Document:

EXHIBIT 4.1

 

LUMINENT MORTGAGE TRUST 2005-1

 

ISSUER,

 

WELLS FARGO BANK, N.A.

 

SECURITIES ADMINISTRATOR

 

AND 

 

LASALLE BANK NATIONAL ASSOCIATION

 

INDENTURE TRUSTEE

	
             
 	
            
 
 
 	
             
 

 

 

INDENTURE

 

DATED AS OF NOVEMBER 2, 2005

 

	
             
 	
            
 
 
 	
             
 

 

 

MORTGAGE-BACKED NOTES

 

	
             
 	
            
 
 
 	
             
 

 

 

 

TABLE OF CONTENTS

	
            ARTICLE I
 	
            DEFINITIONS
 

	
             
 	
            Section 1.01
 	
            Definitions
 

	
             
 	
            Section 1.02
 	
            Incorporation by Reference of Trust Indenture Act
 

	
             
 	
            Section 1.03
 	
            Rules of Construction
 

	
            ARTICLE II
 	
            ORIGINAL ISSUANCE OF NOTES
 

	
             
 	
            Section 2.01
 	
            Form
 

	
             
 	
            Section 2.02
 	
            Execution, Authentication and Delivery
 

	
            ARTICLE III
 	
            COVENANTS
 

	
             
 	
            Section 3.01
 	
            Payment Account
 

	
             
 	
            Section 3.02
 	
            Existence
 

	
             
 	
            Section 3.03
 	
            Payment of Principal and Interest
 

	
             
 	
            Section 3.04
 	
            Protection of Trust Estate
 

	
             
 	
            Section 3.05
 	
            Opinions as to Trust Estate
 

	
             
 	
            Section 3.06
 	
            Performance of Obligations
 

	
             
 	
            Section 3.07
 	
            Negative Covenants
 

	
             
 	
            Section 3.08
 	
            Annual Statement as to Compliance
 

	
             
 	
            Section 3.09
 	
            [Reserved]. 
 

	
             
 	
            Section 3.10
 	
            Representations and Warranties Concerning the Mortgage Loans
 

	
             
 	
            Section 3.11
 	
            Investment Company Act
 

	
             
 	
            Section 3.12
 	
            Issuer May Consolidate, etc
 

	
             
 	
            Section 3.13
 	
            Successor or Transferee
 

	
             
 	
            Section 3.14
 	
            No Other Business
 

	
             
 	
            Section 3.15
 	
            No Borrowing
 

	
             
 	
            Section 3.16
 	
            Guarantees, Loans, Monthly Advances and Other Liabilities
 

	
             
 	
            Section 3.17
 	
            Capital Expenditures
 

	
             
 	
            Section 3.18
 	
            Determination of Note Index. 
 

	
             
 	
            Section 3.19
 	
            Restricted Payments
 

	
             
 	
            Section 3.20
 	
            Notice of Events of Default
 

	
             
 	
            Section 3.21
 	
            Further Instruments and Acts
 

	
             
 	
            Section 3.22
 	
            Reserved. 
 

	
             
 	
            Section 3.23
 	
            Certain Representations Regarding the Trust Estate. 
 

	
             
 	
            Section 3.24
 	
            Allocation of Realized Losses
 

	
             
 	
            Section 3.25
 	
            Permitted Withdrawals and Transfers from the Payment Account
 

	
             
 	
            Section 3.26
 	
            Conveyance of the Subsequent Mortgage Loans. 
 

	
             
 	
            Section 3.27
 	
            Pre-Funding Account. 
 

	
             
 	
            Section 3.28
 	
            Interest Coverage Account. 
 

	
            ARTICLE IV
 	
            THE NOTES; SATISFACTION AND DISCHARGE OF INDENTURE
 

	
             
 	
            Section 4.01
 	
            The Notes
 

	
             
 	
            Section 4.02
 	
            Registration of and Limitations on Transfer and Exchange of Notes; Appointment of Note Registrar and Certificate Registrar
 

	
             
 	
            Section 4.03
 	
            Mutilated, Destroyed, Lost or Stolen Notes
 

	
             
 	
            Section 4.04
 	
            Persons Deemed Owners
 

	
             
 	
            Section 4.05
 	
            Cancellation
 

	
             
 	
            Section 4.06
 	
            Book-Entry Notes
 

	
             
 	
            Section 4.07
 	
            Notices to Depository
 

 

 

	
             
 	
            Section 4.08
 	
            Definitive Notes
 

	
             
 	
            Section 4.09
 	
            Tax Treatment
 

	
             
 	
            Section 4.10
 	
            Satisfaction and Discharge of Indenture
 

	
             
 	
            Section 4.11
 	
            Application of Trust Money
 

	
             
 	
            Section 4.12
 	
            [Reserved]. 
 

	
             
 	
            Section 4.13
 	
            Repayment of Monies Held by Paying Agent
 

	
             
 	
            Section 4.14
 	
            Temporary Notes
 

	
             
 	
            Section 4.15
 	
            Representation Regarding ERISA
 

	
            ARTICLE V
 	
            DEFAULT AND REMEDIES
 

	
             
 	
            Section 5.01
 	
            Events of Default
 

	
             
 	
            Section 5.02
 	
            Acceleration of Maturity; Rescission and Annulment
 

	
             
 	
            Section 5.03
 	
            Collection of Indebtedness and Suits for Enforcement by Indenture Trustee. 
 

	
             
 	
            Section 5.04
 	
            Remedies; Priorities
 

	
             
 	
            Section 5.05
 	
            Optional Preservation of the Trust Estate
 

	
             
 	
            Section 5.06
 	
            Limitation of Suits
 

	
             
 	
            Section 5.07
 	
            Unconditional Rights of Noteholders To Receive Principal and Interest
 

	
             
 	
            Section 5.08
 	
            Restoration of Rights and Remedies
 

	
             
 	
            Section 5.09
 	
            Rights and Remedies Cumulative
 

	
             
 	
            Section 5.10
 	
            Delay or Omission Not a Waiver
 

	
             
 	
            Section 5.11
 	
            Control By Noteholders
 

	
             
 	
            Section 5.12
 	
            Waiver of Past Defaults
 

	
             
 	
            Section 5.13
 	
            Undertaking for Costs
 

	
             
 	
            Section 5.14
 	
            Waiver of Stay or Extension Laws
 

	
             
 	
            Section 5.15
 	
            Sale of Trust Estate
 

	
             
 	
            Section 5.16
 	
            Action on Notes
 

	
            ARTICLE VI
 	
            THE INDENTURE TRUSTEE AND THE SECURITIES ADMINISTRATOR
 

	
             
 	
            Section 6.01
 	
            Duties of Indenture Trustee and Securities Administrator
 

	
             
 	
            Section 6.02
 	
            Rights of Indenture Trustee and Securities Administrator
 

	
             
 	
            Section 6.03
 	
            Individual Rights of Indenture Trustee
 

	
             
 	
            Section 6.04
 	
            [Reserved]. 
 

	
             
 	
            Section 6.05
 	
            Indenture Trustee’s and Securities Administrator’s Disclaimer
 

	
             
 	
            Section 6.06
 	
            Notice of Event of Default
 

	
             
 	
            Section 6.07
 	
            Reports to Holders and Tax Administration. 
 

	
             
 	
            Section 6.08
 	
            Compensation
 

	
             
 	
            Section 6.09
 	
            Replacement of Indenture Trustee and the Securities Administrator
 

	
             
 	
            Section 6.10
 	
            Successor Indenture Trustee and Securities Administrator by Merger
 

	
             
 	
            Section 6.11
 	
            Appointment of Co-Indenture Trustee or Separate Indenture Trustee
 

	
             
 	
            Section 6.12
 	
            Eligibility; Disqualification
 

	
             
 	
            Section 6.13
 	
            [Reserved]. 
 

	
             
 	
            Section 6.14
 	
            Representations and Warranties
 

	
             
 	
            Section 6.15
 	
            Directions to Indenture Trustee and the Securities Administrator. The Indenture Trustee is hereby directed: 
 

	
             
 	
            Section 6.16
 	
            The Agents
 

	
            ARTICLE VII
 	
            NOTEHOLDERS' LISTS AND REPORTS
 

	
             
 	
            Section 7.01
 	
            Issuer To Furnish Securities Administrator Trustee Names and Addresses of Noteholders
 

	
             
 	
            Section 7.02
 	
            Preservation of Information; Communications to Noteholders
 

	
             
 	
            Section 7.03
 	
            Financial Information
 

 

 

	
             
 	
            Section 7.04
 	
            Statements to Noteholders
 

	
             
 	
            Section 7.05
 	
            Reports Filed with Securities and Exchange Commission
 

	
            ARTICLE VIII
 	
            ACCOUNTS, DISBURSEMENTS AND RELEASES
 

	
             
 	
            Section 8.01
 	
            Collection of Money
 

	
             
 	
            Section 8.02
 	
            Officer’s Certificate
 

	
             
 	
            Section 8.03
 	
            Termination Upon Distribution to Noteholders
 

	
             
 	
            Section 8.04
 	
            Release of Trust Estate
 

	
             
 	
            Section 8.05
 	
            Surrender of Notes Upon Final Payment
 

	
             
 	
            Section 8.06
 	
            Optional Redemption of the Mortgage Loans
 

	
             
 	
            Section 8.07
 	
            The Swap Agreements. 
 

	
             
 	
            Section 8.08
 	
            Rights of Swap Provider. 
 

	
            ARTICLE IX
 	
            SUPPLEMENTAL INDENTURES
 

	
             
 	
            Section 9.01
 	
            Supplemental Indentures Without Consent of Noteholders
 

	
             
 	
            Section 9.02
 	
            Supplemental Indentures With Consent of Noteholders
 

	
             
 	
            Section 9.03
 	
            Execution of Supplemental Indentures
 

	
             
 	
            Section 9.04
 	
            Effect of Supplemental Indenture
 

	
             
 	
            Section 9.05
 	
            Conformity with Trust Indenture Act
 

	
             
 	
            Section 9.06
 	
            Reference in Notes to Supplemental Indentures
 

	
            ARTICLE X
 	
            MISCELLANEOUS
 

	
             
 	
            Section 10.01
 	
            Compliance Certificates and Opinions, etc
 

	
             
 	
            Section 10.02
 	
            Form of Documents Delivered to Indenture Trustee
 

	
             
 	
            Section 10.03
 	
            Acts of Noteholders
 

	
             
 	
            Section 10.04
 	
            Notices etc., to Indenture Trustee Issuer, Securities Administrator and Rating Agencies
 

	
             
 	
            Section 10.05
 	
            Notices to Noteholders; Waiver
 

	
             
 	
            Section 10.06
 	
            Conflict with Trust Indenture Act
 

	
             
 	
            Section 10.07
 	
            Effect of Headings
 

	
             
 	
            Section 10.08
 	
            Successors and Assigns
 

	
             
 	
            Section 10.09
 	
            Separability
 

	
             
 	
            Section 10.10
 	
            Legal Holidays
 

	
             
 	
            Section 10.11
 	
            GOVERNING LAW
 

	
             
 	
            Section 10.12
 	
            Counterparts
 

	
             
 	
            Section 10.13
 	
            Recording of Indenture
 

	
             
 	
            Section 10.14
 	
            Issuer Obligation
 

	
             
 	
            Section 10.15
 	
            No Petition
 

	
             
 	
            Section 10.16
 	
            Inspection
 

 

EXHIBITS

 

	
             
 	
            Exhibit A-1
 	
            —
 	
            Form of Class A Notes
 
	
             
 	
            Exhibit A-2
 	
            —
 	
            Form of Class M Notes
 
	
             
 	
            Exhibit A-3
 	
            —
 	
            Form of Class B Notes
 
	
             
 	
            Exhibit B
 	
            —
 	
            Mortgage Loan Schedule
 
	
             
 	
            Exhibit C
 	
            —
 	
            Form of Rule 144A Investment Representation Letter
 
	
             
 	
            Exhibit D
 	
            —
 	
            Form of Transferee Letter
 
	
             
 	
            Exhibit E
 	
            —
 	
            Form of Transferor Certificate
 

 

 

 

 

	
             
 	
            Exhibit F
 	
            —
 	
            Form of Transferee Letter (REIT)
 
	
             
 	
            Exhibit G
 	
            —
 	
            Form of Transferor Letter
 
	
             
 	
            Exhibit H
 	
            —
 	
            Form of Addition Notice
 
	
             
 	
            Exhibit I
 	
            —
 	
            Form of Swap Agreements
 
	
             
 	
             
 	
             
 	
             
 
	
             
 	
            Appendix A
 	
            —
 	
            Definitions
 

 

 

 

RECONCILIATION AND TIE BETWEEN TRUST INDENTURE

ACT OF 1939 AND INDENTURE PROVISIONS*

 

	
            Act Section
 	
            Indenture Section
 

 

	
            Trust  Indenture Act Section
  	
            
Indenture Section
  
  
	
             
  	
             
  
	
            310(a)(1)
 	
            6.11
 
	
            (a)(2)             
 	
            6.11
 
	
            (a)(3)             
 	
            6.10
 
	
            (a)(4)             
 	
            Not Applicable
 
	
            (a)(5)             
 	
            6.11
 
	
            (b)                              
 	
            6.08, 6.11
 
	
            (c)                               
 	
            Not Applicable
 
	
            311(a)                                                       
 	
            6.12
 
	
            (b)                              
 	
            6.12
 
	
            (c)                               
 	
            Not Applicable
 
	
            312(a)                                                       
 	
            7.01, 7.02(a)
 
	
            (b)                              
 	
            7.02(b)
 
	
            (c)                               
 	
            7.02(c)
 
	
            313(a)                                                       
 	
            Not Applicable
 
	
            (b)                              
 	
            Not Applicable
 
	
            (c)                               
 	
            Not Applicable
 
	
            (d)                              
 	
            Not Applicable
 
	
            314(a)                                                       
 	
            3.10
 
	
            (b)                              
 	
            3.07
 
	
            (c)(1)             
 	
            8.05(c), 10.01(a)
 
	
            (c)(2)             
 	
            8.05(c), 10.01(a)
 
	
            (c)(3)             
 	
            Not Applicable 
 
	
            (d)(1)            
 	
            8.05(c), 10.01(b)
 
	
            (d)(2)            
 	
            8.05(c), 10.01(b)
 
	
            (d)(3)            
 	
            8.05(c), 10.01(b)
 
	
            (e)                               
 	
            10.01(a)
 
	
            315(a)                                                       
 	
            6.01(b)
 
	
            (b)                              
 	
            6.05
 
	
            (c)                               
 	
            6.01(a)
 
	
            (d)                              
 	
            6.01(c)
 
	
            (d)(1)            
 	
            6.01(c)
 
	
            (d)(2)            
 	
            6.01(c)
 
	
            (d)(3)            
 	
            6.01(c)
 
	
            (e)                               
 	
            5.13
 
	
            316(a)(1)(A)                
 	
            5.11
 
	
            316(a)(1)(B)                 
 	
            5.12
 
	
            316(a)(2)                                     
 	
            Not Applicable
 
	
            316(b)                                                      
 	
            5.07
 
	
            317(a)(1)                                     
 	
            5.04
 

	
            317(a)(2)                                     
 	
            5.03(d)
 
	
            317(b)                                                      
 	
            3.03(a)(i)
 
	
            318(a)                                                       
 	
            10.07
 

 

 

 

This Indenture, dated as of November 2, 2005, is entered into among Luminent Mortgage Trust 2005-1, a Delaware statutory trust, as Issuer (the “Issuer”), Wells Fargo Bank, N.A., as Securities Administrator (the “Securities Administrator”) and LaSalle Bank National  Association, as Indenture Trustee (the “Indenture Trustee”). 

WITNESSETH THAT:

Each party hereto agrees as follows for the benefit of the other party and for the equal and ratable benefit of the Holders of the Issuer’s Mortgage-Backed Notes, Series 2005-1 (the “Notes”).

GRANTING CLAUSE

The Issuer hereby Grants to the Indenture Trustee at the Closing Date, as trustee for the benefit of the Holders of the Notes, all of the Issuer's right, title and interest in and to, whether now existing or hereafter created, (a) the Mortgage Loans and Substitute Mortgage Loans and the proceeds thereof and all rights under the Related Documents; (b) all funds on deposit from time to time in the Payment Account and in all proceeds thereof; (c) all funds on deposit from time to time in the Pre-Funding Account and the Interest Coverage Account and in all proceeds thereof; (d) any REO Property; (e) all rights under (I) the Mortgage Loan Purchase Agreement as assigned to the Issuer, with respect to the Initial Mortgage Loans and the Subsequent Mortgage Loan Purchase Agreements as assigned to the Issuer, with respect to the related Subsequent Mortgage Loans to the extent provided in Section
2.03(a) of the Sale and Servicing Agreement, (II) the Required Insurance Policies and any amounts paid or payable by the insurer under any Insurance Policy (to the extent the mortgagee has a claim thereto) and (III) the rights with respect to the Servicing Agreements, each as assigned to the Issuer by the related Assignment Agreement; (f) the rights of the Issuer under the Swap Agreements and all amounts received from the Swap Provider thereunder (to the extent provided herein) and (g) all present and future claims, demands, causes and choses in action in respect of any or all of the foregoing and all payments on or under, and all proceeds of every kind and nature whatsoever in respect of, any or all of the foregoing and all payments on or under, and all proceeds of every kind and nature whatsoever in the conversion thereof, voluntary or involuntary, into cash or other liquid property, all cash proceeds, accounts, accounts receivable, notes, drafts, acceptances, checks, deposit
accounts, rights to payment of any and every kind, and other forms of obligations and receivables, instruments and other property which at any time constitute all or part of or are included in the proceeds of any of the foregoing (collectively, the "Trust Estate" or the "Collateral").  

The foregoing Grant is made in trust to secure the payment of principal of and interest on, and any other amounts owing in respect of, the Notes, subject to the priority set forth herein, and to secure compliance with the provisions of this Indenture, all as provided in this Indenture.

The Indenture Trustee, as trustee on behalf of the Holders of the Notes, acknowledges such Grant, accepts the trust under this Indenture in accordance with the provisions hereof and each of the Indenture Trustee and the Securities Administrator agree to perform their respective duties as Indenture Trustee and Securities Administrator as required herein.

 

 

Concurrently with the execution of this Indenture, the Swap Agreements shall be delivered to the Issuer.  In connection therewith, the Issuer hereby directs the Securities Administrator, not in its individual capacity but solely as securities administrator on behalf of the Holders of the Notes, to execute and deliver the Swap Agreements on behalf of, and for the benefit of, the Noteholders.  Upon the issuance of the Notes, ownership in the Trust Estate shall be vested in the Issuer, subject to the lien created by the Indenture Trustee in favor of the Indenture Trustee, for the benefit of the Noteholders.

 

 

 

ARTICLE I

 

DEFINITIONS

Section 1.01    Definitions.  For all purposes of this Indenture, except as otherwise expressly provided herein or unless the context otherwise requires, capitalized terms not otherwise defined herein shall have the meanings assigned to such terms in the Definitions attached hereto as Appendix A which is incorporated by reference herein. All other capitalized terms used herein shall have the meanings specified herein.

Section 1.02    Incorporation by Reference of Trust Indenture Act.  Whenever this Indenture refers to a provision of the Trust Indenture Act (the “TIA”), the provision is incorporated by reference in and made a part of this Indenture.  The following TIA terms used in this Indenture have the following meanings:

“Commission” means the Securities and Exchange Commission.

“indenture securities” means the Notes.

“indenture security holder” means a Noteholder.

“indenture to be qualified” means this Indenture.

“indenture trustee” or “institutional trustee” means the Indenture Trustee.

“obligor” on the indenture securities means the Issuer and any other obligor on the indenture securities.

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

	
             
  	
            Section 1.03
 	
            Rules of Construction.  Unless the context otherwise requires:
 
	
             
  	
            (i)
 	
            a term has the meaning assigned to it;
 	
             

					

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

	
             
  	
            (iii)
 	
            “or” is not exclusive;
 	
             

	
             
  	
            (iv)
 	
            “including” means including without limitation;
 

(v)          words in the singular include the plural and words in the plural include the singular; and

(vi)         any agreement, instrument or statute defined or referred to herein or in any instrument or certificate delivered in connection herewith means such agreement, instrument or statute as from time to time amended, modified or supplemented and includes (in the case of agreements or instruments) references to all attachments thereto and instruments incorporated therein; references to a Person are also to its permitted successors and assigns.

 

 

ARTICLE II

 

ORIGINAL ISSUANCE OF NOTES

Section 2.01      Form.  The Class A-1, Class A-2, Class M-1, Class M-2, Class B-1, Class B-2, Class B-3, Class B-4, Class B-5 and Class B-6 Notes, together with the Securities Administrator’s certificate of authentication, shall be in substantially the form set forth in Exhibits A-1, A-2 and A-3 to this Indenture, respectively, with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture.

The Notes shall be typewritten, printed, lithographed or engraved or produced by any combination of these methods (with or without steel engraved borders).

The terms of the Notes set forth in Exhibits A-1, A-2 and A-3 to this Indenture are part of the terms of this Indenture.

Section 2.02     Execution, Authentication and Delivery.  The Notes shall be executed on behalf of the Issuer by any of its Authorized Officers. The signature of any such Authorized Officer on the Notes may be manual or facsimile.

Notes bearing the manual or facsimile signature of individuals who were at any time Authorized Officers of the Issuer shall bind the Issuer, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Notes or did not hold such offices at the date of such Notes.

The Securities Administrator shall upon Issuer Request authenticate and deliver the Class A-1, Class A-2, Class M-1, Class M-2, Class B-1, Class B-2, Class B-3, Class B-4, Class B-5, and Class B-6 Notes for original issue in an aggregate initial principal amount of $517,706,000.  The Class A-1 Notes shall be issued in an aggregate initial principal amount of $430,250,000.00, the Class A-2 Notes shall be issued in an aggregate initial principal amount of $52,057,000.00, the Class M-1 Notes shall be issued in an aggregate initial principal amount of $9,631,000.00, the Class M-2 Notes shall be issued in an aggregate initial principal amount of $4,685,000.00, the Class B-1 Notes shall be issued in an aggregate initial principal amount of $3,644,000.00, the Class B-2 Notes shall be issued in an aggregate initial principal amount of $6,767,000.00, the Class B-3 Notes shall be issued in an
aggregate initial principal amount of $4,165,000.00, the Class B-4 Notes shall be issued in an aggregate initial principal amount of $2,603,000.00, the Class B-5 Notes shall be issued in an aggregate initial principal amount of $2,603,000.00 and the Class B-6 Notes shall be issued in an aggregate initial principal amount of $1,301,000.00.

Each of the Notes shall be dated the date of its authentication. The Class A-1, Class A-2, Class M-1, Class M-2 and Class B-2 Notes shall be issuable as registered Notes in book-entry form and the Notes shall be issuable in the minimum initial Note Principal Balances of $25,000 and in integral multiples of $1 in excess thereof.  The Class B-2, Class B-3, Class B-4, Class B-5 and Class B-6 Notes shall be issuable as registered Notes in physical form and the Notes shall be issuable in the minimum initial Note Principal of $25,000 and in integral multiples of $1 in excess thereof.

 

 

No Note shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose, unless there appears on such Note a certificate of authentication substantially in the form provided for herein executed by the Securities Administrator by the manual signature of one of its authorized signatories, and such certificate upon any Note shall be conclusive evidence, and the only evidence, that such Note has been duly authenticated and delivered hereunder.

 

 

ARTICLE III

 

COVENANTS

Section 3.01      Payment Account.  (a)  On or prior to the Closing Date, the Issuer shall cause the Securities Administrator to establish and maintain, in the name of the Securities Administrator, for the benefit of the Noteholders and the Certificate Paying Agent, on behalf of the Certificateholder, the Payment Account.

(b)       The Securities Administrator shall, subject to the terms of this paragraph, deposit in the Payment Account, on the same day as it is received from the Master Servicer, each remittance received by the Securities Administrator on each Payment Date. On each Payment Date, the Securities Administrator shall distribute all amounts on deposit in the Payment Account (other than amounts payable to the Holder of the Trust Certificates) to Noteholders in respect of the Notes, and in its capacity as Certificate Paying Agent, to the Certificateholder in the order of priority set forth in Section 3.03 (except as otherwise provided in Section 5.04(b)).

(c)       All monies deposited from time to time in the Payment Account pursuant to the Sale and Servicing Agreement and all deposits therein pursuant to this Indenture are for the benefit of the Noteholders and the Certificate Paying Agent, on behalf of the Certificateholder.

Section 3.02     Existence.  The Issuer will keep in full effect its existence, rights and franchises as a statutory trust under the laws of the State of Delaware (unless it becomes, or any successor Issuer hereunder is or becomes, organized under the laws of any other state or of the United States of America, in which case the Issuer will keep in full effect its existence, rights and franchises under the laws of such other jurisdiction) and will obtain and preserve its qualification to do business in each jurisdiction in which such qualification is or shall be necessary to protect the validity and enforceability of this Indenture, the Notes and each other instrument or agreement included in the Trust Estate.

Section 3.03      Payment of Principal and Interest.  (a)  On each Payment Date, and to the extent of the funds in the Payment Account available therefor, the Available Funds will be distributed by the Securities Administrator as follows; provided, however, any amounts payable under the Swap Agreement shall be distributed in accordance with Section 8.07:

	
            (A)
 	
            On each Payment Date, the Available Funds for such Payment Date shall be distributed as follows:
 

First, to pay any accrued and unpaid interest on the Notes in the following order of priority, subject to clause (b) below:

1.            from Interest Funds, to the Class A-1 Notes and Class A-2 Notes, on a pro rata basis, the Current Interest and then any Interest Carry Forward Amount for each such Class for such Payment Date, in accordance with the amount of accrued interest due thereon;

2.            from remaining Interest Funds, to the Class M-1, Class M-2, Class B-1, Class B-2, Class B-3, Class B-4, Class B-5 and Class B-6 Notes, sequentially, in that order, the 

 

Current Interest and then any Interest Carry Forward Amount for such Class;

3.            Any Excess Spread to the extent necessary to meet a level of overcollateralization equal to the Overcollateralization Target Amount will be the Extra Principal Distribution Amount and will be included as part of the Principal Distribution Amount and distributed in accordance with Second (A) and (B) below; and

4.            Any remaining Excess Spread will be the Remaining Excess Spread and will be applied, together with the Overcollateralization Release Amount, as Excess Cashflow pursuant to clauses Third through Sixteenth below.

Second, to pay as principal on the Notes entitled to payments of principal, in the following order of priority:

	
            (A)
 	
            On each Payment Date (i) prior to the Stepdown Date or (ii) on which a Trigger Event is in effect, Principal Funds and the Extra Principal Distribution Amount for such Payment Date will be distributed:
 

1.     To the Class A-1 Notes and Class A-2 Notes, on a pro rata basis, an amount equal to the Principal Distribution Amount until the Note Principal Balance thereof is reduced to zero;

2.     To the Class M-1 Notes, any remaining Principal Distribution Amount until the Note Principal Balance thereof is reduced to zero;

3.     To the Class M-2 Notes, any remaining Principal Distribution Amount until the Note Principal Balance thereof is reduced to zero;

4.     To the Class B-1 Notes, any remaining Principal Distribution Amount until the Note Principal Balance thereof is reduced to zero;

5.     To the Class B-2 Notes, any remaining Principal Distribution Amount until the Note Principal Balance thereof is reduced to zero;

6.     To the Class B-3 Notes, any remaining Principal Distribution Amount until the Note Principal Balance thereof is reduced to zero;

7.     To the Class B-4 Notes, any remaining Principal Distribution Amount until the Note Principal Balance thereof is reduced to zero;

8.     To the Class B-5 Notes, any remaining Principal Distribution Amount until the Note Principal Balance thereof is reduced to zero, and

9.     To the Class B-6 Notes, any remaining Principal Distribution Amount until the Note Principal Balance thereof is reduced to zero;

	
            (B)
 	
            On each Payment Date on or after the Stepdown Date, so long as a Trigger Event is not in effect, Principal Funds and the Extra Principal Distribution Amount for such Payment Date will be distributed:
 

 

 

1.     To the Class A-1 Notes and Class A-2 Notes, on a pro rata basis, an amount equal to the Class A Principal Distribution Amount until the Note Principal Balance thereof is reduced to zero;

2.     To the Class M-1 Notes, from any remaining Principal Distribution Amount, the Class M-1 Principal Distribution Amount, until the Note Principal Balance thereof is reduced to zero;

3.     To the Class M-2 Notes, from any remaining Principal Distribution Amount, the Class M-2 Principal Distribution Amount, until the Note Principal Balance thereof is reduced to zero;

4.     To the Class B-1 Notes, from any remaining Principal Distribution Amount, the Class B-1 Principal Distribution Amount, until the Note Principal Balance thereof is reduced to zero;

5.     To the Class B-2 Notes, from any remaining Principal Distribution Amount, the Class B-2 Principal Distribution Amount, until the Note Principal Balance thereof is reduced to zero;

6.     To the Class B-3 Notes, from any remaining Principal Distribution Amount, the Class B-3 Principal Distribution Amount, until the Note Principal Balance thereof is reduced to zero;

7.     To the Class B-4 Notes, from any remaining Principal Distribution Amount, the Class B-3 Principal Distribution Amount, until the Note Principal Balance thereof is reduced to zero;

8.     To the Class B-5 Notes, from any remaining Principal Distribution Amount, the Class B-3 Principal Distribution Amount, until the Note Principal Balance thereof is reduced to zero; and

9.     To the Class B-6 Notes, from any remaining Principal Distribution Amount, the Class B-3 Principal Distribution Amount, until the Note Principal Balance thereof is reduced to zero.

Third, from any Excess Cashflow, to the Class A-1 Notes and Class A-2 Notes, on a pro rata basis, an amount equal to (i) first, any remaining Interest Carry Forward Amount for such Classes, in accordance with the Interest Carry Forward Amount due with respect to each such Class, to the extent not fully paid under clause First above and Section 8.07 and (ii) second, any Unpaid Realized Loss Amount for such class for such Payment Date;

Fourth, from any remaining Excess Cashflow, to the Class M-1 Notes, an amount equal to (i) first, any remaining Interest Carry Forward Amount for such Classes, in accordance with the Interest Carry Forward Amount due with respect to each such Class, to the extent not fully paid under clause First above and Section 8.07 and (ii) second, any Unpaid Realized Loss Amount for such class for such Payment Date;

 

 

Fifth, from any remaining Excess Cashflow, to the Class M-2 Notes, an amount equal to (i) first, any remaining Interest Carry Forward Amount for such Classes, in accordance with the Interest Carry Forward Amount due with respect to each such Class, to the extent not fully paid under clause First above and Section 8.07 and (ii) second, any Unpaid Realized Loss Amount for such class for such Payment Date;

Sixth, from any remaining Excess Cashflow, to the Class B-1 Notes, an amount equal to (i) first, any remaining Interest Carry Forward Amount for such Classes, in accordance with the Interest Carry Forward Amount due with respect to each such Class, to the extent not fully paid under clause First above and Section 8.07 and (ii) second, any Unpaid Realized Loss Amount for such class for such Payment Date;

Seventh, from any remaining Excess Cashflow, to the Class B-2 Notes, an amount equal to (i) first, any remaining Interest Carry Forward Amount for such Classes, in accordance with the Interest Carry Forward Amount due with respect to each such Class, to the extent not fully paid under clause First above and Section 8.07 and (ii) second, any Unpaid Realized Loss Amount for such class for such Payment Date;

Eighth, from any remaining Excess Cashflow, to the Class B-3 Notes, an amount equal to (i) first, any remaining Interest Carry Forward Amount for such Classes, in accordance with the Interest Carry Forward Amount due with respect to each such Class, to the extent not fully paid under clause First above and Section 8.07 and (ii) second, any Unpaid Realized Loss Amount for such class for such Payment Date;

Ninth, from any remaining Excess Cashflow, to the Class B-4 Notes, an amount equal to (i) first, any remaining Interest Carry Forward Amount for such Classes, in accordance with the Interest Carry Forward Amount due with respect to each such Class, to the extent not fully paid under clause First above and Section 8.07 and (ii) second, any Unpaid Realized Loss Amount for such class for such Payment Date;

Tenth, from any remaining Excess Cashflow, to the Class B-5 Notes, an amount equal to (a) any Interest Carry Forward Amount to the extent not covered by amounts paid to the Trust pursuant to the Swap Agreements as described herein, and then (b) any Unpaid Realized Loss Amount for such class for such Payment Date;

Eleventh, from any remaining Excess Cashflow, to the Class B-6 Notes, an amount equal to (i) first, any remaining Interest Carry Forward Amount for such Classes, in accordance with the Interest Carry Forward Amount due with respect to each such Class, to the extent not fully paid under clause First above and Section 8.07 and (ii) second, any Unpaid Realized Loss Amount for such class for such Payment Date;

Twelfth, from any remaining Excess Cashflow, to the Class A-1 Notes and Class A-2 Notes, on a pro rata basis, any Basis Risk Shortfall Carry Forward Amount, based on the amount of the Basis Risk Shortfall Carry Forward Amount for such Class for such Payment Date and to the extent not covered by amounts paid to the Trust pursuant to Section 8.07;

Thirteenth, from any remaining Excess Cashflow, to the Class M-1, Class M-2, Class B-1, Class B-2, Class B-3, Class B-4, Class B-5 and Class B-6 Notes, in that order, any Basis Risk 

 

Shortfall Carry Forward Amount based on the amount of the Basis Risk Shortfall Carry Forward Amount for such Class for such Payment Date and to the extent not covered by amounts paid to the Trust pursuant to Section 8.07;

Fourteenth, From any remaining Excess Cashflow, to the Class A-1 Notes and Class A-2 Notes, on a pro rata basis, based on the entitlement of each such Class, and then sequentially to the Class M-1, Class M-2, Class B-1, Class B-2, Class B-3, Class B-4, Class B-5 and Class M-6 Notes, in that order, the amount of shortfalls resulting from the application of the Relief Act and any Prepayment Interest Shortfalls allocated to such Classes of Notes, to the extent not previously reimbursed; 

Fifteenth, From any remaining Excess Cashflow, to the Securities Administrator for payment to the Swap Provider, the amount of any Swap Termination Payment resulting from a Swap Provider Trigger Event not previously paid, and

Sixteenth, any remaining amounts to holder of the Trust Certificates.

(b)          On any Payment Date, any shortfalls resulting from the application of the Relief Act and any Prepayment Interest Shortfalls to the extent not covered by Compensating Interest Payments will be allocated to the Current Interest payable to the Notes, on a pro rata basis, on such Payment Date, based on the respective amounts of interest accrued on such Notes for such Payment Date. 

(c)          On each Payment Date, all amounts representing prepayment charges in respect of the EMC Mortgage Loans and Countrywide Mortgage Loans received during the related Prepayment Period will be withdrawn from the Payment Account and shall not be available for distribution to the holders of the Notes. On each Payment Date, all amounts representing prepayment charges in respect of the PHH Mortgage Loans received during the related Prepayment Period will be withdrawn from the Payment Account and distributed to the holders of the Subordinate Notes and shall not be available for distribution on any other Notes. Prepayment charges with respect to the mortgage loans will be distributed to Countrywide or EMC, respectively, with respect to the related Mortgage Loans and to the holder of the
Subordinate Notes with respect to the PHH Mortgage Loans.

(d)          No Current Interest will be payable with respect to any Class of Notes after the Payment Date on which the Note Principal Balance of such Note has been reduced to zero.

(e)          Each distribution with respect to a Book-Entry Note shall be paid to the Depository, as Holder thereof, and the Depository shall be responsible for crediting the amount of such distribution to the accounts of its Depository Participants in accordance with its normal procedures. Each Depository Participant shall be responsible for disbursing such distribution to the Note Owners that it represents and to each indirect participating brokerage firm (a “brokerage firm” or “indirect participating firm”) for which it acts as agent. Each brokerage firm shall be responsible for disbursing funds to the Note Owners that it represents. None of the Securities Administrator, the Note Registrar, the Paying Agent, the Depositor or the Master Servicer shall have any responsibility therefor.

 

 

(f)          On each Payment Date, the Certificate Paying Agent shall deposit in the Certificate Distribution Account all amounts it received pursuant to this Section 3.03 for the purpose of distributing such funds to the Certificateholders. The Certificate Paying Agent shall make distributions to the Certificateholders under the Trust Agreement as directed by the Securities Administrator hereunder.

(g)          Any installment of interest or principal, if any, payable on any Note that is punctually paid or duly provided for by the Issuer on the applicable Payment Date shall, if such Holder shall have so requested at least five Business Days prior to the related Record Date, be paid to each Holder of record on the preceding Record Date, by wire transfer to an account specified in writing by such Holder as of the preceding Record Date or in all other cases or if no such instructions have been delivered to the Securities Administrator, by check to such Noteholder mailed to such Holder’s address as it appears in the Note Register in the amount required to be distributed to such Holder on such Payment Date pursuant to such Holder’s Notes; provided, however, that the Securities
Administrator shall not pay to such Holders any amount required to be withheld from a payment to such Holder by the Code.

(h)          The Note Principal Balance of each Note shall be due and payable in full on the Final Scheduled Payment Date for such Note as provided in the forms of Note set forth in Exhibits A-1, A-2 and A-3 to this Indenture. All principal payments on the Notes shall be made to the Noteholders entitled thereto in accordance with the Percentage Interests represented by such Notes. Upon notice to the Securities Administrator by the Issuer, the Securities Administrator shall notify the Person in whose name a Note is registered at the close of business on the Record Date preceding the Final Scheduled Payment Date or other final Payment Date (including any final Payment Date resulting from any redemption pursuant to Section 8.06 hereof). Such notice shall to the extent practicable be mailed no later
than five Business Days prior to such Final Scheduled Payment Date or other final Payment Date and shall specify that payment of the principal amount and any interest due with respect to such Note at the Final Scheduled Payment Date or other final Payment Date will be payable only upon presentation and surrender of such Note and shall specify the place where such Note may be presented and surrendered for such final payment. No interest shall accrue on the Notes on or after the Final Scheduled Payment Date or any such other final Payment Date.

Section 3.04      Protection of Trust Estate.  (a)  The Issuer will from time to time prepare, execute and deliver all such supplements and amendments hereto and all such financing statements, continuation statements, instruments of further assurance and other instruments, and will take such other action necessary or advisable to:

(i)           maintain or preserve the lien and security interest (and the priority thereof) of this Indenture or carry out more effectively the purposes hereof;

(ii)          perfect, publish notice of or protect the validity of any Grant made or to be made by this Indenture;

(iii)        cause the Issuer or the Indenture Trustee to enforce any of the rights to the Mortgage Loans; or

 

 

(iv)         preserve and defend title to the Trust Estate and the rights of the Indenture Trustee and the Noteholders in such Trust Estate against the claims of all persons and parties.

(b)       Except as otherwise provided in this Indenture, the Indenture Trustee shall not remove or permit the Custodian to remove any portion of the Trust Estate that consists of money or is evidenced by an instrument, certificate or other writing from the jurisdiction in which it was held at the date of the most recent Opinion of Counsel delivered pursuant to Section 3.05 hereof (or from the jurisdiction in which it was held as described in the Opinion of Counsel delivered on the Closing Date pursuant to Section 3.05(a) hereof, if no Opinion of Counsel has yet been delivered pursuant to Section 3.05(b) hereof), unless the Indenture Trustee shall have first received an Opinion of Counsel to the effect that the lien and security interest created by this Indenture with respect to such property
will continue to be maintained after giving effect to such action or actions.

The Issuer hereby designates the Indenture Trustee its agent and attorney-in-fact to sign any financing statement, continuation statement or other instrument required to be signed pursuant to this Section 3.04 upon the Issuer’s preparation thereof and delivery to the Indenture Trustee.

Section 3.05     Opinions as to Trust Estate.  (a)  On the Closing Date, the Issuer shall furnish to the Indenture Trustee and the Owner Trustee an Opinion of Counsel either stating that, in the opinion of such counsel, such action has been taken with respect to the recording and filing of this Indenture, any indentures supplemental hereto, and any other requisite documents, and with respect to the execution and filing of any financing statements and continuation statements, as are necessary to perfect and make effective the lien and first priority security interest in the Collateral and reciting the details of such action, or stating that, in the opinion of such counsel, no such action is necessary to make such lien and first priority security interest effective.

(b)       On or before December 31st in each calendar year, beginning in 2006, the Issuer shall furnish to the Indenture Trustee an Opinion of Counsel at the expense of the Issuer either (i) stating that, in the opinion of such counsel, such action has been taken with respect to the recording, filing, rerecording and refiling of this Indenture, any indentures supplemental hereto and any other requisite documents and with respect to the execution and filing of any financing statements and continuation statements as is necessary to maintain the lien and security interest in the Collateral and reciting the details of such action or (ii) stating that in the opinion of such counsel no such action is necessary to maintain such lien and security interest. Such Opinion of Counsel shall also describe
the recording, filing, re-recording and refiling of this Indenture, any indentures supplemental hereto and any other requisite documents and the execution and filing of any financing statements and continuation statements that will, in the opinion of such counsel, be required to maintain the lien and security interest in the Collateral until December 31 in the following calendar year. 

 

 

Section 3.06      Performance of Obligations.  (a)  The Issuer will punctually perform and observe all of its obligations and agreements contained in this Indenture, the Basic Documents and in the instruments and agreements included in the Trust Estate.

(b)       The Issuer may contract with other Persons to assist it in performing its duties under this Indenture, and any performance of such duties by a Person identified to the Indenture Trustee in an Officer’s Certificate of the Issuer shall be deemed to be action taken by the Issuer.

(c)       The Issuer will not take any action or permit any action to be taken by others which would release any Person from any of such Person’s covenants or obligations under any of the documents relating to the Mortgage Loans or under any instrument included in the Trust Estate, or which would result in the amendment, hypothecation, subordination, termination or discharge of, or impair the validity or effectiveness of, any of the documents relating to the Mortgage Loans or any such instrument, except such actions as the Master Servicer is expressly permitted to take in the Servicing Agreement.

(d)       The Issuer may retain an administrator and may enter into contracts with other Persons for the performance of the Issuer’s obligations hereunder, and performance of such obligations by such Persons shall be deemed to be performance of such obligations by the Issuer.

Section 3.07     Negative Covenants.  So long as any Notes are Outstanding or  the Majority Certificateholder owns 100% of the Securities, the Issuer shall not:

(i)           except as expressly permitted by this Indenture, sell, transfer, exchange or otherwise dispose of the Trust Estate.

(ii)          claim any credit on, or make any deduction from the principal or interest payable in respect of, the Notes (other than amounts properly withheld from such payments under the Code) or assert any claim against any present or former Noteholder, by reason of the payment of the taxes levied or assessed upon any part of the Trust Estate;

(iii)        (A) permit the validity or effectiveness of this Indenture to be impaired, or permit the lien of this Indenture to be amended, hypothecated, subordinated, terminated or discharged, or permit any Person to be released from any covenants or obligations with respect to the Notes under this Indenture except as may be expressly permitted hereby, (B) permit any lien, charge, excise, claim, security interest, mortgage or other encumbrance (other than the lien of this Indenture) to be created on or extend to or otherwise arise upon or burden the Trust Estate or any part thereof or any interest therein or the proceeds thereof or (C) permit the lien of this Indenture not to constitute a valid first priority security interest in the Trust Estate; or

(iv)         waive or impair, or fail to assert rights under, the Mortgage Loans, or impair or cause to be impaired the Issuer’s interest in the Mortgage Loans, the Mortgage Loan Purchase Agreement or in any Basic Document, if any such action would materially and adversely affect the interests of the Noteholders.

 

 

Section 3.08    Annual Statement as to Compliance.  The Issuer will deliver to the Indenture Trustee, by March 1 of each year commencing with the calendar year 2006, an Officer’s Certificate stating, as to the Authorized Officer signing such Officer’s Certificate, that:

(i)           a review of the activities of the Issuer during the previous calendar year and of its performance under this Indenture and the Trust Agreement has been made under such Authorized Officer’s supervision; and

(ii)          to the best of such Authorized Officer’s knowledge, based on such review, the Issuer has complied with all conditions and covenants under this Indenture and the provisions of the Trust Agreement throughout such year, or, if there has been a default in its compliance with any such condition or covenant, specifying each such default known to such Authorized Officer and the nature and status thereof.

 

 

	
             
  	
            Section 3.09
 	
            [Reserved].
 

Section 3.10     Representations and Warranties Concerning the Mortgage Loans.  The Indenture Trustee, as pledgee of the Mortgage Loans, has the benefit of the representations and warranties made by the Servicers in (i) the related Servicing Agreements, (ii) the Seller in the Mortgage Loan Purchase Agreement concerning the Seller and the Initial Mortgage Loans and (iii) any Subsequent Mortgage Purchase Agreement concerning the Seller and the related Subsequent Mortgage Loans to the same extent as though such representations and warranties were made directly to the Indenture Trustee. If a Responsible Officer of the Indenture Trustee has actual knowledge of any breach of any representation or warranty made by the Servicers in the related Servicing Agreements or the Seller in the Mortgage Loan
Purchase Agreement, or any Subsequent Mortgage Loan Purchase Agreement, the Indenture Trustee shall notify the related Servicer, the Master Servicer and the Seller of such finding. In the case of a breach of a representation or warranty with respect to a Mortgage Loan, the related Servicer shall be obligated to cure such defect or repurchase or substitute for the related Mortgage Loan. In the case of a Countrywide Mortgage Loan, if Countrywide is not obligated to cure, repurchase or substitute a Countrywide Mortgage Loan, EMC shall cure such defect or repurchase or substitute for the related Mortgage Loan. The Seller will have the obligation with respect to a breach of a representation of a warranty only if it was a representation or warranty that the Seller gave in Section 7 of the Mortgage Loan Purchase Agreement and if it was a representation or warranty that the related Servicer was not required to cure, purchase or substitute under the related Servicing Agreement, or in the case
of a Countrywide Mortgage Loan, if EMC also was not required to cure under the EMC Servicing Agreement. In that case, the Seller will  have the obligation to cure such defect or repurchase or substitute for the related Mortgage Loan. 

Section 3.11     Investment Company Act.  The Issuer shall not become an “investment company” or be under the “control” of an “investment company” as such terms are defined in the Investment Company Act of 1940, as amended (or any successor or amendatory statute), and the rules and regulations thereunder (taking into account not only the general definition of the term “investment company” but also any available exceptions to such general definition); provided, however, that the Issuer shall be in compliance with this Section 3.11 if it shall have obtained an order exempting it from regulation as an “investment company” so long as it is in compliance with the conditions imposed in such order.

Section 3.12      Issuer May Consolidate, etc.  (a)  The Issuer shall not consolidate or merge with or into any other Person, unless:

(i)           the Person (if other than the Issuer) formed by or surviving such consolidation or merger shall be a Person organized and existing under the laws of the United States of America or any state or the District of Columbia and shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Indenture Trustee, in form reasonably satisfactory to the Indenture Trustee, the due and punctual payment of the principal of and interest on all Notes, and all amounts payable to the Indenture Trustee and the Securities Administrator, the payment to the Certificate Paying Agent of all amounts due to the Certificateholders, and the performance or observance of every agreement and covenant of this Indenture on the part of the Issuer to be performed or observed, all as provided herein;

 

 

(ii)          immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing;

(iii)        each of the Rating Agencies shall have notified the Issuer that such transaction shall not cause the rating of the Notes to be reduced, qualified, suspended or withdrawn or to be considered by either Rating Agency to be below investment grade;

(iv)         the Issuer shall have received an Opinion of Counsel (and shall have delivered a copy thereof to the Indenture Trustee and the Securities Administrator) to the effect that such transaction will not (A) result in a “substantial modification” of the Class A-1, Class A-2, Class M-1, Class M-2 or Class B-1 Notes or any other classes of Notes with respect to which a “will be debt” opinion has been rendered by nationally recognized tax counsel and furnished to the Securities Administrator under Treasury Regulation Section 1.1001-3, or adversely affect the indebtedness status of such Notes, and (B) cause the Trust to be subject to an entity level tax for federal income tax purposes;

(v)          any action that is necessary to maintain the lien and security interest created by this Indenture shall have been taken; 

(vi)         the Issuer shall have delivered to the Indenture Trustee an Officer’s Certificate and an Opinion of Counsel each stating that such consolidation or merger and such supplemental indenture comply with this Article III and that all conditions precedent herein provided for or relating to such transaction have been complied with (including any filing required by the Exchange Act), and that such supplemental indenture is enforceable.

(vii)       The Issuer shall not convey or transfer any of its properties or assets, including those included in the Trust Estate, to any Person, unless:

(viii)      the Person that acquires by conveyance or transfer the properties and assets of the Issuer, the conveyance or transfer of which is hereby restricted, shall (A) be a United States citizen or a Person organized and existing under the laws of the United States of America or any state thereof, (B) expressly assume, by an indenture supplemental hereto, executed and delivered to the Indenture Trustee, in form satisfactory to the Indenture Trustee, the due and punctual payment of the principal of and interest on all Notes and the performance or observance of every agreement and covenant of this Indenture on the part of the Issuer to be performed or observed, all as provided herein, (C) expressly agree by means of such supplemental indenture that all right, title and interest so conveyed or transferred shall be
subject and subordinate to the rights of the Holders of the Notes, (D) unless otherwise provided in such supplemental indenture, expressly agree to indemnify, defend and hold harmless the Issuer and the Indenture Trustee against and from any loss, liability or expense arising under or related to this Indenture and the Notes and (E) expressly agree by means of such supplemental indenture that such Person (or if a group of Persons, then one specified Person) shall make all filings with the Commission (and any other appropriate Person) required by the Exchange Act in connection with the Notes;

(ix)        immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing;

 

 

(x)          each of the Rating Agencies shall have notified the Issuer that such transaction shall not cause the ratings of the Notes to be reduced, qualified, suspended or withdrawn;

(xi)         the Issuer shall have received an Opinion of Counsel (and shall have delivered a copy thereof to the Indenture Trustee) to the effect that such transaction will not (A) result in a “substantial modification” of the Class A-1, Class A-2, Class M-1, Class M-2 or Class B-1 Notes or any other Classes of Notes with respect to which a “will be debt” opinion has been rendered by nationally recognized tax counsel and furnished to the Securities Administrator under Treasury Regulation Section 1.1001-3, or adversely affect the indebtedness status of such Notes and (B) cause the Trust to be subject to an entity level tax for federal income tax purposes;

(xii)       any action that is necessary to maintain the lien and security interest created by this Indenture shall have been taken; 

(xiii)      the Issuer shall have delivered to the Indenture Trustee an Officer’s Certificate and an Opinion of Counsel each stating that such conveyance or transfer and such supplemental indenture comply with this Article III and that all conditions precedent herein provided for relating to such transaction have been complied with (including any filing required by the Exchange Act).

Section 3.13     Successor or Transferee.  (a)  Upon any consolidation or merger of the Issuer in accordance with Section 3.12(a), the Person formed by or surviving such consolidation or merger (if other than the Issuer) shall, following the Issuer’s satisfaction of all of the conditions precedent set forth therein with respect thereto, succeed to, and be substituted for, and may exercise every right and power of, the Issuer under this Indenture with the same effect as if such Person had been named as the Issuer herein.

(b)       Upon a conveyance or transfer of all the assets and properties of the Issuer pursuant to Section 3.12(b), the Issuer, following its satisfaction of all of the conditions precedent set forth herein with respect thereto, will be released from every covenant and agreement of this Indenture to be observed or performed on the part of the Issuer with respect to the Notes immediately upon the delivery of written notice to the Indenture Trustee of such conveyance or transfer.

Section 3.14      No Other Business.  The Issuer shall not engage in any business other than as set forth with respect thereto in the Trust Agreement and other than financing, purchasing, owning and selling and managing the Mortgage Loans and the issuance of the Certificates in the manner contemplated by this Indenture and the Basic Documents and all activities incidental thereto.

Section 3.15     No Borrowing.  The Issuer shall not issue, incur, assume, guarantee or otherwise become liable, directly or indirectly, for any indebtedness except for the Notes under this Indenture.

Section 3.16     Guarantees, Loans, Monthly Advances and Other Liabilities.  Except as contemplated by this Indenture or the Basic Documents, the Issuer shall not make any loan or advance or credit to, or guarantee (directly or indirectly or by an instrument having the effect of 

 

assuring another’s payment or performance on any obligation or capability of so doing or otherwise), endorse or otherwise become contingently liable, directly or indirectly, in connection with the obligations, stocks or dividends of, or own, purchase, repurchase or acquire (or agree contingently to do so) any stock, obligations, assets or securities of, or any other interest in, or make any capital contribution to, any other Person.

Section 3.17      Capital Expenditures.  The Issuer shall not make any expenditure (by long-term or operating lease or otherwise) for capital assets (either realty or personalty).

	
             
  	
            Section 3.18
 	
            Determination of Note Index.  
 

On the second LIBOR business day preceding the commencement of each Interest Accrual Period for the Notes, which date we refer to as an interest determination date, the Securities Administrator will determine One-Month LIBOR for such Interest Accrual Period on the basis of such rate as it appears on Telerate Screen Page 3750, as of 11:00 a.m. London time on such interest determination date. If such rate does not appear on such page, or such other page as may replace that page on that service, or if such service is no longer offered, the Securities Administrator may rely on such other service for displaying LIBOR or comparable rates as may be reasonably selected by the Securities Administrator, One-Month LIBOR for the applicable Interest Accrual Period will be the Reference Bank Rate. If no such quotations can be obtained and no Reference Bank Rate is available, One-Month LIBOR will be
the One-Month LIBOR applicable to the preceding Interest Accrual Period. The Securities Administrator’s determination of One-Month LIBOR shall be final and binding, absent manifest error.

The Reference Bank Rate with respect to any Interest Accrual Period, means the arithmetic mean, rounded upwards, if necessary, to the nearest whole multiple of 0.03125%, of the offered rates for United States dollar deposits for one month that are quoted by the Reference Banks, as described below, as of 11:00 a.m., New York City time, on the related interest determination date to prime banks in the London interbank market for a period of one month in amounts approximately equal to the aggregate Note Principal Balance of all Classes of Offered Notes for such Interest Accrual Period, provided that at least two such Reference Banks provide such rate. If fewer than two offered rates appear, the Reference Bank Rate will be the arithmetic mean, rounded upwards, if necessary, to the nearest whole multiple of 0.03125%, of the rates quoted by one or more major banks in New York City, selected by
the securities administrator, as of 11:00 a.m., New York City time, on such date for loans in U.S. dollars to leading European banks for a period of one month in amounts approximately equal to the aggregate Note Principal Balance of all Classes of Offered Notes. As used in this section, LIBOR business day means a day on which banks are open for dealing in foreign currency and exchange in London and New York City; and Reference Banks means leading banks selected by the securities administrator and engaged in transactions in Eurodollar deposits in the international Eurocurrency market:

	
             
 	
            1.
 	
            with an established place of business in London,
 

	
             
 	
            2.
 	
            which have been designated as such by the Securities Administrator, and
 

	
             
 	
            3.
 	
            which are not controlling, controlled by, or under common control with, the Depositor, the Seller or the Master Servicer.
 

 

 

The establishment of One-Month LIBOR on each interest determination date by the securities administrator and the securities administrator's calculation of the rate of interest applicable to the Classes of Notes for the related Interest Accrual Period shall, in the absence of manifest error, be final and binding.

Section 3.19     Restricted Payments.  The Issuer shall not, directly or indirectly, (i) pay any dividend or make any distribution (by reduction of capital or otherwise), whether in cash, property, securities or a combination thereof, to the Owner Trustee or any owner of a beneficial interest in the Issuer or otherwise with respect to any ownership or equity interest or security in or of the Issuer, (ii) redeem, purchase, retire or otherwise acquire for value any such ownership or equity interest or security or (iii) set aside or otherwise segregate any amounts for any such purpose; provided, however, that the Issuer may make, or cause to be made, (x) distributions and payments to the Owner Trustee, the Indenture Trustee, the Securities Administrator, the Master Servicer, the Servicer, the
Certificate Registrar, the Certificate Paying Agent, the Noteholders and the Certificateholders as contemplated by, and to the extent funds are available for such purpose under this Indenture and the Basic Documents and (y) payments to the Master Servicer and the Servicer pursuant to the terms of the Servicing Agreements. The Issuer will not, directly or indirectly, make payments to or distributions from the Payment Account except in accordance with this Indenture and the Basic Documents.

Section 3.20      Notice of Events of Default.  The Issuer shall give the Indenture Trustee, the Securities Administrator and each Rating Agency prompt written notice of each Event of Default hereunder.

Section 3.21      Further Instruments and Acts.  Upon request of the Indenture Trustee, the Issuer will execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purpose of this Indenture.

	
             
  	
            Section 3.22
 	
            Reserved.
 	
             

	
             
  	
            Section 3.23
 	
            Certain Representations Regarding the Trust Estate.  
 

(a)        With respect to that portion of the Collateral described in clauses (a) through (c) of the definition of Trust Estate, the Issuer represents to the Indenture Trustee that:

(i)           This Indenture creates a valid and continuing security interest (as defined in the applicable UCC) in the Collateral in favor of the Indenture Trustee, which security interest is prior to all other liens, and is enforceable as such as against creditors of and purchasers from the Issuer.

(ii)          The Collateral constitutes “deposit accounts,” “instruments” or “certificated securities,” as applicable within the meaning of the applicable UCC.

(iii)        The Issuer owns and has good and marketable title to the Collateral, free and clear of any lien, claim or encumbrance of any Person.

(iv)         The Issuer has caused or will have caused, within ten days of the Closing Date, 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 Indenture Trustee hereunder.

(v)          Other than the security interest granted to the Indenture Trustee pursuant to this Indenture, the Issuer has not pledged, assigned, sold, granted a security interest in, or otherwise conveyed any of the Collateral.  The Issuer has not authorized the filing of and is not aware of any financing statements against the Issuer that include a description of collateral covering the Collateral other than any financing statement relating to the security interest granted to the Indenture Trustee hereunder or that has been terminated.

(vi)         The Collateral is not in the name of any Person other than the Issuer or the Indenture Trustee.  The Issuer has in its possession all original copies of the security certificates that constitute or evidence the Collateral.  The security certificates that constitute or evidence the Collateral do not have any marks or notations indicating that they have been pledged, assigned or otherwise conveyed to any Person other than the Indenture Trustee.  The Issuer has not consented to the bank maintaining the Collateral to comply with instructions of any Person other than the Indenture Trustee.

Section 3.24     Allocation of Realized Losses.  On or prior to each Payment Date, the Master Servicer shall determine, based solely on information provided to it by the related Servicer the amount of any Realized Loss in respect of each Mortgage Loan that occurred during the immediately preceding calendar month.

(a)          On the Closing Date, the Trust will include the Excess Reserve Fund which will be funded with $15,000 on the Closing Date by the Seller.  Amounts available in the Excess Reserve Fund will be used to cover losses as described below.  Interest earned on amounts in the Excess Reserve Fund will be retained by the Seller. The Seller shall be the beneficial owner of the Excess Reserve Fund. Amounts in the Excess Reserve Fund shall, at the direction of the Seller be invested in Permitted Investments that mature no later than the Payment Date.  If the Seller gives no such direction, the amount in the Excess Reserve Fund shall be invested in the Wells Fargo Prime Advantage Money Market Fund. All net income and gain from such investments shall be distributed to the Seller on such Payment Date.
All amounts earned on amounts on deposit in the Excess Reserve Fund shall be taxable to the Seller.  Any losses on such investments shall be deposited in the Excess Reserve Fund by the Seller out of its own funds immediately as realized.

(b)          Any Realized Losses on the Mortgage Loans will be allocated or covered on any payment date as follows: first, first, to Excess Spread as part of the payment in respect of the Extra Principal Distribution Amount for such Distribution Date; second, in reduction of  the Overcollateralization Amount until reduced to zero; third, in reduction of the Excess Reserve Fund until reduced to zero; fourth, to the Class B-6 Notes, until the Note Principal Balance thereof has been reduced to zero; fifth, to the Class B-5 Notes, until the Note Principal Balance thereof
has been reduced to zero; sixth, to the Class B-4 Notes, until the Note Principal Balance thereof has been reduced to zero; seventh, to the Class B-3 Notes, until the Note Principal Balance thereof has been reduced to zero; eighth, to the Class B-2 Notes, until the Note Principal Balance thereof has been reduced to zero; ninth, to the Class B-1 Notes, until the Note Principal Balance thereof has been reduced to zero; tenth, to the Class M-2 Notes, until the Note Principal Balance thereof has been reduced to zero; eleventh, to the Class M-1 Notes, until the Note 

 

Principal Balance thereof has been reduced to zero; twelfth, to the Class A-2 Notes, until the Note Principal Balance thereof has been reduced to zero; and thirteenth, to the Class A-1 Notes, until the Note Principal Balance thereof has been reduced to zero. All Realized Losses allocated to a Class of Notes will be allocated in proportion to the Percentage Interests evidenced thereby.

(c)          Notwithstanding the foregoing clause (b), no such allocation of any Realized Loss shall be made on a Payment Date to any Class or Classes of Notes to the extent that such allocation would result in the reduction of the aggregate Note Principal Balance of all of the Classes of Notes as of such Payment Date, after giving effect to all distributions and prior allocations of Realized Losses on such date, to an amount less than the aggregate Scheduled Principal Balance of the Mortgage Loans as of the related Due Date (such limitation, the “Loss Allocation Limitation”).

(d)          The principal portion of any Realized Losses allocated to a Class of Notes shall be allocated among the Notes of such Class  in proportion to their respective Note Principal Balances. Any allocation of Realized Losses shall be accomplished by reducing the Note Principal Balance of the Notes on the related Payment Date.

(e)          Realized Losses shall be allocated on the Payment Date in the month following the month in which such loss was incurred and, in the case of the principal portion thereof, after giving effect to distributions made on such Payment Date.

(f)          In addition, in the event that the Securities Administrator receives any Subsequent Recoveries from the Servicer or Master Servicer, the Securities Administrator shall deposit such funds into the Payment Account  pursuant to Section 3.01 of this Indenture.  If, after taking into account such Subsequent Recoveries, the amount of a Realized Loss is reduced, the amount of such Subsequent Recoveries will be applied to increase the Note Principal Balance of the Notes with the highest payment priority to which Realized Losses have been allocated, but not by more than the amount of Realized Losses previously allocated to that Class or Classes of Notes pursuant to this Section 3.24.  The amount of any Subsequent Recoveries following the application set forth in the immediately preceding
sentence will be applied to sequentially increase the Note Principal Balance of the Notes, beginning with the Class of Notes with the next highest payment priority, up to the amount of such Realized Losses previously allocated to such Class or Classes of Notes pursuant to this Section 3.24.  Holders of such Notes will not be entitled to any payments in respect of Current Interest on the amount of such increases for any Interest Accrual Period preceding the Payment Date on which such increase occurs.  Any such increases shall be applied to the Note Principal Balance of the Notes of such Class in accordance with its respective Percentage Interest.

Section 3.25      Permitted Withdrawals and Transfers from the Payment Account.  (a)  The Securities Administrator will, from time to time on demand of the Master Servicer, make or cause to be made such withdrawals or transfers from the Payment Account as the Master Servicer has designated for such transfer or withdrawal pursuant to the Sale and Servicing Agreement or as the Securities Administrator has instructed hereunder for the following purposes  but not in any order of priority:

(i)           to reimburse the Master Servicer or the related Servicer for any Monthly Advance of its own funds, the right of the Master Servicer or the related Servicer to 

 

reimbursement pursuant to this subclause (i) being limited to amounts received on a particular Mortgage Loan (including, for this purpose, the Repurchase Price therefor, Insurance Proceeds and Liquidation Proceeds) which represent late payments or recoveries of the principal of or interest on such Mortgage Loan respecting which such Monthly Advance was made;

(ii)          to reimburse the Master Servicer or the related Servicer from Insurance Proceeds or Liquidation Proceeds relating to a particular Mortgage Loan for amounts expended by the Master Servicer or such Servicer in good faith in connection with the restoration of the related Mortgaged Property which was damaged by an Uninsured Cause or in connection with the liquidation of such Mortgage Loan;

(iii)        to reimburse the Master Servicer or the related Servicer from Insurance Proceeds relating to a particular Mortgage Loan for insured expenses incurred with respect to such Mortgage Loan and to reimburse the Master Servicer or the related Servicer from Liquidation Proceeds from a particular Mortgage Loan for Liquidation Expenses incurred with respect to such Mortgage Loan; provided that the Master Servicer shall not be entitled to reimbursement for Liquidation Expenses with respect to a Mortgage Loan to the extent that (i) any amounts with respect to such Mortgage Loan were paid as Excess Liquidation Proceeds pursuant to clause (viii) of this Subsection 3.25 (a) to the Master Servicer; and (ii) such Liquidation Expenses were not included in the computation of such Excess Liquidation Proceeds;

(iv)         to reimburse the Master Servicer or the related Servicer for advances of funds (other than Monthly Advances) made with respect to the Mortgage Loans, and the right to reimbursement pursuant to this subclause being limited to amounts received on the related Mortgage Loan (including, for this purpose, the Repurchase Price therefor, Insurance Proceeds and Liquidation Proceeds) which represent late recoveries of the payments for which such advances were made;

(v)          to reimburse the Master Servicer or the related Servicer for any Monthly Advance or Servicing Advance, after a Realized Loss has been allocated with respect to the related Mortgage Loan if the Monthly Advance or advance has not been reimbursed pursuant to clauses (i) and (iv);

(vi)         to pay the Master Servicer as set forth in Section 3.13 of the Sale and Servicing Agreement; provided however, that the Master Servicer shall be obligated to pay from its own funds any amounts which it is required to pay under Section 5.03 of the Sale and Servicing Agreement;

(vii)       to reimburse the Master Servicer for expenses, costs and liabilities incurred by and reimbursable to it pursuant to Sections 3.02, 5.04(c) and (d) of the Sale and Servicing Agreement, to the extent that the Master Servicer has not already reimbursed itself for such amounts from the Payment Account;

(viii)      to pay to the Master Servicer, as additional servicing compensation, any Excess Liquidation Proceeds to the extent not retained by the related Servicer; 

 

 

(ix)         to reimburse or pay the related Servicer any such amounts as are due thereto under the related Servicing Agreements and have not been retained by or paid to the related Servicer, to the extent provided in the related Servicing Agreement; 

(x)          to reimburse or pay the Indenture Trustee, the Owner Trustee, the Securities Administrator, the Seller and the Master Servicer any amounts due or expenses, costs and liabilities incurred by or reimbursable to such Persons pursuant to this Indenture or any other Basic Documents, to the extent such amounts have not already been previously paid or reimbursed to such party from the Payment Account;

	
             
  	
            (xi)
 	
            to remove amounts deposited in error; and
 

(xii)         to pay to the Holder of the Trust Certificates any investment income due and payable to it pursuant to this Indenture. 

	
             
  	
            Section 3.26
 	
            Conveyance of the Subsequent Mortgage Loans.  
 

(a)        Subject to the conditions set forth in paragraph (b) below, in consideration of the Securities Administrator’s delivery on the applicable Subsequent Transfer Dates to or upon the written order of the Depositor of all or a portion of the balance of funds in the Pre-Funding Account, the Depositor shall, on such Subsequent Transfer Date, sell, transfer, assign, set over and convey without recourse to the Trust Estate (subject to the other terms and provisions of this Indenture) all its right, title and interest in and to (i) the related Subsequent Mortgage Loans identified on the Mortgage Loan Schedule attached to the related Subsequent Transfer Instrument delivered by the Depositor on such Subsequent Transfer Date, (ii) all interest accruing thereon on and after the
Subsequent Cut-off Date (with respect to the Subsequent Mortgage Loans) and all collections in respect of interest and principal due after the Subsequent Cut-off Date and (iii) all items with respect to such Subsequent Mortgage Loans to be delivered pursuant to Section 2.01 of the Sale and Servicing Agreement and the other items in the related Mortgage Files; provided, however, that the Seller reserves and retains all right, title and interest in and to principal received and interest accruing on the Subsequent Mortgage Loans due on or prior to the related Subsequent Cut-off Date. The transfer to the Indenture Trustee or the Securities Administrator, on its behalf, for deposit in the Trust Estate by the Depositor of the Subsequent Mortgage Loans identified on the related Mortgage Loan Schedule shall be absolute and is intended by the Depositor, the Seller, the Master Servicer, the Securities Administrator, the Indenture Trustee and the Noteholders to constitute and to be treated as a
sale of the Subsequent Mortgage Loans by the Depositor to the Trust. The related Mortgage File for each Subsequent Mortgage Loan shall be delivered to the Indenture Trustee or the Custodian, as its agent, at least three Business Days prior to the related Subsequent Transfer Date.

The purchase price paid by the Securities Administrator from amounts released from the Pre-Funding Account shall be 100% of the aggregate Scheduled Principal Balance of the Subsequent Mortgage Loans so transferred (as identified on the Mortgage Loan Schedule provided by the Depositor).

(b)       The Depositor shall transfer to the Indenture Trustee or the Custodian, as its agent, for deposit in the Trust Estate the applicable Subsequent Mortgage Loans and the other 

 

property and rights related thereto as described in paragraph (a) above, and the Securities Administrator shall release such applicable funds from the Pre-Funding Account only upon the satisfaction of each of the following conditions on or prior to such Subsequent Transfer Date:

(i)           the Depositor shall have provided the Securities Administrator, the Indenture Trustee and the Rating Agencies with a timely Addition Notice, substantially in the form of Exhibit K hereto, and shall have provided any information reasonably requested by the Indenture Trustee and the Securities Administrator with respect to the Subsequent Mortgage Loans;

(ii)          the Depositor shall have delivered to the Indenture Trustee and the Securities Administrator a duly executed Subsequent Transfer Instrument, which shall include a Mortgage Loan Schedule listing the Subsequent Mortgage Loans, and the Seller shall cause to be delivered a computer file containing such Mortgage Loan Schedule to the Indenture Trustee and the Master Servicer at least three Business Days prior to the related Subsequent Transfer Date;

(iii)        the Depositor shall have furnished to the Master Servicer, no later than three Business Days prior to the related Subsequent Transfer Date, (x) if the servicer or servicers of the Subsequent Mortgage Loans are existing Servicers, then a written acknowledgement of each such Servicer that it is servicing such Subsequent Mortgage Loans pursuant to the related Servicing Agreement, or (y) if the servicer or servicers are not existing Servicers, then a Servicing Agreement and Assignment Agreement with respect to such servicer or servicers in form and substance reasonably satisfactory to the Master Servicer;

(iv)         as of each Subsequent Transfer Date, as evidenced by delivery of the Subsequent Transfer Instrument, substantially in the form of Exhibit J, the Depositor shall not be insolvent nor shall it have been rendered insolvent by such transfer nor shall it be aware of any pending insolvency with respect to it;

(v)          such sale and transfer shall not result in a material adverse tax consequence to the Trust or the Noteholders;

	
             
  	
            (vi)
 	
            the Pre-Funding Period shall not have terminated;
 

(vii)       the Depositor shall not have selected the Subsequent Mortgage Loans in a manner that it believed to be adverse to the interests of the Noteholders; and

(viii)      the Depositor shall have delivered to the Securities Administrator and Indenture Trustee a Subsequent Transfer Instrument confirming the satisfaction of the conditions precedent specified in this Section 3.26 and, pursuant to the Subsequent Transfer Instrument, assigned to the Indenture Trustee without recourse for the benefit of the Noteholders all the right, title and interest of the Depositor, in, to and under the Subsequent Mortgage Loan Purchase Agreement, to the extent of the related Subsequent Mortgage Loans.

(c)       Any conveyance of the Subsequent Mortgage Loans on a Subsequent Transfer Date is subject to certain conditions including, but not limited to the following:

 

 

(i)           Each such Subsequent Mortgage Loan must satisfy the representations and warranties specified in the related Subsequent Transfer Instrument and this Indenture;

(ii)          The Depositor will not select such Subsequent Mortgage Loans in a manner that it believes to be adverse to the interests of the Noteholders;

(iii)        the Depositor will deliver certain Opinions of Counsel with respect to the validity of the conveyance of such Subsequent Mortgage Loans;

(iv)         the Rating Agencies and the Indenture Trustee are provided with an Opinion of Counsel or Opinions of Counsel, at the expense of the Depositor, confirming that the transfer of the Subsequent Mortgage Loans conveyed on such Subsequent Transfer Date is a true sale, to be delivered as provided pursuant to this Section 3.26;

(v)          As of the related Subsequent Cut-off Date, each such Subsequent Mortgage Loan will satisfy the following criteria:

Such Subsequent Mortgage Loan may not be 30 or more days delinquent as of the last day of the month preceding the related Subsequent Cut-off Date;

The original term to stated maturity of such Subsequent Mortgage Loan will not be less than 180 months and will not exceed 360 months;

Each Subsequent Mortgage Loan must be a One Year LIBOR or Six Month LIBOR adjustable rate Mortgage Loan with a first lien on the related mortgaged property;

No Subsequent Mortgage Loan will have a first payment date occurring after December 1, 2005;

The latest maturity date of any Subsequent Mortgage Loan will be no later than November 2035;

Such Subsequent Mortgage Loan will have a credit score of not less than 630; and

Such Subsequent Mortgage Loan shall have been underwritten in accordance with the underwriting guidelines of the related originator. 

(d)       As of the related Subsequent Cut-off Date, the Subsequent Mortgage Loans in the aggregate will satisfy the following criteria:

	
             
  	
            (i)
 	
            Have a weighted average gross margin of 2.270% per annum;
 	
             

	
             
  	
            (ii)
 	
            Have a weighted average credit score greater than 700;
 	
             

	
             
  	
            (iii)
 	
            Have no less than 85% of the Mortgaged Properties be owner occupied;
 
					

(iv)        Have no less than 90% of the Mortgaged Properties be single family detached or planned unit developments;

 

 

(v)          Have no more than 25% of the Subsequent Mortgage Loans be cash out refinance;

(vi)        Have all of such Subsequent Mortgage Loans with a Loan-to-Value Ratio greater than 80% be covered by a Primary Insurance Policy;

(vii)       Have a weighted average maximum mortgage rate greater than or equal to 2.270%; 

(viii)      Have a maximum mortgage rate as of the related Subsequent Cut-off Date not greater than 12.000%; and

(ix)          Will not result in the downgrade or withdrawal of the then current ratings on the Notes.  

	
             
  	
            Section 3.27
 	
            Pre-Funding Account.
 

(a)        No later than the Closing Date, the Securities Administrator shall establish and maintain a segregated trust accounts or sub-accounts of a trust account, which shall be titled “Pre-Funding Account, LaSalle Bank National Association, as trustee for the benefit of Holders of Structured Asset Mortgage Investments II Inc., Luminent Mortgage Trust 2005-1, Mortgage-Backed Notes, Series 2005-1”. The Pre-Funding Account shall be an Eligible Account or a sub account of an Eligible Account. The Securities Administrator shall, promptly upon receipt, deposit in the Pre-Funding Account and retain therein the Pre-Funding Amount deposited by the Depositor on the Closing Date. Funds deposited in the Pre-Funding Account shall be held in trust by the Securities Administrator for the
benefit of the related Noteholders for the uses and purposes set forth herein.

(b)       The Securities Administrator shall invest funds deposited in the Pre-Funding as directed by the Seller or its designee in writing in Permitted Investments with a maturity date no later than the Business Day immediately preceding the date on which such funds are required to be withdrawn from such account pursuant to this Agreement, or, if no written direction is received by the Securities Administrator from the Depositor, then funds in such account shall remain uninvested. For federal income tax purposes, the Seller or its designee shall be the owner of the Pre-Funding Account and shall report all items of income, deduction, gain or loss arising therefrom. The Seller shall be entitled to all income and gain realized from investment of funds deposited in the Pre-Funding Account. The
Seller or its designee shall deposit in the Pre-Funding Account the amount of any net loss incurred in respect of any such Permitted Investment immediately upon realization of such loss without any right of reimbursement therefor. 

(c)       Amounts on deposit in the Pre-Funding Account shall be withdrawn by the Securities Administrator as follows:

(i)           On the related Subsequent Transfer Date, the Securities Administrator shall withdraw from the Pre-Funding Account an amount equal to 100% of the Scheduled Principal Balances of the Subsequent Mortgage Loans transferred and assigned to the Trustee for 

 

deposit on the related Subsequent Transfer Date and the Securities Administrator shall pay such amount into the Payment Account;

(ii)          If the amount on deposit in the Pre-Funding Account (exclusive of investment income) has not been reduced to zero by the close of business on the date of termination of the Pre-Funding Period, then at the close of business on the day immediately following the termination of the Pre-Funding Period, the Securities Administrator shall deposit into the Payment Account any amounts remaining in the Pre-Funding Account (exclusive of investment income) for distribution in accordance with the terms hereof;

(iii)        To withdraw any amount not required to be deposited in the Pre-Funding Account or deposited therein in error; and

(iv)         To clear and terminate the Pre-Funding Account upon the earlier to occur of (A) the  Payment Date immediately following the end of the Pre-Funding Period and (B) the termination of this Indenture, with any amounts remaining on deposit therein being paid to the Holders of the Notes then entitled to distributions in respect of principal.

	
             
  	
            Section 3.28
 	
            Interest Coverage Account.  
 

(a)        No later than the Closing Date, the Securities Administrator shall establish and maintain a segregated trust account or a sub accounts of a trust account, which shall be titled “Interest Coverage Account, LaSalle Bank National Association, as trustee for the benefit of holders of Structured Asset Mortgage Investments II Inc., Luminent Mortgage Trust 2005-1, Mortgage-Backed Notes, Series 2005-1”, as trustee for the benefit of holders of Structured Asset Mortgage Investments II Inc., Luminent Mortgage Trust 2005-1, Mortgage-Backed Notes, Series 2005-1” (the “Interest Coverage Account”). The Interest Coverage Account shall be an Eligible Account or a sub account of an Eligible Account. The Securities Administrator shall, promptly upon receipt, deposit in
the related Interest Coverage Account and retain therein the related Interest Coverage Amount remitted on the Closing Date to the Securities Administrator by the Seller and all income and gain realized from investment of funds deposited in the Pre-Funding Account pursuant to Section 3.27(b). Funds deposited in the related Interest Coverage Account shall be held in trust by the Securities Administrator for the benefit of the related Noteholders for the uses and purposes set forth herein.

(b)       For federal income tax purposes, the Seller shall be the owner of the Interest Coverage Account and shall report all items of income, deduction, gain or loss arising therefrom. All income and gain realized from investment of funds deposited in the Interest Coverage Account, which investment shall be made solely upon the written direction of the Seller, shall be for the sole and exclusive benefit of the Seller and shall be remitted by the Securities Administrator to the Seller no later than the first Business Day following receipt of such income and gain by the Securities Administrator. If no written direction with respect to such investment shall be received by the Securities Administrator from the Seller, then funds in such Account shall remain uninvested.  The Seller shall deposit
in the related Interest Coverage Account the amount of any net loss incurred in respect of any such Permitted Investment immediately upon realization of such loss.

 

 

 

 (c)     On each Payment Date during the Pre-Funding Period and on the day of termination of the Pre-Funding Period, the Securities Administrator shall withdraw from the Interest Coverage Account and deposit in the Payment Account an amount equal to 30 days’ interest on the excess, if any, of the Original Pre-Funded Amount, respectively, over the aggregate Scheduled Principal Balance of the Subsequent Mortgage Loans, that (in each case) both (i) had a Due Date during the Due Period relating to such Payment Date and (ii) had a Subsequent Cut-off Date prior to the first day of the month in which such Payment Date occurs. Such withdrawal and deposit shall be treated as a contribution of cash by the Seller on the date thereof. Immediately following any such withdrawal and deposit, and immediately following the conveyance of any Subsequent
Mortgage Loans to the Trust on any Subsequent Transfer Date, the Securities Administrator shall, at the request of the Seller, withdraw from the Interest Coverage Account and remit to the Seller or its designee an amount equal to the excess, if any, of the amount remaining in such Interest Coverage Account, respectively, over the amount that would be required to be withdrawn therefrom (assuming sufficient funds therein) pursuant to the preceding sentence on each subsequent Payment Date, if any, that will occur during the Pre-Funding Period or that will be the Payment Date immediately following the end of the Pre-Funding Period, if no related Subsequent Mortgage Loans were acquired by the Trust Estate after the end of the Prepayment Period relating to the current Payment Date. 

(d)      Upon the earliest of (i) the Payment Date immediately following the end of the Pre-Funding Period, (ii) the reduction of the Note Principal Balances of the Notes to zero or (iii) the termination of this Indenture in accordance with Section 8.03, any amount remaining on deposit in the Interest Coverage Account after distributions pursuant to paragraph (c) above shall be withdrawn by the Securities Administrator and paid to the Seller or its designee.

 

 

ARTICLE IV

 

THE NOTES; SATISFACTION AND DISCHARGE OF INDENTURE

Section 4.01     The Notes.  Each Class of Class A-1, Class A-2, Class M-1, Class M-2 and Class B-1 Notes shall be registered in the name of a nominee designated by the Depository. Beneficial Owners will hold interests in the Class A-1, Class A-2, Class M-1, Class M-2 and Class B-1 Notes through the book-entry facilities of the Depository in minimum initial Note Principal Balances of $25,000 and integral multiples of $1 in excess thereof. Registered Holders will hold interests in the Class B-2, Class B-3, Class B-4, Class B-5 and Class B-6 Notes in physical form in minimum initial Note Principal Balances of $25,000 and integral multiples of $1 in excess thereof.

The Indenture Trustee and Securities Administrator may for all purposes (including the making of payments due on the Notes) deal with the Depository as the authorized representative of the Beneficial Owners with respect to the Notes for the purposes of exercising the rights of Holders of the Notes hereunder. Except as provided in the next succeeding paragraph of this Section 4.01, the rights of Beneficial Owners with respect to the Notes shall be limited to those established by law and agreements between such Beneficial Owners and the Depository and Depository Participants. Except as provided in Section 4.08 hereof, Beneficial Owners shall not be entitled to definitive certificates for the Notes as to which they are the Beneficial Owners. Requests and directions from, and votes of, the Depository as Holder of the Notes shall not be deemed inconsistent if they are made with respect to
different Beneficial Owners. The Securities Administrator may establish a reasonable record date in connection with solicitations of consents from or voting by Noteholders and give notice to the Depository of such record date. Without the consent of the Issuer and the Securities Administrator, no Note may be transferred by the Depository except to a successor Depository that agrees to hold such Note for the account of the Beneficial Owners.

In the event the Depository Trust Company resigns or is removed as Depository, the Depositor may appoint a successor Depository.  If no successor Depository has been appointed within 30 days of the effective date of the Depository’s resignation or removal, each Beneficial Owner shall be entitled to certificates representing the Notes it beneficially owns in the manner prescribed in Section 4.08.

The Notes shall, on original issue, be executed on behalf of the Issuer by the Owner Trustee, not in its individual capacity but solely as Owner Trustee, authenticated by the Securities Administrator and delivered by the Securities Administrator to or upon the order of the Issuer.

Section 4.02     Registration of and Limitations on Transfer and Exchange of Notes; Appointment of Note Registrar and Certificate Registrar.  The Issuer shall cause to be kept at the Corporate Trust Office of the Securities Administrator a Note Register in which, subject to such reasonable regulations as it may prescribe, the Note Registrar shall provide for the registration of Notes and of transfers and exchanges of Notes as herein provided.

Subject to the restrictions and limitations set forth below, upon surrender for registration of transfer of any Note at the Corporate Trust Office of the Securities Administrator, the Issuer 

 

shall execute and the Note Registrar shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Notes in authorized initial Note Principal Balances evidencing the same Class and aggregate Percentage Interests.

No transfer, sale, pledge or other disposition of any Privately Offered Note or interest therein shall be made unless that transfer, sale, pledge or other disposition is exempt from the registration and/or qualification requirements of the Securities Act and any applicable state securities laws, or is otherwise made in accordance with the Securities Act and such state securities laws.  If a transfer of any Privately Offered Note is to be made without registration under the Securities Act (other than in connection with the initial issuance thereof or a transfer thereof to the Depositor or one of its Affiliates), then the Note Registrar shall refuse to register such transfer unless (i) it receives (and upon receipt, may conclusively rely upon) a certificate substantially in the form attached as Exhibit C hereto (provided, however, that in the case of the Book-Entry Notes, the Noteholder
and the Noteholder’s prospective transferee will be deemed to have made the representations set forth in such certification) or (ii) the transferee executes a representation letter, substantially in the form of Exhibit D attached hereto, and transferor executes a representation letter, substantially in the form of Exhibit E hereto, each acceptable to and in form and substance satisfactory to the Note Registrar, the Securities Administrator and the Indenture Trustee certifying the facts surrounding such transfer, which representation letters shall not be an expense of the Issuer, the Seller, the Owner Trustee, the Indenture Trustee, the Securities Administrator, the Master Servicer or any Servicer.  None of the Issuer, the Depositor, the Indenture Trustee, the Securities Administrator or the Note Registrar is obligated to register or qualify any Notes under the Securities Act or any other securities law or to take any action not otherwise required under this Indenture to permit
the transfer of any Note or interest therein without registration or qualification.  Any Noteholder desiring to effect a transfer of Notes or interests therein shall, and does hereby agree to, indemnify the Issuer, the Depositor, the Owner Trustee, the Indenture Trustee, the Securities Administrator and the Note Registrar against any liability that may result if the transfer is not so exempt or is not made in accordance with such federal and state laws or in accordance with any restrictions on transfer set forth in this Indenture.  Notwithstanding the foregoing, the provisions of this paragraph shall not apply to the initial transfer of the Notes to the Depositor or any Affiliate thereof.

No transfer, sale, pledge or other disposition of any Class B-2, Class B-3, Class B-4, Class B-5 and Class B-6 Notes (other than any Class B-2, Class B-3, Class B-4, Class B-5 and Class B-6 Notes with respect to which a “will be debt” opinion has been rendered by nationally recognized tax counsel and furnished to the Securities Administrator) or interest therein shall be made, and the Note Registrar shall refuse to register any such transfer, sale, pledge or other disposition, unless the transferee shall have delivered to the Owner Trustee, the Note Registrar, the Securities Administrator and the Indenture Trustee a certificate substantially in the form of Exhibit F hereto certifying that (i) it is a real estate investment trust (“REIT”) within the meaning of Section 856(a) of the Code or a qualified REIT subsidiary (“QRS”) within the meaning of Section
856(i) of the Code or an entity disregarded as an entity separate from a REIT or a QRS and (ii) following the transfer, 100% of the Certificates and Class B-2, Class B-3, Class B-4, Class B-5 and Class B-6 Notes (other than any Class B-2, Class B-3, Class B-4, Class B-5 and Class B-6 Notes with respect to which a “will be debt” opinion has been rendered by nationally recognized tax counsel and furnished to the Securities Administrator) will be owned by a single REIT, directly or indirectly through one or more QRSs of such REIT or one or more entities 

 

disregarded as entities separate from such REIT or such QRSs; provided that (x) any Class B-2, Class B-3, Class B-4, Class B-5 and Class B-6 Notes may be pledged to secure indebtedness and may be the subject of repurchase agreements treated by the Issuer as secured indebtedness for federal income tax purposes, (y) any Class B-2, Class B-3, Class B-4, Class B-5 and Class B-6 Notes may be surrendered to the Corporate Trust Office of the Securities Administrator for the issuance of one or more new Notes of the related Class to be registered in the name of the related lender under any such related loan agreement or repurchase agreement, upon the reasonable request of such lender and the delivery by such lender to the Note Registrar, the Securities Administrator, the Owner Trustee and the Indenture Trustee, of a certificate substantially in the form attached hereto as Exhibit I certifying that the related Notes
are being pledged to secure indebtedness or are the subject of repurchase agreements treated by the Issuer as secured indebtedness for federal income tax purposes, in either case in accordance with the immediately preceding clause (x), and (z) any Class B-2, Class B-3, Class B-4, Class B-5 and Class B-6 Notes may be transferred by the related lender under any such related loan agreement or repurchase agreement upon a default under any such indebtedness, in which case the transferor shall deliver to the Note Registrar, the Securities Administrator, the Owner Trustee and the Indenture Trustee a certificate substantially in the form attached hereto as Exhibit G certifying to such effect. For the avoidance of doubt, any Class B-2, Class B-3, Class B-4, Class B-5 and Class B-6 Notes with respect to which a “will be debt” opinion has been rendered by nationally recognized tax counsel and furnished to the Securities Administrator will not be subject to the foregoing transfer
restrictions.

Subject to the foregoing, and Section 4.08, Notes may be exchanged for other Notes of like tenor and in authorized initial Note Principal Balances evidencing the same Class and aggregate Percentage Interests upon surrender of the Notes to be exchanged at the Corporate Trust Office of the Note Registrar. Whenever any Notes are so surrendered for exchange, the Issuer shall execute and the Securities Administrator shall authenticate and deliver the Notes which the Noteholder making the exchange is entitled to receive. Each Note presented or surrendered for registration of transfer or exchange shall (if so required by the Note Registrar) be duly endorsed by, or be accompanied by a written instrument of transfer in form reasonably satisfactory to the Note Registrar duly executed by the Holder thereof or his attorney duly authorized in writing with such signature guaranteed by a commercial
bank or trust company located or having a correspondent located in the city of New York. Notes delivered upon any such transfer or exchange will evidence the same obligations, and will be entitled to the same rights and privileges, as the Notes surrendered.

No service charge shall be made for any registration of transfer or exchange of Notes, but the Note Registrar shall require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any registration of transfer or exchange of Notes.

The Issuer hereby appoints the Securities Administrator as (i) Certificate Registrar to keep at its Corporate Trust Office a Certificate Register pursuant to Section 3.08 of the Trust Agreement in which, subject to such reasonable regulations as it may prescribe, the Certificate Registrar shall provide for the registration of Certificates and of transfers and exchanges thereof pursuant to Section 3.04 of the Trust Agreement and (ii) Note Registrar under this Indenture. The Securities Administrator hereby accepts such appointments.

 

 

Section 4.03     Mutilated, Destroyed, Lost or Stolen Notes.  If (i) any mutilated Note is surrendered to the Securities Administrator, or the Securities Administrator receives evidence to its satisfaction of the destruction, loss or theft of any Note, and (ii) there is delivered to the Securities Administrator such security or indemnity as may be required by it to hold the Issuer and the Securities Administrator harmless, then, in the absence of notice to the Issuer, the Note Registrar or the Securities Administrator that such Note has been acquired by a bona fide purchaser, and provided that the requirements of Section 8-405 of the UCC are met, the Issuer shall execute, and upon its request the Securities Administrator shall authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost
or stolen Note, a replacement Note; provided, however, that if any such destroyed, lost or stolen Note, but not a mutilated Note, shall have become or within seven days shall be due and payable, instead of issuing a replacement Note, the Issuer may pay such destroyed, lost or stolen Note when so due or payable without surrender thereof.  If, after the delivery of such replacement Note or payment of a destroyed, lost or stolen Note pursuant to the proviso to the preceding sentence, a bona fide purchaser of the original Note in lieu of which such replacement Note was issued presents for payment such original Note, the Issuer and the Securities Administrator shall be entitled to recover such replacement Note (or such payment) from the Person to whom it was delivered or any Person taking such replacement Note from such Person to whom such replacement Note was delivered or any assignee of such Person, except a bona fide purchaser, and shall be entitled to recover upon the security or
indemnity provided therefor to the extent of any loss, damage, cost or expense incurred by the Issuer, the Indenture Trustee or the Securities Administrator in connection therewith.

Upon the issuance of any replacement Note under this Section 4.03, the Issuer may require the payment by the Holder of such Note of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other reasonable expenses (including the fees and expenses of the Securities Administrator) connected therewith.

Every replacement Note issued pursuant to this Section 4.03 in replacement of any mutilated, destroyed, lost or stolen Note shall constitute an original additional contractual obligation of the Issuer, whether or not the mutilated, destroyed, lost or stolen Note shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Notes duly issued hereunder.

The provisions of this Section 4.03 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes.

 

 

Section 4.04     Persons Deemed Owners.  Prior to due presentment for registration of transfer of any Note, the Issuer, the Securities Administrator, the Paying Agent and any agent of the Issuer or the Securities Administrator or the Paying Agent may treat the Person in whose name any Note is registered (as of the day of determination) as the owner of such Note for the purpose of receiving payments of principal of and interest, if any, on such Note and for all other purposes whatsoever, whether or not such Note be overdue, and none of the Issuer, the Indenture Trustee, the Securities Administrator, the Paying Agent or any agent of the Issuer, the Securities Administrator, the Indenture Trustee or the Paying Agent shall be affected by notice to the contrary.

Section 4.05     Cancellation.  All Notes surrendered for payment, registration of transfer, exchange or redemption shall, if surrendered to any Person other than the Securities Administrator, be delivered to the Securities Administrator and shall be promptly cancelled by the Securities Administrator. The Issuer may at any time deliver to the Securities Administrator for cancellation any Notes previously authenticated and delivered hereunder which the Issuer may have acquired in any manner whatsoever, and all Notes so delivered shall be promptly cancelled by the Securities Administrator. No Notes shall be authenticated in lieu of or in exchange for any Notes cancelled as provided in this Section 4.05, except as expressly permitted by this Indenture. All cancelled Notes may be held or disposed of by the Securities
Administrator in accordance with its standard retention or disposal policy as in effect at the time unless the Issuer shall direct by an Issuer Request that they be destroyed or returned to it; provided, however, that such Issuer Request is timely and the Notes have not been previously disposed of by the Securities Administrator.

Section 4.06     Book-Entry Notes.  The Class A-1, Class A-2, Class M-1, Class M-2 and Class B-2 Notes, upon original issuance, will be issued in the form of typewritten Notes representing the Book-Entry Notes, to be delivered to The Depository Trust Company, the initial Depository, by, or on behalf of, the Issuer. The Notes shall initially be registered on the Note Register in the name of Cede & Co., the nominee of the initial Depository, and no Beneficial Owner will receive a Definitive Note representing such Beneficial Owner’s interest in such Note, except as provided in Section 4.08. With respect to such Notes, unless and until definitive, fully registered Notes (the “Definitive Notes”) have been issued to Beneficial Owners pursuant to Section 4.08:

	
            (i)
 	
            the provisions of this Section 4.06 shall be in full force and effect;
 

(ii)         the Note Registrar, the Paying Agent, the Indenture Trustee and the Securities Administrator shall be entitled to deal with the Depository for all purposes of this Indenture (including the payment of principal of and interest on the Notes and the giving of instructions or directions hereunder) as the sole holder of the Notes, and shall have no obligation to the Beneficial Owners of the Notes;

(iii)        to the extent that the provisions of this Section 4.06 conflict with any other provisions of this Indenture, the provisions of this Section 4.06 shall control;

(iv)        the rights of Beneficial Owners shall be exercised only through the Depository and shall be limited to those established by law and agreements between such Owners of Notes and the Depository and/or the Depository Participants. Unless and until 

 

Definitive Notes are issued pursuant to Section 4.08, the initial Depository will make book-entry transfers among the Depository Participants and receive and transmit payments of principal of and interest on the Notes to such Depository Participants; and

(v)        whenever this Indenture requires or permits actions to be taken based upon instructions or directions of Holders of Notes evidencing a specified percentage of the Note Principal Balances of the Notes, the Depository shall be deemed to represent such percentage with respect to the Notes only to the extent that it has received instructions to such effect from Beneficial Owners and/or Depository Participants owning or representing, respectively, such required percentage of the beneficial interest in the Notes and has delivered such instructions to the Securities Administrator and the Indenture Trustee. 

None of the Depositor, the Issuer, the Master Servicer, the Seller, the Securities Administrator, the Indenture Trustee, the Note Registrar and the Owner Trustee shall have any liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in the Book-Entry Notes or for maintaining, supervising or reviewing any records relating to beneficial ownership interests or transfers thereof.

The Class B-2, Class B-3, Class B-4, Class B-5 and Class B-6 Notes will be registered in fully registered, definitive form.

Section 4.07     Notices to Depository.  Whenever a notice or other communication to the Note Holders is required under this Indenture, unless and until Definitive Notes shall have been issued to Beneficial Owners pursuant to Section 4.08, the Indenture Trustee or Securities Administrator, as applicable, shall give all such notices and communications specified herein to be given to Holders of the Notes to the Depository, and shall have no obligation to the Beneficial Owners.

Section 4.08     Definitive Notes.  If (i) the Depositor advises the Securities Administrator in writing that the Depository is no longer willing or able to properly discharge its responsibilities with respect to the Book-Entry Notes and the Depositor is unable to locate a qualified successor within 30 days or (ii) the Depositor, at its option (with the consent of the Securities Administrator, such consent not to be unreasonably withheld) elects to terminate the book-entry system through the Depository, then the Securities Administrator shall request that the Depository notify all Beneficial Owners of the occurrence of any such event and of the availability of Definitive Notes to Beneficial Owners requesting the same.  Upon surrender to the Securities Administrator of the typewritten Notes representing the Book-Entry
Notes by the Depository, accompanied by registration instructions, the Issuer shall execute and the Securities Administrator shall authenticate the Definitive Notes in accordance with the instructions of the Depository.  None of the Issuer, the Note Registrar or the Securities Administrator shall be liable for any delay in delivery of such instructions and may conclusively rely on, and shall be protected in relying on, such instructions.  Upon the issuance of Definitive Notes, the Securities Administrator shall recognize the Holders of the Definitive Notes as Noteholders.

In addition, if an Event of Default has occurred and is continuing, each Note Owner materially adversely affected thereby may at its option request a Definitive Note evidencing such Noteholder's interest in the related Class of Notes.  In order to make such request, such Noteholder shall, subject to the rules and procedures of the Depository, provide the Depository 

 

or the related Depository Participant with directions for the Securities Administrator to exchange or cause the exchange of the Noteholder's interest in such Class of Notes for an equivalent interest in fully registered definitive form.  Upon receipt by the Securities Administrator of instructions from the Depository directing the Securities Administrator to effect such exchange (such instructions to contain information regarding the Class of Notes and the Note Principal Balance being exchanged, the Depository Participant account to be debited with the decrease, the registered holder of and delivery instructions for the Definitive Note, and any other information reasonably required by the Securities Administrator), (i) the Securities Administrator shall instruct the Depository to reduce the related Depository Participant's account by the aggregate Note Principal Balance of the Definitive Note, (ii) the
Securities Administrator shall execute, authenticate and deliver, in accordance with the registration and delivery instructions provided by the Depository, a Definitive Note evidencing such Noteholder's interest in such Class of Notes and (iii) the Issuer shall execute and the Securities Administrator shall authenticate a new Book-Entry Note reflecting the reduction in the Note Principal Balance of such Class of Notes by the amount of the Definitive Notes.

Section 4.09     Tax Treatment.  The Issuer has entered into this Indenture, and the Class A-1, Class A-2, Class M-1, Class M-2 and Class B-1 Notes will be issued with the intention that, for federal, state and local income, single business and franchise tax purposes, such Classes of Notes will qualify as indebtedness. The Issuer and the Securities Administrator (in accordance with Section 6.07 hereof), by entering into this Indenture, and each Class A-1, Class A-2, Class M-1, Class M-2 and Class B-1 Noteholder, by its acceptance of its Note (and each Beneficial Owner by its acceptance of an interest in the applicable Book-Entry Note), agree to treat such Classes of Notes for federal, state and local income, single business and franchise tax purposes as indebtedness.

Section 4.10     Satisfaction and Discharge of Indenture.  This Indenture shall cease to be of further effect with respect to the Notes except as to (i) rights of registration of transfer and exchange, (ii) substitution of mutilated, destroyed, lost or stolen Notes, (iii) rights of Noteholders to receive payments of principal thereof and interest thereon, (iv) Sections 3.03, 3.04, 3.06, 3.09, 3.17, 3.19 and 3.20, (v) the rights, obligations and immunities of the Indenture Trustee and Securities Administrator hereunder (including the rights of the Securities Administrator under Section 6.08 and the obligations of the Securities Administrator under Section 4.11), and (vi) the rights of Noteholders as beneficiaries hereof with respect to the property so deposited with the Securities Administrator payable to all or any
of them, and the Indenture Trustee, on demand of and at the expense of the Issuer, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture with respect to the Notes and shall release and deliver, or cause the Custodian to deliver, the Collateral to or upon the order of the Issuer, when

either

all Notes theretofore authenticated and delivered (other than (i) Notes that have been destroyed, lost or stolen and that have been replaced or paid as provided in Section 4.03 hereof and (ii) Notes for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Issuer and thereafter repaid to the Issuer or discharged from such trust, as provided in Section 3.03) have been delivered to the Securities Administrator for cancellation; or

 

 

all Notes that have not been delivered to the Securities Administrator for cancellation have become due and payable, will become due and payable at the Final Scheduled Payment Date within one year, or have been called for early redemption and the Trust has been terminated pursuant to Section 8.06 hereof,

and the Issuer, in the case of a. or b. above, has irrevocably deposited or caused to be irrevocably deposited with the Securities Administrator cash or direct obligations of or obligations guaranteed by the United States of America (which will mature prior to the date such amounts are payable), in trust for such purpose, in an amount sufficient to pay and discharge the entire indebtedness on such Notes then outstanding not theretofore delivered to the Securities Administrator for cancellation when due on the Final Scheduled Payment Date or other final Payment Date and has delivered to the Securities Administrator and the Indenture Trustee a verification report from a nationally recognized accounting firm certifying that the amounts deposited with the Securities Administrator are sufficient to pay and discharge the entire indebtedness of such Notes, or, in the case of c. above, the Issuer shall have
complied with all requirements of Section 8.06 hereof,

the Issuer has paid or caused to be paid all other sums payable hereunder; and

the Issuer has delivered to the Indenture Trustee an Officer’s Certificate and an Opinion of Counsel, each meeting the applicable requirements of Section 10.01 hereof, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with and, if the Opinion of Counsel relates to a deposit made in connection with Section 4.10(A)(2)b. above, such opinion shall further be to the effect that such deposit will constitute an “in-substance defeasance” within the meaning of Revenue Ruling 85-42, 1985-1 C.B. 36, and in accordance therewith, the Issuer will be the owner of the assets deposited in trust for federal income tax purposes.

Section 4.11     Application of Trust Money.  All monies deposited with the Securities Administrator pursuant to Section 4.10 hereof shall be held in trust and applied by it, in accordance with the provisions of the Notes and this Indenture, to the payment, either directly or through any Paying Agent or the Certificate Paying Agent as designee of the Issuer, as the Securities Administrator may determine, to the Holders of Securities, of all sums due and to become due thereon for principal and interest or otherwise; but such monies need not be segregated from other funds except to the extent required herein or required by law.

	
            Section 4.12
 	
            [Reserved].
 

Section 4.13     Repayment of Monies Held by Paying Agent.  In connection with the satisfaction and discharge of this Indenture with respect to the Notes, all monies then held by any Person other than the Securities Administrator under the provisions of this Indenture with respect to such Notes shall, upon demand of the Issuer, be paid to the Securities Administrator to be held and applied according to Section 3.03 and thereupon such Person shall be released from all further liability with respect to such monies.

Section 4.14     Temporary Notes.  Pending the preparation of any Definitive Notes, the Issuer may execute and upon its written direction, the Securities Administrator may authenticate 

 

and make available for delivery, temporary Notes that are printed, lithographed, typewritten, photocopied or otherwise produced, in any denomination, substantially of the tenor of the Definitive Notes in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Notes may determine, as evidenced by their execution of such Notes.

If temporary Notes are issued, the Issuer will cause Definitive Notes to be prepared without unreasonable delay. After the preparation of the Definitive Notes, the temporary Notes shall be exchangeable for Definitive Notes upon surrender of the temporary Notes at the Corporate Trust Office of the Securities Administrator, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Notes, the Issuer shall execute and the Securities Administrator shall authenticate and make available for delivery, in exchange therefor, Definitive Notes of authorized denominations and of like tenor, class and aggregate principal amount. Until so exchanged, such temporary Notes shall in all respects be entitled to the same benefits under this Indenture as Definitive Notes.

Section 4.15     Representation Regarding ERISA.  By acquiring a Class A-1, Class A-2, Class M-1, Class M-2 and Class B-1 Notes or interest therein, each Holder of such Note or Beneficial Owner of any such interest will be deemed to represent that either (1) it is not acquiring such Note with Plan Assets or (2) (A) the acquisition, holding and transfer of such Note will not give rise to a nonexempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code and (B) the Notes are rated investment grade or better and such person believes that the Notes are properly treated as indebtedness without substantial equity features for purposes of the Department of Labor regulation 29 C.F.R. § 2510.3-101, and agrees to so treat the Notes. Alternatively, regardless of the rating of the Notes, such person
may provide the Securities Administrator and the Note Registrar with an opinion of counsel, which opinion of counsel will not be at the expense of the Issuer, the Seller, the Owner Trustee, the Indenture Trustee, the Securities Administrator, the Note Registrar, the Master Servicer or any servicer which opines that the acquisition, holding and transfer of such Note or interest therein is permissible under applicable law, will not constitute or result in a non-exempt prohibited transaction under ERISA or Section 4975 of the Code and will not subject the Issuer, the Seller, the Depositor, the Owner Trustee, the Indenture Trustee, the Securities Administrator, the Note Registrar, the Master Servicer or any Servicer to any obligation in addition to those undertaken in the Indenture and the other Basic Documents.

No transfer of any Class B-2, Class B-3, Class B-4, Class B-5 or Class B-6 Notes or any interest therein shall be made to any Person unless the Indenture Trustee and the Note Registrar are provided with an Opinion of Counsel which establishes to the satisfaction of the Indenture Trustee and the Note Registrar that the purchase of the Notes is permissible under applicable law, will not constitute or result in any prohibited transaction under ERISA or Section 4975 of the Code and will not subject the Issuer, the Seller, the Owner Trustee, the Indenture Trustee, the Master Servicer or the Note Registrar to any obligation or liability (including obligations or liabilities under ERISA or Section 4975 of the Code) in addition to those undertaken in this Indenture, which Opinion of Counsel shall not be an expense of the Depositor, the Owner Trustee, the Indenture Trustee, the Securities
Administrator, the Notes Registrar or the Master Servicer. In lieu of such Opinion of Counsel, a Person acquiring the Notes may provide a certification in the form each attached hereto as paragraph 3 of Exhibit C or clause (d) of Exhibit 

 

D, which the Issuer, the Seller, the Owner Trustee, the Indenture Trustee, the Master Servicer and the Note Registrar may rely upon without further inquiry or investigation. Neither an Opinion of Counsel nor a certification will be required in connection with the initial transfer of any such Notes by the Depositor to an affiliate of the Depositor (in which case, the Depositor or any affiliate thereof shall be deemed to have represented that such affiliate is not a Plan or a Person investing Plan Assets of any Plan) and the Owner Trustee, the Indenture Trustee, the Master Servicer and the Note Register shall be entitled to conclusively rely upon a representation (which, upon the request of the Owner Trustee, the Indenture Trustee, the Master Servicer and the Note Register, shall be a written representation) from the Depositor of the status of such transferee as an affiliate of the Depositor.

 

 

ARTICLE V

 

DEFAULT AND REMEDIES

Section 5.01     Events of Default.  The Issuer shall deliver to the Indenture Trustee and the Securities Administrator, within five days after learning of the occurrence of a Default, written notice in the form of an Officer’s Certificate of any event which with the giving of notice and the lapse of time would become an Event of Default under clause (ii), (iii) or (iv) of the definition of “Event of Default”, its status and what action the Issuer is taking or proposes to take with respect thereto. The Indenture Trustee shall not be deemed to have knowledge of any Default or Event of Default unless a Responsible Officer has actual knowledge thereof or unless written notice of such Default or Event of Default is received by a Responsible Officer and such notice references the Notes, the Trust Estate or
this Indenture.

Section 5.02     Acceleration of Maturity; Rescission and Annulment.  If an Event of Default should occur and be continuing, then and in every such case the Indenture Trustee at the written direction of the Holders of Notes representing not less than a majority of the aggregate Note Principal Balance of the Notes may declare the Notes to be immediately due and payable, by a notice in writing to the Issuer (and to the Indenture Trustee if such notice is given by Noteholders), and upon any such declaration the unpaid Note Principal Balance of the Notes, together with accrued and unpaid interest thereon through the date of acceleration, shall become immediately due and payable.

At any time after such declaration of acceleration of maturity with respect to an Event of Default has been made and before a judgment or decree for payment of the money due has been obtained by the Indenture Trustee as hereinafter in this Article V provided, Holders of the Notes representing not less than a majority of the aggregate Note Principal Balance of each Class of Notes, by written notice to the Issuer and the Indenture Trustee, may, subject to Section 5.12, waive the related Event of Default and rescind and annul such declaration and its consequences if:

(i)         the Issuer has paid or deposited with the Indenture Trustee or Securities Administrator a sum sufficient to pay:

all payments of principal of and interest on the Notes and all other amounts that would then be due hereunder or under the Notes if the Event of Default giving rise to such acceleration had not occurred;

all sums paid or advanced by the Indenture Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Indenture Trustee and its agents and counsel; and

(ii)         all Events of Default, other than the nonpayment of the principal of the Notes that has become due solely by such acceleration, have been cured or waived as provided in Section 5.12.

No such rescission shall affect any subsequent default or impair any right consequent thereto.

 

 

Section 5.03     Collection of Indebtedness and Suits for Enforcement by Indenture Trustee.

(a)      The Issuer covenants that if (i) default is made in the payment of any interest on any Note when the same becomes due and payable, and such default continues for a period of five days, or (ii) default is made in the payment of the principal of or any installment of the principal of any Note when the same becomes due and payable, the Issuer shall, upon demand of the Indenture Trustee, acting at the direction of the Holders of a majority of the aggregate Note Principal Balances of the Notes, pay to the Securities Administrator, for the benefit of the Holders of Notes, the whole amount then due and payable on the Notes for principal and interest, with interest at the applicable Note Interest Rate upon the overdue principal, and in addition thereto such further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and advances of the Indenture Trustee and its agents and counsel.

(b)      In case the Issuer shall fail forthwith to pay such amounts upon such demand, the Indenture Trustee, in its own name and as trustee of an express trust, subject to the provisions of Section 10.15 hereof, may institute a Proceeding for the collection of the sums so due and unpaid, and may prosecute such Proceeding to judgment or final decree, and may enforce the same against the Issuer or other obligor upon the Notes and collect in the manner provided by law out of the property of the Issuer or other obligor upon the Notes, wherever situated, the monies adjudged or decreed to be payable.

(c)      If an Event of Default occurs and is continuing, the Indenture Trustee, subject to the provisions of Section 10.15 hereof, may, as more particularly provided in Section 5.04 hereof, in its discretion, proceed to protect and enforce its rights and the rights of the Noteholders by such appropriate Proceedings as directed in writing by Holders of a majority of the aggregate Note Principal Balances of each Class of Notes, to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy or legal or equitable right vested in the Indenture Trustee by this Indenture or by law.

(d)      In case there shall be pending, relative to the Issuer or any other obligor upon the Notes or any Person having or claiming an ownership interest in the Trust Estate, Proceedings under Title 11 of the United States Code or any other applicable federal or state bankruptcy, insolvency or other similar law, or in case a receiver, assignee or trustee in bankruptcy or reorganization, liquidator, sequestrator or similar official shall have been appointed for or taken possession of the Issuer or its property or such other obligor or Person, or in case of any other comparable judicial Proceedings relative to the Issuer or other obligor upon the Notes, or to the creditors or property of the Issuer or such other obligor, the Indenture Trustee, as directed in writing by Holders of a majority of the aggregate Note Principal Balances of each
Class of Notes, irrespective of whether the principal of any Notes shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Indenture Trustee shall have made any demand pursuant to the provisions of this Section, shall be entitled and empowered, by intervention in such Proceedings or otherwise:

(i)         to file and prove a claim or claims for the whole amount of principal and interest owing and unpaid in respect of the Notes and to file such other papers or documents as 

 

may be necessary or advisable in order to have the claims of the Indenture Trustee (including any claim for reasonable compensation to the Indenture Trustee and each predecessor Indenture Trustee, and their respective agents, attorneys and counsel, and for reimbursement of all expenses and liabilities incurred, and all advances made, by the Indenture Trustee and each predecessor Indenture Trustee, except as a result of negligence, willful misconduct or bad faith) and of the Noteholders allowed in such Proceedings;

(ii)         unless prohibited by applicable law and regulations, to vote on behalf of the Holders of Notes in any election of a trustee, a standby trustee or Person performing similar functions in any such Proceedings;

(iii)        to collect and receive any monies or other property payable or deliverable on any such claims and to distribute all amounts received with respect to the claims of the Noteholders and of the Indenture Trustee on their behalf, and

(iv)        to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Indenture Trustee or the Holders of Notes allowed in any judicial proceedings relative to the Issuer, its creditors and its property;

and any trustee, receiver, liquidator, custodian or other similar official in any such Proceeding is hereby authorized by each of such Noteholders to make payments to the Securities Administrator, and, in the event that the Indenture Trustee shall consent to the making of payments directly to such Noteholders, to pay to the Indenture Trustee such amounts as shall be sufficient to cover reasonable compensation to the Indenture Trustee, each predecessor Indenture Trustee and their respective agents, attorneys and counsel, and all other expenses and liabilities incurred, and all advances made, by the Indenture Trustee and each predecessor Indenture Trustee.

(e)      Nothing herein contained shall be deemed to authorize the Indenture Trustee to authorize or consent to or vote for or accept or adopt on behalf of any Noteholder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof or to authorize the Indenture Trustee to vote in respect of the claim of any Noteholder in any such proceeding except, as aforesaid, to vote for the election of a trustee in bankruptcy or similar Person.

(f)       All rights of action and of asserting claims under this Indenture, or under any of the Notes, may be enforced by the Indenture Trustee without the possession of any of the Notes or the production thereof in any trial or other Proceedings relative thereto, and any such action or proceedings instituted by the Indenture Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment, subject to the payment of the expenses, disbursements and compensation of the Indenture Trustee, each predecessor Indenture Trustee and their respective agents and attorneys, shall be for the ratable benefit of the Holders of the Notes, subject to Section 5.05 hereof.

In any Proceedings brought by the Indenture Trustee (and also any Proceedings involving the interpretation of any provision of this Indenture to which the Indenture Trustee shall be a party), the Indenture Trustee shall be held to represent all the Holders of the Notes, and it shall not be necessary to make any Noteholder a party to any such Proceedings.

 

 

Section 5.04     Remedies; Priorities.  (a)  If an Event of Default shall have occurred and be continuing and if an acceleration has been declared and not rescinded pursuant to Section 5.02 hereof, the Indenture Trustee, subject to the provisions of Section 10.15 hereof, may, and shall, at the written direction of the Holders of a majority of the aggregate Note Principal Balances of the Notes, do one or more of the following (subject to Section 5.05 hereof):

(i)         institute Proceedings in its own name and as trustee of an express trust for the collection of all amounts then payable on the Notes or under this Indenture with respect thereto, whether by declaration or otherwise, enforce any judgment obtained, and collect from the Issuer and any other obligor upon such Notes monies adjudged due;

(ii)         institute Proceedings from time to time for the complete or partial foreclosure of this Indenture with respect to the Trust Estate;

(iii)        exercise any remedies of a secured party under the UCC and take any other appropriate action to protect and enforce the rights and remedies of the Indenture Trustee and the Holders of the Notes; and

(iv)        sell the Trust Estate or any portion thereof or rights or interest therein, at one or more public or private sales called and conducted in any manner permitted by law;

provided, however, that the Indenture Trustee may not sell or otherwise liquidate the Trust Estate following an Event of Default, unless (A) the Indenture Trustee obtains the consent of the Holders of 100% of the aggregate Note Principal Balance of the Notes then outstanding, (B) the proceeds of such sale or liquidation distributable to the Holders of the Notes are sufficient to discharge in full all amounts then due and unpaid upon such Notes for principal and interest or (C) the Indenture Trustee determines that the Mortgage Loans will not continue to provide sufficient funds for the payment of principal of and interest on the applicable Notes as they would have become due if the Notes had not been declared due and payable, and the Indenture Trustee obtains the consent of the Holders of 66 2/3% of the aggregate Note Principal Balance of each Class of Notes then outstanding, voting separately.  In
determining such sufficiency or insufficiency with respect to clause (B) and (C), the Indenture Trustee may, but need not, obtain and rely upon an opinion (obtained at the expense of the Trust) of an Independent investment banking or accounting firm of national reputation as to the feasibility of such proposed action and as to the sufficiency of the Trust Estate for such purpose. Notwithstanding the foregoing, any Sale of the Trust Estate shall be made subject to the continued servicing of the Mortgage Loans by the Servicer (other than any Servicer as to which an Event of Servicer Termination has occurred and is continuing) as provided in the Sale and Servicing Agreement.

(b)      If the Indenture Trustee or the Securities Administrator collects any money or property pursuant to this Article V, the Securities Administrator shall pay out the money or property in the following order:

FIRST: to the Indenture Trustee, the Securities Administrator, Master Servicer, the Owner Trustee, the Custodian and the Servicers for amounts due and not previously paid pursuant to the Indenture and the other Basic Documents;

 

 

SECOND: to the Class A-1 Noteholders and Class A-2 Noteholders, for amounts due and unpaid on such Notes with respect to interest (not including any Basis Risk Shortfall Carryover Amounts), on a pro rata basis, according to the amounts due and payable on each such Class for interest;

THIRD: to the Class A-1 Noteholders and Class A-2 Noteholders, for amounts due and unpaid on such Notes with respect to principal, and to each such Noteholder ratably, without preference or priority of any kind, according to the amounts due and payable on such Notes for principal, until the Note Principal Balance of each such Class is reduced to zero;

FOURTH: to the Class A-1 Notes and Class A-2 Noteholders, pro rata, any Basis Risk Shortfall Carryover Amounts, in each case based on the amount of any Basis Risk Shortfall Carryover Amounts not previously paid to each such Class; 

FIFTH: sequentially, to the Class M-1, Class M-2 and Class B-1 Noteholders, for amounts due and unpaid on such Notes with respect to interest (not including any Basis Risk Shortfall Carryover Amounts), according to the amounts due and payable on each such Class for interest;

SIXTH: sequentially, to the Class M-1, Class M-2 and Class B-1 Noteholders, for amounts due and unpaid on such Notes with respect to principal, according to the amounts due and payable on such Notes for principal, until the Note Principal Balance of each such Class is reduced to zero;

SEVENTH: sequentially, to the Class M-1, Class M-2 and Class B-1 Noteholders, any Basis Risk Shortfall Carryover Amounts based on the amount of any Basis Risk Shortfall Carryover Amounts not previously paid;

EIGHTH: eighth, to the Class A-1 Noteholders and Class A-2 Noteholders, on a pro rata basis, any Applied Realized Loss Amounts based on the amount of any Applied Realized Loss Amounts not previously paid;

NINTH: to the Class A-1 Noteholders and Class A-2 Noteholders, on a pro rata basis, reimbursement of any Relief Act shortfalls and Prepayment Interest Shortfalls previously allocated thereto;

TENTH: sequentially, to the Class M-1, Class M-2 and Class B-1 Noteholders, any Applied Realized Loss Amounts based on the amount of any Applied Realized Loss Amounts not previously paid;

 

 

ELEVENTH: sequentially, to the Class M-1, Class M-2 and Class B-1 Noteholders, reimbursement of any Relief Act shortfalls and Prepayment Interest Shortfalls previously allocated thereto;

TWELFTH: sequentially, to the Class B-2, Class B-3, Class B-4, Class B-5 and Class B-6 Noteholders, for amounts due and unpaid on such Notes with respect to interest (not including any Basis Risk Shortfall Carryover Amounts) according to the amounts due and payable on such Class of Notes for interest and principal;

THIRTEENTH: sequentially, to the Class B-2, Class B-3, Class B-4, Class B-5 and Class B-6 Noteholders, for amounts due and unpaid on such Notes with respect to principal, according to the amounts due and payable on such Notes for principal, until the Note Principal Balance of such class is reduced to zero;

FOURTEENTH, sequentially, to the Class B-2, Class B-3, Class B-4, Class B-5 and Class B-6 Noteholders, any Basis Risk Shortfall Carryover Amounts based on the amount of any Basis Risk Shortfall Carryover Amounts not previously paid;

FIFTEENTH, sequentially, to the Class B-2, Class B-3, Class B-4, Class B-5 and Class B-6 Noteholders, any Applied Realized Loss Amounts based on the amount of any Applied Realized Loss Amounts not previously paid;

SIXTEENTH, to the Swap Provider, the amount (to the extent not paid by the Securities Administrator from any upfront payment received pursuant to any replacement interest rate swap agreement that may be entered into by the trust) of any Swap Termination Payment resulting from a Swap Provider Trigger Event not previously paid; 

SEVENTEENTH, sequentially, to the Class B-2, Class B-3, Class B-4, Class B-5 and Class B-6 and Class B-6 Noteholders, reimbursement of any Relief Act shortfalls and Prepayment Interest Shortfalls previously allocated thereto; and

EIGHTEENTH, to the Certificates as set forth in the Trust Agreement. 

The Securities Administrator may fix a record date and Payment Date for any payment to Noteholders pursuant to this Section 5.04. At least 15 days before such record date, the Securities Administrator shall mail to each Noteholder a notice that states the record date, the Payment Date and the amount to be paid.

Section 5.05     Optional Preservation of the Trust Estate.  If the Notes have been declared to be due and payable under Section 5.02 following an Event of Default and such declaration and its consequences have not been rescinded and annulled, the Indenture Trustee may elect to take and maintain possession of the Trust Estate. It is the desire of the parties hereto and the 

 

Noteholders that there be at all times sufficient funds for the payment of principal of and interest on the Notes and other obligations of the Issuer, and the Indenture Trustee shall take such desire into account when determining whether or not to take and maintain possession of the Trust Estate. In determining whether to take and maintain possession of the Trust Estate, the Indenture Trustee may, but need not, obtain and rely upon an opinion of an Independent investment banking or accounting firm of national reputation as to the feasibility of such proposed action and as to the sufficiency of the Trust Estate for such purpose.

Section 5.06     Limitation of Suits.  So long as the Majority Certificateholder owns 100% of the Securities, no Holder of any Note shall have any right to institute any Proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder.  No Holder of any Note shall have any right to institute any Proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless and subject to the foregoing and the provisions of Section 10.15 hereof:

(i)         such Holder has previously given written notice to the Indenture Trustee of a continuing Event of Default;

(ii)         the Holders of not less than 25% of the aggregate Note Principal Balance of the Notes have made a written request to the Indenture Trustee to institute such Proceeding in respect of such Event of Default in its own name as Indenture Trustee hereunder;

(iii)        such Holder or Holders have offered to the Indenture Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in complying with such request;

(iv)        the Indenture Trustee, for 60 days after its receipt of such notice of request and offer of indemnity, has failed to institute such Proceedings; and

(v)        no direction inconsistent with such written request has been given to the Indenture Trustee during such 60-day period by the Holders of a majority of the Note Principal Balances of the Notes.

It is understood and intended that no one or more Holders of Notes shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders of Notes or to obtain or to seek to obtain priority or preference over any other Holders or to enforce any right under this Indenture, except in the manner herein provided.

Subject to the last paragraph of Section 5.11 herein, in the event the Indenture Trustee shall receive conflicting or inconsistent requests and indemnity from two or more groups of Holders of Notes, each representing less than a majority of the Note Principal Balances of the Notes, the Indenture Trustee shall take such action as requested by the Holders representing the highest amount (in the aggregate) of the Note Principal Balances, notwithstanding any other provisions of this Indenture.

 

 

Section 5.07     Unconditional Rights of Noteholders To Receive Principal and Interest.  Notwithstanding any other provisions in this Indenture, the Holder of any Note shall have the right, which is absolute and unconditional, to receive payment of the principal of and interest, if any, on such Note on or after the respective due dates thereof expressed in such Note or in this Indenture and to institute suit for the enforcement of any such payment, and such right shall not be impaired without the consent of such Holder.

Section 5.08     Restoration of Rights and Remedies.  If the Indenture Trustee or any Noteholder has instituted any Proceeding to enforce any right or remedy under this Indenture and such Proceeding has been discontinued or abandoned for any reason or has been determined adversely to the Indenture Trustee or to such Noteholder, then and in every such case the Issuer, the Indenture Trustee and the Noteholders shall, subject to any determination in such Proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Indenture Trustee and the Noteholders shall continue as though no such Proceeding had been instituted.

Section 5.09     Rights and Remedies Cumulative.  No right or remedy herein conferred upon or reserved to the Indenture Trustee or to the Noteholders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.

Section 5.10     Delay or Omission Not a Waiver.  No delay or omission of the Indenture Trustee or any Holder of any Note to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article V or by law to the Indenture Trustee or to the Noteholders may be exercised from time to time, and as often as may be deemed expedient, by the Indenture Trustee or by the Noteholders, as the case may be.

Section 5.11     Control By Noteholders.  The Holders of a majority of the aggregate Note Principal Balances of Notes shall have the right to direct the time, method and place of conducting any Proceeding for any remedy available to the Indenture Trustee with respect to the Notes or exercising any trust or power conferred on the Indenture Trustee; provided that:

(i)         such direction shall not be in conflict with any rule of law or with this Indenture;

(ii)         any direction to the Indenture Trustee to sell or liquidate the Trust Estate shall be by Holders of Notes representing not less than 100% of the aggregate Note Principal Balance of the Notes, voting separately as set forth in Section 5.04(a) hereof; and; and

(iii)        the Indenture Trustee may take any other action deemed proper by the Indenture Trustee that is not inconsistent with such direction of the Holders of Notes representing a majority of the Note Principal Balances of the Notes.

 

 

Notwithstanding the rights of Noteholders set forth in this Section 5.11 the Indenture Trustee need not take any action that it determines might involve it in liability.

Section 5.12     Waiver of Past Defaults.  Prior to the declaration of the acceleration of the maturity of the Notes as provided in Section 5.02 hereof, the Holders of Notes representing not less than a majority of the aggregate Note Principal Balance of each Class of Notes may waive any past Event of Default and its consequences except an Event of Default (a) with respect to payment of principal of or interest on any of the Notes, or (b) in respect of a covenant or provision hereof which cannot be modified or amended without the consent of the Holder of each Note.  In the case of any such waiver, the Issuer, the Indenture Trustee and the Holders of the Notes shall be restored to their former positions and rights hereunder, respectively, but no such waiver shall extend to any subsequent or other Event of Default or
impair any right consequent thereto.

Upon any such waiver, any Event of Default arising therefrom shall be deemed to have been cured and not to have occurred for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Event of Default or impair any right consequent thereto.

Section 5.13     Undertaking for Costs.  All parties to this Indenture agree, and each Holder of any Note and each Beneficial Owner of any interest therein by such Holder’s or Beneficial Owner’s acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Indenture Trustee for any action taken, suffered or omitted by it as Indenture Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys’ fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such
party litigant; but the provisions of this Section 5.13 shall not apply to (a) any suit instituted by the Indenture Trustee, (b) any suit instituted by any Noteholder, or group of Noteholders, in each case holding in the aggregate more than 10% of the Note Principal Balances of the Notes or (c) any suit instituted by any Noteholder for the enforcement of the payment of principal of or interest on any Note on or after the respective due dates expressed in such Note and in this Indenture.

Section 5.14     Waiver of Stay or Extension Laws.  The Issuer covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead or in any manner whatsoever, claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Issuer (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it shall not hinder, delay or impede the execution of any power herein granted to the Indenture Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted.

Section 5.15     Sale of Trust Estate.  (a)  The power to effect any sale or other disposition (a “Sale”) of any portion of the Trust Estate pursuant to Section 5.04 hereof is expressly subject to the provisions of Sections 5.05 and 5.11(ii) hereof and this Section 5.15. The power to effect any such Sale shall not be exhausted by any one or more Sales as to any portion of the Trust Estate remaining unsold, but shall continue unimpaired until the entire Trust Estate shall have been sold or all amounts payable on the Notes and under this Indenture shall have been paid. The 

 

Indenture Trustee may from time to time postpone any public Sale by public announcement made at the time and place of such Sale. The Indenture Trustee hereby expressly waives its right to any amount fixed by law as compensation for any Sale.

(b)      The Indenture Trustee shall not in any private Sale sell the Trust Estate, or any portion thereof, unless

the Holders of all Notes consent to or direct the Indenture Trustee to make, such Sale, or

the proceeds of such Sale would be not less than the entire amount which would be payable to the Noteholders under the Notes, in full payment thereof in accordance with Section 5.02 hereof, on the Payment Date next succeeding the date of such Sale, or

the Indenture Trustee determines that the conditions for retention of the Trust Estate set forth in Section 5.05 hereof cannot be satisfied (in making any such determination, the Indenture Trustee may rely upon an opinion of an Independent investment banking firm obtained and delivered as provided in Section 5.05 hereof), and the Holders of Notes representing at least 100% of the Note Principal Balances of the Notes consent to such Sale.

The purchase by the Indenture Trustee of all or any portion of the Trust Estate at a private Sale shall not be deemed a Sale or other disposition thereof for purposes of this Section 5.15(b).

(c)      Subject to this Section 5.15, unless the Holders representing at least 100% of the aggregate Note Principal Balance of the Notes voting separately as set forth in Section 5.04(a) hereof, have otherwise consented or directed the Indenture Trustee, at any public Sale of all or any portion of the Trust Estate at which a minimum bid equal to or greater than the amount described in paragraph (2) of subsection (b) of this Section 5.15 has not been established by the Indenture Trustee and no Person bids an amount equal to or greater than such amount, the Indenture Trustee, as trustee for the benefit of the Holders of the Notes, shall bid an amount (which shall include the Indenture Trustee’s right, in its capacity as Indenture Trustee, to credit bid) at least $1.00 more than the highest other bid in order to preserve the Trust
Estate on behalf of the Noteholders.

	
            (d)
 	
            In connection with a Sale of all or any portion of the Trust Estate,
 

any Holder or Holders of Notes may bid for and purchase the property offered for sale, and upon compliance with the terms of sale may hold, retain and possess and dispose of such property, without further accountability, and may, in paying the purchase money therefor, deliver any Notes or claims for interest thereon in lieu of cash up to the amount which shall, upon distribution of the net proceeds of such sale, be payable thereon, and such Notes, in case the amounts so payable thereon shall be less than the amount due thereon, shall be returned to the Holders thereof after being appropriately stamped to show such partial payment;

the Indenture Trustee may bid for and acquire the property offered for Sale in connection with any Sale thereof, and, subject to any requirements of, and to the extent 

 

permitted by, applicable law in connection therewith, may purchase all or any portion of the Trust Estate in a private sale, and, in lieu of paying cash therefor, may make settlement for the purchase price by crediting the gross Sale price against the sum of (A) the amount which would be distributable to the Holders of the Notes and Holders of Certificates on the Payment Date next succeeding the date of such Sale and (B) the expenses of the Sale and of any Proceedings in connection therewith which are reimbursable to it, without being required to produce the Notes in order to complete any such Sale or in order for the net Sale price to be credited against such Notes, and any property so acquired by the Indenture Trustee shall be held and dealt with by it in accordance with the provisions of this Indenture;

the Indenture Trustee shall execute and deliver an appropriate instrument of conveyance, prepared by the Issuer and satisfactory to the Indenture Trustee, transferring its interest in any portion of the Trust Estate in connection with a Sale thereof; and

the Indenture Trustee is hereby irrevocably appointed the agent and attorney-in-fact of the Issuer to transfer and convey its interest in any portion of the Trust Estate in connection with a Sale thereof, and to take all action necessary to effect such Sale.

(e)      So long as the Majority Certificateholder owns 100% of the Securities, the Majority Certificateholder shall not consent to any Sale of the Trust Estate as set forth herein.

Section 5.16     Action on Notes.  The Indenture Trustee’s right to seek and recover judgment on the Notes or under this Indenture shall not be affected by the seeking, obtaining or application of any other relief under or with respect to this Indenture. Neither the lien of this Indenture nor any rights or remedies of the Indenture Trustee or the Noteholders shall be impaired by the recovery of any judgment by the Indenture Trustee against the Issuer or by the levy of any execution under such judgment upon any portion of the Trust Estate or upon any of the assets of the Issuer. Any money or property collected by the Indenture Trustee or the Securities Administrator shall be applied by the Securities Administrator in accordance with Section 5.04(b) hereof.

 

 

ARTICLE VI

 

THE INDENTURE TRUSTEE AND THE SECURITIES ADMINISTRATOR

Section 6.01     Duties of Indenture Trustee and Securities Administrator.  (a)  If an Event of Default has occurred and is continuing, the Indenture Trustee shall exercise the rights and powers vested in it by this Indenture 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.

(b)      Except during the continuance of an Event of Default of which the Indenture Trustee has actual knowledge or has received written notice, in the case of the Indenture Trustee and, at any time, in the case of the Securities Administrator:

(i)         the Indenture Trustee and the Securities Administrator undertakes to perform such duties and only such duties as are specifically set forth in this Indenture and the other Basic Documents to which it is a party and no implied covenants or obligations shall be read into this Indenture and the other Basic Documents against the Indenture Trustee or the Securities Administrator; and

(ii)         in the absence of bad faith on its part, the Indenture Trustee and the Securities Administrator may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates, reports, documents, Issuer Requests or other instruments or opinions furnished to each of the Indenture Trustee and the Securities Administrator and conforming to the requirements of this Indenture or the other Basic Documents; however, the Indenture Trustee and the Securities Administrator shall examine the certificates, reports, documents, Issuer Requests or other instruments and opinions to determine whether or not they conform on their face to the requirements of this Indenture.

(c)      The Indenture Trustee and the Securities Administrator may not be relieved from liability for each of its own negligent action, its own negligent failure to act or its own willful misconduct, except that:

(i)         this paragraph does not limit the effect of paragraph (b) of this Section 6.01;

(ii)         neither the Indenture Trustee nor the Securities Administrator shall not be liable for any error of judgment made in good faith by a Responsible Officer unless it is proved that the Indenture Trustee or the Securities Administrator, as applicable, was negligent in ascertaining the pertinent facts; and

(iii)        neither the Indenture Trustee nor the Securities Administrator shall  be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it from Noteholders, the Certificateholders or from the Issuer, which they are entitled to give under the Basic Documents.

 

 

(d)      The Indenture Trustee shall not be liable for interest on any money received by it except as set forth in the Basic Documents and as the Indenture Trustee may agree in writing with the Issuer.

(e)      Money held in trust by the Indenture Trustee need not be segregated from other trust funds except to the extent required by law or the terms of this Indenture or the Trust Agreement.

(f)       No provision of this Indenture shall require the Indenture Trustee or the Securities Administrator to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers, if it shall have reasonable grounds to believe that repayment of such funds or indemnity satisfactory to it against such risk or liability is not reasonably assured to it.

(g)      Every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Indenture Trustee shall be subject to the provisions of this Section.

(h)      The Indenture Trustee shall not be deemed to have notice or knowledge of any Default or Event of Default unless a Responsible Officer of the Indenture Trustee has actual knowledge thereof or unless written notice of any such event that is in fact an Event of Default or Default is received by the Indenture Trustee at its Corporate Trust Office and such notice references the Notes or Certificates generally, the Issuer, the Trust Estate or this Indenture.

Section 6.02     Rights of Indenture Trustee and Securities Administrator.  (a)  The Indenture Trustee and the Securities Administrator may rely on any document believed by it to be genuine and to have been signed or presented by the proper person. The Indenture Trustee and the Securities Administrator need not investigate any fact or matter stated in the document.

(b)      Before the Indenture Trustee or the Securities Administrator acts or refrains from acting, it may require an Officer’s Certificate or an Opinion of Counsel. Neither the Indenture Trustee nor the Securities Administrator shall be liable for any action it takes or omits to take in good faith in reliance on and in accordance with an Officer’s Certificate or Opinion of Counsel.

(c)      Neither the Indenture Trustee nor the Securities Administrator shall be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers.

(d)      The Indenture Trustee or the Securities Administrator may consult with counsel, and the written advice or Opinion of Counsel (which shall not be at the expense of the Indenture Trustee or the Securities Administrator) with respect to legal matters relating to this Indenture, the other Basic Documents and the Notes shall be full and complete authorization and protection from liability in respect to any action taken, omitted or suffered by it hereunder in good faith and in accordance with the written advice or opinion of such counsel.

(e)      For the limited purpose of effecting any action to be undertaken by each of the Indenture Trustee and the Securities Administrator, but not specifically as a duty of the Indenture Trustee or the Securities Administrator in the Indenture, each of the Indenture Trustee 

 

and the Securities Administrator may execute any of the trusts or powers hereunder or perform any duties hereunder, either directly or by or through agents, attorneys, custodians or nominees appointed with due care, and shall not be responsible for any willful misconduct or negligence on the part of any agent, attorney, custodian or nominee so appointed.

(f)       The Securities Administrator or its Affiliates are permitted to receive additional compensation that could be deemed to be in the Securities Administrator’s economic self-interest for (i) serving as investment adviser, administrator, shareholder servicing agent, custodian or sub-custodian with respect to certain of the Permitted Investments, (ii) using Affiliates to effect transactions in certain Permitted Investments and (iii) effecting transactions in certain Permitted Investments. Such compensation shall not be considered an amount that is reimbursable or payable to the Securities Administrator (i) as part of the compensation hereunder or (ii) out of Available Funds.

(g)      Anything in this Indenture to the contrary notwithstanding, in no event shall the Indenture Trustee or the Securities Administrator be liable for special, indirect or consequential loss or damage of any kind whatsoever (including but not limited to lost profits), even if the Indenture Trustee or the Securities Administrator has been advised of the likelihood of such loss or damage and regardless of the form of action.

(h)      None of the Securities Administrator, the Issuer or the Indenture Trustee shall be responsible for the acts or omissions of the other, it being understood that this Indenture shall not be construed to render them partners, joint venturers or agents of one another.

(i)       Neither the Indenture Trustee nor the Securities Administrator shall be required to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if there is reasonable ground for believing that the repayment of such funds or indemnity reasonably satisfactory to it against such risk or liability is not reasonably assured to it, and none of the provisions contained in this Indenture shall in any event require the Indenture Trustee or the Securities Administrator to perform, or be responsible for the manner of performance of, any of the obligations of the Master Servicer under the Servicing Agreement, except during such time, if any, as the Indenture Trustee shall be the successor to, and be vested with the rights,
duties, powers and privileges of, the Master Servicer in accordance with the terms of the Servicing Agreement.

(j)       Except for those actions that the Indenture Trustee or the Securities Administrator are required to take hereunder, neither the Indenture Trustee nor the Securities Administrator shall have any obligation or liability to take any action or to refrain from taking any action hereunder in the absence of written direction as provided hereunder.

(k)      Neither the Indenture Trustee nor the Securities Administrator shall be under any obligation to exercise any of the trusts or powers vested in it by this Indenture, other than its obligation to give notices pursuant to this Indenture, or to institute, conduct or defend any litigation hereunder or in relation hereto at the request, order or direction of any of the Noteholders pursuant to the provisions of this Indenture, unless such Noteholders shall have offered to the Indenture Trustee or the Securities Administrator, as applicable, reasonable security or indemnity against the costs, expenses and liabilities which may be incurred therein or thereby.  Nothing contained herein shall, however, relieve the Indenture Trustee of the 

 

obligation, upon the occurrence of an Event of Default of which a Responsible Officer of the Indenture Trustee has actual knowledge (which has not been cured or waived), to exercise such of the rights and powers vested in it by this Indenture and to use the same degree of care and skill in their exercise as a prudent person would exercise under the circumstances in the conduct of his own affairs.

(l)       Neither the Indenture Trustee nor the Securities Administrator shall be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond or other paper or document, unless requested in writing to do so by Holders of Notes representing not less than 25% of the Note Principal Balance of the Notes and provided that the payment within a reasonable time to the Indenture Trustee or the Securities Administrator, as applicable, of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Indenture Trustee or the Securities Administrator, as applicable, reasonably assured to the Indenture Trustee by the security afforded to it by the terms of this
Indenture. The Indenture Trustee or the Securities Administrator may require reasonable indemnity against such expense or liability as a condition to taking any such action. The reasonable expense of every such examination shall be paid by the Noteholders requesting the investigation.

(m)     Should the Indenture Trustee or the Securities Administrator deem the nature of any action required on its part to be unclear, the Indenture Trustee or the Securities Administrator, respectively, may require prior to such action that it be provided by the Depositor with reasonable further instructions.

(n)      The right of the Indenture Trustee or the Securities Administrator to perform any discretionary act enumerated in this Indenture shall not be construed as a duty, and neither the Indenture Trustee nor the Securities Administrator shall be accountable for other than its negligence or willful misconduct in the performance of any such act.

(o)      Neither the Indenture Trustee nor the Securities Administrator shall be required to give any bond or surety with respect to the execution of the trust created hereby or the powers granted hereunder.

(p)      Neither the Indenture Trustee nor the Securities Administrator shall have any duty to conduct any affirmative investigation as to the occurrence of any condition requiring the repurchase of any Mortgage Loan by the Seller pursuant to this Indenture or the Mortgage Loan Purchase Agreement, as applicable, or the eligibility of any Mortgage Loan for purposes of this Indenture.

(q)      The Indenture Trustee shall not be deemed to have notice or actual knowledge of any Default or Event of Default unless actually known to a Responsible Officer of the Indenture Trustee or written notice thereof (making reference to this Indenture or the Notes) is received by the Indenture Trustee at the Corporate Trust Office.

Section 6.03     Individual Rights of Indenture Trustee.  The Indenture Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Issuer or its Affiliates with the same rights it would have if it were not Indenture Trustee, subject to the requirements of the Trust Indenture Act. Any Note Registrar, co-registrar 

 

or co-paying agent may do the same with like rights. However, the Indenture Trustee must comply with Section 6.12 hereof.

	
            Section 6.04
 	
            [Reserved].
 

Section 6.05     Indenture Trustee’s and Securities Administrator’s Disclaimer.  Neither the Indenture Trustee nor the Securities Administrator shall be responsible for and makes no representation as to the validity or adequacy of this Indenture, the Notes or any other Basic Document, it shall not be accountable for the Issuer’s use of the proceeds from the Notes, and it shall not be responsible for any statement of the Issuer in the Indenture or in any document issued in connection with the sale of the Notes or in the Notes other than the Securities Administrator’s certificate of authentication.

Section 6.06     Notice of Event of Default.  Subject to Section 5.01, the Indenture Trustee shall promptly mail to each Noteholder notice of the Event of Default after it is known to a Responsible Officer of the Indenture Trustee, unless such Event of Default shall have been waived or cured. Except in the case of an Event of Default in payment of principal of or interest on any Note, the Indenture Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the best interests of Noteholders.

	
            Section 6.07
 	
            Reports to Holders and Tax Administration.
 

The Securities Administrator shall deliver to each Noteholder such information as may be required and such other customary information as the Securities Administrator may determine and/or be required by the Internal Revenue Service or by a federal or state law or rules or regulations to enable such holder to prepare its federal and state income tax returns.

The Securities Administrator shall prepare and file (or cause to be prepared and filed), on behalf of the Owner Trustee, all tax returns (if any) and information reports, tax elections and such annual or other reports of the Issuer as are necessary for preparation of tax returns and information reports as provided in Section 5.03 of the Trust Agreement, including without limitation Form 1099.  All tax returns and information reports shall be signed by the Owner Trustee or to the extent permitted by law, the Securities Administrator as provided in Section 5.03 of the Trust Agreement.

Section 6.08     Compensation.  An annual fee shall be paid to the Indenture Trustee by the Master Servicer pursuant to a separate agreement between the Indenture Trustee and the Master Servicer. In addition, the Indenture Trustee and the Securities Administrator will each be entitled to recover from the Payment Account pursuant to Section 3.25 of this Indenture all reasonable out-of-pocket expenses, disbursements and advances and the expenses of the Indenture Trustee and the Securities Administrator, respectively, in connection with any breach of this Indenture or any claim or legal action (including any pending or threatened claim or legal action) or otherwise incurred or made by the Indenture Trustee or the Securities Administrator, respectively, in the administration of the trusts hereunder (including the
reasonable compensation, expenses and disbursements of its counsel) except any such expense, disbursement or advance as may arise from its own negligence or intentional misconduct or which is the responsibility of the Noteholders as provided herein.  Such compensation and reimbursement obligation shall not be 

 

limited by any provision of law in regard to the compensation of a trustee of an express trust.  Additionally, each of the Indenture Trustee and the Securities Administrator and any director, officer, employee or agent of the Indenture Trustee or the Securities Administrator shall be indemnified by the Trust and held harmless against any loss, liability or expense (including reasonable attorney's fees and expenses) incurred in the administration of this Indenture (other than its ordinary out of pocket expenses incurred hereunder) or in connection with any claim or legal action relating to (a) the Basic Documents or (b) the Notes, other than any loss, liability or expense incurred by reason of its own negligence or intentional misconduct, or which is the responsibility of the Noteholders as provided herein.

The Issuer's payment obligations to the Indenture Trustee and Securities Administrator pursuant to this Section 6.08 shall survive the discharge of this Indenture and the termination or resignation of the Indenture Trustee or Securities Administrator.  When the Indenture Trustee or the Securities Administrator incurs expenses after the occurrence of an Event of Default with respect to the Issuer, the expenses are intended to constitute expenses of administration under Title 11 of the United States Code or any other applicable federal or state bankruptcy, insolvency or similar law.

Section 6.09     Replacement of Indenture Trustee and the Securities Administrator.  No resignation or removal of the Indenture Trustee or the Securities Administrator and no appointment of a successor Indenture Trustee or a successor Securities Administrator shall become effective until the acceptance of appointment by the successor Indenture Trustee pursuant to this Section 6.09. The Indenture Trustee or the Securities Administrator may resign at any time by so notifying the Issuer. In the event that the Indenture Trustee determines that a conflict of interest exists between the Holders of the Class A Notes and the Holders of any Class of Subordinate Notes, then the Indenture Trustee shall be entitled to resign as the indenture trustee for all Classes of Notes other than the Class A Notes.  In such event the
Holders of a majority of Note Principal Balances of all of the Subordinate Notes shall designate a separate indenture trustee to represent their interests hereunder.  Holders of a majority of Note Principal Balances of each Class of Notes may remove the Indenture Trustee by so notifying the Indenture Trustee and may appoint a successor Indenture Trustee. The Issuer shall remove the Indenture Trustee or the Securities Administrator, as applicable, if:

(i)         the Indenture Trustee or the Securities Administrator fails to comply with or qualify pursuant to the provisions of Section 6.12 hereof;

(ii)         the Indenture Trustee or the Securities Administrator is adjudged a bankrupt or insolvent;

(iii)        a receiver or other public officer takes charge of the Indenture Trustee or the Securities Administrator or its property;

(iv)        the Indenture Trustee or the Securities Administrator otherwise becomes incapable of acting; or

(v)        the Master Servicer is terminated pursuant to Section 5.01 of the Servicing Agreement.

 

 

If the Indenture Trustee or the Securities Administrator resigns or is removed or if a vacancy exists in the office of the Indenture Trustee or the Securities Administrator for any reason (the Indenture Trustee or the Securities Administrator in such event being referred to herein as the retiring Indenture Trustee or the retiring Securities Administrator ), the Issuer shall promptly appoint a successor Indenture Trustee or successor Securities Administrator.

Each of a successor Indenture Trustee or successor Securities Administrator shall deliver a written acceptance of its appointment to the retiring Indenture Trustee or the retiring Securities Administrator, as applicable, and to the Issuer.  Thereupon, the resignation or removal of the retiring Indenture Trustee or the retiring Securities Administrator shall become effective, and the successor Indenture Trustee or successor Securities Administrator shall have all the rights, powers and duties of the Indenture Trustee or the Securities Administrator, as applicable, under this Indenture.  The successor Indenture Trustee or successor Securities Administrator shall each mail a notice of its succession to Noteholders.  The retiring Indenture Trustee or the retiring Securities Administrator shall promptly transfer all property held by it as Indenture Trustee or Securities Administrator, as
applicable, to the successor Indenture Trustee or successor Securities Administrator.

If a successor Indenture Trustee or successor Securities Administrator does not take office within 60 days after the retiring Indenture Trustee or the retiring Securities Administrator, as applicable, resigns or is removed, the retiring Indenture Trustee or the retiring Securities Administrator, the Issuer or the Holders of a majority of Note Principal Balances of the Notes may petition any court of competent jurisdiction for the appointment of a successor Indenture Trustee or successor Securities Administrator.

Notwithstanding the replacement of the Indenture Trustee or the Securities Administrator pursuant to this Section, the Issuer's obligations under Section 6.07 shall continue for the benefit of the retiring Indenture Trustee or the retiring Securities Administrator.

Section 6.10     Successor Indenture Trustee and Securities Administrator by Merger.  If the Indenture Trustee or the Securities Administrator consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust business or assets to, another corporation or banking association, the resulting, surviving or transferee corporation, without any further act, shall be the successor Indenture Trustee or successor Securities Administrator, as applicable; provided, that such corporation or banking association shall be otherwise qualified and eligible under Section 6.12 hereof. The Indenture Trustee and the Securities Administrator shall provide the Rating Agencies and the Issuer with prior written notice, and the Noteholders with prompt written notice, of any such transaction.

If at the time such successor or successors by merger, conversion or consolidation to the Indenture Trustee shall succeed to the trusts created by this Indenture and any of the Notes shall have been authenticated but not delivered, any such successor to the Indenture Trustee may adopt the certificate of authentication of any predecessor trustee and deliver such Notes so authenticated; and if at that time any of the Notes shall not have been authenticated, any successor to the Indenture Trustee may authenticate such Notes either in the name of any predecessor hereunder or in the name of the successor to the Indenture Trustee; and in all such cases such certificates shall have the full force which is in the Notes or in this Indenture provided that the certificate of the Indenture Trustee shall have.

 

 

Section 6.11     Appointment of Co-Indenture Trustee or Separate Indenture Trustee.  (a)  Notwithstanding any other provisions of this Indenture, at any time, for the purpose of meeting any legal requirement of any jurisdiction in which any part of the Trust Estate may at the time be located, the Indenture Trustee shall have the power and may execute and deliver all instruments to appoint one or more Persons to act as a co-trustee or co-trustees, or separate trustee or separate trustees, of all or any part of the Trust Estate, and to vest in such Person or Persons, in such capacity and for the benefit of the Noteholders, such title to the Trust Estate, or any part hereof, and, subject to the other provisions of this Section, such powers, duties, obligations, rights and trusts as the Indenture Trustee may consider
necessary or desirable. No co-trustee or separate trustee hereunder shall be required to meet the terms of eligibility as a successor trustee under Section 6.12 hereof.

(b)      Every separate trustee and co-trustee shall, to the extent permitted by law, be appointed and act subject to the following provisions and conditions:

(i)         all rights, powers, duties and obligations conferred or imposed upon the Indenture Trustee shall be conferred or imposed upon and exercised or performed by the Indenture Trustee and such separate trustee or co-trustee jointly (it being understood that such separate trustee or co-trustee is not authorized to act separately without the Indenture Trustee joining in such act), except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed the Indenture Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations (including the holding of title to the Trust Estate or any portion thereof in any such jurisdiction) shall be exercised and performed singly by such separate trustee or co-trustee, but solely at the
direction of the Indenture Trustee;

(ii)         no trustee hereunder shall be personally liable by reason of any act or omission of any other trustee hereunder; and

(iii)        the Indenture Trustee may at any time accept the resignation of or remove any separate trustee or co-trustee.

(c)      Any notice, request or other writing given to the Indenture Trustee shall be deemed to have been given to each of the then separate trustees and co-trustees, as effectively as if given to each of them. Every instrument appointing any separate trustee or co-trustee shall refer to this Indenture and the conditions of this Article VI. Each separate trustee and co-trustee, upon its acceptance of the trusts conferred, shall be vested with the estates or property specified in its instrument of appointment, either jointly with the Indenture Trustee or separately, as may be provided therein, subject to all the provisions of this Indenture, specifically including every provision of this Indenture relating to the conduct of, affecting the liability of, or affording protection to, the Indenture Trustee. Every such instrument shall be filed
with the Indenture Trustee.

(d)      Any separate trustee or co-trustee may at any time constitute the Indenture Trustee, its agent or attorney-in-fact with full power and authority, to the extent not prohibited by law, to do any lawful act under or in respect of this Indenture on its behalf and in its name. If any separate trustee or co-trustee shall die, become incapable of acting, resign or be removed, all of its estates, properties, rights, remedies and trusts shall vest in and be exercised by the Indenture Trustee, to the extent permitted by law, without the appointment of a new or successor trustee.

 

Section 6.12     Eligibility; Disqualification.  The Indenture Trustee shall at all times be an entity that meets the requirements of Section 3(c)(3) under the Investment Company Act of 1940 applicable to a trustee, and shall have a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition and it or its parent shall have a long-term debt rating of Baa3 or better by Moody’s.

	
            Section 6.13
 	
            [Reserved].
 

Section 6.14     Representations and Warranties.  The Indenture Trustee hereby represents that:

(i)         The Indenture Trustee is duly organized and validly existing as a national banking association in good standing under the laws of the United States with power and authority to own its properties and to conduct its business as such properties are currently owned and such business is presently conducted;

(ii)         The Indenture Trustee has the power and authority to execute and deliver this Indenture and to carry out its terms; and the execution, delivery and performance of this Indenture have been duly authorized by the Indenture Trustee by all necessary corporate action;

(iii)        The consummation of the transactions contemplated by this Indenture and the fulfillment of the terms hereof do not conflict with, result in any breach of any of the terms and provisions of, or constitute (with or without notice or lapse of time) a default under, the articles of incorporation or bylaws of the Indenture Trustee or any agreement or other instrument to which the Indenture Trustee is a party or by which it is bound; and

(iv)        To the Indenture Trustee’s knowledge, there are no proceedings or investigations pending or threatened before any court, regulatory body, administrative agency or other governmental instrumentality having jurisdiction over the Indenture Trustee or its properties: (A) asserting the invalidity of this Indenture, (B) seeking to prevent the consummation of any of the transactions contemplated by this Indenture or (C) seeking any determination or ruling that might materially and adversely affect the performance by the Indenture Trustee of its obligations under, or the validity or enforceability of, this Indenture.

Section 6.15     Directions to Indenture Trustee and the Securities Administrator. The Indenture Trustee is hereby directed:

(a)      to accept the pledge of the Mortgage Loans and hold the assets of the Trust in trust for the Noteholders;

(b)      the Securities Administrator is hereby directed to (i) authenticate and deliver the Notes substantially in the form prescribed by Exhibits A-1, A-2 and A-3 to this Indenture in accordance with the terms of this Indenture; and

(c)      to take all other actions as shall be required to be taken by the Securities Administrator pursuant to the terms of this Indenture and the other Basic Documents.

 

 

Section 6.16     The Agents.  The provisions of this Indenture relating to the limitations of the Indenture Trustee’s liability and to its rights and protections shall inure also to the Paying Agent, Note Registrar and Certificate Registrar.

 

 

ARTICLE VII

 

NOTEHOLDERS’ LISTS AND REPORTS

Section 7.01     Issuer To Furnish Securities Administrator Trustee Names and Addresses of Noteholders.  The Issuer will furnish or cause to be furnished to the Securities Administrator (a) not more than five days after each Record Date, a list, in such form as the Securities Administrator may reasonably require, of the names and addresses of the Holders of Notes as of such Record Date, and (b) at such other times as the Securities Administrator may request in writing, within 30 days after receipt by the Issuer of any such request, a list of similar form and content as of a date not more than 10 days prior to the time such list is furnished; provided, however, that so long as the Securities Administrator is the Note Registrar, no such list shall be required to be furnished to the Securities Administrator.

Section 7.02     Preservation of Information; Communications to Noteholders.  (a)  The Securities Administrator shall preserve, in as current a form as is reasonably practicable, the names and addresses of the Holders of Notes contained in the most recent list furnished to the Securities Administrator as provided in Section 7.01 hereof and the names and addresses of Holders of Notes received by the Securities Administrator in its capacity as Note Registrar. The Securities Administrator may destroy any list furnished to it as provided in such Section 7.01 upon receipt of a new list so furnished.

(b)      Noteholders may communicate with other Noteholders with respect to their rights under this Indenture or under the Notes.

Section 7.03     Financial Information.  For so long as any of the Notes bearing a restrictive legend remains outstanding and is a “restricted security” within the meaning of Rule 144(a)(3) under the Securities Act, the Issuer shall, during any period in which it is not subject to Section 13 or 15(d) of the Exchange Act nor exempt from reporting pursuant to Rule 12g3-2(b) under such Act, cause the Securities Administrator to make available to any Holder of any such Note in connection with any sale thereof and to any prospective purchaser of any such Note from such Holder, in each case upon request, the information specified in, and meeting the requirements of, Rule 144A(d)(4) under the Securities Act that is in the Securities Administrator’s possession or reasonably obtainable by it, if requested, from
the Master Servicer (and to the extent such information is in the Master Servicer’s possession or is reasonably obtainable by it from the Servicers).

Unless the Issuer otherwise determines, the fiscal year of the Issuer shall end on December 31 of each year.

Section 7.04     Statements to Noteholders.  (a)  With respect to each Payment Date, the Securities Administrator shall make available via the Securities Administrator’s website, initially located at www.ctslink.com, to each Noteholder and each Certificateholder, the Depositor, the Swap Provider, the Issuer, the Seller, the Owner Trustee, the Certificate Paying Agent and the Rating Agencies, a statement setting forth the following information as to the Notes, to the extent applicable:

 

 

(i)         the Available Funds and the Basis Risk Shortfall Carryover Amount on each Class of Notes for such Payment Date and the aggregate Net Interest Shortfall on each Class of Notes for such Payment Date;

(ii)         (a) the amount of such distribution to each Class of Notes (other than the Class X Notes) applied to reduce the Note Principal Balance thereof, and (b) the aggregate amount included therein representing Principal Prepayments;

(iii)        the amount of such distribution to Holders of each Class of Notes allocable to interest;

	
            (iv)
 	
            the amount of any distribution to the Certificates;
 

(v)        if the distribution to the Holders of any Class of Notes is less than the full amount that would be distributable to such Holders if there were sufficient funds available therefor, the amount of the shortfall;

(vi)        the number and the aggregate Scheduled Principal Balance of the Mortgage Loans as of the end of the related Due Period;

(vii)       the aggregate Note Principal Balance of each Class of Notes, after giving effect to the amounts distributed on such Payment Date, separately identifying any reduction thereof due to Realized Losses and the aggregate Note Principal Balance of the Notes after giving effect to the distribution of principal on such Payment Date;

(viii)      the number and aggregate Scheduled Principal Balance of Mortgage Loans (a) as to which the Monthly Payment is delinquent for 31-60 days, 61-90 days, 91 or more days, respectively, (b) in foreclosure and (c) that have become REO Property, in each case as of the end of the preceding calendar month;

(ix)        the amount of any Monthly Advances, Servicing Advances and Compensating Interest payments;

(x)        the aggregate Realized Losses with respect to the related Payment Date and cumulative Realized Losses since the Closing Date;

(xi)        the number and aggregate Scheduled Principal Balance of Mortgage Loans repurchased pursuant to the Mortgage Loan Purchase Agreement for the related Payment Date and cumulatively since the Closing Date;

	
            (xii)
 	
            the book value (if available) of any REO Property;
 

(xiii)      the amount of any Prepayment Interest Shortfalls or Relief Act Shortfalls for such Payment Date; 

(xiv)      the amount withdrawn from the Pre-Funding Account and the Interest Coverage Account pursuant to Section 3.27(c) and Section 3.28(c), respectively, on that Payment Date, the amount remaining on deposit in the Pre-Funding Account and in the Interest Coverage 

 

Account, following such Payment Date, and the amount withdrawn from the Pre-Funding Account and used to buy Subsequent Mortgage Loans prior to such Payment Date; 

(xv)       the aggregate Scheduled Principal Balance of Mortgage Loans purchased pursuant to Section 2.04 of the Sale and Servicing Agreement for the related Payment Date and cumulatively since the Closing Date; and

(xvi)      the amount of any Net Swap Payment made to the Trust, any Net Swap Payment made to the Swap Provider, any Swap Termination Payment made to the Trust and any Swap Termination Payment made to the Swap Provider, in each case as set forth in Section 8.08.

Items (iii) and (iv) above shall be presented on the basis of a Note having a $1,000 denomination. In addition, by January 31 of each calendar year following any year during which the Notes are outstanding, the Securities Administrator shall furnish a report to each Noteholder of record if so requested in writing at any time during each calendar year as to the aggregate of amounts reported pursuant to (iii) and (iv) with respect to the Notes for such calendar year.

The Securities Administrator may conclusively rely upon the information provided by the Master Servicer to the Securities Administrator in its preparation of monthly statements to Noteholders and by the Swap Provider under the Swap Agreements.

The Securities Administrator will make the monthly statements provided for in this section (and, at its option, any additional files containing the same information in an alternative format) available each month to Noteholders, each Noteholder and each Certificateholder, the Depositor, the Issuer, the Seller, the Owner Trustee, the Certificate Paying Agent and the Rating Agency via the Securities Administrator's website.  The Securities Administrator’s website shall initially be located at “www.ctslink.com.” Assistance in using the website can be obtained by calling the Securities Administrator’s customer service desk at (301) 815-6600.  Parties that are unable to use the website are entitled to have a paper copy mailed to them via first class mail by calling the Securities Administrator’s customer service desk and indicating such.  The Securities Administrator
may have the right to change the way the monthly statements are distributed in order to make such distribution more convenient and/or more accessible to the above parties and the Securities Administrator shall provide timely and adequate notification to all above parties regarding any such changes.

The Securities Administrator shall be entitled to rely on but shall not be responsible for the content or accuracy of any information provided by third parties for purposes of preparing the monthly statement, and may affix thereto any disclaimer it deems appropriate in its reasonable discretion (without suggesting liability on the part of any other party hereto).

Section 7.05     Reports Filed with Securities and Exchange Commission.  Within 15 days after each Payment Date, the Securities Administrator shall, in accordance with industry standards, file with the Commission via the Electronic Data Gathering and Retrieval System (“EDGAR”), a Form 8-K (or other comparable Form containing the same or comparable information or other information mutually agreed upon) with a copy of the statement to the Noteholders for such Payment Date as an exhibit thereto.  Prior to January 30 in any year, the Securities Administrator shall, in accordance with industry standards and only if instructed by the Depositor, file a Form 15 Suspension Notice with respect to the Trust Estate, if applicable.  

 

 

Prior to (i) March 31, 2006, or such earlier filing date as may be required by the Commission, and (ii) unless and until a Form 15 Suspension Notice shall have been filed, March 31 of each year thereafter, or such earlier filing date as may be required by the Commission, the Securities Administrator shall file a Form 10-K, in substance conforming to industry standards, with respect to the Trust.  Such Form 10-K shall include the Master Servicer Certification and other documentation provided by the Master Servicer pursuant to Section 2.16 of the Servicing Agreement.  The Depositor hereby grants to the Securities Administrator a limited power of attorney to execute and file each such document on behalf of the Depositor.  Such power of attorney shall continue until either the earlier of (i) receipt by the Securities Administrator from the Depositor of written termination of such power of
attorney and (ii) the termination of the Trust Estate.  The Depositor agrees to promptly furnish to the Securities Administrator, from time to time upon request, such further information, reports and financial statements within its control related to this Agreement and the Mortgage Loans as the Securities Administrator reasonably deems appropriate to prepare and file all necessary reports with the Commission.  The Securities Administrator shall have no responsibility to file any items other than those specified in this Section 7.05; provided, however, the Securities Administrator will cooperate with the Depositor and the Issuer in connection with any additional filings with respect to the Trust Estate as the Depositor deems necessary under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  Fees and expenses incurred by the Securities Administrator in connection with this Section 7.05 shall not be reimbursable from the Trust Estate.

 

 

ARTICLE VIII

 

ACCOUNTS, DISBURSEMENTS AND RELEASES

Section 8.01     Collection of Money.  Except as otherwise expressly provided herein, the Securities Administrator may demand payment or delivery of, and shall receive and collect, directly and without intervention or assistance of any fiscal agent or other intermediary, all money and other property payable to or receivable by the Securities Administrator pursuant to this Indenture. The Securities Administrator shall apply all such money received by it as provided in this Indenture. Except as otherwise expressly provided in this Indenture, if any default occurs in the making of any payment or performance under any agreement or instrument that is part of the Trust Estate, the Indenture Trustee may take such action as may be appropriate to enforce such payment or performance, including the institution and prosecution
of appropriate Proceedings. Any such action shall be without prejudice to any right to claim a Default or Event of Default under this Indenture and any right to proceed thereafter as provided in Article V.

Section 8.02     Officer’s Certificate.  The Indenture Trustee shall receive at least seven Business Days’ notice when requested by the Issuer to take any action pursuant to Section 8.06(a) hereof, accompanied by copies of any instruments to be executed, and the Indenture Trustee shall also require, as a condition to such action, an Officer’s Certificate, in form and substance satisfactory to the Indenture Trustee, stating the legal effect of any such action, outlining the steps required to complete the same, and concluding that all conditions precedent to the taking of such action have been complied with.

Section 8.03     Termination Upon Distribution to Noteholders.  This Indenture and the respective obligations and responsibilities of the Issuer, the Securities Administrator and the Indenture Trustee created hereby shall terminate upon the distribution to Noteholders, the Certificate Paying Agent on behalf of the Certificateholders, the Securities Administrator and the Indenture Trustee of all amounts required to be distributed pursuant to Article III; provided, however, that in no event shall the trust created hereby continue beyond the expiration of 21 years from the death of the survivor of the descendants of Joseph P. Kennedy, the late ambassador of the United States to the Court of St. James, living on the date hereof.

Section 8.04     Release of Trust Estate.  (a)  Subject to the payment of its fees and expenses, the Indenture Trustee may, and when required by the provisions of this Indenture shall, execute instruments to release property from the lien of this Indenture, or convey the Indenture Trustee’s interest in the same, in a manner and under circumstances that are not inconsistent with the provisions of this Indenture, including for the purposes of any purchase of a Mortgage Loan by the Majority Certificateholder pursuant to Section 8.06 of this Indenture.  No party relying upon an instrument executed by the Indenture Trustee as provided in Article VIII hereunder shall be bound to ascertain the Indenture Trustee’s authority, inquire into the satisfaction of any conditions precedent, or see to the application of any monies.

(b)      The Indenture Trustee shall, at such time as (i) it is notified by the Securities Administrator that there are no Notes Outstanding and (ii) all sums then due and unpaid to the Indenture Trustee pursuant to this Indenture have been paid, release any remaining portion of the Trust Estate that secured the Notes from the lien of this Indenture.

 

 

(c)      The Indenture Trustee shall release property from the lien of this Indenture pursuant to this Section 8.05 only upon receipt of a request from the Issuer.

Section 8.05     Surrender of Notes Upon Final Payment.  By acceptance of any Note, the Holder thereof agrees to surrender such Note to the Securities Administrator promptly, prior to such Noteholder’s receipt of the final payment thereon.

Section 8.06     Optional Redemption of the Mortgage Loans.  (a)  The Majority Certificateholder shall have the option to purchase the assets of the Trust and thereby cause the redemption of the Notes, in whole, but not in part, on or after the Payment Date on which the sum of the aggregate Scheduled Principal Balance of the Mortgage Loans as of the end of the prior Due Period and the Remaining Pre-Funded Amount is 10% or less of the sum of the Cut-off Date Scheduled Principal Balance of the Mortgage Loans and the aggregate of the Pre-Funded Amounts as of the Closing Date.  The aggregate redemption price (the “Redemption Price”) for the Notes will be equal to 100% of the aggregate outstanding Note Principal Balance of the Notes as of the Payment Date on which the proposed redemption will take place in
accordance with the foregoing, together with accrued and unpaid interest thereon at the applicable Note Interest Rate through such Payment Date (including any related Net Interest Shortfall, Basis Risk Shortfall Carryover Amount), plus an amount sufficient to pay in full all amounts owing to the Indenture Trustee, the Master Servicer and the Securities Administrator, pursuant to any Basic Document (which amounts shall be specified in writing upon request of the Issuer, the Indenture Trustee, the Master Servicer and the Securities Administrator, as applicable), and any Swap Termination Payment payable to the Swap Provider as a result of a termination pursuant to this Section 8.06.

(b)      In order to exercise the foregoing option, the Majority Certificateholder shall provide written notice of its exercise of such option to the Securities Administrator, the Issuer, the Owner Trustee, the Swap Provider and the Master Servicer at least 15 days prior to its exercise. Following receipt of the notice, the Securities Administrator shall provide written notice to the Noteholders of the final payment on the Notes. In addition, the Majority Certificateholder shall, not less than one Business Day prior to the proposed Payment Date on which such redemption is to be made, deposit the Redemption Price specified in (a) above with the Securities Administrator, who shall deposit the Redemption Price into the Payment Account and shall, on the Payment Date after receipt of the funds, apply such funds to make final payments of
principal and interest on the Notes in accordance with Section 3.03 hereof and payment to the Securities Administrator, the Swap Provider and the Master Servicer as set forth in (a) above, and this Indenture shall be discharged subject to the provisions of Section 4.10 hereof. If for any reason the amount deposited by the Majority Certificateholder is not sufficient to make such redemption or such redemption cannot be completed for any reason, (a) the amount so deposited by the Majority Certificateholder with the Securities Administrator shall be immediately returned to the Majority Certificateholder in full and shall not be used for any other purpose or be deemed to be part of the Trust Estate and (b) the Note Principal Balance of the Notes shall continue to bear interest at the related Note Interest Rate.

The portion of the Redemption Price representing any Swap Termination Payment owed to the Swap Provider shall be withdrawn by the Swap Administrator from the Payment Account and remitted to the Securities Administrator to be paid in accordance with Section 8.07.

 

 

	
            Section 8.07
 	
            The Swap Agreements.  
 

On or before the Closing Date, the Securities Administrator shall establish a Reserve Fund on behalf of the Holders of the Certificates. The Reserve Fund must be an Eligible Account.  The Reserve Fund shall be entitled “Reserve Fund, Wells Fargo Bank, N.A., as Securities Administrator for the benefit of holders of Luminent Mortgage Trust 2005-1, Mortgage-Backed Notes, Series 2005-1”.  The Securities Administrator shall deposit in the Reserve Fund all payments received from the Swap Provider that are payable to the Trust. On each Distribution Date the Securities Administrator shall remit such amounts received to the Holders of the Notes in the manner provided in clause (a) below.  Net Swap Payments and Swap Termination Payments (other than Swap Termination Payments resulting from a Swap Provider Trigger Event) payable by the Trust to the Swap Provider pursuant to the Swap
Agreement shall be deducted (to the extent not paid from any upfront payment received pursuant to any replacement interest rate swap agreement entered into by the Trust) from Interest Funds, and to the extent of any such remaining amounts due, from Principal Funds, prior to any distributions to the Noteholders. On or before each Payment Date, such amounts will be remitted to the Securities Administrator  on behalf of the Trust, first to make any Net Swap Payment owed to the Swap Provider pursuant to the Swap Agreements for such Payment Date and for prior Payment Dates, if any, and second to make any Swap Termination Payment (not due to a Swap Provider Trigger Event) owed to the Swap Provider pursuant to the Swap Agreement for such Payment Date and for prior Payment Dates, if any. In addition, the Securities Administrator shall remit for payment to the Swap Provider any Swap Termination Payment payable under Section 8.06. Any Swap Termination Payment triggered by a Swap Provider
Trigger Event owed to the Swap Provider pursuant to the Swap Agreements will be subordinated to distributions to the Holders of the Notes and shall be paid as set forth under Section 3.03.

(a)        On or before each Distribution Date, Net Swap Payments payable by the Swap Provider to the Securities Administrator pursuant to the Swap Agreements will be deposited by the Securities Administrator into the Swap Account.  The Swap Administrator shall remit amounts on deposit in the Swap Account for deposit into the Reserve Fund.  On each Payment Date, to the extent required, the Securities Administrator shall withdraw such amounts from the Reserve Fund to distribute to the Notes in the following order of priority:

(i)         first, to each Class of Class A Certificates, on a pro rata basis, to pay Current Interest and any Interest Carry Forward Amount to the extent due to the interest portion of a Realized Loss, in each case to the extent not fully paid pursuant to Section 3.03(a) First; 

(ii)         second, sequentially to the Class M-1, Class M-2, Class B-1, Class B-2, Class B-3, Class B-4, Class B-5 and Class B-6 Notes, in that order, to pay Current Interest to the extent not fully paid pursuant to Section 3.03(a)(first) and any Interest Carry Forward Amount to the extent due to the interest portion of a Realized Loss, to the extent not fully paid pursuant to Section 3.03(a) First;

(iii)        third, to pay first, to the Class A Certificates, on a pro rata basis, and second, sequentially to the Class M-1, Class M-2, Class B-1, Class B-2, Class B-3, Class B-4, Class B-5 and Class B-6 Notes, in that order, any Basis Risk Shortfall Carry Forward Amounts for such Payment Date; and

 

 

(iv)        fourth, to pay as principal to the Notes as part of the Extra Principal Distribution Amount payable under Section 3.03 until the Overcollateralization Target Amount has been reached, to the extent not paid from Excess Cashflow pursuant to Section 3.03 for such Distribution Date. For the avoidance of doubt, any amounts distributable pursuant to this clause (iv) shall be limited to rebuilding overcollateralization to the extent overcollateralization has been reduced through Realized Losses.

(b)        The Trustee on behalf of the Trust shall be the nominal owner of the Reserve Fund.  The Majority Certificateholder shall be the beneficial owner of the Reserve Fund, subject to the power of the Securities Administrator to transfer amounts under Section 8.07(a).  Amounts in the Reserve Fund shall, at the direction of the Majority Certificateholder, be invested in Permitted Investments that mature no later than the Payment Date.  If the Majority Certificateholder gives no such direction, the amount in the Reserve Fund shall be invested in the Wells Fargo Prime Advantage Money Market Fund. All net income and gain from such investments shall be distributed to the Majority Certificateholder on such Payment Date.  All amounts earned on amounts on deposit in the Reserve Fund shall be taxable to the Majority Certificateholder.  Any losses on
such investments shall be deposited in the Reserve Fund by the Majority Certificateholder out of its own funds immediately as realized.

	
            Section 8.08
 	
            Rights of Swap Provider.  
 

The Swap Provider shall be deemed a third-party beneficiary of this Indenture to the same extent as if it were a party hereto and shall have the right, upon designation of an “Early Termination Date” (as defined in the Swap Agreements), to enforce its rights under this Indenture, which rights include but are not limited to the obligation of the Securities Administrator (A) to pay any Net Swap Payment required pursuant to Section 8.08 and any Swap Termination Payment to the Swap Provider, (B) to make such deposits to the Payment Account, investments therein and payments therefrom of any payments under the Swap Account as are required pursuant to Section 3.01 that are payable to the Swap Provider.  For the protection and enforcement of the provisions of this Section the Swap Provider shall be entitled to such relief as can be given either at law or in equity.

 

 

 

ARTICLE IX

 

SUPPLEMENTAL INDENTURES

Section 9.01     Supplemental Indentures Without Consent of Noteholders.  (a)  Without the consent of the Holders of any Notes but with prior notice to the Rating Agencies, the Issuer, the Indenture Trustee and the Securities Administrator, when authorized by an Issuer Request, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Indenture Trustee and the Securities Administrator, for any of the following purposes:

(i)         to correct or amplify the description of any property at any time subject to the lien of this Indenture, or better to assure, convey and confirm unto the Indenture Trustee any property subject or required to be subjected to the lien of this Indenture, or to subject to the lien of this Indenture additional property;

(ii)         to evidence the succession, in compliance with the applicable provisions hereof, of another person to the Issuer, and the assumption by any such successor of the covenants of the Issuer herein and in the Notes contained;

(iii)        to add to the covenants of the Issuer, for the benefit of the Holders of the Notes, or to surrender any right or power herein conferred upon the Issuer;

(iv)        to convey, transfer, assign, mortgage or pledge any property to or with the Indenture Trustee;

(v)        to cure any ambiguity, to correct or supplement any provision herein or in any supplemental indenture that may be inconsistent with any other provision herein or in any supplemental indenture;

(vi)        to make any other provisions with respect to matters or questions arising under this Indenture or in any supplemental indenture; provided, that such action shall not materially and adversely affect the interests of the Holders of the Notes; provided further, that such supplemental indenture will be deemed to not materially and adversely affect the interests of the Holders of the Notes if a Rating Confirmation is received with respect to such supplemental indenture; or

(vii)       to evidence and provide for the acceptance of the appointment hereunder by a successor trustee with respect to the Notes and to add to or change any of the provisions of this Indenture as shall be necessary to facilitate the administration of the trusts hereunder by more than one trustee, pursuant to the requirements of Article VI hereof;

provided, however, that no such indenture supplements shall be entered into unless the Indenture Trustee, the Swap Provider and the Securities Administrator shall have received an Opinion of Counsel not at the expense of the Indenture Trustee or the Securities Administrator as to the enforceability of any such indenture supplement and to the effect that (i) such indenture supplement is permitted hereunder and will not materially and adversely affect the Holders of the Notes and the Swap Provider and (ii) entering into such indenture supplement will not result in a 

 

“substantial modification” of the Class A-1, Class A-2, Class M-1, Class M-2 and Class B-1 and any other Classes of Notes with respect to which a "will be debt" opinion has been rendered by nationally recognized tax counsel and furnished to the Securities Administrator under Treasury Regulation Section 1.1001-3 or adversely affect the indebtedness status of such Notes.  

The Indenture Trustee and the Securities Administrator are hereby authorized to join in the execution of any such supplemental indenture and to make any further appropriate agreements and stipulations that may be therein contained.

(b)      The Issuer, the Securities Administrator and the Indenture Trustee, when authorized by an Issuer Request, in the case of the Securities Administrator and the Indenture Trustee may, also without the consent of any of the Holders of the Notes and prior notice to the Rating Agency, enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to, or changing in any manner or eliminating any of the provisions of, this Indenture or of modifying in any manner the rights of the Holders of the Notes under this Indenture; provided, however, that such action as evidenced by an Opinion of Counsel, (i) is permitted by this Indenture, (ii) shall not adversely affect in any material respect the interests of any Noteholder and (iii) shall not cause the Issuer to be subject to an entity level tax for federal
income tax purposes.

Section 9.02    Supplemental Indentures With Consent of Noteholders.  The Issuer, the Securities Administrator and the Indenture Trustee, when authorized by an Issuer Request in the case of the Securities Administrator and the Indenture Trustee, also may, with prior notice to the Rating Agencies and with the consent of the Swap Provider and with the consent Holders of not less than a majority of the Note Principal Balance of each Class of Notes affected thereby, by Act (as defined in Section 10.03 hereof) of such Holders delivered to the Issuer, the Securities Administrator and the Indenture Trustee, enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to, or changing in any manner or eliminating any of the provisions of, this Indenture or of modifying in any manner the rights
of the Holders of the Notes under this Indenture; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each Note affected thereby:

(i)         change the date of payment of any installment of principal of or interest on any Note, or reduce the principal amount thereof or the interest rate thereon, change the provisions of this Indenture relating to the application of collections on, or the proceeds of the sale of, the Trust Estate and to payment of principal of or interest on the Notes, or change any place of payment where, or the coin or currency in which, any Note or the interest thereon is payable, or impair the right to institute suit for the enforcement of the provisions of this Indenture requiring the application of funds available therefor, as provided in Article V, to the payment of any such amount due on the Notes on or after the respective due dates thereof;

(ii)         reduce the percentage of the Note Principal Balances of the Notes, or any Class of Notes, the consent of the Holders of which is required for any such supplemental indenture, or the consent of the Holders of which is required for any waiver of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences provided for in this Indenture;

 

 

(iii)        modify or alter the provisions of the proviso to the definition of the term “Outstanding” or modify or alter the exception in the definition of the term “Holder”

(iv)        reduce the percentage of the Note Principal Balances of the Notes, or any Class of Notes, required to direct the Indenture Trustee to direct the Issuer to sell or liquidate the Trust Estate pursuant to Section 5.04 hereof;

(v)        modify any provision of this Section 9.02 except to increase any percentage specified herein or to provide that certain additional provisions of this Indenture or the Basic Documents cannot be modified or waived without the consent of the Holder of each Note affected thereby;

(vi)        modify any of the provisions of this Indenture in such manner as to affect the calculation of the amount of any payment of interest or principal due on any Note on any Payment Date (including the calculation of any of the individual components of such calculation); or

(vii)       permit the creation of any lien ranking prior to or on a parity with the lien of this Indenture with respect to any part of the Trust Estate or, except as otherwise permitted or contemplated herein, terminate the lien of this Indenture on any property at any time subject hereto or deprive the Holder of any Note of the security provided by the lien of this Indenture; 

and provided, further, that such action shall not, as evidenced by an Opinion of Counsel, cause the Issuer to be subject to an entity level tax for federal income tax purposes.

Any such action shall not adversely affect in any material respect the interest of any Holder (other than a Holder who shall consent to such supplemental indenture) as evidenced by an Opinion of Counsel (provided by the Person requesting such supplemental indenture) delivered to the Indenture Trustee and the Securities Administrator.

It shall not be necessary for any Act of Noteholders under this Section 9.02 to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof.

Promptly after the execution by the Issuer, the Securities Administrator and the Indenture Trustee of any supplemental indenture pursuant to this Section 9.02, the Securities Administrator shall mail to the Holders of the Notes to which such amendment or supplemental indenture relates a notice setting forth in general terms the substance of such supplemental indenture. Any failure of the Securities Administrator to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture.

Section 9.03     Execution of Supplemental Indentures.  In executing, or permitting the additional trusts created by, any supplemental indenture permitted by this Article IX or the modification thereby of the trusts created by this Indenture, the Indenture Trustee and the Securities Administrator shall be entitled to receive, and subject to Sections 6.01 and 6.02 hereof, shall be fully protected in relying upon, an Opinion of Counsel not at the expense of the Indenture Trustee or the Securities Administrator stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Indenture Trustee and the Securities 

 

Administrator each may, but shall not be obligated to, enter into any such supplemental indenture that affects the Indenture Trustee’s or the Securities Administrator’s own rights, duties, liabilities or immunities under this Indenture or otherwise.

Section 9.04     Effect of Supplemental Indenture.  Upon the execution of any supplemental indenture pursuant to the provisions hereof, this Indenture shall be and shall be deemed to be modified and amended in accordance therewith with respect to the Notes affected thereby, and the respective rights, limitations of rights, obligations, duties, liabilities and immunities under this Indenture of the Indenture Trustee, the Securities Administrator, the Issuer and the Holders of the Notes shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes.

Section 9.05     Conformity with Trust Indenture Act.  Every amendment of this Indenture and every supplemental indenture executed pursuant to this Article IX shall conform to the requirements of the Trust Indenture Act as then in effect so long as this Indenture shall then be qualified under the Trust Indenture Act.

Section 9.06     Reference in Notes to Supplemental Indentures.  Notes authenticated and delivered after the execution of any supplemental indenture pursuant to this Article IX may, and if required by the Securities Administrator shall, bear a notation in form approved by the Securities Administrator as to any matter provided for in such supplemental indenture. If the Issuer or the Securities Administrator shall so determine, new Notes so modified as to conform, in the opinion of the Securities Administrator and the Issuer, to any such supplemental indenture may be prepared and executed by the Issuer and authenticated and delivered by the Securities Administrator in exchange for Outstanding Notes.

 

 

ARTICLE X

 

MISCELLANEOUS

Section 10.01   Compliance Certificates and Opinions, etc.  (a)  Upon any application or request by the Issuer to the Indenture Trustee to take any action under any provision of this Indenture, the Issuer shall furnish to the Indenture Trustee (i) an Officer’s Certificate stating that all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with and (ii) an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that, in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture, no additional certificate or opinion need be furnished.

Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include:

a statement that each signatory of such certificate or opinion has read or has caused to be read such covenant or condition and the definitions herein relating thereto;

a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;

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

a statement as to whether, in the opinion of each such signatory, such condition or covenant has been complied with; and

if the signatory of such certificate or opinion is required to be Independent, the statement required by the definition of the term “Independent”.

(b)      (i) Prior to the deposit of any Collateral or other property or securities with the Indenture Trustee that is to be made the basis for the release of any property or securities subject to the lien of this Indenture, the Issuer shall, in addition to any obligation imposed in Section 10.01 (a) or elsewhere in this Indenture, furnish to the Indenture Trustee an Officer’s Certificate certifying or stating the opinion of each person signing such certificate as to the fair value (within 90 days prior to such deposit) to the Issuer of the Collateral or other property or securities to be so deposited and a report from a nationally recognized accounting firm verifying such value.

(ii)         Whenever the Issuer is required to furnish to the Indenture Trustee an Officer’s Certificate certifying or stating the opinion of any signer thereof as to the matters described in clause (i) above, the Issuer shall also deliver to the Indenture Trustee an Independent Certificate from a nationally recognized accounting firm as to the same matters, if the fair value of the securities to be so deposited and of all other such securities made the basis of 

 

any such withdrawal or release since the commencement of the then current fiscal year of the Issuer, as set forth in the certificates delivered pursuant to clause (i) above and this clause (ii), is 10% or more of the Note Principal Balances of the Notes, but such a certificate need not be furnished with respect to any securities so deposited, if the fair value thereof as set forth in the related Officer’s Certificate is less than $25,000 or less than one percent of the then outstanding Note Principal Balances of the Notes.

(iii)        Whenever any property or securities are to be released from the lien of this Indenture, the Issuer shall also furnish to the Indenture Trustee an Officer’s Certificate certifying or stating the opinion of each person signing such certificate as to the fair value (within 90 days prior to such release) of the property or securities proposed to be released and stating that in the opinion of such person the proposed release will not impair the security under this Indenture in contravention of the provisions hereof.

(iv)        Whenever the Issuer is required to furnish to the Indenture Trustee an Officer’s Certificate certifying or stating the opinion of any signer thereof as to the matters described in clause (iii) above, the Issuer shall also furnish to the Indenture Trustee an Independent Certificate as to the same matters if the fair value of the property or securities and of all other property or securities released from the lien of this Indenture since the commencement of the then-current calendar year, as set forth in the certificates required by clause (iii) above and this clause (iv), equals 10% or more of the Note Principal Balances of the Notes, but such certificate need not be furnished in the case of any release of property or securities if the fair value thereof as set forth in the related Officer’s Certificate is less than $25,000 or
less than one percent of the then outstanding Note Principal Balances of the Notes.

Section 10.02   Form of Documents Delivered to Indenture Trustee.  In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents.

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

Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument.

 

 

Whenever in this Indenture, in connection with any application or certificate or report to the Indenture Trustee, it is provided that the Issuer shall deliver any document as a condition of the granting of such application, or as evidence of the Issuer’s compliance with any term hereof, it is intended that the truth and accuracy, at the time of the granting of such application or at the effective date of such certificate or report (as the case may be), of the facts and opinions stated in such document shall in such case be conditions precedent to the right of the Issuer to have such application granted or to the sufficiency of such certificate or report. The foregoing shall not, however, be construed to affect the Indenture Trustee’s right to rely upon the truth and accuracy of any statement or opinion contained in any such document as provided in Article VI.

Section 10.03   Acts of Noteholders.  (a)  Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Noteholders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Noteholders in person or by agents duly appointed in writing; and except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Indenture Trustee, and, where it is hereby expressly required, to the Issuer. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the “Act” of the Noteholders signing such instrument or instruments. Proof of execution of any such instrument or of a
writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 6.01 hereof) conclusive in favor of the Indenture Trustee and the Issuer, if made in the manner provided in this Section 10.03 hereof.

(b)      The fact and date of the execution by any person of any such instrument or writing may be proved in any manner that the Indenture Trustee deems sufficient.

	
            (c)
 	
            The ownership of Notes shall be proved by the Note Registrar.
 

(d)      Any request, demand, authorization, direction, notice, consent, waiver or other action by the Holder of any Notes shall bind the Holder of every Note issued upon the registration thereof or in exchange therefor or in lieu thereof, in respect of anything done, omitted or suffered to be done by the Indenture Trustee or the Issuer in reliance thereon, whether or not notation of such action is made upon such Note.

Section 10.04   Notices etc., to Indenture Trustee Issuer, Securities Administrator and Rating Agencies.  Any request, demand, authorization, direction, notice, consent, waiver or Act of Noteholders or other documents provided or permitted by this Indenture shall be in writing and if such request, demand, authorization, direction, notice, consent, waiver or act of Noteholders is to be made upon, given or furnished to or filed with:

(i)         the Indenture Trustee by any Noteholder or by the Issuer shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to or with the Indenture Trustee at the Corporate Trust Office. The Indenture Trustee shall promptly transmit any notice received by it from the Noteholders to the Issuer; 

(ii)         the Securities Administrator by any Noteholder or by the Issuer shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to or with the Securities Administrator at Wells Fargo Bank, N.A., P.O. Box 98, Columbia Maryland 21046 

 

(or, in the case of overnight deliveries, 9062 Old Annapolis Road, Columbia, Maryland 21045), Attn: Luminent Mortgage Trust 2005-1, or such other address as may hereafter be furnished to the other parties hereto in writing. The Securities Administrator shall promptly transmit any notice received by it from the Noteholders to the Issuer; or

(iii)        the Issuer by the Indenture Trustee or by any Noteholder shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing and mailed first-class, postage prepaid to the Issuer addressed to: Luminent Mortgage Trust 2005-1, in care of Chase Bank USA, National Association, 500 Stanton Christiana Road, FL3/OPS4, Newark, Delaware 19713, Attention: Worldwide Securities Services, or at any other address previously furnished in writing to the Indenture Trustee by the Issuer. The Issuer shall promptly transmit any notice received by it from the Noteholders to the Indenture Trustee.

(iv)        the Swap Provider shall be sufficient for every purpose hereunder if in writing and mailed first-class, postage prepaid addressed to the Swap Provider or at any other address previously furnished in writing to the Indenture Trustee by the Swap Provider.  

Notices required to be given to the Rating Agencies by the Issuer, the Indenture Trustee, the Securities Administrator or the Owner Trustee shall be in writing, mailed first-class postage pre-paid: in the case of Moody’s, to Moody’s, at the following address: Moody's Investors Service, Inc., 99 Church Street, New York, New York 10007; and in the case of S&P, Standard & Poor's, a division of The McGraw-Hill Companies, Inc., 55 Water Street, New York, New York 10041; or as to each of the foregoing, at such other address as shall be designated by written notice to the other parties.

Section 10.05   Notices to Noteholders; Waiver.  Where this Indenture provides for notice to Noteholders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if made, given, furnished or filed in writing and mailed, first-class, postage prepaid to each Noteholder affected by such event, at such Person’s address as it appears on the Note Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. In any case where notice to Noteholders is given by mail, neither the failure to mail such notice nor any defect in any notice so mailed to any particular Noteholder shall affect the sufficiency of such notice with respect to other Noteholders, and any notice that is mailed in the manner herein provided shall conclusively
be presumed to have been duly given regardless of whether such notice is in fact actually received.

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

In case, by reason of the suspension of regular mail service as a result of a strike, work stoppage or similar activity, it shall be impractical to mail notice of any event to Noteholders when such notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be satisfactory to the Indenture Trustee shall be deemed to be a sufficient giving of such notice.

 

 

Where this Indenture provides for notice to the Rating Agency, failure to give such notice shall not affect any other rights or obligations created hereunder, and shall not under any circumstance constitute an Event of Default.

Section 10.06   Conflict with Trust Indenture Act.  If any provision hereof limits, qualifies or conflicts with another provision hereof that is required to be included in this Indenture by any of the provisions of the Trust Indenture Act, such required provision shall control.

The provisions of TIA §§ 310 through 317 that impose duties on any Person (including the provisions automatically deemed included herein unless expressly excluded by this Indenture) are a part of and govern this Indenture, whether or not physically contained herein.

Section 10.07   Effect of Headings.  The Article and Section headings herein are for convenience only and shall not affect the construction hereof.

Section 10.08   Successors and Assigns.  All covenants and agreements in this Indenture and the Notes by the Issuer shall bind its successors and assigns, whether so expressed or not. All agreements of the Indenture Trustee in this Indenture shall bind its successors, co-trustees and agents.

Section 10.09   Separability.  In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

Section 10.10   Legal Holidays.  In any case where the date on which any payment is due shall not be a Business Day, then (notwithstanding any other provision of the Notes or this Indenture) payment need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the date on which nominally due, and no interest shall accrue for the period from and after any such nominal date.

Section 10.11   GOVERNING LAW.  THIS INDENTURE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS (OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAWS, WHICH SHALL APPLY HERETO), AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

Section 10.12   Counterparts.  This Indenture may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument.

Section 10.13   Recording of Indenture.  If this Indenture is subject to recording in any appropriate public recording offices, such recording is to be effected by the Issuer and at its expense accompanied by an Opinion of Counsel at its expense (which may be counsel to the Indenture Trustee or any other counsel reasonably acceptable to the Indenture Trustee) to the effect that such recording is necessary either for the protection of the Noteholders or any other 

 

Person secured hereunder or for the enforcement of any right or remedy granted to the Indenture Trustee under this Indenture.

Section 10.14   Issuer Obligation.  No recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer, the Owner Trustee or the Securities Administrator on the Notes or under this Indenture or any certificate or other writing delivered in connection herewith or therewith, against (i) the Indenture Trustee or the Owner Trustee in its individual capacity, (ii) any owner of a beneficial interest in the Issuer or (iii) any partner, owner, beneficiary, agent, officer, director, employee or agent of the Securities Administrator, the Owner Trustee in its individual capacity, any holder of a beneficial interest in the Issuer, the Securities Administrator, the Owner Trustee or the Indenture Trustee or of any successor or assign of the Indenture Trustee or the Owner Trustee in its individual capacity,
except as any such Person may have expressly agreed (it being understood that the Indenture Trustee and the Owner Trustee have no such obligations in their individual capacity) and except that any such partner, owner or beneficiary shall be fully liable, to the extent provided by applicable law, for any unpaid consideration for stock, unpaid capital contribution or failure to pay any installment or call owing to such entity. For all purposes of this Indenture, in the performance of any duties or obligations of the Issuer hereunder, the Owner Trustee shall be subject to, and entitled to the benefits of, the terms and provisions of Article VI, VII and VIII of the Trust Agreement.

Section 10.15   No Petition.  The Indenture Trustee and the Securities Administrator, by entering into this Indenture, each Noteholder, by accepting a Note and each Certificateholder, by accepting a Certificate, hereby covenant and agree that they will not at any time prior to one year from the date of termination hereof, institute against the Depositor or the Issuer, or join in any institution against the Depositor or the Issuer of, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, or other proceedings under any United States federal or state bankruptcy or similar law in connection with any obligations relating to the Notes, this Indenture or any of the Basic Documents; provided however, that nothing herein shall prohibit the Indenture Trustee from filing proofs of claim in any proceeding.

Section 10.16   Inspection.  The Issuer agrees that, at its expense, on reasonable prior notice, it shall permit any representative of the Indenture Trustee or the Securities Administrator, during the Issuer’s normal business hours, to examine all the books of account, records, reports and other papers of the Issuer, to make copies and extracts therefrom, to cause such books to be audited by Independent certified public accountants, and to discuss the Issuer’s affairs, finances and accounts with the Issuer’s officers, employees, and Independent certified public accountants, all at such reasonable times and as often as may be reasonably requested. The Indenture Trustee shall cause its representatives to hold in confidence all such information except to the extent disclosure may be required by law (and all
reasonable applications for confidential treatment are unavailing) and except to the extent that the Indenture Trustee or the Securities Administrator may reasonably determine that such disclosure is consistent with its obligations hereunder.

 

 

 

IN WITNESS WHEREOF, the Issuer, the Securities Administrator and the Indenture Trustee have caused their names to be signed hereto by their respective officers thereunto duly authorized, all as of the day and year first above written.

	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            LUMINENT MORTGAGE TRUST 2005-1, as Issuer
 Chase Bank USA, National Association, not in its individual capacity but solely as Owner Trustee

 
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            By:
 	
            
/s/ John J. Cashin
 
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            Name:
 	
            John J. Cashin
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            Title:
 	
            Vice President
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            WELLS FARGO BANK, N.A., as Securities Administrator
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            By:
 	
            
/s/ Amy Doyle
 
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            Name:
 	
            Amy Doyle
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            Title:
 	
            Vice President
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            LASALLE BANK NATIONAL ASSOCIATION, as Indenture Trustee

 
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            By:
 	
            
/s/ Susan L. Abbott
 
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            Name:
 	
            Susan L. Abbott
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            Title:
 	
            Assistant Vice President
 

 

 

 

 

	
            STATE OF MARYLAND
 	
            )
 	
             
 
	
             
 	
            )
 	
            ss.:
 
	
            COUNTY OF BALTIMORE
 	
            )
 	
             
 

 

On the 2nd day of November, 2005 before me, a notary public in and for said State, personally appeared __________________, known to me to be a(n) _________________ of Wells Fargo Bank, N.A. the entity that executed the within instrument, and also known to me to be the person who executed it on behalf of said entity, and acknowledged to me that such entity executed the within instrument.

IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year in this certificate first above written.

	
             
 	
            
 
 
 
	
             
 	
            Notary Public
 

 

 [Notarial Seal]

 

 

 

 

	
            STATE OF DELAWARE
 	
            )
 	
             
 
	
             
 	
            )
 	
            ss.:
 
	
            COUNTY OF NEW CASTLE
 	
            )
 	
             
 

 

On the 2nd day of November, 2005 before me, a notary public in and for said State, personally appeared __________________, known to me to be a(n) _________________ of Wells Fargo Bank, N.A. the entity that executed the within instrument, and also known to me to be the person who executed it on behalf of said entity, and acknowledged to me that such entity executed the within instrument.

IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year in this certificate first above written.

	
             
 	
            
 
 
 
	
             
 	
            Notary Public
 

 

 [Notarial Seal]

 

 

 

 

	
            STATE OF ILLINOIS
 	
            )
 	
             
 
	
             
 	
            )
 	
            ss.:
 
	
            COUNTY OF ILLINOIS
 	
            )
 	
             
 

 

On the 2nd day of November, 2005 before me, a notary public in and for said State, personally appeared Susan L. Abbott, known to me to be Assistant Vice President of the Indenture Trustee. the entity that executed the within instrument, and also known to me to be the person who executed it on behalf of said entity, and acknowledged to me that such entity executed the within instrument.

IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year in this certificate first above written.

	
             
 	
            
 
 
 
	
             
 	
            Notary Public
 

 

 [Notarial Seal]

 

 

 

 

EXHIBIT A-1

FORM OF CLASS A NOTES

 

UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE SECURITIES ADMINISTRATOR OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

THE HOLDER OF THIS NOTE OR BENEFICIAL OWNER OF ANY INTEREST HEREIN IS DEEMED TO REPRESENT THAT EITHER (1) IT IS NOT ACQUIRING THE NOTE WITH PLAN ASSETS OR (2) (A) THE ACQUISITION, HOLDING AND TRANSFER OF A NOTE WILL NOT GIVE RISE TO A NONEXEMPT PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE AND (B) THE NOTES ARE RATED INVESTMENT GRADE OR BETTER AND SUCH PERSON BELIEVES THAT THE NOTES ARE PROPERLY TREATED AS INDEBTEDNESS WITHOUT SUBSTANTIAL EQUITY FEATURES FOR PURPOSES OF THE DOL REGULATIONS, AND AGREES TO SO TREAT THE NOTES. ALTERNATIVELY, REGARDLESS OF THE RATING OF THE NOTES, SUCH PERSON MAY PROVIDE THE INDENTURE TRUSTEE AND THE NOTE REGISTRAR WITH AN OPINION OF COUNSEL, WHICH OPINION OF COUNSEL WILL NOT BE AT THE EXPENSE OF THE ISSUER, THE SELLER, THE OWNER TRUSTEE, THE INDENTURE TRUSTEE, THE SECURITIES ADMINISTRATOR, THE NOTE REGISTRAR, THE MASTER SERVICER OR ANY
SERVICER, WHICH OPINES THAT THE ACQUISITION, HOLDING AND TRANSFER OF SUCH NOTE OR INTEREST THEREIN IS PERMISSIBLE UNDER APPLICABLE LAW, WILL NOT CONSTITUTE OR RESULT IN A NON-EXEMPT PROHIBITED TRANSACTION UNDER ERISA OR SECTION 4975 OF THE CODE AND WILL NOT SUBJECT THE ISSUER, THE SELLER, THE DEPOSITOR, THE OWNER TRUSTEE, THE INDENTURE TRUSTEE, THE SECURITIES ADMINISTRATOR, THE NOTE REGISTRAR, THE MASTER SERVICER OR ANY SERVICER TO ANY OBLIGATION IN ADDITION TO THOSE UNDERTAKEN IN THE INDENTURE.

THE HOLDER OF THIS NOTE OR BENEFICIAL OWNER OF ANY INTEREST HEREIN WILL BE DEEMED TO REPRESENT TO ONE OF THE REPRESENTATIONS CONTAINED IN THE INDENTURE.

 

 

THIS NOTE IS A NON-RECOURSE OBLIGATION OF THE ISSUER, AND IS LIMITED IN RIGHT OF PAYMENT TO AMOUNTS AVAILABLE FROM THE TRUST ESTATE AS PROVIDED IN THE INDENTURE REFERRED TO BELOW. THE ISSUER IS NOT OTHERWISE PERSONALLY LIABLE FOR PAYMENTS ON THIS NOTE.

PRINCIPAL OF THIS NOTE IS PAYABLE OVER TIME AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.

 

 

LUMINENT MORTGAGE TRUST 2005-1

MORTGAGE-BACKED NOTES, SERIES 2005-1

CLASS A-[1][2]

	
            AGGREGATE NOTE PRINCIPAL

BALANCE: $[________________]
 	
            NOTE INTEREST

RATE: Adjustable Rate
 
	
             
 	
             
 
	
            INITIAL NOTE PRINCIPAL

BALANCE OF THIS NOTE: $[_____________]
 	
            NOTE NO. 1
 
	
             
 	
             
 
	
             
 	
            CUSIP NO: [_______________]
 
	
             
 	
             
 

 

LUMINENT MORTGAGE TRUST 2005-1 (the “Issuer”), a Delaware statutory trust, for value received, hereby promises to pay to Cede & Co. or registered assigns, the principal sum of $[____________________] in monthly installments on the twenty-fifth day of each month or, if such day is not a Business Day, the next succeeding Business Day (each a “Payment Date”), commencing in November 2005 and ending on or before the Payment Date occurring in [__________ 20___] (the “Final Scheduled Payment Date”) and to pay interest on the Note Principal Balance of this Note (this “Note”) outstanding from time to time as provided below.

This Note is one of a duly authorized issue of the Issuer’s Mortgage-Backed Notes, Series 2005-1 (the “Notes”), issued under an Indenture dated as of November 2, 2005 (the “Indenture”), among the Issuer, Wells Fargo Bank, N.A., as Securities Administrator and LaSalle Bank National Association, as indenture trustee (the “Indenture Trustee”, which term includes any successor Indenture Trustee under the Indenture) to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights thereunder of the Issuer, the Indenture Trustee, and the Holders of the Notes and the terms upon which the Notes are to be authenticated and delivered. All terms used in this Note which are defined in the Indenture shall have the meanings assigned to them in the Indenture.

Payments of principal and interest on this Note will be made on each Payment Date to the Noteholder of record as of the related Record Date. The “Note Principal Balance” of a Note as of any date of determination is equal to the initial Note Principal Balance thereof, minus (i) all amounts distributed in respect of principal with respect to such Class of Notes and (ii) the aggregate amount of any reductions in the Note Principal Balance thereof deemed to have occurred in connection with allocations of Realized Losses on all prior Payment Dates in accordance with the Indenture, taking account of its applicable Loss Allocation Limitation, plus (iii) any Subsequent Recoveries allocated thereto.

The principal of, and interest on, this Note are due and payable as described in the Indenture, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. All payments made by the Issuer with respect to this Note shall be equal to this Note’s pro rata share of the aggregate payments on all Class A-[1][2] Notes as described above, and shall be applied as between interest and principal as provided in the Indenture.

 

 

All principal and interest accrued on the Notes, if not previously paid, will become finally due and payable at the Final Scheduled Payment Date.

The Mortgage Loans are subject to purchase in whole, but not in part, by the Majority Certificateholder on any  Payment Date on or after the Payment Date on which the aggregate Scheduled Principal Balance of the Mortgage Loans as of the end of the prior Due Period and the Remaining Pre-Funded Amount is 10% or less of the sum of (A) the Cut-off Date Scheduled Principal Balance of the Mortgage Loans and (B) the aggregate of the Pre-Funded Amounts as of the Closing Date.

The Issuer shall not be liable upon the indebtedness evidenced by the Notes except to the extent of amounts available from the Trust Estate which constitutes security for the payment of the Notes. The assets included in the Trust Estate will be the sole source of payments on the Class A-[1][2] Notes, and each Holder hereof, by its acceptance of this Note, agrees that (i) such Note will be limited in right of payment to amounts available from the Trust Estate as provided in the Indenture and (ii) such Holder shall have no recourse to the Issuer, the Owner Trustee, the Indenture Trustee, the Depositor, the Seller, the Master Servicer, the Securities Administrator or any of their respective affiliates, or to the assets of any of the foregoing entities, except the assets of the Issuer pledged to secure the Class A-[1][2] Notes pursuant to the Indenture and the rights conveyed to the Issuer
under the Indenture.

Any payment of principal or interest payable on this Note which is punctually paid on the applicable Payment Date shall be paid to the Person in whose name such Note is registered at the close of business on the Record Date for such Payment Date by check mailed to such person’s address as it appears in the Note Register on such Record Date, except for the final installment of principal and interest payable with respect to such Note, which shall be payable as provided below. Notwithstanding the foregoing, upon written request with appropriate instructions by the Holder of this Note delivered to the Securities Administrator at least five Business Days prior to the Record Date, any payment of principal or interest, other than the final installment of principal or interest, shall be made by wire transfer to an account in the United States designated by such Holder. All reductions in the
principal amount of a Note effected by payments of principal made on any Payment Date shall be binding upon all Holders of this Note and of any Note issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof, whether or not such payment is noted on such Note. The final payment of this Note shall be payable upon presentation and surrender thereof on or after the Payment Date thereof at the office designated by the Securities Administrator or the office or agency of the Issuer maintained by it for such purpose pursuant to Section 4.02 of the Indenture.

Subject to the foregoing provisions, each Note delivered under the Indenture, upon registration of transfer of or in exchange for or in lieu of any other Note, shall carry the right to unpaid principal and interest that were carried by such other Note.

If an Event of Default as defined in the Indenture shall occur and be continuing with respect to the Notes, the Notes may become or be declared due and payable in the manner and with the effect provided in the Indenture. If any such acceleration of maturity occurs prior to the payment of the entire unpaid Note Principal Balance of the Notes, the amount payable to the Holder of this Note will be equal to the sum of the unpaid Note Principal Balance of this Note, together with accrued and unpaid interest thereon as described in the Indenture. The Indenture 

 

provides that, notwithstanding the acceleration of the maturity of the Notes, under certain circumstances specified therein, all amounts collected as proceeds of the Trust Estate securing the Notes or otherwise shall continue to be applied to payments of principal of and interest on the Notes as if they had not been declared due and payable.

The failure to pay any Net Interest Shortfall at any time when funds are not available to make such payment as provided in the Indenture shall not constitute an Event of Default under the Indenture.

The Holder of this Note or Beneficial Owner of any interest herein is deemed to represent that either (1) it is not acquiring the Note with Plan Assets or (2) (A) the acquisition, holding and transfer of a Note will not give rise to a nonexempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code and (B) the Notes are rated investment grade or better and such person believes that the Notes are properly treated as indebtedness without substantial equity features for purposes of the DOL Regulations, and agrees to so treat the Notes. Alternatively, regardless of the rating of the Notes, such person may provide the Indenture Trustee and the Note Registrar with an opinion of counsel, which opinion of counsel will not be at the expense of the Issuer, the Seller, the Owner Trustee, the Indenture Trustee, the Master Servicer, the Securities Administrator, the Note
Registrar or any servicer, which opines that the acquisition, holding and transfer of such Note or interest therein is permissible under applicable law, will not constitute or result in a non-exempt prohibited transaction under ERISA or Section 4975 of the Code and will not subject the Issuer, the Seller, the Depositor, the Owner Trustee, the Indenture Trustee, the Note Registrar, the Securities Administrator, the Master Servicer or any servicer to any obligation in addition to those undertaken in the Indenture and the other Basic Documents.

As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Note may be registered on the Note Register of the Issuer. Upon surrender for registration of transfer of, or presentation of a written instrument of transfer for, this Note at the office or agency designated by the Issuer pursuant to the Indenture, accompanied by proper instruments of assignment in form satisfactory to the Securities Administrator, one or more new Notes of any authorized denominations and of a like aggregate then outstanding Note Principal Balance, will be issued to the designated transferee or transferees.

Prior to the due presentment for registration of transfer of this Note, the Issuer, the Indenture Trustee, the Securities Administrator and any agent of the Issuer, the Securities Administrator or the Indenture Trustee may treat the Person in whose name this Note is registered as the owner of such Note (i) on the applicable Record Date for the purpose of making payments and interest of such Note, and (ii) on any other date for all other purposes whatsoever, as the owner hereof, whether or not this Note be overdue, and none of the Issuer, the Securities Administrator, the Indenture Trustee nor any such agent of the Issuer, the Securities Administrator or the Indenture Trustee shall be affected by notice to the contrary.

The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Issuer and the rights of the Holders of the Notes under the Indenture at any time by the Issuer and the Holders of a majority of each Class of Notes affected thereby. The Indenture also contains provisions permitting the Holders of Notes representing not less than a majority of the aggregate Note Principal Balance of 

 

the Notes, to waive any past Event of Default and its consequences except an Event of Default (a) with respect to payment of principal of or interest on any of the Notes, or (b) in respect of a covenant or provision of the Indenture which cannot be modified or amended without the consent of the Holder of each Note. Any such waiver by the Holder, at the time of the giving thereof, of this Note (or any one or more predecessor Notes) shall bind the Holder of every Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not notation of such consent or waiver is made upon such Note. The Indenture also permits the Issuer, the Indenture Trustee and the Securities Administrator, following prior notice to the Rating Agencies, to amend or waive certain terms and conditions set forth in the Indenture without the consent of the Holders of the Notes issued thereunder.

Initially, the Notes will be registered in the name of Cede & Co. as nominee of DTC, acting in its capacity as the Depository for the Notes. The Notes will be delivered by the clearing agency in denominations as provided in the Indenture and subject to certain limitations therein set forth. The Notes are exchangeable for a like aggregate then outstanding Note Principal Balance of Notes of different authorized denominations, as requested by the Holder surrendering same.

Unless the Certificate of Authentication hereon has been executed by the Securities Administrator by manual signature, this Note shall not be entitled to any benefit under the Indenture, or be valid or obligatory for any purpose.

Anything herein to the contrary notwithstanding, except as expressly provided in the Basic Documents, neither the Owner Trustee in its individual capacity, nor any of its respective partners, beneficiaries, agents, officers, directors, employees, or successors or assigns, shall be personally liable for, nor shall recourse be had to any of them for, the payment of principal of or interest on, or performance of, or omission to perform, any of the covenants, obligations or indemnifications contained in this Note, it being expressly understood that said covenants, obligations and indemnifications have been made solely by the Trust to the extent of the assets of the Trust. The holder of this Note by the acceptance hereof agrees that, except as expressly provided in the Basic Documents, the Holder shall have no claim against any of the foregoing for any deficiency, loss or claim therefrom;
provided, however, that nothing contained herein shall be taken to prevent recourse to, and enforcement against, the assets of the Trust Estate for any and all liabilities, obligations and undertakings contained in this Note.

AS PROVIDED IN THE INDENTURE, THIS NOTE AND THE INDENTURE CREATING THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED THEREIN.

 

 

IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly executed.

Dated: November 2, 2005

 

	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            LUMINENT MORTGAGE TRUST 2005-1
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            BY:
 	
            CHASE BANK USA, NATIONAL ASSOCIATION, not in its individual capacity but solely in its capacity as Owner Trustee
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            By:
 	
            
 
 
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            Authorized Signatory
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 

 

 

SECURITIES ADMINISTRATOR’S CERTIFICATE OF AUTHENTICATION

This is one of the Class A-[1][2] Notes referred to in the within-mentioned Indenture.

 

	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            BY:
 	
            WELLS FARGO BANK, N.A., as Securities Administrator
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            BY
 	
            
 
 
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            Authorized Signatory
 

 

 

 

 

ABBREVIATIONS

The following abbreviations, when used in the inscription on the face of the Note, shall be construed as though they were written out in full according to applicable laws or regulations:

	
            TEN COM
 	
            --
 	
            as tenants in common
 
	
             
 	
             
 	
             
 
	
            TEN ENT
 	
            --
 	
            as tenants by the entireties
 
	
             
 	
             
 	
             
 
	
            JT TEN
 	
            --
 	
            as joint tenants with right of survivorship and not as tenants in common
 
	
             
 	
             
 	
             
 
	
            UNIF GIFT MIN ACT
 	
            --
 	
            ____________ Custodian
 
	
             
 	
             
 	
            
 
 
 
	
             
 	
             
 	
            (Cust)                                     (Minor)
 
	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 
	
             
 	
             
 	
            under Uniform Gifts to Minor Act
 
	
             
 	
             
 	
            
 
 
 
	
             
 	
             
 	
            (State)
 

 

Additional abbreviations may also be used though not in the above list.

 

 

ASSIGNMENT

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto 

PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE:

	
             
 	
            
 
 
 	
             
 

 

	
             
 	
            
 
 
 	
             
 

 

	
             
 	
            
 
 
 	
             
 

(Please print or typewrite name and address, including zip code, of assignee)

	
            
 
 
 

the within Note and all rights thereunder, and hereby irrevocably constitutes and appoints ________________________ attorney to transfer said Note on the books kept for registration thereof, with full power of substitution in the premises.

 

Dated:

 

	
            Signature Guaranteed by
 	
            __________________________________
 

 

NOTICE: The signature(s) to this assignment must correspond with the name as it appears upon the face of the within Note in every particular, without alteration or enlargement or any change whatsoever. Signature(s) must be guaranteed by a commercial bank or by a member firm of the New York Stock Exchange or another national securities exchange. Notarized or witnessed signatures are not acceptable.

 

 

 

EXHIBIT A-2

FORM OF CLASS M NOTES

 

THIS NOTE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS A-1 NOTES AND CLASS A-2 NOTES AS DESCRIBED IN THE INDENTURE.

UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE SECURITIES ADMINISTRATOR OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

THE HOLDER OF THIS NOTE OR BENEFICIAL OWNER OF ANY INTEREST HEREIN IS DEEMED TO REPRESENT THAT EITHER (1) IT IS NOT ACQUIRING THE NOTE WITH PLAN ASSETS OR (2) (A) THE ACQUISITION, HOLDING AND TRANSFER OF A NOTE WILL NOT GIVE RISE TO A NONEXEMPT PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE AND (B) THE NOTES ARE RATED INVESTMENT GRADE OR BETTER AND SUCH PERSON BELIEVES THAT THE NOTES ARE PROPERLY TREATED AS INDEBTEDNESS WITHOUT SUBSTANTIAL EQUITY FEATURES FOR PURPOSES OF THE DOL REGULATIONS, AND AGREES TO SO TREAT THE NOTES. ALTERNATIVELY, REGARDLESS OF THE RATING OF THE NOTES, SUCH PERSON MAY PROVIDE THE INDENTURE TRUSTEE AND THE NOTE REGISTRAR WITH AN OPINION OF COUNSEL, WHICH OPINION OF COUNSEL WILL NOT BE AT THE EXPENSE OF THE ISSUER, THE SELLER, THE OWNER TRUSTEE, THE INDENTURE TRUSTEE, THE SECURITIES ADMINISTRATOR, THE NOTE REGISTRAR, THE MASTER SERVICER OR ANY
SERVICER, WHICH OPINES THAT THE ACQUISITION, HOLDING AND TRANSFER OF SUCH NOTE OR INTEREST THEREIN IS PERMISSIBLE UNDER APPLICABLE LAW, WILL NOT CONSTITUTE OR RESULT IN A NON-EXEMPT PROHIBITED TRANSACTION UNDER ERISA OR SECTION 4975 OF THE CODE AND WILL NOT SUBJECT THE ISSUER, THE SELLER, THE DEPOSITOR, THE OWNER TRUSTEE, THE INDENTURE TRUSTEE, THE SECURITIES ADMINISTRATOR, THE NOTE REGISTRAR, THE MASTER SERVICER OR ANY SERVICER TO ANY OBLIGATION IN ADDITION TO THOSE UNDERTAKEN IN THE INDENTURE.

THE HOLDER OF THIS NOTE OR BENEFICIAL OWNER OF ANY INTEREST HEREIN WILL BE DEEMED TO REPRESENT TO ONE OF THE REPRESENTATIONS CONTAINED IN THE INDENTURE.

 

 

THIS NOTE IS A NON-RECOURSE OBLIGATION OF THE ISSUER, AND IS LIMITED IN RIGHT OF PAYMENT TO AMOUNTS AVAILABLE FROM THE TRUST ESTATE AS PROVIDED IN THE INDENTURE REFERRED TO BELOW. THE ISSUER IS NOT OTHERWISE PERSONALLY LIABLE FOR PAYMENTS ON THIS NOTE.

PRINCIPAL OF THIS NOTE IS PAYABLE OVER TIME AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.

 

 

LUMINENT MORTGAGE TRUST 2005-1

MORTGAGE-BACKED NOTES, SERIES 2005-1

CLASS M-[1][2]

	
            AGGREGATE NOTE PRINCIPAL

BALANCE: $[________________]
 	
            NOTE INTEREST

RATE: Adjustable Rate
 
	
             
 	
             
 
	
            INITIAL NOTE PRINCIPAL

BALANCE OF THIS NOTE: $[_____________]
 	
            NOTE NO. 1
 
	
             
 	
             
 
	
             
 	
            CUSIP NO: [_______________]
 
	
             
 	
             
 

 

LUMINENT MORTGAGE TRUST 2005-1 (the “Issuer”), a Delaware statutory trust, for value received, hereby promises to pay to Cede & Co. or registered assigns, the principal sum of $[____________________] in monthly installments on the twenty-fifth day of each month or, if such day is not a Business Day, the next succeeding Business Day (each a “Payment Date”), commencing in November 2005 and ending on or before the Payment Date occurring in [__________ 20___] (the “Final Scheduled Payment Date”) and to pay interest on the Note Principal Balance of this Note (this “Note”) outstanding from time to time as provided below.

This Note is one of a duly authorized issue of the Issuer’s Mortgage-Backed Notes, Series 2005-1 (the “Notes”), issued under an Indenture dated as of November 2, 2005 (the “Indenture”), among the Issuer, Wells Fargo Bank, N.A., as Securities Administrator and LaSalle Bank National Association, as indenture trustee (the “Indenture Trustee”, which term includes any successor Indenture Trustee under the Indenture) to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights thereunder of the Issuer, the Indenture Trustee, and the Holders of the Notes and the terms upon which the Notes are to be authenticated and delivered. All terms used in this Note which are defined in the Indenture shall have the meanings assigned to them in the Indenture.

Payments of principal and interest on this Note will be made on each Payment Date to the Noteholder of record as of the related Record Date. The “Note Principal Balance” of a Note as of any date of determination is equal to the initial Note Principal Balance thereof, minus (i) all amounts distributed in respect of principal with respect to such Class of Notes and (ii) the aggregate amount of any reductions in the Note Principal Balance thereof deemed to have occurred in connection with allocations of Realized Losses on all prior Payment Dates in accordance with the Indenture, taking account of its applicable Loss Allocation Limitation, plus (iii) any Subsequent Recoveries allocated thereto.

The principal of, and interest on, this Note are due and payable as described in the Indenture, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. All payments made by the Issuer with respect to this Note shall be equal to this Note’s pro rata share of the aggregate payments on all Class M-[1][2] Notes as described above, and shall be applied as between interest and principal as provided in the Indenture.

 

 

All principal and interest accrued on the Notes, if not previously paid, will become finally due and payable at the Final Scheduled Payment Date.

The Mortgage Loans are subject to purchase in whole, but not in part, by the Majority Certificateholder on any  Payment Date on or after the Payment Date on which the aggregate Scheduled Principal Balance of the Mortgage Loans as of the end of the prior Due Period and the Remaining Pre-Funded Amount is 10% or less of the sum of (A) the Cut-off Date Scheduled Principal Balance of the Mortgage Loans and (B) the aggregate of the Pre-Funded Amounts as of the Closing Date.

The Issuer shall not be liable upon the indebtedness evidenced by the Notes except to the extent of amounts available from the Trust Estate which constitutes security for the payment of the Notes. The assets included in the Trust Estate will be the sole source of payments on the Class M-[1][2] Notes, and each Holder hereof, by its acceptance of this Note, agrees that (i) such Note will be limited in right of payment to amounts available from the Trust Estate as provided in the Indenture and (ii) such Holder shall have no recourse to the Issuer, the Owner Trustee, the Indenture Trustee, the Depositor, the Seller, the Master Servicer, the Securities Administrator or any of their respective affiliates, or to the assets of any of the foregoing entities, except the assets of the Issuer pledged to secure the Class M-[1][2] Notes pursuant to the Indenture and the rights conveyed to the Issuer
under the Indenture.

Any payment of principal or interest payable on this Note which is punctually paid on the applicable Payment Date shall be paid to the Person in whose name such Note is registered at the close of business on the Record Date for such Payment Date by check mailed to such person’s address as it appears in the Note Register on such Record Date, except for the final installment of principal and interest payable with respect to such Note, which shall be payable as provided below. Notwithstanding the foregoing, upon written request with appropriate instructions by the Holder of this Note delivered to the Securities Administrator at least five Business Days prior to the Record Date, any payment of principal or interest, other than the final installment of principal or interest, shall be made by wire transfer to an account in the United States designated by such Holder. All reductions in the
principal amount of a Note effected by payments of principal made on any Payment Date shall be binding upon all Holders of this Note and of any Note issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof, whether or not such payment is noted on such Note. The final payment of this Note shall be payable upon presentation and surrender thereof on or after the Payment Date thereof at the office designated by the Securities Administrator or the office or agency of the Issuer maintained by it for such purpose pursuant to Section 4.02 of the Indenture.

Subject to the foregoing provisions, each Note delivered under the Indenture, upon registration of transfer of or in exchange for or in lieu of any other Note, shall carry the right to unpaid principal and interest that were carried by such other Note.

If an Event of Default as defined in the Indenture shall occur and be continuing with respect to the Notes, the Notes may become or be declared due and payable in the manner and with the effect provided in the Indenture. If any such acceleration of maturity occurs prior to the payment of the entire unpaid Note Principal Balance of the Notes, the amount payable to the Holder of this Note will be equal to the sum of the unpaid Note Principal Balance of this Note, together with accrued and unpaid interest thereon as described in the Indenture. The Indenture 

 

provides that, notwithstanding the acceleration of the maturity of the Notes, under certain circumstances specified therein, all amounts collected as proceeds of the Trust Estate securing the Notes or otherwise shall continue to be applied to payments of principal of and interest on the Notes as if they had not been declared due and payable.

The failure to pay any Net Interest Shortfall at any time when funds are not available to make such payment as provided in the Indenture shall not constitute an Event of Default under the Indenture.

The Holder of this Note or Beneficial Owner of any interest herein is deemed to represent that either (1) it is not acquiring the Note with Plan Assets or (2) (A) the acquisition, holding and transfer of a Note will not give rise to a nonexempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code and (B) the Notes are rated investment grade or better and such person believes that the Notes are properly treated as indebtedness without substantial equity features for purposes of the DOL Regulations, and agrees to so treat the Notes. Alternatively, regardless of the rating of the Notes, such person may provide the Indenture Trustee and the Note Registrar with an opinion of counsel, which opinion of counsel will not be at the expense of the Issuer, the Seller, the Owner Trustee, the Indenture Trustee, the Master Servicer, the Securities Administrator, the Note
Registrar or any servicer, which opines that the acquisition, holding and transfer of such Note or interest therein is permissible under applicable law, will not constitute or result in a non-exempt prohibited transaction under ERISA or Section 4975 of the Code and will not subject the Issuer, the Seller, the Depositor, the Owner Trustee, the Indenture Trustee, the Note Registrar, the Securities Administrator, the Master Servicer or any servicer to any obligation in addition to those undertaken in the Indenture and the other Basic Documents.

As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Note may be registered on the Note Register of the Issuer. Upon surrender for registration of transfer of, or presentation of a written instrument of transfer for, this Note at the office or agency designated by the Issuer pursuant to the Indenture, accompanied by proper instruments of assignment in form satisfactory to the Securities Administrator, one or more new Notes of any authorized denominations and of a like aggregate then outstanding Note Principal Balance, will be issued to the designated transferee or transferees.

Prior to the due presentment for registration of transfer of this Note, the Issuer, the Indenture Trustee, the Securities Administrator and any agent of the Issuer, the Securities Administrator or the Indenture Trustee may treat the Person in whose name this Note is registered as the owner of such Note (i) on the applicable Record Date for the purpose of making payments and interest of such Note, and (ii) on any other date for all other purposes whatsoever, as the owner hereof, whether or not this Note be overdue, and none of the Issuer, the Securities Administrator, the Indenture Trustee nor any such agent of the Issuer, the Securities Administrator or the Indenture Trustee shall be affected by notice to the contrary.

The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Issuer and the rights of the Holders of the Notes under the Indenture at any time by the Issuer and the Holders of a majority of each Class of Notes affected thereby. The Indenture also contains provisions permitting the Holders of Notes representing not less than a majority of the aggregate Note Principal Balance of 

 

the Notes, to waive any past Event of Default and its consequences except an Event of Default (a) with respect to payment of principal of or interest on any of the Notes, or (b) in respect of a covenant or provision of the Indenture which cannot be modified or amended without the consent of the Holder of each Note. Any such waiver by the Holder, at the time of the giving thereof, of this Note (or any one or more predecessor Notes) shall bind the Holder of every Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not notation of such consent or waiver is made upon such Note. The Indenture also permits the Issuer, the Indenture Trustee and the Securities Administrator, following prior notice to the Rating Agencies, to amend or waive certain terms and conditions set forth in the Indenture without the consent of the Holders of the Notes issued thereunder.

Initially, the Notes will be registered in the name of Cede & Co. as nominee of DTC, acting in its capacity as the Depository for the Notes. The Notes will be delivered by the clearing agency in denominations as provided in the Indenture and subject to certain limitations therein set forth. The Notes are exchangeable for a like aggregate then outstanding Note Principal Balance of Notes of different authorized denominations, as requested by the Holder surrendering same.

Unless the Certificate of Authentication hereon has been executed by the Securities Administrator by manual signature, this Note shall not be entitled to any benefit under the Indenture, or be valid or obligatory for any purpose.

Anything herein to the contrary notwithstanding, except as expressly provided in the Basic Documents, neither the Owner Trustee in its individual capacity, nor any of its respective partners, beneficiaries, agents, officers, directors, employees, or successors or assigns, shall be personally liable for, nor shall recourse be had to any of them for, the payment of principal of or interest on, or performance of, or omission to perform, any of the covenants, obligations or indemnifications contained in this Note, it being expressly understood that said covenants, obligations and indemnifications have been made solely by the Trust to the extent of the assets of the Trust. The holder of this Note by the acceptance hereof agrees that, except as expressly provided in the Basic Documents, the Holder shall have no claim against any of the foregoing for any deficiency, loss or claim therefrom;
provided, however, that nothing contained herein shall be taken to prevent recourse to, and enforcement against, the assets of the Trust Estate for any and all liabilities, obligations and undertakings contained in this Note.

AS PROVIDED IN THE INDENTURE, THIS NOTE AND THE INDENTURE CREATING THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED THEREIN.

 

 

IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly executed.

Dated: November 2, 2005

 

	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            LUMINENT MORTGAGE TRUST 2005-1
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            BY:
 	
            CHASE BANK USA, NATIONAL ASSOCIATION, not in its individual capacity but solely in its capacity as Owner Trustee
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            By:
 	
            
 
 
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            Authorized Signatory
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 

 

 

SECURITIES ADMINISTRATOR’S CERTIFICATE OF AUTHENTICATION

This is one of the Class M-[1][2] Notes referred to in the within-mentioned Indenture.

 

	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            BY:
 	
            WELLS FARGO BANK, N.A., as Securities Administrator
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            BY
 	
            
 
 
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            Authorized Signatory
 

 

 

 

 

 

 

 

ABBREVIATIONS

The following abbreviations, when used in the inscription on the face of the Note, shall be construed as though they were written out in full according to applicable laws or regulations:

	
            TEN COM
 	
            --
 	
            as tenants in common
 
	
             
 	
             
 	
             
 
	
            TEN ENT
 	
            --
 	
            as tenants by the entireties
 
	
             
 	
             
 	
             
 
	
            JT TEN
 	
            --
 	
            as joint tenants with right of survivorship and not as tenants in common
 
	
             
 	
             
 	
             
 
	
            UNIF GIFT MIN ACT
 	
            --
 	
            ____________ Custodian
 
	
             
 	
             
 	
            
 
 
 
	
             
 	
             
 	
            (Cust)                                     (Minor)
 
	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 
	
             
 	
             
 	
            under Uniform Gifts to Minor Act
 
	
             
 	
             
 	
            
 
 
 
	
             
 	
             
 	
            (State)
 

Additional abbreviations may also be used though not in the above list.

 

 

ASSIGNMENT

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto 

PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE:

	
             
 	
            
 
 
 	
             
 

 

	
             
 	
            
 
 
 	
             
 

 

	
             
 	
            
 
 
 	
             
 

(Please print or typewrite name and address, including zip code, of assignee)

	
            
 
 
 

the within Note and all rights thereunder, and hereby irrevocably constitutes and appoints ________________________ attorney to transfer said Note on the books kept for registration thereof, with full power of substitution in the premises.

 

Dated:

 

	
            Signature Guaranteed by
 	
            __________________________________
 

 

NOTICE: The signature(s) to this assignment must correspond with the name as it appears upon the face of the within Note in every particular, without alteration or enlargement or any change whatsoever. Signature(s) must be guaranteed by a commercial bank or by a member firm of the New York Stock Exchange or another national securities exchange. Notarized or witnessed signatures are not acceptable.

 

 

 

EXHIBIT A-3

FORM OF CLASS B NOTES

 

THIS NOTE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS A-1, CLASS A-2, CLASS M-1 AND CLASS M-2 NOTES AS DESCRIBED IN THE INDENTURE.

[FOR CLASS B-1 NOTES:] UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE SECURITIES ADMINISTRATOR OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

[FOR CLASS B-2, CLASS B-3, CLASS B-4, CLASS B-5 AND CLASS B-6 NOTES:]THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE RESOLD OR TRANSFERRED UNLESS IT IS REGISTERED PURSUANT TO SUCH ACT AND LAWS OR IS SOLD OR TRANSFERRED IN TRANSACTIONS WHICH ARE EXEMPT FROM REGISTRATION UNDER SUCH ACT AND UNDER APPLICABLE STATE LAW AND IS TRANSFERRED IN ACCORDANCE WITH THE PROVISIONS OF THE INDENTURE.

[FOR CLASS B-1 NOTES:] THE HOLDER OF THIS NOTE OR BENEFICIAL OWNER OF ANY INTEREST HEREIN IS DEEMED TO REPRESENT THAT EITHER (1) IT IS NOT ACQUIRING THE NOTE WITH PLAN ASSETS OR (2) (A) THE ACQUISITION, HOLDING AND TRANSFER OF A NOTE WILL NOT GIVE RISE TO A NONEXEMPT PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE AND (B) THE NOTES ARE RATED INVESTMENT GRADE OR BETTER AND SUCH PERSON BELIEVES THAT THE NOTES ARE PROPERLY TREATED AS INDEBTEDNESS WITHOUT SUBSTANTIAL EQUITY FEATURES FOR PURPOSES OF THE DOL REGULATIONS, AND AGREES TO SO TREAT THE NOTES. ALTERNATIVELY, REGARDLESS OF THE RATING OF THE NOTES, SUCH PERSON MAY PROVIDE THE INDENTURE TRUSTEE AND THE NOTE REGISTRAR WITH AN OPINION OF COUNSEL, WHICH OPINION OF COUNSEL WILL NOT BE AT THE EXPENSE OF THE ISSUER, THE SELLER, THE OWNER TRUSTEE, THE INDENTURE TRUSTEE, THE SECURITIES ADMINISTRATOR, THE NOTE REGISTRAR, THE MASTER
SERVICER OR ANY SERVICER, WHICH OPINES THAT THE ACQUISITION, HOLDING AND TRANSFER OF SUCH NOTE OR INTEREST THEREIN IS PERMISSIBLE UNDER APPLICABLE LAW, WILL NOT CONSTITUTE OR RESULT IN A NON-EXEMPT PROHIBITED TRANSACTION 

 

UNDER ERISA OR SECTION 4975 OF THE CODE AND WILL NOT SUBJECT THE ISSUER, THE SELLER, THE DEPOSITOR, THE OWNER TRUSTEE, THE INDENTURE TRUSTEE, THE SECURITIES ADMINISTRATOR, THE NOTE REGISTRAR, THE MASTER SERVICER OR ANY SERVICER TO ANY OBLIGATION IN ADDITION TO THOSE UNDERTAKEN IN THE INDENTURE.

THE HOLDER OF THIS NOTE OR BENEFICIAL OWNER OF ANY INTEREST HEREIN WILL BE DEEMED TO REPRESENT TO ONE OF THE REPRESENTATIONS CONTAINED IN THE INDENTURE.

[FOR CLASS B-2, CLASS B-3, CLASS B-4, CLASS B-5 AND CLASS B-6 NOTES:] NO TRANSFER OF THIS NOTE SHALL BE MADE UNLESS THE TRANSFEREE IS NOT ACQUIRING THE NOTE WITH PLAN ASSETS OR UNLESS THE INDENTURE TRUSTEE AND THE NOTE REGISTRAR ARE PROVIDED WITH AN OPINION OF COUNSEL TO THE EFFECT THAT THE PURCHASE OF THE NOTES IS PERMISSIBLE UNDER APPLICABLE LAW, WILL NOT CONSTITUTE OR RESULT IN ANY PROHIBITED TRANSACTION UNDER ERISA OR SECTION 4975 OF THE CODE AND WILL NOT SUBJECT THE INDENTURE TRUSTEE, THE OWNER TRUSTEE, THE DEPOSITOR, THE ISSUER, THE SELLER, THE SECURITIES ADMINISTRATOR, THE MASTER SERVICER, ANY SERVICER OR THE NOTE REGISTRAR TO ANY OBLIGATION OR LIABILITY (INCLUDING OBLIGATIONS OR LIABILITIES UNDER ERISA OR SECTION 4975 OF THE CODE) IN ADDITION TO THOSE UNDERTAKEN IN THE INDENTURE, WHICH OPINION OF COUNSEL SHALL NOT BE AN EXPENSE OF THE DEPOSITOR, THE OWNER TRUSTEE, THE INDENTURE TRUSTEE, THE NOTE
REGISTRAR OR THE SECURITIES ADMINISTRATOR.

[FOR CLASS B-2, CLASS B-3, CLASS B-4, CLASS B-5 AND CLASS B-6 NOTES:] NO TRANSFER OF THIS NOTE SHALL BE MADE, UNLESS (A) A “WILL BE DEBT” OPINION SHALL HAVE BEEN RENDERED BY NATIONALLY RECOGNIZED TAX COUNSEL WITH RESPECT TO IT AND FURNISHED TO THE SECURITIES ADMINISTRATOR, OR (B) THE TRANSFEREE SHALL HAVE DELIVERED TO THE OWNER TRUSTEE, THE NOTE REGISTRAR, THE SECURITIES ADMINISTRATOR AND THE INDENTURE TRUSTEE A CERTIFICATE CERTIFYING THAT (1) IT IS A REAL INVESTMENT TRUST (“REIT”) WITHIN THE MEANING OF SECTION 856(a) OR A QUALIFIED REIT SUBSIDIARY (“QRS”) WITHIN THE MEANING OF SECTION 856(i) OF THE CODE OR AN ENTITY DISREGARDED AS AN ENTITY SEPARATE FROM A REIT OR A QRS AND (2) FOLLOWING THE TRANSFER, 100% OF THE CERTIFICATES AND CLASS B-2, CLASS B-3, CLASS B-4, CLASS B-5 AND CLASS B-6 NOTES (OTHER THAN ANY CLASS B-2, CLASS B-3, CLASS B-4, CLASS B-5 AND CLASS B-6 NOTES WITH
RESPECT TO WHICH A “WILL BE DEBT” OPINION HAS BEEN RENDERED BY NATIONALLY RECOGNIZED TAX COUNSEL AND FURNISHED TO THE SECURITIES ADMINISTRATOR) WILL BE OWNED BY A SINGLE REIT, DIRECTLY OR INDIRECTLY THROUGH ONE OR MORE QRSs OF SUCH REIT OR ONE OR MORE ENTITIES DISREGARDED AS ENTITIES SEPARATE FROM SUCH REIT OR SUCH QRSs; PROVIDED THAT (X) THIS NOTE MAY BE PLEDGED TO SECURE INDEBTEDNESS AND MAY BE THE SUBJECT OF REPURCHASE AGREEMENTS TREATED BY THE ISSUER AS SECURED 

 

INDEBTEDNESS FOR FEDERAL INCOME TAX PURPOSES, (Y) THIS NOTE MAY BE SURRENDERED TO THE OFFICE OR AGENCY DESIGNATED BY THE ISSUER PURSUANT TO THE INDENTURE FOR THE ISSUANCE OF ONE OR MORE NEW NOTES OF THE SAME CLASS TO BE REGISTERED IN THE NAME OF THE RELATED LENDER UNDER ANY SUCH RELATED LOAN AGREEMENT OR REPURCHASE AGREEMENT, UPON THE REASONABLE REQUEST OF SUCH LENDER AND THE DELIVERY BY SUCH LENDER TO THE NOTE REGISTRAR, THE SECURITIES ADMINISTRATOR, THE OWNER TRUSTEE AND THE INDENTURE TRUSTEE, OF A CERTIFICATE CERTIFYING THAT THIS NOTE IS BEING PLEDGED TO SECURE INDEBTEDNESS OR IS THE SUBJECT OF REPURCHASE AGREEMENTS TREATED BY THE ISSUER AS SECURED INDEBTEDNESS FOR FEDERAL INCOME TAX PURPOSES, AND (Z) THIS NOTE MAY BE TRANSFERRED BY A RELATED LENDER UNDER ANY SUCH RELATED LOAN AGREEMENT OR REPURCHASE AGREEMENT UPON A DEFAULT UNDER ANY SUCH INDEBTEDNESS, IN WHICH CASE THE TRANSFEROR SHALL DELIVER TO
THE NOTE REGISTRAR, THE SECURITIES ADMINISTRATOR, THE OWNER TRUSTEE AND THE INDENTURE TRUSTEE A CERTIFICATE CERTIFYING TO SUCH EFFECT.

 

THIS NOTE IS A NON-RECOURSE OBLIGATION OF THE ISSUER, AND IS LIMITED IN RIGHT OF PAYMENT TO AMOUNTS AVAILABLE FROM THE TRUST ESTATE AS PROVIDED IN THE INDENTURE REFERRED TO BELOW. THE ISSUER IS NOT OTHERWISE PERSONALLY LIABLE FOR PAYMENTS ON THIS NOTE.

PRINCIPAL OF THIS NOTE IS PAYABLE OVER TIME AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.

 

 

LUMINENT MORTGAGE TRUST 2005-1

MORTGAGE-BACKED NOTES, SERIES 2005-1

CLASS B-[1][2][3][4][5][6]

	
            AGGREGATE NOTE PRINCIPAL
 	
            NOTE INTEREST
 
	
            BALANCE: $[_______]
 	
            RATE:  Variable Rate
 
	
             
 	
             
 
	
            INITIAL NOTE PRINCIPAL
 	
            NOTE NO. 1
 
	
            BALANCE OF THIS NOTE: $[_______]
 	
             
 
	
             
 	
             
 
	
            PERCENTAGE INTEREST: 100%
 	
            CUSIP NO: [_______]
 

 

LUMINENT MORTGAGE TRUST 2005-1 (the “Issuer”), a Delaware statutory trust, for value received, hereby promises to pay to ____________ or registered assigns, the principal sum of $[______] in monthly installments on the twenty-fifth day of each month or, if such day is not a Business Day, the next succeeding Business Day (each a “Payment Date”), commencing in November 2005 and ending on or before the Payment Date occurring in __________ 2035 (the “Final Scheduled Payment Date”) and to pay interest on the Note Principal Balance of this Note (this “Note”) outstanding from time to time as provided below.

This Note is one of a duly authorized issue of the Issuer's Mortgage-Backed Notes, Series 2005-1 (the “Notes”), issued under an Indenture, dated as of November 2, 2005 (the “Indenture”), among the Issuer, Wells Fargo Bank, N.A. as securities administrator and LaSalle Bank National Association as indenture trustee (the “Indenture Trustee”, which term includes any successor Indenture Trustee), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights thereunder of the Issuer, the Indenture Trustee and the Holders of the Notes and the terms upon which the Notes are to be authenticated and delivered. All terms used in this Note which are defined in the Indenture shall have the meanings assigned to them in the Indenture.

Payments of principal and interest on this Note will be made on each Payment Date to the Noteholder of record as of the related Record Date. The “Note Principal Balance” of a Note as of any date of determination is equal to the initial Note Principal Balance thereof, minus (i) all amounts distributed in respect of principal with respect to such Class of Notes, (ii) the aggregate amount of any reductions in the Note Principal Balance thereof deemed to have occurred in connection with allocations of Realized Losses on all prior Payment Dates in accordance with the Indenture.

The principal of, and interest on, this Note are due and payable as described in the Indenture, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. All payments made by the Issuer with respect to this Note shall be equal to this Note's pro rata share of the aggregate payments on all Class B-[1][2][3][4][5][6] Notes as described above, and shall be applied as between interest and principal as provided in the Indenture.

 

 

All principal and interest accrued on the Notes, if not previously paid, will become finally due and payable at the Final Scheduled Payment Date.

The Mortgage Loans are subject to purchase in whole, but not in part, by the Majority Certificateholder, on any Payment Date on or after the Payment Date on which sum of the aggregate Scheduled Principal Balance of the Mortgage Loans as of the end of the prior Due Period and the Remaining Pre-Funded Amount is 10% or less of the sum of (A) the Cut-off Date Scheduled Principal Balance of the Mortgage Loans and (B) the aggregate of the Pre-Funded Amounts as of the Closing Date.

[For Class B-1 Notes:] The Issuer shall not be liable upon the indebtedness evidenced by the Notes except to the extent of amounts available from the Trust Estate which constitutes security for the payment of the Notes. 

The assets included in the Trust Estate will be the sole source of payments on the Class B-[1][2][3][4][5][6] Notes, and each Holder hereof, by its acceptance of this Note, agrees that (i) such Note will be limited in right of payment to amounts available from the Trust Estate as provided in the Indenture and (ii) such Holder shall have no recourse to the Issuer, the Owner Trustee, the Indenture Trustee, the Depositor, the Seller, the Master Servicer, the Securities Administrator or any of their respective affiliates, or to the assets of any of the foregoing entities, except the assets of the Issuer pledged to secure the Class B-[1][2][3][4][5][6] Notes pursuant to the Indenture and the rights conveyed to the Issuer under the Indenture.

Any payment of principal or interest payable on this Note which is punctually paid on the applicable Payment Date shall be paid to the Person in whose name such Note is registered at the close of business on the Record Date for such Payment Date by check mailed to such person's address as it appears in the Note Register on such Record Date, except for the final installment of principal and interest payable with respect to such Note, which shall be payable as provided below. Notwithstanding the foregoing, upon written request with appropriate instructions by the Holder of this Note delivered to the Securities Administrator at least five Business Days prior to the Record Date, any payment of principal or interest, other than the final installment of principal or interest, shall be made by wire transfer to an account in the United States designated by such Holder. All reductions in the
principal amount of a Note effected by payments of principal made on any Payment Date shall be binding upon all Holders of this Note and of any note issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof, whether or not such payment is noted on such Note. The final payment of this Note shall be payable upon presentation and surrender thereof on or after the Payment Date thereof at the Office designated by the Securities Administrator or the office or agency of the Issuer maintained by it for such purpose pursuant to the Indenture.

Subject to the foregoing provisions, each Note delivered under the Indenture, upon registration of transfer of or in exchange for or in lieu of any other Note, shall carry the right to unpaid principal and interest that were carried by such other Note.

If an Event of Default as defined in the Indenture shall occur and be continuing with respect to the Notes, the Notes may become or be declared due and payable in the manner and with the effect provided in the Indenture. If any such acceleration of maturity occurs prior to the payment of the entire unpaid Note Principal Balance of the Notes, the amount payable to the 

 

Holder of this Note will be equal to the sum of the unpaid Note Principal Balance of this Note, together with accrued and unpaid interest thereon as described in the Indenture. The Indenture provides that, notwithstanding the acceleration of the maturity of the Notes, under certain circumstances specified therein, all amounts collected as proceeds of the Trust Estate securing the Notes or otherwise shall continue to be applied to payments of principal of and interest on the Notes as if they had not been declared due and payable.

The failure to pay any Net Interest Shortfall at any time when funds are not available to make such payment as provided in the Indenture shall not constitute an Event of Default under the Indenture.

[For Class B-1 Notes:] The Holder of this Note or Beneficial Owner of any interest herein is deemed to represent that either (1) it is not acquiring the Note with Plan Assets or (2) (A) the acquisition, holding and transfer of a Note will not give rise to a nonexempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code and (B) the Notes are rated investment grade or better and such person believes that the Notes are properly treated as indebtedness without substantial equity features for purposes of the DOL Regulations, and agrees to so treat the Notes. Alternatively, regardless of the rating of the Notes, such person may provide the Indenture Trustee and the Note Registrar with an opinion of counsel, which opinion of counsel will not be at the expense of the Issuer, the Seller, the Owner Trustee, the Indenture Trustee, the Master Servicer, the Securities
Administrator, the Note Registrar or any servicer, which opines that the acquisition, holding and transfer of such Note or interest therein is permissible under applicable law, will not constitute or result in a non-exempt prohibited transaction under ERISA or Section 4975 of the Code and will not subject the Issuer, the Seller, the Depositor, the Owner Trustee, the Indenture Trustee, the Note Registrar, the Securities Administrator, the Master Servicer or any servicer to any obligation in addition to those undertaken in the Indenture and the other Basic Documents.

[For Class B-2, Class B-3, Class B-4, Class B-5 and Class B-6 Notes:] No transfer, sale, pledge or other disposition of this Note or interest herein shall be made unless that transfer, sale, pledge or other disposition is exempt from the registration and/or qualification requirements of the Securities Act and any applicable state securities laws, or is otherwise made in accordance with the Securities Act and such state securities laws.  If a transfer of this Note is to be made without registration under the Securities Act (other than in connection with the initial issuance thereof or a transfer thereof by the Depositor or one of its Affiliates), then the Note Registrar shall refuse to register such transfer unless (i) it receives (and upon receipt, may conclusively rely upon) a certificate substantially in the form attached as Exhibit C to the Indenture or (ii) it receives a written
Opinion of Counsel acceptable to and in form and substance satisfactory to the Note Registrar and the Indenture Trustee and the transferee executes a representation letter substantially in the form of Exhibit D attached to the Indenture, and transferor executes a representation letter substantially in the form of Exhibit E attached to the Indenture, each acceptable to and in form and substance satisfactory to the Note Registrar and the Indenture Trustee.  None of the Issuer, the Depositor, the Indenture Trustee or the Note Registrar is obligated to register or qualify any Notes under the Securities Act or any other securities law or to take any action not otherwise required under the Indenture to permit the transfer of this Note or interest herein without registration or qualification.  Any Noteholder desiring to effect a transfer of this Note or interest herein shall, and does hereby agree to, indemnify the Issuer, the 

 

Depositor, the Owner Trustee, the Indenture Trustee and the Note Registrar against any liability that may result if the transfer is not so exempt or is not made in accordance with such federal and state laws.

[For Class B-2, Class B-3, Class B-4, Class B-5 and Class B-6 Notes:] No transfer of this Class B-[2][3][4][5][6] Note or any interest therein shall be made to any Person unless the Indenture Trustee and the Note Registrar are provided with an Opinion of Counsel which establishes to the satisfaction of the Indenture Trustee and the Note Registrar that the purchase of a Class B-[2][3][4][5][6] Note is permissible under applicable law, will not constitute or result in any prohibited transaction under ERISA or Section 4975 of the Code and will not subject the Depositor, the Owner Trustee, the Indenture Trustee, the Master Servicer, any Servicer or the Note Registrar to any obligation or liability (including obligations or liabilities under ERISA or Section 4975 of the Code) in addition to those undertaken in the Indenture, which Opinion of Counsel shall not be an expense of the Depositor,
the Owner Trustee, the Indenture Trustee, the Securities Administrator, the Master Servicer, any Servicer and the Note Registrar. In lieu of such Opinion of Counsel, a Person acquiring a Class B-[2][3][4][5][6] Note may provide a certification in the form attached to the Indenture, which the Depositor, the Owner Trustee, the Indenture Trustee, the Note Registrar and the Master Servicer may rely upon without further inquiry or investigation.

[For Class B-2, Class B-3, Class B-4, Class B-5 and Class B-6 Notes:] No transfer of this Class B-[2][3][4][5][6] Note or any interest therein shall be made to any Person, and the Note Registrar shall refuse to register any such transfer, unless (A) a “will be debt” opinion shall have been rendered by nationally recognized tax counsel with respect to it and furnished to the Securities Administrator, or (B) the transferee shall have delivered to the Owner Trustee, the Note Registrar, the Securities Administrator and the Indenture Trustee a certificate certifying that (i) it is a real estate investment trust (“REIT”) within the meaning of Section 856(a) of the Code or a qualified REIT subsidiary (“QRS”) within the meaning of Section 856(i) of the Code or an entity disregarded as an entity separate from a REIT or a QRS and (ii) following the transfer, 100% of
the Certificates and Class B-2, Class B-3, Class B-4, Class B-5 and Class B-6 Notes (other than any Class B-2, Class B-3, Class B-4, Class B-5 and Class B-6 Notes with respect to which a “will be debt” opinion has been rendered by nationally recognized tax counsel and furnished to the Securities Administrator) will be owned by a single REIT, directly or indirectly through one or more qualified QRSs of such REIT or one or more entities disregarded as entities separate from such REIT or such QRSs; provided that (x) this Class B-[2][3][4][5][6] Note may be pledged to secure indebtedness and may be the subject of repurchase agreements treated by the Issuer as secured indebtedness for federal income tax purposes, (y) this Class B-[2][3][4][5][6] Note may be surrendered to the office or agency designated by the Issuer pursuant to the Indenture for the issuance of one or more new Notes of the same Class to be registered in the name of the related lender under any such related loan
agreement or repurchase agreement, upon the reasonable request of such lender and the delivery by such lender to the Note Registrar, the Securities Administrator, the Owner Trustee and the Indenture Trustee, of a certificate certifying that this Note is being pledged to secure indebtedness or is the subject of repurchase agreements treated by the Issuer as secured indebtedness for federal income tax purposes, and (z) this Class B-[2][3][4][5][6] Note may be transferred by the related lender under any such related loan agreement or repurchase agreement upon a default under any such indebtedness, in which 

 

case the transferor shall deliver to the Note Registrar, the Securities Administrator, the Owner Trustee and the Indenture Trustee a certificate certifying to such effect.

As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Note may be registered on the Note Register of the Issuer. Upon surrender for registration of transfer of, or presentation of a written instrument of transfer for, this Note at the office or agency designated by the Issuer pursuant to the Indenture, accompanied by proper instruments of assignment in form satisfactory to the Securities Administrator, one or more new Notes of any authorized denominations and of a like aggregate then outstanding Note Principal Balance, will be issued to the designated transferee or transferees.

 

Prior to the due presentment for registration of transfer of this Note, the Issuer, the Indenture Trustee, the Securities Administrator and any agent of the Issuer, the Securities Administrator or the Indenture Trustee may treat the Person in whose name this Note is registered as the owner of such Note (i) on the applicable Record Date for the purpose of making payments and interest of such Note, and (ii) on any other date for all other purposes whatsoever, as the owner hereof, whether or not this Note be overdue, and none of the Issuer, the Securities Administrator, the Indenture Trustee nor any such agent of the Issuer, the Securities Administrator or the Indenture Trustee shall be affected by notice to the contrary.

The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Issuer and the rights of the Holders of the Notes under the Indenture at any time by the Issuer and the Holders of a majority of each Class of Notes affected thereby. The Indenture also contains provisions permitting the Holders of Notes representing not less than a majority of the aggregate Note Principal Balance of the Notes, to waive any past Event of Default and its consequences except an Event of Default (a) with respect to payment of principal of or interest on any of the Notes, or (b) in respect of a covenant or provision of the Indenture which cannot be modified or amended without the consent of the Holder of each Note. Any such waiver by the Holder, at the time of the giving thereof, of this Note (or any one or more predecessor
Notes) shall bind the Holder of every Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not notation of such consent or waiver is made upon such Note. The Indenture also permits the Issuer, the Indenture Trustee and the Securities Administrator, following prior notice to the Rating Agencies, to amend or waive certain terms and conditions set forth in the Indenture without the consent of the Holders of the Notes issued thereunder.

The Notes are exchangeable for a like aggregate then outstanding Note Principal Balance of Notes of different authorized denominations, as requested by the Holder surrendering same.

Unless the Certificate of Authentication hereon has been executed by the Securities Administrator by manual signature, this Note shall not be entitled to any benefit under the Indenture, or be valid or obligatory for any purpose.

Anything herein to the contrary notwithstanding, except as expressly provided in the Basic Documents, neither the Owner Trustee in its individual capacity, nor any of its respective partners, beneficiaries, agents, officers, directors, employees, or successors or assigns, shall be personally liable for, nor shall recourse be had to any of them for, the payment of principal of or interest on, or performance of, or omission to perform, any of the covenants, obligations or 

 

indemnifications contained in this Note, it being expressly understood that said covenants, obligations and indemnifications have been made solely by the Trust to the extent of the assets of the Trust. The holder of this Note by the acceptance hereof agrees that, except as expressly provided in the Basic Documents, the Holder shall have no claim against any of the foregoing for any deficiency, loss or claim therefrom; provided, however, that nothing contained herein shall be taken to prevent recourse to, and enforcement against, the assets of the Trust Estate for any and all liabilities, obligations and undertakings contained in this Note.

AS PROVIDED IN THE INDENTURE, THIS NOTE AND THE INDENTURE CREATING THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED THEREIN.

 

 

IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly executed.

Dated: November 2, 2005

	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            LUMINENT MORTGAGE TRUST 2005-1
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            By:
 	
            CHASE BANK USA, NATIONAL ASSOCIATION, not in its individual capacity but solely in its capacity as Owner Trustee
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            By:
 	
            
 
 
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            Authorized Signatory
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 

 

SECURITIES ADMINISTRATOR’S CERTIFICATE OF AUTHENTICATION

This is one of the Class B-[1][2][3][4][5][6] Notes referred to in the within-mentioned Indenture.

	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            By:
 	
            WELLS FARGO BANK, N.A., 

as Securities Administrator
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            By:
 	
            
 
 
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            Authorized Signatory
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 

 

 

 

ABBREVIATIONS

The following abbreviations, when used in the inscription on the face of the Note, shall be construed as though they were written out in full according to applicable laws or regulations:

	
            TEN COM
 	
            --
 	
            as tenants in common
 
	
             
 	
             
 	
             
 
	
            TEN ENT
 	
            --
 	
            as tenants by the entireties
 
	
             
 	
             
 	
             
 
	
            JT TEN
 	
            --
 	
            as joint tenants with right of survivorship and not as tenants in common
 
	
             
 	
             
 	
             
 
	
            UNIF GIFT MIN ACT
 	
            --
 	
            ____________ Custodian
 
	
             
 	
             
 	
            
 
 
 
	
             
 	
             
 	
            (Cust)                                     (Minor)
 
	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 
	
             
 	
             
 	
            under Uniform Gifts to Minor Act
 
	
             
 	
             
 	
            
 
 
 
	
             
 	
             
 	
            (State)
 

 

Additional abbreviations may also be used though not in the above list.

 

 

 

ASSIGNMENT

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE:

	
             
 	
             
 	
             
 
	
             
 	
            
 
 
 	
             
 
	
             
 	
             
 	
             
 
	
             
 	
            
 
 
 	
             
 
	
             
 	
             
 	
             
 
	
             
 	
            
 
 
 	
             
 

(Please print or typewrite name and address, including zip code, of assignee)

 

	
            
 
 
 

the within Note and all rights thereunder, and hereby irrevocably constitutes and appoints ________________________ attorney to transfer said Note on the books kept for registration thereof, with full power of substitution in the premises.

	
            Dated:
 	
             
 	
             
 
	
             
 	
             
 	
             
 
	
            Signature Guaranteed by
 	
            
 
 
 	
             
 
	
             
 	
             
 	
             
 
					

 

NOTICE: The signature(s) to this assignment must correspond with the name as it appears upon the face of the within Note in every particular, without alteration or enlargement or any change whatsoever. Signature(s) must be guaranteed by a commercial bank or by a member firm of the New York Stock Exchange or another national securities exchange. Notarized or witnessed signatures are not acceptable.

 

 

 

EXHIBIT B

MORTGAGE LOAN SCHEDULE

(Provided Upon Request)

 

 

 

EXHIBIT C

[FORM OF RULE 144A INVESTMENT REPRESENTATION]

Description of Rule 144A Securities, including numbers:

	
             
 	
             
 	
             
 
	
             
 	
            
 
 
 	
             
 
	
             
 	
             
 	
             
 
	
             
 	
            
 
 
 	
             
 
	
             
 	
             
 	
             
 
	
             
 	
            
 
 
 	
             
 
	
             
 	
             
 	
             
 
	
             
 	
            
 
 
 	
             
 

 

The undersigned seller, as registered holder (the “Seller”), intends to transfer the Rule 144A Securities described above to the undersigned buyer (the “Buyer”).

1.   In connection with such transfer and in accordance with the agreements pursuant to which the Rule 144A Securities were issued, the Seller hereby certifies the following facts: Neither the Seller nor anyone acting on its behalf has offered, transferred, pledged, sold or otherwise disposed of the Rule 144A Securities, any interest in the Rule 144A Securities or any other similar security to, or solicited any offer to buy or accept a transfer, pledge or other disposition of the Rule 144A Securities, any interest in the Rule 144A Securities or any other similar security from, or otherwise approached or negotiated with respect to the Rule 144A Securities, any interest in the Rule 144A Securities or any other similar security with, any person in any manner, or made any general solicitation by means of general advertising or in any other manner, or taken any other action, that would
constitute a distribution of the Rule 144A Securities under the Securities Act of 1933, as amended (the “1933 Act”), or that would render the disposition of the Rule 144A Securities a violation of Section 5 of the 1933 Act or require registration pursuant thereto, and that the Seller has not offered the Rule 144A Securities to any person other than the Buyer or another “qualified institutional buyer” as defined in Rule 144A under the 1933 Act.

2.  The Buyer warrants and represents to, and covenants with, the Indenture Trustee pursuant to Section 4.02 of the Indenture (the “Indenture”), dated as of November 2, 2005, among Luminent Mortgage Trust 2005-1, as Issuer, and Wells Fargo Bank, N.A., as Securities Administrator and LaSalle Bank National Association, as Indenture Trustee, as follows:

a.  The Buyer understands that the Rule 144A Securities have not been registered under the 1933 Act or the securities laws of any state.

b.  The Buyer considers itself a substantial, sophisticated institutional investor having such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of investment in the Rule 144A Securities.

 

 

c.  The Buyer has been furnished with all information regarding the Rule 144A Securities that it has requested from the Seller, the Indenture Trustee, the Owner Trustee or the Master Servicer.

d.  Neither the Buyer nor anyone acting on its behalf has offered, transferred, pledged, sold or otherwise disposed of the Rule 144A Securities, any interest in the Rule 144A Securities or any other similar security to, or solicited any offer to buy or accept a transfer, pledge or other disposition of the Rule 144A Securities, any interest in the Rule 144A Securities or any other similar security from, or otherwise approached or negotiated with respect to the Rule 144A Securities, any interest in the Rule 144A Securities or any other similar security with, any person in any manner, or made any general solicitation by means of general advertising or in any other manner, or taken any other action, that would constitute a distribution of the Rule 144A Securities under the 1933 Act or that would render the disposition of the Rule 144A Securities a violation of Section 5 of
the 1933 Act or require registration pursuant thereto, nor will it act, nor has it authorized or will it authorize any person to act, in such manner with respect to the Rule 144A Securities.

e.  The Buyer is a “qualified institutional buyer” as that term is defined in Rule 144A under the 1933 Act and has completed either of the forms of certification to that effect attached hereto as Annex 1 or Annex 2. The Buyer is aware that the sale to it is being made in reliance on Rule 144A. The Buyer is acquiring the Rule 144A Securities for its own account or the accounts of other qualified institutional buyers, understands that such Rule 144A Securities may be resold, pledged or transferred only (i) to a person reasonably believed to be a qualified institutional buyer that purchases for its own account or for the account of a qualified institutional buyer to whom notice is given that the resale, pledge or transfer is being made in reliance on Rule 144A, or (ii) pursuant to another exemption from registration under the 1933 Act.

3.  The Buyer warrants and represents to, and covenants with, the Seller, the Indenture Trustee, Owner Trustee, the Certificate Registrar, Master Servicer and the Depositor that either (1) the Buyer is (A) not an employee benefit plan (within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”)), or a plan (within the meaning of Section 4975(e)(1) of the Internal Revenue Code of 1986 (“Code”)), which (in either case) is subject to ERISA or Section 4975 of the Code (both a “Plan”), and (B) is not directly or indirectly purchasing the Rule 144A Securities on behalf of, as investment manager of, as named fiduciary of, as trustee of, or with “plan assets” of a Plan, or (2) the Buyer understands that registration of transfer of any Rule 144A Securities to any Plan, or to any Person acting on behalf of
any Plan, will not be made unless (i) it is rated investment grade at the time of transfer and there has been rendered a “will be” debt opinion of counsel as to such Note and the purchase and holding will not result in a non-exempt prohibited transaction under ERISA, the Code, or the Note (ii) such Plan delivers an opinion of its counsel, addressed and satisfactory to the Certificate Registrar, the Owner Trustee, the Indenture Trustee, the Master Servicer and the Depositor, to the effect that the purchase and holding of the Rule 144A Securities by, on behalf of or with “plan assets” of any Plan is permissible under applicable law, would not constitute or result in a prohibited transaction under ERISA or Section 4975 of the Code, and would not subject the Depositor, the Owner Trustee, the Indenture Trustee, the 

 

Certificate Registrar or the Master Servicer to any obligation or liability (including liabilities under ERISA or Section 4975 of the Code) in addition to those undertaken in the Agreement, which Opinion of Counsel shall not be an expense of the Depositor, the Owner Trustee, the Indenture Trustee, the Certificate Registrar or the Master Servicer.

4.  This document may be executed in one or more counterparts and by the different parties hereto on separate counterparts, each of which, when so executed, shall be deemed to be an original; such counterparts, together, shall constitute one and the same document.

IN WITNESS WHEREOF, each of the parties has executed this document as of the date set forth below.

	
             
 
	
            
 
 
 	
             
 	
            
 
 
 
	
            Print Name of Seller
 	
             
 	
            Print Name of Buyer
 
	
             
 	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 	
             
 
	
            By:
 	
            
 
 
 	
            By:
 	
            
 
 
 
	
             
 	
            Name:
 	
             
 	
            Name:
 
	
             
 	
            Title:
 	
             
 	
            Title:
 
	
             
 	
             
 	
             
 	
             
 
	
            Taxpayer Identification:
 	
             
 	
            Taxpayer Identification:
 
	
             
 	
             
 	
             
 
	
            No:
 	
            
 
 
 	
            No:
 	
            
 
 
 
	
             
 	
             
 	
             
 	
             
 
	
            Date:
 	
            
 
 
 	
            Date:
 	
            
 
 
 

 

 

ANNEX 1 TO EXHIBIT C

QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A

[For Buyers Other Than Registered Investment Companies]

The undersigned hereby certifies as follows in connection with the Rule 144A Investment Representation to which this Certification is attached:

1.  As indicated below, the undersigned is the President, Chief Financial Officer, Senior Vice President or other executive officer of the Buyer.

2.  In connection with purchases by the Buyer, the Buyer is a “qualified institutional buyer” as that term is defined in Rule 144A under the Securities Act of 1933 (“Rule 144A”) because (i) the Buyer owned and/or invested on a discretionary basis $_________1 in securities (except for the excluded securities referred to below) as of the end of the Buyer’s most recent fiscal year (such amount being calculated in accordance with Rule 144A) and (ii) the Buyer satisfies the criteria in the category marked below.

	
            
 
 
 	
            Corporation, etc. The Buyer is a corporation (other than a bank, savings and loan association or similar institution), Massachusetts or similar business trust, partnership, or charitable organization described in Section 501(c)(3) of the Internal Revenue Code.
 
	
             
 	
             
 
	
            
 
 
 	
            Bank. The Buyer (a) is a national bank or banking institution organized under the laws of any State, territory or the District of Columbia, the business of which is substantially confined to banking and is supervised by the State or territorial banking commission or similar official or is a foreign bank or equivalent institution, and (b) has an audited net worth of at least
 
	
             
 	
             
 
	
            
 
 
 	
            Savings and Loan. The Buyer (a) is a savings and loan association, building and loan association, cooperative bank, homestead association or similar institution, which is supervised and examined by a State or Federal authority having supervision over any such institutions or is a foreign savings and loan association or equivalent institution and (b) has an audited net worth of at least $25,000,000 as demonstrated in its latest annual financial statements.
 
	
             
 	
             
 
	
            
 
 
 	
            Broker-Dealer. The Buyer is a dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934.
 
	
             
 	
             
 
	
            
 
 
 	
            Insurance Company. The Buyer is an insurance company whose primary and predominant business activity is the writing of insurance or the reinsuring of risks underwritten by insurance companies and which is subject to supervision by the insurance commissioner or a similar official or agency of a State or territory or the District of Columbia.
 
	
             
 	
             
 

 

 

 

_________________________

1    Buyer must own and/or invest on a discretionary basis at least $100,000,000 in securities unless Buyer is a dealer, and, in that case, Buyer must own and/or invest on a discretionary basis at least $10,000,000 in securities.

 

 

	
            
 
 
 	
            State or Local Plan. The Buyer is a plan established and maintained by a State, its political subdivisions, or any agency or instrumentality of the State or its political subdivisions, for the benefit of its employees.
 
	
             
 	
             
 
	
            
 
 
 	
            ERISA Plan. The Buyer is an employee benefit plan within the meaning of Title I of the Employee Retirement Income Security Act of 1974.
 
	
             
 	
             
 
	
            
 
 
 	
            Investment Adviser. The Buyer is an investment adviser registered under the Investment Advisers Act of 1940.
 
	
             
 	
             
 
	
            
 
 
 	
            SBIC. The Buyer is a Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958.
 
	
             
 	
             
 
	
            
 
 
 	
            Business Development Company. The Buyer is a business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940.
 
	
             
 	
             
 
	
            
 
 
 	
            Trust Fund. The Buyer is a trust fund whose trustee is a bank or trust company and whose participants are exclusively (a) plans established and maintained by a State, its political subdivisions, or any agency or instrumentality of the State or its political subdivisions, for the benefit of its employees, or (b) employee benefit plans within the meaning of Title I of the Employee Retirement Income Security Act of 1974, but is not a trust fund that includes as participants individual retirement accounts or H.R. 10 plans.
 
	
             
 	
             
 

3.   The term “securities” as used herein does not include (i) securities of issuers that are affiliated with the Buyer, (ii) securities that are part of an unsold allotment to or subscription by the Buyer, if the Buyer is a dealer, (iii) bank deposit Notes and certificates of deposit, (iv) loan participations, (v) repurchase agreements, (vi) securities owned but subject to a repurchase agreement and (vii) currency, interest rate and commodity swaps.

4.  For purposes of determining the aggregate amount of securities owned and/or invested on a discretionary basis by the Buyer, the Buyer used the cost of such securities to the Buyer and did not include any of the securities referred to in the preceding paragraph. Further, in determining such aggregate amount, the Buyer may have included securities owned by subsidiaries of the Buyer, but only if such subsidiaries are consolidated with the Buyer in its financial statements prepared in accordance with generally accepted accounting principles and if the investments of such subsidiaries are managed under the Buyer’s direction. However, such securities were not included if the Buyer is a majority-owned, consolidated subsidiary of another enterprise and the Buyer is not itself a reporting company under the Securities Exchange Act of 1934.

5.  The Buyer acknowledges that it is familiar with Rule 144A and understands that the seller to it and other parties related to the Certificates are relying and will continue to rely on the statements made herein because one or more sales to the Buyer may be in reliance on Rule 144A. 

 

 

 

	
            
 
 
 	
             
 	
            
 
 
 	
            Will the Buyer be purchasing the Rule 144A Securities only for the Buyer’s own account?
 
	
            Yes
 	
             
 	
            No
 
	
             
 	
             
 	
             
 

6.  If the answer to the foregoing question is “no”, the Buyer agrees that, in connection with any purchase of securities sold to the Buyer for the account of a third party (including any separate account) in reliance on Rule 144A, the Buyer will only purchase for the account of a third party that at the time is a “qualified institutional buyer” within the meaning of Rule 144A. In addition, the Buyer agrees that the Buyer will not purchase securities for a third party unless the Buyer has obtained a current representation letter from such third party or taken other appropriate steps contemplated by Rule 144A to conclude that such third party independently meets the definition of “qualified institutional buyer” set forth in Rule 144A.

7.  The Buyer will notify each of the parties to which this certification is made of any changes in the information and conclusions herein. Until such notice is given, the Buyer’s purchase of Rule 144A Securities will constitute a reaffirmation of this certification as of the date of such purchase.

	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            
 
 
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            Print Name of Buyer
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 

 

	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            By:
 	
            
 
 
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            Name
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            Title
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            Date:
 

 

 

 

ANNEX 2 TO EXHIBIT C

QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A

[For Buyers That Are Registered Investment Companies]

The undersigned hereby certifies as follows in connection with the Rule 144A Investment Representation to which this Certification is attached:

1. As indicated below, the undersigned is the President, Chief Financial Officer or Senior Vice President of the Buyer or, if the Buyer is a “qualified institutional buyer” as that term is defined in Rule 144A under the Securities Act of 1933 (“Rule 144A”) because Buyer is part of a Family of Investment Companies (as defined below), is such an officer of the Adviser.

2. In connection with purchases by Buyer, the Buyer is a “qualified institutional buyer” as defined in SEC Rule 144A because (i) the Buyer is an investment company registered under the Investment Company Act of 1940, and (ii) as marked below, the Buyer alone, or the Buyer’s Family of Investment Companies, owned at least $100,000,000 in securities (other than the excluded securities referred to below) as of the end of the Buyer’s most recent fiscal year. For purposes of determining the amount of securities owned by the Buyer or the Buyer’s Family of Investment Companies, the cost of such securities was used.

	
            _____
 	
            The Buyer owned $___________________ in securities (other than the excluded securities referred to below) as of the end of the Buyer’s most recent fiscal year (such amount being calculated in accordance with Rule 144A).
 
	
             
 	
             
 
	
            _____
 	
            The Buyer is part of a Family of Investment Companies which owned in the aggregate $ in securities (other than the excluded securities referred to below) as of the end of the Buyer’s most recent fiscal year (such amount being calculated in accordance with Rule 144A).
 
	
             
 	
             
 

3.  The term “Family of Investment Companies” as used herein means two or more registered investment companies (or series thereof) that have the same investment adviser or investment advisers that are affiliated (by virtue of being majority owned subsidiaries of the same parent or because one investment adviser is a majority owned subsidiary of the other).

4.  The term “securities” as used herein does not include (i) securities of issuers that are affiliated with the Buyer or are part of the Buyer’s Family of Investment Companies, (ii) bank deposit Notes and certificates of deposit, (iii) loan participations, (iv) repurchase agreements, (v) securities owned but subject to a repurchase agreement and (vi) currency, interest rate and commodity swaps.

5.  The Buyer is familiar with Rule 144A and understands that each of the parties to which this certification is made are relying and will continue to rely on the statements made herein because one or more sales to the Buyer will be in reliance on Rule 144A. In addition, the Buyer will only purchase for the Buyer’s own account.

 

 

6.  The undersigned will notify each of the parties to which this certification is made of any changes in the information and conclusions herein. Until such notice, the Buyer’s purchase of Rule 144A Securities will constitute a reaffirmation of this certification by the undersigned as of the date of such purchase.

	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            
 
 
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            Print Name of Buyer
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 

 

	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            By:
 	
            
 
 
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            Name
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            Title
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            IF AN ADVISER:
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            
 
 
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            Print Name of Buyer
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            Date:
 	
            
 
 
 

 

 

 

 

EXHIBIT D

FORM OF INVESTMENT LETTER [NON-RULE 144A]

[DATE]

Chase Bank USA, National Association

500 Stanton Christiana Road, FL3/OPS4

Newark, DE 19713

Wells Fargo Bank, N.A.

Sixth Street and Marquette Avenue

Minneapolis, Minnesota 55479

	
            Re:
 	
            Luminent Mortgage Trust, Mortgage-Backed Notes, Series 2005-1,
 

[[Class B-2][Class B-3][Class B-4][Class B-5][Class B-6] (the “Notes”)

Ladies and Gentlemen:

In connection with our acquisition of the above-captioned Notes, we certify that (a) we understand that the Notes are not being registered under the Securities Act of 1933, as amended (the “Act”), or any state securities laws and are being transferred to us in a transaction that is exempt from the registration requirements of the Act and any such laws, (b) we are an “accredited investor,” as defined in Regulation D under the Act, and have such knowledge and experience in financial and business matters that we are capable of evaluating the merits and risks of investments in the Notes, (c) we have had the opportunity to ask questions of and receive answers from the Depositor concerning the purchase of the Notes and all matters relating thereto or any additional information deemed necessary to our decision to purchase the Notes, (d) we are not an employee benefit plan
that is subject to the Employee Retirement Income Security Act of 1974, as amended, or a plan that is subject to Section 4975 of the Internal Revenue Code of 1986, as amended, nor are we acting on behalf of any such plan or we have delivered an opinion of counsel as required by the Indenture, or the Note is rated investment grade at the time of transfer and there has been rendered a “will be” debt opinion of counsel as to such Note and the purchase and holding will not result in a non-exempt prohibited transaction under ERISA or the Code, (e) we are acquiring the Notes for investment for our own account and not with a view to any distribution of such Notes (but without prejudice to our right at all times to sell or otherwise dispose of the Notes in accordance with clause (g) below), (f) we have not offered or sold any Notes to, or solicited offers to buy any Notes from, any person, or otherwise approached or negotiated with any person with respect thereto, or taken any other
action which would result in a violation of Section 5 of the Act, and (h) we will not sell, transfer or otherwise dispose of any Notes unless (1) such sale, transfer or other disposition is made pursuant to an effective registration statement under the Act or is exempt from such registration requirements, and if requested, we will at our expense provide an Opinion of Counsel satisfactory to the addressees of this certificate that such sale, transfer or other disposition may be made pursuant to an exemption from the Act, (2) the purchaser or transferee of such Note has executed and delivered to you a certificate to substantially the same effect as this certificate, and (3) the purchaser or transferee has otherwise complied with any conditions for transfer set forth in the Indenture.

 

 

	
             
 	
             
 	
             
 	
             
 	
             
 	
            Very truly yours,
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
            [TRANSFEREE]
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
            By:
 	
            
 
 
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            Authorized Officer
 

 

 

 

 

EXHIBIT E

TRANSFEROR CERTIFICATE

Chase Bank USA, National Association

500 Stanton Christiana Road, FL3/OPS4

Newark, DE 19713

Wells Fargo Bank, N.A.

Sixth Street and Marquette Avenue

Minneapolis, Minnesota 55479

	
            Re:
 	
            Proposed Transfer of [Class B-2][Class B-3][Class B-4][Class B-5][Class B-6]

      Luminent Mortgage Trust 2005-1
 

Gentlemen:

This certification is being made by __________________________ (the “Transferor”) in connection with the proposed Transfer to ________________________ (the “Transferee”) of the [Class B-2][Class B-3][Class B-4][Class B-5][Class B-6] (the “Notes”) issued pursuant to the Indenture, dated November 2, 2005, being referred to herein as the “Indenture”) among Luminent Mortgage Trust 2005-1, as issuer, Wells Fargo Bank, N.A., as securities administrator and LaSalle Bank National Association as indenture trustee (the “Indenture”). Initially capitalized terms used but not defined herein have the meanings assigned to them in the Indenture. The Transferor hereby certifies, represents and warrants to, and covenants with, the Owner Trustee and the Indenture Trustee that:

Neither the Transferor nor anyone acting on its behalf has (a) offered, pledged, sold, disposed of or otherwise transferred any Note, any interest in any Note or any other similar security to any person in any manner, (b) has solicited any offer to buy or to accept a pledge, disposition or other transfer of any Note, any interest in any Note or any other similar security from any person in any manner, (c) has otherwise approached or negotiated with respect to any Note, any interest in any Note or any other similar security with any person in any manner, (d) has made any general solicitation by means of general advertising or in any other manner, or (e) has taken any other action, that (as to any of (a) through (e) above) would constitute a distribution of the Notes under the Securities Act of 1933 (the “Act”), that would render the disposition of any Note a violation of Section
5 of the Act or any state securities law, or that would require registration or qualification pursuant thereto. The Transferor will not act in any manner set forth in the foregoing sentence with respect to any Note. The Transferor has not and will not sell or otherwise transfer any of the Notes, except in compliance with the provisions of the Indenture.

 

 

	
            Date:
 	
            
 
 
 	
             
 	
            
 
 
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            Authorized Officer
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            
 
 
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            Signature
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            
 
 
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
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            Title
 

 

 

 

 

EXHIBIT F

FORM OF TRANSFEREE CERTIFICATE

Chase Bank USA, National Association

500 Stanton Christiana Road, FL3/OPS4

Newark, DE 19713

Wells Fargo Bank, N.A.

Sixth Street and Marquette Avenue

Minneapolis, Minnesota 55479

	
            Re:
 	
            Proposed Transfer of [Class B-2][Class B-3][Class B-4][Class B-5][Class B-6] 

      Notes, Luminent Mortgage Trust 2005-1
 

Gentlemen:

This certification is being made by __________ (the “Transferee”) in connection with the proposed transfer (the “Transfer”) by ___________ of a [Class B-2][Class B-3][Class B-4][Class B-5][Class B-6] Note issued pursuant to the Indenture, dated as of November 2, 2005 (the “Indenture”), among Luminent Mortgage Trust 2005-1, as issuer, Wells Fargo Bank, N.A., as securities administrator (the “Securities Administrator”), and LaSalle Bank National Association, as indenture trustee (the “Indenture Trustee”). Initially capitalized terms used but not defined herein have the meanings assigned to them in the Indenture. The Transferee hereby certifies, represents and warrants to, and covenants with, the Owner Trustee, the Note Registrar, the Securities Administrator and the Indenture Trustee that:

(a)        The Transferee is a REIT or a QRS within the meaning of Section 856(a) or Section 856(i) of the Code or an entity disregarded as an entity separate from a REIT or a QRS.

(b)        Following the Transfer, 100% of the Certificates and Class B-2, Class B-3, Class B-4, Class B-5 and Class B-6 Notes (other than any Class B-2, Class B-3, Class B-4, Class B-5 and Class B-6 Notes with respect to which a “will be debt” opinion has been rendered by nationally recognized tax counsel and furnished to the Securities Administrator) will be owned by a single REIT, directly or indirectly through one or more QRSs of such REIT or one or more entities disregarded as entities separate from such REIT or such QRSs.

 

 

	
            Date:
 	
            
 
 
 	
             
 	
            
 
 
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            Authorized Officer
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            
 
 
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            Signature
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            
 
 
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
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            Title
 

 

 

 

 

EXHIBIT G

FORM OF TRANSFEROR CERTIFICATE

Chase Bank USA, National Association, as Owner Trustee

500 Stanton Christiana Road, FL3/OPS4

Newark, DE 19713

Wells Fargo Bank, N.A.

Sixth Street and Marquette Avenue

Minneapolis, Minnesota 55479

	
            Re:
 	
            Proposed Transfer of [Class B-2][Class B-3][Class B-4][Class B-5][Class B-6] 

      Notes, Luminent Mortgage Trust 2005-1 (the “Notes”)
 

Gentlemen:

This certification is being made by _________________ (the “Transferor”) in connection with the proposed transfer or pledge by the Transferor of a [Class B-2][Class B-3][Class B-4][Class B-5][Class B-6] Note issued pursuant to the Indenture, dated as of November 2, 2005 (the “Indenture”) among Luminent Mortgage Trust 2005-1, as issuer, Wells Fargo Bank, National Association, as securities administrator (the “Securities Administrator”) and LaSalle Bank National Association, as indenture trustee (the “Indenture Trustee”). Initially capitalized terms used but not defined herein have the meanings assigned to them in the Indenture. The Transferor hereby certifies, represents and warrants to, and covenants with, the Securities Administrator, the Owner Trustee, the Indenture Trustee and the Note Registrar that:

(a)        The [Class B-2][Class B-3][Class B-4][Class B-5][Class B-6] Notes are being pledged by the Transferor to secure indebtedness or are the subject of repurchase agreements treated by the Issuer as secured indebtedness for federal income tax purposes as permitted under the Indenture; or

(b)        The [Class B-2][Class B-3][Class B-4][Class B-5][Class B-6] Notes are being transferred by the related lender under a loan agreement or repurchase agreement upon a default under any such indebtedness as permitted under the Indenture.

 

 

	
            Date:
 	
            
 
 
 	
             
 	
            
 
 
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            Authorized Officer
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            
 
 
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            Signature
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            
 
 
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
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EXHIBIT H

FORM OF ADDITION NOTICE

[Date]

Wells Fargo Bank, N.A.

Sixth Street and Marquette Avenue

Minneapolis, Minnesota 55479

LaSalle Bank National Association

135 S. LaSalle St., Suite 1625

Chicago, IL 60603

 

	
            RE:
 	
            Indenture, dated as of November 2, 2005 (the “Indenture”), among Luminent Mortgage Trust 2005-1, a Delaware business trust, as Issuer (the “Issuer”), LaSalle Bank National Association, as Indenture Trustee (the “Indenture Trustee”) and Wells Fargo Bank, N.A., as Securities Administrator (the “Securities Administrator”), relating to Luminent Mortgage Trust 2005-1, Mortgage-Backed Notes, Series 2005-7, Subsequent Transfer
 

 

Ladies and Gentlemen:

Pursuant to Section 3.26 of the Indenture, Issuer has designated the Subsequent Mortgage Loans to be transferred to the Indenture Trustee on ______________, 20__, with an approximate aggregate principal balance of $________________.

Capitalized terms not otherwise defined herein have the meaning set forth in the Indenture.

Please acknowledge your receipt of this notice by countersigning the enclosed copy in the space indicated below and returning it to the attention of the undersigned.

 

Very truly yours,

LUMINENT MORTGAGE TRUST 2005-1, as Issuer

Chase Bank U.S.A., National Association, not in its individual capacity but solely as Owner Trustee

By: _____________________________

Name:

Title:

 

 

ACKNOWLEDGED AND AGREED:

LASALLE BANK NATIONAL ASSOCIATION, not in its individual

capacity but solely as Indenture Trustee

 

By: _____________________________

Name:

Title:

 

WELLS FARGO BANK, N.A., 

as Securities Administrator

 

By: _____________________________

Name:

Title:

 

 

 

EXHIBIT I

 

FORM OF LENDER CERTIFICATE

Chase Bank USA, National Association, as Owner Trustee

500 Stanton Christiana Road, FL3/OPS4

Newark, DE 19713

Wells Fargo Bank, N.A.

Sixth Street and Marquette Avenue

Minneapolis, Minnesota 55479

	
            Re:
 	
            Proposed Registration of [Class B-2][Class B-3][Class B-4][Class
 

B-5][Class B-6] Notes, Luminent Mortgage Trust 2005-1 (the “Notes”)

Gentlemen:

This certification is being made by _______________________ (the “Lender”) in connection with the proposed registration of a [Class B-2][Class B-3][Class B-4][Class B-5][Class B-6] Note issued pursuant to the Indenture, dated as of November 2, 2005 (the “Indenture”) among Luminent Mortgage Trust 2005-1, as issuer, Wells Fargo Bank, National Association, as securities administrator (the “Securities Administrator”) and LaSalle Bank National Association, as indenture trustee (the “Indenture Trustee”) in the name of the Lender in connection with the borrowing transactions described below. Initially capitalized terms used but not defined herein have the meanings assigned to them in the Indenture. The Lender hereby certifies, represents and warrants to, and covenants with, the Securities Administrator, the Owner Trustee, the Indenture Trustee and the
Note Registrar that:

(a)        The [Class B-2][Class B-3][Class B-4][Class B-5][Class B-6] Notes are being pledged to the Lender to secure indebtedness or are the subject of repurchase agreements treated by the Issuer as secured indebtedness for federal income tax purposes as permitted under the Indenture.

 

 

	
            Date:
 	
            
 
 
 	
             
 	
            
 
 
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            Authorized Officer
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            
 
 
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            Signature
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            
 
 
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
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APPENDIX A

DEFINITIONS

Accepted Master Servicing Practices:  With respect to any Mortgage Loan, those customary mortgage servicing practices of prudent mortgage servicing institutions that master service Mortgage Loans of the same type and quality as such Mortgage Loan in the jurisdiction where the related Mortgaged Property is located, to the extent applicable to the Master Servicer (except in its capacity as successor to the Servicer).

Account:  The Payment Account, the Certificate Distribution Account, the Pre-Funding Account, the Interest Coverage Account and the Protected Account, as the context may require.

Administration Agreement:  The Administration Agreement, dated as of November 2, 2005, among the Issuer, the Depositor, the Owner Trustee and the Securities Administrator.

Additional Termination Event:  As defined in the Swap Agreements.

Affected Party:  As defined in the Swap Agreements.

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

Aggregate Master Servicing Compensation:  For any Payment Date, any investment income on funds on deposit in the Payment Account that is payable to the Master Servicer on such Payment Date pursuant to the Sale and Servicing Agreement.

Applicable Credit Rating:  For any long-term deposit or security, a credit rating of AAA from S&P.  For any short-term deposit or security, a rating of A-l+ from S&P.

Applied Realized Loss Amount:  With respect to any Class of Notes and as to any Payment Date, the sum of the Realized Losses with respect to the Mortgage Loans, which have been applied in reduction of the Note Principal Balance of such Class, in an amount equal to the amount, if any, by which, (i) the aggregate Note Principal Balance of all of the Notes (after all distributions of principal on such Payment Date) exceeds (ii) the aggregate Stated Principal Balance of the Mortgage Loans for such Payment Date and any Remaining Pre-Funding Amount as of such Payment Date.

Appraised Value:  For any Mortgaged Property related to a Mortgage Loan, the amount set forth as the appraised value of such Mortgaged Property in an appraisal made for the mortgage originator in connection with its origination of the related Mortgage Loan.

Assignment Agreements: The agreements attached whereby the Servicing Agreements were assigned to the Indenture Trustee for the benefit of the Noteholders.

 

 

Assignment of Mortgage:  An assignment of Mortgage, notice of transfer or equivalent instrument, in recordable form, which is sufficient under the laws of the jurisdiction wherein the related Mortgaged Property is located to reflect of record the sale of the Mortgage, which assignment, notice of transfer or equivalent instrument may be in the form of one or more blanket assignments covering Mortgages secured by Mortgaged Properties located in the same county, if permitted by law.

Authorized Newspaper:  A newspaper of general circulation in the Borough of Manhattan, The City of New York, printed in the English language and customarily published on each Business Day, whether or not published on Saturdays, Sundays or holidays.

Authorized Officer:  With respect to the Issuer, any officer of the Owner Trustee who is authorized to act for the Owner Trustee in matters relating to the Issuer and who is identified on the list of Authorized Officers delivered by the Owner Trustee to the Indenture Trustee and Securities Administrator on the Closing Date (as such list may be modified or supplemented from time to time thereafter).

Available Funds:  With respect to any Payment Date, the Interest Funds and the Principal Funds.

Available Funds Rate:  With respect to any Payment Date and the Notes, a per annum rate equal to the product of (1) a fraction equal to (x) the Interest Funds for such Payment Date divided by (y) the aggregate Note Principal Balance of the Notes immediately prior to such Payment Date and (2) a fraction equal to (x) 360 divided by (y) the actual number of days in the related Interest Accrual Period.

Average Loss Severity Percentage:  With respect to any Payment Date, the percentage equivalent of a fraction, the numerator of which is the sum of the Loss Severity Percentages for each Mortgage Loan which had a Realized Loss and the denominator of which is the number of Mortgage Loans which had Realized Losses.

Bankruptcy Code:  The United States Bankruptcy Code, as amended as codified in 11 U.S.C.  §§ 101-1330.

Bankruptcy Loss:  With respect to any Mortgage Loan, any Deficient Valuation or Debt Service Reduction related to such Mortgage Loan as reported by the Servicer to the Master Servicer.

Basic Documents:  The Sale and Servicing Agreement, the Countrywide Servicing Agreement, the EMC Servicing Agreement, the PHH Servicing Agreement, the Indenture, the Trust Agreement, the Mortgage Loan Purchase Agreement, the Custodial Agreement, the Swap Agreements and the Administration Agreement and the other documents and certificates delivered in connection with any of the above.

Basis Risk Shortfall:  With Respect to any Payment Date, if the Note Interest Rate for a Class of Notes is based upon the Available Funds Rate, the excess, if any of:

 

 

1.          The amount of Current Interest that such Class would have been entitled to receive on such Payment Date had the applicable Note Interest Rate been calculated at a per annum rate equal to the lesser of (i) One-Month LIBOR plus the related Margin and (ii) 11.50%, over

2.          The amount of Current Interest on such Class calculated using a Note Interest Rate equal to the Available Funds Rate for such Payment Date.

Basis Risk Shortfall Carry-Forward Amount:  As of any Payment Date for the Notes, the sum of the Basis Risk Shortfall for such Payment Date and the Basis Risk Shortfall for all previous Payment Dates not previously paid, together with interest thereon at a rate equal to the applicable Note Interest Rate for such Payment Date (without regard to the Available Funds Rate).

Beneficial Owner:  With respect to any Note, the Person who is the beneficial owner of such Note as reflected on the books of the Depository or on the books of a Person maintaining an account with such Depository (directly as a Depository Participant or indirectly through a Depository Participant, in accordance with the rules of such Depository).

Book-Entry Notes:  Beneficial interests in the Class A-1, Class A-2, Class M-1, Class M-2 and Class B-1 Notes, ownership and transfers of which shall be made through book entries by the Depository as described in the Indenture.

Business Day:  Any day other than (i) a Saturday or a Sunday, or (ii) a day on which the New York Stock Exchange or Federal Reserve is closed or on which banking institutions in the jurisdiction in which the Indenture Trustee, the Master Servicer, the Seller, the Servicer or the Securities Administrator is located are authorized or obligated by law or executive order to be closed.

Calendar Quarter:  A calendar quarter shall consist of one of the following time periods in any given year:  January 1 through March 31, April 1 through June 30, July 1 through September 30, and October 1 through December 31.

Certificate Paying Agent:  Initially, the Securities Administrator, in its capacity as Certificate Paying Agent, or any successor to Securities Administrator in such capacity.

Certificate Distribution Account:  The account or accounts created and maintained pursuant to Section 3.09(c) of the Trust Agreement.  The Certificate Distribution Account shall be an Eligible Account.

Certificate Percentage Interest:  With respect to the Trust Certificates and any date of determination, the percentage interest as stated on the face of any Trust Certificate.

Certificate Register:  The register maintained by the Certificate Registrar in which the Certificate Registrar shall provide for the registration of Certificates and of transfers and exchanges of Certificates.

 

 

Certificate Registrar:  Initially, the Securities Administrator, in its capacity as Certificate Registrar, or any successor to the Securities Administrator in such capacity pursuant to the Trust Agreement.

Certificate of Trust:  The Certificate of Trust filed for the Trust pursuant to Section 3810(a) of the Statutory Trust Statute.

Certificates or Trust Certificates:  The Luminent Mortgage Trust 2005-1 Trust Certificates, Series 2005-1, evidencing the beneficial ownership interest in the Issuer and executed by the Owner Trustee in substantially the form set forth in Exhibit A to the Trust Agreement.

Certificateholder:  The Person in whose name a Certificate is registered in the Certificate Register.  Owners of Certificates that have been pledged in good faith may be regarded as Holders if the pledgee establishes to the satisfaction of the Securities Administrator or the Owner Trustee, as the case may be, the pledgee’s right so to act with respect to such Certificates and that the pledgee is not the Issuer, any other obligor upon the Certificates or any Affiliate of any of the foregoing Persons.

Class:  Any of the Class A-1, Class A-2, Class M-1, Class M-2, Class B-1, Class B-2, Class B-3, Class B-4, Class B-5 and Class B-6 Notes.

Class A Notes:  The Class A-1 Notes and Class A-2 Notes in the form attached as Exhibit A-1 to the Indenture.

Class A Principal Distribution Amount:  With respect to any applicable Payment Date, an amount equal to the excess, if any, of:

1.          the aggregate Note Principal Balance of the Class A-1 Notes and Class A-2 Notes immediately prior to such Payment Date over

	
            2.
 	
            the excess of
 

(a)        the aggregate Stated Principal Balance of the Mortgage Loans for such Payment Date, over

(b)        the aggregate Stated Principal Balance of the Mortgage Loans for such Payment Date multiplied by the sum of (x) approximately 13.60% and (y) the Current Specified Overcollateralization Percentage for such Payment Date.

Class B Notes:  The Class B-1, Class B-2, Class B-3 Class B-4, Class B-5 and Class B-6 Notes in the form attached as Exhibit A-3 to the Indenture.

Class B-1 Principal Distribution Amount:  With respect to any applicable Payment Date, an amount equal to the excess, if any of:

1.                 the Note Principal Balance of the Class B-1 Notes immediately prior to such Payment Date over

 

 

	
            2.
 	
            the excess of
 

	
            (a)
 	
            the aggregate Stated Principal Balance of the Mortgage Loans for such Payment Date, over
 

	
            (b)
 	
            the sum of
 	
             

	
             
	
            (1)
 	
            the aggregate Note Principal Balance of the Class A-1 Notes and Class A-2 Notes (after taking into account the payment of the Class A Principal Distribution Amount on such Payment Date),
 
	
             
	
            (2)
 	
            the Note Principal Balance of the Class M-1 Notes (after taking into account the payment of the Class M-1 Principal Distribution Amount on such Payment Date),
 
	
             
	
            (3)
 	
            the Note Principal Balance of the Class M-2 Notes (after taking into account the payment of the Class M-2 Principal Distribution Amount on such Payment Date),
 
	
             
	
            (4)
 	
            the aggregate Stated Principal Balance of the Mortgage Loans for such Payment Date multiplied by the sum of (x) approximately 6.70% and (y) the Current Specified Overcollateralization Percentage for such Payment Date.
 
					

Class B-2 Principal Distribution Amount:  With respect to any applicable Payment Date, an amount equal to the excess, if any of:

1.                 the Note Principal Balance of the Class B-2 Notes immediately prior to such Payment Date over

	
            2.
 	
            the excess of
 

	
            (a)
 	
  the aggregate Stated Principal Balance of the Mortgage Loans for such Payment Date, over
 

	
            (b)
 	
            the sum of
 	
             

	
             
	
            (1)
 	
            the aggregate Note Principal Balance of the Class A-1 Notes and Class A-2 Notes (after taking into account the payment of the Class A Principal Distribution Amount on such Payment Date),
 
	
             
	
            (2)
 	
            the Note Principal Balance of the Class M-1 Notes (after taking into account the payment of the Class M-1 Principal Distribution Amount on such Payment Date),
 
					

 

 

 

 

	
            (3)
 	
            the Note Principal Balance of the Class M-2 Notes (after taking into account the payment of the Class M-2 Principal Distribution Amount on such Payment Date),
 
	
            (4)
 	
            the Note Principal Balance of the Class B-1 Notes (after taking into account the payment of the Class B-1 Principal Distribution Amount on such Payment Date), and
 
	
            (5)
 	
            the aggregate Stated Principal Balance of the Mortgage Loans for such Payment Date multiplied by the sum of (x) approximately 4.10% and (y) the Current Specified Overcollateralization Percentage for such Payment Date.
 

Class B-3 Principal Distribution Amount:  With respect to any applicable Payment Date, an amount equal to the excess, if any of:

1.                 the Note Principal Balance of the Class B-3 Notes immediately prior to such Payment Date over

	
            2.
 	
            the excess of
 

	
            (a)
 	
  the aggregate Stated Principal Balance of the Mortgage Loans for such Payment Date, over
 

	
            (b)
 	
            the sum of
 	
             

	
             
	
            (1)
 	
            the aggregate Note Principal Balance of the Class A-1 Notes and Class A-2 Notes (after taking into account the payment of the Class A Principal Distribution Amount on such Payment Date),
 
	
             
	
            (2)
 	
            the Note Principal Balance of the Class M-1 Notes (after taking into account the payment of the Class M-1 Principal Distribution Amount on such Payment Date),
 
	
             
	
            (3)
 	
            the Note Principal Balance of the Class M-2 Notes (after taking into account the payment of the Class M-2 Principal Distribution Amount on such Payment Date),
 
	
             
	
            (4)
 	
            the Note Principal Balance of the Class B-1 Notes (after taking into account the payment of the Class B-1 Principal Distribution Amount on such Payment Date),
 
	
             
	
            (5)
 	
            the Note Principal Balance of the Class B-2 Notes (after taking into account the payment of the Class B-2 Principal Distribution Amount on such Payment Date), and
 
					

 

 

 

 

	
            (6)
 	
            the aggregate Stated Principal Balance of the Mortgage Loans for such Payment Date multiplied by the sum of (x) approximately 2.50% and (y) the Current Specified Overcollateralization Percentage for such Payment Date.
 

Class B-4 Principal Distribution Amount:  With respect to any applicable Payment Date, an amount equal to the excess, if any of:

1.                 the Note Principal Balance of the Class B-4 Notes immediately prior to such Payment Date over

	
            2.
 	
            the excess of
 

	
            (a)
 	
  the aggregate Stated Principal Balance of the Mortgage Loans for such Payment Date, over
 

	
            (b)
 	
            the sum of
 	
             

	
             
	
            (1)
 	
            the aggregate Note Principal Balance of the Class A-1 Notes and Class A-2 Notes (after taking into account the payment of the Class A Principal Distribution Amount on such Payment Date),
 
	
             
	
            (2)
 	
            the Note Principal Balance of the Class M-1 Notes (after taking into account the payment of the Class M-1 Principal Distribution Amount on such Payment Date),
 
	
             
	
            (3)
 	
            the Note Principal Balance of the Class M-2 Notes (after taking into account the payment of the Class M-2 Principal Distribution Amount on such Payment Date),
 
	
             
	
            (4)
 	
            the Note Principal Balance of the Class B-1 Notes (after taking into account the payment of the Class B-1 Principal Distribution Amount on such Payment Date),
 
	
             
	
            (5)
 	
            the Note Principal Balance of the Class B-2 Notes (after taking into account the payment of the Class B-2 Principal Distribution Amount on such Payment Date),
 
	
             
	
            (6)
 	
            the Note Principal Balance of the Class B-3 Notes (after taking into account the payment of the Class B-3 Principal Distribution Amount on such Payment Date), and
 
					

 

 

 

 

	
            (7)
 	
            the aggregate Stated Principal Balance of the Mortgage Loans for such Payment Date multiplied by the sum of (x) approximately 1.50% and (y) the Current Specified Overcollateralization Percentage for such Payment Date.
 

Class B-5 Principal Distribution Amount:  With respect to any applicable Payment Date, an amount equal to the excess, if any of:

1.                 the Note Principal Balance of the Class B-5 Notes immediately prior to such Payment Date over

	
            2.
 	
            the excess of
 

	
            (a)
 	
  the aggregate Stated Principal Balance of the Mortgage Loans for such Payment Date, over
 

	
            (b)
 	
            the sum of
 	
             

	
             
	
            (1)
 	
            the aggregate Note Principal Balance of the Class A-1 Notes and Class A-2 Notes (after taking into account the payment of the Class A Principal Distribution Amount on such Payment Date),
 
	
             
	
            (2)
 	
            the Note Principal Balance of the Class M-1 Notes (after taking into account the payment of the Class M-1 Principal Distribution Amount on such Payment Date),
 
	
             
	
            (3)
 	
            the Note Principal Balance of the Class M-2 Notes (after taking into account the payment of the Class M-2 Principal Distribution Amount on such Payment Date),
 
	
             
	
            (4)
 	
            the Note Principal Balance of the Class B-1 Notes (after taking into account the payment of the Class B-1 Principal Distribution Amount on such Payment Date),
 
	
             
	
            (5)
 	
            the Note Principal Balance of the Class B-2 Notes (after taking into account the payment of the Class B-2 Principal Distribution Amount on such Payment Date),
 
	
             
	
            (6)
 	
            the Note Principal Balance of the Class B-3 Notes (after taking into account the payment of the Class B-3 Principal Distribution Amount on such Payment Date),
 
	
             
	
            (7)
 	
            the Note Principal Balance of the Class B-4 Notes (after taking into account the payment of the Class B-4 Principal Distribution Amount on such Payment Date), and
 
					

 

 

 

 

	
            (8)
 	
            the aggregate Stated Principal Balance of the Mortgage Loans for such Payment Date multiplied by the sum of (x) approximately 0.50% and (y) the Current Specified Overcollateralization Percentage for such Payment Date.
 

Class B-6 Principal Distribution Amount:  With respect to any applicable Payment Date, an amount equal to the excess, if any of:

1.                 the Note Principal Balance of the Class B-6 Notes immediately prior to such Payment Date over

	
            2.
 	
            the excess of
 

	
            (a)
 	
  the aggregate Stated Principal Balance of the Mortgage Loans for such Payment Date, over
 

	
            (b)
 	
            the sum of
 	
             

	
             
	
            (1)
 	
            the aggregate Note Principal Balance of the Class A-1 Notes and Class A-2 Notes (after taking into account the payment of the Class A Principal Distribution Amount on such Payment Date),
 
	
             
	
            (2)
 	
            the Note Principal Balance of the Class M-1 Notes (after taking into account the payment of the Class M-1 Principal Distribution Amount on such Payment Date),
 
	
             
	
            (3)
 	
            the Note Principal Balance of the Class M-2 Notes (after taking into account the payment of the Class M-2 Principal Distribution Amount on such Payment Date),
 
	
             
	
            (4)
 	
            the Note Principal Balance of the Class B-1 Notes (after taking into account the payment of the Class B-1 Principal Distribution Amount on such Payment Date),
 
	
             
	
            (5)
 	
            the Note Principal Balance of the Class B-2 Notes (after taking into account the payment of the Class B-2 Principal Distribution Amount on such Payment Date),
 
	
             
	
            (6)
 	
            the Note Principal Balance of the Class B-3 Notes (after taking into account the payment of the Class B-3 Principal Distribution Amount on such Payment Date),
 
	
             
	
            (7)
 	
            the Note Principal Balance of the Class B-4 Notes (after taking into account the payment of the Class B-4 Principal Distribution Amount on such Payment Date)
 
	
             
	
            (8)
 	
            the Note Principal Balance of the Class B-5 Notes (after taking into account the payment of the Class B-5 Principal Distribution Amount on such Payment Date), and
 
					

 

 

 

 

	
            (9)
 	
            the aggregate Stated Principal Balance of the Mortgage Loans for such Payment Date multiplied by the Current Specified Overcollateralization Percentage for such Payment Date.
 

 

Class M Notes:  The Class M-1 Notes and Class M-2 Notes in the form attached as Exhibit A-2 to the Indenture.

Class M-1 Principal Distribution Amount:  With respect to any applicable Payment Date, an amount equal to the excess, if any of:

1.                 the Note Principal Balance of the Class M-1 Notes immediately prior to such Payment Date over

	
            2.
 	
            the excess of
 

	
            (a)
 	
  the aggregate Stated Principal Balance of the Mortgage Loans for such Payment Date, over
 

	
            (b)
 	
            the sum of
 	
             

	
             
	
            (1)
 	
            the aggregate Note Principal Balance of the Class A-1 Notes and Class A-2 Notes (after taking into account the payment of the Class A Principal Distribution Amount on such Payment Date), and
 
	
             
	
            (2)
 	
            the aggregate Stated Principal Balance of the Mortgage Loans for such Payment Date multiplied by the sum of (x) approximately 9.90% and (y) the Current Specified Overcollateralization Percentage for such Payment Date.
 
					

Class M-2 Principal Distribution Amount:  With respect to any applicable Payment Date, an amount equal to the excess, if any of:

1.                 the Note Principal Balance of the Class M-2 Notes immediately prior to such Payment Date over

	
            2.
 	
            the excess of
 

	
            (a)
 	
  the aggregate Stated Principal Balance of the Mortgage Loans for such Payment Date, over
 

	
            (b)
 	
            the sum of
 

 

 

 

 

	
            (1)
 	
            the aggregate Note Principal Balance of the Class A-1 Notes and Class A-2 Notes (after taking into account the payment of the Class A Principal Distribution Amount on such Payment Date),
 
	
            (2)
 	
            the Note Principal Balance of the Class M-1 Notes (after taking into account the payment of the Class M-1 Principal Distribution Amount on such Payment Date), and
 
	
            (3)
 	
            the aggregate Stated Principal Balance of the Mortgage Loans for such Payment Date multiplied by the sum of (x) approximately 8.10% and (y) the Current Specified Overcollateralization Percentage for such Payment Date.
 

Closing Date:  November 2, 2005.

Code:  The Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder.

Collateral:  The meaning specified in the Granting Clause of the Indenture.

Commission:  The Securities and Exchange Commission.

Compensating Interest Payment:  As defined in Section 3.21 of the Sale and Servicing Agreement with respect to amounts payable by the Master Servicer, and any amounts in respect of Interest Shortfalls required to be paid by the Servicers pursuant to the related Servicing Agreement.

Countrywide:  Countrywide Home Loans Servicing LP, and its successors and assigns.

Countrywide Assignment Agreement:  The agreement attached as a Exhibit D to the Sale and Servicing Agreement, whereby the Countrywide Servicing Agreement was assigned to the Indenture Trustee for the benefit of the Noteholders.

Countrywide Mortgage Loans:  The Mortgage Loans sold by Countrywide Home Loans, Inc.  to EMC pursuant to the Countrywide Servicing Agreement.

Countrywide Servicing Agreement:  The Seller’s Warranties and Servicing Agreement, dated as of September 1, 2002, as amended and that certain Master Mortgage Loan Purchase Agreement, dated as of November 1, 2002, as amended, between EMC Mortgage Corporation and Countrywide Home Loans, Inc.

Corporate Trust Office:  With respect to the Indenture Trustee, the principal corporate trust office of the Indenture Trustee at which at any particular time its corporate trust business shall be administered, which office at the date of the execution of this instrument is located at LaSalle Bank, 135 S.  LaSalle St., Suite 1625, Chicago, IL 60603, Attn:  Global Securities and Trust Services Group — Luminent 2005-1.  With respect to the Owner Trustee, the principal corporate trust office of the Owner Trustee at which at any particular time its 

 

corporate trust business shall be administered, which office at the date of the execution of this Trust Agreement is located at Chase Bank USA, National Association, 500 Stanton Christiana Road, FL3/OPS4, Newark, Delaware 19713, Attention:  Worldwide Securities Services.  With respect to the Securities Administrator, Certificate Registrar, Note Registrar and Paying Agent, the Corporate Trust Office of the Note Registrar and the Certificate Registrar for purposes of presentment and surrender of the Notes and the Certificates for the final payment or distribution thereon and for transfer is located at Sixth Street and Marquette Avenue, Minneapolis, Minnesota 55479, Attention:  Luminent Mortgage Trust 2005-1, and for all other purposes is located at P.O.  Box 98, Columbia, Maryland 21046 (or, for overnight deliveries, 9062 Old Annapolis Road, Columbia, Maryland, 21045), Attn Luminent Mortgage Trust 2005-1, or
any other address that the Securities Administrator may designate from time to time by notice to the Noteholders and the Certificateholders.

Current Interest:  With respect to each Class of Notes and each Payment Date, the interest accrued at the applicable Note Interest Rate for the applicable Interest Accrual Period on the Note Principal Balance of such Class plus any amount previously distributed with respect to interest for such Class that is recovered as a voidable preference by a trustee in bankruptcy reduced by any Prepayment Interest Shortfall to the extent not covered by Compensating Interest Payments and any shortfalls resulting from the application of the Relief Act, in each case to the extent allocated to such Class of Notes. Current Interest for each Class of Notes shall be calculated on the basis of 360-day year and the actual number of days in the related Interest Accrued Period.

Current Specified Overcollateralization Percentage:  For any Payment Date, a percentage equivalent of a fraction, the numerator of which is the Overcollateralization Target Amount and the denominator of which is the aggregate Stated Principal Balance of the Mortgage Loans for such Payment Date.

Custodial Agreement:  The custodial agreement, dated as of November 2, 2005, among the Issuer, the Depositor, the Indenture Trustee, the Master Servicer and the Custodian, relating to the Luminent Mortgage Trust 2005-1, Mortgage-Backed Notes, Series 2005-1.

Custodian:  Wells Fargo Bank, N.A., and its successors and assigns.

Cut-off Date:  With respect to the Mortgage Loans, October 1, 2005.

Cut-off Date Balance:  $486,400,221.86.

Cut-off Date Principal Balance:  With respect to any Mortgage Loan, the unpaid principal balance thereof as of the Cut-off Date after applying the principal portion of Monthly Payments due on or before such date, whether or not received, and without regard to any payments due after such date.

Debt Service Reduction:  Any reduction of the Scheduled Payments which a Mortgagor is obligated to pay with respect to a Mortgage Loan as a result of any proceeding under the Bankruptcy Code or any other similar state law or other proceeding.

 

 

Default:  Any occurrence which is or with notice or the lapse of time or both would become an Event of Default.

Defaulting Party:  As defined in the Swap Agreements.

Deficient Valuation:  With respect to any Mortgage Loan, a valuation of the Mortgaged Property by a court of competent jurisdiction in an amount less than the then outstanding indebtedness under the Mortgage Loan, which valuation results from a proceeding initiated under the Bankruptcy Code or any other similar state law or other proceeding.

Definitive Notes:  The meaning specified in Section 4.08 of the Indenture.

Deleted Mortgage Loan:  A Mortgage Loan replaced or to be replaced with an Substitute Mortgage Loan.

Depositor:  Structured Asset Mortgage Investments II Inc., a Delaware corporation, or its successor in interest.

Depository:  The Depository Trust Company, the nominee of which is Cede & Co., or any successor thereto.

Depository Participant:  A Person for whom, from time to time, the Depository effects book-entry transfers and pledges of securities deposited with the Depository.

Designated Depository Institution:  A depository institution (commercial bank, federal savings bank, mutual savings bank or savings and loan association) or trust company (which may include the Indenture Trustee), the deposits of which are fully insured by the FDIC to the extent provided by law.

Determination Date:  With respect to any Payment Date, the 15th day of the related month, or if the 15th day of such month is not a Business Day, the immediately preceding Business Day.

Due Date:  With respect to each Mortgage Loan, the date in each month on which its Monthly Payment is due if such due date is the first day of a month and otherwise is deemed to be the first day of the following month or such other date specified in the related Servicing Agreement.

Due Period:  With respect to any Payment Date and the Mortgage Loans, the period commencing on the second day of the month immediately preceding the month of such Payment Date (or, with respect to the first Due Period, the day following the Cut-off Date) and ending at the close of business on the first day of the month of such Payment Date.

Eligible Account:  An account that is any of the following:  (i) maintained with a depository institution the short-term debt obligations of which have been rated by each Rating Agency in its highest rating category available, or (ii) an account or accounts in a depository institution in which such accounts are fully insured to the limits established by the FDIC, provided that any deposits not so insured shall, to the extent acceptable to each Rating Agency, 

 

as evidenced in writing, be maintained such that (as evidenced by an Opinion of Counsel delivered to the Indenture Trustee and each Rating Agency) the Indenture Trustee have a claim with respect to the funds in such account or a perfected first priority security interest against any collateral (which shall be limited to Permitted Investments) securing such funds that is superior to claims of any other depositors or creditors of the depository institution with which such account is maintained, or (iii) in the case of the Payment Account, a trust account or accounts maintained in the corporate trust division of the Master Servicer or Securities Administrator, or (iv) an account or accounts of a depository institution acceptable to each Rating Agency (as evidenced in writing by each Rating Agency that use of any such account as the Payment Account will not reduce the rating assigned to any of the Notes by
such Rating Agency as of the Closing Date by such Rating Agency).

EMC:  EMC Mortgage Corporation, and its successors and assigns.

EMC Assignment Agreement:  The agreement attached as a Exhibit F to the Sale and Servicing Agreement, whereby the EMC Servicing Agreement was assigned to the Indenture Trustee for the benefit of the Noteholders.

EMC Mortgage Loans:  The Mortgage Loans sold by EMC to the Seller pursuant to the EMC Servicing Agreement.

EMC Servicing Agreement:  The Purchase, Warranties and Servicing Agreement, dated as of October 28, 2005, among EMC, Mercury Mortgage Finance Statutory Trust, Luminent Mortgage Capital, Inc.  and Maia Mortgage Finance Statutory Trust, as amended.

ERISA:  The Employee Retirement Income Security Act of 1974, as amended.

Event of Default:  With respect to the Indenture, any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):

(i)         a failure by the Issuer to pay Current Interest on the Class A-1, Class A-2, Class M-1, Class M-2 and Class B-1 Notes or any other Class of Notes to the extent such other Class of Notes is the most senior Class of Notes then outstanding on any Payment Date and such default shall continue for a period of five days; or

(ii)         the failure by the Issuer on the Final Scheduled Payment Date to pay all Current Interest on any Class of Notes, all remaining Interest Carry Forward Amounts, all remaining Basis Risk Shortfall Carryover Amounts to any of the Notes and to reduce the Note Principal Balances of any Class of Notes to zero; or

(iii)        there occurs a default in the observance or performance of any covenant or agreement of the Issuer made in the Indenture, or any representation or warranty of the Issuer made in the Indenture or in any certificate or other writing delivered pursuant hereto or in connection herewith proving to have been incorrect in any material respect as of the time when the same shall have been made, and such default shall continue or not be cured, or the circumstance or condition in respect of which such representation or warranty was incorrect shall 

 

not have been eliminated or otherwise cured, for a period of 30 days after there shall have been given, by registered or certified mail, to the Issuer by the Indenture Trustee or to the Issuer and the Indenture Trustee by the Holders of at least 25% of the aggregate Note Principal Balance of the Outstanding Notes, a written notice specifying such default or incorrect representation or warranty and requiring it to be remedied and stating that such notice is a notice of default hereunder; or

(iv)        there occurs the filing of a decree or order for relief by a court having jurisdiction in the premises in respect of the Issuer or any substantial part of the Trust Estate in an involuntary case under any applicable federal or state bankruptcy, insolvency or other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Issuer or for any substantial part of the Trust Estate, or ordering the winding-up or liquidation of the Issuer’s affairs, and such decree or order shall remain unstayed and in effect for a period of 60 consecutive days; or

(v)        there occurs the commencement by the Issuer of a voluntary case under any applicable federal or state bankruptcy, insolvency or other similar law now or hereafter in effect, or the consent by the Issuer to the entry of an order for relief in an involuntary case under any such law, or the consent by the Issuer to the appointment or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Issuer or for any substantial part of the assets of the Trust Estate, or the making by the Issuer of any general assignment for the benefit of creditors, or the failure by the Issuer generally to pay its debts as such debts become due, or the taking of any action by the Issuer in furtherance of any of the foregoing.

Event of Servicer Termination:  The occurrence of an event, as defined in the related Servicing Agreement, permitting termination or removal of the related Servicer thereunder as servicer of the Mortgage Loans.

Excess Cashflow:  With respect to any Payment Date, the sum of (i) Remaining Excess Spread for such Payment Date and (ii) Overcollateralization Release Amount for such Payment Date.

Excess Liquidation Proceeds:  To the extent that such amount is not required by law to be paid to the related Mortgagor, the amount, if any, by which Liquidation Proceeds with respect to a Liquidated Mortgage Loan exceed the sum of (i) the Outstanding Principal Balance of such Mortgage Loan and accrued but unpaid interest at the related Mortgage Interest Rate through the last day of the month in which the related Liquidation Date occurs, (ii) related Liquidation Expenses (including Liquidation Expenses which are payable therefrom to the Servicer or the Master Servicer in accordance with the Wells Fargo Servicing Agreement or Sale and Servicing Agreement) and (iii) unreimbursed advances by the Servicer or the Master Servicer and Monthly Advances.

Excess Reserve Fund:  A reserve fund which will be funded with $15,000 on the Closing Date by the Seller.

 

 

Excess Spread:  With respect to any Payment Date, the excess, if any, of the Interest Funds for such Payment Date over the sum of the Current Interest and Interest Carry Forward Amounts on the Notes on such Payment Date.

Exchange Act:  The Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

Expiration Notice: The notice to be delivered by the Master Servicer to the related Servicer and the Seller (pursuant to the related Servicing Agreement), stating that it has received notice from the Investor that (i) all of the Classes of Subordinate Notes are no longer held by the Investor or an Affiliate of the Investor or (ii) the Investor has forfeited its rights set forth in the related Servicing Agreement.

Extra Principal Distribution Amount: With respect to any Payment Date, an amount derived from Excess Spread equal to the lesser of (a) the excess, if any, of the Overcollateralization Target Amount for such Payment Date over the Overcollateralization Amount for such Payment Date and (b) the Excess Spread for such Payment Date.

Expenses:  The meaning specified in Section 7.02 of the Trust Agreement.

FDIC:  The Federal Deposit Insurance Corporation or any successor thereto.

Final Certification:  The final certification delivered by the Custodian pursuant to Section 2.3(c) of the Custodial Agreement in the form attached thereto as Exhibit Three.

Final Scheduled Payment Date:  With respect to each Class of Notes, the Payment Date in November 2035.

Five-Year Hybrid Mortgage Loan:  An adjustable-rate Mortgage Loan which has an initial fixed period of five years.

Foreclosure Notice: The notice to be delivered by the related Servicer to the Master Servicer (pursuant to the related Servicing Agreement) no later than five Business Days prior to its commencement of foreclosure proceedings with respect to a Mortgage Loan, of its intention to commence such foreclosure proceedings.

Freddie Mac: Freddie Mac, formerly the Federal Home Loan Mortgage Corporation, or any successor thereto.

Grant:  Pledge, bargain, sell, warrant, alienate, remise, release, convey, assign, transfer, create, and grant a lien upon and a security interest in and right of set-off against, deposit, set over and confirm pursuant to the Indenture.  A Grant of the Collateral or of any other agreement or instrument shall include all rights, powers and options (but none of the obligations) of the granting party thereunder, including the immediate and continuing right to claim for, collect, receive and give receipt for principal and interest payments in respect of such collateral or other agreement or instrument and all other moneys payable thereunder, to give and receive notices and other communications, to make waivers or other agreements, to exercise all rights and options, to bring proceedings in the name of the granting party or otherwise, and generally to 

 

do and receive anything that the granting party is or may be entitled to do or receive thereunder or with respect thereto.

Gross Margin:  As to each Mortgage Loan, the fixed percentage set forth in the related Mortgage Note and indicated on the Mortgage Loan Schedule which percentage is added to the related Index on each Interest Adjustment Date to determine (subject to rounding, the minimum and maximum Mortgage Interest Rate and the Periodic Rate Cap) the Mortgage Interest Rate until the next Interest Adjustment Date.

Holder:  Any Certificateholder or any Noteholder, as the context requires.

Indemnified Party:  The meaning specified in Section 7.02 of the Trust Agreement.

Indenture:  The indenture, dated as of November 2, 2005, among the Issuer, the Indenture Trustee and the Securities Administrator, relating to the Luminent Mortgage Trust, Mortgage-Backed Notes, 2005-1.

Indenture Trustee:  LaSalle Bank National Association, and its successors and assigns or any successor indenture trustee appointed pursuant to the terms of the Indenture.

Independent:  When used with respect to any specified Person, the Person (i) is in fact independent of the Issuer, any other obligor on the Notes, the Seller, the Master Servicer, the Depositor and any Affiliate of any of the foregoing Persons, (ii) does not have any direct financial interest or any material indirect financial interest in the Issuer, any such other obligor, the Seller, the Master Servicer, the Depositor or any Affiliate of any of the foregoing Persons and (iii) is not connected with the Issuer, any such other obligor, the Seller, the Master Servicer, the Depositor or any Affiliate of any of the foregoing Persons as an officer, employee, promoter, underwriter, trustee, partner, director or person performing similar functions.

Independent Certificate:  A certificate or opinion to be delivered to the Indenture Trustee under the circumstances described in, and otherwise complying with, the applicable requirements of Section 10.01 of the Indenture, made by an independent appraiser or other expert appointed by an Issuer Request and approved by the Indenture Trustee in the exercise of reasonable care, and such opinion or certificate shall state that the signer has read the definition of “Independent” in this Indenture and that the signer is Independent within the meaning thereof.

Index:  The index, if any, specified in a Mortgage Note by reference to which the related Mortgage Interest Rate will be adjusted from time to time.

Initial Certification:  The initial certification delivered by the Custodian pursuant to Section 2.3(a) of the Custodial Agreement in the form attached thereto as Exhibit One.

Initial Interest Coverage Deposit:  The amount to be paid by the Depositor to the Securities Administrator for deposit in the Interest Coverage Account on the Closing Date, which amount is approximately $670,000.

 

 

Interest Coverage Account: The account or sub-account established and maintained pursuant to Section 3.28 and which shall be an Eligible Account or a sub-account of an Eligible Account.

Initial Note Principal Balance:  With respect to the Class A-1 Notes, $430,250,000.00, with respect to the Class A-2 Notes, $52,057,000.00, with respect to the Class M-1 Notes, $9,631,000.00, with respect to the Class M-2 Notes, $4,685,000.00, with respect to the Class B-1 Notes, $3,644,000.00, with respect to the Class B-2 Notes, $6,767,000.00, with respect to the Class B-3 Notes, $4,165,000.00, with respect to the Class B-4 Notes, $2,603,000.00, with respect to the Class B-5 Notes, $2,603,000.00, and with respect to the Class B-6 Notes, $1,301,000.00.

Insurance Policy:  With respect to any Mortgage Loan, any standard hazard insurance policy, flood insurance policy or title insurance policy.

Insurance Proceeds:  All proceeds of any Insurance Policy covering any Mortgage Loan or Mortgaged Property other than amounts required to be paid over to the Mortgagor pursuant to law or the related Mortgage Note or Security Instrument and other than amounts used to repair or restore the Mortgaged Property or to reimburse insured expenses.

Interest Accrual Period:  With respect to the Notes and any Payment Date, the period from and including the preceding Payment Date (or from the Closing Date, in the case of the first Payment Date) to and including the day prior to the current Payment Date.

Interest Adjustment Date:  With respect to a Mortgage Loan, the date, if any, specified in the related Mortgage Note on which the Mortgage Interest Rate is subject to adjustment.

Interest Carry Forward Amount:  With respect to each Class of Notes and the first Payment Date, zero, and for each Payment Date thereafter, the sum of:

	
            1.
 	
            the excess of
 	
             

	
             
	
            (a)
 	
            Current Interest for such Class with respect to prior Payment Dates, over
 
				

	
             
	
            (b)
 	
            the amount actually distributed to such Class with respect to interest on or after such prior Payment Dates, and
 
	
            2.
 	
            interest on such excess (to the extent permitted by applicable law) at the applicable Note Interest Rate for the related Interest Accrual Period including the Interest Accrual Period relating to such Payment Date.
 
			

 

Interest Funds:  With respect to any Payment Date, an amount equal to (i) the sum, without duplication, of (a) all scheduled interest during the related Due Period with respect to the related Mortgage Loans less the Servicing Fee, if any, and the Master Servicing Fee with respect to such Payment Date (b) all Advances relating to interest with respect to the related Mortgage Loans by the related Servicer made on or prior to the related Payment Date, (c) all 

 

Compensating Interest Payment with respect to the related Mortgage Loans and required to be remitted by the Master Servicer pursuant to this Agreement with respect to such Payment Date, (d) Liquidation Proceeds and Insurance Proceeds with respect to the related Mortgage Loans collected during the related Prepayment Period (or in the case of Subsequent Recoveries, during the related Due Period, (e) the interest portion of proceeds from Mortgage Loans that were repurchased during the related Due Period, (f) the interest portion of the purchase price of the assets of the Trust upon exercise by the Certificateholder of its optional termination right and (g) all amounts relating to interest with respect to each Mortgage repurchased by the Seller pursuant to Sections 2.02 and 2.03 of the Sale and Servicing Agreement, in each case to the extent remitted by the Master Servicer to the Payment Account pursuant to
the Sale and Servicing Agreement, minus (ii) all amounts required to be reimbursed or paid pursuant to the Indenture or as otherwise set forth in any Basic Document and any Net Swap Payments or Swap Termination Payments not resulting from a Swap Provider Trigger Event owed to the Securities Administrator for payment to the Swap Provider for such Payment Date (to the extent not paid by the Securities Administrator from any upfront payment received pursuant to any replacement interest rate swap agreements that may be entered into by the trust) and any such payments remaining unpaid for prior Payment Dates.

Interest Shortfall:  With respect to any Payment Date and each Mortgage Loan that during the related Prepayment Period was the subject of a Principal Prepayment or constitutes a Relief Act Mortgage Loan, an amount determined as follows:

(a)        Partial principal prepayments received during the relevant Prepayment Period:  The difference between (i) one month’s interest at the applicable Net Rate on the amount of such prepayment and (ii) the amount of interest for the calendar month of such prepayment (adjusted to the applicable Net Rate) received at the time of such prepayment;

(b)        Principal prepayments in full received during the relevant Prepayment Period:  The difference between (i) one month’s interest at the applicable Net Rate on the Scheduled Principal Balance of such Mortgage Loan immediately prior to such prepayment and (ii) the amount of interest for the calendar month of such prepayment (adjusted to the applicable Net Rate) received at the time of such prepayment; and

(c)        Relief Act Mortgage Loans:  As to any Relief Act Mortgage Loan, the excess of (i) 30 days’ interest (or, in the case of a principal prepayment in full, interest to the date of prepayment) on the Scheduled Principal Balance thereof (or, in the case of a principal prepayment in part, on the amount so prepaid) at the related Net Rate over (ii) 30 days’ interest (or, in the case of a principal prepayment in full, interest to the date of prepayment) on such Scheduled Principal Balance (or, in the case of a Principal Prepayment in part, on the amount so prepaid) at the Net Rate required to be paid by the Mortgagor as limited by application of the Relief Act.

Interim Certification:  The interim certification delivered by the Custodian pursuant to Section 2.3(b) of the Custodial Agreement in the form attached thereto as Exhibit Two.

 

 

Investor: Minerva Mortgage Finance Corporation, a QRS of the Seller, for so long as (i) such Person or an Affiliate thereof who is a QRS holds all of the Classes of Subordinate Notes and (ii) has not forfeited its rights set forth in the related Servicing Agreements.

Investment Company Act:  The Investment Company Act of 1940, as amended, and any amendments thereto.

IRS:  The Internal Revenue Service.

Issuer or Trust:  Luminent Mortgage Trust 2005-1, a Delaware statutory trust, or its successor in interest.

Issuer Request:  A written order or request signed in the name of the Issuer by any one of its Authorized Officers and delivered to the Indenture Trustee.

Lender-Paid PMI Rate: With respect to each Mortgage Loan covered by a lender-paid primary mortgage insurance policy, the amount payable to the related insurer, as stated in the Mortgage Loan Schedule.

LIBOR Business Day:  A day on which banks are open for dealing in foreign currency and exchange in London and New York City.

Lien:  Any mortgage, deed of trust, pledge, conveyance, hypothecation, assignment, participation, deposit arrangement, encumbrance, lien (statutory or other), preference, priority right or interest or other security agreement or preferential arrangement of any kind or nature whatsoever, including, without limitation, any conditional sale or other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing and the filing of any financing statement under the UCC (other than any such financing statement filed for informational purposes only) or comparable law of any jurisdiction to evidence any of the foregoing.

Liquidated Mortgage Loan:  With respect to any Payment Date, a defaulted Mortgage Loan that has been liquidated through deed-in-lieu of foreclosure, foreclosure sale, indenture trustee’s sale or other realization as provided by applicable law governing the real property subject to the related Mortgage and any security agreements and as to which the Servicer has certified in the related Prepayment Period that it has received all amounts it expects to receive in connection with such liquidation.

Liquidation Date:  With respect to any Liquidated Mortgage Loan, the date on which the Master Servicer or the Servicer has certified that such Mortgage Loan has become a Liquidated Mortgage Loan.

Liquidation Expenses:  With respect to a Mortgage Loan in liquidation, unreimbursed expenses paid or incurred by or for the account of the Master Servicer or the Servicer in connection with the liquidation of such Mortgage Loan and the related Mortgage Property, such expenses including (a) property protection expenses, (b) property sales expenses, (c) foreclosure and sale costs, including court costs and reasonable attorneys’ fees, and (d) similar expenses reasonably paid or incurred in connection with liquidation.

 

 

Liquidation Proceeds:  Cash received in connection with the liquidation of a defaulted Mortgage Loan, whether through trustee’s sale, foreclosure sale, condemnation proceeds or otherwise.

Loan-to-Value Ratio:  With respect to any Mortgage Loan, the fraction, expressed as a percentage, the numerator of which is the original principal balance of the related Mortgage Loan and the denominator of which is the Original Value of the related Mortgaged Property.

Loss Allocation Limitation:  As defined in Section 3.24(c) of the Indenture.

Loss Severity Percentage:  With respect to any Payment Date, the percentage equivalent of a fraction, the numerator of which is the amount of Realized Losses incurred on a Mortgage Loan and the denominator of which is the Scheduled Principal Balance of such Mortgage Loan immediately prior to the liquidation of such Mortgage Loan.

Lost Notes:  The original Mortgage Notes that have been lost, as indicated on the Mortgage Loan Schedule.

Majority Certificateholder:  A Holder of a 50.01% or greater Certificate Percentage Interest of the Trust Certificates.

Margin:  With respect to any Payment Date on or prior to the first possible optional termination date and (i) with respect to the Class A-1 Notes, 0.260% per annum, (ii) with respect to the Class A-2 Notes, 0.340% per annum, (iii) with respect to the Class M-1 Notes, 0.490% per annum, (iv) with respect to the Class M-2 Notes, 0.520% per annum, (v) with respect to the Class B-1 Notes, 0.560% per annum, (vi) with respect to the Class B-2 Notes, 0.750% per annum; (vii) with respect to the Class B-3 Notes, 1.150% per annum, (viii) with respect to the Class B-4 Notes, 2.100% per annum, (ix) with respect to the Class B-5 Notes, 2.100% per annum and (x) with respect to the Class B-6 Notes, 2.100% per annum; with respect to any Payment Date after the first possible optional termination date and (i) with respect to the Class A-1 Notes, 0.520% per annum, (ii) with respect
to the Class A-2 Notes, 0.680% per annum, (iii) with respect to the Class M-1 Notes, 0.735% per annum, (iv) with respect to the Class M-2 Notes, 0.780% per annum, (v) with respect to the Class B-1 Notes, 0.840% per annum, (vi) with respect to the Class B-2 Notes, 1.125% per annum; (vii) with respect to the Class B-3 Notes, 1.725% per annum, (viii) with respect to the Class B-4 Notes, 3.150% per annum, (ix) with respect to the Class B-5 Notes, 3.150% per annum and (x) with respect to the Class B-6 Notes, 3.150% per annum.

Master Servicer:  Wells Fargo Bank, N.A., and its successors and assigns.

Master Servicer Certification:  A written certification covering servicing of the Mortgage Loans by the Servicer and signed by an officer of the Master Servicer that complies with (i) the Sarbanes-Oxley Act of 2002, as amended from time to time, and (ii) the February 21, 2003 Statement by the Staff of the Division of Corporation Finance of the Securities and Exchange Commission Regarding Compliance by Asset-Backed Issuers with Exchange Act Rules 13a-14 and 15d-14, as in effect from time to time; provided that if, after the Closing Date (a) the Sarbanes-Oxley Act of 2002 is amended, (b) the Statement referred to in clause (ii) is 

 

modified or superseded by any subsequent statement, rule or regulation of the Securities and Exchange Commission or any statement of a division thereof, or (c) any future releases, rules and regulations are published by the Securities and Exchange Commission from time to time pursuant to the Sarbanes-Oxley Act of 2002, which in any such case affects the form or substance of the required certification and results in the required certification being, in the reasonable judgment of the Master Servicer, materially more onerous than the form of the required certification as of the Closing Date, the Master Servicer Certification shall be as agreed to by the Master Servicer and the Depositor following a negotiation in good faith to determine how to comply with any such new requirements.

Master Servicer Compensation:  As defined in Section 3.13 of the Sale and Servicing Agreement.

Master Servicer Event of Default:  Has the meaning assigned to such term in Section 6.01 of the Sale and Servicing Agreement.

Material Defect:  The meaning specified in Section 2.02(a) of the Sale and Servicing Agreement.

Maximum Lifetime Mortgage Rate:  The maximum level to which a Mortgage Interest Rate can adjust in accordance with its terms, regardless of changes in the applicable Index.

Maximum Note Interest Rate:  11.50% per annum.

MERS:  Mortgage Electronic Registration Systems, Inc., a corporation organized and existing under the laws of the State of Delaware, or any successor thereto.

MERS® System:  The system of recording transfers of Mortgages electronically maintained by MERS.

MIN:  The Mortgage Identification Number for Mortgage Loans registered with MERS on the MERS® System.

Minimum Lifetime Mortgage Rate:  The minimum level to which a Mortgage Interest Rate can adjust in accordance with its terms, regardless of changes in the applicable Index.

MOM Loan:  With respect to any Mortgage Loan, MERS acting as the mortgagee of such Mortgage Loan, solely as nominee for the originator of such Mortgage Loan and its successors and assigns, at the origination thereof, or as nominee for any subsequent assignee of the originator pursuant to an assignment of mortgage to MERS.

Monthly Advance:  An advance of principal and interest plus certain amounts representing assured payments not covered by any current net income on the Mortgaged Properties acquired by foreclosure or deed in lieu of foreclosure required to be made by the Servicers pursuant to the related Servicing Agreement or the Master Servicer pursuant to the Sale and Servicing Agreement.

 

 

Monthly Payment:  With respect to any Mortgage Loan (including any REO Property) and any Due Date, the scheduled payment of principal and interest due thereon (after adjustment, if any, for partial Principal Prepayments and for Deficient Valuations occurring prior to such Due Date but before any adjustment to such amortization schedule by reason of any bankruptcy, other than a Deficient Valuation, or similar proceeding or any moratorium or similar waiver or grace period) without giving effect to any extension granted or agreed to by the Master Servicer or related Servicer.

Moody’s:  Moody’s Investors Service, Inc.

Mortgage:  The mortgage, deed of trust or other instrument reflected on the Mortgage Loan Schedule as securing a Mortgage Loan.

Mortgage File:  The file containing the Related Documents pertaining to a particular Mortgage Loan and any additional documents required to be added to the Mortgage File pursuant to the Indenture.

Mortgage Interest Rate:  The annual rate at which interest accrues from time to time on any Mortgage Loan pursuant to the related Mortgage Note, which rate is initially equal to the “Mortgage Interest Rate” set forth with respect thereto on the applicable Mortgage Loan Schedule.

Mortgage Loan:  Any of the Mortgage Loans included in the Trust Estate as of the Closing Date.  The aggregate principal balance of the Mortgage Loans as of the Cut-off Date is equal to approximately $486,400,221.86.

Mortgage Loan Purchase Agreement:  The Mortgage Loan Purchase Agreement, dated as of November 2, 2005, between Mercury Mortgage Finance Statutory Trust, as seller, and Structured Asset Mortgage Investments II Inc., as purchaser, and all amendments thereof and supplements thereto, attached to the Sale and Servicing Agreement as Exhibit I.

Mortgage Loan Schedule:  With respect to any date, the schedule of Mortgage Loans held by the Issuer on such date.  The schedule of Mortgage Loans as of the Cut-off Date is the schedule set forth in Exhibit A to the Sale and Servicing Agreement, which schedule sets forth as to each Mortgage Loan:

(i) the loan number;

(ii) the city, state and zip code of the Mortgaged Property;

(iii) the Mortgage Interest Rate;

(iv) the Servicing Fee Rate;

(v) the Net Rate;

(vi) the original term to maturity;

 

 

(vii) the maturity date;

(viii) the stated remaining term to maturity;

(ix) the original principal balance;

(x) the first Payment Date;

(xi) the Monthly Payment in effect as of the Cut-off Date;

(xii) the Cut-off Date Principal Balance;

(xiii) the Loan-to-Value Ratio at origination;

(xiv) the paid-through date of the Mortgage Loan;

(xv) the Issuer of any Primary Mortgage Insurance Policy;

(xvi) the Index and the Gross Margin, if applicable;

(xvii) the Maximum Lifetime Mortgage Rate, if applicable;

(xviii) the Minimum Lifetime Mortgage Rate, if applicable;

(xix) the Interest Adjustment Date frequency and Payment Date frequency, if applicable; 

(xx) the number of days delinquent, if any; and

(xxi) a code identifying whether the Mortgage Loan is a Three-Year Hybrid Mortgage Loan or Five-Year Hybrid Mortgage Loan.

The Mortgage Loan Schedule shall also set forth the total number of Mortgage Loans, the total of each of the amounts described under (ix) and (xii) above for all of the Mortgage Loans, the weighted average by principal balance of each of the rates described under (iii), (iv) and (v) above for all of the Mortgage Loans and the weighted average remaining term to maturity by unpaid principal balance as of the Cut-off Date for all of the Mortgage Loans.

Mortgage Note:  The originally executed note or other evidence of the indebtedness of a Mortgagor under the related Mortgage Loan.

Mortgaged Property:  Land and improvements securing the indebtedness of a Mortgagor under the related Mortgage Loan or, in the case of REO Property, such REO Property.

Mortgagor:  The obligor on a Mortgage Note.

Net Collections:  With respect to any Liquidated Mortgage Loan, an amount equal to all payments on account of interest and principal on such Mortgage Loan.

 

 

Net Interest Shortfall:  With respect to any Payment Date, the Interest Shortfall, if any, for such Payment Date net of Compensating Interest made with respect to such Payment Date.

Net Liquidation Proceeds:  With respect to any Liquidated Mortgage Loan, Liquidation Proceeds and Subsequent Recoveries net of unreimbursed advances by the Servicers, Monthly Advances, expenses incurred by the Servicers in connection with the liquidation of such Mortgage Loan and the related Mortgaged Property, and any other amounts payable to the Servicers under the related Servicing Agreement.

Net Rate or Net Mortgage Rate:  For any Mortgage Loan, the then applicable Mortgage Rate thereon less the related Servicing Fee Rate.

Net Swap Payment:  With respect to each Payment Date, the net payment required to be made pursuant to the terms of the Swap Agreements, which net payment shall not take into account any Swap Termination Payment.

Non-Foreclosure Notice: The notice to be delivered by the related Servicer to the Master Servicer (pursuant to the related Servicing Agreement) in the event that the related Servicer determines not to proceed with foreclosure proceedings with respect to a Mortgage Loan that becomes 60 days' or more delinquent, pursuant to which notice the related Servicer shall specify that it does not intend to proceed with such foreclosure proceedings and shall state such other action as it intends to take with respect to such Mortgage Loan.

Nonrecoverable Advance:  Any Servicing Advance or Monthly Advance (i) which was previously made or is proposed to be made by the Master Servicer, the Indenture Trustee solely as successor Master Servicer, or the Servicers and (ii) which, in the good faith judgment of the Master Servicer, the Indenture Trustee as successor Master Servicer or the Servicers, will not or, in the case of a proposed advance or Monthly Advance, would not, be ultimately recoverable by the Master Servicer, the Indenture Trustee as successor Master Servicer, or the Servicers from Liquidation Proceeds, Insurance Proceeds or future payments on the Mortgage Loan for which such advance or Monthly Advance was made or is proposed to be made.

Note:  A Class A, Class M or Class B Note.

Noteholder:  The Person in whose name a Note is registered in the Note Register, except that, any Note registered in the name of the Depositor, the Issuer, the Indenture Trustee, the Seller, the Securities Administrator or the Master Servicer or any Affiliate of any of them shall be deemed not to be a holder or holders, nor shall any so owned be considered outstanding, for purposes of giving any request, demand, authorization, direction, notice, consent or waiver under the Indenture or the Trust Agreement; provided that, in determining whether the Indenture Trustee or Securities Administrator shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Notes that a Responsible Officer of the Indenture Trustee or Securities Administrator has actual knowledge to be so owned shall be so disregarded.  Owners
of Notes that have been pledged in good faith may be regarded as Holders if the pledgee establishes to the satisfaction of the Securities Administrator or the Owner Trustee 

 

the pledgee’s right so to act with respect to such Notes and that the pledgee is not the Issuer, any other obligor upon the Notes or any Affiliate of any of the foregoing Persons.

Note Interest Rate:  A per annum rate for the Notes which will be equal to the least of 1) One-Month LIBOR plus the related Margin, 2) 11.50% per annum, and 3) the Available Funds Rate.

Note Owner:  The Beneficial Owner of a Note.

Note Principal Balance:  With respect to any Note as of any date of determination, the initial Note Principal Balance as stated on the face thereof, minus all amounts distributed in respect of principal with respect to such Note and the aggregate amount of any reductions in the Note Principal Balance thereof deemed to have occurred in connection with allocations of the principal portion of Realized Losses on all prior Payment Dates, plus any Subsequent Recoveries on the related Mortgage Loans added to the Note Principal Balance of such Note pursuant to Section 3.27 of the Indenture.  With respect to any Class of Notes, the Note Principal Balance thereof shall be equal to the sum of the Note Principal Balances of all Outstanding Notes of such Class.

Note Register:  The register maintained by the Note Registrar in which the Note Registrar shall provide for the registration of Notes and of transfers and exchanges of Notes.

Note Registrar:  The Securities Administrator, in its capacity as Note Registrar, or any successor to the Securities Administrator in such capacity.

Officer’s Certificate:  With respect to the Master Servicer, a certificate signed by the President, Managing Director, a Director, a Vice President or an Assistant Vice President, of the Master Servicer and delivered to the Indenture Trustee or the Securities Administrator, as applicable.  With respect to the Issuer, a certificate signed by any Authorized Officer of the Issuer, under the circumstances described in, and otherwise complying with, the applicable requirements of Section 10.01 of the Indenture, and delivered to the Indenture Trustee.  Unless otherwise specified, any reference in the Indenture to an Officer’s Certificate shall be to an Officer’s Certificate of any Authorized Officer of the Issuer.

One-Month LIBOR:  With respect to any Accrual Period, the rate determined by the Securities Administrator on the related Interest Determination Date on the basis of the London interbank offered rate for one-month United States dollar deposits, as such rates appear on the Telerate Screen Page 3750, as of 11:00 a.m.  (London time) on such Interest Determination Date.

In the event that on any Interest Determination Date, Telerate Screen 3750 fails to indicate the London interbank offered rate for one-month United States dollar deposits, then One-Month LIBOR for the related Interest Accrual Period will be established by the Securities Administrator as follows:

(i)         If on such Interest Determination Date two or more Reference Banks provide such offered quotations, One-Month LIBOR for the related 

 

Accrual Period shall be the arithmetic mean of such offered quotations (rounded upwards if necessary to the nearest whole multiple of 1/16%).

(ii)         If on such Interest Determination Date fewer than two Reference Banks provide such offered quotations, One-Month LIBOR for the related Accrual Period shall be the higher of (i) One-Month LIBOR as determined on the previous Interest Determination Date and (ii) the Reserve Interest Rate.

The establishment of One-Month LIBOR on each Interest Determination Date by the Securities Administrator and the Securities Administrator’s calculation of the rate of interest applicable for the related Accrual Period shall (in the absence of manifest error) be final and binding.

Opinion of Counsel:  A written opinion of counsel acceptable to the Indenture Trustee in its reasonable discretion which counsel may be in-house counsel for the Depositor or the Seller if acceptable to the Indenture Trustee and the Rating Agencies or outside counsel for the Depositor, the Seller, the Issuer or the Master Servicer, as the case may be.

Optional Termination Date:  The Payment Date occurring after the first Payment Date for which the sum of the aggregate Scheduled Principal Balance of the Mortgage Loans plus all amounts in the Pre-Funding Account as of the end of the related Due Period is reduced to 10% or less of the Cut-off Date Balance plus the Pre-Funded Amount.

Original Value:  The lesser of (i) the Appraised Value or (ii) the sales price of a Mortgaged Property at the time of origination of a Mortgage Loan, except in instances where either clauses (i) or (ii) is unavailable, the other may be used to determine the Original Value, or if both clauses (i) and (ii) are unavailable, Original Value may be determined from other sources reasonably acceptable to the Depositor.

Outstanding:  With respect to the Notes, as of the date of determination, all Notes theretofore executed, authenticated and delivered under this Indenture except:

(i)         Notes theretofore canceled by the Note Registrar or delivered to the Securities Administrator for cancellation; and

(ii)         Notes in exchange for or in lieu of which other Notes have been executed, authenticated and delivered pursuant to the Indenture unless proof satisfactory to the Securities Administrator is presented that any such Notes are held by a holder in due course.

Outstanding Mortgage Loan:  With respect to any Due Date, a Mortgage Loan which, prior to such Due Date, was not the subject of a Principal Prepayment in full, did not become a Liquidated Mortgage Loan and was not purchased or replaced.

Outstanding Principal Balance:  As of the time of any determination, the principal balance of a Mortgage Loan remaining to be paid by the Mortgagor, or, in the case of an REO Property, the principal balance of the related Mortgage Loan remaining to be paid by the 

 

Mortgagor at the time such property was acquired by the Trust less any Excess Liquidation Proceeds with respect thereto to the extent applied to principal.

Owner Trust Estate:  The corpus of the Issuer created by the Trust Agreement which consists of items referred to in Section 3.01 of the Trust Agreement.

Owner Trustee:  Chase Bank U.S.A., National Association, and its successors and assigns or any successor owner trustee appointed pursuant to the terms of the Trust Agreement.

Overcollateralization Amount:  With respect to any Payment Date, the excess, if any, of (a) the aggregate Stated Principal Balance of the Mortgage Loans plus the remaining Pre-Funded Amounts for such Payment Date over (b) the Note Principal Balances of the Notes (after taking into account the payment of principal other than any Extra Principal Distribution Amount on such Notes).

Overcollateralization Release Amount:  With respect to any Payment Date is the lesser of (x) the sum of the amounts described in clauses (1) through (5) in the definition of Principal Funds for such Payment Date and (y) the excess, if any, of (i) the Overcollateralization Amount for such Payment Date (assuming that 100% of such Principal Funds is applied as a principal payment on such Payment Date) over (ii) the Overcollateralization Target Amount for such Payment Date (with the amount pursuant to clause (y) deemed to be $0 if the Overcollateralization Amount is less than or equal to the Overcollateralization Target Amount on that Payment Date).

Overcollateralization Target Amount:  With respect to any Payment Date (a) prior to the Stepdown Date, approximately $2,863,125, (b) on or after the Stepdown Date and if a Trigger Event is not in effect, the greater of (i) the lesser of (1) approximately $2,863,125 and (2) 1.10% of the then current aggregate Stated Principal Balance of the Mortgage Loans as of that Payment Date and (ii) approximately $2,602,841 and (c) on or after the Stepdown Date and if a Trigger Event is in effect, the Overcollateralization Target Amount for the immediately preceding Payment Date.

Paying Agent:  Any paying agent or co-paying agent appointed under the Indenture, which initially shall be the Securities Administrator.

Payment Account:  The trust account or accounts created and maintained pursuant to Section 3.01 of the Indenture, which shall be denominated Wells Fargo Bank, N.A., as Securities Administrator f/b/o holders of Luminent Mortgage Trust 2005-1, Mortgage-Backed Notes, Series 2005-1 - Payment Account.” The Payment Account shall be an Eligible Account.

Payment Account Deposit Date:  The Business Day prior to each Payment Date.

Payment Date:  The 25th day of each month, or if such day is not a Business Day, then the next Business Day, commencing in November 2005.

Percentage Interest:  With respect to any Note, the percentage obtained by dividing the Note Principal Balance of such Note by the aggregate Note Principal Balances of all Notes of that Class.  With respect to any Certificate, the percentage as stated on the face thereof.

 

 

Periodic Rate Cap:  With respect to any Mortgage Loan, the maximum rate, if any, by which the Mortgage Rate on such Mortgage Loan can adjust on any Adjustment Date, as stated in the related Mortgage Note or Mortgage.

Permitted Investments:  Any one or more of the following obligations or securities held in the name of the Indenture Trustee for the benefit of the Noteholders:

(i)         direct obligations of, and obligations the timely payment of which are fully guaranteed by the United States of America or any agency or instrumentality of the United States of America the obligations of which are backed by the full faith and credit of the United States of America;

(ii)         (a) demand or time deposits, federal funds or bankers’ acceptances issued by any depository institution or trust company incorporated under the laws of the United States of America or any state thereof (including the Indenture Trustee, Securities Administrator or the Master Servicer or its Affiliates acting in its commercial banking capacity) and subject to supervision and examination by federal and/or state banking authorities, provided that the commercial paper and/or the short-term debt rating and/or the long-term unsecured debt obligations of such depository institution or trust company at the time of such investment or contractual commitment providing for such investment have the Applicable Credit Rating or better from the Rating Agencies and (b) any other demand or time deposit or certificate of deposit that is fully
insured by the Federal Deposit Insurance Corporation;

(iii)        repurchase obligations with respect to (a) any security described in clause (i) above or (b) any other security issued or guaranteed by an agency or instrumentality of the United States of America, the obligations of which are backed by the full faith and credit of the United States of America, in either case entered into with a depository institution or trust company (acting as principal) described in clause (ii)(a) above where the Securities Administrator holds the security therefor;

(iv)        securities bearing interest or sold at a discount issued by any corporation (including the Indenture Trustee, Securities Administrator or the Master Servicer or its Affiliates) incorporated under the laws of the United States of America or any state thereof that have the Applicable Credit Rating or better from the Rating Agencies at the time of such investment or contractual commitment providing for such investment; provided, however, that securities issued by any particular corporation will not be Permitted Investments to the extent that investments therein will cause the then outstanding principal amount of securities issued by such corporation and held as part of the Trust to exceed 10% of the aggregate Outstanding Principal Balances of all the Mortgage Loans and Permitted Investments held as part of the Trust as determined by the Master Servicer;

(v)        commercial paper (including both non-interest-bearing discount obligations and interest-bearing obligations payable on demand or on a specified date not more than one year after the date of issuance thereof) having the Applicable Credit Rating or better from the Rating Agencies at the time of such investment;

 

 

(vi)        a Reinvestment Agreement issued by any bank, insurance company or other corporation or entity;

(vii)       any other demand, money market or time deposit, obligation, security or investment as may be acceptable to the Rating Agencies as evidenced in writing by the Rating Agencies to the Securities Administrator; and

(viii)      any money market or common trust fund having the Applicable Credit Rating or better from the Rating Agencies, including any such fund for which the Securities Administrator or Master Servicer or any affiliate of the Securities Administrator or Master Servicer acts as a manager or an advisor; provided, however, that no instrument or security shall be a Permitted Investment if such instrument or security evidences a right to receive only interest payments with respect to the obligations underlying such instrument or if such security provides for payment of both principal and interest with a yield to maturity in excess of 120% of the yield to maturity at par or if such instrument or security is purchased at a price greater than par as determined by the Master Servicer.

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

PHH:  PHH Mortgage Corporation, and its successors and assigns.

PHH Assignment Agreement:  The agreement attached as a Exhibit H to the Sale and Servicing Agreement, whereby the Countrywide Servicing Agreement was assigned to the Indenture Trustee for the benefit of the Noteholders.

PHH Mortgage Loans:  The Mortgage Loans sold by PHH to the Seller.

PHH Servicing Agreement:  The Mortgage Loan Flow Purchase, Sale and Servicing Agreement, dated as of August 29, 2005, among Mercury Mortgage Finance Statutory Trust, Luminent Mortgage Capital, Inc., Maia Mortgage Finance Statutory Trust, PHH and Bishop’s Gate Residential Mortgage Trust, as amended and that certain Bill of Warranty, dated as of August 30, 2005, among PHH, Bishop’s Gate Residential Mortgage Trust and Mercury Mortgage Finance Statutory Trust, as amended.

Plan:  Any employee benefit plan or certain other retirement plans and arrangements, including individual retirement accounts and annuities, Keogh plans and bank collective investment funds and insurance company general or separate accounts in which such plans, accounts or arrangements are invested, that are subject to ERISA or Section 4975 of the Code.

Plan Assets:  Assets of a Plan within the meaning of Department of Labor regulation 29 C.F.R.  § 2510.3-101.

Pool Balance:  With respect to any date of determination, the aggregate of the Scheduled Principal Balances of all Mortgage Loans as of such date.

 

 

Pre-Funding Account: The account or sub-account established and maintained pursuant to Section 3.27 and which shall be an Eligible Account or a sub-account of an Eligible Account.

Pre-Funded Amount:  The amount deposited by the Securities Administrator in the Pre-Funding Account on the Closing Date for the Mortgage Loans, which amount is approximately $34,175,858.

Pre-Funding Period:  The period from the Closing Date up to and including February 2, 2006, in which the Securities Administrator may purchase subsequent Mortgage Loans for inclusion in the trust with amounts in the pre-funding account.

Prepayment Charge:  Any prepayment premium, penalty or charge payable by a Mortgagor in connection with any Principal Prepayment on a Mortgage Loan pursuant to the terms of the related Mortgage Note.

Prepayment Interest Shortfall:  As to any Payment Date, Interest Shortfalls, if any, of the type described in clauses (a) and (b) of the definition thereof, for such Payment Date, net of Compensating Interest Payments made with respect to such Payment Date.

Prepayment Period:  With respect any Mortgage Loan serviced by the Servicer and any Payment Date, the calendar month immediately preceding the month in which such Payment Date occurs.  

Primary Mortgage Insurance Policy:  Any primary mortgage guaranty insurance policy issued in connection with a Mortgage Loan which provides compensation to a Mortgage Note holder in the event of default by the obligor under such Mortgage Note or the related Security Instrument, if any, or any replacement policy therefor through the related Interest Accrual Period for such Class relating to a Payment Date.

Principal Distribution Amount:  With respect to each Payment Date, an amount equal to

	
            1.
 	
            the Principal Funds for such Payment Date, plus
 	
             

	
            2.
 	
            any Extra Principal Distribution Amount for such Payment Date, minus
 
	
            3.
 	
            any Overcollateralization Release Amount for such Payment Date.
 	
             

				

Principal Funds:  With respect to a Payment Date, an amount equal to the sum, without duplication, of (i) the scheduled principal collected on the Mortgage Loans during the related Due Period or advanced by the Servicer or Master Servicer, (ii) prepayments of principal in respect of the Mortgage Loans, exclusive of any prepayment charges, collected in the related Prepayment Period, (iii) the Stated Principal Balance of each Mortgage Loan that was repurchased by the Depositor or the related Servicer during the related Due Period, (iv) the amount, if any, by which the aggregate unpaid principal balance of any replacement Mortgage Loans is less than the aggregate unpaid principal balance of any deleted Mortgage Loans delivered by the related Servicer in connection with a substitution of a Mortgage Loan during the related Due Period, (v) all Liquidation Proceeds and
Insurance Proceeds collected during the 

 

related Prepayment Period on the Mortgage Loans (or in the case of Subsequent Recoveries, during the related Due Period), to the extent such Liquidation Proceeds, Insurance Proceeds and Subsequent Recoveries relate to principal, less all non-recoverable advances relating to principal reimbursed during the related Due Period, and (vi) the principal portion of the purchase price of the assets of the trust upon the exercise by the Certificateholder of its optional termination right; minus any amounts required to be reimbursed to the Seller, the Master Servicer, the Securities Administrator, the Custodian or the Indenture Trustee as provided in the Indenture and any Net Swap Payments or Swap Termination Payments not resulting from a Swap Provider Trigger Event owed to the Securities Administrator for payment to the Swap Provider (to the extent not paid by the Securities Administrator from any upfront payment
received pursuant to any replacement interest rate swap agreement that may be entered into by the Trust) to the extent not paid from Interest Funds for the related Payment Date and to the extent remaining unpaid from any previous Payment Date.

Principal Prepayment:  Any payment (whether partial or full) or other recovery of principal on a Mortgage Loan which is received in advance of its scheduled Due Date to the extent that it is not accompanied by an amount as to interest representing scheduled interest due on any date or dates in any month or months subsequent to the month of prepayment, including Insurance Proceeds and Repurchase Proceeds, but excluding the principal portion of Liquidation Proceeds.

Privately Offered Notes:  Any of the Class B-2, Class B-3, Class B-4, Class B-5 and Class B-6 Notes.

Proceeding:  Any suit in equity, action at law or other judicial or administrative proceeding.

Protected Account:  The trust account or accounts created and maintained by the Servicers pursuant to the related Servicing Agreement.  Each Protected Account shall be an Eligible Account.

Publicly Offered Notes:  Any of the Class A-1, Class A-2, Class M-1, Class M-2 and Class B-1 Notes.

Purchaser:  Structured Asset Mortgage Investments II Inc., a Delaware corporation, and its successors and assigns.

QRS: Qualified REIT Subsidiary.

Qualified Insurer:  Any insurance company duly qualified as such under the laws of the state or states in which the related Mortgaged Property or Mortgaged Properties is or are located, duly authorized and licensed in such state or states to transact the type of insurance business in which it is engaged and approved as an insurer by the Master Servicer, so long as the claims paying ability of which is acceptable to the Rating Agencies for mortgage-backed notes having the same rating as the Notes rated by the Rating Agencies as of the Closing Date.

Rating Agency:  Any nationally recognized statistical rating organization, or its successor, that rated the Notes at the request of the Depositor at the time of the initial issuance of 

 

the Notes.  Initially, Standard & Poor’s and Moody’s.  If such organization or a successor is no longer in existence, “Rating Agency” with respect to the Notes shall be such nationally recognized statistical rating organization, or other comparable Person, designated by the Depositor, notice of which designation shall be given to the Indenture Trustee and Master Servicer.  References herein to the highest short term unsecured rating category of a Rating Agency shall mean A-1 or better in the case of Standard & Poor’s, P-1 in the case of Moody’s and in the case of any other Rating Agency shall mean such equivalent ratings.  References herein to the highest long-term rating category of a Rating Agency shall mean “AAA” in the case of Standard & Poor’s, “Aaa” in the case of Moody’s and in the case of any other Rating Agency, such equivalent rating.

Rating Confirmation:  A letter from each Rating Agency then providing a rating for any of the Notes at the request of the Issuer confirming that the action proposed to be taken by the Issuer will not, in and of itself, result in a downgrade of any of the ratings then applicable to the Notes, or cause any Rating Agency to suspend or withdraw the ratings then applicable to the Notes.

Realized Loss:  The excess of the Stated Principal Balance of a defaulted mortgage loan over the net Liquidation Proceeds with respect thereto that are allocated to principal..

Record Date:  With respect to any Class of Offered Notes, the Business Day preceding the applicable Payment Date so long as the Offered Notes remain in Book-entry Form; and otherwise the Record Date shall be the last business day of the month preceding the month in which such Payment Date occurs; and with respect to any Privately Offered Notes and the Trust Certificate and any Payment Date, the close of business on the last Business Day of the calendar month immediately preceding such Payment Date.  

Redemption Price:  As defined in Section 8.06(a) of the Indenture.  

Registered Holder:  The Person in whose name a Note is registered in the Note Register on the applicable Record Date.

Related Documents:  With respect to each Mortgage Loan, the documents specified in Section 2.01(b)(i)-(vii) of the Sale and Servicing Agreement, and any documents required to be added to such documents pursuant to the Sale and Servicing Agreement, the Trust Agreement, the Indenture or the Mortgage Loan Purchase Agreement.

Release:  The Federal Reserve Board’s statistical Release No.  H.15(519).

Relief Act:  Servicemembers Civil Relief Act.

Relief Act Mortgage Loan:  Any Mortgage Loan as to which the Scheduled Payment thereof has been reduced due to the application of the Relief Act.

Remaining Excess Spread:  With respect to any Payment Date, the Excess Spread remaining after the distribution of any Extra Principal Distribution Amount for such Payment Date.

 

 

Remaining Pre-Funded Amount:  With respect to any Mortgage Loan, an amount equal to the related Pre-Funded Amount minus the amount equal to 100% of the aggregate Stated Principal Balance of the subsequent Mortgage Loans transferred during the Pre-Funding Period.

REO Property:  A Mortgaged Property acquired in the name of the Indenture Trustee, for the benefit of the Noteholders, by foreclosure or deed-in-lieu of foreclosure in connection with a defaulted Mortgage Loan.

Repurchase Price:  With respect to any Mortgage Loan (or any property acquired with respect thereto) required to be repurchased by the Seller pursuant to the Mortgage Loan Purchase Agreement or Article II of the Sale and Servicing Agreement, an amount equal to the sum of (i)(a) 100% of the Outstanding Principal Balance of such Mortgage Loan as of the date of repurchase (or if the related Mortgaged Property was acquired with respect thereto, 100% of the Outstanding Principal Balance at the date of the acquisition), plus (b) accrued but unpaid interest on the Outstanding Principal Balance at the related Mortgage Interest Rate, through and including the last day of the month of repurchase, plus (c) any unreimbursed Monthly Advances and Servicing Advances payable to the Servicers or to the Master Servicer and (ii) any costs and damages (if any) incurred by the Trust
in connection with any violation of such Mortgage Loan of any anti-predatory lending laws.

Repurchase Proceeds:  the Repurchase Price in connection with any repurchase of a Mortgage Loan by the Seller and any cash deposit in connection with the substitution of a Mortgage Loan.

Request for Release:  A request for release in the form attached to the Custodial Agreement as Exhibit Four.

Required Insurance Policy:  With respect to any Mortgage Loan, any insurance policy which is required to be maintained from time to time under the Sale and Servicing Agreement with respect to such Mortgage Loan.

Responsible Officer:  With respect to the Securities Administrator, any officer of the Securities Administrator with direct responsibility for the administration of the Indenture and also, with respect to a particular matter, any other officer to whom such matter is referred because of such officer’s knowledge of and familiarity with the particular subject; and with respect to the Indenture Trustee, any vice president, assistant vice president, any assistant secretary, any assistant treasurer, any associate or any other officer of the Indenture Trustee customarily performing functions similar to those performed by any of the above designated officers who at such time shall be officers to whom, with respect to a particular matter, such matter is referred because of such officer’s knowledge of and familiarity with the particular subject or who shall have
direct responsibility for the administration of this Indenture.

Rolling Three-Month Delinquency Average:  With respect to a Payment Date, the average of a fraction, calculated for that Payment Date and each of the immediately preceding two Payment Dates, the numerator of which is the aggregate Stated Principal Balance of the Mortgage Loans that are 60 or more days delinquent as of the related Payment Date (including for this purpose any such Mortgage Loans in bankruptcy or foreclosure and the Mortgage Loans 

 

with respect to which the related Mortgaged Property has been acquired by the Trust) and the denominator of which is the aggregate Stated Principal Balance of Mortgage Loans as of the related Payment Date.

Sale and Servicing Agreement:  The Sale and Servicing Agreement, dated as of November 2, 2005, among the Issuer, the Seller, the Indenture Trustee, the Master Servicer, the Securities Administrator and the Depositor.

Scheduled Payment:  With respect to any Mortgage Loan and any month, the scheduled payment or payments of principal and interest due during such month on such Mortgage Loan which either is payable by a Mortgagor in such month under the related Mortgage Note or, in the case of REO Property, would otherwise have been payable under the related Mortgage Note.

Scheduled Principal:  The principal portion of any Scheduled Payment.

Scheduled Principal Balance:  With respect to any Mortgage Loan and any Payment Date (1) the unpaid principal balance of such Mortgage Loan as of the close of business on the related Due Date (taking account of the principal payment to be made on such Due Date and irrespective of any delinquency in its payment), as specified in the amortization schedule at the time relating thereto (before any adjustment to such amortization schedule by reason of any extension granted by the related Servicer or any bankruptcy or similar proceeding occurring after the Cut-off Date (other than a Deficient Valuation) or any moratorium or similar waiver or grace period) less (2) any Principal Prepayments and the principal portion of any Excess Liquidation Proceeds received during or prior to the immediately preceding Prepayment Period; provided that the Scheduled Principal Balance of
any Liquidated Mortgage Loan is zero.

Securities Act:  The Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

Securities Administrator:  Wells Fargo Bank, National Association, or its successor in interest, or any successor securities administrator.

Security:  Any of the Certificates or Notes.

Securityholder or Holder:  Any Noteholder or Certificateholder.

Security Instrument:  A written instrument creating a valid first lien on a Mortgaged Property securing a Mortgage Note, which may be any applicable form of mortgage, deed of trust, deed to secure debt or security deed, including any riders or addenda thereto.

Seller:  Mercury Mortgage Finance Statutory Trust, and its successors and assigns.

Senior Notes:  The Class A-1 Notes and Class A-2 Notes.

Servicers:  Countrywide Home Loans Servicing LP, EMC Mortgage Corporation and PHH Mortgage Corporation, and their respective successors and assigns.

 

 

Servicer Remittance Date:  With respect to each Mortgage Loan, the date set forth in the related Servicing Agreement.  

Servicing Advances:  All customary, reasonable and necessary “out of pocket” costs and expenses (including reasonable legal fees) incurred in the performance by the Master Servicer of its servicing obligations hereunder, including, but not limited to, the cost of (i) the preservation, restoration and protection of a Mortgaged Property, (ii) any enforcement or judicial proceedings, including foreclosures, and including any expenses incurred in relation to any such proceedings that result from the Mortgage Loan being registered in the MERS® System, (iii) the management and liquidation of any REO Property (including, without limitation, realtor’s commissions) and (iv) compliance with any obligations under Section 3.07 hereof to cause insurance to be maintained.

Servicing Agreements:  Any of the Countrywide Servicing Agreement, EMC Servicing Agreement or PHH Servicing Agreement.

Servicing Fee:  As to any Mortgage Loan and Payment Date, an amount equal to the product of (i) the Scheduled Principal Balance of such Mortgage Loan as of the Due Date in the preceding calendar month and (ii) the applicable Servicing Fee Rate.

Servicing Fee Rate:  As to any Mortgage Loan, (i) 0.25% per annum with respect to the Mortgage Loans serviced by Countrywide Servicing, increasing by 0.125% per annum on the first adjustment date, with respect to those Mortgage Loans with an initial fixed-rate period of five years, (ii) 0.375% per annum with respect to the Mortgage Loans serviced by EMC and (iii) 0.375% per annum with respect to the Mortgage Loans serviced by PHH.

Servicing Officer:  Any officer of the Master Servicer involved in, or responsible for, the administration and servicing of the Mortgage Loans whose name and specimen signature appear on a list of servicing officers furnished to the Indenture Trustee by the Master Servicer, as such list may be amended from time to time.

Standard & Poor’s:  Standard & Poor’s, a division of The McGraw-Hill Companies, Inc., or its successor in interest.

Stated Principal Balance:  For any Mortgage Loan, with respect to any Payment Date, the principal balance thereof as of the Cut-off Date minus the sum of:

	
            1.
 	
            the principal portion of the scheduled monthly payments due from mortgagors with respect to such Mortgage Loan due during each Due Period ending prior to such Payment Date (and irrespective of any delinquency in their payment);
 
	
            2.
 	
            all prepayments of principal with respect to such Mortgage Loan received prior to or during the related Prepayment Period, and all liquidation proceeds to the extent applied by the related Servicer as recoveries of principal in accordance with the Agreement or the related Servicing Agreement that were received by the related Servicer as of the close of business on the last day of the Prepayment Period related to such Payment Date; and
 

 

 

 

3.          any Realized Loss thereon incurred prior to or during the related Prepayment Period.

The Stated Principal Balance of any liquidated Mortgage Loan is zero.

 

Statutory Trust Statute:  Chapter 38 of Title 12 of the Delaware Code, 12 Del.  Code §§3801 et seq., as the same may be amended from time to time.

Stepdown Date:  the earlier to occur of

	
            1.
 	
            the Payment Date on which the aggregate Note Principal Balance of the Class A-1 Notes and Class A-2 Notes has been reduced to zero and
 

	
            2.
 	
            the later to occur of
 	
             

	
             
	
            (a)
 	
            the Payment Date occurring in November 2008, and
 
				

	
            (b)
 	
  the first Payment Date for which the sum of the aggregate Note Principal Balance of the Subordinate Notes and the Overcollateralization Amount divided by the sum of the Stated Principal Balances of the Mortgage Loans for such Payment Date is greater than or equal to approximately 14.70%.
 

Subordinate Notes:  Any of the Class M-1, Class M-2, Class B-1, Class B-2, Class B-3, Class B-4, Class B-5 and Class B-6 Notes.

Subsequent Mortgage Loans:  The Mortgage Loans purchased during the Pre-Funding Period.

Substitute Mortgage Loan:  A Mortgage Loan tendered to the Indenture Trustee pursuant to the Mortgage Loan Purchase Agreement or the Sale and Servicing Agreement, as applicable, in each case, (i) which has an Outstanding Principal Balance not greater nor materially less than the Mortgage Loan for which it is to be substituted; (ii) which has a Mortgage Interest Rate and Net Rate not less than, and not materially greater than, such Mortgage Loan; (iii) which has a maturity date not materially earlier or later than such Mortgage Loan and not later than the latest maturity date of any Mortgage Loan; (iv) which is of the same property type and occupancy type as such Mortgage Loan; (v) which has a Loan-to-Value Ratio not greater than the Loan-to-Value Ratio of such Mortgage Loan; (vi) which is current in payment of principal and interest as of the date of
substitution; (vii) as to which the payment terms do not vary in any material respect from the payment terms of the Mortgage Loan for which it is to be substituted and (viii) which has a Gross Margin and Maximum Lifetime Mortgage Rate no less than those of such Mortgage Loan, has the same Index and interval between Interest Adjustment Dates as such Mortgage Loan, and a Minimum Lifetime Mortgage Rate no lower than that of such Mortgage Loan.

Subsequent Recoveries:  As of any Payment Date, amounts received during the related Due Period by the related Servicer or surplus amounts held by the related Servicer to cover estimated expenses (including, but not limited to, recoveries in respect of the 

 

representations and warranties made by the Seller or the Servicers) specifically related to a liquidated Mortgage Loan or disposition of an REO property prior to the related Prepayment Period that resulted in a Realized Loss, after liquidation or disposition of such Mortgage Loan.

Swap Account:  The trust account or accounts created and maintained pursuant to Section 8.09 of the Indenture, which shall be denominated “LaSalle Bank National Association, as Indenture Trustee f/b/o holders of Luminent Mortgage Trust 2005-1, Mortgage-Backed Notes, Series 2005-1 - Swap Account.” The Swap Account shall be an Eligible Account.

Swap Agreements:  The two interest rate swap agreements, each between the Swap Provider and the Trust, together with any schedules, confirmations or other agreements relating thereto, attached to the Indenture as Exhibit I.

Swap Provider:  The counterparty to the Trust either (a) entitled to receive payments from the Trust or (b) required to make payments to the Trust, in either case pursuant to the terms of the Swap Agreements, and any successor in interest or assign.  Initially, the Swap Provider shall be Bear Stearns Capital Markets Inc.

Swap Provider Trigger Event:  shall mean: (i) an Event of Default under a Swap Agreement with respect to which the Swap Provider is a Defaulting Party (as defined in the Swap Agreements), (ii) a Termination Event under a Swap Agreement with respect to which the Swap Provider is the sole Affected Party (as defined in the Swap Agreements) or (iii) an Additional Termination Event under a Swap Agreement with respect to which the Swap Provider is the sole Affected Party.

Swap Default:  Any of the circumstances constituting an “Event of Default” under the Swap Agreements.

Swap Termination Payment:  Upon the designation of an “Early Termination Date” as defined in the Swap Agreements, the payment to be made by the Trust to the Swap Provider, or by the Swap Provider to the Trust, as applicable, pursuant to the terms of the Swap Agreements.

Termination Event:  As defined in the Swap Agreements.

Three-Year Hybrid Mortgage Loan:  An adjustable-rate Mortgage Loan which has an initial fixed period of three years.

Treasury Regulations:  Regulations, including proposed or temporary Regulations, promulgated under the Code.  References herein to specific provisions of proposed or temporary regulations shall include analogous provisions of final Treasury Regulations or other successor Treasury Regulations.

Trigger Event:  With respect to a Payment Date on or after the Stepdown Date, an event that exists if either (i) the Rolling Three-Month Delinquency Average exceeds 36% of a fraction, the numerator of which is the sum of the aggregate Note Principal Balance of the Subordinate Notes and the Overcollateralization Amount, in each case after taking into account the distribution of the Principal Distribution Amount on such Payment Date and the denominator 

 

of which is the aggregate Stated Principal Balance of the Mortgage Loans for such Payment Date or (ii) the percentage of the cumulative amount of Realized Losses on the Mortgage Loans as of such date of determination is greater than the applicable percentage listed below of the aggregate Stated Principal Balance of the Mortgage Loans as of the closing date:

	
            Months
 	
            Percentage
 
	
            25 – 36
 	
            0.35%
 
	
            37 – 48
 	
            0.75%
 
	
            49 – 60
 	
            1.10%
 
	
            61-72
 	
            1.30%
 
	
            73+
 	
            1.40%
 

 

Trust Agreement:  The Short-Form Trust Agreement, dated as of October 28, 2005, as amended by the Amended and Restated Trust Agreement, dated as of November 2, 2005, among the Owner Trustee, the Depositor, the Securities Administrator, relating to the Trust.

Trust Estate:  The meaning specified in the Granting Clause of the Indenture.

Trust Indenture Act or TIA:  The Trust Indenture Act of 1939, as amended from time to time, as in effect on any relevant date.

UCC:  The Uniform Commercial Code, as amended from time to time, as in effect in any specified jurisdiction.

Underwriters:  Bear, Stearns & Co.  Inc.  and Morgan Stanley & Co.

Uninsured Cause:  Any cause of damage to a Mortgaged Property or related REO Property such that the complete restoration of such Mortgaged Property or related REO Property is not fully reimbursable by the hazard insurance policies required to be maintained pursuant to the related Servicing Agreement, without regard to whether or not such policy is maintained.

Unpaid Realized Loss Amount:  With respect to any Class of Notes and as to any Payment Date, the excess of

	
            1.
 	
            Applied Realized Loss Amounts with respect to such Class over
 

	
            2.
 	
  the sum of all distributions in reduction of the Applied Realized Loss Amounts on all previous Payment Dates.
 

Any amounts distributed to a Class of Notes in respect of any Unpaid Realized Loss Amount will not be applied to reduce the Note Principal Balance of such Class.Exhibit 10.1

                                               Published CUSIP Number: 104577AD3

                                                               EXECUTION VERSION
--------------------------------------------------------------------------------

                                  $110,000,000

                      AMENDED AND RESTATED CREDIT AGREEMENT

                                      among

                         BRADLEY PHARMACEUTICALS, INC.,
                                  as Borrower,

                                       and

                      CERTAIN SUBSIDIARIES OF THE BORROWER,
                                 as Guarantors,

                           THE LENDERS PARTIES HERETO,

                      WACHOVIA BANK, NATIONAL ASSOCIATION,
                            as Administrative Agent,

                              JPMORGAN CHASE BANK,
                              as Syndication Agent

                                       and

                      GENERAL ELECTRIC CAPITAL CORPORATION,
                             as Documentation Agent

                          Dated as of November 14, 2005

                         WACHOVIA CAPITAL MARKETS, LLC,
                   as Sole Lead Arranger and Sole Book Runner

--------------------------------------------------------------------------------

<PAGE>

                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----

ARTICLE I  DEFINITIONS.........................................................1
      Section 1.1    Defined Terms.............................................1
      Section 1.2    Other Definitional Provisions............................28
      Section 1.3    Accounting Terms.........................................28
      Section 1.4    Time References..........................................28

ARTICLE II  THE LOANS; AMOUNT AND TERMS.......................................29
      Section 2.1    Revolving Loans..........................................29
      Section 2.2    Term Loan................................................31
      Section 2.3    Letter of Credit Subfacility.............................33
      Section 2.4    Swingline Loan Subfacility...............................37
      Section 2.5    Fees.....................................................39
      Section 2.6    Commitment Reductions....................................39
      Section 2.7    Prepayments..............................................40
      Section 2.8    Lending Offices..........................................43
      Section 2.9    Default Rate.............................................43
      Section 2.10   Conversion Options.......................................43
      Section 2.11   Computation of Interest and Fees.........................44
      Section 2.12   Pro Rata Treatment and Payments..........................45
      Section 2.13   Non-Receipt of Funds by the Administrative Agent.........47
      Section 2.14   Inability to Determine Interest Rate.....................48
      Section 2.15   Illegality...............................................48
      Section 2.16   Requirements of Law......................................49
      Section 2.17   Indemnity................................................50
      Section 2.18   Taxes....................................................51
      Section 2.19   Indemnification; Nature of Issuing
                       Lender's Duties........................................53

ARTICLE III  REPRESENTATIONS AND WARRANTIES...................................54
      Section 3.1    Financial Condition......................................54
      Section 3.2    No Change................................................55
      Section 3.3    Corporate Existence; Compliance with Law.................55
      Section 3.4    Corporate Power; Authorization;
                       Enforceable Obligations................................56
      Section 3.5    No Legal Bar; No Default.................................57
      Section 3.6    No Material Litigation...................................57
      Section 3.7    Investment Company Act; PUHCA; Etc.......................57
      Section 3.8    Margin Regulations.......................................57
      Section 3.9    ERISA....................................................58
      Section 3.10   Environmental Matters....................................58
      Section 3.11   Use of Proceeds..........................................59
      Section 3.12   Subsidiaries; Joint Ventures; Partnerships...............59
      Section 3.13   Ownership................................................60
      Section 3.14   Indebtedness.............................................60
      Section 3.15   Taxes....................................................60
      Section 3.16   Intellectual Property....................................60

                                       i
<PAGE>

      Section 3.17   Solvency.................................................61
      Section 3.18   Investments..............................................61
      Section 3.19   Location of Collateral...................................61
      Section 3.20   Brokers' Fees............................................62
      Section 3.21   Labor Matters............................................62
      Section 3.22   Security Documents.......................................62
      Section 3.23   Accuracy and Completeness of Information.................62
      Section 3.24   Fraud and Abuse..........................................63
      Section 3.25   Licensing and Accreditation..............................63
      Section 3.26   Other Regulatory Protection..............................63
      Section 3.27   Material Contracts.......................................64
      Section 3.28   Insurance................................................64
      Section 3.29   Reimbursement from Third Party Payors....................64
      Section 3.30   Other Agreements.........................................64
      Section 3.31   Classification as Senior Indebtedness....................65
      Section 3.32   Foreign Assets Control Regulations, Etc..................65
      Section 3.33   Compliance with OFAC Rules and Regulations...............65

ARTICLE IV  CONDITIONS PRECEDENT..............................................65
      Section 4.1    Conditions to Closing Date and
                       Initial Extensions of Credit...........................65
      Section 4.2    Conditions to All Extensions of Credit...................71

ARTICLE V  AFFIRMATIVE COVENANTS..............................................72
      Section 5.1    Financial Statements.....................................72
      Section 5.2    Certificates; Other Information..........................74
      Section 5.3    Payment of Obligations...................................75
      Section 5.4    Conduct of Business and Maintenance of Existence.........75
      Section 5.5    Maintenance of Property; Insurance.......................75
      Section 5.6    Inspection of Property; Books and Records;
                       Discussions............................................76
      Section 5.7    Notices..................................................76
      Section 5.8    Environmental Laws.......................................78
      Section 5.9    Financial Covenants......................................78
      Section 5.10   Additional Guarantors....................................79
      Section 5.11   Compliance with Law......................................79
      Section 5.12   Pledged Assets...........................................80
      Section 5.13   Covenants Regarding Patents,
                       Trademarks and Copyrights..............................80
      Section 5.14   Post-Closing Covenants...................................82

ARTICLE VI  NEGATIVE COVENANTS................................................82
      Section 6.1    Indebtedness.............................................83
      Section 6.2    Liens....................................................84
      Section 6.3    Nature of Business.......................................84
      Section 6.4    Consolidation, Merger, Sale or
                       Purchase of Assets, etc................................84
      Section 6.5    Advances, Investments and Loans..........................85
      Section 6.6    Transactions with Affiliates.............................85
      Section 6.7    Ownership of Subsidiaries; Restrictions..................85
      Section 6.8    Fiscal Year; Organizational Documents;
                       Material Contracts.....................................86
      Section 6.9    Limitation on Restricted Actions.........................86

                                       ii
<PAGE>

      Section 6.10   Restricted Payments......................................86
      Section 6.11   Sale Leasebacks..........................................87
      Section 6.12   No Further Negative Pledges..............................87
      Section 6.13   Operating Lease Obligations..............................87
      Section 6.14   Deposit Account Control Agreements;
                       Additional Bank Accounts...............................87

ARTICLE VII  EVENTS OF DEFAULT................................................88
      Section 7.1    Events of Default........................................88
      Section 7.2    Acceleration; Remedies...................................91

ARTICLE VIII  THE AGENT.......................................................92
      Section 8.1    Appointment..............................................92
      Section 8.2    Delegation of Duties.....................................92
      Section 8.3    Exculpatory Provisions...................................92
      Section 8.4    Reliance by Administrative Agent.........................93
      Section 8.5    Notice of Default........................................93
      Section 8.6    Non-Reliance on Administrative Agent and
                       Other Lenders..........................................94
      Section 8.7    Indemnification..........................................94
      Section 8.8    Administrative Agent in Its Individual Capacity..........95
      Section 8.9    Successor Administrative Agent...........................95
      Section 8.10   Other Agents.............................................96
      Section 8.11   Releases.................................................96

ARTICLE IX  MISCELLANEOUS.....................................................96
      Section 9.1    Amendments, Waivers and Release of Collateral............96
      Section 9.2    Notices..................................................98
      Section 9.3    No Waiver; Cumulative Remedies..........................100
      Section 9.4    Survival of Representations and Warranties..............100
      Section 9.5    Payment of Expenses and Taxes...........................100
      Section 9.6    Successors and Assigns; Participations;
                      Purchasing Lenders.....................................101
      Section 9.7    Adjustments; Set-off....................................105
      Section 9.8    Table of Contents and Section Headings..................106
      Section 9.9    Counterparts............................................106
      Section 9.10   Effectiveness...........................................106
      Section 9.11   Severability............................................106
      Section 9.12   Integration.............................................106
      Section 9.13   Governing Law...........................................106
      Section 9.14   Consent to Jurisdiction and Service of Process..........107
      Section 9.15   Arbitration.............................................107
      Section 9.16   Confidentiality.........................................108
      Section 9.17   Acknowledgments.........................................109
      Section 9.18   Waivers of Jury Trial; Waiver of
                       Consequential Damages.................................110
      Section 9.19   Patriot Act Notice......................................110

ARTICLE X  GUARANTY..........................................................110
      Section 10.1   The Guaranty............................................110
      Section 10.2   Bankruptcy..............................................111
      Section 10.3   Nature of Liability.....................................111
      Section 10.4   Independent Obligation..................................112

                                      iii
<PAGE>

      Section 10.5   Authorization...........................................112
      Section 10.6   Reliance................................................112
      Section 10.7   Waiver..................................................112
      Section 10.8   Limitation on Enforcement...............................114
      Section 10.9   Confirmation of Payment.................................114

                                       iv
<PAGE>

Schedules
---------

Schedule 1.1-1                      Account Designation Letter
Schedule 1.1-2                      Permitted Investments
Schedule 1.1-3                      Permitted Liens
Schedule 2.1(b)(i)                  Form of Notice of Borrowing
Schedule 2.1(e)                     Form of Revolving Note
Schedule 2.2(d)                     Form of Term Note
Schedule 2.4(d)                     Form of Swingline Note
Schedule 2.10                       Form of Notice of Conversion/Extension
Schedule 2.18                       Tax Exempt Certificate
Schedule 3.12                       Subsidiaries
Schedule 3.16                       Intellectual Property
Schedule 3.19(a)                    Location of Real Property
Schedule 3.19(b)                    Location of Collateral
Schedule 3.19(c)                    Chief Executive Offices
Schedule 3.21                       Labor Matters
Schedule 3.27                       Material Contracts
Schedule 3.28                       Insurance
Schedule 4.1-1                      Form of Secretary's Certificate
Schedule 4.1-2                      Litigation
Schedule 4.1-3                      Form of Solvency Certificate
Schedule 4.1-4                      Mortgaged Properties
Schedule 4.1-5                      Closing EBITDA
Schedule 5.10                       Form of Joinder Agreement
Schedule 6.1(b)                     Indebtedness
Schedule 6.14                       Deposit and Securities Accounts
Schedule 9.6(c)                     Form of Commitment Transfer Supplement

                                       v
<PAGE>

      AMENDED AND  RESTATED  CREDIT  AGREEMENT,  dated as of November  14, 2005,
among BRADLEY  PHARMACEUTICALS,  INC., a Delaware  corporation (the "Borrower"),
those Domestic  Subsidiaries of the Borrower  identified as a "Guarantor" on the
signature  pages hereto and such other Domestic  Subsidiaries of the Borrower as
may  from  time  to  time  become  a  party  hereto  (each  a  "Guarantor"  and,
collectively,  the "Guarantors"),  the several banks,  financial institutions or
other  investment  entities as are,  or may from time to time become  parties to
this Credit Agreement (each a "Lender" and,  collectively,  the "Lenders"),  and
WACHOVIA  BANK,  NATIONAL  ASSOCIATION,  a  national  banking  association,   as
administrative   agent  for  the  Lenders  hereunder  (in  such  capacity,   the
"Administrative Agent").

                              W I T N E S S E T H:
                              --------------------

      WHEREAS, the Borrower,  the Guarantors,  the lenders party thereto and the
Administrative  Agent are parties to that certain Credit  Agreement  dated as of
September 28, 2004 (as amended,  supplemented or otherwise modified from time to
time prior to the date hereof, the "Existing Credit Agreement"); and

      WHEREAS,  the Borrower  desires to amend the Existing Credit  Agreement as
set forth herein and to restate the Existing Credit Agreement in its entirety to
read as follows; and

      WHEREAS,  the Borrower has requested that the Lenders make loans and other
financial accommodations to the Borrower in the amount of up to $110,000,000, as
more particularly described herein; and

      WHEREAS,  the Lenders  have agreed to make such loans and other  financial
accommodations to the Borrower on the terms and conditions contained herein.

      NOW, THEREFORE,  in consideration of the premises and the mutual covenants
contained herein, the parties hereto hereby agree as follows:

                                    ARTICLE I

                                   DEFINITIONS

      Section 1.1 Defined Terms.

      As used in this Credit  Agreement,  terms  defined in the preamble to this
Credit  Agreement have the meanings therein  indicated,  and the following terms
have the following meanings:

      "ABR Default Rate" shall mean the Alternate  Base Rate plus the Applicable
Percentage with respect to Alternate Base Rate Loans plus two percent (2%).

      "Accessible  Borrowing  Availability"  shall  mean,  as  of  any  date  of
determination, the amount that the Borrower is able to borrow on such date under
the Revolving Committed

                                       1
<PAGE>

Amount without a Default or Event of Default  occurring or existing after giving
pro forma effect to such borrowing.

      "Account  Designation  Letter" shall mean the Account  Designation  Letter
dated as of the  Closing  Date from the  Borrower  to the  Administrative  Agent
substantially in the form attached hereto as Schedule 1.1-1.

      "Additional  Credit Party" shall mean each Person that becomes a Guarantor
by execution of a Joinder Agreement in accordance with Section 5.10.

      "Administrative  Agent"  shall  have the  meaning  set  forth in the first
paragraph of this Credit  Agreement  and shall  include any  successors  in such
capacity.

      "Administrative  Details Form" shall mean,  with respect to any Lender,  a
document  containing such Lender's  contact  information for purposes of notices
provided  under this  Credit  Agreement  and  account  details  for  purposes of
payments made to such Lender under this Credit Agreement.

      "Affiliate"  shall mean as to any Person,  any other Person (excluding any
Subsidiary) which,  directly or indirectly,  is in control of, is controlled by,
or is under common control with, such Person. For purposes of this definition, a
Person shall be deemed to be "controlled by" a Person if such Person  possesses,
directly or  indirectly,  power either (a) to vote ten percent  (10%) or more of
the Capital Stock having  ordinary voting power for the election of directors of
such  Person  or (b) to  direct or cause the  direction  of the  management  and
policies of such Person whether by contract or otherwise.

      "Agreement"  or "Credit  Agreement"  shall mean this  Amended and Restated
Credit  Agreement,  as  amended,  modified,   restated,  amended  and  restated,
extended,  replaced,  increased or supplemented  from time to time in accordance
with its terms.

      "Alternate  Base Rate" shall mean,  for any day, a rate per annum equal to
the  greater  of (a) the Prime  Rate in  effect on such day and (b) the  Federal
Funds Effective Rate in effect on such day plus 1/2 of 1%. For purposes  hereof:
"Prime Rate" shall mean,  at any time,  the rate of interest per annum  publicly
announced  from time to time by Wachovia at its  principal  office in Charlotte,
North  Carolina  as its prime  rate.  Each  change in the  Prime  Rate  shall be
effective as of the opening of business on the day such change in the Prime Rate
occurs.  The parties  hereto  acknowledge  that the rate  announced  publicly by
Wachovia as its Prime Rate is an index or base rate and shall not necessarily be
its lowest or best rate charged to its  customers  or other banks;  and "Federal
Funds Effective Rate" shall mean, for any day, the weighted average of the rates
on overnight  federal  funds  transactions  with members of the Federal  Reserve
System  arranged by federal funds brokers,  as published on the next  succeeding
Business Day by the Federal Reserve Bank of New York, or, if such rate is not so
published on the next succeeding Business Day, the average of the quotations for
the day of such transactions received by the Administrative Agent from three (3)
federal funds brokers of recognized  standing  selected by it. If for any reason
the  Administrative  Agent shall have determined (which  determination  shall be
conclusive in the absence of manifest  error) that it is unable to ascertain the
Federal Funds Effective Rate, for any

                                       2
<PAGE>

reason, including the inability or failure of the Administrative Agent to obtain
sufficient  quotations in  accordance  with the terms,  the Alternate  Base Rate
shall be determined  without  regard to clause (b) of the first sentence of this
definition,  until the  circumstances  giving rise to such  inability  no longer
exist.  Any change in the Alternate  Base Rate due to a change in the Prime Rate
or the  Federal  Funds  Effective  Rate  shall be  effective  on the  opening of
business on the date of such change.

      "Alternate  Base Rate  Loans"  shall mean Loans that bear  interest  at an
interest rate based on the Alternate Base Rate.

      "Applicable  Percentage"  shall mean,  for any day, the rate per annum set
forth  below,  it  being  understood  that  the  Applicable  Percentage  for (a)
Revolving Loans and Term Loans that are Alternate Base Rate Loans shall be 3.00%
at all times,  (b) Revolving  Loans and Term Loans that are LIBOR Rate Loans and
the  Letter of Credit Fee shall be 4.00% at all times,  (c) the  Commitment  Fee
shall be 0.50% at all times.

      "Approved Fund" shall mean, with respect to any Lender,  any fund or trust
or entity  that  invests  in  commercial  bank loans in the  ordinary  course of
business and is advised or managed by (i) such Lender, (ii) an Affiliate of such
Lender,  (iii)  any  other  Lender  or any  Affiliate  thereof  or (iv) the same
investment advisor as any Person described in clauses (i) - (iii).

      "Arranger" shall mean Wachovia Capital Markets, LLC, as Sole Lead Arranger
and Sole Book Runner, together with its successors and/or assigns.

      "Asset Disposition" shall mean the disposition of any or all of the assets
(including,  without  limitation,  the  Capital  Stock  of a  Subsidiary  or any
ownership  interest in a joint  venture) of any Credit  Party or any  Subsidiary
whether by sale, lease,  transfer or otherwise,  in a single transaction or in a
series of transactions.  The term "Asset  Disposition" shall not include (i) the
sale,  lease,  transfer  or other  disposition  of assets  permitted  by Section
6.4(a)(i), (ii), (iii)(A), (iv) or (v) hereof or (ii) any Equity Issuance.

      "Bankruptcy Code" shall mean the Bankruptcy Code in Title 11 of the United
States Code, as amended, modified, succeeded or replaced from time to time.

      "Bankruptcy  Event" shall mean the occurrence of an Event of Default under
Section 7.1(f).

      "Borrower" shall have the meaning set forth in the first paragraph of this
Credit Agreement.

      "Borrowing Date" shall mean, in respect of any Loan, the date such Loan is
made.

      "Business" shall have the meaning set forth in Section 3.10(b).

      "Business Day" shall mean a day other than a Saturday, Sunday or other day
on which commercial banks in Charlotte, North Carolina or New York, New York are
authorized or

                                       3
<PAGE>

required by law to close; provided, however, that when used in connection with a
rate  determination,  borrowing or payment in respect of a LIBOR Rate Loan,  the
term "Business Day" shall also exclude any day on which banks in London, England
are not open for dealings in Dollar deposits in the London interbank market.

      "Capital  Lease" shall mean any lease of property,  real or personal,  the
obligations  with respect to which are required to be  capitalized  on a balance
sheet of the lessee in accordance with GAAP.

      "Capital Lease  Obligations"  shall mean the capitalized lease obligations
relating to a Capital Lease determined in accordance with GAAP.

      "Capital  Stock"  shall  mean  (i) in the case of a  corporation,  capital
stock,  (ii) in the  case of an  association  or  business  entity,  any and all
shares,  interests,   participations,   rights  or  other  equivalents  (however
designated)  of capital stock,  (iii) in the case of a partnership,  partnership
interests (whether general or limited),  (iv) in the case of a limited liability
company,  membership  interests and (v) any other interest or participation that
confers on a Person the right to receive a share of the  profits  and losses of,
or distributions of assets of, the issuing Person.

      "Cash  Equivalents" shall mean (i) securities issued or directly and fully
guaranteed  or  insured  by the  United  States  of  America  or any  agency  or
instrumentality  thereof  (provided that the full faith and credit of the United
States of America is pledged in support  thereof) having  maturities of not more
than twelve (12) months from the date of acquisition ("Government Obligations"),
(ii) Dollar  denominated  (or foreign  currency  fully  hedged)  time  deposits,
certificates of deposit, Eurodollar time deposits and Eurodollar certificates of
deposit  of (y) any  domestic  commercial  bank of  recognized  standing  having
capital and surplus in excess of $250,000,000  or (z) any bank whose  short-term
commercial  paper rating from S&P is at least A-1 or the  equivalent  thereof or
from Moody's is at least P-1 or the  equivalent  thereof (any such bank being an
"Approved  Bank"),  in each case with  maturities of not more than 364 days from
the date of acquisition, (iii) commercial paper and variable or fixed rate notes
issued by any Approved Bank (or by the parent  company  thereof) or any variable
rate notes issued by, or  guaranteed by any domestic  corporation  rated A-1 (or
the equivalent  thereof) or better by S&P or P-1 (or the equivalent  thereof) or
better by Moody's and maturing within six (6) months of the date of acquisition,
(iv) repurchase  agreements with a bank or trust company (including a Lender) or
a  recognized  securities  dealer  having  capital  and  surplus  in  excess  of
$500,000,000 for direct  obligations issued by or fully guaranteed by the United
States of  America,  (v)  obligations  of any state of the United  States or any
political  subdivision  thereof for the payment of the principal and  redemption
price of and  interest  on which  there  shall have been  irrevocably  deposited
Government  Obligations  maturing as to  principal  and interest at times and in
amounts  sufficient to provide such payment,  (vi) auction preferred stock rated
in the highest  short-term  credit rating category by S&P or Moody's,  and (vii)
money market accounts subject to Rule 2a-7 of the Securities  Exchange Act ("SEC
Rule 2a-7") which consist  primarily of cash and cash  equivalents  set forth in
clauses (i) through  (vi) above and of which 95% shall at all times be comprised
of First Tier Securities (as defined in SEC Rule 2a-7) and any remaining  amount
shall at all times be  comprised  of Second Tier  Securities  (as defined in SEC
Rule 2a-7).

                                       4
<PAGE>

      "CHAMPUS"  shall mean the United  States  Department  of Defense  Civilian
Health and Medical Program of the United States.

      "Change of Control" shall mean the occurrence of any of the following: (a)
any  "person" or "group"  (within the meaning of Sections  13(d) and 14(d)(2) of
the Securities  Exchange Act) becomes the "beneficial owner" (as defined in Rule
l3d-3 under the Securities  Exchange Act) of more than twenty-five percent (25%)
of then  outstanding  Voting  Stock of the  Borrower,  measured by voting  power
rather than the number of shares,  but shall not include any  transfer of Voting
Stock of the  Borrower by Daniel  Glassman for estate  planning  purposes to any
family members of Daniel Glassman,  or an entity  controlled by any thereof or a
trust for the benefit of any thereof so long as Daniel Glassman remains chairman
of the board of  directors  and chief  executive  officer of the  Borrower;  (b)
Continuing  Directors shall cease for any reason to constitute a majority of the
members  of the board of  directors  of the  Borrower  then in office or (c) the
occurrence  of a "Change of Control"  (or any  comparable  term)  under,  and as
defined in, the documents evidencing or governing any Subordinated Indebtedness.

      "Closing Date" shall mean the date of this Credit Agreement.

      "CMS" shall mean the Center for  Medicare  and  Medicaid  Services and any
successor thereto.

      "Code" shall mean the Internal  Revenue Code of 1986, as amended from time
to time.

      "Collateral" shall mean a collective  reference to the collateral which is
identified  in, and at any time will be covered by, the Security  Documents  and
any  other  collateral  that may  from  time to time  secure  the  Credit  Party
Obligations.

      "Compliance  Certificate"  shall  have the  meaning  set forth in  Section
5.2(b).

      "Commitment" shall mean the Revolving Commitment,  the LOC Commitment, the
Term Loan Commitment and the Swingline Commitment, individually or collectively,
as appropriate.

      "Commitment Fee" shall have the meaning set forth in Section 2.5(a).

      "Commitment  Percentage"  shall mean the Revolving  Commitment  Percentage
and/or the Term Loan Commitment Percentage, as appropriate.

      "Commitment  Period" shall mean (a) with respect to Revolving  Loans,  the
period  from and  including  the Closing  Date to but  excluding  the  Revolving
Commitment  Termination  Date and (b) with  respect to  Letters  of Credit,  the
period from and  including  the Closing Date to but  excluding  the date that is
thirty (30) days prior to the Revolving Commitment Termination Date.

      "Commitment   Transfer   Supplement"  shall  mean  a  Commitment  Transfer
Supplement, substantially in the form of Schedule 9.6(c).

                                       5
<PAGE>

      "Commonly  Controlled  Entity"  shall  mean  an  entity,  whether  or  not
incorporated, which is under common control with the Borrower within the meaning
of Section  4001 of ERISA or is part of a group which  includes the Borrower and
which is treated as a single employer under Section 414 of the Code.

      "Consolidated  Capital  Expenditures"  shall  mean,  for any  period,  all
capital  expenditures  of the Borrower and its  Subsidiaries  on a  consolidated
basis for such period, as determined in accordance with GAAP.

      "Consolidated  EBITDA"  shall  mean,  for  any  period,  the  sum  of  (i)
Consolidated  Net  Income for such  period,  plus (ii) an amount  which,  in the
determination of Consolidated Net Income for such period,  has been deducted for
(A) Consolidated  Interest Expense, (B) total federal,  state, local and foreign
income,  value  added  and  similar  taxes  and (C)  depreciation,  amortization
expense,  all  as  determined  in  accordance  with  GAAP.  Notwithstanding  the
foregoing,  for  purposes  of  calculating  Consolidated  EBITDA  for the fiscal
quarters  ending  September  30,  2005,  December  31, 2005 and March 31,  2006,
Consolidated  EBITDA shall be determined by annualizing such calculations during
such fiscal quarters such that (i) for the calculation of Consolidated EBITDA as
of  September  30,  2005,  Consolidated  EBITDA  for the fiscal  quarter  ending
September 30, 2005 would be multiplied by four (4), (ii) for the  calculation of
Consolidated  EBITDA as of December  31, 2005,  Consolidated  EBITDA for the two
fiscal  quarter  period then ending would be multiplied by two (2) and (iii) for
the calculation of Consolidated EBITDA as of March 31, 2006, Consolidated EBITDA
for the three fiscal  quarter  period then ending would be multiplied by one and
one-third (1 1/3).

      "Consolidated  Interest Expense" shall mean, for any period,  all interest
expense of the Borrower and its Subsidiaries (including, without limitation, the
interest  component under Capital Leases and any synthetic  lease, tax retention
operating lease,  off-balance sheet loan or similar  off-balance sheet financing
product, but excluding interest income), as determined in accordance with GAAP.

      "Consolidated  Net  Income"  shall  mean,  for  any  period,   net  income
(excluding extraordinary losses up to $3,000,000 in any twelve (12) month period
and excluding  extraordinary  gains) after taxes for such period of the Borrower
and its  Subsidiaries on a consolidated  basis, as determined in accordance with
GAAP.

      "Consolidated Working Capital" shall mean, for any period, (i) all current
assets of the Borrower and its  Subsidiaries on a consolidated  basis minus (ii)
all current  liabilities of the Borrower and its  Subsidiaries on a consolidated
basis, as determined in accordance with GAAP.

      "Continuing  Directors" shall mean, during any period of up to twenty-four
(24) consecutive  months  commencing after the Closing Date,  individuals who at
the  beginning  of such  twenty-four  (24) month  period were  directors  of the
Borrower  (together with any new director whose election by the Borrower's board
of directors or whose nomination for election by the Borrower's shareholders was
approved by a vote of at least  two-thirds of the directors then still in office
who either were  directors at the beginning of such period or whose  election or
nomination for election was previously so approved).

                                       6
<PAGE>

      "Contractual  Obligation"  shall mean, as to any Person,  any provision of
any security issued by such Person or of any contract, agreement,  instrument or
undertaking  to  which  such  Person  is a party  or by  which  it or any of its
property is bound.

      "Convertible  Bonds"  shall mean the  securities  issued  pursuant  to the
following:  (i) the  Indenture,  dated June 11,  2003,  between the Borrower and
American Stock Transfer & Trust Company, (ii) the First Supplemental  Indenture,
dated as of July 24, 2003,  between the Borrower and American  Stock  Transfer &
Trust Company,  (iii) the Registration  Rights  Agreement,  dated as of June 11,
2003,  between  Borrower and UBS  Securities LLC and Raymond James & Associates,
Inc. (for whom UBS  Securities  LLC is acting as  representative),  and (iv) the
Registration  Rights Agreement,  dated as of July 24, 2003, between Borrower and
UBS Securities LLC and Raymond James & Associates, Inc. (for whom UBS Securities
LLC is acting as representative).

      "Copyright  Licenses" shall mean any written  agreement  naming any Credit
Party as licensor and granting any right under any Copyright including,  without
limitation, any thereof referred to in Schedule 3.16.

      "Copyrights"  shall  mean  (a) all  registered  copyrights  of the  Credit
Parties and their  Subsidiaries in all Works, now existing or hereafter  created
or acquired,  all registrations and recordings thereof,  and all applications in
connection therewith, including, without limitation,  registrations,  recordings
and  applications in the United States Copyright Office or in any similar office
or agency of the United  States,  any state  thereof or any other country or any
political subdivision thereof, or otherwise including,  without limitation,  any
thereof  referred to in Schedule 3.16, and (b) all renewals  thereof  including,
without limitation, any thereof referred to in Schedule 3.16.

      "Credit  Documents" shall mean this Credit  Agreement,  each of the Notes,
any Joinder Agreement, the LOC Documents and the Security Documents.

      "Credit Party" shall mean any of the Borrower or the Guarantors.

      "Credit Party Obligations" shall mean, without duplication, (a) all of the
obligations,  indebtedness  and liabilities of the Credit Parties to the Lenders
(including the Issuing Lender) and the Administrative  Agent,  whenever arising,
under this  Credit  Agreement,  the Notes or any of the other  Credit  Documents
(including,  but not limited to, any interest accruing after the occurrence of a
filing of a petition of bankruptcy under the Bankruptcy Code with respect to any
Credit Party,  regardless of whether such interest is an allowed claim under the
Bankruptcy  Code) and (b) solely for purposes of the Security  Documents and the
Guaranty,  all liabilities and  obligations,  whenever  arising,  owing from any
Credit  Party or any of their  Subsidiaries  to any Hedging  Agreement  Provider
arising under any Secured Hedging Agreement.

      "Debt Issuance" shall mean the issuance of any  Indebtedness  for borrowed
money by any Credit Party or any of its  Subsidiaries  (excluding,  for purposes
hereof, any Equity Issuance or

                                       7
<PAGE>

any  Indebtedness  of any  Credit  Party and its  Subsidiaries  permitted  to be
incurred pursuant to Section 6.1 hereof).

      "Default" shall mean any event which would constitute an Event of Default,
whether or not any requirement for the giving of notice or the lapse of time, or
both,  or any other  condition  with respect to such Event of Default,  has been
satisfied.

      "Defaulting Lender" shall mean, at any time, any Lender that, at such time
(a) has  failed to make a Loan  required  pursuant  to the terms of this  Credit
Agreement,  including the funding of a Participation Interest in accordance with
the  terms  hereof,  (b) has  failed to pay to the  Administrative  Agent or any
Lender an  amount  owed by such  Lender  pursuant  to the  terms of this  Credit
Agreement,  or (c)  has  been  deemed  insolvent  or  has  become  subject  to a
bankruptcy  or  insolvency  proceeding  or to a  receiver,  trustee  or  similar
official.

      "Deposit Account Control Agreement" shall mean an agreement among a Credit
Party, a depository  institution,  and the Administrative Agent, which agreement
is in a form  acceptable  to the  Administrative  Agent and which  provides  the
Administrative  Agent with  "control"  (as such term is used in Article 9 of the
Uniform  Commercial Code) over the deposit accounts  described  therein,  as the
same may be amended,  restated,  supplemented,  extended,  replaced or otherwise
modified from time to time.

      "Dollars"  and "$" shall  mean  dollars in lawful  currency  of the United
States of America.

      "Domestic Lending Office" shall mean, initially, the office of each Lender
designated  as  such  Lender's   Domestic   Lending   Office  in  such  Lender's
Administrative Details Form; and thereafter, such other office of such Lender as
such Lender may from time to time  specify to the  Administrative  Agent and the
Borrower as the office of such Lender at which Alternate Base Rate Loans of such
Lender are to be made.

      "Domestic  Subsidiary"  shall mean any  Subsidiary  that is organized  and
existing  under  the laws of the  United  States  or any  state or  commonwealth
thereof or under the laws of the District of Columbia.

      "Environmental  Laws" shall mean any and all applicable foreign,  Federal,
state,  local  or  municipal  laws,  rules,   orders,   regulations,   statutes,
ordinances,  codes, decrees, requirements of any Governmental Authority or other
Requirement of Law (including  common law)  regulating,  relating to or imposing
liability or standards of conduct  concerning  protection of human health or the
environment,  as now or may at any  time be in  effect  during  the term of this
Credit Agreement.

      "Equity  Issuance"  shall mean any  issuance  by any  Credit  Party or any
Subsidiary  to any Person which is not a Credit Party of (a) shares or interests
of its Capital Stock,  (b) any shares or interests of its Capital Stock pursuant
to the exercise of options or warrants (including, without limitation,  employee
stock options), (c) any shares or interests of its Capital Stock pursuant to the
conversion of any debt  securities to equity or (d) warrants or options or other
similar rights which are exercisable for or convertible into shares or interests
of its Capital Stock. The term

                                       8
<PAGE>

"Equity  Issuance"  shall  not  include  (i) any  Asset  Disposition,  (ii) Debt
Issuance or (iii) any equity  issuance to  officers or  employees  of any Credit
Party.

      "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time.

      "Eurodollar  Reserve  Percentage"  shall mean for any day, the  percentage
(expressed as a decimal and rounded  upwards,  if necessary,  to the next higher
1/100th  of 1%) which is in effect  for such day as  prescribed  by the  Federal
Reserve Board (or any successor) for determining the maximum reserve requirement
(including without limitation any basic,  supplemental or emergency reserves) in
respect of Eurocurrency liabilities, as defined in Regulation D of such Board as
in effect from time to time, or any similar category of liabilities for a member
bank of the Federal Reserve System in New York City.

      "Event of Default" shall mean any of the events  specified in Section 7.1;
provided,  however, with respect to any such event, that any requirement for the
giving  of notice or the lapse of time,  or both,  or any other  condition  with
respect thereto, has been satisfied.

      "Excess  Cash Flow"  shall  mean,  with  respect to any fiscal year of the
Borrower,  for the Borrower and its  Subsidiaries  on a consolidated  basis,  an
amount equal to (a)  Consolidated  EBITDA for such period minus (b) Consolidated
Capital  Expenditures  for such period minus (c) Scheduled  Funded Debt Payments
made during such period minus (d) Consolidated  Interest Expense  (excluding any
Consolidated  Interest Expense  associated with  intercompany  indebtedness) for
such period minus (e) amounts paid in cash in respect of federal,  state,  local
and foreign  income taxes of the Borrower and its  Subsidiaries  with respect to
such  period  minus (f)  increases  in  Consolidated  Working  Capital  plus (g)
decreases in  Consolidated  Working  Capital minus (h) optional  prepayments  of
Revolving Loans (to the extent  accompanied by a corresponding  reduction of the
Revolving Commitments).

      "Extension of Credit"  shall mean, as to any Lender,  the making of a Loan
by such Lender or the  issuance of, or  participation  in, a Letter of Credit by
such Lender.

      "Federal  Funds  Effective  Rate"  shall have the meaning set forth in the
definition of "Alternate Base Rate".

      "Fee Letter" shall mean the letter agreement dated June 29, 2005 addressed
to the  Borrower  from  Wachovia  and the  Arranger,  as  amended,  modified  or
otherwise supplemented.

      "Fixed Charge Coverage Ratio" shall mean, with respect to the Borrower and
its Subsidiaries on a consolidated  basis for the twelve-month  period ending on
the  last  day  of  any  fiscal  quarter  of  the  Borrower,  the  ratio  of (i)
Consolidated EBITDA for such period minus Consolidated Capital Expenditures made
in cash during such period to the extent  permitted under this Credit  Agreement
to (ii) the sum of Consolidated Interest Expense made in cash during such period
to the extent  permitted under this Credit  Agreement plus Scheduled Funded Debt
Payments for such period plus total federal,  state,  local and foreign  income,
value  added and  similar  taxes paid or payable in cash during such period plus
Restricted Payments made during

                                       9
<PAGE>

such period.  Notwithstanding  the foregoing,  for purposes of  calculating  the
Fixed Charge Coverage Ratio for the fiscal  quarters ending  September 30, 2005,
December 31, 2005 and March 31, 2006,  the Fixed Charge  Coverage Ratio shall be
determined by annualizing Consolidated Interest Expense and the Scheduled Funded
Debt Payments  during such fiscal  quarters such that (i) for the calculation of
the Fixed Charge Coverage Ratio as of September 30, 2005,  Consolidated Interest
Expense and the  Scheduled  Funded Debt Payments for the fiscal  quarter  ending
September 30, 2005 would be multiplied by four (4), (ii) for the  calculation of
the Fixed Charge  Coverage Ratio as of December 31, 2005  Consolidated  Interest
Expense and the Scheduled Funded Debt Payments for the two fiscal quarter period
then ending would be multiplied by two (2) and (iii) for the  calculation of the
Fixed Charge Coverage Ratio as of March 31, 2006,  Consolidated Interest Expense
and the Scheduled  Funded Debt Payments for the three fiscal quarter period then
ending would be multiplied by one and one-third (1 1/3).

      "Flood  Hazard  Property"  shall  have the  meaning  set forth in  Section
4.1(e)(iv).

      "Foreign  Subsidiary"  shall  mean any  Subsidiary  that is not a Domestic
Subsidiary.

      "Fronting Fee" shall have the meaning set forth in Section 2.5(b).

      "Funded Debt" shall mean, with respect to any Person, without duplication,
(a) all  obligations of such Person for borrowed  money,  (b) all obligations of
such person evidenced by bonds,  debentures,  notes or similar  instruments,  or
upon which interest  payments are customarily  made, (c) all obligations of such
Person under  conditional sale or other title retention  agreements  relating to
property  purchased  by  such  Person  (other  than  customary  reservations  or
retentions of title under agreements with suppliers entered into in the ordinary
course of business), (d) all obligations (including, without limitation, earnout
obligations) of such Person incurred, issued or assumed as the deferred purchase
price of property or services  purchased  by such Person  (other than trade debt
incurred in the ordinary course of business and due within six (6) months of the
incurrence thereof) which would appear as liabilities on a balance sheet of such
Person,  (e) the  principal  portion of all  obligations  of such  Person  under
Capital  Leases,  (f) all  obligations of such Person under Hedging  Agreements,
excluding any portion  thereof which would be accounted for as interest  expense
under GAAP,  (g) the maximum  amount of all letters of credit issued or bankers'
acceptances  facilities  created for the  account of such  Person  and,  without
duplication,  all drafts drawn thereunder (to the extent unreimbursed),  (h) all
preferred  Capital  Stock or other  equity  interests  issued by such Person and
which by the terms  thereof  could be (at the request of the holders  thereof or
otherwise)  subject to mandatory  sinking  fund  payments,  redemption  or other
acceleration,  (i) the principal balance  outstanding under any synthetic lease,
tax retention  operating lease,  off-balance  sheet loan or similar  off-balance
sheet financing product, (j) all Indebtedness of others of the type described in
clauses  (a)  through  (i)  hereof  secured  by (or for which the holder of such
Indebtedness has an existing right,  contingent or otherwise,  to be secured by)
any Lien on, or payable out of the proceeds of production  from,  property owned
or acquired by such Person,  whether or not the obligations secured thereby have
been  assumed,  (k) all  Guaranty  Obligations  of such Person  with  respect to
Indebtedness  of another Person of the type described in clauses (a) through (i)
hereof,  and (l) all  Indebtedness  of the type described in clauses (a) through
(i) hereof of any  partnership  or  unincorporated  joint  venture in which such
Person is a general partner or a joint venturer;  provided,  however,  that with
respect to Funded Debt of the Borrower and its

                                       10
<PAGE>

Subsidiaries,  Funded Debt shall not include Subordinated Indebtedness among the
Borrower and the Guarantors to the extent such Indebtedness  would be eliminated
on a consolidated basis.

      "GAAP" shall mean generally  accepted  accounting  principles in effect in
the United States of America applied on a consistent basis, subject, however, in
the case of determination of compliance with the financial  covenants set out in
Section 5.9 to the provisions of Section 1.3.

      "Government Acts" shall have the meaning set forth in Section 2.19(a).

      "Governmental Authority" shall mean any nation or government, any state or
other  political  subdivision  thereof  and  any  entity  exercising  executive,
legislative,  judicial,  regulatory or administrative functions of or pertaining
to government.

      "Guarantor"  shall have the  meaning set forth in the first  paragraph  of
this Credit Agreement.

      "Guaranty  Obligations"  shall mean,  with respect to any Person,  without
duplication,  any  obligations  of such Person (other than  endorsements  in the
ordinary course of business of negotiable instruments for deposit or collection)
guaranteeing  or intended to guarantee any  Indebtedness  of any other Person in
any manner,  whether direct or indirect,  and including  without  limitation any
obligation,  whether or not contingent, (i) to purchase any such Indebtedness or
any property constituting security therefor, (ii) to advance or provide funds or
other  support  for the  payment  or  purchase  of any such  Indebtedness  or to
maintain  working  capital,  solvency or other balance  sheet  condition of such
other Person  (including  without  limitation keep well agreements,  maintenance
agreements,  comfort  letters or similar  agreements  or  arrangements)  for the
benefit of any holder of  Indebtedness  of such other Person,  (iii) to lease or
purchase Property,  securities or services primarily for the purpose of assuring
the holder of such  Indebtedness,  or (iv) to otherwise  assure or hold harmless
the holder of such Indebtedness  against loss in respect thereof.  The amount of
any Guaranty  Obligation  hereunder  shall (subject to any limitations set forth
therein) be deemed to be an amount equal to the outstanding principal amount (or
maximum  principal  amount,  if larger) of the  Indebtedness in respect of which
such Guaranty Obligation is made.

      "Guaranty"  shall mean the guaranty of the Guarantors set forth in Article
X.

      "Hedging  Agreement  Provider"  shall mean any Person  that  enters into a
Secured Hedging Agreement with a Credit Party or any of its Subsidiaries that is
permitted by Section 6.1(e) to the extent such Person is a Lender,  an Affiliate
of a Lender or any other  Person that was a Lender (or an Affiliate of a Lender)
at the time it entered into the Secured Hedging Agreement but has ceased to be a
Lender  (or  whose  Affiliate  has  ceased  to be a  Lender)  under  the  Credit
Agreement;  provided,  in the case of a Secured Hedging  Agreement with a Person
who is no longer a Lender,  such Person shall be considered a Hedging  Agreement
Provider only through the stated maturity date (without extension or renewal) of
such Secured Hedging Agreement.

      "Hedging Agreements" shall mean, with respect to any Person, any agreement
entered into to protect such Person against  fluctuations  in interest rates, or
currency or raw materials values,  including,  without limitation,  any interest
rate swap, cap or collar agreement or similar

                                       11
<PAGE>

arrangement  between  such  Person and one or more  counterparties,  any foreign
currency exchange agreement, currency protection agreements,  commodity purchase
or option  agreements  or other  interest or exchange  rate or  commodity  price
hedging agreements.

      "Immaterial Subsidiary" shall mean any Subsidiary having (a) assets with a
book value of less than $100,000 and (b) EBITDA of less than $100,000 during the
immediately   preceding  four  (4)  fiscal  quarter  period,  as  calculated  in
accordance with GAAP.

      "Indebtedness"   shall  mean,   with   respect  to  any  Person,   without
duplication,  (a) all  obligations  of such Person for borrowed  money,  (b) all
obligations  of such Person  evidenced  by bonds,  debentures,  notes or similar
instruments,  or upon which  interest  payments are  customarily  made,  (c) all
obligations  of such Person  under  conditional  sale or other  title  retention
agreements  relating to property  purchased by such Person (other than customary
reservations or retentions of title under agreements with suppliers entered into
in the ordinary  course of business),  (d) all obligations  (including,  without
limitation,  earnout  obligations)  of such  Person  issued  or  assumed  as the
deferred purchase price of property or services  purchased by such Person (other
than trade debt  incurred in the ordinary  course of business and due within six
(6) months of the  incurrence  thereof)  which would appear as  liabilities on a
balance  sheet  of  such  Person,  (e) all  obligations  of  such  Person  under
take-or-pay or similar  arrangements or under  commodities  agreements,  (f) all
Indebtedness of others secured by (or for which the holder of such  Indebtedness
has an existing right,  contingent or otherwise,  to be secured by) any Lien on,
or payable out of the proceeds of production from, property owned or acquired by
such Person,  whether or not the obligations  secured thereby have been assumed,
(g) all  Guaranty  Obligations  of such Person with respect to  Indebtedness  of
another  Person,  (h) the principal  portion of all  obligations  of such Person
under Capital Leases plus any accrued interest  thereon,  (i) all obligations of
such Person under Hedging  Agreements,  (j) the maximum amount of all letters of
credit issued or bankers' acceptances facilities created for the account of such
Person and,  without  duplication,  all drafts drawn  thereunder  (to the extent
unreimbursed),  (k) all preferred Capital Stock or other equity interests issued
by such  Person and which by the terms  thereof  could be (at the request of the
holders  thereof or  otherwise)  subject to  mandatory  sinking  fund  payments,
redemption or other  acceleration,  (l) the principal balance  outstanding under
any synthetic lease, tax retention  operating lease,  off-balance  sheet loan or
similar  off-balance  sheet financing product plus any accrued interest thereon,
and (m) the Indebtedness of any partnership or  unincorporated  joint venture in
which such Person is a general partner or a joint venturer.

      "Insolvency"  shall mean,  with  respect to any  Multiemployer  Plan,  the
condition that such Plan is insolvent within the meaning of such term as used in
Section 4245 of ERISA.

      "Insolvent" shall mean being in a condition of Insolvency.

      "Intellectual   Property"  shall  mean,   collectively,   all  Copyrights,
Copyright Licenses, Patents, Patent Licenses, Trademarks and Trademark Licenses.

      "Interest  Payment Date" shall mean (a) as to any Alternate Base Rate Loan
or Swingline  Loan,  the last  Business Day of each March,  June,  September and
December during the term of this Credit Agreement and on the applicable Maturity
Date, (b) as to any LIBOR Rate Loan

                                       12
<PAGE>

having an  Interest  Period of three  (3)  months or less,  the last day of such
Interest Period,  (c) as to any LIBOR Rate Loan having an Interest Period longer
than three (3) months, (i) each three (3) month anniversary  following the first
day of such Interest  Period and (ii) the last day of such  Interest  Period and
(d) as to any Loan  which is the  subject  of a  mandatory  prepayment  required
pursuant to Section 2.7(b) hereof, the date of such prepayment.

      "Interest Period" shall mean, with respect to any LIBOR Rate Loan,

            (i)  initially,  the  period  commencing  on the  Borrowing  Date or
      conversion  date, as the case may be, with respect to such LIBOR Rate Loan
      and ending one, two,  three or six (6) months  thereafter,  as selected by
      the Borrower in the Notice of Borrowing or Notice of  Conversion/Extension
      given with respect thereto; and

            (ii)  thereafter,  each  period  commencing  on the  last day of the
      immediately  preceding  Interest Period applicable to such LIBOR Rate Loan
      and ending one, two,  three or six (6) months  thereafter,  as selected by
      the Borrower by irrevocable  notice to the  Administrative  Agent not less
      than three (3)  Business  Days  prior to the last day of the then  current
      Interest Period with respect thereto;

                  provided  that the  foregoing  provisions  are  subject to the
                  following:

                  (A) if any  Interest  Period  pertaining  to a LIBOR Rate Loan
            would  otherwise  end on a day  that  is not a  Business  Day,  such
            Interest  Period shall be extended to the next  succeeding  Business
            Day  unless  the  result of such  extension  would be to carry  such
            Interest  Period  into  another  calendar  month in which event such
            Interest Period shall end on the immediately preceding Business Day;

                  (B) any Interest  Period  pertaining to a LIBOR Rate Loan that
            begins on the last Business Day of a calendar month (or on a day for
            which  there is no  numerically  corresponding  day in the  calendar
            month  at the end of such  Interest  Period)  shall  end on the last
            Business Day of the relevant calendar month;

                  (C) if the  Borrower  shall  fail to give  notice as  provided
            above,  the Borrower  shall be deemed to have  selected an Alternate
            Base Rate Loan to replace the affected LIBOR Rate Loan;

                  (D) any  Interest  Period in  respect  of any Loan that  would
            otherwise  extend beyond the  applicable  Maturity Date shall end on
            such  Maturity  Date,  and further with regard to the Term Loan,  no
            Interest  Period  shall  extend  beyond any  principal  amortization
            payment  date  unless the  portion of such Term Loan  consisting  of
            Alternate  Base Rate Loans  together  with the  portion of such Term
            Loan consisting of LIBOR Rate Loans with Interest  Periods  expiring
            prior to or concurrently  with the date such principal  amortization
            payment  date  is due,  is at  least  equal  to the  amount  of such
            principal amortization payment due on such date; and

                                       13
<PAGE>

                  (E) no more than five (5) LIBOR Rate Loans may be in effect at
            any time; provided that, for purposes hereof,  LIBOR Rate Loans with
            different  Interest  Periods shall be  considered as separate  LIBOR
            Rate  Loans,  even if they shall begin on the same date and have the
            same duration, although borrowings,  extensions and conversions may,
            in accordance with the provisions  hereof, be combined at the end of
            existing Interest Periods to constitute a new LIBOR Rate Loan with a
            single Interest Period.

      "Investment" shall mean all investments made directly or indirectly in, to
or from any  Person,  whether  in cash or by  acquisition  of shares of  Capital
Stock, property,  assets,  indebtedness or other obligations or securities or by
loan, advance, capital contribution or otherwise.

      "Issuing Lender" shall mean Wachovia and any successor in such capacity.

      "Issuing Lender Fees" shall have the meaning set forth in Section 2.5(c).

      "Joinder  Agreement" shall mean a Joinder  Agreement  substantially in the
form of Schedule 5.10,  executed and delivered by an Additional  Credit Party in
accordance with the provisions of Section 5.10.

      "Lender"  shall have the meaning set forth in the first  paragraph of this
Credit Agreement and shall include the Issuing Lender and the Swingline Lender.

      "Lender  Commitment  Letter" shall mean,  with respect to any Lender,  the
letter (or other  correspondence) to such Lender from the  Administrative  Agent
notifying such Lender of its LOC  Commitment,  Revolving  Commitment  Percentage
and/or Term Loan Commitment Percentage.

      "Letters of Credit"  shall mean any letter of credit issued by the Issuing
Lender  pursuant to the terms hereof,  as such letters of credit may be amended,
modified, extended, renewed or replaced from time to time.

      "Letter of Credit Fee" shall have the meaning set forth in Section 2.5(b).

      "Leverage  Ratio"  shall  mean,  with  respect  to the  Borrower  and  its
Subsidiaries on a consolidated  basis for the twelve-month  period ending on the
last day of any fiscal quarter of the Borrower,  the ratio of (a) Funded Debt of
the  Borrower  and  its  Subsidiaries  on the  last  day of such  period  to (b)
Consolidated EBITDA for such period.

      "LIBOR"  shall  mean,  for any  LIBOR  Rate Loan for any  Interest  Period
therefor,  the rate per annum  (rounded  upwards,  if necessary,  to the nearest
1/100 of 1%)  appearing  on Telerate  Page 3750 (or any  successor  page) as the
London  interbank  offered rate for deposits in Dollars at  approximately  11:00
A.M. (London time) two (2) Business Days prior to the first day of such Interest
Period for a term  comparable  to such Interest  Period.  If for any reason such
rate is not available,  the term "LIBOR" shall mean, for any LIBOR Rate Loan for
any Interest Period therefor,

                                       14
<PAGE>

the rate per annum (rounded upwards,  if necessary,  to the nearest 1/100 of 1%)
appearing on Reuters Screen LIBO Page as the London  interbank  offered rate for
deposits in Dollars at  approximately  11:00 A.M. (London time) two (2) Business
Days prior to the first day of such  Interest  Period for a term  comparable  to
such Interest Period;  provided,  however, if more than one rate is specified on
Reuters Screen LIBO Page, the  applicable  rate shall be the arithmetic  mean of
all such rates (rounded upwards, if necessary,  to the nearest 1/100 of 1%). If,
for any reason, neither of such rates is available,  then "LIBOR" shall mean the
rate per annum at which, as determined by the Administrative  Agent,  Dollars in
an amount  comparable  to the Loans then  requested are being offered to leading
banks at  approximately  11:00 A.M.  London time, two (2) Business Days prior to
the commencement of the applicable Interest Period for settlement in immediately
available  funds by leading  banks in the London  interbank  market for a period
equal to the Interest Period selected.

      "LIBOR Lending  Office" shall mean,  initially,  the office of each Lender
designated as such Lender's LIBOR Lending Office in such Lender's Administrative
Details Form;  and  thereafter,  such other office of such Lender as such Lender
may from time to time  specify to the  Administrative  Agent and the Borrower as
the office of such Lender at which the LIBOR Rate Loans of such Lender are to be
made.

      "LIBOR Rate" shall mean a rate per annum (rounded  upwards,  if necessary,
to the  next  higher  1/100th  of 1%)  determined  by the  Administrative  Agent
pursuant to the following formula:

                                                LIBOR
                  LIBOR Rate = ------------------------------------
                               1.00 - Eurodollar Reserve Percentage

      "LIBOR  Rate Loan"  shall mean Loans the rate of  interest  applicable  to
which is based on the LIBOR Rate.

      "Lien" shall mean any mortgage, pledge, hypothecation, assignment, deposit
arrangement,  encumbrance,  lien (statutory or other),  charge or other security
interest or any preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including, without limitation, any
conditional sale or other title retention agreement and any Capital Lease having
substantially the same economic effect as any of the foregoing).

      "Loan"  shall mean a  Revolving  Loan,  the Term Loan,  and/or a Swingline
Loan, as appropriate.

      "LOC Commitment"  shall mean the commitment of the Issuing Lender to issue
Letters of Credit and with respect to each Lender, the commitment of such Lender
to purchase participation interests in the Letters of Credit up to such Lender's
LOC Commitment as specified in the Lender Commitment  Letter, as such amount may
be reduced from time to time in accordance with the provisions hereof.

      "LOC Committed Amount" shall mean,  collectively,  the aggregate amount of
all of the LOC Commitments of the Lenders to issue and participate in Letters of
Credit as referenced in

                                       15
<PAGE>

Section 2.2 and,  individually,  the amount of each  Lender's LOC  Commitment as
specified  in  its  Lender  Commitment  Letter  or in  the  Commitment  Transfer
Supplement.

      "LOC  Documents"  shall mean,  with respect to any Letter of Credit,  such
Letter of Credit, any amendments thereto,  any documents delivered in connection
therewith, any application therefor, and any agreements, instruments, guarantees
or other  documents  (whether  general in application or applicable only to such
Letter of Credit)  governing or providing for (i) the rights and  obligations of
the parties concerned or (ii) any collateral security for such obligations.

      "LOC  Obligations"  shall  mean,  at any time,  the sum of (i) the maximum
amount  which is, or at any time  thereafter  may become,  available to be drawn
under  Letters  of  Credit  then  outstanding,   assuming  compliance  with  all
requirements  for  drawings  referred to in such Letters of Credit plus (ii) the
aggregate  amount of all drawings under Letters of Credit honored by the Issuing
Lender but not theretofore reimbursed.

      "Mandatory  LOC  Borrowing"  shall have the  meaning  set forth in Section
2.3(e).

      "Mandatory  Swingline  Borrowing"  shall  have the  meaning  set  forth in
Section 2.4(b)(ii).

      "Material  Adverse Effect" shall mean a material adverse effect on (a) the
business, operations,  property, condition (financial or otherwise) or prospects
of the  Borrower  or of the Credit  Parties  and their  Subsidiaries  taken as a
whole,  (b)  the  ability  of the  Borrower  or any  Guarantor  to  perform  its
obligations,  when such  obligations  are required to be  performed,  under this
Credit  Agreement,  any of the Notes or any  other  Credit  Document  or (c) the
validity or enforceability of this Credit Agreement,  any of the Notes or any of
the other Credit Documents or the rights or remedies of the Administrative Agent
or the Lenders hereunder or thereunder.

      "Material Contract" shall mean any contract or other arrangement,  whether
written or oral, to which any Credit Party or any of its Subsidiaries is a party
as to which the breach, nonperformance,  cancellation or failure to renew by any
party thereto could reasonably be expected to have a Material Adverse Effect.

      "Materials of Environmental  Concern" shall mean 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  Law,  including,  without  limitation,  asbestos,
polychlorinated biphenyls and urea-formaldehyde insulation.

      "Maturity Date" shall mean the Revolving  Commitment  Termination  Date or
the Term Loan Maturity Date, as applicable.

      "Medicaid"  shall mean that  entitlement  program  under  Title XIX of the
Social  Security  Act  that  provides  federal  grants  to  states  for  medical
assistance based on specific eligibility criteria.

      "Medicaid  Certification"  shall mean  certification  by a state agency or
other such entity administering the Medicaid program that a health care provider
or supplier is in compliance with

                                       16
<PAGE>

all the conditions of participation set forth in the Medicaid Regulations.

      "Medicaid Provider Agreement" shall mean an agreement entered into between
a state agency or other such entity  administering  the  Medicaid  program and a
health  care  provider  or  supplier  under  which the health  care  provider or
supplier agrees to provide services for Medicaid patients in accordance with the
terms of the agreement and Medicaid Regulations.

      "Medicaid Regulations" shall mean, collectively,  (i) all federal statutes
(whether  set  forth in  Title  XIX of the  Social  Security  Act or  elsewhere)
affecting the medical assistance program  established by Title XIX of the Social
Security Act and any statutes succeeding thereto; (ii) all applicable provisions
of all  federal  rules,  regulations,  manuals  and  orders of all  Governmental
Authorities promulgated pursuant to or in connection with the statutes described
in clause  (i) above and all  federal  administrative,  reimbursement  and other
guidelines of all Governmental  Authorities  having the force of law promulgated
pursuant to or in  connection  with the statutes  described in clause (i) above;
(iii) all state statutes and plans for medical  assistance enacted in connection
with the statutes and  provisions  described in clauses (i) and (ii) above;  and
(iv) all applicable provisions of all rules, regulations,  manuals and orders of
all Governmental  Authorities  promulgated pursuant to or in connection with the
statutes  described  in  clause  (iii)  above  and  all  state   administrative,
reimbursement  and other guidelines of all Governmental  Authorities  having the
force  of  law  promulgated  pursuant  to or in  connection  with  the  statutes
described in clause (ii) above, in each case as may be amended,  supplemented or
otherwise modified from time to time.

      "Medical Reimbursement Programs" shall mean Medicare, Medicaid and CHAMPUS
programs and any other healthcare program operated by or financed in whole or in
part by any foreign, domestic,  federal, state or local government and any other
non-government funded third party payor programs.

      "Medicare  Certification"  shall  mean  certification  by CMS or an entity
under  contract  with  CMS that the  health  care  provider  or  supplier  is in
compliance with all of the conditions of participation set forth in the Medicare
Regulations.

      "Medicare Provider Agreement" shall mean an agreement entered into between
CMS or other such entity  administering  the Medicare  program on behalf of CMS,
and a health care  provider or supplier  under which the health care provider or
supplier agrees to provide services for Medicare patients in accordance with the
terms of the agreement and Medicare Regulations.

      "Medicare" shall mean that government-sponsored  entitlement program under
Title XVIII of the Social  Security  Act that  provides  for a health  insurance
system for eligible elderly and disabled individuals.

      "Medicare  Regulations"  shall mean,  collectively,  all Federal  statutes
(whether  set forth in Title  XVIII of the  Social  Security  Act or  elsewhere)
affecting the health insurance program for the aged and disabled  established by
Title XVIII of the Social  Security  Act and any  statutes  succeeding  thereto;
together with all applicable provisions of all rules,  regulations,  manuals and
orders and  administrative,  reimbursement and other guidelines having the force
of law of all

                                       17
<PAGE>

Governmental  Authorities  (including,  without  limitation,  the United  States
Department  of  Health  and  Human  Services  ("HHS"),  CMS,  the  Office of the
Inspector General for HHS (the "OIG"), or any person succeeding to the functions
of any of the foregoing)  promulgated  pursuant to or in connection  with any of
the foregoing  having the force of law, as each may be amended,  supplemented or
otherwise modified from time to time.

      "Moody's" shall mean Moody's Investors Service, Inc.

      "Mortgage  Instrument"  shall mean any mortgage,  deed of trust or deed to
secure debt executed by a Credit Party in favor of the Administrative Agent, for
the benefit of the Lenders,  pursuant to the terms of Section 4.1(e)(i), 5.10 or
5.12, as the same may be amended,  modified,  restated or supplemented from time
to time.

      "Mortgage Policy" shall mean, with respect to any Mortgage Instrument,  an
ALTA mortgagee  title insurance  policy issued by a title company  acceptable to
the  Administrative   Agent  in  such  amount  as  reasonably  approved  by  the
Administrative  Agent,  assuring  the  Administrative  Agent that such  Mortgage
Instrument  creates a valid and enforceable  first priority mortgage lien on the
applicable  Mortgaged  Property,  free and clear of all defects and encumbrances
except  Permitted  Liens,  which Mortgage  Policy shall be in form and substance
reasonably  satisfactory  to the  Administrative  Agent  and shall  provide  for
affirmative  insurance  and such  reinsurance  as the  Administrative  Agent may
reasonably request.

      "Mortgaged  Property"  shall mean any owned or leased  real  property of a
Credit  Party  with  respect  to which  such  Credit  Party  executes a Mortgage
Instrument in favor of the Administrative Agent.

      "Multiemployer  Plan" shall mean a Plan which is a  multiemployer  plan as
defined in Section 4001(a)(3) of ERISA.

      "Net Cash Proceeds" shall mean the aggregate cash proceeds received by any
Credit  Party or any  Subsidiary  in  respect of any Asset  Disposition,  Equity
Issuance or Debt  Issuance,  net of (a) direct costs paid or payable as a result
thereof  (including,  without  limitation,   reasonable  legal,  accounting  and
investment banking fees, and sales commissions) and (b) taxes paid or payable as
a result  thereof;  it being  understood that "Net Cash Proceeds" shall include,
without limitation,  any cash received upon the sale or other disposition of any
non-cash consideration received by any Credit Party or any Subsidiary in respect
of any Asset Disposition, Equity Issuance or Debt Issuance.

      "Note" or "Notes"  shall mean the Revolving  Notes,  the Term Notes and/or
the Swingline Note, collectively, separately or individually, as appropriate.

      "Notice of Borrowing"  shall mean a request for a Revolving Loan borrowing
pursuant to Section 2.1(b)(i) or a Swingline Loan borrowing  pursuant to Section
2.4(b)(i),  as  appropriate,  in  substantially  the form  attached  as Schedule
2.1(b)(i).

                                       18
<PAGE>

      "Notice  of  Conversion/Extension"   shall  mean  the  written  notice  of
conversion  of a LIBOR Rate Loan to an Alternate  Base Rate Loan or an Alternate
Base Rate Loan to a LIBOR Rate Loan,  or extension of a LIBOR Rate Loan, in each
case substantially in the form of Schedule 2.10.

      "Obligations" shall mean, collectively, Loans and LOC Obligations.

      "Operating  Lease"  shall  mean,  as  applied  to any  Person,  any  lease
(including,  without limitation, leases which may be terminated by the lessee at
any time) of any  property  (whether  real,  personal  or mixed)  which is not a
Capital Lease other than any such lease in which that Person is the lessor.

      "Participant" shall have the meaning set forth in Section 9.6(b).

      "Participation  Interest" shall mean the purchase by a Revolving Lender of
a participation  interest in Letters of Credit as provided in Section 2.3 and in
Swingline Loans as provided in Section 2.4.

      "Participant Register" shall have the meaning set forth in Section 9.6(d).

      "Patent  License"  shall  mean all  agreements,  whether  written or oral,
providing for the grant by or to a Credit Party of any right to manufacture, use
or sell any invention covered by a Patent,  including,  without limitation,  any
thereof referred to in Schedule 3.16.

      "Patents"  shall mean (a) all letters  patent of the United  States or any
other  country and all  reissues  and  extensions  thereof,  including,  without
limitation,  any thereof  referred to in Schedule 3.16, and (b) all applications
for letters  patent of the United States or any other country and all divisions,
continuations and continuations-in-part  thereof, including, without limitation,
any thereof referred to in Schedule 3.16.

      "PBGC" shall mean the Pension  Benefit  Guaranty  Corporation  established
pursuant to Subtitle A of Title IV of ERISA.

      "Permitted Acquisition" shall mean an acquisition or any series of related
acquisitions by a Credit Party of (a) all or substantially  all of the assets or
a majority of the  outstanding  Voting  Stock or economic  interests of a Person
that is  incorporated,  formed  or  organized  in the  United  States or (b) any
division,  line  of  business  or  other  business  unit  of a  Person  that  is
incorporated,  formed or  organized  in the United  States  (such Person or such
division,  line of  business  or other  business  unit of such  Person  shall be
referred to herein as the "Target"), in each case that is a type of business (or
assets  used in a type of  business)  permitted  to be  engaged in by the Credit
Parties and their Subsidiaries pursuant to Section 6.3 hereof, so long as (i) no
Default or Event of Default  shall then exist or would exist after giving effect
thereto,   (ii)  the  Credit   Parties  shall   demonstrate  to  the  reasonable
satisfaction of the  Administrative  Agent and the Required  Lenders that, after
giving effect to the acquisition on a pro forma basis, the Credit Parties are in
compliance with each of the financial  covenants set forth in Section 5.9, (iii)
the  Administrative  Agent,  on behalf of the Lenders,  shall have  received (or
shall receive in

                                       19
<PAGE>

connection  with the closing of such  acquisition)  a first  priority  perfected
security interest in all property (including,  without limitation, Capital Stock
and real  estate)  acquired  with respect to the Target in  accordance  with the
terms of Sections 5.10 and 5.12 and the Target, if a Person, shall have executed
a Joinder  Agreement  in  accordance  with the terms of Section  5.10,  (iv) the
Administrative  Agent and the Lenders shall have  received (A) a description  of
the material terms of such acquisition, (B) audited financial statements (or, if
unavailable, management-prepared financial statements) of the Target for its two
(2) most recent fiscal years and for any fiscal quarters ended within the fiscal
year to date and (C) consolidated  projected  income  statements of the Borrower
and its consolidated  Subsidiaries  (giving effect to such acquisition),  all in
form and substance reasonably  satisfactory to the Administrative Agent, (v) the
Target shall have earnings before interest, taxes, depreciation and amortization
for the four (4)  fiscal  quarter  period  prior to the  acquisition  date in an
amount  greater  than  $0,  (vi)  such  acquisition  shall  not  be a  "hostile"
acquisition  and shall  have been  approved  by the  Board of  Directors  and/or
shareholders of the applicable  Credit Party and the Target,  (vii) the Borrower
shall have  satisfied the  requirements  set forth in Sections  5.14(a) and (b),
(viii)  after  giving  effect  to such  acquisition,  there  shall  be at  least
$10,000,000 of Accessible  Borrowing  Availability under the Revolving Committed
Amount and (ix) the aggregate consideration (including without limitation equity
consideration,   earn  outs  or   deferred   compensation   or   non-competition
arrangements and the amount of Indebtedness and other liabilities assumed by the
Credit  Parties  and their  Subsidiaries)  paid by the Credit  Parties and their
Subsidiaries (A) in connection with any individual  acquisition shall not exceed
$20,000,000 and (B) for all  acquisitions  made during any  twelve-month  period
shall not exceed $30,000,000.

      "Permitted Investments" shall mean:

            (i) cash and Cash Equivalents;

            (ii) receivables owing to the Borrower or any of its Subsidiaries or
      any  receivables  and  advances  to  suppliers,  in each case if  created,
      acquired  or made in the  ordinary  course  of  business  and  payable  or
      dischargeable in accordance with customary trade terms;

            (iii)  Investments  in and  loans by any  Credit  Party to any other
      Credit Party;

            (iv) loans and  advances  to  employees  in the  ordinary  course of
      business  in an  aggregate  amount  not to exceed  $1,000,000  at any time
      outstanding and not in violation of the  Sarbanes-Oxley Act of 2002 or any
      other Requirement of Law;

            (v) Investments  (including debt obligations) received in connection
      with the  bankruptcy or  reorganization  of suppliers and customers and in
      settlement  of  delinquent   obligations  of,  and  other  disputes  with,
      customers and suppliers arising in the ordinary course of business;

            (vi)  Investments,  acquisitions  or  transactions  permitted  under
      Section 6.4(b);

                                       20
<PAGE>

            (vii)  Investments  existing as of the Closing Date, as set forth on
      Schedule 1.1-2 and any  refinancing or replacement of any such  Investment
      in  a  principal  or  initial  amount  not  to  exceed  the  principal  or
      outstanding  amount of such Investment (plus accrued interest  thereon) at
      the  time  of  such   refinancing  or  replacement;   provided  that  such
      refinancing or replacement  Investment  shall (A) have  substantially  the
      same  tenor  and be  substantially  the  same  type of  Investment  as the
      Investment  refinanced or replaced or other  Permitted  Investment and (B)
      have the  same or  higher  rating  or  credit  quality  as the  Investment
      refinanced or replaced or other Permitted Investment;

            (viii) Permitted Acquisitions; and

            (ix)  additional  loan advances  and/or  Investments of a nature not
      contemplated by the foregoing  clauses  hereof,  provided that such loans,
      advances  and/or  Investments  made pursuant to this clause (ix) shall not
      exceed an aggregate amount of $5,000,000.

      "Permitted Liens" shall mean:

            (i) Liens created by or otherwise  existing,  under or in connection
      with this Credit  Agreement or the other Credit  Documents in favor of the
      Lenders;

            (ii) Liens in favor of a Hedging  Agreement  Provider in  connection
      with a  Secured  Hedging  Agreement,  but only if such  Hedging  Agreement
      Provider and the  Administrative  Agent,  on behalf of the Lenders,  shall
      share pari passu in the collateral subject to such Liens;

            (iii) Liens securing  purchase money  Indebtedness and Capital Lease
      Obligations to the extent permitted under Section 6.1(c);  provided,  that
      (A) any such Lien  attaches to such property  concurrently  with or within
      thirty (30) days after the acquisition  thereof and (B) such Lien attaches
      solely to the property so acquired in such transaction;

            (iv) Liens for  taxes,  assessments,  charges or other  governmental
      levies  not yet due or as to which  the  period  of grace  (not to  exceed
      ninety (90) days),  if any,  related  thereto has not expired or which are
      being  contested in good faith by appropriate  proceedings,  provided that
      adequate  reserves with respect thereto are maintained on the books of the
      any Credit Party or its  Subsidiaries,  as the case may be, in  conformity
      with GAAP;

            (v)    carriers',     warehousemen's,     landlord's,    mechanics',
      materialmen's,  repairmen's  or other like Liens  arising in the  ordinary
      course of  business  which are not overdue for a period of more than sixty
      (60)  days or which  are  being  contested  in good  faith by  appropriate
      proceedings;

            (vi) pledges or deposits in connection  with workers'  compensation,
      unemployment  insurance and other social security legislation and deposits
      securing liability to insurance carriers under insurance or self-insurance
      arrangements incurred in the ordinary course of business;

                                       21
<PAGE>

            (vii) deposits to secure the  performance of bids,  trade  contracts
      (other than for borrowed money), leases, statutory obligations, surety and
      appeal bonds,  performance  bonds and other  obligations  of a like nature
      incurred in the ordinary course of business;

            (viii)  any  extension,   renewal  or  replacement   (or  successive
      extensions,  renewals or  replacements),  in whole or in part, of any Lien
      referred  to in the  foregoing  clauses;  provided  that  such  extension,
      renewal  or  replacement  Lien  shall be  limited  to all or a part of the
      property which secured the Lien so extended, renewed or replaced;

            (ix) Liens  existing on the  Closing  Date and set forth on Schedule
      1.1-3;  provided  that (a) no such Lien shall at any time be  extended  to
      cover property or assets other than the property or assets subject thereto
      on the  Closing  Date and (b) the  principal  amount  of the  Indebtedness
      secured  by  such  Liens  shall  not be  extended,  renewed,  refunded  or
      refinanced;

            (x)  easements,   rights-of-way,   restrictions   (including  zoning
      restrictions),  minor defects or irregularities in title and other similar
      charges or encumbrances not, in any material respect, impairing the use of
      the encumbered Property for its intended purposes; and

            (xi) Liens on equipment  arising from  precautionary  UCC  financing
      statements relating to the lease of such equipment to the extent permitted
      by this Credit Agreement.

      "Person"  shall  mean an  individual,  partnership,  corporation,  limited
liability company,  business trust, joint stock company,  trust,  unincorporated
association,  joint venture,  Governmental Authority or other entity of whatever
nature.

      "Plan" shall mean, at any particular time, any employee benefit plan which
is covered  by Title IV of ERISA and in  respect of which any Credit  Party or a
Commonly  Controlled  Entity is (or, if such plan were  terminated at such time,
would under  Section 4069 of ERISA be deemed to be) an  "employer" as defined in
Section 3(5) of ERISA.

      "Pledge  Agreement"  shall mean the Amended and Restated Pledge  Agreement
dated as of the  Closing  Date  executed  by the Credit  Parties in favor of the
Administrative  Agent,  as amended,  modified,  restated,  amended and restated,
extended, replaced, increased or supplemented from time to time.

      "Prime  Rate"  shall  have the  meaning  set  forth in the  definition  of
Alternate Base Rate.

      "Pro Forma Basis" shall mean, with respect to any  transaction,  that such
transaction  shall  be  deemed  to  have  occurred  as of the  first  day of the
twelve-month  period ending as of the most recent quarter end preceding the date
of such transaction.

      "Properties" shall have the meaning set forth in Section 3.10(a).

                                       22
<PAGE>

      "Purchasing Lender" shall have the meaning set forth in Section 9.6(c).

      "Recovery  Event" shall mean the receipt by any Credit Party or any of its
Subsidiaries  of any cash insurance  proceeds or  condemnation  award payable by
reason of theft, loss, physical  destruction or damage,  taking or similar event
with respect to any of their property or assets.

      "Register" shall have the meaning set forth in Section 9.6(d).

      "Reimbursement  Obligation"  shall mean the  obligation of the Borrower to
reimburse the Issuing Lender  pursuant to Section 2.3(d) for amounts drawn under
Letters of Credit.

      "Reorganization"  shall mean, with respect to any Multiemployer  Plan, the
condition that such Plan is in reorganization within the meaning of such term as
used in Section 4241 of ERISA.

      "Reportable  Event"  shall  mean any of the  events  set forth in  Section
4043(c)  of ERISA,  other than those  events as to which the  thirty-day  notice
period is waived under PBGC Reg. ss.4043.

      "Required  Lenders"  shall  mean,  at any  time,  Lenders  holding  in the
aggregate  a  majority  of (i)  the  Commitments  (and  Participation  Interests
therein) or (ii) if the Commitments have been terminated,  the outstanding Loans
and  Participation  Interests  (including  the  Participation  Interests  of the
Issuing Lender in any Letters of Credit and of the Swingline Lender in Swingline
Loans)  provided,  however,  that if any Lender shall be a Defaulting  Lender at
such time,  then there  shall be  excluded  from the  determination  of Required
Lenders,   Obligations  (including   Participation   Interests)  owing  to  such
Defaulting Lender and such Defaulting Lender's Commitments, or after termination
of the  Commitments,  the  principal  balance of the  Obligations  owing to such
Defaulting Lender.

      "Requirement  of Law" shall mean,  as to any Person,  the  certificate  or
articles of  incorporation  and  by-laws or other  organizational  or  governing
documents  of  such  Person,  and  each  law,  treaty,  rule  or  regulation  or
determination of an arbitrator or a court or other  Governmental  Authority,  in
each case applicable to or binding upon such Person or any of its property or to
which such Person or any of its property is subject.

      "Responsible  Officer"  shall  mean,  as to any Credit  Party,  any of the
President,  the Chief  Executive  Officer,  the Chief  Financial  Officer or any
Vice-President of such Credit Party.

      "Restricted  Payments" shall mean (a) any dividend or other  distribution,
direct or  indirect,  on account of any shares of any class of Capital  Stock of
any Credit Party or any of their Subsidiaries, now or hereafter outstanding, (b)
any redemption,  retirement,  sinking fund or similar payment, purchase or other
acquisition for value, direct or indirect, of any shares of any class of Capital
Stock  of any  Credit  Party  or any of  their  Subsidiaries,  now or  hereafter
outstanding,  (c) any payment made to retire, or to obtain the surrender of, any
outstanding warrants,  options or other rights to acquire shares of any class of
Capital Stock of any Credit Party or any of their Subsidiaries, now or hereafter
outstanding, (d) any payment with respect to

                                       23
<PAGE>

any earnout obligation,  (e) any payment or prepayment of principal of, premium,
if any, or interest on, redemption,  purchase,  retirement,  defeasance, sinking
fund or similar  payment with respect to, any  Subordinated  Indebtedness or (f)
the payment by any Credit Party or any of their  Subsidiaries of any management,
advisory or consulting  fee to any Person or of any salary,  bonus or other form
of  compensation  to any Person who is  directly  or  indirectly  a  significant
partner,  shareholder,  owner or executive  officer of any such  Person,  to the
extent such salary,  bonus or other form of  compensation is not included in the
corporate overhead of such Credit Party or such Subsidiary.

      "Revolving  Commitment" shall mean, with respect to each Revolving Lender,
the commitment of such Revolving  Lender to make Revolving Loans in an aggregate
principal amount at any time outstanding up to an amount equal to such Revolving
Lender's Revolving Commitment Percentage of the Revolving Committed Amount.

      "Revolving  Commitment  Percentage" shall mean, for each Revolving Lender,
the percentage  identified as its Revolving Commitment  Percentage in its Lender
Commitment  Letter or in the Commitment  Transfer  Supplement  pursuant to which
such Lender became a Lender  hereunder,  as such  percentage  may be modified in
connection with any assignment made in accordance with the provisions of Section
9.6(c).

      "Revolving Commitment Termination Date" shall mean November 14, 2010

      "Revolving  Committed  Amount" shall have the meaning set forth in Section
2.1(a).

      "Revolving  Lender" shall mean, as of any date of determination,  a Lender
holding a Revolving Commitment on such date.

      "Revolving Loans" shall have the meaning set forth in Section 2.1.

      "Revolving  Note" or "Revolving  Notes" shall mean the promissory notes of
the Borrower in favor of each of the Revolving Lenders  evidencing the Revolving
Loans provided  pursuant to Section  2.1(e),  individually or  collectively,  as
appropriate,  as such  promissory  notes  may be  amended,  modified,  restated,
amended and restated, extended, replaced, increased or supplemented from time to
time.

      "S&P" shall mean Standard & Poor's Ratings Group, a division of The McGraw
Hill, Inc.

      "Sanctioned  Country" shall mean a country subject to a sanctions  program
identified    on   the   list    maintained    by   OFAC   and    available   at
http://www.treas.gov/offices/enforcement   /ofac/sanctions/index.html,   or   as
otherwise published form time to time.

      "Sanctioned  Person"  shall  mean  (a) a  Person  named  on  the  list  of
"Specially   Designated  Nationals  and  Blocked  Persons"  maintained  by  OFAC
available at http://www.treas.gov/offices/enforcement/ofac/sdn/index.html, or as
otherwise published from time to time, or (b) (i) an agency of the government of
a Sanctioned Country, (ii) an organization

                                       24
<PAGE>

controlled by a Sanctioned  Country,  or (iii) a person resident in a Sanctioned
Country, to the extent subject to a sanctions program administered by OFAC.

      "Scheduled   Funded  Debt  Payments"   shall  mean,  as  of  any  date  of
determination  for the Borrower and its  Subsidiaries,  the sum of all scheduled
payments of principal  on Funded Debt for the  applicable  period  ending on the
date of  determination  (including  the  principal  component of payments due on
Capital   Leases   during  the   applicable   period   ending  on  the  date  of
determination).

      "SEC" shall mean the Securities  and Exchange  Commission or any successor
Governmental Authority.

      "SEC Letter" shall mean that certain letter, dated July 12, 2004, from the
SEC  to  the  Borrower  relating  to  the  Borrower's   acquisition  of  Bioglan
Pharmaceuticals, Inc.

      "SEC Rule 2a-7" shall have the meaning set forth in the definition of Cash
Equivalents.

      "Secured  Hedging  Agreement" shall mean any Hedging  Agreement  between a
Credit  Party  and  a  Hedging  Agreement   Provider,   as  amended,   modified,
supplemented, extended or restated from time to time.

      "Securities  Exchange Act" shall mean the Securities Exchange Act of 1934,
together  with any  amendment  thereto or  replacement  thereof and any rules or
regulations promulgated thereunder.

      "Security   Agreement"  shall  mean  the  Amended  and  Restated  Security
Agreement  dated as of the Closing Date executed by the Credit  Parties in favor
of the  Administrative  Agent,  as  amended,  modified,  restated,  amended  and
restated, extended, replaced, increased or supplemented from time to time.

      "Security  Documents"  shall  mean  the  Security  Agreement,  the  Pledge
Agreement and such other documents executed and delivered in connection with the
attachment and perfection of the  Administrative  Agent's security interests and
liens  arising  thereunder,   including,   without  limitation,   UCC  financing
statements, and patent, trademark and copyright filings.

      "Single  Employer  Plan" shall mean any Plan which is not a  Multiemployer
Plan.

      "Subordinated  Indebtedness" shall mean unsecured Indebtedness incurred by
any Credit Party on terms and conditions acceptable to the Administrative Agent,
which Indebtedness shall be specifically subordinated in right of payment to the
prior  payment  of the  Credit  Party  Obligations  on terms  acceptable  to the
Administrative Agent and the Required Lenders; provided that, in any event, such
Indebtedness  shall (a) mature at least 180 days after the Maturity Date and (b)
have covenants and defaults no more  restrictive than the covenants and defaults
hereunder.

                                       25
<PAGE>

      "Subsidiary"  shall mean, as to any Person,  a  corporation,  partnership,
limited  liability  company  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. Unless otherwise qualified, all
references to a "Subsidiary" or to "Subsidiaries" in this Credit Agreement shall
refer to a Subsidiary or Subsidiaries of the Borrower.

      "Swingline  Commitment"  shall mean the commitment of the Swingline Lender
to make Swingline Loans in an aggregate principal amount at any time outstanding
up to the  Swingline  Committed  Amount,  and the  commitment  of the  Revolving
Lenders to purchase  Participation  Interests in the Swingline Loans as provided
in Section  2.4(b)(ii),  as such  amounts  may be  reduced  from time to time in
accordance with the provisions hereof.

      "Swingline  Committed  Amount" shall have the meaning set forth in Section
2.4(a).

      "Swingline Lender" shall mean Wachovia and any successor in such capacity.

      "Swingline Loan" or "Swingline  Loans" shall have the meaning set forth in
Section 2.4(a).

      "Swingline  Note" shall mean the promissory  note of the Borrower in favor
of the Swingline  Lender  evidencing the Swingline  Loans  provided  pursuant to
Section  2.4(d),  as such promissory  note may be amended,  modified,  restated,
amended and restated, extended, replaced, increased or supplemented from time to
time.

      "Tax  Exempt  Certificate"  shall  have the  meaning  set forth in Section
2.18(b).

      "Taxes" shall have the meaning set forth in Section 2.18(a).

      "Term Loan" shall have the meaning set forth in Section 2.2(a).

      "Term Loan Commitment"  shall mean, with respect to each Term Loan Lender,
the  commitment of such Term Loan Lender to make its portion of the Term Loan in
a  principal  amount  equal to such Term  Loan  Lender's  Term  Loan  Commitment
Percentage of the Term Loan Committed Amount.

      "Term Loan  Commitment  Percentage"  shall mean, for any Term Loan Lender,
the percentage identified as its Term Loan Commitment Percentage as specified in
its Lender Commitment Letter or in the Commitment  Transfer  Supplement pursuant
to which  such  Lender  became a Lender  hereunder,  as such  percentage  may be
modified  in  connection  with  any  assignment  made  in  accordance  with  the
provisions of Section 9.6(c).

      "Term Loan  Committed  Amount" shall have the meaning set forth in Section
2.2(a).

                                       26
<PAGE>

      "Term Loan Lender" shall mean, as of any date of determination, any Lender
that holds a portion of the outstanding Term Loan on such date.

      "Term Loan Maturity Date" shall mean November 14, 2010.

      "Term Note" or "Term Notes" shall mean the promissory notes of Borrower in
favor of each of the Term Loan Lenders  evidencing  the portion of the Term Loan
provided   pursuant  to  Section  2.2(d),   individually  or  collectively,   as
appropriate,  as such  promissory  notes  may be  amended,  modified,  restated,
amended and restated, extended, replaced, increased or supplemented from time to
time.

      "Trademark License" shall mean any agreement,  written or oral,  providing
for the  grant  by or to a  Credit  Party  of any  right  to use any  Trademark,
including, without limitation, any thereof referred to in Schedule 3.16.

      "Trademarks" shall mean (a) all trademarks,  trade names, corporate names,
company  names,  business  names,  fictitious  business  names,  service  marks,
elements of package or trade dress of goods or services,  logos and other source
or business identifiers,  together with the goodwill associated  therewith,  now
existing or hereafter  adopted or acquired,  all  registrations  and  recordings
thereof,  and all  applications in connection  therewith,  whether in the United
States  Patent and  Trademark  Office or in any similar  office or agency of the
United  States,  any  State  thereof  or any  other  country  or  any  political
subdivision thereof, or otherwise,  including,  without limitation,  any thereof
referred to in Schedule 3.16, and (b) all renewals thereof,  including,  without
limitation, any thereof referred to in Schedule 3.16.

      "Tranche"  shall mean the  collective  reference to LIBOR Rate Loans whose
Interest  Periods  begin and end on the same day.  A Tranche  may  sometimes  be
referred to as a "LIBOR Tranche".

      "Transfer  Effective  Date"  shall  have  the  meaning  set  forth in each
Commitment Transfer Supplement.

      "Type" shall mean,  as to any Loan,  its nature as an Alternate  Base Rate
Loan or LIBOR Rate Loan, as the case may be.

      "UCC"  shall mean the  Uniform  Commercial  Code as in effect from time to
time in the State of New York.

      "Voting  Stock"  shall mean,  with  respect to any Person,  Capital  Stock
issued by such  Person the  holders of which are  ordinarily,  in the absence of
contingencies,  entitled  to vote for the  election  of  directors  (or  persons
performing similar  functions) of such Person,  even though the right so to vote
may be or have been suspended by the happening of such a contingency.

      "Wachovia"  shall mean Wachovia  Bank,  National  Association,  a national
banking association, together with its successors and/or assigns.

                                       27
<PAGE>

      "Works"  shall mean all works  which are subject to  copyright  protection
pursuant to Title 17 of the United States Code.

      Section 1.2 Other Definitional Provisions.

            (a) Unless otherwise  specified  therein,  all terms defined in this
      Credit Agreement shall have the defined meanings when used in the Notes or
      other  Credit  Documents  or any  certificate  or other  document  made or
      delivered pursuant hereto.

            (b) The  words  "hereof",  "herein"  and  "hereunder"  and  words of
      similar  import  when used in this  Credit  Agreement  shall refer to this
      Credit  Agreement as a whole and not to any  particular  provision of this
      Credit Agreement, and Section, subsection, Schedule and Exhibit references
      are to this Credit Agreement unless otherwise specified.

            (c) The  meanings  given to terms  defined  herein  shall be equally
      applicable to both the singular and plural forms of such terms.

      Section 1.3 Accounting Terms.

      Unless otherwise  specified herein, all accounting terms used herein shall
be interpreted,  all accounting  determinations hereunder shall be made, and all
financial  statements  required to be delivered  hereunder  shall be prepared in
accordance with GAAP applied on a basis  consistent with the most recent audited
consolidated  financial  statements  of the  Borrower  delivered to the Lenders;
provided that, if the Borrower notifies the Administrative  Agent that it wishes
to amend any  covenant in Section 5.9 to  eliminate  the effect of any change in
GAAP on the operation of such covenant (or if the Administrative  Agent notifies
the  Borrower  that the  Required  Lenders  wish to amend  Section  5.9 for such
purpose),  then the Borrower's compliance with such covenant shall be determined
on the basis of GAAP in effect  immediately  before the relevant  change in GAAP
became  effective,  until either such notice is  withdrawn  or such  covenant is
amended in a manner satisfactory to the Borrower and the Required Lenders.

      The Borrower shall deliver to the Administrative  Agent and each Lender at
the same time as the  delivery of any annual or quarterly  financial  statements
given in accordance  with the  provisions  of Section 5.1, (i) a description  in
reasonable  detail of any  material  change  in the  application  of  accounting
principles  employed in the preparation of such financial  statements from those
applied in the most recently preceding quarterly or annual financial  statements
as to which no objection  shall have been made in accordance with the provisions
above and (ii) a reasonable  estimate of the effect on the financial  statements
on account of such changes in application.

      Section 1.4 Time References.

      Unless otherwise specified, all references herein to times of day shall be
references to Eastern time (daylight or standard, as applicable).

                                       28
<PAGE>

                                   ARTICLE II

                           THE LOANS; AMOUNT AND TERMS

      Section 2.1 Revolving Loans.

            (a) Revolving Commitment.  During the Commitment Period,  subject to
      the terms and conditions hereof, each Revolving Lender severally,  but not
      jointly,  agrees to make revolving credit loans ("Revolving Loans") to the
      Borrower  from  time to time in an  aggregate  principal  amount  of up to
      THIRTY MILLION DOLLARS ($30,000,000) (as such aggregate maximum amount may
      be reduced from time to time as provided in Section  2.6,  the  "Revolving
      Committed  Amount")  for the  purposes  hereinafter  set forth;  provided,
      however,  that (i) with regard to each Revolving Lender individually,  the
      sum of such  Revolving  Lender's  Revolving  Commitment  Percentage of the
      aggregate  principal  amount  of  outstanding  Revolving  Loans  plus  the
      aggregate  principal  amount  of  outstanding  Swingline  Loans  plus  LOC
      Obligations shall not exceed such Revolving Lender's Revolving  Commitment
      and (ii) with regard to the Revolving Lenders collectively, the sum of the
      aggregate  principal  amount  of  outstanding  Revolving  Loans  plus  the
      aggregate  principal  amount  of  outstanding  Swingline  Loans  plus  LOC
      Obligations  shall not exceed the Revolving  Committed  Amount.  Revolving
      Loans may consist of Alternate  Base Rate Loans or LIBOR Rate Loans,  or a
      combination  thereof,  as the Borrower may request,  and may be repaid and
      reborrowed in accordance with the provisions  hereof;  provided,  however,
      Revolving  Loans  made  on the  Closing  Date or on any of the  three  (3)
      Business  Days  following  the Closing  Date may only consist of Alternate
      Base Rate Loans unless the Borrower delivers a funding indemnity letter to
      the  Administrative  Agent at least three (3)  Business  Days prior to the
      Closing Date.  LIBOR Rate Loans shall be made by each Revolving  Lender at
      its LIBOR  Lending  Office and  Alternate  Base Rate Loans at its Domestic
      Lending Office.

            (b) Revolving Loan Borrowings.

                  (i)  Notice  of  Borrowing.   The  Borrower  shall  request  a
            Revolving Loan borrowing by delivering a written Notice of Borrowing
            (or telephone notice promptly  confirmed in writing by delivery of a
            written Notice of Borrowing,  which delivery may be by facsimile) to
            the  Administrative  Agent not later than 11:00 A.M. on the Business
            Day  prior to the  date of the  requested  borrowing  in the case of
            Alternate  Base Rate Loans,  and on the third  Business Day prior to
            the date of the requested borrowing in the case of LIBOR Rate Loans.
            Each such Notice of Borrowing shall be irrevocable and shall specify
            (A)  that a  Revolving  Loan  is  requested,  (B)  the  date  of the
            requested  borrowing  (which  shall  be a  Business  Day),  (C)  the
            aggregate principal amount to be borrowed, (D) whether the borrowing
            shall be comprised of Alternate Base Rate Loans, LIBOR Rate Loans or
            a combination  thereof,  and if LIBOR Rate Loans are requested,  the
            Interest Period(s)  therefor.  If the Borrower shall fail to specify
            in any such Notice of Borrowing (I) an applicable Interest Period in
            the case of a LIBOR Rate Loan,

                                       29
<PAGE>

            then such  notice  shall be deemed to be a request  for an  Interest
            Period  of one  (1)  month,  or (II)  the  type  of  Revolving  Loan
            requested,  then such notice  shall be deemed to be a request for an
            Alternate Base Rate Loan hereunder.  The Administrative  Agent shall
            give notice to each Revolving  Lender  promptly upon receipt of each
            Notice of Borrowing,  the contents  thereof and each such  Revolving
            Lender's share thereof.

                  (ii)  Minimum  Amounts.  Each  Revolving  Loan  shall  be in a
            minimum aggregate amount of $1,000,000 and in integral  multiples of
            $500,000 in excess thereof (or the remaining amount of the Revolving
            Committed Amount, if less).

                  (iii) Advances.  Each Revolving Lender will make its Revolving
            Commitment  Percentage of each Revolving Loan borrowing available to
            the  Administrative  Agent for the  account of the  Borrower  at the
            office of the  Administrative  Agent specified in Section 9.2, or at
            such  other  office as the  Administrative  Agent may  designate  in
            writing, by 1:00 P.M. on the date specified in the applicable Notice
            of  Borrowing in Dollars and in funds  immediately  available to the
            Administrative  Agent. Such borrowing will then be made available to
            the Borrower by the Administrative Agent by crediting the account of
            the  Borrower on the books of such office with the  aggregate of the
            amounts made available to the Administrative  Agent by the Revolving
            Lenders and in like funds as received by the Administrative Agent.

            (c) Repayment.  The principal amount of all Revolving Loans shall be
      due and  payable in full on the  Revolving  Commitment  Termination  Date,
      unless accelerated sooner pursuant to Section 7.2.

            (d) Interest.  Subject to the  provisions of Section 2.9,  Revolving
      Loans shall bear interest as follows:

                  (i)  Alternate  Base  Rate  Loans.   During  such  periods  as
            Revolving  Loans shall be comprised  of  Alternate  Base Rate Loans,
            each such  Alternate  Base Rate Loan  shall bear  interest  at a per
            annum  rate  equal to the sum of the  Alternate  Base  Rate plus the
            Applicable Percentage; and

                  (ii) LIBOR Rate Loans.  During such periods as Revolving Loans
            shall be  comprised  of LIBOR Rate Loans,  each such LIBOR Rate Loan
            shall  bear  interest  at a per annum  rate  equal to the sum of the
            LIBOR Rate plus the Applicable Percentage.

            Interest  on  Revolving  Loans  shall be  payable in arrears on each
            Interest Payment Date.

            (e) Revolving Notes;  Covenant to Pay. The Borrower's  obligation to
      pay each Revolving  Lender's  Revolving Loans shall be evidenced by a duly
      executed  promissory  note of the  Borrower  to such  Revolving  Lender in
      substantially the form of

                                       30
<PAGE>

      Schedule  2.1(e).  The Borrower  covenants and agrees to pay the Revolving
      Loans in  accordance  with  the  terms of this  Credit  Agreement  and the
      Revolving Notes.

      Section 2.2 Term Loan.

            (a) Term  Loan.  Subject to the terms and  conditions  hereof and in
      reliance upon the  representations  and warranties set forth herein,  each
      Term Loan Lender severally agrees to make available to the Borrower on the
      Closing Date such Term Loan Lender's Term Loan Commitment  Percentage of a
      term loan in Dollars (the "Term Loan") in the aggregate  principal  amount
      of EIGHTY MILLION DOLLARS ($80,000,000) (the "Term Loan Committed Amount")
      for the  purposes  hereinafter  set  forth.  The Term Loan may  consist of
      Alternate Base Rate Loans or LIBOR Rate Loans,  or a combination  thereof,
      as Borrower may request;  provided  that on the Closing Date the Term Loan
      shall  bear  interest  at the  Alternate  Base Rate  unless  the  Borrower
      delivers a funding indemnity letter to the  Administrative  Agent at least
      three (3) Business Days prior to the Closing Date.  LIBOR Rate Loans shall
      be made by each Term Loan Lender at its LIBOR Lending Office and Alternate
      Base Rate Loans at its Domestic Lending Office.  Amounts repaid or prepaid
      on the Term Loan may not be reborrowed.

            (b) Repayment of Term Loan.  The  principal  amount of the Term Loan
      shall be repaid in twenty (20) consecutive  quarterly  installments and on
      the Term Loan Maturity Date (as reduced  pursuant to Section 2.7),  unless
      accelerated sooner pursuant to Section 7.2, as follows:

                                       31
<PAGE>

      =====================================================================
        Principal Amortization                        Term Loan
             Payment Date                  Principal Amortization Payment
      ---------------------------------------------------------------------
          December 31, 2005                           $2,000,000
      ---------------------------------------------------------------------
            March 31, 2006                            $2,000,000
      ---------------------------------------------------------------------
            June 30, 2006                             $2,000,000
      ---------------------------------------------------------------------
          September 30, 2006                          $2,000,000
      ---------------------------------------------------------------------
          December 31, 2006                           $3,000,000
      ---------------------------------------------------------------------
            March 31, 2007                            $3,000,000
      ---------------------------------------------------------------------
            June 30, 2007                             $3,000,000
      ---------------------------------------------------------------------
          September 30, 2007                          $3,000,000
      ---------------------------------------------------------------------
          December 31, 2007                           $4,000,000
      ---------------------------------------------------------------------
            March 31, 2008                            $4,000,000
      ---------------------------------------------------------------------
            June 30, 2008                             $4,000,000
      ---------------------------------------------------------------------
          September 30, 2008                          $4,000,000
      ---------------------------------------------------------------------
          December 31, 2008                           $5,000,000
      ---------------------------------------------------------------------
            March 31, 2009                            $5,000,000
      ---------------------------------------------------------------------
            June 30, 2009                             $5,000,000
      ---------------------------------------------------------------------
          September 30, 2009                          $5,000,000
      ---------------------------------------------------------------------
          December 31, 2009                           $6,000,000
      ---------------------------------------------------------------------
            March 31, 2010                            $6,000,000
      ---------------------------------------------------------------------
            June 30, 2010                             $6,000,000
      ---------------------------------------------------------------------
          September 30, 2010                          $6,000,000
      ---------------------------------------------------------------------
              Term Loan                  Remaining Principal Balance of the
            Maturity Date                             Term Loan
      ---------------------------------------------------------------------

            (c) Interest on the Term Loan.  Subject to the provisions of Section
      2.9, the Term Loan shall bear interest as follows:

                  (i) Alternate Base Rate Loans. During such periods as the Term
            Loan shall be  comprised  of  Alternate  Base Rate Loans,  each such
            Alternate  Base Rate Loan  shall bear  interest  at a per annum rate
            equal to the sum of the  Alternate  Base  Rate  plus the  Applicable
            Percentage; and

                                       32
<PAGE>

                  (ii) LIBOR Rate Loans.  During  such  periods as the Term Loan
            shall be  comprised  of LIBOR Rate Loans,  each such LIBOR Rate Loan
            shall  bear  interest  at a per annum  rate  equal to the sum of the
            LIBOR Rate plus the Applicable Percentage.

            (d) Term Notes;  Covenant to Pay. The  Borrower's  obligation to pay
      each Term Loan Lender's Term Loan shall be evidenced,  upon such Term Loan
      Lender's  request,  by  a  Term  Note  made  payable  to  such  Lender  in
      substantially  the form of Schedule  2.2(d).  The Borrower  covenants  and
      agrees to pay the Term Loan in  accordance  with the terms of this  Credit
      Agreement and the Term Notes.

      Section 2.3 Letter of Credit Subfacility.

            (a) Issuance.  Subject to the terms and conditions hereof and of the
      LOC  Documents,  if any,  and any  other  terms and  conditions  which the
      Issuing Lender may reasonably  require,  during the Commitment  Period the
      Issuing Lender shall issue,  and the Revolving  Lenders shall  participate
      in,  Letters of Credit for the account of the  Borrower  from time to time
      upon  request  in a form  acceptable  to  the  Issuing  Lender;  provided,
      however, that (i) the aggregate amount of LOC Obligations shall not at any
      time exceed TWO MILLION FIVE HUNDRED  THOUSAND DOLLARS  ($2,500,000)  (the
      "LOC Committed Amount"), (ii) the sum of the aggregate principal amount of
      outstanding  Revolving  Loans  plus  the  aggregate  principal  amount  of
      outstanding  Swingline  Loans plus LOC  Obligations  shall not at any time
      exceed the Revolving  Committed Amount,  (iii) all Letters of Credit shall
      be  denominated  in Dollars and (iv) Letters of Credit shall be issued for
      lawful corporate  purposes and may be issued as standby letters of credit,
      including in connection  with workers'  compensation  and other  insurance
      programs,  and trade  letters of  credit.  Except as  otherwise  expressly
      agreed upon by all the Revolving  Lenders,  no Letter of Credit shall have
      an  original  expiry  date more than  twelve  (12) months from the date of
      issuance; provided, however, so long as no Default or Event of Default has
      occurred and is continuing  and subject to the other terms and  conditions
      to the  issuance  of Letters  of Credit  hereunder,  the  expiry  dates of
      Letters of Credit may be extended  annually or  periodically  from time to
      time on the request of the  Borrower or by  operation  of the terms of the
      applicable  Letter of Credit to a date not more than  twelve  (12)  months
      from the date of extension;  provided,  further, that no Letter of Credit,
      as originally  issued or as extended,  shall have an expiry date extending
      beyond the date that is thirty (30) days prior to the Revolving Commitment
      Termination  Date. Each Letter of Credit shall comply with the related LOC
      Documents.  The issuance and expiry date of each Letter of Credit shall be
      a Business  Day.  Any  Letters of Credit  issued  hereunder  shall be in a
      minimum original face amount of $100,000 or such lesser amount as approved
      by the Issuing Lender and the Administrative  Agent. Wachovia shall be the
      Issuing  Lender on all  Letters of Credit  issued on or after the  Closing
      Date.

            (b) Notice and Reports.  The request for the issuance of a Letter of
      Credit shall be submitted to the Issuing Lender at least five (5) Business
      Days prior to the  requested  date of  issuance.  The Issuing  Lender will
      promptly upon request provide to the

                                       33
<PAGE>

      Administrative Agent for dissemination to the Revolving Lenders a detailed
      report  specifying  the  Letters  of  Credit  which  are then  issued  and
      outstanding  and any activity with respect thereto which may have occurred
      since the date of any prior  report,  and including  therein,  among other
      things, the account party, the beneficiary,  the face amount,  expiry date
      as well as any  payments  or  expirations  which  may have  occurred.  The
      Issuing Lender will further provide to the  Administrative  Agent promptly
      upon  request  copies of the Letters of Credit.  The  Issuing  Lender will
      provide to the Administrative Agent promptly upon request a summary report
      of the nature and extent of LOC Obligations then outstanding.

            (c) Participations.  Each Revolving Lender upon issuance of a Letter
      of Credit  shall be  deemed  to have  purchased  without  recourse  a risk
      participation  from the  Issuing  Lender in such  Letter of Credit and the
      obligations  arising  thereunder and any collateral  relating thereto,  in
      each case in an amount equal to its Revolving Commitment Percentage of the
      obligations   under   such   Letter  of  Credit   and  shall   absolutely,
      unconditionally  and  irrevocably  assume,  as primary  obligor and not as
      surety,  and  be  obligated  to pay to the  Issuing  Lender  therefor  and
      discharge when due, its Revolving Commitment Percentage of the obligations
      arising under such Letter of Credit; provided that any Person that becomes
      a  Revolving  Lender  after  the  Closing  Date  shall be  deemed  to have
      purchased a risk participation in all outstanding Letters of Credit on the
      date it  becomes a  Revolving  Lender  hereunder  and any Letter of Credit
      issued  on or  after  such  date,  in each  case in  accordance  with  the
      foregoing  terms.  Without limiting the scope and nature of each Revolving
      Lender's  participation  in any Letter of Credit,  to the extent  that the
      Issuing Lender has not been reimbursed as required  hereunder or under any
      LOC Document,  each such Revolving  Lender shall pay to the Issuing Lender
      its Revolving Commitment  Percentage of such unreimbursed drawing pursuant
      to and in accordance  with the  provisions of subsection  (d) hereof.  The
      obligation of each  Revolving  Lender to so reimburse  the Issuing  Lender
      shall be  absolute  and  unconditional  and shall not be  affected  by the
      occurrence  of a Default,  an Event of Default or any other  occurrence or
      event.  Any such  reimbursement  shall not relieve or otherwise impair the
      obligation  of the  Borrower to  reimburse  the Issuing  Lender  under any
      Letter of Credit, together with interest as hereinafter provided.

            (d)  Reimbursement.  In the event of any drawing under any Letter of
      Credit,  the Issuing  Lender will  promptly  notify the  Borrower  and the
      Administrative  Agent.  The Borrower shall reimburse the Issuing Lender on
      the day of drawing  under any  Letter of Credit  (with the  proceeds  of a
      Revolving  Loan  obtained  hereunder  or  otherwise)  in same day funds as
      provided  herein or in the LOC  Documents.  If the Borrower  shall fail to
      reimburse the Issuing Lender as provided herein,  the unreimbursed  amount
      of such drawing  shall bear  interest at a per annum rate equal to the ABR
      Default Rate.  Unless the Borrower  shall  immediately  notify the Issuing
      Lender and the Administrative  Agent of its intent to otherwise  reimburse
      the  Issuing  Lender,  the  Borrower  shall be deemed to have  requested a
      Revolving  Loan in the amount of the drawing as provided in subsection (e)
      hereof,  the  proceeds of which will be used to satisfy the  Reimbursement
      Obligations.  The Borrower's Reimbursement  Obligations hereunder shall be
      absolute and  unconditional  under all  circumstances  irrespective of any
      rights of set-off, counterclaim

                                       34
<PAGE>

      or defense to payment the  Borrower  may claim or have against the Issuing
      Lender,  the  Administrative  Agent,  the Lenders,  the beneficiary of the
      Letter  of  Credit  drawn  upon or any  other  Person,  including  without
      limitation  any defense  based on any  failure of the  Borrower to receive
      consideration or the legality, validity, regularity or unenforceability of
      the Letter of Credit.  The Issuing  Lender will promptly  notify the other
      Revolving  Lenders  of the  amount of any  unreimbursed  drawing  and each
      Revolving  Lender shall promptly pay to the  Administrative  Agent for the
      account of the  Issuing  Lender in Dollars  and in  immediately  available
      funds,  the  amount  of  such  Revolving  Lender's  Revolving   Commitment
      Percentage of such unreimbursed drawing. Such payment shall be made on the
      day such  notice is  received  by such  Revolving  Lender from the Issuing
      Lender if such notice is received at or before 2:00 P.M.,  otherwise  such
      payment  shall be made at or before  12:00 Noon on the  Business  Day next
      succeeding the day such notice is received.  If such Revolving Lender does
      not pay such amount to the Issuing Lender in full upon such request,  such
      Revolving Lender shall, on demand, pay to the Administrative Agent for the
      account of the Issuing  Lender  interest on the unpaid  amount  during the
      period from the date of such drawing until such Revolving Lender pays such
      amount to the Issuing Lender in full at a rate per annum equal to, if paid
      within three (3) Business  Days of the date of drawing,  the Federal Funds
      Effective  Rate and thereafter at a rate equal to the Alternate Base Rate.
      Each  Revolving  Lender's  obligation  to make such payment to the Issuing
      Lender,  and the right of the Issuing Lender to receive the same, shall be
      absolute  and  unconditional,  shall not be affected  by any  circumstance
      whatsoever and without regard to the termination of this Credit  Agreement
      or the  Commitments  hereunder,  the  existence  of a Default  or Event of
      Default or the acceleration of the Credit Party Obligations  hereunder and
      shall be made  without any offset,  abatement,  withholding  or  reduction
      whatsoever.

            (e) Repayment with Revolving Loans. On any day on which the Borrower
      shall have requested,  or been deemed to have requested,  a Revolving Loan
      to reimburse a drawing under a Letter of Credit, the Administrative  Agent
      shall give notice to the Revolving  Lenders that a Revolving Loan has been
      requested or deemed  requested in connection with a drawing under a Letter
      of Credit, in which case a Revolving Loan borrowing  comprised entirely of
      Alternate  Base  Rate  Loans  (each  such  borrowing,   a  "Mandatory  LOC
      Borrowing")  shall be  immediately  made  (without  giving  effect  to any
      termination of the Commitments  pursuant to Section 7.2) pro rata based on
      each  Revolving  Lender's  respective  Revolving   Commitment   Percentage
      (determined  before giving effect to any  termination  of the  Commitments
      pursuant to Section 7.2) and the proceeds  thereof  shall be paid directly
      to the Issuing Lender for  application to the respective LOC  Obligations.
      Each Revolving  Lender hereby  irrevocably  agrees to make such on the day
      such notice is received by the Revolving  Lenders from the  Administrative
      Agent if such notice is received  at or before 2:00 P.M.,  otherwise  such
      payment  shall be made at or before  12:00 Noon on the  Business  Day next
      succeeding the date such notice is received,  in each case notwithstanding
      (i) the amount of Mandatory  LOC Borrowing may not comply with the minimum
      amount for borrowings of Revolving  Loans  otherwise  required  hereunder,
      (ii) whether any conditions  specified in Section 4.2 are then  satisfied,
      (iii)  whether a Default  or an Event of  Default  then  exists,  (iv) the
      failure of any such  request or deemed  request for  Revolving  Loan to be
      made by the time

                                       35
<PAGE>

      otherwise  required in Section 2.1(b),  (v) the date of such Mandatory LOC
      Borrowing,  or (vi) any reduction in the Revolving  Committed Amount after
      any such  Letter of Credit may have been drawn  upon;  provided,  however,
      that in the event any such Mandatory LOC Borrowing should be less than the
      minimum amount for  borrowings of Revolving  Loans  otherwise  provided in
      Section 2.1(b)(ii), the Borrower shall pay to the Administrative Agent for
      its own  account  an  administrative  fee of $500.  In the event  that any
      Mandatory  LOC  Borrowing  cannot  for any  reason  be  made  on the  date
      otherwise required above (including, without limitation, the occurrence of
      a Bankruptcy Event), then each such Revolving Lender hereby agrees that it
      shall  forthwith  fund (as of the date the Mandatory  LOC Borrowing  would
      otherwise have occurred,  but adjusted for any payments  received from the
      Borrower  on  or  after  such  date  and  prior  to  such   purchase)  its
      Participation Interests in the LOC Obligations; provided, further, that in
      the  event  any  Revolving  Lender  shall  fail to fund its  Participation
      Interest on the day the  Mandatory  LOC  Borrowing  would  otherwise  have
      occurred,   then  the   amount  of  such   Revolving   Lender's   unfunded
      Participation  Interest  therein  shall  bear  interest  payable  by  such
      Revolving Lender to the Issuing Lender upon demand,  at the rate equal to,
      if paid within three (3)  Business  Days of such date,  the Federal  Funds
      Effective Rate, and thereafter at a rate equal to the Alternate Base Rate.

            (f)  Modification,   Extension.  The  issuance  of  any  supplement,
      modification,  amendment,  renewal,  or  extension to any Letter of Credit
      shall,  for  purposes  hereof,  be treated in all respects the same as the
      issuance of a new Letter of Credit hereunder.

            (g) UCP and ISP98.  Unless otherwise expressly agreed by the Issuing
      Lender and the Borrower,  when a Letter of Credit is issued, (i) the rules
      of the "International  Standby Practices 1998," as most recently published
      by the  Institute of  International  Banking Law & Practice at the time of
      issuance,  shall apply to each standby Letter of Credit and (ii) the rules
      of the Uniform  Customs and  Practice  for  Documentary  Credits,  as most
      recently published by the International Chamber of Commerce at the time of
      issuance, shall apply to each commercial Letter of Credit.

            (h)  Conflict  with LOC  Documents.  In the  event  of any  conflict
      between this Credit  Agreement and any LOC Document  (including any letter
      of credit application), this Credit Agreement shall control.

            (i) Designation of Subsidiaries as Account Parties.  Notwithstanding
      anything to the  contrary  set forth in this Credit  Agreement,  including
      without limitation Section 2.3(a), a Letter of Credit issued hereunder may
      contain a statement to the effect that such Letter of Credit is issued for
      the   account  of  a   Subsidiary   of  the   Borrower;   provided   that,
      notwithstanding  such statement,  the Borrower shall be the actual account
      party for all purposes of this Credit  Agreement for such Letter of Credit
      and  such  statement   shall  not  affect  the  Borrower's   Reimbursement
      Obligations hereunder with respect to such Letter of Credit.

                                       36
<PAGE>

      Section 2.4 Swingline Loan Subfacility.

            (a) Swingline Commitment.  During the Commitment Period,  subject to
      the terms and conditions  hereof,  the Swingline Lender, in its individual
      capacity,  agrees to make certain revolving credit loans in Dollars to the
      Borrower  (each a  "Swingline  Loan"  and,  collectively,  the  "Swingline
      Loans") for the purposes hereinafter set forth; provided, however, (i) the
      aggregate  principal  amount of Swingline  Loans  outstanding  at any time
      shall  not  exceed  FIVE  MILLION  DOLLARS  ($5,000,000)  (the  "Swingline
      Committed Amount"),  and (ii) the sum of the aggregate principal amount of
      outstanding  Revolving  Loans  plus  the  aggregate  principle  amount  of
      outstanding  Swingline  Loans  plus LOC  Obligations  shall not exceed the
      Revolving  Committed  Amount.  Swingline Loans hereunder may be repaid and
      reborrowed in accordance with the provisions hereof.

            (b) Swingline Loan Borrowings.

                  (i) Notice of Borrowing and Disbursement. The Swingline Lender
            will make Swingline  Loans available to the Borrower on any Business
            Day upon  delivery of a Notice of  Borrowing  by the Borrower to the
            Administrative  Agent not later than 2:00 P.M. on such Business Day.
            Swingline Loan borrowings hereunder shall be made in minimum amounts
            of $100,000 and in integral  amounts of $100,000 in excess  thereof.
            Such  borrowing  will then be made  available to the Borrower by the
            Swingline  Lender  on the  date  (which  shall  be a  Business  Day)
            specified in the applicable  Notice of Borrowing) by the end of such
            Business  Day) by funding the account of the  Borrower  set forth in
            the Account Designation Letter the aggregate amount of the Swingline
            Loans requested.

                  (ii)  Repayment  of  Swingline  Loans.   Each  Swingline  Loan
            borrowing  shall  be due and  payable  on the  Revolving  Commitment
            Termination Date. The Swingline Lender may, at any time, in its sole
            discretion, by written notice to the Borrower and the Administrative
            Agent, demand repayment of its Swingline Loans by way of a Revolving
            Loan  borrowing,  in which case the Borrower shall be deemed to have
            requested a Revolving Loan borrowing comprised entirely of Alternate
            Base Rate Loans in the  amount of such  Swingline  Loans;  provided,
            however, that, in the following circumstances, any such demand shall
            also be deemed to have been given one (1) Business Day prior to each
            of (A) the Revolving Commitment Termination Date, (B) the occurrence
            of a Bankruptcy  Event,  (C) upon  acceleration  of the Credit Party
            Obligations  hereunder,  whether on account of a Bankruptcy Event or
            any other  Event of  Default,  and (D) the  exercise  of remedies in
            accordance  with the  provisions  of Section  7.2 hereof  (each such
            Revolving  Loan borrowing made on account of any such deemed request
            therefor  as  provided  herein  being  hereinafter  referred  to  as
            "Mandatory  Swingline  Borrowing").  Each  Revolving  Lender  hereby
            irrevocably  agrees to make such  Revolving  Loans promptly upon any
            such  request  or  deemed  request  on  account  of  each  Mandatory
            Swingline Borrowing in the amount and in the manner specified in the
            preceding sentence on the date such notice is received by such

                                       37
<PAGE>

            Revolving  Lender  from the  Administrative  Agent if such notice is
            received at or before 2:00 P.M.,  otherwise  such  payment  shall be
            made at or before 12:00 Noon on the Business Day next succeeding the
            date such notice is received,  in each case  notwithstanding (1) the
            amount of  Mandatory  Swingline  Borrowing  may not comply  with the
            minimum amount for borrowings of Revolving Loans otherwise  required
            hereunder,  (2) whether any conditions  specified in Section 4.2 are
            then  satisfied,  (3) whether a Default or an Event of Default  then
            exists,  (4)  failure  of any such  request  or deemed  request  for
            Revolving Loans to be made by the time otherwise required in Section
            2.1(b)(i),  (5) the date of such Mandatory Swingline  Borrowing,  or
            (6) any reduction in the Revolving  Committed  Amount or termination
            of the Revolving  Commitments  immediately  prior to such  Mandatory
            Swingline  Borrowing or  contemporaneously  therewith.  In the event
            that any Mandatory Swingline Borrowing cannot for any reason be made
            on the date otherwise required above (including, without limitation,
            as a result of the commencement of a proceeding under the Bankruptcy
            Code),  then  each  Revolving  Lender  hereby  agrees  that it shall
            forthwith purchase (as of the date the Mandatory Swingline Borrowing
            would  otherwise  have  occurred,  but  adjusted  for  any  payments
            received  from the  Borrower on or after such date and prior to such
            purchase) from the Swingline Lender such  Participation  Interest in
            the outstanding  Swingline Loans as shall be necessary to cause each
            such Revolving Lender to share in such Swingline Loans ratably based
            upon its  respective  Revolving  Commitment  Percentage  (determined
            before giving effect to any termination of the Commitments  pursuant
            to  Section  7.2);  provided  that (x) all  interest  payable on the
            Swingline  Loans  shall be for the account of the  Swingline  Lender
            until the date as of which the respective  Participation Interest is
            purchased,  and (y) at the  time  any  purchase  of a  Participation
            Interest  pursuant to this sentence is actually made, the purchasing
            Revolving  Lender shall be required to pay to the  Swingline  Lender
            interest  on the  principal  amount of such  Participation  Interest
            purchased  for each day from and  including  the day upon  which the
            Mandatory  Swingline  Borrowing would otherwise have occurred to but
            excluding the date of payment for such  Participation  Interest,  at
            the rate equal to, if paid  within  three (3)  Business  Days of the
            date  of  the  Mandatory  Swingline  Borrowing,  the  Federal  Funds
            Effective Rate, and thereafter at a rate equal to the Alternate Base
            Rate.

            (c)  Interest  on  Swingline  Loans.  Subject to the  provisions  of
      Section 2.9, Swingline Loans shall bear interest at a per annum rate equal
      to the Alternate  Base Rate plus the  Applicable  Percentage for Revolving
      Loans that are  Alternate  Base Rate Loans.  Interest on  Swingline  Loans
      shall be payable in arrears on each Interest Payment Date.

            (d) Swingline  Note;  Covenant to Pay. The Swingline  Loans shall be
      evidenced  by a duly  executed  promissory  note  of the  Borrower  to the
      Swingline Lender in the original amount of the Swingline  Committed Amount
      and substantially in the form of Schedule 2.4(d).  The Borrower  covenants
      and agrees to pay the Swingline Loans in accordance with the terms of this
      Credit Agreement and the Swingline Note.

                                       38
<PAGE>

      Section 2.5 Fees.

            (a) Commitment Fee. In consideration  of the Revolving  Commitments,
      the  Borrower  agrees to pay to the  Administrative  Agent for the ratable
      benefit of the Revolving  Lenders a commitment fee (the "Commitment  Fee")
      in an amount  equal to one-half  of one  percent  (0.50%) per annum on the
      average  daily  unused  amount  of the  Revolving  Committed  Amount.  For
      purposes of computation of the Commitment  Fee, LOC  Obligations  shall be
      considered  usage of the Revolving  Committed  Amount but Swingline  Loans
      shall not be  considered  usage of the  Revolving  Committed  Amount.  The
      Commitment Fee shall be payable  quarterly in arrears on the last Business
      Day of each calendar quarter.

            (b) Letter of Credit Fees. In  consideration of the LOC Commitments,
      the Borrower agrees to pay to the  Administrative  Agent,  for the ratable
      benefit of the Revolving Lenders, a fee (the "Letter of Credit Fee") equal
      to the Applicable Percentage per annum on the average daily maximum amount
      available  to be  drawn  under  each  Letter  of  Credit  from the date of
      issuance to the date of  expiration.  In addition to such Letter of Credit
      Fee, the Borrower agrees to pay to the Issuing Lender, for its own account
      and without sharing by the other Lenders,  an additional fronting fee (the
      "Fronting  Fee") of  one-quarter  of one percent  (0.25%) per annum on the
      average daily maximum amount  available to be drawn under each such Letter
      of Credit  issued by it.  The Letter of Credit  Fee and the  Fronting  Fee
      shall be payable  quarterly  in arrears on the last  Business  Day of each
      calendar quarter.

            (c) Issuing  Lender  Fees.  In addition to the Letter of Credit Fees
      and Fronting Fees payable pursuant to subsection (b) hereof,  the Borrower
      shall pay to the Issuing Lender for its own account without sharing by the
      other Lenders the  reasonable  and customary  charges from time to time of
      the   Issuing   Lender   with   respect   to  the   amendment,   transfer,
      administration,  cancellation and conversion of, and drawings under,  such
      Letters of Credit (collectively, the "Issuing Lender Fees").

            (d)   Administrative   Fee.  The  Borrower  agrees  to  pay  to  the
      Administrative Agent the annual administrative fee as described in the Fee
      Letter.

      Section 2.6 Commitment Reductions.

            (a)  Voluntary  Reductions.  The  Borrower  shall  have the right to
      terminate  or  permanently  reduce  the unused  portion  of the  Revolving
      Committed  Amount at any time or from time to time upon not less than five
      (5) Business Days' prior notice to the  Administrative  Agent (which shall
      notify  the  Lenders   thereof  as  soon  as  practicable)  of  each  such
      termination  or reduction,  which notice shall specify the effective  date
      thereof and the amount of any such  reduction  which shall be in a minimum
      amount of $1,000,000 or a whole multiple of $500,000 in excess thereof and
      shall be  irrevocable  and  effective  upon receipt by the  Administrative
      Agent,  provided that no such reduction or termination  shall be permitted
      if after giving effect  thereto,  and to any prepayments of the Loans made
      on the effective date thereof, the sum of the outstanding Revolving

                                       39
<PAGE>

      Loans plus outstanding  Swingline Loans plus LOC Obligations  would exceed
      the Revolving Committed Amount.

            (b) Swingline Committed Amount. If the Revolving Committed Amount is
      reduced  pursuant to Section  2.7(a)  below the then  Swingline  Committed
      Amount, the Swingline  Committed Amount shall  automatically be reduced by
      an amount such that the  Swingline  Committed  Amount equals the Revolving
      Committed Amount.

            (c) Revolving Commitment Termination Date. The Revolving Commitment,
      the  Swingline  Commitment  and the  LOC  Commitment  shall  automatically
      terminate on the Revolving Commitment Termination Date.

      Section 2.7 Prepayments.

            (a)  Optional  Prepayments.  The  Borrower  shall  have the right to
      prepay  Loans in whole or in part  from time to time;  provided,  however,
      that (i) each  partial  prepayment  of a Revolving  Loan and the Term Loan
      shall  be  in a  minimum  principal  amount  of  $1,000,000  and  integral
      multiples  of $500,000 in excess  thereof  (or the  remaining  outstanding
      principal  amount),  and (ii) each partial  prepayment of a Swingline Loan
      shall be in a minimum principal amount of $100,000 and integral  multiples
      of $100,000  in excess  thereof (or the  remaining  outstanding  principal
      amount).  The  Borrower  shall give three (3) Business  Days'  irrevocable
      notice  in the  case of  LIBOR  Rate  Loans  and one  (1)  Business  Day's
      irrevocable  notice  in the case of  Alternate  Base  Rate  Loans,  to the
      Administrative  Agent (which  shall notify the Lenders  thereof as soon as
      practicable).  Amounts  prepaid under this Section 2.7(a) shall be applied
      to the outstanding Loans as the Borrower may elect;  provided that (A) any
      prepayment  of the Term Loan  shall be applied  pro rata to the  remaining
      Term Loan  amortization  payments set forth in Section 2.2(b) and (B) each
      Lender  shall   receive  its  pro  rata  share  (except  with  respect  to
      prepayments  of  Swingline  Loans)  of any  such  prepayment  based on its
      Revolving  Commitment  Percentage or Term Loan Commitment  Percentage,  as
      applicable.  Within  the  foregoing  parameters,  prepayments  under  this
      Section  shall be applied  first to Alternate  Base Rate Loans and then to
      LIBOR  Rate  Loans in direct  order of  Interest  Period  maturities.  All
      prepayments  under this Section  2.7(a) shall be subject to Section  2.17,
      but otherwise without premium or penalty;  provided that any prepayment of
      the  outstanding  Term Loan pursuant to this Section 2.7(a) (with proceeds
      of a new  tranche  of term  loans  under this  Credit  Agreement  or other
      optional  prepayment) (1) during the first year following the Closing Date
      shall  be made at 101% of par,  and (2)  thereafter  shall be made at par.
      Interest  on the  principal  amount  prepaid  shall be payable on the next
      occurring  Interest  Payment Date that would have  occurred had such Loans
      not been prepaid or, at the request of the Administrative  Agent, interest
      on the  principal  amount  prepaid  shall be  payable  on any date  that a
      prepayment  is made  hereunder  through  the date of  prepayment.  Amounts
      prepaid on the Revolving  Loans and the Swingline  Loans may be reborrowed
      in accordance with the terms hereof. Amounts prepaid on the Term Loans may
      not be reborrowed.

                                       40
<PAGE>

            (b) Mandatory Prepayments.

                  (i)  Revolving  Committed  Amount.  If at any time  after  the
            Closing  Date,  the  sum  of  the  aggregate   principal  amount  of
            outstanding  Revolving Loans plus the aggregate  principal amount of
            outstanding  Swingline Loans plus LOC  Obligations  shall exceed the
            Revolving  Committed Amount,  the Borrower  immediately shall prepay
            the Loans and cash  collateralize  the LOC  Obligations in an amount
            sufficient to eliminate  such excess (such  prepayment to be applied
            as set forth in clause (vi) below).

                  (ii)  Asset   Dispositions.   Promptly   following  any  Asset
            Disposition (or related series of Asset Dispositions),  the Borrower
            shall prepay the Loans and cash collateralize the LOC Obligations in
            an aggregate  amount equal to one hundred  percent (100%) of the Net
            Cash Proceeds derived from such Asset Disposition (or related series
            of Asset  Dispositions)  (such prepayment to be applied as set forth
            in  clause  (vi)  below);  provided,  however,  that  such  Net Cash
            Proceeds  shall not be  required  to be so applied to the extent the
            Borrower  delivers to the  Administrative  Agent promptly  following
            such Asset Disposition a certificate  stating that it intends to use
            such Net Cash  Proceeds to acquire  like assets used in the business
            of the Borrower and its Subsidiaries  within 180 days of the receipt
            of such Net Cash Proceeds,  it being  expressly  agreed that any Net
            Cash Proceeds not so reinvested shall be applied to prepay the Loans
            and cash  collateralize the LOC Obligations  immediately  thereafter
            (such prepayment to be applied as set forth in clause (vi) below).

                  (iii) Issuances.  Immediately upon receipt by any Credit Party
            of proceeds from (A) any Debt  Issuance,  the Borrower  shall prepay
            the Loans and cash collateralize the LOC Obligations in an aggregate
            amount equal to one hundred  percent (100%) of the Net Cash Proceeds
            of such Debt Issuance to the Lenders (such  prepayment to be applied
            as set forth in clause (vi) below) or (B) any Equity  Issuance,  the
            Borrower  shall  prepay  the  Loans and cash  collateralize  the LOC
            Obligations  in an aggregate  amount equal to fifty percent (50%) of
            the Net Cash Proceeds of such Equity Issuance (such prepayment to be
            applied as set forth in clause (vi) below).

                  (iv) Recovery  Event.  Immediately  upon receipt by any Credit
            Party of proceeds from any Recovery Event, the Borrower shall prepay
            the Loans and cash collateralize the LOC Obligations in an aggregate
            amount  equal to one hundred  percent  (100%) of such cash  proceeds
            (such  prepayment  to be applied as set forth in clause (vi) below);
            provided,  however,  that, so long as no Default or Event of Default
            has occurred and is continuing  at the time of such Recovery  Event,
            (A) the Borrower and its  Subsidiaries  may retain Net Cash Proceeds
            consisting of business  interruption  insurance proceeds and (B) any
            other Net Cash  Proceeds  shall not be  required to be so applied to
            the extent  the  Borrower  delivers  to the  Administrative  Agent a
            certificate  stating that the Borrower  intends to use such Net Cash
            Proceeds  to repair,  restore or replace  the assets  subject to the
            Recovery

                                       41
<PAGE>

            Event within 180 days of the receipt of such Net Cash  Proceeds,  it
            being expressly  agreed that any Net Cash Proceeds not so reinvested
            by the end of the  applicable  period  shall be applied to repay the
            Loans  and/or cash  collateralize  the LOC  Obligations  immediately
            thereafter  (such  prepayment  to be  applied as set forth in clause
            (vi) below).

                  (v) Excess Cash Flow. Within ninety (90) days after the end of
            each fiscal year  (commencing  with the fiscal year ending  December
            31,   2006),   the   Borrower   shall  prepay  the  Loans  and  cash
            collateralize  the LOC  Obligations in an aggregate  amount equal to
            seventy-five  percent  (75%) of the Excess Cash Flow  earned  during
            such prior fiscal year (such  prepayments to be applied as set forth
            in clause (vi) below).

                  (vi)  Application  of  Mandatory   Prepayments.   All  amounts
            required to be paid pursuant to this Section 2.7(b) shall be applied
            as  follows:  (A) with  respect to all amounts  prepaid  pursuant to
            Sections 2.8(b)(i),  (1) first, to the outstanding  Swingline Loans,
            (2) second, to the outstanding  Revolving Loans and (3) third (after
            all Revolving Loans have been repaid),  to a cash collateral account
            in respect of LOC  Obligations,  and (B) with respect to all amounts
            prepaid pursuant to Sections  2.8(b)(ii),  (iii),  (iv) and (v), (1)
            first, to the remaining Term Loan amortization payments set forth in
            Section  2.2(b) on pro rata basis,  (2) second,  to the  outstanding
            Swingline Loans (without a corresponding  permanent reduction in the
            Revolving Committed Amount), (3) third, to the outstanding Revolving
            Loans (without a corresponding  permanent reduction in the Revolving
            Committed  Amount) and (4) fourth  (after all  Revolving  Loans have
            been  repaid),  to a  cash  collateral  account  in  respect  of LOC
            Obligations.  Within the  parameters of the  applications  set forth
            above,  prepayments  shall be applied  first to Alternate  Base Rate
            Loans  and then to LIBOR  Rate  Loans in  direct  order of  Interest
            Period  maturities.  Each  Lender  shall  receive its pro rata share
            (except with respect to prepayments of Swingline  Loans) of any such
            prepayment based on its Revolving Commitment Percentage or Term Loan
            Commitment  Percentages,  as applicable.  All prepayments under this
            Section  2.7(b)  shall be  subject to Section  2.17,  but  otherwise
            without premium or penalty;  provided that any mandatory  prepayment
            of the outstanding Term Loan made pursuant to Section  2.7(b)(ii) or
            Section  2.7(b)(iii)(A)  (x)  during the first  year  following  the
            Closing Date shall be made at 101% of par, and (y) thereafter  shall
            be made at par.

            (c) Hedging Obligations Unaffected. Any repayment or prepayment made
      pursuant to this Section 2.7 shall not affect the Borrower's obligation to
      continue to make payments under any Secured Hedging Agreement, which shall
      remain  in  full  force  and  effect  notwithstanding  such  repayment  or
      prepayment, subject to the terms of such Secured Hedging Agreement.

                                       42
<PAGE>

      Section 2.8 Lending Offices.

      LIBOR Rate Loans shall be made by each Lender at its LIBOR Lending  Office
and Alternate Base Rate Loans at its Domestic Lending Office.

      Section 2.9 Default Rate.

      Upon the occurrence,  and during the continuance,  of an Event of Default,
at the discretion of the Required  Lenders,  the principal of and, to the extent
permitted by law, interest on the Loans and any other amounts owing hereunder or
under the other Credit  Documents shall bear interest,  payable on demand,  at a
per annum rate two percent (2%)  greater than the rate which would  otherwise be
applicable (or if no rate is applicable, whether in respect of interest, fees or
other amounts, then the ABR Default Rate).

      Section 2.10 Conversion Options.

            (a) The Borrower  may, in the case of  Revolving  Loans and the Term
      Loan,  elect  from  time to  time  to  convert  all or any  portion  of an
      Alternate Base Rate Loan to a LIBOR Rate Loan by giving the Administrative
      Agent at least three (3) Business Days' prior  irrevocable  written notice
      of such election; provided that (i) no Alternate Base Rate Loan or portion
      thereof may be converted  into a LIBOR Rate Loan when any Default or Event
      of Default has occurred and is continuing and (ii) conversions shall be in
      an  aggregate  principal  amount  of (A) in the  case of  Revolving  Loans
      $1,000,000  or a whole  multiple of $500,000 in excess  thereof and (B) in
      the case of the Term Loan, $2,000,000 or a whole multiple of $1,000,000 in
      excess thereof.  In addition,  the Borrower may elect from time to time to
      convert all or any portion of a LIBOR Rate Loan to an Alternate  Base Rate
      Loan by giving the Administrative Agent irrevocable written notice thereof
      by  11:00  A.M.  one (1)  Business  Date  prior  to the  proposed  date of
      conversion.  A form of  Notice  of  Conversion/Extension  is  attached  as
      Schedule 2.10. If the date upon which an Alternate Base Rate Loan is to be
      converted to a LIBOR Rate Loan is not a Business Day, then such conversion
      shall be made on the next  succeeding  Business  Day and during the period
      from such last day of an Interest Period to such  succeeding  Business Day
      such Loan shall bear  interest as if it were an Alternate  Base Rate Loan.
      LIBOR Rate Loans may only be converted to Alternate Base Rate Loans on the
      last day of the applicable Interest Period. If the date upon which a LIBOR
      Rate  Loan is to be  converted  to an  Alternate  Base  Rate Loan is not a
      Business Day, then such  conversion  shall be made on the next  succeeding
      Business  Day and  during  the  period  from such last day of an  Interest
      Period to such succeeding Business Day such Loan shall bear interest as if
      it were an Alternate Base Rate Loan.

            (b)  Any  LIBOR  Rate  Loans  may be  continued  as  such  upon  the
      expiration of an Interest Period with respect thereto by compliance by the
      Borrower  with  the  notice  provisions   contained  in  Section  2.10(a);
      provided,  that no LIBOR  Rate  Loan  may be  continued  as such  when any
      Default or Event of Default has occurred and is continuing,  in which case
      such Loan shall be automatically  converted to an Alternate Base Rate Loan
      at the end of the applicable  Interest Period with respect thereto. If the
      Borrower shall fail

                                       43
<PAGE>

      to give timely notice of an election to continue a LIBOR Rate Loan, or the
      continuation  of LIBOR Rate Loans is not permitted  hereunder,  such LIBOR
      Rate Loans shall be  automatically  converted to Alternate Base Rate Loans
      at the end of the applicable Interest Period with respect thereto.

      Section 2.11 Computation of Interest and Fees.

      (a) Interest  payable  hereunder with respect to Alternate Base Rate Loans
based on the Prime Rate shall be  calculated  on the basis of a year of 365 days
(or 366 days,  as  applicable)  for the actual  days  elapsed.  All other  fees,
interest and all other  amounts  payable  hereunder  shall be  calculated on the
basis of a 360-day year for the actual days elapsed.  The  Administrative  Agent
shall  as soon as  practicable  notify  the  Borrower  and the  Lenders  of each
determination of a LIBOR Rate on the Business Day of the determination  thereof.
Any  change  in the  interest  rate on a Loan  resulting  from a  change  in the
Alternate Base Rate shall become  effective as of the opening of business on the
day on which such change in the Alternate Base Rate shall become effective.  The
Administrative  Agent shall as soon as  practicable  notify the Borrower and the
Lenders of the effective date and the amount of each such change.

      (b) Each  determination  of an interest rate by the  Administrative  Agent
pursuant to any  provision  of this Credit  Agreement  shall be  conclusive  and
binding on the  Borrower and the Lenders in the absence of manifest  error.  The
Administrative  Agent  shall,  at the  request of the  Borrower,  deliver to the
Borrower a statement showing the computations used by the  Administrative  Agent
in determining any interest rate.

      (c) It is the intent of the Lenders  and the Credit  Parties to conform to
and contract in strict compliance with applicable usury law from time to time in
effect.  All  agreements  between the Lenders and the Credit  Parties are hereby
limited by the  provisions of this  subsection  which shall override and control
all such  agreements,  whether  now  existing or  hereafter  arising and whether
written or oral. In no way, nor in any event or  contingency  (including but not
limited to  prepayment  or  acceleration  of the  maturity  of any Credit  Party
Obligation),  shall the interest taken,  reserved,  contracted for, charged,  or
received under this Credit Agreement,  under the Notes or otherwise,  exceed the
maximum  nonusurious  amount  permissible  under  applicable  law.  If, from any
possible  construction  of any of the Credit  Documents  or any other  document,
interest would otherwise be payable in excess of the maximum nonusurious amount,
any such  construction  shall be subject to the provisions of this paragraph and
such interest shall be automatically  reduced to the maximum  nonusurious amount
permitted  under  applicable  law,  without the  necessity  of  execution of any
amendment or new  document.  If any Lender shall ever receive  anything of value
which is  characterized  as interest on the Loans under applicable law and which
would,  apart  from this  provision,  be in excess  of the  maximum  nonusurious
amount,  an amount equal to the amount which would have been excessive  interest
shall,  without  penalty,  be applied to the reduction of the  principal  amount
owing on the  Loans and not to the  payment  of  interest,  or  refunded  to the
Borrower or the other payor thereof if and to the extent such amount which would
have been excessive exceeds such unpaid principal amount of the Loans. The right
to demand

                                       44
<PAGE>

payment of the Loans or any other  Indebtedness  evidenced  by any of the Credit
Documents  does not  include  the right to receive  any  interest  which has not
otherwise  accrued on the date of such demand,  and the Lenders do not intend to
charge  or  receive  any  unearned  interest  in the event of such  demand.  All
interest  paid or agreed to be paid to the  Lenders  with  respect  to the Loans
shall,  to the extent  permitted  by  applicable  law, be  amortized,  prorated,
allocated,  and spread throughout the full stated term (including any renewal or
extension)  of the  Loans so that the  amount of  interest  on  account  of such
Indebtedness  does not  exceed  the  maximum  nonusurious  amount  permitted  by
applicable law.

      Section 2.12 Pro Rata Treatment and Payments.

            (a)  Allocation  of Payments  Prior to Exercise  of  Remedies.  Each
      borrowing  of  Revolving   Loans  and  any   reduction  of  the  Revolving
      Commitments  shall be made pro rata according to the respective  Revolving
      Commitment Percentages of the Lenders.  Unless otherwise specified herein,
      each  payment  under this Credit  Agreement  or any Note shall be applied,
      first, to any fees then due and owing by the Borrower  pursuant to Section
      2.5, second,  to interest then due and owing hereunder and under the Notes
      and, third, to principal then due and owing hereunder and under the Notes.
      Each payment on account of any fees  pursuant to Section 2.5 shall be made
      pro rata in accordance  with the respective  amounts due and owing (except
      as to the Fronting Fees,  the Issuing  Lender Fees and the  administrative
      fees  referenced  in Section  2.5(d)).  Subject to  Section  2.2(b),  each
      payment (other than  prepayments)  by the Borrower on account of principal
      of and  interest  on the  Revolving  Loans and on the Term  Loan  shall be
      applied to such Loans as directed by the Borrower or otherwise  applied in
      accordance  with  the  terms  of  Section  2.7(a)  hereof.  Each  optional
      prepayment  on  account  of  principal  of the Loans  shall be  applied an
      accordance with Section 2.7(a);  provided,  that prepayments made pursuant
      to Section 2.15 shall be applied in  accordance  with such  Section.  Each
      optional  prepayment on account of principal of the Loans shall be applied
      in accordance with Section 2.7(a) and each mandatory prepayment on account
      of  principal  of the Loans shall be applied in  accordance  with  Section
      2.7(b)(vi).  All  payments  (including  prepayments)  to be  made  by  the
      Borrower on account of principal,  interest and fees shall be made without
      defense,  set-off or counterclaim  (except as provided in Section 2.18(b))
      and  shall be made to the  Administrative  Agent  for the  account  of the
      Lenders at the  Administrative  Agent's office specified in Section 9.2 in
      Dollars and in immediately available funds not later than 1:00 P.M. on the
      date when due. The Administrative  Agent shall distribute such payments to
      the  Lenders  entitled  thereto  promptly  upon  receipt  in like funds as
      received.  If any payment hereunder (other than payments on the LIBOR Rate
      Loans)  becomes due and payable on a day other than a Business  Day,  such
      payment shall be extended to the next  succeeding  Business Day, and, with
      respect to payments of principal, interest thereon shall be payable at the
      then applicable rate during such extension. If any payment on a LIBOR Rate
      Loan  becomes  due and  payable on a day other than a Business  Day,  such
      payment date shall be extended to the next succeeding  Business Day unless
      the result of such extension  would be to extend such payment into another
      calendar  month,  in  which  event  such  payment  shall  be  made  on the
      immediately preceding Business Day.

                                       45
<PAGE>

            (b)   Allocation   of   Payments   After   Exercise   of   Remedies.
      Notwithstanding  any other  provisions  of this  Credit  Agreement  to the
      contrary,  after the exercise of remedies  (other than the  invocation  of
      default interest pursuant to Section 2.9) by the  Administrative  Agent or
      the  Lenders  pursuant  to  Section  7.2 (or after the  Commitments  shall
      automatically  terminate and the Loans (with accrued interest thereon) and
      all other amounts under the Credit  Documents shall  automatically  become
      due and payable in accordance with the terms of such Section), all amounts
      collected or received by the Administrative Agent or any Lender on account
      of the Credit Party Obligations or any other amounts outstanding under any
      of the Credit Documents or in respect of the Collateral shall be paid over
      or  delivered as follows  (irrespective  of whether the  following  costs,
      expenses, fees, interest,  premiums, scheduled periodic payments or Credit
      Party  Obligations are allowed,  permitted or recognized as a claim in any
      proceeding resulting from the occurrence of a Bankruptcy Event):

                  FIRST,  to the payment of all reasonable  out-of-pocket  costs
            and expenses  (including  without limitation  reasonable  attorneys'
            fees) of the  Administrative  Agent in connection with enforcing the
            rights of the Lenders under the Credit  Documents and any protective
            advances  made  by the  Administrative  Agent  with  respect  to the
            Collateral  under  or  pursuant  to  the  terms  of  the  Collateral
            Documents;

                  SECOND,  to  payment  of any fees  owed to the  Administrative
            Agent and the Issuing Lender;

                  THIRD,  to the payment of all of the Credit Party  Obligations
            consisting of accrued fees and interest;

                  FOURTH, to the payment of the outstanding  principal amount of
            the  Credit  Party  Obligations,   including  the  payment  or  cash
            collateralization  of the  outstanding  LOC  Obligations  and,  with
            respect  to any  Secured  Hedging  Agreement,  any  fees,  premiums,
            scheduled periodic payments, breakage, termination or other payments
            due under such Secured  Hedging  Agreement and any interest  accrued
            thereon;

                  FIFTH, to the payment of the outstanding  principal  amount of
            the  Credit  Party  Obligations,   including  the  payment  or  cash
            collateralization  of the  outstanding  LOC  Obligations,  and  with
            respect to any Secured Hedging Agreement, any breakage,  termination
            or other payments due under such Secured  Hedging  Agreement and any
            interest accrued thereon;

                  SIXTH,  to  all  other  Credit  Party  Obligations  and  other
            obligations which shall have become due and payable under the Credit
            Documents or otherwise  and not repaid  pursuant to clauses  "FIRST"
            through "FIFTH" above; and

                                       46
<PAGE>

                  SEVENTH, to the payment of the surplus, if any, to whoever may
            be lawfully entitled to receive such surplus.

      In carrying out the  foregoing,  (i) amounts  received shall be applied in
      the numerical  order provided until  exhausted prior to application to the
      next  succeeding  category;  (ii)  each of the  Lenders  and  any  Hedging
      Agreement  Providers  shall  receive an amount equal to its pro rata share
      (based  on  the  proportion  that  the  then  outstanding  Loans  and  LOC
      Obligations held by such Lender or the outstanding  obligations payable to
      such Hedging  Agreement  Provider bears to the aggregate then  outstanding
      Loans,  LOC Obligations and obligations  payable under all Secured Hedging
      Agreements)  of  amounts  available  to be  applied  pursuant  to  clauses
      "THIRD", "FOURTH", "FIFTH" and "SIXTH" above; and (iii) to the extent that
      any amounts  available for  distribution  pursuant to clause "FIFTH" above
      are  attributable to the issued but undrawn amount of outstanding  Letters
      of Credit,  such amounts  shall be held by the  Administrative  Agent in a
      cash  collateral  account and applied (A) first,  to reimburse the Issuing
      Lender from time to time for any drawings under such Letters of Credit and
      (B) then,  following the expiration of all Letters of Credit, to all other
      obligations of the types described in clauses "FIFTH" and "SIXTH" above in
      the manner provided in this Section 2.12(b). Notwithstanding the foregoing
      terms of this Section 2.12(b), only Collateral proceeds and payments under
      the Guaranty (as opposed to ordinary  course  principal,  interest and fee
      payments  hereunder)  shall be applied to  obligations  under any  Secured
      Hedging Agreement.

      Section 2.13 Non-Receipt of Funds by the Administrative Agent.

            (a) Unless the  Administrative  Agent  shall have been  notified  in
      writing by a Lender  prior to the date a Loan is to be made by such Lender
      (which  notice shall be effective  upon receipt) that such Lender does not
      intend to make the proceeds of such Loan  available to the  Administrative
      Agent, the Administrative  Agent may assume that such Lender has made such
      proceeds  available  to the  Administrative  Agent on such  date,  and the
      Administrative  Agent may in reliance upon such  assumption (but shall not
      be required to) make available to the Borrower a corresponding  amount. If
      such   corresponding   amount  is  not  in  fact  made  available  to  the
      Administrative  Agent, the  Administrative  Agent shall be able to recover
      such  corresponding  amount from such Lender.  If such Lender does not pay
      such corresponding amount forthwith upon the Administrative Agent's demand
      therefor,  the Administrative Agent will promptly notify the Borrower, and
      the  Borrower  shall  immediately  pay such  corresponding  amount  to the
      Administrative  Agent. The Administrative  Agent shall also be entitled to
      recover from such Lender or the Borrower,  as the case may be, interest on
      such  corresponding  amount  in  respect  of each day  from the date  such
      corresponding amount was made available by the Administrative Agent to the
      Borrower  to the  date  such  corresponding  amount  is  recovered  by the
      Administrative Agent at a per annum rate equal to (i) from the Borrower at
      the applicable rate for the applicable borrowing pursuant to the Notice of
      Borrowing and (ii) from such Lender at the Federal Funds Effective Rate.

            (b) Unless the  Administrative  Agent  shall have been  notified  in
      writing  by the  Borrower,  prior to the date on which any  payment is due
      from the Borrower hereunder

                                       47
<PAGE>

      (which notice shall be effective  upon receipt) that the Borrower does not
      intend to make such payment,  the Administrative Agent may assume that the
      Borrower has made such payment when due, and the Administrative  Agent may
      in  reliance  upon such  assumption  (but shall not be  required  to) make
      available  to each  Lender on such  payment  date an  amount  equal to the
      portion  of  such  assumed  payment  to  which  such  Lender  is  entitled
      hereunder,  and if the  Borrower  has not in fact made such payment to the
      Administrative   Agent,  such  Lender  shall,  on  demand,  repay  to  the
      Administrative  Agent the amount made  available to such  Lender.  If such
      amount is repaid to the Administrative Agent on a date after the date such
      amount was made  available  to such  Lender,  such Lender shall pay to the
      Administrative  Agent on demand interest on such amount in respect of each
      day from the date such  amount was made  available  by the  Administrative
      Agent  to  such  Lender  to the  date  such  amount  is  recovered  by the
      Administrative  Agent  at a per  annum  rate  equal to the  Federal  Funds
      Effective Rate.

            (c) A  certificate  of the  Administrative  Agent  submitted  to the
      Borrower or any Lender with respect to any amount owing under this Section
      2.13 shall be conclusive in the absence of manifest error.

      Section 2.14 Inability to Determine Interest Rate.

      Notwithstanding  any other provision of this Credit Agreement,  if (i) the
Administrative  Agent shall reasonably  determine (which  determination shall be
conclusive and binding absent manifest  error) that, by reason of  circumstances
affecting the relevant  market,  reasonable  and adequate means do not exist for
ascertaining  LIBOR for such Interest Period, or (ii) the Required Lenders shall
reasonably determine (which determination shall be conclusive and binding absent
manifest  error) that the LIBOR Rate does not  adequately and fairly reflect the
cost to such Lenders of funding LIBOR Rate Loans that the Borrower has requested
be   outstanding  as  a  LIBOR  Tranche   during  such  Interest   Period,   the
Administrative   Agent   shall   forthwith   give   telephone   notice  of  such
determination,  confirmed in writing, to the Borrower,  and the Lenders at least
two (2) Business Days prior to the first day of such Interest Period. Unless the
Borrower  shall have  notified  the  Administrative  Agent upon  receipt of such
telephone notice that it wishes to rescind or modify its request  regarding such
LIBOR Rate Loans,  any Loans that were  requested to be made as LIBOR Rate Loans
shall be made as Alternate  Base Rate Loans and any Loans that were requested to
be  converted  into or  continued  as LIBOR  Rate  Loans  shall  remain as or be
converted  into  Alternate  Base  Rate  Loans.  Until any such  notice  has been
withdrawn  by the  Administrative  Agent,  no  further  Loans  shall be made as,
continued as, or converted  into,  LIBOR Rate Loans for the Interest  Periods so
affected.

      Section 2.15 Illegality.

      Notwithstanding  any other  provision  of this  Credit  Agreement,  if the
adoption of or any change in any Requirement of Law or in the  interpretation or
application thereof by the relevant  Governmental  Authority to any Lender shall
make it unlawful for such Lender or its LIBOR Lending Office to make or maintain
LIBOR Rate Loans as  contemplated  by this Credit  Agreement or to obtain in the
interbank  eurodollar  market  through its LIBOR  Lending  Office the funds with
which  to  make  such  Loans,   (a)  such  Lender  shall  promptly   notify  the
Administrative

                                       48
<PAGE>

Agent and the Borrower  thereof,  (b) the commitment of such Lender hereunder to
make LIBOR Rate Loans or continue  LIBOR Rate Loans as such shall  forthwith  be
suspended until the Administrative Agent shall give notice that the condition or
situation which gave rise to the suspension  shall no longer exist, and (c) such
Lender's Loans then  outstanding as LIBOR Rate Loans, if any, shall be converted
on the last day of the  Interest  Period for such Loans or within  such  earlier
period as required by law to  Alternate  Base Rate Loans.  The  Borrower  hereby
agrees  promptly to pay any  Lender,  upon its demand,  any  additional  amounts
necessary  to  compensate  such  Lender for  actual  and  direct  costs (but not
including anticipated profits) reasonably incurred by such Lender including, but
not limited to, any  interest or fees payable by such Lender to lenders of funds
obtained by it in order to make or maintain  its LIBOR Rate Loans  hereunder.  A
certificate  as to any  additional  amounts  payable  pursuant  to this  Section
submitted  by such Lender,  through the  Administrative  Agent,  to the Borrower
shall be conclusive in the absence of manifest error.  Each Lender agrees to use
reasonable  efforts  (including  reasonable  efforts to change its LIBOR Lending
Office) to avoid or to  minimize  any  amounts  which may  otherwise  be payable
pursuant to this Section;  provided,  however, that such efforts shall not cause
the  imposition  on such Lender of any  additional  costs or legal or regulatory
burdens deemed by such Lender in its sole discretion to be material.

      Section 2.16 Requirements of Law.

            (a) If the adoption of or any change in any Requirement of Law or in
      the interpretation or application thereof or compliance by any Lender with
      any request or directive (whether or not having the force of law) from any
      central bank or other  Governmental  Authority made subsequent to the date
      hereof:

                  (i)  shall  subject  such  Lender  to  any  tax  of  any  kind
            whatsoever with respect to any Letter of Credit,  any  Participation
            Interest therein or any application relating thereto, any LIBOR Rate
            Loan made by it, or change the basis of taxation of payments to such
            Lender in respect  thereof (except for changes in the rate of tax on
            the overall net income of such Lender);

                  (ii) shall  impose,  modify or hold  applicable  any  reserve,
            special  deposit,  compulsory  loan or similar  requirement  against
            assets held by, deposits or other  liabilities in or for the account
            of,  advances,  loans or other extensions of credit by, or any other
            acquisition  of funds by,  any  office of such  Lender  which is not
            otherwise included in the determination of the LIBOR Rate hereunder;
            or

                  (iii) shall impose on such Lender any other condition;

            and the result of any of the  foregoing  is to increase  the cost to
      such  Lender of making or  maintaining  LIBOR Rate Loans or the Letters of
      Credit (or the  Participations  Interests therein) or to reduce any amount
      receivable  hereunder  or under  any Note,  then,  in any such  case,  the
      Borrower shall promptly pay such Lender,  upon its demand,  any additional
      amounts  necessary to compensate  such Lender for such  additional cost or
      reduced  amount  receivable  which  such  Lender  reasonably  deems  to be
      material as determined by such Lender with respect to its LIBOR Rate Loans
      or Letters of Credit. A

                                       49
<PAGE>

      certificate as to any additional  amounts payable pursuant to this Section
      submitted  by  such  Lender,  through  the  Administrative  Agent,  to the
      Borrower shall be conclusive in the absence of manifest error. Each Lender
      agrees to use reasonable efforts  (including  reasonable efforts to change
      its Domestic  Lending Office or LIBOR Lending Office,  as the case may be)
      to avoid or to minimize  any  amounts  which  might  otherwise  be payable
      pursuant to this paragraph of this Section;  provided,  however, that such
      efforts shall not cause the  imposition  on such Lender of any  additional
      costs or legal or  regulatory  burdens  deemed by such  Lender in its sole
      discretion to be material.

            (b) If any Lender shall have reasonably determined that the adoption
      of or any change in any Requirement of Law regarding  capital  adequacy or
      in the interpretation or application  thereof or compliance by such Lender
      or any corporation  controlling  such Lender with any request or directive
      regarding  capital adequacy  (whether or not having the force of law) from
      any central bank or  Governmental  Authority  made  subsequent to the date
      hereof  does or shall  have the effect of  reducing  the rate of return on
      such  Lender's  or such  corporation's  capital  as a  consequence  of its
      obligations  hereunder  to a level  below that  which such  Lender or such
      corporation  could  have  achieved  but  for  such  adoption,   change  or
      compliance  (taking into consideration such Lender's or such corporation's
      policies with respect to capital  adequacy) by an amount reasonably deemed
      by such Lender in its sole  discretion  to be material,  then from time to
      time, within fifteen days after demand by such Lender,  the Borrower shall
      pay to such Lender such  additional  amount as shall be  certified by such
      Lender as being  required  to  compensate  it for such  reduction.  Such a
      certificate  as to any  additional  amounts  payable  under  this  Section
      submitted by a Lender (which  certificate  shall include a description  of
      the basis for the computation),  through the Administrative  Agent, to the
      Borrower shall be conclusive absent manifest error.

            (c)  The   agreements   in  this  Section  2.16  shall  survive  the
      termination  of this  Credit  Agreement  and  payment of the Notes and all
      other amounts payable hereunder.

      Section 2.17 Indemnity.

      The  Borrower  hereby  agrees to  indemnify  each  Lender and to hold such
Lender  harmless  from any funding loss or expense which such Lender may sustain
or  incur  as a  consequence  of (a)  the  failure  of the  Borrower  to pay the
principal  amount of or interest on any Loan by such Lender in  accordance  with
the terms  hereof,  (b) the failure of the Borrower to accept a borrowing  after
the Borrower has given a notice in  accordance  with the terms  hereof,  (c) the
failure of the  Borrower to make any  prepayment  after the Borrower has given a
notice  in  accordance  with the  terms  hereof,  and/or  (d) the  making by the
Borrower of a prepayment of a Loan, or the conversion thereof, on a day which is
not the last day of the  Interest  Period  with  respect  thereto,  in each case
including, but not limited to, any such loss or expense arising from interest or
fees  payable  by such  Lender to lenders  of funds  obtained  by it in order to
maintain its Loans hereunder, but excluding any such loss or expense due to such
Lender's  gross  negligence  or  willful  misconduct.  A  certificate  as to any
additional  amounts  payable  pursuant to this Section  submitted by any Lender,
through the  Administrative  Agent, to the Borrower (which  certificate  must be
delivered to the  Administrative  Agent within thirty (30) days  following  such
default,

                                       50
<PAGE>

prepayment or conversion)  shall be conclusive in the absence of manifest error.
The  agreements  in this  Section  shall  survive  termination  of  this  Credit
Agreement and payment of the Notes and all other amounts payable hereunder.

      Section 2.18 Taxes.

            (a) All payments  made by the  Borrower  hereunder or under any Note
      will be,  except as provided in Section  2.18(b),  made free and clear of,
      and without  deduction or  withholding  for, any present or future  taxes,
      levies,  imposts,  duties, fees,  assessments or other charges of whatever
      nature now or hereafter  imposed by any  Governmental  Authority or by any
      political  subdivision or taxing authority thereof or therein with respect
      to such payments (but  excluding any tax imposed on or measured by the net
      income or profits of a Lender pursuant to the laws of the  jurisdiction in
      which it is organized or the jurisdiction in which the principal office or
      applicable  lending  office of such  Lender is located or any  subdivision
      thereof or therein) and all  interest,  penalties  or similar  liabilities
      with  respect  thereto  (all such  non-excluded  taxes,  levies,  imposts,
      duties, fees,  assessments or other charges being referred to collectively
      as "Taxes"). If any Taxes are so levied or imposed, the Borrower agrees to
      pay the full amount of such Taxes,  and such additional  amounts as may be
      necessary  so that every  payment  of all  amounts  due under this  Credit
      Agreement or under any Note,  after  withholding  or  deduction  for or on
      account of any Taxes, will not be less than the amount provided for herein
      or in such Note. The Borrower will furnish to the Administrative  Agent as
      soon as  practicable  after  the  date  the  payment  of any  Taxes is due
      pursuant to  applicable  law  certified  copies (to the extent  reasonably
      available and required by law) of tax receipts  evidencing such payment by
      the  Borrower.  The Borrower  agrees to indemnify  and hold  harmless each
      Lender, and reimburse such Lender upon its written request, for the amount
      of any Taxes so levied or imposed and paid by such Lender.

            (b) Each Lender that is not a United  States person (as such term is
      defined  in  Section  7701(a)(30)  of the Code)  agrees to  deliver to the
      Borrower and the Administrative  Agent on or prior to the Closing Date, or
      in the case of a Lender that is an assignee or  transferee  of an interest
      under this  Credit  Agreement  pursuant  to  Section  9.6(d)  (unless  the
      respective Lender was already a Lender hereunder immediately prior to such
      assignment  or  transfer),  on the date of such  assignment or transfer to
      such Lender,  (i) if the Lender is a "bank"  within the meaning of Section
      881(c)(3)(A) of the Code, two accurate and complete original signed copies
      of Internal  Revenue  Service Form W-8BEN,  W-8ECI or W-8IMY (or successor
      forms) certifying such Lender's  entitlement to a complete  exemption from
      United  States  withholding  tax with respect to payments to be made under
      this Credit  Agreement  and under any Note, or (ii) if the Lender is not a
      "bank" within the meaning of Section  881(c)(3)(A)  of the Code,  Internal
      Revenue  Service Form W-8BEN,  W-8ECI or W-8IMY as set forth in clause (i)
      above,  or (x) a certificate  in  substantially  the form of Schedule 2.18
      (any such  certificate,  a "Tax Exempt  Certificate") and (y) two accurate
      and  complete  original  signed  copies of Internal  Revenue  Service Form
      W-8BEN (or successor  form)  certifying  such Lender's  entitlement  to an
      exemption from United States  withholding  tax with respect to payments of
      interest to be made under this  Credit  Agreement  and under any Note.  In
      addition, each Lender

                                       51
<PAGE>

      agrees that it will deliver upon the Borrower's  request updated  versions
      of the foregoing,  as applicable,  whenever the previous certification has
      become obsolete or inaccurate in any material respect,  together with such
      other  forms as may be  required  in order to  confirm  or  establish  the
      entitlement  of such Lender to a continued  exemption from or reduction in
      United States  withholding  tax with respect to payments under this Credit
      Agreement and any Note. Notwithstanding anything to the contrary contained
      in Section 2.18(a),  but subject to the immediately  succeeding  sentence,
      (x) the Borrower shall be entitled,  to the extent it is required to do so
      by law, to deduct or withhold  Taxes  imposed by the United States (or any
      political  subdivision  or  taxing  authority  thereof  or  therein)  from
      interest,  fees or other amounts payable  hereunder for the account of any
      Lender  which is not a United  States  person  (as such term is defined in
      Section  7701(a)(30) of the Code) for U.S.  federal income tax purposes to
      the extent that such Lender has not provided to the Borrower U.S. Internal
      Revenue  Service  Forms  that  establish  a complete  exemption  from such
      deduction  or  withholding  and (y) the  Borrower  shall not be  obligated
      pursuant to Section  2.18(a)  hereof to gross-up  payments to be made to a
      Lender in respect of Taxes imposed by the United States if (I) such Lender
      has not  provided to the  Borrower  the  Internal  Revenue  Service  Forms
      required to be provided to the Borrower  pursuant to this Section  2.18(b)
      or (II)  in the  case of a  payment,  other  than  interest,  to a  Lender
      described  in clause  (ii)  above,  to the  extent  that such Forms do not
      establish  a  complete   exemption   from   withholding   of  such  Taxes.
      Notwithstanding  anything  to the  contrary  contained  in  the  preceding
      sentence or  elsewhere in this Section  2.18,  the Borrower  agrees to pay
      additional amounts and to indemnify each Lender in the manner set forth in
      Section  2.18(a)  (without  regard  to the  identity  of the  jurisdiction
      requiring the deduction or withholding) in respect of any amounts deducted
      or withheld by it as described in the immediately  preceding sentence as a
      result  of any  changes  after the  Closing  Date in any  applicable  law,
      treaty,  governmental  rule,  regulation,  guideline  or order,  or in the
      interpretation thereof, relating to the deducting or withholding of Taxes.

            (c)  Each  Lender  agrees  to  use  reasonable   efforts  (including
      reasonable  efforts to change its Domestic Lending Office or LIBOR Lending
      Office,  as the case may be) to avoid or to  minimize  any  amounts  which
      might otherwise be payable  pursuant to this Section;  provided,  however,
      that such  efforts  shall not cause the  imposition  on such Lender of any
      additional  costs or legal or regulatory  burdens deemed by such Lender in
      its reasonable discretion to be material.

            (d) If the  Borrower  pays any  additional  amount  pursuant to this
      Section  2.18 with respect to a Lender,  such Lender shall use  reasonable
      efforts to obtain a refund of tax or credit against its tax liabilities on
      account  of  such  payment;  provided  that  such  Lender  shall  have  no
      obligation to use such reasonable efforts if either (i) it is in an excess
      foreign tax credit position or (ii) it believes in good faith, in its sole
      discretion,  that  claiming a refund or credit  would  cause  adverse  tax
      consequences  to it. In the event that such Lender  receives such a refund
      or credit,  such  Lender  shall pay to the  Borrower  an amount  that such
      Lender  reasonably  determines is equal to the net tax benefit obtained by
      such Lender as a result of such payment by the Borrower. In the event that
      no refund or credit is obtained with respect to the Borrower's payments to
      such Lender pursuant to this

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<PAGE>

      Section 2.18,  then such Lender shall upon request provide a certification
      that such  Lender has not  received a refund or credit for such  payments.
      Nothing  contained in this Section 2.18 shall require a Lender to disclose
      or detail the basis of its calculation of the amount of any tax benefit or
      any  other  amount or the basis of its  determination  referred  to in the
      proviso to the first  sentence of this Section 2.18 to the Borrower or any
      other party.

            (e)  The   agreements   in  this  Section  2.18  shall  survive  the
      termination of this Credit  Agreement and the payment of the Notes and all
      other amounts payable hereunder.

      Section 2.19 Indemnification; Nature of Issuing Lender's Duties.

            (a) In addition to its other  obligations  under  Section  2.3,  the
      Borrower  hereby  agrees to protect,  indemnify,  pay and save the Issuing
      Lender and each  Revolving  Lender  harmless  from and against any and all
      claims, demands, liabilities, damages, losses, costs, charges and expenses
      (including  reasonable  attorneys'  fees) that the Issuing  Lender or such
      Revolving  Lender may incur or be subject to as a  consequence,  direct or
      indirect,  of (i) the issuance of any Letter of Credit or (ii) the failure
      of the  Issuing  Lender to honor a  drawing  under a Letter of Credit as a
      result  of any act or  omission,  whether  rightful  or  wrongful,  of any
      present or future de jure or de facto government or governmental authority
      (all such acts or omissions, herein called "Government Acts").

            (b) As  between  the  Borrower  and  the  Issuing  Lender  and  each
      Revolving  Lender,  the  Borrower  shall  assume  all  risks of the  acts,
      omissions  or misuse of any Letter of Credit by the  beneficiary  thereof.
      Neither the Issuing Lender nor any Revolving  Lender shall be responsible:
      (i) for the form, validity,  sufficiency,  accuracy,  genuineness or legal
      effect  of any  document  submitted  by any party in  connection  with the
      application for and issuance of any Letter of Credit, even if it should in
      fact prove to be in any or all respects invalid, insufficient, inaccurate,
      fraudulent  or  forged;  (ii)  for  the  validity  or  sufficiency  of any
      instrument  transferring  or assigning or purporting to transfer or assign
      any  Letter of Credit or the rights or  benefits  thereunder  or  proceeds
      thereof,  in whole or in part, that may prove to be invalid or ineffective
      for any reason; (iii) for failure of the beneficiary of a Letter of Credit
      to comply fully with conditions required in order to draw upon a Letter of
      Credit;   (iv)  for  errors,   omissions,   interruptions   or  delays  in
      transmission or delivery of any messages, by mail, cable, telegraph, telex
      or  otherwise,  whether  or not  they  be in  cipher;  (v) for  errors  in
      interpretation  of  technical  terms;  (vi)  for any  loss or delay in the
      transmission  or  otherwise  of any  document  required in order to make a
      drawing under a Letter of Credit or of the proceeds thereof; and (vii) for
      any  consequences  arising  from causes  beyond the control of the Issuing
      Lender  or  any  Revolving  Lender,  including,  without  limitation,  any
      Government  Acts. None of the above shall affect,  impair,  or prevent the
      vesting of the Issuing Lender's rights or powers hereunder.

            (c) In  furtherance  and  extension  and  not in  limitation  of the
      specific provisions  hereinabove set forth, any action taken or omitted by
      the Issuing Lender or any Revolving  Lender,  under or in connection  with
      any Letter of Credit or the related  certificates,  if taken or omitted in
      the absence of gross negligence or willful misconduct,

                                       53
<PAGE>

      shall not put such  Issuing  Lender  or such  Revolving  Lender  under any
      resulting  liability to the  Borrower.  It is the intention of the parties
      that this Credit  Agreement  shall be construed and applied to protect and
      indemnify the Issuing Lender and each Revolving Lender against any and all
      risks  involved in the  issuance  of the  Letters of Credit,  all of which
      risks are hereby assumed by the Borrower,  including,  without limitation,
      any and all risks of the acts or omissions,  whether rightful or wrongful,
      of any Government Authority.  The Issuing Lender and the Revolving Lenders
      shall not, in any way, be liable for any failure by the Issuing  Lender or
      anyone else to pay any  drawing  under any Letter of Credit as a result of
      any  Government  Acts or any other cause beyond the control of the Issuing
      Lender and the Revolving Lenders.

            (d)  Nothing  in  this   Section  2.19  is  intended  to  limit  the
      Reimbursement  Obligation  of the  Borrower  contained  in Section  2.3(d)
      hereof.  The  obligations  of the  Borrower  under this Section 2.19 shall
      survive the termination of this Credit  Agreement.  No act or omissions of
      any current or prior  beneficiary  of a Letter of Credit  shall in any way
      affect or  impair  the  rights of the  Issuing  Lender  and the  Revolving
      Lenders  to  enforce  any  right,  power  or  benefit  under  this  Credit
      Agreement.

            (e)  Notwithstanding  anything  to the  contrary  contained  in this
      Section  2.19,  the Borrower  shall have no  obligation  to indemnify  the
      Issuing  Lender  or any  Revolving  Lender  in  respect  of any  liability
      incurred by the Issuing Lender or such Revolving Lender arising out of the
      gross  negligence or willful  misconduct of the Issuing Lender  (including
      action  not taken by the  Issuing  Lender or such  Revolving  Lender),  as
      determined   by  a  court  of  competent   jurisdiction   or  pursuant  to
      arbitration.

                                   ARTICLE III

                         REPRESENTATIONS AND WARRANTIES

      To induce the Lenders to enter into this Credit  Agreement and to make the
Extensions of Credit herein  provided for, the Credit Parties  hereby  represent
and warrant to the Administrative Agent and to each Lender that:

      Section 3.1 Financial Condition.

      The  Borrower  has  delivered  the  following  financial   statements  and
projections to the Administrative  Agent and the Lenders,  in form and substance
reasonably satisfactory to the Administrative Agent:

            (a) unaudited  balance  sheets and the related  statements of income
      and of cash flows of the Borrower and its  consolidated  Subsidiaries  for
      the fiscal year ended December 31, 2004;

                                       54
<PAGE>

            (b) unaudited  balance  sheets and the related  statements of income
      and of cash flows of the Borrower and its  consolidated  Subsidiaries  for
      fiscal quarter ended June 30, 2005;

            (c)  unaudited  monthly  balance  sheets and related  statements  of
      income for the  Borrower  and its  consolidated  Subsidiaries  through the
      month  most  recently  ended  prior to the  Closing  Date for  which  such
      statements are available;

            (d) an opening  balance  sheet of the Borrower and its  consolidated
      Subsidiaries  as of June 30,  2005  giving  effect  to the  initial  Loans
      hereunder and the other transactions to occur on the Closing Date; and

            (e) six-year projections (consisting of projected balance sheets and
      statements  of income  and cash flows  prepared  by the  Borrower)  of the
      Borrower and its consolidated Subsidiaries, which shall have been prepared
      in good faith based upon reasonable assumptions.

      The financial statements referred to in subsections (a), (b), (c), and (d)
above are complete and correct and present fairly the financial condition of the
Borrower and its Subsidiaries as of such dates.  All such financial  statements,
including  the  related  schedules  and notes  thereto,  have been  prepared  in
accordance  with GAAP  applied  consistently  throughout  the  periods  involved
(except as disclosed therein).

      Section 3.2 No Change.

      Since  December 31, 2003 there has been no  development or event which has
had or could reasonably be expected to have a Material Adverse Effect.

      Section 3.3 Corporate Existence; Compliance with Law.

      Each of the Borrower and the other Credit  Parties (a) is duly  organized,
validly  existing and in good standing under the laws of the jurisdiction of its
incorporation or organization; (b) has the requisite power and authority and the
legal  right to own and  operate  all its  property,  to lease the  property  it
operates as lessee and to conduct the business in which it is currently engaged;
(c) is duly qualified to conduct business and in good standing under the laws of
(i) the jurisdiction of its organization,  (ii) the jurisdiction where its chief
executive  office is  located  and (iii) and each other  jurisdiction  where its
ownership,  lease or  operation  of  property  or the  conduct  of its  business
requires such qualification  except to the extent that the failure to so qualify
or be in good standing in any such other jurisdiction could not, individually or
in the aggregate,  reasonably be expected to have a Material Adverse Effect; and
(d) is in compliance with all  Requirements of Law except to the extent that the
failure  to  comply  therewith  could  not,  individually  or in the  aggregate,
reasonably be expected to have a Material  Adverse  Effect;  provided,  however,
that the  Borrower is not in  compliance  with certain SEC  requirements  as set
forth in the SEC Letter but such non-compliance could not reasonably be expected
to have a Material  Adverse  Effect.  Without  limiting  the  generality  of the
foregoing, each of the Borrower and the other Credit Parties represents that:

                                       55
<PAGE>

            (i) (A)  There is no  Credit  Party or  individual  employed  by any
      Credit Party who may  reasonably be expected to have criminal  culpability
      or  to  be  excluded  or  suspended  from  participation  in  any  Medical
      Reimbursement  Program  for  their  corporate  or  individual  actions  or
      failures to act where such culpability, exclusion and/or suspension has or
      could be reasonably  expected to result in a Material Adverse Effect;  and
      (B) there is no member of  management  continuing  to be  employed  by any
      Credit Party who may reasonably be expected to have individual culpability
      for matters under investigation by any Governmental  Authority unless such
      member of management  has been,  within a reasonable  period of time after
      discovery of such actual or  potential  culpability,  either  suspended or
      removed from positions of responsibility related to those activities under
      challenge by the Governmental  Authority and where such failure to suspend
      or remove such Person has or could be  reasonably  expected to result in a
      Material Adverse Effect;

            (ii)  Current   billing   policies,   arrangements,   protocols  and
      instructions  comply with requirements of Medical  Reimbursement  Programs
      and are administered by properly  trained  personnel except where any such
      failure to comply could not reasonably be expected to result in a Material
      Adverse Effect; and

            (iii) Current medical director  compensation  arrangements,  if any,
      and other  arrangements  with referring  physicians,  if any,  comply with
      state and federal  self-referral and anti-kickback laws, including without
      limitation 42 U.S.C. Section 1320a-7b(b)(1) - (b)(2) and 42 U.S.C. Section
      1395nn,  except where any such failure to comply could not  reasonably  be
      expected to result in a Material Adverse Effect.

      Section 3.4 Corporate Power; Authorization; Enforceable Obligations.

      Each of the  Borrower  and the other  Credit  Parties  has full  power and
authority and the legal right to make,  deliver and perform the Credit Documents
to which it is party and has taken all necessary  limited  liability  company or
corporate  action to authorize the execution,  delivery and performance by it of
the Credit  Documents  to which it is party.  No consent  or  authorization  of,
filing  with,  notice  to or other act by or in  respect  of,  any  Governmental
Authority or any other Person (except as it may relate to immaterial  contracts)
is required in connection  with the borrowings  hereunder or with the execution,
delivery or  performance  of any Credit  Document  by the  Borrower or the other
Credit  Parties (other than those which have been obtained) or with the validity
or  enforceability  of any Credit  Document  against  the  Borrower or the other
Credit  Parties  (except such filings as are  necessary in  connection  with the
perfection of the Liens created by such Credit Documents).  Each Credit Document
to which it is a party has been duly  executed  and  delivered  on behalf of the
Borrower and the other Credit Parties,  as the case may be. Each Credit Document
to which it is a party constitutes a legal,  valid and binding obligation of the
Borrower and the other Credit Parties,  as the case may be, enforceable  against
the Borrower and such other Credit Party, as the case may be, in accordance with
its terms,  except as  enforceability  may be limited by applicable  bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors'  rights  generally and by general  equitable  principles  (whether
enforcement is sought by proceedings in equity or at law).

                                       56
<PAGE>

      Section 3.5 No Legal Bar; No Default.

      The  execution,  delivery and  performance  of the Credit  Documents,  the
borrowings  thereunder and the use of the proceeds of the Loans will not violate
(a)  any  Requirement  of Law  or any  material  Contractual  Obligation  of the
Borrower or any other Credit Party (except those as to which waivers or consents
have been  obtained),  (b) conflict with,  result in a breach of or constitute a
default under any approval or consent from any Governmental  Authority  relating
to such  Person,  and (c) will not  result  in,  or  require,  the  creation  or
imposition of any Lien on any Credit Party's  properties or revenues pursuant to
any  Requirement of Law or Contractual  Obligation  other than the Liens arising
under or  contemplated  in  connection  with the Credit  Documents.  Neither the
Borrower nor any other  Credit Party is in default  under or with respect to any
of its Contractual Obligations in any respect which could reasonably be expected
to have a Material  Adverse Effect.  No Default or Event of Default has occurred
and is continuing.

      Section 3.6 No Material Litigation.

      No  litigation,   investigation,   claim,  criminal   prosecution,   civil
investigative  demand,  imposition of criminal or civil fines and penalties,  or
any other  proceeding  of or before any  arbitrator  or  Governmental  Authority
including  but  not  limited  to  those  regulatory  agencies   responsible  for
licensing, accrediting or issuing Medicare or Medicaid certifications is pending
or, to the best  knowledge of the Credit  Parties,  threatened by or against any
Credit  Party  or  any of  its  Subsidiaries  or  against  any  of its or  their
respective  properties  or revenues (a) with respect to the Credit  Documents or
any Extension of Credit or any of the transactions  contemplated  hereby, or (b)
which,  if  adversely  determined,  could  individually  or  in  the  aggregate,
reasonably be expected to have a Material Adverse Effect.

      Section 3.7 Investment Company Act; PUHCA; Etc..

      Neither  the  Borrower  nor  any  other  Credit  Party  is an  "investment
company",  or a company  "controlled"  by an  "investment  company",  within the
meaning of the Investment Company Act of 1940, as amended.  Neither the Borrower
nor any other Credit  Party is subject to  regulation  under the Public  Utility
Holding  Company Act of 1935, as amended,  the Federal Power Act, the Interstate
Commerce Act or any federal or state statute or regulation  limiting its ability
to incur the Credit Party Obligations.

      Section 3.8 Margin Regulations.

      No part of the proceeds of any Extension of Credit  hereunder will be used
directly  or  indirectly  for  any  purpose  which  violates,   which  would  be
inconsistent  with or which  would  require  any  Lender  to make any  filing in
accordance  with,  the  provisions  of  Regulation  T,  U or X of the  Board  of
Governors of the Federal  Reserve  System as now and from time to time hereafter
in effect. The Credit Parties and their Subsidiaries taken as a group do not own
"margin stock" except as identified in the financial  statements  referred to in
Section 3.1 and the  aggregate  value of all "margin  stock" owned by the Credit
Parties  and their  Subsidiaries  taken as a group does not  exceed  twenty-five
percent (25%) of the value of their assets.

                                       57
<PAGE>

      Section 3.9 ERISA.

      Neither a Reportable Event nor an "accumulated funding deficiency" (within
the  meaning of Section  412 of the Code or Section  302 of ERISA) has  occurred
during the five-year  period prior to the date on which this  representation  is
made or deemed made with respect to any Plan,  and each Plan has complied in all
material  respects with the applicable  provisions of ERISA and the Code, except
to the extent that any such occurrence or failure to comply would not reasonably
be  expected  to have a Material  Adverse  Effect.  No  termination  of a Single
Employer  Plan  has  occurred  resulting  in any  liability  that  has  remained
underfunded,  and no Lien in favor of the PBGC or a Plan has arisen, during such
five-year  period which could  reasonably be expected to have a Material Adverse
Effect.  The present value of all accrued  benefits  under each Single  Employer
Plan  (based on those  assumptions  used to fund such  Plans) did not, as of the
last annual  valuation  date prior to the date on which this  representation  is
made or deemed  made,  exceed the value of the assets of such Plan  allocable to
such accrued benefits by an amount which, as determined in accordance with GAAP,
could  reasonably  be expected to have a Material  Adverse  Effect.  Neither any
Credit Party nor any  Commonly  Controlled  Entity is  currently  subject to any
liability for a complete or partial  withdrawal from a Multiemployer  Plan which
could reasonably be expected to have a Material Adverse Effect.

      Section 3.10 Environmental Matters.

            (a) To the best  knowledge  of the  Borrower  and the  other  Credit
      Parties,  the facilities and properties  owned,  leased or operated by the
      Borrower and the other Credit  Parties or any of their  Subsidiaries  (the
      "Properties")  do not contain any  Materials of  Environmental  Concern in
      amounts or  concentrations  which (i)  constitute a violation  of, or (ii)
      could give rise to  liability  on behalf of any Credit  Party  under,  any
      Environmental  Law,  which  could  reasonably  be  expected to result in a
      Material Adverse Effect.

            (b) To the best  knowledge  of the  Borrower  and the  other  Credit
      Parties,  the  Properties and all operations of the Borrower and the other
      Credit  Parties  and/or  their  Subsidiaries  at  the  Properties  are  in
      compliance,  and have in the last five (5) years (or in the case of leased
      Property,  during the period of time that the applicable Credit Party have
      leased such Property),  been in compliance,  in all material respects with
      all applicable Environmental Laws, and there is no contamination at, under
      or about the Properties or violation of any Environmental Law with respect
      to the  Properties or the business  operated by the Borrower and the other
      Credit Parties or any of their Subsidiaries (the "Business") for which any
      Credit Party could  reasonably  be expected to have  liability  that could
      result in a Material Adverse Effect.

            (c) Neither the  Borrower  nor any of the other  Credit  Parties has
      received any written or actual  notice of  violation,  alleged  violation,
      non-compliance,  liability or potential liability regarding  environmental
      matters or compliance  with  Environmental  Laws with regard to any of the
      Properties  or the  Business,  nor does the  Borrower  or any of the other
      Credit Parties nor any of their  Subsidiaries  have knowledge or reason to
      believe that any such notice will be received or is being threatened.

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<PAGE>

            (d) To the best  knowledge  of the  Borrower  and the  other  Credit
      Parties,  Materials of Environmental  Concern have not been transported or
      disposed of from the  Properties  in violation  of, or in a manner or to a
      location  which could give rise to liability on behalf of any Credit Party
      under any  Environmental  Law,  nor, to the knowledge of any Credit Party,
      have any  Materials  of  Environmental  Concern been  generated,  treated,
      stored or disposed of at, on or under any of the  Properties  in violation
      of, or in a manner  that  could  give rise to  liability  on behalf of any
      Credit  Party  under,  any  applicable   Environmental   Law  which  could
      reasonably be expected to result in a Material Adverse Effect.

            (e) No judicial proceeding or governmental or administrative  action
      is pending  or, to the  knowledge  of the  Borrower  and the other  Credit
      Parties,  threatened, under any Environmental Law to which the Borrower or
      any other  Credit Party or any  Subsidiary  is or will be named as a party
      with respect to the  Properties or the  Business,  nor to the knowledge of
      any Credit Party 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 the Properties or the Business pursuant to which any Credit Party would
      have  liability  which  could  reasonably  be  expected to have a Material
      Adverse Effect.

            (f) To the best  knowledge  of the  Borrower  and the  other  Credit
      Parties,  there has been no release or threat of release of  Materials  of
      Environmental  Concern  at or from  the  Properties,  or  arising  from or
      related to the operations of the Borrower or any other Credit Party or any
      Subsidiary  in connection  with the  Properties or otherwise in connection
      with the Business, in violation of or in amounts or in a manner that could
      give rise to liability  on behalf of any Credit Party under  Environmental
      Laws which could  reasonably  be expected to result in a Material  Adverse
      Effect.

      Section 3.11 Use of Proceeds.

      The  proceeds  of the  Extensions  of Credit  shall be used  solely by the
Borrower to (i) repay certain existing  indebtedness  (including the Convertible
Bonds),   (ii)  pay  any  fees  and  expenses  owing  to  the  Lenders  and  the
Administrative  Agent in connection with this Credit Agreement and (iii) provide
for working capital and other general corporate  purposes,  including  Permitted
Acquisitions and permitted capital expenditures.

      Section 3.12 Subsidiaries; Joint Ventures; Partnerships.

      Set  forth  on  Schedule  3.12  is a  complete  and  accurate  list of all
Subsidiaries, joint ventures and partnerships of the Credit Parties. Information
on the attached  Schedule  includes state of incorporation or organization;  the
number  of shares  of each  class of  Capital  Stock or other  equity  interests
outstanding;  the number and percentage of  outstanding  shares of each class of
Capital  Stock;  and the number and effect,  if  exercised,  of all  outstanding
options,  warrants,  rights of  conversion or purchase and similar  rights.  The
outstanding Capital Stock and other equity interests of all such Subsidiaries is
validly issued, fully paid and non-assessable and is

                                       59
<PAGE>

owned,  free  and  clear  of all  Liens  (other  than  those  arising  under  or
contemplated in connection with the Credit  Documents).  The Borrower may update
Schedule 3.12 from time to time by providing a replacement  Schedule 3.12 to the
Administrative Agent.

      Section 3.13 Ownership.

      Each Credit Party and its  Subsidiaries  is the owner of, and has good and
marketable  title to, all of its respective  assets,  except as may be permitted
pursuant Section 6.13 hereof, and a valid and enforceable  leasehold interest in
all of its leased real property,  and none of such assets is subject to any Lien
other than Permitted Liens.

      Section 3.14 Indebtedness.

      Except as otherwise  permitted  under Section 6.1, the Credit  Parties and
their Subsidiaries have no Indebtedness.

      Section 3.15 Taxes.

      Each of the Credit Parties and its Subsidiaries has filed, or caused to be
filed, all tax returns (federal,  state, local and foreign) required to be filed
and paid (a) all amounts of taxes shown  thereon to be due  (including  interest
and penalties) and (b) all other taxes, fees, assessments and other governmental
charges  (including  mortgage  recording  taxes,  documentary  stamp  taxes  and
intangibles  taxes)  owing by it,  except  for such  taxes (i) which are not yet
delinquent  or (ii)  that  are  being  contested  in good  faith  and by  proper
proceedings,  and  against  which  adequate  reserves  are being  maintained  in
accordance  with  GAAP.  Neither  any  of  the  Credit  Parties  nor  any of its
Subsidiaries  are aware as of the Closing Date of any  proposed tax  assessments
against it or any of its Subsidiaries which could reasonably be expected to have
a Material Adverse Effect.

      Section 3.16 Intellectual Property.

      Each of the Credit  Parties and its  Subsidiaries  owns,  or has the legal
right to use,  all  Intellectual  Property to conduct its  business as currently
conducted,  except to the extent that the failure thereof in the aggregate could
not  reasonably  be expected  to have a Material  Adverse  Effect.  Set forth on
Schedule 3.16 is a list of all Intellectual Property owned by each of the Credit
Parties and its  Subsidiaries  or that each of the Credit  Parties or any of its
Subsidiaries  has the right to use. Except as disclosed on Schedule 3.16 hereto,
(a) and except for the licensed  Intellectual  Property as disclosed on Schedule
3.16, the specified Credit Party has the right to use the material  Intellectual
Property  disclosed on Schedule 3.16 hereto in perpetuity and without payment of
royalties,   (b)  all  registrations   with  and  applications  to  Governmental
Authorities in respect of the material Intellectual Property owned by the Credit
Parties,  and to the  knowledge of the Credit  Parties,  the  material  licensed
Intellectual  Property,  are valid  and in full  force  and  effect  and are not
subject  to the  payment  of any taxes or  maintenance  fees to  maintain  their
validity or  effectiveness,  and (c) there are no  restrictions on the direct or
indirect  transfer  of any  material  Intellectual  Property,  or  any  interest
therein,  held by any of the Credit  Parties  in  respect  of any such  material
Intellectual Property which has not been obtained. To the knowledge of the

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Credit Parties: (i) none of the Credit Parties is in default (or with the giving
of notice or lapse of time or both,  would be in  default)  under any license to
use such material Intellectual Property;  (ii) no claim has been asserted and is
pending by any Person  challenging or  questioning  the use of any such material
Intellectual  Property or the  validity or  effectiveness  of any such  material
Intellectual  Property,  nor do the Credit Parties or any of their  Subsidiaries
know of any such claim  which  could  reasonably  be expected to have a Material
Adverse  Effect;  and, to the  knowledge  of the Credit  Parties or any of their
Subsidiaries,  the  use of such  material  Intellectual  Property  by any of the
Credit Parties or any of its Subsidiaries does not infringe on the rights of any
Person,  in each case which  could  reasonably  be  expected  to have a Material
Adverse  Effect.  The Credit Parties have recorded or deposited with and paid to
the United States Copyright Office,  the Register of Copyrights,  the Copyrights
Royalty Tribunal or other  Governmental  Authority,  all notices,  statements of
account,  royalty  fees and  other  documents  and  instruments  required  to be
recorded  or  deposited  by  any of the  Credit  Parties  under  the  terms  and
conditions of any Contractual Obligation of the Credit Parties applicable to the
Intellectual  Property  and/or under Title 17 of the United  States Code and the
rules and regulations issued thereunder (collectively, the "Copyright Act"), and
are not liable to any Person for copyright  infringement under the Copyright Act
or any other law,  rule,  regulation,  contract  or license as a result of their
business  operations.  Schedule  3.16 may be  updated  from  time to time by the
Borrower to include new  Intellectual  Property by giving written notice thereof
to the Administrative Agent.

      Section 3.17 Solvency.

      The fair saleable value of each Credit Party's assets, measured on a going
concern basis,  exceeds all of its probable  liabilities,  including those to be
incurred pursuant to this Credit  Agreement.  None of the Credit Parties (a) has
unreasonably  small  capital  in  relation  to the  business  in  which it is or
proposes to be engaged or (b) has incurred, or believes that it will incur after
giving effect to the transactions  contemplated by this Credit Agreement,  debts
beyond its ability to pay such debts as they become due. In executing the Credit
Documents and consummating the transactions  contemplated  thereby,  none of the
Credit  Parties  intends to hinder,  delay or defraud  either  present or future
creditors or other Persons to which one or more of the Credit Parties is or will
become indebted.

      Section 3.18 Investments.

      All  Investments  of each of the Credit Parties and its  Subsidiaries  are
Permitted Investments.

      Section 3.19 Location of Collateral.

      Set forth on Schedule  3.19(a) is a list of the  Properties  of the Credit
Parties  and their  Subsidiaries  as of the Closing  Date with  street  address,
county and state where located.  Set forth on Schedule  3.19(b) is a list of all
locations where any tangible  personal  property of the Credit Parties and their
Subsidiaries  with a fair market value in excess of $25,000 is located as of the
Closing Date,  including  county and state where located.  Set forth on Schedule
3.19(c) is the chief executive office and principal place of business of each of
the Credit Parties and their

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Subsidiaries  and the State of incorporation or organization of each such Person
as of the Closing Date.

      Section 3.20 Brokers' Fees.

      None of the Credit Parties or any of its  Subsidiaries  has any obligation
to any Person in respect of any finder's, broker's,  investment banking or other
similar fee in connection with any of the  transactions  contemplated  under the
Credit  Documents other than the closing and other fees payable pursuant to this
Credit Agreement and as set forth in the Fee Letter.

      Section 3.21 Labor Matters.

      There are no  collective  bargaining  agreements  or  Multiemployer  Plans
covering the employees of any of the Credit  Parties or any of its  Subsidiaries
as of the Closing  Date,  other than as set forth in Schedule  3.21 hereto,  and
none of the  Credit  Parties or any of its  Subsidiaries  (i) has  suffered  any
strikes,  walkouts, work stoppages or other material labor difficulty within the
last five (5) years, other than as set forth in Schedule 3.21 hereto or (ii) has
knowledge of any potential or pending  strike,  walkout or work stoppage.  Other
than as set forth on  Schedule  3.21,  no unfair  labor  practice  complaint  is
pending  against  any Credit  Party or any of its  Subsidiaries  or, to the best
knowledge of the Credit Parties, before any Governmental Authority.

      Section 3.22 Security Documents.

      The Security  Documents  create valid security  interest in, and Liens on,
the  Collateral  purported  to be  covered  thereby.  Except as set forth in the
Security Documents, such security interests and Liens are currently (or will be,
upon (a) the filing of appropriate  financing  statements  with the Secretary of
State of the  state of  incorporation  for each  Credit  Party,  the  filing  of
appropriate  assignments  or notices with the United States Patent and Trademark
Office  and the United  States  Copyright  Office,  and the  recordation  of the
applicable  Mortgage  Instruments  (if  any),  in  each  case  in  favor  of the
Administrative  Agent,  on behalf  of the  Lenders,  and (b) the  Administrative
Agent, obtaining Control (as defined in the Security Agreement) over those items
of  Collateral  in which a  security  interest  is  perfected  through  Control)
perfected  security  interest  and Liens,  prior to all other  Liens  other than
Permitted Liens.

      Section 3.23 Accuracy and Completeness of Information.

      All  factual  information   heretofore,   contemporaneously  or  hereafter
furnished by or on behalf of any Credit Party or any of its  Subsidiaries to the
Administrative  Agent or any Lender for purposes of or in  connection  with this
Credit Agreement or any other Credit Document,  or any transaction  contemplated
hereby or thereby,  is or will be true and accurate in all material respects and
not  incomplete  by omitting to state any material  fact  necessary to make such
information  not  misleading.  There is no fact now known to the  Borrower,  any
other Credit Party or any of their  Subsidiaries  which has, or could reasonably
be expected to have, a Material Adverse Effect which fact has not been set forth
herein,  in the  financial  statements  of the  Borrower  and  its  Subsidiaries
furnished to the Administrative Agent and/or the Lenders, or in

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any  certificate,  opinion or other written  statement  made or furnished by any
Credit Party to the Administrative Agent and/or the Lenders.

      Section 3.24 Fraud and Abuse.

      Neither the Credit  Parties  nor, to the  knowledge of the officers of the
Credit  Parties,  any of  their  officers  or  directors,  have  engaged  in any
activities which are prohibited under federal Medicare and Medicaid statutes, 42
U.S.C.  ss.1320a-7b,  or 42  U.S.C.  ss.1395nn  or the  regulations  promulgated
pursuant to such statutes or related state or local statutes or regulations,  or
which are prohibited by binding rules of professional conduct, including but not
limited to the  following:  (a) knowingly and willfully  making or causing to be
made a false statement or  representation of a material fact in any applications
for any benefit or payment;  (b) knowingly and willfully making or causing to be
made  any  false  statement  or  representation  of a  material  fact for use in
determining rights to any benefit or payment;  (c) failing to disclose knowledge
by a claimant of the occurrence of any event  affecting the initial or continued
right to any  benefit or payment on its own behalf or on behalf of another  with
the intent to secure such benefit or payment  fraudulently;  (d)  knowingly  and
willfully  soliciting or receiving  any  remuneration  (including  any kickback,
bribe or rebate),  directly or  indirectly,  overtly or covertly,  in cash or in
kind or  offering  to pay such  remuneration  (i) in  return  for  referring  an
individual to a Person for the furnishing or arranging for the furnishing of any
item or service for which  payment may be made in whole or in part by  Medicare,
Medicaid  or  other  applicable  third  party  payors,  or  (ii) in  return  for
purchasing, leasing or ordering or arranging for or recommending the purchasing,
leasing or ordering of any good,  facility,  service,  or item for which payment
may be made in whole or in part by Medicare,  Medicaid or other applicable third
party payors.

      Section 3.25 Licensing and Accreditation.

      Each of the  Credit  Parties  and their  Subsidiaries  has,  to the extent
applicable:  (a) obtained and maintains in good standing all required  licenses;
(b) to the extent  prudent and customary in the industry in which it is engaged,
obtained and maintains  accreditation from all generally recognized  accrediting
agencies;  (c)  obtained  and  maintains  Medicaid  Certification  and  Medicare
Certification;  and (d) entered into and maintains in good standing its Medicare
Provider  Agreement and its Medicaid  Provider  Agreement,  if any, except as to
(a),  (b),  and (c) above to the extent  that any such  noncompliance  could not
reasonably be expected to have a Material  Adverse  Effect.  To the knowledge of
the officers of the Credit Parties, all such required licenses are in full force
and  effect  on the  date  hereof  and have not been  revoked  or  suspended  or
otherwise limited.

      Section 3.26 Other Regulatory Protection.

      Each of the Credit Parties and their  Subsidiaries  represent that it does
not  manufacture  pharmaceutical  products and is in compliance  with all rules,
regulations and other requirements of the Food and Drug Administration  ("FDA"),
the Drug  Enforcement  Administration  ("DEA"),  the  Federal  Trade  Commission
("FTC"),  the  Occupational  Safety  and  Health  Administration  ("OSHA"),  the
Department of Agriculture ("USDA"), the Consumer Product Safety Commission,  the
United States Customs Service and the United States Postal Service and other

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state or federal  regulatory  authorities or  jurisdictions  in which any of the
Credit Parties or any of its  Subsidiaries  do business or distribute and market
pharmaceutical products,  except to the extent that any such noncompliance would
not have a Material Adverse Effect. Except as so disclosed, neither the FDA, the
DEA, the FTC, OSHA, the USDA, the Consumer  Product Safety  Commission,  nor any
other such  regulatory  authority  has  requested  (or,  to the Credit  Parties'
knowledge,  are considering requesting) any product recalls or other enforcement
actions that (a) if not complied with would result in a Material  Adverse Effect
and (b) with which the Credit  Parties have not complied  within the time period
(as may be extended) allowed.

      Section 3.27 Material Contracts.

Schedule  3.27 sets forth a true and correct and  complete  list of all Material
Contracts  currently in effect.  All of the Material Contracts are in full force
and  effect and to the  knowledge  of the Credit  Parties no  material  defaults
currently exist  thereunder.  The Borrower may update Schedule 3.27 from time to
time by providing a replacement Schedule 3.27 to the Administrative Agent.

      Section 3.28 Insurance.

      The insurance  coverage of the Credit Parties and their Subsidiaries as of
the Closing Date is outlined as to carrier, policy number, expiration date, type
and  amount on  Schedule  3.28 and such  insurance  coverage  complies  with the
requirements  set forth in Section 5.5(b) or has been otherwise  approved by the
Administrative Agent.

      Section 3.29 Reimbursement from Third Party Payors.

      The accounts  receivable of the Credit Parties have been and will continue
to be adjusted to reflect the  reimbursement  policies (both those most recently
published  in writing as well as those not in writing  which have been  verbally
communicated) of third party payors such as Medicare,  Medicaid, Blue Cross/Blue
Shield, private insurance companies, health maintenance organizations, preferred
provider  organizations,  alternative  delivery  systems,  managed care systems,
government  contacting  agencies and other third party payors, in each case in a
manner which could reasonably be expected not to have a Material Adverse Effect.
In  particular,  accounts  receivable  relating to third party payors do not and
shall not exceed amounts any obligee is entitled to receive under any capitation
arrangement,  fee schedule,  discount formula, cost-based reimbursement or other
adjustment  or  limitation  to its  usual  charges,  in each  case  which  could
reasonably be expected to have a Material Adverse Effect.

      Section 3.30 Other Agreements.

      No Credit Party or  Subsidiary  thereof is in default in the  performance,
observance or  fulfillment  of any of the  obligations,  covenants or conditions
contained in (i) any Medicaid Provider Agreement, Medicare Provider Agreement or
other agreement or instrument to which a Credit Party or any of its Subsidiaries
is a party,  which  default  has  resulted  in, or if not  remedied  within  any
applicable   grace  period  could  result  in,  the   revocation,   termination,
cancellation or suspension of Medicaid  Certification or Medicare  Certification
of any Credit Party or any of its  Subsidiaries  and which could  reasonably  be
expected to have a Material Adverse Effect; or

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(ii) any other  agreement or  instrument to which any Credit Party or any of its
Subsidiaries is a party, which default as to items (i) and (ii) above has, or if
not remedied within any applicable  grace period could reasonably be expected to
have, a Material Adverse Effect.

      Section 3.31 Classification as Senior Indebtedness.

      The  Credit  Party  Obligations   constitute  "Senior   Indebtedness"  and
"Designated Senior  Indebtedness" (or any similar terms) under and as defined in
any  agreement  governing the  outstanding  Subordinated  Indebtedness,  and the
subordination  provisions set forth in each such agreement are legally valid and
enforceable against the parties thereto.

      Section 3.32 Foreign Assets Control Regulations, Etc.

      None of the Credit Parties and none of their Subsidiaries is an "enemy" or
an "ally of the enemy"  within the meaning of Section 2 of the Trading  with the
Enemy Act of the United States of America (50 U.S.C.  App. ss.ss. 1 et seq.), as
amended.  None of the  Credit  Parties  and  none of  their  Subsidiaries  is in
violation  of (a) the Trading  with the Enemy Act,  as  amended,  (b) any of the
foreign assets control  regulations of the United States Treasury Department (31
CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or executive
order relating thereto or (c) the Patriot Act (as defined in Section 9.19). None
of the Credit  Parties  (i) is a blocked  person  described  in section 1 of the
Anti-Terrorism  Order  or (ii)  to the  best of its  knowledge,  engages  in any
dealings or  transactions,  or is  otherwise  associated,  with any such blocked
person.

      Section 3.33 Compliance with OFAC Rules and Regulations.

      None of the  Credit  Parties  or their  Subsidiaries  or their  respective
Affiliates (i) is a Sanctioned  Person,  (ii) has more than 15% of its assets in
Sanctioned  Countries,  or (iii) derives more than 15% of its  operating  income
from  investments  in, or  transactions  with  Sanctioned  Persons or Sanctioned
Countries.  No part of the proceeds of any Extension of Credit hereunder will be
used directly or indirectly to fund any operations  in, finance any  investments
or  activities  in or make any payments to, a Sanctioned  Person or a Sanctioned
Country.

                                   ARTICLE IV

                              CONDITIONS PRECEDENT

      Section 4.1 Conditions to Closing Date and Initial Extensions of Credit.

      This  Agreement  shall become  effective  upon, and the obligation of each
Lender to make the initial Revolving Loans, Term Loan and the Swingline Loans on
the Closing Date is subject to, the  satisfaction  of the  following  conditions
precedent:

            (a) Execution of  Agreements.  The  Administrative  Agent shall have
      received (i) counterparts of this Credit  Agreement,  (ii) for the account
      of each  applicable  Revolving  Lender,  a Revolving  Note,  (iii) for the
      account of each Term Loan Lender that

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      requests a Term Note, a Term Note,  (iv) for the account of the  Swingline
      Lender,   the  Swingline  Note,  and  (v)  counterparts  of  the  Security
      Agreement,  the Pledge Agreement,  each Mortgage Instrument and each other
      Credit  Document  to be  executed  on  the  Closing  Date,  in  each  case
      conforming to the  requirements of this Credit Agreement and executed by a
      duly  authorized  officer of each party thereto,  and in each case in form
      and substance satisfactory to the Lenders.

            (b)  Authority  Documents.   The  Administrative  Agent  shall  have
      received the following:

                  (i)  Articles of  Incorporation/Charter  Documents/Partnership
            Agreements.  Copies of the  articles of  incorporation,  partnership
            agreement or other charter documents, as applicable,  of each Credit
            Party  certified  to be true and complete as of a recent date by the
            appropriate Governmental Authority of the state of its incorporation
            or organization.

                  (ii)  Resolutions.  Copies  of  resolutions  of the  board  of
            directors  or other  comparable  managing  body of each Credit Party
            approving  and  adopting  the  Credit  Documents,  the  transactions
            contemplated therein and authorizing execution and delivery thereof,
            certified by a secretary or assistant secretary of such Credit Party
            (pursuant to a secretary's  certificate in substantially the form of
            Schedule  4.1-1  attached  hereto) as of the Closing Date to be true
            and correct and in force and effect as of such date.

                  (iii)  Bylaws/Operating  Agreement.  A copy of the  bylaws  or
            comparable  operating  agreement of each Credit Party certified by a
            secretary or assistant secretary of such Credit Party (pursuant to a
            secretary's  certificate in substantially the form of Schedule 4.1-1
            attached  hereto) as of the Closing  Date to be true and correct and
            in force and effect as of such date.

                  (iv)  Good  Standing.  Copies  of  (i)  certificates  of  good
            standing,  existence  or its  equivalent  with  respect  to the each
            Credit  Party  certified  as of a  recent  date  by the  appropriate
            Governmental   Authorities   of  the  state  of   incorporation   or
            organization and each other state in which the failure to so qualify
            and be in good  standing  could  reasonably  be  expected  to have a
            Material Adverse Effect and (ii) a certificate indicating payment of
            all corporate  franchise  taxes certified as of a recent date by the
            appropriate governmental taxing authorities.

                  (v) Incumbency. An incumbency certificate of each Credit Party
            certified  by a secretary  or  assistant  secretary  (pursuant  to a
            secretary's  certificate in substantially the form of Schedule 4.1-1
            attached hereto) to be true and correct as of the Closing Date.

            (c) Legal Opinions of Counsel.  The Administrative  Agent shall have
      received opinions of legal counsel  (including local counsel to the extent
      required by the

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      Administrative  Agent) for the Credit Parties,  dated the Closing Date and
      addressed  to the  Administrative  Agent and the Lenders,  which  opinions
      shall  provide,  among  other  things,  that the Credit  Parties and their
      Subsidiaries are in compliance with all regulatory requirements, corporate
      instruments  and  material  agreements  on the Closing  Date after  giving
      effect to the transactions  contemplated  herein and shall otherwise be in
      form and substance acceptable to the Administrative Agent.

            (d) Personal Property  Collateral.  The  Administrative  Agent shall
      have received,  in form and substance  satisfactory to the  Administrative
      Agent:

                  (i)  searches  of  Uniform  Commercial  Code  filings  in  the
            jurisdiction of the chief executive office of each Credit Party, the
            State of incorporation or organization of each Credit Party and each
            jurisdiction where any Collateral is located or where a filing would
            need to be made in  order  to  perfect  the  Administrative  Agent's
            security  interest  in  the  Collateral,  copies  of  the  financing
            statements on file in such  jurisdictions and evidence that no Liens
            exist other than Permitted Liens;

                  (ii)   UCC   financing   statements   for   each   appropriate
            jurisdiction  as is necessary,  in the  Administrative  Agent's sole
            discretion,  to perfect the Administrative Agent's security interest
            in the Collateral;

                  (iii)  duly  executed  consents  as  are  necessary,   in  the
            Administrative  Agent's  sole  discretion,  to perfect the  Lenders'
            security interest in the Collateral;

                  (iv)  in the  case  of any  warehouse,  plant  or  other  real
            property  material to the Credit Parties' business that is leased by
            a Credit Party, such estoppel letters, consents and waivers from the
            landlords  on real  property  leased by the  Borrower  or any of its
            Subsidiaries as reasonably requested by the Administrative Agent;

                  (v) all stock  certificates,  if any,  evidencing  the Capital
            Stock  pledged to the  Administrative  Agent  pursuant to the Pledge
            Agreement, together with duly executed in blank undated stock powers
            attached thereto;

                  (vi)  searches of  ownership of  Intellectual  Property in the
            appropriate governmental offices and such patent/trademark/copyright
            filings as requested by the Administrative Agent in order to perfect
            the  Administrative  Agent's  security  interest in the Intellectual
            Property;

                  (vii) such patent/trademark/copyright  filings as requested by
            the  Administrative  Agent in order to  perfect  the  Administrative
            Agent's security interest in the Intellectual Property;

                  (viii) all  instruments and chattel paper in the possession of
            any of the Credit Parties,  together with allonges or assignments as
            may be necessary or

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            appropriate to perfect the Administrative  Agent's security interest
            in the Collateral;

                  (ix) such duly executed Deposit Account Control  Agreements as
            requested by the Administrative Agent with respect to Collateral for
            which  a  control  agreement  is  required  for  perfection  of  the
            Administrative   Agent's   security   interest   under  the  Uniform
            Commercial Code; and

                  (x) copies of the Material Contracts,  certified by an officer
            of the Borrower to be true and correct  copies of such  documents as
            of  the   Closing   Date,   and  to  the  extent   required  by  the
            Administrative  Agent,  a  collateral  assignment  of  any  Material
            Contract and a consent thereto from any applicable third party.

            (e) Real Property  Collateral.  The Administrative  Agent shall have
      received,  in form and substance  satisfactory to the Administrative Agent
      and the Lenders:

                  (i)  fully   executed  and  notarized   Mortgage   Instruments
            encumbering the Mortgaged Properties listed in Schedule 4.1-4;

                  (ii) a title report  obtained by the Credit Parties in respect
            of each of the Mortgaged Properties listed in Schedule 4.1-4;

                  (iii) a Mortgage  Policy with respect to each of the Mortgaged
            Properties listed in Schedule 4.1-4;

                  (iv) evidence as to (A) whether any Mortgaged  Property listed
            in Schedule 4.1-4 is in an area designated by the Federal  Emergency
            Management  Agency as having  special  flood or mud slide hazards (a
            "Flood Hazard Property") and (B) if any such Mortgaged Property is a
            Flood  Hazard  Property,  (1)  whether the  community  in which such
            Mortgaged Property is located is participating in the National Flood
            Insurance  Program,   (2)  the  applicable  Credit  Party's  written
            acknowledgment   of  receipt  of  written   notification   from  the
            Administrative Agent (x) as to the fact that such Mortgaged Property
            is a Flood Hazard  Property  and (y) as to whether the  community in
            which each such Flood Hazard Property is located is participating in
            the  National  Flood  Insurance  Program and (z) copies of insurance
            policies  or   certificates  of  insurance  of  the  Credit  Parties
            evidencing   flood   insurance   reasonably   satisfactory   to  the
            Administrative  Agent and  naming the  Administrative  Agent as sole
            loss payee on behalf of the Lenders;

                  (v)  Surveys of the  Mortgaged  Properties  listed in Schedule
            4.1-4;

                  (vi) reasonably  satisfactory  phase I  environmental  reports
            with respect to each of the Mortgaged  Properties listed in Schedule
            4.1-4,  together with reliance  letters with respect to such reports
            in favor of the Lenders; and

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                  (vii) an opinion of  counsel  to the Credit  Parties  for each
            jurisdiction in which the Mortgaged Properties are located.

            (f)  Liability,   Casualty,   Property  and  Business   Interruption
      Insurance.   The  Administrative  Agent  shall  have  received  copies  of
      insurance  policies or  certificates  of insurance  evidencing  liability,
      casualty and property  insurance meeting the requirements set forth herein
      or  in  the  Security  Documents  and  business   interruption   insurance
      satisfactory to the Administrative  Agent. The Administrative  Agent shall
      be named as loss payee or  mortgagee,  as its interest may appear,  and/or
      additional insured with respect to any such insurance  providing liability
      coverage or coverage in respect of any  Collateral,  and each  provider of
      any such insurance shall agree, by endorsement upon the policy or policies
      issued by it or by independent instruments furnished to the Administrative
      Agent, that it will give the  Administrative  Agent thirty (30) days prior
      written  notice  before any such  policy or  policies  shall be altered or
      canceled.

            (g) Fees.  The  Administrative  Agent  and the  Lenders  shall  have
      received all fees,  if any,  owing  pursuant to the Fee Letter and Section
      2.5.

            (h) Litigation. Except as set forth on Schedule 4.1-2 and other than
      the SEC inquiry and class action  lawsuits that have been disclosed to the
      Administrative  Agent and the  Lenders,  which in any  event  could not be
      reasonably  expected to have a Material  Adverse  Effect,  there shall not
      exist  pending or, to the  knowledge  of the Credit  Parties',  threatened
      litigation,    investigation,    claim,   criminal   prosecution,    civil
      investigative demand, imposition of criminal or civil fines and penalties,
      or any  other  proceeding  of or before  any  arbitrator  or  Governmental
      Authority,   including  but  not  limited  to  those  regulatory  agencies
      responsible  for licensing,  accrediting  or issuing  Medicare or Medicaid
      certifications,  by or against any Credit Party or any of its Subsidiaries
      or against  any of its or their  respective  properties  or  revenues  (a)
      affecting  or relating to the Credit  Documents  or any Loan or any of the
      transactions  contemplated  hereby,  or (b)  affecting  or relating to any
      Credit  Party  or any of its  Subsidiaries,  that  has not  been  settled,
      dismissed, vacated, discharged or terminated prior to the Closing Date.

            (i)  Solvency  Certificate.  The  Administrative  Agent  shall  have
      received an officer's  certificate prepared by the chief financial officer
      of the  Borrower  as to the  financial  condition,  solvency  and  related
      matters of each  Credit  Party,  in each case after  giving  effect to the
      initial  borrowings under the Credit Documents,  in substantially the form
      of Schedule 4.1-3 hereto.

            (j) Account Designation Letter. The Administrative  Agent shall have
      received the executed Account  Designation  Letter in the form of Schedule
      1.1-1 hereto.

            (k)  Notice  of  Borrowing.  The  Administrative  Agent  shall  have
      received a Notice of Borrowing  with respect to the Revolving  Loans to be
      made on the Closing Date.

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            (l)  Corporate  Structure.  The  corporate,  capital  and  ownership
      structure  of the  Credit  Parties  and  their  Subsidiaries  shall  be as
      described in Schedule 3.12,  and shall  otherwise be  satisfactory  to the
      Administrative  Agent and the Lenders.  The  Administrative  Agent and the
      Lenders shall be satisfied  with the  management of the Credit Parties and
      their Subsidiaries and with all legal, tax, accounting, business and other
      matters relating to the Credit Parties and their Subsidiaries.

            (m) Consents.  The Administrative Agent shall have received evidence
      that all governmental,  shareholder,  board of director and material third
      party  consents  and  approvals  necessary in  connection  with the Credit
      Documents and other  transactions  contemplated  hereby have been obtained
      and all applicable  waiting  periods have expired without any action being
      taken by any authority that could restrain, prevent or impose any material
      adverse conditions on such transactions or that could seek or threaten any
      of such transactions.

            (n) Compliance  with Laws.  The  financings  and other  transactions
      contemplated  hereby shall be in compliance in all material  respects with
      all applicable laws and regulations  (including all applicable  securities
      and banking laws,  rules and  regulations);  provided,  however,  that the
      Borrower is not in compliance  with certain SEC  requirements as set forth
      in the SEC Letter but such non-compliance could not reasonably be expected
      to have a Material Adverse Effect.

            (o)   Bankruptcy.   There  shall  be  no  bankruptcy  or  insolvency
      proceedings   with  respect  to  the  any  Credit  Party  or  any  of  its
      Subsidiaries.

            (p) Material  Adverse Effect.  Except as disclosed to the Lenders in
      the Confidential Information Memorandum dated September, 2005, the minutes
      from the Special Meeting of the Board of Directors of the Borrower held on
      September  7, 2005 and the  written  presentation  by the  Borrower to the
      Lenders  dated  October 3, 2005,  no material  adverse  change  shall have
      occurred since December 31, 2003 in the business,  properties,  operations
      or financial  condition of the Borrower or of the Credit Parties and their
      Subsidiaries taken as a whole.

            (q) Minimum Consolidated EBITDA. The Administrative Agent shall have
      received  evidence  satisfactory  thereto  provided by the  Borrower  that
      Consolidated  EBITDA of the Borrower and its  Subsidiaries  as of June 30,
      2005 utilizing unaudited financial  information,  as set forth on Schedule
      4.1-5, was no less than $37,500,000.

            (r)  Financial  Statements.  The  Administrative  Agent  shall  have
      received  copies of the  financial  statements  referred to in Section 3.1
      hereof, each in form and substance satisfactory to it.

            (s) Termination of Existing Indebtedness.  All existing Indebtedness
      (except for Indebtedness  set forth on Schedule  6.1(b),  but specifically
      including the  Convertible  Bonds) for borrowed  money of the Borrower and
      its Subsidiaries shall have been repaid

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      in full and all  commitments  relating  thereto shall have been terminated
      and all Liens relating thereto shall have been terminated.

            (t)  Officer's  Certificates.  The  Administrative  Agent shall have
      received a certificate  executed by a Responsible  Officer of the Borrower
      as of the Closing Date stating that (i) no action, suit,  investigation or
      proceeding is pending or, to the knowledge of any Credit Party, threatened
      in any court or before any arbitrator or governmental instrumentality that
      purports to affect any Credit Party or any other transaction  contemplated
      by the Credit Documents, if such action, suit, investigation or proceeding
      could  reasonably be expected to have a Material  Adverse  Effect and (ii)
      immediately  after giving effect to this Credit  Agreement  (including the
      initial  Extensions of Credit  hereunder),  the other Credit Documents and
      all the  transactions  contemplated  therein to occur on such date, (A) no
      Default or Event of Default exists, (B) all representations and warranties
      contained herein and in the other Credit Documents are true and correct in
      all material  respects,  and (C) the Credit Parties are in compliance with
      each of the initial financial  covenant levels set forth in Section 5.9(a)
      - (c),  calculated  as of June  30,  2005  utilizing  unaudited  financial
      information,  in each case after giving  effect to the initial  borrowings
      under  the  Credit  Documents  on a pro  forma  basis,  and  demonstrating
      compliance with such financial covenants.

            (u) Patriot Act  Certificate.  The  Administrative  Agent shall have
      received a certificate satisfactory thereto, for benefit of itself and the
      Lenders,  provided by the Borrower that sets forth information required by
      the  Patriot  Act  (as  defined  in  Section  9.19)   including,   without
      limitation,  the  identity  of the  Borrower,  the name and address of the
      Borrower and other information that will allow the Administrative Agent or
      any Lender, as applicable, to identify the Borrower in accordance with the
      Patriot Act.

            (v) Final Reports.  The Administrative Agent shall have received the
      final  reports of FTI  Consulting,  Inc.  (either  written or verbal),  if
      available,  and Capstone  Advisory Group,  LLC, each in form and substance
      satisfactory to the Administrative Agent.

            (w)  Additional  Matters.  All other  documents and legal matters in
      connection with the  transactions  contemplated  by this Credit  Agreement
      shall  be   reasonably   satisfactory   in  form  and   substance  to  the
      Administrative Agent and its counsel.

      Section 4.2 Conditions to All Extensions of Credit.

      The obligation of each Lender to make any Extension of Credit hereunder is
subject to the satisfaction of the following conditions precedent on the date of
making such Extension of Credit:

            (a)   Representations   and  Warranties.   The  representations  and
      warranties made by the Credit Parties herein, in the Security Documents or
      which are contained in any  certificate  furnished at any time under or in
      connection herewith (i) that contain a materiality  qualification shall be
      true and correct on and as of the date of such Extension

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      of Credit as if made on and as of such date and (ii) that do not contain a
      materiality  qualification  shall  be true  and  correct  in all  material
      respects on and as of the date of such  Extension  of Credit as if made on
      and as of such date.

            (b) No Default or Event of  Default.  No Default or Event of Default
      shall have  occurred and be continuing on such date or after giving effect
      to the  Extension of Credit to be made on such date unless such Default or
      Event of Default  shall have been  waived in  accordance  with this Credit
      Agreement.

            (c) Compliance with Commitments.  Immediately after giving effect to
      the making of any such  Extension  of Credit (and the  application  of the
      proceeds  thereof),  (i)  the sum of the  aggregate  principal  amount  of
      outstanding  Revolving  Loans  plus  the  aggregate  principal  amount  of
      outstanding  Swingline  Loans  plus LOC  Obligations  shall not exceed the
      Revolving  Committed Amount, (ii) the LOC Obligations shall not exceed the
      LOC Committed  Amount and (iii) the  Swingline  Loans shall not exceed the
      Swingline Committed Amount.

            (d) Additional Conditions to Extensions of Credit. If such Extension
      of Credit is made pursuant to Sections 2.1, 2.2, 2.3 or 2.4 all conditions
      set forth in such Section shall have been satisfied.

      Each  request  for an  Extension  of  Credit  and each  acceptance  by the
Borrower  of any such  Extension  of  Credit  shall be deemed  to  constitute  a
representation  and warranty by the Borrower as of the date of such Extension of
Credit that the  applicable  conditions in  subsections  (a) through (d) of this
Section have been satisfied.

                                    ARTICLE V

                              AFFIRMATIVE COVENANTS

      The Credit Parties hereby covenant and agree that on the Closing Date, and
thereafter  for so long as this  Credit  Agreement  is in  effect  and until the
Commitments  have  terminated,  no Note remains  outstanding  and unpaid and the
Credit Party Obligations,  together with interest, Commitment Fees and all other
amounts owing to the Administrative  Agent or any Lender hereunder,  are paid in
full, the Credit Parties shall, and shall cause each of their Subsidiaries, to:

      Section 5.1 Financial Statements.

      Furnish to the Administrative Agent and each of the Lenders:

            (a)  Annual  Financial  Statements.  Subject to the terms of Section
      5.14(a), as soon as available,  and in any event no later than the earlier
      of (i) the date the  Borrower  is  required by the SEC to deliver its Form
      10-K for any fiscal year of the  Borrower  and (ii) ninety (90) days after
      the end of each fiscal year of the  Borrower,  a copy of the  consolidated
      and consolidating balance sheet of the Borrower and its consolidated

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      Subsidiaries   as  at  the  end  of  such  fiscal  year  and  the  related
      consolidated and consolidating  statements of income and retained earnings
      and of cash flows of the Borrower and its  consolidated  Subsidiaries  for
      such year, audited (with respect to the consolidated statements only) by a
      firm of independent  certified public accountants of nationally recognized
      standing reasonably  acceptable to the Administrative  Agent, in each case
      setting forth in comparative form consolidated and  consolidating  figures
      for the preceding  fiscal year,  reported on without a "going  concern" or
      like  qualification  or exception,  or  qualification  indicating that the
      scope of the audit was  inadequate  to permit such  independent  certified
      public  accountants  to certify  such  financial  statements  without such
      qualification;

            (b) Quarterly Financial Statements. As soon as available, and in any
      event no later than the  earlier of (i) the date the  Borrower is required
      by the SEC to deliver its Form 10-Q for any fiscal quarter of the Borrower
      and (ii) forty-five (45) days after the end of each of the fiscal quarters
      of the  Borrower,  a  company-prepared  consolidated  balance sheet of the
      Borrower and its  consolidated  Subsidiaries  as at the end of such period
      and  related  company-prepared   consolidated  statements  of  income  and
      retained  earnings and cash flows for the  Borrower  and its  consolidated
      Subsidiaries  for such quarterly  period and for the portion of the fiscal
      year ending with such period,  in each case setting  forth in  comparative
      form consolidated  figures for the corresponding  period or periods of the
      preceding  fiscal  year  (subject  to  normal  recurring   year-end  audit
      adjustments) and including management discussion and analysis of operating
      results  inclusive of operating  metrics in comparative form and a summary
      of  accounts  receivable  and  accounts  payable  aging  reports  in  form
      satisfactory  to the Lenders;  provided  that,  with respect to the fiscal
      quarter  ending  September  30,  2005,  the  Borrower  shall  deliver such
      quarterly financial statements on or before November 30, 2005;

            (c) Monthly  Financial  Statements.  As soon as available and in any
      event  within  thirty (30) days after the end of each fiscal  month of the
      Borrower from the Closing Date through the later of (i) March 31, 2006 and
      (ii) the date the  requirements set forth in Sections 5.14(a) and (b) have
      been  satisfied,  a  company-prepared  consolidated  balance  sheet of the
      Borrower and its  consolidated  Subsidiaries  as at the end of such period
      and  related  company-prepared   consolidated  statements  of  income  and
      retained  earnings and cash flows for the  Borrower  and its  consolidated
      Subsidiaries  for such  monthly  period and for the  portion of the fiscal
      year ending with such period,  in each case setting  forth in  comparative
      form consolidated  figures for the corresponding  period or periods of the
      preceding  fiscal  year  (subject  to  normal  recurring   year-end  audit
      adjustments); and

            (d)  Annual  Budget  Plan.  As soon as  available,  but in any event
      within  forty-five  days (45) after the end of each fiscal year, a copy of
      the detailed annual budget or plan including cash flow  projections of the
      Borrower for the next fiscal year on a quarterly basis, in form and detail
      reasonably  acceptable  to  the  Administrative  Agent  and  the  Required
      Lenders,  together with a summary of the material  assumptions made in the
      preparation of such annual budget or plan;

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<PAGE>

all such  financial  statements  to be  complete  and  correct  in all  material
respects  (subject,  in the case of  interim  statements,  to  normal  recurring
year-end audit  adjustments) and to be prepared in reasonable detail and, in the
case of the annual and  quarterly  financial  statements  provided in accordance
with subsections (a) and (b) above, in accordance with GAAP applied consistently
throughout  the  periods  reflected   therein  and  further   accompanied  by  a
description  of, and an estimation of the effect on the financial  statements on
account of, a change,  if any, in the  application  of accounting  principles as
provided in Section 1.3.

      Section 5.2 Certificates; Other Information.

      Furnish to the Administrative Agent and each of the Lenders:

            (a)  concurrently  with the  delivery  of the  financial  statements
      referred to in Section  5.1(a)  above,  a certificate  of the  independent
      certified  public  accountants  reporting  on  such  financial  statements
      stating that in making the examination necessary therefor no knowledge was
      obtained of any Default or Event of Default,  except as  specified in such
      certificate;

            (b)  concurrently  with the  delivery  of the  financial  statements
      referred  to in  Sections  5.1(a) and 5.1(b)  above,  a  certificate  of a
      Responsible  Officer  stating  that,  to  the  best  of  such  Responsible
      Officer's  knowledge,  during  such  period  each  of the  Credit  Parties
      observed or performed in all material  respects all of its  covenants  and
      other agreements,  and satisfied in all material respects every condition,
      contained in this Credit Agreement to be observed,  performed or satisfied
      by it, and that such Responsible  Officer has obtained no knowledge of any
      Default or Event of Default  except as specified in such  certificate  and
      such  certificate  shall include the  calculations  in  reasonable  detail
      required to  indicate  compliance  with  Section 5.9 as of the last day of
      such period ("Compliance Certificate");

            (c)  concurrently  with or prior to the  delivery  of the  financial
      statements referred to in Sections 5.1(a) and 5.1(b) above, (i) an updated
      copy of  Schedule  3.12 if the  Borrower  or any of its  Subsidiaries  has
      formed  or  acquired  a new  Subsidiary  since the  Closing  Date or since
      Schedule 3.12 was last  updated,  as  applicable,  (ii) an updated copy of
      Schedule 3.16 if the Borrower or any of its  Subsidiaries  has registered,
      applied for registration of, acquired or otherwise  obtained  ownership of
      any new  Intellectual  Property  since the Closing Date or since  Schedule
      3.16 was last  updated,  as  applicable,  and  (iii)  an  updated  copy of
      Schedule 3.27 if any new Material Contract has been entered into since the
      Closing  Date or since  Schedule  3.27 was last  updated,  as  applicable,
      together with a copy of each new Material Contract;

            (d)  within  ten (10) days  after  the same are sent,  copies of all
      reports (other than those otherwise  provided  pursuant to Section 5.1 and
      those which are of a promotional  nature) and other financial  information
      which the Borrower sends to its members and equity holders, and within ten
      (10) days after the same are filed, copies of all financial statements and
      non-confidential reports which the Borrower may make to, or

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<PAGE>

      file with the  Securities  and  Exchange  Commission  or any  successor or
      analogous Governmental Authority;

            (e) within ninety (90) days after the end of each fiscal year of the
      Borrower, a certificate containing information regarding the amount of all
      Asset  Dispositions,  Debt Issuances,  and Equity Issuances that were made
      during the prior fiscal year and amounts  received in connection  with any
      Recovery Event during the prior fiscal year;

            (f)  promptly  upon receipt  thereof,  a copy of any other report or
      "management  letter"  submitted by  independent  accountants to any Credit
      Party or any of its Subsidiaries in connection with any annual, interim or
      special audit of the books of such Person; and

            (g) promptly, such additional financial and other information as the
      Administrative  Agent,  on  behalf  of any  Lender,  may from time to time
      reasonably request.

      Section 5.3 Payment of Obligations.

      Pay,  discharge or otherwise  satisfy at or before maturity or before they
become delinquent,  as the case may be, all its taxes (Federal, state, local and
any other  taxes) and all its other  obligations  and  liabilities  of  whatever
nature and any  additional  costs that are imposed as a result of any failure to
so pay, discharge or otherwise satisfy such obligations and liabilities,  except
when the  amount  or  validity  of such  obligations,  liabilities  and costs is
currently being contested in good faith by appropriate proceedings and reserves,
if applicable,  in conformity  with GAAP with respect thereto have been provided
on the books of the Borrower or its  Subsidiaries,  as the case may be or except
to the extent  that  failure to so pay,  discharge  or  otherwise  satisfy  such
obligations  and  liabilities  could  not,  individually  or in  the  aggregate,
reasonably be expected to have a Material Adverse Effect.

      Section 5.4 Conduct of Business and Maintenance of Existence.

      Continue to engage in business of the same general  type as now  conducted
by it on the Closing Date and preserve,  renew and keep in full force and effect
its  corporate  existence and good  standing and take all  reasonable  action to
maintain all rights,  privileges  and  franchises  necessary or desirable in the
normal  conduct of its business;  comply with all  Contractual  Obligations  and
Requirements of Law applicable to it except to the extent that failure to comply
therewith could not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.

      Section 5.5 Maintenance of Property; Insurance.

            (a) Keep all material  property useful and necessary in its business
      in  good  working  order  and  condition   (ordinary  wear  and  tear  and
      obsolescence excepted);

            (b)  Maintain  with  financially   sound  and  reputable   insurance
      companies  insurance  on all  its  material  property  (including  without
      limitation its material tangible

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      Collateral)  in at least such  amounts  and against at least such risks as
      are usually insured against in the same general area by companies  engaged
      in  the  same  or  a  similar  business  (including,  without  limitation,
      liability,  property,  casualty and business interruption insurance);  and
      furnish  to  the   Administrative   Agent,  upon  written  request,   full
      information as to the insurance carried. The Administrative Agent shall be
      named as loss payee or  mortgagee,  as its  interest  may appear,  and the
      Administrative  Agent shall be named as an additional insured with respect
      to any such  liability  insurance  and any property or casualty  insurance
      providing coverage in respect of any Collateral,  and each provider of any
      such insurance  shall agree,  by  endorsement  upon the policy or policies
      issued by it or by independent instruments furnished to the Administrative
      Agent, that it will give the  Administrative  Agent thirty (30) days prior
      written  notice  before any such  policy or  policies  shall be altered or
      canceled,  and that no act or default  of any  Credit  Party or any of its
      Subsidiaries   or  any  other  Person  shall  affect  the  rights  of  the
      Administrative Agent or the Lenders under such policy or policies; and

            (c) In case of any material  loss,  damage to or  destruction of the
      Collateral  of any Credit  Party or any part  thereof,  such Credit  Party
      shall  promptly give written notice  thereof to the  Administrative  Agent
      generally  describing the nature and extent of such damage or destruction.
      In case of any loss,  damage to or  destruction  of the  Collateral of any
      Credit Party or any part thereof,  such Credit  Party,  whether or not the
      insurance  proceeds,  if  any,  received  on  account  of such  damage  or
      destruction  shall be sufficient for that purpose,  at such Credit Party's
      cost and expense,  will promptly  repair or replace the Collateral of such
      Credit Party so lost,  damaged or destroyed to the extent such  Collateral
      is reasonably necessary for such Credit Party's business.

      Section 5.6 Inspection of Property; Books and Records; Discussions.

      Keep proper  books of records and account in which full,  true and correct
entries in conformity with GAAP and all Requirements of Law shall be made of all
dealings and  transactions  in relation to its  businesses and  activities;  and
permit,  during  regular  business  hours  and  upon  reasonable  notice  by the
Administrative  Agent or any Lender, the  Administrative  Agent or any Lender to
visit and inspect any of its  properties and examine and make abstracts from any
of its books and records (other than materials  protected by the attorney-client
privilege and materials which the Borrower may not disclose without violation of
a  confidentiality  obligation  binding upon it) at any  reasonable  time and as
often as may  reasonably be desired,  and to discuss the  business,  operations,
properties  and  financial and other  condition of the Credit  Parties and their
Subsidiaries  with  officers  and  employees  of the  Credit  Parties  and their
Subsidiaries and with its independent certified public accountants, in each case
at the Borrower's expense.

      Section 5.7 Notices.

      Give notice in writing to the  Administrative  Agent (which shall promptly
transmit such notice to each Lender) of:

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            (a)  promptly,  but in any event within two (2) Business  Days after
      any Credit Party knows or has reason to know  thereof,  the  occurrence of
      any Default or Event of Default;

            (b) promptly,  but in any event within three (3) Business Days after
      any Credit Party knows or has reason to know thereof, any default or event
      of default under any Contractual  Obligation of any Credit Party or any of
      its  Subsidiaries  which could  reasonably  be expected to have a Material
      Adverse Effect or involve a monetary claim in excess of $1,000,000;

            (c) promptly,  but in any event within three (3) Business Days after
      any Credit Party knows or has reason to know thereof,  any litigation,  or
      any  investigation or proceeding known to a Credit Party (i) affecting any
      Credit Party or any of its  Subsidiaries  which, if adversely  determined,
      could  reasonably  be expected  to have a Material  Adverse  Effect,  (ii)
      affecting,  or with  respect to, this Credit  Agreement,  any other Credit
      Document or any  security  interest or Lien  created  thereunder  or (iii)
      involving   an   environmental   claim  or   potential   liability   under
      Environmental Laws in excess of $1,000,000.

            (d) as soon as  possible  and in any event  within  thirty (30) days
      after  any  Credit  Party  knows or has  reason to know  thereof:  (i) the
      occurrence or expected  occurrence of any Reportable Event with respect to
      any Plan,  a failure  to make any  required  contribution  to a Plan,  the
      creation of any Lien in favor of the PBGC (other than a Permitted Lien) or
      a Plan or any  withdrawal  from,  or the  termination,  Reorganization  or
      Insolvency  of,  any  Multiemployer   Plan  or  (ii)  the  institution  of
      proceedings  or the  taking of any other  action by the PBGC or any Credit
      Party, or any Commonly  Controlled Entity or any Multiemployer  Plan, with
      respect to the  withdrawal  from, or the  terminating,  Reorganization  or
      Insolvency of, any Plan;

            (e) promptly,  of the institution of any investigation or proceeding
      against any Credit  Party to  suspend,  revoke or  terminate  or which may
      result in the  termination of any Medicaid  Provider  Agreement,  Medicaid
      Certification,  Medicare  Provider  Agreement,  Medicare  Certification or
      exclusion from any Medical Reimbursement Program;

            (f) promptly,  after any Credit Party becomes  involved in a pending
      civil  or  criminal  investigation,  criminal  action  or  civil  proposed
      debarment, exclusion or other sanctioning action related to any Federal or
      state healthcare program;

            (g) promptly,  but in any event within three (3) Business Days after
      any  Credit  Party  knows or has  reason to know  thereof,  any  formal or
      informal  inquiry  or  investigation  of a Credit  Party by the SEC or any
      written correspondence received from the SEC regarding any existing formal
      or informal inquiry or investigation of a Credit Party; and

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<PAGE>

            (h) promptly,  any other development or event which could reasonably
      be expected to have a Material Adverse Effect.

Each notice  pursuant to this Section shall be  accompanied  by a statement of a
Responsible  Officer setting forth details of the occurrence referred to therein
and stating what action the Borrower  proposes to take with respect thereto.  In
the case of any  notice of a Default or Event of  Default,  the  Borrower  shall
specify  that such  notice is a Default or Event of  Default  notice on the face
thereof.

      Section 5.8 Environmental Laws.

            (a) Comply in all material  respects with, and ensure  compliance in
      all material  respects by all tenants and  subtenants,  if any,  with, all
      applicable  Environmental  Laws and  obtain  and  comply  in all  material
      respects  with and  maintain,  and ensure that all tenants and  subtenants
      obtain and comply in all material respects with and maintain,  any and all
      licenses, approvals,  notifications,  registrations or permits required by
      applicable  Environmental  Laws except to the extent that failure to do so
      could not reasonably be expected to have a Material Adverse Effect;

            (b) Conduct and complete all investigations,  studies,  sampling and
      testing,  and all  remedial,  removal  and other  actions  required  under
      Environmental  Laws and promptly comply in all material  respects with all
      lawful orders and  directives of all  Governmental  Authorities  regarding
      Environmental  Laws except to the extent that the same are being contested
      in  good  faith  by  appropriate  proceedings  and  the  pendency  of such
      proceedings  could not  reasonably be expected to have a Material  Adverse
      Effect; and

            (c) Defend, indemnify and hold harmless the Administrative Agent and
      the  Lenders,  and  their  respective  employees,   agents,  officers  and
      directors and  affiliates,  from and against any and all claims,  demands,
      penalties, fines, liabilities, settlements, damages, costs and expenses of
      whatever kind or nature known or unknown, contingent or otherwise, arising
      out of, or in any way relating to the violation of,  noncompliance with or
      liability under, any Environmental Law applicable to the operations of the
      any Credit  Party or any of its  Subsidiaries  or the  Properties,  or any
      orders,  requirements  or  demands  of  Governmental  Authorities  related
      thereto,   including,   without  limitation,   reasonable  attorney's  and
      consultant's  fees,  investigation  and laboratory  fees,  response costs,
      court costs and litigation expenses,  except to the extent that any of the
      foregoing arise out of the gross  negligence or willful  misconduct of the
      party seeking  indemnification  therefor. The agreements in this paragraph
      shall  survive  repayment  of the  Notes  and all  other  amounts  payable
      hereunder  and  the   termination  of  the   Commitments  and  the  Credit
      Documents..

      Section 5.9 Financial Covenants.

      Comply with the following financial covenants:

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            (a) Maximum Leverage Ratio. The Leverage Ratio as of the end of each
      fiscal  quarter of the Borrower,  beginning  with the fiscal quarter ended
      September 30, 2005, for the twelve (12) month period ending on any date of
      determination, shall be less than or equal 2.50 to 1.00.

            (b) Minimum Fixed Charge Coverage  Ratio.  The Fixed Charge Coverage
      Ratio as of the end of each fiscal quarter of the Borrower, beginning with
      the fiscal  quarter ended  September  30, 2005,  for the twelve (12) month
      period ending on any date of determination, shall be greater than or equal
      to 1.50 to 1.00.

            (c) Minimum  Cash  Balance.  The  Borrower  shall have not less than
      $25,000,000 of unrestricted cash and Cash Equivalents on its balance sheet
      at all times,  in an  account(s) in which the  Administrative  Agent has a
      perfected security interest under the UCC.

            (d)  Minimum  Consolidated  EBITDA.  Upon  receipt  of  the  audited
      financial  statements for the fiscal year ended 2004,  Consolidated EBITDA
      for  the  Borrower  and  its  Subsidiaries'   shall  have  been  at  least
      $42,200,000  for such period after  giving  effect to the  acquisition  of
      Bioglan Pharmaceuticals, Inc. on a pro forma basis.

      For  purposes  of  computing  the  financial  covenants  set forth in this
Section 5.9 for any applicable test period, any Permitted Acquisition or sale of
assets (including a stock sale) permitted pursuant to Section 6.4(a)(vi) that is
consummated  during such test period  shall have been deemed to have taken place
as of the first day of such test period.

      Section 5.10 Additional Guarantors.

      Cause  each of  their  Domestic  Subsidiaries  that  is not an  Immaterial
Subsidiary,  whether  newly formed,  after  acquired or otherwise  existing,  to
promptly  become  a  Guarantor  hereunder  by  way  of  execution  of a  Joinder
Agreement;  provided  that the Credit  Parties  shall have no more than five (5)
Immaterial  Subsidiaries at any time that are not  Guarantors.  The Credit Party
Obligations shall be secured by, among other things, a first priority  perfected
security  interest in the  Collateral of such new Guarantor and a pledge of 100%
of the Capital Stock of such new Guarantor and its Domestic Subsidiaries and 65%
(or such  higher  percentage  that  would not  result in  material  adverse  tax
consequences for such new Guarantor) of the voting Capital Stock and 100% of the
non-voting Capital Stock of its first-tier Foreign  Subsidiaries.  In connection
with the foregoing, the Credit Parties shall deliver to the Administrative Agent
such  Security   Documents,   legal  opinions  and  related   documents  as  the
Administrative  Agent may reasonably request with respect to such Collateral and
with respect to the Joinder Agreement executed by the new Guarantor.

      Section 5.11 Compliance with Law.

            (a) Comply with all laws,  rules,  regulations  and orders,  and all
      applicable   restrictions   imposed  by  all   Governmental   Authorities,
      applicable  to it and its  Property  if  noncompliance  with any such law,
      rule,  regulation,  order or restriction  could  reasonably be expected to
      have, individually or in the aggregate, a Material Adverse Effect;

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            (b) conform with and duly observe in all material respects all laws,
      rules and regulations  and all other valid  requirements of any regulatory
      authority with respect to the conduct of its business,  including  without
      limitation  Titles  XVIII and XIX of the  Social  Security  Act,  Medicare
      Regulations,  Medicaid Regulations, and all laws, rules and regulations of
      Governmental Authorities, pertaining to the business of the Credit Parties
      if noncompliance with any such law, rule, regulation, order or restriction
      could reasonably be expected to have a Material Adverse Effect; and

            (c) obtain and maintain all licenses,  permits,  certifications  and
      approvals of all applicable  Governmental  Authorities as are required for
      the  conduct  of  its   business  as   currently   conducted   and  herein
      contemplated, including without limitation professional licenses, Medicaid
      Certifications and Medicare Certifications, if failure to do so could have
      a Material Adverse Effect.

      Specifically,  but without  limiting the  foregoing,  and except where any
such  failure to comply  could not  reasonably  be  expected  to have a Material
Adverse Effect: (i) billing policies,  arrangements,  protocols and instructions
will comply with reimbursement  requirements under Medicare,  Medicaid and other
Medical  Reimbursement  Programs and will be  administered  by properly  trained
personnel;  and  (ii)  medical  director  compensation  arrangements  and  other
arrangements  with referring  physicians will comply with  applicable  state and
federal  self-referral and anti-kickback  laws,  including without limitation 42
U.S.C. Section 1320a-7b(b)(1) - (b)(2) 42 U.S.C. and 42 U.S.C. Section 1395nn.

      Section 5.12 Pledged Assets.

      Cause such  Person's real  property and tangible and  intangible  personal
property to be subject at all times to a first priority, perfected Lien (subject
in each case to Permitted Liens) in favor of the  Administrative  Agent pursuant
to the terms and  conditions  of the Security  Documents or such other  security
documents as the  Administrative  Agent shall  reasonably  request.  Each Credit
Party  shall,  and  shall  cause  each of its  Subsidiaries  to,  adhere  to the
covenants set forth in the Security Documents.

      Section 5.13 Covenants Regarding Patents, Trademarks and Copyrights.

            (a)  Notify the  Administrative  Agent  promptly  if it knows or has
      reason  to know  that any  application,  letters  patent  or  registration
      relating to any Patent, Patent License,  Trademark or Trademark License of
      the Credit Parties or any of their  Subsidiaries may become abandoned,  or
      of  any  adverse   determination   or  development   (including,   without
      limitation,  the institution of, or any such  determination or development
      in, any proceeding in the United States Patent and Trademark Office or any
      court) regarding a Credit Party's or any of its Subsidiary's  ownership of
      any Patent or  Trademark,  its right to patent or register the same, or to
      enforce,  keep and  maintain  the same,  or its  rights  under any  Patent
      License or Trademark License.

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            (b) Notify the  Administrative  Agent promptly after it knows or has
      reason to know of any adverse  determination  or  development  (including,
      without  limitation,  the  institution  of, or any such  determination  or
      development  in, any  proceeding in any court)  regarding any Copyright or
      Copyright  License  of the Credit  Parties  or any of their  Subsidiaries,
      whether (i) such  Copyright  or  Copyright  License may become  invalid or
      unenforceable prior to its expiration or termination,  or (ii) such Credit
      Party's or any of its Subsidiary's ownership of such Copyright,  its right
      to register the same or to enforce,  keep and  maintain  the same,  or its
      rights under such Copyright License, may become affected.

            (c) (i) Promptly  notify the  Administrative  Agent of any filing by
      any Credit Party or any of its Subsidiaries,  either itself or through any
      agent,  employee,  licensee  or  designee  (but in no event later than the
      fifteenth day following such filing),  of any application for registration
      of any  Intellectual  Property with the United States  Copyright Office or
      United States Patent and Trademark  Office or any similar office or agency
      in any other country or any political subdivision thereof.

                  (ii)  Concurrently  with the delivery of quarterly  and annual
            financial statements of the Borrower pursuant to Section 5.1 hereof,
            provide  the  Administrative  Agent and its  counsel a complete  and
            correct list of all  Intellectual  Property  owned by or licensed to
            the  Credit  Parties  or  any  of  their   Subsidiaries  other  than
            Intellectual   Property  previously  disclosed  in  writing  to  the
            Administrative Agent and the Lenders on Schedule 3.16 or otherwise.

                  (iii) Upon request of the  Administrative  Agent,  execute and
            deliver any and all agreements,  instruments,  documents, and papers
            as the  Administrative  Agent may reasonably request to evidence the
            Administrative   Agent's  security   interest  in  the  Intellectual
            Property  referred  to in  clauses  (i) and  (ii)  and  the  general
            intangibles  relating  thereto or  represented  thereby,  including,
            without  limitation,  the  goodwill of the Credit  Parties and their
            Subsidiaries  relating thereto or represented thereby (or such other
            Intellectual Property or the general intangibles relating thereto or
            represented  thereby  as the  Administrative  Agent  may  reasonably
            request).

            (d)  Take all  actions  that are  reasonably  necessary  (including,
      without limitation,  in any proceeding before the United States Patent and
      Trademark Office or the United States  Copyright  Office) to maintain each
      material  item of  Intellectual  Property of the Credit  Parties and their
      Subsidiaries,  including, without limitation, payment of maintenance fees,
      filing of  applications  for renewal,  affidavits  of use,  affidavits  of
      incontestability    and   opposition,    interference   and   cancellation
      proceedings.

            (e) In the  event  that any  Credit  Party  becomes  aware  that any
      Intellectual Property is infringed,  misappropriated or diluted by a third
      party in any material respect,  notify the  Administrative  Agent promptly
      after it learns thereof and,  unless the Credit  Parties shall  reasonably
      determine that such Intellectual  Property is not material to the business
      of the Credit Parties and their  Subsidiaries  taken as a whole,  promptly
      sue for

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      infringement,  misappropriation  or  dilution  and to recover  any and all
      damages for such infringement, misappropriation or dilution, and take such
      other actions as the Credit  Parties  shall  reasonably  deem  appropriate
      under the circumstances to protect such Intellectual Property.

      Section 5.14 Post-Closing Covenants.

            (a) No later than  December 31, 2005 the Borrower  shall  deliver to
      the Lenders the balance sheets and the related statements of income and of
      cash flows of the  Borrower  for the fiscal year ended  December 31, 2004,
      audited  by  a  firm  of  independent   certified  public  accountants  of
      nationally recognized standing reasonably acceptable to the Administrative
      Agent,  setting forth in comparative form  consolidated and  consolidating
      figures  for the  preceding  fiscal  year,  reported  on  without a "going
      concern" or like qualification or exception,  or qualification  indicating
      that the scope of the  audit was  inadequate  to permit  such  independent
      certified public accountants to certify such financial  statements without
      a "going  concern" or like  qualification  or  exception,  such  financial
      statements to be acceptable to the Administrative Agent.

            (b) The Borrower shall be a current filer and shall be in compliance
      with all SEC regulations by March 31, 2006.

            (c) Within thirty (30) days after the Closing Date (or such extended
      period of time as agreed to by the Administrative  Agent in its reasonable
      discretion),  the Credit  Parties  shall use their  good faith  efforts to
      deliver  to the  Administrative  Agent  account  control  agreements  with
      respect to the  deposit  accounts  and  securities  accounts of the Credit
      Parties listed on Schedule 6.14.

            (d) Upon the request of the Administrative  Agent,  promptly perform
      or cause to be  performed  any and all  acts  and  execute  or cause to be
      executed any and all documents for filing under the  provisions of the UCC
      or any other  Requirement  of Law  which are  necessary  or  advisable  to
      maintain  in favor of the  Administrative  Agent,  for the  benefit of the
      Lenders,  Liens on the  Collateral  that are duly  perfected in accordance
      with the  requirements of, or the obligations of the Credit Parties under,
      the Credit Documents and all applicable Requirements of Law.

                                   ARTICLE VI

                               NEGATIVE COVENANTS

      The Credit Parties hereby covenant and agree that on the Closing Date, and
thereafter  for so long as this  Credit  Agreement  is in  effect  and until the
Commitments  have  terminated,  no Note remains  outstanding  and unpaid and the
Credit Party Obligations,  together with interest,  Commitment Fee and all other
amounts owing to the Administrative  Agent or any Lender hereunder,  are paid in
full that:

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      Section 6.1 Indebtedness.

      Each of the Credit Parties will not, nor will it permit any Subsidiary to,
contract, create, incur, assume or permit to exist any Indebtedness, except:

            (a) Indebtedness arising or existing under this Credit Agreement and
      the other Credit Documents;

            (b) Indebtedness of the Borrower and its Subsidiaries existing as of
      the Closing Date as referenced in the financial  statements  referenced in
      Section 3.1 (and set out more  specifically in Schedule 6.1(b)) hereto and
      renewals,  refinancings or extensions thereof in a principal amount not in
      excess of that outstanding as of the date of such renewal,  refinancing or
      extension;

            (c) Indebtedness of the Borrower and its Subsidiaries incurred after
      the Closing Date consisting of Capital Leases or Indebtedness  incurred to
      provide all or a portion of the purchase price or cost of  construction of
      an asset  provided  that (i) such  Indebtedness  when  incurred  shall not
      exceed the purchase price or cost of construction  of such asset;  (ii) no
      such Indebtedness  shall be refinanced for a principal amount in excess of
      the principal balance outstanding thereon at the time of such refinancing;
      and (iii)  the total  amount  of all such  Indebtedness  shall not  exceed
      $5,000,000 at any time outstanding;

            (d) Unsecured  intercompany  Indebtedness  among the Credit Parties,
      provided that any such Indebtedness shall be (i) fully subordinated to the
      Credit Party Obligations hereunder on terms reasonably satisfactory to the
      Administrative Agent and (ii) evidenced by promissory notes which shall be
      pledged to the  Administrative  Agent as  Collateral  for the Credit Party
      Obligations;

            (e)  Indebtedness  and  obligations   owing  under  Secured  Hedging
      Agreements  and other Hedging  Agreements  entered into in order to manage
      existing or  anticipated  interest rate or exchange rate risks and not for
      speculative purposes;

            (f)  Indebtedness  and  obligations  of Credit  Parties  owing under
      documentary  letters  of  credit  for  the  purchase  of  goods  or  other
      merchandise (but not under standby,  direct pay or other letters of credit
      except for the Letters of Credit hereunder) generally;

            (g)  Guaranty  Obligations  in respect of  Indebtedness  of a Credit
      Party to the extent such Indebtedness is permitted to exist or be incurred
      pursuant to this Section 6.1;

            (h)  Subordinated  Indebtedness in a principal  amount not exceeding
      $30,000,000 in the aggregate at any time outstanding; and

            (i) other  Indebtedness of the Borrower and its  Subsidiaries  which
      does not exceed $2,500,000 in the aggregate at any time outstanding.

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      Section 6.2 Liens.

      Each of the Credit Parties will not, nor will it permit any Subsidiary to,
contract,  create, incur, assume or permit to exist any Lien with respect to any
of its property or assets of any kind  (whether  real or  personal,  tangible or
intangible),  whether  now owned or  hereafter  acquired,  except for  Permitted
Liens.  Notwithstanding  the foregoing,  if a Credit Party shall grant a Lien on
any of its assets in violation  of this Section 6.2,  then it shall be deemed to
have  simultaneously  granted an equal and  ratable  Lien on any such  assets in
favor of the Administrative Agent for the ratable benefit of the Lenders and the
Hedging  Agreement  Providers,  to the extent such a Lien has not  already  been
granted to the Administrative Agent.

      Section 6.3 Nature of Business.

      Each of the Credit Parties will not, nor will it permit any Subsidiary to,
alter the character of its business in any material  respect from that conducted
as of the Closing Date.

      Section 6.4 Consolidation, Merger, Sale or Purchase of Assets, etc.

      Each of the Credit Parties will not, nor will it permit any Subsidiary to,

            (a)  dissolve,  liquidate  or wind up its affairs,  sell,  transfer,
      lease or otherwise  dispose of its property or assets or agree to do so at
      a  future  time  except  the  following,  without  duplication,  shall  be
      expressly permitted:

                  (i)  the  sale,  transfer,   lease  or  other  disposition  of
            inventory and materials in the ordinary course of business

                  (ii) the  conversion  of cash into Cash  Equivalents  and Cash
            Equivalents into cash;

                  (iii) (A) the  disposition  of  property or assets as a direct
            result of a Recovery Event or (B) the sale, lease, transfer or other
            disposition  of  machinery,  parts and  equipment  no longer used or
            useful in the conduct of the  business of the Borrower or any of its
            Subsidiaries,  so long as the net  proceeds  therefrom  are  used to
            replace  such  machinery,  parts and  equipment  or to  purchase  or
            otherwise  acquire new assets or property within 180 days of receipt
            of the net proceeds;

                  (iv) the sale,  lease or  transfer  of property or assets (for
            fair market value) between the Borrower and any Guarantor;

                  (v) the sale,  lease or  transfer of property or assets from a
            Credit Party other than the Borrower to another Credit Party;

                  (vi) the sale,  lease or transfer of property or assets not to
            exceed $1,000,000 in the aggregate in any fiscal year; and

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                  (vii) the voluntary termination of Hedging Agreements;

      provided, that, in the case of clauses (i), (iii) and (vi) above, at least
      seventy-five  percent (75%) of the consideration  received therefor by the
      Borrower  or any  other  Credit  Party  is in the  form  of  cash  or Cash
      Equivalents;  provided,  further,  that  with  respect  to sales of assets
      permitted  hereunder  only,  the  Administrative  Agent shall be entitled,
      without the consent of the Required Lenders, to release its Liens relating
      to the particular assets sold; or

            (b)  (i)  purchase,   lease  or  otherwise   acquire  (in  a  single
      transaction or a series of related transactions) the property or assets of
      any Person  (other than  purchases  or other  acquisitions  of  inventory,
      leases, licenses, Intellectual Property, materials, property and equipment
      in the  ordinary  course of  business,  except  as  otherwise  limited  or
      prohibited  herein)  or (ii)  enter  into any  transaction  of  merger  or
      consolidation,  except  for  (A)  investments  or  acquisitions  permitted
      pursuant to Section 6.5, and (B) the merger or  consolidation  of a Credit
      Party with and into another Credit Party; provided that if the Borrower is
      a party thereto, the Borrower will be the surviving corporation.

      Section 6.5 Advances, Investments and Loans.

      Each of the Credit Parties will not, nor will it permit any Subsidiary to,
make any Investment except for Permitted Investments.

      Section 6.6 Transactions with Affiliates.

      Except as  permitted in  subsection  (iv) of the  definition  of Permitted
Investments,  each of the  Credit  Parties  will  not,  nor will it  permit  any
Subsidiary to, enter into any transaction or series of transactions,  whether or
not in the ordinary course of business, with any officer, director,  shareholder
or Affiliate  other than on terms and conditions  substantially  as favorable as
would be obtainable in a comparable arm's-length transaction with a Person other
than an officer, director, shareholder or Affiliate.

      Section 6.7 Ownership of Subsidiaries; Restrictions.

      Each of the Credit Parties will not, nor will it permit any Subsidiary to,
create, form or acquire any Subsidiaries,  except for (a) Domestic Subsidiaries,
other than  certain  Immaterial  Subsidiaries,  which are  joined as  Additional
Credit  Parties  in  accordance   with  the  terms  hereof  and  (b)  Immaterial
Subsidiaries,  subject to the terms of Section 5.10. The Borrower will not sell,
transfer,  pledge or  otherwise  dispose of any  Capital  Stock or other  equity
interests in any of its Subsidiaries, nor will it permit any of its Subsidiaries
to issue,  sell,  transfer,  pledge or otherwise dispose of any of their Capital
Stock or other equity  interests,  except in a transaction  permitted by Section
6.4.

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      Section 6.8 Fiscal Year; Organizational Documents; Material Contracts.

      Each of the Credit Parties will not, nor will it permit any Subsidiary to,
change its fiscal year or its  accounting  policies.  Each of the Credit Parties
will not,  nor will it permit any  Subsidiary  to,  amend,  modify or change its
articles of incorporation (or corporate charter or other similar  organizational
document)  or bylaws  (or other  similar  document)  without  the prior  written
consent of the  Administrative  Agent.  Each of the Credit Parties will not, nor
will it permit any  Subsidiary  to,  without  the prior  written  consent of the
Administrative  Agent,  amend,  modify,  cancel or terminate or fail to renew or
extend or permit the amendment, modification, cancellation or termination of any
of  the  Material   Contracts,   except  in  the  event  that  such  amendments,
modifications, cancellations or terminations could not reasonably be expected to
have a Material Adverse Effect. The Borrower will not, without the prior written
consent of the Required Lenders,  amend,  modify,  waive or extend or permit the
amendment, modification, waiver or extension of any Subordinated Indebtedness or
of any documentation governing or evidencing such Subordinated Indebtedness in a
manner  that is adverse to the  interests  of the  Lenders or the issuer of such
Subordinated  Indebtedness.  Each of the Credit Parties will not, without giving
30 days' prior written notice to the Administrative  Agent,  change its state of
incorporation,  organization  or  formation  or have  more  than  one  state  of
incorporation, organization or formation.

      Section 6.9 Limitation on Restricted Actions.

      Each of the Credit Parties will not, nor will it permit any Subsidiary to,
directly or indirectly,  create or otherwise  cause or suffer to exist or become
effective any  encumbrance  or  restriction on the ability of any such Person to
(a) pay  dividends  or make any other  distributions  to any Credit Party on its
Capital  Stock or with  respect to any other  interest or  participation  in, or
measured by, its profits,  (b) pay any  Indebtedness or other obligation owed to
any Credit  Party,  (c) make loans or  advances to any Credit  Party,  (d) sell,
lease or transfer any of its  properties or assets to any Credit  Party,  or (e)
act as a Guarantor and pledge its assets pursuant to the Credit Documents or any
renewals,  refinancings,  exchanges, refundings or extension thereof, except (in
respect of any of the  matters  referred to in clauses  (a)-(d)  above) for such
encumbrances  or  restrictions  existing  under or by reason of (i) this  Credit
Agreement  and the  other  Credit  Documents,  (ii)  applicable  law,  (iii) any
document  or  instrument  governing  Indebtedness  incurred  pursuant to Section
6.1(c); provided that any such restriction contained therein relates only to the
asset or assets  constructed  or acquired in connection  therewith,  or (iv) any
Permitted  Lien or any document or  instrument  governing  any  Permitted  Lien;
provided that any such restriction  contained  therein relates only to the asset
or assets subject to such Permitted Lien.

      Section 6.10 Restricted Payments.

      Each of the Credit Parties will not, nor will it permit any Subsidiary to,
directly or indirectly, declare, order, make or set apart any sum for or pay any
Restricted  Payment,  except (a) to make  dividends  payable  solely in the same
class  of  Capital  Stock  of  such  Person,  (b) to  make  dividends  or  other
distributions  payable to any  Credit  Party  (directly  or  indirectly  through
Subsidiaries),  and (c) so long as (i) no Default or Event of Default shall have
occurred and be continuing  or would result  therefrom and (ii) the Borrower has
satisfied the requirements set

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forth in Sections  5.14(a) and (b), the Borrower  may  repurchase  shares of its
Capital Stock in an aggregate amount not to exceed $3,000,000 during the term of
this Credit Agreement.

      Section 6.11 Sale Leasebacks.

      Each of the Credit Parties will not, nor will it permit any Subsidiary to,
directly or  indirectly  become or remain  liable as lessee or as  guarantor  or
other surety with respect to any lease,  whether an operating lease or a Capital
Lease, of any property (whether real,  personal or mixed),  whether now owned or
hereafter  acquired,  (a) which any Credit Party or any  Subsidiary  has sold or
transferred  or is to sell or transfer to a Person  which is not another  Credit
Party or Subsidiary or (b) which any Credit Party or any  Subsidiary  intends to
use for substantially the same purpose as any other property which has been sold
or is to be sold or  transferred  by such  Credit  Party or such  Subsidiary  to
another  Person which is not another  Credit Party or  Subsidiary  in connection
with such lease.

      Section 6.12 No Further Negative Pledges.

      Each of the Credit Parties will not, nor will it permit any Subsidiary to,
enter into,  assume or become subject to any agreement  prohibiting or otherwise
restricting  the  creation  or  assumption  of any Lien upon its  properties  or
assets,  whether now owned or hereafter acquired,  or requiring the grant of any
security  for such  obligation  if security is given for some other  obligation,
except (a) pursuant to this Credit Agreement and the other Credit Documents, (b)
pursuant to any document or instrument governing  Indebtedness incurred pursuant
to Section 6.1(c);  provided that any such restriction contained therein relates
only to the asset or assets constructed or acquired in connection  therewith and
(c) in  connection  with  any  Permitted  Lien  or any  document  or  instrument
governing  any Permitted  Lien;  provided  that any such  restriction  contained
therein relates only to the asset or assets subject to such Permitted Lien.

      Section 6.13 Operating Lease Obligations.

      Each of the Credit Parties will not, nor will it permit any Subsidiary to,
enter into,  assume or permit to exist any  obligations  for the payment of rent
under Operating  Leases which in the aggregate for all such Persons would exceed
$3,250,000 in any fiscal year.

      Section 6.14 Deposit Account Control Agreements; Additional Bank Accounts.

      Each of the Credit  Parties will not, nor will it permit any Subsidiary to
(a) open, maintain or otherwise have any checking,  savings or other accounts at
any bank or other financial institution,  or any other account where money is or
may be deposited or maintained with any Person,  other than (i) the accounts set
forth on Schedule  6.14,  (ii) demand  deposit  accounts  established  after the
Closing  Date that are subject to a Deposit  Account  Control  Agreement,  (iii)
other  demand  deposit  accounts  established  after the Closing  Date solely as
payroll  and  other  zero  balance  accounts  and (iv)  other  deposit  accounts
established  after the Closing  Date,  so long as at any time the balance in any
such account  does not exceed  $100,000  and the  aggregate  balance in all such
accounts  does not exceed  $250,000,  and (b) from and after the  Closing  Date,
deposit or transfer money into any account set forth on Schedule 6.14.

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                                   ARTICLE VII

                                EVENTS OF DEFAULT

      Section 7.1 Events of Default.

      An  Event  of  Default  shall  exist  upon  the  occurrence  of any of the
following specified events (each an "Event of Default"):

            (a)  Payment  Default.  (i)  The  Borrower  shall  fail  to pay  any
      principal on any Loan or Note when due (whether at maturity,  by reason of
      acceleration or otherwise) in accordance with the terms thereof or hereof;
      (ii) the Borrower shall fail to pay any Reimbursement  Obligation when due
      (whether  at  maturity,   by  reason  of  acceleration  or  otherwise)  in
      accordance with the terms hereof; (iii) the Borrower shall fail to pay any
      interest on any Loan or Note or any fee or other amount payable  hereunder
      when due (whether at maturity,  by reason of acceleration or otherwise) in
      accordance  with the  terms  thereof  or  hereof  and such  failure  shall
      continue  unremedied  for three (3) Business  Days;  or (iv) any Guarantor
      shall  fail to pay on the  Guaranty  in  respect  of any of the  foregoing
      (after giving effect to any applicable grace period); or

            (b) Misrepresentation. Any representation or warranty made or deemed
      made  herein,  in the  Security  Documents  or in any of the other  Credit
      Documents or which is contained in any certificate,  document or financial
      or other statement  furnished at any time under or in connection with this
      Credit  Agreement shall prove to have been incorrect,  false or misleading
      in any material respect on or as of the date made or deemed made; or

            (c)  Covenant  Default.  (i) Any Credit Party shall fail to perform,
      comply with or observe any term,  covenant or agreement  applicable  to it
      contained in Section  5.1(a),  Section 5.1(b),  Section 5.2,  Section 5.4,
      Section 5.7(a),  Section 5.9, Section 5.14(a),  Section 5.14(b) or Article
      VI hereof;  or (ii) any Credit  Party  shall fail to comply  with  Section
      5.1(c) or Section 5.1(d) and such breach or failure to comply is not cured
      within ten (10) Business Days of its occurrence; or (iii) any Credit Party
      shall fail to comply  with any other  covenant,  contained  in this Credit
      Agreement or the other Credit Documents or any other  agreement,  document
      or instrument  among any Credit Party,  the  Administrative  Agent and the
      Lenders or  executed  by any Credit  Party in favor of the  Administrative
      Agent or the Lenders (other than as described in Sections 7.1(a),  7.1(b),
      7.1(c)(i) or 7.1(c)(ii) above), and in the event such breach or failure to
      comply is capable of cure,  is not cured  within  thirty  (30) days of its
      occurrence; or

            (d) Debt Cross-Default.  Any Credit Party or any of its Subsidiaries
      shall (i)  default  in any  payment of  principal  of or  interest  on any
      Indebtedness  (other  than the Credit  Party  Obligations)  in a principal
      amount  outstanding of at least $1,000,000 in the aggregate for the Credit
      Parties and their Subsidiaries beyond the period of grace (not to

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      exceed thirty (30) days), if any,  provided in the instrument or agreement
      under  which  such  Indebtedness  was  created;  or  (ii)  default  in the
      observance or performance of any other agreement or condition  relating to
      any Indebtedness in a principal amount  outstanding of at least $1,000,000
      in the  aggregate  for  the  Credit  Parties  and  their  Subsidiaries  or
      contained in any instrument or agreement evidencing,  securing or relating
      thereto,  or any other event shall occur or condition exist, the effect of
      which  default or other event or condition  is to cause,  or to permit the
      holder or holders of such  Indebtedness or beneficiary or beneficiaries of
      such  Indebtedness  (or a trustee  or agent on  behalf  of such  holder or
      holders or  beneficiary  or  beneficiaries)  to cause,  with the giving of
      notice if required,  such  Indebtedness  to become due prior to its stated
      maturity;  or (iii)  breach or default in any material  respect  under any
      Secured Hedging Agreement; or

            (e)  Other  Cross-Default.  The  Credit  Parties  or  any  of  their
      Subsidiaries  shall default in (i) the payment when due under any Material
      Contract or (ii) in the  performance or  observance,  of any obligation or
      condition of any Material  Contract and such failure to perform or observe
      such other  obligation or condition  continues  unremedied for a period of
      thirty (30) days after notice of the  occurrence  of such default  unless,
      but only as long as, the existence of any such default is being  contested
      by  the  Borrower  or  such   Subsidiary  in  good  faith  by  appropriate
      proceedings and adequate reserves in respect thereof have been established
      on the books of the Borrower or such  Subsidiary to the extent required by
      GAAP.

            (f)  Bankruptcy  Event.  (i) The  Borrower or any of the  Borrower's
      Subsidiaries shall commence any case, proceeding or other action (A) under
      any  existing  or future law of any  jurisdiction,  domestic  or  foreign,
      relating to bankruptcy,  insolvency,  reorganization or relief of debtors,
      seeking to have an order for relief entered with respect to it, or seeking
      to  adjudicate  it a bankrupt  or  insolvent,  or seeking  reorganization,
      arrangement, adjustment, winding-up, liquidation, dissolution, composition
      or  other  relief  with  respect  to it  or  its  debts,  or  (B)  seeking
      appointment  of a  receiver,  trustee,  custodian,  conservator  or  other
      similar  official for it or for all or any substantial part of its assets,
      or the Borrower or any Subsidiary shall make a general  assignment for the
      benefit of its  creditors;  or (ii) there shall be  commenced  against the
      Borrower or any of the  Borrower's  Subsidiaries  any case,  proceeding or
      other action of a nature referred to in clause (i) above which (A) results
      in  the  entry  of an  order  for  relief  or  any  such  adjudication  or
      appointment  or (B) remains  undismissed,  undischarged  or unbonded for a
      period of sixty (60) days;  or (iii) there shall be commenced  against the
      Borrower or any of the  Borrower's  Subsidiaries  any case,  proceeding or
      other  action  seeking  issuance  of a warrant of  attachment,  execution,
      distraint or similar process  against all or any  substantial  part of its
      assets  which  results in the entry of an order for any such relief  which
      shall  not have been  vacated,  discharged,  or  stayed or bonded  pending
      appeal within sixty (60) days from the entry thereof; or (iv) the Borrower
      or any of the Borrower's Subsidiaries shall take any action in furtherance
      of, or indicating its consent to, approval of, or acquiescence  in, any of
      the acts set  forth in  clauses  (i),  (ii),  or (iii)  above;  or (v) the
      Borrower  or any of its  Subsidiaries  shall  generally  not,  or shall be
      unable to, or shall  admit in writing its  inability  to, pay its debts as
      they become due; or

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<PAGE>

            (g) Judgment  Default.  One or more  judgments  or decrees  shall be
      entered against any Credit Party or any of its  Subsidiaries  involving in
      the  aggregate a liability  (to the extent not paid when due or covered by
      insurance) of  $1,000,000 or more and all such  judgments or decrees shall
      not have been paid and satisfied,  vacated,  discharged,  stayed or bonded
      pending appeal within thirty (30) days from the entry thereof; or

            (h) ERISA  Default.  (i) Any Person shall engage in any  "prohibited
      transaction"  (as defined in Section  406 of ERISA or Section  4975 of the
      Code) involving any Plan, (ii) any  "accumulated  funding  deficiency" (as
      defined in Section 302 of ERISA),  whether or not waived, shall exist with
      respect to any Plan or any Lien in favor of the PBGC or a Plan (other than
      a Permitted  Lien)  shall  arise on the assets of any Credit  Party or any
      Commonly  Controlled  Entity,  (iii) a  Reportable  Event shall occur with
      respect to, or proceedings shall commence to have a trustee appointed,  or
      a trustee  shall be appointed,  to administer or to terminate,  any Single
      Employer Plan,  which  Reportable  Event or commencement of proceedings or
      appointment  of a trustee is, in the  reasonable  opinion of the  Required
      Lenders,  likely to result in the termination of such Plan for purposes of
      Title IV of ERISA,  (iv) any  Single  Employer  Plan shall  terminate  for
      purposes  of  Title  IV of  ERISA,  (v)  any  Credit  Party  or any of its
      Subsidiaries or any Commonly Controlled Entity shall, or in the reasonable
      opinion  of the  Required  Lenders is likely to,  incur any  liability  in
      connection with a withdrawal from, or the Insolvency or Reorganization of,
      any Multiemployer  Plan or (vi) any other similar event or condition shall
      occur or exist  with  respect to a Plan;  and in each case in clauses  (i)
      through (vi) above, such event or condition,  together with all other such
      events or conditions,  if any, has or could reasonably be expected to have
      a Material Adverse Effect; or

            (i) Change of Control. There shall occur a Change of Control; or

            (j) Failure of Guaranty. The Guaranty or any provision thereof shall
      cease to be in full force and effect or any Guarantor or any Person acting
      by or on behalf of any Guarantor  shall deny or disaffirm any  Guarantor's
      obligations under the Guaranty; or

            (k) Failure of Credit  Documents.  Any other Credit  Document  shall
      fail to be in full  force and effect or to give the  Administrative  Agent
      and/or the Lenders the security interests, liens, rights, powers, priority
      and privileges  purported to be created  thereby (except as such documents
      may be terminated or no longer in force and effect in accordance  with the
      terms thereof,  other than those indemnities and provisions which by their
      terms shall  survive),  or any Credit Party or any Person  acting by or on
      behalf of any Credit Party shall assert in writing any of the foregoing or
      shall (i) deny or disaffirm  such Person's  obligations  under this Credit
      Agreement or any other Credit  Document or (ii) assert the  invalidity  or
      lack of perfection  or priority of any Lien granted to the  Administrative
      Agent pursuant to the Security Documents; or

            (l)  Subordinated  Indebtedness  Default.  Any default (which is not
      waived or cured within the applicable period of grace) or event of default
      shall occur under any document  governing or evidencing  any  Subordinated
      Indebtedness or the subordination

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      provisions contained therein shall cease to be in full force and effect or
      to give the Lenders  the rights,  powers and  privileges  purported  to be
      created thereby; or

            (m) Medical Reimbursement Program Suspension. Any Credit Party shall
      be  suspended  or  excluded  from  (i) any  Medicaid  Provider  Agreement,
      Medicaid    Certification,    Medicare   Provider   Agreement,    Medicare
      Certification  or (ii)  any  Medical  Reimbursement  Program,  where  such
      exclusion or suspension  arises from fraud or other claims or  allegations
      which could reasonably be expected to have a Material Adverse Effect.

      Section 7.2 Acceleration; Remedies.

      Upon the  occurrence of an Event of Default,  then, and in any such event,
(a) if such event is a Bankruptcy  Event,  automatically  the Commitments  shall
immediately  terminate and the Loans (with accrued  interest  thereon),  and all
other amounts  under the Credit  Documents  (including  without  limitation  the
maximum  amount of all  contingent  liabilities  under  Letters of Credit) shall
immediately  become due and payable,  and the Borrower shall  immediately pay to
the Administrative Agent cash collateral as security for the LOC Obligations for
subsequent  drawings under then outstanding Letters of Credit in an amount equal
to the maximum  amount  which may be drawn under such Letters of Credit and (ii)
the Administrative  Agent may exercise on behalf of the Lenders all of its other
rights and remedies under this Credit Agreement,  the other Credit Documents and
applicable law, and (b) if such event is any other Event of Default,  any or all
of the  following  actions  may be taken:  (i) with the  written  consent of the
Required Lenders,  the Administrative  Agent may, or upon the written request of
the Required Lenders,  the Administrative Agent shall, by notice to the Borrower
declare the  Commitments to be terminated  forthwith,  whereupon the Commitments
shall  immediately  terminate;  (ii) the  Administrative  Agent may, or upon the
written  request of the Required  Lenders,  the  Administrative  Agent shall, by
notice of default to the  Borrower,  declare  the Loans (with  accrued  interest
thereon) and all other amounts  owing under this Credit  Agreement and the Notes
to be  due  and  payable  forthwith  and  direct  the  Borrower  to  pay  to the
Administrative  Agent cash  collateral as security for the LOC  Obligations  for
subsequent  drawings under then outstanding Letters of Credit in an amount equal
to the  maximum  amount  of which may be drawn  under  Letters  of  Credit  then
outstanding,  whereupon the same shall immediately become due and payable; (iii)
exercise any rights or remedies of the Administrative Agent or the Lenders under
this  Credit  Agreement  or  any  other  Credit  Document,   including,  without
limitation,  any rights or remedies  with  respect to the  Collateral;  and (iv)
exercise any rights or remedies available to the Administrative Agent or Lenders
under applicable law.

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                                  ARTICLE VIII

                                    THE AGENT

      Section 8.1 Appointment.

      Each Lender hereby  irrevocably  designates  and appoints  Wachovia as the
Administrative  Agent of such Lender under this Credit Agreement,  and each such
Lender irrevocably  authorizes  Wachovia,  as the Administrative  Agent for such
Lender,  to take such action on its behalf under the  provisions  of this Credit
Agreement  and to exercise  such powers and perform such duties as are expressly
delegated  to the  Administrative  Agent by the terms of this Credit  Agreement,
together  with  such  other  powers  as  are  reasonably   incidental   thereto.
Notwithstanding   any  provision  to  the  contrary  elsewhere  in  this  Credit
Agreement,   the   Administrative   Agent   shall   not  have  any   duties   or
responsibilities,  except those  expressly  set forth  herein,  or any fiduciary
relationship   with  any   Lender,   and  no   implied   covenants,   functions,
responsibilities,  duties,  obligations or  liabilities  shall be read into this
Credit Agreement or otherwise exist against the Administrative Agent.

      Section 8.2 Delegation of Duties.

      The  Administrative  Agent may execute any of its duties under this Credit
Agreement  by or through  agents or  attorneys-in-fact  and shall be entitled to
advice  of  counsel  concerning  all  matters  pertaining  to such  duties.  The
Administrative  Agent shall not be responsible  for the negligence or misconduct
of any agents or attorneys-in-fact  selected by it with reasonable care. Without
limiting  the  foregoing,  the  Administrative  Agent  may  appoint  one  of its
affiliates  as its agent to perform the  functions of the  Administrative  Agent
hereunder relating to the advancing of funds to the Borrower and distribution of
funds  to the  Lenders  and to  perform  such  other  related  functions  of the
Administrative Agent hereunder as are reasonably incidental to such functions.

      Section 8.3 Exculpatory Provisions.

      Neither  the  Administrative  Agent  nor any of its  officers,  directors,
employees,  agents,  attorneys-in-fact,  Subsidiaries or affiliates shall be (a)
liable for any action lawfully taken or omitted to be taken by it or such Person
under or in  connection  with  this  Credit  Agreement  (except  for its or such
Person's own gross  negligence or willful  misconduct) or (b) responsible in any
manner to any of the Lenders for any recitals,  statements,  representations  or
warranties  made by any Credit  Party or any officer  thereof  contained in this
Credit  Agreement or in any  certificate,  report,  statement or other  document
referred to or provided for in, or received by the Administrative Agent under or
in  connection  with,  this  Credit  Agreement  or  for  the  value,   validity,
effectiveness,  genuineness,  enforceability or sufficiency of any of the Credit
Documents  or for any  failure of any Credit  Party to perform  its  obligations
hereunder  or  thereunder.  The  Administrative  Agent  shall  not be under  any
obligation  to any Lender to  ascertain  or to inquire as to the  observance  or
performance  by any  Credit  Party of any of the  agreements  contained  in,  or
conditions of, this Credit  Agreement,  or to inspect the  properties,  books or
records of any Credit Party.

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      Section 8.4 Reliance by Administrative Agent.

            (a) The Administrative Agent shall be entitled to rely, and shall be
      fully protected in relying,  upon any note, writing,  resolution,  notice,
      consent,  certificate,  affidavit, letter, cablegram,  telegram, telecopy,
      telex  or  teletype  message,   statement,  order  or  other  document  or
      conversation believed by it in good faith 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 Credit Parties),  independent accountants and other experts
      selected by the Administrative  Agent. The  Administrative  Agent may deem
      and  treat the payee of any Note as the  owner  thereof  for all  purposes
      unless an executed  Commitment Transfer Supplement has been filed with the
      Administrative  Agent pursuant to Section 9.6(c) with respect to the Loans
      evidenced by such Note. The Administrative  Agent shall be fully justified
      in failing or  refusing  to take any action  under this  Credit  Agreement
      unless it shall first receive such advice or  concurrence  of the Required
      Lenders as it deems  appropriate  or it shall first be  indemnified to its
      satisfaction  by the  Lenders  against any and all  liability  and expense
      which may be incurred by it by reason of taking or  continuing to take any
      such  action.  The  Administrative  Agent  shall  in all  cases  be  fully
      protected in acting, or in refraining from acting, under any of the Credit
      Documents in accordance  with a request of the Required  Lenders or all of
      the  Lenders,  as may be required  under this Credit  Agreement,  and such
      request and any action taken or failure to act pursuant  thereto  shall be
      binding upon all the Lenders and all future holders of the Notes.

            (b) For  purposes  of  determining  compliance  with the  conditions
      specified  in  Section  4.1,  each  Lender  that has  signed  this  Credit
      Agreement shall be deemed to have consented to, approved or accepted or to
      be satisfied with, each document or other matter required thereunder to be
      consented to or approved by or acceptable or satisfactory to a Lender.

      Section 8.5 Notice of Default.

      The  Administrative  Agent shall not be deemed to have knowledge or notice
of the  occurrence  of any  Default  or Event of  Default  hereunder  unless the
Administrative Agent has received notice from a Lender or the Borrower referring
to this  Credit  Agreement,  describing  such  Default or Event of  Default  and
stating  that such  notice  is a  "notice  of  default".  In the event  that the
Administrative Agent receives such a notice, the Administrative Agent shall give
prompt notice thereof to the Lenders.  The Administrative  Agent shall take such
action with respect to such  Default or Event of Default as shall be  reasonably
directed by the Required Lenders;  provided,  however, that unless and until the
Administrative  Agent shall have received such  directions,  the  Administrative
Agent may (but shall not be  obligated  to) take such  action,  or refrain  from
taking such action, with respect to such Default or Event of Default as it shall
deem  advisable in the best  interests of the Lenders  except to the extent that
this Credit  Agreement  expressly  requires  that such  action be taken,  or not
taken,  only with the consent or upon the authorization of the Required Lenders,
or all of the Lenders, as the case may be.

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      Section 8.6 Non-Reliance on Administrative Agent and Other Lenders.

      Each Lender expressly  acknowledges that neither the Administrative  Agent
nor any of its officers,  directors,  employees,  agents,  attorneys-in-fact  or
affiliates has made any  representation or warranty to it and that no act by the
Administrative  Agent hereinafter taken,  including any review of the affairs of
any Credit Party,  shall be deemed to constitute any  representation or warranty
by the  Administrative  Agent  to any  Lender.  Each  Lender  represents  to the
Administrative  Agent that it has,  independently  and without reliance upon the
Administrative  Agent or any  other  Lender,  and  based on such  documents  and
information  as it  has  deemed  appropriate,  made  its  own  appraisal  of and
investigation  into the  business,  operations,  property,  financial  and other
condition  and  creditworthiness  of the  Borrower or any other Credit Party and
made its own  decision  to make its Loans  hereunder  and enter into this Credit
Agreement.  Each Lender also represents that it will,  independently and without
reliance upon the  Administrative  Agent or any other Lender,  and based on such
documents and information as it shall deem appropriate at the time,  continue to
make its own credit  analysis,  appraisals and decisions in taking or not taking
action under this Credit Agreement,  and to make such  investigation as it deems
necessary to inform itself as to the business,  operations,  property, financial
and other  condition and  creditworthiness  of the Borrower and the other Credit
Parties.  Except for notices,  reports and other documents expressly required to
be  furnished  to  the  Lenders  by  the  Administrative  Agent  hereunder,  the
Administrative  Agent shall not have any duty or  responsibility  to provide any
Lender with any credit or other information concerning the business, operations,
property,  condition (financial or otherwise),  prospects or creditworthiness of
the Borrower or any other Credit Party which may come into the possession of the
Administrative  Agent  or any of its  officers,  directors,  employees,  agents,
attorneys-in-fact or affiliates.

      Section 8.7 Indemnification.

      The Lenders agree to indemnify each of the Administrative  Agent,  Issuing
Lenders and the Swingline Lender in its capacity  hereunder and their respective
Subsidiaries,   Affiliates,   officers,   directors,   employees,   agents   and
attorneys-in-fact  acting on their behalf in such capacity (each an "Indemnified
Party") (to the extent not  reimbursed by the Borrower and without  limiting the
obligation  of the  Borrower  to do so),  ratably  according  to  such  Lenders'
respective Commitment Percentages in effect on the date on which indemnification
is  sought  under  this  Section,  from  and  against  any and all  liabilities,
obligations,  losses,  damages,  penalties,  actions,  judgments,  suits, costs,
expenses  or  disbursements  of any  kind  whatsoever  which  may  at  any  time
(including,  without limitation,  at any time following the payment of the Notes
or any Reimbursement  Obligation) be imposed on, incurred by or asserted against
such  Indemnified  Party in any way  relating  to or  arising  out of any Credit
Document or any  documents  contemplated  by or referred to herein or therein or
the transactions  contemplated  hereby or thereby or any action taken or omitted
by an  Indemnified  Party  under or in  connection  with  any of the  foregoing;
provided,  however,  that no Lender shall be liable to an Indemnified  Party for
the payment of any portion of such liabilities,  obligations,  losses,  damages,
penalties,  actions,  judgments,  suits, costs, expenses or disbursements to the
extent  resulting  from such  Indemnified  Party's  gross  negligence or willful
misconduct,  as determined by a court of competent jurisdiction.  The agreements
in this Section 8.7 shall survive the termination of this Credit

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Agreement and payment of the Notes, any  Reimbursement  Obligation and all other
amounts payable hereunder.

      Section 8.8 Administrative Agent in Its Individual Capacity.

      The  Administrative  Agent and its  affiliates  may make loans to,  accept
deposits from and generally engage in any kind of business with the Borrower and
the  other  Credit  Parties  as though  the  Administrative  Agent  were not the
Administrative Agent hereunder.  With respect to the Loans made or renewed by it
and any Note issued to it, the  Administrative  Agent shall have the same rights
and powers  under this Credit  Agreement as any Lender and may exercise the same
as though it were not the  Administrative  Agent,  and the  terms  "Lender"  and
"Lenders" shall include the Administrative Agent in its individual capacity.

      Section 8.9 Successor Administrative Agent.

      The  Administrative  Agent may resign as Administrative  Agent upon thirty
(30)  days'  prior  written  notice  to the  Borrower  and the  Lenders.  If the
Administrative  Agent  shall  resign as  Administrative  Agent under this Credit
Agreement  and the other  Credit  Documents,  then the  Required  Lenders  shall
appoint from among the Lenders a successor administrative agent for the Lenders,
which  successor  agent  shall  have  capital  of at least  $500,000,000  and be
approved by the Borrower (such approval not to be unreasonably withheld) so long
as no Default or Event of Default has occurred and is continuing, whereupon such
successor administrative agent shall succeed to the rights, powers and duties of
the Administrative  Agent, and the term  "Administrative  Agent" shall mean such
successor administrative agent effective upon such appointment and approval, and
the former  Administrative  Agent's rights,  powers and duties as Administrative
Agent shall be terminated,  without any other or further act or deed on the part
of such  former  Administrative  Agent  or any of the  parties  to  this  Credit
Agreement or any holders of the Notes. If no successor  Administrative Agent has
accepted  appointment as Administrative  Agent within thirty (30) days after the
retiring  Administrative  Agent's  giving  notice of  resignation,  the retiring
Administrative  Agent shall have the right, on behalf of the Lenders, to appoint
a successor administrative agent, which successor shall have capital of at least
$500,000,000  and  be  approved  by  the  Borrower  (such  approval  not  to  be
unreasonably  withheld)  so long as no Default or Event of Default has  occurred
and is continuing. If no successor administrative agent has accepted appointment
as Administrative Agent within sixty (60) days after the retiring Administrative
Agent's  giving  notice of  resignation,  the  retiring  Administrative  Agent's
resignation  shall  nevertheless  become effective and the Lenders shall perform
all duties of the Administrative Agent hereunder until such time, if any, as the
Required Lenders appoint a successor administrative agent as provided for above.
After any retiring  Administrative  Agent's resignation as Administrative Agent,
the  indemnification  provisions  of this Credit  Agreement and the other Credit
Documents and the  provisions of this Article VIII shall inure to its benefit as
to any  actions  taken or omitted to be taken by it while it was  Administrative
Agent under this Credit Agreement.

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<PAGE>

      Section 8.10 Other Agents.

      None of the  Lenders or other  Persons  identified  on the facing  page or
signature   pages  of  this  Credit   Agreement   as  a   "syndication   agent,"
"co-syndication   agent,"  "documentation  agent,"   "co-documentation   agent,"
"co-agent,"  "book manager," "book runner," "lead  manager,"  "arranger,"  "lead
arranger" or "co-arranger" shall have any right, power,  obligation,  liability,
responsibility  or duty under this Credit  Agreement  other than, in the case of
such  Lenders,  those  applicable to all Lenders as such.  Without  limiting the
foregoing,  none of the Lenders or other Persons so identified  shall have or be
deemed  to  have  any  fiduciary  relationship  with  any  Lender.  Each  Lender
acknowledges that it has not relied, and will not rely, on any of the Lenders or
other Persons so  identified in deciding to enter into this Credit  Agreement or
in taking or not taking action hereunder.

      Section 8.11 Releases.

      The  Administrative  Agent may release any  Guarantor  and any Lien on any
Collateral that is sold or otherwise disposed of in accordance with the terms of
this  Credit  Agreement  or as  otherwise  permitted  by the Lenders or Required
Lenders, as applicable.

                                   ARTICLE IX

                                  MISCELLANEOUS

      Section 9.1 Amendments, Waivers and Release of Collateral.

      Neither this Credit Agreement,  nor any of the Notes, nor any of the other
Credit Documents, nor any terms hereof or thereof may be amended,  supplemented,
waived or modified  except in accordance with the provisions of this Section nor
may the Borrower or any  Guarantor  be released  except in  accordance  with the
provisions  of this Section 9.1. The Required  Lenders may, or, with the written
consent of the Required  Lenders,  the  Administrative  Agent may,  from time to
time,  (a)  enter  into with the  Borrower  or any other  Credit  Party  written
amendments,  supplements  or  modifications  hereto  and  to  the  other  Credit
Documents for the purpose of adding any  provisions to this Credit  Agreement or
the other  Credit  Documents or changing in any manner the rights of the Lenders
or of the  Borrower or any other Credit Party  hereunder  or  thereunder  or (b)
waive, on such terms and conditions as the Required  Lenders may specify in such
instrument, any of the requirements of this Credit Agreement or the other Credit
Documents  or any  Default or Event of Default and its  consequences;  provided,
however,  that  no  such  waiver  and no  such  amendment,  waiver,  supplement,
modification or release shall:

                  (i) reduce the amount or extend the scheduled date of maturity
            of any Loan or Note or any installment thereon, or reduce the stated
            rate of any interest or fee payable  hereunder (except in connection
            with a waiver of interest  at the  increased  post-default  rate set
            forth in Section  2.9,  which shall be  determined  by a vote of the
            Required  Lenders)  or  extend  the  scheduled  date of any  payment
            thereof or increase the amount or extend the expiration  date of any
            Lender's

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            Commitment,  in each case without the written consent of each Lender
            directly  affected  thereby;  provided  that, it is  understood  and
            agreed  that  no  waiver,  reduction  or  deferral  of  a  mandatory
            prepayment required pursuant to Section 2.7(b), nor any amendment of
            Section  2.7(b)  or  the  definitions  of  Asset  Disposition,  Debt
            Issuance,  Equity  Issuance,  Excess Cash Flow,  or Recovery  Event,
            shall  constitute  a reduction  of the amount of, or an extension of
            the  scheduled  date of, any  principal  installment  of any Loan or
            Note; or

                  (ii) amend, modify or waive any provision of this Section 9.1,
            without the written  consent of all the  Lenders  directly  affected
            thereby; or

                  (iii) reduce the  percentage  specified in the  definition  of
            Required Lenders, without the written consent of all the Lenders; or

                  (iv)  amend,  modify or waive any  provision  of Article  VIII
            without the written consent of the then Administrative Agent; or

                  (v) release the  Borrower or all or  substantially  all of the
            Guarantors from their respective  obligations hereunder or under the
            Guaranty,  without the written consent of all of the Lenders and, to
            the extent the Secured  Hedging  Agreements  will cease to rank pari
            passu with the Credit Party Obligations in connection therewith, all
            of the Hedging Agreement Providers; or

                  (vi)  release  all or  substantially  all  of  the  Collateral
            without the written consent of all of the Lenders and, to the extent
            the Secured  Hedging  Agreements  will cease to rank pari passu with
            the Credit Party  Obligations  in connection  therewith,  all of the
            Hedging Agreement Providers; or

                  (vii)  amend,  modify or waive  any  provision  of the  Credit
            Documents  requiring  consent,  approval or request of the  Required
            Lenders or all  Lenders,  without the written  consent of all of the
            Required Lenders or Lenders as appropriate; or

                  (viii) without the consent of Lenders holding in the aggregate
            more  than  fifty  percent  (50%)  of  the   outstanding   Revolving
            Commitments (or if the Revolving  Commitments  have been terminated,
            the  outstanding  Revolving  Loans),  amend,  modify  or  waive  any
            provision  in Section  4.2 or waive any  Default or Event of Default
            (or amend any Credit  Document to  effectively  waive any Default or
            Event of  Default)  if the effect of such waiver is that the Lenders
            shall be required to fund  Revolving  Loans when such Lenders  would
            otherwise not be required to do so; or

                  (ix)  amend,  modify  or waive  any  provision  of the  Credit
            Documents  affecting  the  rights or  duties  of the  Administrative
            Agent,  the Issuing Lender or the Swingline  Lender under any Credit
            Document without the written consent of

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            the  Administrative  Agent,  the Issuing Lender and/or the Swingline
            Lender,   as  applicable,   in  addition  to  the  Lenders  required
            hereinabove to take such action; or

                  (x) require any Lender to make available Interest Periods with
            a duration  longer than 6 months without the consent of such Lender;
            or

                  (xi) amend,  modify or waive the order in which  Credit  Party
            Obligations  are paid in  Section  2.7(b)(vi)  or  Section  2.12(b),
            without  the  written  consent  of  each  Lender  and  each  Hedging
            Agreement Provider directly affected thereby; or

                  (xii) amend the  definitions  of "Credit  Party  Obligations,"
            Secured Hedging  Agreement," or "Hedging Agreement Provider" without
            the  consent  of  any  Hedging  Agreement  Provider  that  would  be
            adversely affected thereby;

provided,  further, that no amendment, waiver or consent affecting the rights or
duties of the  Administrative  Agent, the Issuing Lender or the Swingline Lender
under any Credit Document shall in any event be effective, unless in writing and
signed by the  Administrative  Agent,  the Issuing  Lender  and/or the Swingline
Lender, as applicable,  in addition to the Lenders required  hereinabove to take
such action.

      Any such waiver,  any such amendment,  supplement or modification  and any
such  release  shall  apply  equally to each of the Lenders and shall be binding
upon the Borrower,  the other Credit Parties,  the Lenders,  the  Administrative
Agent and all  future  holders  of the  Notes.  In the case of any  waiver,  the
Borrower,  the other Credit Parties,  the Lenders and the  Administrative  Agent
shall be restored to their former  position and rights  hereunder  and under the
outstanding Loans and Notes and other Credit Documents, and any Default or Event
of Default  permanently  waived shall be deemed to be cured and not  continuing;
but no such waiver shall extend to any  subsequent  or other Default or Event of
Default, or impair any right consequent thereon.

      Notwithstanding  any of the foregoing to the contrary,  the consent of the
Borrower shall not be required for any amendment,  modification or waiver of the
provisions of Article VIII (other than the provisions of Section 8.9); provided,
however,  that the  Administrative  Agent  will  provide  written  notice to the
Borrower of any such amendment, modification or waiver.

      Notwithstanding  the fact that the  consent of all the Lenders is required
in certain circumstances as set forth above, (x) each Lender is entitled to vote
as such Lender sees fit on any bankruptcy  reorganization  plan that affects the
Loans,  and each Lender  acknowledges  that the provisions of Section 1126(c) of
the Bankruptcy Code supersedes the unanimous consent provisions set forth herein
and (y) the  Required  Lenders may  consent to allow a Credit  Party to use cash
collateral in the context of a bankruptcy or insolvency proceeding.

      Section 9.2 Notices.

      Except as  otherwise  provided in Article II, all  notices,  requests  and
demands to or upon the  respective  parties  hereto to be effective  shall be in
writing (including by telecopy), and,

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<PAGE>

unless otherwise  expressly  provided herein,  shall be deemed to have been duly
given or made (a) when delivered by hand, (b) when  transmitted via telecopy (or
other  facsimile  device) to the number set out  herein,  (c) the  Business  Day
following the day on which the same has been  delivered  prepaid (or pursuant to
an invoice  arrangement) to a reputable  national overnight air courier service,
or (d) the third  Business  Day  following  the day on which the same is sent by
certified or registered mail, postage prepaid, in each case addressed as follows
in the case of the  Borrower,  the other Credit  Parties and the  Administrative
Agent,  and  in the  case  of  each  Lender,  as  set  forth  in  such  Lender's
Administrative  Details  Form  or to  such  other  address  as may be  hereafter
notified by the respective parties hereto and any future holders of the Notes:

     The Borrower                   Bradley Pharmaceuticals, Inc.
     and the other                  383 Route 46 West
     Credit Parties:                Fairfield, New Jersey  07084-2402
                                    Attention:       R. Brent Lenczycki,
                                                     Chief Financial Officer
                                    Telecopier:      (973) 575-5366
                                    Telephone:       (973) 882-1505 (x510)

                                    with a copy to:

                                    Epstein Becker & Green, P.C.
                                    250 Park Avenue
                                    New York, New York  10177
                                    Attention:       Theodore L. Polin, Esq.
                                    Telecopier:      (212) 878-8622
                                    Telephone:       (212) 351-4522

     The Administrative             Wachovia Bank, National Association,
     Agent:                           as Administrative Agent
                                    Charlotte Plaza
                                    201 South College Street, CP-8
                                    Charlotte, North Carolina  28288-0680
                                    Attention:       Syndication Agency Services
                                    Telecopier:      (704) 383-0288
                                    Telephone:       (704) 715-8946

                                    with a copy to:

                                    Wachovia Bank, National Association,
                                    One Wachovia Center, DC-5
                                    Charlotte, North Carolina  28288-0737
                                    Attention:       Scott Santa Cruz
                                    Telecopier:      (704) 383-7611
                                    Telephone:       (704) 383-1988

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<PAGE>

      Section 9.3 No Waiver; Cumulative Remedies.

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

      Section 9.4 Survival of Representations and Warranties.

      All  representations  and  warranties  made hereunder and in any document,
certificate or statement  delivered  pursuant  hereto or in connection  herewith
shall survive the execution and delivery of this Credit  Agreement and the Notes
and the  making  of the  Loans;  provided  that  all  such  representations  and
warranties  shall  terminate  on the date upon which the  Commitments  have been
terminated  and all amounts owing under the Credit  Documents  have been paid in
full.

      Section 9.5 Payment of Expenses and Taxes.

      The Credit Parties agree (a) to pay or reimburse the Administrative  Agent
and the  Arranger  for all their  reasonable  out-of-pocket  costs and  expenses
incurred in connection with the development,  preparation, negotiation, printing
and execution of, and any amendment,  supplement or modification to, this Credit
Agreement  and the other Credit  Documents and any other  documents  prepared in
connection herewith or therewith, and the consummation and administration of the
transactions  contemplated hereby and thereby, together with the reasonable fees
and disbursements of counsel to the Administrative  Agent and the Arranger,  (b)
to pay or reimburse each Lender and the  Administrative  Agent for all its costs
and expenses  incurred in connection with the enforcement or preservation of any
rights under this Credit  Agreement and the other Credit  Documents,  including,
without  limitation,  the reasonable  fees and  disbursements  of counsel to the
Administrative Agent and to the Lenders (including reasonable allocated costs of
in-house legal counsel),  and (c) on demand,  to pay,  indemnify,  and hold each
Lender,  the  Administrative  Agent and the Arranger  harmless from, any and all
recording  and  filing  fees and any and all  liabilities  with  respect  to, or
resulting from any delay in paying,  stamp,  excise and other similar taxes,  if
any,  which may be payable or determined  to be payable in  connection  with the
execution  and  delivery of, or  consummation  or  administration  of any of the
transactions  contemplated by, or any amendment,  supplement or modification of,
or any waiver or consent  under or in respect of, the Credit  Documents  and any
such  other  documents,  (d) to  pay,  indemnify,  and  hold  each  Lender,  the
Administrative  Agent,  the Arranger and their  Affiliates and their  respective
officers,   directors,    employees,   partners,   members,   counsel,   agents,
representatives, advisors and affiliates (collectively called the "Indemnitees")
harmless from and against, any and all other liabilities,  obligations,  losses,
damages, penalties,  actions, judgments, suits, costs, expenses or disbursements
of any kind or  nature  whatsoever  with  respect  to the  execution,  delivery,
enforcement, performance and administration of the Credit Documents and any such
other  documents  and the use, or proposed use, of proceeds of the Loans and (e)
to pay any  civil  penalty  or  fine  assessed  by the  U.S.  Department  of the
Treasury's  Office of Foreign Assets Control  against,  and all reasonable costs
and expenses (including counsel fees and

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<PAGE>

disbursements) incurred in connection with defense thereof by the Administrative
Agent or any Lender as a result of the funding of Loans, the issuance of Letters
of Credit,  the  acceptance  of payments or of  Collateral  due under the Credit
Documents (all of the foregoing,  collectively,  the "Indemnified Liabilities");
provided,  however, that the Borrower shall not have any obligation hereunder to
an Indemnitee  with respect to  Indemnified  Liabilities  arising from the gross
negligence or willful misconduct of such Indemnitee, as determined by a court of
competent  jurisdiction  pursuant  to  a  final  non-appealable   judgment.  The
agreements in this Section 9.5 shall survive  repayment of the Loans,  Notes and
all other amounts hereunder.

      Section 9.6 Successors and Assigns; Participations; Purchasing Lenders.

            (a) This Agreement shall be binding upon and inure to the benefit of
      the Credit Parties,  the Lenders,  the  Administrative  Agent,  all future
      holders of the Notes and their respective  successors and assigns,  except
      that  the  Borrower  may not  assign  or  transfer  any of its  rights  or
      obligations  under this Credit  Agreement  or the other  Credit  Documents
      without the prior written consent of each Lender.

            (b) Any Lender may, in the  ordinary  course of its  business and in
      accordance  with  applicable law, at any time sell to one or more banks or
      other entities ("Participants")  participating interests in any Loan owing
      to such  Lender,  any Note held by such  Lender,  any  Commitment  of such
      Lender,  or any other interest of such Lender  hereunder.  In the event of
      any such sale by a Lender of  participating  interests  to a  Participant,
      such Lender's obligations under this Credit Agreement to the other parties
      to this Credit Agreement shall remain unchanged,  such Lender shall remain
      solely responsible for the performance  thereof,  such Lender shall remain
      the holder of any such Note for all purposes under this Credit  Agreement,
      and the  Borrower  and the  Administrative  Agent  shall  continue to deal
      solely and  directly  with such Lender in  connection  with such  Lender's
      rights  and  obligations  under this  Credit  Agreement.  No Lender  shall
      transfer or grant any participation under which the Participant shall have
      rights to approve any  amendment to or waiver of this Credit  Agreement or
      any other Credit  Document  except to the extent such  amendment or waiver
      would  (i)  extend  the  scheduled  maturity  of any  Loan  or Note or any
      installment thereon in which such Participant is participating,  or reduce
      the stated rate or extend the time of payment of interest or fees  thereon
      (except  in  connection  with  a  waiver  of  interest  at  the  increased
      post-default rate set forth in Section 2.9, which shall be determined by a
      vote of the Required  Lenders) or reduce the principal amount thereof,  or
      increase  the amount of the  Participant's  participation  over the amount
      thereof then in effect;  provided  that, it is understood  and agreed that
      (A) no waiver,  reduction or deferral of a mandatory  prepayment  required
      pursuant to Section  2.7(b),  nor any  amendment of Section  2.7(b) or the
      definitions of Asset Disposition,  Debt Issuance,  Equity Issuance, Excess
      Cash Flow, or Recovery Event,  shall  constitute a reduction of the amount
      of, or an  extension  of the  scheduled  date of,  the  scheduled  date of
      maturity of, or any  installment of, any Loan or Note, (B) a waiver of any
      Default or Event of Default shall not  constitute a change in the terms of
      such participation, and (C) an increase in any Commitment or Loan shall be
      permitted   without  consent  of  any  participant  if  the  Participant's
      participation  is not increased as a result  thereof,  (ii) release all or
      substantially all of the Guarantors from

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<PAGE>

      their obligations  under the Guaranty,  (iii) release all or substantially
      all of the  Collateral,  or (iv) consent to the  assignment or transfer by
      the  Borrower  of any of its rights  and  obligations  under  this  Credit
      Agreement.  In the case of any such  participation,  the Participant shall
      not have any rights under this Credit Agreement or any of the other Credit
      Documents (the Participant's rights against such Lender in respect of such
      participation  to be those set  forth in the  agreement  executed  by such
      Lender  in favor of the  Participant  relating  thereto)  and all  amounts
      payable by the Borrower  hereunder  shall be  determined as if such Lender
      had not sold such  participation;  provided that each Participant shall be
      entitled to the benefits of Sections 2.15,  2.16,  2.17, 2.18 and 9.5 with
      respect to its  participation in the Commitments and the Loans outstanding
      from time to time; provided further, that no Participant shall be entitled
      to  receive  any  greater  amount  pursuant  to  such  Sections  than  the
      transferor  Lender  would have been  entitled to receive in respect of the
      amount of the participation  transferred by such transferor Lender to such
      Participant had no such transfer occurred.

            (c) Any Lender may, in the  ordinary  course of its  business and in
      accordance  with applicable law, at any time, sell or assign to any Lender
      or  any   Affiliate  or  Approved  Fund  and,  with  the  consent  of  the
      Administrative  Agent and,  so long as no Default or Event of Default  has
      occurred and is  continuing,  the Borrower  (in each case,  which  consent
      shall not be unreasonably  withheld or delayed), to one or more additional
      banks,  insurance companies,  funds or financial  institutions or entities
      (each such Lender, Affiliate, Approved Fund, bank, insurance company, fund
      or financial  institution or entity,  a "Purchasing  Lender"),  all or any
      part of its rights and  obligations  under this Credit  Agreement  and the
      Notes in minimum  amounts of (i) $2,000,000  with respect to its Revolving
      Commitment or its Revolving  Loans and (ii) $1,000,000 with respect to its
      Term Loan  Commitment  (or, if less,  the entire  amount of such  Lender's
      obligations),  pursuant to a Commitment Transfer  Supplement,  executed by
      such  Purchasing  Lender and such  transferor  Lender (and,  to the extent
      required above, the Administrative Agent and the Borrower),  and delivered
      to the  Administrative  Agent  for its  acceptance  and  recording  in the
      Register;  provided,  however,  that any sale or assignment to an existing
      Lender or an  Affiliate or Approved  Fund of an existing  Lender shall not
      require the consent of the Administrative  Agent or the Borrower nor shall
      any such sale or assignment be subject to the minimum  assignment  amounts
      specified herein and the amount of contemporaneous  assignments in respect
      of any assigning  Lender and its Approved  Funds shall be  aggregated  for
      purposes of such requirement.  Upon such execution,  delivery,  acceptance
      and  recording,  from and after the Transfer  Effective  Date specified in
      such Commitment Transfer Supplement,  (A) the Purchasing Lender thereunder
      shall be a party  hereto  and, to the extent  provided in such  Commitment
      Transfer Supplement, have the rights and obligations of a Lender hereunder
      with a Commitment  as set forth  therein,  and (B) the  transferor  Lender
      thereunder  shall,  to the extent  provided  in such  Commitment  Transfer
      Supplement,  be released from its obligations  under this Credit Agreement
      (and, in the case of a Commitment  Transfer Supplement covering all or the
      remaining  portion of a transferor  Lender's rights and obligations  under
      this Credit  Agreement,  such transferor  Lender shall cease to be a party
      hereto; provided, however, that such Lender shall still be entitled to any
      indemnification rights that expressly survive hereunder).  Such Commitment
      Transfer Supplement shall

                                      102
<PAGE>

      be deemed to amend this Credit  Agreement  to the extent,  and only to the
      extent,  necessary to reflect the addition of such  Purchasing  Lender and
      the  resulting  adjustment  of  Commitment  Percentages  arising  from the
      purchase by such  Purchasing  Lender of all or a portion of the rights and
      obligations of such transferor  Lender under this Credit Agreement and the
      Notes.  On or prior  to the  Transfer  Effective  Date  specified  in such
      Commitment Transfer Supplement,  the Borrower,  at its own expense,  shall
      execute and deliver to the Administrative  Agent in exchange for the Notes
      delivered to the Administrative Agent pursuant to such Commitment Transfer
      Supplement new Notes to the order of such  Purchasing  Lender in an amount
      equal to the Commitment assumed by it pursuant to such Commitment Transfer
      Supplement and, unless the transferor Lender has not retained a Commitment
      hereunder,  new Notes to the order of the  transferor  Lender in an amount
      equal to the Commitment retained by it hereunder.  Such new Notes shall be
      dated the  Closing  Date and shall  otherwise  be in the form of the Notes
      replaced thereby.  The Notes surrendered by the transferor Lender shall be
      returned by the  Administrative  Agent to the Borrower marked  "canceled".
      Notwithstanding  anything to the contrary contained in this Section 9.6, a
      Lender may assign any or all of its rights under this Credit  Agreement to
      an  Affiliate  or an Approved  Fund of such Lender  without  delivering  a
      Commitment  Transfer  Supplement to the  Administrative  Agent;  provided,
      however,  that (1) the Credit  Parties  and the  Administrative  Agent may
      continue to deal solely and directly  with such  assigning  Lender until a
      Commitment  Transfer  Supplement has been delivered to the  Administrative
      Agent for  recordation on the Register,  (2) the failure of such assigning
      lender to deliver a Commitment  Transfer  Supplement to the Administrative
      Agent shall not affect the  legality,  validity or binding  effect of such
      assignment and (3) a Commitment  Transfer Supplement between the assigning
      Lender, an Affiliate or Approved Fund of such Lender shall be effective as
      of the date specified in such Commitment Transfer Supplement.

            (d) The Administrative  Agent shall maintain at its address referred
      to in Section 9.2 a copy of each Commitment Transfer Supplement  delivered
      to it and a register (the "Register") for the recordation of the names and
      addresses of the Lenders and the  Commitment  of, and principal  amount of
      the Loans owing to, each Lender from time to time. A Loan (and the related
      Note) recorded on the Register may be assigned or sold in whole or in part
      upon registration of such assignment or sale on the Register.  The entries
      in the Register shall be conclusive, in the absence of manifest error, and
      the  Borrower,  the  Administrative  Agent and the  Lenders may treat each
      Person  whose name is  recorded  in the  Register as the owner of the Loan
      recorded therein for all purposes of this Credit  Agreement.  The Register
      shall be  available  for  inspection  by the Borrower or any Lender at any
      reasonable time and from time to time upon reasonable prior notice. In the
      case of an assignment  pursuant to the last sentence of Section  9.6(c) as
      to  which  a  Commitment  Transfer  Supplement  is  not  delivered  to the
      Administrative  Agent, the assigning Lender shall,  acting solely for this
      purpose  as a  non-fiduciary  agent  of the  Credit  Parties,  maintain  a
      comparable register on behalf of the Credit Parties. In the event that any
      Lender  sells  participations  in a Loan  recorded on the  Register,  such
      Lender  shall  maintain  a  register  on which it  enters  the name of all
      participants in such Loans held by it (the "Participant Register"). A Loan
      recorded on the Register (and the registered Note, if any,  evidencing the
      same) may be participated in whole or in part only by

                                      103
<PAGE>

      registration of such  participation on the Participant  Register (and each
      registered Note shall  expressly so provide).  Any  participation  of such
      Loan recorded on the Register (and the registered Note, if any, evidencing
      the same) may be effected only by the  registration of such  participation
      on the Participant Register.

            (e)  Upon  its  receipt  of  a  duly  executed  Commitment  Transfer
      Supplement,  together  with  payment  to the  Administrative  Agent by the
      transferor  Lender or the Purchasing  Lender, as agreed between them, of a
      registration  and processing fee of $3,500.00 for each  Purchasing  Lender
      (other than a Purchasing  Lender that is an Affiliate or an Approved  Fund
      of the transferor  Lender) listed in such Commitment  Transfer  Supplement
      and  the  Notes  subject  to  such  Commitment  Transfer  Supplement,  the
      Administrative Agent shall (i) accept such Commitment Transfer Supplement,
      (ii) record the  information  contained  therein in the Register and (iii)
      give prompt notice of such  acceptance and  recordation to the Lenders and
      the Borrower.

            (f)  The  Borrower   authorizes  each  Lender  to  disclose  to  any
      Participant  or  Purchasing   Lender  (each,  a   "Transferee")   and  any
      prospective  Transferee any and all financial information in such Lender's
      possession  concerning  the  Borrower  and its  Affiliates  which has been
      delivered to such Lender by or on behalf of the Borrower  pursuant to this
      Credit  Agreement  or which  has been  delivered  to such  Lender by or on
      behalf of the Borrower in connection with such Lender's credit  evaluation
      of the  Borrower  and its  Subsidiaries  prior to becoming a party to this
      Credit Agreement, in each case subject to Section 9.15.

            (g) At the time of each assignment pursuant to this Section 9.6 to a
      Person which is not already a Lender  hereunder  and which is not a United
      States person (as such term is defined in Section 7701(a)(30) of the Code)
      for Federal  income tax purposes,  the  respective  assignee  Lender shall
      provide  to the  Borrower  and the  Administrative  Agent the  appropriate
      Internal  Revenue  Service  Forms  (and,  if  applicable,   a  Tax  Exempt
      Certificate) described in Section 2.18.

            (h)  Nothing  herein  shall  prohibit  any Lender  from  pledging or
      assigning  any of its  rights  under  this  Credit  Agreement  (including,
      without  limitation,  any right to payment of principal and interest under
      any  Note)  to  secure  obligations  of  such  Lender,  including  without
      limitation,  (i) any  pledge  or  assignment  to secure  obligations  to a
      Federal  Reserve Bank and (ii) in the case of any Lender that is a fund or
      trust or entity  that  invests in  commercial  bank loans in the  ordinary
      course of business, any pledge or assignment to any holders of obligations
      owed, or securities  issued,  by such Lender including to any trustee for,
      or any other representative of, such holders; it being understood that the
      requirements for assignments set forth in this Section 9.6 shall not apply
      to any such  pledge or  assignment  of a security  interest,  except  with
      respect to any  foreclosure  or similar  action  taken by such  pledgee or
      assignee with respect to such pledge or assignment;  provided that no such
      pledge or  assignment of a security  interest  shall release a Lender from
      any of its  obligations  hereunder  or  substitute  any  such  pledgee  or
      assignee for such Lender as a party hereto and no such pledgee or assignee
      shall have any voting rights under this Credit  Agreement unless and until
      the

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      requirements  for  assignments  set forth in this Section 9.6 are complied
      with in connection  with any  foreclosure  or similar action taken by such
      pledgee or assignee.

      Section 9.7 Adjustments; Set-off.

            (a) Each  Lender  agrees that if any Lender (a  "Benefited  Lender")
      shall at any time  receive  any  payment of all or part of its  Loans,  or
      interest  thereon,  or receive any collateral in respect thereof  (whether
      voluntarily or involuntarily, by set-off, a Bankruptcy Event or otherwise)
      in a greater proportion than any such payment to or collateral received by
      any other  Lender,  if any, in respect of such other  Lender's  Loans,  or
      interest  thereon,  such Benefited Lender shall purchase for cash from the
      other Lenders a participating  interest in such portion of each such other
      Lender's  Loan,  or shall  provide such other Lenders with the benefits of
      any such  collateral,  or the proceeds  thereof,  as shall be necessary to
      cause such  Benefited  Lender to share the excess  payment or  benefits of
      such  collateral or proceeds  ratably with each of the Lenders;  provided,
      however,  that if all or any portion of such excess payment or benefits is
      thereafter  recovered from such Benefited  Lender,  such purchase shall be
      rescinded,  and the purchase price and benefits returned, to the extent of
      such recovery,  but without interest. The Borrower agrees that each Lender
      so purchasing a portion of another  Lender's Loans may exercise all rights
      of payment (including, without limitation, rights of set-off) with respect
      to such portion as fully as if such Lender were the direct  holder of such
      portion.

            (b) In addition to any rights and  remedies of the Lenders  provided
      by law  (including,  without  limitation,  other rights of set-off),  each
      Lender shall have the right,  without  prior notice to the Borrower or the
      applicable  Credit Party,  any such notice being  expressly  waived by the
      Credit  Parties  to the  extent  permitted  by  applicable  law,  upon the
      occurrence of any Event of Default,  to setoff and  appropriate  and apply
      any and all deposits (general or special,  time or demand,  provisional or
      final), in any currency, and any other credits, indebtedness or claims, in
      any  currency,  in each case  whether  direct  or  indirect,  absolute  or
      contingent,  matured  or  unmatured,  at any time held by or owing to such
      Lender or any branch or agency thereof to or for the credit or the account
      of the  Borrower or any other  Credit  Party,  or any part thereof in such
      amounts as such Lender may elect,  against and on account of the Loans and
      other  Credit  Party  Obligations  of the  Borrower  and the other  Credit
      Parties to the  Administrative  Agent and the  Lenders and claims of every
      nature and description of the Administrative Agent and the Lenders against
      the  Borrower  and the other  Credit  Parties,  in any  currency,  whether
      arising hereunder,  under any other Credit Document or any Secured Hedging
      Agreement  pursuant to the terms of this Credit Agreement,  as such Lender
      may elect,  whether or not the  Administrative  Agent or the Lenders  have
      made any demand for payment and although such obligations, liabilities and
      claims may be contingent or unmatured.  The aforesaid right of set-off may
      be exercised by such Lender  against the Borrower,  any other Credit Party
      or against any trustee in bankruptcy,  debtor in possession,  assignee for
      the benefit of creditors,  receiver or  execution,  judgment or attachment
      creditor of the Borrower or any other Credit Party, or against anyone else
      claiming  through or against the  Borrower,  any other Credit Party or any
      such trustee in bankruptcy, debtor in possession, assignee for the benefit
      of creditors, receiver, or execution, judgment or

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      attachment  creditor,  notwithstanding the fact that such right of set-off
      shall not have been  exercised by such Lender prior to the  occurrence  of
      any Event of Default.  Each Lender agrees  promptly to notify the Borrower
      and the  Administrative  Agent after any such set-off and application made
      by such Lender;  provided,  however,  that the failure to give such notice
      shall not affect the validity of such set-off and application.

      Section 9.8 Table of Contents and Section Headings.

      The table of contents and the Section and subsection  headings  herein are
intended for  convenience  only and shall be ignored in  construing  this Credit
Agreement.

      Section 9.9 Counterparts.

      This  Agreement  may be  executed  by one or more of the  parties  to this
Credit  Agreement  on any  number  of  separate  counterparts,  and  all of said
counterparts  taken  together  shall be  deemed to  constitute  one and the same
agreement.

      Section 9.10 Effectiveness.

      This Credit  Agreement shall become  effective on the date on which all of
the parties have signed a copy hereof (whether the same or different copies) and
shall have  delivered the same to the  Administrative  Agent pursuant to Section
9.2 or, in the case of the Lenders, shall have given to the Administrative Agent
written,  telecopied or telex notice (actually received) at such office that the
same has been signed and mailed to it.

      Section 9.11 Severability.

      Any   provision  of  this  Credit   Agreement   which  is   prohibited  or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability  without  invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render  unenforceable such provision in any
other jurisdiction.

      Section 9.12 Integration.

      This Agreement and the other Credit  Documents  represent the agreement of
the Credit Parties, the Administrative Agent and the Lenders with respect to the
subject matter hereof, and there are no promises, undertakings,  representations
or  warranties by the  Administrative  Agent,  the Credit  Parties or any Lender
relative to the subject  matter  hereof not  expressly  set forth or referred to
herein or in the other Credit Documents.

      Section 9.13 Governing Law.

      This Agreement and, unless otherwise  specified therein,  the other Credit
Documents  and the rights  and  obligations  of the  parties  under this  Credit
Agreement and the other Credit Documents shall be governed by, and construed and
interpreted in accordance with, the law of

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the State of New York  without  regard to  conflict of laws  principles  thereof
(other than Sections 5-1401 and 5-1402 of The New York General Obligations Law).

      Section 9.14 Consent to Jurisdiction and Service of Process.

      All judicial  proceedings  brought  against the Borrower  and/or any other
Credit Party with respect to this Credit Agreement, any Note or any of the other
Credit  Documents  may be  brought in any state or  federal  court of  competent
jurisdiction  in the State of New York,  and, by execution  and delivery of this
Credit Agreement, each of the Borrower and the other Credit Parties accepts, for
itself and in connection with its properties, generally and unconditionally, the
non-exclusive  jurisdiction of the aforesaid courts and irrevocably agrees to be
bound by any final  judgment  rendered  thereby in  connection  with this Credit
Agreement,  any Note or any other Credit  Document from which no appeal has been
taken  or is  available.  Each of the  Borrower  and the  other  Credit  Parties
irrevocably  agrees that all service of process in any such  proceedings  in any
such court may be effected by mailing a copy thereof by  registered or certified
mail (or any substantially  similar form of mail), postage prepaid, to it at its
address  set  forth  in  Section  9.2 or at such  other  address  of  which  the
Administrative  Agent shall have been notified  pursuant  thereto,  such service
being  hereby  acknowledged  by the each of the  Borrower  and the other  Credit
Parties  to be  effective  and  binding  service in every  respect.  Each of the
Borrower,  the other Credit Parties,  the  Administrative  Agent and the Lenders
irrevocably waives any objection,  including,  without limitation, any objection
to the laying of venue based on the grounds of forum non conveniens which it may
now or hereafter  have to the bringing of any such action or  proceeding  in any
such jurisdiction. Nothing herein shall affect the right to serve process in any
other  manner  permitted  by law or shall limit the right of any Lender to bring
proceedings against the Borrower or the other Credit Parties in the court of any
other jurisdiction.

      Section 9.15 Arbitration.

            (a)  Notwithstanding the provisions of Section 9.14 to the contrary,
      upon demand of any party  hereto,  whether made before or within three (3)
      months after institution of any judicial proceeding, any dispute, claim or
      controversy  arising  out of,  connected  with or  relating to this Credit
      Agreement and other Credit Documents ("Disputes") between or among parties
      to this  Credit  Agreement  shall be resolved  by binding  arbitration  as
      provided herein.  Institution of a judicial proceeding by a party does not
      waive the right of that party to demand  arbitration  hereunder.  Disputes
      may include, without limitation, tort claims,  counterclaims,  disputes as
      to  whether a matter is subject to  arbitration,  claims  brought as class
      actions,  claims arising from Credit Documents  executed in the future, or
      claims arising out of or connected with the transaction  reflected by this
      Credit Agreement.

            Arbitration  shall be conducted under and governed by the Commercial
      Arbitration  Rules (the "Arbitration  Rules") of the American  Arbitration
      Association  (the  "AAA") and Title 9 of the U.S.  Code.  All  arbitration
      hearings shall be conducted in Charlotte,  North Carolina. A hearing shall
      begin within ninety (90) days of demand for  arbitration  and all hearings
      shall be concluded within 120 days of demand for  arbitration.  These time
      limitations  may not be extended  unless a party shows cause for extension
      and then

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      no  more  than a  total  extension  of  sixty  (60)  days.  The  expedited
      procedures set forth in Rule 51 et seq. of the Arbitration  Rules shall be
      applicable to claims of less than $1,000,000.  All applicable  statutes of
      limitation  shall apply to any Dispute.  A judgment  upon the award may be
      entered in any court having  jurisdiction.  Arbitrators  shall be licensed
      attorneys selected from the Commercial Financial Dispute Arbitration Panel
      of the AAA. The parties  hereto do not waive  applicable  Federal or state
      substantive law except as provided herein.  Notwithstanding the foregoing,
      this arbitration  provision does not apply to disputes under or related to
      Hedging Agreements.

            (b) Notwithstanding  the preceding binding  arbitration  provisions,
      the Administrative  Agent, the Lenders,  the Borrower and the other Credit
      Parties agree to preserve,  without diminution,  certain remedies that the
      Administrative  Agent on  behalf of the  Lenders  may  employ or  exercise
      freely,  independently or in connection with an arbitration  proceeding or
      after an arbitration action is brought. The Administrative Agent on behalf
      of the  Lenders  shall  have the right to  proceed  in any court of proper
      jurisdiction  or by  self-help  to exercise  or  prosecute  the  following
      remedies,  as applicable  (i) all rights to foreclose  against any real or
      personal  property or other security by exercising a power of sale granted
      under Credit Documents or under applicable law or by judicial  foreclosure
      and sale,  including a proceeding to confirm the sale;  (ii) all rights of
      self-help including peaceful occupation of real property and collection of
      rents,  set-off,  and  peaceful  possession  of personal  property;  (iii)
      obtaining  provisional or ancillary remedies including  injunctive relief,
      sequestration, garnishment, attachment, appointment of receiver and filing
      an involuntary bankruptcy proceeding; and (iv) when applicable, a judgment
      by confession of judgment.  Preservation  of these remedies does not limit
      the power of an arbitrator to grant similar remedies that may be requested
      by a party in a Dispute.

            (c) The  parties  hereto  agree that they shall not have a remedy of
      punitive or exemplary  damages against the other in any Dispute and hereby
      waive any right or claim to punitive or exemplary damages they have now or
      which may arise in the future in connection  with any Dispute  whether the
      Dispute is resolved by arbitration or judicially.

            (d) By execution and delivery of this Credit Agreement,  each of the
      parties hereto accepts,  for itself and in connection with its properties,
      generally and unconditionally,  the non-exclusive jurisdiction relating to
      any  arbitration  proceedings  conducted  under the  Arbitration  Rules in
      Charlotte,  North Carolina and irrevocably agrees to be bound by any final
      judgment  rendered  thereby in connection with this Credit  Agreement from
      which no appeal has been taken or is available.

      Section 9.16 Confidentiality.

      The  Administrative  Agent and each of the Lenders  agrees that during the
Commitment Period and for one (1) year thereafter,  without the prior consent of
the Borrower,  it will use its best efforts not to disclose any information with
respect  to the  Credit  Parties  which is  furnished  pursuant  to this  Credit
Agreement,  any  other  Credit  Document  or any  documents  contemplated  by or
referred to herein or therein  and which is  designated  by the  Borrower to the
Lenders in

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writing as  confidential  or as to which it is otherwise  reasonably  clear such
information  is not  public,  except  that  any  Lender  may  disclose  any such
information (a) to its employees, Affiliates, auditors and counsel or to another
Lender,  (b) as has become  generally  available  to the public  other than by a
breach of this  Section  9.16,  (c) as may be  required  or  appropriate  in any
report,  statement or testimony  submitted  to any  municipal,  state or federal
regulatory body having or claiming to have  jurisdiction  over such Lender or to
the Federal  Reserve Board or the Federal Deposit  Insurance  Corporation or the
Office  of the  Comptroller  of the  Currency  or the  National  Association  of
Insurance  Commissioners or similar organizations  (whether in the United States
or  elsewhere) or their  successors,  (d) as may be required or  appropriate  in
response  to any summons or subpoena  or any law,  order,  regulation  or ruling
applicable to such Lender,  (e) to any  prospective  Participant  or assignee or
pledgee in connection with any  contemplated  transfer  pursuant to Section 9.6;
provided  that such  prospective  transferee  shall have been made aware of this
Section 9.16 and shall have agreed to be bound by its provisions as if it were a
party to this Credit Agreement,  (f) to Gold Sheets and other similar bank trade
publications;  such  information to consist of deal terms and other  information
regarding the credit facilities  evidenced by this Credit Agreement  customarily
found  in  such  publications,  (g) in  connection  with  any  suit,  action  or
proceeding  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 the Credit Documents or any Secured Hedging Agreement, (h)
to any direct or indirect  contractual  counterparty  in swap agreements or such
contractual  counterparty's  professional  advisor (so long as such  contractual
counterparty or professional advisor to such contractual  counterparty agrees to
be bound by the provisions of this Section 9.16), (i) any nationally  recognized
rating agency that requires  access to information  about a Lender's  investment
portfolio in connection with ratings issued with respect to such Lender,  (j) to
a Person that is an investor or  prospective  investor in a  Securitization  (as
defined below) that agrees that its access to information regarding the Borrower
and the Loans is  solely  for  purposes  of  evaluating  an  investment  in such
Securitization;  provided  that such  Person  shall have been made aware of this
Section 9.16 and shall have agreed to be bound by its provisions as if it were a
party to this Credit Agreement, or (k) to a Person that is a trustee, collateral
manager, servicer, noteholder or secured party in a Securitization in connection
with the  administration,  servicing  and  reporting  on the  assets  serving as
collateral  for such  Securitization;  provided that such Person shall have been
made  aware  of this  Section  9.16 and  shall  have  agreed  to be bound by its
provisions as if it were a party to this Credit Agreement.  For purposes of this
Section  "Securitization" shall mean a public or private offering by a Lender or
any of its affiliates or their respective  successors and assigns, of securities
which represent an interest in, or which are  collateralized in whole or in part
by, the Loans.

      Section 9.17 Acknowledgments.

      The Borrower and the other Credit Parties each hereby acknowledges that:

            (a) it has been advised by counsel in the negotiation, execution and
      delivery of each Credit Document;

            (b)  neither  the  Administrative  Agent  nor  any  Lender  has  any
      fiduciary  relationship  with or duty to the  Borrower or any other Credit
      Party arising out of or in

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<PAGE>

      connection  with  this  Credit  Agreement  and  the  relationship  between
      Administrative  Agent and Lenders,  on one hand,  and the Borrower and the
      other Credit Parties,  on the other hand, in connection herewith is solely
      that of debtor and creditor; and

            (c) no joint venture  exists among the Lenders or among the Borrower
      or the other Credit Parties and the Lenders.

      Section 9.18 Waivers of Jury Trial; Waiver of Consequential Damages.

      THE BORROWER,  THE OTHER CREDIT PARTIES,  THE ADMINISTRATIVE AGENT AND THE
LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE, TO THE EXTENT PERMITTED BY
APPLICABLE LAW, TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS
CREDIT AGREEMENT OR ANY OTHER CREDIT DOCUMENT AND FOR ANY COUNTERCLAIM  THEREIN.
Each of the Borrower, the other Credit Parties, the Administrative Agent and the
Lenders  agree not to assert any claim  against  any other  party to this Credit
Agreement or any their respective  directors,  officers,  employees,  attorneys,
Affiliates  or  agents,  on any  theory of  liability,  for  special,  indirect,
consequential or punitive damages arising out of or otherwise relating to any of
the transactions contemplated herein.

      Section 9.19 Patriot Act Notice.

      Each Lender and the Administrative  Agent (for itself and not on behalf of
any other party) hereby notifies the Borrower that, pursuant to the requirements
of the USA Patriot Act, Title III of Pub. L. 107-56, signed into law October 26,
2001  (the  "Patriot  Act"),  it  is  required  to  obtain,  verify  and  record
information that identifies the Borrower,  which  information  includes the name
and address of the Borrower and other information that will allow such Lender or
the Administrative Agent, as applicable,  to identify the Borrower in accordance
with the Patriot Act.

                                    ARTICLE X

                                    GUARANTY

      Section 10.1 The Guaranty.

      In order to induce the Lenders to enter into this Credit Agreement and any
Hedging  Agreement  Provider to enter into any Secured Hedging  Agreement and to
extend credit hereunder and thereunder and in recognition of the direct benefits
to be received by the Guarantors from the Extensions of Credit hereunder and any
Secured  Hedging  Agreement,  each of the  Guarantors  hereby  agrees  with  the
Administrative  Agent,  the  Lenders  and the  Hedging  Agreement  Providers  as
follows:  the  Guarantor  hereby  unconditionally  and  irrevocably  jointly and
severally  guarantees  as primary  obligor and not merely as surety the full and
prompt payment when due, whether upon maturity, by acceleration or otherwise, of
any and all  indebtedness  of the  Borrower  to the  Administrative  Agent,  the
Lenders and the Hedging Agreement  Providers.  If any or all of the indebtedness
becomes due and payable hereunder or

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<PAGE>

under any Secured Hedging Agreement,  each Guarantor unconditionally promises to
pay such  indebtedness to the  Administrative  Agent,  the Lenders,  the Hedging
Agreement Providers, or their respective order, or demand, together with any and
all reasonable expenses which may be incurred by the Administrative Agent or the
Lenders  in  collecting   any  of  the  Credit  Party   Obligations.   The  word
"indebtedness"  is used in this  Article X in its most  comprehensive  sense and
includes  any  and all  advances,  debts,  obligations  and  liabilities  of the
Borrower,  including  specifically  all  Credit  Party  Obligations,  arising in
connection with this Credit Agreement, the other Credit Documents or any Secured
Hedging Agreement, in each case, heretofore, now, or hereafter made, incurred or
created,   whether   voluntarily  or  involuntarily,   absolute  or  contingent,
liquidated  or  unliquidated,  determined or  undetermined,  whether or not such
indebtedness  is from  time to time  reduced,  or  extinguished  and  thereafter
increased  or  incurred,  whether the  Borrower  may be liable  individually  or
jointly with others,  whether or not recovery upon such  indebtedness  may be or
hereafter  become barred by any statute of limitations,  and whether or not such
indebtedness may be or hereafter become otherwise unenforceable.

      Notwithstanding  any provision to the contrary  contained herein or in any
other of the Credit  Documents,  to the extent the  obligations  of a  Guarantor
shall be adjudicated to be invalid or unenforceable  for any reason  (including,
without  limitation,  because of any applicable state or federal law relating to
fraudulent conveyances or transfers) then the obligations of each such Guarantor
hereunder  shall be limited to the  maximum  amount  that is  permissible  under
applicable law (whether federal or state and including,  without limitation, the
Bankruptcy Code).

      Section 10.2 Bankruptcy.

      Additionally,  each  of the  Guarantors  unconditionally  and  irrevocably
guarantees  jointly  and  severally  the  payment  of any and all  Credit  Party
Obligations  of the Borrower to the Lenders and any Hedging  Agreement  Provider
whether or not due or payable by the Borrower upon the  occurrence of any of the
events  specified in Section 7.1(f),  and  unconditionally  promises to pay such
Credit  Party  Obligations  to the  Administrative  Agent for the account of the
Lenders and to any such Hedging  Agreement  Provider,  or order,  on demand,  in
lawful money of the United States. Each of the Guarantors further agrees that to
the extent that the  Borrower or a Guarantor  shall make a payment or a transfer
of an interest in any property to the  Administrative  Agent,  any Lender or any
Hedging  Agreement  Provider,  which  payment or transfer or any part thereof is
subsequently  invalidated,   declared  to  be  fraudulent  or  preferential,  or
otherwise  is  avoided,  and/or  required  to be  repaid  to the  Borrower  or a
Guarantor, the estate of the Borrower or a Guarantor, a trustee, receiver or any
other  party  under any  bankruptcy  law,  state or federal  law,  common law or
equitable  cause,  then  to the  extent  of such  avoidance  or  repayment,  the
obligation  or part  thereof  intended  to be  satisfied  shall be  revived  and
continued in full force and effect as if said payment had not been made.

      Section 10.3 Nature of Liability.

      The liability of each Guarantor  hereunder is exclusive and independent of
any  security  for or other  guaranty  of the Credit  Party  Obligations  of the
Borrower whether  executed by any such Guarantor,  any other guarantor or by any
other  party,  and no  Guarantor's  liability  hereunder  shall be  affected  or
impaired by (a) any direction as to application of payment by the Borrower

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or by  any  other  party,  or  (b)  any  other  continuing  or  other  guaranty,
undertaking or maximum  liability of a guarantor or of any other party as to the
Credit Party Obligations of the Borrower,  or (c) any payment on or in reduction
of any such other guaranty or undertaking,  or (d) any dissolution,  termination
or increase, decrease or change in personnel by the Borrower, or (e) any payment
made to the Administrative  Agent, the Lenders or any Hedging Agreement Provider
on the Credit Party Obligations which the Administrative  Agent, such Lenders or
such Hedging  Agreement  Provider repay the Borrower  pursuant to court order in
any bankruptcy,  reorganization,  arrangement, moratorium or other debtor relief
proceeding,  and each of the  Guarantors  waives  any right to the  deferral  or
modification of its obligations hereunder by reason of any such proceeding.

      Section 10.4 Independent Obligation.

      The  obligations  of  each  Guarantor  hereunder  are  independent  of the
obligations  of any other  Guarantor or the Borrower,  and a separate  action or
actions may be brought and  prosecuted  against  each  Guarantor  whether or not
action is brought against any other Guarantor or the Borrower and whether or not
any other Guarantor or the Borrower is joined in any such action or actions.

      Section 10.5 Authorization.

      Each of the Guarantors  authorizes the  Administrative  Agent, each Lender
and each Hedging Agreement Provider without notice or demand (except as shall be
required by applicable  statute and cannot be waived),  and without affecting or
impairing its liability hereunder,  from time to time to (a) renew,  compromise,
extend,  increase,  accelerate  or otherwise  change the time for payment of, or
otherwise  change the terms of the Credit Party  Obligations or any part thereof
in accordance with this Credit Agreement and any Secured Hedging  Agreement,  as
applicable,  including any increase or decrease of the rate of interest thereon,
(b) take and hold security from any Guarantor or any other party for the payment
of this Guaranty or the Credit Party Obligations and exchange, enforce waive and
release  any such  security,  (c) apply  such  security  and direct the order or
manner of sale  thereof  as the  Administrative  Agent and the  Lenders in their
discretion  may  determine  and  (d)  release  or  substitute  any  one or  more
endorsers, Guarantors, the Borrower or other obligors.

      Section 10.6 Reliance.

      It is not  necessary  for the  Administrative  Agent,  the  Lenders or any
Hedging  Agreement  Provider  to  inquire  into the  capacity  or  powers of the
Borrower or the  officers,  directors,  members,  partners  or agents  acting or
purporting  to act on its  behalf,  and any  Credit  Party  Obligations  made or
created  in  reliance  upon  the  professed  exercise  of such  powers  shall be
guaranteed hereunder.

      Section 10.7 Waiver.

            (a) Each of the  Guarantors  waives  any right  (except  as shall be
      required  by  applicable  statute  and cannot be  waived)  to require  the
      Administrative Agent, any Lender

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<PAGE>

      or any Hedging Agreement Provider to (i) proceed against the Borrower, any
      other  guarantor or any other party,  (ii) proceed  against or exhaust any
      security held from the Borrower,  any other  guarantor or any other party,
      or (iii)  pursue  any other  remedy  in the  Administrative  Agent's,  any
      Lender's or any Hedging Agreement Provider's power whatsoever. Each of the
      Guarantors  waives any  defense  based on or arising out of any defense of
      the Borrower, any other guarantor or any other party other than payment in
      full of the Credit  Party  Obligations  (other than  contingent  indemnity
      obligations), including without limitation any defense based on or arising
      out of the  disability of the Borrower,  any other  guarantor or any other
      party, or the unenforceability of the Credit Party Obligations or any part
      thereof from any cause,  or the cessation  from any cause of the liability
      of  the  Borrower   other  than  payment  in  full  of  the  Credit  Party
      Obligations.  The Administrative Agent may, at its election,  foreclose on
      any security held by the  Administrative  Agent by one or more judicial or
      nonjudicial  sales (to the extent  such sale is  permitted  by  applicable
      law),  or exercise any other right or remedy the  Administrative  Agent or
      any  Lender may have  against  the  Borrower  or any other  party,  or any
      security,  without  affecting or impairing in any way the liability of any
      Guarantor hereunder except to the extent the Credit Party Obligations have
      been paid in full and the Commitments  have been  terminated.  Each of the
      Guarantors  waives any  defense  arising  out of any such  election by the
      Administrative  Agent or any of the  Lenders,  even though  such  election
      operates to impair or extinguish any right of reimbursement or subrogation
      or other right or remedy of the  Guarantors  against  the  Borrower or any
      other party or any security.

            (b) Each of the  Guarantors  waives all  presentments,  demands  for
      performance, protests and notices, including without limitation notices of
      nonperformance,  notice  of  protest,  notices  of  dishonor,  notices  of
      acceptance of this  Guaranty,  and notices of the  existence,  creation or
      incurring of new or additional  Credit Party  Obligations.  Each Guarantor
      assumes all  responsibility  for being and keeping itself  informed of the
      Borrower's  financial condition and assets, and of all other circumstances
      bearing upon the risk of  nonpayment of the Credit Party  Obligations  and
      the nature, scope and extent of the risks which such Guarantor assumes and
      incurs hereunder, and agrees that neither the Administrative Agent nor any
      Lender shall have any duty to advise such Guarantor of  information  known
      to it regarding such circumstances or risks.

            (c) Each of the  Guarantors  hereby  agrees it will not exercise any
      rights of subrogation  which it may at any time otherwise have as a result
      of this  Guaranty  (whether  contractual,  under  Section  509 of the U.S.
      Bankruptcy Code, or otherwise) to the claims of the Lenders or any Hedging
      Agreement  Provider  against the  Borrower or any other  guarantor  of the
      Credit  Party  Obligations  of the  Borrower  owing to the Lenders or such
      Hedging  Agreement  Provider  (collectively,  the "Other Parties") and all
      contractual, statutory or common law rights of reimbursement, contribution
      or indemnity  from any Other Party which it may at any time otherwise have
      as a  result  of  this  Guaranty  until  such  time  as the  Credit  Party
      Obligations  shall  have been paid in full and the  Commitments  have been
      terminated.  Each of the Guarantors  hereby further agrees not to exercise
      any right to enforce any other remedy which the Administrative  Agent, the
      Lenders or any Hedging  Agreement  Provider now have or may hereafter have
      against any Other Party, any endorser or any other guarantor of all or any
      part of the Credit Party

                                      113
<PAGE>

      Obligations  of the  Borrower  and  any  benefit  of,  and  any  right  to
      participate in, any security or collateral  given to or for the benefit of
      the Lenders  and/or the Hedging  Agreement  Providers to secure payment of
      the Credit Party Obligations of the Borrower until such time as the Credit
      Party Obligations (other than contingent indemnity obligations) shall have
      been paid in full and the Commitments have been terminated.

      Section 10.8 Limitation on Enforcement.

      The Lenders and the Hedging  Agreement  Providers agree that this Guaranty
may be enforced only by the action of the  Administrative  Agent acting upon the
instructions of the Required  Lenders or such Hedging  Agreement  Provider (only
with respect to obligations under the applicable  Secured Hedging Agreement) and
that no Lender or Hedging Agreement  Provider shall have any right  individually
to seek to enforce or to enforce this Guaranty,  it being  understood and agreed
that such rights and remedies may be exercised by the  Administrative  Agent for
the benefit of the Lenders under the terms of this Credit  Agreement and for the
benefit of any Hedging Agreement  Provider under any Secured Hedging  Agreement.
The Lenders and the Hedging Agreement Providers further agree that this Guaranty
may not be enforced  against any director,  officer,  employee or stockholder of
the Guarantors.

      Section 10.9 Confirmation of Payment.

      The Administrative  Agent and the Lenders will, upon request after payment
of the indebtedness  and obligations  which are the subject of this Guaranty and
termination of the Commitments  relating thereto,  confirm to the Borrower,  the
Guarantors or any other Person that such  indebtedness and obligations have been
paid and the Commitments relating thereto terminated,  subject to the provisions
of Section 10.2.

                                      114
<PAGE>

      IN WITNESS  WHEREOF,  the parties hereto have caused this Credit Agreement
to be duly executed and delivered by its proper and duly authorized  officers as
of the day and year first above written.

BORROWER:                                         BRADLEY PHARMACEUTICALS, INC.,
                                                  a Delaware corporation

                                                  By: /s/ R. Brent Lenczycki
                                                      --------------------------
                                                  Name:  R. Brent Lenczycki
                                                  Title: CFO & Vice President

GUARANTORS:                                       DOAK DERMATOLOGICS, INC.,
                                                  a New York corporation

                                                  By: /s/ R. Brent Lenczycki
                                                      --------------------------
                                                  Name:  R. Brent Lenczycki
                                                  Title: CFO & Vice President

                                                  BIOGLAN PHARMACEUTICALS CORP.,
                                                  a Delaware corporation

                                                  By: /s/ R. Brent Lenczycki
                                                      --------------------------
                                                  Name:  R. Brent Lenczycki
                                                  Title: CFO & Vice President

<PAGE>

ADMINISTRATIVE AGENT
AND LENDERS:                             WACHOVIA BANK, NATIONAL ASSOCIATION,
                                         as Administrative Agent and as a Lender

                                         By: /s/ Scott Santa Cruz
                                             -----------------------------------
                                         Name:  Scott Santa Cruz
                                         Title: Director

                           [Signature Pages Continue]

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