,
required to be delivered by the Seller along with each Borrowing Notice.



“Borrowing Notice”: Each notice, in the form of Exhibit A-1, A-1-S or
A-2 (as applicable), required to be delivered by the Seller (i) in respect of (a) the
Initial Advance, each incremental Advance and each Swingline Advance (as applicable), (b) any
reduction of the Facility Amount or repayment of Advances Outstanding, or (c) any reinvestment of
Principal Collections under Section 2.9(b); and (ii) on each Determination Date.



“Breakage Costs”: Collectively, the VFCC Breakage Costs and any Additional Purchaser
Breakage Costs, if any.



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




9









 







“CS Funding I Transaction”: The transactions contemplated by the Fourth Amended Loan
Certificate and Servicing Agreement, dated as of May 28, 2004, among CapitalSource Funding LLC,
CapitalSource Finance LLC, Eiffel Funding, LLC, Hannover Funding Company LLC, Harris Nesbitt Corp.,
CDC Financial Products, Inc., Norddeutsche Landesbanke Girozentrale and Wells Fargo Bank, National
Association, and the related “Transaction Documents” (as defined therein).



“CS Funding III Asset”: Any Asset included in the Collateral on the date of the Initial
Advance that was previously included in the “Collateral” under and as defined in the CS Funding
III Transaction.



“CS Funding III Cut-Off Date”: With respect to any CS Funding III Asset, the applicable
“Cut-Off Date” under and as defined in the CS Funding III Transaction.



“CS Funding III Transaction”: The transactions contemplated by the Sale and Servicing
Agreement, dated as of April 20, 2004, among CapitalSource Funding III LLC, CapitalSource Finance
LLC, Variable Funding Capital Company LLC (f/k/a Variable Funding Capital Corporation), each other
commercial paper conduit from time to time party thereto, Wachovia Bank, National Association,
Wachovia Capital Markets, LLC, each other purchaser agent from time to time party thereto, and
Wells Fargo Bank, National Association, and the related “Transaction Documents” (as defined
therein).



“Change-in-Control”: Any of the following:




     (a) The failure of John K. Delaney, Jason M. Fish and Bryan Corsini and Affiliates thereof to
own in the aggregate (directly or indirectly), free and clear of all liens, at least 7,000,000
million shares of the outstanding shares of common stock of CapitalSource Inc., as adjusted from
time to time to reflect stock splits or reverse stock splits, respectively;



     (b) The failure of CapitalSource Inc. to own (directly or through wholly owned subsidiaries),
free and clear of all liens, 99.9% of the outstanding voting membership interests of the
Originator;



     (c) the creation or imposition of any Lien on any limited liability company membership
interest in the Seller; or



     (d) the failure by Originator to own all of the limited liability company membership interests
in the Seller.


“Charged-Off Asset”: An Asset (or portion thereof deemed to be “charged-off”) as to which
any of the following first occurs: (i) the Servicer has determined or should have reasonably
determined in accordance with the Credit and Collection Policy that such Asset is not collectible,
(ii) (a) all or any portion of one or more principal or interest payments (other than in respect of
default rate interest) remain unpaid for at least ninety (90) days from the original due date for
such payment (without giving effect to any Servicer Advance thereon), in which case not less than
fifty percent (50%) of the Outstanding Asset Balance shall be deemed to be “charged-off” for
purposes of this Agreement, and (b) all or any portion of one or more principal or interest
payments (other than in respect of default rate interest) remain unpaid for at least one hundred


10









 






and eighty (180) days from the original due date for such payment (without giving effect to any
Servicer Advance thereon), in which case not less than one hundred percent (100%) of the
Outstanding Asset Balance of an Asset shall be deemed to be “charged-off” for purposes of this
Agreement, or (iii) (a) the Obligor thereof or any Person obligated thereon is subject to an
Insolvency Event, in which case not less than fifty percent (50%) of the Outstanding Asset Balance
of an Asset shall be deemed to be “charged-off” as of the date of the occurrence of such Insolvency
Event for purposes of this Agreement, (b) the Obligor thereof or any Person obligated thereunder
has suffered a material adverse change which materially affects its viability as a going concern as
reasonably determined by the Servicer, or (c) adequate collateral or other source of payment does
not exist to repay the full amount due to the Seller under the Asset as determined by the Servicer.



“Charged-Off Portfolio Asset”: A Portfolio Asset (or portion thereof deemed to be
“charged-off”) (excluding equity investments) as to which any of the following first occurs: (i)
the Servicer has determined or should have reasonably determined in accordance with the Credit and
Collection Policy (or such similar policies and procedures utilized by the Servicer in servicing
such Portfolio Asset) that such Portfolio Asset is not collectible, (ii) (a) all or any portion of
one or more principal or interest payments (other than in respect of default rate interest) remain
unpaid for at least ninety (90) days from the original due date for such payment (without giving
effect to any Servicer Advance thereon), in which case not less than fifty percent (50%) of the
Portfolio Outstanding Asset Balance of such Portfolio Asset shall be deemed to be “charged-off” for
purposes of this Agreement, and (b) all or any portion of one or more principal or interest
payments (other than in respect of default rate interest) remain unpaid for at least one hundred
and eighty (180) days from the original due date for such payment (without giving effect to any
Servicer Advance thereon), in which case not less than one hundred percent (100%) of the Portfolio
Outstanding Asset Balance of such Portfolio Asset shall be deemed to be “charged-off” for purposes
of this Agreement, or (iii) (a) the Obligor thereof or any Person obligated thereon is subject to
an Insolvency Event, in which case not less than fifty percent (50%) of the Portfolio Outstanding
Asset Balance of such Portfolio Asset shall be deemed to be “charged-off” as of the date of the
occurrence of such Insolvency Event for purposes of this Agreement, (b) the Obligor or any Person
obligated thereon has suffered a material adverse change which materially affects its viability as
an ongoing concern as reasonably determined by the Servicer, or (c) adequate collateral or other
source of payment does not exist to repay the principal due under the Portfolio Asset as determined
by the Servicer.



“Clearing Agency”: An organization registered as a “clearing agency” pursuant to Section
17A of the Exchange Act.



“Closing Date”: December 28, 2005.



“Code”: The Internal Revenue Code of 1986, as amended from time to time.



“Collateral”: All right, title, and interest (whether now owned or hereafter acquired or
arising, and wherever located) of the Seller 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


11









 






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 Existing Assets and Additional Assets, and
all monies due or to become due in payment under such Existing Assets and Additional Assets on and
after the related Cut-Off Date, including but not limited to all Collections, but excluding any
Excluded Amounts; and (ii) all Related Security with respect to the Assets referred to in
clause (i), and (iii) all income and Proceeds of the foregoing.



“Collateral Custodian”: Wells Fargo Bank, National Association, not in its individual
capacity, but solely as Collateral Custodian, its successor in interest pursuant to Section
8.3 or such Person as shall have been appointed Collateral Custodian pursuant to Section
8.5.



“Collateral Custodian Fee”: Defined in the Collateral Custodian Fee Letter.



“Collateral Custodian Fee Letter”: The Collateral Custodian Fee Letter, dated as of the
date hereof, by and among the Originator, the Administrative Agent and the Collateral Custodian, as
such letter may be amended, modified, supplemented, restated or replaced from time to time.



“Collateral Custodian Termination Notice”: Defined in Section 8.5.



“Collection Account”: Defined in Section 6.4(f).



“Collection Date”: The date following the Termination Date on which the Aggregate Unpaids
have been reduced to zero and indefeasibly paid in full.



“Collection Period”: Each calendar month.



“Collections”: (a) All cash collections and other cash proceeds of any Asset, including,
without limitation, Scheduled Payments, Finance Charges, Prepayments, Insurance Proceeds, all
Recoveries or other amounts received in respect thereof but excluding any Excluded Amounts, (b) any
cash proceeds or other funds received by the Seller or the Servicer with respect to any Related
Security, (c) all payments received pursuant to any Hedging Agreement or Hedge Transaction and (d)
all Deemed Collections.



“Commercial Paper Notes”: On any day, any short-term promissory notes of any Conduit
Purchaser issued by such Conduit Purchaser in the commercial paper market.



“Commitment”: With respect to each Conduit Purchaser or Swingline Purchaser, as
applicable, the commitment of such Purchaser to make Advances or Swingline Advances in accordance
herewith in an amount not to exceed (i) (a) prior to the Termination Date, the dollar amount set
forth opposite such Purchaser’s signature on the signature pages hereto or the signature pages of
the Additional Purchaser Agreement relating to such Purchaser, as applicable, under the heading
“Commitment” and (b) on or after the Termination Date, such Conduit Purchaser’s Pro Rata Share of
the aggregate Advances Outstanding or (ii) as to Conduit Purchasers only, with respect to each
Advance, the Pro Rata Share.



“Commitment Fee”: (a) With respect to VFCC, as defined in the VFCC Fee Letter and (b) with
respect to any Additional Purchaser, as defined in such Additional Purchaser’s Additional Purchaser
Fee Letter.




12









 







“Concentrations Effective Date”: The earlier of:




     (i) the date that is three months following the closing of a Permitted Securitization
Transaction after the Closing Date; or



     (ii) the date on which the Aggregate Outstanding Asset Balance first equals or exceeds
$100,000,000 following the more recent of (a) the Closing Date and (b) the closing of a Permitted
Securitization Transaction after the Closing Date.


“Conduit Purchasers”: Defined in the Preamble of this Agreement.



“Consolidated Funded Indebtedness”: As of any date of determination, all outstanding
Indebtedness of the Originator and its Subsidiaries determined on a consolidated basis in
accordance with GAAP.



“Consolidated Tangible Net Worth”: As of any date of determination, the assets less the
liabilities of the Originator and its Subsidiaries on a consolidated basis, less intangible assets
(including goodwill), all determined in accordance with GAAP.



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



“CP Rate”: The VFCC CP Rate or any Additional Purchaser CP Rate, as applicable.



“Credit and Collection Policy”: The written credit policies and procedures manual of the
Originator and the Servicer (which policies shall include without limitation policies on a risk
rating system, Asset Loss Reserve, due diligence format, underwriting parameters and credit
approval procedures) in the form provided to the Administrative Agent prior to the Closing Date, as
it may be as amended or supplemented from time to time in accordance with Section 5.1(h)
and Section 5.4(f).



“CSE Prime Rate”: The rate designated by CSE Mortgage (or the originator of an Assigned
Loan) from time to time and/or pursuant to the related loan documents as its prime rate in the
United States, such rate to change as and when the designated rate changes; provided that the CSE
Prime Rate is not intended to be the lowest rate of interest charged by CSE Mortgage (or such
originator) in connection with extensions of credit to debtors.



“CSE LIBOR Rate”: The posted rate for thirty (30), sixty (60) or ninety (90) day, as
applicable, deposits in Dollars appearing on Telerate Page 3750, as and when determined in
accordance with the applicable Required Asset Documents.



“Cut-Off Date”: With respect to each Asset and Additional Asset, the related Funding Date
therefor.



“Deemed Collection”: Defined in Section 2.4(c).




13









 







“Delinquent Asset”: An Asset (that is not a Charged-Off Asset) as to which either of the
following first occurs: (a) all or any portion of one or more principal or interest payments
(other than in respect of default rate interest) remain unpaid for at least sixty (60) days from
the original due date for such payment (without giving effect to any Servicer Advance thereon) or
(b) consistent with the Credit and Collection Policy such Asset would be classified as delinquent
by the Servicer.



“Delinquent Portfolio Asset”: A Portfolio Asset (that is not a Charged-Off Portfolio
Asset) (excluding equity investments) as to which either of the following first occurs: (a) all or
any portion of one or more principal or interest payments (other than in respect of default rate
interest) remain unpaid for at least sixty (60) days from the original due date for such payment
(without giving effect to any Servicer Advance thereon) or (b) consistent with the Credit and
Collection Policy (or such similar policies and procedures utilized by the Servicer in servicing
such Portfolio Asset) such Portfolio Asset would be classified as delinquent by the Servicer.



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



“Determination Date”: The last day of each Collection Period.



“DIP Loan”: Any Loan to an Obligor that is a Chapter 11 debtor under the Bankruptcy Code
which is permitted by the Credit and Collection Policy and also satisfies the following criteria:
(a) the Loan is duly authorized by a final order of the applicable bankruptcy or federal district
court under the provisions of subsection (b), (c) or (d) of 11 U.S.C. § 364, (b) the Obligor’s
bankruptcy case is still pending as a case under the provisions of Chapter 11 of Title 11 of the
Bankruptcy Code and has not been dismissed or converted to a case under the provisions of Chapter 7
of Title 11 of the Bankruptcy Code, (c) the Obligor’s obligations under such Loan have not been (i)
disallowed, in whole or in part, or (ii) subordinated, in whole or in part, to the claims or
interests of any other Person under the provisions of 11 U.S.C. § 510, (d) the Loan is secured and
the liens and security interests granted by the applicable federal bankruptcy or district court in
relation to the Loan have not been subordinated, in whole or in part, to the liens or interests of
any other lender under the provisions of 11 U.S.C. § 364(d) or otherwise, (e) the Obligor is not in
default on its payment obligations under the Loan, (f) neither the Obligor nor any party in
interest has filed a Chapter 11 plan with the applicable federal bankruptcy or district court that,
upon confirmation, would (i) disallow or subordinate the Loan, in whole or in part, (ii)
subordinate, in whole or in part, any lien or security interest granted in connection with such
Loan, (iii) fail to provide for the repayment, in full and in cash, of the Loan upon the effective
date of such plan or (iv) otherwise impair, in any manner, the claim evidenced by the Loan and (g)
the Loan is substantially in the form of the “DIP Loan Agreement” previously delivered by
CapitalSource Finance LLC to the Administrative Agent in connection with the CS Funding I
Transaction or in such other form as shall be adopted by the Originator and approved in writing


14









 






by the Administrative Agent at least ten days prior to such Loan becoming part of the Collateral
hereunder. For the purposes of this definition, an order is a “final order” if the applicable
period for filing a motion to reconsider or notice of appeal in respect of a permanent order
authorizing the Obligor to obtain credit has lapsed and no such motion or notice has been filed
with the applicable federal bankruptcy or district court or the clerk thereof.



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



“Eligible Asset”: On any date of determination, each Asset (A) for which the
Administrative Agent, Collateral Custodian and Backup Servicer have received the following no later
than 2:00 p.m. (Charlotte, North Carolina time) on the day prior to the related Funding Date: (1)
a faxed copy of the duly executed original promissory note, master purchase agreement and purchase
statements, Loan Register and Asset Checklist in a form and substance satisfactory to the
Administrative Agent and, with respect to any Loans closed in escrow, a certificate (in the form of
Exhibit M) from the counsel to the Originator or the Obligor of such Loans certifying the
possession of the Required Asset Documents; provided that notwithstanding the foregoing, the
Required Asset Documents (including any UCCs included in the Required Asset Documents) shall be in
the possession of the Collateral Custodian within two Business Days of any related Funding Date as
to any Additional Assets; (2) a Borrowing Notice delivered by the Seller to the Collateral
Custodian and the Administrative Agent as part of the Borrowing Notice or Monthly Report delivered
by the Servicer, (3) a Borrowing Base Certificate, and (4) a Certificate of Assignment (Exhibit A
to the Sale Agreement, including Schedule I thereto); provided that if such Asset is part of a
capital contribution to the Seller the Collateral Custodian shall have received the Required Asset
Documents within three Business Days of receipt of the Certificate of Assignment and (B) that
satisfies each of the following eligibility requirements, as applicable:





	(1)	 	With respect to any Asset:





     (a) the Asset, together with the Related Security, has been originated or acquired by the
Originator, sold to the Seller pursuant to (and in accordance with) the Sale Agreement and the
Seller has good title, free and clear of all Liens (other than Permitted Liens), on such Asset and
Related Security;



     (b) the Asset, (i) (together with the Collections and Related Security related thereto) has
been the subject of a grant by the Seller in favor of the Administrative Agent, on behalf of the
Secured Parties, of a first priority perfected security interest, and (ii) with respect to which,
at the time of the sale of such Asset to the Seller, the Originator had a first priority (other
than in the case of Senior Subordinated Loans or Junior Subordinated Loans) perfected security
interest in the Related Property (other than additional or “boot” collateral) relating to such
Loan;



     (c) at the time such Asset is included in the Collateral, the Asset (i) is not (and since its
origination by the Originator or, in the case of Acquired Loans, acquisition by the Originator has
never been) a Charged-Off Asset (either in whole or in part), (ii) is not past due in the case of a
Loan, with respect to payments of principal or interest (provided that if such Asset is past due at
the time it is included in the Collateral but not more than ten days past due, the Originator and
the Servicer must reasonably believe that such Asset will promptly and in no event later than the
date of the next Scheduled Payment due on such Asset, be brought current with respect to all



15









 




payments due thereunder), and (iii) has never been more than thirty days past due (after
giving effect to a five day grace period in determining the number of days past due), with respect
to payments of principal or interest, or, in the case of Acquired Loans, to the best of the
Originator’s knowledge after due inquiry, has never been more than thirty days past due in the
twelve months prior to acquisition;




     (d) the Asset is an “eligible asset” as defined in Rule 3a-7 under the 1940 Act;



     (e) the Asset is a contract the purchase of which with the proceeds of Commercial Paper Notes
would constitute a “current transaction” within the meaning of Section 3(a)(3) of the Securities
Act of 1933, as amended;



     (f) the Asset is an “account”, “chattel paper”, “instrument” or a “general intangible” within
the meaning of Article 9 of the UCC of all applicable jurisdictions;



     (g) the Obligor with respect to such Asset is an Eligible Obligor and such Asset is
denominated and payable only in United States dollars in the United States and does not permit the
currency in which or country in which such Asset is payable to be changed;



     (h) the Asset is evidenced by a promissory note, Loan Register, security agreement or other
instrument and the related loan documents that have been duly authorized and executed, are in full
force and effect and constitute the legal, valid, binding and absolute and unconditional payment
obligation of the related Obligor, enforceable against such Obligor in accordance with their terms
(subject to applicable bankruptcy, insolvency, moratorium or other similar laws affecting the
rights of creditors generally and to general principles of equity, whether considered in a suit at
law or in equity), and there are no conditions precedent to the enforceability or validity of the
Asset that have not been satisfied or validly waived;



     (i) the Asset does not contravene in any material respect any Applicable Laws (including,
without limitation all applicable predatory and abusive lending laws and all laws, rules and
regulations relating to usury, truth in lending, fair credit billing, fair credit reporting, equal
credit opportunity, fair debt collection practices, licensing and privacy) and with respect to
which no part thereof is in violation of any Applicable Law in any material respect;



     (j) neither the assignment of the Asset under the Sale Agreement by the Originator, the sale
of the Asset hereunder or the granting of a security interest hereunder by the Seller violates,
conflicts with or contravenes any Applicable Laws or any contractual or other restriction,
limitation or encumbrance;



     (k) on or before the applicable Cut-Off Date, the Obligor of such Asset shall have been
directed to make all payments to the Lock-Box or directly to the Lock-Box Account;



     (l) the Asset requires the Obligor thereof to maintain adequate property damage and loss
insurance with respect to the real or personal property constituting the Related Property (if any)
if such Related Property is of a type customarily so insured;



16









 





     (m) the Related Property (if any) (i) has not been foreclosed on or repossessed from the
current Obligor by the Servicer, and (ii) has not suffered any material loss or damage that has not
been repaired or restored;



     (n) the Asset provides by its terms that the Obligor’s payment obligations are absolute and
unconditional without any right of rescission, setoff, counterclaim or defense for any reason
against the Originator and the Asset contains a clause that has the effect of unconditionally and
irrevocably obligating the Obligor to make periodic payments (including taxes) notwithstanding any
damage to, defects in, or destruction of the Related Property (if any) or any other event,
including obsolescence of any property or improvements;



     (o) the Asset is not subject to any litigation, dispute, refund, claims of rescission, setoff,
netting, counterclaim or defense whatsoever, including but not limited to, claims by or against the
Obligor thereof or a payor to or account debtor of such Obligor;



     (p) the Asset requires the Obligor to maintain the Related Property in good condition and to
bear all the costs of operating and maintaining same, including taxes and insurance relating
thereto;



     (q) the Asset shall not have been originated in, nor shall it be subject to the laws of, any
jurisdiction under which the sale, transfer and assignment of such Asset under the Transaction
Documents would be unlawful, void or voidable;



     (r) the Asset, together with the Required Asset Documents and Asset File related thereto, is
assignable and does not require the consent of or notice to the Obligor to consummate the
transactions contemplated by the Transaction Documents or contain any other restriction on the
transfer or the assignment of the Asset for the purpose of consummating the transactions
contemplated by the Transaction Documents other than a consent or waiver of such restriction that
has been obtained prior to the date on which the Asset was sold to the Seller; provided that with
respect to Loans which are secured by an interest in commercial real estate, the Required Asset
Documents may restrict the transfer or the assignment of the related Loan so long as such Loan is
freely assignable or transferable to a Qualified Transferee;



     (s) the Obligor of such Asset is legally responsible for all taxes relating to the Related
Security or other security relating to such Asset, and all payments in respect of the Asset are
required to be made free and clear of, and without deduction or withholding for or on account of,
any taxes, unless such withholding or deduction is required by Applicable Law in which case the
Obligor thereof is required to make “gross-up” payments that cover the full amount of any such
withholding taxes on an after-tax basis;



     (t) the Asset complies with the representations and warranties made by the Seller and Servicer
hereunder and all information provided by the Seller or the Servicer with respect to the Asset is
true and correct in all material respects;



     (u) the Asset and the Related Security have not been sold, transferred, assigned or pledged by
the Seller to any Person;



17









 





     (v) no selection procedure adverse to the interests of the Administrative Agent, the Purchaser
Agents or the Secured Parties was utilized by the Seller or Originator in the selection of Asset
for inclusion in the Collateral; it being understood that selection procedures used by the Seller
or Originator for the inclusion of Assets in one or more of its various securitizations or other
financing facilities and which are solely intended to obtain the most beneficial advance rates
thereunder and/or otherwise maximize the efficiency of such facilities, shall not be deemed to be
adverse procedures for purposes of this paragraph;



     (w) the Asset has not been compromised, adjusted, extended, satisfied, rescinded, set-off or
modified by the Seller, the Originator or the Obligor with respect thereto, and no Asset is subject
to compromise, adjustment, extension, satisfaction, rescission, set-off, counterclaim, defense,
abatement, suspension, deferment, deductible, reduction, termination or modification, whether
arising out of transactions concerning the Asset, or otherwise, by the Seller, the Originator or
the Obligor with respect thereto except for amendments to such Asset otherwise permitted under
Section 6.4(a) of this Agreement and in accordance with the Credit and Collection Policy;



     (x) the particular Asset is not one as to which the Seller has knowledge which should lead it
to expect such Asset will not be paid in full;



     (y) except with respect to DIP Loans, the Obligor of such Asset is not the subject of an
Insolvency Event or Insolvency Proceedings;



     (z) the Asset is secured by a valid, perfected, first priority (other than with respect to
Senior Subordinated Loans and Junior Subordinated Loans) security interest in all assets that
constitute the collateral for the Asset (subject to Liens expressly permitted by the underlying
loan documents), and, in the case of a Loan (other than the types listed above), such collateral
shall include but not be limited to the material intellectual property of the Obligor (if any);



     (aa) 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 or performance of the Asset have been duly obtained, effected or given
and are in full force and effect;



     (bb) no provision of the Asset has been waived, modified, or altered in any respect, except in
accordance with the Credit and Collection Policy and by instruments duly authorized and executed
and contained in the Required Asset Documents;



     (cc) the Asset satisfies all applicable requirements of and was originated or acquired,
underwritten and closed in accordance with the Credit and Collection Policy (including without
limitation the execution by the Obligor of all documentation required by the Credit and Collection
Policy);



     (dd) the Asset was generated in the ordinary course of the Originator’s business;



     (ee) the Asset arises pursuant to documentation with respect to which the Originator has
performed all obligations required to be performed by it thereunder;



18









 





     (ff) the Asset is not Margin Stock;



     (gg) the acquisition of the Asset by the Seller will not cause the Seller or the pool of
Collateral to be required to be registered as an investment company under the 1940 Act; and



     (hh) the Asset is not subject to a guaranty by the Originator or any Affiliate thereof.




	(2)	 	With respect to any Loan:





     (a) the Loan provides (i) for periodic payments of interest and/or principal in cash, which
are due and payable on a monthly, quarterly or semi-annual basis unless otherwise consented to in
writing by the Administrative Agent, and (ii) that the Servicer (or, with respect to Assigned
Loans, that the agent bank or a majority of the related lenders) may accelerate all payments if the
Obligor is in default under the Loan and any applicable grace period has expired (in the case of
any Senior Subordinated Loan or Junior Subordinated Loan, subject to any applicable intercreditor
or subordination agreement);



     (b) the Loan is underwritten as (i) a cash flow enterprise value loan, (ii) a rediscount loan,
or (iii) a commercial real estate loan, in each case pursuant to and in accordance with the Credit
and Collection Policy;



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



     (d) the Loan does not permit the Obligor to defer all or any portion of the current cash
interest due thereunder;



     (e) the Loan does not permit the payment obligation of the Obligor thereunder to be converted
or exchanged for equity capital of such Obligor;



     (f) other than Participation Loans, Agented Notes and Assigned Loans, with respect to the
Originator’s obligation to fund and the actual funding of the Loan by the Originator, the
Originator has not assigned or granted participations to, in whole or in part;



     (g) with respect to any DIP Loan, the Originator or its assignee has been granted a first
priority lien status in respect of all or certain of the Obligor’s assets by final order of the
applicable federal bankruptcy or district court;



     (h) if the Obligor of such Loan is the Obligor of more than one Loan, all such Loans are
cross-collateralized and cross-defaulted;



     (i) the Loan does not represent capitalized interest or payment obligations relating to “put”
rights;



     (j) the Loan is not a Loan or extension of credit by the Originator to the Obligor for the
purpose of making any past due principal, interest or other payments due on such Loan;



19









 





     (k) the Originator (i) has completed to its satisfaction, in accordance with the Credit and
Collection Policy, a due diligence audit and collateral assessment with respect to such Loan and
(ii) has done nothing to impair the rights of the Administrative Agent, the Purchaser Agents or the
Secured Parties with respect to the Loan, the Related Security, the Scheduled Payments or any
income or Proceeds therefrom;



     (l) the Loan is a Senior Secured ABL Loan, Senior Secured Term Loan, Stretch Senior Secured
Loan, Senior B-Note Loan, Senior Subordinated Loan or Junior Subordinated Loan;



     (m) except with respect to Senior Subordinated Loans, Junior Subordinated Loans and, to the
extent set forth in the definition thereof, Senior B-Note Loans, the Loan is not subordinated to
any other loan or financing to the related Obligor;



     (n) if the Loan is a Revolver, either it provides by its terms that any future funding
thereunder is in the Originator’s sole and absolute discretion or it is subject to the Retained
Interest provision of this Agreement;



     (o) the Face Amount of the Loan is the dollar amount thereof shown on the books and records of
the Originator and Seller;



     (p) with respect to Senior B-Note Loans, Senior Subordinated Loans or Junior Subordinated
Loans, the Originator has entered into an intercreditor agreement or subordination agreement (or
such provisions are contained in the principal loan documents) with, or provisions for the benefit
of, the senior lender, which agreement or provisions are assignable to and have been assigned to
the Seller, and which provide that any standstill of remedies by the Originator or its assignee is
limited (A) such that there shall be no standstill of remedies (x) until after a payment default
with respect to the senior obligation or the Originator’s or assignee’s receipt from the senior
lender or Obligor of a notice of default by the Obligor under the senior debt and (y) unless a
covenant or payment default is also in effect, and (B) to no longer than one hundred eighty (180)
days in duration in the aggregate in any given year;



     (q) with respect to any Acquired Loan or Assigned Loan, such Loan has been re-underwritten by
the Originator and satisfies all of the Originator’s underwriting criteria;



     (r) with respect to any Acquired Loan acquired from an Affiliate of the Originator, the
Administrative Agent has received a satisfactory legal opinion concerning the acquisition of such
Loan by the Originator in a true sale transaction;



     (s) with respect to any Acquired Loan that was acquired in a pool by the Originator along with
one or more other Acquired Loans, the Administrative Agent has approved in writing such Loan for
inclusion in the Collateral and has completed its own due diligence with respect to such Loan;



     (t) with respect to Agented Notes, the related underlying loan documents (a) shall include a
note purchase or similar 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 previously delivered by the Originator



20









 




to the Administrative Agent in connection with the CS Funding I Transaction, and (b) are duly
authorized, fully and properly executed and are the valid, binding and unconditional payment
obligation of the Obligor thereof;




     (u) with respect to Agented Notes, the Originator (or 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;



     (v) 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;



     (w) with respect to any Agented Note, all required notifications, if any, have been given to
the collateral agent, the payment agent and any other parties required by the Required Asset
Documents of, and all required consents, if any, have been obtained with respect to, the
Originator’s assignment of such Agented Note and the Originator’s right, title and interest in the
Related Property to the Seller and the Administrative Agent’s security interest therein on behalf
of the secured parties;



     (x) with respect to Agented Notes, the right to control the actions of and replace the
collateral agent and/or the paying agent of the syndicated notes is to be exercised by at least a
majority in interest of all holders of such Agented Notes;



     (y) 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 holders 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;



     (z) no portion of the proceeds used to make payments of principal or interest on such Loan
have come from a new loan by the Originator;



     (aa) does not contain a confidentiality provision that restricts or purports to restrict the
ability of the Administrative Agent or any Secured Party to exercise their rights under this
Agreement, including, without limitation, their rights to review the Loan, the Required Asset
Documents and Asset File;



     (bb) has an original term to maturity (A) in the case of Senior Secured ABL Loans, Senior
Secured Term Loans, Stretch Senior Secured Loans and Senior B-Note Loans of not greater than 84
months, or (B) in the case of Junior Subordinated Loans and Senior Subordinated Loans of not
greater than 120 months;



     (cc) is not a consumer loan;



21









 





     (dd) none of the Loans secured by a mortgage are high-cost loans as defined by applicable
predatory- and abusive-lending laws; and



     (ee) the proceeds of the Loan will not be used to finance activities of the type engaged in by
businesses classified under NAICS Codes 2361 (Residential Building Construction), 2362
(Nonresidential Building Construction), 2371 (Utility System Construction), 2372 (Land
Subdivision); provided that the foregoing shall not be deemed to render inventory loans to
timeshare operators ineligible.


“Eligible Obligor”: On any date of determination, any Obligor that (i) is a business
organization (and not a natural person) duly organized and validly existing under the laws of its
jurisdiction of organization and has a billing address within the United States, (ii) is a legal
operating entity or holding company, (iii) has not entered into the Loan primarily for personal,
family or household purposes, (iv) is not a Governmental Authority, (v) is not an Affiliate of any
party hereto, (vi) is not in the gaming (other than Obligors in the business of providing services
to the gaming industry), nuclear waste or natural resources industry (other than Obligors in the
business of wholesale purchasing and reselling of natural gas or electricity, the Loans to which
have been appropriately hedged), (vii) is not engaged in the business of conducting proprietary
research on new drug development, (viii) is not the subject of an Insolvency Proceeding (except
with respect to a DIP Loan), (ix) as of the applicable Cut-Off Date, has an Eligible Risk Rating,
and (x) is not an Obligor of a Charged-Off Asset or Delinquent Asset; provided that with respect to
an Obligor on any Loan previously financed pursuant to and in accordance with the terms and
conditions of the Acquisition Facility, the Eligible Obligor criteria applicable to such Obligor
(to the extent different than the foregoing) shall be limited to the criteria set forth in the
definition of “Eligible Obligor” in the Acquisition Facility (which criteria are incorporated
herein by reference along with any related terms, provisions and definitions mutatis mutandis as if
set forth fully herein and notwithstanding any subsequent or contemporaneous termination of the
Acquisition Facility (collectively, the “Incorporated Obligor Criteria”)) and such Obligor
shall be deemed to be an Eligible Obligor or an ineligible Obligor for purposes of this Agreement,
as the case may be, on any date of determination by virtue of such Obligor’s having satisfied or
failed to satisfy each of the Eligible Obligor criteria and any Incorporated Obligor Criteria on
such date.



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



“Eligible Risk Rating”: With respect to a designated Obligor, a “Rating 1,” “Rating 2,”
“Rating 3,” or, solely in the case of Assets originated or acquired by CapitalSource Inc. or its
Affiliates longer than six months before the Asset becomes part of the Collateral, “Rating 4” each
as determined in accordance with the Credit and Collection Policy.



“Environmental Laws”: Any and all foreign, federal, state and local laws, statutes,
ordinances, rules, regulations, permits, licenses, approvals, interpretations and orders of courts
or Governmental Authorities, relating to the protection of human health or the environment,
including, but not limited to, requirements pertaining to the manufacture, processing,


22









 






distribution, use, treatment, storage, disposal, transportation, handling, reporting, licensing,
permitting, investigation or remediation of hazardous materials. Environmental Laws include,
without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act (42
U.S.C. § 9601 et seq.), the Hazardous Material Transportation Act (49 U.S.C. § 331 et
seq.), the Resource Conservation and Recovery Act (42 U.S.C. § 6901 et seq.), the
Federal Water Pollution Control Act (33 U.S.C. § 1251 et seq.), the Clean Air Act (42
U.S.C. § 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. § 2601 et
seq.), the Safe Drinking Water Act (42 U.S.C. § 300, et seq.), the Environmental
Protection Agency’s regulations relating to underground storage tanks (40 C.F.R. Parts 280 and
281), and the Occupational Safety and Health Act (29 U.S.C. § 651 et seq.), and the rules
and regulations thereunder, each as amended or supplemented from time to time.



“ERISA”: The United States 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 Seller, (b) a trade or
business (whether or not incorporated) under common control (within the meaning of Section 414(c)
of the Code) with the Seller, or (c) a member of the same affiliated service group (within the
meaning of Section 414(m) of the Code) as the Seller, any corporation described in clause (a) above
or any trade or business described in clause (b) above.



“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) any Liquidity
Bank shall have notified the Administrative Agent of a determination by such Liquidity Bank or any
of its 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
United States dollars in the London interbank market to fund any Advance, (b) any Liquidity Bank
shall have notified the Administrative Agent of the inability, for any reason, of such Liquidity
Bank or any of its assignees or participants to determine the Adjusted Eurodollar Rate, (c) any
Liquidity Bank shall have notified the Administrative Agent of a determination by such Liquidity
Bank or any of its assignees or participants that the rate at which deposits of United States
dollars are being offered to such Liquidity Bank or any of its assignees or participants in the
London interbank market does not accurately reflect the cost to such Liquidity Bank, such assignee
or such participant of making, funding or maintaining any Advance or (d) any Liquidity Bank shall
have notified the Administrative Agent of the inability of such Liquidity Bank or any of its
assignees or participants to obtain United States dollars in the London interbank market to make,
fund or maintain any Advance.



“Eurodollar Reserve Percentage”: For any period means the percentage, 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


23









 






requirements) with respect to liabilities or assets consisting of or including Eurocurrency
Liabilities having a term of one month.



“Excepted Person”: Defined in Section 13.13(a).



“Exchange Act”: The United States Securities Exchange Act of 1934, as amended.



“Excluded Amounts”: (a) Any amount received in the Lock-Box by, on or with respect to any
Asset included as part of the Collateral, which amount is attributable to the payment of any tax,
fee or other charge imposed by any Governmental Authority on such Asset, (b) any amount
representing a reimbursement of insurance premiums and (c) any amount with respect to any Asset
retransferred or substituted for upon the occurrence of a Warranty Event (if the Seller has decided
that such Asset is no longer to be included in the Collateral) or that is otherwise replaced by a
Substitute Asset (if the Seller has decided that such Asset is no longer to be included in the
Collateral), to the extent such amount is attributable to a time after the effective date of such
replacement.



“Existing Assets”: Each Asset purchased by the Seller under the Sale Agreement and owned
by the Seller on the Closing Date.



“Face Amount”: With respect to any Asset, the Outstanding Asset Balance thereof shown on
the applicable Asset List.



“Facility Amount”: $470,000,000, 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 mean the Advances Outstanding.



“Facility Termination Date”: February 28, 2006, or such later date as the Administrative
Agent and each Purchaser Agent, in its sole discretion, shall notify the Seller of in writing.



“FDIC”: The Federal Deposit Insurance Corporation, and any successor thereto.



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



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



“Financial Sponsor”: Any Person, including any Subsidiary of another Person, whose
principal business activity is acquiring, holding, and selling investments (including controlling
interests) in otherwise unrelated companies that each are distinct legal entities with separate
management, books and records and bank accounts, whose operations are not integrated one with
another and


24









 






whose financial condition and creditworthiness are independent of the other companies so owned by
such Person.



“Fitch”: Fitch, Inc. or any successor thereto.



“Fixed Rate Asset”: A Loan that is an Eligible Asset other than a Floating Rate Asset.



“Fixed Rate Asset Percentage”: As of any date of determination, the percentage equivalent
of a fraction (a) the numerator of which is equal to the sum of the Outstanding Asset Balances of
all Fixed Rate Assets and Banded Floating Rate Loans that are within 0.50% of the maximum interest
rate allowable under their Required Asset Documents as of such date, and (b) the denominator of
which is equal to the Aggregate Outstanding Asset Balance as of such date.



“Floating Rate Asset”: A Loan that is an Eligible Asset where the interest rate payable by
the Obligor thereof is based on the CSE Prime Rate or CSE LIBOR Rate, plus some specified interest
percentage in addition thereto, and the Loan provides that such interest rate will reset
immediately upon any change in the related CSE Prime Rate or CSE LIBOR Rate.



“Funding Date”: The third Business Day following the Closing Date, and (i) as to any
incremental Advance, any Business Day that is one Business Day immediately following, and (ii) as
to any Swingline Advance, the Business Day of, the receipt by the Administrative Agent and each
Purchaser Agent of a Borrowing Notice (along with a Borrowing Base Certificate) in accordance with
Section 2.2 or Section 2.3, as applicable.



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



“Governmental Authority”: With respect to any Person, any nation or government, any state
or other political subdivision thereof, any central bank (or similar monetary or regulatory
authority) thereof, any body or entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government and any court or arbitrator having
jurisdiction over such Person.



“Guarantor”: Defined in the Recitals of this Agreement.



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



“Hedge Amount”: On any day, an amount equal to the product of (a) the Borrowing Base and
(b) the Fixed Rate Asset Percentage on such day.



“Hedge Collateral”: Defined in Section 5.3(b).



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



“Hedge Counterparty”: Means (a) Wachovia Bank, National Association and its successors and
assigns, and (b) any entity that (i) on the date of entering into a Hedging Agreement (x) is an
interest rate swap dealer that has been approved in writing by the Administrative Agent (which


25









 






approval shall not be unreasonably withheld), and (y) has a long-term unsecured debt rating of not
less than “A” by S&P, not less than “A2” by Moody’s and not less than “A” by Fitch (if such entity
is rated by Fitch) (“Long-term Rating Requirement”) and a short-term unsecured debt rating of not
less than “A-1” by S&P, not less than “P-1” by Moody’s and not less than “F-1” by Fitch (if such
entity is rated by Fitch) (“Short-term Rating Requirement”), and (ii) in a Hedging Agreement (x)
consents to the assignment of the Seller’s rights under each Hedging Agreement to the
Administrative Agent for the benefit of the Secured Parties pursuant to Section 5.3(b) and (y)
agrees that in the event that Moody’s, S&P or Fitch reduces its long-term unsecured debt rating
below the Long-term Rating Requirement, or reduces its short-term unsecured debt rating below the
Short-term Rating Requirement, it shall transfer its rights and obligations under each Hedge
Transaction to another entity that meets the requirements of clause (i) and (ii) hereof and has
entered into a Hedging Agreement with the Seller on or prior to the date of such transfer.



“Hedge Guaranty”: The Guaranty, dated as of the date hereof, by and between CSE Mortgage
in favor of Wachovia, as Hedge Counterparty, as amended, modified, waived, supplemented, restated
or replaced from time to time.



“Hedge Notional Amount”: For any Advance or Swingline Advance, the aggregate notional
amount in effect on any day under all Hedge Transactions entered into pursuant to Section
5.3(a) for that Advance or Swingline Advance.



“Hedge Percentage”: With respect to:




     (a) Fixed Rate Assets is, on any day that (i) the Aggregate Outstanding Asset Balance exceeds
$150,000,000, an amount equal to 100% if the sum of the Outstanding Asset Balances of all Fixed
Rate Assets exceeds $35,000,000, (ii) the Aggregate Outstanding Asset Balance exceeds $150,000,000,
an amount equal to 0% if the sum of the Outstanding Asset Balances of all Fixed Rate Assets is less
than or equal to $35,000,000, (iii) the Aggregate Outstanding Asset Balance is less than or equal
to $150,000,000, an amount equal to 100% if the sum of the Outstanding Asset Balances of all Fixed
Rate Assets exceeds $20,000,000 or (iv) the Aggregate Outstanding Asset Balance is less than or
equal to $150,000,000, an amount equal to 0% if the sum of the Outstanding Asset Balances of all
Fixed Rate Assets is less than or equal to $20,000,000;



     (b) Floating Rate Assets is 0%;



     (c) Banded Floating Rate Loans, on any day, is an amount equal to 100%.


“Hedge Transaction”: Each interest rate or index rate swap transaction between the Seller
and a Hedge Counterparty that is entered into pursuant to Section 5.3(a) and is governed by
a Hedging Agreement.



“Hedged Rate”: For any Advance or Swingline Advance, the interest rate payable to a Hedge
Counterparty under the Hedge Transaction related to such Advance or Swingline Advance computed as
of the Cut-Off Date under or with respect to the Asset to which that Advance or Swingline Advance
relates.




26









 







“Hedging Agreement”: Each agreement between the Seller and a Hedge Counterparty that
governs one or more Hedge Transactions entered into pursuant to Section 5.3(a), 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 D hereto or such other form as the Administrative Agent shall approve in writing,
and each “Confirmation” thereunder confirming the specific terms of each such Hedge Transaction.



“Highest Required Investment Category”: (i) With respect to ratings assigned by Moody’s,
“Aa2” or “P-1” for one month instruments, “Aa2” and “P-1” for three month instruments, “Aa3” and
“P-1” for six month instruments and “Aa2” and “P-1” for instruments with a term in excess of six
months, (ii) with respect to rating assigned by S&P, “A-1” for short-term instruments and “A” for
long-term instruments, and (iii) with respect to rating assigned by Fitch (if such investment is
rated by Fitch), “F-1+” for short-term instruments and “AAA” for long-term instruments.



“Increased Costs”: Any amounts required to be paid by the Seller to an Affected Party
pursuant to Section 2.15.



“Indebtedness”: With respect to any Person at any date, (a) all indebtedness of such
Person for borrowed money or for the deferred purchase price of property or services (other than
current liabilities incurred in the ordinary course of business and payable in accordance with
customary trade practices) or that is evidenced by a note, bond, debenture or similar instrument or
other evidence of indebtedness customary for indebtedness of that type, (b) all obligations of such
Person under leases that shall have been or should be, in accordance with generally accepted
accounting principles, recorded as 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, (e) all indebtedness, obligations or liabilities of that
Person in respect of Derivatives, and (f) obligations under direct or indirect guaranties in
respect of obligations (contingent or otherwise) to purchase or otherwise acquire, or to otherwise
assure a creditor against loss in respect of, indebtedness or obligations of others of the kind
referred to in clauses (a) through (e) above.



“Indemnified Amounts”: Defined in Section 11.1.



“Indemnified Parties”: Defined in Section 11.1.



“Independent Director”: Defined in Section 4.1(u).



“Industry”: The industry of an Obligor as determined by reference to the two digit
standard industry classification or North American Industry Classification System 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


27









 






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



“Insolvency Laws”: 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 other
Governmental Authority relating to any Insolvency Event.



“Instrument”: Any “instrument” (as defined in Article 9 of the UCC), other than an
instrument that constitutes part of chattel paper.



“Insurance Policy”: With respect to any Asset, an insurance policy covering liability and
physical damage to or loss of the Related Property.



“Insurance Proceeds”: Any amounts payable or any payments made on or with respect to an
Asset under any Insurance Policy.



“Intercreditor Agreement”: The Fourth Amended and Restated Intercreditor and Lockbox
Administration Agreement, dated as of June 30, 2005, by and among each of the financing agents from
time to time party thereto, Bank of America, N.A., as the lockbox bank, CapitalSource Finance LLC,
as the originator, as the original servicer and as the lockbox servicer, and CapitalSource Funding
LLC, as the owner of the account and as the owner of the lockbox, as amended, modified, waived,
supplemented, restated or replaced from time to time.



“Interest”: For each Accrual Period and each Advance or Swingline Advance outstanding, 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






28









 






	 	 	 	 	 	 	 
	 

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





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



“Interest Collections”: Any and all amounts received in respect of any interest, fees or
other similar charges (including any Finance Charges) from or on behalf of any Obligor that are
deposited into the Collection Account, or received by or on behalf of the Seller by the Servicer or
Originator in respect of an Asset, in the form of cash, checks, wire transfers, electronic
transfers or any other form of cash payment (net of any payment owed by the Seller to, and
including any receipts from, any Hedge Counterparties).



“Interest Rate”: For any Accrual Period and for each Advance or Swingline Advance
outstanding for each day during such Accrual Period:





     (i) to the extent the applicable Conduit Purchaser or Swingline Purchaser has funded
the applicable Advance or Swingline Advance through the issuance of commercial paper, a rate
equal to the applicable CP Rate; or




     (ii) to the extent the applicable Conduit Purchaser or Swingline Purchaser did not fund
the applicable Advance or Swingline Advance through the issuance of commercial paper, 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 a Conduit Purchaser has funded the making or maintenance thereof by a sale of an interest
therein to any Liquidity Bank under the applicable Liquidity Agreement on any day other than the
first day of such Accrual Period without giving such Liquidity Bank(s) at least two Business Days’
prior notice of such assignment.



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



“Issuer”: VFCC and any other Conduit Purchaser whose principal business consists of
issuing commercial paper or other securities to fund its acquisition or maintenance of receivables,
accounts, instruments, chattel paper, general intangibles and other similar assets.



“Junior Subordinated Loan”: Any Term Loan that (i) is a cash flow enterprise value loan in
accordance with the Credit and Collection Policy, (a) may or may not be secured by a Lien on the
Obligor’s assets constituting Related Property for the Loan, (b) has a Loan-to-Value of less than
85%, (c) contains terms which, upon the occurrence of an event of default under the underlying loan
documents or in the case of any liquidation or foreclosure on the Related Property, provide that
the Seller’s portion of such Loan would be paid only after the other lenders party to such Loan
(including any lender party making any Senior Secured ABL Loan, Senior Secured Term Loan, Stretch
Senior Secured Loan, Senior B-Note Loan or Senior Subordinated Loan whose right to payment is
contractually senior to the Seller) is paid in full or




29









 







(ii) is a “mezzanine” real estate loan in accordance with the Credit and Collection Policy, (a) is
subordinate to a Senior Secured Loan, Stretch Senior Secured Loan or Senior B-Note Loan in terms of
priority of payment obligations and does not share the same collateral as any of the senior loans
to the applicable Obligor, and (b) the Related Property consists of real property and/or a pledge
of the ownership interests in the entity that owns the related mortgaged property and (iii) in each
case is substantially in the form of the “Junior Subordinated Loan” previously delivered by the
Originator to the Administrative Agent in connection with the CS Funding I Transaction or such
other form as shall be adopted by the Originator and approved in writing by the Administrative
Agent at least five days prior to such Loan becoming part of the Collateral hereunder.



“LIBOR Rate”: For any day during any Accrual Period and any Advance or Swingline Advance
or portion thereof, an interest rate per annum equal to:





     (1) the posted rate for thirty (30) day deposits in United States Dollars appearing on
Telerate page 3750 as of 11:00 a.m. (London time) on the Business Day which 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




     (2) if no such 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 United States
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”: Any mortgage, lien, pledge, charge, right, claim, security interest or encumbrance
of any kind of or on any Person’s assets or properties in favor of any other Person (including any
UCC financing statement or any similar instrument filed against such Person’s assets or
properties).



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


30









 






repossession, refurbishing and disposition of any related assets securing such Portfolio Asset upon
or after the expiration or earlier termination of such Portfolio Asset and other out-of-pocket
costs related to the liquidation of any such assets, including the attempted collection of any
amount owing pursuant to such Portfolio Asset if it is a Charged-Off Portfolio Asset, and if
requested by the Administrative Agent, the Servicer and Originator must provide to the
Administrative Agent a breakdown of the Liquidation Expenses for any Portfolio Asset along with any
supporting documentation therefor.



“Liquidity Agreement”: (a) with respect to VFCC, the Liquidity Purchase Agreement, dated
as of the date hereof, by and among VFCC, as seller, the Liquidity Banks named therein, WCM, as
Deal Agent and documentation agent, and Wachovia, as liquidity agent and eligible credit enhancer,
and (b) with respect to each Additional Purchaser, the liquidity purchase agreement by and among
such Additional Purchaser, the Liquidity Banks named therein and the related Additional Agent, as
such agreement may be amended, modified, waived, supplemented, restated or replaced from time to
time.



“Liquidity Bank”: The Person or Persons who provide liquidity support to VFCC or any
Additional Purchaser pursuant to a Liquidity Agreement in connection with the issuance by such
Conduit Purchaser of Commercial Paper Notes.



“Liquidity Factor Reduction Event”: With respect to each Asset included as part of the
Collateral subject to the Retained Interest provisions of this Agreement, a “Liquidity Factor
Reduction Event” under and as defined in any Permitted Securitization Transaction rated by the
Rating Agencies.



“Loan”: Any loan originated by the Originator or, in the case of an Assigned Loan or an
Acquired Loan, otherwise acquired by the Originator, that is identified on an Asset List and sold
or contributed to the Seller hereunder and included as part of the Collateral, which loan includes,
without limitation, (i) the Required Asset Documents and Asset File, and (ii) all right, title and
interest of the Originator in and to the loan and any Related Property; provided that the foregoing
shall include any “Loan” under and as defined in the Acquisition Facility.



“Loan Register”: Defined in Section 5.4(n).



“Loan-to-Liquidation Value or LLV”: With respect to any Loan, as of the date of
origination, the percentage equivalent of a fraction (i) the numerator of which is equal to the
maximum availability (as provided in the applicable underlying loan documents) of such Loan as of
the date of its origination and (ii) the denominator of which is equal to the liquidation value of
the Related Property securing such Loan that is subject to a first priority lien in favor of the
Originator (as determined by the Servicer in accordance with the Credit and Collection Policy and
in a commercially reasonable manner).



“Loan-to-Value Ratio or LTV”: With respect to any Loan, as of any date of
determination, the percentage equivalent of a fraction (a) the numerator of which is equal to the
total commitment amount of such Loan as of the date of its origination (as provided in the related
loan documents) plus the total commitment amount or principal amount, as the case may be, as of the
applicable date of origination or incurrence, of all loans and other indebtedness which is senior
to or pari




31









 







passu with such Loan in the “capital structure” of the related Obligor (as defined in, and as
determined by the Servicer in accordance with, the Credit and Collection Policy and in a
commercially reasonable manner), and (b) the denominator of which is equal to the enterprise value
of the related Obligor as of the applicable Cut-Off Date (as determined by the Servicer in good
faith, in a manner consistent with third party transactions of a similar nature and in accordance
with the Credit and Collection Policy); provided that in the case of Material Mortgage Loans, the
denominator in the foregoing calculation shall be the lower of the Obligor’s cost to acquire the
Related Property or the current appraised value of the Related Property.



“Lock-Box”: The post office box to which Collections are remitted for retrieval by a
Lock-Box Bank and deposited by such Lock-Box Bank into a Lock-Box Account, the details of which are
contained in Schedule II.



“Lock-Box Account”: The account maintained at the Lock-Box Bank for the purpose of
receiving Collections, the details of which are contained in Schedule II, as such schedule
may be amended from time to time.



“Lock-Box Agreement”: The Fifth Amended and Restated Three Party Agreement Relating to
Lockbox Services and Control (with Activation Upon Notice), dated as of June 30, 2005, by and among
certain financing agents party thereto, Bank of America, N.A., as the lockbox bank, CapitalSource
Finance LLC, as the originator, as the original servicer and as the lockbox servicer, and
CapitalSource Funding LLC, as the owner of the account and as the owner of the lockbox, as amended,
modified, waived, supplemented, restated or replaced from time to time.



“Lock-Box Bank”: Bank of America, N.A., or any of the banks or other financial
institutions holding one or more Lock-Box Accounts.



“Margin Stock”: Margin Stock as defined under Regulation U.



“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 Originator, the Servicer or the Seller, (b) the validity,
enforceability or collectibility of this Agreement or any other Transaction Document or the
validity, enforceability or collectibility of the Assets generally or any material portion of the
Assets, (c) the rights and remedies of the Administrative Agent, the Purchasers, the Purchaser
Agents and the Secured Parties, (d) the ability of the Seller, the Servicer, the Backup Servicer or
the Collateral Custodian to perform its obligations under this Agreement or any Transaction
Document, or (e) the status, existence, perfection, priority or enforceability of the
Administrative Agent’s, the Purchaser Agents’, or the Secured Parties’ interest in the Collateral.



“Material Mortgage Loan”: Any Loan for which the underlying Related Property consisting of
real property owned by the Obligor (i) represents 25% or more (measured by the book value of the
three most valuable parcels of real property as of the date of such Loan) of (a) the original
commitment for such Loan and (b) the fair value of the underlying Obligor and Related Property as a
whole and (ii) is material to the operations of the related business; provided that a Material
Mortgage Loan shall not include certain parcels of real property which the Obligor is in the
process of disposing.




32









 







“Materials of Environmental Concern”: Any gasoline or petroleum (including crude oil or
any fraction thereof) or petroleum products or any hazardous or toxic substances, materials or
wastes, defined or regulated as such in or under any Environmental Laws, including, without
limitation, asbestos, polychlorinated biphenyls and urea-formaldehyde insulation.



“Maximum Availability”: An amount equal to the lesser of:




     (a) the Facility Amount;



     (b) the sum of (i) the product of the Borrowing Base and the Weighted Average Advance Rate
plus (ii) the amount on deposit in the Principal Collections Account received in reduction of the
Outstanding Asset Balance of any Asset that is an Eligible Asset; and



     (c) an amount equal to (i) the Borrowing Base minus (ii) the Required Equity Contribution plus
(iii) the amount on deposit in the Principal Collections Account received in reduction of the
Outstanding Asset Balance of any Asset that is an Eligible Asset;


provided that in case of each of the foregoing clauses (a)-(c), during the Amortization
Period, the Maximum Availability shall be equal to the Advances Outstanding.



“Minimum Pool Yield”: A Pool Yield equal to 3.5%.



“Monthly Report”: Defined in Section 6.10(b).



“Moody’s”: Moody’s Investors Service, Inc., and 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 Seller or any ERISA Affiliate on behalf of its employees.



“NAICS Code” means the North American Industry Classification System Codes by at least four
digits.



“Noteless Loan”: A Loan with respect to which the underlying loan documents do not require
the Obligor to execute and deliver a promissory note to evidence the indebtedness created under
such Loan.



“Obligor”: With respect to any Asset, any Person or Persons obligated to make payments
pursuant to or with respect to such Asset, including any guarantor thereof. For purposes of
calculating any of the Pool Concentration Criteria only, all Assets included as part of the
Collateral or to be transferred to the Collateral the Obligor of which is an Affiliate of another
Obligor (excluding any Financial Sponsor or Obligors that are Affiliates solely because of common
ownership or control by a Financial Sponsor) shall be aggregated with all Assets of such other
Obligor; for example, if Corporation A is an Affiliate (other than because of a
common Financial Sponsor) of Corporation B, and the sum of the Outstanding Asset Balances of all of
Corporation A’s Loans included as part of the Collateral constitutes 10% of the Aggregate
Outstanding Asset Balance and the sum of the Outstanding Asset Balances all of Corporation B’s
Loans included as part of the Collateral constitutes 10% of the Aggregate Outstanding Asset


33









 






Balance, the combined Obligor concentration for Corporation A and Corporation B would be 20%.



“Officer’s Certificate”: A certificate signed by a Responsible Officer of the Seller or
the Servicer, as the case may be, and delivered to the Collateral Custodian.



“Opinion of Counsel”: A written opinion of counsel, which opinion and counsel are
acceptable to the Administrative Agent in its sole discretion.



“Optional Sale”: Defined in Section 2.19(a).



“Optional Sale Date”: Any Business Day, provided forty-five (45) days written notice is
given in accordance with Section 2.19(a).



“Originator”: Defined in the Preamble of this Agreement.



“Other Costs”: Defined in Section 13.09(c).



“Outstanding Asset Balance”: (i) With respect to any Loan (other than any other “Loan”
under and as defined in the Acquisition Facility) at any time, the sum of (a) the portion of all
future Scheduled Payments becoming due under or with respect to such Loan plus (b) any past due
Scheduled Payments with respect to such Loan (other than with respect to those payments to the
extent a Servicer Advance is outstanding with respect thereto), and (ii) with respect to any other
“Loan” (under and as defined in the Acquisition Facility), the “Outstanding Asset Balance” as
calculated in accordance with the terms and provisions of the Acquisition Facility (which terms and
provisions are incorporated herein by reference mutatis mutandis as if set forth fully herein and
notwithstanding any subsequent or contemporaneous termination of the Acquisition Facility);
provided that notwithstanding anything to the contrary contained herein, for purposes of
determining the Aggregate Outstanding Asset Balance, if any portion of an Asset is deemed to be
“charged-off” in accordance with the provisions of the definition of Charged-Off Asset, then the
entire Asset shall be deemed to have an Outstanding Asset Balance of zero, except for purposes of
calculating the Average Pool Charged-Off Ratio.



“Participation Loan”: A Loan to an Obligor, originated by the Originator and serviced by
the Servicer in the ordinary course of its business, in which a participation interest has been
granted to another Person in accordance with the Credit and Collection Policy and (i) such
transaction has been fully consummated, pursuant to a participation agreement in the form of the
“Participation Loan Agreement” previously delivered by the Originator to the Administrative Agent
in connection with the CS Funding I Transaction or in such other form as shall be adopted by the
Originator and approved in writing by the Administrative Agent at least five days prior to such
Loan becoming part of the Collateral hereunder, (ii) such Loan (other than in the case of a
Noteless Loan) is represented by a separate promissory note, and (iii) the Originator has the right
to receive and collect payments directly in its own name, and to enforce its rights directly
against the Obligor thereof including the right to proceed against collateral; provided that any
such Loan shall exclude any Retained Interest.



“Payment Date”: The fifteenth (15th) day of each calendar month or, if such day is not a
Business Day, the next succeeding Business Day.




34









 







“Payment Duties”: Defined in Section 8.2(b).



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





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




     (2) demand deposits, time deposits or certificates of deposit of depository
institutions or trust companies incorporated under the laws of the United States or any
state thereof and subject to supervision and examination by federal or state banking or
depository institution authorities; provided that at the time of the Seller’s investment or
contractual commitment to invest therein, the commercial paper, if any, and short-term
unsecured debt obligations (other than such obligation whose rating is based on the credit
of a Person other than such institution or trust company) of such depository institution or
trust company shall have a credit rating from Fitch and each Rating Agency in the Highest
Required Investment Category granted by Fitch and such Rating Agency, which in the case of
Fitch, shall be “F-1+”;




     (3) commercial paper, or other short term obligations, having, at the time of the
Seller’s investment or contractual commitment to invest therein, a rating in the Highest
Required Investment Category granted by each Rating Agency, which in the case of Fitch,
shall be “F-1+”;




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




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




     (6) investments in taxable money market funds or other regulated investment companies
having, at the time of the Seller’s investment or contractual commitment to invest therein,
a rating of the Highest Required Investment Category from Moody’s, S&P and Fitch (if rated
by Fitch);




     (7) time deposits (having maturities of not more than ninety (90) days) by an entity
the commercial paper of which has, at the time of the Seller’s investment or



35









 







contractual commitment to invest therein, a rating of the Highest Required Investment
Category granted by Fitch and each Rating Agency; or




     (8) Eligible Repurchase Obligations with a rating acceptable to the Rating Agencies,
which in the case of Fitch, shall be “F-1+” and in the case of S&P shall be “A-1”.


The Collateral Custodian may pursuant to the direction of the Servicer or Administrative Agent, as
applicable, purchase or sell to itself or an Affiliate, as principal or agent, the Permitted
Investments described above.



“Permitted Liens”: Any of the following as to which no enforcement, collection, execution,
levy or foreclosure proceeding shall have been commenced (a) Liens for state, municipal or other
local taxes if such taxes shall not at the time be due and payable, (b) Liens imposed by law, such
as materialmen’s, mechanics’, carriers’, workmen’s and repairmen’s Liens and other similar Liens,
arising in the ordinary course of business securing obligations that are not overdue for a period
of more than thirty (30) days, and (c) Liens granted pursuant to or by the Transaction Documents.



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



“Person”: An individual, partnership, corporation (including a business 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.



“Pool Charged-Off Ratio”: As of any Determination Date, the product of (i) twelve (12) and
(ii) the percentage equivalent of a fraction, (a) the numerator of which is equal to the sum of the
Outstanding Asset Balances of all Eligible Assets that became Charged-Off Assets (net of Recoveries
during such Collection Period) during the Collection Period related to such Determination Date, and
(b) the denominator of which is equal to the Aggregate Outstanding Asset Balance as of the first
(1st) day of the Collection Period related to such Determination Date.



“Pool Concentration Criteria”: With respect to item (11) below on any day, and with
respect to all other items below, on any day on and after the Concentrations Effective Date, each
of the concentration limitations as set forth below, which concentration limitations (unless
otherwise indicated) shall be measured on the basis of a percentage of the Aggregate Outstanding
Asset Balance:





     (1) the sum of the Outstanding Asset Balance of all Eligible Assets the Obligors of
which are resident of the same state shall not exceed 20%, with the exception of the State
of Florida, which shall not exceed 30%;




     (2) the sum of the Outstanding Asset Balances of all Eligible Assets the Obligors of
which are in the same Industry shall not exceed 20%, with the exception of



36









 







the nursing care facility industry, North American Industry Classification System code
6231, which shall not exceed 40%, lessors of real estate, North American Industry
Classification System code 5311, which shall not exceed 30%, and the real estate management
and appraisal industry, North American Industry Classification System code 5313, which shall
not exceed 30%;




     (3) the sum of the Outstanding Asset Balances of all Eligible Assets with a “Risk
Rating 5” and a “Risk Rating 6” shall not exceed 10% and 0%, respectively;




     (4) the sum of the Outstanding Asset Balances of all Eligible Assets that are DIP Loans
shall not exceed 15%;




     (5) the sum of the Outstanding Asset Balances of all Eligible Assets to a single
Obligor shall not exceed $30,000,000;




     (6) the sum of the Outstanding Asset Balances of all Eligible Assets that are Senior
Secured ABL Loans shall not exceed 25%;




     (7) the sum of the Outstanding Asset Balances of all Eligible Assets that are Senior
Subordinated Loans or Junior Subordinated Loans shall not exceed 20%;




     (8) the sum of the Outstanding Asset Balances of all Eligible Assets that are Senior
B-Note Loans shall not exceed 20%;




     (9) the sum of the Outstanding Asset Balances of all Eligible Assets that are Acquired
Loans shall not exceed 25%;




     (10) the sum of the Outstanding Asset Balances of all Eligible Assets which have been
included as part of the Collateral for eighteen (18) months or more shall not exceed 20%;




     (11) the sum of the Outstanding Asset Balances of all Eligible Assets where all or any
portion of the Related Property is located outside of the United States and its territories
and protectorates shall not exceed 10%; and




     (12) the sum of the Outstanding Asset Balances of all Loans which provide for payments
of interest on a semi-annual basis shall not exceed the lesser of (a) 5% and (b)
$20,000,000.


“Pool Rate”: As of any Determination Date, the annualized percentage equivalent of a
fraction, (a) the numerator of which is equal to all Interest Collections on Assets included in the
Aggregate Outstanding Asset Balance as of the first (1st) day of the Collection Period related to
such Determination Date that are deposited into the Collection Account during such Collection
Period, and (b) the denominator of which is equal to the Aggregate Outstanding Asset Balance as of
the first (1st) day of such Collection Period.



“Pool Weighted Average Life”: At any point in time, the number obtained by (i) for each
Asset included in the Borrowing Base as of such point in time, multiplying each Scheduled Payment


37









 






by the number of months from such point in time until such Scheduled Payment is due; (ii) summing
all of the products calculated pursuant to clause (i); (iii) dividing the sum calculated
pursuant to clause (ii) by the sum of all successive Scheduled Payments due on all Assets
included in the Borrowing Base as of such point in time; and (iv) dividing the amount calculated
pursuant to clause (iii) by 12.



“Pool Yield”: On any day, the excess, if any, of (a) the Pool Rate on such day
over (b) the sum of (i) the Interest Rate, (ii) the Program Fee Rate, (iii) the Servicing
Fee Rate and (iv) the amount determined by multiplying the Revolving Servicing Fee Rate by a
fraction, the numerator of which is the Outstanding Asset Balance of all Revolving Loans and the
denominator of which is the Aggregate Outstanding Asset Balance, in each case as of such day.



“Portfolio Aggregate Outstanding Asset Balance”: With respect to all Portfolio Assets, on
any day, the sum of the Portfolio Outstanding Asset Balances of such Portfolio Assets on such date.
Notwithstanding anything to the contrary contained herein, for purposes of determining the
Portfolio Aggregate Outstanding Asset Balance, if any portion of a Portfolio Asset is deemed to be
“charged-off” in accordance with the provisions of the definition of Charged-Off Portfolio Asset,
then the entire Portfolio Asset shall have a zero (0) Outstanding Asset Balance, except for
purposes of calculating the Average Portfolio Charged-Off Ratio.



“Portfolio Asset”: Any asset owned or serviced by the Originator (including each Asset).
For the avoidance of doubt, the term Portfolio Asset shall not include any asset owned and/or
serviced solely by one or more Affiliates of the Originator (but not by the Originator); provided
that (i) such asset shall not have been originated or acquired by the Originator and (ii) such
asset shall not be included in the consolidated financial statements of the Originator.



“Portfolio Charged-Off Ratio”: As of any Determination Date, the product of (i) twelve
(12) and (ii) the percentage equivalent of a fraction, (a) the numerator of which is equal to the
sum of the Portfolio Outstanding Asset Balances of all Portfolio Assets (excluding equity and
preferred stock investments) that became Charged-Off Portfolio Asset (net of Recoveries during such
Collection Period) during the Collection Period related to such Determination Date and (b) the
denominator of which is equal to the Portfolio Aggregate Outstanding Asset Balance (excluding
equity and preferred stock investments) as of the first (1st) day of the Collection Period related
to such Determination Date.



“Portfolio Delinquency Ratio”: As of any Determination Date, the percentage equivalent of
a fraction, (i) the numerator of which is equal to the sum of the Portfolio Outstanding Asset
Balances of all Delinquent Portfolio Assets on such date and (ii) the denominator of which is equal
to the Portfolio Aggregate Outstanding Asset Balance on such date.



“Portfolio Outstanding Asset Balance”: With respect to any Portfolio Asset, the sum of (i)
the portion of all future Scheduled Payments becoming due under or with respect to such Portfolio
Asset plus (ii) any past due Scheduled Payments with respect to such Portfolio Asset.



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



“Prepayment Amount”: Defined in Section 6.4(b).




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“Prepayments”: Any and all (i) partial or full prepayments on or with respect to an Asset
(including, with respect to any Asset and any Collection Period, any Scheduled Payment, Finance
Charge or portion thereof that is due in a subsequent Collection Period that the Servicer has
received, and pursuant to the terms of Section 6.4(b) expressly permitted the related
Obligor to make, in advance of its scheduled due date, and that will be applied to such Scheduled
Payment on such due date), (ii) Recoveries, and (iii) Insurance Proceeds.



“Prime Rate”: (a) 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, or (b) with
respect to any Additional Purchaser, as otherwise specified by or on behalf of such Additional
Purchaser in the applicable Additional Purchaser Agreement. The Prime Rate is not intended to be
the lowest rate of interest charged by Wachovia or any other specified financial institution in
connection with extensions of credit to debtors.



“Principal Collections”: Any and all amounts received in respect of any principal due and
payable from or on behalf of Obligors that are deposited into the Principal Collections Account, or
received by or on behalf of the Seller by the Servicer or Originator in respect of Assets, in the
form of cash, checks, wire transfers, electronic transfers or any other form of cash payment.



“Principal Collections Account”: Defined in Section 6.4(f).



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



“Program Fee”: (a) With respect to VFCC, as defined in the VFCC Fee Letter and (b) with
respect to any Additional Purchaser, as specified in the applicable Additional Purchaser Fee
Letter.



“Program Fee Rate”: (a) With respect to VFCC, the rate set forth in the VFCC Fee Letter
and (b) with respect to any Additional Purchaser, the rate set forth in the applicable Additional
Agent Fee Letter as the “Program Fee Rate.”



“Pro Rata Share”: (i) the percentage obtained by dividing each Conduit Purchaser’s, as
applicable, Commitment (as determined under subsection (i)(a) of the definition of
Commitment) by the aggregate Commitments of all the Conduit Purchasers (as determined under
subsection (i)(a) of the definition of Commitment).



“Purchaser”: (i) VFCC, (ii) any Additional Purchaser, (iii) the Swingline Purchaser, as
the context requires, and “Purchasers” means collectively (a) VFCC, (b) the Additional
Purchasers and (c) the Swingline Purchaser.



“Purchaser Agent”: The VFCC Agent or any Additional Agent, as the context requires, and
“Purchaser Agents” means collectively the VFCC Agent and the Additional Agents.



“Qualified Institution”: Defined in Section 6.4(f).




39









 







“Qualified Transferee”:




     (a) The Seller, each Purchaser Agent and any Affiliate thereof, or the Administrative Agent or
any Affiliate of the Administrative Agent; or



     (b) any other Person which:




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




     (ii) is regularly engaged in the business of making or owning commercial real estate
loans or operating commercial real estate properties; and




     (iii) is one of the following: (I) an insurance company, bank, savings and loan
association, investment bank, trust company, commercial credit corporation, pension plan,
pension fund, pension fund advisory firm, mutual fund, real estate investment trust,
governmental entity or plan; (II) an investment company, money management firm or a
“qualified institutional buyer” within the meaning of Rule 144A under the Securities Act of
1933, as amended, or an “institutional accredited investor” within the meaning of
Regulation D under the Securities Act of 1933, as amended; or (III) the trustee, collateral
agent or administrative agent in connection with (x) a securitization of the subject Asset
through the creation of collateralized debt or loan obligations or (y) an asset-backed
commercial paper transaction funded by a commercial paper conduit whose commercial paper
notes are rated at least “A-1” by S&P or at least “P-1” by Moody’s, or (z) a repurchase
transaction funded by an entity which would otherwise be a Qualified Transferee so long as
the “equity interest” (other than any nominal or de minimis equity interest) in the special
purpose entity that issues notes or certificates in connection with any such collateralized
debt or loan obligation, asset-backed commercial paper funded transaction or repurchase
transaction is owned by one or more entities that are Qualified Transferees under subclauses
(A) or (B) above; or (IV) any entity Controlled (as defined below) by any of the entities
described in subclauses (i), (ii) or (iii) above.



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



“Quarterly Determination Date”: March 31, June 30, September 30 and December 31 of each
calendar year.



“Rating Agency”: Each of S&P, Moody’s and any other rating agency that has been requested
to issue a rating with respect to a Permitted Securitization Transaction.



“Records”: All documents relating to the Assets, including books, records and other
information (including without limitation, computer programs, tapes, disks, punch cards, data
processing software and related property and rights) executed in connection with the origination or
acquisition of the Collateral or maintained with respect to the Collateral and the related Obligors



40









 







that the Seller, the Originator or the Servicer have generated, in which the Seller, the Originator
or the Servicer have acquired an interest pursuant to the Sale Agreement or in which the Seller,
the Originator or the Servicer have otherwise obtained an interest.



“Recoveries”: As of the time any Related Property or any other related property is sold,
discarded (after a determination by the Servicer that such Related Property or any other related
property has little or no remaining value) or otherwise determined to be fully liquidated by the
Servicer in accordance with the Credit and Collection Policy (or such similar policies and
procedures utilized by the Servicer in servicing the Portfolio Assets) with respect to any
Charged-Off Asset or Charged-Off Portfolio Asset, the proceeds from the sale of the Related
Property or any other related property, the proceeds of any related Insurance Policy, any other
recoveries with respect to such Charged-Off Asset or Charged-Off Portfolio Asset, the Related
Property, any other related property, and amounts representing late fees and penalties, net of
Liquidation Expenses and amounts, if any, received that are required under such Asset or Portfolio
Asset, as applicable, to be refunded to the related Obligor.



“Regulation U”: Regulation U of the Board of Governors of the Federal Reserve System, 12
C.F.R. §221, or any successor regulation.



“Related Property”: With respect to an Asset, any property or other assets pledged as
collateral to the Originator to secure repayment of such Asset, including all Proceeds from any
sale or other disposition of such property or other assets.



“Related Security”: All of the Seller’s right, title and interest in and to:



     (a) any Related Property securing an Asset and all Recoveries related thereto;



     (b) all Required Asset Documents, Asset Files related to any Asset, Records, and the
documents, agreements, and instruments included in the Asset File or Records, including without
limitation, rights of recovery of the Seller against the Originator;



     (c) all Insurance Policies with respect to any Asset;



     (d) 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 or support payment of any Asset, together with all UCC financing statements or similar
filings signed by an Obligor relating thereto;



     (e) the Collection Account, each Lock Box and all Lock Box Accounts, together with all cash
and investments in each of the foregoing other than amounts earned on investments therein;



     (f) any Hedging Agreement and any payment from time to time due thereunder;



     (g) the Sale Agreement and the assignment to the Administrative Agent of all UCC financing
statements filed by the Seller against the Originator under or in connection with the Sale
Agreement; and



41









 





     (h) the proceeds of each of the foregoing.


“Replaced Asset”: Defined in Section 2.18(a).



“Reporting Date”: The date that is three 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) Advances Outstanding on such day minus (b) the Maximum
Availability on such day.



“Required Asset Documents”: With respect to (i) any Noteless Loan identified as a Noteless
Loan on the Asset Checklist, a copy of the related Loan Register (together with a certificate of a
Responsible Officer of the Servicer certifying to the accuracy of such Loan Register as of the date
such Loan is included as a part of the Collateral), (ii) all Loans other than Noteless Loans, the
duly executed original of the promissory note and an assignment (which may be by endorsement or
allonge) of each such promissory note to the Seller and then the Administrative Agent, signed by an
officer of the Originator and the Seller, respectively, (iii) any Loan, any related loan agreement
and the Asset Checklist together with, to the extent set forth on the Asset Checklist, duly
executed (if applicable) originals or copies of each of any related participation agreement,
acquisition agreement, subordination agreement, intercreditor agreement, security agreements or
similar instruments, UCC financing statements, guarantee, or Insurance Policy (iv) for each Loan
secured by real property, an Assignment of Mortgage and (v) for any Loan identified as an Assigned
Loan on the Asset Checklist, the duly executed original assignment agreement; provided that with
respect to any Assigned Loan, any of the foregoing documents, other than any related promissory
notes in the case of Assigned Loans only, may be copies.



“Required Equity Contribution”: On any day, an equity contribution equal to the sum of the
Outstanding Asset Balances of all Eligible Assets attributable to the three Obligors having the
largest aggregate Outstanding Asset Balances of Eligible Assets included as part of the Collateral
on such date (net of amounts in excess of applicable Pool Concentration Criteria calculated without
duplication).



“Required Reports”: Collectively, the Monthly Report, the Servicer’s Certificate required
pursuant to Section 6.10(c), the financial statements of the Servicer required pursuant to
Section 6.10(d), the annual statements as to compliance required pursuant to Section
6.11, and the annual independent public accountant’s report required pursuant to Section
6.12.



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



“Restricted Junior Payment”: (i) any dividend or other distribution, direct or indirect,
on account of any class of membership interests of the Seller now or hereafter outstanding, except
a dividend payment solely in interests of that class of membership interests or in any junior class
of membership interests of the Seller; (ii) any redemption, retirement, sinking fund or similar
payment, purchase or other acquisition for value, direct or indirect, of any class of membership
interest of the Seller now or hereafter outstanding, (iii) any payment made to redeem, purchase,


42









 






repurchase or retire, or to obtain the surrender of, any outstanding warrants, options or other
rights to acquire membership interests of Seller now or hereafter outstanding, and (iv) any payment
of management fees by the Seller (except for reasonable management fees to the Originator or its
Affiliates in reimbursement of actual management services performed).



“Retained Interest”: (A) With respect to any Revolving Loan or any Loan with an unfunded
commitment on the part of the Originator that does not provide by its terms that funding thereunder
is in Originator’s sole and absolute discretion and that is transferred by the Originator to the
Seller and/or by the Seller to the Purchasers, all of the obligations, if any, to provide
additional funding with respect to such Revolving Loan, and (B) with respect to any Assigned Loan,
any Participation Loan or any Agented Note that is transferred by the Originator to the Seller
and/or by the Seller to the Purchasers, (i) all of the obligations, if any, of the agent(s) under
the documentation evidencing such Assigned Loan, Participation Loan, or Agented Note and (ii) the
applicable portion of the interests, rights and obligations under the documentation evidencing such
Assigned Loan, Participation Loan, or Agented Note that relate to such portion(s) of the
indebtedness that is owned by another lender or is being retained by the Originator pursuant to
clause (A) of this definition.



“Retransfer Date”: Defined in Section 4.6.



“Revolving Loan”: A Loan that is a line of credit or contains an unfunded commitment
arising from an extension of credit by the Originator to an Obligor, pursuant to the terms of which
amounts borrowed may be repaid and subsequently reborrowed; provided that any such Loan shall
exclude any Retained Interest.



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



“Revolving Servicing Fee”: Defined in Section 2.14(c).



“Revolving Servicing Fee Rate”: 0.25% per annum.



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



“Sale Agreement”: The Sale and Contribution Agreement, dated as of the date hereof,
between the Originator and the Seller, as amended, modified, waived, supplemented, restated or
replaced from time to time.



“Scheduled Payments”: With respect to any Loan, each monthly, quarterly, or annual payment
of principal required to be made by the Obligor thereof under the terms of such Loan; in all cases,
excluding any payment in the nature of, or constituting, interest.



“Secured Party”: (i) each Purchaser, (ii) the Administrative Agent and each Purchaser
Agent, and (iii) each Hedge Counterparty that is either a Purchaser or an Affiliate of the VFCC
Agent if that Affiliate is a Hedge Counterparty that executes a counterpart of this Agreement
agreeing to be bound by the terms of this Agreement applicable to a Secured Party.




43









 







“Seller”: Defined in the Preamble of this Agreement.



“Senior B-Note Loan”: Any Term Loan that (i) is secured by a first priority Lien on all of
the Obligor’s assets constituting Related Property for the Loan, (ii)(a) has a “first dollar” at
risk not to exceed 60% of the Loan-to-Value and a “last dollar” at risk not to exceed 70% of the
Loan-to-Value where the Loan is not a Material Mortgage Loan or the Related Property is not
primarily real estate, and (b) has a “last dollar” at risk not to exceed 85% of the Loan-to-Value
where the Loan is a Material Mortgage Loan or the Related Property is primarily real estate, (iii)
contains terms which, upon the occurrence of an event of default under the Loan Documents or in the
case of any liquidation or foreclosure on the Related Property, provide that the principal of the
Seller’s portion of such Loan would be paid only after the other lenders party to such Loan
(including any lender party making any Senior Secured Term Loan or Stretch Senior Secured Loan
whose right to payment is contractually senior to the Seller) is paid in full, and (iv) is
substantially in the form of the “Senior B-Note Loan” attached hereto as Schedule VII or such other
form as shall be adopted by the Originator and approved in writing by the Administrative Agent at
least five days prior to such Loan becoming part of the Collateral hereunder.



“Senior Secured ABL Loan”: Any Revolving Loan that (i) is secured by a first priority Lien
on all of the Obligor’s assets constituting Related Property for the Loan, (ii) provides the
related Obligor with the option to receive additional borrowings thereunder based on the value of
its eligible accounts receivable, inventory or equipment, (iii) has a Loan-to-Liquidation Value of
less than or equal to (a) 85% with respect to the Related Property which constitutes accounts
receivable, (b) 50% with respect to the Related Property which constitutes inventory, and (c) 80%
with respect to the Related Property which constitutes equipment, (iii) provides that the payment
obligation of the Obligor on such Loan is either senior to, or pari passu with, all other loans or
financings to such Obligor, and (iv) is substantially in the form of the “Senior Secured ABL Loan”
previously delivered by the Originator to the Administrative Agent in connection with the CS
Funding I Transaction or such other form as shall be adopted by the Originator and approved in
writing by the Administrative Agent at least five days prior to such Loan becoming part of the
Collateral hereunder; provided that any such Loan shall exclude any Retained Interest.



“Senior Secured Term Loan”: Any Term Loan that (i) is secured by a first priority Lien on
all of the Obligor’s assets constituting Related Property for the Loan, (ii) has a Loan-to-Value of
less than (a) 60% where the Loan is not a Material Mortgage Loan or the Related Property is not
primarily real estate, and (b) 75% where the Loan is a Material Mortgage Loan or the Related
Property is primarily real estate, (iii) provides that the payment obligation of the Obligor on
such Loan is either senior to, or pari passu with, all other loans or financings to such Obligor,
and (iv) is substantially in the form of the “Senior Secured Term Loan” previously delivered by the
Originator to the Administrative Agent in connection with the CS Funding I Transaction or such
other form as shall be adopted by the Originator and approved in writing by the Administrative
Agent at least five days prior to such Loan becoming part of the Collateral hereunder.



“Senior Subordinated Loan”: Any Term Loan that (i) may be secured by a combination of
senior and/or junior Liens on substantially all of the Obligor’s assets constituting Related
Property for the Loan, (ii) has a Loan-to-Value of less than (a) 75% where the Loan is not a
Material Mortgage Loan or the Related Property is not primarily real estate, and (b) 90% where the
Loan is a Material Mortgage Loan or the Related Property is primarily real estate, (iii) contains
terms


44









 






which, upon the occurrence of certain events of default under the senior loan documents between
another lender and the Obligor or in the case of any liquidation or foreclosure on any Related
Property, provide that the Seller’s portion of such Loan would be paid only after the other lender
party to such related senior loan documents (including any lender party making any Senior Secured
ABL Loan, Senior Secured Term Loan, Stretch Senior Secured Loan or Senior B-Note Loan whose right
to payment is contractually senior to the Seller) is paid in full, and (iv) is substantially in the
form of the “Senior Subordinated Loan” previously delivered by the Originator to the Administrative
Agent in connection with the CS Funding I Transaction or such other form as shall be adopted by the
Originator and approved in writing by the Administrative Agent at least five days prior to such
Loan becoming part of the Collateral hereunder.



“Servicer”: CSE Mortgage, and each successor (in the same capacity) appointed as Successor
Servicer pursuant to Section 6.16(a).



“Servicer Advance”: An advance of Scheduled Payments made by the Servicer pursuant to
Section 6.5.



“Servicer Default”: Defined in Section 6.15.



“Servicer Termination Notice”: Defined in Section 6.15.



“Servicer’s Certificate”: Defined in Section 6.10(c).



“Servicing Fee”: Defined in Section 2.14(b).



“Servicing Fee Rate”: 1.0% per annum.



“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 of such Person is greater than
the amount of such Person’s liabilities (including disputed, contingent and unliquidated
liabilities) as such value is established and liabilities evaluated for purposes of Section 101(32)
of the Bankruptcy Code; (b) the present fair salable value of the property of such Person in an
orderly liquidation of such Person is not less than the amount that will be required to pay the
probable liability of such Person on its debts 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 a 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.



“Stretch Senior Secured Loan”: Any Term Loan other than a Senior Secured Term Loan that
(i) is secured by a first priority Lien on all of the Obligor’s assets constituting Related
Property for the Loan, (ii) has a Loan-to-Value of less than (a) 70% where the Loan is not a
Material Mortgage Loan or the Related Property is not primarily real estate, and (b) 80% where the
Loan is a Material Mortgage Loan or the Related Property is primarily real estate, (iii) provides
that the payment obligation of the Obligor on such Loan is either senior to, or pari passu with,
all other loans or financings to such Obligor, and (iv) is substantially in the form of the
“Stretch


45









 






Senior Secured Loan” attached hereto as Schedule VIII or such other form as shall be adopted by the
Originator and approved in writing by the Administrative Agent at least five days prior to such
Loan becoming part of the Collateral hereunder.



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



“Substitute Asset”: On any day, an Eligible Asset that meets each of the conditions for
substitution set forth in Section 2.18.



“Successor Servicer”: Defined in Section 6.16(a).



“Swingline Advance”: Defined in Section 2.1(c).



“Swingline Funding Request”: A Borrowing Notice requesting a Swingline Advance and
including the items required by Section 2.2.



“Swingline Purchaser”: Wachovia, in its capacity as Swingline Purchaser hereunder.



“Tape”: Defined in Section 7.2(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
Governmental Authority.



“Termination Date”: The earliest of (a) the date of the termination of the Facility Amount
pursuant to Section 2.4, (b) the Business Day designated by the Seller to the
Administrative Agent and each Purchaser Agent as the Termination Date at any time following two
Business Days’ prior written notice thereof to the Administrative Agent and each Purchaser Agent,
(c) February 28, 2006, (d) the date any Liquidity Agreement shall cease to be in full force and
effect, (d) the date of the declaration of the Termination Date pursuant to Section 10.2(a)
or the date of the automatic occurrence of the Termination Date pursuant to Section
10.2(b), and (e) the second Business Day prior to the Facility Termination Date.



“Termination Event”: Defined in Section 10.1.



“Term Loan”: A Loan that is a term loan that has been fully funded and does not contain
any unfunded commitment on the part of the Originator arising from an extension of credit by the
Originator to an Obligor.



“Transaction”: Defined in Section 3.2.



“Transaction Documents”: The Agreement, the Sale Agreement, each Hedging Agreement, the
Hedge Guaranty, the Lock-Box Agreement, the Intercreditor Agreement, each Variable Funding


46









 






Certificate, the VFCC Fee Letter, any Additional Agent Fee Letters, any Additional Purchaser
Agreements, the Backup Servicer Fee Letter, the Collateral Custodian Fee Letter, any UCC financing
statements filed pursuant to the terms of this Agreement, and any additional document the execution
of which is necessary or incidental to carrying out the terms of the foregoing documents.



“Transferee Letter”: Defined in Section 13.16(a).



“Transition Expenses”: The reasonable costs (including reasonable attorneys’ fees) of the
Backup Servicer incurred in connection with the transferring the servicing obligations under this
Agreement and amending this Agreement to reflect such transfer in an amount not to exceed $100,000.



“UCC”: The Uniform Commercial Code as from time to time in effect in the applicable
jurisdiction or jurisdictions.



“United States”: The United States of America.



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



“US Bank Collection Account”: Account number 4346848296 maintained by the Originator at US
Bank National Association.



“Variable Funding Certificate”: Defined in Section 2.1.



“VFCC”: Defined in the Preamble of this Agreement.



“VFCC Agent”: WCM or any other entity that has been appointed as the administrator for
VFCC.



“VFCC Agent’s Account”: A special account (account number 2000002391825) in the name of
the VFCC Agent maintained at Wachovia.



“VFCC Breakage Costs”: Any amount or amounts as shall compensate VFCC for any loss, cost
or expense incurred by VFCC (as determined by the VFCC Agent on behalf of VFCC, in the VFCC Agent’s
sole discretion) as a result of (i) a prepayment by the Seller of Advances Outstanding or Interest
or (ii) any difference between the VFCC CP Rate and the Adjusted Eurodollar Rate. All VFCC
Breakage Costs shall be due and payable hereunder upon demand.



“VFCC CP Rate”: For any day during 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 VFCC Agent (on
behalf of VFCC) to fund or maintain the Advances Outstanding funded by VFCC during such period, as
determined by the VFCC Agent (on behalf of VFCC) and reported to the Seller


47









 






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 VFCC 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 that if
any component of such rate is a discount rate, in calculating the VFCC CP Rate, the VFCC Agent
shall for such component use the rate resulting from converting such discount rate to an interest
bearing equivalent rate per annum.



“VFCC Fee Letter”: The VFCC Fee Letter Agreement, dated as of the date hereof, by and
among the Seller, the Servicer, the Administrative Agent, and the VFCC Agent, as amended, modified,
waived, supplemented, restated or replaced from time to time.



“Wachovia”: Wachovia Bank, National Association, a national banking association in its
individual capacity, and its successors and assigns.



“Warranty Asset”: Any Asset that fails to satisfy any criteria of the definition of
Eligible Asset; provided that notwithstanding the foregoing, for purposes of determining what is a
Warranty Asset, (i) the criteria set forth in clauses (1)(c), (1)(d),
1(m)(i), 1(t) (but solely to the extent the criteria in such clause 1(t)
relates to any express representation and warranty that an Asset is an Eligible Asset),
1(w), 1(x), (1)(y) and clauses (2)(c) and 2(d) (but solely
to the extent that the criteria in such clauses 2(c) and 2(d) would not be
satisfied as a result of the operation of law or an effective court order in connection with an
Insolvency Event) of the definition of Eligible Asset and clauses (vi), (viii) and
(ix) in the definition of Eligible Obligor shall apply only as of the applicable Cut-Off
Date of such Asset, and (ii) with respect to any CS Funding III Asset, the criteria set forth in
the definition of Eligible Asset and Eligible Obligor shall apply only as of the applicable CS
Funding III Cut-Off Date (other than the criteria set forth in the definition of Eligible Asset
clauses (1)(a), (b)(i), (d), (e), (f), (j),
(k), (r), (dd), (ff) and (gg) which shall apply only as of
the applicable Cut-Off Date).



“Warranty Event”: As to any Asset, the discovery that as of the related Cut-Off Date or
Funding Date there had existed a breach of any representation or warranty relating to such Asset
and the continuance of such breach through any applicable determination date or beyond any
applicable cure period.



“Watchlist Asset”: Any Asset (that is not a Charged-Off Asset or Delinquent Asset) as to
which the Servicer has discovered circumstances which lead the Servicer to reasonably expect loss
or non-payment by the Obligor thereof.



“Weighted Average Advance Rate”: For any Advances Outstanding on any day, the weighted
average of the Advance Rates applicable to the Eligible Assets backing such Advances or Swingline
Advance on such day, weighted according to the proportion of the Aggregate Outstanding Asset
Balance each type of Asset represents.




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     Section 1.2 Other Terms.



     All accounting terms used but 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 used but 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;




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




     (v) reference to any time means Charlotte, North Carolina time;




     (vi) reference to any agreement (including any Transaction Document), document or
instrument means such agreement, document or instrument as amended, modified, waived,
supplemented, restated or replaced 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




     (vii) 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.



49









 





ARTICLE II




PURCHASE OF THE VARIABLE FUNDING CERTIFICATES




     Section 2.1 The Variable Funding Certificates.



     (a) On the terms and conditions hereinafter set forth, Seller shall deliver a duly executed
variable funding certificate (each such certificate, a “Variable Funding Certificate” or
“VFC”), in substantially the form of Exhibit B-1, B-2 or B-3, as
applicable, (i) on the Closing Date, to the VFCC Agent and the Swingline Purchaser at their
respective addresses set forth on the signature pages of this Agreement, and (ii) on each date on
which an Additional Purchaser purchases a Variable Funding Certificate, to the related Additional
Agent at the address designated by such Additional Agent. Each Variable Funding Certificate shall
evidence an undivided ownership interest (and the Seller does hereby sell, transfer, assign and
convey such undivided ownership interest to the Purchasers) in the Collateral purchased by a
Purchaser in an amount equal, at any time, to the percentage equivalent of a fraction (i) the
numerator of which is the Advances outstanding under the applicable VFC on such day, and (ii) the
denominator of which is the total aggregate Advances Outstanding on such day. Interest shall
accrue, and each VFC shall be payable, as described herein. The VFC purchased by (1) VFCC shall be
in the name of “Wachovia Capital Markets, LLC, as the VFCC Agent” and shall be in the face amount
equal to $470,000,000 and otherwise duly completed, (2) the Swingline Purchaser shall be in the
name of Wachovia Bank, National Association, as the Swingline Purchaser and be in a face amount
equal to $0, and (3) an Additional Purchaser shall be in the name of such Additional Purchaser and
shall be in a face amount to be determined; provided that the aggregate amount outstanding under
all VFCs at any one time shall not exceed the Facility Amount.



     (b) On the terms and conditions hereinafter set forth, from the Closing Date to, but excluding
the Termination Date, the Seller may, at its option, request the Conduit Purchasers to make
advances of funds under the VFCs (each, an “Advance”) and the Conduit Purchasers shall make
such Advance in an amount equal to their Pro Rata Share of such requested Advance; provided that,
in no event shall the Conduit Purchasers make any Advance if, after giving effect to such Advance
the aggregate Advances Outstanding hereunder would exceed the lesser of (i) the Facility Amount or
(ii) the Maximum Availability. Notwithstanding anything contained in this Section 2.1 or
elsewhere in this Agreement to the contrary, no Conduit Purchaser shall be obligated to provide its
Purchaser Agent or the Seller with aggregate funds in connection with an Advance that would exceed
such Conduit Purchaser’s unused Commitment then in effect. Each Advance made by the Conduit
Purchasers hereunder is subject to the interests of the Hedge Counterparties under Section
2.9(a)(i) and Section 2.10(a)(i) of this Agreement.



     (c) On the terms and conditions hereinafter set forth, from the Closing Date to, but excluding
the Termination Date, the Seller may, at its option, request the Swingline Purchaser to advance
funds to the Seller on an expedited basis, each such Swingline Funding Request to be on the terms
and conditions set forth herein and substantially in the form of Exhibit A-1-S hereto, and
the Swingline Purchaser shall advance to the Seller the amount requested under a Swingline Funding
Request (each, a “Swingline Advance”). Notwithstanding anything to the contrary contained
herein, the Swingline Purchaser shall not be obligated to provide the Seller with aggregate funds
in connection with a Swingline Advance that would exceed the aggregate



50









 




unused Commitment then in effect. Each Swingline Advance made by the Swingline Purchaser
hereunder is subordinated to the interests of the Hedge Counterparties under Section
2.9(a)(i) and Section 2.10(a)(i) of this Agreement.




     (d) The Seller may, within sixty (60) days but not less than forty-five (45) days prior to the
expiration of any Liquidity Agreement or this Agreement, by written notice to each Purchaser Agent,
make a request (i) for each applicable Liquidity Bank to extend the term of such Liquidity
Agreement for an additional period of 364 days and (ii) for each Purchaser Agent to extend the
Facility Termination Date for an additional period of 364 days. Each Purchaser Agent will give
prompt notice to the applicable Purchaser and each applicable Liquidity Bank of its receipt of such
request, and each Purchaser and each Liquidity Bank shall make a determination, in their sole
discretion, not less than fifteen (15) days prior to the Facility Termination Date or the
expiration of any Liquidity Agreement (as applicable) as to whether or not it will agree to the
extension requested. The failure of a Purchaser Agent or a Liquidity Bank to provide timely notice
of its decision to the Seller shall be deemed to constitute a refusal by such Purchaser or such
Liquidity Bank (as applicable) to extend the Facility Termination Date or the term of the Liquidity
Agreement, respectively. The Seller confirms that each Liquidity Bank and each Purchaser, 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 any Liquidity Agreement or Facility Termination Date (as
applicable).



     Section 2.2 Procedures for Swingline Advances by the Swingline Purchaser.



     (a) Subject to the limitations set forth in Section 2.1, the Seller may request a
Swingline Advance from the Swingline Purchaser by delivering to the Administrative Agent and the
Collateral Custodian, as applicable, at certain times the information and documents set forth in
this Section 2.2.



     (b) No later than 2:00 p.m. (Charlotte, North Carolina time) on the Business Day of the
proposed Funding Date the Seller (or the Servicer on its behalf) shall deliver:




     (i) to the Administrative Agent and the Collateral Custodian written notice of such
proposed Funding Date;




     (ii) to the Administrative Agent a description of the Obligor and the proposed Loan
transaction that is the subject of the proposed Swingline Advance;




     (iii) to the Administrative Agent and the Collateral Custodian a duly completed
Borrowing Base Certificate and Tape updated to such date;




     (iv) to the administrative agent a wire disbursement and authorization form;




     (v) to the Administrative Agent a certification substantially in the form of
Exhibit M from outside counsel to the Originator or the Obligor of such Assets
concerning the Collateral Custodian’s receipt of certain documentation relating to the
funding of Eligible Asset(s) related to such Swingline Advance; and



51









 






     (vi) to the Administrative Agent and the Collateral Custodian a duly completed
Swingline Funding Request, which shall (a) specify the aggregate amount of the requested
Swingline Advance, which shall be in an amount equal to at least $0, (b) specify the date of
the requested Swingline Advance, (c) specify the amount of Advances Outstanding, (d) include
a representation that all conditions precedent for a funding have been met, (e) include a
calculation of the Borrowing Base as of the date the Swingline Advance is requested, and (f)
include an updated Asset List including each Asset that is subject to the requested
Swingline Advance. Any Swingline Funding Request shall be irrevocable. If any Swingline
Funding Request is received by the Administrative 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 shall be deemed to be received by
the Administrative Agent at 9:00 a.m. (Charlotte, North Carolina time) on the next following
Business Day.



     (c) On the Funding Date, the Swingline Purchaser 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 Seller in same day funds, at such bank or other location reasonably
designated by the Seller in the Swingline Funding Request given pursuant to this Section
2.2, an amount equal to the least of (i) the amount requested by the Seller for such Swingline
Advance, (ii) $0 minus the amount of all Swingline Advances outstanding on such Funding Date and
(iii) the Availability on such Funding Date.



     (d) Notwithstanding anything to the contrary contained herein, this Agreement shall constitute
a single revolving debt facility with a single maturity and in no event shall the Seller be
permitted to (i) obtain or request any Swingline Advances from the Swingline Purchaser hereunder or
(ii) have outstanding one or more debt obligations with two or more maturities hereunder. For
purposes of this section, debt obligations have “two or more maturities” if they have different
stated maturities or if the holders of the debt obligations possess different rights concerning the
acceleration of or delay in the maturities of the obligations.



     Section 2.3 Procedures for Advances by Conduit Purchasers.



     (a) Each Advance from a Conduit Purchaser hereunder shall be effected by the Seller (or the
Servicer on its behalf) delivering to the Administrative Agent, each Purchaser Agent and the
Swingline Purchaser (with a copy to the Collateral Custodian and the Backup Servicer) a duly
completed Borrowing Notice (along with a Borrowing Base Certificate) no later than 2:00 p.m.
(Charlotte, North Carolina time) at least one Business Day prior to the proposed Funding Date.
Each Borrowing Notice (along with a Borrowing Base Certificate) shall (i) specify the desired
amount of such Advance, which amount must be at least equal to $250,000 per Conduit Purchaser, (ii)
specify the date of such Advance, (iii) specify the Assets to be financed on such Funding Date
(including the appropriate file number, Outstanding Asset Balance for each Asset and identifying
each Loan by type and whether such Loan is a Senior Secured ABL Loan, Senior Secured Term Loan,
Stretch Senior Secured Loan, Senior B-Note Loan, Senior Subordinated Loan, Junior Subordinated
Loan, Acquired Loan, Assigned Loan, or Participation Loan) and (iv) include a representation that
all conditions precedent for an Advance described in Article III hereof have been met.
Each Borrowing Notice shall be irrevocable.



52









 





     (b) On the date of each Advance, each Conduit Purchaser shall, upon satisfaction of the
applicable conditions set forth in Article III, make available to the Seller in same day
funds, at such bank or other location reasonably designated by Seller in its Borrowing Notice given
pursuant to this Section 2.3, an amount equal to its Pro Rata Share of the lesser of (i)
the amount requested by the Seller for such Advance, (ii) an amount equal to the Availability on
such Funding Date or (iii) the Facility Amount.



     (c) On each Funding Date, the obligation of each Purchaser to remit its Pro Rata Share of any
such Advance shall be several from that of each other Purchaser and the failure of any Purchaser to
so make such amount available to the Seller shall not relieve any other Purchaser of its obligation
hereunder.



     Section 2.4 Reduction of the Facility Amount; Mandatory and Optional Repayments.



     (a) The Seller may, upon at least twenty (20) Business Days’ prior written notice (such notice
to be received by the Administrative Agent and each Purchaser Agent no later than 5:00 p.m.
(Charlotte, North Carolina time) on such day) to the Administrative Agent and each Purchaser Agent,
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 each
partial reduction of the Facility Amount shall be in an aggregate amount equal to at least
$1,000,000. Each notice of reduction or termination pursuant to this Section 2.4(a) shall
be irrevocable.



     (b) The Seller may, upon one Business Days’ prior written notice (such notice to be received
by the Administrative Agent, each Hedge Counterparty and each Purchaser Agent no later than 2:00
p.m. (Charlotte, North Carolina time) on such day) to the Administrative Agent and each Purchaser
Agent, reduce the Advances Outstanding by remitting, in accordance with their Pro Rata Share, to
each Purchaser Agent, for payment to the respective Purchasers, (i) cash and (ii) instructions to
reduce such Advances Outstanding, related accrued Interest, Breakage Costs and Hedge Breakage
Costs; provided that no such reduction shall be given effect (1) unless the Seller 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 Seller has
paid all Hedge Breakage Costs and any payments owing to the relevant Hedge Counterparty for any
such termination (2) if a Termination Event or Unmatured Termination Event has occurred, is
continuing or would result from such reduction. Any reduction of the Advances Outstanding shall be
in a minimum amount of $500,000. 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 Purchaser Agents shall apply such amounts first to the pro rata reduction of the
Advances Outstanding, second to the payment of related accrued Interest on the amount of
the Advances Outstanding to be repaid by paying such amounts to the respective Purchasers, and
third to the payment of any Breakage Costs and Hedge Breakage Costs and any other payments
owing to the applicable Hedge Counterparty in respect of the termination of any Hedge Transaction.
Any notice relating to any prepayment pursuant to this Section 2.4(b) shall be irrevocable.



53









 





     (c) If on any day (i) the Administrative Agent, as agent for the Secured Parties, does not own
or have a valid and perfected first priority security interest in any of the Collateral or (ii) any
Asset which has been represented by the Seller to be an Eligible Asset is later determined not to
have been an Eligible Asset as of the related Cut-Off Date, upon the earlier of the Seller’s
receipt of notice from the Administrative Agent or the Seller becoming aware thereof and the
Seller’s failure to cure such breach within thirty (30) days, the Seller shall be deemed to have
received on such day a collection (a “Deemed Collection”) of such Asset in full and shall
on such day pay to the Administrative Agent, on behalf of the Purchasers and each Hedge
Counterparty, an amount equal to (x) the Outstanding Asset Balance of the Asset to be applied to
the pro rata reduction of the principal of each VFC plus (y) any Breakage Costs and Hedge Breakage
Costs and any other payments owing to the applicable Hedge Counterparty in respect of the
termination of any Hedge Transaction required as a result of the Deemed Collection and retransfer
of the related Asset contemplated by this Section 2.4(c). In connection with any such
Deemed Collection, the Administrative Agent, as agent for the Secured Parties, shall automatically
and without further action, be deemed to transfer to the Seller, free and clear of any Lien created
by the Administrative Agent, all of the right, title and interest of the Administrative Agent, as
agent for the Secured Parties, in, to, and under the Asset with respect to which the Administrative
Agent has received such Deemed Collection, but without any other representation and warranty of any
kind, express or implied.



     Section 2.5 Determination of Interest.



     (a) The VFCC Agent shall determine the VFCC CP Rate and the Interest (including unpaid
Interest, if any, due and payable on a prior Payment Date but excluding the Additional CP Rates) to
be paid by the Seller with respect to each Advance on each Payment Date for the related Accrual
Period and shall advise the Servicer thereof on or before the third (3rd) Business Day prior to
such Payment Date.



     (b) Each Additional Agent shall determine such Additional Agent’s Additional Agent CP Rate
(including unpaid Interest related to such Additional Agent CP Rate, if any, due and payable to a
prior Payment Date) to be paid by the Seller with respect to each Advance on each Payment Date for
the related Accrual Period and shall advise the Servicer thereof on or before the third (3rd)
Business Day prior to such Payment Date.



     (c) The Administrative Agent shall determine the Interest (including unpaid Interest, if any,
due and payable on a prior Payment Date) to be paid by the Seller with respect to each Swingline
Advance on each Payment Date for the related Accrual Period and shall advise the Servicer thereof
on or before the third (3rd) Business Day prior to such Payment Date.



     Section 2.6 Percentage Evidenced by each Variable Funding Certificate.



     The variable percentage ownership interest in the Collateral represented by each VFC shall be
initially computed on its date of purchase. Thereafter, until the Termination Date, each VFC shall
be automatically recomputed (or deemed to be recomputed) on each day prior to the Termination Date.
The variable percentage ownership interest in the Collateral represented by each VFC as computed
(or deemed recomputed) as of the close of business on the day immediately preceding the Termination
Date shall remain constant at all times on and after the



54









 




Termination Date. The variable percentage ownership interest in the Collateral represented by
each VFC shall become zero when its Advances or Swingline Advances and Interest have been
indefeasibly paid in full.




     Section 2.7 Reimbursement of Swingline Advances.



     The Conduit Purchasers hereby agree that if the Swingline Purchaser funds any Swingline
Advance, the Conduit Purchasers shall reimburse the Swingline Purchaser for such Swingline Advance
not later than one Business Day after the Swingline Purchaser funds such Swingline Advance. Such
reimbursement shall be accomplished by the Conduit Purchasers remitting to the Swingline Purchaser
at the Swingline Purchaser’s Account or such other account as designated in writing by the
Swingline Purchaser the amount (up to the amount of the outstanding Swingline Advance) that the
Conduit Purchasers otherwise would be required to remit to the account designated by the Seller
pursuant to Section 2.3(b) in connection with the Advance being made on the date of such
reimbursement. The Seller and the Servicer hereby authorize and instruct the Conduit Purchasers to
reimburse the Swingline Purchaser in such manner.



     Section 2.8 Notations on Variable Funding Certificates.



     Each Purchaser Agent and the Swingline Purchaser is hereby authorized to enter on a schedule
attached to the VFC a notation (which may be computer generated) with respect to each Advance or
Swingline Advance under the VFC made by the related Purchaser or Swingline Purchaser of: (a) the
date and principal amount thereof, and (b) each repayment of principal thereof, and any such
recordation shall constitute prima facie evidence of the accuracy of the information so recorded.
The failure of any Purchaser Agent or the Swingline Purchaser to make any such notation on the
schedule attached to the VFC shall not limit or otherwise affect the obligation of the Seller to
repay the Advances or Swingline Advances in accordance with their respective terms as set forth
herein.



     Section 2.9 Settlement Procedures During the Revolving Period.



     (a) On each Payment Date during the Revolving Period, the Servicer shall direct the Collateral
Custodian to pay pursuant to the Monthly Report to the following Persons, from (1) the Collection
Account, to the extent of Available Funds, and (2) Servicer Advances received with respect to the
immediately preceding Collection Period that ended on the last day of the calendar month
immediately preceding the calendar month in which such Payment Date occurs, the following amounts
in the following order of priority:




     (i) FIRST, pro rata to each Hedge Counterparty, any amounts, (other than any
Hedge Breakage Costs and any payments due in respect of the termination of any Hedging
Transaction), owing to 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;



55









 






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




     (iv) FOURTH, to the extent not paid for by the Originator, pro rata to the
Backup Servicer and the Collateral Custodian, in an amount equal to any accrued and unpaid
Backup Servicing Fees, Collateral Custodian Fees and Transition Expenses, for the payment
thereof;




     (v) FIFTH, to each Purchaser Agent and the Swingline Purchaser, pro rata in
accordance with the amount of Advances Outstanding hereunder for the account of the
applicable Purchaser, in an amount equal to any accrued and unpaid Interest, Program Fee,
Commitment Fee and Breakage Costs, for the payment thereof;




     (vi) SIXTH, to each Purchaser Agent and the Swingline Purchaser, 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 hereunder for the account of the applicable Purchaser, for the payment
thereof;




     (vii) SEVENTH, pro rata to each Hedge Counterparty, any Hedge Breakage Costs
and payments due in termination of any Hedge Transaction, owing to that Hedge Counterparty
under its respective Hedging Agreement, for the payment thereof;




     (viii) EIGHTH, to the Administrative Agent, each Purchaser Agent, the
applicable Purchaser, the Backup Servicer, the Collateral Custodian, the Affected Parties,
the Indemnified Parties or the Secured Parties, pro rata in accordance with the amount owed
to such Person under this EIGHTH clause, all other amounts, including Increased
Costs but other than Advances Outstanding, then due under this Agreement, for the payment
thereof; and




     (ix) NINTH, any remaining amount shall be distributed to the Seller.



     (b) On the terms and conditions hereinafter set forth, from time to time during the Revolving
Period, the Servicer may, to the extent of any Principal Collections on deposit in the Principal
Collections Account, withdraw such funds for the purpose of reinvesting in additional Eligible
Assets, provided the following conditions are satisfied:




     (i) all conditions precedent set forth in Section 3.2(b) have been satisfied;




     (ii) the Servicer provides same day written notice to the Administrative Agent and
Collateral Custodian by facsimile (to be received no later than 2:00 p.m. (Charlotte, North
Carolina time) on such day) of the request to withdraw Principal Collections and the amount
thereof;




     (iii) the notice required in clause (ii) above shall be accompanied by a Borrowing
Notice in the form of Exhibit A-2 and a Borrowing Base Certificate and the same are
executed by the Seller and at least one Responsible Officer of the Servicer;



56









 






     (iv) the Collateral Custodian provides to the Administrative Agent by facsimile (to be
received no later than 2:00 p.m. (Charlotte, North Carolina time) on that same date) a
statement reflecting the total amount on deposit on such day in the Principal Collections
Account; and




     (v) upon the satisfaction of the conditions set forth in clauses (i) through (iv)
above, and the Administrative Agent’s confirmation of available funds, the Administrative
Agent will instruct the Collateral Custodian by facsimile on such day to release funds from
the Principal Collections Account to the Servicer in an amount not to exceed the lesser of
(A) the amount requested by the Servicer and (B) the amount on deposit in the Principal
Collections Account on such day.



     Section 2.10 Settlement Procedures During the Amortization Period.



     (a) On each Payment Date during the Amortization Period, the Servicer shall direct the
Collateral Custodian to pay pursuant to the Monthly Report to the following Persons, from (i) the
Collection Account, to the extent of Available Funds, and (ii) Servicer Advances received with
respect to the immediately preceding Collection Period, the following amounts in the following
order of priority:




     (i) FIRST, pro rata to each Hedge Counterparty, any amounts, (including any
Hedge Breakage Costs and any payments due in respect of the termination of any Hedge
Transaction in an amount not to exceed $250,000 in the aggregate for all Hedging
Agreements), owing to 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 any accrued and unpaid
Servicing Fees and Revolving Servicing Fees to the end of the preceding Collection Period,
for the payment thereof;




     (iv) FOURTH, to the extent not paid for by the Originator, pro rata to the
Backup Servicer and the Collateral Custodian, in an amount equal to any accrued and unpaid
Backup Servicing Fees, Collateral Custodian Fees and Transition Expenses, for the payment
thereof;




     (v) FIFTH, to each Purchaser Agent and the Swingline Purchaser, pro rata in
accordance with the amount of Advances Outstanding hereunder for the account of the
applicable Purchaser, in an amount equal to any accrued and unpaid Interest, Program Fee,
Commitment Fee and Breakage Costs, for the payment thereof;




     (vi) SIXTH, to each Purchaser Agent and the Swingline Purchaser, pro rata in
accordance with the amount of Advances Outstanding hereunder for the account of the
applicable Purchaser, in an amount necessary to reduce the Advances Outstanding and
Aggregate Unpaids to zero, for the payment thereof;



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     (vii) SEVENTH, to each Purchaser Agent, 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 hereunder for
the account of the applicable Purchaser, for the payment thereof;




     (viii) EIGHTH, pro rata to each Hedge Counterparty, any Hedge Breakage Costs
and payments due in termination of any Hedge Transaction, owing to that Hedge Counterparty
under its respective Hedging Agreement to the extent not reimbursed pursuant to clause
FIRST above, for the payment thereof;




     (ix) NINTH, to the Administrative Agent, each Purchaser Agent, the applicable
Purchaser, the Backup Servicer, the Collateral Custodian, the Affected Parties, the
Indemnified Parties or the Secured Parties, pro rata in accordance with the amount owed to
such Person under this NINTH clause, all other amounts, including Increased Costs
but other than Advances Outstanding, then due under this Agreement, for the payment thereof;
and




     (x) TENTH, any remaining amount shall be distributed to the Seller.



     Section 2.11 Collections and Allocations.



     (a) Collections. The Servicer shall promptly identify any collections received as
being on account of Interest Collections, Principal Collections or other Collections and shall
transfer, or cause to be transferred, all Collections received directly by it or on deposit in the
form of available funds in the Lock-Box Accounts to the Collection Account by the close of business
on the second (2nd) Business Day after such Collections are received. In transferring Collections
to the Collection Account, the Servicer shall segregate Principal Collections and transfer the same
to the corresponding Principal Collections Account. The Servicer shall make such deposits or
payments on the date indicated therein by wire transfer, in immediately available funds. The
Servicer shall further include a statement as to the amount of Principal Collections and Interest
Collections on deposit in the Collection Account on each Reporting Date in the Monthly Report
delivered pursuant to Section 6.10(b).



     (b) Initial Deposits. On the Closing Date and on each Addition Date thereafter, the
Servicer will deposit (in immediately available funds) into the Collection Account all Collections
received after the applicable Cut-Off Date and through and including the Closing Date or Addition
Date, as the case may be, in respect of Eligible Assets being transferred to and included as part
of the Collateral on such date.



     (c) Excluded Amounts. With the prior written consent of the Administrative Agent and
each Purchaser Agent, which consent shall not be unreasonably withheld (a copy of which will be
provided by the Servicer to the Backup Servicer), the Servicer may withdraw from the Collection
Account any deposits thereto constituting Excluded Amounts if the Servicer has, prior to such
withdrawal and consent, delivered to the Administrative Agent and each Purchaser Agent a report
setting forth the calculation of such Excluded Amounts in a format satisfactory to the
Administrative Agent and each Purchaser Agent in their sole discretion.



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     (d) Investment of Funds. 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 that mature no later than the Business Day
immediately preceding the next Payment Date; from and after the occurrence of a Termination Event,
to the extent there are uninvested amounts in the Collection Account (net of losses and investment
expenses), all amounts may be invested in Permitted Investments selected by the Administrative
Agent that mature no later than the Business Day immediately preceding the next Payment Date. All
earnings (net of losses and investment expenses) thereon shall be retained or deposited into the
Collection Account and shall be applied pursuant to the provisions of Section 2.9 and
Section 2.10.



     Section 2.12 Payments, Computations, Etc.



     (a) Unless otherwise expressly provided herein, all amounts to be paid or deposited by the
Seller or the Servicer hereunder shall be paid or deposited in accordance with the terms hereof no
later than 2:00 p.m. (Charlotte, North Carolina time) on the day when due in lawful money of the
United States in immediately available funds to the applicable Purchaser Agent’s Account or
Swingline Purchaser’s Account and if not received before such time shall be deemed received on the
next Business Day. The Seller 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 that such interest rate shall not at any time exceed the maximum
rate permitted by Applicable Law. Such interest shall be for the account of, and distributed to,
each applicable Purchaser. All computations of interest and all computations of Interest and other
fees hereunder shall be made on the basis of a year consisting of 360 days (other than calculations
with respect to the Base Rate which shall be based on a year consisting of 365 or 366 days, as
applicable) 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 the payment of Interest or any fee payable
hereunder, as the case may be. For avoidance of doubt, to the extent that Available Funds are
insufficient on any Payment Date to satisfy the full amount of any Increased Costs pursuant to
clause EIGHTH of Section 2.9(a) or clause NINTH of Section 2.10,
such unpaid amounts shall remain due and owing and shall accrue Interest until repaid in full.



     (c) If any Advance or Swingline Advance requested by the Seller and approved by the applicable
Purchaser or Swingline Purchaser and the Purchaser Agents or, in the case of a Swingline Advance,
the Administrative Agent, pursuant to Section 2.2 or 2.3 is not, for any reason
made or effectuated, as the case may be, on the date specified therefor, the Seller shall indemnify
the applicable Purchaser or the Swingline Purchaser against any reasonable loss, cost or expense
incurred by the applicable Purchaser or the Swingline Purchaser including, without limitation, any
loss (including loss of anticipated profits, net of anticipated profits in the reemployment of such
funds in the manner determined by each Purchaser or the Swingline Purchaser, as applicable), cost
or expense incurred by reason of the liquidation or reemployment of deposits or other funds
acquired by the applicable Purchaser or Swingline Purchaser to fund or maintain such Advance or
Swingline Advance.



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     Section 2.13 Optional Repurchase.



     At any time following the Termination Date when the Borrowing Base is less than fifteen (15%)
percent of the Borrowing Base as of the Termination Date, the Seller may notify the Administrative
Agent and each Purchaser Agent in writing of its intention to purchase all remaining Collateral;
provided that all Hedge Transactions have been terminated in accordance with their terms. On the
Payment Date next succeeding any such notice, the Seller shall purchase all such Collateral for a
price equal to the Aggregate Unpaids and the proceeds of such purchase will be deposited into the
Collection Account and paid in accordance with Section 2.10.



     Section 2.14 Fees.



     (a) The Servicer on behalf of the Seller shall pay in accordance with Section
2.9(a)(v) and Section 2.10(a)(v), as applicable, to the applicable Purchaser Agent from
the Collection Account to the extent funds are available on each Payment Date, monthly in arrears,
the applicable Program Fee and the applicable Commitment Fee agreed to between the Seller and such
Purchaser Agent in the VFCC Fee Letter and the relevant Additional Agent Fee Letter, as applicable.



     (b) The Servicer shall be entitled to receive a fee (the “Servicing Fee”), monthly in
arrears in accordance with Section 2.9(a)(iii) and Section 2.10(a)(iii), as
applicable, which fee shall be equal to the product of (i) the Servicing Fee Rate, (ii) the
Aggregate Outstanding Asset Balance, as of the first day of the immediately preceding Collection
Period and (iii) the actual number of days in such Collection Period divided by 360.



     (c) The Servicer shall be entitled to receive a fee (the “Revolving Servicing Fee”),
monthly in arrears in accordance with Section 2.9(a)(iii) and Section 2.10(a)(iii),
as applicable, which fee shall be equal to the product of (i) the Revolving Servicing Fee Rate,
(ii) the aggregate Outstanding Asset Balance of all Revolving Loans as of the first day of the
immediately preceding Collection Period and (iii) the actual number of days in such Collection
Period divided by 360.



     (d) The Backup Servicer shall be entitled to receive the Backup Servicing Fee in accordance
with Section 2.9(a)(iv) and Section 2.10(a)(iv), as applicable.



     (e) The Collateral Custodian shall be entitled to receive the Collateral Custodian Fee in
accordance with Section 2.9(a)(iv) and Section 2.10(a)(iv), as applicable.



     (f) The Seller shall pay to Dechert LLP as counsel to the Administrative Agent, on the Closing
Date, its reasonable estimated fees and out-of-pocket expenses in immediately available funds and
shall pay all additional reasonable fees and out-of-pocket expenses of Dechert LLP within thirty
(30) Business Days after receiving an invoice for such amounts.



     Section 2.15 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 law or
regulation or (ii) the compliance by an Affected Party with any guideline or request



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from any central bank or other Governmental Authority (whether or not having the force of
law), shall (a) 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 any ownership interest in the
Collateral, or any right to make Advances or Swingline Advances hereunder, or on any payment made
hereunder, (b) impose, modify or deem applicable any reserve requirement (including, without
limitation, any reserve requirement imposed by the Board of Governors of the Federal Reserve
System, 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) impose any other condition affecting the ownership
interest in the Collateral conveyed to the Purchasers hereunder or the Purchasers’ 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
days after demand by such Affected Party (which demand shall be accompanied by a statement setting
forth the basis for such demand), the Servicer shall pay (and to the extent the Servicer does not
make such payment the Seller 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 law,
guideline, rule, regulation, directive or request or (ii) compliance by any Affected Party with any
law, guideline, rule, regulation, directive or request from any central bank or other governmental
authority or agency (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 days
after demand by such Affected Party (which demand shall be accompanied by a statement setting forth
the basis for such demand), the Servicer shall pay (and to the extent the Servicer does not make
such payment the Seller shall pay) directly to such Affected Party such additional amount or
amounts as will compensate such Affected Party for such reduction. For the avoidance of doubt, if
the issuance of Interpretation No. 46 by the Financial Accounting Standards Board or any other
change in accounting standards or the issuance of any other pronouncement, release or
interpretation, causes or requires the consolidation of all or a portion of the assets and
liabilities of the Originator or Seller with the assets and liabilities of the Administrative
Agent, any Purchaser Agent, any Purchaser or any Liquidity Bank, such event shall constitute a
circumstance on which such Affected Party may base a claim for reimbursement under this Section
2.15.



     (c) If as a result of any event or circumstance similar to those described in clause (a) or
(b) of this Section 2.15, 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 or
Swingline Advances hereunder, then within ten days after demand by such Affected Party, the
Servicer shall pay (or to the extent the Servicer does not make such payment the Seller shall pay)



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to such Affected Party such additional amount or amounts as may be necessary to reimburse such
Affected Party for any amounts payable or paid by it.




     (d) In determining any amount provided for in this Section 2.15, the Affected Party
may use any reasonable averaging and attribution methods. Any Affected Party making a claim under
this Section 2.15 shall submit to the Servicer a written description as to such additional
or increased cost or reduction and the calculation thereof, which written description shall be
conclusive absent demonstrable error.



     (e) If the applicable Purchaser or Swingline Purchaser shall notify their respective Purchaser
Agent (or, in the case of the Swingline Purchaser, the Administrative Agent) that a Eurodollar
Disruption Event as described in clause (a) of the definition of “Eurodollar Disruption
Event” has occurred, the applicable Purchaser Agent or the Administrative Agent shall in turn so
notify the Seller, whereupon all Advances Outstanding of the affected Purchaser or Swingline
Purchaser in respect of which Interest accrues at the Adjusted Eurodollar Rate shall immediately be
converted into Advances Outstanding in respect of which Interest accrues at the Base Rate.



     Section 2.16 Taxes.



     (a) All payments made by an Obligor in respect of an Asset and all payments made by the Seller
or the Servicer under this Agreement will be made free and clear of and without deduction or
withholding for or on account of any Taxes. If any Taxes are required to be withheld from any
amounts payable to the Administrative Agent, the Purchaser Agents, any Affected Party or any
Secured Party, then the amount payable to such Person will be increased (such increase, the
“Additional Amount”) such that every net payment made under this Agreement after
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 net income or franchise taxes imposed on the Purchasers,
any Affected Party, the Administrative Agent or the Purchaser Agents, respectively, with respect to
payments required to be made by the Seller or Servicer under this Agreement, by a taxing
jurisdiction in which the Purchasers, any Affected Party, the Administrative Agent or the Purchaser
Agents, are organized, conducts business or is paying taxes (as the case may be).



     (b) The Servicer will indemnify (and to the extent the indemnification provided by the
Servicer is insufficient the Seller will indemnify) each Affected Party for the full amount of
Taxes payable by such Person in respect of Additional Amounts and any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto. All payments in
respect of this indemnification shall be made within ten days from the date a written invoice
therefor is delivered to the Seller.



     (c) Within thirty (30) days after the date of any payment by the Seller and the Servicer of
any Taxes, the Seller and the Servicer will furnish to the Administrative Agent and each of the
Purchaser Agents at its address set forth under its name on the signature pages hereof, appropriate
evidence of payment thereof.



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     (d) If a Purchaser is not created or organized under the laws of the United States or a
political subdivision thereof, such Purchaser shall deliver to the Seller, with a copy to the
Administrative Agent, (i) within fifteen (15) days after the date hereof, two (or such other number
as may from time to time be prescribed by Applicable Laws) duly completed copies of IRS Form W-8BEN
or Form W-8ECI (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 Seller to make payments hereunder for the account of such Purchaser
without deduction or withholding of United States federal income or similar Taxes and (ii) upon the
obsolescence of or after the occurrence of any event requiring a change in, any form or certificate
previously delivered pursuant to this Section 2.16(d), copies (in such numbers as may from
time to time be prescribed by Applicable Laws or regulations) of such additional, amended or
successor forms, certificates or statements as may be required under Applicable Laws or regulations
to permit the Seller and the Servicer to make payments hereunder for the account of such Purchaser
without deduction or withholding of United States federal income or similar Taxes.



     (e) If, in connection with an agreement or other document providing liquidity support, credit
enhancement or other similar support to the Purchasers in connection with this Agreement or the
funding or maintenance of Advances hereunder, the Purchasers are required to compensate a bank or
other financial institution in respect of Taxes under circumstances similar to those described in
this Section 2.16, then, within ten days after demand by the Purchasers, the Servicer shall
pay (or to the extent the Servicer does not make such payment the Seller shall pay) to the
Purchasers such additional amount or amounts as may be necessary to reimburse the Purchasers for
any amounts paid by them.



     (f) Without prejudice to the survival of any other agreement of the Seller and the Servicer
hereunder, the agreements and obligations of the Seller and the Servicer contained in this
Section 2.16 shall survive the termination of this Agreement.



     Section 2.17 Assignment of the Sale Agreement.



     The Seller hereby assigns to the Administrative Agent, for the ratable benefit of the Secured
Parties hereunder, all of the Seller’s right, title and interest in and to, but none of its
obligations under, the Sale Agreement and any UCC financing statements filed under or in connection
therewith. In furtherance and not in limitation of the foregoing, the Seller hereby assigns to the
Administrative Agent for the benefit of the Secured Parties its right to indemnification under
Article VIII of the Sale Agreement. The Seller confirms that the Administrative Agent on
behalf of the Secured Parties shall have the sole right to enforce the Seller’s rights and remedies
under the Sale Agreement and any UCC financing statements filed under or in connection therewith
for the benefit of the Secured Parties.



     Section 2.18 Substitution of Assets.



     On any day prior to the occurrence of a Termination Event (and after the Termination Date at
the discretion of the Administrative Agent with the consent of the Purchaser Agents), the Seller
may, subject to the conditions set forth in this Section 2.18 and subject to the other
restrictions contained herein, replace any Asset with one or more Eligible Assets (each, a



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“Substitute Asset”); 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 Seller has recommended to the Administrative Agent (with a copy to the Collateral
Custodian) in writing that the Asset to be replaced should be replaced (each a “Replaced
Asset”);



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



     (c) after giving effect to any such substitution, the Advances Outstanding do not exceed the
lesser of (i) the Facility Amount and (ii) the Maximum Availability;



     (d) for purposes only of substitutions pursuant to Section 4.6 undertaken because an
Asset has become a Warranty Asset, the aggregate Outstanding Asset Balance of such Substitute
Assets shall be equal to or greater than the aggregate Outstanding Asset Balances of the Replaced
Assets;



     (e) for purposes only of substitutions pursuant to Section 4.6 undertaken because an
Asset has become a Warranty Asset, such Substitute Assets, at the time of substitution by the
Seller, shall have no greater weighted average life than the Replaced Asset;



     (f) all representations and warranties of the Seller contained in Section 4.1 and
Section 4.2 shall be true and correct as of the date of substitution of any such Substitute
Asset;



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



     (h) the sum of the Outstanding Asset Balance of all Assets that are Substitute Assets does not
exceed 20% of the Facility Amount, calculated on an annualized basis commencing with the Closing
Date;



     (i) the sum of the Outstanding Asset Balance of all Substitute Assets substituted for
Delinquent Assets, Charged-Off Assets and Warranty Assets shall not exceed 10% of the Facility
Amount, calculated on an annualized basis commencing with the Closing Date;



     (j) the Seller shall deliver to the Administrative Agent on the date of such substitution a
certificate of a Responsible Officer certifying that each of the foregoing is true and correct as
of such date; and



     (k) each Asset that is replaced pursuant to the terms of this Section 2.18 shall be
substituted only with another Asset that meets the foregoing conditions.



     In addition, the Seller shall in connection with such substitution deliver to the Collateral
Custodian the related Required Asset Documents. In connection with any such substitution, the
Administrative Agent, as agent for the Secured Parties, shall, automatically and without further
action, be deemed to transfer to the Seller, free and clear of any Lien created pursuant to this
Agreement, all of the right, title and interest of the Administrative Agent, as agent for the



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Secured Parties, in, to and under such Replaced Asset, but without any representation and
warranty of any kind, express or implied.




     Section 2.19 Optional Sales.



     (a) On any Optional Sale Date, the Seller shall have the right to prepay all or a portion of
the Advances Outstanding in connection with the sale and assignment to the Seller by the
Administrative Agent, on behalf of the Secured Parties, of the Collateral (each, an “Optional
Sale”), subject to the following terms and conditions:




     (i) The Seller shall have given the Administrative Agent at least forty-five (45)
Business Days’ prior written notice of its intent to effect an Optional Sale, unless such
notice is waived or reduced by the Administrative Agent;




     (ii) Any Optional Sale shall be in connection with a Permitted Securitization
Transaction;




     (iii) Unless an Optional Sale is to be effected on a Payment Date (in which case the
relevant calculations with respect to such Optional Sale shall be reflected on the
applicable Monthly Report), the Servicer shall deliver to the Administrative Agent a
certificate and evidence to the reasonable satisfaction of the Administrative Agent (which
evidence may consist solely of a certificate from the Servicer) that the Seller shall have
sufficient funds on the related Optional Sale Date to effect the contemplated Optional Sale
in accordance with this Agreement. In effecting an Optional Sale, the Seller may use the
Proceeds of sales of the Collateral;




     (iv) After giving effect to the Optional Sale and the assignment to the Seller of the
Collateral on any Optional Sale Date, (a) the remaining Advances Outstanding shall not
exceed the lesser of the Facility Amount and the Maximum Availability, (b) the
representations and warranties contained in Section 4.1 hereof shall continue to be
correct in all material respects, except to the extent relating to an earlier date, (c) the
eligibility of any Asset remaining as part of the Collateral after the Optional Sale will be
redetermined as of the Optional Sale Date, (d) the Pool Concentration Criteria will be
redetermined as of the Optional Sale Date, and (e) neither an Unmatured Termination Event
nor a Termination Event shall have resulted;




     (v) On the related Optional Sale Date, the Administrative Agent, the Swingline
Purchaser, each Purchaser Agent, on behalf of the applicable Purchaser and the Hedge
Counterparties, shall have received, as applicable, in immediately available funds, an
amount equal to the sum of (a) the portion of the Advances Outstanding to be prepaid plus
(b) an amount equal to all unpaid Interest to the extent reasonably determined by the
Administrative Agent and the Purchaser Agents to be attributable to that portion of the
Advances Outstanding to be paid in connection with the Optional Sale plus (c) an aggregate
amount equal to the sum of all other amounts due and owing to the Administrative Agent, the
Collateral Custodian, the Backup Servicer, the Purchaser Agents, the applicable Purchaser,
the Affected Parties and the Hedge Counterparties, as applicable, under this Agreement and
the other Transaction Documents, to the extent



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accrued to such date and to accrue thereafter (including, without limitation, Breakage
Costs, Hedge Breakage Costs and any other payments owing to the applicable Hedge
Counterparty in respect of the termination of any Hedge Transaction); provided that the
Administrative Agent and each Purchaser Agent shall have the right to determine whether the
amount paid (or proposed to be paid) by the Seller on the Optional Sale Date is sufficient
to satisfy the requirements of clauses (iii), (iv) and (v) and is
sufficient to reduce the Advances Outstanding to the extent requested by the Seller in
connection with the Optional Sale; and




     (vi) On or prior to each Optional Sale Date, the Seller shall have delivered to the
Administrative Agent a list specifying all Assets to be sold and assigned pursuant to such
Optional Sale.



     (b) In connection with any Optional Sale, following receipt by the Purchaser Agents of the
amounts referred to in clause (v) above, there shall be sold and assigned to the Seller
without recourse, representation or warranty all of the right, title and interest of the
Administrative Agent, the Purchaser Agents, the Purchasers and the Secured Parties in, to and under
the portion of the Collateral so retransferred and such portion of the Collateral so retransferred
shall be released from the Lien of this Agreement (subject to the requirements of clause
(iv) above).



     (c) The Seller hereby agrees to pay the reasonable legal fees and expenses of the
Administrative Agent, each Purchaser Agent and the Secured Parties in connection with any Optional
Sale (including, but not limited to, expenses incurred in connection with the release of the Lien
of the Administrative Agent, the Secured Parties and any other party having an interest in the
Collateral in connection with such Optional Sale).



     (d) In connection with any Optional Sale, on the related Optional Sale Date, the
Administrative Agent, on behalf of the Secured Parties, shall, at the expense of the Seller (i)
execute such instruments of release with respect to the portion of the Collateral to be
retransferred to the Seller, in recordable form if necessary, in favor of the Seller as the Seller
may reasonably request, (ii) deliver any portion of the Collateral to be retransferred to the
Seller in its possession to the Seller and (iii) 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 Administrative Agent and the Secured Parties on the portion of the Collateral to be
retransferred to the Seller and release and deliver to the Seller such portion of the Collateral to
be retransferred to the Seller.



ARTICLE III




CONDITIONS TO ADVANCES AND SWINGLINE ADVANCES




     Section 3.1 Conditions to Closing and Initial Advance.



     The Purchasers shall not be obligated to make any Advance hereunder on the occasion of the
Initial Advance, nor shall any Purchaser, Administrative Agent, the Purchaser Agents, the Backup
Servicer and the Collateral Custodian be obligated to take, fulfill or perform any other



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action hereunder, until the following conditions have been satisfied, in the sole discretion
of, or waived in writing by, the Administrative Agent and each Purchaser Agent:




     (a) Each Transaction Document shall have been duly executed by, and delivered to, the parties
thereto, and the Administrative Agent and each Purchaser Agent shall have received such other
documents, instruments, agreements and legal opinions as the Administrative Agent and each
Purchaser Agent shall reasonably request in connection with the transactions contemplated by this
Agreement, including, without limitation, all those specified in the Schedule of Documents attached
hereto as Schedule I, each in form and substance satisfactory to the Administrative Agent
and each Purchaser Agent;



     (b) The Administrative Agent and each Purchaser Agent shall have received (i) satisfactory
evidence that the Seller 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 the 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 Seller and the Servicer in form and substance reasonably satisfactory to the
Administrative Agent and each Purchaser Agent affirming that no such consents or approvals are
required; it being understood that the acceptance of such evidence or officer’s certificate shall
in no way limit the recourse of the Administrative Agent, each Purchaser Agent or any Secured Party
against the Originator or the Seller for a breach of the Originator’s and the Seller’s
representation or warranty that all such consents and approvals have, in fact, been obtained;



     (c) The Seller, the Servicer and the Originator shall each be in compliance in all material
respects with all Applicable Laws and shall have delivered to the Administrative Agent and each
Purchaser Agent as to this and other closing matters certification in the form of Exhibits
F-1 and F-2;



     (d) The Seller and the Servicer shall have delivered to the Administrative Agent and each
Purchaser Agent duly executed Powers of Attorney in the form of Exhibits G-1 and
G-2;



     (e) The Seller and the Servicer shall each have delivered to the Administrative Agent and each
Purchaser Agent a certificate as to Solvency in the form of Exhibits E-1 and E-2
and a perfection certificate in form reasonably acceptable to the Administrative Agent; and



     (f) The Administrative Agent shall have received evidence satisfactory to it that (i) the sum
of all amounts payable to VFCC under the CS Funding III Transaction and the amount of the
commitment of VFCC under the CS Funding III Transaction does not exceed $280,000,000 and (ii) the
amount of the commitment of Wachovia as “Swingline Purchaser” under the CS Funding III Transaction
does not exceed $28,000,000.



     Section 3.2 Conditions Precedent to All Advances and Swingline Advances.



     Each Advance or Swingline Advance to the Seller by the applicable Purchaser (each, a
“Transaction”) shall be subject to the further conditions precedent that:



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     (a) (i) With respect to any Advance (including the Initial Advance) or Swingline Advance, the
Servicer shall have delivered to the Administrative Agent and each Purchaser Agent (with a copy to
the Collateral Custodian and the Backup Servicer), (x) in the case of an Advance, no later than
2:00 p.m. (Charlotte, North Carolina time), one Business Day prior to the related Funding Date, and
(y) in the case of a Swingline Advance, no later than 2:00 p.m. (Charlotte, North Carolina time) on
the related Funding Date, in a form and substance satisfactory to the Administrative Agent and each
Purchaser Agent, (1) a Borrowing Notice (Exhibit A-1 or A-1-S, as applicable),
Borrowing Base Certificate (Exhibit A-3), Asset List and Monthly Report, if applicable, and
(2) a Certificate of Assignment (Exhibit A to the Sale Agreement including Schedule
I, thereto) and containing such additional information as may be reasonably requested by the
Administrative Agent and each Purchaser Agent, and (ii) with respect to any reduction in Advances
Outstanding pursuant to Section 2.4(b) or any reinvestment of Principal Collections
permitted by Section 2.9(b), the Servicer shall have delivered to the Administrative Agent
and each Purchaser Agent (with a copy to the Backup Servicer) at least one Business Day prior to
any reduction of Advances Outstanding or same day notice no later than 2:00 p.m. (Charlotte, North
Carolina time) on such day for any reinvestment of Principal Collections a Borrowing Notice
(Exhibit A-2) and a Borrowing Base Certificate (Exhibit A-3) executed by the
Servicer and the Seller;



     (b) On the date of such Transaction the following statements shall be true, and the Seller
shall be deemed to have certified that:




     (i) The representations and warranties contained in Section 4.1, Section
4.2 and Section 4.3 are true and correct on and as of such day as though made on
and as of such day and shall be deemed to have been made on such day;




     (ii) No event has occurred and is continuing, or would result from such Transaction,
that constitutes a Termination Event or Unmatured Termination Event;




     (iii) On and as of such day, after giving effect to such Transaction, the Advances
Outstanding shall not exceed the lesser of (x) the Facility Amount and (y) the Maximum
Availability, and, if such Transaction involves a Swingline Advance, the aggregate amount of
Swingline Advances outstanding does not exceed $0;




     (iv) On and as of such day, the Seller and the Servicer each has performed all of the
covenants and agreements contained in this Agreement to be performed by such person at or
prior to such day; and




     (v) No law or regulation shall prohibit, and no order, judgment or decree of any
federal, state or local court or governmental body, agency or instrumentality shall prohibit
or enjoin, the making of such Advance, incremental Advance or Swingline Advance by the
Purchaser or the Swingline Purchaser in accordance with the provisions hereof, the reduction
of Advances Outstanding, the reinvestment of Principal Collections or any other transaction
contemplated herein;



     (c) The Seller shall have delivered to the Collateral Custodian (with a copy to the Backup
Servicer and the Administrative Agent) (i) in the case of an Advance, no later than 2:00



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p.m. (Charlotte, North Carolina time) one Business Day prior to any Funding Date, and (ii) in
the case of a Swingline Advance, no later than 2:00 p.m. (Charlotte, North Carolina time) on the
related Funding Date, a faxed copy of the duly executed original promissory notes, master purchase
agreement and purchase statements or a copy of the Loan Register, as applicable, for the Loans,
and, if any Assets are closed in escrow, a certificate (in the form of Exhibit M) from the
counsel to the Originator or the Obligor of such Assets certifying the possession of the Required
Asset Documents, provided that notwithstanding the foregoing, the Required Asset Documents
(including any UCCs included in the Required Asset Documents) shall be in the possession of the
Collateral Custodian within two Business Days of any related Funding Date as to any Additional
Assets;




     (d) The Seller shall not have requested the Termination Date to occur;




     (e) The Facility Termination Date shall not have occurred;




     (f) On the date of such Transaction, the Administrative Agent and each Purchaser Agent shall
have received such other approvals, opinions or documents as the Administrative Agent and each
Purchaser Agent may reasonably require;



     (g) The Required Equity Contribution, if any, shall have been made to the Seller;




     (h) The Administrative Agent shall have received from the Seller all hedging confirms related
to any Hedging Agreement required by this Agreement;



     (i) The Seller and Servicer shall have delivered to the Administrative Agent and each
Purchaser Agent all reports required to be delivered as of the date of such Transaction including,
without limitation, all deliveries required by Section 2.2 or 2.3, as applicable;



     (j) With respect to any Acquired Loan intended to be included as a part of the Collateral, the
Administrative Agent and each Purchaser Agent shall have received an opinion of counsel in
accordance with Schedule I;



     (k) The Seller shall have paid all fees required to be paid, including all fees required
hereunder and under the VFCC Fee Letter and any Additional Agent Fee Letter and shall have
reimbursed the Purchasers, the Administrative Agent and each Purchaser Agent for all fees, costs
and expenses of closing the transactions contemplated hereunder and under the other Transaction
Documents, including the reasonable attorney fees and any other legal and document preparation
costs incurred by the Purchasers, the Administrative Agent and each Purchaser Agent;



     (l) In the case of each Swingline Advance, the Administrative Agent shall have consented to
such Swingline Advance;



     (m) The Seller shall have delivered to the Administrative Agent and each Purchaser Agent an
Officer’s Certificate (which may be part of the Borrowing Notice) in form and substance reasonably
satisfactory to the Administrative Agent and each Purchaser Agent certifying that each of the
foregoing conditions precedent has been satisfied; and



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     (n) Before the close of business on January 13, 2006, the Originator shall have delivered an
Opinion of Counsel, in form and substance satisfactory to the Administrative Agent and each
Purchaser Agent, with respect to the existence of no conflicts with Contractual Obligations.



     The failure of the Seller to satisfy any of the foregoing conditions precedent in respect of
any Advance or Swingline Advance shall give rise to a right of the Administrative Agent and the
applicable Purchaser Agent (or, in the case of a Swingline Advance, the Administrative Agent),
which right may be exercised at any time on the demand of the applicable Purchaser Agent (or, in
the case of a Swingline Advance, the Administrative Agent), to rescind the related Advance or
Swingline Advance and direct the Seller to pay to the Administrative Agent for the benefit of the
applicable Purchaser or Swingline Purchaser an amount equal to the Advances or Swingline Advances
made during any such time that any of the foregoing conditions precedent were not satisfied.



ARTICLE IV




REPRESENTATIONS AND WARRANTIES




     Section 4.1 Representations and Warranties of the Seller.



     The Seller represents and warrants as follows:



     (a) Organization and Good Standing. The Seller has been duly organized, and is
validly existing as a limited liability company in good standing, under the laws of the State of
Delaware, with all requisite company power and authority to own or lease its properties and conduct
its business as such business is presently conducted, and had at all relevant times, and now has
all necessary power, authority and legal right to acquire, own and sell the Collateral.



     (b) Due Qualification. The Seller is duly qualified to do business and is in good
standing as a limited liability company, and has obtained all necessary licenses and approvals, in
all jurisdictions in which the ownership or lease of property or the conduct of its business
requires such qualification, licenses or approvals.



     (c) Power and Authority; Due Authorization; Execution and Delivery. The Seller (i)
has all necessary power, authority and legal right to (a) execute and deliver this Agreement and
the other Transaction Documents to which it is a party, (b) carry out the terms of the Transaction
Documents to which it is a party, (c) sell and assign an ownership interest in the Collateral, and
(d) receive Advances and Swingline Advances and sell the Collateral on the terms and conditions
provided herein and (ii) has duly authorized by all necessary company action the execution,
delivery and performance of this Agreement and the other Transaction Documents to which it is a
party and the sale and assignment of an ownership interest in the Collateral on the terms and
conditions herein provided. This Agreement and each other Transaction Document to which the Seller
is a party have been duly executed and delivered by the Seller.



     (d) Binding Obligation. This Agreement and each other Transaction Document to which
the Seller is a party constitutes a legal, valid and binding obligation of the Seller enforceable
against the Seller in accordance with its respective terms, except as such



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enforceability may be limited by Insolvency Laws and by general principles of equity (whether
considered in a suit at law or in equity).




     (e) No Violation. The consummation of the transactions contemplated by this Agreement
and the other Transaction Documents to which it is a party and the fulfillment of the terms hereof
and thereof will not (i) conflict with, result in any breach of any of the terms and provisions of,
or constitute (with or without notice or lapse of time or both) a default under, the Seller’s
operating agreement or any Contractual Obligation of the Seller, (ii) result in the creation or
imposition of any Lien (other than Permitted Liens) upon any of the Seller’s properties pursuant to
the terms of any such Contractual Obligation, other than this Agreement, or (iii) violate any
Applicable Law.



     (f) No Proceedings. There is no litigation, proceeding or investigation pending or,
to the best knowledge of the Seller, threatened against the Seller, before any Governmental
Authority (i) asserting the invalidity of this Agreement or any other Transaction Document to which
the Seller is a party, (ii) seeking to prevent the consummation of any of the transactions
contemplated by this Agreement or any other Transaction Document to which the Seller is a party or
(iii) seeking any determination or ruling that could reasonably be expected to have 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 for the due execution,
delivery and performance by the Seller of this Agreement and any other Transaction Document to
which the Seller is a party have been obtained.



     (h) Bulk Sales. The execution, delivery and performance of this Agreement and the
transactions contemplated hereby do not require compliance with any “bulk sales” act or similar law
by Seller.



     (i) Solvency. The Seller is not the subject of any Insolvency Proceedings or
Insolvency Event. The transactions under this Agreement and any other Transaction Document to
which the Seller is a party do not and will not render the Seller not Solvent and the Seller shall
deliver to the Administrative Agent and each Purchaser Agent on the Closing Date a certification in
the form of Exhibit E-1.



     (j) Selection Procedures. No procedures believed by the Seller to be adverse to the
interests of the Purchaser were utilized by the Seller in identifying and/or selecting the Assets
in the Collateral. In addition, each Asset shall have been underwritten in accordance with and
satisfy the standards of any Credit and Collection Policy that has been established by the Seller
or the Originator and is then in effect.



     (k) Taxes. The Seller has filed or caused to be filed all tax returns that are
required to be filed by it. The Seller has paid or made adequate provisions for the payment of 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 Seller),
and



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no tax lien has been filed and, to the Seller’s knowledge, no claim is being asserted, with
respect to any such Tax, fee or other charge.




     (l) Exchange Act Compliance; Regulations T, U and X. None of the transactions
contemplated herein (including, without limitation, the use of the proceeds from the sale of the
Collateral) will violate or result in a violation of Section 7 of the Securities Exchange Act, or
any regulations issued pursuant thereto, including, without limitation, Regulations T, U and X of
the Board of Governors of the Federal Reserve System, 12 C.F.R., Chapter II. The Seller does not
own or intend to carry or purchase, and no proceeds from the Advances or the Swingline Advances
will be used to carry or purchase, any “margin stock” within the meaning of Regulation U or to
extend “purpose credit” within the meaning of Regulation U.



     (m) Security Interest.




     (i) This Agreement creates a valid and continuing security interest (as defined in the
applicable UCC) in the Collateral in favor of the Administrative 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 Seller;




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




     (iii) the Seller owns and has good and marketable title to the Collateral free and
clear of any Lien (other than Permitted Liens), claim or encumbrance of any Person;




     (iv) the Seller has received all consents and approvals required by the terms of any
Asset to the sale and granting of a security interest in the Assets hereunder to the
Administrative Agent, on behalf of the Secured Parties;




     (v) the Seller 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 the Collateral granted to the Administrative Agent, on
behalf of the Secured Parties, under this Agreement;




     (vi) other than the security interest granted to the Administrative Agent, on behalf of
the Secured Parties, pursuant to this Agreement, the Seller has not pledged, assigned, sold,
granted a security interest in or otherwise conveyed any of the Collateral. The Seller has
not authorized the filing of and is not aware of any financing statements against the Seller
that include a description of collateral covering the Collateral other than any financing
statement (A) relating to the security interest granted to the Seller under the Sale
Agreement, or (B) that have been terminated. The Seller is not aware of the filing of any
judgment or tax lien filings against the Seller;




     (vii) all original executed copies of each underlying promissory note or copies of each
Loan Register, as applicable, that constitute or evidence each Loan has been, or



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subject to the delivery requirements contained herein, will be delivered to the
Collateral Custodian;




     (viii) the Seller has received a written acknowledgment from the Collateral Custodian
that the Collateral Custodian or its bailee is holding the underlying promissory notes (if
any), the copies of the Loan Registers that constitute or evidence the Assets solely on
behalf of and for the benefit of the Secured Parties provided that, notwithstanding the
foregoing, with respect to any Asset to be funded with the proceeds of a Swingline Advance,
the Seller shall have received a written acknowledgment from the Collateral Custodian (A)
that the Collateral Custodian has received a faxed copy of the applicable underlying
promissory note or Loan Register, as applicable, and (B) within two Business Days after such
Funding Date, that the Collateral Custodian or its bailee is holding the applicable
underlying promissory note or Loan Register, as applicable, that constitute or evidence the
Assets included in the Collateral solely on behalf of, and for the benefit of, the Secured
Parties;




     (ix) none of the underlying promissory notes or Loan Registers, as applicable, that
constitute or evidence the Assets has any marks or notations indicating that they have been
pledged, assigned or otherwise conveyed to any Person other than the Administrative Agent,
on behalf of the Secured Parties; and




     (x) none of the Collateral has been pledged or otherwise made subject to a Lien in
favor of Bear, Stearns & Co. Inc., Bear, Stearns Securities Corp. or any of their now or
hereafter existing affiliates, except for such pledge or Lien as shall have been previously
released or terminated.



     (n) Reports Accurate. All Monthly Reports (if prepared by the Seller, or to the
extent that information contained therein is supplied by the Seller), information, exhibits,
financial statements, documents, books, records or reports furnished or to be furnished by the
Seller to the Administrative Agent, each Purchaser Agent or any Purchaser in connection with this
Agreement are true, complete and correct.



     (o) Location of Offices. The Seller’s location (within the meaning of Article 9 of
the UCC) is Delaware. The office where the Seller keeps all the Records is at the address of the
Seller referred to in Section 13.2 hereof (or at such other locations as to which the
notice and other requirements specified in Section 5.2(g) shall have been satisfied). The
Seller’s Federal Employee Identification Number is 30-3991722. The Seller has not changed its
name, whether by amendment of its certificate of formation, by reorganization or otherwise, and has
not changed its location within the four months preceding the Closing Date.



     (p) Lock-Boxes. The names and addresses of all the Lock-Box Banks, together with the
account numbers of the Lock-Box Accounts of the Seller at such Lock-Box Banks and the names,
addresses and account numbers of all accounts to which Collections of the Collateral outstanding
before the Initial Advance hereunder have been sent, are specified in Schedule II (which
shall be deemed to be amended in respect of terminating or adding any Lock-Box Account or Lock-Box
Bank upon satisfaction of the notice and other requirements specified in Section 5.2(k)).
The Seller has not granted any Person other than the Administrative Agent and



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Collateral Custodian an interest in any Lock-Box Account at a future time or upon the
occurrence of a future event.




     (q) Tradenames. The Seller 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.



     (r) Sale Agreement. The Sale Agreement is the only agreement pursuant to which the
Seller purchases Collateral.



     (s) Value Given. The Seller shall have given reasonably equivalent value to the
Originator in consideration for the transfer to the Seller of the Collateral under the Sale
Agreement, no such transfer shall have been made for or on account of an antecedent debt owed by
the Originator to the Seller, and no such transfer is or may be voidable or subject to avoidance
under any section of the Bankruptcy Code.



     (t) Accounting. The Seller accounts for the transfers to it from the Originator of
interests in Collateral under the Sale Agreement as financings of such Collateral for tax and
consolidated accounting purposes (with a notation that it is treating the transfers as a sale for
legal and all other purposes on its books, records and financial statements, in each case
consistent with GAAP and with the requirements set forth herein).



     (u) Special Purpose Entity. The Seller has not and shall not:




     (i) engage in any business or activity other than the purchase and receipt of
Collateral and related assets from the Originator under the Sale Agreement, the sale of
Collateral under the Transaction Documents, and such other activities as are incidental
thereto;




     (ii) acquire or own any material assets other than (a) the Collateral and related
assets from the Originator under the Sale Agreement and (b) incidental property as may be
necessary for the operation of the Seller;




     (iii) merge into or consolidate with any Person or dissolve, terminate or liquidate in
whole or in part, transfer or otherwise dispose of all or substantially all of its assets or
change its legal structure, without in each case first obtaining the consent of the
Administrative Agent and each Purchaser Agent;




     (iv) fail to preserve its existence as an entity duly organized, validly existing and
in good standing under the laws of the jurisdiction of its organization or formation, or
without the prior written consent of the Administrative Agent and each Purchaser Agent,
amend, modify, terminate or fail to comply with the provisions of its operating agreement,
or fail to observe limited liability company formalities;




     (v) own any Subsidiary or make any investment in any Person without the consent of the
Administrative Agent and each Purchaser Agent;




     (vi) except as permitted by this Agreement and the Lock-Box Agreement, commingle its
assets with the assets of any of its Affiliates, or of any other Person;



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     (vii) incur any debt, secured or unsecured, direct or contingent (including
guaranteeing any obligation), other than indebtedness to the Secured Parties hereunder or in
conjunction with a repayment of all Advances or Swingline Advances owed to the Purchasers or
the Swingline Purchaser, except for trade payables in the ordinary course of its business;
provided that such debt is not evidenced by a note and is paid when due;




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




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




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




     (xi) seek its dissolution or winding up in whole or in part;




     (xii) fail to correct any known misunderstandings regarding the separate identity of
Seller and the Originator or any principal or Affiliate thereof or any other Person;




     (xiii) guarantee, become obligated for, or hold itself out to be responsible for the
debt of another Person;




     (xiv) make any loan or advances to any third party, including any principal or
Affiliate, or hold evidence of indebtedness issued by any other Person (other than cash and
investment-grade securities);




     (xv) fail to file its own separate tax return, or file a consolidated federal income
tax return with any other Person, except as may be required by the Internal Revenue Code and
regulations;




     (xvi) fail either to hold itself out to the public as a legal entity separate and
distinct from any other Person or to conduct its business solely in its own name in order
not (a) to mislead others as to the identity with which such other party is transacting
business, or (b) to suggest that it is responsible for the debts of any third party
(including any of its principals or Affiliates);




     (xvii) fail to maintain adequate capital for the normal obligations reasonably
foreseeable in a business of its size and character and in light of its contemplated
business operations;




     (xviii) file or consent to the filing of any petition, either voluntary or involuntary,
to take advantage of any applicable insolvency, bankruptcy, liquidation or reorganization
statute, or make an assignment for the benefit of creditors;



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     (xix) except as may be required by the Internal Revenue Code and regulations, share any
common logo with or hold itself out as or be considered as a department or division of (a)
any of its principals or affiliates, (b) any Affiliate of a principal or (c) any other
Person;




     (xx) permit any transfer (whether in one or more transactions) of any direct or
indirect ownership interest in the Seller to the extent it has the ability to control the
same, unless the Seller delivers to the Administrative Agent and each Purchaser Agent an
acceptable non-consolidation opinion and the Administrative Agent consents to such transfer;




     (xxi) fail to maintain separate financial statements, showing its assets and
liabilities separate and apart from those of any other Person;




     (xxii) fail to pay its own liabilities and expenses only out of its own funds;




     (xxiii) fail to pay the salaries of its own employees in light of its contemplated
business operations;




     (xxiv) acquire the obligations or securities of its Affiliates or stockholders;




     (xxv) fail to allocate fairly and reasonably any overhead expenses that are shared with
an Affiliate, including paying for office space and services performed by any employee of an
Affiliate;




     (xxvi) fail to use separate invoices and checks bearing its own name;




     (xxvii) pledge its assets for the benefit of any other Person, other than with respect
to payment of the indebtedness to the Secured Parties hereunder;




     (xxviii) fail at any time to have at least one independent director who is not and has
not been for at least five years a director, officer, employee, trade credit or shareholder
(or spouse, parent, sibling or child of the foregoing) of (a) the Servicer, (b) the Seller,
(c) any principal of the Servicer, (d) any Affiliate of the Servicer, or (e) any Affiliate
of any principal of the Servicer (an “Independent Director”); provided that such
Independent Director may be an independent director of another special purpose entity
affiliated with the Servicer or fail to ensure that all limited liability company action
relating to the selection, maintenance or replacement of the Independent Director are duly
authorized by the unanimous vote of the board of directors (including the Independent
Director);




     (xxix) to provide that the unanimous consent of all directors (including the consent of
the Independent Director) is required for the Seller to (a) dissolve or liquidate, in whole
or part, or institute proceedings to be adjudicated bankrupt or insolvent, (b) institute or
consent to the institution of bankruptcy or insolvency proceedings against it, (c) file a
petition seeking or consent to reorganization or relief under any applicable federal or
state law relating to bankruptcy or insolvency, (d) seek or consent to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator, custodian or any



76









 






similar official for the Seller, (e) make any assignment for the benefit of the
Seller’s creditors, (f) admit in writing its inability to pay its debts generally as they
become due, or (g) take any action in furtherance of any of the foregoing; and




     (xxx) take or refrain from taking, as applicable, each of the activities specified in
the non-consolidation opinion of Patton Boggs LLP, dated as of the date hereof, upon which
the conclusions expressed therein are based.



     (v) Confirmation from the Originator. The Seller has received in writing from the
Originator confirmation that the Originator will not cause the Seller to file a voluntary petition
under the Bankruptcy Code or Insolvency Laws. Each of the Seller and the Originator is aware that
in light of the circumstances described in the preceding sentence and other relevant facts, the
filing of a voluntary petition under the Bankruptcy Code for the purpose of making any Collateral
or any other assets of the Seller available to satisfy claims of the creditors of the Originator
would not result in making such assets available to satisfy such creditors under the Bankruptcy
Code.



     (w) Investment Company Act. The Seller is not, and is not controlled by, an
“investment company” within the meaning of the 1940 Act, as amended, or is exempt from the
provisions of the 1940 Act.



     (x) ERISA. The present value of all benefits vested under all “employee pension
benefit plans,” as such term is defined in Section 3 of ERISA, maintained by the Seller, or
in which employees of the Seller are entitled to participate, as from time to time in effect
(herein called the “Pension Plans”), does not exceed the value of the assets of the Pension
Plan allocable to such vested benefits (based on the value of such assets as of the last annual
valuation date). No prohibited transactions, accumulated funding deficiencies, withdrawals or
reportable events have occurred with respect to any Pension Plans that, in the aggregate, could
subject the Seller to any material tax, penalty or other liability. No notice of intent to
terminate a Pension Plan has been billed, nor has any Pension Plan been terminated under Section
4041(f) of ERISA, nor has the Pension Benefit Guaranty Corporation instituted proceedings to
terminate, or appoint a trustee to administer a Pension Plan and no event has occurred or condition
exists that might constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Pension Plan.



     (y) PUHCA. The Seller is not a “holding company” or a “subsidiary holding company” of
a “holding company” within the meaning of the Public Utility Holding Company Act of 1935, as
amended, or any successor statute.



     (z) Compliance with Law. The Seller has complied in all respects with all Applicable
Laws to which it may be subject, and no item of Collateral contravenes any Applicable Laws
(including, without limitation, all applicable predatory and abusive lending laws and all laws,
rules and regulations relating to licensing, truth in lending, fair credit billing, fair credit
reporting, equal credit opportunity, fair debt collection practices, and privacy).



     (aa) Credit and Collection Policy. The Seller has complied in all material respects
with the Credit and Collection Policy with respect to all of the Collateral.



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     (bb) Collections. The Seller acknowledges that all Collections received by it or its
Affiliates with respect to the Collateral sold hereunder are held and shall be held in trust for
the benefit of the Secured Parties until deposited into the Collection Account within two Business
Days from receipt as required herein.



     (cc) Set-Off, etc. Other than Senior Subordinated Loans or Junior Subordinated Loans,
no Collateral has been compromised, adjusted, extended, satisfied, subordinated, rescinded, set-off
or modified by the Seller, the Originator or the Obligor thereof, and no Collateral is subject to
compromise, adjustment, extension, satisfaction, subordination, rescission, set-off, counterclaim,
defense, abatement, suspension, deferment, deduction, reduction, termination or modification,
whether arising out of transactions concerning the Collateral or otherwise, by the Seller, the
Originator or the Obligor with respect thereto, except for amendments to such Collateral otherwise
permitted under Section 6.4(a) of this Agreement and in accordance with the Credit and
Collection Policy.



     (dd) Full Payment. The Seller has no knowledge of any fact which should lead it to
expect that any Collateral will not be paid in full.



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



     (ff) Representations and Warranties in Sale Agreement. The representations and
warranties made by the Originator to the Seller in the Sale Agreement are hereby remade by the
Seller on each date to which they speak in the Sale Agreement as if such representations and
warranties were set forth herein. For purposes of this Section 4.1(ff), such
representations and warranties are incorporated herein by reference as if made by the Seller to the
Administrative Agent, each Purchaser Agent and each of the Secured Parties under the terms hereof
mutatis mutandis.



     (gg) Reaffirmation of Representations and Warranties by the Seller. On each day that
any Advance or Swingline Advance is made hereunder, the Seller shall be deemed to have certified
that all representations and warranties described in Section 4.1 hereof are correct on and
as of such day as though made on and as of such day.



     (hh) Participation, Acquired and Assigned Loans. The participations created with
respect to the Participation Loans and the sale to the Originator with respect to the Acquired and
Assigned Loans do not violate any provisions of the underlying Required Asset Documents and such
documents do not contain any express or implied prohibitions on participations or sales of such
Loans.



     (ii) Environmental.




     (i) Each item of the Related Property is in compliance with all applicable
Environmental Laws, and there is no violation of any Environmental Law with respect to such
Related Property and there are no conditions relating to such Related Property that could
give rise to liability under any applicable Environmental Laws.



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     (ii) None of the Related Property contains, or has previously contained, any Materials
of Environmental Concern at, on or under the Related Property in amounts or concentrations
that constitute or constituted a violation of, or could give rise to liability under,
Environmental Laws.




     (iii) None of the Seller, the Originator nor the Servicer has received any written or
verbal notice of, or inquiry from any Governmental Authority regarding, any violation,
alleged violation, non-compliance, liability or potential liability regarding environmental
matters or compliance with Environmental Laws with regard to any of the Related Property,
nor does any such Person have knowledge or reason to believe that any such notice will be
received or is being threatened.




     (iv) Materials of Environmental Concern have not been transported or disposed of from
the Related Property, or generated, treated, stored or disposed of at, on or under any of
the Related Property or any other location, in each case by or on behalf of the Seller, the
Originator and/or the Servicer in violation of, or in a manner that would be reasonably
likely to give rise to liability under, any applicable Environmental Law.




     (v) No judicial proceeding or governmental or administrative action is pending or, to
the best knowledge of the Seller, the Originator and/or the Servicer, threatened, under any
Environmental Law to which any of the Seller, the Originator and/or the Servicer is or will
be named as a party, nor are there any consent decrees or other decrees, consent orders,
administrative orders or other orders, or other administrative or judicial requirements,
outstanding under any Environmental Law with respect to any of the Seller, the Originator,
the Servicer or the Related Property.




     (vi) There has been no release or threat of release of Materials of Environmental
Concern at or from any of the Related Property, or arising from or related to the operations
(including, without limitation, disposal) of any of the Seller, the Originator and/or the
Servicer in connection with the Related Property in violation of or in amounts or in a
manner that could give rise to liability under Environmental Laws.



     (jj) USA PATRIOT Act. Neither the Seller nor any Affiliate of the Seller is (i) a
country, territory, organization, person or entity named on an Office of Foreign Asset Control
(OFAC) list, (ii) 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, or whose subscription funds are transferred from or through such a
jurisdiction; (iii) 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 (iv)
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 Sections 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(m) shall survive the termination of
this Agreement and such representations and warranties may not be waived by any party hereto.



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     Section 4.2 Representations and Warranties of the Seller Relating to the Agreement and
the Collateral.



     The Seller hereby represents and warrants, as of the Closing Date and as of each Addition
Date:



     (a) Binding Obligation, Valid Transfer and Security Interest.




     (i) This Agreement and each other Transaction Document to which the Seller is a party
each constitute a legal, valid and binding obligation of the Seller, enforceable against the
Seller in accordance with its 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).




     (ii) This Agreement constitutes a valid transfer to the Administrative Agent, as agent
for the Secured Parties, of all right, title and interest of the Seller in, to and under all
of the Collateral, free and clear of any Lien of any Person claiming through or under the
Seller or its Affiliates, except for Permitted Liens. If the conveyances contemplated by
this Agreement are determined to be transfer for security, then this Agreement constitutes a
grant of a security interest in all of the Collateral to the Administrative Agent, as agent
for the Secured Parties, which upon the delivery of the Required Asset Documents to the
Collateral Custodian and the filing of the financing statements described in Section
4.1(m) and, in the case of Additional Assets on the applicable Addition Date, shall be a
first priority perfected security interest in all Collateral, subject only to Permitted
Liens. Neither the Seller nor any Person claiming through or under Seller shall have any
claim to or interest in the Collection Account and, if this Agreement constitutes the grant
of a security interest in such property, except for the interest of Seller in such property
as a debtor for purposes of the UCC.



     (b) Eligibility of Collateral. As of the Closing Date and each Addition Date, (i) the
Asset List and the information contained in the Borrowing Notice delivered pursuant to Section
2.2 or Section 2.3, as applicable, is an accurate and complete listing in all material
respects of all Collateral as of the Cut-Off Date and the information contained therein with
respect to the identity of such Collateral and the amounts owing thereunder is true and correct in
all material respects as of the related Cut-Off Date, (ii) each such Asset that is part of the
Borrowing Base is an Eligible Asset as of such date, (iii) each such item of Collateral is free and
clear of any Lien of any Person (other than Permitted Liens) and in compliance with all Applicable
Laws, (iv) with respect to each such item of Collateral, all consents, licenses, approvals or
authorizations of or registrations or declarations of any Governmental Authority required to be
obtained, effected or given by the Seller in connection with the transfer of an ownership interest
in such Collateral to the Administrative Agent as agent for the Secured Parties have been duly
obtained, effected or given and are in full force and effect, and (v) the representations and
warranties set forth in Section 4.2(a) are true and correct with respect to each item of
Collateral.



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



     Section 4.3 Representations and Warranties of the Servicer.



     The Servicer represents and warrants as follows:



     (a) Organization and Good Standing. The Servicer has been duly organized and is
validly existing as a limited liability company in good standing under the laws of the State of
Delaware, with all requisite company power and authority to own or lease its properties and to
conduct its business as such business is presently conducted and to enter into and perform its
obligations pursuant to this Agreement.



     (b) Due Qualification. The Servicer is duly qualified to do business as a limited
liability company and is in good standing as a limited liability company, and has obtained all
necessary licenses and approvals in all jurisdictions in which the ownership or lease of its
property and or the conduct of its business requires such qualification, licenses or approvals.



     (c) Power and Authority; Due Authorization; Execution and Delivery. The Servicer (i)
has all necessary power, authority and legal right to (a) execute and deliver this Agreement and
the other Transaction Documents to which it is a party, (b) carry out the terms of the Transaction
Documents to which it is a party, and (ii) has duly authorized by all necessary company action the
execution, delivery and performance of this Agreement and the other Transaction Documents to which
it is a party. This Agreement and each other Transaction Document to which the Servicer is a party
have been duly executed and delivered by the Servicer.



     (d) Binding Obligation. This Agreement and each other Transaction Document to which
the Servicer is a party constitutes a legal, valid and binding obligation of the Servicer
enforceable against the Servicer in accordance with its respective terms, except as such
enforceability may be limited by Insolvency Laws and general principles of equity (whether
considered in a suit at law or in equity).



     (e) No Violation. The consummation of the transactions contemplated by this Agreement
and the other Transaction Documents to which it is a party and the fulfillment of the terms hereof
and thereof will not (i) conflict with, result in any breach of any of the terms and provisions of,
or constitute (with or without notice or lapse of time or both) a default under, the Servicer’s
operating agreement or any Contractual Obligation of the Servicer, (ii) result in the creation or
imposition of any Lien upon any of the Servicer’s properties pursuant to the terms of any such
Contractual Obligation, other than this Agreement, or (iii) violate any Applicable Law.



     (f) No Proceedings. There is no litigation, proceedings or investigations pending or,
to the best knowledge of the Servicer, threatened against the Servicer, before any Governmental
Authority (i) asserting the invalidity of this Agreement or any other Transaction Document to which
the Servicer is a party, (ii) seeking to prevent the consummation of any of the transactions
contemplated by this Agreement or any other Transaction Document to which the Servicer is a



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




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



     (h) Reports Accurate. All Servicer Certificates and other written and electronic
information, exhibits, financial statements, documents, books, records or reports furnished by the
Servicer to the Administrative Agent, each Purchaser Agent or any Purchaser in connection with this
Agreement are accurate, true and correct.



     (i) Credit and Collection Policy. The Servicer has complied in all material respects
with the Credit and Collection Policy with regard to the origination, underwriting and servicing of
the Assets.



     (j) Collections. The Servicer acknowledges that all Collections received by it or its
Affiliates with respect to the Collateral sold hereunder are held and shall be held in trust for
the benefit of the Secured Parties until deposited into the Collection Account within two Business
Days from receipt as required herein.



     (k) Bulk Sales. The execution, delivery and performance of this Agreement do not
require compliance with any “bulk sales” act or similar law by the Servicer.



     (l) Solvency. The Servicer is not the subject of any Insolvency Proceedings or
Insolvency Event. The transactions under this Agreement and any other Transaction Document to
which the Servicer is a party do not and will not render the Servicer not Solvent and the Servicer
shall deliver to the Administrative Agent and each Purchaser Agent on the Closing Date a
certification in the form of Exhibit E-2.



     (m) Taxes. The Servicer has filed or caused to be filed all tax returns that are
required to be filed by it. The Servicer has paid or made adequate provisions for the payment of
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
Servicer), and no tax lien has been filed and, to the Servicer’s knowledge, no claim is being
asserted, with respect to any such Tax, fee or other charge.



     (n) Exchange Act Compliance; Regulations T, U and X. None of the transactions
contemplated herein (including, without limitation, the use of the Proceeds from the sale of the
Collateral) will violate or result in a violation of Section 7 of the Securities Exchange Act, or
any regulations issued pursuant thereto, including, without limitation, Regulations T, U and X of
the Board of Governors of the Federal Reserve System, 12 C.F.R., Chapter II. The Servicer does not
own or intend to carry or purchase, and no proceeds from the Advances or Swingline Advances will be
used to carry or purchase, any “margin stock” within the meaning of Regulation U or to extend
“purpose credit” within the meaning of Regulation U.



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     (o) Security Interest. The Servicer will take all steps necessary to ensure that the
Seller has granted a security interest (as defined in the UCC) to the Administrative Agent, as
agent for the Secured Parties, in the Collateral, which is enforceable in accordance with
Applicable Law upon execution and delivery of this Agreement. Upon the filing of UCC-1 financing
statements naming the Administrative Agent as secured party and the Seller as debtor, the
Administrative Agent, as agent for the Secured Parties, shall have a first priority perfected
security interest in the Collateral (except for any Permitted Liens). All filings (including,
without limitation, such UCC filings) as are necessary for the perfection of the Secured Parties’
security interest in the Collateral have been (or prior to the date of the applicable Advance or
Swingline Advance will be) made.



     (p) ERISA. The present value of all benefits vested under all “employee pension
benefit plans,” as such term is defined in Section 3 of ERISA, maintained by the Servicer,
or in which employees of the Servicer are entitled to participate, as from time to time in effect
(herein called the “Pension Plans”), does not exceed the value of the assets of the Pension Plan
allocable to such vested benefits (based on the value of such assets as of the last annual
valuation date). No prohibited transactions, accumulated funding deficiencies, withdrawals or
reportable events have occurred with respect to any Pension Plans that, in the aggregate, could
subject the Servicer to any material tax, penalty or other liability. No notice of intent to
terminate a Pension Plan has been billed, nor has any Pension Plan been terminated under Section
4041(f) of ERISA, nor has the Pension Benefit Guaranty Corporation instituted proceedings to
terminate, or appoint a trustee to administer, a Pension Plan and no event has occurred or
condition exists that might constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Pension Plan.



     (q) Investment Company Act. The Servicer is not, and is not controlled by, an
“investment company” within the meaning of the 1940 Act, as amended, or is exempt from the
provisions of the 1940 Act.



     (r) USA PATRIOT Act. Neither the Servicer nor any Affiliate of the Servicer is (i) a
country, territory, organization, person or entity named on an OFAC list, (ii) 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, or whose subscription funds are transferred from or through such a jurisdiction;



     (iii) 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 (iv) 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 Sections 311 or 312 of the USA PATRIOT Act as warranting
special measures due to money laundering concerns.



     Section 4.4 Representations and Warranties of the Backup Servicer.



     The Backup Servicer in its individual capacity and as Backup Servicer represents and warrants
as follows:



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     (a) Organization and Corporate Power. It is a duly organized and validly existing
national banking association in good standing under the laws of the United States. It has full
corporate power, authority and legal right to execute, deliver and perform its obligations as
Backup Servicer under this Agreement.



     (b) Due Authorization. The execution and delivery of this Agreement and the
consummation of the transactions provided for herein have been duly authorized by all necessary
association action on its part, either in its individual capacity or as Backup Servicer, as the
case may be.



     (c) No Conflict. The execution and delivery of this Agreement, the performance of the
transactions contemplated hereby and the fulfillment of the terms hereof will not conflict with,
result in any breach of any of the material terms and provisions of, or constitute (with or without
notice or lapse of time or both) a default under any indenture, contract, agreement, mortgage, deed
of trust, or other instrument to which the Backup Servicer is a party or by which it or any of its
property is bound.



     (d) No Violation. The execution and delivery of this Agreement, the performance of
the transactions contemplated hereby and the fulfillment of the terms hereof will not conflict with
or violate, in any material respect, any Applicable Law.



     (e) All Consents Required. All approvals, authorizations, consents, orders or other
actions of any Person or Governmental Authority applicable to the Backup Servicer, required in
connection with the execution and delivery of this Agreement, the performance by the Backup
Servicer of the transactions contemplated hereby and the fulfillment by the Backup Servicer of the
terms hereof have been obtained.



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



     Section 4.5 Representations and Warranties of the Collateral Custodian.



     The Collateral Custodian in its individual capacity and as Collateral Custodian represents and
warrants as follows:



     (a) Organization and Corporate Power. It is a duly organized and validly existing
national banking association in good standing under the laws of the United States. It has full
corporate power, authority and legal right to execute, deliver and perform its obligations as
Collateral Custodian under this Agreement.



     (b) Due Authorization. The execution and delivery of this Agreement and the
consummation of the transactions provided for herein have been duly authorized by all necessary
association action on its part, either in its individual capacity or as Collateral Custodian, as
the case may be.



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     (c) No Conflict. The execution and delivery of this Agreement, the performance of the
transactions contemplated hereby and the fulfillment of the terms hereof will not conflict with,
result in any breach of any of the material terms and provisions of, or constitute (with or without
notice or lapse of time or both) a default under any indenture, contract, agreement, mortgage, deed
of trust, or other instrument to which the Collateral Custodian is a party or by which it or any of
its property is bound.



     (d) No Violation. The execution and delivery of this Agreement, the performance of
the Transactions contemplated hereby and the fulfillment of the terms hereof will not conflict with
or violate, in any material respect, any Applicable Law.



     (e) All Consents Required. All approvals, authorizations, consents, orders or other
actions of any Person or Governmental Authority applicable to the Collateral Custodian, required in
connection with the execution and delivery of this Agreement, the performance by the Collateral
Custodian of the transactions contemplated hereby and the fulfillment by the Collateral Custodian
of the terms hereof have been obtained.



     (f) Validity, Etc. The Agreement constitutes the legal, valid and binding obligation
of the Collateral Custodian, enforceable against the Collateral Custodian in accordance with its
terms, except as such enforceability may be limited by applicable Insolvency Laws and general
principles of equity (whether considered in a suit at law or in equity).



     Section 4.6 Breach of Certain Representations and Warranties.



     If on any day an Asset is (or becomes) a Warranty Asset, no later than two Business Days
following the earlier of knowledge by the Seller of such Asset becoming a Warranty Asset or receipt
by the Seller from the Administrative Agent or the Servicer of written notice thereof, the Seller
shall either: (a) make a deposit to the Collection Account (for allocation pursuant to Section
2.9 or Section 2.10, as applicable) in immediately available funds in an amount equal
to the sum of (i) the amount which, if deposited to the Collection Account on such date, would
cause the Availability as of such date (after giving effect to such Warranty Asset) to be greater
than or equal to zero, (ii) any outstanding Servicer Advances thereon, (iii) any accrued and unpaid
interest, (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 Hedging
Agreement and (v) in the case of a Loan, any costs and damages incurred in connection with any
violation by such Loan of any predatory- or abusive-lending law; or (b) subject to the satisfaction
of the conditions in Section 2.18, substitute for such Warranty Asset a Substitute Asset.
In either of the foregoing instances, the Seller may (in its discretion) accept retransfer of each
such Warranty Asset and any Related Security and the Borrowing Base shall be reduced by the
Outstanding Asset Balance of each such Warranty Asset and, if applicable, increased by the
Outstanding Asset Balance of each Substitute Asset. Upon confirmation of the deposit of such
Retransfer Price into the Collection Account or the delivery by the Seller of a Substitute Asset
for each Warranty Asset (the “Retransfer Date”), such Warranty Asset shall not be included
in the Borrowing Base (and, if and when the Seller elects to accept the retransfer of such Warranty
Asset, the Collateral) and, as applicable, the Substitute Asset shall be included in the
Collateral. Upon the Retransfer Date of each Warranty Asset, the Administrative Agent, as agent
for the Secured Parties, shall (if and when the Seller elects to accept the retransfer of such



85









 




Warranty Asset) automatically and without further action be deemed to transfer, assign and
set-over to the Seller, without recourse, representation or warranty, all the right, title and
interest of the Administrative Agent, as agent for the Secured Parties in, to and under such
Warranty Asset and all future monies due or to become due with respect thereto, the Related
Security, all Proceeds of such Warranty Asset, Recoveries and Insurance Proceeds relating thereto,
all rights to security for any such Warranty Asset, and all Proceeds and products of the foregoing.
The Administrative Agent, as agent for the Secured Parties, shall (if and when the Seller elects
to accept the retransfer of such Warranty Asset), at the sole expense of the Servicer, execute such
documents and instruments of transfer as may be prepared by the Servicer on behalf of the Seller
and take other such actions as shall reasonably be requested by the Seller to effect the transfer
of such Warranty Asset pursuant to this Section 4.6.




ARTICLE V




GENERAL COVENANTS




     Section 5.1 Affirmative Covenants of the Seller.



     From the date hereof until the Collection Date:



     (a) Compliance with Laws. The Seller will comply in all material respects with all
Applicable Laws, including those with respect to the Collateral or any part thereof.



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



     (c) Performance and Compliance with Collateral. The Seller will, at its expense,
timely and fully perform and comply (or cause the Originator to perform and comply pursuant to the
Sale Agreement) with all provisions, covenants and other promises required to be observed by it
under the Collateral and all other agreements related to such Collateral.



     (d) Keeping of Records and Books of Account. The Seller will maintain and implement
administrative and operating procedures (including, without limitation, an ability to recreate
records evidencing the Collateral in the event of the destruction of the originals thereof), and
keep and maintain all documents, books, records and other information reasonably necessary or
advisable for the collection of all or any portion of the Collateral.



     (e) Originator’s Collateral. With respect to the Collateral acquired by the Seller,
the Seller will (i) acquire such Collateral pursuant to and in accordance with the terms of the
Sale Agreement, (ii) (at the Servicer’s expense) take all action necessary to perfect, protect and
more fully evidence the Seller’s ownership of such Collateral free and clear of any Lien other than
the Lien created hereunder and Permitted Liens, including, without limitation, (a) filing and
maintaining (at the Servicer’s expense), effective financing statements against the Originator 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



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executed such other instruments or notices as may be necessary or appropriate, (iii) permit
the Administrative Agent, each Purchaser Agent or their respective agents or representatives to
visit the offices of the Seller during normal office hours and upon reasonable notice examine and
make copies of all documents, books, records and other information concerning the Collateral and
discuss matters related thereto with any of the officers or employees of the Seller having
knowledge of such matters, and (iv) take all additional action that the Administrative Agent or any
Purchaser Agent may reasonably request to perfect, protect and more fully evidence the respective
interests of the parties to this Agreement in the Collateral.




     (f) Delivery of Collections. The Seller will pay to the Servicer promptly (but in no
event later than two Business Days after receipt) all Collections received by Seller in respect of
the Collateral and cause the same to be promptly deposited into the Collection Account by the
Servicer in accordance with Section 5.4(l).



     (g) Separate Limited Liability Company Existence. The Seller shall be in compliance
with the Special Purpose Entity requirements set forth in Section 4.1(u).



     (h) Credit and Collection Policy. The Seller will (a) comply in all material respects
with the Credit and Collection Policy in regard to the Collateral, and (b) furnish to the
Administrative Agent and each Purchaser Agent, prior to its effective date, prompt notice of any
material changes in the Credit and Collection Policy. The Seller will not agree to or otherwise
permit to occur any material change in the Credit and Collection Policy, which change would impair
the collectibility of any of the Collateral or otherwise adversely affect the interests or remedies
of the Administrative Agent, each Purchaser Agent or the Secured Parties under this Agreement or
any other Transaction Document, without the prior consent of the Administrative Agent and each
Purchaser Agent (which consent shall not be unreasonably withheld).



     (i) Termination Events. The Seller will provide the Administrative Agent and each
Purchaser Agent with immediate written notice of the occurrence of each Termination Event and each
Unmatured Termination Event of which the Seller has knowledge or has received notice. In addition,
no later than two Business Days following the Seller’s knowledge or notice of the occurrence of any
Termination Event or Unmatured Termination Event, the Seller will provide to the Administrative
Agent and each Purchaser Agent a written statement of the chief financial officer or chief
accounting officer of Seller setting forth the details of such event and the action that the Seller
proposes to take with respect thereto.



     (j) Taxes. The Seller will file and pay any and all Taxes required to meet the
obligations of the Transaction Documents.



     (k) Use of Proceeds. The Seller will use the proceeds of the Advances or Swingline
Advances only to acquire Collateral or to make distributions to its members in accordance with the
terms hereof.



     (l) Obligor Notification Forms. The Seller shall furnish the Administrative Agent
with an appropriate power of attorney to send (at the Administrative Agent’s discretion after the
occurrence of a Termination Event or an Unmatured Termination Event) Obligor notification



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forms to give notice to the Obligors of the Secured Parties’ interest in the Collateral and
the obligation to make payments as directed by the Administrative Agent.




     (m) Adverse Claims. The Seller will not create, or participate in the creation of, or
permit to exist, any Liens in relation to each Lock-Box Account other than as disclosed to the
Administrative Agent and each Purchaser Agent.



     (n) Seller’s Collateral. With respect to each item of Collateral acquired by the
Secured Parties, the Seller will (i) take all action necessary to perfect, protect and more fully
evidence the Secured Parties’ ownership of such Collateral, including, without limitation, (a)
filing and maintaining (at the Servicer’s expense), effective financing statements against the
Seller 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 and (ii) take
all additional action that the Administrative Agent may reasonably request to perfect, protect and
more fully evidence the respective interests of the parties to this Agreement in such Collateral.



     (o) Notices. The Seller will furnish to the Administrative Agent and each Purchaser
Agent:




     (i) Income Tax Liability. Within ten Business Days after the receipt of
revenue agent reports or other written proposals, determinations or assessments of the
Internal Revenue Service or any other taxing authority which propose, determine or otherwise
set forth positive adjustments to the Tax liability of any Affiliated group (within the
meaning of Section 1504(a)(l) of the Internal Revenue Code of 1986 (as amended from time to
time)) which equal or exceed $1,000,000 in the aggregate, telephonic, telex or telecopy
notice (confirmed in writing within five Business Days) specifying the nature of the items
giving rise to such adjustments and the amounts thereof;




     (ii) Auditors’ Management Letters. Promptly after the receipt thereof, any
auditors’ management letters are received by the Seller or by its accountants;




     (iii) Representations. Forthwith upon receiving knowledge of same, the Seller
shall notify the Administrative Agent and each Purchaser Agent if any representation or
warranty set forth in Section 4.1 was incorrect at the time it was given or deemed
to have been given and at the same time deliver to the Administrative Agent and each
Purchaser Agent a written notice setting forth in reasonable detail the nature of such facts
and circumstances. In particular, but without limiting the foregoing, the Seller shall
notify the Administrative Agent and each Purchaser Agent in the manner set forth in the
preceding sentence before any Funding Date of any facts or circumstances within the
knowledge of the Seller which would render any of the said representations and warranties
untrue at the date when such representations and warranties were made or deemed to have been
made;



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     (iv) ERISA. Promptly after receiving notice of any “reportable event” (as
defined in Title IV of ERISA) with respect to the Seller (or any Affiliate thereof), a copy
of such notice;




     (v) Proceedings. As soon as possible and in any event within three Business
Days after any executive officer of the Seller receives notice or obtains knowledge thereof,
of any settlement of, material judgment (including a material judgment with respect to the
liability phase of a bifurcated trial) in or commencement of any material labor controversy,
material litigation, material action, material suit or material proceeding before any court
or governmental department, commission, board, bureau, agency or instrumentality, domestic
or foreign, affecting the Collateral, the Transaction Documents, the Secured Parties’
interest in the Collateral, or the Seller, the Servicer or the Originator or any of their
Affiliates; provided that, notwithstanding the foregoing, any settlement, judgment, labor
controversy, litigation, action, suit or proceeding affecting the Collateral, the
Transaction Documents, the Secured Parties’ interest in the Collateral, or the Seller, the
Servicer or the Originator or any of their Affiliates in excess of $2,500,000 or more shall
be deemed to be material for purposes of this Section 5.1(o); and




     (vi) Notice of Material Events. Promptly upon becoming aware thereof, notice
of any other event or circumstances that, in the reasonable judgment of the Seller, is
likely to have a Material Adverse Effect.



     (p) Other. The Seller will furnish to the Administrative Agent and each Purchaser
Agent promptly, from time to time, such other information, documents, records or reports respecting
the Collateral or the condition or operations, financial or otherwise, of Seller or Originator as
the Administrative Agent and each Purchaser Agent may from time to time reasonably request in order
to protect the interests of the Administrative Agent, each Purchaser Agent or the Secured Parties
under or as contemplated by this Agreement.



     Section 5.2 Negative Covenants of the Seller.



     From the date hereof until the Collection Date:



     (a) Other Business. Seller will not (i) engage in any business other than the
transactions contemplated by the Transaction Documents, (ii) incur any Indebtedness, obligation,
liability or contingent obligation of any kind other than pursuant to this Agreement or under any
Hedging Agreement required by Section 5.3(a), or (iii) form any Subsidiary or make any
Investments in any other Person.



     (b) Collateral Not to be Evidenced by Instruments. The Seller will take no action to
cause any Collateral that is not, as of the Closing Date or the related Addition Date, as the case
may be, evidenced by an Instrument, to be so evidenced except in connection with the enforcement or
collection of such Collateral.



     (c) Security Interests. Except as otherwise permitted herein and in respect of any
Optional Sale and Permitted Securitization, the Seller will not sell, pledge, assign or transfer to
any other Person, or grant, create, incur, assume or suffer to exist any Lien on any Collateral,
whether now existing or hereafter transferred hereunder, or any interest therein, and the Seller



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will not sell, pledge, assign or suffer to exist any Lien on its interest, if any, hereunder.
The Seller will promptly notify the Administrative Agent and each Purchaser Agent of the existence
of any Lien on any Collateral and the Seller shall defend the right, title and interest of the
Administrative Agent as agent for the Secured Parties in, to and under the Collateral against all
claims of third parties; provided that nothing in this Section 5.2(c) shall prevent or be
deemed to prohibit the Seller from suffering to exist Permitted Liens upon any of the Collateral.




     (d) Mergers, Acquisitions, Sales, etc. The Seller will not be a party to any merger
or consolidation, or purchase or otherwise acquire any of the assets or any stock of any class of,
or any partnership or joint venture interest in, any other Person, or sell, transfer, convey or
lease any of its assets, or sell or assign with or without recourse any Collateral or any interest
therein (other than pursuant hereto or to the Sale Agreement).



     (e) Deposits to Special Accounts. Except as otherwise provided in the Lock-Box
Agreement, the Seller will not deposit or otherwise credit, or cause or permit to be so deposited
or credited, to any Lock-Box Account cash or cash proceeds other than Collections in respect of the
Collateral.



     (f) Restricted Payments. The Seller shall not make any Restricted Junior Payment,
except that, so long as no Termination Event or Unmatured Termination Event has occurred and is
continuing or would result therefrom, the Seller may declare and make distributions to its members
on their membership interests.



     (g) Change of Name or Location of Loan Files. The Seller shall not (x) change its
name, move the location of its principal place of business and chief executive office, change the
offices where it keeps the records from the location referred to in Section 13.2, or change
the jurisdiction of its formation, or (y) move, or consent to the Collateral Custodian or Servicer
moving, the Required Asset Documents and the Asset Files from the location thereof on the Closing
Date, unless the Seller has given at least thirty (30) days’ written notice to the Administrative
Agent and has taken all actions required under the UCC of each relevant jurisdiction in order to
continue the first priority perfected security interest of the Administrative Agent, as agent for
the Secured Parties, in the Collateral.



     (h) Accounting of Purchases. Other than for tax and consolidated accounting purposes,
the Seller will not account for or treat (whether in financial statements or otherwise) the
transactions contemplated hereby in any manner other than as a sale of the Collateral by the Seller
to the Secured Parties. Other than for tax and consolidated accounting purposes, the Seller will
not account for or treat (whether in financial statements or otherwise) the transactions
contemplated by the Sale Agreement in any manner other than as a sale of the Collateral by the
Originator to the Seller.



     (i) ERISA Matters. The Seller 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 Seller or any ERISA



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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.




     (j) Operating Agreement; Sale Agreement. The Seller will not amend, modify, waive or
terminate any provision of its operating agreement or the Sale Agreement without the prior written
consent of the Administrative Agent and each Purchaser Agent.



     (k) Changes in Payment Instructions to Obligors. The Seller will not add or terminate
any bank as a Lock-Box Bank or any Lock-Box Account from those listed in Schedule II or
make any change, or permit Servicer to make any change, in its instructions to Obligors regarding
payments to be made to Seller or Servicer or payments to be made to any Lock-Box Bank, unless the
Administrative Agent has consented to such addition, termination or change (which consent shall not
be unreasonably withheld) and has received duly executed copies of Lock-Box Agreements with each
new Lock-Box Bank or with respect to each new Lock-Box Account, as the case may be.



     (l) Extension or Amendment of Collateral. The Seller will not, except as otherwise
permitted in Section 6.4(a), waive, extend, amend or otherwise modify, or permit the
Servicer to extend, amend or otherwise modify, the terms of any Collateral (including the Related
Security) provided that no waiver, extension, modification or alteration otherwise permitted under
Section 6.4(a) shall (i) alter the status of any Asset as a Delinquent Asset or Charged-Off
Asset, (ii) in the reasonable judgment of the Administrative Agent, prevent or delay any Asset from
becoming a Delinquent Asset or Charged-Off Asset, or (iii) limit and/or impair the rights of the
Administrative Agent or the Secured Parties under this Agreement.



     (m) Credit and Collection Policy. The Seller will not materially amend, modify,
restate or replace, in whole or in part, the Credit and Collection Policy, which amendment,
modification, restatement or replacement would impair the collectibility of any of the Collateral
or otherwise adversely affect the interests or remedies of the Administrative Agent, each Purchaser
Agent or the Secured Parties under this Agreement or any other Transaction Document, without the
prior written consent of the Administrative Agent and each Purchaser Agent (which consent will not
be unreasonably withheld).



     (n) Other Indedtedness. The Seller will not issue or extend any class or type of
Indebtedness whether senior, pari passu or subordinated to the Indebtedness arising under this
Agreement, unless an opinion of special tax counsel is first rendered to the effect that such
issuance of additional Indebtedness will not cause the Seller to be treated as a taxable mortgage
pool.



     Section 5.3 Covenants of the Seller Relating to the Hedging of Assets.



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




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



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     (ii) have a schedule of monthly calculation periods the first of which commences on the
Funding Date of that Advance or Swingline Advance and the last of which ends on the last
Scheduled Payment due to occur under or with respect to the Assets included in the Aggregate
Outstanding Asset Balance to which that Advance or Swingline Advance relates;




     (iii) have an amortizing notional amount such that the Hedge Notional Amount shall be
at least equal to the product of the Hedge Percentage and the portion of the Hedge Amount
represented by such Advance or Swingline Advances; and




     (iv) provide for two series of monthly payments to be netted against each other, one
such series being payments to be made by the Seller to a Hedge Counterparty (solely on a net
basis) by reference to a fixed rate for that Advance or Swingline Advance, and the other
such series being payments to be made by such Hedge Counterparty to the Administrative Agent
(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 such Hedge Counterparty) or from the Collection Account to the extent funds are available
under Section 2.9(a)(i) and Section 2.10(a)(i) (if payable by the Seller).



     (b) As additional security hereunder, Seller hereby assigns to the Administrative Agent, as
agent for the Secured Parties, all right, title and interest but none of the obligations of the
Seller in each Hedging Agreement, each Hedge Transaction, and all present and future amounts
payable by a Hedge Counterparty to Seller 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 Administrative Agent, as agent for the Secured Parties, in the
Hedge Collateral. Seller acknowledges that, as a result of that assignment, Seller may not,
without the prior written consent of the Administrative Agent, exercise any rights under any
Hedging Agreement or Hedge Transaction, except for Seller’s right under any Hedging Agreement to
enter into Hedge Transactions in order to meet the Seller’s obligations under Section
5.3(a) hereof. Nothing herein shall have the effect of releasing the Seller from any of its
obligations under any Hedging Agreement or any Hedge Transaction, nor be construed as requiring the
consent of the Administrative Agent or any Secured Party for the performance by Seller of any such
obligations.



     Section 5.4 Affirmative Covenants of the Servicer.



     From the date hereof until the Collection Date:



     (a) Compliance with Law. The Servicer will comply in all material respects with all
Applicable Laws, including those with respect to the Collateral or any part thereof.



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



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



     (d) Keeping of Records and Books of Account.




     (i) The Servicer will maintain and implement administrative and operating procedures
(including without limitation, an ability to recreate records evidencing Collateral in the
event of the destruction of the originals thereof), and keep and maintain all documents,
books, records and other information reasonably necessary or advisable for the collection of
all Collateral and the identification of the Collateral.




     (ii) The Servicer shall permit the Administrative Agent, each Purchaser Agent or their
respective agents or representatives, to visit the offices of the Servicer during normal
office hours and upon reasonable notice and examine and make copies of all documents, books,
records and other information concerning the Collateral and discuss matters related thereto
with any of the officers or employees of the Servicer having knowledge of such matters.




     (iii) The Servicer will on or prior to the date hereof, mark its master data processing
records and other books and records relating to the Collateral with a legend, acceptable to
the Administrative Agent and each Purchaser Agent, describing the sale of the Collateral (A)
from the Originator to the Seller, and (B) from the Seller to the Purchaser.



     (e) Preservation of Security Interest. The Servicer (at its own expense) will execute
and file 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 security
interest of the Administrative Agent as agent for the Secured Parties in, to and under the
Collateral.



     (f) Credit and Collection Policy. The Servicer will (i) comply in all material
respects with the Credit and Collection Policy in regard to the Collateral, and (ii) furnish to the
Administrative Agent and each Purchaser Agent, prior to its effective date, prompt notice of any
proposed material change in the Credit and Collection Policy. Without the prior written consent of
the Administrative Agent and each Purchaser Agent (which consent will not be unreasonably
withheld), the Servicer will not agree to or otherwise permit to occur any material change in the
Credit and Collection Policy, which change would impair the collectibility of any of the Collateral
or otherwise adversely affect the interests or remedies of the Administrative Agent, each Purchaser
Agent or the Secured Parties under this Agreement or any other Transaction Document.



     (g) Termination Events. The Servicer will provide the Administrative Agent and each
Purchaser Agent with immediate written notice of the occurrence of each Termination Event and each
Unmatured Termination Event of which the Servicer has knowledge or has received notice. In
addition, no later than two Business Days following the Servicer’s



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knowledge or notice of the occurrence of any Termination Event or Unmatured Termination Event,
the Servicer will provide to the Administrative Agent and each Purchaser Agent a written statement
of the chief financial officer or chief accounting officer of the Servicer setting forth the
details of such event and the action that the Servicer proposes to take with respect thereto.




     (h) Taxes. The Servicer will file and pay any and all Taxes required to meet the
obligations of the Seller and the Servicer under the Transaction Documents.



     (i) Other. The Servicer will promptly furnish to the Administrative Agent and each
Purchaser Agent such other information, documents, records or reports respecting the Collateral or
the condition or operations, financial or otherwise, of the Seller or the Servicer as the
Administrative Agent and each Purchaser Agent may from time to time reasonably request in order to
protect the interests of the Administrative Agent, each Purchaser Agent or Secured Parties under or
as contemplated by this Agreement.



     (j) Proceedings. As soon as possible and in any event within three Business Days
after any executive officer of the Servicer receives notice or obtains knowledge thereof, of any
settlement of, material judgment (including a material judgment with respect to the liability phase
of a bifurcated trial) in or commencement of any material labor controversy material litigation,
material action, material suit or material proceeding before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, affecting the
Collateral, the Transaction Documents, the Secured Parties’ interest in the Collateral, or the
Seller, the Servicer or the Originator or any of their Affiliates; provided that, notwithstanding
the foregoing, any settlement, judgment, labor controversy, litigation, action, suit or proceeding
affecting the Collateral, the Transaction Documents, the Secured Parties’ interest in the
Collateral, or the Seller, the Servicer or the Originator or any of their Affiliates in excess of
$2,500,000 or more shall be deemed to be material for purposes of this Section 5.4(j).



     (k) Deposit of Collections. The Servicer shall promptly (but in no event later than
two Business Days after receipt) deposit into the Collection Account any and all Collections
received by the Seller, the Servicer or any of their Affiliates.



     (l) Servicing of Participation, Acquired and Assigned Loans. With respect to
Participation Loans, Acquired Loans and Assigned Loans, the Servicer shall: (i) segregate all Loan
Files with respect to such Loans; (ii) keep separate records with respect to such Loans; and (iii)
identify each such Type of Loan on the Servicing Reports required hereunder with respect to such
Loans.



     (m) Change-in-Control. Upon the occurrence of a Change-in-Control (including any
merger or consolidation of the Originator or transfer of substantially all of its assets and its
business), the Servicer shall provide the Administrative Agent, each Purchaser Agent and the Hedge
Counterparties with notice of such Change-in-Control within thirty (30) days after completion of
the same.



     (n) Loan Register.




     (i) The Servicer shall maintain with respect to each Noteless Loan a register (each, a
“Loan Register”) in which it will record (v) the amount of such Loan, (w) the



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amount of any principal or interest due and payable or to become due and payable from
the Obligor thereunder, (x) the amount of any sum in respect of such Loan received from the
Obligor and each Purchaser’s share thereof, (y) the date of origination of such Loan and (z)
the maturity date of such Loan. The entries made in each Loan Register maintained pursuant
to this Section 5.04(n) shall be prima facie evidence of the existence and amounts
of the obligations therein recorded; provided that the failure of the Servicer to maintain
any such Loan Register or any error therein shall not in any manner affect the obligations
of the Obligor to repay the related Loans in accordance with their terms or any Purchaser’s
interest therein.




     (ii) At any time a Noteless Loan is included as part of the Collateral pursuant to this
Agreement, the Servicer shall deliver to the Collateral Custodian a copy of the related Loan
Register, together with a certificate of a Responsible Officer of the Servicer certifying to
the accuracy of such Loan Register as of the date such Loan is included as part of the
Collateral.



     Section 5.5 Negative Covenants of the Servicer.



     From the date hereof until the Collection Date.



     (a) Deposits to Special Accounts. Except as otherwise provided in the Lock-Box
Agreement, the Servicer will not deposit or otherwise credit, or cause or permit to be so deposited
or credited, to any Lock-Box Account cash or cash proceeds other than Collections in respect of the
Collateral.



     (b) Mergers, Acquisition, Sales, etc. The Servicer will not consolidate with or merge
into any other Person or convey or transfer its properties and assets substantially as an entirety
to any Person, unless the Servicer is the surviving entity and unless:




     (i) the Servicer has delivered to the Administrative Agent and each Purchaser Agent an
Officer’s Certificate and an Opinion of Counsel each stating that any consolidation, merger,
conveyance or transfer and such supplemental agreement comply with this Section 5.5
and that all conditions precedent herein provided for relating to such transaction have been
complied with and, in the case of the Opinion of Counsel, that such supplemental agreement
is legal, valid and binding with respect to the Servicer and such other matters as the
Administrative Agent may reasonably request;




     (ii) the Servicer shall have delivered notice of such consolidation, merger, conveyance
or transfer to the Administrative Agent and each Purchaser Agent;




     (iii) after giving effect thereto, no Termination Event or Servicer Default or event
that with notice or lapse of time would constitute either a Termination Event or a Servicer
Default shall have occurred; and




     (iv) the Administrative Agent and each Purchaser Agent have consented in writing to
such consolidation, merger, conveyance or transfer.



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     (c) Change of Name or Location of Loan Files. The Servicer shall not (x) change its
name, move the location of its principal place of business and chief executive office, change the
offices where it keeps records concerning the Collateral from the location referred to in
Section 13.2, or change the jurisdiction of its formation, or (y) move, or consent to the
Collateral Custodian moving, the Required Asset Documents and Asset Files from the location thereof
on the Closing Date, unless the Servicer has given at least thirty (30) days’ written notice to the
Administrative Agent and has taken all actions required under the UCC of each relevant jurisdiction
in order to continue the first priority perfected security interest of the Administrative Agent as
agent for the Secured Parties in the Collateral.



     (d) Change in Payment Instructions to Obligors. The Servicer will not add or
terminate any bank as a Lock-Box Bank or any Lock-Box Account from those listed in Schedule
II or make any change in its instructions to Obligors regarding payments to be made to the
Seller or the Servicer or payments to be made to any Lock-Box Bank, unless the Administrative Agent
has consented to such addition, termination or change (which consent shall not be unreasonably
withheld) and has received duly executed copies of Lock-Box Agreements with each new Lock-Box Bank
or with respect to each new Lock-Box Account, as the case may be.



     (e) Extension or Amendment of Assets. The Servicer will not, except as otherwise
permitted in Section 6.4(a), extend, amend or otherwise modify the terms of any Assets;
provided that no waiver, extension, modification or alteration otherwise permitted under
Section 6.4(a) shall (i) alter the status of any Asset as a Delinquent Asset or Charged-Off
Asset, (ii) in the reasonable judgment of the Administrative Agent, prevent or delay any Asset from
becoming a Delinquent Asset or Charged-Off Asset, or (iii) limit and/or impair the rights of the
Administrative Agent or the Secured Parties under this Agreement.



     Section 5.6 Affirmative Covenants of the Backup Servicer.



     From the date hereof until the Collection Date:



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



     Section 5.7 Negative Covenants of the Backup Servicer.



     From the date hereof until the Collection Date:



     (a) No Changes in Backup Servicer Fee. The Backup Servicer will not make any changes
to the Backup Servicer Fee set forth in the Backup Servicer Fee Letter without the prior written
approval of the Administrative Agent and each Purchaser Agent.



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     Section 5.8 Affirmative Covenants of the Collateral Custodian.



     From the date hereof until the Collection Date:



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



     (c) Location of Required Asset Documents. The Required Asset Documents 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 or unless the
Administrative Agent agrees to allow certain Required Asset Documents to be released to the
Servicer on a temporary basis in accordance with the terms hereof.



     Section 5.9 Negative Covenants of the Collateral Custodian.



     From the date hereof until the Collection Date:



     (a) Required Asset Documents. The Collateral Custodian will not dispose of any
documents constituting the Required Asset Documents 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 Collateral except as contemplated by this Agreement.



     (b) No Changes in Collateral Custodian Fee. The Collateral Custodian will not make
any changes to the Collateral Custodian Fee set forth in the Collateral Custodian Fee Letter
without the prior written approval of the Administrative Agent and each Purchaser Agent.



ARTICLE VI




ADMINISTRATION AND SERVICING OF CONTRACTS




     Section 6.1 Designation of the Servicer.



     (a) Initial Servicer. The servicing, administering and collection of the Collateral
shall be conducted by the Person designated as the Servicer hereunder from time to time in
accordance with this Section 6.1. Until the Administrative Agent gives to the Originator a
Servicer Termination Notice, the Originator is hereby designated as, and hereby agrees to perform
the duties and responsibilities of, the Servicer pursuant to the terms hereof.



     (b) Successor Servicer. Upon the Servicer’s receipt of a Servicer Termination Notice
(with a copy to the Backup Servicer) from the Administrative Agent pursuant to the terms of
Section 6.15, the Servicer agrees that it will terminate its activities as Servicer
hereunder in a manner that the Administrative Agent reasonably believes will facilitate the
transition of the



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performance of such activities to a successor Servicer, and the successor Servicer shall
assume each and all of the Servicer’s obligations to service and administer the Collateral, on the
terms and subject to the conditions herein set forth, and the Servicer shall use its best
reasonable efforts to assist the successor Servicer in assuming such obligations.




     (c) Subcontracts. The Servicer may, with the prior consent of the Administrative
Agent, subcontract with any other Person for servicing, administering or collecting the Collateral;
provided that the Servicer shall remain liable for the performance of the duties and obligations of
the Servicer pursuant to the terms hereof and that any such subcontract may be terminated upon the
occurrence of a Servicer Default.



     (d) Servicing Programs. In the event that the Servicer uses any software program in
servicing the Collateral that it licenses from a third party, the Servicer shall use its best
reasonable efforts to obtain, either before the Closing Date or as soon as possible thereafter,
whatever licenses or approvals are necessary to allow the Administrative Agent or the Servicer to
use such program.



     Section 6.2 Duties of the Servicer.



     (a) Appointment. The Seller hereby appoints the Servicer as its agent, as from time
to time designated pursuant to Section 6.1, to service the Collateral and enforce its
respective rights in and under such Collateral. The Servicer hereby accepts such appointment and
agrees to perform the duties and obligations with respect thereto as set forth herein. The
Servicer and the Seller hereby acknowledge that the Administrative Agent, each Purchaser Agent and
the Secured Parties are third party beneficiaries of the obligations undertaken by the Servicer
hereunder.



     (b) Duties. The Servicer shall take or cause to be taken all such actions as may be
necessary or advisable to collect on the Collateral from time to time, all in accordance with
Applicable Laws, with reasonable care and diligence, and in accordance with the Credit and
Collection Policy. Without limiting the foregoing, the duties of the Servicer shall include the
following:




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




     (ii) maintaining all necessary servicing records with respect to the Collateral and
providing such reports to the Administrative Agent and each Purchaser Agent in respect of
the servicing of the Collateral (including information relating to its performance under
this Agreement) as may be required hereunder or as the Administrative Agent and each
Purchaser Agent may reasonably request;




     (iii) maintaining and implementing administrative and operating procedures (including,
without limitation, an ability to recreate servicing records evidencing the Collateral 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 Collateral;



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     (iv) promptly delivering to the Administrative Agent, each Purchaser Agent or the
Collateral Custodian, from time to time, such information and servicing records (including
information relating to its performance under this Agreement) as the Administrative Agent,
each Purchaser Agent or the Collateral Custodian may from time to time reasonably request;




     (v) identifying each Asset clearly and unambiguously in its servicing records to
reflect that such Asset is owned by the Seller and that the Seller is selling an undivided
ownership interest therein to the Secured Parties pursuant to this Agreement;




     (vi) notifying the Administrative Agent and each Purchaser Agent of any material
action, suit, proceeding, dispute, offset, deduction, defense or counterclaim (1) that is or
is threatened to be asserted by an Obligor with respect to any Asset (or portion thereof) of
which it has knowledge or has received notice; or (2) that is reasonably expected to have a
Material Adverse Effect;




     (vii) notifying the Administrative Agent and each Purchaser Agent of any proposed
change in the Credit and Collection Policy that could have an adverse effect on the
collectibility of the Collateral, on the Seller or on the interests of the Administrative
Agent, each Purchaser Agent or any Secured Party;




     (viii) using its reasonable best efforts to maintain the perfected security interest of
the Administrative Agent, as agent for the Secured Parties, in the Collateral;




     (ix) maintaining in the same manner as the Collateral Custodian holds the Required
Asset Documents, the Asset File (other than Required Asset Documents) with respect to each
Asset included as part of the Collateral; and




     (x) the Servicer shall make payments pursuant to the terms of the Monthly Report in
accordance with Section 2.9 and Section 2.10.



     (c) Notwithstanding anything to the contrary contained herein, the exercise by the
Administrative Agent, each Purchaser Agent and the Secured Parties of their rights hereunder shall
not release the Servicer, the Originator or the Seller from any of their duties or responsibilities
with respect to the Collateral. The Secured Parties, the Administrative Agent, each Purchaser
Agent and the Collateral Custodian (except in the role of Backup Servicer) shall not have any
obligation or liability with respect to any Collateral, nor shall any of them be obligated to
perform any of the obligations of the Servicer hereunder.



     (d) Any payment by an Obligor in respect of any Indebtedness owed by it to the Originator or
the Seller shall, except as otherwise specified by such Obligor or otherwise required by contract
or law and unless otherwise instructed by the Administrative Agent, be applied as a Collection of
an item of Collateral of such Obligor (starting with the oldest such Collateral) to the extent of
any amounts then due and payable thereunder before being applied to any other receivable or other
obligation of such Obligor.



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     Section 6.3 Authorization of the Servicer.



     (a) Each of the Seller, the Administrative Agent, each Purchaser Agent, each Purchaser and
each Hedge Counterparty hereby authorizes the Servicer (including any successor thereto) to take
any and all reasonable steps in its name and on its behalf necessary or desirable and not
inconsistent with the sale of the Collateral to the Purchasers and each Hedge Counterparty, in the
determination of the Servicer, to collect all amounts due under any and all Collateral, 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
Collateral and, after the delinquency of any Collateral 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 Collateral.
The Originator, the Seller and the Administrative Agent on behalf of the Secured Parties and each
Hedge Counterparty 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 Collateral. In no event shall the Servicer be
entitled to make the Secured Parties, any Hedge Counterparty, the Collateral Custodian, the
Administrative Agent or the Purchaser Agents a party to any litigation without such party’s express
prior written consent, or to make the Seller a party to any litigation (other than any routine
foreclosure or similar collection procedure) without the Administrative Agent’s and each Purchaser
Agent’s consent.



     (b) After a Termination Event has occurred and is continuing, at the direction the
Administrative Agent, the Servicer shall take such action as the Administrative Agent may deem
necessary or advisable to enforce collection of the Collateral; provided that the Administrative
Agent may, at any time that a Termination Event or Unmatured Termination Event has occurred and is
continuing, notify any Obligor with respect to any Collateral of the assignment of such Collateral
to the Administrative Agent and direct that payments of all amounts due or to become due be made
directly to the Administrative Agent and each Purchaser Agent or any servicer, collection agent or
lock-box or other account designated by the Administrative Agent and each Purchaser Agent and, upon
such notification and at the expense of the Seller, the Administrative Agent may enforce collection
of any such Collateral, and adjust, settle or compromise the amount or payment thereof.



     Section 6.4 Collection of Payments.



     (a) Collection Efforts, Modification of Collateral. The Servicer will use its
reasonable best efforts to collect all payments called for under the terms and provisions of the
Assets included in the Collateral as and when the same become due in accordance with the Credit and
Collection Policy, and will follow those collection procedures that it follows with respect to all
comparable Collateral that it services for itself or others. The Servicer may not waive, modify or
otherwise vary any provision of an item of Collateral in a manner that, in its reasonable judgment,
would impair the collectibility of the Collateral or in any manner contrary to the Credit and
Collection Policy.



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     (b) Prepaid Asset. Prior to a Termination Event, upon any Asset becoming a Prepaid
Asset, the Servicer shall either (x) provide a Substitute Asset in accordance with Section
2.18 or (y) deposit to the Collection Account (in addition to all amounts received from the
related Obligor upon the prepayment of such Asset) an amount equal to the excess, if any, of the
sum of (a) the Outstanding Asset Balance on the date of such payment, (b) any outstanding Servicer
Advances thereon, (c) any accrued and unpaid interest, and (d) all Hedge Breakage Costs owing 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 Hedging Agreement as the result of any such Asset becoming
a Prepaid Asset, over the amount received from the related Obligor upon such prepayment
(such excess, the “Prepayment Amount”), in each case, only to the extent necessary to cause
the Availability as of such date (after giving effect to such substitution or deposit, as
applicable) to be greater than or equal to zero. After a Termination Event has occurred, upon any
Asset becoming a Prepaid Asset, the Servicer shall deposit to the Collection Account all amounts
received from the related Obligor upon the prepayment of such Asset plus the Prepayment Amount, if
any.



     (c) Acceleration. If required by the Credit and Collection Policy, the Servicer shall
accelerate the maturity of all or any Scheduled Payments and other amounts due under any Asset in
which a default under the terms thereof has occurred and is continuing (after the lapse of any
applicable grace period) promptly after such Asset becomes a Charged-Off Asset.



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



     (e) Payments to Lock-Box Account. Subject to Section 5.1(p), on or before the
applicable Cut-Off Date, the Servicer shall have instructed all Obligors to make all payments in
respect of the Collateral to the Lock-Box or directly to the Lock-Box Account.



     (f) Establishment of the Collection Account. The Servicer shall cause to be
established, on or before the Closing Date, with the Collateral Custodian, and maintained in the
name of the Administrative Agent as agent for the Secured Parties, with an office or branch of a
depository institution or trust company a segregated corporate trust account entitled Collection
Account for Wachovia Capital Markets, LLC, as Administrative Agent for the Secured Parties (the
“Collection Account”), and the Servicer shall further maintain a subaccount within the
Collection Account for the purpose of segregating, within two Business Days of the receipt of any
Collections, Principal Collections (the “Principal Collections Account”), over which the
Collateral Custodian as agent for the Secured Parties shall have control and from which neither the
Originator, Servicer nor the Seller shall have any right of withdrawal except in accordance with
Section 2.9(b); provided that at all times such depository institution or trust company
shall be acceptable to the Administrative Agent and a depository institution organized under the
laws of the United States of America 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 “A2” 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



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better by S&P and “A2” or better by Moody’s or (2) a short-term unsecured debt rating or
certificate of deposit rating of “A-1” or better by S&P and “P-1” or better by Moody’s or (c) is
otherwise acceptable to the Administrative Agent and (ii) whose deposits are insured by the Federal
Deposit Insurance Corporation (any such depository institution or trust company, a “Qualified
Institution”).




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



     Section 6.5 Servicer Advances.



     For each Collection Period, if the Servicer determines that any Scheduled Payment (or portion
thereof) that was due and payable pursuant to an Asset during such Collection Period was not
received prior to the last day of such Collection Period, the Servicer may (in its sole and
absolute discretion) make an advance in an amount up to the amount of such delinquent Scheduled
Payment. The Servicer will deposit any Servicer Advances into the Collection Account on or prior
to 9:00 a.m. (Charlotte, North Carolina time) on the Business Day prior to the related Payment
Date, in immediately available funds. Notwithstanding anything to the contrary contained herein,
no Successor Servicer shall have any responsibility to make Servicer Advances.



     Section 6.6 Realization Upon Charged-Off Assets.



     The Servicer will use reasonable efforts to repossess or otherwise comparably convert the
ownership of any Related Property relating to a Charged-Off Asset and will act as sales and
processing agent for Related Property that it repossesses. The Servicer will follow such other
practices and procedures as it deems necessary or advisable and as are customary and usual in its
servicing of contracts and other actions by the Servicer in order to realize upon such Related
Property, which practices and procedures may include reasonable efforts to enforce all obligations
of Obligors and repossessing and selling such Related Property at public or private sale in
circumstances other than those described in the preceding sentence. Without limiting the
generality of the foregoing, unless the Administrative Agent has specifically given instruction to
the contrary, the Servicer may sell any such Related Property to the Servicer or its Affiliates for
a purchase price equal to the then fair market value thereof, any such sale to be evidenced by a
certificate of a Responsible Officer of the Servicer delivered to the Administrative Agent setting
forth the Asset, the Related Property, the sale price of the Related Property and certifying that
such sale price is the fair market value of such Related Property. In any case in which any such
Related Property has suffered damage, the Servicer will not expend funds in connection with any
repair or toward the repossession of such Related Property unless it reasonably determines that
such repair and/or repossession will increase the Recoveries by an amount greater than the amount
of such expenses. The Servicer will remit to the Collection Account the Recoveries



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received in connection with the sale or disposition of Related Property relating to a
Charged-Off Asset.




     Section 6.7 Maintenance of Insurance Policies.



     The Servicer will use its reasonable best efforts to ensure that each Obligor maintains an
Insurance Policy with respect to any Related Property (other than accounts receivable) in an amount
at least equal to the Servicer’s good faith and commercially reasonable estimate of the value of
the real property, inventory, and/or equipment constituting such Related Property and shall ensure
that each such Insurance Policy names the Servicer as loss payee and as an insured thereunder and
all of the Seller’s right, title and interest therein is fully assigned to the Administrative
Agent, as agent for the Secured Parties. Additionally, the Servicer will require that each Obligor
maintain property damage liability insurance during the term of each Asset in amounts and against
risks customarily insured against by the Obligor on property owned by it. If an Obligor fails to
maintain property damage insurance, the Servicer may in its discretion purchase and maintain such
insurance on behalf of, and at the expense of, the Obligor. In connection with its activities as
Servicer, the Servicer agrees to present, on behalf of the Administrative Agent, 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 Asset. The Servicer’s
Insurance Policies with respect to the Related Property will insure against liability for physical
damage relating to such Related Property in accordance with the requirements of the Credit and
Collection Policy. The Servicer hereby disclaims any and all right, title and interest in and to
any Insurance Policy and Insurance Proceeds with respect to any Related Property, including any
Insurance Policy with respect to which it is named as loss payee and as an insured, and agrees that
it has no equitable, beneficial or other interest in the Insurance Polices and Insurance Proceeds
other than being named as loss payee and as an insured. The Servicer acknowledges that with
respect to the Insurance Policies and Insurance Proceeds thereof that it is acting solely in the
capacity as agent for the Administrative Agent, as agent for the Secured Parties.



     Section 6.8 Servicing Compensation.



     As compensation for its servicing activities hereunder and reimbursement for its expenses, the
Servicer shall be entitled to receive the Servicing Fee and the Revolving Servicing Fee to the
extent of funds available therefor pursuant to the provisions of Section 2.9(a)(iii) or
Section 2.10(a)(iii), as applicable.



     Section 6.9 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 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 Seller, but excluding Liquidation Expenses incurred as a result of activities
contemplated by Section 6.6; provided that for avoidance of doubt, to the extent
Liquidation Expenses relate to a Loan and a Retained Interest such Liquidation Expenses shall be
allocated pro rata. The Servicer will be required to pay all reasonable fees and expenses owing



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to any bank or trust company in connection with the maintenance of the Collection Account and
the Lock-Box Account. 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 and, as applicable, the
Revolving Servicing Fee.




     Section 6.10 Reports.



     (a) Borrowing Notice. On each Funding Date, on each reduction of Advances Outstanding
pursuant to Section 2.4(b) and on each reinvestment of Principal Collections pursuant to
Section 2.9(b), the Seller (and the Servicer on its behalf) will provide a Borrowing
Notice, updated as of such date, to the Administrative Agent and each Purchaser Agent (with a copy
to the Collateral Custodian).



     (b) Monthly Report. On each Reporting Date, the Servicer will provide to the Seller,
the Administrative Agent, each Purchaser Agent, the Backup Servicer and any Liquidity Bank, a
monthly statement including a Borrowing Base calculated as of the most recent Determination Date,
with respect to the related Collection Period signed by a Responsible Officer of the Servicer and
the Seller and substantially in the form of Exhibit C (a “Monthly Report”).



     (c) Servicer’s Certificate. Together with each Monthly Report, the Servicer shall
submit to the Administrative Agent, each Purchaser Agent and any Liquidity Bank a certificate (a
“Servicer’s Certificate”), signed by a Responsible Officer of the Servicer and
substantially in the form of Exhibit J.



     (d) Financial Statements. The Servicer will submit to the Administrative Agent, each
Purchaser Agent, each Purchaser, the Backup Servicer and any Liquidity Bank, (i) within forty-five
(45) days after the end of each of its first three fiscal quarters, commencing with the fiscal
quarter ending March 31, 2006, a copy of the quarterly report on Form 10-Q of CapitalSource Inc.
for the most recent fiscal quarter, and (ii) within ninety (90) days after the end of each fiscal
year, commencing with the fiscal year ending December 31, 2005, a copy of the annual report on Form
10-K of CapitalSource Inc., in each case in the form as filed with the Securities and Exchange
Commission.



     (e) Tax Returns. Upon demand by the Administrative Agent, each Purchaser Agent and
any Liquidity Bank, copies of all federal, state and local Tax returns and reports filed by the
Seller and Servicer, or in which the Seller or Servicer was included on a consolidated or combined
basis (excluding sales, use and like taxes).



     Section 6.11 Annual Statement as to Compliance.



     The Servicer will provide to the Administrative Agent and each Purchaser Agent, within ninety
(90) days following the end of each fiscal year of the Servicer, commencing with the fiscal year
ending on December 31, 2006, a fiscal 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 fiscal 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 Default has occurred and is continuing.



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     Section 6.12 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 Administrative Agent, each
Purchaser Agent, the Collateral Custodian and the Backup Servicer, within ninety (90) days
following the end of each fiscal year of the Servicer, commencing with the fiscal year ending on
December 31, 2006: (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 Collateral, 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 Administrative Agent and each
Purchaser Agent) to certain documents and records relating to the Collateral under any Transaction
Document, 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, except for such exceptions as such
accountants shall believe to be immaterial and such other exception as shall be set forth in such
statement.



     Section 6.13 Limitation on Liability of the Servicer and Others



     Except as provided herein, the Servicer shall not be under any liability to the Administrative
Agent, each Purchaser Agent, the Secured Parties or any other Person for any action taken or for
refraining from the taking of any action pursuant to this Agreement whether arising from express or
implied duties under this Agreement; provided that notwithstanding anything to the contrary
contained herein nothing shall protect the Servicer against any liability that would otherwise be
imposed by reason of its willful misfeasance, bad faith or negligence in the performance of duties
or by reason of its willful misconduct hereunder.



     Section 6.14 The Servicer Not to Resign.



     The Servicer shall not resign from the obligations and duties hereby imposed on it except upon
the Servicer’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 the Servicer could
take to make the performance of its duties hereunder permissible under Applicable Law. Any such
determination permitting the resignation of the Servicer shall be evidenced as to clause (i) above
by an Opinion of Counsel to such effect delivered to the Administrative Agent, each Purchaser Agent
and the Backup Servicer. No such resignation shall become effective until a Successor Servicer
shall have assumed the responsibilities and obligations of the Servicer in accordance with
Section 6.2.



     Section 6.15 Servicer Defaults.



     If any one of the following events (a “Servicer Default”) shall occur and be
continuing:



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     (a) any failure by the Servicer to make any payment, transfer or deposit (including without
limitation with respect to Collections) as required by this Agreement which continues unremedied
for a period of one Business Day;



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



     (c) 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 the other
Transaction Documents to which the Servicer is a party and the same continues unremedied for a
period of thirty (30) days after the earlier to occur of (i) the date on which written notice of
such failure requiring the same to be remedied shall have been given to the Servicer by the
Administrative Agent and each Purchaser Agent and (ii) the date on which the Servicer becomes aware
thereof;



     (d) any representation, warranty or certification made by the Servicer in any Transaction
Document or in any certificate delivered pursuant to any Transaction Document shall prove to have
been incorrect when made, which has a Material Adverse Effect on the Administrative Agent, any
Purchaser Agent or the Secured Parties and which continues to be unremedied for a period of thirty
(30) days after the earlier 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 Administrative Agent
or any Purchaser Agent and (ii) the date on which the Servicer becomes aware thereof;



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



     (f) any material delegation of the Servicer’s duties that is not permitted by Section
6.1;



     (g) any financial or other information reasonably requested by the Administrative Agent, any
Purchaser Agent or any Purchaser is not provided as requested within a reasonable amount of time
following such request;



     (h) the rendering against the Servicer of one or more final judgments, decrees or orders for
the payment of money in excess of $7,500,000, individually or in the aggregate, and the continuance
of such judgment, decree or order unsatisfied and in effect for any period of more than sixty (60)
consecutive days without a stay of execution;



     (i) the failure of the Servicer to make any payment due with respect to any recourse debt or
other obligations, which debt or other obligations are in excess of $7,500,000, individually or in
the aggregate, or the occurrence of any event or condition that would permit acceleration of such
recourse debt or other obligations whether or not waived;



     (j) CapitalSource Inc. fails to maintain GAAP stockholders’ equity equal to at least
$700,000,000 plus 80% of the proceeds of any equity offerings subsequent to April 8, 2004;



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     (k) [Reserved];



     (l) the Servicer fails in any material respect to comply with the Credit and Collection Policy
regarding the servicing of the Collateral;



     (m) the Servicer consents or agrees to, or otherwise permits to occur, any amendment,
modification, change, supplement or rescission of or to the Credit and Collection Policy (after the
adoption of same) in whole or in part that could be reasonably expected to have a Material Adverse
Effect upon the Collateral, the Administrative Agent, any Purchaser Agent or the Secured Parties,
without the prior written consent of the Administrative Agent and each Purchaser Agent;



     (n) CSE Mortgage ceases to be the Servicer; or



     (o) the Servicer fails to maintain the Asset Loss Reserve for any Watchlist Assets;


then notwithstanding anything herein to the contrary, so long as any such Servicer Default shall
not have been remedied within any applicable cure period prior to the date of the Servicer
Termination Notice (defined below), the Administrative Agent, by written notice to the Servicer
(with a copy to the Backup Servicer) (a “Servicer Termination Notice”), may terminate all
of the rights and obligations of the Servicer as Servicer under this Agreement.




     Section 6.16 Appointment of Successor Servicer.



     (a) On and after the receipt by the Servicer of a Servicer Termination Notice pursuant to
Section 6.15, 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
Administrative Agent in writing or, if no such date is specified in such Servicer Termination
Notice or otherwise specified by the Administrative Agent, until a date mutually agreed upon by the
Servicer and the Administrative Agent. The Administrative Agent may at the time described in the
immediately preceding sentence in its sole discretion, appoint the Backup Servicer as the Servicer
hereunder, and the Backup Servicer shall 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. As compensation therefor, the Backup Servicer shall be entitled to
the Servicing Fee and the Revolving Servicing Fee, together with other servicing compensation in
the form of assumption fees, late payment charges or otherwise as provided herein; including,
without limitation, Transition Expenses. In the event that the Administrative Agent does not so
appoint the Backup Servicer, there is no Backup Servicer or the Backup Servicer is unable to assume
such obligations on such date, the Administrative 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 Administrative Agent and each
Purchaser Agent. In the event that a Successor Servicer has not accepted its appointment at the
time when the Servicer ceases to act as Servicer, the Administrative Agent shall petition a court
of competent jurisdiction to appoint any established financial institution, having a net worth of
not less than $50,000,000 and whose regular business includes the servicing of Collateral, as the
Successor Servicer hereunder.



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     (b) Upon its appointment, the Backup Servicer (subject to Section 6.16(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 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; provided that the Backup Servicer or
Successor Servicer, as applicable, shall have (i) no liability with respect to any action performed
by the terminated Servicer prior to the date that the Backup Servicer or Successor Servicer, as
applicable, becomes the successor to the Servicer or any claim of a third party based on any
alleged action or inaction of the terminated Servicer, (ii) no obligation to perform any advancing
obligations, if any, of the Servicer unless it elects to in its sole discretion, (iii) no
obligation to pay any taxes required to be paid by the Servicer (provided that the Backup Servicer
or Successor Servicer, as applicable, shall pay any income taxes for which it is liable), (iv) no
obligation to pay any of the fees and expenses of any other party to the transactions contemplated
hereby, and (v) no liability or obligation with respect to any Servicer indemnification obligations
of any prior Servicer, including the original Servicer. The indemnification obligations of the
Backup Servicer or the Successor Servicer, as applicable, upon becoming a Successor Servicer, are
expressly limited to those arising on account of its failure to act in good faith and with
reasonable care under the circumstances. In addition, the Backup Servicer or Successor Servicer,
as applicable, shall have no liability relating to the representations and warranties of the
Servicer contained in Article IV. Further, for so long as the Backup Servicer shall be the
Successor Servicer, the provisions of Section 2.15, Section 2.16(b) and Section
2.16(e) of this Agreement shall not apply to it in its capacity as Servicer.



     (c) All authority and power granted to the Servicer under this Agreement shall automatically
cease and terminate upon termination of this Agreement and shall pass to and be vested in the
Seller and, without limitation, the Seller 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
Seller in effecting the termination of the responsibilities and rights of the Servicer to conduct
servicing of 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 6.16, the Backup Servicer
will promptly begin the transition to its role as Servicer. Notwithstanding the foregoing, the
Backup Servicer may, in its discretion, appoint, or petition a court of competent jurisdiction to
appoint, any established servicing institution as the successor to the Servicer hereunder in the
assumption of all or any part of the responsibilities, duties or liabilities of the Servicer
hereunder. As compensation, any Successor Servicer (including, without limitation, the
Administrative Agent) so appointed shall be entitled to receive the Servicing Fee and the Revolving
Servicing Fee, together with any other servicing compensation in the form of assumption fees, late
payment charges or otherwise as provided herein that accrued prior thereto, including, without
limitation, Transition Expenses. In the event the Backup Servicer is required to solicit bids as
provided herein, the Backup Servicer shall solicit, by public announcement, bids from banks and
mortgage servicing institutions meeting the qualifications set forth in Section 6.16(a).
Such public announcement shall specify that the Successor Servicer shall be entitled to the full
amount



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of the Servicing Fee and the Revolving Servicing Fee as servicing compensation, together with
the other servicing compensation in the form of assumption fees, late payment charges or otherwise
that accrued prior thereto. Within thirty (30) days after any such public announcement, the Backup
Servicer shall negotiate and effect the sale, transfer and assignment of the servicing rights and
responsibilities hereunder to the qualified party submitting the highest qualifying bid. The
Backup Servicer shall deduct from any sum received by the Backup Servicer from the successor to the
Servicer in respect of such sale, transfer and assignment all costs and expenses of any public
announcement and of any sale, transfer and assignment of the servicing rights and responsibilities
hereunder and the amount of any unreimbursed Servicing Advances. After such deductions, the
remainder of such sum shall be paid by the Backup Servicer to the Servicer at the time of such
sale, transfer and assignment to the Servicer’s successor. The Backup Servicer and such successor
shall take such action, consistent with this Agreement, as shall be necessary to effectuate any
such succession. No appointment of a successor to the Servicer hereunder shall be effective until
written notice of such proposed appointment shall have been provided by the Backup Servicer to the
Administrative Agent and each Purchaser Agent and the Backup Servicer shall have consented thereto.
The Backup Servicer shall not resign as servicer until a Successor Servicer has been appointed and
accepted such appointment. Notwithstanding anything to the contrary contained herein, in no event
shall Wells Fargo, in any capacity, be liable for any Servicing Fee, Revolving Servicing Fee or for
any differential in the amount of the Servicing Fee or Revolving Servicing Fee paid hereunder and
the amount necessary to induce any Successor Servicer under this Agreement and the transactions set
forth or provided for by this Agreement.




ARTICLE VII




THE BACKUP SERVICER




     Section 7.1 Designation of the Backup Servicer.



     (a) Initial Backup Servicer. The backup servicing role with respect to the Collateral
shall be conducted by the Person designated as Backup Servicer hereunder from time to time in
accordance with this Section 7.1. Until the Administrative Agent shall give to Wells Fargo
a Backup Servicer Termination Notice, Wells Fargo is hereby designated as, and hereby agrees to
perform the duties and obligations of, a Backup Servicer pursuant to the terms hereof.



     (b) Successor Backup Servicer. Upon the Backup Servicer’s receipt of Backup Servicer
Termination Notice from the Administrative Agent of the designation of a replacement Backup
Servicer pursuant to the provisions of Section 7.5, the Backup Servicer agrees that it will
terminate its activities as Backup Servicer hereunder.



     Section 7.2 Duties of the Backup Servicer.



     (a) Appointment. The Seller and the Administrative Agent, as agent for the Secured
Parties, each hereby appoints Wells Fargo to act as Backup Servicer, for the benefit of the
Administrative Agent, each Purchaser Agent and the Secured Parties, as from time to time designated
pursuant to Section 7.1. The Backup Servicer hereby accepts such appointment and agrees to
perform the duties and obligations with respect thereto set forth herein.



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     (b) Duties. On or before the initial Funding Date, and until its removal pursuant to
Section 7.5, the Backup Servicer shall perform, on behalf of the Administrative 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 (if any) in hard
copy and on computer tape; provided that the computer tape is in an MS DOS, PC readable
ASCII format or other format to be agreed upon by the Backup Servicer and the Servicer on or
prior to closing.




     (ii) Not later than 12:00 noon Charlotte, North Carolina time on each Reporting Date,
the Servicer shall deliver to the Backup Servicer the asset tape, which shall include but
not be limited to the following information: (x) for each Asset, the name and number of the
related Obligor, the collection status, the loan status, the date of each Scheduled Payment
and the Outstanding Asset Balance, (y) the Borrowing Base and (z) the Aggregate Outstanding
Asset Balance (the “Tape”). The Backup Servicer shall accept delivery of the Tape.




     (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
Borrowing Base, (B) the Backup Servicing Fee, (C) the Assets that are current and not past
due, (D) the Assets that are 1 — 30 days past due, (E) the Assets that are 31 — 60 days past
due, (F) the Assets that are 61 — 90 days past due, (G) the Assets that are 90+ days past
due, (H) the Pool Charged-Off Ratio, and (I) the Aggregate Outstanding Asset Balance. The
Backup Servicer by a separate written report shall notify the Administrative Agent 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 Servicer disagrees with the report provided under paragraph (iii) above by
the Backup Servicer or if the Servicer or any subservicer has not reconciled such
discrepancy, the Backup Servicer agrees to confer with the Servicer to resolve such
disagreement on or prior to the next succeeding Determination Date and shall settle such
discrepancy with the Servicer if possible, and notify the Administrative Agent of the
resolution thereof. The Servicer hereby agrees to cooperate at its own expense with the
Backup Servicer in reconciling any discrepancies herein. If within twenty (20) days after
the delivery of the report provided under paragraph (iii) above by the Backup Servicer, such
discrepancy is not resolved, the Backup Servicer shall promptly notify the Administrative
Agent of the continued existence of such discrepancy. Following receipt of such notice by
the Administrative Agent, the Servicer shall deliver to the Administrative 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.



     (c) Reliance on Tape. With respect to the duties described in Section 7.2(b),
the Backup Servicer, is entitled to rely conclusively, and shall be fully protected in so relying,
on the



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contents of each Tape, including, but not limited to, the completeness and accuracy thereof,
provided by the Servicer.




     Section 7.3 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 provided
such Person is organized under the laws of the United States of America 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 “A2” 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 which has either (1) a long-term
unsecured debt rating of “A” or better by S&P and “A2” or better by Moody’s or (2) a short-term
unsecured debt rating or certificate of deposit rating of “A-1” or better by S&P and “P-1” or
better by Moody’s or (c) is otherwise acceptable to the Administrative Agent.



     Section 7.4 Backup Servicing Compensation.



     As compensation for its back-up servicing activities hereunder, the Backup Servicer shall be
entitled to receive the Backup Servicing Fee from the Servicer. To the extent that 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
Section 2.9(a)(iv) and Section 2.10(a)(iv), as applicable. The Backup Servicer’s
entitlement to receive the Backup Servicing Fee shall cease (excluding any unpaid outstanding
amounts as of that date) on the earliest to occur of: (i) it becoming the Successor Servicer, (ii)
its removal as Backup Servicer pursuant to Section 7.5, or (iii) the termination of this
Agreement. Upon becoming Successor Servicer pursuant to Section 6.16, the Backup Servicer
shall be entitled to the Servicing Fee and the Revolving Servicing Fee.



     Section 7.5 Backup Servicer Removal.



     The Backup Servicer may be removed, with or without cause, by the Administrative Agent by
notice given in writing to the Backup Servicer (the “Backup Servicer Termination Notice”).
In the event of any such removal, a replacement Backup Servicer may be appointed by the
Administrative Agent.



     Section 7.6 Limitation on Liability.



     (a) 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



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Servicer. The Backup Servicer may act through its agents, nominees, 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 willful misconduct of it or them or the failure
to perform materially in accordance with this Agreement.




     (b) 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 Secured Parties, the
Administrative Agent and the Collateral Custodian each agree to look only to the Servicer to
perform such obligations. The Backup Servicer shall have no responsibility and shall not be in
default hereunder or incur any liability for any failure, error, malfunction or any delay in
carrying out any of its duties under this Agreement if such failure or delay results from the
Backup Servicer acting in accordance with information prepared or supplied by a Person other than
the Backup Servicer or the failure of any such other Person to prepare or provide such information.
The Backup Servicer shall have no responsibility, shall not be in default and shall incur no
liability for (i) any act or failure to act of any third party, including the Servicer, (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 Collateral under Applicable Law, (iv) the
breach or inaccuracy of any representation or warranty made with respect to any Collateral, or (v)
the acts or omissions of any successor Backup Servicer.



     Section 7.7 The Backup Servicer Not to Resign.



     The Backup Servicer shall not resign (except with prior consent of the Administrative Agent
which consent shall not be unreasonably withheld) from the obligations and duties hereby imposed on
it except upon the Backup Servicer’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 the
Backup Servicer could take to make the performance of its duties hereunder permissible under
Applicable Law. Any such determination permitting the resignation of the Backup Servicer shall be
evidenced as to clause (i) above by an Opinion of Counsel to such effect delivered to the
Administrative Agent and each Purchaser Agent. No such resignation shall become effective until a
successor Backup Servicer shall have assumed the responsibilities and obligations of the Backup
Servicer hereunder.




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ARTICLE VIII




THE COLLATERAL CUSTODIAN




     Section 8.1 Designation of Collateral Custodian.



     (a) Initial Collateral Custodian. The role of collateral custodian with respect to
the Required Asset Documents shall be conducted by the Person designated as Collateral Custodian
hereunder from time to time in accordance with this Section 8.1. Until the Administrative
Agent shall give to Wells Fargo a Collateral Custodian Termination Notice, Wells Fargo is hereby
designated as, and hereby agrees to perform the duties and obligations of, Collateral Custodian
pursuant to the terms hereof.



     (b) Successor Collateral Custodian. Upon the Collateral Custodian’s receipt of a
Collateral Custodian Termination Notice from the Administrative Agent of the designation of a
successor Collateral Custodian pursuant to the provisions of Section 8.5, the Collateral
Custodian agrees that it will terminate its activities as Collateral Custodian hereunder.



     Section 8.2 Duties of Collateral Custodian.



     (a) Appointment. The Seller and the Administrative Agent each hereby appoints Wells
Fargo to act as Collateral Custodian, for the benefit of the Administrative Agent, as agent for the
Secured Parties. The Collateral Custodian hereby accepts such appointment and agrees to perform
the duties and obligation with respect thereto set forth herein.



     (b) Duties. On or before the initial Funding Date, and until its removal pursuant to
Section 8.5, the Collateral Custodian shall perform on behalf of the Administrative Agent
and the Secured Parties, the following duties and obligations:




     (i) The Collateral Custodian shall take and retain custody of the Required Asset
Documents delivered by the Seller pursuant to Section 3.2 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 Administrative Agent as agent for the Secured
Parties. Within five Business Days of its receipt of any Required Asset Documents, the
Collateral Custodian shall review the related Collateral and Required Asset Documents to
confirm that (A) such Collateral has been properly executed and has no missing or mutilated
pages, (B) any UCC and other filings (as set forth on the Asset Checklists) have been made,
(C) an Insurance Policy exists with respect to any real or personal property constituting
the Related Property, and (D) confirming the related Outstanding Asset Balance, Asset number
and Obligor name with respect to such Asset is referenced on the related Asset List and is
not a duplicate Asset (collectively, the “Review Criteria”). In order to facilitate
the foregoing review by the Collateral Custodian, in connection with each delivery of
Required Asset Documents hereunder to the Collateral Custodian, the Servicer shall provide
to the Collateral Custodian an electronic file (in EXCEL or a comparable format) that
contains the related Asset List or that otherwise contains the Asset identification number
and the name of the Obligor with respect to each related Asset. If, at the conclusion of such
review, the Collateral Custodian shall determine that



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(i) the Outstanding Asset Balances of the Collateral it has received Required Asset
Documents with respect to is less than as set forth on the electronic file, the Collateral
Custodian shall immediately notify the Administrative Agent of such discrepancy, and (ii)
any Review Criteria is not satisfied, the Collateral Custodian shall within one Business Day
notify the Servicer of such determination and provide the Servicer with a list of the
non-complying Assets and the applicable Review Criteria that they fail to satisfy. The
Servicer shall have five Business Days to correct any non-compliance with a Review Criteria.
If after the conclusion of such time period the Servicer has still not cured any
non-compliance by an Asset with a Review Criteria, the Collateral Custodian shall promptly
notify the Seller and the Administrative Agent of such determination by providing a written
report to such persons identifying, with particularity, each Asset and each of the
applicable Review Criteria that such Asset fails to satisfy. In addition, if requested in
writing by the Servicer and approved by the Administrative Agent within ten Business Days of
the Collateral Custodian’s delivery of such report, the Collateral Custodian shall return
any Asset which fails to satisfy a Review Criteria to the Seller. Other than the foregoing,
the Collateral Custodian shall not have any responsibility for reviewing any Required Asset
Documents.




     (ii) In taking and retaining custody of the Required Asset Documents, the Collateral
Custodian shall be deemed to be acting as the agent of the Administrative 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 Required Asset Documents or the
instruments therein; and provided further that, the Collateral Custodian’s duties as agent
shall be limited to those expressly contemplated herein.




     (iii) All Required Asset Document shall be kept in fire resistant vaults, rooms or
cabinets at the locations specified on Schedule III attached hereto, or at such
other office as shall be specified to the Administrative Agent by the Collateral Custodian
in a written notice delivered at least forty-five (45) days prior to such change. All
Required Asset Documents shall be placed together with an appropriate identifying label and
maintained in such a manner so as to permit retrieval and access. All Required Asset
Documents shall be clearly segregated from any other documents or instruments maintained by
the Collateral Custodian.




     (iv) The Collateral Custodian shall make payments pursuant to the terms of the Monthly
Report in accordance with Section 2.9 and Section 2.10 (the “Payment
Duties”).




     (v) On each Reporting Date, the Collateral Custodian shall provide a written report to
the Administrative Agent and the Servicer (in a form acceptable to the Administrative Agent)
identifying each Asset for which it holds Required Asset Documents, the non-complying Assets
and the applicable Review Criteria that any non-complying Asset fails to satisfy.




     (vi) In performing its duties, the Collateral Custodian shall use the same degree of
care and attention as it employs with respect to similar Collateral that it holds as
Collateral Custodian.



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     Section 8.3 Merger or Consolidation.



     Any Person (i) into which the Collateral Custodian may be merged or consolidated, (ii) that
may result from any merger or consolidation to which the Collateral Custodian shall be a party, or
(iii) that may succeed to the properties and assets of the Collateral Custodian substantially as a
whole, which Person in any of the foregoing cases executes an agreement of assumption to perform
every obligation of the Collateral Custodian hereunder, shall be the successor to the Collateral
Custodian under this Agreement without further act of any of the parties to this Agreement.



     Section 8.4 Collateral Custodian Compensation.



     As compensation for its collateral custodian activities hereunder, the Collateral Custodian
shall be entitled to a Collateral Custodian Fee (the “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 its Collateral Custodian
Fee to the extent of funds available therefor pursuant to the provision of Section
2.9(a)(iv) or Section 2.10(a)(iv), as applicable. The Collateral Custodian’s
entitlement to receive the Collateral Custodian Fee shall cease on the earlier to occur of: (i)
its removal as Collateral Custodian pursuant to Section 8.5 or (ii) the termination of this
Agreement.



     Section 8.5 Collateral Custodian Removal.



     The Collateral Custodian may be removed, with or without cause, by the Administrative Agent by
notice given in writing to the Collateral Custodian (the “Collateral Custodian Termination
Notice”); provided that, notwithstanding its receipt of a Collateral Custodian Termination
Notice, the Collateral Custodian shall continue to act in such capacity until a successor
Collateral Custodian has been appointed, has agreed to act as Collateral Custodian hereunder, and
has received all Required Asset Documents held by the previous Collateral Custodian.



     Section 8.6 Limitation on Liability.




     (1) 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. The Collateral Custodian may rely conclusively
on and shall be fully protected in acting upon (a) the written instructions of any
designated officer of the Administrative Agent or (b) the verbal instructions of the
Administrative Agent.




     (2) 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.




     (3) 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



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law, or for anything that it may do or refrain from doing in connection herewith except in the
case of its willful misconduct or grossly negligent performance or omission of its duties
and in the case of the negligent performance of its Payment Duties and in the case of its
negligent performance of its duties in taking and retaining custody of the Required Asset
Documents.




     (4) 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 Collateral, and will not be required to and will not make any
representations as to the validity or value (except as expressly set forth in this
Agreement) of any of the Collateral. 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.




     (5) 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.




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




     (7) 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 Collateral.



     Section 8.7 The Collateral Custodian Not to Resign.



     The Collateral Custodian shall not resign from the obligations and duties hereby imposed on it
except upon the Collateral Custodian’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 the Collateral Custodian could take to make the performance of its duties hereunder
permissible under Applicable Law. Any such determination permitting the resignation of the
Collateral Custodian shall be evidenced as to clause (i) above by an Opinion of Counsel to
such effect delivered to the Administrative Agent and each Purchaser Agent. No such resignation
shall become effective until a successor Collateral Custodian shall have assumed the
responsibilities and obligations of the Collateral Custodian hereunder.



     Section 8.8 Release of Documents.



     (a) Release for Servicing. From time to time and as appropriate for the enforcement
or servicing any of the Collateral, the Collateral Custodian is hereby authorized (unless and until
such authorization is revoked by the Administrative Agent), upon written receipt from the
Servicer of a request for release of documents and receipt in the form annexed hereto as
Exhibit H to release to the Servicer the related Required Asset Documents or the documents
set forth in such request and receipt to the Servicer. All documents so released to the Servicer
shall be held by the Servicer in trust for the benefit of the Administrative Agent in accordance
with the



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terms of this Agreement. The Servicer shall return to the Collateral Custodian the
Required Asset Documents or other such documents (i) immediately upon the request of the
Administrative Agent, or (ii) when the Servicer’s need therefor in connection with such foreclosure
or servicing no longer exists, unless the Asset 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 H, the
Servicer’s request and receipt submitted pursuant to the first sentence of this subsection shall be
released by the Collateral Custodian to the Servicer.




     (b) Limitation on Release. The foregoing provision respecting release to the Servicer
of the Required Asset Documents and documents by the Collateral Custodian upon request by the
Servicer shall be operative only to the extent that at any time the Collateral Custodian shall not
have released to the Servicer active Required Asset Documents (including those requested)
pertaining to more than fifteen (15) Assets at the time being serviced by the Servicer under this
Agreement. Any additional Required Asset Documents or documents requested to be released by the
Servicer may be released only upon written authorization of the Administrative Agent. The
limitations of this paragraph shall not apply to the release of Required Asset Documents to the
Servicer pursuant to the immediately succeeding subsection.



     (c) 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 H(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 Required Asset Documents to
the Servicer.



     Section 8.9 Return of Required Asset Documents.



     The Seller may, with the prior written consent of the Administrative Agent (such consent not
to be unreasonably withheld), require that the Collateral Custodian return each Required Asset
Document (a) delivered to the Collateral Custodian in error, (b) for which a Substitute Asset has
been substituted in accordance with Section 2.18, (c) as to which the lien on the Related
Property has been so released pursuant to Section 9.2, (d) that has been repaid by the
Seller pursuant to Section 4.6 or (e) that is required to be redelivered to the Seller in
connection with the termination of this Agreement, in each case by submitting to the Collateral
Custodian and the Administrative Agent a written request in the form of Exhibit H hereto
(signed by both the Seller and the Administrative Agent) specifying the Collateral to be so
returned and reciting that the conditions to such release have been met (and specifying the Section
or Sections of this Agreement being relied upon for such release). The Collateral Custodian shall
upon its receipt of each such request for return executed by the Seller and the Administrative
Agent promptly, but in any event within five Business Days, return the Required Asset Documents so
requested to the Seller.



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	 	 	Section 8.10 Access to Certain Documentation and Information Regarding the Collateral; Audits.





     The Collateral Custodian shall provide to the Administrative Agent and each Purchaser Agent
access to the Required Asset Documents and all other documentation regarding the Collateral
including in such cases where the Administrative Agent and each Purchaser Agent is required in
connection with the enforcement of the rights or interests of the Secured Parties, or by applicable
statutes or regulations, to review such documentation, such access being afforded without charge
but only (i) upon two Business Days prior written request, (ii) during normal business hours and
(iii) subject to the Servicer’s and Collateral Custodian’s normal security and confidentiality
procedures. Prior to the Closing Date and periodically thereafter at the discretion of the
Administrative Agent and each Purchaser Agent, the Administrative Agent and each Purchaser Agent
may review the Servicer’s collection and administration of the Collateral in order to assess
compliance by the Servicer with the Credit and Collection Policy, as well as with this Agreement
and may conduct an audit of the Collateral, Required Asset Documents in conjunction with such a
review. Such review shall be reasonable in scope and shall be completed in a reasonable period of
time. Without limiting the foregoing provisions of this Section 8.10, from time to time on
request of the Administrative Agent, the Collateral Custodian shall permit certified public
accountants or other auditors acceptable to the Administrative Agent to conduct, at the Servicer’s
expense, a review of the Required Asset Documents and all other documentation regarding the
Collateral.



ARTICLE IX




SECURITY INTEREST




     Section 9.1 Grant of Security Interest.



     The parties to this Agreement intend that the conveyance of the Collateral by the Seller to
the applicable Purchasers be treated as sales for all purposes (other than for the purposes
described in Section 13.19). If, despite such intention, a determination is made that such
transactions not be treated as sales, then the parties hereto intend that this Agreement constitute
a security agreement and the transactions effected hereby constitute secured loans by the
applicable Purchasers to the Seller under Applicable Law. For such purpose, the Seller hereby
transfers, conveys, assigns and grants as of the Closing Date to the Administrative Agent, as agent
for the Secured Parties, a lien and continuing security interest in all of the Seller’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 Seller, 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 Aggregate
Unpaids of the Seller arising in connection with this Agreement and each other Transaction
Document, whether now or hereafter existing, due or to become due, direct or indirect, or absolute
or contingent, including, without limitation, all Aggregate Unpaids. The assignment under this
Section 9.1 does not constitute and is not intended to result in a creation or an
assumption by the Administrative Agent, the Purchaser Agents, any Hedge Counterparty, the Liquidity
Banks or any of the Secured Parties of any obligation of the Seller or any other Person in
connection with any or all of the Collateral or under any agreement or instrument relating



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thereto. Anything herein to the contrary notwithstanding, (a) the Seller shall remain liable
under the Collateral to the extent set forth therein to perform all of its duties and obligations
thereunder to the same extent as if this Agreement had not been executed, (b) the exercise by the
Administrative Agent, as agent for the Secured Parties, of any of its rights in the Collateral
shall not release the Seller from any of its duties or obligations under the Collateral, and (c)
none of the Administrative Agent, the Purchaser Agents, any Hedge Counterparty, the Liquidity Banks
or any Secured Party shall have any obligations or liability under the Collateral by reason of this
Agreement, nor shall the Administrative Agent, the Purchaser Agents, any Hedge Counterparty, the
Liquidity Banks or any Secured Party be obligated to perform any of the obligations or duties of
the Seller thereunder or to take any action to collect or enforce any claim for payment assigned
hereunder.




     Section 9.2 Release of Lien on Collateral.



     At the same time as (i) any 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
Asset becomes a Prepaid Asset and all amounts in respect thereof have been paid in full by the
related Obligor and deposited in the Collection Account, (iii) such Asset is replaced in accordance
with Section 2.18, or (iv) this agreement terminates in accordance with Section
13.6, the Administrative Agent as agent for the Secured Parties will, to the extent requested
by the Servicer, release its interest in such Collateral. In connection with any sale of such
Related Property, the Administrative 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 Administrative 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 shall diminish the Servicer’s obligations pursuant to Section 6.6
with respect to the Proceeds of any such sale.



     Section 9.3 Further Assurances.



     The provisions of Section 13.12 shall apply to the security interest granted under
Section 9.1 as well as to the Advances and Swingline Advances hereunder.



     Section 9.4 Remedies.



     Upon the occurrence of a Termination Event, the Administrative Agent and Secured Parties shall
have, with respect to the Collateral granted pursuant to Section 9.1, and in addition to
all other rights and remedies available to the Administrative 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 9.5 Waiver of Certain Laws.



     Each of the Seller 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



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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 purchasers thereof, and each of the Seller 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 Administrative
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 Administrative Agent or
such court may determine.




     Section 9.6 Power of Attorney.



     Each of the Seller and the Servicer hereby irrevocably appoints the Administrative Agent its
true and lawful attorney (with full power of substitution) in its name, place and stead and at is
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 deliver for value all necessary or appropriate bills of sale, assignments and other
instruments in connection with any such sale or other disposition, the Seller 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 Administrative Agent or a Purchaser Agent, the Seller shall ratify and confirm any
such sale or other disposition by executing and delivering to the Administrative Agent or such
purchaser all proper bills of sale, assignments, releases and other instruments as may be
designated in any such request.



ARTICLE X




TERMINATION EVENTS




     Section 10.1 Termination Events.



     The following events shall be Termination Events (“Termination Events”) hereunder:



     (a) as of any Determination Date, the Average Portfolio Delinquency Ratio exceeds 5.0%; or



     (b) as of any Determination Date, the Average Pool Charged-Off Ratio exceeds 2.0%; or



     (c) as of any Determination Date, the Average Portfolio Charged-Off Ratio exceeds 2.5%; or



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     (d) the Advances Outstanding on any day exceeds the lesser of the Facility Amount and Maximum
Availability and the same continues unremedied for two Business Days; provided that during the
period of time that such event remains unremedied, no additional Advances or Swingline Advances
will be made under this Agreement and any payments required to be made by the Servicer on a Payment
Date shall be made under Section 2.10; or



     (e) a Servicer Default occurs and is continuing; or



     (f) the Facility Termination Date shall have occurred; or



     (g) failure on the part of the Seller or Originator to make any payment or deposit (including
without limitation with respect to Collections) required by the terms of any Transaction Document
on the day such payment or deposit is required to be made and the same continues unremedied for two
Business Days; or



     (h) the occurrence of an Insolvency Event relating to the Originator, the Seller, the Servicer
or any Affiliate of the Originator which is a party to a Permitted Securitization Transaction; or



     (i) the Seller shall become required to register as an “investment company” within the meaning
of the Investment Company Act of 1940, as amended or the arrangements contemplated by the
Transaction Documents shall require registration as an “investment company” within the meaning of
the 1940 Act; or



     (j) a regulatory, tax or accounting body has ordered that the activities of the Seller or any
Affiliate of the Seller contemplated hereby be terminated or, as a result of any other event or
circumstance, the activities of the Seller contemplated hereby may reasonably be expected to cause
the Seller or any of its respective Affiliates to suffer materially adverse regulatory, accounting
or tax consequences; or



     (k) there shall exist any event or occurrence that has caused a Material Adverse Effect; or



     (l) the Internal Revenue Service shall file notice of a lien pursuant to Section 6323
of the Code with regard to any assets of the Seller or the Originator and such lien shall not have
been released within five Business Days, or the Pension Benefit Guaranty Corporation shall file
notice of a lien pursuant to Section 4068 of ERISA with regard to any of the assets of the Seller
or the Originator and such lien shall not have been released within five Business Days; or



     (m) any Change-in-Control shall occur; or



     (n) (i) any Transaction Document, or any lien or security interest granted thereunder, shall
(except in accordance with its terms), in whole or in part, terminate, cease to be effective or
cease to be the legally valid, binding and enforceable obligation of the Seller, the Originator, or
the Servicer,



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     (ii) the Seller, the Originator, the Servicer or any other party shall, directly or
indirectly, contest in any manner the effectiveness, validity, binding nature or
enforceability of any Transaction Document or any lien or security interest thereunder, or




     (iii) any security interest securing any obligation under any Transaction Document
shall, in whole or in part, cease to be a perfected first priority security interest; or



     (o) on any date of determination, the aggregate Hedge Notional Amount in effect for that day
under all Hedge Transactions is less than the product of the Hedge Percentage on such day and the
Hedge Amount on that day, and the same continues unremedied for a period of two Business Days; or



     (p) any failure on the part of the Seller or the Originator duly to observe or perform in any
material respect any other covenants or agreements of the Seller or the Originator set forth in
this Agreement or the other Transaction Documents to which the Seller or the Originator is a party
and the same continues unremedied for a period of thirty (30) days after the earlier 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 Seller or the Originator by the Administrative Agent and (ii) the date on which
the Seller or the Originator becomes aware thereof; or



     (q) any representation, warranty or certification made by the Seller or the Originator in any
Transaction Document or in any certificate delivered pursuant to any Transaction Document shall
prove to have been incorrect when made, which has a Material Adverse Effect on the Secured Parties
and which continues to be unremedied for a period of thirty (30) days after the earlier 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 Seller or the Originator by the Administrative Agent and (ii) the date on
which the Seller or the Originator becomes aware thereof; or



     (r) any failure by the Seller to give instructions or notice to the Administrative Agent as
required by this Agreement, or to deliver any required Monthly Report or other Required Reports
hereunder on or before the date occurring two Business Days after the date such instruction, notice
or report is required to be made or given, as the case may be, under the terms of this Agreement;
or



     (s) the failure of the Seller, the Servicer or the Originator to make any payment due with
respect to recourse debt or other obligations, in the case of the Servicer or the Originator, in
excess of $7,500,000, or the occurrence of any event or condition that would permit acceleration of
such recourse debt or other obligations whether or not such event or condition has been waived; or



     (t) (1) the rendering of one or more final judgments, decrees or orders by a court or
arbitrator of competent jurisdiction for the payment of money in excess of $7,500,000, individually
or in the aggregate, against the Originator, or $2,000,000 against the Seller, individually or in
the aggregate, and the Originator shall not have either (i) discharged or provided for the
discharge of any such judgment, decree or order in accordance with its terms or



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(ii) perfected a timely appeal of such judgment, decree or order and caused the execution of
same to be stayed during the pendency of the appeal or (2) the Originator or the Seller shall have
made payments of amounts in excess of $5,000,000 by the Originator, or $2,000,000 by the Seller, in
the settlement of any litigation, claim or dispute (excluding payments made from insurance
proceeds); or




     (u) as of any Determination Date, the Pool Yield does not equal or exceed the Minimum Pool
Yield and the same continues unremedied by the following Determination Date; or



     (v) [Reserved]; or



     (w) as of any Quarterly Determination Date, the Originator’s ratio of Consolidated Funded
Indebtedness to Consolidated Tangible Net Worth is more than 5 to 1; provided that such ratio shall
exclude investments (and related debt financing) in residential mortgage assets acquired for real
estate investment trust compliance purposes.



     Section 10.2 Remedies.



     (a) Upon the occurrence of a Termination Event (other than a Termination Event described in
Section 10.1(i)), the Administrative Agent shall, at the request of, or may, with the
consent of, any of the Purchasers, by notice to the Seller, declare the Termination Date to have
occurred and the Amortization Period to have commenced.



     (b) Upon the occurrence of a Termination Event described in Section 10.1(i), the
Termination Date shall occur immediately and the Amortization Period shall commence automatically.



     (c) Upon the occurrence of any Termination Event described in Section 10.1, no
Advances or Swingline Advances will thereafter be made, and the Administrative Agent and the
Secured Parties shall have, in addition to all other rights and remedies under this Agreement or
otherwise, all other rights and remedies provided under the UCC of each applicable jurisdiction and
other Applicable Laws, which rights shall be cumulative, and also may require the Seller and
Servicer to, and the Seller and Servicer hereby agree that they will at the Servicer’s expense and
upon request of the Administrative Agent forthwith, (i) assemble all or any part of the Collateral
as directed by the Administrative Agent and make the same available to the Administrative Agent at
a place to be designated by the Administrative Agent and (ii) without notice except as specified
below, sell the Collateral or any part thereof in one or more parcels at a public or private sale,
at any of the Administrative Agent’s offices or elsewhere, for cash, on credit or for future
delivery, and upon such other terms as the Administrative Agent may deem commercially reasonable.
The Seller agrees that, to the extent notice of sale shall be required by law, at least ten days’
notice to the Seller of the time and place of any public sale or the time after which any private
sale is to be made shall constitute reasonable notification. The Administrative Agent shall not be
obligated to make any sale of Collateral regardless of notice of sale having been given. The
Administrative Agent may adjourn any public or private sale from time to time by announcement at
the time and place fixed therefor, and such sale may, without further notice, be made at the time
and place to which it was so adjourned. All cash Proceeds received by the



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Administrative Agent in respect of any sale of, collection from, or other realization upon,
all or any part of the Collateral (after payment of any amounts incurred in connection with such
sale) shall be deposited into the Collection Account and to be applied against all or any part of
the Aggregate Unpaids pursuant to Section 2.10 or otherwise in such order as the
Administrative Agent shall elect in its discretion.




ARTICLE XI




INDEMNIFICATION




     Section 11.1 Indemnities by the Seller.



     (a) Without limiting any other rights that any such Person may have hereunder or under
Applicable Law, the Seller hereby agrees to indemnify the Administrative Agent, the Purchaser
Agents, the Backup Servicer, the Collateral Custodian, the Secured Parties, the Affected Parties
and each of their respective assigns 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 attorneys’ fees
and disbursements (all of the foregoing being collectively referred to as the “Indemnified
Amounts”) awarded against or incurred by such Indemnified Party and other non-monetary damages
of any such Indemnified Party or any of them arising out of or as a result of this Agreement or the
ownership of an interest in the Collateral or in respect of any Asset included in the Collateral,
excluding, however, (a) Indemnified Amounts to the extent resulting from gross negligence or
willful misconduct on the part of such Indemnified Party or (b) Indemnified Amounts that have the
effect of recourse for non-payment of the Assets included in the Collateral due to credit problems
of the Obligors (except as otherwise specifically provided in this Agreement). If the Seller has
made any indemnity payment pursuant to this Section 11.1 and such payment fully indemnified
the recipient thereof and the recipient thereafter collects any payments from others in respect of
such Indemnified Amounts then, the recipient shall repay to the Seller an amount equal to the
amount it has collected from others in respect of such indemnified amounts. Without limiting the
foregoing, the Seller shall indemnify each Indemnified Party for Indemnified Amounts relating to or
resulting from:




     (i) any representation or warranty made or deemed made by the Seller, the Servicer (if
the Originator or one of its Affiliates is the Servicer) or any of their respective officers
under or in connection with this Agreement or any other Transaction Document, which shall
have been false or incorrect in any material respect when made or deemed made or delivered;




     (ii) the failure by the Seller or the Servicer (if the Originator or one of its
Affiliates is 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 Collateral or the nonconformity of any Collateral with
any such Applicable Law;




     (iii) the failure to vest and maintain vested in the Administrative Agent, as agent for
the Secured Parties, an undivided ownership interest in the Collateral, together



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     with all Collections, free and clear of any Lien (other than Permitted Liens) whether
existing at the time of any Advance or Swingline Advance or at any time thereafter;




     (iv) the failure to maintain, as of the close of business on each Business Day prior to
the Termination Date, an amount of Advances Outstanding that is less than or equal to the
lesser of (x) the Facility Amount and (y) the Maximum Availability on such Business Day;




     (v) the failure to file, or any delay in filing, financing statements, continuation
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 Swingline Advance or at any subsequent time;




     (vi) any dispute, claim, offset or defense (other than the discharge in bankruptcy of
the Obligor) of the Obligor to the payment with respect to any Collateral (including,
without limitation, a defense based on the Collateral not being a legal, valid and binding
obligation of such Obligor enforceable against it in accordance with its terms), or any
other claim resulting from the sale of the merchandise or services related to such
Collateral or the furnishing or failure to furnish such merchandise or services;




     (vii) any failure of the Seller or the Servicer (if the Originator or one of its
Affiliates is the Servicer) to perform its duties or obligations in accordance with the
provisions of this Agreement or any of the other Transaction Documents to which it is a
party or any failure by the Originator, the Seller or any Affiliate thereof to perform its
respective duties under any Collateral;




     (viii) the failure of any Lock-Box Bank to remit any amounts held in a Lock-Box Account
pursuant to the instructions of the Servicer or the Administrative Agent (to the extent such
Person is entitled to give such instructions in accordance with the terms hereof and of any
applicable Lock-Box Agreement) whether by reason of the exercise of set-off rights or
otherwise;




     (ix) any inability to obtain any judgment in, or utilize the court or other
adjudication system of, any state in which an Obligor may be located as a result of the
failure of the Seller or the Originator to qualify to do business or file any notice or
business activity report or any similar report;




     (x) any action taken by the Seller or the Originator (in its capacity as Servicer) in
the enforcement or collection of any Collateral;




     (xi) any products liability claim or personal injury or property damage suit or other
similar or related claim or action of whatever sort arising out of or in connection with the
Related Property or services that are the subject of any Collateral;




     (xii) any claim, suit or action of any kind arising out of or in connection with
Environmental Laws including any vicarious liability;



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




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




     (xv) the commingling of Collections on the Collateral at any time with other funds;




     (xvi) any investigation, litigation or proceeding related to this Agreement or the use
of proceeds of Advances or Swingline Advances or the security interest in the Collateral;




     (xvii) any failure by the Seller to give reasonably equivalent value to the Originator
in consideration for the transfer by the Originator to the Seller of any item of Collateral
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;




     (xviii) the use of the proceeds of any Advance or Swingline Advance in a manner other
than as provided in this Agreement and the Sale Agreement;




     (xix) the failure of the Seller, the Originator or any of their respective agents or
representatives to remit to the Servicer or the Administrative Agent or the Purchaser
Agents, Collections on the Collateral remitted to the Seller, the Originator, the Servicer
or any such agent or representative; or




     (xx) the failure by the Seller to comply with any of the covenants relating to any
Hedging Agreement in accordance with the Transaction Documents.



     (b) Any amounts subject to the indemnification provisions of this Section 11.1 shall
be paid by the Seller to the Indemnified Party within five Business Days following such Person’s
demand therefor.



     (c) If for any reason the indemnification provided above in this Section 11.1 is
unavailable to the Indemnified Party or is insufficient to hold an Indemnified Party harmless, then
the Seller or the Servicer, as the case may be, 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 Seller or the Servicer, as the case may be, on the other hand but also the
relative fault of such Indemnified Party as well as any other relevant equitable considerations.



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     (d) The obligations of the Seller under this Section 11.1 shall survive the
resignation or removal of the Administrative Agent, the Purchaser Agents, the Servicer, the Backup
Servicer or the Collateral Custodian and the termination of this Agreement.



     Section 11.2 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 Document, 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, (iv) the failure by the
Servicer to comply with any of the covenants relating to any Hedging Agreement in accordance with
the Transaction Documents, or (v) any litigation, proceedings or investigation against the
Servicer. The provisions of this indemnity shall run directly to and be enforceable by an injured
party subject to the limitations hereof.



     (b) Any amounts subject to the indemnification provisions of this Section 11.2 shall
be paid by the Servicer to the Indemnified Party within five Business Days following such Person’s
demand therefor.



     (c) The Servicer shall have no liability for making indemnification hereunder to the extent
any such indemnification constitutes recourse for uncollectible or uncollected Assets.



     (d) The obligations of the Servicer under this Section 11.2 shall survive the
resignation or removal of the Administrative Agent, the Purchaser Agents, the Backup Servicer or
the Collateral Custodian and the termination of this Agreement.



     (e) Any indemnification pursuant to this Section 11.2 shall not be payable from the
Collateral.



     Section 11.3 After-Tax Basis.



     Indemnification under Section 11.1 and Section 11.2 shall be in an amount
necessary to make the Indemnified Party whole after taking into account any tax consequences to the
Indemnified Party of the receipt of the indemnity provided hereunder, including the effect of such
tax or refund on the amount of tax measured by net income or profits that is or was payable by the
Indemnified Party.



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ARTICLE XII




THE ADMINISTRATIVE AGENT

AND PURCHASER AGENTS




     Section 12.1 The Administrative Agent.



     (a) Each Purchaser Agent and each Secured Party hereby appoints and authorizes the
Administrative Agent as its agent and bailee for purposes of perfection pursuant to the applicable
UCC or other Applicable Law and hereby further authorizes the Administrative Agent to appoint
additional agents and bailees to act on its behalf and for the benefit of each of the Purchaser
Agents and each Secured Party. Each of the Purchaser Agents and each Secured Party further
authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such
powers under this Agreement and the other Transaction Documents as are delegated to the
Administrative Agent by the terms hereof and thereof, together with such powers as are reasonably
incidental thereto. In furtherance, and without limiting the generality, of the foregoing, each
Secured Party hereby appoints the Administrative Agent as its agent to execute and deliver all
further instruments and documents, and take all further action that the Administrative Agent may
deem necessary or appropriate or that a Secured Party may reasonably request in order to perfect,
protect or more fully evidence the security interests granted by the Seller hereunder, or to enable
any of them to exercise or enforce any of their respective rights hereunder, including, without
limitation, the execution by the Administrative Agent as secured party/assignee of such financing
or continuation statements, or amendments thereto or assignments thereof, relative to all or any of
the Collateral now existing or hereafter arising, and such other instruments or notices, as may be
necessary or appropriate for the purposes stated hereinabove. The Purchaser Agents and the
Purchasers may direct the Administrative Agent to take any such incidental action hereunder. With
respect to other actions which are incidental to the actions specifically delegated to the
Administrative Agent hereunder, the Administrative Agent shall not be required to take any such
incidental action hereunder, but shall be required to act or to refrain from acting (and shall be
fully protected in acting or refraining from acting) upon the direction of the Purchaser Agents and
the Purchasers; provided that that the Administrative Agent shall not be required to take any
action hereunder if the taking of such action, in the reasonable determination of the
Administrative Agent, shall be in violation of any Applicable Law or contrary to any provision of
this Agreement or shall expose the Administrative Agent to liability hereunder or otherwise. In
the event the Administrative Agent requests the consent of a Purchaser Agent or a Purchaser
pursuant to the foregoing provisions and the Administrative Agent does not receive a consent
(either positive or negative) from such Person within ten Business Days of such Person’s receipt of
such request, then such Purchaser Agent or Purchaser shall be deemed to have declined to consent to
the relevant amendments.



     (b) The Administrative Agent shall exercise such rights and powers vested in it by this
Agreement and the other Transaction Documents, and use the same degree of care and skill in their
exercise as a prudent person would exercise or use under the circumstances in the conduct of such
person’s own affairs.



     (c) Administrative Agent’s Reliance, Etc. Neither the Administrative Agent nor any of
its directors, officers, agents or employees shall be liable for any action taken or omitted to be



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taken by it or them as Administrative Agent under or in connection with this Agreement or any
of the other Transaction Documents, except for its or their own gross negligence or willful
misconduct. Without limiting the foregoing, the Administrative Agent: (i) may consult with legal
counsel (including counsel for the Seller or the Originator), independent public accountants and
other experts selected by it and shall not be liable for any action taken or omitted to be taken in
good faith by it in accordance with the advice of such counsel, accountants or experts; (ii) makes
no warranty or representation and shall not be responsible for any statements, warranties or
representations made in or in connection with this Agreement; (iii) shall not have any duty to
ascertain or to inquire as to the performance or observance of any of the terms, covenants or
conditions of this Agreement or any of the other Transaction Documents on the part of the Seller,
the Originator, or the Servicer or to inspect the property (including the books and records) of the
Seller, the Originator, or the Servicer; (iv) shall not be responsible for the due execution,
legality, validity, enforceability, genuineness, sufficiency or value of this Agreement, any of the
other Transaction Documents or any other instrument or document furnished pursuant hereto or
thereto; and (v) shall incur no liability under or in respect of this Agreement or any of the other
Transaction Documents by acting upon any notice (including notice by telephone), consent,
certificate or other instrument or writing (which may be by telex) believed by it to be genuine and
signed or sent by the proper party or parties.




     (d) Credit Decision with Respect to the Administrative Agent. Each Purchaser Agent
and Secured Party acknowledges that it has, independently and without reliance upon the
Administrative Agent, or any of the Administrative Agent’s Affiliates, and based upon such
documents and information as it has deemed appropriate, made its own evaluation and decision to
enter into this Agreement and the other Transaction Documents to which it is a party. Each
Purchaser Agent and Secured Party also acknowledges that it will, independently and without
reliance upon the Administrative Agent, or any of the Administrative Agent’s Affiliates, and based
on such documents and information as it shall deem appropriate at the time, continue to make its
own decisions in taking or not taking action under this Agreement and the other Transaction
Documents to which it is a party.



     (e) Indemnification of the Administrative Agent. Each Purchaser Agent and Purchaser
agrees to indemnify the Administrative Agent (to the extent not reimbursed by the Seller or the
Servicer), ratably in accordance with its Pro Rata Share from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever which may be imposed on, incurred by, or asserted
against the Administrative Agent in any way relating to or arising out of this Agreement or any of
the other Transaction Documents, or any action taken or omitted by the Administrative Agent
hereunder or thereunder; provided that none of the Purchaser Agents or Purchasers shall be liable
for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting from the Administrative Agent’s gross negligence
or willful misconduct. Without limitation of the foregoing, each Purchaser Agent and Purchaser
agrees to reimburse the Administrative Agent, ratably in accordance with its Pro Rata Share
promptly upon demand for any out-of-pocket expenses (including counsel fees) incurred by the
Administrative Agent in connection with the administration, modification, amendment or enforcement
(whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of
rights or responsibilities under, this Agreement and the other Transaction Documents, to the extent
that such expenses are incurred in the interests of or



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otherwise in respect of the Purchaser Agents, or the Purchasers hereunder and/or thereunder
and to the extent that the Administrative Agent is not reimbursed for such expenses by the Seller
or the Servicer.




     (f) Successor Administrative Agent. The Administrative Agent may resign at any time,
effective upon the appointment and acceptance of a successor Administrative Agent as provided
below, by giving at least five days’ written notice thereof to each Purchaser Agent, the Swingline
Purchaser and the Seller and may be removed at any time with cause by the Purchaser Agents and the
Swingline Purchaser acting jointly. Upon any such resignation or removal, the Purchaser Agents
acting jointly shall appoint a successor Administrative Agent. Each of the Purchaser Agents agrees
that it shall not unreasonably withhold or delay its approval of the appointment of a successor
Administrative Agent. If no such successor Administrative Agent shall have been so appointed, and
shall have accepted such appointment, within thirty (30) days after the retiring Administrative
Agent’s giving of notice of resignation or the removal of the retiring Administrative Agent, then
the retiring Administrative Agent may, on behalf of the Secured Parties, appoint a successor
Administrative Agent which successor Administrative Agent shall be either (i) a commercial bank
organized under the laws of the United States or of any state thereof and have a combined capital
and surplus of at least $50,000,000 or (ii) an Affiliate of such a bank. Upon the acceptance of
any appointment as Administrative Agent hereunder by a successor Administrative Agent, such
successor Administrative Agent shall thereupon succeed to and become vested with all the rights,
powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative
Agent shall be discharged from its duties and obligations under this Agreement. After any retiring
Administrative Agent’s resignation or removal hereunder as Administrative Agent, the provisions of
this Article XII shall continue to inure to its benefit as to any actions taken or omitted
to be taken by it while it was Administrative Agent under this Agreement.



     (g) Payments by the Administrative Agent. Unless specifically allocated to a specific
Purchaser Agent or the Swingline Purchaser pursuant to the terms of this Agreement, all amounts
received by the Administrative Agent on behalf of the Purchaser Agents and the Swingline Purchaser
shall be paid by the Administrative Agent to the Purchaser Agents and the Swingline Purchaser in
accordance with their respective Pro Rata Shares in the applicable Advances Outstanding, or if
there are no Advances Outstanding then to the Purchaser Agents in accordance with the most recent
applicable Commitment, on the Business Day received by the Administrative Agent, unless such
amounts are received after 12:00 noon on such Business Day, in which case the Administrative Agent
shall use its reasonable efforts to pay such amounts to each Purchaser Agent on such Business Day,
but, in any event, shall pay such amounts to such Purchaser Agent not later than the following
Business Day.



     Section 12.2 VFCC Agent.



     (a) Authorization and Action. VFCC hereby designates and appoints WCM as the VFCC
Agent hereunder, and authorizes the VFCC Agent to take such actions as agent on its behalf and to
exercise such powers as are delegated to the VFCC Agent by the terms of this Agreement together
with such powers as are reasonably incidental thereto. The VFCC 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,



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obligations or liabilities on the part of the VFCC Agent shall be read into this Agreement or
otherwise exist for the VFCC Agent. In performing its functions and duties hereunder, the VFCC
Agent shall act solely as agent for VFCC and does not assume nor shall be deemed to have assumed
any obligation or relationship of trust or agency with or for the Seller or any of its successors
or assigns. The VFCC Agent shall not be required to take any action that exposes the VFCC Agent to
personal liability or that is contrary to this Agreement or Applicable Law. The appointment and
authority of the VFCC Agent hereunder shall terminate at the indefeasible payment in full of the
Aggregate Unpaids.




     (b) Delegation of Duties. The VFCC 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 VFCC Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care.



     (c) Exculpatory Provisions. Neither the VFCC 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 VFCC Agent, the breach
of its obligations expressly set forth in this Agreement), or (ii) responsible in any manner to
VFCC for any recitals, statements, representations or warranties made by the Seller 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 Seller to perform its obligations
hereunder, or for the satisfaction of any condition specified in Article III. The VFCC
Agent shall not be under any obligation to VFCC 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 Seller. The VFCC Agent shall not be deemed
to have knowledge of any Unmatured Termination Event, Termination Event or Servicer Default unless
the VFCC Agent has received notice from the Seller or a Secured Party.



     (d) Reliance. The VFCC 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 Seller), independent
accountants and other experts selected by the VFCC Agent. The VFCC 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 VFCC Agent shall have received such advice, the VFCC Agent may
take or refrain from taking any action as the VFCC Agent shall deem advisable and in the best
interests of VFCC. The VFCC 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.



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     (e) Non-Reliance on the VFCC Agent and Other Purchasers. VFCC expressly acknowledges
that neither the VFCC 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 VFCC Agent hereafter taken, including, without limitation, any review of the affairs of the
Seller, shall be deemed to constitute any representation or warranty by the VFCC Agent. VFCC
represents and warrants to the VFCC Agent that it has and will, independently and without reliance
upon the VFCC 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 Seller and made its own decision to
enter into this Agreement or any Hedging Agreement, as the case may be.



     (f) The VFCC Agent in its Individual Capacity. The VFCC Agent and any of its
Affiliates may make loans to, accept deposits from and generally engage in any kind of business
with the Seller or any Affiliate of the Seller as though the VFCC Agent were not the VFCC Agent
hereunder. With respect to the Advances made pursuant to this Agreement, the VFCC 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 VFCC Agent and the terms “Purchaser” and
“Purchasers” shall include the VFCC Agent in its individual capacity.



     (g) Successor VFCC Agent. The VFCC Agent may, upon five days’ notice to the Seller
and VFCC, and the VFCC Agent will, upon the direction of VFCC, resign as VFCC Agent. If the VFCC
Agent shall resign, then VFCC, during such five day period, shall appoint a successor agent. If
for any reason no successor VFCC Agent is appointed by VFCC during such five day period, then
effective upon the expiration of such five day period, the Seller shall make all payments it
otherwise would have made to the VFCC Agent in respect of the Aggregate Unpaids or under any fee
letter delivered in connection herewith directly to VFCC and for all purposes shall deal directly
with VFCC. After any retiring VFCC Agent’s resignation hereunder as VFCC Agent, the provisions of
Articles XI and XII shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was the VFCC Agent under this Agreement. Notwithstanding the resignation or removal of
the VFCC Agent, Wachovia, as Hedge Counterparty, shall continue to be a Secured Party hereunder.



     Section 12.3 Additional Agent.



     (a) Authorization and Action. Each Additional Purchaser hereby designates and appoints
the relevant Additional Agent designated in the related Additional Purchaser Agreement to act as
its agent hereunder and under each other Transaction Document, and authorizes such Additional Agent
to take such actions as agent on its behalf and to exercise such powers as are delegated to the
Additional Agent by the terms of this Agreement and the other Transaction Documents together with
such powers as are reasonably incidental thereto. No Additional Agent shall have any duties or
responsibilities, except those expressly set forth herein or in any other Transaction Document, or
any fiduciary relationship with such related Additional Purchaser, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities on the part of such Additional
Agent shall be read into this Agreement or any other Transaction Document or otherwise exist for
such Additional Agent. In performing its functions and duties hereunder and under the other
Transaction Documents, each Additional Agent shall act solely as agent for the related Additional
Purchaser and does not assume nor shall be deemed to have assumed any



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obligation or relationship of trust or agency with or for the Seller or the Servicer or any of
the Seller’s or the Servicer’s successors or assigns. No Additional Agent shall be required to
take any action that exposes the Additional Agent to personal liability or that is contrary to this
Agreement, any other Transaction Document or Applicable Law. The appointment and authority of each
Additional Agent hereunder shall terminate upon the indefeasible payment in full of all Aggregate
Unpaids. Each Additional Agent hereby authorizes the Administrative Agent to execute each of the
UCC financing statements on behalf of such Additional Agent (the terms of which shall be binding on
such Additional Agent).




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



     (c) Exculpatory Provisions. Neither any Additional 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 or any other Transaction Document
(except for its, their or such Person’s own gross negligence or willful misconduct), or (ii)
responsible in any manner to any Additional Purchaser for any recitals, statements, representations
or warranties made by the Seller or the Servicer contained in Article IV, any other
Transaction Document or any certificate, report, statement or other document referred to or
provided for in, or received under or in connection with, this Agreement or any other Transaction
Document, or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of
this Agreement, any other Transaction Document or any other document furnished in connection
herewith or therewith, or for any failure of the Seller or the Servicer to perform its obligations
hereunder or thereunder, or for the satisfaction of any condition specified in this Agreement, or
for the perfection, priority, condition, value or sufficiency of any collateral pledged in
connection herewith. No Additional Agent shall be under any obligation to any Additional Purchaser
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 any other Transaction Document, or to
inspect the properties, books or records of the Seller or the Servicer. No Additional Agent shall
be deemed to have knowledge of any Termination Event or Unmatured Termination Event unless such
Additional Agent has received notice from the Seller or the related Additional Purchaser.



     (d) Reliance by Additional Agent. Each Additional 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 Seller), independent accountants and other experts selected by such Additional Agent. Each
Additional Agent shall in all cases be fully justified in failing or refusing to take any action
under this Agreement or any other Transaction Document unless it shall first receive such advice or
concurrence of the related Additional Purchaser as it deems appropriate and it shall first be
indemnified to its satisfaction by such Additional Purchaser; provided that unless and until such
Additional Agent shall have received such advice, the Additional Agent may take or refrain from
taking any action, as the Additional Agent shall deem advisable and in the best interests of the
Related Additional Purchaser. Each Additional Agent



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shall in all cases be fully protected in acting, or in refraining from acting, in accordance
with a request of the related Additional Purchaser, and such request and any action taken or
failure to act pursuant thereto shall be binding upon such Additional Purchaser.




     (e) Non-Reliance on Additional Agent. Each Additional Purchaser expressly
acknowledges that neither any Additional 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 such Additional Agent hereafter taken, including, without limitation, any review of the
affairs of the Seller or the Servicer, shall be deemed to constitute any representation or warranty
by such Additional Agent. Each Additional Purchaser represents and warrants to the related
Additional Agent that it has and will, independently and without reliance upon such Additional
Agent, such Additional Purchaser 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 Seller and made its own
decision to enter into this Agreement, the other Transaction Documents and all other documents
related hereto or thereto.



     (f) Additional Agent in its Individual Capacity. Each Additional Agent and its
Affiliates may make loans to, accept deposits from and generally engage in any kind of business
with the Seller or any Affiliate of the Seller as though such Additional Agent were not an
Additional Agent hereunder. With respect to Advances pursuant to this Agreement, each Additional
Agent shall have the same rights and powers under this Agreement in its individual capacity as any
Purchaser and may exercise the same as though it were not an Additional Agent, and the terms
“Purchaser,” and “Purchasers,” shall include the Additional Agent in its individual capacity.



     (g) Successor Additional Agent. Each Additional Agent may, upon five days’ notice to
the Seller, and the related Additional Purchaser, and such Additional Agent will, upon the



     direction of such Additional Purchaser (other than such Additional Agent, in its individual
capacity) resign as Additional Agent. If any Additional Agent shall resign, then the related
Additional Purchaser during such five day period shall appoint a successor agent. If for any
reason no successor Additional Agent is appointed by the related Additional Purchaser during such
five day period, then effective upon the termination of such five day period, and the Seller shall
make all payments in respect of the Aggregate Unpaids directly to such Additional Purchaser, and
for all purposes shall deal directly with such Additional Purchaser. After any retiring Additional
Agent’s resignation hereunder as an Additional Agent, the provisions of Articles XI and
XII shall inure to its benefit with respect to any actions taken or omitted to be taken by
it while it was an Additional Agent under this Agreement.



ARTICLE XIII




MISCELLANEOUS




     Section 13.1 Amendments and Waivers.



     (a) Except as provided in this Section 13.1, no amendment, waiver or other
modification of any provision of this Agreement shall be effective without the written agreement



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of the Seller, the Servicer, the Backup Servicer, the Collateral Custodian, the Administrative
Agent and the Secured Parties; provided that no such amendment, waiver or modification adversely
affecting the rights or obligations of any Hedge Counterparty shall be effective without the
written agreement of such Person.




     (b) The parties hereto acknowledge and agree that after the Closing Date the Agreement may
need to be amended to correct certain ambiguities or errors as well as to correct inconsistencies
with the terms of the other Transaction Documents and each such party agrees to cooperate in good
faith to effectuate, and not to unreasonably withhold, delay or condition its consent to, any such
amendments; provided that, notwithstanding the foregoing, to the extent any such amendment would
have a adverse effect on any Secured Party, such Secured Party shall have the right to consent or
withhold consent in its sole discretion.



     Section 13.2 Notices, Etc.



     All notices, reports 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 delivered, as to each party hereto, at its address set forth
under its name on the signature pages hereof or at such other address as shall be designated by
such party in a written notice to the other parties hereto (provided that, for avoidance of doubt,
Lord Securities Corp. shall not receive notices, reports and other communications provided pursuant
to Article II, and Section 6.10, Section 6.11 and Section 6.12
hereof). 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.



     Section 13.3 Ratable Payments.



     If any Secured Party, whether by setoff or otherwise, has payment made to it with respect to
any portion of the Aggregate Unpaids owing to such Secured Party (other than payments received
pursuant to Section 11.1) in a greater proportion than that received by any other Secured
Party, such Secured Party agrees, promptly upon demand, to purchase for cash without recourse or
warranty a portion of the Aggregate Unpaids held by the other Secured Parties so that after such
purchase each Secured Party will hold its ratable proportion of the Aggregate Unpaids; provided
that if all or any portion of such excess amount is thereafter recovered from such Secured Party,
such purchase shall be rescinded and the purchase price restored to the extent of such recovery,
but without interest.



     Section 13.4 No Waiver; Remedies.



     No failure on the part of the Administrative Agent, the Purchaser Agents, the Collateral
Custodian, the Backup Servicer or a 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.



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     Section 13.5 Binding Effect; Benefit of Agreement.



     This Agreement shall be binding upon and inure to the benefit of the Seller, the Servicer, the
Administrative Agent, the Purchaser Agents, the Backup Servicer, the Collateral Custodian, the
Secured Parties and their respective successors and permitted assigns and, in addition, the
provisions of Section 2.9(a)(i) and Section 2.10(a)(i) shall inure to the benefit
of each Hedge Counterparty, whether or not that Hedge Counterparty is a Secured Party.



     Section 13.6 Term of this Agreement.



     This Agreement, including, without limitation, the Seller’s representations and covenants set
forth in Articles IV and V, and the Servicer’s representations, covenants and
duties set forth in Articles VI, VII and VIII, create and constitute the
continuing obligation of the parties hereto in accordance with its terms, and shall remain in full
force and effect until the Collection Date; provided that the rights and remedies with respect to
any breach of any representation and warranty made or deemed made by the Seller pursuant to
Articles III and IV the indemnification and payment provisions of Article
XI and the provisions of Section 13.9, Section 13.10 and Section 13.11,
shall be continuing and shall survive any termination of this Agreement.



     Section 13.7 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 EACH 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 EACH SECURED PARTY HEREBY WAIVES ANY OBJECTION BASED ON FORUM NON CONVENIENS,
AND ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED HEREUNDER IN ANY OF THE AFOREMENTIONED COURTS
AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH
COURT.



     Section 13.8 Waiver of Jury Trial.



     TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE PARTIES HERETO AND EACH HEDGE
COUNTERPARTY HEREBY 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.



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     Section 13.9 Costs, Expenses and Taxes.



     (a) In addition to the rights of indemnification granted to the Administrative Agent, the
Purchaser Agents, the Backup Servicer, the Collateral Custodian, the Secured Parties and its or
their Affiliates and officers, directors, employees and agents thereof under Article XI hereof, the
Seller and Originator agrees to pay on demand all reasonable costs and expenses of the
Administrative Agent, the Purchaser Agents, the Backup Servicer, the Collateral Custodian and the
Secured Parties incurred in connection with the preparation, execution, delivery, administration
(including periodic auditing, which shall be limited to two audits per year prior to the occurrence
of a Termination Event), renewal, 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 any Hedging Agreement), including, without limitation, the reasonable fees and
out-of-pocket expenses of counsel for the Administrative Agent, the Purchaser Agents, the Backup
Servicer, the Collateral Custodian and the Secured Parties with respect thereto and with respect to
advising the Administrative Agent, the Purchaser Agents, the Backup Servicer, the Collateral
Custodian 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 (including any Hedging
Agreement), and all costs and expenses, if any (including reasonable counsel fees and expenses),
incurred by the Administrative Agent, the Purchaser Agents, the Backup Servicer, the Collateral
Custodian 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 Hedging Agreement).



     (b) The Seller and Originator 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 Purchasers and the Swingline Purchaser in connection with this Agreement or the
funding or maintenance of Advances or Swingline Advances hereunder.



     (c) The Seller and Originator shall pay on demand all other reasonable costs, expenses and
Taxes (excluding income taxes) incurred by the Administrative Agent, the Purchaser Agents, the
Secured Parties (“Other Costs”), including, without limitation, all costs and expenses
incurred by the Administrative Agent and the Purchaser Agents in connection with periodic audits of
the Seller’s or the Servicer’s books and records.



     Section 13.10 No Proceedings.



     (a) Each of the parties hereto (other than VFCC) and each Hedge Counterparty (by accepting the
benefits of this Agreement) hereby agrees that it will not institute against, or join any other
Person in instituting against, VFCC, the Administrative Agent, the VFCC or any Liquidity Banks any
Insolvency Proceeding so long as any commercial paper issued by VFCC shall be outstanding and there
shall not have elapsed one year and one day since the last day on which any such commercial paper
shall have been outstanding.



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     (b) Each of the parties hereto (other than a particular Additional Purchaser) hereby agrees
that it will not institute against, or join any other Person in instituting against such Additional
Purchaser, the related Additional Agent or any of its Liquidity Banks any Insolvency Proceeding so
long as any commercial paper issued by such Additional Purchaser shall be outstanding and there
shall not have elapsed one year and one day since the last day on which any such commercial paper
shall have been outstanding.



     (c) Each of the parties hereto (other than the Administrative Agent without the consent of the
Purchaser Agents) hereby agrees that it will not institute against, or join any other Person in
instituting against, the Seller any Insolvency Proceeding so long as there shall not have elapsed
one year and one day since the Collection Date; provided that nothing in this Section 13.10
shall limit any party’s right to file any claim in or otherwise take any action with respect to any
insolvency proceeding that was instituted by any other Person.



     Section 13.11 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 Administrative Agent,
the Purchaser Agents, 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 administrator of the Administrative Agent, the Purchaser Agents, or any Secured Party,
or any incorporator, affiliate, stockholder, officer, employee or director of the Administrative
Agent, the Purchaser Agents, or any Secured Party, or of any such administrator, as such, by the
enforcement of any assessment or by any legal or equitable proceeding, by virtue of any statute or
otherwise; it being expressly agreed and understood
that the agreements of the Administrative Agent, the Purchaser Agents, or any Secured Party
contained in this Agreement and all of the other agreements, instruments and documents entered into
by it pursuant hereto or in connection herewith are, in each case, solely the corporate obligations
of the Administrative Agent, the Purchaser Agents, or any Secured Party, and that no personal
liability whatsoever shall attach to or be incurred by any administrator of the Administrative
Agent, the Purchaser Agents, or any Secured Party or any incorporator, stockholder, affiliate,
officer, employee or director of the Administrative Agent, the Purchaser Agents, or any Secured
Party or of any such administrator, as such, or any other of them, under or by reason of any of the
obligations, covenants or agreements of the Administrative Agent, the Purchaser Agents, or any
Secured Party contained in this Agreement or in any other such instruments, documents or
agreements, or that are implied therefrom, and that any and all personal liability of every such
administrator of the Administrative Agent, the Purchaser Agents, or any Secured Party and each
incorporator, stockholder, affiliate, officer, employee or director of the Administrative Agent,
the Purchaser Agents, or any Secured Party or of any such administrator, or any of them, for
breaches by the Administrative Agent, the Purchaser Agents, or any Secured Party of any such
obligations, covenants or agreements, which liability may arise either at common law or at equity,
by statute or constitution, or otherwise, is hereby expressly waived as a condition of and in
consideration for the execution of this Agreement. The provisions of this Section 13.11
shall survive the termination of this Agreement.



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     (b) Notwithstanding anything in this Agreement to the contrary, neither VFCC nor any
Additional Purchaser shall have any obligation to pay any amount required to be paid by it
hereunder in excess of any amount available to VFCC or such Additional Purchaser, as applicable,
after paying or making provision for the payment of its Commercial Paper Notes. All payment
obligations of VFCC and each Additional Purchaser, as applicable, hereunder are contingent on the
availability of funds in excess of the amounts necessary to pay its Commercial Paper Notes; and
each of the other parties hereto agrees that it will not have a claim under Section 101(5) of the
Bankruptcy Code if and to the extent that any such payment obligation owed to it by VFCC or an
Additional Purchaser, as applicable, exceeds the amount available to VFCC or such Additional
Purchaser, as applicable, to pay such amount after paying or making provision for the payment of
its Commercial Paper Notes.



     (c) Notwithstanding any contrary provision set forth herein, no claim may be made by the
Seller, the Originator or the Servicer or any other Person against the Administrative Agent and the
Secured Parties or their respective Affiliates, directors, officers, employees, attorneys or agents
for any special, indirect, consequential or punitive damages in respect to any claim for breach of
contract or any other theory of liability arising out of or related to the transactions
contemplated by this Agreement, or any act, omission or event occurring in connection therewith;
and the Seller, the Originator and the Servicer each hereby waives, releases, and agrees not to sue
upon any claim for any such damages, whether or not accrued and whether or not known or suspected.



     (d) No obligation or liability to any Obligor under any of the Assets is intended to be
assumed by the Administrative Agent and the Secured Parties under or as a result of this Agreement
and the transactions contemplated hereby




	 	 	Section 13.12 Protection of Right, Title and Interest in the Collateral; Further Action
Evidencing Advances and Swingline Advances.





     (a) The Servicer shall cause this Agreement, all amendments hereto and/or all financing
statements and continuation statements and any other necessary documents covering the right, title
and interest of the Administrative Agent as agent for the Secured Parties and of the Secured
Parties to the Collateral to be promptly recorded, registered and filed, and at all times to be
kept recorded, registered and filed, all in such manner and in such places as may be required by
law fully to preserve and protect the right, title and interest of the Administrative Agent as
agent for the Secured Parties hereunder to all property comprising the Collateral. The Servicer
shall deliver to the Administrative Agent file-stamped copies of, or filing receipts for, any
document recorded, registered or filed as provided above, as soon as available following such
recording, registration or filing. The Seller shall cooperate fully with the Servicer in
connection with the obligations set forth above and will execute any and all documents reasonably
required to fulfill the intent of this Section 13.12(a).



     (b) The Seller agrees that from time to time, at its expense, it will promptly execute and
deliver all instruments and documents, and take all actions, that the Administrative Agent may
reasonably request in order to perfect, protect or more fully evidence the Advances and Swingline
Advances hereunder and the security interest granted in the Collateral, or to enable the



139









 




Administrative Agent or the Secured Parties to exercise and enforce their rights and remedies
hereunder or under any Transaction Document.




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



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




     (i) execute and deliver and file or cause to be filed an appropriate continuation
statement with respect to such financing statement; and




     (ii) deliver or cause to be delivered to the Administrative Agent an opinion of the
counsel for Seller, in form and substance reasonably satisfactory to the Administrative
Agent, confirming and updating the opinion delivered pursuant to Section 3.1 with
respect to perfection and otherwise to the effect that the security interest hereunder
continues to be an enforceable and perfected security interest, 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 13.13 Confidentiality




     (a) Each of the Administrative Agent, the Purchaser Agents, the Secured Parties, the Servicer,
the Collateral Custodian, the Backup Servicer and the Seller shall maintain and shall cause each of
its employees and officers to maintain the confidentiality of the Agreement and all information
with respect to the other parties, including all information regarding the business of the Seller
and the Servicer 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, attorneys, investors, potential investors parties that provide or may in the future
provide first loss or credit enhancement to such Person and the agents of such Persons
(“Excepted Persons”); (ii) disclose the existence of the Agreement, but



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not the financial terms thereof, (iii) disclose such information as is required by Applicable
Law and (iv) disclose the Agreement and such information in any suit, action, proceeding or
investigation (whether in law or in equity or pursuant to arbitration) involving any of the
Transaction Documents or any Hedging Agreement for the purpose of defending itself, reducing its
liability, or protecting or exercising any of its claims, rights, remedies, or interests under or
in connection with any of the Transaction Documents or any Hedging Agreement. It is understood
that the financial terms that may not be disclosed except in compliance with this Section
13.13(a) include, without limitation, all fees and other pricing terms, and all Termination
Events, Servicer Defaults, and priority of payment provisions.




     (b) Anything herein to the contrary notwithstanding, the Seller and the Servicer each hereby
consents to the disclosure of any nonpublic information with respect to it (i) to the
Administrative Agent, the Purchaser Agents, the Collateral Custodian, the Backup Servicer or the
Secured Parties by each other, (ii) by the Administrative Agent, the Purchaser Agents, the
Collateral Custodian, the Backup Servicer and the Secured Parties to any prospective or actual
assignee or participant of any of them provided such Person agrees to hold such information
confidential, or (iii) by the Administrative Agent, the Purchaser Agents, and the Secured Parties
to any commercial paper dealer or provider of a surety, guaranty or credit or liquidity enhancement
to any Purchaser, as applicable, 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. In addition, the Secured Parties, the Administrative Agent and the Purchaser
Agents, may disclose any such nonpublic information as required pursuant to any law, rule,
regulation, direction, request or order of any judicial, administrative or regulatory authority or
proceedings (whether or not having the force or effect of law).



     (c) Notwithstanding anything herein to the contrary, the foregoing shall not be construed to
prohibit (i) disclosure of any and all information that is or becomes publicly known; (ii)
disclosure of any and all information (a) if required to do so by any applicable statute, law, rule
or regulation, (b) to any government agency or regulatory body having or claiming authority to
regulate or oversee any respects of the Administrative Agents’, the Purchaser Agents’, the Secured
Parties’, the Collateral Custodian’s or the Backup Servicer’s business or that of their affiliates,
(c) pursuant to any subpoena, civil investigative demand or similar demand or request of any court,
regulatory authority, arbitrator or arbitration to which the Administrative Agent, the Purchaser
Agents, the Secured Parties, the Collateral Custodian or the Backup Servicer or an officer,
director, employer, shareholder or affiliate of any of the foregoing is a party, (d) in any
preliminary or final offering circular, registration statement or contract or other document
approved in advance by the Seller, the Servicer or the Originator or (e) to any affiliate,
independent or internal auditor, agent, employee or attorney of the Collateral Custodian or Backup
Servicer having a need to know the same, provided that the Collateral Custodian or Backup Servicer
advises such recipient of the confidential nature of the information being disclosed; or (iii) any
other disclosure authorized by the Seller, Servicer or Originator.



     Section 13.14 Execution in Counterparts; Severability; Integration.



     This Agreement may be executed in any number of counterparts and by different parties hereto
in separate counterparts (including by facsimile), 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



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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 and any agreements or letters
(including fee letters) executed in connection herewith contains the final and complete integration
of all prior expressions by the parties hereto with respect to the subject matter hereof and shall
constitute the entire agreement among the parties hereto with respect to the subject matter hereof,
superseding all prior oral or written understandings other than any fee letter delivered by the
Originator to the Administrative Agent, the Purchaser Agents, and the Secured Parties.




     Section 13.15 Waiver of Setoff.



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



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



     Section 13.16 Assignments.



     (a) The Purchasers 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 Variable Funding Certificate or Additional Purchaser Variable
Funding Certificate, the assignee (other than any assignee that is a Liquidity Bank) shall execute
and deliver to the Servicer and the Administrative Agent a Transferee Letter substantially in the
form of Exhibit K hereto (the “Transferee Letter”). The parties to any such
assignment, grant or sale of participation interest shall execute and deliver to the VFCC Agent or
the related Additional Agent, as applicable, for its acceptance and recording in its books and
records, such agreement or document as may be satisfactory to such parties and the VFCC Agent or
such Additional Agent, as applicable. The Seller shall not assign or delegate, or grant any
interest in, or permit any Lien to exist upon, any of the Seller’s rights, obligations or duties
under this Agreement without the prior written consent of the Administrative Agent and each Hedge
Counterparty.



     (b) The Originator may, with the written consent of the Administrative Agent and VFCC, add
additional Persons as an Additional Purchaser or an Additional Agent or cause an existing Purchaser
to increase its Commitment; provided that the Commitment of any Purchaser may only be increased
with the prior written consent of such Purchaser and the Administrative Agent. Each new Additional
Purchaser and Additional Agent shall become a party hereto by executing and delivering to the
Administrative Agent and the Originators an Assumption Agreement substantially in the form of
Exhibit L hereto (the “Assumption Agreement”).



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     Section 13.17 Heading and Exhibits.



     The headings 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.



     Section 13.18 Loans Subject to Retained Interest Provisions.



     (a) With respect to any Loan included in the Collateral subject to the Retained Interest
provisions of this Agreement, the Seller will own only the principal portion of such Loans
outstanding as of the applicable Cut-Off Date. Principal Collections received by the Seller or the
Servicer on any Revolving Loans will be allocated first to the portion of such Revolving Loan owned
by the Seller, until the principal amount of such portion is reduced to zero, and then to the
portion not owned by the Seller; provided that if (i) a payment default occurs with respect to any
of the related Loans, (ii) a Liquidity Factor Reduction Event occurs and continues, (iii) the
Originator has determined in its sole discretion that an Obligor’s credit has deteriorated or the
Originator has determined in its sole discretion to reduce its commitment to an Obligor, or (iv) an
Allocation Adjustment Event occurs, then Principal Collections received on (x) the applicable Loan
(in the case of clause (i) or (iii) above or during the time that a Liquidity
Factor Reduction Event exists and continues in the case of clause (ii) above) or (y) all the
Revolving Loans (in the case of clauses (iv) above) will be allocated between the portion
owned by the Seller and the portion not owned by the Seller, pro
rata based upon the outstanding
principal amount of each such portion.



     (b) With respect to any Term Loans included in the Collateral subject to the Retained Interest
provisions of this Agreement, Principal Collections and Interest Collections received by the
Servicer will be allocated between the portion owned by the Seller and to the portion not owned by
the Seller (if any) on a pro rata basis according to the outstanding principal amount of such
portion.



     Section 13.19 Tax Treatment of Advances.



     It is the intention of the Seller and the Purchasers that, for U.S. federal, state and local
income and franchise tax purposes only, the Advances and Swingline Advances made hereunder will be
treated as indebtedness secured by the Collateral. The Seller, by entering into this Agreement,
and the Purchasers, by making the Advances and Swingline Advances, as applicable, described herein,
agree to treat the Advances and Swingline Advances, as applicable, for U.S. federal, state and
local income and franchise tax purposes as indebtedness. The provisions of this Agreement and all
related Transaction Documents shall be construed to further these intentions of the parties.



[Remainder of Page Intentionally Left Blank.]




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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.



	 	 	 	 	 	 	 
	THE SELLER:	 	CSE QRS FUNDING I LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Thomas A. Fink
 

	 	 
	 	 	Name: Thomas A. Fink

Title: Chief Financial Officer and Senior Vice

President
	 	 
	 
	 	 	 	 	 	 
	 	 	CSE QRS Funding I LLC

4445 Willard Avenue, 12th Floor

Chevy Chase, Maryland 20815

Attention:             Treasurer

Facsimile No.:       (301) 841-2375

Confirmation No.: (301) 841-2731	 	 
	 
	 	 	 	 	 	 
	THE ORIGINATOR	 	CSE MORTGAGE LLC	 	 
	AND SERVICER:
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Thomas A. Fink
 

	 	 
	 	 	Name: Thomas A. Fink

Title: Financial Officer and Senior Vice

President	 	 
	 
	 	 	 	 	 	 
	 	 	CSE Mortgage LLC

4445 Willard Avenue, 12th Floor

Chevy Chase, Maryland 20815

Attention:                Treasurer

Facsimile No.:         (301) 841-2375

Confirmation No.:   (301) 841-2731	 	 






[Signatures
Continued on the Following Page]




 









 








	 	 	 	 	 	 	 
	VFCC:	 	VARIABLE FUNDING CAPITAL

COMPANY LLC	 	 
	Commitment:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	$470,000,000

	 	By:
	 	Wachovia Capital Markets, LLC,

as attorney-in-fact	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Douglas R Wilson, Sr.
 

	 	 
	 	 	Name: Douglas R.
Wilson, Sr.	 	 
	 

	 	Title:
	 	 Vice President	 	 
	 
	 	 	 	 	 	 
	 	 	Variable Funding Capital Company LLC

c/o Wachovia Capital Markets, LLC

One Wachovia Center, Mail Code: NC0600

Charlotte, North Carolina 28288
Attention:                Raj Shah

Facsimile No.:            (704) 383-7979

Confirmation No.:       (704) 374-6230	 	 





With respect to notices required pursuant to Section 13.2, a copy of notices sent to VFCC
shall be sent to:




	 	 	 	 	 	 	 
	 	 	Lord Securities Corp.

2 Wall Street, 19th Floor

New York, New York 10005

Attention:                Vice President

Facsimile No.:          (212) 346-9012

Confirmation No.:    (212) 346-9008
	 	 
	 
	 	 	 	 	 	 
	THE ADMINISTRATIVE AGENT	 	WACHOVIA CAPITAL MARKETS, LLC	 	 
	AND THE VFCC AGENT
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Raj Shah	 	 
	 

	 	 	 	 	 	 
	 	 	Name: Raj Shah

Title: Director	 	 
	 
	 	 	 	 	 	 
	 	 	Wachovia Capital Markets, LLC

One Wachovia Center, Mail Code: NC0600

Charlotte, North Carolina 28288

Attention:                 Raj Shah

Facsimile No.:          (704) 383-7979

Confirmation No.:    (704) 374-6230	 	 






[Signatures
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	THE SWINGLINE PURCHASER:	 	WACHOVIA BANK, NATIONAL

ASSOCIATION	 	 
	 
	 	 	 	 	 	 
	Commitment:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	$0
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Michael Romanzo
 

	 	 
	 	 	Name: Michael Romanzo

Title: Vice President	 	 
	 
	 	 	 	 	 	 
	 	 	Wachovia Bank, National Association

One Wachovia Center, Mail Code: NC0600

Charlotte, North Carolina 28288

Attention:                Raj Shah

Facsimile No.:          (704) 383-7979

Confirmation No.:    (704) 374-6230	 	 






[Signatures
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	THE BACKUP SERVICER:

AND THE COLLATERAL

CUSTODIAN:	 	WELLS FARGO BANK, NATIONAL

ASSOCIATION, not in its individual capacity but
solely as Backup Servicer	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	/s/ Joe Nardi	 	 
	 	 	 	 	 	 	 
	 	 	Name: Joe Nardi

Title: Vice President	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	Wells Fargo Bank, National Association

Sixth Street and Marquette Avenue

MAC N9311-161

Minneapolis, Minnesota 55479	 	 
	 	 	Attention:	 	Corporate Trust Services	 	 
	 

	 	 	 	 	 	Collateral-Backed Administration	 	 
	 	 	Facsimile No.:	 	(612) 667-3539	 	 
	 	 	Confirmation No.:	 	(612) 667-8058	 	 






[Signatures
Continued on the Following Page]




 









 








Acknowledged and Agreed to

as of the date first written above.

WACHOVIA BANK, NATIONAL ASSOCIATION,

as the Hedge Counterparty




	 	 	 	 	 
	By:

	 	/s/ Bruce Young
	 	 
	 

	 	 	 	 
	Name: Bruce Young	 	 
	Title: Senior Vice President	 	 






Wachovia Bank, National Association

One Wachovia Center, DC-8

Charlotte, North Carolina 28202-0600

Attention:                 Bruce M. Young

Facsimile No.:         (704) 383-0575

Confirmation No.:   (704) 383-8778